Memorandum of Decision Re: Credit Card Debt

FOR THE NORTHERN DISTRICT OF CALIFORNIA In re GRACE E. ACKERMAN,                                                                              No. 1-90-02096      Debtor. ________________________________/ MANUFACTURER'S HANOVER TRUST CO.,      Plaintiff,    v.                                                                                                                  A.P. No. 91-1053 GRACE E. ACKERMAN,      Defendant. ______________________________/
Memorandum of Decision Regarding Attorney Fees
     Plaintiff Manufacturers Hanover Trust Company issued a credit card to debtor and defendant Grace Ackerman in 1989. When she filed a Chapter 7 bankruptcy a year later, MHT brought this adversary proceeding seeking to have the debt declared nondischargeable.      After hearing all the evidence, the court determined that Ackerman used her card exactly as it was touted to her when she applied for it, that she had no fraudulent intent any time she used it, and that her bankruptcy was the result of an increase in domestic expenses and the imminent loss of her job, not a scheme to defraud credit card issuers. The court then determined that attorneys' fees were mandated by section 523(d) of the Bankruptcy Code.      Counsel for the debtor is well known to the court. For many years, she was a member of a law firm which represented consumers and investors in complex class action cases. She has since opened up a law office as a sole practitioner, and is doing some consumer debtor work. There are few attorneys of her experience and capabilities willing to do consumer debtor work, which is generally considered to be the least glamorous and remunerative aspect of bankruptcy practice.      Counsel for the debtor seeks $7,800.00 for her services in successfully defending the debtor. MHT objects on the grounds that the fees are successive and that her agreement with the debtor did not call for such a high fee. The court awards the fees as filed, finding that they are extremely reasonable under the circumstances and that the fees are not limited by the debtor's liability for them.      Counsel for the debtor has charged only $150 per hour for her services in this matter. This is well below the prevailing rate for Marin County. Attorneys who regularly represent consumer debtors in Marin County currently charge $175 to $200 per hour, and most of them are far less capable than debtor's counsel. Counsel's time records easily justify the fee request, which involved pretrial discovery and preparation and a full court trial against an institution with comparatively infinite resources. Moreover, the case was not a very desirable one both because it involved a consumer debtor and because counsel took a very great risk of nonpayment if the case was lost or even if the case was won but the court declined to award fees. The court may take all of these factors into account in fixing a fee award. In re Powerline Oil Co., 71 B.R. 767, 771 (9th Cir.BAP 1986).      MHT argues that it is entitled to see the fee agreement between Ackerman and her attorney, and to have the fees limited to those contained in the agreement. The court disagrees, and finds that the fee agreement is irrelevant. It is entirely permissible and consistent with the Code for counsel for the debtor to take only a nominal fee, or no fee at all, from the debtor and still seek a full fee, and even an enhanced fee, from the losing creditor. The language of the statute refers to reasonable fees, not what the debtor actually pays or is liable for. To find merit in MHT's position would be to limit its liability to what a consumer debtor can afford, thereby increasing the already inherently unfair litigation posture between a bank and a debtor with nothing.      MHT's most patently meritless argument is that the court's award will have a "chilling effect" on other similar actions by it and other credit card issuers. That is the exact purpose of the provision allowing consumer debtors to recover attorney fees. As Collier notes:
         The threat of litigation over the exceptions          of section 523(a)(2) and its attendant costs          are often enough to induce the debtor to settle          for a reduced sum, in order to avoid the costs          of litigation. Thus, creditors with marginal          cases are usually able to have at least part of          their claims excepted from discharge or reaffirmed,          even though the merits of the case are weak.          In order to balance the scales, subdivision (d)           of section 523, an entirely new concept, was           adopted.
     3 Collier on Bankruptcy (15th Ed.), p. 523-81 (emphasis added). The court is well aware, by the volume of stipulations flowing across its desk, that credit card issuers have become very aggressive and that most debtors are settling rather than bearing the cost and risks of defending an action. The risk to the creditor of having to pay a decent fee to the debtor's counsel is exactly the "chilling effect" Congress intended.      For the foregoing reasons, the court will award fees and expenses to debtor's counsel as prayed.
Dated: November 12, 1991                                                                        _______________________                                                                                                                      Alan Jaroslovsky                                                                                                                      U.S. Bankruptcy