Daniel N. Hoffman

OCR transcription for search; preserved printed pages are authoritative

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For The Northern District Of California

UNITED STATES BANKRUPTCY COURT

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AUTHENTICATE
U.S. GOVERNME
INFORMATION

GPO

Entered on Docket
October 12, 2006

GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
04-52699-ASW

In re Case No.

DANIEL N. HOFFMAN, Chapter 13

]
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Debtor ]
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MEMORANDUM DECISION REGARDING REQUEST FOR
ATTORNEYS FEES UNDER BANKRUPTCY CODE SECTION 506 (b)

Before the Court is a motion by secured creditor The Vineyard

of Saratoga (“Creditor”) for allowance of post-petition attorney's

fees pursuant to Bankruptcy Code § 506(b). In its motion, Creditor
requests an allowance of $21,365.29' in attorney’s fees and costs.
Debtor objects to the reasonableness of the requested fees.

Debtor is represented by Stanley A. Zlotoff, Esq. Creditor is

represented by Evelynn N. Tran, Esq. of McGrane Greenfield LLP.
The matter has been submitted on the papers after a hearing on the

motion.

' The summary of fees and costs listed on the first page of Exhibit B to the declaration of
Brian J. Hannon in support of Creditor’s motion plus the alleged fees incurred in filing this motion
actually total $21,265.29.

MEMORANDUM DECISION REGARDING
REQUEST FOR ATTORNEYS FEES UNDER

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This Memorandum Decision constitutes the Court’s findings of
fact and conclusions of law, pursuant to Rule 7052 of the Federal

Rules of Bankruptcy Procedure.

I.
FACTS

Debtor filed his Chapter 13 petition on April 29, 2004. At the
time Debtor filed his petition, Debtor owned property located at
19403 Vineyard Lane, Saratoga, California (the “Property”).
Debtor’s schedules value the Property at $475,000 and list a first
deed of trust in the amount of $97,000. The Property is also
subject to a Restated Declaration of Covenants, Conditions and
Restrictions of The Vineyards of Saratoga (“CC&Rs”). The CC&Rs
give Creditor the authority to levy and collect both regular and
special assessments. Monthly assessments are approximately $600.

Pre-petition, Debtor had not been current with his assessment
payments since 1999. In September 2003, Creditor retained Allied
Trust Services, Inc. (“Allied Trust”) to pursue collection. Allied
Trust recorded a Notice of Default with the Santa Clara County
Recorder’s Office on December 4, 2003.

On July 13, 2004, Creditor filed a proof of claim asserting a
secured claim of $29,219.79. On September 8, 2004, Creditor’s
counsel filed another proof of claim in the amount of $29,141.43
and withdrew that claim on April 8, 2005. Debtor has not objected
to Creditor’s claim. Creditor incurred $212.50 in fees preparing
the second proof of claim and the withdrawal.

On May 4, 2004, Debtor filed a chapter 13 plan that, inter

alia, provided a $475,000 value of the Property, estimated arrears

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to Creditor of $22,000 with a minimum monthly payment of $150,
provided for an increase in the monthly plan payments from $350 to
$550 after 24 months, and provided for ongoing monthly assessment
payments of $580 to Creditor. Creditor filed an 1l-page objection
to confirmation asserting that the proposed plan: (i) violated the
best interest of creditors test since unsecured creditors would not
be paid in full; (ii) was not feasible because the proposed
payments did not provide sufficient funds to pay the scheduled
unsecured claims and there was no basis for a $200 increase in
monthly plan payments since Debtor was retired and the homeowners
association dues would increase over time; (iii) failed to provide
interest payments on the delayed payment of Creditor’s arrears;
(iv) was not filed in good faith because amounts owed to taxing
authorities were not disclosed, Debtor had a history of filing
bankruptcy petitions, and this case was filed only after Debtor
lost a hearing for a preliminary injunction to prevent Creditor
from foreclosing on the Property; and (v) failed to provide for
increases in the monthly assessment amount.

On June 10, 2004, Debtor filed a first amended chapter 13 plan
that treated Creditor in the same manner as the initial plan.
Creditor filed a 9-page objection to confirmation asserting that
the proposed plan: (i) violated the best interest of creditors;

(i1) was not feasible; (iii) failed to provide interest payments on
the delayed payment of Creditor’s arrears; (iv) was not filed in
good faith; (v) inaccurately listed the amount of arrears since the
amount did not include collection fees and costs; and (vi) failed
to provide for increases in the monthly assessment amount.

On December 29, 2004, Debtor filed a chapter 13 plan that,

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inter alia, provided a $475,000 value of the Property, estimated

arrears to Creditor of $29,141.43 with a minimum monthly payment of
$150, and provided for ongoing monthly assessment payments of $580
to Creditor. Creditor filed a 9-page objection to confirmation
asserting that the proposed plan: (i) failed to provide interest
payments on the delayed payment of Creditor’s arrears;

(ii) violated section 1322(d) since the plan provided for payments
over 36 months but the sale or refinance of the Property would
occur 36 months after confirmation; (iii) vests the Property in
Debtor after confirmation -- but Creditor asserted that the
chapter 13 trustee should retain jurisdiction over the Property
until it is sold or refinanced; (iv) did not state accurately the
monthly assessments that were $585 and failed to provide for
increases in the monthly assessment amount; and (v) was not filed
in good faith.

Debtor's second amended plan was confirmed with oral amendments
read into the record at a hearing on January 10, 2005. An order
confirming Debtor’s second amended plan was entered on January 31,
2005, and an amended order confirming plan was entered on
February 9, 2005. The amended order changed the language regarding
the oral amendments from:

PER JUDGE WEISSBRODT’S ORAL ORDER THE PLAN IS AMENDED TO

INCREASE THE INTEREST TO VINEYARDS OF SARATOGA HOA IN

SECTION 2(b) TO 10%. PAYMENT TO VINEYARDS OF SARATOGA IN

SECTION 4 SHALL INCREASE TO $585.00. THE BALANCE OF THE

PLAN SHALL BE PAID THROUGH SALE/REFINANCE NO LATER THAN

6/30/06.
to:

PER JUDGE WEISSBRODT’S ORAL ORDER THE PLAN IS AMENDED TO

INCREASE THE INTEREST TO VINEYARDS OF SARATOGA HOA IN

SECTION 2(b) TO 10%. PAYMENT TO VINEYARDS OF SARATOGA IN

SECTION 4 SHALL INCREASE TO $585.00. THERE IS ALSO AN

UNDERSTANDING THAT THE HOMEOWNER’S ASSOCIATION REVIEWS,

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ADJUST [sic], PURSUANT TO THE WORKINGS OF THE HOMEOWNER’S
ASSOCIATION. AS THAT AMOUNT ADJUSTS, THAT ADJUSTED AMOUNT
SHALL BECOME DUE AND PAYABLE BY THE DEBTOR. THE BALANCE OF

THE PLAN SHALL BE PAID THOUGH [sic] SALE/REFINANCE NO LATER

THAN 6/30/06.

Creditor asserts Debtor repudiated his confirmed plan at a
July 15, 2005 deposition taken in a state court action. On
October 25, 2005, Creditor brought a motion for relief from stay
and alternative motion to dismiss or convert based on Debtor’s
failure to pay fully post-petition assessments for February 2005
through October 2005 and Debtor’s alleged repudiation of his plan.
On November 8, 2005, Debtor filed an opposition to the motion
asserting that Debtor cured the defaults on November 4 and accused
Creditor of violating the automatic stay by taking Debtor’s
deposition in July. Creditor’s counsel filed a reply to the
opposition.

At the November 22 hearing on the motion for relief from stay,
Creditor accepted the tendered payment to cure the post-petition
defaults and withdrew its motion on condition that Creditor zould
restore its motion on 10-days notice should Debtor default again.
An order granting the request was entered on January 17, 2005.

The Court cannot determine the amount of fees requested by
Creditor that relate to the three objections to confirmation,
amending the confirmation order, or Creditor’s motion for relief
from stay because Creditor has lumped its time entries, redazted
certain information from its time entries, and failed to specify
those time entries for which it does not request fees.

On May 1, 2006, Creditor filed its motion for allowance of its
post-petition attorney’s fees. Creditor states it has incurred

$4,791.25 in fees preparing of this motion. Those fees do not

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REQUEST FOR ATTORNEYS FEES UNDER

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include any sums for preparing the reply to Debtor’s opposition.
In all, Creditor requests $21,365.29 in fees and costs in its

motion.

IZ.
ANALYSIS
Bankruptcy Code section 506(b)? provides:
To the extent that an allowed secured claim is secured by
property the value of which, after any recovery under
subsection (c) of this section, is greater than the amount
of such claim, there shall be allowed to the holder of such
claim, interest on such claim, and any reasonable fees,
costs, or charges provided for under the agreement under
which such claim arose.
For a party to recover attorney’s fees under that section, four
elements need to be met: (1) the creditor must have an allowed
secured claim; (2) the creditor must be oversecured; (3) the fees

must be reasonable under the circumstances; and (4) the fees must

be provided for under the agreement. In re Salazar, 82 B.R. 538,

540 (9th Cir. BAP 1987). “[W]hen fees are provided for in the
underlying agreement, and when the creditor is oversecured,

allowance of the attorney’s fees is mandatory.” In re Dalessio,

74 B.R. 721, 723 (9th Cir. BAP 1987). The only element in dispute
between the parties is the reasonableness of the requested fees.
In determining reasonableness, Dalessio states that:

[t]he key determinant is whether the creditor incurred
expenses and fees that fall within the scope of the fees
provision in the agreement, and took the kinds of actions
that similarly situated creditors might reasonably conclude
should be taken, or whether such actions and fees were so
clearly outside the range as to be deemed unreasonable.

The bankruptcy court should inquire whether, considering
all relevant factors including duplication, the creditor

* Because Debtor’s bankruptcy petition was filed prior to October 17, 2005, the quoted
version of section 506(b) is the version in effect when Debtor’s case was filed.

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reasonably believed that the services employed were
necessary to protect his interests in the debtor’s
property.

Dalessio, 74 B.R. at 723 (citation omitted).

The reasonableness requirement in Section 506(b) was
intended to prevent creditors from “failf[ing] to exercise
restraint in the attorney’s fees and expenses they incur,
perhaps exhibiting excessive caution, overzealous advocacy,
and hyperactive legal efforts.” If proper restraint is not
exercised, the costs of any “overlawyering” should be borne
by Creditor, rather than Debtors.

In re Stagqgie, 255 B.R. 48, 54 (Bankr. D. Idaho 2000) (citations

omitted). “The attorney applying for fees bears the burden of
proving the reasonableness of those fees, which can only be done by
presentation of carefully detailed applications and supporting
documentation.” Dalessio, 74 B.R. at 724.

The Court has three issues regarding Creditor’s motion that
impact the Court’s ability to determine the reasonableness of the
requested fees. First, Creditor requests an award of $21,365.29 in
fees and costs. Based on the summary chart at the beginning of
Exhibit B to Mr. Hannon’s declaration supporting this motion,
Creditor has reduced the hours expended by Evelynn Tran in this
matter by 9.35 hours. However, the invoices attached to the
declaration do not indicate which time entries of Ms. Tran comprise
this reduction. The total fees charged in the attached invoices is
$21,051.25. Tf the full amount of the costs are added to those
fees, the total of fees and costs reflected is $23,452.79. This
number exceeds the fees and costs requested in Creditor’s motion by
$2,088.50. Without further information from Creditor, the Court
cannot determine which of Ms. Tran’s time entries are not included
in Creditor’s motion.

Second, it appears that Creditor has redacted parts of numerous

MEMORANDUM DECISION REGARDING
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time entries attached to the motion. For example, on the first
invoice dated July 6, 2004, the time entry for Brian Hannon on

June 4, 2004 is missing the description of the subject of his
meeting with Ms. Tran. Likewise, Ms. Tran’s entry for the same day
is missing the description of the subject of her research and her
Pacer research. Similar redactions can be found on the June 10,
2004 entry for Mr. Hannon and the June 11, 2004 entries for Mr.
Hannon and Ms. Tran. The Court has reviewed the invoices included
in Exhibit B to Mr. Hannon’s declaration supporting this motion and
has determined that the entries with a missing or inadequate
description total $7,327.50 in fees. A list of those entries is
attached as Exhibit A to this Memorandum Decision.

The Court is concerned that the time entries with redacted
information may relate to fees that are not reasonable. For
example, there is a time entry for Ms. Tran dated September 30,
2005 for “{b]egin motion for Rule 11 sanctions.” While there is no
charge for this particular entry, fees related to any Rule 11
motion might well not be reasonable in this case.

Third, Creditor’s time entries occasionally lump activities
related to more than one activity on the same day and the Court
cannot determine the amount of time spent on various matters. For
example, on the first invoice dated July 6, 2004, the time entry
for Ms. Tran on June 14, 2004 states that Ms. Tran spent 1.3 hours
appearing at the meeting of creditors and editing Creditor’s first
objection to confirmation. Without Creditor separating out the
amount of time spent on each activity, the Court cannot determine
if the time spent appearing at the meeting of creditors and

objecting to Debtor’s plan was reasonable.

MEMORANDUM DECISION REGARDING
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Creditor has spent more than $21,000 in attorney’s fees and
costs protecting its extremely oversecured claim -- Creditor had an
equity cushion of over $300,000 when the petition was filed and has
monthly assessments of approximately $600. Given Creditor's
comfortably oversecured position, Creditor was never truly at risk
of not being paid in full. However, the Court also notes that
Debtor has been difficult in this case and had not kept current
with his dues for several years before the case was filed and
Creditor had a right to protect itself. The Court currently is
unable to rule on Creditor’s motion without additional information.

The Court notes, however, certain time entries that, if
Creditor is including in its motion, would be unreasonable. First,
Creditor seeks $212.50 in attorneys fees for preparing a duplicate
proof of claim to that filed by the client and its subsequent
withdrawal. Those fees are not necessary to protect Creditor and
Debtor should not have to pay them. Additionally, Creditor claims
it spent approximately $14,100 protecting its claim and nearly
$4,800, or over 34% of the original fees, preparing this motion to
collect them. The nearly $4,800 in fees for this motion appear
excessive, especially in light of the fact that Creditor was
protecting a claim of less than $30,000 and that the information
provided to the Court is inadequate for the Court to rule on
Creditor’s motion. Eight hours of Ms. Tran’s time at her billing
rate of $250 per hour (a reasonable billing rate for an attorney
with her experience) would be a reasonable amount of time to

prepare this motion.

MEMORANDUM DECISION REGARDING
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IIil.

CONCLUSION

For the reasons set forth above, the Court disallows all fees
requested by Creditor without prejudice to Creditor moving for
those fees again after providing additional information to support
the reasonableness of those fees. Should Creditor file additional
papers, the Court requests that Creditor separately set forth the
amount of fees sought with respect to each of the following
categories: (1) Creditor’s first objection to confirmation;

(2) Creditor’s second objection to confirmation; (3) Creditor’s
third objection to confirmation; (4) amending the confirmation
order; (5) Creditor’s motion for relief from stay and,
alternatively, to dismiss or convert; and (6) Creditor’s section

506 (b) motion.

Dated: — [ ) le] b cy yy Doe

ARTHUR S. WEISSBRODT
UNITED STATES BANKRUPTCY JUDGE

MEMORANDUM DECISION REGARDING
REQUEST FOR ATTORNEYS FEES UNDER

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Cape*tes26gg BSH B2°° Filed: 10/08/

Date

6/4/04
6/4/04
6/10/04
6/11/04
6/11/04
6/14/04
7/8/04
7/8/04
7/23/04
7/26/04
7/29/04
7/30/04
8/2/04
8/3/04
8/23/04
9/1/04
9/15/04
1/3/05
1/5/05
1/7/05
1/10/05
1/11/05
2/2/05
2/4/05
2/7/05
3/7/05
3/8/05
3/9/05
3/11/05
3/21/05
4/7/05
7/18/05
9/6/05
9/7/05

Timekeeper

BJH
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BUH
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BJH
BJH
BJH
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ENT
ENT
ENT
ENT
ENT
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ENT
ENT
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MEMORANDUM DECISION REGARDING
REQUEST FOR ATTORNEYS FEES UNDER

EXHIBIT A

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Hours Amount:
.30 $105.00
.50 $375.00
.00 $350.00
.20 $50.00
.30 $455.00
A $105.00
.10 $35.00
.56 $140.00
.20 $50.00
.15 $37.50
.00 $250.00
.50 $125.00
235 $87.50
.25 $62.50
.30 $75.00
.50 $125.00
.20 $50.00
.40 $100.00
.00 $500.00
.15 $37.50
.00 $250.00
225 $62.50
.67 $167.50
.00 $250.C0
.20 $50.C0
.40 $100.C0
.28 $70.C0
.50 $125.C0
.30 $75.C0
.30 $75.C0
.40 $100.C0
.30 $75.C0
.70 $175.C0
.50 $150.CO

oo 0.06UmUNDClUlULUCUCOUNUCOUOUCUCOUNCOOCCOCOOOCrhRPlLUC DCU RPlLUCCOUrmUCUwNNCOOCCOCOCOUCUCOUCOUCUCOUCRRLUCOUCOCOCO

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Cay

9/26/05 ENT

9/29/05 ENT
9/30/05 BJH
10/14/05 ENT
11/8/05 ENT
11/9/05 ENT
11/14/05 ENT
11/15/05 ENT
2/22/06 ENT
3/8/06 ENT
Total

MEMORANDUM DECISION REGARDING
REQUEST FOR ATTORNEYS FEES UNDER

0.20 $50.00
1.20 $300.00
0.25 $87.50
1.20 $300.00
0.20 $50.00
0.60 $150.00
2.00 $500.00
1.00 $250.00
1.20 $300.00
2.00 $500.00
27.61 $7,327.50

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Court Service List

Stanley A. Zlotoff, Esq.

Law Offices of Stanley A. Zlotoff
300 S 1st St. #215

San Jose, CA 95113

Marcia E. Gerston, Esq.

McGrane Greenfield

40 South Market Street, Seventh Floor
San Jose, CA 95113

Devin Derham-Burk
P.O. Box 50013
San Jose, CA 95150-0013

Office of the U.S. Trustee / SJ
U.S. Federal Bldg.

280 S Ist St. #268

San Jose, CA 95113-3004

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