DAVID M. WARREN, Bankruptcy Judge.
This matter comes on to be heard upon the Application for Administrative Expenses Pursuant to Section 503 ("Application") filed by Only Fools & Horses, LLC ("OFH") on May 29, 2015, the Debtor's Objection to Application for Administrative Expense ("Objection") filed by Sandra Faulkner Butterworth ("Debtor") on June 22, 2015, the Objection to Application for Administrative Expenses filed by the United States Bankruptcy Administrator ("BA") on June 22, 2015, and the Response and Objection to Application for Allowance of Administrative Expenses filed by TrustAtlantic Bank ("TrustAtlantic") on July 7, 2015. The court conducted a hearing in New Bern, North Carolina on August 20, 2015. John G. Rhyne, Esq. appeared for OFH, David J. Haidt, Esq. appeared for the Debtor, Christopher Scott Kirk, Esq. appeared for the BA, and John C. Bircher, III, Esq. appeared for TrustAtlantic. Based upon the evidence presented and the arguments of counsel, the court makes the following findings of fact and conclusions of law:
1. This matter is a core proceeding pursuant to 28 U.S.C. § 157, and the court has jurisdiction pursuant to 28 U.S.C. §§ 151, 157, and 1334. The court has the authority to hear this matter pursuant to the General Order of Reference entered August 3, 1984 by the United States District Court for the Eastern District of North Carolina.
2. The Debtor filed a petition for relief under Chapter 13 of the United States Bankruptcy Code ("Code") on September 13, 2013 ("Petition Date"). On January 14, 2014, the Debtor's case was voluntarily converted to a case under Chapter 11. The Debtor filed her initial Chapter 11 Plan of Reorganization on August 13, 2014, and the court confirmed the Debtor's Second Amended Plan of Reorganization ("Amended Plan") on June 9, 2015.
3. On December 16, 2008, the Debtor executed an Irrevocable Trust Agreement ("Trust") of which the Debtor was the beneficiary. On December 17, 2008, the Debtor assigned her interest in several separate limited liability companies to the Trust.
4. In 2011, two years prior to the Debtor filing her petition, OFH began collection efforts on a debt asserted against the Debtor. On April 27, 2012, a Default Judgment ("Default Judgment") was entered in favor of OFH against the Debtor and was docketed in a Tennessee state court. Since 2011, OFH has attempted to collect on the Default Judgment until the filing of the present case. On September 25, 2013, OFH filed a Proof of Claim for Claim #4 in the amount of $140,524.35 resulting from the Default Judgment.
5. On the Petition Date, the Debtor disclosed the existence and interest in the Trust on Schedule B and on the Debtor's Statement of Financial Affairs. The Debtor listed the Trust as having a value of $1.00.
6. Throughout the course of the bankruptcy case, OFH has taken the position that the creation of the Trust, and the assignments of the Debtor's interest in several limited liability companies to the Trust, were fraudulent conveyances under 11 U.S.C. § 548(e). OFH objected to and contested the Debtor's efforts to have the court confirm a plan of reorganization that did not disclose the value of assets within the Trust, and that did not provide, in OFH's view, a satisfactory dividend to the creditors.
7. On May 29, 2015, OFH filed the Application, requesting that the court enter an order allowing OFH an administrative claim for its attorney's fees and expenses in the amount of $49,888.03 pursuant to 11 U.S.C. §§ 503(b)(3)(D) and (b)(4). The total reimbursement sought appears to represent all legal expenses incurred by OFH beginning in 2011 in connection with its retention of attorneys hired or utilized to collect the Default Judgment.
8.
9.
a. Under the "American Rule," each party is responsible for its own attorney's fees and a prevailing litigant is not entitled to attorney's fees unless specifically provided for by statute or by contract. See Alyeska Pipeline Serv. Co. v. Wilderness Soc'y., 421 U.S. 240 (1975). Even though Section 503 creates an opportunity for an applicant to receive an administrative claim for fees, the court must give deference to the priority structure created by Congress. Statutes related to priority expenses should be and are generally construed narrowly. A narrow construction "is consistent with the general doctrine that priority statutes, such as Section 503(b), should be strictly construed to preserve the estate for the benefit of creditors." In re Asarco LLC, No. 05-21207, 2010 WL 3812642, at *8 (Bankr. S.D. Tex. Sept. 28, 2010). (citations omitted). "Activities of a creditor . . . that are ordinary, expected, routine, or duplicative do not constitute a substantial contribution to a debtor's estate." Id. (citations omitted).
b. This court previously held that Sections 503(b)(3)(D) and 503(b)(4) allow reimbursement of fees and expenses where it is demonstrated that a creditor has made a substantial contribution to the bankruptcy case. In re Shangra-La, Inc., 213 B.R. 303, 306 (Bankr. E.D.N.C. 1997) (rev'd on other grounds), 167 F.3d 843 (4
c. "`[S]ubstantial contribution' is not a defined term in the Code. However, the term has been judicially interpreted to mean contributions to the bankruptcy case that `foster and enhance, rather than retard or interrupt the progress of reorganization.'" In re On Tour, LLC, 276 B.R. 407, 417 (Bankr. D. Md. 2002) citing In re Big Rivers Elec. Corp., 233 B.R. 739, 746 (W.D. Ky. 1998), see also Hall Fin. Grp., Inc. v. DP Partners, Ltd. (In re DP Partners, Ltd.), 106 F.3d 667, 672 (5
d. A leading definition of "substantial contribution" is currently found in the case of In re Paolino, 71 B.R. 576, 580 (Bankr. E.D.Pa. 1987). The On Tour decision cited to In re Paolino when that court held, "that the services must provide a `demonstrable benefit to the debtor's estate, the creditors, and, to the extent relevant, the stockholders,' in order to be compensable." In re On Tour, LLC, 276 B.R. 407, 418 (Bankr. D. Md. 2002) (quoting In re Paolino, 71 B.R. at 580.).
e. OFH argued that it made a substantial contribution to the case by discovering the existence of the Trust. OFH states that the discovery of the Trust and the allegations made by OFH of fraudulent conveyances from the Debtor to the Trust led to a significant increase in the dividend that would be paid to unsecured creditors by the Debtor. OFH believes that these efforts constitute a "substantial contribution" to the case as contemplated by Section 503, and that OFH should be reimbursed for the attorney's fees expended and the costs incurred in the case. Before this court is the determination of whether OFH's actions and efforts constitute "substantial contribution" as contemplated by Section 503.
f. The Fifth Circuit developed a standard for determining whether a creditor has made a "substantial contribution" to the bankruptcy estate as contemplated by Sections 503(b)(3)(D) and 503(b)(4) in Matter of DP Partners Ltd. P'ship. The DP Partners court posited that "the policy aim of authorizing fee awards to creditors is to promote meaningful creditor participation in the reorganization process." Matter of DP Partners Ltd. P'ship, 106 F.3d 667, 672 (5th Cir. 1997).
g. The court in DP Partners found that a "substantial contribution" in Section 503(b)(3)(D) means a contribution that is "considerable in amount, value or worth." Id. at 673. The Fifth Circuit in DP Partners, also held that a "direct benefit must be provided to the debtor's estate in order to be eligible for payment for a substantial contribution." Id., see also In re Buttes Gas & Oil Co., 112 B.R. 191, 194 (Bankr. S.D. Tex. 1989).
h. The court in Asarco, LLC performed a thorough and valuable analysis of the Fifth Circuit's Decision in DP Partners and the preceding case law and held that "failing to show a direct, significant and demonstrable benefit to the estate caused by the actions of the applicant is, therefore, fatal to a substantial contribution claim." Asarco, 2010 WL 3812642, at *7 (emphasis added)(citations omitted). The claimant must establish "by a preponderance of the evidence, that they caused a substantial contribution if they wish to recover the fees and expenses associated with their making such a contribution." Id.
i. Asarco held that Section 503(b)(3)(D) "should not become a vehicle for reimbursing every creditor who elects to hire an attorney." Id. at *8. The court in Asarco also asserted that substantial contribution claims may only be granted in "unusual or rare circumstances." Id.
j. The Asarco court further held that to meet the burden of proof required to establish a substantial contribution claim, the claim must show that the services it provided had a "causal relationship" to the contribution they are claiming. Id. More importantly, simply providing "conclusory statements regarding the causation or provision of a substantial contribution are insufficient to establish that a substantial contribution has been made." Id. After proving a causal relationship exists, the claimant must also prove that it was the claimant's action alone that lead to the contribution. The Asarco court noted that "a substantial contribution claim cannot be successful when the asserted contribution would have occurred without the claimant's involvement." Id.
k. According to the considerable body of persuasive case law regarding the application for fees under Section 503, OFH must prove by a preponderance of the evidence that the work it performed made a substantial contribution. OFH must prove that OFH's actions alone had the specific, direct, and demonstrable benefit to the Debtor's estate and the other creditors. OFH must also prove that the substantial contribution made was under unusual or rare circumstance. OFH must further prove that its efforts were not ordinary, expected, routine, or duplicative efforts of a creditor in this case. Failure to prove any of these elements by a preponderance of the evidence is fatal to OFH's claim for substantial contribution.
l. OFH argued that its actions caused the increase in the dividend to unsecured creditors from the initial proposal of the Debtor's initial plan of reorganization to the confirmed Amended Plan, and the increase is a "substantial contribution" to the estate. OFH further alleged that this increase in the dividend to unsecured creditors is due solely to its efforts in discovery of the Trust, the allegations of fraudulent transfers on the part of the Debtor, and garnering of the support and involvement of other creditors by OFH, forcing the Debtor to propose a more reasonable plan with a substantially more generous dividend to the unsecured creditors. Based on these conclusions, OFH boasts it has made a substantial contribution to the Debtor's estate.
m. Contrarily, the Debtor argued that OFH did not discover the Trust. The Debtor plainly disclosed the existence of the Trust on the Debtor's Schedule B as early as the Petition Date and disclosed the specific conveyances to the Trust on the Debtor's Statement of Financial Affairs. According to the Debtor's Objection, even before the Petition Date, the Trust and the transfers were disclosed to OFH as a result of the Debtor's Motion and Notice to Claim Exempt Property served on OFH during OFH's judgment execution. The Debtor argued that no efforts of OFH led to the "discovery" of the Trust or any previously unknown asset or undisclosed information regarding the Trust.
n. The Debtor consistently denies that she created the Trust with the intent to hinder, delay, or defraud any creditor and has always denied that any conveyances to the Trust were avoidable pursuant to Section 548. The Debtor does not believe that the Trust was avoidable and scheduled it with a value of $1.00 as of the Petition Date. The Debtor claims that the negotiations with creditors, other than OFH, together with the restrictions of 11 U.S.C. § 1129 and the help of TrustAtlantic and the BA, caused the increase in the dividend to the unsecured creditors. OFH was not a part of that equation.
10.
a. In an analysis of the decision in Asarco and the preceding case law, the In re R. L. Adkins Corp. court found that courts have employed a variety of factors to determine whether a substantial contribution has occurred, including:
In re R.L. Adkins Corp., 505 B.R. 770, 780-81 (Bankr. N.D. Tex. 2014) quoting In re Energy Partners, Ltd., 422 B.R. 68, 80 (Bankr. S.D. Tex. 2009).
b. This court finds the factors enumerated in Adkins instructive in analyzing the current matter. That analysis is as follows:
c. The application of the Adkins factors indicate the efforts of OFH did not result in a substantial contribution to the estate or to other creditors as contemplated by 11 U.S.C. § 503(b)(3)(D). OFH cannot show, by a preponderance of the evidence, that its efforts alone achieved a direct and demonstrable benefit to the Debtor's estate that was of great worth or value. The increased dividend paid to unsecured creditors was a result of several parties, including the Debtor, the BA, TrustAtlantic, participating in a collaborative effort to move the Debtor's case towards confirmation.
d. Under the decision in Adkins, OFH must show a causal connection between its services and the substantial contribution, and mere conclusory statements will not suffice. OFH must further show that the contribution would not have occurred without its involvement. In re RL Adkins Corp., 505 B.R. at 770. All OFH has shown is conclusory statements that its efforts caused a substantial contribution to the case. OFH has not indicated a single action, whether in the arguments of counsel at the hearing or in the documented fees for which it requests reimbursement that directly benefited the estate or other creditors.
e. OFH fails to show that its efforts in this case were under rare or unusual circumstances as required by Asarco. Similar to the matter before this court, the creditors in Asarco were large and expectedly active creditors in the case. The Asarco court noted that, "merely being an active creditor . . . does not entitle that creditor to a claim for making a substantial contribution." Asarco, 2010 WL 3812642 at *10. The creditor in Asarco took actions similar to OFH presently, requesting that the court ignore the actions of other parties in interest in the case and recognize the status of their actions as not only "rare" or "unusual," but as the primary forces that caused the parties in question to undertake actions in the case. Here, OFH is asking that this court ignore the actions and efforts of the Debtor, TrustAtlantic, the BA, and others in bringing this case to confirmation, and further, to consider the ordinary actions of counsel for OFH in attempting to increase the dividend to its creditor client as extraordinary.
f. TrustAtlantic argued that the majority of OFH's participation in the case was as a general unsecured creditor, making arguments and taking positions that are standard creditor objections; therefore, these actions cannot constitute a "substantial contribution" under Section 503(b)(3)(D). The court agrees with TrustAtlantic.
11.
11 U.S.C. § 330(a)(3). The instant application as filed by OFH is deficient in this regard and should be disallowed in its entirety.
d. Exhibit A to the Application, which purports to detail the fees requested for reimbursement, is made up of three separate documents. The first appears to be a chart entitled "legal fees butterworth-All Dates," which includes several columns listing a date, account name, name of what appears to be the attorney performing the work, and an amount. This chart does not provide sufficient information for the court to perform the analysis required by the decision in DP Partners and On Tour, supra. The court cannot determine what actions or services generated these requested fees or the relationship to the case. The only information that seems apparent from this fee request is the date of the service and the amount charged. This information is not a sufficient explanation of the fees requested; therefore, this portion of the Application, requesting $18,503.31, should be denied in full.
e. The second document in Exhibit A appears to be the Statement of Account billed by Mr. Rhyne to OFH for the entire course of representation of OFH. The entries on this document begin with "Review of petition. Correspondence to client and engagement agreement" and end with "Travel to and from New Bern for [confirmation] hearing. Conduct hearing before Court. Report to Client." Although the entries made in this statement allow the court to perform the required analysis under Section 330, all of these entries and fees do not relate to actions that provided a substantial contribution to the Debtor's estate. These time entries are actions taken in the ordinary course of representing a creditor in bankruptcy. This portion of fees requested in the amount of $14,338.51 should be denied in full.
12. Congress states that in order to be granted an administrative claim under Section 503, the applicant would have to prove that its efforts in the case constituted an extraordinary circumstance that permits deviation from the priority structure. OFH has failed to demonstrate the extraordinary circumstances necessary.
13. OFH failed to show any direct significant or demonstrable benefit to the Debtor's estate or to the other creditors by its acts alone. This failure is fatal to OFH's substantial contribution claim Asarco, 2010 WL 3812642, at *7; now therefore,
It is ORDERED, ADJUDGED and DECREED that the Application is denied.
