John Leo Butts

UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
CENTRAL DIVISION
____________________________________
)
In re: 	) 	Chapter 13
) 	Case No. 10-40538-MSH
JOHN LEO BUTTS 	)
)
Debtor. 	)
____________________________________)
MEMORANDUM OF DECISION AND ORDER ON DEBTOR’S APPLICATION TO
EMPLOY SPECIAL COUNSEL
This matter came before me for hearing on the Debtor’s Application to Employ Special
Counsel [#52] and the Limited Opposition of Home Loan Investment Bank, FSB [#53]. The
Debtor who is represented by Attorney Paul A. LaRoche as bankruptcy counsel seeks to employ
Attorney Walter Oney as special counsel for the purpose of investigating potential claims the
Debtor may have against Deutsche Bank, holder of a second mortgage on the Debtor’s property,
and if appropriate, representing the Debtor in prosecuting such claims. Home Loan Investment
Bank, FSB (“Home Loan”), the servicing agent for Deutsche Bank, objects on the grounds that
potential claims are likely time-barred and that there is no authority for a Chapter 13 debtor to
employ special counsel.
As to the first basis for its objection, suffice it to say that Home Loan’s opinion of the
viability of the Debtor’s claims against Deutsche Bank is of no relevance to the right of the
Debtor to engage legal representation to evaluate and, if appropriate, prosecute those claims. In
support of its second argument, Home Loan relies upon, In re Allen, 2006 WL2912534 (Bankr.
D. Mass. October 10, 2006), in which Judge Hillman denied a Chapter 13 debtor’s motion to
employ a “mortgage finance analyst, recovery specialist, truth in lending expert” pursuant to 11
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U.S.C. § 327(a) because § 327(a) permits a trustee, not a Chapter 13 debtor, to retain
professional persons. Allen is distinguishable from the instant case, however. First, both the
Debtor and Home Loan acknowledge that the application is not brought pursuant to § 327(a) nor
could it be as that section is inapplicable to attorneys representing Chapter 13 debtors. In re
Holland, 374 B.R. 409 (Bankr. D. Mass. 2007). Second, a Chapter 13 debtor has the right to
employ counsel. Ordinarily that employment occurs prior to the filing of the petition, as in the
case of Attorney LaRoche. Nothing in the Bankruptcy Code, however, precludes a Chapter 13
debtor from retaining successor counsel, special counsel, or even co-counsel, with the fees of
such counsel, which are paid out of property of the estate, being subject to review and approval
by the court. See Fed. R. Civ. P. 2016, M.L.B.R. 2016-1, and M.l.B.R. Appendix 1, Rule 13-7.
Moreover, as the Debtor correctly notes, the Bankruptcy Code provides for compensation
of Chapter 13 debtors’ attorneys in § 330(a)(4)(b). That section provides:
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 consideration of the benefit
and necessity of such services to the debtor and the other factors set forth in this section.
As Judge Feeney noted in Holland, § 330(a)(4)(b) directs a court to focus on the welfare
of the debtor, not the estate, in determining reasonable compensation. It is that standard which
acts as a restraint of sorts by ensuring that Chapter 13 debtor’s counsel does not run up excessive
fees in pursuant of frivolous claims and it is the standard by which the work of the Debtor’s
general bankruptcy counsel and special counsel will be evaluated.
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For the foregoing reasons, the Debtor’s Application to Employ Special Counsel is
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ALLOWED.
Dated: August 25, 2010 	_______________________________
Melvin S. Hoffman
United States Bankruptcy Judge
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