KSB

Judge Nugent

09-10601 Hueser (Doc. # 31) - Document Text

Case 09-10601 Doc# 31 Filed 08/31/09

SO ORDERED.

SIGNED this 31 day of August, 2009.

OPINION DESIGNATED FOR ON - LINE PUBLICATION
BUT NOT PRINT PUBLICATION

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS

IN RE: )

)
JASON M. HUESER, ) Case No. 09-10601
SHERRY A. HUESER, ) Chapter 13

)
Debtors. )
________________________________________________)
)
IN RE: )


)
DAVID J. AKALIS, ) Case No. 08-13346
PAULA J. AKALIS, ) Chapter 13

)
Debtors. )
________________________________________________)
)
IN RE: )
)


MARLENA L. WARREN, ) Case No. 09-10039
) Chapter 13
Debtors. )
________________________________________________)

1

________________________________________
ROBERT E. NUGENT
UNITED STATES CHIEF BANKRUPTCY JUDGE
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Case 09-10601 Doc# 31 Filed 08/31/09 Page 2 of 10


MEMORANDUM OPINION

In each of these three chapter 13 cases, debtors’ counsel Mark J. Lazzo seeks a fee of $3,000
for representing the debtors. Because this fee exceeds the $2,500 “presumptive fee” established for
this Division in In re Mayer in 2006, the Trustee has objected.1 The Court convened a brief
evidentiary hearing on August 17, 2009 and heard evidence from Mr. Lazzo and two other chapter
13 debtors’ lawyers, David J. Lund and Michael J. Studtmann. The Trustee, Laurie B. Williams,
appeared in pro per and testified in support of increasing the presumptive fee. The Court admitted
exhibits from both parties, including statistical exhibits prepared by Ms. Williams. The Court took
the matter under advisement but left the record open for possible further proceedings to hear from
the creditor body.2

In re Mayer 3

In Mayer, this Court concluded that in light of the then-recent enactment of BAPCPA (The
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005), an increase of the
presumptive fee to $2,500 was amply supported. At that time, the Court was convinced that the
additional work imposed by the means test and other aspects of the 2005 law easily justified an

1 This contested matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (L) and (O)
and 11 U.S.C. § 330(a)(4)(B). The Court has subject matter jurisdiction. See 28 U.S.C. §§ 1334
and 157(a) and (b)(1).

2 The Court now issues this opinion as a final opinion, closing the record in this matter
and declining to conduct further proceedings. The Court notes that only the standing trustee has
filed an objection to the debtors’ attorney’s fees, ostensibly to bring the matter before the Court,
and that no creditor in these three cases has filed an objection to allowing a fee of $3,000.

3 The presumptive fee in a chapter 13 case was increased from $2,000 to $2,500 for all
chapter 13 cases filed on or after July 18, 2006. This decision was entered in three companion
cases: In re Mayer, No. 06-10013; In re Connell, No. 06-10300; and In re Dick, No. 06-10418.
For ease of reference, these companion cases will be referred to collectively as In re Mayer,
2006 WL 2850451 (Bankr. D. Kan. Oct. 2, 2006).

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increase of $500 per case. The presumptive fee increased for all chapter 13 cases filed on or after
the date of the evidentiary hearing in Mayer, July 18, 2006, and has remained at $2,500 for the past
three years. As always, and as this Court noted in Mayer, counsel seeking to be paid more than
$2,500 may keep time records and file a “formal” fee application under Fed. R. Bankr. P. 2016(a)
to obtain approval of fees over the presumptive amount.4 The Court sees little need to restate
Mayer’s legal conclusion that a detailed fee application in every chapter 13 case would add
considerably to the work of both the attorneys and the Court for very little gain.

The Current Cases

Each of these three cases has a slightly different factual setting. In Hueser, one of the
debtors owns and operates a hair salon business which is only marginally profitable; debtors are
below-median income and have an applicable commitment period of three years. Debtors’ home
was in foreclosure when they filed their chapter 13 bankruptcy and they proposed in their plan to
surrender the property. The mortgage lender sought and obtained stay relief without objection by
debtors. The debtors in Hueser filed their chapter 13 petition and plan on March 12, 2009. The
trustee was the sole objector to confirmation of the plan, only on the issue of debtors’ attorney’s
fees.5 Debtors’ plan has not been confirmed.

In Akalis, the debtors had extensive tax claims by the Kansas Department of Revenue, to
which a claims objection was filed by debtors, and a contest with their credit union over a secured
claim. They also are below-median income debtors. Their plan provided for a conduit mortgage

4 2006 WL 2850451, *3.
5 Hueser, Dkt. 24.
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payment as debtors were delinquent on mortgage payments at the time of filing.6 The debtors in
Akalis filed their chapter 13 petition and plan on December 30, 2008. The trustee objected to
confirmation on several grounds.7 The credit union creditor also objected to confirmation but did
not object to the debtors’ attorney’s fees; this creditor subsequently entered into stipulated plan
treatment.8 The debtors’ plan was confirmed August 12, 2009, subject only to the presumptive fee
issue.

In Warren, debtor was single and she claimed six dependents, all ages 10 and under. This
debtor had no secured or priority claims. She is a below-median income debtor. Debtor filed her
chapter 13 petition and plan on January 12, 2009. Her plan was confirmed, subject to the attorney’s
fees issue, on May 26, 2009.

No creditor in any of these three cases objected to Mr. Lazzo’s claimed attorney’s fees of
$3,000. These three cases all appear to be typical of consumer chapter 13 cases in this Division.

Presumptive Fees

The bankruptcy courts may, consistent with § 330 of the Bankruptcy Code, set presumptive
or “no-look” fees for debtor attorneys providing routine legal services in chapter 13 cases.9 The
Tenth Circuit Bankruptcy Appellate Panel noted that bankruptcy courts that allow a presumptive fee

6 See Bankr. S.O. 09-2, Conduit Mortgage Payments in Chapter 13 effective October 1,
2008.

7 Akalis, Dkt. 15.

8 Akalis, Dkt. 16, 33.

9 See Keith M. Lundin, 4 CHAPTER 13 BANKRUPTCY, 3RD EDITION, § 294.1, pp. 294-27 294-
42 (2000 & Supp. 2004); In re Eliapo, 468 F.3d 592, 598-99 (9th Cir. 2006) (discussing the
virtues of presumptive fees and citing other circuits that have approved use of presumptive fees);
Hastings v. United States Trustee (In re Agyekum), 225 B.R. 695, 699 (9th Cir. BAP 1998).

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merely set the maximum allowable fee without submitting a detailed fee application.10 In this

District, Judge Karlin, sitting in the Topeka division, has approved a chapter 13 presumptive fee of

$2,800 for below-median income debtor cases and $3,300 for above- median debtor cases.11 Other

bankruptcy courts in the Tenth Circuit have increased their chapter 13 presumptive fees subsequent

to BAPCPA.12 As explained below, the Court believes that it is appropriate to increase the current

presumptive fee for chapter 13 cases to the amount of $3,000.13

From the general statistical evidence compiled and presented by the Trustee in the current

cases before it, the Court found most interesting the fact that the number of lawyers filing chapter

10 In re Rogers, 401 B.R. 490, 494 (10th Cir. BAP 2009). See also, In re Tahah, 330 B.R.
777 (10th Cir. BAP 2005) (recognizing independent duty of bankruptcy courts to evaluate
compensation requested under fee statute regardless of existence of presumptive fee).

11 In re Beck, No. 06-40774 (Bankr. D. Kan. Feb. 21, 2007). The presumptive fee set by
Judge Karlin encompasses the time period from initial consultation through discharge or
completion of the case, whether by dismissal or closing. She “built in” to the presumptive fee,
the amount of $450 for post-confirmation time not related to responding to motions, filing
motions, or appearing in court. Judge Karlin also allowed additional “presumptive fees” of $400
for those cases (repeat filers) where counsel must file a motion to extend or create a stay.

12 See In re Mullings, 2006 WL 2130648 (Bankr. E. D. Okla. Jul. 26, 2006) (increased
presumptive fee to $3,750 in all chapter 13 cases effective August 15, 2006); In re Attorneys’
Fees in Chapter 13 Cases, 2006 WL 4860080 (Bankr. D. Utah Mar. 22, 2006) (adopting
presumptive fee of $2,750 through plan confirmation; declining presumptive a la carte fees for
post-confirmation services).

13 This increase is in line with chapter 13 presumptive fees in other jurisdictions. See
e.g., In re Thain, 356 B.R. 804, 806 n. 4 (Bankr. D. Alaska 2006) (by local bankruptcy rule fees
of $2,500 “deemed allowed” in chapter 13 consumer case); In re Younger, 360 B.R. 89, 93 n. 7
(Bankr. W.D. Pa. 2006) (no-look fee of $2,500 for chapter 13 cases after October 17, 2005); In
re Bellamy, 379 B.R. 86, 90-91 (Bankr. D. Md. 2007) (tiered presumptively reasonable flat fees
for chapter 13 cases ranging from $2,000 to $4,500, depending upon scope of representation;
$3,500 presumptive fee for all matters in main case through confirmation and 6 months
following confirmation); In re Jones, 2008 WL 4552370, *2 n. 2 (Bankr. E. D. Tenn. Oct. 6,
2008) (presumptive fee in chapter 13 cases raised to $3,000 on February 25, 2008).

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13 cases in this Division has dropped from 91 to 71 since the effective date of BAPCPA.14 Case
filings in this Division are on the rise, suggesting that there are fewer attorneys to handle more
chapter 13 cases than previously. The Court also notes with interest that, after the October 1, 2008
effective date of the Conduit Mortgage Rule in this District, some 143 cases have been filed in
Wichita with plans providing for the payment of mortgages through the plan.15 The lawyers who
testified agreed that mandatory inclusion of the home mortgage payment for debtors who are in
default at filing, while salutary, further complicates the work of debtors’ lawyers and adds to the
time involved in securing information about the claim and providing for it in a plan.

The Court also finds that the average retainer taken by lawyers prior to commencing these
cases ranges from $500 to $1,000. Yet, at least based on Mr. Lazzo’s time statements, a substantial
amount of lawyer time goes into initial consultation with the clients and preparation of the petition,
schedules, statements, and plan. In each of the three cases here, consultation and preparation of
documents pre-filing took more than 8 hours and, in once case, more than 10 hours. At Mr. Lazzo’s
hourly rate of $195, simply commencing the case can entail $1,560 in fees. This suggests to the
Court that debtors’ lawyers take substantial payment risk by allowing fees to be paid over time.

Most importantly, it appears to the Court that Mr. Lazzo has expended about $3,000 in time
on these cases that are now only at the point of confirmation. If the presumptive fee is to consider
ordinary post-confirmation hand-holding as opposed to actual motion practice, an increase in the fee
is warranted. This fact, along with the evidence submitted by the Trustee indicating what chapter
13 lawyers collect from post-BAPCPA cases, suggests that $3,000 is a fair presumptive fee for the

14 See Akalis, Trustee Ex. H and H1.
15 See Akalis, Trustee Ex. H2.
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work of filing and prosecuting a chapter 13 case in this Division at this time.16 As reflected by the
Trustee’s exhibit summarizing attorney’s fees paid through the plan during the approximate three
year period October 2, 2006 - August 13, 2009 for closed cases, Mr. Lazzo filed 173 cases and his
average fee to be paid through the plan was $1,542. Mr. Lazzo actually received this average fee
in 83.70% of the cases.17 This summary also demonstrates that the more prolific filers of chapter
13 cases are not fully paid their average fee through the plan, again pointing to the risk debtors’
attorneys take in having their fees paid through case administration over time and the success rate
of chapter 13 cases.18

As has been the custom here, if an attorney believes that she is entitled to an additional fee
above the presumptive fee, she may keep time and apply separately for that fee’s allowance as an
administrative expense under Fed. R. Bankr. P. 2016. Additionally, for work associated with post-
confirmation modification of plans, defending motions for stay relief or motions to dismiss, or for
other post-confirmation litigation activity, and if an attorney so desires, she may seek an additional
fee by including a brief description of the work done and a prayer for same in a motion to modify

16 As sought here and in future cases, this presumptive fee would cover the time and
legal services from the initial consultation through plan confirmation.

17 See Akalis, Trustee Ex. H3.

18 Id. Attorney Ronald Leslie filed 125 cases during this three year period, with an
average fee of $1,193 to be paid through the plan, and received his average fee 89.74% of the
time prior to closing. Attorney David Lund filed 171 cases during this three year period, with an
average fee of $1,551 to be paid through the plan, and received his average fee 86.74% of the
time. Attorney Michael Studtmann filed 161 cases during this three year period, with an average
fee of $1,270 to be paid through the plan, and received his average fee 87.70% of the time.
Attorney William Zimmerman filed 127 cases during this three year period, with an average fee
of $1,441 to be paid through the plan, and received his average fee 86.01% of the time prior to
closing. Attorney Todd Allison filed 101 cases during this three year period, with an average fee
of $1,736 to be paid through the plan, and received his average fee 73.89% of the time.

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or in a responsive pleading.19 If an additional fee is requested, notice of the motion or responsive
pleading containing that request should be given to the creditor body. If a creditor or party in
interest objects to the additional fee application, the Court will conduct a hearing and consider the
request at that time.

Retroactive Application of New Presumptive Fee

At the August 18 hearing, Mr. Lazzo orally requested that if the Court increased the
presumptive fee to $3,000, such increase be retroactive. In support of that request, he argues that
he has many cases filed between January 1, 2009 and the present date in which he believes he has
earned an additional fee above $2,500 and that applying for fees in those cases will be expensive and
time-consuming. The Trustee adamantly opposed this Order having retroactive effect because she
fears a flood of such applications, especially where there appears to be no real basis upon which to
establish a beginning date for the period of retroactivity. She also persuasively argues that making
the $3,000 fee retroactive effectively modifies each plan that has been confirmed in this Court
during the period of retroactivity, increasing the payment burden on the debtors and decreasing the
distribution to many unsecured creditors.

Because no creditor had notice of this request for a retroactive increase of the presumptive
fee, the Court denies it.20 Further, there is no logical basis upon which the Court can set the date the

19 See In re Kiser, 2009 WL 161322, *3 (Bankr. D. Kan. Jan. 22, 2009) (court will
consider allowing “no-look” fee of $350 for defensive response to a motion to dismiss); See also,
In re Beck, supra.

20 The Court is also mindful of the general presumption against retroactivity, at least in
the case of interpreting substantive statutory enactments. See Landgraf v. USI Film Products,
511 U.S. 244, 270 (1994) (noting that retroactivity is matter on which judges tend to have sound
instincts and properly consider fair notice, reasonable reliance, and settled expectations that
should not be lightly disrupted).

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retroactive period is to begin. Unless a written motion for this treatment is noticed to the creditors
in these and other cases, this Court sees no fair way to increase fees in previously-filed cases other
than the three before it today by fiat. Mr. Lazzo’s oral request for retroactivity of the presumptive
fee is therefore DENIED.

Conclusion

Therefore, the Court ORDERS that in the three cases before the Court today, and in cases
filed after the date this Order is entered on the docket, the presumptive fee for representing a chapter
13 debtor from initial consultation through plan confirmation in the Wichita Division shall be
$3,000. If the trustee or a creditor objects to the presumptive fee in a particular case, it may pursue
that objection by an appropriate pleading and bring that objection before the Court. If a debtor’s
attorney believes that time and expenses in excess of the presumptive fee will be consumed in a
particular case, he or she may file a formal fee application with time records in accordance with Fed.

R. Bankr. P. 2016(a) and § 330. If debtors’ counsel seek additional fees for work done post-
confirmation related to modifying a confirmed plan, responding to a motion to dismiss, responding
to a stay relief motion, or some similar litigation activity, counsel may request that fee in the
modification motion or in a responsive pleading along with a brief description of the work done and
anticipated to be done. Any such request must be noticed to the matrix so that all creditors and
parties in interest may have an opportunity to respond.
The trustee’s objection to confirmation on the grounds that debtors’ attorney’s fees exceed
the presumptive fee established in Mayer is OVERRULED. Debtors’ attorney shall be allowed a
presumptive fee of $3,000 and these cases shall be confirmed. The trustee is directed to prepare an
appropriate order confirming the debtors’ plans in these three cases.

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IT IS SO ORDERED.


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