Daniel S. Opperman
Chapter 13 Proceeding
Hon. Daniel S. Opperman
OPINION REGARDING APPLICATION FOR COMPENSATION
Procedural Background and Facts
Lorna Tracy ("Debtor") filed her Chapter 13 bankruptcy petition and her proposed Chapter 13 Plan on June 26, 2012. On August 21, 2012, Household Finance Corporation III's ("Creditor") previous counsel, Panayiotis Marselis, of Marselis and Berman, P.C., filed an objection to confirmation of the proposed Plan, alleging a pre-petition delinquency and requesting that the claim be paid via the Trustee's office. On September 28, 2012, the Court entered the Order Confirming Plan, which provided that the Creditor's claim would be paid by the Trustee.
The Debtor's Plan provided for payments to the Midland County Treasurer in the amount of $2,759.02, but that provision did not state which tax years these funds were intended to repay. On August 24, 2012, the Midland County Treasurer filed a proof of claim in the amount of $2,249.81 at 12% interest, representing pre-petition property taxes for the 2011 tax year. Payments were never commenced on the Midland County Treasurer's claim.
On July 25, 2013, the Creditor filed a Notice of Post-Petition Fees, Expenses, and Charges (the "Notice"), disclosing its disbursement to the Midland County Treasurer of $2,474.79 for the 2011 city taxes and $2,413.43 for county taxes. The Notice contained an error in that the $2,413.43 amount owing for county taxes was unrelated to the Debtor's property.
On September 7, 2013, the Trustee filed a Motion to Dismiss the Debtor's case based on feasibility issues in light of the Creditor's Notice. The Debtor filed an Objection to the Trustee's Motion to Dismiss on September 11, 2013.
On November 8, 2013, the Debtor filed an Objection to the Notice. A hearing regarding the Objection to the Notice was set for December 5, 2013. Shortly thereafter, the Creditor retained its current counsel, Adam Reatherford, of Trott & Trott, P.C., and, on November 25, 2013, filed a Response to the Debtor's Objection. The hearing on the Objection to the Notice was adjourned to December 19, 2013. On December 18, 2013, the Creditor filed an Amended Notice, removing the $2,413.43 charge erroneously included in the original Notice.
The Amended Notice resolved the Debtor's Objection to the Notice and the Trustee's Motion to Dismiss. On December 19, 2013, the Trustee withdrew his Motion to Dismiss. The hearing on Debtor's Objection to the Notice was held on December 19, 2013, at which Debtor's Counsel requested that the Debtor's attorney fees and expenses that were incurred as a result of the erroneous Notice be assessed against and paid by the Creditor. On January 3, 2014, the Court entered an Order Concerning Procedure for Application of Debtor's Counsel for Attorney Fees to Be Assessed Against and Paid by Creditor.
On January 23, 2014, Debtor's Counsel filed an Application for Compensation, seeking $4,723.82 in fees and expenses to be assessed against and paid by the Creditor. On February 19, 2014, the Creditor filed a Response, noting that (1) between July 25, 2013, the date the Creditor filed the Notice, and November 8, 2013, the date Debtor's counsel filed the Objection to the Notice, Debtor's Counsel billed approximately $3,090.00 of the $4,723.82 being requested in the fee application; (2) Debtor's Counsel never made an attempt to contact the Creditor or its prior counsel during that period to allow the Creditor an opportunity to mitigate the situation.
The Court held a hearing on Debtor's Application for Compensation on March 20, 2014, and the matter was taken under advisement.
JURISDICTION
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § § 1334, 157(a) and E.D. Mich. LR 83.50. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) (matters concerning the administration of the estate).
The issues in this matter arise from Title 11 of the United States Code and do not involve any matter which limits this Court's jurisdiction as detailed by the United States Supreme Court in Stern v. Marshall, ----- U.S. -----, 131 S. Ct. 2594, 2608, 180 L.Ed.2d 475 (2011) and later by the United States Supreme Court in Executive Benefits Ins. Agency v. Arkison, No. 12-1200 (U.S. June 9, 2014). See also Waldman v. Stone, 698 F.3d 910 (6th Cir. 2012).
ARGUMENTS
The Debtor argues that Creditor's filing of the erroneous Notice caused the Trustee to file a Motion to Dismiss based on feasibility, and that Debtor's Counsel incurred significant attorney fees related to defending the Motion to Dismiss and Objecting to the erroneous Notice. The Debtor argues that the related attorney fees and expenses should be assessed against the Creditor.
The Creditor argues that (1) there is no authority for the proposition that the Creditor should be held responsible for the Debtor's attorney fees and expenses in a situation such as this, and (2) it would be inequitable for the Court to assess fees and costs against the Creditor when approximately 65% of total amount requested was incurred before the Creditor was given the opportunity to rectify the problem.
APPLICABLE LAW
Rule 3002.1 applies only in Chapter 13 cases and only "to claims that are (1) secured by a security interest in the debtor's principal residence, and (2) provided for under § 1322(b)(5) of the Code in the debtor's plan." Fed. R. Bankr. P. 3002.1(a). The Rule further provides:
(c) Notice of Fees, Expenses, and Charges. The holder of the claim shall file and serve on the debtor, debtor's counsel, and the [Chapter 13 Trustee] a notice itemizing all fees, expenses, or charges (1) that were incurred in connection with the claim after the bankruptcy case was filed, and (2) that the holder asserts are recoverable against the debtor or against the debtor's principal residence. The notice shall be served within 180 days after the date on which the fees, expenses, or charges are incurred.
* * *
(i) Failure to notify. If the holder of a claim fails to provide any information as required by subdivision (b), (c), or (g) of this rule, the court may, after notice and a hearing, take either or both of the following actions:
(1) preclude the holder from presenting the omitted information, in any form, as evidence in any contested matter or adversary proceeding in the case, unless the court determines that the failure was substantially justified or is harmless; or
(2) award other appropriate relief, including reasonable expenses and attorney's fees caused by the failure.
DISCUSSION
Fed. R. Bankr. P. 3002.1(i) provides that the Court may award attorney's fees if a holder of a claim fails to provide the information required in subsection (c). In this case, the Creditor did provide the necessary information when it filed its notice; however, that information was admittedly incorrect. The error in the originally filed notice made it necessary for Debtor's Counsel to expend additional time determining that there was an error, responding to the Trustee's Motion to Dismiss that was initiated because of the error, and filing an objection to the Notice. Although not specifically stated in Fed. R. Bankr. P. 3002.1, the Court determines that it is not enough for a creditor to simply provide the information as set forth in subsection (c) - it is necessary for the creditor to provide correct information. It is clear that this was a case of mistake. Despite the fact that this was a mistake, the Creditor's failure to provide correct information can essentially be viewed as a failure to provide the information at all. Accordingly, the Court has concluded that it is appropriate to award the attorney fees and expenses caused by the Creditor's failure to provide correct information pursuant to Fed. R. Bankr. P. 3002.1(i). However, the Court has determined that some of the attorney fees and expenses requested by Debtor's Counsel could have been avoided if Debtor's Counsel had attempted to contact the Creditor or Creditor's counsel of record immediately.
Initially, the Court divides the time entries between the periods of July 25, 2013, through November 8, 2013, and post November 8, 2013. The post November 8, 2013, entries are indicative of what services would be provided if the correct attorney for the Creditor was contacted. These fees, which total $1,590.00, are appropriate and were the direct result of the mistaken Notice filed by the Creditor.
The remaining fees, however, are problematic. While the Court notes that many of the services were related to Debtor's Counsel trying to determine the cause of the problem, an easier solution would have been to contact Creditor's Counsel of record and then proceed with inquiry with the Midland County Treasurer. This is especially true because it appears that Debtor's Counsel reviewed the file as early as July 29, 2013, and he should have noted the Creditor had an attorney. On the other hand, the Debtor needed to defend the Trustee's motion to dismiss regardless of the outcome of a conversation with Creditor's Counsel. It is also clear the Trustee, by relying on the Creditor's Notice, was acting independently and his efforts would continue regardless of any conversation between the attorneys for the Creditor or Debtor. Debtor's Counsel was required to investigate, answer and defend the Trustee's Motion to Dismiss that was filed because of the incorrect notice. Per the Court's review of time entries from July 29, 2013, to October 30, 2013, Debtor's counsel devoted 6.5 hours to this task. For brevity, the dates, hours, and amounts are stated as:
|
Date |
Hours |
Amount |
| 09/09/13 |
.20 |
60.00 |
| 09/09/13 |
.70 |
210.00 |
| 09/09/13 |
.30 |
90.00 |
| 09/16/13 |
.30 |
90.00 |
| 09/24/13 |
.20 |
60.00 |
| 09/24/13 |
.30 |
90.00 |
| 09/24/13 |
.10 |
30.00 |
| 09/25/13 |
.20 |
60.00 |
| 09/25/13 |
.20 |
60.00 |
| 09/26/13 |
.50 |
150.00 |
| 10/01/13 |
.30 |
90.00 |
| 10/08/13 |
.10 |
30.00 |
| 10/08/13 |
.20 |
60.00 |
| 10/08/13 |
.10 |
30.00 |
| 10/09/13 |
.10 |
30.00 |
| 10/09/13 |
.10 |
30.00 |
| 10/09/13 |
.10 |
30.00 |
| 10/10/13 |
.50 |
150.00 |
| 10/14/13 |
.30 |
90.00 |
| 10/30/13 |
.50 |
150.00 |
|
Date |
Hours |
Amount |
| 10/30/13 |
.20 |
60.00 |
| 10/30/13 |
.20 |
60.00 |
| 10/31/13 |
.50 |
150.00 |
| 11/04/13 |
.30 |
90.00 |
Applying the reasonable and acceptable hourly rate of $300.00, another $1,950.00 is awarded to Debtor's Counsel. All costs are appropriate.
While not perfect, this decision attempts to balance the ability of Debtor's Counsel to avoid the extra costs by contacting Creditor's Counsel, but also enforces the provision of Rule 3002.1 to require creditors to state information in their notices accurately.
For the vast majority of cases, the current system of providing information and communicating works extremely well. To the extent this case is an aberration, this decision is limited. If additional abuses occur, by either Creditor or Debtor, the Court will take more drastic action in the future.
CONCLUSION
Attorney fees in the amount of $3,540.00 and costs of $13.82 are awarded in favor of the Debtor and against the Creditor. All other requests for fees are disallowed.
__________
Daniel S. Opperman
United States Bankruptcy Judge