Elawyers Elawyers
Washington| Change

In re Calvary Community Assembly of God, Inc., 17-13475-MKN. (2018)

Court: United States Bankruptcy Court, D. Nevada Number: inbco20181010933 Visitors: 22
Filed: Sep. 28, 2018
Latest Update: Sep. 28, 2018
Summary: ORDER ON FIRST AND FINAL APPLICATION FOR COMPENSATION AND REIMBURSEMENT OF EXPENSES FOR THE TIME PERIOD OF APRIL 1, 2018 THROUGH JUNE 30, 2018, BY BARNES & THORNBURG LLP 1 MIKE K. NAKAGAWA , Bankruptcy Judge . On September 5, 2018, the court heard the First and Final Application for Compensation and Reimbursement of Expenses for the Time Period of April 1, 2018 through June 30, 2018, brought by Barnes & Thornburg LLP ("B&T Fee Application"). The appearances of counsel were noted on the rec
More

ORDER ON FIRST AND FINAL APPLICATION FOR COMPENSATION AND REIMBURSEMENT OF EXPENSES FOR THE TIME PERIOD OF APRIL 1, 2018 THROUGH JUNE 30, 2018, BY BARNES & THORNBURG LLP1

On September 5, 2018, the court heard the First and Final Application for Compensation and Reimbursement of Expenses for the Time Period of April 1, 2018 through June 30, 2018, brought by Barnes & Thornburg LLP ("B&T Fee Application"). The appearances of counsel were noted on the record. After arguments were presented, the matter was taken under submission.

BACKGROUND

On June 28, 2017, Calvary Community Assembly of God, Inc. ("Debtor") filed a voluntary Chapter 11 bankruptcy petition along with its schedules of assets and liabilities ("Schedules") and other required information. (ECF No. 1). On the same date, a notice was sent to all parties in interest that a meeting of creditors would be held on August 3, 2017, at the office of the United States Trustee ("UST") for this judicial district. The notice also set forth a deadline of November 1, 2017, for non-governmental creditors to file proofs of claim, as well as a deadline of December 26, 2017, for government units to file proofs of claim.

On its Schedule "A/B," Debtor listed real property located at 2900 N. Torrey Pines Drive, Las Vegas, Nevada, described as including "a church, a school, and 5-6 acres of vacant land."2 The value of the real property was scheduled as $11,000,000. In addition to the real property, the same Schedule described various items of personal property having a value of $43,805.32. On its Schedule "D," Debtor listed one creditor identified as Assemblies of God Loan Fund ("AGLF") having a claim in the amount of $3,400,000 secured by a mortgage against the real property.3 No other secured claims were listed. On its Schedule "E/F," Debtor listed creditors holding priority and non-priority unsecured claims in the aggregate amount of $132,500. The Schedules are signed under penalty of perjury by Bruce A. Morris who is described as the "Pastor" of the Debtor.4

On December 26, 2017, the deadline for both non-governmental and governmental entities to file proofs of claim had expired. According to the claims register maintained by the clerk of the court, secured claims totaling $3,967,836.56, and unsecured claims totaling $63,354.78 had been filed by the applicable deadlines. Included in those figures are a secured claim filed by AGLF in the amount $3,659,055.84, and a separate secured claim in the amount of $308,780.72 filed by Assemblies of God, Northern California and Nevada.

On January 26, 2018, AGLF filed a motion to appoint a Chapter 11 trustee to replace the management of the Debtor ("Trustee Motion"). (ECF No. 94). The Trustee Motion was noticed to be heard on February 28, 2018. (ECF No. 96).

On February 27, 2018, the UST filed a motion to dismiss the Chapter 11 proceeding ("Dismissal Motion"). (ECF No. 100). The Dismissal Motion was noticed to be heard on April 4, 2018.

On February 28, 2018, the Trustee Motion was heard. No opposition to the appointment of a Chapter 11 trustee was filed by the Debtor, the UST, or any other party in interest. No party in interest appeared at the hearing to oppose the appointment of a Chapter 11 trustee. The motion was granted and counsel for AGLF was directed to submit an appropriate order.

On March 6, 2018, an order was entered granting the Trustee Motion and directing the UST to appoint a Chapter 11 trustee in this matter. (ECF No. 106).

On March 12, 2018, the UST submitted an application to approve the appointment of Kavita Gupta ("Gupta") as the Chapter 11 trustee for the case, along with a supporting declaration of the proposed trustee. (ECF Nos. 110 and 111). On the same date, an order was entered approving the UST's request. (ECF No. 112).

On March 19, 2018, a notice of acceptance of appointment as Chapter 11 trustee was filed on behalf of Gupta. (ECF No. 115). That notice was filed by the law firms of Holley Driggs Walch Fine Wray Puzey & Thompson ("Holley Driggs") and Cooley LLP ("Cooley").

On April 16, 2018, an application was filed pursuant to Sections 327 and 328 for authorization to employ the law firm of Barnes & Thornburg LLP ("B&T") as lead counsel for the Chapter 11 trustee as of April 1, 2018 ("B&T Employment Application"). (ECF No. 135). That application was filed by B&T and Holley Driggs, signed by Gupta, and accompanied by the supporting declaration of Ali M. M. Mojdehi ("Mojdehi Employment Declaration") (ECF No. 136).5 The application was noticed to be heard on May 23, 2018. (ECF No. 137).

On April 20, 2018, an application was filed pursuant to Sections 327 and 328 for authorization to employ Holley Driggs as local counsel for the Chapter 11 trustee nunc pro tunc to March 14, 2018. (ECF No. 151). That application was filed by Holley Driggs and B&T, signed by Gupta, and accompanied by the supporting declarations of proposed local counsel as well as the Chapter 11 trustee. (ECF Nos. 152 and 153). The application also was noticed to be heard on May 23, 2018. (ECF No. 154).

On May 21, 2018, an order was entered approving a stipulation to withdraw the UST's Dismissal Motion. (ECF No. 174).

On May 23, 2018, the applications to employ B&T and Holley Driggs were heard. No opposition or objections were filed or presented to either application. Both applications were granted.

On May 31, 2018, orders were entered approving the Chapter 11 trustee's employment of both B&T and Holley Driggs pursuant to Sections 327 and 328. (ECF Nos. 183 and 185).

On June 12, 2018, Gupta filed a substitution for Holley Driggs to act as lead counsel instead of B&T. (ECF No. 187).6

On June 13, 2018, an order was entered approving the substitution. (ECF No. 188).

On July 16, 2018, the instant B&T Fee Application was filed, accompanied by the Declaration of Ali M. M. Mojdehi ("First Mojdehi Fee Declaration").7 (ECF Nos. 224 and 225). The application was noticed to be heard on August 15, 2018. (ECF No. 226).8 The application, declaration, and notice of hearing were served on all parties in interest, including the UST. (ECF No. 227).

On August 6, 2018, an order was entered extending the deadline for the Chapter 11 trustee to object to the B&T Fee Application and continuing the hearing to September 5, 2018. (ECF No. 235).9

On August 22, 2018, the Chapter 11 trustee filed her objection to the B&T Fee Application ("Objection") accompanied by her supporting declaration ("Gupta Declaration"). (ECF Nos. 247 and 248).

On August 30, 2018, B&T filed a reply ("Reply") to the Objection along with a further Declaration of Ali M. M. Mojdehi ("Second Mojdehi Fee Declaration"), in addition to an ex parte motion to seal ("Seal Motion") portions of the Reply and accompanying declaration. (ECF Nos. 257, 258 and 255). Attached as Exhibit "1" to the Reply is a line-by-line response to the Chapter 11 trustee's Objection, using the Chapter 11 trustee's table format, to certain time entries contained in the B&T Billing Statement ("Reply Exhibit 1"). Attached as Exhibit "2" to the Reply is a table setting forth the time entries in the Chapter 11 trustee's tables in which she has objected on more than one basis ("Reply Exhibit 2"). Attached to the Second Mojdehi Fee Declaration as Exhibits "A" through "R" ("Mojdehi Exhibits") are copies of emails and letters, as well as billing invoices and statements, exchanged between the Chapter 11 trustee and the B&T firm. The Seal Motion, as well as redacted versions of the Reply and Second Mojdehi Fee Declaration, was served on all parties in interest, including the UST. (ECF No. 260).

On September 4, 2018, an order was entered granting the Seal Motion. (ECF No. 261).

APPLICABLE LEGAL STANDARDS

Section 330 provides that the court may award to a professional person employed under Section 327 reasonable compensation for actual, necessary services rendered by the professional person and reimbursement for actual, necessary expenses. 11 U.S.C. § 330(a)(1)(A)-(B). "The court may, on its own motion or on the motion of the United States Trustee, the United States Trustee for the District or Region, the trustee for the estate, or any other party in interest, award compensation that is less than the amount of compensation that is requested." 11 U.S.C. § 330(a)(2). Moreover, Section 330(a)(3) provides that:

In determining the amount of reasonable compensation to be awarded to . . . [a] professional person, the court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including — (A) the time spent on such services; (B) the rates charged for such services; (C) whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title; (D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed; (E) with respect to a professional person, whether the person is board certified or otherwise has demonstrated skill and experience in the bankruptcy field; and (F) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title.

11 U.S.C. § 330(a)(3)(A)-(F) (emphasis added).

Section 330(a)(4) provides that "[t]he court shall not allow compensation for (i) unnecessary duplication of services; or (ii) services that were not B (I) reasonably likely to benefit the debtor's estate; or (II) necessary to the administration of the case." 11 U.S.C. §330(a)(4)(A)(i)-(ii)(I and II). In Smith v. Edwards & Hale, Ltd. (In re Smith), 317 F.3d 918 (9th Cir. 2002), abrogated on other grounds by Lamie v. United States Trustee, 540 U.S. 526 (2004), the court observed that "[u]nder [S]ection 330(a)(4)(A), a bankruptcy court may award compensation if the services rendered were not unnecessarily duplicative and if the services rendered were both reasonably likely to benefit the debtor's estate and were necessary for the administration of the case." Id. at 926 (emphasis added). The Smith court acknowledged that Section 330 "[e]xpressly contemplate[d] compensation for preparation of fee applications." Id. at 927, citing 11 U.S.C. § 330(a)(6).

DISCUSSION

The B&T Fee Application seeks the allowance of attorney's fees in the amount of $123,114.50 and costs in the amount of $5,595.25 for 211.5 hours of services rendered from April 1, 2018 through June 30, 2018.10 Notice was properly given and only the Chapter 11 trustee has objected to the compensation requested by her former lead bankruptcy counsel.

The instant fee application is accompanied by hourly billing statements. The application summarizes the contents of the B&T Billing Statement by using the various "project categories" of services described in the professional compensation guidelines issued by the UST ("UST Guidelines").11 While the UST Guidelines provide a useful structure for fee requests to be reviewed, the court is not bound by those guidelines as they are not a substitute for the requirements of Section 330.

The Chapter 11 trustee does not object to the hourly rates billed by the various professionals tasked by B&T to perform services in this case. Instead, she objects both to specific time entries appearing in the B&T Billing Statement, and to the overall amount of the fees and costs sought. See Objection at 8:3 to 29:15.12 Specific fee reductions are requested, id. at 8:3 to 28:6, or, in the alternative, an across the board reduction of up to sixty percent of all fees requested by B&T. Id. at 28:7 to 29:15.13

The Chapter 11 trustee's specific reductions are set forth in seven separate "tables" of billing entries appearing in the Objection. The objections contained in these seven tables appear to fall into three categories. Table "1" and Table "2" object to time entries for email communications apparently between members of the B&T firm. For the entries encompassed by these two tables ("Category One"), the Chapter 11 trustee seeks a fee disallowance of $7,170.00. Table "3" objects to the amount of time spent by B&T in communicating with potential purchasers of the real property of the estate. Table "4" objects to the time spent by B&T in preparing the B&T Employment Application. Table "5" objects to the time spent by B&T to prepare and present a follow-up, postpetition financing motion. Table "6" objects to the time spent by B&T in preparing the instant fee application. For the entries encompassed by these four tables ("Category Two"), the Chapter 11 trustee seeks a fee disallowance of $26,145.14 Table "7" objects to billing entries that allegedly violate the UST Guidelines by being too vague, or describing services that are lumped together.15 For the entries encompassed by this table ("Category Three"), the Chapter 11 trustee seeks a fee disallowance of as much as $40,047.50. Inasmuch as the total amount of fees sought by B&T for services to the Chapter 11 trustee is $123,114.50, and the total amount of disallowances requested by the Chapter 11 trustee appears to be $73,362.50 ($7,170 + $26,145 + $40,047.50), the Chapter 11 trustee does not object to $49,752.00 in fees for services to the estate.16

The Chapter 11 trustee's alternative request for an across the board reduction ("Alternative Objection") overlaps the specific disallowances requested in the various tables, and appears to be based on the same internal emails amongst counsel, allegedly excessive time billed by senior attorneys, and alleged violations of the UST Guidelines. See Objection at 28:24 to 29:3.

Not surprisingly, B&T argues that the services rendered were reasonable under Section 330 and properly requested in this case. Moreover, B&T maintains that neither a disallowance of specific billing entries, nor an across the board reduction of the total requested compensation is appropriate.17

The court has considered the written and oral arguments of counsel, along with the declarations, billing statements, and record in the case. Based on these considerations, the court concludes that the B&T Fee Application should be granted as set forth below.

Category One.

The Chapter 11 trustee maintains that the B&T firm billed for too many email and other exchanges of information within the law firm. See Objection at 8:3 to 13:19. She relies on Table 1 to list eleven hours billed by B&T attorneys for, inter alia, reviewing and responding to emails from other firm members. She then relies on Table 2 to suggest that a "third attorney" with the initials "AM" also billed an additional 4.5 hours to perform duplicate, unnecessary tasks. Id. at 10:22 to 11:3. Because of the "unnecessary" or "duplication of" services represented by Table 2, the Chapter 11 trustee argues that the eleven hours described in Table 1, totaling $7,170.00 in professional fees, should be disallowed. Id. at 13:18-19.

A simple comparison between Table 1 and Table 2, however, reflects that most if not all of the "AM" entries appearing on Table 2 already appear on Table 1.18 Moreover, many of the entries in Table 2 are inaccurate. For example, a comparison of Table 2 to the entries in the actual billing statements would easily reveal that an entry dated 4/3/18 by "AM" for .10 hours under the description "Reviewed email regarding need for financing and related issues" simply does not exist; rather, that time entry and description is dated 04/04/18 under the name Ali Mojdehi. See B&T Billing Statement at page 11. Additionally, Table 2 includes an entry dated 04/12/18 by "AM" for .80 hours under the description "Reviewed and analyzed draft financing papers and exchanged emails regarding same and followed up" that also does not exist; the correct date is 04/13/18, but Table 2 also includes the correct entry as well. Compare B&T Billing Statement at page 12 with Table 2 at 12:21-22. Table 2 also includes an entry dated 04/19/18 by "AM" described as "Reviewed and analyzed draft loan documents and followed up regarding same and reviewed multiple emails exchanged regarding loan documents and upcoming hearing" that also did not exist, but which apparently took place on 04/24/18. Compare B&T Billing Statement at 12 with Table 2 at 9:18-20. Because Table 2 duplicates much of the information in Table 1 and also contains many inaccuracies, it hardly supports the Chapter 11 trustee's contention that the eleven hours set forth in Table 1 are unreasonable.

Having considered Table 1 and Table 2, as well as the substance of the Chapter 11 trustee's argument, however, the court overrules the Category One objection. By its nature, internal communications within a law firm create some duplication, but the intended purpose of such communication is to coordinate services on behalf of the client. The court's review of the time entries in Table 1 does not reveal an amount of duplication that is unreasonable in this case. The court therefore concludes that the Chapter 11 trustee's request to disallow fees for these services is without merit.

Category Two.

The Chapter 11 trustee also argues that B&T billed for too much time in four discrete areas. The Chapter 11 trustee does not suggest that services in those areas was unnecessary, but only that the time spent by the B&T firm was excessive.

First, the Chapter 11 trustee objects to 5.3 hours billed in connection with communicating with potential purchasers of the Debtor's real property. Those time entries appear in Table 3, but the Chapter 11 trustee argues that only .5 hours should be allowed for preparing a "two-paragraph email" that was transmitted to potential purchasers. She also argues that only 2.00 hours should be allowed for compiling a list of potential purchasers. See Objection at 14:26 to 15:3. By far the largest single entry in Table 3 is 1.2 hours on 4/4/18 that included a follow up with the client, i.e., the Chapter 11 trustee, regarding potential purchasers of the real property. There is another entry on 4/9/18 reflecting additional communications with the Chapter 11 trustee.19 Given the Chapter 11 trustee's own involvement in tailoring counsel's communications with prospective purchasers, the court concludes that "two-paragraph email" clearly involved more than the use of a keyboard. Thus, the total amount of time billed for communicating with prospective purchasers is not excessive.20

Second, the Chapter 11 trustee objects to 15 hours billed "to prepare B&T's employment application." Objection at 15:7-8. The cumulative billing entries are set forth in Table 4, and the total amount billed for the services set forth in Table 4 is $8,077.50. The Chapter 11 trustee argues that only four hours should be allowed to the preparation of the B&T Employment Application for an allowed fee of $2,100. Id. at 16:22-24.21 But even a cursory review of Table 4 reflects that the services were not restricted to the B&T Employment Application. Instead, it included preparation of the employment application for the Chapter 11 trustee's financial advisors. No later than the entry on 4/10/18, it appears from Table 4 that many of the subsequent billing entries include the preparation of the additional employment application. Indeed, the record reflects that on April 16, 2018, an application for authorization to employ Grobstein Teeple LLP as financial advisors was filed on behalf of the Chapter 11 trustee ("Grobstein Employment Application"). (ECF No. 138). Additionally, it appears that the largest single entry in Table 4 is 3.80 hours on 4/9/18 that included a conflict search with respect to B&T's employment application. Given the apparent size of the B&T firm, see Mojdehi Employment Declaration at ¶ 2, it is not unreasonable for B&T to have expended significant time examining and detailing its various connections as required by FRBP 2014(a). See Mojdehi Employment Declaration at ¶¶ 6 through 15. Moreover, gathering information to draft an employment application for a separate, outside professional, i.e., the financial advisors, is not the same obtaining information in-house.22 On balance, the court concludes that the time expended by B&T to obtain authorization for its employment was reasonable.

Third, the Chapter 11 trustee objects to 16.30 hours billed in connection with a "Second Financing Motion." Objection at 17:1-3. The billing entries are set forth in Table 5 and encompass services from 4/4/18 to 4/25/18. Id. at 17:4-19. Prior to the 4/4/18 billing entry, the record reflects that on March 26, 2018, a Verified Emergency Motion for Interim and Final Orders Authorizing Estate to Obtain Postpetition Financing; Granting Liens; and Scheduling a Final Hearing, was filed on behalf of the Chapter 11 trustee ("First Financing Motion"). (ECF No. 118). Attached to the First Financing Motion was a simple verification signed by the Chapter 11 trustee along with a copy of a letter dated March 26, 2018, containing a loan offer for postpetition financing. After an emergency hearing conducted in the morning of March 27, 2018,23 an interim order was entered in the afternoon granting the First Financing Motion and scheduling a final hearing for April 25, 2018. (ECF No. 123). On April 13, 2018, the Second Financing Motion was filed by B&T, along with the Holley Driggs firm, accompanied by the Declaration of Kavita Gupta in Support of Emergency Motion for Interim and Final Orders Authorizing Estate to Obtain Postpetition Financing; Granting Liens; and Scheduling a Final Hearing; and in Support of Order Shortening Time ("Gupta Financing Declaration"). (ECF No. 132). Attached to the Gupta Financing Declaration is a copy of a "Cash Requirements Analysis — Wind Down" along with a letter dated April 11, 2018, from the postpetition lender. The Chapter 11 trustee argues that only 4.5 hours should be allowed to prepare the Second Financing Motion as well as to prepare for a hearing, for an allowed fee of $2,362.50. Id. at 17:5-10.

It is clear, however, that the preparation of the Second Financing Motion was significantly different from the First Financing Motion. Moreover, it also is clear that the preparation for any hearing on the Second Financing Motion would be significantly different from the First Financing Motion, including a possible discussion of the projection of cash needs and the negotiations of the final agreement. Counsel in this district are well aware of the consequences of being unprepared, see, e.g., In re Spickelmier, 469 B.R. 903 (Bankr. D. Nev. 2012)(attorney's lack of preparation and professionalism subject to sanctions as an "epic fail"), so the court finds no fault in counsel adequately preparing for what ultimately became an uncontested proceeding. Thus, the court concludes that the time billed for the Second Financing Motion was reasonable.

Fourth, the Chapter 11 trustee objects to 12.90 hours billed in connection with the B&T Fee Application. Objection at 18:14-15. The billing entries are set forth in Table 6, encompass services from 5/21/18 to 6/22/18, and are in the total amount of $7,102.50. Id. at 18:19 to 19:8.24 The Chapter 11 trustee argues that only 7.0 hours should be allowed for the preparation of the B&T Fee Application, with those hours to be allocated between junior associates at a $350 hourly rate and senior attorneys at a $525 hourly rate; the total allowance would be $2,800. Id. at 19:17-21. Additionally, the Chapter 11 trustee objects to the allowance of any portion of the $7,175 in Estimated Additional Fees "to prepare for and attend the hearing for the Application with no explanation why an additional 12-13 hours would be justified for such services." Id. at 19:22-24. The Estimated Additional Fee, however, was not just for preparing and attending the hearing on the B&T Fee Application. Rather, the $7,175 estimate is based on an additional 9.5 hours spent from 07/02/18 to 07/27/18 to prepare the fee application totaling $5,092.50, see Mojdehi Exhibit "Q,"25 with the remaining $2,082.50 of the Estimated Additional Fee sought for attorney Mojdehi to prepare and attending the hearing. See Reply at 14:8-15 and Second Mojdehi Fee Declaration at ¶ 5.

The expenditure of 23 hours to prepare the B&T Fee Application appears is excessive inasmuch as the B&T Billing Statement already was separated into the project categories used in the UST Guidelines. See UST Guidelines at ¶ C.8 and Exhibit D-1 thereto. Indeed, B&T admittedly prepared its fee application using the UST Guidelines. See B&T Fee Application at 6:11-12. Construction of the fee application primarily involved preparing a summary of the services performed in each project category, see B&T Fee Application at 6:23 to 9:13, and a single paragraph explaining the necessity for the services. Id. at 11:7-23. While lead counsel in a Chapter 11 proceeding seldom are terminated mid-case, preparation of the instant application was otherwise routine because B&T was unaware of whether the Chapter 11 trustee would even object. Id. at 5:20-23.26 Under these circumstances, the court agrees with the Chapter 11 trustee that a portion of the total amount of fees for preparation of the B&T Fee Application, including the Estimated Additional Fee, should be disallowed. The total amount of $6,000 will be allowed for preparation and presentation of the instant fee application, and the balance of the amount requested for this task is disallowed.

Category Three.

The Chapter 11 trustee maintains that the B&T firm has not complied with the UST Guidelines. See Objection at 20:3-27. She relies on Table "7" to list time entries reflecting 86.10 hours billed by B&T professionals and seeks disallowance of $40,047.50 in fees for vague time entries or $37,280.50 for lumped time entries. Id. at 28:5.27 In response, B&T has provided an additional description of the services rendered, separates out the services lumped together, or both. See B&T's Reply Exhibit 1. At the hearing on the B&T Fee Application, no suggestion was made by the Chapter 11 trustee that the additional information supplied by B&T is insufficient to meet the UST Guidelines. More important, the court has reviewed Reply Exhibit 1 and concludes that B&T has provided sufficient information to discern the professional services performed and the time spent by the fee applicant as required by Section 330. The disallowances requested in this category are without merit.

Alternative Objection.

In the alternative, the Chapter 11 trustee seeks to disallow 60% ($73,868.70) of the $123,114.50 of fees appearing in the B&T Billing Statement, all of the $7,175 in Estimated Additional Fees, and $3,400 in "retroactive" storage fees, allegedly leaving a net of $78,848.45 in allowed fees and expenses. See Objection at 29:10-13.28 This across the board disallowance, however, is based on the Chapter 11 trustee's same objections encompassed by Category One, Category Two and Category Three. Id. at 28:22 to 29:3. Except for a disallowance in Category Two of a portion of the requested fees for preparation of the B&T Fee Application, the court concluded above that the Chapter 11 trustee's objections are without merit. For the same reasons, the court concludes that the fee disallowance sought by the Alternative Objection is without merit.

CONCLUSION

Based on the foregoing, the court will allow professional compensation for the project categories specified in the B&T Fee Application as follows: $46,496.00 for Asset Disposition, $2,665.00 for Business Operations, $11,812.50 for Case Administration, $15,961.00 for Claims Administration and Objections, $14,077.50 for Employment and Fee Applications,29 and $29,695.00 for Financing and Cash Collateral. The total allowed amount of professional fees is $120,707.00. Reimbursement for costs advanced is allowed in the total amount of $6,175.25.30 The total amount of allowed professional fees and reimbursement of costs will be $126,882.25.

IT IS THEREFORE ORDERED that the First and Final Application for Compensation and Reimbursement of Expenses for the Time Period of April 1, 2018 through June 30, 2018, by Barnes & Thornburg LLP, Docket No. 224, be, and the same hereby is, GRANTED in the amount of $120,707.00 in professional fees and $6,175.25 in reimbursement for costs advanced.

IT IS FURTHER ORDERED that the compensation and reimbursement allowed by this Order, in the total amount of $126,882.25, shall be paid by the Chapter 11 trustee at such time as sufficient funds are available in the bankruptcy estate to pay all allowed administrative expenses.

FootNotes


1. In this Order, all references to "ECF No." are to the number assigned to the documents filed in the above-captioned case as they appear on the docket maintained by the clerk of court. All references to "Section" are to the provisions of the Bankruptcy Code, 11 U.S.C. §§ 101-1532. All references to "FRBP" are to the Federal Rules of Bankruptcy Procedure.
2. In addition to a church and an elementary school, the Debtor also operated a daycare facility on the real property.
3. As the owner of the real property, the Debtor's opinion of its value ($11,000,000) would be admissible. See In re Lake Tahoe Partners, L.L.C., 2016 WL 1626798, at *3 (Bankr. N.D. Cal. Apr. 21, 2016); Everest Stables, Inc. v. Canani, 2011 WL 1321657, at *3 (C.D. Cal. Oct. 6, 2011).
4. On July 10, 2017, an amended Chapter 11 petition was filed to which was attached a document entitled "Calvary Community Church, Church Board Agenda, June 15, 2017." Item 6 of that document indicates that at a prior gathering, the persons in attendance on June 15, 2017, had authorized a voluntary Chapter 11 proceeding to be filed on behalf of the Debtor.
5. It is not clear from the B&T Employment Application or the Mojdehi Employment Declaration when the involvement of Cooley ended. In any event, there has never been a request to approve the employment of the Cooley law firm and no compensation for its services prior to April 1, 2018, has been requested.
6. There is no dispute that the Chapter 11 trustee terminated the services of B&T on June 12, 2018, thereby necessitating the substitution of different lead counsel.
7. Attached as Exhibit "1" to the First Mojdehi Fee Declaration are copies of the May 31, 2018, June 11, 2018, and July 11, 2018 invoices and billing statements reflecting the services performed by the applicant (collectively "B&T Billing Statement"). Those billing statements identify by first and last name, rather than initials, the professionals at the B&T firm who performed the services described.
8. On July 31, 2018, a limited opposition to the B&T Fee Application was filed by AGLF. (ECF No. 232). That opposition by the secured creditor only concerns the source of payment of any allowed administrative expenses rather than the allowance itself. It does not need to be addressed at this time.
9. On August 16, 2018, Holley Driggs filed an application for allowance of final compensation as counsel for the Chapter 11 trustee through August 16, 2018. (ECF No. 237). The Holley Driggs application is supported by a declaration of counsel that includes copies of various billing statements from the law firm. (ECF No. 239). The billing statements of the Holley Driggs firm identify the professional performing services by use of initials, rather than first and last name. That fee application was noticed to be heard on September 19, 2018. (ECF No. 240). The following day, Holley Driggs filed a motion to withdraw as attorney of record that also was noticed to be heard on the same date as its final fee application. (ECF Nos. 243 and 244). Both the final fee application and the withdrawal motion disclose that the Chapter 11 trustee now will be represented by the law firm of Lewis Roca Rothgerber Christie LLP ("Lewis Roca"). As of the date of the hearing on the B&T Fee Application, an application for authorization to employ the Lewis Roca firm as counsel for the Chapter 11 trustee has not been filed.
10. Other than fees in connection with the preparation and presentation of the instant fee application, B&T does not seek compensation for professional services after its termination on June 12, 2018. B&T apparently does seek an additional $10,575 in estimated fees and costs incurred in July and August 2018, in connection with preparing and presenting the instant fee application ("Estimated Additional Fees"). See B&T Fee Application at 1:15-19. Elsewhere in the same fee application, however, B&T describes that additional amount as $7,175 rather than $10,575. See B&T Fee Application at 6:18-20 and 8:24-27. Although not stated in the instant application, it appears that the $10,575 amount consists of $7,175 plus the $3,400 in estimated storage fees sought by B&T. The additional fees sought for preparation of the fee application are set forth in the August 10, 2018 billing statement submitted as Mojdehi Exhibit "Q."
11. See Executive Office for the United States Trustee, Appendix B Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed Under United States Code by Attorneys in Larger Chapter 11 Cases, 78 Fed.Reg., No. 116 (June 17, 2013).
12. The Chapter 11 trustee has objected to the timeliness on which the monthly billing statements were provided to her by B&T. See Objection at 5:8-9. Given that the instant fee application encompasses services for seventy-three days from April 1, 2018, to June 12, 2018, and the transition of the same individual attorneys from the Cooley firm to B&T, the timing of the billing statements prepared by the latter law firm is not unreasonable. There appears to be no prejudice to the Chapter 11 trustee inasmuch as she has provided detailed objections to specific time entries as well as the aggregate amount of the fees requested. Moreover, no other party in interest has objected.
13. The Chapter 11 trustee also has objected to certain storage fees requested by B&T for the Debtor's records that were held by B&T after its employment was terminated. See Objection at 29:16-25. At the hearing on the instant fee application, the court was advised that the records were retrieved from B&T on August 1, 2018, and transferred to the offices of the Chapter 11 trustee's new counsel. The court also was advised that the parties resolved the dispute as to the $3,400 in estimated storage fees sought in the application. After the Objection was filed by the Chapter 11 trustee, B&T reduced its actual storage fee request to the final amount of $580.00, see Reply at 17:4-6, and the Chapter 11 trustee agreed to that figure at the hearing.
14. The Chapter 11 trustee summarizes the aggregate amount of the fee reductions requested in a separate table appearing on pages 3 and 4 of her Objection. The left hand column of that table states that there is a requested disallowance of $26,145, see Objection at 4:4, while the text of the Objection itself seeks a disallowance of $34,370. Id. at 13:20-23.
15. B&T's Reply Exhibit 1 provides an additional description of the services rendered or separates out the services lumped together. At the hearing on the B&T Fee Application, no suggestion was made by the Chapter 11 trustee that the additional information appearing in that Exhibit is insufficient to meet the UST Guidelines. The court has reviewed Reply Exhibit 1 and concludes that it provides sufficient information to discern the professional services performed and the time spent by the fee applicant as required by Section 330.
16. In the introduction to her objection, the Chapter 11 trustee states, inter alia, that she seeks an order disallowing $76,762.50 in fees and costs resulting in a proposed allowance of $78,848.45. See Objection at 2:2-5. If those two figures are added together, however, the total is $155,610.95. As the maximum amount sought by the B&T Fee Application, including Estimated Additional Fees, is $139,284.75, see B&T Fee Application at 1:13-19, the Chapter 11 trustee's basic math does not make sense.
17. The Chapter 11 trustee terminated the operations of the church, the elementary school, and the daycare facility on or about March 26, 2018. That decision was contrary to the recommendation of the then-Cooley and now-B&T attorneys to delay closures to soften the impact on church members, students, and parents. Apparently due to this fundamental disagreement, the relationship between the Chapter 11 trustee and her lead bankruptcy counsel deteriorated to the point where both questioned the professionalism and professional judgment of the other. See Mojdehi Exhibits "I" and "J." The unfortunate and unnecessary friction between two self-assured parties, however, is immaterial to the inquiry under Section 330.
18. The Chapter 11 trustee's use of tables to simplify the presentation of her objections is laudable but not necessarily helpful if the entries in the actual billing statements are not accurately transferred to the tables. Using a professional's initials in tables you create rather than the actual names in the billing statements, and then questioning the identity of the professional represented by the initials, see Objection at 10:14 to 11:3, is like claiming you have been misquoted in your autobiography.
19. Nothing in the Gupta Declaration suggests that the "follow up" and additional communications regarding potential purchasers did not take place, or should not have been taken into account by the Chapter 11 trustee's lead bankruptcy counsel.
20. Moreover, it appears that there was an additional paraprofessional named Andrea Mattingly who provided services to the estate, but whose services were not billed. See Second Mojdehi Fee Declaration at ¶ 15. Reference to Ms. Mattingly appears in Table 3 in the 4/9/18 time entry, but there is no separate time entry for Ms. Mattingly. While it would have been simpler to include separate billing entries for Ms. Mattingly as "no charge" items, it appears that B&T in fact did not charge for her services.
21. The Chapter 11 trustee argues that the Holley Driggs firm billed only $1,667 for its employment application "which is over 80% less than the amount billed by B&T for the same service." Objection at 16:21-22. The court is not sure how a figure can be "over" a certain percentage "less" than another figure. Perhaps the objection is that the amount sought by B&T is 4 times the amount sought by Holley Driggs for a similar fee application, or that Holley Driggs billed only 20% of the amount billed by B&T. Regardless of the amount of time billed by the Holley Driggs firm or any other professional for similar services, however, the question is whether the time billed by the B&T firm is unreasonable under the circumstances.
22. In this instance, it appears that the financial advisors had a connection with the Chapter 11 trustee that required disclosure under FRBP 2014(a). See Declaration of Disinterestedness for Employment of Professional Person under Rule 2014, Federal Rules of Bankruptcy Procedure, at ¶ 7, attached to Grobstein Employment Application
23. At the emergency hearing, the Chapter 11 trustee's attorney, Janet Gertz, appeared telephonically, as well as Robert Kinas, counsel for the postpetition lender. After the First Financing Motion was granted, it appears that much of the drafting of the Second Financing Motion was done by attorney Allison Rego of the B&T, who bills at a significant, but lower hourly rate than attorneys Gertz or Mojdehi.
24. There is a discrepancy in the entries appearing in Table 6 as well as the total amount billed for the instant fee application compared to the entries and total amount shown in the B&T Billing Statement. Table 6 appears to include the billing entries shown on page 8 of the June 11, 2018 billing statement and page 3 of the July 11, 2018 billing statement. See B&T Billing Statement at pages 27 of 35 and 33 of 35. The total shown on Table 6 ($7,102.50) does not match the combined dollar amounts on those pages of the billing statements ($2,275 plus $5,570, i.e., $7,845). Table 6 omits a time entry for 5/23/18 of .60 hours for attorney Gertz (therefore totaling 13.5 hours), but that entry would not explain the dollar amount of the discrepancy.
25. With the additional 9.5 hours appearing in the August 10 billing statement, plus the 13.5 hours appearing in the prior B&T Billing Statement, it appears that a total of 23.0 hours have been billed for the B&T Fee Application. Adding $5,092.50 to the $7,103.50 found in Table 7, the total amount sought for preparation of the B&T Fee Application would be $12,196.00. Adding $7,175.00 to the $7,103.50 found in Table 7, the total amount sought for preparation of the B&T Fee Application would be $14,278.50. If the hours encompassed by the Estimated Additional Fee are added to the 211.5 hours encompassed by the B&T Fee Application, the time allocated to the B&T Fee Application itself would be slightly more than ten percent of the total hours for which compensation is requested.
26. Although it appears that B&T expended substantially more time and effort in preparing its response to the Chapter 11 trustee's objections, its fees for such efforts are not compensable and B&T does not seek them. See Baker Botts L.L.P. v. ASARCO LLC, 135 S.Ct. 2158, 2166-67 (U.S. 2015). both sides to a fee dispute. The court apologizes in advance, of course, if its own numerical calculations are inaccurate.
27. Many of the time entries in Table 7 also appear in Tables 1, 3, 4, 5 and 6. Reply Exhibit 2 specifically identifies the time entries in Table 7 that appear in the other tables. At the hearing, the Chapter 11 trustee acknowledged that granting the relief requested by all of the tables would duplicate the disallowances for certain services performed by the B&T firm.
28. These figures ($78,868.70 plus $7,175 plus $3,400) come to a total of $89,443.70. If that total is subtracted from the maximum amount sought in the B&T Fee Application ($139,284.75), see note 16, supra, the remainder is $49,841.05 rather than $78,848.45. So the court cannot reconcile the latter figure used by the Chapter 11 trustee. The phrase "I was told there would be no math" is the stuff of comedy legend, see https://vimeo.com/65921206, but contested fee applications should not require the court to review the basic arithmetic used by
29. This figure represents $8,077.50 for the professional employment applications included in Table 4, plus the $6,000.00 allowed for preparation of the B&T Fee Application.
30. This figure represents the $5,595.25 requested through June 30, 2018, plus the agreed post-termination storage fees of $580.00.
Source:  Leagle

Can't find what you're looking for?

Post a free question on our public forum.
Ask a Question
Search for lawyers by practice areas.
Find a Lawyer