John Raymond Herbert, Sr

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
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IN RE:
CASE NO.: 	04-86487-ast
JOHN RAYMOND HERBERT, SR., 	CHAPTER 	13
DEBTOR.
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APPEARANCES:
Ronald D. Weiss, Esq.
734 Walt Whitman Road
Suite 203
Melville, NY 11747
John Raymond Herbert, Sr.
P O Box 1060
Huntington, NY 11743
Marianne Derosa
Standing Chapter 13 Trustee
100 Jericho Quadrangle
Suite 208
Jericho, NY 11753
MEMORANDUM OPINION ON REQUEST FOR ATTORNEYS FEES
Issues Before the Court and Summary of Ruling
Pending before the Court is the request for the allowance of legal fees of the
Debtor’s former attorney, Ronald D. Weiss, Esq. (“Counsel”), and Debtor’s request that
Counsel’s fees be reduced to a portion of the fees charged. For the reasons herein, this
Court approves Counsel’s request for the allowance of fees in the amount paid and
denies Debtor’s request for reduction and/or disgorgement of any fees paid.
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Jurisdiction
This Court has jurisdiction over this core proceeding pursuant to 28 U.S.C. §§
157(b)(2)(A), (B) and (O), and 1334(b), and the Standing Order of Reference in effect in
the Eastern District of New York.
Procedural History
On October 12, 2004, Debtor filed a voluntary petition for relief under Chapter 13
of the United States Bankruptcy Code (the “Petition Date”). [dkt item 1] Counsel filed
the petition on Debtor’s behalf. Along with the petition, Debtor filed, inter alia, his
Schedules and Statement of Financial Affairs (“SOFA”). In addition, Counsel filed his
Chapter 13 Retainer Agreement and Disclosure of Compensation of Attorney for
Debtor, which disclosed a fee agreement as follows: $1,500.00 as an initial legal fee,
plus the $194.00 filing fee then in effect, plus an additional $1,500.00 to be paid to
Counsel by the Chapter 13 Trustee from Debtor’s pre-confirmation and/or post-
confirmation payments. [dkt item 1] Also along with his Petition, Debtor filed a Chapter
13 Plan (the “Plan”).
A meeting of creditors under Section 341(a) of the Bankruptcy Code was
scheduled for and subsequently held on November 9, 2004, at 9:00 a.m. Also on
November 9, 2004, Objections to Debtor’s Plan were filed. [dkt item 10] On November
19, 2004, the Chapter 13 Trustee filed a Motion to Dismiss Debtor’s case. [dkt item 11]
On February 11, 2005, Debtor filed an Amended Chapter 13 Plan. [dkt item 12] On
March 3, 2005, Debtor entered into a stipulation with the Internal Revenue Service to
resolve certain claims of the IRS. [dkt item 13]
On March 11, 2005, Debtor, through Counsel, filed an objection to the proof of
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claim filed by American General Finance, Inc. (“AGF”), the holder of a mortgage against
the Debtor’s principal residence (the “AGF Claim Objection”). [dkt item 14, 15] In an
affidavit signed by Debtor in support of the Claim Objection, Debtor stated as follows:
I am filing this affidavit in support of my motion objecting to the secured proof of
claim filed by American General Finance Inc., (“AGF”), dated November 19,
2004, for the payoff amount of $25,188.80 and for the reinstatement amount of
$6,703.10. I seek to expunge such claim, which has been designated by the
clerk’s office as claim #2 in this case (the “AGF Claim”), and to avoid the
mortgage lien supported by such claim.
[dkt item 15] Debtor also alleged, inter alia, that the “AGF Claim is based on a home
improvement loan, dated approximately September 13, 1999, with Island Home Design,
Inc., (“IHDI”).”
On March 31, 2005, AGF filed its opposition to the AGF Claim Objection. [dkt
item 16] AGF alleged, inter alia, that at the time this bankruptcy was filed, Debtor had
been involved in a state court mortgage foreclosure action with AGF. That action was
alleged to have commenced in November 2003 and continued to the Petition Date. The
issues regarding Debtor, AGF and IHDI had been the subject of motion practice and a
discovery schedule before the state court.
On April 14, 2005, Debtor filed a Second Amended Chapter 13 Plan. [dkt item
17] On December 2, 2005, the Chapter 13 Trustee filed a Second Motion to Dismiss
Debtor’s case. [dkt item 21] On February 7, 2006, Debtor filed a Third Amended
Chapter 13 Plan. [dkt item 22] On February 14, 2006,An Objection to Debtor’s Third
Amended Plan was filed by a judgment creditor. [dkt item 23]
On April 6, 2006, Debtor, still acting through Counsel, filed a Fourth Amended
Chapter 13 Plan. [dkt item 25] On April 12, 2006, this Court entered an Order
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confirming Debtor’s Fourth Amended Plan. [dkt item 26] Incident to confirmation of this
Plan, the Court approved a $1500.00 increase of Counsel’s legal fees, for a total fee of
$4500.00. [dkt item 25] Debtor’s Plan, as confirmed by the Court, expressly provided
for an increase of the post-petition distribution to be made to Counsel through plan
payments of $3,000.00.
On May 23, 2006, this Court entered a lengthy Decision and a separate Order
denying the portion of the AGF Claim Objection which sought to expunge the AGF
Claim, and denying, without prejudice, that portion of the AGF Claim Objection which
sought to avoid the mortgage lien of AGF. The Court further granted the Debtor leave
to commence an adversary proceeding against AGF with respect to certain issues
raised by Debtor in the AGF Claim Objection. [dkt items 27, 28]
This case proceeded and the parties acted in accordance with Debtor’s
confirmed Plan for over two (2) years. Then, on October 8, 2008, the Chapter 13
Trustee filed a Motion to Dismiss Case for Failure to Make Plan Payments (the
“Dismissal Motion”). [dkt item 43] A hearing thereon was scheduled for October 23,
2008. On October 20, 2008, the Debtor, through Counsel, filed an opposition to the
Dismissal Motion. [dkt item 44] Subsequently, the Dismissal Motion was withdrawn on
December 4, 2008.
From the Petition Date through the end of 2008, all of Debtor’s pleadings were
filed by or through Counsel. However, on February 3, 2009, the Debtor, without the
assistance or signature of Counsel, filed an Objection to the payments being made by
the Chapter 13 Trustee to AGF (the “AGF Payment Motion”). [dkt item 45] Debtor
alleged that the payments should not be made to AGF, and asserted, inter alia, that
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AGF should not be paid because it did not hold a valid lien against the Debtor’s
residence. A hearing thereon was scheduled for March 10, 2009.
On February 11, 2009, the Chapter 13 Trustee filed an Affirmation in Opposition
to the AGF Payment Motion (the “Opposition”). [dkt item 46]
On March 4, 2009, the Debtor, again without the assistance or signature of
Counsel, filed a Supplemental Affirmation and Motion to Cease Illegal payments to
American General Finance and Return the Funds to Debtor Account. [dkt item 48]
Therein, Debtor supplemented the AGF Payment Motion by alleging, inter alia, that the
claim filed by AGF was illegal and further attacked the validity of the AGF lien and claim.
On March 10, 2009, the hearing on the AGF Payment Motion was called.
Counsel did not appear at the hearing, but the Debtor did. On the record, the Debtor
expressed his frustration with his Counsel for not addressing the issues raised by the
AGF Payment Motion and expressed a failure of Counsel to communicate with him
regarding same. The Court adjourned the hearing to May 5, 2009, at 9:30 a.m. for an
evidentiary hearing.
At the time of the March 10, 2009, hearing this Court had not entered an order
relieving Counsel of his obligation to represent Debtor. In fact, such relief had not been
requested. Accordingly, on March 17, 2009, this Court issued an Order to Show Cause,
directing Counsel to appear on May 5, 2009 at 9:30 a.m., and to show cause why he
should not be sanctioned in accordance with E.D.N.Y. LBR 2090 (“Show Cause Order”).
[dkt item 50] In its Show Cause Order, this Court specifically noted that E.D.N.Y. LBR
2090-2, inter alia, requires that the attorney of record for a debtor:
[S]hall appear on behalf of the debtor in every aspect of the case, including, but
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not limited to . . . defending an adversary proceeding, contested matter, motion,
or application filed against the debtor during the pendency of the case.
Also in its Show Cause Order, this Court specifically noted that E.D.N.Y. LBR
2090-2(e) provides, inter alia, that:
[A]n 	attorney 	of 	record 	who 	fails 	or 	refuses 	without 	reasonable 	excuse 	to
represent the debtor in defending an adversary proceeding, contested matter,
motion or application filed against the debtor. . . may, after notice and a hearing,
be sanctioned pursuant to this rule and may be ordered to disgorge fees paid in
connection with the case pursuant to Bankruptcy Rule 2017.
On March 23, 2009, Counsel filed an opposition to the Show Cause Order. [dkt
item 51] On April 17, 2009, Counsel filed a Motion to Withdraw as Attorney for Debtor,
citing a disagreement with Debtor that “marred” an otherwise good relationship (the
“Withdrawal Motion”). [dkt item 54] Various additional pleadings were filed in relation to
the AGF Payment Motion, the Show Cause Order, and the Withdrawal Motion. [dkt
items 48, 49, 52, 53, 56, 59, 60, 61]
At the hearings of May 5, 2009, this Court granted Counsel’s request to withdraw
and directed Counsel to file a fee statement as to services rendered to, and payments
received from, the Debtor by May 15, 2009. Debtor was directed to file any further
responsive papers by May 19, 2009. This Court, incident to allowing Counsel to
withdraw, also directed Counsel to file and serve a letter notifying Debtor of all pending
deadlines in effect in this case. Also at the hearings of May 5, 2009, this Court denied
the AGF Payment Motion.
On May 15, 2009, Counsel filed his Fee Statement [dkt items 63, 65] and his
letter advising Debtor of the deadlines in effect in this case. [dkt item 66] Debtor filed a
response to Counsel’s Fee Statement on May 27, 2009 [dkt item 67], along with his
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explanation as to why the response was late. This Court has excused the tardiness and
has considered Debtor’s late response.
In his Fee Statement, Counsel states he has expended 58.25 hours of time
representing Debtor, incurring $13,574.75 of legal fees. Counsel further states, in
effect, that he is only seeking allowance of the $4,500.001 he has received in this case.
[dkt item 65]
Debtor asserts that he has paid Counsel substantially more money, in excess of
$15,000.00. [dkt item 67] Debtor asserts that he and Counsel had disagreements
regarding the strategy to be used against AGF. Debtor, however, acknowledged that he
has had separate counsel in the state court litigation against AGF both prior and
subsequent to the Petition Date. Debtor, citing E.D.N.Y. LBR 2090-2, appears to ask
this Court to determine a reasonable fee for Counsel. [dkt item 67]
Legal Analysis
In a Chapter 13 case, the court may allow reasonable compensation to the
debtor's attorney for representing the interests of the debtor in connection with the
bankruptcy case. See 11 U.S.C. § 330(a)(4)(B). Compensation is based upon a
consideration of the benefit and necessity of such services to the debtor. The standard
for determining compensation of a Chapter 13 debtor’s counsel is, therefore, different
than the standard utilized in Chapter 11 cases, as the services of the Chapter 13
counsel need not benefit the estate generally, so long as the services benefit the debtor.
See 11 U.S.C. § 330(a)(3).
1 Counsel has voluntarily waived any compensation above $4,500.00; therefore this opinion will only
analyze Counsel’s services in light of this self-imposed fee cap.
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Bankruptcy Code § 330(a)(4)(B) provides as follows:
In a chapter 12 or chapter 13 case in which the debtor is an individual, the court
may allow reasonable compensation to the debtor's attorney for representing the
interests of the debtor in connection with the bankruptcy case based on a
consideration of the benefit and necessity of such services to the debtor and the
other factors set forth in this section.
11 U.S.C. § 330(a)(4)(B). The “other factors” referenced in Section § 330(a)(4)(B) are
set forth in Section 330(a)(3), which provides:
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)(3); see also In re Anderson, 362 B.R. 575 (Bankr. E.D.N.Y. 2007)
(addressing chapter 13 attorneys fees under the Bankruptcy Code and other federal
statutes).
Counsel bears the burden of proof to demonstrate entitlement to the requested
fees. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983); In re Bolton, 43 B.R.598, 600
(Bankr. E.D.N.Y 1984). This Court has an obligation to examine the propriety of
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attorney's fees, regardless of whether an objection is raised. In re Thorn, 192 B.R. 52,
55 (Bankr. N.D.N.Y.1995). In Thorn, former Northern District of New York Bankruptcy
Court Chief Judge Gerling noted that “when the issues are not complex and the process
is straightforward, an attorney is expected to exercise “billing judgment” [citation
omitted], and is encouraged to reduce its customary fees in appropriate circumstances
to reflect a less substantial expenditure of the attorney's time.” Id. at 56 (citing Hensley,
461 U.S. at 437); see also In re Hirsch, No. 1-02-17966, 2008 WL 5234057, *5 (Bankr.
E.D.N.Y. 2008).
Bankruptcy Rule 2017(b) provides that, after notice and hearing, the court may:
determine whether any payment of money or any transfer of property, or any
agreement therefor, by the debtor to an attorney after entry of an order for relief
in a case under the Code is excessive, whether the payment or transfer is made
or is to be made directly or indirectly, if the payment, transfer, or agreement
therefor is for services in any way related to the case.
FED . R. BANKR . P. 2017(b). Bankruptcy Rule 2017 expressly authorizes the Court to
analyze and determine whether any payment made to a debtor’s attorney is reasonable
or excessive, whether such agreement is made before the order for relief (Rule
2017(a)), or after the order for relief (Rule 2017(b)),2 so long as such services are “in
any way related to the case.” FED . R. BANKR . P. 2017.
Rule 2016(a) of the Federal Rules of Bankruptcy Procedure implements the
standards set forth in Section 330 of the Code:
2 Bankruptcy Rule 2017(b) provides that, after notice and hearing, the court may:
determine whether any payment of money or any transfer of property, or any agreement therefor, by
the debtor to an attorney after entry of an order for relief in a case under the Code is excessive,
whether the payment or transfer is made or is to be made directly or indirectly, if the payment,
transfer, 	or 	agreement 	therefor 	is 	for 	services 	in 	any 	way 	related 	to 	the 	case.
FED. R. B ANKR. P. 2017(b).
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Application for Compensation or Reimbursement. An entity
seeking interim of final compensation for services, or
reimbursement of necessary expenses, from the estate shall file
with the court an application setting forth a detailed statement
of (1) the services rendered, the time expended and expenses
incurred, and (2) the amounts requested.
FED . R. BANKR . P. 2016(a). To satisfy this burden, a claimant must justify its charges
with detailed, specific, itemized documentation. In re Bennett Funding Group Inc., 213
B.R. 234, 244 (Bankr. N.D.N.Y. 1997); In re Poseiden Pools of America, Inc., 180
B.R.718, 729 (Bankr. E.D.N.Y. 1995), aff’d, 216 BR. 98, 100 (E.D.N.Y. 1997). Billing
records must clearly identify each billed discrete task, indicate the date the task was
performed, the precise amount of time spent, not to be billed in increments greater than
one-tenth of an hour, who performed the task, their level of experience, and that
person’s hourly rate. In re Fibermark, Inc., 349 B.R. 385, 395 (Bankr. D.Vt. 2006).
Moreover, the records must be detailed enough to enable a court to determine whether
the attorneys are claiming compensation for hours that are “redundant, excessive, or
otherwise unnecessary.” Hensley, 461 U.S. at 434.
Debtor objects that Counsel has a number of billing entries logged as “various dates.”
However, even if this Court disallowed every entry logged as “various dates,” Counsel still
would have expended substantially more time than his requested allowance for a fee of
$4,500.00 would reflect at the rates he has charged. Counsel’s billable rates are discussed
below.
Further, this Court rejects Debtor’s contention that Counsel was supposed to file an
adversary proceeding against AGF and/or represent him in the state court litigation.
The Retainer Agreement specifically excludes any post-confirmation services for the
agreed fee (initially $3,000.00); if Counsel were to provide any additional services, such
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as filing or defending an adversary proceeding, Debtor agreed he would incur additional
fees. [dkt item 1] Although E.D.N.Y. LBR 2090-2(a) does allow Counsel to exclude the
defense of adversary proceedings if the pre-petition retainer agreement with the debtor
so provides and the appropriate procedures under LBR 2090-2(b) are followed,
this Rule does not require Counsel to initiate an adversary proceeding.
Finally, the Court rejects Debtor’s contention that he paid Counsel more than
$15,000.00 in fees. Upon a review of the record, Debtor appears to be confusing
Counsel’s charges incurred in connection with this case with charges incurred for
services undertaken by Counsel for Debtor in connection with Debtor’s ex-wife’s
bankruptcy case. Counsel separately billed Debtor for work associated with Debtor’s
ex-wife’s bankruptcy case, wherein Debtor was a creditor. The Court will not consider
those charges, because they are for work outside of this bankruptcy case, and Section
330 of the Code and Bankruptcy Rule 2017 do not contemplate the consideration of
those fees incurred “for representing the interests of the debtor in connection with the
bankruptcy case[.]” In this case, the Debtor has only paid Counsel $4,500.00, and that
is the legal fee this Court is reviewing for reasonableness in this case.
As for the reasonableness of Counsel’s billing rate, a rate of $250.00 per hour for
Counsel is commensurate with his skill level and reasonable in relation to rates
generally charged in this district. 	In addition, the hourly rate of $80.00 for Counsel’s
paralegal is certainly reasonable in this district. Counsel and his paralegal expended
58.25 hours in this case in the aggregate. The division of attorney time and
paraprofessional time reflects that Counsel billed 51.5 hours of attorney time and 6.75
hours of paralegal’s time. Based on the $4,500.00 fee, this results in a blended billing
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rate of $77.25 per hour, an unquestionably reasonable overall rate for Counsel. Even if
the Court allowed only Counsel’s billed hours, the result would still be a reasonable fee.
Counsel’s work benefitted Debtor. Debtor was able to resolve issues with the
Internal Revenue Service and objections to his various proposed plans. Debtor was
able to withstand motions to dismiss his case brought by the Chapter 13 Trustee.
Although Debtor has not resolved his issues with AGF before this Court, he was given
the opportunity to bring those issues to this Court in May 2006 and failed to do so.
Further, Debtor has been continuing to litigate his disputes with AGF before the state
court.
Therefore, based upon the services rendered by Counsel as set forth above, and
the benefits received by Debtor, a fee of $4,500.00 is reasonable for Counsel in this
case. Counsel will be awarded a reasonable fee of $4,500.00. All other relief will be
denied.
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____________________________
Alan S. Trust
United States Bankruptcy Judge
Dated: July 2, 2009
Central Islip, New York
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