In Re: Bruce Leichty v. Rod Danielson

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 14, 2024
• Docket: 22-55847
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 14 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: BRUCE LEICHTY, No. 22-55847

Debtor, D.C. No. 5:22-cv-00371-FWS ______________________________

BRUCE LEICHTY, MEMORANDUM*

Appellant,

v.

ROD DANIELSON, Trustee; THE BANKRUPTCY LAW FIRM, PC,

Appellees.

Appeal from the United States District Court for the Central District of California Fred W. Slaughter, District Judge, Presiding

Argued and Submitted October 18, 2023 Pasadena, California

Before: CLIFTON and SANCHEZ, Circuit Judges, and KORMAN,** District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Edward R. Korman, United States District Judge for the Eastern District of New York, sitting by designation. Appellant Bruce Leichty (“Leichty”) appeals from an order of the district

court affirming the bankruptcy court’s fee award and modification of Leichty’s

Chapter 13 plan. Leichty and his wife, Kathryn Leichty (together, the “Debtors”)

filed a voluntary petition for Chapter 13 bankruptcy on September 5, 2018. The

Debtors’ Chapter 13 plan was confirmed on January 16, 2019. The Chapter 13

Trustee, Rod Danielson, (the “Trustee”) filed a motion to dismiss the Debtors’

Chapter 13 case on June 23, 2021, because the Debtors failed to submit their 2020

federal and state tax returns to the Trustee, as required by Central District of

California Local Bankruptcy Rule 3015-1(o) (the “Local Rules”). The Debtors’

attorney, Paul Lee (“Lee”), opposed the Trustee’s motion, arguing that the Debtors

had timely sought extensions for filing their tax returns until October 15, 2021. A

hearing set for July 30, 2021, was continued until October 13, 2021, to give the

Debtors a chance to file their returns and submit them to the Trustee.

Leichty was dissatisfied with the continuance and Lee’s refusal to file a

declaration “assert[ing] [Leichty’s] entitlement to the full tax return filing

extension period.” Leichty then retained Kathleen P. March (“March”) of The

Bankruptcy Law Firm PC (“TBLF”) for the limited purpose of obtaining a

continuance until after October 15, 2021. TBLF filed a supplemental brief in

opposition to the Trustee’s motion on September 29, 2021, arguing that the

Debtors had timely sought and received an extension to file their tax returns until

2 October 15, 2021. The Debtors submitted their returns to the Trustee before the

October 13, 2021 hearing, and the Trustee withdrew his motion on October 12,

2021.

On December 15, 2021, TBLF filed a fee application, seeking $5,206 in

attorney’s fees. On January 26, 2022, the bankruptcy court granted the fee

application and modified the Chapter 13 plan base by $4,416 to permit payment of

the fees to TBLF. Leichty appealed to the district court, which affirmed. This

appeal followed.

Exercising jurisdiction under 28 U.S.C. §§ 158(d)(1) and 1291, we affirm.

We review the district court’s decision on an appeal from a bankruptcy court de

novo. Mano-Y & M, Ltd. v. Field (In re Mortg. Store, Inc.), 773 F.3d 990, 994 (9th

Cir. 2014). A bankruptcy court’s award of attorney’s fees will not be disturbed

“absent an abuse of discretion or an erroneous application of the law.” Law Offices

of David A. Boone v. Derham-Burk (In re Eliapo), 468 F.3d 592, 596 (9th Cir.

2006) (citations and internal quotation marks omitted).

1. The bankruptcy court had jurisdiction to award attorney’s fees to

TBLF because bankruptcy courts have “inherent authority over the debtor’s

attorney’s compensation.” Law Offices of Nicholas A. Franke v. Tiffany (In re

Lewis), 113 F.3d 1040, 1045 (9th Cir. 1997). Moreover, the award of attorney’s

fees “can be construed as a core proceeding over which the bankruptcy court has

3 jurisdiction” under 28 U.S.C. § 157. United States v. Yochum (In re Yochum), 89

F.3d 661, 669 (9th Cir. 1996).

The bankruptcy court had authority to modify the Chapter 13 plan upon

TBLF’s fee application to allow for the payment of the awarded fees. After

confirmation, Chapter 13 plans “may be modified, upon request of the debtor, the

trustee, or the holder of an allowed unsecured claim.” 11 U.S.C. § 1329(a). We

have held that “an obligation to pay attorneys’ fees . . . [is] a claim against the

debtor’s estate.” Am. Law Ctr. PC v. Stanley (In re Jastrem), 253 F.3d 438, 442

(9th Cir. 2001). TBLF therefore had standing to request modification of the

Chapter 13 plan under 11 U.S.C. § 1329(a) and did so in its fee application.

Further, the Debtors, the Trustee, and all creditors in the Chapter 13 proceeding

received timely notice of the fee application, as required by Federal Rule of

Bankruptcy Procedure 2002(a)(6) and Local Rule 2016-1(c)(3).

The bankruptcy court did not abuse its discretion in finding that TBLF’s fees

were reasonable under 11 U.S.C. § 330. Moreover, the bankruptcy court properly

considered the 11 U.S.C. § 330(a)(3) factors in determining whether compensation

was appropriate, including the rates charged by TBLF; the necessity or beneficial

nature of TBLF’s services to the Debtors; March’s skills and professionalism; and

March’s hourly rate compared with similarly experienced attorneys.

4 2. The district court did not err in denying Leichty’s motion to

reconsider his request that the district court require the Trustee to appoint counsel.

A motion for reconsideration is “appropriate if the district court (1) is presented

with newly discovered evidence, (2) committed clear error or the initial decision

was manifestly unjust, or (3) if there is an intervening change in controlling law.”

Sch. Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993).

By virtue of his statutory duties, the Trustee is a real party in interest to this

suit and thus is entitled to represent himself in this proceeding. A “real party in

interest” is “any party to whom the relevant substantive law grants a cause of

action.” U-Haul Int’l, Inc. v. Jartran, Inc., 793 F.2d 1034, 1038 (9th Cir. 1986).

“[T]he bankruptcy code endows the bankruptcy trustee with the exclusive right to

sue on behalf of the estate.” Estate of Spirtos v. One San Bernandino Cty. Superior

Court Case Numbered SPR 02211, 443 F.3d 1172, 1176 (9th Cir. 2006).

Furthermore, 11 U.S.C. § 1302(b)(2)(C) provides that a trustee “shall appear and

be heard at any hearing that concerns modification of the plan after confirmation.”

Both the fee agreement between Leichty and TBLF and TBLF’s fee application

noted that TBLF’s fees would be paid through the Chapter 13 plan, which would

require modification. The Trustee was thus compelled by statute to appear in this

matter because it could, and did, result in modification of the confirmed Chapter 13

plan. Because Leichty did not show that the district court committed clear error

5 resulting in manifest injustice by failing to order the Trustee to appoint counsel in

this suit, the district court properly denied the motion for reconsideration.

3. We decline TBLF’s request to dismiss this appeal based on Leichty’s

failure to join his wife as an indispensable party. TBLF forfeited the issue by not

raising it before the district court. See One Indus., LLC v. Jim O’Neal Distrib., Inc.,

578 F.3d 1154, 1158 (9th Cir. 2009) (“A party normally may not press an

argument on appeal that it failed to raise in the district court.”).

AFFIRMED.