Opinion
5:18-03265-MJC
10-18-2023
In re: Jessie R. Thomas, Taheesha Thomas, Debtors.
Chapter 13
OPINION
MARK J. CONWAY, BANKRUPTCY JUDGE
Pending before the Court is the Amended Seventh Interim Application of Attorney for Chapter 13 Debtor for Compensation and Reimbursement of Expenses ("Seventh Interim Application") that was filed on May 11, 2022, Dkt. # 149, by Debtors' Counsel, Mr. Gary J. Imblum, Esquire ("Counsel" or "Mr. Imblum"). Mr. Imblum seeks approval of $1,596.00 in compensation and reimbursement of expense of $77.76 for the period from April 30, 2021 through August 24, 2021. Also before the Court for review are Counsel's six previous interim fee applications, which, combined with the Seventh Interim Application, total $26,501.19, in what the Court considers a "routine" Chapter 13 case in this District.
For the reasons stated below, the fee applications will be reduced and interim compensation in the amount of $13,337.25 and reimbursement of expenses of $1,596.79 will be approved.
I. JURISDICTION
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§157 and 1334 and the March 11, 2016 Standing Order of Reference of the United States District Court for the Middle District of Pennsylvania. This matter is a core proceeding pursuant to 28 U.S.C. §157(b)(2)(A), (B), and (O). Venue is proper pursuant to 28 U.S.C. §1409(a).
II. PROCEDURAL HISTORY
At the outset of this case, Mr. Imblum filed his Federal Rule of Bankruptcy Procedure 2016(b) Disclosure of Compensation on October 1, 2018. See Dkt. # 21. It reflected that Mr. Imblum received from Debtors a pre-petition retainer in the sum of $1,585.00 and that he would bill against the retainer at an hourly rate of $295.00, $235.00 for associate counsel, and $135.00 for paralegal time on a lodestar basis. Nothing in the record indicates if Counsel ever quoted an estimated total fee to Debtors.
Mr. Imblum filed his first Application of Attorney for Chapter 13 Debtor for Compensation and Reimbursement of Expenses ("First Interim Application") on March 18, 2019, seeking $7,901.75 in attorney's fees and $729.44 in costs for the period July 6, 2018 through February 13, 2019. See Dkt. # 58.
Mr. Imblum filed six subsequent interim fee applications as follows:
Mr. Imblum billed fees for preparation of each of these Applications of an average of $408.00 each. Additionally, Mr. Imblum billed costs of approximately $70.00 for each of these Applications.
• March 4, 2020 - $2,560.00 of fees and $97.05 in costs for February 4, 2019 to September 25, 2019 ("Second Interim Application"). See Dkt. # 81.
• May 8, 2020 - $7,223.00 of fees and $235.35 in costs for September 26, 2019 to April 13, 2020 ("Third Interim Application"). See Dkt. # 105.
• September 28, 2020 - $1,454.50 of fees and $104.85 in costs for April 14, 2020 to September 9, 2020 ("Fourth Interim Application"). See Dkt. # 111.
• January 26, 2021 - $1,863.00 of fees and $75.05 in costs for September 10, 2020 to November 24, 2020 ("Fifth Interim Application"). See Dkt. #115.
• June 11, 2021 - $2,165.50 of fees and $277.94 in costs for November 25, 2020 to April 29, 2021 ("Sixth Interim Application"). See Dkt. # 125.
• November 8, 2021 - $1,736.00 of fees and $77.76 in costs for April 30, 2021 to August 24, 2021 ("Seventh Interim Application"). See Dkt. # 131.
There was some overlap between the First and Second Interim Applications, which was corrected with the amended applications.
Each of these applications, exclusive of the Seventh Interim Application, were approved on an interim basis. See Dkt. #s 59, 94, 108, 112, 118, & 126. In total, the seven applications seek a staggering $24,903.75 in compensation and $1,597.44 in expenses, and because the case hasn't been completed yet, the Court assumes Counsel will seek approval of additional applications.
This case was previously assigned to Judge Robert N. Opel, II, until his retirement, and then to Chief Bankruptcy Judge Henry W.Van Eck. This case was reassigned to the undersigned Judge upon appointment to the bench on July 30, 2021. See Dkt. # 127. It is worth noting that the Fee Applications taken separately may not appear excessive but when taken together and totaling over $25,000 on an interim basis, they are, for the reasons set forth below, clearly excessive in this routine case.
Upon review of the Seventh Interim Application and taking into account the six previous applications, the Court issued an Order to Mr. Imblum to show cause why his applications for compensation should be approved based upon, inter alia, the standards as set forth in In re Busy Beaver Building Centers, Inc., 19 F.3d 833 (3d Cir. 1994). See Order, dated February 24, 2022, Dkt. # 140.
The Court is also not aware of a "routine" consumer bankruptcy case in this District having seven interim fee applications and possibly more to come.
On April 21, 2022, the Court held a hearing on the applications, where Mr. Imblum appeared but Debtors did not. At the conclusion of the hearing, the matter was taken under advisement and Mr. Imblum indicated that he would submit amended applications based upon the concerns addressed at the hearing. Accordingly, Mr. Imblum filed amended applications on May 11, 2022 (collectively "Amended Fee Applications"):
• First Amended - $7,278.25 of fees, a reduction of $623.50. See Dkt. # 143.
• Second Amended - $1,841.50 of fees, a reduction of $718.50. See Dkt. # 144.
• Third Amended - $6,599.00 of fees, a reduction of $624.00. See Dkt. # 145.
• Fourth Amended - $1,131.50 of fees, a reduction of $323.00. See Dkt. # 146.
• Fifth Amended - $1,763.50 of fees, a reduction of $99.50. See Dkt. # 147.
• Sixth Amended - $1,885.50 of fees, a reduction of $280.00. See Dkt. # 148.
• Seventh Amended - $1,596.00 of fees, a reduction of $140.00. See Dkt. # 149.
The amendments reduced the total requested compensation by $2,808.50. This brought the total requested compensation for Amended Fee Applications down to $22,095.25.
While the Amended Fee Applications were under advisement, Mr. Imblum withdrew the Amended Fee Applications (except for the Seventh Amended), without explanation. See Dkt. # 158 - 163. Not knowing the impetus for withdrawal of the amended applications and choosing not to speculate on whether Counsel was abandoning any further claim for fees, the Court set a status conference. See Dkt. # 164. At the status conference, Counsel indicated that he withdrew the amended fee applications because he had stopped receiving payments from the Chapter 13 Trustee under the plan due to the fee applications being under advisement by the Court.
The Chapter 13 Trustee's records indicate that to date, Debtors have paid into the estate a total of $77,470.66 and Mr. Imblum has been paid $19,954.28 from these funds.
Mr. Imblum subsequently refiled the Amended Fee Applications (First through Six) on March 24, 2023. See Dkt. # 166 - 171. The Amended Fee Applications are ripe for disposition.
In a different Chapter 13 case where Mr. Imblum was counsel for the debtor, the Court reduced his fees by 30% finding that the excessive billing of almost $10,000 on an interim basis was for services that were either non-billable administrative tasks, should have been billed at non-attorney rates, and/or for excessive time billed for certain tasks. See In re Grove, No. 5:20-0698-MJC, Dkt. # 56.
III. THE BANKRUPTCY CASE
Given the substantial interim fee requests of Counsel, it is beneficial to outline the facts and circumstances in this routine Chapter 13 case in order to determine whether there is any basis for the payment of these extraordinarily high fees.
Debtors Jessie and Taheesha Thomas initiated this bankruptcy case by filing a voluntary Chapter 13 petition on August 2, 2018. After two extensions of time, Debtors filed their schedules, statements, and other required documents, including their Chapter 13 plan, on October 1, 2018. See Dkt. #s 21 & 24.
According to Schedule A/B, Debtors own a single-family home in Allentown, Pennsylvania and four vehicles, all encumbered with secured debt. See Dkt. # 21. Debtors listed $441,011.94 in secured debt and $68,139.32 in unsecured debt with $20,315.00 being attributed to student loans. See Id. As per Schedules I and J, Debtors are wage earners, with one employed as a leasing agent and the other employed over the winter months performing snow removal. Id. Debtors also receive a monthly stipend for a disabled brother ($3,000) and contributions from various family members who reside with Debtors. Schedule I reflects a combined monthly income in the amount of $11,183.13. After deducting expenses, Debtors report a monthly net income of $1,598.68. This net income would be the amount available to fund Debtors' Chapter 13 Plan.
Counsel indicated that this is a household of nine. See April 21, 2022 Transcript at 8, Dkt. # 152. Schedule J indicates that Debtors' dependents are three minor children, two adult children and two siblings. Notably, the Schedules do not indicate any income information for the adult "dependents" other than the stipend and the voluntary contributions listed on Schedule J.
According to Mr. Imblum, the bankruptcy case was filed because Debtors were several months behind on their mortgage and on two of their vehicle loans. See 4/21/22 Tr. at 8; Supplement to Seventh Fee Application at 1, Dkt. # 151. The case was intended to also address excessive interest rates on one or more of the vehicles and to cramdown the values in the plan. Id. Throughout the case, according to the testimony of Mr. Imblum, Debtors changed their minds on the treatment of the vehicles causing numerous amended plans to be filed. See 4/21/22 Tr. at 8. It appears as though almost every time the plan was amended, Counsel would file a request for compensation.
The initial Chapter 13 plan provided, inter alia, to cure mortgage arrears to Lakeview Loan Servicing, LLC ("Lakeview"), pay the debts in full through the plan for two vehicles, a 2013 Mercedes S550 and a 2008 Cadillac Escalade, and cramdown Debtors' other two vehicles, a 2012 Mercedes E350 and a 2011 Chevrolet Malibu. Debtors proposed to pay $1,600.00 per month over 55 months, for a total of $88,000.00, which included $6,000.00 in arrears on their home mortgage. See Dkt. # 24. Three creditors lodged objections to the initial Chapter 13 plan. See Dkt. #s 32, 42, & 43.
In response to the objections, Debtors filed an Amended Plan on January 4, 2019. After entering into a stipulation with Lakeview regarding its objection to the Amended Plan, the Court confirmed the Amended Plan on March 7, 2019 ("Confirmed Plan"). Dkt. # 57. Under the Confirmed Plan, Debtors were obligated to pay $1,650.00 per month to the Chapter 13 Trustee to address, inter alia, arrears on Debtors' mortgage to Lakeview. The total base amount under the Confirmed Plan was $89,050.00.
Since confirmation of the Amended Plan, Counsel has filed six motions to modify the confirmed plan, which are briefly described below. See Dkt. #s 80, 97, 114, 119, 128, & 132.
By August 2019, Debtors were three months in arrears to the Chapter 13 Trustee in the amount of $4,950.00. See Dkt. # 60. Then, in November 2019, Lakeview filed a motion for relief from automatic stay asserting arrears of $8,746.85. See Dkt. # 68. The First Motion to Modify Confirmed Plan was filed on March 4, 2020 to cure the arrears to the Trustee and Lakeview, to surrender the 2011 Chevrolet Malibu to Ally Financial and 2012 Mercedes E350 to AmeriCredit/GM Financial, and to include attorney's fees and costs through September 25, 2019. See Dkt. # 80.
Counsel filed his Second Interim Fee Application on the same day. Dkt. # 81.
The First Motion to Modify was mooted before the Court could consider it by Debtors' Second Motion to Modify which was filed on April 8, 2020. Dkt. # 97. The Second Motion to Modify was filed to correct typographical errors in the proposed Second Amended Plan. The Court granted the Second Motion to Modify. See Order, entered May 6, 2020; Dkt. # 104.
Counsel filed his Third Interim Fee Application two days later. Dkt. # 105. This included fees of $271.50 for preparation of Fee Application and costs of $64.35 to serve it.
Debtors filed their Third Motion to Modify on January 26, 2021. Dkt. #114. The purpose of this proposed modification was to extend plan payments for a full sixty months, surrender the 2008 Cadillac Escalade to OneMain Financial, and to include attorney's fees and costs through September 8, 2020. The Court granted the Third Motion on February 22, 2021. Dkt. # 118.
Less than a month later on March 18, 2021, Debtors filed their Fourth Motion to Modify. Dkt. # 119. This modification sought to take advantage of the relief available under the Coronavirus Aid, Relief, and Economic Security (CARES) Act as a result of the pandemic. According to the Fourth Motion, Debtors experienced significantly reduced income and proposed to extend the plan term to eighty-four months. The proposed plan also adjusted the amount paid to AmeriCredit/GM Financial and include attorney's fees and costs incurred through November 24, 2020. The Fourth Motion was granted on April 13, 2021. Dkt. # 121.
Debtors filed a Fifth Motion to Modify on September 3, 2021. Dkt. # 128. This motion was filed because Debtors reversed course on surrender of the 2008 Cadillac Escalade and sought to cramdown the value of the vehicle. The Fifth Motion was granted without objection. Dkt. # 129. A couple of months later, in November 2021, Debtors sought to amend the plan for the sixth time. See Dkt. # 132.
Counsel indicated that two vehicles were totaled during the case and Debtors were undecided whether to purchase at least one of the vehicles from the salvage company and have it repaired. See 4/21/23 Tr. at 14-16; Exhibit at 3, 5-6, Dkt. # 141.
The Sixth Motion to Modify included attorney's fees and costs incurred through August 24, 2021, eliminated the pre-petition arrears to Lakeview because a loan modification had been granted, and corrected the amount paid to AmeriCredit/GM Financial. The Sixth Motion was granted on January 5, 2022. Dkt. # 137. The base amount for the Seventh Amended Plan was $100,314.76.
It is significant to note that there have been no claims litigation or adversary proceedings filed in this case and from the docket it does not appear as though counsel ever appeared in Court for any hearing other than remotely through Courtcall or Zoom.
IV. LEGAL STANDARD
Under the Bankruptcy Code, compensation of professionals is governed by Section 330. In Chapter 13 cases, the Court may award "reasonable compensation" to debtor's counsel, taking into account "the nature, the extent, and the value of such services." 11 U.S.C. §330(a)(3). Under §330(a)(3), the Court must consider:
(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).
Also relevant in Chapter 13 cases is Section 330(a)(4)(B), which governs the circumstances where an attorney provides services that benefit the debtor, rather than the bankruptcy estate. It provides:
In a chapter 12 or chapter 13 case in which the debtor is an individual, the court may allow reasonable compensation to the debtor's attorney for representing the interests of the debtor in connection with the bankruptcy case based on a
consideration of the benefit and necessity of such services to the debtor and the other factors set forth in this section.11 U.S.C. §330(a)(4)(B). Thus, in order for attorney services to be compensated from the bankruptcy estate, those services must: "1) be provided to an individual debtor; 2) be provided 'in connection with' a Chapter 12 or Chapter 13 case; 3) benefit the debtor; 4) be necessary to the debtor; and 5) otherwise be appropriate under the terms of § 330." In re Pochron, 2022 WL 1085459, at *4 (Bankr. S.D. Ohio 2022) (citing In re Hunt, 588 B.R. 496, 499 (Bankr. W.D. Mich. 2018)).
Generally, courts have construed the phrase "in connection with the bankruptcy case" broadly. See Pochron, 2022 WL 1085459, at *4 (collecting cases). Thus, Section 330(a)(4)(B) "may include services related to the precipitating cause of the bankruptcy, or services which are inextricably intertwined with the bankruptcy." In re Keller Fin. Servs. of Fla., Inc., 248 B.R. 859, 879 (Bankr. M.D. Fla. 2000). However, the phrase "in connection with the bankruptcy case" is not so broad as to cover "every service rendered to a person who is a debtor." In re Campbell, 259 B.R. 615, 626 (Bankr.N.D.Ohio 2001).
For requests for compensation, the burden of proof rests on the applicant to establish that the fees earned are reasonable. Zolfo, Cooper & Co. v. Sunbeam-Oster Co., 50 F.3d 253, 261 (3d Cir. 1995) (citing In re Metro Transp. Co., 107 B.R. 50, 53 (E.D. Pa. 1989)); Pochron, 2022 WL 1085459, at *2; In re Murray, 2007 WL 2317523, at *2 (Bankr. E.D. Pa. 2007). "This burden is not to be taken lightly, especially given that every dollar expended on legal fees results in a dollar less that is available for distribution to the creditors or use by [the] debtor." In re Pettibone Corp., 74 B.R. 293, 299 (Bankr. N.D.Ill. 1987) (citing In re Hotel Associates, Inc., 15 B.R. 487, 488 (Bankr. E.D. Pa. 1981)). Even in the absence of objection, "the bankruptcy court has a duty to review fee applications." In re Busy Beaver Bldg. Centers, Inc., 19 F.3d 833, 841 (3d Cir. 1994) (emphasis in original).
In determining a reasonable fee, the calculation most frequently used is the lodestar method, which, simply stated, multiples the number of expended hours by the hourly rate. In re Smith, 331 B.R. 622, 628 (Bankr. M.D. Pa. 2005) (citing Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)). Under the lodestar, courts frequently assess whether the services were provided in a cost-efficient manner. See In re Szymczak, 246 B.R. 774, 782 (Bankr. D. N.J. 2000) ("Simply because an attorney spent time, does not mean it is compensable or that counsel used the most economical means of rendering the services.").
A bankruptcy court has "broad discretion" to determine reasonable attorneys' fees, as the "bankruptcy court is more familiar with the actual services performed and has a far better means of knowing what is just and reasonable than an appellate court can have." In re ASARCO, L.L.C., 751 F.3d 291, 294 (5th Cir. 2014) (citing In re Lawler, 807 F.2d 1207, 1211 (5th Cir. 1987) (internal quotation marks and citation omitted)); Smith, 331 B.R. at 628.
Courts also look to ensure that an applicant has delegated tasks that do not require a senior attorney's expertise to less expensive attorneys or paralegals, Szymczak, 246 B.R. at 783, and that administrative tasks are billed at appropriate rates, see Busy Beaver, 19 F.3d at 855 ("[w]hen an experienced attorney does clerk's work, he or she should be paid clerk's wages") (quoting In re Vogue, 92 B.R. 717, 718 (Bankr. E.D. Mich. 1988)). Tasks such as "obtaining hearing dates, filing pleadings, copying, exhibit preparation, forwarding documents, preparing a certificate of service and ordering a transcript" are clerical in nature, can be accomplished by non-lawyers, and consequently, should be billed at paralegal or office staff rates. In re Oakes, 135 B.R. 511, 514 (Bankr.N.D.Ohio 1991). This type of review is necessary so that the costs of administration do not consume assets that otherwise would be available to creditors. See Badyrka, 2022 WL 4656034, at *10 (Bankr. M.D. Pa. 2022) (citing In re Fontaine, 2015 WL 5162557, at *3 (Bankr. M.D. Pa. 2015)).
The bottom line is that attorneys are expected to exercise reasonable billing judgment. See Busy Beaver, 19 F.3d at 856; Szymczak, 246 B.R. at 783. This involves "writing off unproductive research time, duplicative services, redundant costs precipitated by overstaffing, or other expenses with regard to which the professional generally assumes the cost as overhead in corresponding non-bankruptcy matters." Busy Beaver, 19 F.3d at 856.
In reviewing fee applications, the court must "conduct an objective inquiry based upon what services a reasonable lawyer or legal firm would have performed in the same circumstances." In re Fleming Companies, Inc., 304 B.R. 85, 89 (Bankr. D. Del. 2003) (quoting In re Cenargo Int'l, PLC, 294 B.R. 571, 595 (Bankr. S.D.N.Y. 2003)) (internal quotations omitted). A "judge's experience with fee petitions and his or her expert judgment pertaining to appropriate billing practices, founded on an understanding of the legal profession, will be the starting point for any analysis." Id. (citing Busy Beaver, 19 F.3d at 854). The Court should then consider any evidence submitted with the application or at a hearing. Id. When making its consideration, the court is not required to make a line-by-line analysis of the fee application, and a sampling will suffice. In re Maruko Inc., 160 B.R. 633, 645 (Bankr. S.D. Cal. 1993). "Because its time is precious, the reviewing court need only correct reasonably discernible abuses, not pin down to the nearest dollar the precise fee to which the professional is ideally entitled." Busy Beaver, 19 F.3d at 845.
Additionally, a fee applicant's failure to exercise billing judgment will result in reduction of fees where, in the sound discretion of the bankruptcy court, such fees are unreasonable. In re Maxine's, Inc., 304 B.R. 245, 249 (Bankr. D. Md. 2003). "The exercise of billing judgment is the voluntary reduction of a fee by counsel to a private client for services that either conferred a negligible benefit or were excessive." Id. (citing In re Leonard Jed Co., 103 B.R. 706, 713 (Bankr. D. Md. 1989)). "Such billing judgment is an absolute requirement of fee applications in bankruptcy." Maxine's, 304 B.R. at 249.
Judge France, in evaluating a fee application, stated "[a] bankruptcy court must balance adequately compensating attorneys in order to encourage competent counsel to represent bankruptcy debtors with insuring that the costs of administration do not consume assets that otherwise would be available to creditors. In making a fee determination, the court must take into consideration whether the professional exercised 'reasonable billing judgment.'" Fontaine, 2015 WL 5162557, at *3 (citation omitted). "The court's responsibility to protect the estate is especially important in chapter 13 cases where there is little motivation for a debtor, or creditors, to object to a particular fee allowance." Id. (quoting Szymczak, 246 B.R. at 778).
V. DISCUSSION
"Disagreeable as the chore may be, the bankruptcy court must protect the estate, lest overreaching attorneys or other professionals drain it of wealth which by right should inure to the benefit of unsecured creditors." Busy Beaver, 19 F.3d at 844 (citing Cohen & Thiros, P.C. v. Keen Enterprises, Inc., 44 B.R. 570, 573 (N.D. Ind. 1984)). This Court approves without comment or objection the vast majority of fee applications that come before it. However, where an application (or applications) appears to be so unreasonable, the Court is obligated to review the professional's charges.
Here, the primary reason why Counsel's fee applications were set for hearing was because, based upon the lack of any adversarial or novel legal work in this case appearing on the docket, the aggregate fees are extraordinarily higher than standard charges for similar cases in this District and more than five times the amount of the presumptively reasonable fee ("PRF") of $4,500.00, see L.B.R. 2016-2(c), for Chapter 13 cases in this District (the PRF also allows a maximum amount of $500.00 for each post-confirmation plan modification). The Court acknowledges that the instant case is not one in which Counsel has chosen to utilize the presumptively reasonable fee method for billing and practitioners are under no obligation to employ the PRF. However, as this Court has previously stated, it considers the PRF as a guide or "starting point" to what should be considered a reasonable fee in a routine Chapter 13 case in this District. See Badyrka, 2022 WL 4656034, at *6 (citing In re Schuman, 2013 WL 1195279, at *6 (Bankr. N.D. N.Y. 2013) (describing presumptive fee as "pre-calculated lodestar" and utilizing it as a starting point for review of lodestar fee applications)). It is Counsel's burden to support the "reasonableness" of billing over five (5) times the PRF in this case.
The PRF is an alternative method of billing that recognizes that generally speaking, many services rendered in Chapter 13 cases are "standard," and therefore, streamlines the billing process by forgoing formal fee applications and hearings.
The fee applications were also set for hearing to determine the reasonableness of billing at an attorney's hourly rate for administrative tasks that are in nature routine, ministerial, secretarial or paralegal time. As discussed below, Mr. Imblum's billing in this "routine" case appears to be grossly excessive compared to other practitioners in this District and, for the amount of fees charged, appears to have had little benefit to the Bankruptcy Estate, and the benefit to Debtors is questionable.
The Court notes that on October 5, 2023, Lakeview filed a certificate of default indicating that Debtors were two months in arrears on their mortgage payment. Dkt. # 182.
A. Hourly Rate/Delegation of Duties
At the outset, the Court states that it has no issue with Mr. Imblum's competence in Chapter 13 cases, as it finds that he satisfactorily and adequately represents his clients in bankruptcy cases. Furthermore, the Court believes his hourly rate of $295 appropriately reflects Mr. Imblum's experience and skill as an attorney and is reasonable for consumer bankruptcy practitioners in this District. Mr. Imblum employs three paralegals, all of whom have in excess of 18 years of experience. See 4/21/22 Tr. at 29-30; Supplement at 1-2. The billing rate of $135 per hour is also reasonable for paralegals in this District. Based upon these facts, Mr. Imblum and his office staff should be able to represent debtor clients in an efficient and effective manner.
Mr. Imblum has been practicing for 36 years. 4/21/22 Tr. at 29.
Notwithstanding and as stated above, the Third Circuit has instructed that as part of assessing the reasonableness of compensation, the Court must consider whether a particular task has been assigned to the appropriate professional or paraprofessional. See Busy Beaver, 19 F.3d at 855 ("Section 330(a) is not coy about this matter, but states expressly that how much compensation is reasonable depends on the nature and value of the services, as measured by the cost of comparable services."); accord In re Jefsaba, Inc., 172 B.R. 786, 796-97 (Bankr. E.D. Pa. 1994) ("The nature, extent and complexity of the task at hand determines the level of professional or paraprofessional who should perform the task, and, consequently, the reasonableness of the fees charged for the services.").
At the April 21st hearing, the Court addressed this issue with Counsel, as well as whether certain time entries might be considered non-billable administrative tasks. See 4/21/22 Tr. at 20-21. Counsel revised the Fee Applications in an effort to address these concerns and resubmitted them. The Court finds that the amendments have not adequately addressed certain time entries which the Court has determined to be not reasonable.
In reviewing the time detail, it is exceedingly apparent that there are numerous time entries where Mr. Imblum or his associate is billing at his full attorney rate but the particular task could very well be handled by a paralegal. Below are a few examples:
12/11/18
Call from Lakeview counsel Re: Will not oppose continuance
GJI
.2
$295.00
$59.00
12/11/18
Email to counsel for GM inquiring whether he would agree to continue confirmation hearing in light of unresolved objection.
JT
.2
$235.00
$47.00
12/18/18
Review of file Re: Settlement offer made to GM/AmeriCredit; Email to counsel Re: Please respond to offer.
GJI
.2
$295.00
$59.00
12/18/18
Review of Email from counsel for GM - accepting settlement offer.
GJI
.2
$295.00
$59.00
2/11/19
Review of Email from Trustee Re: Will recommend for confirmation on 2/20/19 if no objections filed.
GJI
.1
$295.00
$29.50
What should be clear from these examples is that items such as communications between counsel regarding continuances do not require the skill or training of a lawyer and should not be billed at a full attorney rate. A paralegal is perfectly capable of discussing a continuance or receiving information that the Trustee will recommend a plan for confirmation and should be billed accordingly. See In re Wilson, 2022 WL 24058, at *28 (Bankr. E.D.N.Y. 2022) ("where a senior lawyer seeks to be compensated as such for tasks that could well have been performed by a junior lawyer or a paraprofessional, then an appropriate adjustment may need to be made"). Counsel should be mindful that if a task requires analysis or action by an attorney, only then should it be billed at full attorney rates.
Of course, this is subject to the types of exceptions Busy Beaver identified. 19 F.3d at 855 ("time pressures not brought on by a lack of diligence, the excusable non-availability of a less experienced employee, or an inability to delegate the task efficiently, perhaps because the learning curve renders effective delegation infeasible").
Even though it is not required to conduct a line-by-line analysis, this Court has done so. See Appendix. As indicated on the Appendix, the Court has made determinations, based upon its experience not only as a Judge in this District reviewing other attorney fee applications, but also based upon being a former Chapter 7 Trustee and practicing in this District for thirty (30) years. See Busy Beaver, 19 F.3d at 854 ("…a bankruptcy judge's experience with fee petitions and his or her expert judgment pertaining to appropriate billing practices, founded on an understanding of the legal profession, will be the starting point for any analysis." (emphasis in original)). The Court has identified those time entries that have been reduced to a reflect an appropriate paralegal rate. These times entries are denoted with a "P".
B. Excessive Time Billed to Tasks
Although Chapter 13 cases can be complex and require a competent attorney's expertise, Chapter 13 cases are almost exclusively filed using standardized forms that are a part of a bankruptcy software program. These forms include the petition, schedules, statement of financial affairs and means test. The Chapter 13 Plan is a five (5) page standardized "Model Plan" approved to be used in this District. The financial calculations required in a Chapter 13 case such as the means test (Forms 122C-1 and 2) and the Chapter 13 plan are largely done automatically through the software program. After the filing of the case, a skilled paralegal utilizing the bankruptcy software program should be able to handle most of the tasks involved in making adjustments to the plan with minimum input from counsel and minimum time required.
Despite this, Counsel's Applications requested almost $25,000 (prior to amendment) and covers only the period up to August 24, 2021. It is difficult for this Court to comprehend how these unreasonably large fees can be incurred in a routine case, much less how these struggling Debtors, if they were paying these fees directly, could afford them. Debtors' plan has blossomed from $88,000 (Dkt. # 24) to $100,314.76 (Dkt. # 132).
As stated in Busy Beaver, in most cases and particularly in a Chapter 13 such as this case, (i) the debtor has no real incentive to object to his or her counsel's fees since he or she is obligated to pay a fixed monthly payment based upon a determination of his or her disposable income; and (ii) creditors have no incentive since the cost-benefit of contesting the fees would not warrant a small pro-rata increase in plan distribution amount, Busy Beaver, 19 F.3d at 843.
The last plan would have been about $17,000 more but Debtors were successful in obtaining a loan modification. See Dkt. # 139.
This case was filed as an emergency petition so there is relatively little time billed in the pre-petition period. The case was confirmed just over seven months after the Petition Date. During that timeframe, Counsel billed just under $8,000. This means that in the post-confirmation period - which covers March 2019 to August 2021, Counsel racked up an eye-watering $16,900. This is for a nearly two and a half year period where most Chapter 13 cases are on "autopilot" and do not require much effort on the part of Counsel. However, it is only upon closer review of the time detail that it becomes apparent that Counsel and his paralegal staff severely and consistently overworked this case. Mr. Imblum's billing practices are reminiscent of the Court's observations in Szymczak, 246 B.R. at 783:
In reviewing Applicant's time records, it appears the Debtors were billed every time Applicant picked up the telephone, uttered the Debtors' name, or looked at the Debtors' case; even where nothing meaningful occurred. More importantly, time
was billed at full attorney rates where the work could, and should have been performed by a secretary or a paralegal. This court is highly skeptical of this practice, and especially discourages it in chapter 13 cases.
It's clear from the time records that Mr. Imblum exercised little billing judgment. Furthermore, it's evident that Mr. Imblum and his staff were heavy handed in billing on most matters. For example:
3/1/21
Review of memo from Paralegal Re: Reduced hours and change of jobs due pandemic; Review of Docket; Review of Trustee's Case Report; Review of file; Draft of Amended Plan; Draft of Motion to Modify Plan; Call to client Re: Tiering Plan; Letter to client; Follow up memo to calendar.
GJI
.8
$295.00
$236.00
3/1/21
Telephone call with client Re: Wage attachment and extending Plan term; Email to client with employer information form to complete and return with paystub; Memo to Attorney Re: Client want to extend Plan term.
BW
.4
$135.00
$54.00
3/18/21
Plan letter of instruction to clients Re: Terms of 5th Amended Plan.
BW
.2
$135.00
$27.00
4/9/21
Review of fax from Trustee Re: Taheesha no longer employer at TriNet; Email to client Re: Please provide information as to your new employer and pay Trustee directly until wage attachment resumes with new employer; Follow up memo to calendar.
GJI
.3
$295.00
$88.50
4/13/21
Review of e-mail from client - will apply to finance another vehicle and advise when no position letter is needed; Review of e-mail from client requesting contact information for OneMain to surrender Cadillac; Review of file; Responsive e-mail to client with telephone number for OneMain Financial
BW
.3
$135.00
$40.50
With regard to these types of time entries, it very difficult to understand for instance, how a paralegal with over 20 years experience requires 12 minutes to draft a simple letter to the client enclosing something for review - especially when it is very likely that staff is utilizing a form letter that has already been addressed to those clients and requires little modification. The Amended Fee Applications have many ".2" entries for very simple tasks that should take only a few minutes at most and therefore, the Court has reduced those time entries. See In re Trinh, 2022 WL 898758, at *4 (Bankr. C.D. Cal. 2022) ("[E]ven where evidence supports [that] a particular number of hours [were] worked, the court may give credit for fewer hours if the time claimed is 'excessive, redundant, or otherwise unnecessary.'" (citing Wechsler v. Macke International Trade, Inc. (In re Macke International Trade, Inc.), 370 B.R. 236, 254 (BAP 9th Cir. 2007))).
Furthermore, the Court questions the unusual need for six modifications to a plan in a two year period. The Court acknowledges that according to Mr. Imblum, Debtors were indecisive regarding their four vehicles (2 of which had no equity above loan balances), however, it's questionable whether Counsel should have indulged Debtors in pursuing what appears to have resulted in minimal benefit. It appears that Counsel and his staff expended approximately $1,500 in time on discussing with his clients, drafting, and confirming the amended plans in this case. This equates to 5 hours at Mr. Imblum's hourly rate. Yet, comparing the changes between the Fifth and Sixth Amended Plans shows that it's merely a matter of recalculating the base amount, and changing two lines of the model plan, which for a seasoned attorney and/or paralegal should take minutes and not hours. Another questionable expenditure of time relates to the Third and Fourth Amended Plans and how close in proximity they were proposed (less than two months apart).
Although not before the Court, it is not clear why Debtors, while experiencing financial difficulties, would incur thousands of dollars of legal fees trying to maintain 2 Mercedes Benz automobiles and a Cadillac Escalade with minimal equity, if any.
This amount has already been reduced due to excessive time spent on particular matters and is not indicative of the actual amount expended.
Taking into account that plans are on pre-printed forms that are computer calculated as a part of the attorney's software, in a PRF case, the Local Rules provide that an attorney may receive additional compensation in the maximum amount of $500 for each post-confirmation plan confirmation that is approved.
On the Appendix, the Court has identified and designated the time entries with an "E" for excessive time spent.
C. Non-billable/ Administrative Tasks
The Court also identified a few time entries that appeared to be duplicative and were disallowed. See Appendix entries marked with a "D." A few time entries were also disallowed as vague. See Appendix entries marked with a "V."
The last category of time entries involves non-billable tasks and requires no extended discussion. These entries include such items as E-filing documents with the Court, reviewing such items as an order transferring the case or granting a motion to modify, or reviewing an email confirming a continuance.
Filing documents with the Court is an administrative task that is part of overhead and should not billed to the client. The other types of tasks in this general category involve no more than a quick review to confirm that there is nothing unusual or unexpected in the order or email. These matters are certainly required to be performed but do not justify billing to the client a ".1" -that is 6 minutes when in reality these tasks require only seconds.
The above items have been identified and designated as "N" on the Appendix and the Court has disallowed these time entries.
VI. CONCLUSION
For the reasons set forth above, the Court concludes that a reduction of fees is warranted. The Court concludes that the Applicant is entitled to a total fee allowance for the Amended Fee Applications in the amount of $13,337.25 plus reimbursement of expenses of $1,596.79.
The Court notes that the expenses of $1,596.79 are more than $1,000 higher than the usual consumer Chapter 13 case. This is primarily due to the costs of service of the multiple fee applications and modified plans. Given the deduction in fees set forth herein, the Court has not reduced these expenses.
An appropriate order will be entered.
Mark J. Conway, Bankruptcy Judge
APPENDIX OMITTED.