Lee B. Keppert and Shirley J. Keppert

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 00-46807 TG
Chapter 13
LEE B. KEPPERT and SHIRLEY
KEPPERT,
Debtors.
___________________________/
MEMORANDUM OF DECISION RE FEE APPLICATION
Richard Seim (“Seim”), attorney for the above-captioned debtors
(the “Debtors”), seeks an award of $21,977.10 in attorneys’ fees and
$136.74 in costs for his representation of the Debtors in this case.
For the reasons stated below, his application will be denied, in part
with prejudice and in part without prejudice.
SUMMARY OF FACTS AND PROCEDURAL HISTORY
The 	Debtors 	filed 	a 	voluntary 	petition 	seeking 	relief 	under
chapter 	7 	of 	the 	Bankruptcy 	Code 	on 	December 	8, 	2000. 	On 	December
22, 2000, Seim filed a statement disclosing the receipt of $1,150 in
compensation from the Debtors for representing them in the chapter 7
case. 	The Debtors received a chapter 7 discharge on March 14, 2001.
The 	Debtors’ 	principal 	nonexempt 	asset 	was 	a 	right 	to 	collect
Signed: February 15, 2007
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
February 15, 2007
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 00-46807 Doc# 137 Filed: 02/15/07 Entered: 02/15/07 12:31:54 Page 1 of
8

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
2
lottery 	payments. 	These 	payments 	were 	due 	annually. 	The 	trustee
initiated efforts to recover this asset for the benefit of creditors.
As a result, to prevent the trustee from recovering this asset,
beginning in April 2001, the Debtors attempted to convert the case to
chapter 	13. 	The 	Court 	questioned 	whether 	the 	Debtors 	could 	do 	so
after receiving a chapter 7 discharge and denied the proposed order
converting 	the 	case 	without 	prejudice 	pending 	a 	hearing. 	At 	the
hearing, 	on 	July 	6, 	2001, 	the 	Debtors 	offered 	to 	vacate 	their
discharge, and the case was converted to chapter 13.
A chapter 13 plan (the “Plan”) was also filed on June 4, 2001.
An order confirming the Plan was entered on December 4, 2001. 	During
the 	summer 	of 	2002, 	the 	Debtors 	filed 	a 	motion 	to 	sell 	their
residence free and clear of liens. 	An order granting the motion was
entered 	on 	July 	10, 	2002. 	Shortly 	thereafter, 	the 	Debtors 	filed 	a
motion to avoid three judgment liens on the sale proceeds which they
claimed 	impaired 	their 	homestead 	exemption. 	An 	order 	granting 	the
motion was entered on September 6, 2002.
On May 25, 2004, the chapter 13 trustee filed an application to
convert the case back to chapter 7 for failure to make the required
Plan payments. 	In response, the Debtors filed a motion to amend the
Plan or for a hardship discharge. 	The motion revealed that Shirley
Keppert had died in January 2004 and that Lee Keppert was in his late
70s, unemployed, and in poor health. 	It stated that, other than the
three 	remaining 	annual 	lottery 	payments 	of 	$62,000 	each, 	the 	other
unpaid Plan payments totaled only $6,000. 	It suggested that, rather
than converting the case to chapter 7, the Plan be amended to relieve
Case: 00-46807 Doc# 137 Filed: 02/15/07 Entered: 02/15/07 12:31:54 Page 2 of
8

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26 	1In a subsequent filing, they revealed that the assignment had
been made in exchange for a cash advance.
3
Mr. Keppert of the obligation to make the remaining $6,000 in monthly
payments. 	The Trustee did not oppose the motion to amend.
A 	hearing 	was 	conducted 	on 	July 	16, 	2004 	at 	which 	time 	a
question 	was 	raised 	concerning 	why 	the 	chapter 	13 	trustee 	had 	not
received the July 2004 lottery payment. 	The hearing was continued to
August 	20, 	2004. 	On 	August 	17, 	2004, 	Mr. 	Keppert 	filed 	a 	document
stating that they had been mistaken in stating previously that there
were three remaining annual payments due, of $62,000 each, the first
of which would be received in July 2004. 	Instead, he asserted that
there were three remaining annual payments to be received, of $87,000
each, 	due 	in 	2005, 	2006, 	and 	2007. 	The 	statement 	represented 	that
the 2004 payment had been assigned to a creditor prior to the filing
of the bankruptcy case. 1
Based 	on 	this 	information, 	the 	August 	20, 	2004 	hearing 	was
continued to October 22, 2004, and the Debtors were directed to file
another motion to amend the Plan. 	The motion was filed on September
27, 	2004. 	The 	motion 	revealed 	that 	there 	were 	only 	two 	remaining
lottery 	payments 	due, 	not 	three. 	An 	order 	granting 	the 	motion 	was
entered on November 10, 2004.
On 	January 	25, 	2006, 	the 	chapter 	13 	trustee 	filed 	a 	motion 	to
convert the chapter 13 case back to chapter 7 on the ground that Mr.
Keppert 	had 	failed 	to 	pay 	over 	to 	her 	that 	year’s 	lottery 	payment.
A 	hearing 	was 	conducted 	on 	the 	motion 	on 	March 	17, 	2006. 	At 	the
hearing, 	its 	was 	disclosed 	that 	Mr. 	Keppert 	had 	recieved 	a 	$61,000
Case: 00-46807 Doc# 137 Filed: 02/15/07 Entered: 02/15/07 12:31:54 Page 3 of
8

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
4
lottery 	payment 	and 	had 	spent 	it 	for 	living 	expenses. 	However, 	at
the 	hearing, 	$31,000, 	representing 	a 	portion 	of 	this 	payment, 	was
tendered to the chapter 13 trustee.
The chapter 13 trustee accepted the $31,000 without prejudice to
her right to the balance. 	Mr. Keppert represented that he was unable
to repay the balance. 	He was given 20 days to file a motion to amend
the 	Plan 	to 	conform 	his 	obligations 	with 	what 	he 	was 	able 	to 	pay.
This time was later extended.
A 	motion 	to 	modify 	the 	Plan 	was 	filed 	on 	April 	21, 	2006. 	The
motion was denied. 	An order granting the chapter 13 trustee’s motion
to 	convert 	the 	case 	to 	chapter 	7 	was 	entered 	on 	October 	11, 	2006.
Neither 	Mr. 	Keppert 	nor 	his 	counsel 	appeared 	at 	the 	meeting 	of
creditors 	in 	the 	chapter 	7 	case. 	It 	was 	later 	learned 	that 	Mr.
Keppert had died on December 28, 2006.
On January 5, 2007, the chapter 7 trustee filed a motion for an
order 	directing 	the 	California 	State 	Lottery 	Commission 	(the
“Commission”) to make the final lottery payment due to the trustee.
The motion was set for hearing on February 7, 2007. 	The motion was
granted by order entered on February 8, 2007. 	On December 26, 2006,
Seim 	filed 	an 	application 	for 	compensation. 	The 	application 	was
heard 	on 	February 	7, 	2007 	and 	was 	taken 	under 	submission 	at 	that
time.
FEE APPLICATION
1. 	Inadequate Notice
On 	December 	28, 	2006, 	Seim 	filed 	a 	fee 	application 	(the
“Application”) 	and 	notice 	of 	motion 	(the 	“Notice”). 	On 	January 	4,
Case: 00-46807 Doc# 137 Filed: 02/15/07 Entered: 02/15/07 12:31:54 Page 4 of
8

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
5
2007, 	he 	filed 	a 	certificate 	of 	service, 	evidencing 	service 	of 	the
Application 	on 	numerous 	creditors 	and 	the 	chapter 	7 	trustee. 	The
Application, 	which 	was 	served, 	does 	not 	reveal 	the 	date 	or 	time 	of
the 	hearing 	on 	the 	Application. 	The 	Notice, 	which 	was 	not 	served,
does reveal the date and time of the hearing. 	As a result, creditors
did 	not 	receive 	adequate 	notice 	of 	the 	hearing 	and 	the 	Application
must be denied pending the conduct a properly noticed hearing.
2. 	Secretarial and Other Staff Time
The Application states that the compensation requested reflects
27.95 	hours 	of 	secretarial 	and 	other 	staff 	time. 	The 	Application
states that the attorney’s agreement with his clients provides that
any 	such 	time 	directly 	traceable 	to 	a 	case 	will 	be 	billed 	to 	the
client 	at 	rates 	ranging 	from 	$30 	per 	hour 	to 	$85 	per 	hour. 	The
Court’s Fee Guidelines do not permit compensation for secretarial or
other 	staff 	time. 	The 	circumstances 	surrounding 	this 	case 	do 	not
justify waiving this requirement. 	Of the fees requested, $2,242.75
reflect services provided by the attorney’s secretary or other staff.
Thus, this amount will be disallowed with prejudice.
3. 	Dischargeability Action Time
According to the time sheets, 7.10 hours of Seim’s services for
which 	compensation 	is 	requested 	were 	spent 	in 	connection 	with 	a
lawsuit 	during 	2001 	involving 	Heller 	First 	Capital 	Corporation
(“Heller”). 	The fees requested for these services total $1,233. 	In
this adversary proceeding, Heller sought to except its debt from the
Debtors’ chapter 7 discharge. 	The proceeding was filed on March 12,
2001. 	When 	the 	Debtors 	converted 	their 	case 	to 	chapter 	13, 	the
Case: 00-46807 Doc# 137 Filed: 02/15/07 Entered: 02/15/07 12:31:54 Page 5 of
8

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
6
proceeding 	was 	stayed 	pending 	confirmation 	of 	the 	Plan. 	Shortly
after the Plan was confirmed, the proceeding was dismissed.
The fees incurred in connection with this adversary proceeding
were incurred in aid of the Debtors’ fresh start in contemplation of
their receiving a chapter 7 discharge. 	These fees are not entitled
to be paid as a priority chapter 13 claim. 	Thus, this portion of the
fees requested will also be disallowed with prejudice.
4. 	Time During Initial Chapter 7 Case
As 	stated 	above, 	the 	Debtors 	initially 	sought 	relief 	under
chapter 7 of the Bankruptcy Code on December 8, 2000. 	Seim received
a $1,150 retainer for his services in connection with this case. 	The
case 	was 	converted 	to 	chapter 	13 	on 	July 	11, 	2001. 	Seim’s 	request
for 	fees 	appears 	to 	include 	the 	time 	incurred 	during 	this 	pre-
conversion 	period. 	Seim 	is 	not 	entitled 	to 	a 	chapter 	13 	priority
claim for services provided to a chapter 7 debtor. 	He is entitled to
retain 	the 	$1,150 	retainer 	to 	the 	extent 	the 	amount 	paid 	in 	not
unreasonable with respect to the services provided.
Having 	reviewed 	the 	time 	sheets, 	the 	Court 	concludes 	that 	the
$1,150 	retainer 	was 	reasonable. 	However, 	the 	time 	spent 	prior 	to
conversion 	of 	the 	case 	to 	chapter 	7 	and 	after 	conversion 	back 	to
chapter 7 may not be included in the fee request. 	Unfortunately, the
time 	sheets 	filed 	with 	the 	Court 	cut 	off 	a 	portion 	of 	the 	date 	on
which the services were provided. 	Therefore, the Court is unable to
compute 	the 	dates 	of 	the 	chapter 	7 	services 	as 	compared 	to 	the
chapter 13 services. 	This problem must be remedied. 	Thus, no amount
Case: 00-46807 Doc# 137 Filed: 02/15/07 Entered: 02/15/07 12:31:54 Page 6 of
8

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
7
may be allowed at this time. 	However, this disallowance of fees is
without prejudice.
CONCLUSION
Seim’s 	application 	for 	allowance 	of 	$21,977.10 	in 	attorneys’
fees and $136.74 in costs is disallowed, in part with prejudice and
in part without. 	The application was improperly noticed for hearing
and 	must 	be 	renoticed. 	Secretarial 	and 	other 	staff 	time 	and 	time
incurred during the chapter 7 phases of the case is disallowed with
prejudice. 	Otherwise, 	the 	application 	is 	denied 	without 	prejudice
pending 	submission 	of 	legible 	time 	sheets 	and 	a 	properly 	noticed
hearing. 	The costs appear allowable. 	However, the Court will defer
ruling on them pending a further hearing.
END OF DOCUMENT
Case: 00-46807 Doc# 137 Filed: 02/15/07 Entered: 02/15/07 12:31:54 Page 7 of
8

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
8
COURT SERVICE LIST
Richard Seim
133 Race St.
San Jose, CA 95126
Martha G. Bronitsky
Chapter 13 Trustee
P.O. Box 5004
Hayward, CA 94540-5004
Case: 00-46807 Doc# 137 Filed: 02/15/07 Entered: 02/15/07 12:31:54 Page 8 of
8