Summary of a Recent
Judicial Development in
Bankruptcy

Court Reviews Application for Attorney Fees, Reduces Amount of Fees Awarded

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In In re McClintock Dairy, LLC, No. 07-10077PM, 2009 WL 222962 (Bankr. D. Md. Jan. 26, 2009), the United States Bankruptcy Court for the District of Maryland reviewed a final application for attorney fees and concluded that the attorney was not entitled to the entire amount of fees claimed because he had provided little or no benefit to his clients.

Background

The court reviewed a final application for attorney fees submitted by an attorney admitted pro hac vice to represent bankruptcy debtors. Id. at *1. The debtors and the bankruptcy trustee objected to the application. Id. The court had previously allowed interim compensation to the attorney, not being fully aware of the facts of the case. Id.

Analysis and Holdings

The court began by noting that interim fees are always subject to reexamination, adjustment, and disgorgement. Id. at *2. Examining the facts of the case that it had not previously been privy to, the court found that the attorney had abandoned the debtors early in his representation; having "caved when opposed," he "failed to raise available meritable defenses" and appeared to have been "truly uninterested" in his cases, forcing the debtors to hire replacement counsel, who had to duplicate work that the original attorney may have already done. Id. The court believed the debtors' testimony that the attorney was unresponsive and uncooperative, and had taken credit for more work than he had actually performed. Id. For example, he had approved a stipulation for full payment with interest to one creditor for an action that had actually been filed in violation of the automatic stay. Id. at *3.

In determining a proper fee amount, the court considered the following factors: the attorney's time and labor; "the novelty and difficulty of the questions raised"; the level of skill needed; preclusion of other employment opportunities; the customary fee; "whether the fee is fixed or contingent"; time limitations; the involvement compared to the results obtained; the attorney's experience, reputation, and ability; the "undesirability of the case"; the nature and length of the attorney-client relationship; and awards in similar cases. Id. at *4-5. The court seriously questioned the amount of time the attorney had actually spent on the case, which was a simple farm reorganization, but concluded that even if he had spent as much time as he claimed, it was irrelevant. Id. at *4. The court stated that the amount involved compared to the results obtained was "by far the most important factor to consider in determining the amount of any fee award." Id. The court found that the case was no farther along than at the time of the filing; in fact, the case was "perhaps in far worse shape in that the general financial condition ha[d] deteriorated so that other sources of funding [were] unavailable." Id. The court was also unimpressed with the attorney's skill, stating that "were he to present himself to this court again for admission pro hac vice that application would be denied." Id. at *5. The court concluded that "little if any benefit was rendered" to the debtors, and reduced the attorney fee award accordingly. Id.

The case was decided on January 26, 2009.