Memorandum of Decision Re: Tardy Fee Application
This case is one of those nightmare cases where absolutely nothing goes right. After almost a decade of problems, yet another has surfaced: the fee application of Levene and Eisenberg, one-time counsel for debtor Geneva Limited Partnership. Painful as it is, a brief history of the case is required to put the present situation into proper context. Debtors Geneva Towers Associates and Geneva Limited Partnership owned two high-rise public housing projects in San Francisco. They filed Chapter 11 petitions in 1990, hoping to stave off action by the Department of Housing and Urban Development (HUD) to foreclose due to failure of the debtors to properly maintain the property. That part of the case was a complete disaster, with HUD obtaining leave of court to foreclose. The two case were consolidated, and converted to Chapter 7. The middle part of the case, spanning several years, centered over the fees of one Robert Beach. Beach was a tax accountant hired by the debtors to obtain a property tax refund on a contingent fee basis. The court awarded him a fee, based on his contract, of several hundred thousand dollars. HUD got it into its head that those fees belonged to it, and appealed successfully. However, in the meantime it foreclosed on the projects and bid in the full amount of its claim. The order to Beach to return most of the fees became property of the estate. By this time, the case was a tangled legal mess. Among other crazy results of the litigation, the amount Beach was supposed to return to the estate was far more than the total claims, so that a large amount would be going back to the general partners who had hired Beach and agreed to pay the fee that the court had originally ordered. The court referred the matter to the Bankruptcy Dispute Resolution Program. Thanks to the exhausting efforts of a fine resolution advocate, a very fair global settlement was reached between the general partners, the Chapter 7 trustee, and Beach. Under the terms of the settlement, Beach would pay a very reduced amount and the general partners would pay the trustee enough to satisfy the claims of creditors. The case seemed to finally be heading for resolution when the law firm of Levene & Eisenberg arose from its crypt. The firm had been disbanded in 1993, having never sought compensation beyond the $75,000.00 retainer it was paid in 1990. On February 26, 1999, it suddenly appeared through counsel and filed a fee application for an additional $48,315.87. Incredibly, it also seeks additional fees for its counsel even though that counsel has never been appointed by the court.
When Levene & Eisenberg originally applied to the court for appointment as counsel for the debtor, it represented that it would apply for additional compensation "during the course of and/or at the end of the Firm's engagement." Declaration of Joseph A. Eisenberg filed September 12, 1990, page 2, lines 13-14. Instead, it waited until six years after its engagement had terminated to make its application. The court frankly thought that it would be simple for the general partners to establish a laches defense to the application, based on the fact that they had let Beach off the hook for several thousand dollars based on the amount they thought they were going to have to pay to settle the case.(1) However, at the evidentiary hearing the partners failed to make this argument. The court therefore cannot disallow the fees on the basis of laches, even though there was an unreasonable delay by Levene & Eisenberg in filing its fee application.
III. Results Achieved and Other Factors
In its employment application, Levene & Eisenberg represented that it would ask the court for fees "based on the time spent and services rendered, the results achieved and other factors." Id. Despite this criteria, Levene & Eisenberg is seeking the maximum compensation based on time spent and hourly rates (including rates increased after employment) even though the results it achieved were practically nil. While the court does not feel justified in denying the fees based on delay, Levene & Eisenberg cannot use the delay to its advantage by hoping the court will forget that it achieved nothing. A total of $60,735.50 of the fee application is related to litigation with HUD, which was completely unsuccessful. Another $8,979.00 was spent on preparing a plan and disclosure statement which never resulted in anything. While a complete denial of these fees is not warranted, neither is maximum compensation. The court finds that these amounts should be reduced by half due to poor results.
IV. Fees for Unappointed Counsel
Levene & Eisenberg has been defunct for six years. It is represented in this fee application by the law firm of Wynne Speigel Itkin, which has never been appointed to represent anyone in this case. Citing In re Nucorp Energy, Inc., 764 F.2d 655 (9th Cir.1985), Levene & Eisenberg takes the position that it is entitled to recover its attorneys' fees incurred in preparing the fee application. A court-appointed professional is entitled to bill the estate for all his or her time, including time spent on preparing the fee application. However, the Wynne firm is not an appointed professional and probably ineligible even if were to seek appointment. No award can be made to a professional not appointed by the court. In re Shirley, 134 B.R. 940, 943 (9th Cir. BAP 1992); See In re Maller Restaurant Corp., 57 B.R. 72, 74 (Bkrtcy.E.D.N.Y. 1985)[law firm retained by debtor's attorney not entitled to compensation where it was never authorized by bankruptcy court to act as attorney for debtor]. Nucorp held that § 330(a) of the Bankruptcy Code mandates compensation for preparing fee applications because that section requires compensation be provided for "all 'actual, necessary' services rendered by bankruptcy counsel." 764 F.2d at 659 (emphasis added). However, in this case the services related to preparation of the fee application were not rendered by bankruptcy counsel, but rather by counsel for bankruptcy counsel. Section 330(a) does not require, or even permit, any award to any person other than the appointed bankruptcy counsel.
In light of the dismal results in this case, the court reduces by 50% the compensation sought for the HUD litigation and that sought for preparing the plan and disclosure statement. This amounts to a reduction of $34,857.26, so that the allowed amount is $88,458.62. After deducting the $75,000.00 retainer, the amount to be paid to Levene & Eisenberg is $13,458.62. All request for fees for work done by the Wynne law firm will be disallowed. Counsel for Levene & Eisenberg shall submit an appropriate form of order which counsel for the trustee has approved as conforming to the rulings herein.
Dated: May 10, 1999 ____________________________ Alan Jaroslovsky United States Bankruptcy Judge
1. The judgment against Beach had been affirmed by the Court of Appeals, and was