OPINION REGARDING THE AMOUNT OF FEES AND EXPENSES TO BE AWARDED IN GRANTING THE MOTION TO ALLOW ADMINISTRATIVE EXPENSE FILED BY STEVENSON & BULLOCK, PLC

THOMAS J. TUCKER, Bankruptcy Judge.

I. Introduction

This case came before the Court for a hearing on April 6, 2017, on the motion filed by creditor Stevenson & Bullock, PLC, entitled "Motion to Allow Administrative Expense Pursuant to 11 U.S.C. §503(b)" (Docket # 166, the "Motion"). Confirming action taken during the hearing, and for the reasons stated by the Court on the record during the hearing, the Court entered an Order on April 6, 2017 (Docket # 194, the "April 6 Order").

The April 6 Order granted the Motion in part, and otherwise took the Motion under advisement. The Order stated:

IT IS ORDERED that:

(Bold emphasis in original) (footnotes omitted).

In an order filed April 19, 2017 (Docket # 202), the Court cancelled the April 20, 2017 bench opinion hearing, stating that the Court had decided to issue its ruling on the remaining issue in writing. This opinion, and the accompanying order that will be entered based on this opinion, is the Court's written ruling on the remaining issue.

II. Discussion

A. The remaining issue

As framed by paragraph 2 of the April 6 Order, quoted above, the administrative expense to be awarded to Stevenson & Bullock, PLC (the "Creditor"), is "in the amount of the reasonable attorney fees and expenses incurred by the Creditor, after the conversion of this case to Chapter 13, in successfully objecting to the Debtor Steven Sharkey's claimed exemptions in the scheduled assets described as `The Hartford Annuity' and the `Nationwide Annuity.'" The remaining issue is what is that amount?

B. Creditor's fee and expense itemization

In the Motion, the Creditor seeks attorney fees totaling $32,085.00 plus expenses of $609.76, for a total of $32,694.76. The Debtors, who are the only parties who objected to the Motion, did not actually object to the reasonableness of the amount of fees and expenses sought by the Motion, either in their written response (Docket # 167)1 or during the April 6, 2017 hearing. Rather, Debtors argued only that the Court could not and should not allow the Creditor any administrative expense, in any amount. (The Court rejected that argument, for the reasons stated on the record during the April 6, 2017 hearing.) Nonetheless, the Court should and will conduct its own independent review of the reasonableness of the amount requested by the Creditor.

The support for the Creditor's claimed amount of fees and expenses is the fee and expense itemization that is attached as Exhibit 6-2 to the Motion (at Docket # 166) (the "Itemization"). The Court has carefully reviewed the Itemization, and the Court finds and concludes that numerous attorney time entries in the Itemization should be disallowed for purposes of calculating the reasonable fee amount.

To show what these disallowed time entries are, and to help show why they are disallowed, the Court attaches to this opinion a copy of the Itemization, with handwritten notations placed on the Itemization by the Court. With these notations the Court shows which time entries are disallowed, by crossing them out. And these notations show why each entry is disallowed. In addition, the Court has crossed out all time entries designated in the "Total" column of the Itemization as "No Charge" or "Do Not Bill." These time entries are not included in the total of fees sought by the Creditor, and the Court has crossed them out to make clear that the Court does not include them in its total of fees either.

The Court's reasons for disallowance of specific attorney time entries fall into two categories. The first category is time entries for the work done by attorney "MAS" (Michael A. Stevenson). Attorney "SNG" (Sonia N. Goll) did the vast majority of the work for the Creditor in seeking to obtain disallowance of the Debtor Steven Sharkey's claimed exemptions in the annuities at issue, and Ms. Goll made the oral arguments for the Creditor at all the hearings held. As the Itemization shows, Ms. Goll had various conferences with Mr. Stevenson, and both Ms. Goll and Mr. Stevenson billed for many of those conferences with each other. And Mr. Stevenson did, and billed for, other work, such as reviewing drafts of items to be filed by the Creditor that Ms. Goll had prepared. The Court finds that it is unreasonable to allow fees in this case for all of this work by both Ms. Goll and Mr. Stevenson. Cf. 11 U.S.C. § 330(a)(4)(A)(i) ("the court shall not allow compensation for . . . unnecessary duplication of services").

The Court does not question the quality of Mr. Stevenson's work and the assistance he gave to Ms. Goll in this case, but the Court does find that billing for the work of both Ms. Goll and Mr. Stevenson combined is excessive and unreasonable. This is so because Ms. Goll alone reasonably could have done all the work on this matter, and had she done so she could have and would have obtained the same ultimate favorable result for the Creditor on the exemption issues. So the Court disallows all of Mr. Stevenson's time entries. These are identified by the handwritten notation "2X" on the attached Itemization, and these disallowed time entries total 14.2 hours of Mr. Stevenson's time, equating to $5,325.00 of the fees in the Itemization.

The second category of reason for the Court disallowing some of the time entries in the Itemization is that several of the entries are for work that was not directly related to the exemption issues. These are designated by the notation "NR" (not relevant) on the attached Itemization. Under the April 6 Order, the fees to be awarded as an administrative expense are limited to the reasonable fees incurred by the Creditor "after the conversion of this case to Chapter 13, in successfully objecting to the Debtor Steven Sharkey's claimed exemptions" in the Hartford and Nationwide annuities. Several of the time entries are for work involving other issues, including (1) work to obtain allowance of a Chapter 7 administrative expense for work done by the Creditor as counsel for the Chapter 7 Trustee before conversion of this case to Chapter 13, and related issues (these are designated with the notation "NR-AE7" on the attached Itemization); (2) work in objecting to confirmation of the Debtors' filed Chapter 13 plans, or work otherwise relating to plan confirmation or case administration matters other than the exemption issues; (3) work done solely on the Creditor's unsuccessful effort to obtain sanctions against Debtors' counsel under 28 U.S.C. § 1927; and (4) work done to prepare and prosecute the present Motion (Docket # 166).

These categories of work are being disallowed because none of them were sufficiently related to, and contributed directly enough to, the Creditor's success in objecting to the Debtor Steven Sharkey's claimed exemptions in the annuities. These disallowed time entries of Ms. Goll total 13.6 hours of her time, equating to $4,080.00 of the fees in the Itemization.

The disallowed time entries translate to a total of $9,405.00 in fees. After deducting this amount from the fees in the Itemization, the reduced total of fees is $22,680.00 ($32,085.00 - $9,405.00 = $22,680.00). The Court finds and concludes that $22,680.00 is the "amount of the reasonable attorney fees and expenses incurred by the Creditor, after the conversion of this case to Chapter 13, in successfully objecting to the Debtor Steven Sharkey's claimed exemptions," within the meaning of the April 6 Order.2

With respect to the expenses in the Itemization, the Court finds them to be reasonable and appropriate to include in the allowed administrative expense, with no deductions. These expenses total $609.76.

Thus, the Court finds that the appropriate amount of the administrative expense to be awarded to the Creditor is $22,680.00 in attorney fees plus $609.76 in expenses, for a total amount of $23,289.76.

C. Proportionality

Furthermore, the Court finds that this amount is not disproportional to the benefit that the Creditor produced for the bankruptcy estate and the other creditors, by the Creditor's success in obtaining disallowance of the claimed exemptions in Debtor Steven Sharkey's annuities. Cf. In re Allied Computer Repair, Inc., 202 B.R. 877, 887 (Bankr. W.D. Ky. 1996) (citations omitted) ("[T]he overwhelming majority of Courts have recognized that a `reasonable' attorney fee for purposes of [11 U.S.C.] § 330 is one that is `commensurate with the potential or actual value obtained.' Thus, the Bankruptcy Court has the authority to reduce the requested attorney fees when disproportionate to the benefit produced thereby.")

Rather, the administrative expense amount the Court is allowing is reasonable in light of the benefit the Creditor's efforts obtained for the other creditors in the case. This Court so finds, based on the following undisputed facts. First, the exemptions that Debtor Steven Sharkey claimed were for the entire value of his two annuities, which the Debtors' Schedules B and C stated had a total value of $96,675.00. (See the Court's opinion filed February 16, 2017 (Docket # 164) at 5). The Creditor obtained the complete disallowance of the exemptions, and thereby brought a total value of $96,675.00 into the bankruptcy estate, for the benefit of all the creditors.

Second, as a result of the Creditor's obtaining the disallowance of these exemptions, all creditors will have to be paid a 100% dividend on their allowed claims. This is so regardless of whether the Debtors manage to confirm a plan in this Chapter 13 case, or failing that, the case converts back to Chapter 7. At the moment, the allowed unsecured claims in this bankruptcy case, other than the administrative claims and the claim of a vehicle-lease creditor whose lease the Debtors are proposing to assume and pay directly, total $15,763.23. This number is based on the claims and amended claims filed to date, as they appear in the claims register, and the Debtors' most recent proposed Chapter 13 plan (Docket # 172 at p. 6 (Class Nine 100% dividend proposed) plus p. 9 (Worksheet at item 8)).

The deadline for filing proofs of claim in this case was October 31, 2016. (See Notice (Docket # 55) at 2). At least until that claim-filing deadline passed, the record in this case indicated that the allowed unsecured claims might total at least as high as $63,074.40. This is the total amount of such claims that the Debtors listed in their Schedule E/F, which was filed on March 25, 2017 (Docket # 1) and never amended. As it turned out, not all of the eight non-priority unsecured creditors that Debtors listed in their Schedule E/F filed a proof of claim before the October 31, 2016 deadline. But the Creditor's counsel could not have known that would occur until after October 31, 2016, and by that time much of the work by the Creditor in objecting to the claimed exemptions in Steven Sharkey's annuities had already been done. Cf. 11 U.S.C. § 330(a)(3)(C) (factors relevant to reasonable amount of fees include "whether the services were . . . beneficial at the time at which the service was rendered"). And if this case ultimately converts back to Chapter 7 (a distinct possibility), it is still possible that the unsecured creditors listed in Debtors' Schedule E/F who have not timely filed proofs of claim could file tardy claims, and have those claims paid in full, under 11 U.S.C. § 726(a)(3). That would significantly increase the total amount by which the other creditors will have benefitted by the Creditor's work in obtaining disallowance of the exemptions.

Under these circumstances, the amount of the administrative claim the Court is allowing is not excessive; rather, it is reasonable in amount.

III. Conclusion

For the reasons stated in this opinion, the Court will enter an order setting the amount of the administrative expense to be granted to Stevenson & Bullock, PLC at $23,289.76, and allowing a Chapter 13 administrative expense in that amount.3