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NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY.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-23-1048-LCF PEDRO FIGUEROA and FLOR M. FIGUEROA, Bk. No. 0:17-bk-08550-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 Pedro and Flor M.
Figueroa, was employed to serve as attorney for the estate with the
* 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, “Rule” references are to the Federal Rules of Bankruptcy Procedure, and “Civil Rule” references are to the Federal Rules of Civil 1 approval of the bankruptcy court. After the case was reopened and an
additional asset recovered, Smith filed a second fee application seeking an
additional $1,982.50 in fees for his services as attorney for the estate after
the reopening. Smith also filed a second Trustee’s Final Report (“TFR”) and
an application requesting trustee’s commission of $1,648.20 for the case.
The request for commission as trustee further sought permission to pay
himself $1,292.28 in unpaid attorney’s fees owed from the initial fee
application. Based on the U.S. Trustee’s (“UST”) opposition to the second
fee application and the bankruptcy court’s independent analysis of the
requested fees, the bankruptcy court allowed the trustee’s commission of
$1,648.20, reduced the fees requested in the second fee application to $540,
but did not permit Smith to pay himself the unpaid portion of the fees
allowed in the first fee application. Smith appeals the rulings. Seeing no
error, we AFFIRM.2
FACTS 3
A. The bankruptcy case and Smith’s activities
Pedro and Flor M. Figueroa filed their chapter 7 petition on July 25,
2017. Smith was appointed trustee. Two months later, Smith filed a two-
Procedure. 2 This appeal was concurrently heard with three others: (1) Smith v. UST (In re
Rivera), BAP No. AZ-23-1047-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). 2 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 October 12, 2017, Smith filed a three-page “Trustee’s Complaint
to Recover Preference” against State Farm Mutual Automobile Insurance
Company (“State Farm”). The complaint asserted that State Farm had
garnished $2,337.41 from Mr. Figueroa’s wages within 90 days of the
petition date and that the garnishment constituted a preference. When
State Farm failed to respond, a default judgment was entered. At about the
same time, State Farm paid Smith $1,636.19 which Smith, according to the
TFR, apparently accepted as full payment, abandoning the remaining
balance.
On October 26, 2017, Smith filed a two-page “Motion for Turnover of
Non-Disclosed Estate Asset,” specifically a “2003 Polaris ATV.” The motion
contained no declaration or other evidence to support the allegations.
There being no objections, the motion was granted. The ATV was
ultimately abandoned to the Debtors. 4
On June 26, 2018, Smith received the Debtors’ 2017 income tax refund
totaling $2,110 from the IRS. He subsequently paid $335.44 to the Debtors
for their portion of the refund which was approved by the court.
4 The TFR identified the undisclosed ATV with a value of $25. 3 On February 13, 2019, Smith filed a two-page objection to State
Farm’s proof of claim, asserting that it was filed after the bar date and
therefore should be subordinated to timely filed proofs of claim. State Farm
did not respond, and the objection was sustained.
The court clerk filed and served a Notice of Bar Date, and ultimately
three proofs of claim were filed totaling $26,240.27.
B. The fee applications and UST’s objections
On December 4, 2019, Smith filed an eight-page “Application for
Allowance of Administrative Expense – and – Rule 2016 Disclosure.” The
application sought fees of $4,980 for 16.6 hours of work at $300 per hour.
The fee request pertained to the following categories: 8.9 hours for the State
Farm matters; 3.4 hours for the ATV turnover activities; .8 hours for the
preparation of the employment application documents; and 1.5 hours for
the fee application. The 16.6 hours included an anticipated 2.0 hours for
preparing for and attending a hearing on the application should there be
objections to the fee request. Smith noted that if there were no objections,
he would reduce the amount requested to $2,250. Again, Smith included no
declaration to support the application.
The UST timely objected to the application, arguing that there was
improper lumping of time in Smith’s time entries and that Smith should
not be paid for drafting and filing his own employment application. It also
objected to Smith’s proposed reduction in fees if there were no objections to
the fee application, arguing that the adjustment was an attempt to
4 circumvent the Supreme Court’s decision in Baker Botts LLP v. ASARCO
LLC, 576 U.S. 121, 131 (2015), that an attorney may not be paid for efforts
responding to objections to the application.
There was no further activity on the fee application until almost ten
months later when Smith filed an amended fee application which sought
fees of $4,350 for 14.5 hours at $300 per hour (the “Amended Fee
Application”). The Amended Fee Application provided more detail in
response to the UST’s lumping objection and removed the request for fees
to appear at a hearing should that become necessary. It reduced the time
sought for the State Farm matters from 8.9 to 7.7 hours and the turnover
motion from 3.4 to 3.0 hours. It increased the time for preparation of the
employment application documents from .8 to .9 hours and the fee
application from 1.5 to 2.0 hours. There was no explanation for the change
in the total hours requested for compensation. The Amended Fee
Application falsely stated that Smith had filed no “previous fee
applications in this case.”
The UST did not object to the Amended Fee Application. Smith
thereafter filed a Certificate of No Objection which stated that he had
“received no response nor opposition to the Application or Notice.” Based
thereon, an order was entered approving the Amended Fee Application
allowing $4,350 as attorney’s fees.
On December 21, 2020, Smith filed his Trustee Final Report (the “First
TFR”) which disclosed that the estate had $2,960.75 in funds on hand.
5 Smith proposed to pay himself that amount as a portion of the fees allowed
in the Amended Fee Application. The court docket indicates that the UST
reviewed the First TFR and had no objections. There was no separate
application for trustee’s commission.
The case was closed on March 4, 2021.
C. Reopening the case and further activities
On August 11, 2021, Smith filed a one-page motion to reopen the case
to recover a non-disclosed insurance refund. The motion was granted and
Smith was reinstated as the trustee.
Two weeks later, Smith filed a two-page complaint against Wells
Fargo Bank (“WFB”) for turnover of $5,571.26 representing a “refund
resulting from a pre-bankruptcy repossession of a vehicle.” A month later,
Smith and WFB “settled” for the full amount owed. Smith filed a two-page
application for approval of the settlement which was approved 30 days
later.
On October 25, 2021, Smith filed a further application for allowance
of attorney’s fees with respect to fees incurred since the case was reopened,
seeking an additional $1,982.50 in fees and $23.85 in expenses (the “Second
Fee Application”). The fees requested were categorized as: 1.5 hours of
attorney time for preparing the fee application, .9 hours of
“paraprofessional” time (at $125 per hour) for the fee application; 4.4 hours
of attorney time for the WFB “litigation”; and .8 hours of paraprofessional
time for the WFB “litigation.” The Second Fee Application made no
6 disclosures concerning previously filed applications. The UST did not
object to the Second Fee Application, and an order was entered approving
the fees and expenses. On November 22, 2021, Smith paid himself $2,005.85
from the estate bank account.
On February 2, 2022, Smith filed an amended TFR (the “Second
TFR”) which included an accounting from the petition date. The Second
TFR disclosed that after payment to himself of the fees and costs from the
two fee applications, banking expenses and filing fees, there remained
$2,933.29 in the estate account. Concurrently, Smith filed an “Application
for Compensation and Reimbursement of Expenses” (the “Trustee
Commission Request”) which proposed that Smith use those funds to pay
himself $1,648.20 in trustee’s commission, $46.17 in trustee’s expenses, and
$1,292.28 as the remaining fees still owed from the Amended Fee
Application. There would be no distribution to creditors. The court docket
indicates that the UST reviewed the Second TFR the same day it was filed
and had no objections.
Approximately three weeks later, the UST filed an objection to
Smith’s Trustee Commission Request. It recounted the events in the case
and argued that Smith was improperly seeking compensation as an
attorney for tasks that should have been completed by the trustee. It
7 requested that the court deny the “submitted TFR in its current form” and
“deny the [Second Fee Application] in its entirety.” 5
D. The hearings on the Second Fee Application and the Second TFR
The court held a hearing on the Second Fee Application, the Second
TFR, and the Trustee’s Commission Request on August 4, 2022. 6 At the
hearing, Smith suggested to the bankruptcy court that it simply rule on the
pleadings to date without further hearings, and the UST agreed. 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 five of the entries included in the two fee
applications “may be compensable for attorney’s fees, provided there is
further explanation from Mr. Smith[,]” suggesting that the remainder of the
time would be disallowed. (Emphasis added). The court invited 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
5 The objection made no comments about its previous approval of the Second Fee Application and the Second TFR or Civil Rule 60(b). 6 This was a combined hearing for all four of the cases for which the Panel heard
argument on September 28, 2023. 8 review fee applications by independent counsel as it does to review those
by trustees also serving as attorneys for the estate.”
Smith’s response repeated his position that all of 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 from 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
7 Apparently, the only other chapter 7 trustee in the Yuma, Arizona area. 9 time entries as some appeared to be administrative overhead expense.
Over Smith’s objection, the court set an evidentiary hearing in December.
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 “Notice of Filing ‘De-Lump’ Time Entries as Required
by 9/8/2022 Court Order” in which he added additional detail to his time
entries. He also filed a separate 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
copies of two short letters and two short emails from Smith to WFB,
including WFB’s letter to Smith advising him of the refund, and a
subsequent WFB letter advising him that the refund had been mistakenly
sent to the Debtors. All of the communications were dated prior to the
filing of the motion to reopen the case.
10 On December 20, 2022, the bankruptcy court conducted an
evidentiary hearing at which Smith testified and was cross-examined.
Smith testified that he discovered the WFB refund several months before
he reopened the case. He had demanded turnover of the refund, but WFB
mistakenly turned it over to the Debtors, and thereafter, according to
Smith, ignored his request for the funds. He explained that he had no
choice but to reopen the case and file the adversary complaint.
E. The bankruptcy court’s ruling on the Second Fee Application and the Second TFR 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”). The bankruptcy court first addressed the Trustee
Commission Request ruling that it was not appropriate to deny the
commission provided to the trustee under § 326(a) on the basis that “Smith
previously received attorney’s fees.” It next addressed the procedural
concern that the fees in the Second Fee Application had already been
approved. The court stated that under Civil Rule 60(b), it would grant the
UST relief from that approval based on excusable neglect because a review
of the application did not alert the UST to the fact that the requested fees
would result in no distribution to creditors.8
8 As to the Civil Rule 60(c)(1) requirement that the request be made within one year, the court noted that the UST filed its objection three months after entry of the order approving the Second Fee Application, which was within the one-year limit. 11 On the merits of the allowance of the Second Fee Application, the
court disallowed all the line entries for the WFB litigation and allowed 1.8
hours or $540 to prepare the fee application. As to each of the disallowed
entries, the court stated that “[t]his time entry is not compensable for
attorney’s fees. Objection sustained.” As to the fee application, the court
stated that the time was “compensable as attorneys for the estate routinely
request compensation for preparing fee applications in this district.”
The bankruptcy court specifically found that “Wells Fargo [was]
responsive and compliant with Mr. Smith’s requests.” It 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.”
The court concluded that “[i]t is inconceivable that Mr. Smith seeks
approval to pay himself compensation totaling $8,050.22 as both the
Chapter 7 trustee and counsel to the chapter 7, because the total amount of
net funds he recovered without any contested litigation was only
$7,859.87.” The court noted that even as reduced by the court’s orders,
Smith nonetheless earned a combined total of $5,178.95 of trustee’s
compensation under § 326(a) and attorney’s fees compensation under § 330
for the case.
Smith timely appealed.
12 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 Smith’s
attorney’s fee request in the Second Fee Application from $1,982.50 to $540?
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).
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 review for abuse of discretion decisions on relief from judgment
under Civil Rule 60(b). See Flores v. Rosen, 984 F.3d 720, 731 (9th Cir. 2020)
(citation omitted).
13 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 two specific issues to be resolved in
this appeal: 1) was the bankruptcy court “legally correct in vacating a
previous Order Allowing Administrative Fee Allowance of $1,982”; and 2)
did the bankruptcy court properly allow “only $540 for the legal services in
the Wells Fargo Adversary Litigation[?]” 9
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
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, 402 (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).10
9 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). 10 Section 330(a) states in relevant part:
(a)(1) [The bankruptcy court may award] – 14 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
(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 (ii) services that were not— (I) reasonably likely to benefit the debtor’s estate; or (II) necessary to the administration of the case. 15 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 skills 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
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
16 is requested do not rise to the level of tasks for which the expertise of an
attorney was required.
A. The bankruptcy court did not abuse its discretion in granting Civil Rule 60(b) relief to the UST. Civil Rule 60(b), made applicable to this matter by Rule 9024, permits
a court to “relieve a party . . . from a final judgment, order or proceeding
for [among other reasons] . . . (1) mistake, inadvertence, surprise, or
excusable neglect; . . . or (6) any other reason that justifies relief.”
The bankruptcy court specifically found excusable neglect justifying
relief under Civil Rule 60(b)(1) because a review of the Second Fee
Application did not alert the UST to the fact that the requested fees would
result in no distribution to creditors. The court’s ruling under these
circumstances was not illogical, implausible, or without support in
inferences that may be drawn from the facts in the record.
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 Second Fee Application contained no separate declaration
ascribed under penalty of perjury or narrative in the application itself that
17 would support the proposition that the services rendered were reasonable
and necessary within § 330. The single-sentence explanation in the fee
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 Adversary Litigation to
recover the Bankruptcy Estate’s interest in non-exempt Insurance Refund
Claim.”
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[.]” His testimony at the evidentiary 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.
In his opening brief, Smith set forth nineteen 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:
The Court’s conclusion that the Wells Fargo Adversary Litigation was unnecessary is not supported by the record. During the eight (8) month period prior to filing the Wells Fargo Adversary Litigation, requests were made to Wells Fargo for payment. The Court documents evidence the dispute and the Court Ordered Proof of pre-litigation demands clearly show that there was a dispute.
18 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 on his or her own. Section
328(b) 11 unambiguously requires that the fees awarded to an attorney
representing a trustee in a bankruptcy case must not include any time 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.”
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
11 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. 19 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.” See 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 WFB related 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.
There is nothing in the record that would support a finding that the
fees disallowed by the bankruptcy court were for services which 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).
20 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
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 having an attorney do the
paperwork for the WFB dispute was required to monetize what was going
to be a simple and nominal recovery for the estate. Smith offered no
evidence that he considered the potential for recovery or did any balancing
assessment before incurring attorney’s fees. That was his burden, and we
cannot second guess the bankruptcy court’s finding that the expertise of an
21 attorney was not necessary. 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.