Cripps et al v. Foley
OPINION; Order to issue; signed by Judge Janet T. Neff (Judge Janet T. Neff, clb)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
Lon W. Cripps and Deborah E. Cripps,
Case No. 1:16-cv-744
LON W. CRIPPS, DEBORAH E.
CRIPPS and DIETRICH LAW FIRM,
HON. JANET T. NEFF
BARBARA P. FOLEY,
Chapter 13 Trustee,
Appellant Dietrich Law Firm (“Dietrich Law”) appeals from an order of the Bankruptcy
Court approving in part and denying in part Dietrich Law’s application for attorney fees in
connection with its representation of the Debtors in their Chapter 13 bankruptcy. Having considered
the parties’ appellate briefs and the record, the Court finds oral argument unnecessary. “[T]he facts
and legal arguments are adequately presented in the briefs and record, and the decisional process
would not be significantly aided by oral argument.” FED. R. BANKR. P. 8019. The Court affirms the
decision of the Bankruptcy Court.
On June 22, 2010, the Debtors, Lon W. Cripps and Deborah E. Cripps (the “Cripps” or
“Debtors”) filed a Voluntary Petition for relief under Chapter 13 of the Bankruptcy Code. Appellant
Dietrich Law represented the Cripps in their bankruptcy case.
The Debtors’ Chapter 13 plan provided for the full payment of general secured creditors over
a period of sixty months. In re Cripps, 549 B.R. 836, 842 (Bankr. W.D. Mich. 2016). On November
6, 2015, the Trustee issued her notice/letter to the Debtors concerning completion of the Chapter 13
plan, and on the same date issued a notice of final cure of mortgage payments. Id. at 842-43. The
payroll orders, by which Debtors had made the required payments to their Chapter 13 case by
payroll deductions, were terminated by the Bankruptcy Court on November 9, 2015. Id. at 843, n.6.
On December 7, 2015, the Trustee filed a report of plan completion, and the Debtors filed
their certificate regarding domestic support obligations. Two days later, on December 9, 2015,
Dietrich Law filed its final fee application,1 seeking an additional $686.60 in fees and expenses,
which was later limited to $642.60 by agreement of the parties. Id. at 843-44, n.8.
The Trustee filed an objection to the fee application on December 16, 2015, contending that
the court should not award Dietrich Law compensation to be paid as an administrative expense
because the application was untimely in light of the letter to the Cripps, the report of plan
completion, and the imminent entry of the discharge. Id. at 843. Further, Dietrich Law’s delay in
filing the application would prejudice the Cripps by impairing their fresh start and/or precluding the
entry of their discharge. Id. at 843-44.
The Trustee notes that Dietrich Law’s four previous applications for fees and costs were
approved in the amount of $13,167.72.
On January 13, 2016, during the pendency of the instant fee matter, the Bankruptcy Court
entered a Discharge in the Cripps’ case. Id. at 843.
Following oral argument on Dietrich Law’s pending application for fees, the Bankruptcy
Court took the matter under advisement. Id. at 844. On May 13, 2016, the Bankruptcy Court issued
an Opinion and Order approving in part and denying in part the fee application. The court awarded
compensation in the amount of $642.60 pursuant to 11 U.S.C. § 330(a), but determined that the
compensation awarded shall not be paid as an administrative expense under 11 U.S.C. § 503, and
was discharged pursuant to 11 U.S.C. §§ 524(a) and 1328(a) (Dkt 11-2 at PageID.118).2 The Order
also stated that “nothing contained herein shall preclude the Debtors from voluntarily satisfying the
compensation awarded herein pursuant to 11 U.S.C. § 524(f).”
Dietrich Law now appeals the Bankruptcy Court’s decision on its fee request.
II. Legal Standard
“The bankruptcy court has broad discretion in determining the amount of attorneys’ fees, and
the award may be reversed only on a showing that the bankruptcy judge abused its discretion.”
Solomon v. Wein (In re Huhn), 145 B.R. 872, 874-875 (W.D. Mich. 1992). “An abuse of discretion
occurs only when the bankruptcy court fails to apply the proper legal standard and procedure in
making the fee determination or bases the award on clearly erroneous findings.” Id.
The bankruptcy court’s conclusions of law are reviewed de novo. Rowell v. Chase
Manhattan Auto. Fin. Corp. (In re Rowell), 359 F. Supp. 2d 645, 647 (W.D. Mich. 2004). Issues
of statutory interpretation are questions of law, and are thus subject to review de novo. Mitan v.
The parties’ citations to the record do not coincide with those of this Court; the record
citations herein refer to this Court’s docket.
Duval (In re Mitan), 573 F.3d 237, 241 (6th Cir. 2009); ITT Indus. v. BorgWarner, Inc., 506 F.3d
452, 457 (6th Cir. 2007). “Under a de novo standard of review, the reviewing court decides an issue
independently of, and without deference to, the trial court’s determination.” Menninger v.
Accredited Home Lenders (In re Morgeson), 371 B.R. 798, 800 (B.A.P. 6th Cir. 2007).
Appellant Dietrich Law seeks the reversal of the Bankruptcy Court’s decision and a remand
so that an order may enter allowing the awarded fees to survive discharge. Dietrich Law argues that
(1) no statute or court rule establishes a definite deadline to submit a fee application; and (2) allowed
attorney fees are not discharged under the Bankruptcy Code. Accordingly, the Bankruptcy Court
erred in denying Dietrich Law’s fee application and request to be paid as an administrative expense
because the application was timely filed and the awarded compensation survives discharge. Upon
review of the Bankruptcy Court’s reasoning and rulings, the Court finds no error of law that warrants
reversal. The Bankruptcy Court’s decision was a proper exercise of its discretion based on the
circumstances of the case.
Dietrich Law emphasizes that no Bankruptcy Code section, Federal Rule of Bankruptcy
Procedure, or local court rule establishes a definite deadline to submit a fee application in a Chapter
13 case. See In re Fricker, 131 B.R. 932, 940 (Bankr. E.D. Pa. 1991). Because there is no deadline,
the fee application was timely and the awarded compensation should be allowed as an administrative
expense. Thus, the Bankruptcy Court erred in determining that the application was untimely.
The Bankruptcy Court thoroughly considered the timeliness of Dietrich Law’s administrative
fee request in a detailed analysis of the governing legal authority and the specific case
circumstances—both the Cripps’ bankruptcy case plan provisions and Dietrich Law’s actions. In
re Cripps, 549 B.R. at 849-60. It is noteworthy that in the same opinion, the Bankruptcy Court
conducted a similarly thorough analysis of the same issues concerning Dietrich Law’s fee request
in a separate Chapter 13 bankruptcy case, In re Mears, No. 11-11505 (Bankr. W.D. Mich.), under
different circumstances, reaching a different result. The Bankruptcy Court’s analysis in this case
was well-reasoned and accords with the law and the facts, which the Bankruptcy Court observed
present some “fairly complex issues.” In re Cripps, 549 B.R. at 864. As explained subsequently,
Dietrich Law’s arguments provide no valid challenge to the Bankruptcy Court’s conclusion that the
administrative fee request was untimely under the circumstances presented.
Dietrich Law argues that since no statute or court rule establishes a definite deadline to
submit a fee application and Bankruptcy Rule 2016(a) provides a procedure to obtain court approval
of requests for compensation and reimbursement of expenses, the court can approve a fee application
filed pursuant to Rule 2016(a) even though the underlying bankruptcy case has been dismissed. In
re Fox, 140 B.R. 761, 765 (Bankr. D. S.D. 1992). And it does not matter if a plan has completed,
the discharge has entered, and/or if there are no funds on hand for the trustee to disburse.
Dietrich Law cites several case holdings for the proposition that the Bankruptcy Court here
still had the “ability” to award the fee application as an administrative claim. See, e.g., In re
Sweports, Ltd., 777 F.3d 364, 365 (7th Cir. 2015) (the question presented “is the authority of a
bankruptcy judge to make an award of fees after dismissal of the bankruptcy proceeding and the
consequent revesting of the assets of the debtor’s estate in the debtor”).3 However, the question is
In In re Sweports, the court noted that there is a critical difference between an entitlement
to fees and ordering payment of fees. In re Sweports, 777 F.3d at 366. “It’s true that with the
bankruptcy dismissed the bankruptcy judge could no longer disburse assets of the debtor’s estate to
not whether the Bankruptcy Court had the ability or the “power” to award the attorney fees, but
whether the award of the fees as an administrative expense was mandated, as Dietrich Law
implicitly argues. The cases cited by Dietrich Law offer no support for the latter proposition,
particularly given the differing case circumstances.
In analyzing the timeliness issue, the Bankruptcy Court noted it had the “inherent authority
to establish a deadline for filing requests for awards of compensation.” In re Cripps, 549 B.R. at
849 (citing In re Alda, 464 B.R. 61 (6th Cir. BAP 2010) (table decision) (citations omitted)). The
court declined, however to impose a deadline in the context of the cases before it. “[N]o section of
the Bankruptcy Code or any applicable rule explicitly establishes a deadline for the filing of requests
for administrative expenses.” Id. at 850. “[A]bsent any explicit or implicit directive in the
Bankruptcy Code or an applicable rule, bankruptcy courts have the inherent authority under section
503(a) and section 105(a) to establish the time by which a request for an administrative expense
must be made.” Id. And “even where the Bankruptcy Code or an applicable rule provides an
explicit or implicit deadline, the court may, ‘for cause,’ allow a tardily filed request for an
administrative expense. Id. (citing 11 U.S.C. § 503(a)).
The Bankruptcy Court concluded that although the “request for compensation” from Dietrich
Law was timely, the separate request for an “administrative expense” was not. In re Cripps, 549
B.R. at 851. The court acknowledged Dietrich Law’s argument that no deadline exists under the
Bankruptcy Code or any applicable rule for a fee application that requests allowance of an
anyone; it had no assets; it was defunct. But the judge could determine that Wolf had a valid claim
to a fee in the amount he was seeking. Such a ruling would create a debt of Sweports to Wolf, and
if Sweports refused (as Wolf expects it would) to pay, he could, like any other creditor, sue Sweports
in state court. Id. at 366-67.
administrative expense. The court found this argument only partly correct. While there is no
deadline for a professional to seek an award of compensation, there is an implicit deadline that
results from various sections of Chapter 13, which “when considered together, require that a request
for an administrative expense be made, at the latest, prior to completion of plan payments.” Id. at
Reviewing those interrelated provisions of the Bankruptcy Code, and the timing
requirements, id. at 852-53, along with the terms of the Cripps’ confirmed plan, the court found it
clear that Dietrich Law’s request for an administrative expense was untimely. Id. at 853.
As summarized by the Trustee, the Cripps’ Chapter 13 plan stated that “additional attorney
fees as may be allowed are to be paid as an administrative expense” via Trustee disbursement.
Dietrich Law’s request to have the allowed compensation paid as an administrative expense via
Trustee disbursement pursuant to 11 U.S.C. § 503 was not timely because the bankruptcy case was
completed. See In re Cripps, 549 B.R. at 856-60. The fees thus could not be paid as provided in
the Cripps’ Chapter 13 plan. Because Dietrich Law knew that the end of the Cripps’ bankruptcy
case was fast approaching; because of the numerous implicit deadlines for filing an administrative
expense claim found in the Bankruptcy Code itself; because the prejudice that would be suffered by
the Cripps was greater than that which would be suffered by Dietrich Law; and because the
application for compensation was filed after the completion of payments under the terms of the
Chapter 13 plan, the Bankruptcy Court found the request for an administrative expense, which had
to be “paid through the Plan,” futile at the time it was filed. In re Cripps, 549 B.R. at 853-860.
Thus, it was untimely.4
Dietrich Law noted in its brief before the Bankruptcy Court that the delay with respect to
the filing of its application was attributable to the inexperience of a billing clerk who had only
recently been hired. See In re Cripps, 549 B.R. at 844, 851. The Bankruptcy Court observed that
As a result, the administrative claim presented for the attorney compensation was not
allowed. It could not be treated in the manner provided for by the Cripps’ Chapter 13 plan, and it
was too late to make additional payments or amend the Chapter 13 plan to treat the administrative
claim in a different manner. Dietrich Law’s reference to contrary holdings in other cases, under
different circumstances, is immaterial and does not undermine the Bankruptcy Court’s analysis
based on the facts and circumstances of the Cripps’ bankruptcy case.
Likewise, Dietrich Law’s argument that it “was and is agreeable to a different treatment
under Section 1322(a)(2) by waiving the right to full payment through the Debtors’ Plan and having
the awarded compensation survive discharge” is immaterial (Dkt 13 at PageID.300).
Bankruptcy Court considered and rejected Dietrich Law’s argument under § 1322(a)(2).5 The Court
noted that under the Cripps’ confirmed plan, Dietrich Law did not agree to different treatment of its
priority claim, and the plan remains binding unless modified. In re Cripps, 549 B.R. at 856
(citing11 U.S.C. § 1327(a)). “The terms of a confirmed plan may be modified only after court
approval.” Id. (citing 11 U.S.C. § 1329(b)(2)). The Bankruptcy Court noted that plan was not
modified, nor could it be modified because all payments have been completed. Id. (citing 11 U.S.C.
§ 1329(a)). Further, Dietrich Law could not “unilaterally alter the terms of the confirmed plan by
announcing in a reply brief to a fee application that it has elected a different treatment.” Thus,
Dietrich Law’s reliance on § 1322(a)(2) was unavailing. Id.
due to the inexperience of the billing clerk, Dietrich Law inexcusably failed to request its
administrative expense before the Cripps’ plan completion, failed to take any curative action, and
instead “neglected to request an administrative expense until it was simply too late.” Id. at 859.
The plan “shall provide for the full payment, in deferred cash payments, of all claims
entitled to priority under section 507 of this title, unless the holder of a particular claim agrees to a
different treatment of such claim.” 11 U.S.C. § 1322(a)(2).
The Bankruptcy Court’s reasoning was sound, as was the ultimate basis for determining the
fees untimely where the plan payments were complete, there were no funds in the estate from which
to pay Dietrich Law, nor would there be any in the future. Id. at 855.
Dietrich Law further challenges the Bankruptcy Court’s conclusion that the fee approved by
the court was discharged. Dietrich Law argues that even though the Debtors’ plan is unable to pay
the awarded compensation, the Bankruptcy Court could, and did, determine that Dietrich Law had
a valid claim to the compensation and award the $642.60. However, the court further ordered that
the awarded compensation was discharged pursuant to 11 U.S.C. §§ 524 and 1328(a), thus
preventing Dietrich Law from requesting payment from the Debtors.
Dietrich Law states that there is relatively little case law on the issue of approved attorney
fees surviving discharge in a Chapter 13 case, and the published opinions on this issue are split. But
even if the discharge provisions apply, only prepetition debts are subject to discharge through
bankruptcy, and here, the awarded fees were incurred after the Debtors filed for bankruptcy, and,
therefore, they are post-petition debt not subject to the Discharge Order.
As with the issue of timeliness, Dietrich Law’s arguments establish no error requiring
reversal of the Bankruptcy Court’s decision concerning discharge. The court considered the
applicable law and reasonably concluded that the fee award did not survive discharge for several
reasons. In re Cripps, 549 B.R. at 861-63. Dietrich Law failed to request in its application that its
fees and expenses survive discharge. Id. at 861. The Cripps have completed payments under their
plan and the discharge has entered; their plan could not, as a matter of law, be modified to provide
that the fee awarded shall survive discharge. Id. at 862 (citing 11 U.S.C. §§ 1328(a), 1329(a)).
Under no circumstances are the Debtors personally liable to Dietrich Law post-discharge. Id.
And, of particular relevance to Dietrich Law’s argument on appeal, the court held that fees
and expenses of an attorney for a debtor in a Chapter 13 case are not post-petition claims under
§ 1305(a)(2). Id. at 863. Dietrich Law acknowledges there is no conclusive, controlling case
authority on this issue. The Bankruptcy Court noted that the majority of the courts that have
considered the post-petition claim argument have rejected it. Id. (citing In re Phillips, 219 B.R.
1001 (Bankr. W.D. Tenn .1998); In re Ryder, 358 B.R. 794, 798 n.11 (Bkrtcy. N.D. Cal. 2005); In
re Hanson, 223 B.R. 775, 778 (Bankr. D. Or. 1998)). That Dietrich Law cites cases reaching a
different result reflects no error in the Bankruptcy Court’s reliance on the reasoning of In re Phillips,
In re Ryder, and In re Hanson. Dietrich Law’s efforts to distinguish those cases are unavailing.
Other courts continue to find the reasoning of these cases persuasive. See, e.g., In re Conner, 559
B.R. 526, 531 (Bankr. D. N.M. 2016) (relying on the reasoning of In re Hanson and cases similarly
holding that attorney fees are discharged if the plan provides for them and the fee application is not
submitted until after plan payments are completed).
Finally, Dietrich Law contends that the case circumstances and policy support a conclusion
that the fee award is not discharged. For instance, it makes practical sense for a debtor to have one
nominal obligation survive discharge as opposed to numerous claims against the debtor had counsel
not provided representation to obtain a discharge. Additionally, “[h]aving awarded compensation
be discharged” is a hardship on attorneys representing debtors in Chapter 13 cases, and could be
considered a windfall to the debtors, and to hold otherwise would have a “chilling effect” on the
willingness of attorneys to represent Chapter 13 debtors (Dkt 13 at PageID. 303-304). Such general
considerations do not override the Bankruptcy Court’s sound reasoning for discharge under the
Bankruptcy Code and the specific circumstances of this case.
At the outset of its thorough decision in this case, the Bankruptcy Court observed that in
deciding the issues before it, “the court must strike a delicate balance between a debtor’s fresh start
and an attorney’s right to reasonable compensation for necessary and beneficial services rendered
at the end of a case.” In re Cripps, 549 B.R. at 841-42. The Bankruptcy Court did so. Its reasoning
and decision are sound under the applicable authority and the circumstances presented.
Accordingly, the decision of the Bankruptcy Court is affirmed. An Order will be entered consistent
with this Opinion.
Dated: March 31, 2017
/s/ Janet T. Neff
JANET T. NEFF
United States District Judge
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