FILED DEC 19 2023 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. AZ-23-1047-LCF ALEJANDRO RIVERA and BRENDA JIMENEZ-CONTERAS, Bk. No. 0:18-bk-04468-SHG Debtors.
JIM D. SMITH, Appellant, v. MEMORANDUM* UST-UNITED STATES TRUSTEE, PHOENIX, Appellee.
Appeal from the United States Bankruptcy Court for the District of Arizona Scott H. Gan, Bankruptcy Judge, Presiding
Before: LAFFERTY, CORBIT, and FARIS, Bankruptcy Judges.
INTRODUCTION
Jim D. Smith, trustee of the chapter 71 estate of Alejandro Rivera and
Brenda Jimenez-Conteras, was employed to serve as attorney for the estate
* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. 1 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, and “Rule” references are to the Federal Rules of Bankruptcy Procedure. 1 with the approval of the bankruptcy court. Smith later filed a fee
application seeking attorney’s fees of $3,390, incurred during his
administration of the estate. Based on the U.S. Trustee’s (“UST”) opposition
to the fee application and the bankruptcy court’s independent analysis of
the requested fees, the bankruptcy court reduced the fees to $870. Smith
appeals the reduction. Seeing no error, we AFFIRM.2
FACTS 3
A. The bankruptcy case and Smith’s activities
Alejandro Rivera and Brenda Jimenez-Conteras filed their chapter 7
petition on April 24, 2018.4 Smith was appointed trustee.
Four months later, Smith filed a two-page application to have himself
appointed “attorney for the estate.” Concurrent with the application, Smith
filed a one-page declaration which simply stated that he is a sole
practitioner and had no conflicts. There being no objections, the application
was approved.
On August 21, 2018, Smith filed a two-page “Motion for Accounting”
which asserted that “the Debtors made cash withdrawals from their AEA
2 This appeal was concurrently heard with three others: (1) Smith v. UST (In re Figuero), BAP No. AZ-23-1048-LCF; (2) Smith v. UST (In re Banghart), BAP No. AZ-23- 1049-LCF; and (3) Smith v. UST (In re Earle’s Custom Wines, Inc.), BAP No. AZ-23-1050- LCF. These companion appeals are the subject of their own separate written decisions. 3 We exercise our discretion to take judicial notice of documents electronically
filed in the underlying bankruptcy case and adversary proceeding. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 4 The Debtors’ discharge was entered on August 28, 2018, after the time period to
object had elapsed. 2 Federal Credit Union Account . . . totaling $5,000 which was within two
months prior to filing Bankruptcy. . . . [T]he $5,000 Cash Withdrawals were
not disclosed and are property of the Bankruptcy Estate. . . . [T]he Trustee
has requested and the Debtors have not provided receipts for the
disposition of the $5,000 Cash Withdrawal.” The motion contained no
evidence to support the allegations and no legal argument as to why a
failure to disclose prepetition spending caused the amount spent to be
property of the estate.
Smith and the Debtors settled the dispute described in the motion for
$2,500 to be paid over time. Smith prepared and filed a two-page motion to
approve the settlement and attached a three-page settlement agreement.
Again, the application contained no declaration setting forth factual
support, nor any argument or discussion of why the settlement was
appropriate. There being no objections to the settlement motion, an order
was entered approving the motion.
On July 22, 2019, the IRS sent Smith $9,419.58 representing the
Debtors’ tax refund for 2018. Smith subsequently paid the Debtors
$6,415.19 as their pro rata share of the refund which was approved by the
court.
The bankruptcy court clerk filed and served a Notice of Bar Date and
ultimately three proofs of claim were filed, all by credit card companies,
totaling $9,813.39.
3 B. The fee applications and UST objections
On October 24, 2019, Smith filed a six-page Application for
Allowance of Administrative Expense – and – Rule 2016 Disclosure. The
application sought attorney’s fees of $3,465.00 for 12.6 hours of work at
$275 per hour. The time was limited to the following categories: 8.4 hours
for “litigation” with the Debtors over the $5,000 alleged to be property of
the estate; .7 hours for the preparation of the employment application
documents; and 1.5 hours for the fee application. The 12.6 hours included
an anticipated 2.0 hours for preparing for and attending a hearing on the
application should there be objections. Smith noted that if there were no
objections to the application, he would reduce the amount requested to
$2,500. Again, Smith included no declaration to support the application.
The UST timely objected to Smith’s application, arguing that there
was improper lumping of time on specified time entries and that Smith
should not be paid for drafting and filing his own employment application.
The UST also objected to the inclusion by Smith of time which might be
spent attending a hearing because an attorney cannot be compensated for
responding to an opposition to the fee application under Baker Botts L.L.P.
v. ASARCO LLC, 576 U.S. 121, 131 (2015).
There was no further activity on the fee application until almost a
year later, in October 2020, when Smith filed an amended fee application
which sought fees of $3,390 for 11.3 hours at $300 per hour (the “Amended
Fee Application”). The Amended Fee Application provided more detail in
4 response to the UST’s lumping objection and removed the request for time
to appear at a hearing if that were necessary. It replaced the 1.5-hour entry
for preparation of the original fee application with a 2.0-hour entry for the
Amended Fee Application. There was no explanation why the total time
increased slightly (less the two hours for the opposition hearing) or why
the rate went from $275 to $300 per hour.5
The UST objected again that the Amended Fee Application still had
inappropriate lumping and that the application sought attorney’s fees for
“the performance of . . . trustee’s duties.” The UST specifically identified
eight of the time entries totaling 3.9 hours as objectionable.
Shortly thereafter, the bankruptcy clerk filed a preprinted
Memorandum to Case Trustee noting that there had been no activity in the
case for more than one year and that “it is unclear as to whether this case is
continuing to be administered or whether an appropriate final report
should be filed and the case closed.”
C. The hearings on Smith’s Amended Fee Application
Neither Smith nor the UST timely responded to the case
memorandum; rather eight months later the UST filed a “request for status
hearing regarding Memorandum to Case Trustee and United States
Trustee’s Objection to First Amended Application for Allowance of
Administrative Expenses – Attorney’s Fees,” noting that there was no
activity in the case and that the Amended Fee Application was pending.
5 Smith’s employment application disclosed an hourly rate of $300 per hour. 5 Thereafter, the bankruptcy court set a status hearing which was heard on
August 4, 2022.6
At the hearing, Smith suggested that the bankruptcy court simply
rule on the outstanding fee application and the objection without further
hearings. The court invited Smith to file a response to the UST’s objection,
but Smith demurred. The court then stated on the record that the matter
was submitted.
On September 8, 2022, the bankruptcy court entered its order
requiring simultaneous further responses from Smith and the UST and
setting a further hearing on the fee application. In its order, the court made
tentative findings including that all but one of the trustee’s time entries
were “presumptively non-compensable trustee duties.” The court ordered
Smith to explain the need for the “research” entries and to “de-lump” each
entry so it could “accurately determine the reasonableness of the fees
requested.” The court instructed Smith to respond to the UST objections as
well as its tentative findings.
As to the UST, the court ordered the UST to file a reply “describing
its procedure for identifying such violations when it reviews fee
applications and whether it uses the same procedure and scrutiny to
review fee applications by independent counsel as it does to review those
by trustees also serving as attorneys for the estate.”
This was a combined hearing for all four of the cases for which the Panel heard 6
argument on September 28, 2023. 6 Smith’s response repeated his position that all his billed time was for
services “routinely performed” by attorneys employed by chapter 7
trustees. The response further complained that the UST was not objecting
to the fees requested by trustee Lawrence Warfield’s7 attorney who “was
paid over $800,000 in the Year 2021 . . . for representing Chapter 7 Case
Trustees in cases where issues similar to this Case were made and
litigated.”
The UST’s response summarized its process for reviewing chapter 7
fee applications.
On November 1, 2022, the bankruptcy court conducted a second
hearing and advised the parties that its review of the supplemental
responses left it with questions and further concerns directed at both
parties. After lengthy colloquy between the court and the parties, the court
invited the parties to file further supplemental pleadings regarding its
specific concerns. The court requested “case law” from the parties that
differentiated a trustee’s efforts as trustee and those of trustee’s counsel.
The court stated that it wished to better understand the UST’s position on
that issue so that it could “more clearly set a standard . . . to apply across
the board.” As to Smith, the court asked him to “take a hard look” at his
time entries as some appeared to be administrative overhead expense.
Over Smith’s objection, the court set an evidentiary hearing in December.
7 Apparently, the only other chapter 7 trustee in the Yuma, Arizona area. 7 Subsequently, the UST filed a further memorandum which
essentially repeated its earlier statement of its procedures regarding fee
applications. It attached numerous exhibits containing turnover motions
filed by trustees without counsel arguing that this type of turnover action is
routinely done by trustees without counsel.
Smith filed a list of thirty-four “recent” cases purporting to establish
that “the Attorney for the Chapter 7 Trustee was compensated (without
objection) for services which the U.S. Trustee now claims are services that
must be provided by the Chapter 7 Trustee, not an Attorney.” The list
contained some details about each case and a “[d]escription of the work”
but contained no analysis or statement by Smith establishing a direct
relationship between those cases and his case nor showing any relevance to
the tasks Smith performed.
Smith also filed a Proof of Pre-Litigation Demands which contained a
copy of a “Trustee’s Second Document Request” and a follow-up letter
Smith sent to the Debtors a few weeks later asking for an accounting
including receipts for the prepetition expenditures totaling $5,000.
On December 20, 2022, the bankruptcy court conducted an
evidentiary hearing at which Smith testified and was cross-examined.
Smith testified summarily that his efforts amounted to “turnover litigation”
which brought $2,500 into the estate. He suggested he was forced into the
litigation because Debtors’ counsel, Mr. Hineman, was “a particularly
difficult lawyer to deal with.”
8 On cross-examination, Smith continued to insist that he hired himself
to do the legal work because it was litigation and that made it “legal
work.” He stated in response to the court’s question, “[a]ll of this litigation
has to do with an attempt to recover money for the estate. If it was easy
and they would send me the money, all of this wouldn’t be necessary.”
D. The bankruptcy court’s ruling on the Amended Fee Application
The bankruptcy court issued its “Ruling on United States Trustee’s
Objection to Jim Smith’s Attorney Fee Application on February 21, 2023”
(the “Memorandum”). In the Memorandum, the court disallowed all the
line entries for the litigation and allowed the entries related to Smith’s
employment and amended fee application. As to each of the litigation
entries, the court stated:
Without a showing that legal issues or disputes were present, recovery of pre-bankruptcy cash withdrawals is a duty routinely performed by trustees without counsel assistance. Mr. Smith’s argument that Mr. Hineman was “difficult to work with” is not sufficient to show this involved any kind of dispute with the Debtors. Mr. Smith further failed to demonstrate what type of legal issues or complexities were involved. Accordingly, recovery of pre-petition assets, without objection or dispute, is a duty routinely performed by trustees. As to the employment and fee applications, the court stated that the
time was compensable “as it is routine in this district for attorneys for the
estate to request compensation for preparing . . . the applications.”
9 The bankruptcy court concluded that the disallowed “services were
neither reasonable nor necessary.” It stated that “Smith . . . failed to
demonstrate how any of those services performed involved legal expertise
beyond the duties routinely performed by trustees without counsel
assistance.” It further noted that the reduction “is warranted based on [the
court’s] review for reasonableness and necessity and the anticipated return
to creditors in this case.” The court reduced the attorney’s fees requested
from $3,390 to $870.
Smith timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court abuse its discretion in reducing the
trustee’s attorney’s fee request from $3,390 to $870?
STANDARDS OF REVIEW
We review for abuse of discretion a bankruptcy court’s order
awarding compensation to an estate professional under § 330. Hopkins v.
Asset Acceptance LLC (In re Salgado-Nava), 473 B.R. 911, 915 (9th Cir. BAP
2012). We will not disturb a bankruptcy court’s award of attorney’s fees
“absent an abuse of discretion or an erroneous application of the law.” In re
Nucorp Energy, Inc., 764 F.2d 655, 657 (9th Cir. 1985); see also Dawson v.
Wash. Mut. Bank F.A. (In re Dawson), 390 F.3d 1139, 1145 (9th Cir. 2004).
10 Factual findings made in the course of awarding compensation are
not disturbed unless clearly erroneous. See Friedman Enters. v. B.U.M. Int'l,
Inc. (In re B.U.M. Int'l, Inc.), 229 F.3d 824, 830 (9th Cir. 2000). A finding is
not “clearly erroneous” unless, based on the entire evidence, the reviewing
court is left with the definite and firm conviction that a mistake has been
committed. United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948).
We may affirm on any basis supported by the record. Black v. Bonnie
Springs Family Ltd. P'ship (In re Black), 487 B.R. 202, 211 (9th Cir. BAP 2013).
DISCUSSION
In his opening brief, Smith cites three specific issues to be resolved in
this appeal: 1) were the bankruptcy court’s conclusions “correct” in
disallowing the fees “to obtain Turnover of non-disclosed assets?”; 2) did
the bankruptcy court err in finding that it was Smith’s “burden of proof to
establish each and every time entry was compensable and that the
objecting party (U.S. Trustee) did not have any burden of proof?”; and
3) did the UST provide any evidence to support its position? 8
There are reasons why a court of appeals defers to the trial court,
especially when reviewing attorney’s fee applications. Fundamentally, the
Bankruptcy Code and cases interpreting § 330 make clear that the trial
8 Smith does not argue for reversal on the basis that the UST targeted him by objecting to his fee application while at the same time not objecting to similar fee applications by other trustees. That issue is therefore waived and not discussed herein. Maloney v. T3Media, Inc., 853 F.3d 1004, 1019 (9th Cir. 2017) (issue not argued in briefs is waived). 11 court has an independent obligation, whether a party objects or not, to
review, critique, and reduce the fees requested if necessary, using the given
standards; see In re Crown Orthodontic Dental Grp., 159 B.R. 307, 309 (Bankr.
C.D. Cal. 1993). See also Law Offices of David A. Boone v. Derham-Burk (In re
Eliapo), 298 B.R. 392, 399 (9th Cir. BAP 2003) (the court has “wide discretion
in determining reasonable and necessary fees under § 330(a)”), aff’d in part,
rev’d in part and remanded by 468 F.3d 592 (9th Cir. 2006). 9
9 Section 330(a) states in relevant part: (a) (1) [The bankruptcy court may award] – (A) reasonable compensation for actual, necessary services rendered by the . . . attorney . . . employed by [the trustee]; ... (2) The court may . . . award compensation that is less than the amount of compensation that is requested. (3) 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; (E) with respect to a professional person, whether the person is board certified or otherwise has demonstrated skill and experience in the bankruptcy field; and (F) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title. (4)(A) . . . the court shall not allow compensation for— (i) unnecessary duplication of services; or 12 The basis for the extremely deferential standard is that the
bankruptcy court is uniquely in the best position to assess the amount of
work done, its contribution to the administration of the estate, and its
benefit to the stakeholders; and thus, to determine the appropriate amount
of fees. See Phillips v. Gilman (In re Gilman), CC-18-1101-STaL, 2019 WL
3074607, at *4 (9th Cir. BAP July 12, 2019) (“It is uniquely the province of
the bankruptcy court to determine the level of review and the basis for
critique in fee review, and a reviewing court should defer as thoroughly to
that decision by the bankruptcy court as it would to any other decision
concerning reasonableness of fees[.]”) (citations omitted), aff'd, 836 F. App’x
511 (9th Cir. 2020). The skill requisite to achieve those results may be much
more obvious in mid-size or larger cases of some complexity than they may
be in cases such as the one before this Panel where there is very little
activity and the court simply does not have the same opportunity to assess
the nature of the work or whether it was actually necessary.
These cases represent exactly that dilemma. While we do not suggest
that in every small case the court should schedule a hearing to probe the
necessity of employing counsel, neither do we accept the proposition that
the court must rely on the general assertion by the trustee in the
employment application regarding the need for attorney assistance as
(ii) services that were not— (I) reasonably likely to benefit the debtor’s estate; or (II) necessary to the administration of the case. 13 establishing that any particular services actually rendered required the
expertise of counsel.
The Bankruptcy Code requires the trustee to do his or her own work;
this requirement sometimes creates a tension in small cases like these
between the work that should be done by the trustee and that which
genuinely requires the assistance of an attorney. Therefore, it is not
surprising that the only meaningful review of the fees in small cases occurs
at the end of the case, and may frequently be predicated on an objection, or
the court’s independent concern, that the services for which compensation
is requested do not rise to the level of tasks for which the expertise of an
attorney was required.
A. The bankruptcy court properly ruled that Smith had the burden of proof to establish that his requested compensation complied with the Bankruptcy Code. Smith’s principal argument is that the party objecting to an
application for compensation has the burden of proof to show that fees are
unreasonable or unnecessary, citing Koncicky v. Peterson (In re Koncicky),
BAP No. WW-07-1170-MkPaJ, 2007 WL 7540997 (9th Cir. BAP Oct. 19,
2007). We agree that a party objecting to the fees must establish that the
fees are unreasonable. But we do not agree that the burden of the objecting
party somehow relieves the professional from its burden to establish that
its requested fees are reasonable in the first instance. In Koncicky, the debtor
objected to the Trustee’s Final Report including the requested fees and
14 costs. The bankruptcy court overruled the objection on the basis that the
debtor offered no factual or legal basis for reversal. Id. at *1. The Panel in
Koncicky noted that the record contained ample evidence to support the fee
award and affirmed the ruling.
Neither Koncicky nor any other authority creates a presumption in
favor of the trustee which can only be overcome by objection to the request.
The Bankruptcy Code permits a court to award fees to the trustee as
attorney but “only to the extent that the trustee performed services as
attorney . . . for the estate and not for performance of any of the trustee’s
duties that are generally performed by a trustee without the assistance of
an attorney . . . for the estate.” See § 328(b). 10 The court is required to find
that the fees are reasonable and only for services actually and necessarily
rendered. See § 330(a). The Bankruptcy Code requires the court to “tak[e]
into account all relevant factors, including” whether the services were
“beneficial at the time at which the service was rendered” and “reasonably
likely to benefit the estate.” § 330(a)(3) and (4).
Smith asks the Panel to find that his fees were appropriate solely
because the UST did not establish that the fees were inappropriate. That
10 Section 328(b) states in relevant part: (b) If the court has authorized a trustee to serve as an attorney . . . for the estate under section 327(d) of this title, the court may allow compensation for the trustee’s services as such attorney . . . only to the extent that the trustee performed services as attorney . . . for the estate and not for performance of any of the trustee’s duties that are generally performed by a trustee without the assistance of an attorney . . . for the estate. 15 standard would stand the statute on its head. The burden is on the party
requesting allowance of the fees to establish that the requirements of the
Code have been met. See In re McKenna, 93 B.R. 238, 242 (Bankr. E.D. Cal.
1988); In re Gary Fairbanks, Inc., 111 B.R. 809, 811 (Bankr. N.D. Iowa 1990)
(“The burden is on the trustee to demonstrate that services for which
attorney’s fees are sought are not duties generally performed without the
assistance of counsel.”). In In re King, 546 B.R. 682, 697 (Bankr. S.D. Tex.
2016), the court stated, “[w]here insufficient explanatory information is
provided for determining the precise nature of the services rendered, the
[C]ourt is compelled to determine that the services are not compensable as
legal services.” (Citation omitted) (alteration in original).
Smith also obliquely complains that, even if it is his burden of proof,
he should not have to support “each and every time entry.” We disagree.
Section 330(a) does not modify the professional’s or the court’s duties
based on the size of the time entry. Smith cites no authority to support his
position.
In the last analysis, the bankruptcy court reduced the requested
attorney’s fees, as it is expressly permitted to do in § 330(a)(2), because
Smith failed to offer sufficient evidence that the fees were reasonable and
necessary under the requirements of § 330(a).11 There is no erroneous
application of the law on this issue.
11 We note that the bankruptcy court referenced in its Memorandum that, for each time entry disallowed, the UST objection was sustained even though the UST did 16 B. The bankruptcy court did not abuse its discretion in disallowing the requested compensation. 1. There was insufficient evidence to permit the bankruptcy court to find that the services were reasonable and necessary. Section 330 requires that an applicant establish that the fees incurred
were reasonable and necessary as the bankruptcy court correctly ruled.
Smith’s application simply does not demonstrate adherence to that
standard.
Smith’s Amended Fee Application contained no separate declaration
ascribed under penalty of perjury or narrative in the application itself that
would support the proposition that the services rendered were actually
and necessarily performed within § 330. The single-sentence explanation in
the application for the work is: “[t]hat the legal services rendered in this
Case were required and benefitted the Estate including (but not limited to)
the following: Legal work to prosecute and settle Litigation to recover the
Bankruptcy Estate’s interest in Estate Assets.”
Smith’s response to the UST objection contained his short declaration
which simply concluded that “in [his] legal opinion,” the services
performed were “not duties which are required to be performed by a
chapter 7 Trustee[.]” He offered no evidentiary support for that position
beyond his bare conclusory statements. His testimony at the evidentiary
not specifically object to some of the time entries. Because the bankruptcy court is required to make an independent determination of the allowability of each entry, we treat any error as harmless. 17 hearing was no more than that: a few conclusory comments of the work he
did and his belief that he should be paid for it. Smith commented at trial
that he relied on his time entries to establish the work accomplished.
In his opening brief, Smith set forth seventeen time entries that are
“specific examples of disallowance where the findings and conclusions are
illogical, implausible and without support in the record.” For these entries,
Smith offers a cursory explanation: “[t]he itemized services were to recover
non-disclosed Bank withdrawals. The Court documents evidence the
dispute and the Court Ordered Proof of pre-litigation demands clearly
show that there was a dispute.” That conclusory statement is woefully
short of the sort of factual support necessary to establish that the requested
fees were reasonable and necessary. And identifying a task as related to a
dispute does not remove it from the trustee’s obligations.
The bankruptcy court’s ruling does not leave us with a definite and
firm conviction that a mistake has been committed.
2. There was insufficient evidence to permit the bankruptcy court to find that the disallowed services required special expertise. The UST’s main objection to the fee application was that the services
performed by Smith purportedly as the trustee’s attorney were services
which the trustee would generally undertake. Section 328(b)
unambiguously requires that the fees awarded to an attorney representing
a trustee in a bankruptcy case must not include any time for “performance
18 of any of the trustee’s duties that are generally performed by a trustee
without the assistance of an attorney . . . for the estate.”
Section 704 sets forth the trustee’s duties which include collecting
and reducing to money the property of the estate, investigating the
financial affairs of the debtor, examining the proofs of claim with a view
toward objecting to allowance, and preparing the trustee’s final account.
The role of counsel for the trustee is to perform those tasks that require
special expertise beyond that expected of an ordinary trustee. “Only when
unique difficulties arise may compensation be provided for services which
coincide or overlap with the trustee’s duties and only to the extent of
matters requiring legal expertise.” Ferrette & Slater v. U.S. Tr. (In re Garcia),
335 B.R. 717, 725 (9th Cir. BAP 2005) (quotation marks and citation
omitted). Attorneys must therefore present sufficient evidence including
billing records with enough detail to establish that the services rendered
went beyond the scope of the trustee’s statutory duties and involve unique
difficulties. Id. at 727. The cryptic descriptions in the billing statements
provoked the court’s concern about Smith’s dual role in this case. Even the
bankruptcy court’s entreaties to Smith before the evidentiary hearing did
not prompt Smith to adequately explain why the tasks required attorney
expertise. Smith’s failure to adequately explain the context of the time
entries prevented the court from making the required findings in Smith’s
favor.
19 Except for his employment application and fee application, Smith’s
billing statement places all of his requested time into a category entitled
“Litigation to Recover Transfer(s).” The cryptic descriptions of the tasks
support the finding that Smith seeks to be paid for the efforts both as a
trustee as well as those of a professional.
There is nothing in the record that would support a finding that the
efforts disallowed by the bankruptcy court required expertise beyond that
expected of an ordinary trustee. It is not clear error to find that these and
similar entries are efforts Congress intended to be undertaken by the
trustee and compensated under § 326(a).
3. Section 330 implicitly requires counsel to exercise billing discretion; therefore, the bankruptcy court properly considered the anticipated return to creditors standard when disallowing the time and fees. Beyond the literal language that the services must be reasonable and
necessary to be compensable, “[p]rofessionals have an obligation to
exercise billing judgment.” Lobel & Opera v. U.S. Tr. (In re Auto Parts Club,
Inc.), 211 B.R. 29, 33 (9th Cir. BAP 1997). Having an attorney perform a task
does not compel a finding that the fees were necessary per se, and we
implicitly rely on the trustee to exercise appropriate discretion before
burdening the estate, and in particular a small estate, with attorney’s fees
where the task might well have been performed by the trustee.
The “actual and necessary” prong of § 330(a)(1) requires the trustee
to consider the potential for recovery and balance the effort required
20 against the results that might be achieved. See Unsec. Creditors' Comm. v.
Puget Sound Plywood, Inc. (In re Puget Sound Plywood, Inc.), 924 F.2d 955, 961
(9th Cir. 1991) (“Absent unusual circumstances, an attorney must scale his
or her fee at least to the reasonably expected recovery.”).
Smith offered no explanation as to why litigation was required to
monetize what was obviously going to be a simple and nominal recovery
for the estate. Smith offered no evidence that he considered the potential
for recovery and did any balancing assessment before filing the turnover
motion. That was his burden, and we cannot second guess the bankruptcy
court’s finding that the litigation was not necessary given the dynamics of
the case at the time. Smith’s blind insistence that it was compensable
professional time because he said so is not sufficient to satisfy the
requirements of the Bankruptcy Code.
CONCLUSION
For these reasons set forth above, we AFFIRM.