JAMES S. STARZYNSKI, Bankruptcy Judge.
The Supplemental Application for Allowance of Attorney Fees as Part of Secured
On August 3, 2010, this Court issued its Memorandum Opinion on ORIX Capital Market [sic], LLC's Motion to Allow Secured Claim Pursuant to 11 U.S.C. § 506 and to Order Payment Thereof and On Objection to ORIX Capital Market's Claim (doc 167), In re Market Center East Retail Property, Inc., 433 B.R. 335 (Bankr. D.N.M.2010) (together with the resulting order, the "Secured Claim Order").
Id. at 376, n. 51. This Supplemental Application is for fees incurred by Thuma & Walker, P.C. from January 2010 in prosecuting and defending ORIX's secured claim. The Supplemental Application seeks payment of $23,247.50 in fees, $1,545.27 in New Mexico gross receipts tax ("GRT"), and reimbursement of costs of $396.53, for a total of $25,189.30. Supplemental Application at 1-2.
Debtor concedes that ORIX is entitled to some fees, just not all of those claimed. Response at 1. It asks the Court to disallow certain charges as unrelated to litigating ORIX's secured claim, and to prorate the remainder of the fees and expenses to reflect that ORIX was awarded only 41% of what it asked for in its Motion to Allow Secured Claim.
Also, Debtor has asked the Court to force ORIX to litigate in this case the attorney fee issues stemming from the guaranty litigation in California against Debtor's principal and sole shareholder Danny Lahave and Top Terraces, Inc. Response at 3-5. The Court orally ruled at the preliminary hearing conducted on October 18, 2010 that it would not so rule. The Court now makes that ruling in writing. Assuming without deciding that this Court has the authority to do what Debtor asks, it is nevertheless the case that the California state court is competent to decide
Debtor first argues that charges incurred for other than litigating the payment of the remaining secured claim are not payable by the estate. This Court finds, however, that a reasonable amount of time keeping apprised of the California and other New Mexico litigation is something competent counsel would be expected to do, and so is reimbursable. More than that, however, the Court has already ruled that the loan documents permit ORIX to reimburse itself for the fees and costs of pursuing the guaranty collection action and defending the counterclaims. In re Market Center East Retail Property, Inc., 433 B.R. at 370. Such charges must however be reasonable. Id. In that light the Court ruled that the charges for Jeffer, Mangels, Butler & Marmaro, LLP (California counsel pursuing the guaranty collection action) for work done in January 2010 was no longer necessary in light of the receipts from the Lowe's litigation which were more than sufficient to ensure full payment of any sums that might be left owing to ORIX. Nor was the New Mexico counterclaim defense by Atkinson, Thal & Baker, P.C. necessary, id. at 373-75, which presumably would not have arisen had the California guaranty collection not continued.
The Court has reviewed the Thuma & Walker billings from this perspective and makes its best estimate
The Court further reduces the fees and applicable gross receipts tax by 1/3, resulting in a final total allowed charge against the proceeds of the collateral of $15,615.43. The Court chooses a 1/3 reduction in part because ORIX's claim of $642,397.44 was reduced to $265,211.86. 433 B.R. at 349 and 377. That constitutes, as Debtor correctly calculates, a 59% reduction in the amount requested. The discussion in the underlying opinion of what collection costs ought to be allowed, 433 B.R. at 370-74, cites both New Mexico and bankruptcy authority, some of which suggests a more liberal award of fees, e.g., Fort Knox Self Storage, Inc. v. Western Technologies, Inc., 140 N.M. 233, 242, 142 P.3d 1, 10 (Ct.App.2006) (affirming award of $240,000 in attorney fees based on a damage award of $110,000), and others which suggest just the opposite. E.g., In the Matter of Nicfur-Cruz Realty Corp., 50 B.R. 162, 169 (Bankr.S.D.N.Y.1985); accord, In re Precision Tool and Die Mfg. Co. Inc., 285 B.R. 621, 623 (Bankr.W.D.Pa. 2002) (right to collect fees out of collateral is not a blank check for needless litigation). A creditor holding a secured claim is entitled to assert a reasonable claim against the collateral for collection costs, and the mere fact that it is not entirely successful does not mean that it was unreasonable to make the claim, or that it was unreasonable to include in the claim all the components of the claim that might be recovered. At the same time, some reduction in the reimbursement of collection costs out of the collateral when the result is the allowance of a much smaller amount than was claimed is appropriate. There is no precise formula to make that determination, but the Court is comfortable that a 1/3 reduction of the fees (and of the GRT applicable to the fees), and full reimbursement of the costs (and applicable GRT) strikes a reasonable balance in these circumstances.
For the foregoing reasons, the Court finds that the amount requested by ORIX out of the collateral for its collection efforts should be substantially reduced.
Fees approved by Court Costs Approved 02/08/2010 $ 21.50 02/10/2010 $ 332.42 02/12/2010 $ 160.00 03/10/2010 $ 22.30 $ 64.50 04/10/2010 $ 8.49 $ 86.00 05/10/2010 $ 1.22 02/14/2010 $ 43.00 06/10/2010 $ 32.10 02/17/2010 $ 666.50 07/10/2010 $ 0.00 02/18/2010 $ 192.00 _______ $ 512.00 Total $ 396.53 ======= $ 208.00 $ 279.50 02/19/2010 $ 224.00 $ 365.50 02/20/2010 $ 21.50 02/23/2010 $ 1,999.50 $ 320.00 02/24/2010 $ 817.00 $ 2,408.00 $ 175.50 02/25/2010 $ 1,720.00 02/26/2010 $ 32.00 02/27/2010 $ 64.50 03/01/2010 $ 43.00 $ 48.00 $ 215.00 (Lahave var) 03/02/2010 $ 129.00 $ 32.00 $ 43.00 03/03/2010 $ 112.00 $ 43.00 03/04/2010 $ 279.50 03/09/2010 $ 432.00 03/11/2010 $ 224.00 03/12/2010 $ 240.00 03/15/2010 $ 21.50 03/16/2010 $ 432.00 03/18/2010 $ 21.50 03/22/2010 $ 368.00 03/23/2010 $ 272.00 03/24/2010 $ 112.00 03/25/2010 $ 576.00 $ 176.00 $ 43.00 03/26/2010 $ 881.50 $ 432.00 03/29/2010 $ 1,096.00 $ 64.00 03/30/2010 $ 43.00 03/31/2010 $ 301.00 $ 416.00 04/02/2010 $ 304.00 04/07/2010 $ 736.00 04/08/2010 $ 288.00 $ 247.50 04/09/2010 $ 544.00 $ 382.50
04/12/2010 $ 202.50 04/13/2010 $ 427.50 04/15/2010 $ 450.00 $ 80.00 05/14/2010 $ 22.50 05/17/2010 $ 22.50 06/09/2010 $ 45.00 06/21/2010 $ 45.00 07/22/2010 $ 22.50 _________ fees total $21,296.00 See page 5 of opinion costs total$ 396.53 _________ subtotal$21,692.53 taxes$ 1,518.48 7% grt _________ total$23,211.01 =========