KATHARINE M. SAMSON, Bankruptcy Judge.
This matter is before the Court on the Application in Support of Request for Attorney's Fees (Adv. Dkt. No. 24)
The Court has jurisdiction over the parties to and the subject matter of this adversary proceeding pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (I), and (O).
II. Findings of Fact
After a trial on the matter, the Court entered an opinion finding that the debt owed by Jeanette Peters to Hometown Credit, LLC ("Hometown Credit") to be nondischargeable under Section 523(a)(2)(B) of the Bankruptcy Code. In re Peters, 2016 WL 4991506, at *3. The Court further ordered that "Hometown Credit may submit a fee itemization and supporting affidavit as required by the Court's local rules. . . ." Id. Hometown Credit requests $11,988.75, including $11,388.75 in fees and $600.00 in expenses. Adv. Dkt. No. 24 at 1. The fee itemization attached to Hometown Credit's application shows that its attorneys billed 58.15
Adv. Dkt. No. 1-2 at 2. According to the undisputed testimony at trial, Peters was in default at the time she filed for bankruptcy.
The Court held a hearing on the fee application on November 17, 2016. Adv. Dkt. No. 28. Simpson appeared as counsel for Hometown Credit and called to testify (1) Buchanan, (2) Stephen Binning, the owner of Hometown Credit, and (3) Jeffrey Ryan Barber,
Although "the Bankruptcy Code does not expressly award attorney's fees to a creditor who successfully contests the dischargeability of his claim[,] . . . creditors are entitled to recover attorney's fees in bankruptcy claims if they have a contractual right to them valid under state law." Jordan v. Se. Nat'l Bank (In re Jordan), 927 F.2d 221, 226-27 (5th Cir. 1991) (internal quotation marks omitted), overruled on other grounds by Coston v. Bank of Malvern (In re Coston), 991 F.2d 257, 260-61 (5th Cir. 1993). Where an award of attorney's fees is based on substantive state law, then state law governs the reasonableness of that award. Mathis v. Exxon Corp., 302 F.3d 448, 461 (5th Cir. 2002) ("State law controls both the award of and the reasonableness of fees awarded where state law supplies the rule of decision."). Because Hometown Credit's entitlement to fees is based on a contract governed by Mississippi law, the Court will apply Mississippi law to determine whether the requested fees are reasonable. In most cases in Mississippi, whether state or federal law applies is a distinction without a difference because the lodestar method and Johnson
The Mississippi Code provides that
Miss. Code Ann. § 9-1-41 (1990).
Miss. R. Prof'l Conduct 1.5(a). A trial court must support any award with "findings of fact and conclusions of law," though individual consideration of each factor has never been specifically required. See BellSouth Pers. Commc'n, LLC v. Bd. of Supervisors of Hinds Cnty., 912 So.2d 436, 446 (Miss. 2005) (quoting Miss. Power & Light Co. v. Cook, 832 So.2d 474, 487 (Miss. 2002)). Consideration of the factors need not be taken in a particular order.
Hometown Credit argues that the fees it seeks are reasonable. Peters argues that they are excessive. Peters brings two challenges to the requested amount: (1) that the hours billed are excessive light of the amount involved and (2) that counsel for Hometown Credit "overlawyered" this case resulting in redundant fees. Adv. Dkt. No. 27 at 2-3. The first argument addresses one of the factors for reasonableness, and the second addresses the calculation of the lodestar amount. The Court recently and thoroughly examined an award of attorney's fees under a contract to a prevailing creditor and adopts many of the same conclusions of law here, finding the legal questions presented to be substantially similar. See Pikco Fin., Inc. v. Staten (In re Staten), 559 B.R. 666, 671-75 (Bankr. S.D. Miss 2016).
Counsel for Hometown Credit has included 58.15 billed hours in the fee itemization. Some of the entries are billed at $0.00 per hour, and counsel voluntarily reduced the bill by $800.00. According to the affidavit and the testimony at the hearing, Buchanan was the primary attorney on this case, and Simpson's billed hours represent time spent on this case while Buchanan was on maternity leave. Adv. Dkt. No. 24-1 at 1; Adv. Dkt. No. 33 at 4-5. Because of this, the Court will attribute the voluntary reduction in fees solely to Buchanan's hours. After review of the itemization, the Court finds that Buchanan is seeking payment for 47.9
The Court finds that Buchanan engaged in block billing for the time spent preparing the subpoenas and the time spent preparing for trial. Block billing "is a billing method in which an attorney lumps together time spent working on a case, rather than enumerating the time expended on specific tasks." In re Adams, 516 B.R. 361, 372 (Bankr. S.D. Miss. 2014) This "impedes a court's ability to determine the reasonableness of the hours spent on individual tasks and has served as the basis for courts to issue a flat reduction of a specific percentage from an award of attorney's fees." Id. at 373. First, the itemization contains an entry for 5.1 hours billed to prepare nine
Therefore, the lodestar amount for Buchanan is $8,420.00 (42.1 times $200.00), and the lodestar amount for Simpson is $1,718.75 (6.25 times $275.00). The Court now turns to the Mississippi Rule 1.5 factors to determine whether these amounts should be reduced or increased.
Just as it has before, "[t]he Court finds that the fourth, third, and first factors, when considered together, merit a substantial reduction in the amount of the award. . . ." In re Staten, 559 B.R. at 671. Barber, Hometown Credit's expert, discussed these three factors in his testimony. Adv. Dkt. No. 33 at 33-39. The Court finds that the remaining factors do not merit a change in the lodestar amount and does not address them here.
Hometown Credit did not file a proof of claim in this case but stated in its adversary complaint that it was owed a debt of $2,903.89 as of the time of filing. Adv. Dkt. No. 1 at 1. After a trial, the Court found the entire debt to be nondischargeable. In re Peters, 2016 WL 4991506, at *3. As the Court has previously held:
In re Staten, 559 B.R. at 671-72 (footnote omitted) (alteration in original).
The amount of the underlying debt is $2,903.89 and the lodestar amount as determined by the Court is $8,420.00 for Buchanan and $1,718.75 for Simpson. The total request is $10,138.75 or more than triple the amount of the debt. The Court finds no basis to justify a fee award so much greater than the amount recovered. The Court previously reduced a fee award by 75%, finding that the request was "nearly quadruple" the amount of the underlying debt. Id. at 672. However as noted below in discussion of the first factor, there are differences between Staten and this case, and as a result, the Court finds that this factor merits a 50% reduction in the fees for both Buchanan and Simpson, when the third and first factors are also considered. The lodestar amount is reduced to $4,210.00 for Buchanan and $859.38 for Simpson.
Barber asserted in his testimony discussing this factor that
Adv. Dkt. No. 33 at 35-36. The Court finds this argument irrelevant to the discussion of this factor in general and unpersuasive when considering the factors and the purpose of bankruptcy as a whole, particularly in the context of small consumer loans.
Barber testified that the rates charged by Buchanan and Simpson were reasonable, even calling Buchanan's rate "a bargain." Adv. Dkt. No. 33 at 35. He further testified that it would be unreasonable to find that "another firm [could] . . . have prosecuted this case through trial for any amount significantly less than $12,000." Adv. Dkt. No. 33 at 34-35. Barber based his testimony, at least in part, on the "very thorough and comprehensive scheduling order" required in this Court. Adv. Dkt. No. 33 at 35. The Court notes that its scheduling order is a streamlined version of the once used by the District Court. It requires initial disclosures in an attempt to avoid unnecessary and duplicative discovery.
Regarding this factor, the Court previously held that it "has been the experience of the Court" "that the customary fee for" "suits for nondischargeability for small consumer loans" "is one-third of the amount of the indebtedness." In re Staten, 559 B.R. at 672-73 (listing cases). Considering Barber's testimony and the Court's own experience, the Court finds again that "[t]his factor also supports a reduction in the amount of the fee. However, in light of the reduction made above, no further reduction will be taken." Id. at 673.
Barber testified that "[a]dmittedly, the issues [in this case] were not particularly unusual or novel" but that Hometown Credit "had to do a little more legwork in this particular case in order to satisfy the standard pleading requirements in Federal Court and to make sure that the complaint was substantially justified."
There are, however, important differences between this case and In re Staten that are relevant to the discussion of this factor. In Staten, the Court found that the discovery conducted by the creditor was not proportional to the needs of the case because the creditor had continued to propound discovery when settlement negotiations broke down, and the only issue remaining to be settled was the amount of the creditor's attorneys' fees. Id. at 673-74. The Court held that the parties should have "submitted the question of attorney's fees to the Court rather than needlessly drive up the fees by continuing to litigate." Id. at 674 (holding that "[a] contractual provision to pay attorney's fees is not a blank check" and that "[i]f proper restraint is not exercised, the costs of any `overlawyering' should be borne by the Creditor, rather than Debtors").
In this case, Buchanan testified that she contacted Peters's counsel with a settlement offer for "the amount of the debt, $2,093.23, plus the $350 court filing fee and then the attorneys' fees to be decided by" the Court. Adv. Dkt. No. 33 at 10. Peters rejected that offer, and consequently, the case was submitted to trial, where Peters did not even appear to testify. See Adv. Dkt. No. 33 at 12. Just as the Court would not allow creditor's counsel to profit from engaging in unnecessary litigation, the debtor cannot avoid paying for fees that she has caused the creditor to reasonably incur. See Schwertner Backhoe Servs., Inc. v. Kirk (In re Kirk), 525 B.R. 325, 337 (Bankr. W.D. Tex. 2015).
Having fully examined the fee itemization, the Court turns to the expenses requested. Hometown Credit requested $600.00 in expenses, which are included as a separate category in the fee itemization. Adv. Dkt. No. 24-1 at 4. Peters did not challenge the claimed expenses in her objection, and the Court finds the expenses listed are reasonable. Accordingly, the Court finds that Hometown Credit is entitled to the full amount of expenses requested.
Having considered the Mississippi Rule 1.5 factors and the lodestar amount, the Court finds that Hometown Credit is entitled to collect $4,210.00 in attorney's fees for Buchanan and $859.38 for Simpson and $600.00 in expenses for a total award of $5,669.38. This amount shall be added to the debt Peters owes Hometown Credit, which the Court found to be nondischargeable in the amount of $2,903.89. See In re Jordan, 927 F.2d at 226-28 (holding that where party has contracted to pay attorney's fees for collection of nondischargeable debt, attorney's fee award also will not be discharged in bankruptcy). Accordingly, the total nondischargeable debt Peters owes Hometown Credit is $8,573.27.
