Hopkins Growth Fund, LLC v. Smith et al
MEMORANDUM DECISION AND ORDER - IT IS ORDERED: 1. The Bankruptcy Courts Award of Attorney Fees in the two chapter 11 cases is AFFIRMED. No fees or costs are awarded on appeal. 2. This case, along with the member case, shall be deemed closed. Signed by Judge Edward J. Lodge. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)(Emailed to JDP, dj & zs at Bankruptcy Court on 2/17/2017.)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
Bk. Case No. 13-02275-JDP
HOLLAND & HART, LLP,
UNDER CONFIRMED PLAN
Case No. 1:16-cv-00214-EJL (Lead Case)
1:16-cv-00230-EJL (Member Case)
Before the Court is Holland and Hart, LLP’s (Law Firm) appeal regarding the
attorney fees awarded by the Bankruptcy Court for the representation of debtors Hopkins
Growth Fund, L.L.C. (Growth Fund) and Hopkins Northwest Fund, L.L.C. (Northwest
Fund) chapter 11 bankruptcy cases. Two separate appeals were timely filed and the
appeals were consolidated since the same attorney fees issue was raised in each appeal.
The appeal is fully briefed and ripe for the Court’s review.
MEMORANDUM DECISION AND ORDER 1
Having fully reviewed the record, the Court finds that the facts and legal
arguments are adequately presented in the briefs and record. Accordingly, in the interest
of avoiding further delay, and because the Court conclusively finds that the decisional
process would not be significantly aided by oral argument, this matter shall be decided on
the record before this Court without oral argument.
This appeal is a challenge to the hourly attorney and paralegal fees awarded by the
Bankruptcy Court in the two chapter 11 bankruptcy cases. It is undisputed that the hours
for services were not reduced by the Bankruptcy Court (except for an agreed upon 6.5
hours requested in error). Rather, the appeal focuses on the reduction of the applicable
hourly rates for services. The Bankruptcy Court held a hearing on the issue of fees and
determined that experienced partners would receive $280 per hour, associate attorneys
$220 per hour and paralegals $100 per hour. This was a reduction of approximately 27%
in the hourly rates requested. The partners were requesting $385 to $435 per hour,
associates were requesting $260 to $280 per hour, paralegals were requesting $160 to
$195 per hour. Total fees were reduced by $167,564 in the two cases.
Judge Pappas determined the applicable market for determining reasonable hourly
fees was the District of Idaho, not just the Boise market area.1 Judge Pappas determined
The Court finds the market area defined as the District of Idaho was basically
conceded by the Law Firm during the hearing and when the Law Firm presented hourly
rates for attorneys involved in Eastern Idaho bankruptcy cases for consideration by the
MEMORANDUM DECISION AND ORDER 2
the applicable range of hourly rates for attorneys within the District for bankruptcy cases
was between $200 and $450. In considering the factors set forth in 11 U.S.C.
§ 330(a)(3), Judge Pappas acknowledged that the court should consider the customary
compensation charged by comparably skilled practitioners in cases other than cases under
The Law Firm argues the Bankruptcy Court errored in awarding fees under the
principle of “economy of administration,” not giving adequate consideration to hourly
rates approved in the District of Idaho for non-bankruptcy cases, and erroneously
applying the law regarding “reasonable billing judgment.”
The Appellee Oversight Committee Under Confirmed Plan of Liquidation
(“Oversight Committee) for the Growth Fund responded to the appeal by the Law Firm.
The oversight committee for the Northwest Fund did not file a brief in the appeal.
However, the Court finds the arguments of the Oversight Committee for the Growth Fund
apply equally to the Northwest Fund. The Oversight Committee argues the Bankruptcy
Court properly exercised its discretion in applying the factors of § 330(a)(3) in
determining the appropriate attorney and paralegal fees to be awarded.
Bankruptcy Court in these chapter 11 cases. This market area determination is not clearly
erroneous or an abuse of discretion and the Court declines to address the Law Firm’s new
argument that the relevant market should be limited to the Boise area.
MEMORANDUM DECISION AND ORDER 3
The District Court has jurisdiction over the appeal pursuant to 28 U.S.C.
STANDARD OF REVIEW
This Court reviews the Bankruptcy Court’s fee determination for erroneous
application of the law or abuse of discretion. Ford v. Baroff (In re Ford), 105 F.3d 439,
441 (9th Cir. 1997). ‘[A]n inaccurate view of the law” can lead to an erroneous
application of the law. Trevino v. Gates, 99 F.3d 911, 924 (9th Cir. 1996). An abuse of
discretion occurs if a trial court makes a clearly erroneous finding of fact.” Escobar v.
Bowen, 857 F.2d 644, 645,n.1 (9th Cir. 1988).
The Bankruptcy Court has a duty to review debtor’s requested attorney fees in a
chapter 11 bankruptcy and to determine reasonable compensation. The Bankruptcy Court
may award compensation that is less than the amount of compensation requested. 11
U.S.C. § 330(a)(2). Compensation awarded under § 330(a) is an administrative expense
which is paid out of the assets of the bankruptcy estate before the claims of most
unsecured creditors. 11 U.S.C. § § 503(b), 507(a). Therefore, the award of attorney fees
undeniably reduces the assets in the estate available to be paid to creditors. This is not to
say that such professional fees are not justified nor entitled to a priority of payment.
Instead, the incurrence of reasonable professional fees is critical to presenting a plan for
MEMORANDUM DECISION AND ORDER 4
confirmation. It simply highlights the competing interests that exist in a bankruptcy case
that do not exist in other types of litigation.
In this case, Judge Pappas found all of the hours requested were reasonable based
on the services provided. Judge Pappas did note that these two cases were not extremely
complex in nature and were essentially liquidation cases from the outset versus chapter
11 cases involving reorganization and restructuring. The cases did involve significant
professional hours for the numerous legal issues presented, but the nature of these two
chapter 11 cases was primarily focused on the distribution of monies after liquidation and
the legal issues were not considered complex by the Bankruptcy Court.
The applicable law for determining the amount of reasonable compensation is set
forth in § 330(a)(3) which provides the court shall consider the nature, the extent and the
value of such services, taking into account all relevant factors, including-(A) the time spent on such services;
the rates charged for such services;
whether the services were necessary to the administration of, or beneficial
at the time at which the service was rendered toward the completion of, a case
under this title;
(D) whether the services were performed within a reasonable amount of time
commensurate with the complexity, importance, and nature of the problem, issue
or task addressed;
with respect to a professional person, whether the person is board certified
or otherwise has demonstrated skill and experience in the bankruptcy field; and
whether the compensation is reasonable based on the customary
compensation charged by comparatively skilled practitioners in cases other than
cases under this title.
Judge Pappas acknowledged on the record that in certain bankruptcy cases,
attorneys had been awarded up to $450 per hour. Judge Pappas also noted that he was
MEMORANDUM DECISION AND ORDER 5
aware of attorneys being awarded at higher hourly rates in civil cases in the District of
Idaho and had considered the rates of comparatively skilled practitioners in cases other
than bankruptcy cases.
On appeal, it is not this Court’s job to determine if it would have awarded the
same hourly rates as the Bankruptcy Court. Instead, this Court is charged with
determining if the Bankruptcy Court erred in applying the law when exercising its
discretion in determining the amount of reasonable compensation to be awarded in these
bankruptcy cases. The Court finds the Bankruptcy Court did not erroneously apply the
law and did not abuse its discretion in determining the applicable hourly rates in this case.
First, the Bankruptcy Court did not apply an “economy of administration” analysis
in determining the hourly rate. The Bankruptcy Court did consider the nature, extent and
value of services under the particular facts and found it to be different than a restructuring
chapter 11 or a chapter 11 case wherein the size of the bankruptcy estate presented more
complexities than in the case at bar. The Bankruptcy Court did not find the hourly rates
should be reduced merely because of the size of the bankruptcy estates at issue, but
instead analyzed the nature of the legal issues presented in these two specific chapter 11
cases. The Court found the requested services and time were necessary, but the legal
issues were not necessarily complex. The analysis was not an “economy of
administration” analysis, but an analysis of the overall nature and complexity of the
particular chapter 11 cases. The nature of the case and the extent of the services is a
judgment call by the Court and such a finding does not appear to be an error in applying
the law or an abuse of the Court’s discretion.
MEMORANDUM DECISION AND ORDER 6
Second, the Law Firm argues the Bankruptcy Court errored in not considering the
rates charged in comparative non-bankruptcy cases under § 330(a)(3)(F). The Court
respectfully disagrees with this conclusion based on a review of the transcript from the
hearing. While arguably, the Bankruptcy Court did not place as much weight as the Law
Firm would like on this factor, the Bankruptcy Court considered hourly rates outside
bankruptcy cases in determining a reasonable hourly rate in the chapter 11 cases. The
statute does not require that this factor be given any more or less weight than the other
factors listed in the statute or the consideration of the “nature, extent and value of
Attorney fee awards are made on a case by case basis. Section 330(a)(3)(B) sets
forth the “rates charged” are a factor to be considered. Reasonableness of the overall
hours and time spent on specific issues are other factors. Another factor to be considered
is the customary compensation charged by comparatively skilled practitioners in nonbankruptcy cases. The Court finds the limited cases cited by the Law Firm are not
indicative of average attorney fee awards in the District of Idaho. Some of the cited cases
involve plaintiff’s attorneys in contingent fee civil rights cases which skew the hourly
rate. The hourly rates approved in such cases are impacted by the risk to the attorney and
the limited number of attorneys willing to take such cases. Class action lawsuits normally
involve some counsel outside the state of Idaho who bill at substantially higher rates than
Idaho attorneys. Criminal defense attorneys on the District of Idaho’s CJA panel are only
paid $129 per hour regardless of their experience level. It has been this Court experience
that insurance defense attorneys who successfully defend cases are normally
MEMORANDUM DECISION AND ORDER 7
compensated at lower hourly rates even though they are highly skilled. It is simply unfair
and imprecise to cite a few cases where civil attorneys have been awarded hourly rates
higher than $280 awarded by the Bankruptcy Court as persuasive support that a higher
hourly rate is justified in the specific cases on appeal in this matter. It has been this
Court’s experience there is always an attorney who will attest that another attorney’s
hourly rate is reasonable. Instead, this Court, like the Bankruptcy Court, is entitled to rely
on its years on the bench and familiarity with thousands of cases in evaluating what is a
reasonable hourly rate for the services provided in a particular case in the District of
The role of the attorney in these cases is representing debtors in a chapter 11
bankruptcy. The attorney knows that professional fees are considered administrative fees
subject to reimbursement ahead of most unsecured creditors. This is a different situation
than a plaintiff’s attorney in a civil suit taking a civil rights case on a contingent fee
arrangement. While both cases may involve skilled attorneys, the likelihood of being paid
for services provided is completely different. The hourly rate approved should reflect
comparative skills as well as “customary” compensation and should not be limited to
comparing the customary charges in a few isolated examples of civil cases. Moreover,
just because a debtor agrees to an attorney’s hourly rate does not mean that is the
customary rate charged for such services. The Court acknowledges in its experience that
larger regional law firms appear to charge clients higher hourly rates than other smaller or
sole practitioners. But merely charging a rate does not make such a rate a customary
MEMORANDUM DECISION AND ORDER 8
rate.2 Here, the Bankruptcy Court applied all the factors of § 330(a)(3) and in its
discretion determined the appropriated reasonable hourly rates.3 The argument the
Bankruptcy Court did not apply § 330(a)(3)(F) is rejected.
Third, the Law Firm argues the Bankruptcy Court erroneously applied the law
regarding “reasonable billing judgment.” The Law Firm admits the Bankruptcy Court
accurately summarized the case law holding that an applicant under § 330 must show
they have exercised reasonable billing judgment by establishing the attorney did not
engage in excessive legal services in relation to the size of the estate and maximum
probability of recovery. See Unsecured Creditors’ Committee v. Puget Sound Plywood,
Inc., 924 F.2d 955 (9th Cir. 1991) and Ferrett & Slater v. United States Trustee (In Re
Garcia), 335 F.R. 717 (9th Cir. BAP 2005). The Law Firm claims the Bankruptcy Court
relied on these cited cases to support reducing the hourly rate when cited cases should
In fact, this Court recently approved an uncontested award of attorney fees in a
bankruptcy appeal and the hourly rates submitted by three experienced District of Idaho
bankruptcy attorneys were $220 to $225 per hour in the Boise area. See In Re Ricks, Civil
The Court notes that debtors have some discretion in selecting providers of
professional services. However, the costs of presenting a plan for confirmation are
subject to review and approval by the Bankruptcy Court. If an attorney wants to know
where the Bankruptcy Court stands on appropriate hourly professional fees before taking
a case, then that attorney should consider the customary fees approved in the District of
Idaho when agreeing to provide professional services. This Court finds the customary
fees approved by the Bankruptcy Court are not unreasonable as there is a large market of
experienced bankruptcy attorneys who regularly provide services to debtors at less than
the requested hourly rates in this case.
MEMORANDUM DECISION AND ORDER 9
only be relied on in cases where the number of hours was determined to have been
The Court finds this argument to be unpersuasive and too restrictive of a reading
of the cited cases. While the requested hours were not reduced by the Bankruptcy Court,
the court could consider one of the reasonable billing judgment factors set forth in Garcia
as it relates to its analysis of an appropriate hourly rate. The Bankruptcy Court
determined the first factor of probable cost of legal services in relation to the size of the
estate and maximum possible recovery is relevant when setting an hourly rate. Again this
factor goes to the § 330(a)(3)’s requirement of consideration of the “nature, extent and
value of such services.” The Bankruptcy Court noted higher hourly rates have been
approved in larger bankruptcy estate cases, but that these two chapter 11 cases did not
present similar legal issues or complexities. This is not an error in applying the case law
or an abuse of discretion to consider the overall size and complexity of a case in
determining a reasonable hourly rate.
Fourth, in considering the paralegal fees, this Court finds the reduced rates for
paralegals are also appropriate. Paralegals do not have the legal skills of an attorney and
the rates requested do not appear to be reasonable. The hourly rate of $100 for a paralegal
is within the range of charges regularly approved for paralegals in bankruptcy cases and
civil matters in the District of Idaho.4
The Court notes in CJA criminal cases, the Court awards a much lower hourly
rate for paralegal services
MEMORANDUM DECISION AND ORDER 10
Fifth, in considering the Law Firm’s arguments separately and collectively, the
Court finds the appeals must be denied. The Bankruptcy Court did not erroneously apply
the law. The Court is satisfied the Bankruptcy Court considered and applied all the
§ 330(a)(3) factors in determining reasonable hourly rates for these particular cases.
Further, the Bankruptcy Court did not abuse its discretion in determining the range of
hourly fees is between $200 and $450 in the District of Idaho and that appropriate fees
for this case would be $280 for a partner, $220 for an associate, and $100 for a paralegal.
IT IS ORDERED:
The Bankruptcy Court’s Award of Attorney Fees in the two chapter 11
cases is AFFIRMED. No fees or costs are awarded on appeal.
This case, along with the member case, shall be deemed closed.
DATED: February 16, 2017
Edward J. Lodge
United States District Judge
MEMORANDUM DECISION AND ORDER 11
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