UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
COVINGTON DIVISION
IN RE:
NORTHERN
KENTUCKY
PROFESSIONAL BASEBALL, LLC CASE
NO. 04-22256
CHAPTER 11
MEMORANDUM OPINION
This matter is before the court on
the First Interim Application for Approval of Compensation for Services
Rendered and Reimbursement of Expenses Incurred by Ulmer & Berne, LLP (“U
& B”), Counsel for the Official Committee of Unsecured Creditors (“the Fee Application”). The Fee Application seeks the sum of
$52,148.00 for services rendered and $1,503.77 for actual and necessary
expenses incurred, for a total of $53,651.77 for the period from September 15,
2004 through February 14, 2005. The Fee
Application represents that U & B does not anticipate filing any future
applications for payment of fees and reimbursement of expenses.
Lori Schlarman, the Estate
Representative, timely filed her Objection to First Interim Application (“the
Objection”), and U & B filed its Response to Objection by Estate
Representative (“the Response”). No
other party objected to the Fee Application.
The matter was heard on April 12, 2005, and taken under submission for
decision.
1. Factual and procedural background
The Official Committee of Unsecured
Creditors (“the Committee”) filed its Application for Authority to Employ Ulmer
& Berne, LLP as Counsel on September 23, 2004 (“the Employment
Application”). The Employment Application
was accompanied by an Affidavit in Support which made the required
representation of U & B’s disinterestedness. The Affidavit in Support also named the attorneys who would
render services, and set out the types of expenses for which compensation would
be sought. These included telephone and
telecopier charges, mail and express mail charges, special or hand delivery
charges, photocopying charges, computerized research, transcription costs, and
non-ordinary overhead expenses. The
Affidavit in Support further stated that charges for such expenses would be
made in a manner and at rates consistent with charges made to other
clients. The two attorneys who were to
render services during the pendency of the case were Richard G. Hardy (“Hardy”)
at the rate of $300.00 per hour and Reuel D. Ash (“Ash”) at the rate of $225.00
per hour. There were no objections to
the Employment Application, and on October 8, 2004, an Order Granting
Application was entered.
U & B filed its Fee Application
on February 16, 2005. The Estate
Representative filed her objection on March 8, 2005. She objects to the Fee Application on the following bases:
1. The Employment Application fails to
state the proposed “retention” of law clerks at $125.00 per hour and paralegals
at $130.00 per hour;
2. The Employment Application and the
order approving it do not clearly recognize that any fee will be paid as an
administrative fee along with other administrative fees, and to the extent that
the estate has insufficient funds to pay all such fees, that it will be paid on
a prorated basis;
3. The amount sought in the Fee
Application is excessive in view of the benefit provided to the estate,
particularly considering the “fee” proposed for law clerks and paralegals, the
nature of duplicative work performed, and the fee being charged by Debtor’s
counsel for the same. The Estate
Representative also objects to the request for reimbursement of expenses in
regard to charges for computer-assisted legal research, the cost to qualify
before the court, and charges for communications with the press;
4. Many of the specific time entries
indicate duplicative review of e-mails or pleadings from other counsel, billing
in excess of ten hours relating to the preparation of the Fee Application and
in excess of eight hours to the preparation of retention pleadings;
5. Time spent discussing abstract legal
questions and for research on law that is well known to bankruptcy
practitioners should not be compensable;
6. The majority of paralegal time was
expended in reviewing lien filings for mechanics lien holders when the
identical information was already available in the form of a “lien book”
prepared by counsel for the city of Florence and shared with U & B by
Debtor’s counsel.
The court will address each objection in turn.
2. Legal discussion
a. Applicable law
The pertinent statutes to be
considered in the context of this Fee Application are Bankruptcy Code sections
1103, 328, 330, and 331. Subsection
1103(a) permits an unsecured creditors’ committee to employ one or more
attorneys, with the court’s approval.
Pursuant to subsection 328(a), such employment may be “on any reasonable
terms and conditions of employment, including on a retainer, on an hourly
basis, or on a contingent fee basis.”
11 U.S.C. § 328(a). Section
330 provides in pertinent part:
(a)(1) After notice to the parties in interest and the
United States Trustee and a hearing, and subject to section[] . . . 328 . . ,
the court may award to a . . . professional person employed under section . . .
1103--
(A) reasonable
compensation for actual, necessary services rendered by the . . . attorney, and
by any paraprofessional person employed by any such person; and
(B) reimbursement
for actual, necessary expenses.
(2) 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.
(3) In determining
the amount of reasonable compensation to be awarded, 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; and
(E) 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)(1)(2)(3). Section 330(a)(3) codified the 12-factor formula set out in Johnson
v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), and used by
courts over the years to assess “reasonableness.” Section 331 provides for application for compensation on an
interim basis.
The burden is on the fee applicant
to prove entitlement to fees. In re
Wildman, 72 B.R. 700, 708 (Bankr. N.D. Ill. 1987). The starting point for determining an award
of attorney fees is the application of the "lodestar" method, whereby
"the attorney's reasonable hourly rate [is multiplied] by the number of
hours reasonably expended." In
re Boddy, 950 F.2d 334, 337 (6th Cir. 1991). “Once the applicant has met his burden of proof as to the reasonableness
of the fee request, the burden shifts to the objecting party.” In re Marlar, 315 B.R. 81, 86 (Bankr.
W.D. Ark. 2004). It is the court's task
to determine what is "reasonable.”
b. The Estate Representative’s
objections
The Estate Representative’s first
two objections are addressed relatively easily. There is no Bankruptcy Code provision that requires professionals
to seek “retention” of their employees such as paralegals and law clerks. In regard to the Employment Application and
whether it clearly states that any fee will be paid as an administrative
expense, review of the Employment Application reveals several references to the
payment of any fee to U & B as an administrative expense. In addition, as stated in U & B’s
Response, “[i]t is a given that the fees awarded would be administrative
expenses, and that U & B would be paid pari passu with other
administrative expenses.” These
objections are not well-taken. The
court finds that valuable services were rendered by the paralegal and the law
clerk which reduced the overall expense to the estate by performing these
services at rates considerably below those of the attorneys. However, it appears that the hourly rates
charged for these services exceed those customarily charged for similar
services on similar cases in the area.[1] The court will allow $90.00 per hour for
compensable services performed by the paralegal and $75.00 per hour for
compensable services performed by the law clerk. The court believes that these rates reflect the current charges
for such services in the urban areas of the Eastern District.
The Estate Representative next
objects to what she characterizes as duplicative services performed by U &
B. The Estate Representative does not
identify the alleged duplicative services.
Objections made on the basis of duplication of services are usually in
regard to billing for more than one attorney in the same firm doing the same
work. “What the Court must avoid is allowing
a double charge for the same service where attorneys are acting jointly in the
same capacity.” In re Sapolin Paints, Inc., 38 B.R. 807, 811 (Bankr.
E.D. N.Y. 1984). There has been no such
allegation here. The Estate
Representative makes a vague reference to “duplicative review of emails or
pleadings from other counsel on issues of not (sic) significance to the
unsecured creditors.” As U & B
points out, one does not know whether an e-mail or pleading is significant
until one reads it. This objection is
not well-taken.
The Estate Representative also
objects to the amount of time spent on preparation of the Employment
Application and the Fee Application, eight and ten hours respectively. U & B contends that the time expended for
these efforts was reasonable in comparison to the total time billed (the 10.8
hours to prepare the Fee Application is less than 5% of the 244.3 total hours
billed). Courts have addressed
objections to time spent on fee applications in different ways such as
reduction of time by a certain percentage or the limitation of compensation to
a percentage of the overall fee application.
See In re ACT Mfg., Inc., 281 B.R. 468 (Bankr. D. Mass.
2002). Generally speaking, however,
professionals are allowed reasonable compensation for the preparation of a fee
application. The court finds that the
time spent both on U & B’s getting retained and preparing the Fee
Application was reasonable.
The Estate Representative objects to
the paralegal time billed in regard to mechanics’ lien filings. U & B responds that the paralegal used
the “lien book” referred to by the Estate Representative as a starting point in
analyzing the claims and their validity, and did not merely reproduce the
material in the book. U & B points
out that the analysis was conducted at a time when it was uncertain whether the
mechanics’ lien holders would waive their claims against the Debtor’s estate,
and that the paralegal’s analysis would have enabled the estate to challenge
the validity of some of the liens if they had not. The court agrees with U & B that this objection is not
well-taken.
The Estate Representative objects to
time spent on research and expense claims for the cost of computer-assisted
legal research (WESTLAW). Experienced bankruptcy counsel should not be
compensated for time spent on research into relatively common bankruptcy
issues. In re Wire Cloth Products,
Inc., 130 B.R. 798 (Bankr. N.D. Ill. 1991). Here, however, Ash was dealing with complicated issues that were
significant to the outcome of the case.
His research time will be allowed.
As concerns WESTLAW charges, they are generally billed to clients and
proper use of WESTLAW and other computer-assisted legal research programs
represents a time savings in attorney hours on complex questions. These charges will be allowed.
Finally, the court’s review of the
Fee Application reveals that on October 1, 2004, Ash billed 0.40 hours for
assembling a package of materials for overnight delivery. This is secretarial work and the time for it
will be disallowed.
In conclusion, the court finds that
U & B should be awarded a fee in the amount of $50,664.00 and be reimbursed
for expenses in the amount of $1,503.77.
An order in conformity with this opinion will be entered separately.
Copies to:
Reuel D.
Ash, Esq.
Dennis R.
Williams, Esq.
U.S.
Trustee