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allowing fees of nearly 85% of debt sought to be collected
Summary of this case from In re Makris, KalliopiOpinion
Case No. 03-32669-SAF-11.
November 1, 2004
MEMORANDUM OPINION AND ORDER
Corporate Press, Inc., the debtor, objects to claims 30 and 43 filed by Man Capital Corporation. Man has filed two proofs of secured claims. Corporate Press does not contest claim 30 to the extent that it asserts a claim of $11,528.40 for the pre-petition principal and interest due on a promissory note secured by certain of the debtor's equipment. In claim 43, Man asserts a claim of $23,632.70, which adds post-petition interest and attorney's fees to the pre-petition debt. The court conducted a hearing on the allowance of the claim on October 13, 2004.
The allowance of a claim constitutes a core matter over which this court has jurisdiction to enter a final order. 28 U.S.C. §§ 157(b)(2)(B) and 1334. This memorandum opinion contains the court's findings of fact and conclusions of law. Bankruptcy Rules 7052 and 9014.
Man objected to the debtor's plan of reorganization because the plan did not purport to pay Man as much on its claim as Man would receive under Chapter 7 of the Bankruptcy Code. Man contended that the collateral would be worth $15,000.00 if sold in the market. The court confirmed the plan. The plan states that no attorney's fees would be paid. But that provision is superceded by the court's finding that the plan complies with the Code. Therefore, Man is entitled to the benefits of 11 U.S.C. § 506(b).
Accepting Man's assertion that the market value of the collateral at confirmation was $15,000.00, Man's allowed secured claim is secured by property the value of which exceeds the claim, the claim being the pre-petition unpaid principal and interest of $11,528.40. Accordingly, under § 506(b), the court "shall allow" Man "any reasonable fees, costs, or charges provided for under [the loan] agreement . . ." The pre-petition security agreement provides for attorney's fees and expenses and interest.
The Bankruptcy Code permits recovery of "reasonable" fees and expenses. In re Hudson Shipbuilders, Inc., 794 F.2d 1051 (5th Cir. 1986). Counsel may perform services at the request of Man. Regardless of what Man and its counsel agreed concerning payment for those services, the court must determine whether it is reasonable to charge the debtor under the loan agreement and the Bankruptcy Code for those services. Brown v. Sullivan, 917 F.2d 189, 192 (5th Cir. 1990). The standard for reasonableness is a federal standard. In re Hudson Shipbuilders, Inc., 794 F.2d at 1056. To determine reasonableness under the Code, the court must consider several factors. Hudson Shipbuilders, 794 F.2d at 1058.
The court must determine the nature and extent of the services rendered by counsel and the value of those services. In re First Colonial Corp. of America, 544 F.2d 1291, 1299 (5th Cir.),cert. denied, 431 U.S. 904 (1977). These two factors comprise the components for the lodestar calculation. Generally, the lodestar is calculated by multiplying the number of hours reasonably expended by reasonable hourly rates. Hensley v. Eckerhart, 461 U.S. 424 (1983). The court may then adjust the compensation based on the factors set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).Blanchard v. Bergeron, 489 U.S. 87, 91-92 (1989). The Johnson factors may be relevant for adjusting the lodestar calculation but no one factor can substitute for the lodestar. Indeed, the lodestar subsumes the first four factors. Shipes v. Trinity Industries, 987 F.2d 311, 321 (5th Cir. 1993).
Man's counsel charged 35 hours of services from the petition date through confirmation and including defending the claim. Of that time, the court finds 2.1 hours to be unreasonable and therefore disallowed. The disallowed time includes duplicate time charged by two attorneys in the firm without a showing of the necessity for both working on a matter or communicating with each other. In those instances, the court finds the time of Colleen McManus to be reasonable and compensable. The court disallows a charge for vagueness, the court being unable to determine the reasonableness of the work based on the description of the services rendered (9/16/2003 "attention to hearing on motion to lift stay"). The court has also disallowed time charged for researching case law on the rights of the oversecured creditor under the Code. That background research may not be charged to the debtor, even if Man directs its attorney to do that research or agrees to pay for the research.
Adjusting for the disallowed time, the court finds charges of $9,784.80 for 32.9 hours of work reasonable. The resulting blended hourly rate is within the range of rates customarily approved by this court as consistent with the market for similarly experienced attorneys.
Man asserts post-petition to confirmation interest of $2,176.00.
Accordingly, under § 506(b), the court adds the attorney fees of $9,784.80 and the interest of $2,176.00 to the prepetition principal and interest of $11,528.40, for a total of $23,489.20. That compares with claim 43 of $23,632.70.
However, the allowed secured claim may not exceed the value of the collateral. 11 U.S.C. § 506(a). Man represented to the court, at confirmation, that the collateral had a market value of $15,000.00. The record does not present a conflicting value. Accordingly, the court finds, for purposes of this matter, a value of $15,000.00. Man's secured claim must, therefore, be limited to $15,000.00.
Based on the foregoing,
IT IS ORDERED that Man Capital Corporation is allowed a secured claim of $15,000.00.