Smith v. Ust - United States Trustee, Phoenix

• Court: Court of Appeals for the Ninth Circuit
• Decided: October 28, 2024
• Docket: 24-174
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS OCT 28 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

JIM D. SMITH, No. 24-174 BAP. No. Appellant, 23-1050 v. MEMORANDUM*

UST - UNITED STATES TRUSTEE, PHOENIX,

Appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Lafferty, Corbit, and Faris, Bankruptcy Judges, Presiding

Submitted October 24, 2024** Phoenix, Arizona

Before: M. SMITH, BADE, and FORREST, Circuit Judges.

Appellant Jim D. Smith appeals from a decision of the Bankruptcy Appellate

Panel (BAP) affirming the bankruptcy court’s order regarding attorney’s fees. We

review decisions of the BAP de novo. Renwick v. Bennett (In re Bennett), 298

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). F.3d 1059, 1063 (9th Cir. 2002). We will not disturb the bankruptcy court’s award

of attorney’s fees in the absence of an abuse of discretion or an erroneous

application of law. L. Offs. of David A. Boone v. Derham-Burk (In re Eliapo), 468

F.3d 592, 596 (9th Cir. 2006). We “affirm unless the [bankruptcy] court applied

the wrong legal standard or its findings were illogical, implausible, or without

support in the record.” Johnson v. MGM Holdings, Inc., 943 F.3d 1239, 1241 (9th

Cir. 2019) (citation omitted). We have jurisdiction under 28 U.S.C. §§ 158(d) and

1291, and we affirm.

Smith was appointed the Chapter 7 trustee of the bankruptcy estate of

Earle’s Custom Wines, Inc. With the bankruptcy court’s approval, Smith

employed himself as the attorney for the estate under 11 U.S.C. § 327 and

subsequently filed an application for attorney’s fees.

1. The bankruptcy court awarded Smith attorney’s fees in an amount less

than he requested. The court was authorized to award “compensation that is less

than the amount of compensation that is requested,” 11 U.S.C. § 330(a)(2), and it

did not abuse its discretion in doing so. The bankruptcy court fulfilled its

obligation to consider “the nature, the extent, and the value of [Smith’s] services,

taking into account all relevant factors” by conducting a thorough review of the fee

application, including holding an evidentiary hearing. Id. § 330(a)(3). It properly

considered the relevant factors, including “the anticipated return to creditors.” See

2 24-173 Unsecured Creditors’ Comm. v. Puget Sound Plywood, Inc., 924 F.2d 955, 958–59

(9th Cir. 1991) (explaining that, under 11 U.S.C. § 330, an attorney for the

bankruptcy estate must consider the “maximum probable recovery” compared to

the “probable cost of legal services”); see also Leichty v. Neary (In re Strand), 375

F.3d 854, 860 (9th Cir. 2004) (factoring attorney’s fees into the consideration of

the potential benefit to the estate).

2. Under § 330, the bankruptcy court may award a professional

appointed under § 327, such as Smith, “reasonable compensation for actual,

necessary services rendered.” 11 U.S.C. § 330(a)(1)(A). While § 330 provides for

“reasonable compensation,” when the trustee serves as the attorney for the estate,

§ 328 prohibits compensation for the “performance of any of the trustee’s duties

that are generally performed by a trustee without the assistance of an

attorney . . . for the estate.” 11 U.S.C. § 328(b); see 11 U.S.C. § 704(a)(1), (4)

(stating that the trustee’s duties include “collect[ing] and reduc[ing] to money the

property of the estate,” and “investigat[ing] the financial affairs of the debtor”).

Under § 328, an attorney who serves as counsel for the trustee may be

compensated only for tasks that require legal expertise beyond that of an ordinary

trustee. U.S. Tr. v. Boldt (In re Jenkins), 188 B.R. 416, 420 (B.A.P. 9th Cir. 1995),

aff’d, 130 F.3d 1335 (9th Cir. 1997); see Ferrette & Slater v. U.S. Trustee (In re

Garcia), 335 B.R. 717, 725 (B.A.P. 9th Cir. 2005) (“Only when unique difficulties

3 24-173 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.”

(quoting U.S. Tr. v. Porter, Wright, Morris & Arthur (In re J.W. Knapp), 930 F.2d

386, 388 (4th Cir. 1991)).

Considering the limitations in § 328, the bankruptcy court did not abuse its

discretion in placing the burden on Smith to demonstrate his entitlement to

attorney’s fees. See Dalessio v. Pauchon (In re Dalessio), 74 B.R. 721, 724

(B.A.P. 9th Cir. 1987); see also Roderick v. Levy (In re Roderick Timber Co.), 185

B.R. 601, 606–07 (B.A.P. 9th Cir. 1995) (stating that the trustee has the burden of

providing records to distinguish between work of an attorney and work of the

trustee). Nor did the bankruptcy court abuse its discretion in declining to award

Smith attorney’s fees for his performance of services that fell within the scope of a

trustee’s duties and for which he failed to show legal expertise was required. The

evidence in the record, including Smith’s own testimony that he could have done

“anything” in this case in his capacity as trustee, supports the bankruptcy court’s

conclusion.

AFFIRMED.

4 24-173