631 B.R. 704
Bankr. N.D. Tex.2021Background
- Debtors Shayne Steen and Tracie Cole filed a Chapter 13; their counsel Sam Gregory disclosed a $3,700 standard fee that expressly excluded defending dischargeability adversary proceedings.
- Shayne’s ex‑wife filed an adversary under 11 U.S.C. § 523(a)(4) alleging non‑dischargeability; the adversary was dismissed on a Rule 12(b)(6) motion.
- Gregory seeks $6,260 for 15.65 hours of post‑petition work defending the adversary (separate from the $3,700 standard fee); Trustee objects to payment from the estate.
- Trustee argues the services did not benefit the estate, invokes the American Rule, and contends unsecured creditors should not fund defense of the adversary.
- Gregory and debtors argue § 330(a)(4)(B) permits allowance of fees in Chapter 13 when services are beneficial and necessary to the debtor (even if benefit to the estate is indirect).
- The court concluded Gregory’s adversary work was beneficial and necessary to the debtors, the requested fees were reasonable, and allowed them as an administrative expense payable under the Chapter 13 plan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether counsel’s adversary‑defense fees may be paid from the Chapter 13 estate | Gregory: §330(a)(4)(B) permits payment from the estate for services beneficial/necessary to the debtor in Chapter 13 | Trustee: American Rule means parties pay own fees; services did not benefit estate so estate should not pay | Allowed: fees may be allowed under §330(a)(4)(B) and paid as administrative expense under §503(b)(2) |
| Whether the services benefitted the debtor or the estate | Gregory: defending §523 claim benefitted debtor by preserving potential discharge and encouraging plan completion | Trustee: benefit to estate is at best indirect and insufficient | Held: services benefitted the debtor (and thus satisfy §330(a)(4)(B)) |
| Whether the services were necessary to the bankruptcy case | Gregory: dischargeability litigation is core and necessary to the case’s completion | Trustee: not necessary to administration of estate | Held: services were necessary or beneficial toward completion of the case |
| Whether requested fees were reasonable | Gregory: hours, rate, and skill justified request | Trustee: objected to payment source, not amount; otherwise did not contest reasonableness | Held: requested fees (15.65 hrs at $400/hr) were reasonable under applicable factors |
Key Cases Cited
- Matter of Riley, 923 F.3d 433 (5th Cir. 2019) (courts have discretion to allow or disallow fees under §330(a)(4)(B))
- Continental Ill. Nat’l Bank & Trust v. Charles N. Wooten, Ltd., 890 F.2d 1312 (5th Cir. 1989) (applicant bears burden of proof in fee applications)
- CRG Partners Grp., L.L.C. v. Neary (In re Pilgrim’s Pride Corp.), 690 F.3d 650 (5th Cir. 2012) (use of Johnson factors to assess reasonableness)
- Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974) (twelve factors for fee reasonableness)
- Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121 (2015) (American Rule and statutory exceptions for fee shifting)