DAVID T. THUMA, Bankruptcy Judge.
Ron Holmes replaced Debtors' first attorney on April 14, 2019, represented Debtors for about four months, and withdrew. During his tenure, Mr. Holmes and his legal assistant spent about 40 billable hours on the case, resulting in a fee application (including gross receipts tax and costs) of about $9,200. Debtors object that this is unreasonably high and should be reduced. Having reviewed the matter in some detail, the Court will award Mr. Holmes fees, taxes, and costs of $9,006.73.
The Court finds:
Debtors are married and live in Belen, New Mexico. Mr. Guajardo works offshore about three weeks in every month.
Debtors filed four bankruptcy cases in the Eastern District of Virginia. In 1991 they filed a chapter 7 case and received a discharge. They filed three pro se chapter 13 cases in quick succession in late 2015 and early 2016, all of which were dismissed without a confirmed plan. The bankruptcy judge who dismissed the third case had concerns about the good faith of these cases.
Debtors filed this chapter 13 case on March 13, 2019. They were represented by Jason Cline. Mr. Cline, who had just been retained, was forced to file an "emergency" petition, without bankruptcy schedules, a Statement of Financial Affairs ("SOFA"), or a chapter 13 plan. The immediate purpose of the filing was to stay a state court hearing on a motion filed by Alicia Garcia
The petition filing had its intended effect. However, Ms. Garcia filed an adversary proceeding against Debtors on March 25, 2019, seeking injunctive relief and a declaratory judgment. The Court held an emergency hearing in the adversary proceeding on March 27, 2019. At the end of the hearing, the Court ordered Debtors to release a lis pendens they had filed on the house. Debtors did not file the release by the deadline. The Court set a show cause hearing for March 28, 2019. Before the show cause hearing, Debtors released the lis pendens.
On March 27, 2019, Mr. Cline moved to withdraw as Debtors' counsel, citing difficulty communicating with Debtors and getting them to comply with the Court's order. The Court granted Mr. Cline's motion on April 2, 2019.
On April 11, 2019, Debtors signed a "Chapter 13 Bankruptcy Fee Agreement" with attorney Ron Holmes, agreeing to pay him $275 per hour and his legal assistant $110 per hour.
When the Debtors and Mr. Cline parted company, no substantial work had been done on Debtors' schedules, SOFA, or plan. Mr. Holmes prepared these documents. The circumstances required Mr. Holmes to file a third motion for an extension of deadline to file the documents.
Mr. Holmes drafted and filed an answer to Alicia Garcia's adversary proceeding complaint on April 26, 2019. He filed Debtors' bankruptcy schedules, SOFA, chapter 13 plan, and an amended mailing list on May 10, 2019.
Mr. Holmes represented Debtors at their § 341
Mr. Holmes reviewed proofs of claim filed in the case, worked on Debtors' missing tax returns, negotiated plan confirmation issues with the chapter 13 trustee, and worked on the adversary proceeding.
Ultimately, Mr. Holmes also got crosswise with Debtors. He moved to withdraw on July 24, 2019, citing a failure of communication and compliance leading to a breakdown in the attorney/client relationship. The Court granted the motion to withdraw over Debtors' objection on August 19, 2019. Mr. Holmes's representation lasted a little over four months. He filed a fee application on August 14, 2019, to which he attached all billing entries.
Debtors retained Michael Daniels as counsel on or about September 3, 2019. Debtors filed a pro se objection to Mr. Holmes's fee application on September 5, 2019.
Mr. Holmes originally asked for total fees, costs, and taxes of $9,810.40. After he adjusted the request for two billing errors, he sought approval of $9,172.85.
11 U.S.C. § 330(a) provides:
The key questions are whether the professional services were necessary and beneficial to the bankruptcy estate and whether the fees charged for those services are reasonable in amount. In re Lederman Enterprises, Inc., 997 F.2d 1321, 1323 (10th Cir. 1993); In re Schupbach Investments, LLC, 2014 WL 6680122, at *8 (10th Cir. B.A.P.); see also In re KOBA Limited Partnership, 2019 WL 5584901, at *3 (Bankr. D.N.M.) (citing additional authority for same proposition); In re Hungry Horse, LLC, 2017 WL 3638182, at *2-*3 (Bankr. D.N.M.) (same); In re Weaver, 2011 WL 867136, at *3 (Bankr. D.N.M.) (same). In chapter 12 and 13 cases, the benefit can be to the debtor rather than the estate. See, e.g., In re Williams, 378 B.R. 811, 823 (Bankr. E.D. Mich. 2007) (§ 330(a)(4)(B) is an exception to the general rule that professionals' services must benefit the estate to be compensable); In re Argento, 282 B.R. 108, 116 (Bankr. D. Mass. 2002) (same).
In their objection and at the final hearing, Debtors principally complained about Mr. Holmes's demeanor toward and interactions with them. They raised only a few specific objections to his fee application.
First, Debtors and Mr. Holmes disagree about whether he agreed to offer Debtors a free initial consultation (Mr. Holmes billed one hour for an initial conference on April 11, 2019). The Court finds that both sides testified credibly on this point, and that likely there was a misunderstanding. Mr. Holmes testified that he sometimes offers free initial consultations. However, he does not do so when asked to take on a case post-petition because he cannot get a retainer (post-petition, all cash is estate property). In exchange for agreeing to represent debtors without a retainer, Mr. Holmes charges for the initial consultation. The fee charged for the initial conference will be allowed.
Second, Debtors argued that it was excessive for Mr. Holmes to spend approximately ten hours on bankruptcy schedules when Debtors themselves had spent two to three hours on the material. This argument is unpersuasive; preparing a good set of schedules and a SOFA is technical work, and Debtors are not lawyers. See KOBA, 2019 WL 5584901, at *5 (overruling debtor's principal's objection that legal work at real estate closing could have been handled competently by a broker at a fraction of the cost). Debtors' version of the paperwork is not in evidence, but the schedules ultimately filed by Mr. Holmes are substantial and appear to be thorough. Debtors listed 81 unsecured creditors in their Schedule E/F. Mr. Holmes filed a substantially longer amended mailing list. Mr. Holmes testified that he took the time to include creditors from Debtors' prior dismissed bankruptcy cases to make sure Debtors received the full benefit of their "fresh start." The Court finds that the time billed for work on Debtors' schedules and SOFA was reasonable and necessary to the administration of this case.
Third, Debtors complain about the time Mr. Holmes billed for the April 17, 2019 § 341 meeting. Ms. Garcia-Guajardo missed the meeting because of car trouble. Apparently she and Mr. Holmes agreed to meet after the meeting, which had to be rescheduled. Through miscommunication, they missed each other. Regardless of fault, which the Court does not assign, it does not appear Mr. Holmes billed for any time other than that which he spent preparing for and attending the § 341 meeting.
Finally, Debtors argued that Mr. Holmes billed too much time for a meeting on May 8, 2019. The fee bills, however, indicate that Mr. Holmes not only billed for the meeting but also to revise the schedules and SOFA after the meeting. Mr. Holmes's testimony corroborates this.
Debtors' specific objections to Mr. Holmes's fee application are overruled.
One exception to the necessity/benefit analysis is clerical work. While necessary in every legal proceeding, clerical work cannot reasonably be passed onto clients or the estate and should instead be absorbed by the firm as overhead. In re CF&I Fabricators of Utah, Inc., 131 B.R. 474, 489 (Bankr. D. Utah 1991); In re Lady Baltimore Foods, Inc, 2004 WL 2192368, at *1 (Bankr. D. Utah); Weaver, 2011 WL 867136, at *4; In re Guzman, 2009 WL 607401 (Bankr. D.N.M.). Filing and serving documents on the Court through CM/ECF is non-compensable clerical work. Weaver, 2011 WL 867136, at *4. Further, in the event of any dispute or lack of clarity as to the nature of a billing entry, "[t]he party requesting compensation from the estate bears the burden of demonstrating that the requested fees are reasonable." Id. at *3.
Here, there are several entries of 0.2 hours where Mr. Holmes's legal assistant "[f]inalize[d], file[d], and serve[d]" documents on the Court.
Section 330(a)(3) lists six factors to consider when evaluating the reasonableness of fees. The Tenth Circuit has taken other factors from Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974). See In re Market Center East Retail Property, Inc., 730 F.3d 1239, 1249 (10th Cir. 2013) ("[B]ankruptcy court[s] must consider the § 330(a)(3) and Johnson factors in evaluating whether a proposed fee amount is reasonable"). The Johnson factors are
Market Center East, 730 F.3d at 1247; KOBA, 2019 WL 5584901, at *4; Hungry Horse, 2017 WL 3638182, at *3. The Court weighs the § 330(a)(3)/Johnson factors as follows:
Overall, the Johnson/§ 330(a)(3) factors weigh decidedly in favor of allowing Mr. Holmes's fee application in the in the amount of $8,016.25 (fees), $631.28 (tax), and $359.20 (costs), for a total allowance of $9,006.73.
Debtors' objection was not frivolous; the Court understands why they thought $9,200 was too much for Mr. Holmes's work in the case. Having heard Mr. Holmes's defense of his fee application, however, and having examined the docket and the fee bills, the Court concludes that, with the relatively minor adjustments discussed above, the fees charged are necessary, beneficial, and reasonable. The Court will enter a separate order consistent with this opinion.
