In re Porter Ltd. of London, dba

David Porter Jewelry,

Case No. 95-43022 NS

Debtor.

This Chapter 7 case is before the Court pursuant to the United States trustee's objection to applications for compensation submitted by the Chapter 7 trustee and professionals in his employ. The United States trustee ("UST") raises two objections: (1) the compensation requested is unreasonable in light of the outcome of the case; and (2) the applicants have failed to justify this result in their applications. The gist of the objections is that many of the services sought to be compensated ought to have been performed by the Chapter 7 trustee rather than by other professionals.

The facts are not disputed. The debtor, a retail jewelry store, filed a petition for relief under Chapter 11, a plan of reorganization was confirmed, and the case closed. Upon failure to meet the requirements of the plan, the case was reopened and converted to Chapter 7. Richard J. Spear was appointed as the Chapter 7 trustee. With the Court's approval, Mr. Spear retained counsel and an appraiser. Sometime later, the Court authorized the sale of substantially all of the debtor's personal property, subject to any and all claims of consignment and accounts receivable. The Court then approved Mr. Spear's retention of an accounting firm. Seven months later, Mr. Spear and the appointed professionals filed the fee applications in question.

The UST urges that the fees should be reduced 50% across the board. This Court set the matter for hearing on June 17, 1998, took the matter under submission, and now approves fees and costs in the amounts set forth below. Discussion

The UST posits that Unsecured Creditors' Committee v. Puget Sound P1ywood, 924 F.2d 955 (9th Cir. 1991), imposes a special burden on all of the professionals to show that their fee requests are reasonable in light of the overall outcome of this case. The UST advocates this position on the grounds that "a bad result was obtained" in this case.

Section 330(a)(3) as amended in 1994 requires the Court to consider whether the services provided by the professionals were necessary to the administration of the case or were beneficial at the time the services were rendered. Section 330(a)(4), also added in 1994, prohibits compensation for services that are unlikely to benefit the debtor's estate or unnecessary to its administration. Although cost-benefit is an important factor to consider under both § 330 and Puget Sound Plywood , actual benefit to the estate is not (and never was) an absolute prerequisite to compensability. In re Ames Dept. Stores, Inc., 76 F.3d 66 (2nd Cir 1996). All of the factors spelled out in § 330 must be considered in order to arrive at a reasonable fee.

A. Compensation of Chapter 7 Trustee Spear under §§ 326 and 330

While § 330 provides for the compensation of trustees, § 326(a) limits the compensation that a trustee may receive to a percentage of the money disbursed to creditors. Mr. Spear has requested the maximum compensation allowable under § 326(a). The relevant question is whether the requested fees reflect reasonable, actual, and necessary services. Under § 704, a Chapter 7 trustee is required to collect and reduce to money the property of the estate and to close the estate as expeditiously as is compatible with the best interests of all parties. According to his fee request, the trustee's services resulted in a distributable sum of $25,432.27. His fee application shows that he fulfilled his obligations to reduce the debtor's assets to cash, organize the receipts and disbursements of the debtor, and provide notice of the bar date for the filing of claims against the debtor's estate. Nonetheless, this Court agrees that some reduction is reasonable because it finds that the professionals hired by the trustee performed someservices that should have been performed by the trustee, as explained below. Mr. Spear therefore will be awarded fees in the amount of $2,800.00.

B. Compensation of Chapter 7 Trustee's Professionals under §§ 328 and 330

Although § 327 allows the trustee to employ professionals "to represent or assist the trustee in carrying out the trustee's duties under the title..," it is equally clear that "[professionals] may not be employed and will not be compensated for services that the Code identifies as administrative duties of a trustee." 3 Mary Davies Scott et al., Collier on Bankruptcy § 327.02[2] (Lawrence P. King ed., 15th ed. 1998). See also In re Jenkins, 130 F.3d 1335, 1341 (9th Cir. 1997) (citing In re Prairie Central Railway Co., 87 B.R. 952, 959 (Bankr. N.D. Ill. 1988), for the proposition that "[t]he Trustee cannot effectively expand the maximum limits of § 326(a) by hiring other people to perform his duties for him, whether they are paralegals, attorneys, accountants or other professional persons, and utilize the potentially unlimited scope of § 330 as a basis for award of reasonable compensation.").

1. Chapter 7 Trustee's Attorneys' §§ 327 and 330 Fee Applications

The UST contends that many of the services performed by the Chapter 7 trustee's attorneys were administrative in nature. The UST particularly objects to time spent by the attorneys talking to creditors regarding consignments in bankruptcy cases. A fine line often separates tasks requiring the services of a lawyer from tasks which could be performed by a trustee. Although it is debatable whether discussing consignment issues requires a lawyer's services, there is little question that other tasks performed by the lawyers in this case, such as responding to numerous inquiries from creditors regarding Chapter 7 and acting as an intermediary between the trustee and potential purchasers of assets, did not require the services of a lawyer. To suggest that responding to such inquiries consumes no more time than referring the calls to the trustee begs the question, particularly since with little effort any creditor calls could be channeled to the appropriate party. The Court also agrees that time spent coordinating with the trustee's appraiser to determine the value of personal property is not legal work. The same reasoning applies to time spent reviewing accounts receivable for their collectibility; providing inventory lists and explaining auction procedures to creditors; and providing accountants with the debtor's books and records. All of these are administrative duties.

Because these services are not legal in nature, they are not properly compensable under § 330. All that remains is to calculate the compensation to be awarded according to applicable Ninth Circuit law. As was noted in In re Yermakov, 718 F.2d 1465 (9th Cir. 1983), "The primary method used to determine a reasonable attorney fee in a bankruptcy case is to multiply the number of hours expended by an hourly rate." Id. at 1471. This is referred to as the 'lodestar' approach. The hourly rate must be based on the rate that would be charged for comparable services in a non-bankruptcy case. §330(a)(3)(E). But Puget Sound Plywood clarified that '[a]lthough ... calculating the 'lodestar' is the 'primary' method for calculating fees, 'primary' is not a synonym for 'exclusive.'" 924 F.2d 955, 960 (9th Cir. 1991). The Ninth Circuit concluded that where the fee application submitted by counsel is such that a court cannot "quantify to numerical precision ... the lodestar calculation," the court does not abuse its discretion in applying a different formula. Id. at 960 - 61.

Because it is difficult in this case "to quantify to numerical precision" a reasonable number of hours, the Court will impose a 25% reduction as to the attorneys' fees. The UST does not object with particularity to the attorneys' request for compensation of expenses, and it is hereby approved.

2. Appraiser's §§ 327 and 330 Fee Applications

Here, too, the UST argues that many of the services provided by the appraiser ought to have been performed by the trustee. The UST objects specifically to requests for compensation for time spent obtaining keys; opening the debtor's premises and supervising the removal of assets, personal items, and consigned goods; and securing the debtor's premises. Some of the tasks performed, such as removal of assets, might be compensable if it could be shown that the trustee would have been required to obtain these services elsewhere at greater expense in the ordinary course of preserving the assets of the estate. No such showing was made here. Moreover, the appraiser's application states that his date of appointment was August 22, 1997, but he applies for fees starting from July 21, 1997, without explaining the justification for retroactive payment. Because the amount of the appraiser's fee request is not justified under the standards of § 330, and because it is impossible to "quantify to numerical precision" the lodestar calculation, the Court will impose a 25% reduction in fees. The request for expenses will be granted in its entirety.

3. Accountants' §§ 327 and 330 Fee Applications

The UST raises no factual objections related specifically to the fee application of the Chapter 7 trustee's accountants. The objection merely asserts that the fees requested are too high in light of the results of the case and are unjustified by the accountants' fee application. The Court finds neither the approximately eighteen hours billed by the accountants on this case nor the rates charged unreasonable. Neither is the request for $214.56 in expenses. The services provided involved computing payroll withholding taxes and preparing income tax returns. These are precisely the types of services that fall within the expertise of an accountant. For these reasons, the accountant's fee and cost requests will be granted.

Conclusion

Accordingly, trustee's fees are hereby awarded to Richard Spear in the amount of $2,800. Carr, McClellan, Ingersoll, Thompson & Horn, the attorneys for the trustee, are awarded $9,429.73 in fees and $548.47 in expenses. Phillip L. Canville, the trustee's appraiser, is hereby awarded $1,254 in fees and $144 in expenses. Bachecki, Crom & Co., the trustee's accountants, are hereby awarded $2,329.50 in fees and $214.56 in expenses.

IT IS SO ORDERED.

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Randall J. Newsome,

United States Bankruptcy Judge