Judges of the Court
Memorandum Decision re George Michael Montross
In re: No. 94-31395-WTC Chapter 7 GEORGE MICHAEL MONTROSS, Debtor. ____________________________/
The court held a hearing on the final fee application of counsel for trustee, Iain A. Macdonald, on July 23, 1998. Macdonald appeared on his own behalf. Dennis D. Davis appeared for creditors Aqua Associates, et al. (Creditors). Creditors object to the allowance of $29,085 sought for services performed by Peter L. Robinson, on the basis that Robinson was neither appointed to represent the estate nor an associate in Macdonald's firm. For the reasons set forth below, the objection is sustained.FACTS This court ruled in favor of defendants in a fraudulent conveyance action brought by trustee. Trustee appealed. Robinson performed the vast majority of legal work on that appeal. Robinson was not, however, appointed to represent the estate in that appeal. Instead, Macdonald, who was appointed to represent trustee, hired Robinson as a contract attorney on an hourly basis. At the hearing and in his fee application, Macdonald acknowledged the following facts regarding his professional relationship with Robinson. (1) Robinson specializes in appellate law, and once headed the appellate department of a San Francisco law firm. (2) Robinson signed the appellate brief, argued the appeal before the Bankruptcy Appellate Panel, and performed two-thirds of the attorney work hours spent on trustee's appeal. (3) Macdonald employs two associates, Marta M. Guzman and Kaipo K.B. Young, on a continuing basis. Macdonald has utilized Robinson's services only in the present case and in one prior case. Robinson also worked for other attorneys and clients while he worked for Macdonald. (4) Macdonald maintains office space for Guzman and Young at his Embarcadero Center law offices. He does not maintain office space for Robinson. (5) Macdonald lists Guzman and Young as attorneys in his firm in the telephone book and attorney listing services. He does not list Robinson. (6) Robinson performed no more than 20 percent of his work on the present case in Macdonald's offices. The remaining work was performed at Robinson's home and in public law libraries. (7) Macdonald has paid Robinson for the work in question. Any amount owed by the estate is owed to Macdonald, not to Robinson. (8) Macdonald paid Robinson less than the amount he seeks to charge the estate for Robinson's services. (7) Macdonald also seeks compensation for the time he spent reviewing Robinson's work. ANALYSIS An attorney must be appointed by the court before that attorney may receive compensation from the bankruptcy estate for services performed for the estate. See In Shirley, 134 B.R. 940, 943-44 (9th Cir. BAP 1992). When a law firm has been appointed to represent the estate, however, it is not necessary that every member of that firm be separately appointed. "Regular associates" of the firm are covered by the appointment of the firm. Rule 2014(b) of the Federal Rules of Bankruptcy Procedure provides: If, under the Code and this rule, a law partner- ship or corporation is employed as an attorney, or an accounting partnership or corporation is employed as an accountant, or if a named attorney or accountant is employed, any partner, member, or regular associate of the partnership, corporation or individual may act as attorney or accountant so employed, without further order of the court. Macdonald does not contend that Robinson is a "partner" or "member" of his firm. The question here is whether Robinson was a "regular associate" of Macdonald's law firm. I have found no published decisions that define what is required for an attorney to be a "regular associate." For the reasons set forth below, I determine that Robinson is not a "regular associate" of the Law Offices of Iain A. Macdonald. First, Robinson is not regularly employed by Macdonald. He works for Macdonald only sporadically, and does not work exclu-sively for Macdonald. Second, Robinson is not known as an attorney who regularly works for Macdonald. Macdonald does not advertise that Robinson works in his office. Robinson does not perform his work for Macdonald at Macdonald's office. Although Macdonald has many cases in this court, I had no prior knowledge that Macdonald claims Robinson to be an associate of his firm. Third, Robinson is not an associate of Macdonald's firm in an economic sense. Macdonald does not bear any significant overhead expenses related to Robinson's work. Macdonald does not maintain office space for Robinson. Robinson is not on a regular salary. Macdonald has billed separately for the time he spent reviewing Robinson's work. Fourth, Robinson functioned as co-counsel, rather than as a subordinate associate. Robinson was brought into the case because of his specialized knowledge of appellate practice. He performed the majority of his work by himself outside Macdonald's office. Most important, Robinson occupied first chair on the appeal. It was he who signed the appellate brief and argued the case before the Bankruptcy Appellate Panel.
The evil of Macdonald's seeking compensation for Robinson's services is that Macdonald has overcharged the estate to profit from services performed by co-counsel. Macdonald charged the estate more than he paid Robinson. Macdonald should have arranged for the estate to retain Robinson as its appellate counsel at the rate Robinson agreed to work for Macdonald. It is important to note that I do not decide that a contract attorney who works in his or her home can never be a "regular associate." I also do not decide that a "regular associate" can never be lead attorney on a case. It is the unique combination of facts present here that dictate the result. The fact that Robinson was hired on a sporadic basis, the fact that he worked outside Macdonald's office, and the fact that he performed specialized work in which he assumed the lead role, when considered together, indicate the Robinson functioned in the role of co-counsel and not in the role of a "regular associate" of Macdonald. Assuming I have discretion to allow some or all of the fees sought for Robinson's services, notwithstanding the fact that Robinson is not a regular associate of Macdonald and was not separately appointed to represent the estate, I decline to do so. Macdonald is an experienced bankruptcy attorney and is charged with full knowledge of Rule 2014(b). This is not a close case in which Macdonald can reasonably be surprised by this court's interpretation of Rule 2014(b). The evidence lends no support whatsoever to Macdonald's claim that Robinson was a "regular associate" of his firm. Finally, Macdonald attempted to over-charge the estate by claiming a profit margin on work performed by co-counsel. Denial of the fees sought for Robinson's services is an appropriate sanction to discourage such conduct. CONCLUSION
Dated: ____________________ _____________________________ Thomas E. Carlson United States Bankruptcy Judge