George Quinn Chen

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1 	The following discussion constitutes the court’s
findings of fact and conclusions of law. 	Fed. R. Bankr. P. 7052
(incorporating by reference Fed. R. Civ. P. 52(a)). 	Unless
otherwise defined herein, capitalized terms have the meanings
provided in the Interim Order or the Interim Application and the
papers filed in support and in opposition thereto, and all
chapter, section and rule references are to the Bankruptcy Code,
11 U.S.C. §§ 101-1330, and to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9036, as enacted and promulgated prior to
the effective date of The Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, Pub. L. 109-8, Apr. 20, 2005, 119 Stat.
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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
GEORGE QUINN CHEN,
Debtor.
Case No. 03-32157
Chapter 7
MEMORANDUM DECISION REGARDING OBJECTIONS
TO FIRST INTERIM FEE APPLICATION OF
CHAPTER 7 TRUSTEE’S ATTORNEYS
On November 21, 2005, the court issued its Interim Order
Regarding Application of Goldberg, Stinnett, Meyers & Davis, APC
for Allowance and Payment of Interim Compensation and
Reimbursement of Expenses as Counsel for Chapter 11 Trustee, for
the Period From August 27, 2003 to July 15, 2005 (the “Interim
Order”). 1 	The Interim Order awarded Goldberg, Stinnett, Meyers &
Signed and Filed: January 09, 2006
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
January 10, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 03-32157 Doc# 219 Filed: 01/09/06 Entered: 01/10/06 09:54:11 Page 1 of
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23. 	The court notes that the Interim Application covers the
period prior to July 18, 2005, when the case was converted from
Chapter 11 to Chapter 7.
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Davis, APC (“Applicant”) $225,000.00 out of $350,516.25 in
requested fees and all of the $13,088.02 in requested expenses.
This Memorandum Decision addresses the balance of $125,516.25
($350,516.25 - $225,000.00) requested by Applicant and objections
to Applicant’s requested fees and expenses filed by Debtor, George
Quinn Chen (“Debtor”) and Terra Nova Industries, Inc. (“Terra
Nova”).
For the reasons set forth below the court will not approve
$94,353.00 of the requested fees, but will allow the remaining
$31,163.25 ($125,516.25 - $94,353.00). 	Applicant will have the
opportunity to revisit whether the court should allow some or all
of the $94,353.00 in the future if changed circumstances warrant.
I. Debtor’s Objection
Debtor objects that approximately $94,000.00 of Applicant’s
fees have been incurred in litigation in which the estate appears
to have foregone a contractual right to seek reimbursement of its
attorneys’ fees, namely Dux Capital Management Corp. and Davis v.
Chen and Schoenmann, A.P. No. 04-3318) (the “Dux litigation”).
Debtor argues that by not requesting reimbursement Applicant may
have decreased the funds available to pay non-dischargeable
claims, thereby harming Debtor.
Debtor’s arguments are premised on (a) the estate actually
having a contractual right to reimbursement of its attorneys’ fees
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2 	The contract at issue is a pre-petition settlement
agreement between Debtor and the Dux Parties which states
(§ 12.7):
12.7 Expenses. 	The prevailing party as to any disputes
relating to this Agreement shall be entitled to recover from
the unsuccessful party to this Agreement all costs, expenses
and actual attorneys’ fees relating to the enforcement or
interpretation of, or any litigation or arbitration relating
to, this Agreement. 	Any judgment or order entered in such
action shall contain a specific provisions providing for the
recovery of attorneys’ fees and costs incurred in enforcing
such judgment. 	For purposes of this paragraph, attorneys’
fees shall include, without limitation, fees incurred in the
following: 	(1) post judgment motions and appeals;
(2) contempt proceedings; (3) garnishment, levee, and debtor
and third party examinations; (4) discovery; and (5)
bankruptcy litigation.
3 	Debtor points out that the estate has been successful in
its litigation with the Dux Parties so far. 	Various appeals in
the Dux Litigation are pending before the Ninth Circuit (Docket
Nos. 04-16911, 04-16973, 04-17272, 05-16497).
4 	Two nondischargeability adversary proceedings are
pending:
(1) City and County of San Francisco v. Chen (A.P. No.
03-03713). 	This adversary proceeding has been settled and the
settlement agreement has been approved by the court.
(2) Terra Nova Industries, Inc. v. Chen et al. (A.P. No.
03-03712), in which Terra Nova seeks a nondischargeability
judgment of over $500,000. 	A judgment for Debtor entered on July
25, 2005, was appealed by Terra Nova (BAP No. NC-05-1323), and an
order denying Debtor’s motion for attorneys’ fees entered on
October 24, 2005, was appealed by Debtor (Dist. Ct. No. 05-4873).
The appeals are pending.
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by Dux, 2 (b) the estate ultimately prevailing in the Dux
litigation and being able to collect those fees, 3 and (c) Debtor
having non-dischargeable debts that could be paid were it not for
distributions to Applicant. 4 	There is some evidence to support
each of these premises.
Applicant replies that Trustee made a strategic decision not
to seek recovery of fees in the Dux Litigation because Trustee
denied that the estate had “any participation, rights or
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obligations” under the contract at issue, so it would have been
“anaomalous at best” for Trustee to claim attorneys’ fees under
that contract, “at least while the primary dispute with the Dux
Parties was ongoing.” 	Applicant adds:
At a minimum, an effort to collect attorneys’ fees
from the Dux Parties would have increased the
litigation, against litigants that had already
demonstrated their appetite for endless battles,
and undoubtedly would have multiplied the services
for which Applicant would have sought compensation,
without any assurance of success. 	A battle over
attorneys’ fees, both as to entitlement and as to
amount, might still be ongoing today had it been
initiated by the Trustee, resulting in a further
diminution and delay in the administration of the
estate.
The court is not persuaded by Applicant’s reasons for not
including any prayer for attorneys’ fees in its answer in the Dux
Litigation. 	It is true that ultimately the estate might not
prevail in that litigation, so it might not be entitled to recover
fees, but an unknown probability of recovery is better than none
at all. For sure, Applicant, on behalf of the Trustee has
prevailed at two courts so far. 	It is also true that litigation
over attorneys’ fees could be expensive and time consuming but the
Dux Parties have already sought recovery from the estate using the
same attorneys’ fee clause, and there is no showing that the
estate would incur any significant additional fees by making
essentially the same claim back against Dux. 	Finally, it is true
that the estate would have to argue in the alternative --
preserving its right to seek attorneys’ fees while at the same
time denying that the Dux Parties would have any right to such
fees should they prevail in the Dux Litigation -- but there is
nothing novel about arguing in the alternative. 	In short, the
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estate does not appear to have gained anything by not praying for
attorneys’ fees, and it may have lost such a right by not doing
so.
Therefore, it is possible that the estate and Debtor will
have been damaged in the amount of whatever attorneys’ fees the
estate will have to pay Applicant for its work in the Dux
Litigation, because otherwise those funds would have been
available to pay down nondischargeable debts. 	At present the
court does not know whether the estate will ultimately prevail in
the Dux Litigation and expresses no opinion whether the estate
could still recover those fees from Dux on some theory, as
Applicants’ papers imply. 	In other words, there are still some
uncertainties. 	Nevertheless, to preserve Debtor’s rights the
court will not at present allow the fees attributable to the Dux
Litigation. 	Those fees appear to be the $94,353.00 listed on page
18, line 16.5 of the Interim Application. 	Deducting this from the
$125,516.25 balance of fees sought in the Interim Application
leaves a balance of $31,163.25 ($125,516.25 - $94,353.00).
II. Tera Nova Objections
Terra Nova requests that the court order Applicant to pay for
an audit of its billings by an outside auditing firm. 	The court
has had the benefit of the parties’ thorough written and oral
presentations of facts and arguments and does not believe such an
audit is warranted. 	That request will be denied. 	Terra Nova’s
particular objections are as follows:
A. Travel
Terra Nova objects to 1.7 hours of billed time for an
attorney to travel from San Francisco to Sausalito and back to
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attend a PWI shareholder meeting. 	Terra Nova questions the amount
of time but not the necessity of the travel. 	Applicant replies
that 51 minutes each way is not unreasonable when considering
driving time, walking from a parking garage, unknown delays, and
that the travel time was charged at 50% of normal rates. 	The
court agrees.
Terra Nova objects to 9 hours of billed time for “Travel to
Taipei, Taiwan (partial)” on June 18, 2004, and another 9 hours of
billed time for “Travel from Taipei, Taiwan (partial)” on June 24,
2004, for Applicant to take two depositions. 	Again, Terra Nova
questions only the amount of time and not the necessity of the
travel. 	Applicant replies that (a) it has again billed this time
at 50% of its normal rates, (b) the actual travel time was more
than 9 hours because “travel to Taipei, with a lay-over in Tokyo
and with waiting time at each airport, requires nearly twice that
amount of time,” and (c) the cost to the estate has been
effectively reduced by $10,000 that Rextron paid as a sanction --
i.e., if the court applies the first $7,509.94 of this $10,000
sanction to cover all of Applicant’s travel costs then the
$2,490.06 balance can be applied to $4,275.00 in fees that
Applicant billed for these 18 hours of travel.
Section III.J of The court’s posted Practices and Procedures
in Judge Montali’s Court (Rev. 1/30/04) state:
Travel: 	Judge Montali generally will allow up to
two hours of compensation for non-working airplane
travel time, to account for inevitable delays for
security and administration involved in air travel.
Other air travel time is not likely to be
compensable, per Guideline 17 of the Guidelines for
Compensation and Expense Reimbursement of
Professionals and Trustees.
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The referenced Guidelines state:
17. Airplane Travel Time - Airplane travel time is
not compensable, but work actually done during a
flight is compensable. 	If significant travel time
is expected in a case, specific guidelines should
be obtained for that case.
The court recognizes that in theory a layover might increase
the presumed two hours allotted for unavoidable non-working time,
but at the hearing on November 10, 2005, the court questioned
Applicant about whether a direct flight might have been more
efficient.
That said, the court also recognizes that even a direct
flight to Taipei takes many hours and that the exhaustion of such
long distance travel can result in more unavoidable non-working
time for which attorneys should be compensated. 	Regardless of the
possibility of reducing those costs somewhat, they were advanced
to Applicant by Rextron and thus the estate and Debtor are not
affected by their allowance.
In addition, as Applicant points out, it has voluntarily
reduced its fees by $30,000 on top of its normal elimination of
charges in its billing discretion. 	For these reasons the court is
not convinced that any further fees should be deducted for this
non-working travel time.
B. Efficiency
Terra Nova objects to Applicant’s time spent on conferences,
intra-office communications, the use of two attorneys at the same
hearing or conference, and what it asserts are inadequate
descriptions of large blocks of time, duplicate entries, and
administrative or paraprofessional tasks performed by attorneys.
Terra Nova states that the work performed by Applicant “did not
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require any significant evidentiary hearings” and that Applicant
“billed over 44 hours to oppose a routine motion to intervene
filed by Dux Capital.” 	In support of these objections Terra Nova
provides an exemplary appendix setting forth each time entry to
which it objects with coded objections. 	Applicant’s reply papers
set forth a thorough response.
First, the court agrees with Applicant that this has been a
very complex case involving numerous parties and hard-fought
litigation on multiple fronts, including a motion to intervene
that was anything but routine. 	Second, the court has carefully
reviewed the time entries and is satisfied that it would have been
inefficient in a case of this complexity for Applicant not to have
had a certain level of conferences, intra-office communications,
and attendance by two attorneys at the same hearing or conference,
and that Applicant has exercised adequate billing judgment in
these matters. 	Among other things, for most intra-office
communications only the lower-rate attorney’s time is billed and,
as one would expect, most of the intra-office conferences after
the start of the case were brief.
The court is less persuaded by Applicant’s explanations for
having attorneys perform some administrative tasks. 	It should be
part of attorneys’ non-billable continuing legal education to be
generally familiar with the local rules and part of a law firm’s
overhead to train administrative staff to e-file documents and
present documents for filing under seal. 	Recognizing that
drafting an application to file documents under seal may take
considerable attorney time, it still should take no more than a
minimal amount of time to explain to support staff how to submit
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that application and sealed documents to the court, nor should it
take much time to e-file documents. 	Applying these principles
some time entries are either excessive or inadequately described
-- e.g., 0.4 hours to e-file a document in the Schoenmann v. Yageo
matter on April 14, 2005; 	0.9 hours to e-file two documents in
the Yageo/Rextron Settlement matter on June 21 and 22, 2005; 	and
an unspecified amount of time to review local rules and e-file
documents, clumped with preparing an ex parte motion to file
documents under seal in the PWI Stock Sale matter on September 20
through 22, 2004. 	Nevertheless, the court is persuaded that
Applicant’s administrative tasks do not amount to much time and
are covered many times over by Applicant’s voluntary $30,000
reduction.
The court has also carefully reviewed the allegedly duplicate
entries and inadequate descriptions of large blocks of time. 	The
court is persuaded that the time entries are not duplicative but
instead represent multiple days of work on complex matters. 	The
court also believes that although fee applications should include
detailed overviews of the work performed and daily time records,
and although Applicant could have provided more detail in some of
its daily time records, nevertheless too much detail would be
inefficient and the court and the major players are thoroughly
familiar with the complex issues in this case. 	If Terra Nova had
any doubt about the complexity of the issues or the amount of work
required it could have reviewed the court’s files, which contain
pleadings that thoroughly describe all of the issues, most of
which are not only accessible to the public but are also readily
available online.
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For the foregoing reasons the court will not further reduce
Applicant’s fees on account of Terra Nova’s objections.
III. Conclusion
Applicant should submit an order allowing an additional
$31,163.25 of the fees requested in its Interim Application and
deferring any allowance of the $94,353.00 balance, all for the
reasons stated in this Memorandum Decision. 	The order should also
direct Applicant to segregate fees attributable to the Dux
Litigation in its future fee applications and note in those
applications that such fees are not presently allowable under this
Memorandum Decision. 	Applicant should comply with B.L.R. 9021-1.
* END OF MEMORANDUM DECISION *
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COURT SERVICE LIST
Merle C. Meyers, Esq.
Goldberg, Stinnett, Meyers & Davis, APC
44 Montgomery Street, Suite 2900
San Francisco, CA 94104
Iain A. Macdonald, Esq.
Macdonald & Associates
Two Embarcadero Center, Suite 1670
San Francisco, CA 94111-3930
Cheryl C. Rouse, Esq.
Law Offices of Rouse & Bahlert
345 Franklin Street
San Francisco, CA 94102
Phillip A Jaret, Esq.
Jaret & Jaret
900 Fifth Avenue, Suite 201
San Rafael, CA 94901
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