The debtors’ attorney was entitled to approximately $67,000.00 in attorney’s fees and expert witness fees and costs for his representation of the debtors in their action against the creditor for violation of the automatic stay. In re Moon, No. 13-12466 (Bankr. D. Nev. May 29, 2020).
After they had obtained their discharge, the debtors reopened their bankruptcy with new counsel, Christopher Burke, in order to file a motion to hold Rushmore Loan Management Services, LLC, in contempt for violation of the automatic stay and the discharge injunction. After an evidentiary hearing, the bankruptcy court found Rushmore in violation of the automatic stay, but because the date Rushmore learned of the discharge was not established, the court did not find it in violation of the discharge injunction. The bankruptcy court awarded the debtors over $100,000 in actual damages, $200,000 in punitive damages, and attorney’s fees and costs under section 362(k)(1).
Mr. Burke then submitted his fee application seeking $56,150 in fees based on 112.3 hours of work at $500.00/hour, $1,950.30 in costs, and $8,907.64 in witness fees for the expert testimony of John Rao. He further sought an order enhancing his fees by a multiplier of 1.5. Rushmore objected to the fee application generally, arguing that because he did not have a written fee agreement with the debtors, Mr. Burke did not comply with ethics requirements. Rushmore further argued that Mr. Burke’s hourly rate and the expert witness fee were excessive. Finally, Rushmore argued that Mr. Burke was not entitled to a fee enhancement.
The court began its analysis with section 362(k)(1) which provides that debtors may recover damages resulting from violation of the automatic stay, including attorney’s fees incurred in the enforcement of the stay as well as litigation for its violation. This fee-shifting provision does not require the debtors to have entered into a written fee agreement with their attorney in order to have their legal fees covered.
Nor did the absence of a fee agreement offend Nevada ethics requirements. State ethics rules require an attorney to sufficiently communicate the fees and costs for which the client will be responsible. Mr. Burke did not seek to recover his fees from the debtors but, rather, sought to obtain his fees only through fee-shifting. Likewise, section 329(a), requiring debtor’s counsel to file a statement of his fee agreement with the debtors, was inapplicable, as that section applies only if the fee agreement was made within one year prior to filing the bankruptcy petition. Here, Mr. Burke entered the case well after the petition was filed. For the same reason, Fed. R. Bankr. Pro. 2016(b) also was inapplicable.
The court found Mr. Burke’s hourly rate to be reasonable. In so holding, the court noted Mr. Burke’s twenty-five years of experience, the successful outcome of the case, his education and practice credentials, and the court’s own observation of Mr. Burke’s litigation of the case, all supported his hourly rate. It found that the fact that Rushmore paid its counsel only $325/hour was a business decision irrelevant to the legitimacy of Mr. Burke’s fees. As to the issue of the amount of time Mr. Burke spent on the case, the court noted that Mr. Burke’s hours were well-documented, appeared necessary and reasonable, and that Rushmore had not pointed to any excess with respect to any time spent on the case. Under the lodestar approach, therefore, Mr. Burke’s reasonable fee applied to reasonable time, rendered his total fee request reasonable.
As an aside, the court noted that his fees came out to 18.7% of the total award to the debtors representing a low contingency fee percentage had he sought to be paid that way. The good result of the case for the debtors and the absence of any violation of disclosure requirements on Mr. Burke’s part would also support a finding that his fee request was reasonable under a quantum meruit theory.
With respect to his request for enhancement, the court found that where the lodestar approach yields adequate compensation to entice a competent attorney to take a case, fee enhancement is not warranted. Here, because Mr. Burke was adequately compensated for his services under the lodestar approach, the court denied his request for fee enhancement.
Turning to the expert testimony of John Rao, the court likewise found the witness fee to be well-documented and reasonable. As to the importance of his testimony, the court found it reliable and relevant overall.
In sum, the court awarded $56,150.00 in attorney’s fees and $10,857.94 in costs to be paid by Rushmore.
Moon.Order.on.Atty.Fees. Bankr Nev. May 2020
Tags: Attorney Fees, automatic stay
