IN RE TURNER

C. STILSON, Bankruptcy Judge

This matter was before the court on a motion to determine ownership of a personal injury claim, to accept an offer in settlement of the claim, and for approval of attorney's fees and expenses. The court has reviewed the evidence in the context of applicable law and finds the claim is property of Leola Turner's BANKRUPTCY ESTATE, that the settlement of the claim is due to be APPROVED, and that payment of the attorneys' contingent fees should also be APPROVED.

FINDING OF FACTS

The court held an October 12, 2006 hearing on this MOTION FOR DETERMINATION OF OWNERSHIP OF CLAIM AND FOR APPROVAL OF ESTATES ACCEPTANCE OF AN OFFER IN A GROUP PERSONAL INJURY SETTLEMENT, APPROVAL OF RETENTION OF SPECIAL COUNSEL WHO GENERATED THE GROUP OFFER AND PAYMENT OF CONTINGENT FEES AND EXPENSES (BK Doc. 50).

Jason A. Stuckey of the firm Gulas Stuckey; Michael T. Gallagher of The Gallagher Firm; Richard A. Freese of the firm Sweet Freese; Tim K. Goss of the firm Capshaw, Goss Bowers, LLP; and Chris Hellums of the firm Pittman Hooks Dutton Kirby and Hellums, (hereinafter referred to as Group Counsel) filed the motion.

In essence, the movants asked the Bankruptcy Court to determine the following:

(1) If a claim of the debtor against Warner-Lambert, LLC and Pfizer, LLC arising from use of Rezulin was property of the bankruptcy estate;

(2) If the claim is property of the estate, to authorize their retention as special counsel on a contingent fee basis;

(3) To approve their consummation of a settlement of debtor's claim; and

(4) To award attorney fees and expenses.

A previous motion requesting similar relief (BK Doc. 31) was set for the October 12, 2006 hearing as well. Objections to Group Counsel's motions by the Chapter 13 Trustee and the Bankruptcy Administrator were also heard that day. (See BK Docs. 40, 42, 56 and 57)

The court has set out below a chronology of factual events leading up to this point. This chronology is based upon the bankruptcy file of Leola Turner, the file of AP 02-70118, and exhibits to pleadings in the bankruptcy file.

Prior to December, 2004 — Leola Turner retained Group Counsel to represent her against Parke-Davis, a division of Warner-Lambert, LLC, on a claim arising out of her use of the drug Rezulin. The parties agreed to a 40 % contingent fee. The exact date of this retention is not in evidence.

November 21, 2002 — Chapter 13 Trustee David Cottingham filed an adversary proceeding, AP 02-70118, against attorney Morris Bart and other defendants representing debtors in such group claims. The trustee's complaint alleged that counsel had failed to obtain approval of their employment to represent bankruptcy estates of Chapter 13 debtors with such claims.

January 31, 2003 — Turner filed this Chapter 13 bankruptcy case. (BK Doc. 1) Included with Turner's petition was her Chapter 13 plan in which she proposed to pay all creditors 100%. Her Schedule J shows that she had excess income of $649 per month and that she proposed to pay $625 per month into the plan for 60 months. The debtor's schedules did not list her Rezulin claim as an asset and she did not commit any of her Rezulin claim to be paid to her creditors.

April 29, 2003 — The court entered an order confirming Turner's plan. (BK Doc. 8) The confirmation order included a provision stating:

7. Property of the estate — "[T]he plan upon confirmation returns so much of that property to the debtor's control as is not necessary to the fulfillment of the plan."

August 5, 2003 — During the pendency of the trustees's separate adversary proceeding (AP 02-70118), The Gallagher Firm did a Pacer search to determine which of their clients might also be bankruptcy debtors in the Northern District of Alabama. Apparently, Turner's name appeared on the list as having filed a bankruptcy petition in 2003. (BK Doc. 56, Exhibit 1). Exhibit 1 indicates that a letter was sent to the client concerning her open bankruptcy, with a copy to the referring attorney. October 30, 2003 — Attorney Gallagher sent a letter to Attorney Freese again referring to the pending bankruptcy cases of clients like Turner and indicating that they did not handle cases involving clients who were in bankruptcy.

November 17, 2003 — Exhibit 3 of bankruptcy document 56 is a copy of a letter from Attorney Gallagher to Attorney Freese asking if he planned to handle the bankruptcy issues involved with those clients with Rezulin claims.

November 20, 2003 — Exhibit 4 to bankruptcy document 56 is a copy of another letter from the Gallagher firm to Attorney Gulas again concerning the handling of cases in which the clients, including Turner, with Rezulin claims were in bankruptcy.

December, 2004 — The parties reached a global settlement in the Rezulin group cases that Turner had joined. The settlement was structured so that accepting plaintiffs would be entitled to various settlement amounts based on their injuries or potential injuries. Turner, who had no proof of injury, would be entitled to receive approximately $4,503.00 if she accepted the offer.

May 26, 2006 — Group Counsel filed their first motion to determine ownership of the claim, approve the settlement, and approve retention of counsel and attorney fees. (BK Doc. 31)

May 30, 2006 — Turner filed amended Schedules B and C, as well as an amended Statement of Financial Affairs. (BK Docs. 33 and 34) In her amended Schedule B she listed the Rezulin claim as an asset stating the value as "contingent", and in her amended Schedule C she claimed $62.69 as exempt. Her amended Statement of Financial Affairs listing a class action lawsuit in Harris County, Texas, involving the Rezulin claim.

July 3, 2006 — The Chapter 13 Trustee objected to Document 31. (BK Doc. 40)

July 5, 2006 — The Bankruptcy Administrator objected to Document 31. (BK Doc. 42)

July 25, 2006 — The parties reached a settlement with the Gallagher defendants in the trustee's lawsuit, AP 02-70118. (AP Doc. 367) Settlement provisions allowed Group Counsel to file applications to be employed in the bankruptcy cases of individual debtors with pending claims similar to Turner's. This application was to be filed within 30 days of entry of the settlement order in AP 02-70118. August 23, 2006 — Group Counsel filed BK Doc. 50, the motion currently before the court, which is similar to the request in BK Doc. 31. It was filed in compliance with the time limit set by the settlement order in AP 02-70118.

October 10 and 11, 2006 — The Bankruptcy Administrator and Trustee objected to Group Counsel's motion. (BK Docs. 56 and 57) These objections did not oppose the employment of Group Counselper se; but asserted that the employment should be effective as of May 26, 2006 (when BK Doc. 31 was filed), and that fees and expenses should only be allowed for services rendered after that date.

October 11, 2006 — Chapter 13 Trustee filed a motion to modify the debtor's plan after confirmation (BK Doc. 58) to provide that the proceeds from the Rezulin lawsuit be paid to the trustee and distributed to the creditors.

October 12, 2006 — A hearing was held on the pending motions and objections.

October 18, 2006 — An order was entered approving Group Counsel's employment on a contingent fee basis. (BK Doc. 62)

November 21, 2006 — An order was entered granting the trustee's motion providing that the debtor's plan be amended to pay the settlement proceeds to the Chapter 13 Trustee. (BK Doc. 71)

CONCLUSIONS OF LAW

This court has jurisdiction of Turner's Chapter 13 case pursuant to 28 U.S.C. § 1334(a). This court has jurisdiction of this motion, including core bankruptcy proceedings, under 28 U.S.C. § 1334(b). Pursuant to 28 U.S. § 157(a), the jurisdiction is referred to this court by the General Order of Reference of the United States District Courts for the Northern District of Alabama, Signed July 16, 1984, As Amended July 17, 1984.

At the hearing on October 12, 2006 the court authorized the employment of group counsel effective May 26, 2006. An order was entered reflecting this on October 18, 2006. (BK Doc. 62) The court further announced that it would approve Group Counsel's motion on Turner's behalf to compromise the Rezulin claim for approximately $4,503.00. The Rezulin claim of the debtor was clearly a prepetition asset which became property of the estate upon the filing of her case on January 31, 2003. Debtor's schedules and plan did not address this cause of action and the confirmation order did not provide for any proceeds to be paid to creditors, but did provide that property not necessary for the fulfillment of the plan was returned to the debtor. The court does not need to decide whether or not this meant that the undisclosed asset revested in the debtor since the trustee's motion to modify the plan was granted (BK Doc. 71) and the proceeds from the lawsuit became part of the funds to be used to fulfill the debtor's plan.

Group Counsel's employment was approved pursuant to Section 327(e) of the Bankruptcy Code. (BK Doc. 62) Their employment was on a contingent fee basis. Therefore, pursuant to Section 330(a) and Section 331 of the Bankruptcy Code, they would be allowed reasonable compensation and reimbursement for actual and necessary expenses. The only remaining issue for the court to decide is the amount of fees which are reasonable for the services rendered by Group Counsel on behalf of the debtor and a reasonable amount of expenses.

Group Counsel learned of Turner's pending Chapter 13 bankruptcy case as a result of a Pacer search during the resolution of AP 02-70118. One of the issues in AP 02-70118 was which of Group Counsel's clients were, or had been, in bankruptcy while their drug claims were pending. Another disputed issue involved who — the debtor and bankruptcy counsel, or Group Counsel — was responsible for applying to the Bankruptcy Court for approval of Group Counsel's employment. Although the adversary proceeding was settled, there was no ruling on who was responsible for requesting employment of special counsel in this type case.

The record shows that Group Counsel learned of Turner's pending bankruptcy case in August of 2003 (BK Doc. 56, Exhibit 1). Exhibit 1 to document 56 indicates that a letter was sent to the debtor concerning her pending bankruptcy case on August 5, 2003.

Debtor's amendment to her Statement of Financial Affairs filed May 30, 2006, described the pending lawsuit as a class action, but the record is not clear as to whether or not this was a class action or a mass tort claim involving individual plaintiffs, including the debtor. Regardless of the form of the lawsuit, Group Counsel proceeded with negotiations with the defendants which resulted in a global settlement of the Rezulin claims in December of 2004. This appears to be a settlement in principal with each individual plaintiff being required to take further steps in order to consummate their individual settlements. Turner, who had no proof of injury, would receive approximately $4,503.00 if she chose to accept the settlement. The court at the October 12, 2006 hearing approved the settlement of the Rezulin claim for the approximate $4,503.00 settlement offer.

Group Counsel's employment was granted effective May 26, 2006. Further efforts are required after May 26, 2006 to consummate Turner's settlement; to obtain and disburse settlement funds, and to execute appropriate releases. A contingent fee of 40% would yield a total attorneys' fee of $1,801.43 plus interest accrued since the global settlement. Based upon the facts in this case, the court finds that a contingent fee of $1,801.43 plus interest is a reasonable fee, and that it must be approved.

Group counsel has also requested expenses in the amount of $212.05. However, they have provided no itemization setting out the nature of the expenses, or the dates they were incurred. Because of this defect, the court cannot determine if these expenses are actual or necessary as required by Section 330. Therefore, no expenses are due to be approved.

CONCLUSION

In summary, the court finds the prepetition cause of action and its settlement to be property of Turner's BANKRUPTCY ESTATE; that Turner's $4,503.00 settlement offer should be APPROVED; and that payment of Group Counsel's 40% contingent attorney's fee for representing the debtor must also be APPROVED.

Group Counsel is to be directed to submit to the court an order setting out the amount of fees to be received by each individual attorney in the group, consistent with a total award of $1,801.43 plus interest.

An order, consistent with these findings pursuant to Fed.R.Bankr.P. 7052, will be entered separately.

DONE and ORDERED.