UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
TRI-CITY TURF CLUB, INC. CASE NO. 94-10360
TAMMY EVELYN FANNIN CASE NO. 99-71203
BRUNER BUILDING AND SUPPLY
COMPANY, INC. CASE NO. 99-50227
This matter came before the court for hearing on the fee applications filed in the within matters on behalf of attorney John O. Morgan, Jr. in each case. The court scheduled the matters for hearing and they were heard together on September 25, 2001. At the hearing, the court suggested that Mr. Morgan might supplement the application in each case, and in each case, he has done so by an amended application.
At the hearing on September 25, 2001 the court expressed to the attorney its concern pertaining to certain areas that appeared in connection with the fee applications. Those areas will be discussed in the following paragraphs.
The first area of concern was whether Mr. Morgan was adequately supervising non-attorney subordinates. In reviewing the applications, in some instances, the court noted work being done by paralegals, including drafting of pleadings and agreements with no corresponding time entry showing the attorney=s supervision of the work involved. The court=s concern was that, while certain mundane and repetitive functions might require little or no supervision in preparing documents for attorney=s review and execution, most of the work performed in these cases was of a non-routine and non-repetitive nature.
Another area of concern was the duplication of time entries for intra-office conferences. The court=s policy in this regard has been to allow only the time charges for the highest charging conferee at such intra-office conferences.
The court further expressed concern about the qualification of personnel performing paralegal duties for the attorney since the filing did not include adequate information to inform the court as to the qualification by way of education or experience to allow paralegal personnel to be properly qualified to render the services and, therefore, for the court to allow compensation for those services.
At the hearing, the court additionally expressed its concern that certain services rendered required only seconds to perform but were billed for 0.1 hours each. This type of service was the receipt of an executed order or document and, in some cases, multiple instances of receipt of such documents by the same paralegal during the same day were recorded and compensation for 0.1 hours for each was requested therefor. Clearly, determining that an order has been executed and entered by the court or that an agreement has been executed by a party is necessary and should, therefore, be compensable. However, a separate charge should not be incurred for each such act which requires only seconds at most. These matters should be included and itemized along with other larger time charges or several should be combined together for one minimum unit time charge.
The court further expressed its concern that some of the charges for paralegal services were apparently for secretarial services. Those services included preparing files for hearing, preparing documents for binder, and organizing binders for hearing, etc. These appear to be secretarial functions by their own description, and are subsumed under the attorney=s charges in the case.
The court also expressed concern about the use of Acontract@ attorneys by the applicant. While that question does not appear to concern the particular cases before the court, it does appear to raise the question of whether the contract attorney needs to make separate application to the court to be retained as an attorney since they are not a Amember@ of the Morgan firm.
Where attorneys are handling multiple matters within a case, it is very useful to have the matters broken out by category in order that the court may review the application and see all of the related services together in a continuous format rather than spread among various other unrelated services rendered for the same estate. The guidelines of the United States Trustee=s Office in this regard, when followed, render a fee application which is easier for the court and other interested parties to follow.
The court will now review the specific applications pending before the court in light of the above general concerns.
CASE NO. 99-71203 TAMMY EVELYN FANNIN
The amended application in this matter was filed with the court on October 15, 2001. It reduces the requested attorney=s fees from $1,318.00 to $460.00 and the requested expenses from $6.21 to $2.25. The amended application appears to delete the duplication of time charges for intraoffice conferences. It also eliminates charges for various other services by both Mr. Morgan and paralegals.
A review of the application indicates that duplication of services and charges for what amount to secretarial services, and other matters, have been eliminated from the request for services. As such, the application should be allowed in the amount requested, and the court will do so by separate order.
CASE NO. 99-50227 BRUNER BUILDING AND SUPPLY COMPANY, INC.
In this matter, the applicant debtor retained Morgan to represent it in its Chapter 11 proceeding. On April 11, 2001 Morgan applied for fees in the amount of $19,360.25 and expenses in the amount of $1,311.71 for a total application of $20,671.96. Against this, Morgan shows a credit for the retainer in the amount of $20,000.00 and a net balance due, if allowed, in the amount of $671.96. On June 28, 2001, the debtor filed an amended application requesting an allowance of attorney=s fees and expenses for Morgan in the same amounts as requested in the original April 11, 2001 application.
Pursuant to the September 25, 2001 hearing, on October 16, 2001, the debtor filed an amended application to be allowed to pay Morgan attorney=s fees in the amount of $17,045.75 and expenses in the amount of $896.40.
When the court compares the amended application filed October 16, 2001 with the amended application filed June 28, 2001, it appears that there are clerical errors in the summary which should be observed. The October 16 amended application recites a total of 10.70 hours chargeable for Mr. Morgan for work on this matter. The June 28 amended application recites 39.35 hours chargeable for Mr. Morgan. A review of the detail of the October 16 amended application, and adding up the hours chargeable by Mr. Morgan, indicates that he spent 40.71 hours per the itemized application instead of the 10.70 hours recited on the second page of that amended application. The court will treat this as a clerical error and give the applicant the benefit of the doubt since the time is clearly documented as 40.71 hours claimed chargeable by Mr. Morgan.
A review of the application by the court suggests that this matter was substantially practiced by the paralegal staff with only incidental attorney involvement on certain of the steps and procedures in the prosecution of this Chapter 11 case. Numerous incidents appear where paralegal personnel proceed to assemble information, confer with client, creditors and their attorneys, discuss agreed orders, prepare motions and, the court assumes, act upon these matters, without the intervention of an attorney. An example would appear to be the time charges listed from February 5, 1999 through February 15, 1999, where all of the time charges are those of paralegal personnel with no corresponding time entries of an attorney giving direction, supervision and review of the work of the paralegal personnel. Similar intervals occur from February 26, 1999 through March 8, 1999; July 28, 1999 through August 6, 1999; September 3, 1999 through September 22, 1999; October 25, 1999 through November 16, 1999; December 2, 1999 through December 29, 1999; May 16, 2000 through August 9, 2000, and August 18, 2000 through April 20, 2001. It is difficult for the court to imagine that the paralegal personnel are properly supervised in their proper tasks when there appear no entries of time charges for an attorney during these extended periods of substantial service to the client which indicate the supervision required. Additionally, a review of the application reveals many other instances where, while the paralegal personnel were rendering substantial services to the client, time entries were made by the attorney, Mr. Morgan, but in matters that indicate no supervision of those tasks being performed by the paralegal personnel.
Another area of concern are entries appearing on April 9, April 13, and April 16, 1999 indicating paralegal personnel began an initial draft of disclosure statement and plan and orders approving same and the lack of any corresponding time entry prior thereto or concurrent therewith documenting his supervision of this process critical to success in a Chapter 11 case. The court doubts that the drafting of a disclosure statement and plan, in substantial part, can be left to paralegal personnel because of the unique nature of each business and its circumstances which vary widely from case to case. Additionally, the requirements for approval of a disclosure statement and confirmation of a plan are difficult enough for experienced attorneys that the court doubts that delegation of preparation of adequate documents can be accomplished short of the investment of significant time in educating the paralegal personnel as to these concepts.
To further complicate the computation of fees in this matter, at some point during the representation of Bruner Building and Supply Company, the hourly rate of Mr. Morgan increased from $150.00 per hour to $200.00 per hour.
In reviewing the application before the court, it appears that Morgan rendered 40.71 hours of service, and when multiplied by his hourly rate applicable for each, results in a fee request for his services of $5,945.00 and this amount will be allowed. The court, having expressed its concern over the supervision of paralegal services, will reduce by one-third the requested compensation for paralegal services. This results in an allowance of $7,383.83 for paralegal time charges (two-thirds of the $11,075.75 requested). The total compensation due for legal services allowed by the court is $13,328.83. The court will further allow the request for expenses itemized in the amount of $896.40. A separate order will be entered allowing these fees and expenses.
CASE NO. 94-10360 TRI-CITY TURF CLUB, INC.
In this matter, the trustee, Phaedra S. Spradlin, has applied for an order allowing her to compensate Morgan and reimburse him for expenses. The original application, filed August 13, 2001, requests fees in the amount of $6,823.25 and expenses in the amount of $522.71. After hearing the matter on September 25, 2001, an amended application has been filed by the trustee changing those amounts to a request for $5,519.25 for fees and $567.59 for expenses.
The amended application lists 11.85 hours chargeable for attorney services and 39.05 hours chargeable for paralegal services. A review of the application indicates that there has been deleted from the original application various time charges which appear to be secretarial or ministerial in nature and not properly chargeable to the estate. While the court has the same concern about supervision of activities of paralegals by the professional, this particular application and the time entries indicate that Mr. Morgan, while delegating very substantial tasks to his paralegals, did exercise some supervision over them in reviewing documents, pleadings and other matters prepared by them for filing and indicates substantial compliance with appropriate ethical and legal requirements in that regard.
The application should be sustained as requested in the amount of $5,519.25 for attorney=s fees and $567.59 for expenses. The court will enter a separate order allowing these fees and expenses.
Dated this day of November, 2001.
BY THE COURT
John O. Morgan Jr, Esq.
Phaedra S. Spradlin, Esq.
Robin Browning Brock, Esq.
Attorneys for any Creditor Committees