Chief Judge Nugent
- Category: Chief Judge Nugent
- Published on 16 October 2008
- Written by Judge Nugent
- Hits: 6590
Page 2 of 2PROFESSIONAL FEE AND EXPENSE GUIDELINES
IN BANKRUPTCY CASES PENDING BEFORE
THE HONORABLE ROBERT E. NUGENT,
UNITED STATES BANKRUPTCY JUDGE
(Effective January 31, 2002)
INTRODUCTION; COURT’S PHILOSOPHY AND APPROACH; APPLICABILITY OF
Introduction. For the benefit of the practicing bar both in the Wichita Division and
from other locales, the Court has developed the following fee and expense guidelines.
The Guidelines are based upon this Court’s interpretation of 11 U.S.C. §§327-3311,
Fed. R. Bankr. P. 2016, and this Court’s recent experience as a lawyer practicing in
Philosophy and Approach. This Court’s philosophy concerning fees and expenses to
be drawn from bankruptcy estates is simple. While the Court recognizes the need for
capable estate counsel and professionals to be compensated fairly, and at a level which
is commensurate with that enjoyed by nonbankruptcy professionals, bankruptcy estates
almost always lack sufficient assets to satisfy all creditor demands. The Court strives to
balance the need to fairly compensate professionals with the duty of the bankruptcy
system to maximize the assets in estates for the benefit of the creditor body. Estate
professionals are called upon to make that their highest concern. While they should be
fairly and promptly paid for their labors on behalf of the estate, the integrity of the
bankruptcy system requires that the interests of the creditors always be foremost. This
Court will approach the allowance of professional fees and expenses with that concern
for the creditors’ affairs, leavened by a desire to recognize the practical and economic
realities of professional practice. As a rule, this Court reviews all fee applications
submitted to it. Because these are guidelines and not statutes or rules, this Court may,
in rare but appropriate circumstances, depart from them to prevent substantial injustice.
Applicability: These guidelines apply to all professional fees sought to be allowed
under §§327 and 328. Absent a compelling reason to do otherwise, the Court will
apply these Guidelines to requests for allowance of secured claim enhancements under
§506(b) and surcharges under §506(c).
1All statutory references hereafter are to the Bankruptcy Code, 11 U.S.C. §101, et seq., unless
RETENTION OF PROFESSIONALS:
Need for Appointment. In order to be compensated, the estate must obtain court
approval for the employment of professionals. See 11 U.S.C. §327. Professionals
whose appointment has not been approved will not be granted compensation.
Employing equitable principles, the Court will grant nunc pro tunc relief to professionals
who have failed to obtain Court approval before undertaking estate work.
Professionals need be aware that this relief will be accorded only in extraordinary or
exigent situations. Ordinary neglect will not likely be a basis for nunc pro tunc
employment. Trustees or debtors in possession employing attorneys and other
professionals not accustomed to practicing in this area should take special care to have
their allied professionals’ employment approved.
Retention Effect. Procuring the Court’s approval of the appointment of a professional
does not insulate that person from the Court’s review of fees requested or the
possibility that the Court may be required to exercise its statutory power and duty to
reduce or disallow fees or expenses. The Court may allow compensation different from
that provided for in any agreement if the terms prove to have been improvident “. . . in
light of developments not capable of being anticipated at the time of the fixing of such
terms and conditions.” 11 U.S.C. §328(a). Moreover, the fees and expenses allowed
shall be reasonable compensation for the actual and necessary services or expenses
performed or incurred in service to the estate. See 11 U.S.C. §330(a)(1) and (3).
RATES. The following discussion of rates applies to attorneys, accountants and other
professionals who charge on a time basis. The Court understands that other professionals such
as auctioneers or appraisers may charge fees on a different basis.
Local Attorney/Accountant Rates. Local attorneys and accountants will be
compensated at their customary and usual rates subject to the Court’s power to limit
fees and expenses under §328.
“Out of Town” or “National” Rates. When professionals are engaged in cases of
national scope or which present complex issues requiring the skill and experience of
attorneys or accountants from other areas, their employment will be approved at their
customary and usual rates, again subject to the Court’s power to limit their fees and
expenses under §328.
Paraprofessionals. The Court encourages the use of paraprofessionals in bankruptcy
cases to perform non-legal tasks at a lower cost to the estate and its constituents.
Paraprofessionals will be compensated at the usual and customary rates charged by the
attorneys or accountants for whom they work.
APPLICATION PROCESS. Section 330(a) requires that compensation be awarded to
professionals only after notice and a hearing. Notice must be given to the parties in interest and
the U. S. Trustee. Fee applications should be set on the Court’s monthly miscellaneous docket,
but may be “negatively noticed” – in other words, if objections are not filed to the application, it
may be approved without further hearing. However, applicants should be aware that the Court
does review all fee applications whether objections are filed or not and that the lack of an
objection to the application does not assure its approval without the Court’s modification.
Information Necessary on All Applications: Whether or not the applications filed are
for monthly, interim or final allowance of compensation, all applications must contain the
following information in order to be considered and approved. The Court may require
additional information be provided where circumstances warrant. Nothing contained
herein limits the Court’s powers under §§ 326-331, applicable Federal Rules of
Bankruptcy Procedure (Fed. R. Bankr. P.), and the Local Bankruptcy Rules of
The identity of the applicant and who applicant represents;
Date of case filing;
Dates of (a) application for; and (b) order of appointment of applicant;
A statement regarding whether the application is interim or final and, if interim,
which interim application (first, second, etc. interim application for services
rendered from [date] to [date]);
A recapitulation of –
Previous payments made to applicant;
The payments’ source;
The dates of said payments; and
The amounts of compensation and reimbursement previously approved
by the Court;
The amount of fees and expenses requested;
Relative to EXPENSES, the following –
Exact nature of expense (e.g., number of copies and rate per copy);
Purpose or need for incurring such expense (e.g., copies of plan for
solicitation of ballots);
Any profit margin, markup or other overhead factor realized on any
Relative to FEES, the following –
Name(s) of the individual(s) who have worked on the case during the
period, their titles and positions and their hourly rates;
Individual and separate entries describing each service performed
Who did the work;
Date it was performed;
A specific, detailed description of work done and, where not
self-evident, the purpose of the work;
Identity of the parties involved in work performed;
The amount of time spent on each task (in increments of tenths
of an hour); and
The dollar value of the work performed.
Receipts: Members of Official Creditors Committees and non-lawyer
professionals shall submit receipts in support of reimbursable expense
claims; attorney applicants shall, absent further Court order, be excused
from submitting receipts.2
WHAT IS COMPENSABLE.
In determining whether the amount of time expended on a particular activity is
reasonable, the Court is guided by In re Permian Anchor Services, Inc., 649
F.2d 763, 768 (10th Cir. 1981), which adopted the lodestar analysis set forth
in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.
1974), which looks to the following factors:
2By signing fee and expense applications, attorneys certify that the statements contained in them
are true, See Fed. R. Bankr. P. 9011.
The time and labor required;
The novelty and difficulty of the questions;
The skill requisite to perform the legal service properly;
The preclusion of other employment by the attorney due to acceptance
of the case;
The customary fee;
Whether the fee is fixed or contingent;
Time limitations imposed by the client or the circumstances;
The amount involved and the results obtained;
The experience, reputation, and ability of the attorneys;
The "undesirability" of the case;
The nature and length of the professional relationship with the client;
Awards in similar cases.
The Court will also make a separate determination of the necessity of the
services for which compensation is being requested, see In re Lederman Enter.,
Inc., 997 F.2d 1321 (10th Cir. 1993), including whether the services benefitted
the bankruptcy estate.
Paralegal Fees: The principles set out above for usual and customary rates of local
and national attorneys shall apply to the rates of their respective paralegal employees.
Time entries for paralegals should not include secretarial or clerical tasks.
Other Professionals: Other professionals who ordinarily bill on an hourly basis may be
allowed their usual and customary rate, subject to the Court's discretion. Flat fees for
accountants, financial advisors, investment bankers, or consultants are disfavored and
will not be approved unless approved upon prior application for cause shown.
Compensable Components of Attorney and Paralegal Fees
Fee Applications: reasonable time spent in preparation of fee application. In re
Seneca Oil Co., 65 B.R. 902, 910 (Bankr. W.D. Okla. 1986);
Prepetition: only time spent in preparation for or contemplation of filing
Personal services: services that benefit bankruptcy estate are compensable.
Services that benefit debtor personally are not compensable (e.g. defense of
Section 523 and 727 actions);
Travel: nonlocal travel compensated at counsel's usual and customary hourly
rate. Travel must be apportioned among all the cases on which attorney
Interoffice conferences among attorneys are compensable subject to a showing
that they are reasonable, necessary and not duplicative.
Components of Attorney and Paralegal Fees that are Not Compensable
Clerical or secretarial work – filing, organization of files, mailing, copying;
Time spent "educating an untrained apprentice or familiarizing oneself with
general Code provisions or basic law" is not compensable. Attorneys are
required to have some minimum level of expertise. In re Seneca Oil, 65 B.R.
902, 912 (Bankr. W.D. Okla. 1986);
What is compensable –
Extraordinary photocopying-actual, reasonable and
Extraordinary postage expense-actual, reasonable and necessary;
Long distance telephone calls;
Fees charged by clerk's office for copies from the file;
Certified mail if shown to be required by law;
Out of town travel, including coach class airfare, tolls, parking,
necessary lodging and meals, nonlocal mileage at IRC rate;
Express mail or delivery- actual and necessary costs;
Telefacsimile charges- actual, reasonable and necessary long-distance
telephone charges; and
Computerized legal research- actual and reasonable cost over monthly
What is not compensable –
Ordinary photocopying- routine correspondence;
Ordinary postage expense- routine correspondence;
Office overhead, including, but not limited to: rent; utilities; insurance;
taxes; clerical or secretarial wages, salary, benefits and overtime; local
Messenger service; and
Library costs, expenses.
INTERIM AND FINAL APPLICATION PRACTICE: The Court recognizes that forcing
counsel or accountants to await the conclusion of a case to obtain compensation results in
professionals actually financing the case. Therefore, the Court welcomes interim applications
for compensation as contemplated by §331. All interim applications must contain a
recapitulation of all fees and expenses applied for and awarded to the date of the application’s
filing so that the Court may know a running total of fees and expenses incurred at each stage of
A. Applications for Monthly Payments: Counsel and other professionals should consult
L.B.R. 2016.1(a) which, as it will be amended in March of 2002, will provide that only
counsel for the debtor may apply for leave to be paid on a monthly, rather than a
quarterly, basis for his or her services in the conduct of the case. This is a revision of a
previous rule which permitted all estate professionals to apply to draw fees monthly.
The Court believes that, in appropriate circumstances, it may authorize other estate
professionals (such as counsel for a committee) to be paid monthly. The allowance of
monthly draws under L.B.R. 2016.1(a) is by no means automatic and the Court
certainly reserves the right to conduct a hearing to determine the extent of counsel’s
need to be compensated monthly.
Applications for monthly draws should be noticed to the docket and
should not be combined with applications for employment.
Counsel may apply for allowance of 100 percent of the fees incurred in
a given month and 100 percent of the expenses incurred. Such
applications may be approved, provided, however, that where 100
percent of the fees are allowed, counsel shall retain 20 percent of the
fees in trust pending approval by this Court of an interim or final
application, unless otherwise ordered.
As with interim applications under §331, all monthly applications and
orders submitted thereon shall contain a clear statement of what
payments have been received by the applicant to the date of the present
application, the source of those payments, the date of the payments and
what payments and reimbursements of fees and expenses have
previously been approved by the Court. From the order’s terms, the
Court should be able to ascertain, without further research in the file,
how much the conduct of the case has cost in attorneys fees and
expenses at any given application date. After sixty days following
the date of these guidelines (January 31, 2002), orders lacking
any of this information will be returned.
Final Applications: When a professional has received compensation and/or
reimbursement on either a monthly or an interim application, the orders granting same
shall be deemed interim only and the orders remain subject to the Court’s review of
the final application, usually filed at the conclusion of the case (e.g., after confirmation of
a plan, completion of an estate’s administration, etc.). Counsel and allied professionals
should understand that until a final fee application is approved, the Court retains the
power to enhance or reduce fees and expenses previously approved as well as the
power to order the disgorgement of some or all of such fees in appropriate situations.
CONCLUSION: The Court recognizes that in the creation of these guidelines it may not have
anticipated every conceivable fee and expense concern which could be raised by counsel or
other professionals. Questions should be directed either to the Court’s Law Clerk or to the
Courtroom Deputies in the office of the Clerk of the Court.
January 31, 2002
ROBERT E. NUGENT, BANKRUPTCY JUDGE
UNITED STATES BANKRUPTCY COURT
DISTRICT OF KANSAS
- << Prev