KSB

Judge Karlin

12-40685 H D Gerlach Company Inc (Doc. # 129) - Document Text

SO ORDERED.
SIGNED this 30th day of November, 2012.

 

 

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS


In re:
HD Gerlach Company Inc., Case No. 12-40685
Chapter 11
Debtor.

Order Requiring Creditor Central National Bank to Supplement its
Privilege Log in Relation to its First Interim Application for Allowance
and Payment of Attorney Fees and Expenses

On October 12, 2012, Central National Bank (Central) filed its first application
for fees and expenses, seeking almost $50,000 for the period December 2011 through
October 2012.1 Debtor objected to Central’s fee motion in large part because the
attached itemization was so heavily redacted that counsel was unable to determine the
reasonableness of the fees.2 At a hearing conducted November 14, 2012, after a

1 Doc. 94.

2 At the hearing on Central’s motion, Debtor’s counsel agreed that, if reasonable, theterms of the agreement between the parties allows for attorney fees and expenses pursuantto 11 U.S.C. § 506(b). In addition, this judge does not remember that counsel had anyargument about the hourly rate requested. Therefore, it appears that only Debtor’s

Case 12-40685 Doc# 129 Filed 11/30/12 Page 1 of 8


preliminary review of the heavily redacted fee itemization, the Court agreed that the
redactions made it impossible for Debtor’s counsel to assess reasonableness. On that
basis, the Court believed it unfair to proceed to its own review of reasonableness
without input of Debtor’s counsel. The Court therefore ordered that Central provide
opposing counsel and the Court with a less-redacted version of the itemization, where
possible, and a privilege log to justify the remaining redactions. Central was also
ordered to file an unredacted copy of the fee itemization under seal.

Central timely filed the unredacted itemization under seal. In addition, Central
has eliminated some of the redactions—in other words, some words that were
previously redacted are now viewable—and has presumably provided that less
redacted itemization to Debtor. But these limited efforts haven’t been very helpful. The
amended itemization that opposing counsel received is still heavily redacted.

As an applicant for an award of attorney fees, Central has the burden of proving
that the number of hours for which it seeks fees is reasonable considering the legal
tasks for which fees are sought.3 To satisfy its burden, Central must submit
“meticulous, contemporaneous time records that reveal, for each lawyer for whom fees
are sought, all hours for which compensation is requested and how those hours were
allotted to specific tasks.”4 Furthermore, this Court “has a positive and affirmative

reasonableness challenge remains in dispute.

3 Malloy v. Monahan, 73 F.3d 1012, 1017–18 (10th Cir. 1996).

4 Case v. Unified School District No. 233, Johnson County, Kansas, 157 F.3d 1243,
1250 (10th Cir. 1998) (citing Ramos v. Lamm, 713 F.2d 546, 552 (10th Cir. 1983)) (alsoholding that a court is justified in reducing the number of reasonable hours when the

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function in the fee fixing process, not merely a passive role.”5 For that reason, the

itemization must be sufficient to allow the Court to determine reasonableness. That

role is enhanced through the adversary process, by allowing both counsel to help

educate the trial judge about the fees in a particular case.

As in a similar case, Tomlinson v. Combined Underwriters Life Ins. Co.,6 the

attorney billing statements here do not meet the standard required to support the

award, at least in part, because

“[t]hey have been redacted so as to eliminate practically all references to thesubject matter or issue being researched or addressed, and the document beingprepared, reviewed, or revised. In other words, the redactions render the feerequest essentially unsupported because the redactions deprive the court of theability to determine whether the time spent on a particular task was reasonable.
The redactions also deprive Plaintiff of sufficient information to enable Plaintiffto formulate a reasoned objection.”7

Although this Court has now been provided, under seal, an unredacted version of the

time entries, Debtor’s attorney has not. Debtor has no real ability to make the required

attorney does not adequately document how “he or she utilized large blocks of time” andwhen hours claimed are unnecessary, irrelevant or duplicative). Case is very instructive onattorney fee awards, generally, including that time spent on generalized “conferences”
between attorneys is not necessarily compensable when the billing entries are notsufficiently specific and do not indicate what happened at the conference, and time spent onbackground research spent familiarizing oneself with the general area of law should beabsorbed in the firm’s overhead and not billed to the client.)

5 Valenti v. Allstate Ins. Co., 243 F. Supp. 2d 200, 209 (M.D. Pa. 2003) (citing
Loughner v. University of Pittsburgh, 260 F.3d 173, 178 (3d Cir. 2001)). In addition, not allhours expended in litigation are normally billed to a client, and applicants should exercise“billing judgment” with respect to a claim of the number of hours worked. Malloy v.
Monahan, 73 F.3d at 1018 (also holding that a court has a corresponding obligation toexclude hours “not reasonably expended” from the calculation of fees).

6 Case No. 08-cv-259-TCK-FHM, 2009 WL 2392950 (N.D. Okla. July 29, 2009).

7 Id. at *1.

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determination, and is deprived of the ability to support its argument that certain fees
may not reasonable in light of the work required.8

And like in Tomlinson, this Court is also not persuaded by Central’s arguments
that the information redacted from the billing statements constitutes either protected
attorney-client communication or work product, in the vast majority of the redacted
entries. As the Tomlinson Court noted, and which is very true here, “the redacted
information appears to be of the type that is routinely included in billing statements
appended to fee requests. It does not appear that the billing statements contain
professional advice or opinion or the mental impressions, conclusions, opinions, or legal
theories of an attorney.”9

Furthermore, the asserted privilege log does not meet the requirements of a
proper privilege log, because it is so generic as to be essentially worthless to this Court,
and undoubtedly to opposing counsel. Although there are well over 100 instances of
redaction, the log only states one of two sentences for all these redactions. The first is
“Attorney-client privilege as it reflects litigation strategy and the nature of services
provided,” and the second is “Work product doctrine as it reflects litigation strategy
and the nature of services provided.”

The attorney-client privilege is intended to encourage full and frank

8 The Court will note that without receipt of the unredacted copy, the fee applicationas originally filed lacked such specificity that the Court was simply unable to determine thereasonableness or accuracy of many charges. That lack of specificity, alone, would havejustified the Court’s complete denial of fees.

9 2009 WL 2392950, at *1.

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communications between attorneys and their clients, therein promoting broader public
interests in the observance of law and the administration of justice.10 But that privilege

“does not automatically extend to a peripheral fact regarding an attorney-clientcommunication or the attorney-client relationship in general. The generalnature of the privileged matter, the occasion and circumstances of anycommunications, actual circumstances of the attorney-client relationship remaindiscoverable, even when the underlying communication itself may be privileged.
‘The attorney-client privilege only precludes disclosures of communicationsbetween attorney and client and does not protect against disclosures of the factsunderlying the communication.’ In general, the facts of legal consultation oremployment, client identities, attorney's fees and the scope and nature ofemployment are not deemed privileged.”11

Similarly, the work product doctrine protects unwarranted inquiries into the

files and mental impressions of an attorney.12 But the burden of proof is on the

proponent of the doctrine. Any privilege must be weighed against the burden upon the

party requesting attorney’s fees to set forth, with specificity, the information that

supports the fees they seek.13

The Valenti case is instructive. There the Court noted that it had

“great concern with the defendant’s liberal use of purported privilege to protectwhat can only be described as mundane and uninforming entries in their billingrecords. This use of purported “privilege” has greatly multiplied the work thiscourt has had to undertake since the opposing party could not address any of theparticulars that have been redacted from the billing statement presented .... Asrandom examples of “privileged” information, selected from the billing, thedefendant on July 13, 1999 redacted an itemization for Attorney Stein thatreads “telephone conference with Jack Brinkman.” Nothing in the description

10 Swidler & Berlin v. United States, 524 U.S. 399, 403 (1998) (citing Upjohn Co. v.
United States, 449 U.S. 383, 389 (1981)).

11 Valenti, 243 F. Supp. 2d at 218 (citations omitted).

12 Hickman v. Taylor, 329 U.S. 495 (1947).

13 Valenti, 243 F. Supp. 2d at 218.

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describes the contents of the conversation, but merely that a phone call betweenone lawyer and another took place. It is hard to understand what privilegedinformation would be disclosed by leaving that description unredacted.14

The redactions in this case are quite similar, and this Court is also hard placed to
understand, except in maybe 5-10 possible instances, how the information could be
remotely privileged.

As noted above, construing the concept of privilege exceedingly broadly, it is
possible that a few redactions might contain privileged information. But Central has
placed the Court in a situation where it is having to guess about a possible privilege,
because the privilege log so inadequately describes the basis for claiming the privilege.
For example, if the description of work done included research about a possible legal
theory that the other side might be able to use (but maybe had not thought of yet), it
is possible this Court would find a redaction of that fee entry is privileged. Admittedly
an objection to a billing statement should not be used to smoke out theories that the
objecting counsel might not have contemplated. Similarly, if a description identified a
witness that opposing counsel did not wish to reveal at that juncture, for strategic
reasons, the identity could theoretically fit into some privilege.

But again, this Court is left guessing whether a privilege truly exists, because
the short-hand bases for redaction are simply inadequate. Again, the party seeking to
invoke the attorney-client or work product privilege has the burden of establishing its
applicability. To satisfy this burden, it is insufficient for the party invoking privilege
to merely contend, without more, that the redacted information contains privileged

14 Id.


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information.”15 A privilege log must describe the nature of the documents or
communications not produced in a manner that, without revealing any potentially
privileged information, will enable other parties to assess the claim.16 Central’s cursory
log entries wholly fail to do this.

Accordingly, the Court requires Central to provide to the Court and to the
Debtor a proper privilege log by December 7, 2012. This will enable the Court and
opposing counsel a true opportunity to evaluate the privileges asserted, which is
presently impossible. At some point before the hearing set for December 13, 2012,
counsel for both parties should consult and decide which redactions are still truly
disputed.

In addition, the Court again strongly encourages counsel to similarly consult and
decide which of the dozens of time entries are in dispute as to the reasonableness of
time spent, so that at the December 13 hearing, we do not have to use court time to
discuss entries that are undisputed.17 The Court also hopes that its citation to a few
cases in this order will give guidance as to how the Court views many of these issues.

Finally, the Court will note that it disagrees with the Debtor’s contention that
a state court (where some of the attorney time was expended) should decide the
reasonableness of the time spent on state court matters. I disagree. I believe I am

15 Cf., Centennial Archaeology, Inc. v. AECOM, Inc., 688 F.3d 673, 683 (10th Cir.
2012).

16 See Fed. R. Civ. P. 26(b)(5)(A).

17 It would be very helpful if counsel could jointly present a list of which entries
remain in dispute prior to the hearing (both as to whether a redaction is appropriate andwhether the fee sought is reasonable).

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capable of determining the reasonableness of those fees, and doing so in one forum will
avoid potential delay.

IT IS, THEREFORE, ORDERED that Central provide to this Court and Debtor
an amended privilege log, in full compliance with Fed. R. Civ. P. 26(a)(5), by December
7, 2012. In addition, counsel for both parties should meet prior to December 13, 2012
to winnow both the redaction dispute and the reasonableness dispute for court
presentation.

# # #

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