In Re Busy Beaver Building Centers, Inc. Kirkpatrick & Lockhart
OPINION OF THE COURT
Appellant Kirkpatrick & Lockhart (“K & L”) provided legal services for the debtor Busy Beaver Building Centers, Inc. (“Busy Beaver”), in its Chapter 11 Bankruptcy proceedings,
see
In a December 5, 1991 Order accompanying a published memorandum opinion, the court determined that clerical services are not compensable under § 330(a) of the Code, and directed K & L to file an amended fee petition excluding charges or fees for clerical functions or services.
In re Busy Beaver Bldg. Ctrs., Inc.,
K & L’s appeal requires us to address two fee-determination questions of considerable importance in the bankruptcy field which no court of appeals has ever decided. First, does a bankruptcy court have the power and obligation to review fee applications which have not been the subject of an objection by a party in interest or the United States trustee? We conclude that it does. Second, what standard should a court employ to determine whether specific paralegal services are compensable? After a thorough examination of the issue, we opt for an objective standard which incorporates the practices in the non-bankruptcy legal market. Accordingly, we will vacate the district court’s order and remand for further proceedings.
I. FACTS AND PROCEDURAL HISTORY
A.- The Facts
Busy Beaver, a regional chain of do-it-yourself home center stores, filed a voluntary Chapter 11 petition for bankruptcy on December 12, 1990.
2
The bankruptcy court authorized K & L to represent Busy Beaver as
From time to time during the pendency of Busy Beaver’s bankruptcy petition, K & L filed with the bankruptcy court applications for interim compensation for services rendered by its professionals and paraprofessionals, and for the actual and necessary expenses it incurred in its representation.
See
On April 16, 1991, in response to K & L’s motion for reconsideration, 3 the bankruptcy court held an evidentiary hearing. A representative of the Office of the United States Trustee appeared at the hearing and subsequently filed a brief in opposition to K & L’s motion for reconsideration, and a representative of amicus curiae the National Federation of Paralegal Associations, Inc. appeared and subsequently filed a brief in support of K & L’s motion for reconsideration. At the hearing K & L proffered an affidavit and adduced testimony from six highly qualified witnesses, some of whom were experts on the subject of paralegals’ training and responsibilities and others of whom were senior attorneys responsible for delegating legal assignments.
K & L proffered extensive testimony that paralegals, and not legal secretaries, typically organize and maintain forms, pleadings, and files, maintain calendars and tickler systems, mail and distribute pleadings and other correspondence, and perform the other sorts of activities the bankruptcy court had found non-compensable. The witnesses explained that paralegals are assigned these tasks because they require the exercise of professional judgment. With respect to the calendar and tickler system, for example, a K & L witness testified that a paralegal is expected not only to just know what a date is, but to understand the importance of the date and to follow up to make sure that the attorney gets timely notice of the date’s approach and that either the attorney or the paralegal meets the deadline, “so it is a matter of exercising some judgment, not just dropping off a date or a reminder.” To take another example, a different expert witness testified that a paralegal is charged with filing a motion because that task “involves making sure that all the proper exhibits and affidavits are there, appropriately [signed, collated, and] marked, that the Court gets the right copies, that all named parties or parties in interest get the appropriate copies, and that filing deadlines are maintained,” and that a legal secretary cannot be relied upon to perform the task properly because “you have to have someone who knows what [he or she is] reading and knows the importance of what [he or she is] working on.”
The same witness testified that a paralegal would need to exercise professional judgment
Taken as a whole, the evidence K & L proffered at the hearing showed that paralegals ordinarily perform services similar to those the bankruptcy court disallowed; that law firms 4 typically bill such services to their non-bankruptcy clients, who typically pay for them; and that if the court were to disallow paralegal assistance on such matters the paralegal profession would suffer a major setback, and attorneys would instead perform those services but at a greater expense to the debtor’s estate.
B. The Bankruptcy Court’s Decision
After the evidentiary hearing, in a memorandum opinion dated December 5, 1991, the bankruptcy court again held clerical services uncompensable under § 330(a) of the Code and instructed K & L to file an amended fee application omitting charges or fees for clerical functions or services.
In re Busy Beaver Bldg. Ctrs.,
The evidentiary hearing persuaded the bankruptcy court that many of the disallowed services at issue require the exercise of professional judgment, but it nevertheless refused to grant K & L its requested fees for two reasons. First, the court concluded that K & L had not provided sufficient information in its fee application for the court to reach that conclusion earlier (before the evi-dentiary hearing). The court explained pointedly that it would require fee applicants to comply with the specificity requirements of Local Bankruptcy Rule of Procedure 9016.1 and that it generally would not hold an evidentiary hearing in the future to permit fee applicants to elucidate the specifics of services rendered. Thus, if the applicant failed its burden of proving compensability in the fee application, compensation would be denied. Id. at 757-58. Second, at least with respect to some of the disallowed services, the court reasoned that the evidentiary hearing had focused generally on paralegals’ training and duties but had not sufficiently explicated the nature of the particular tasks for which the court had denied compensation. That is, K & L had failed to prove beyond question that each task “required independent [professional] judgment and decision-making,” the purported precondition to obtaining compensation for those services. Id. at 757-58 & n. 3. .
C. The District Court’s Decision
The district court on K & L’s appeal agreed with the bankruptcy court that clerical services are never compensable under § 330 because they are accounted for in the attorneys’ hourly rates, even if non-bankruptcy clients compensate law firms for such services. Mem. op. at 5-6. The court emphasized that a professional or paraprofessional may be compensated only for services commensurate with his or her skill, so if either were to. perform a task not requiring the exercise of a level of judgment or skill upon which his or her level of compensation is predicated, the court would not award fees for that person’s efforts under § 330. Mem. op. at 6-7. It agreed with K & L that Congress intended to allow bankruptcy attor
The district court did recognize that in some instances the billing of clerical services can be customary — and compensable — if clerical overhead is not also included in the professional’s fee, but it did not apply the theory to this case or describe how a court should determine whether or not clerical services are subsumed within overhead. Mem. op. at 7-8. The linchpin of the court’s reasoning rested on the putative capacity of a non-bankruptcy client to challenge a legal bill by refusing payment, requesting a modification, or threatening termination of the attorney-client relationship, whereas it believed that the bankruptcy court can review fee applications only for abuses. Mem. op. at 8.
D. Jurisdiction and Scope of Review
The bankruptcy court had subject matter jurisdiction pursuant to
II. THE REVIEW OF FEE APPLICATIONS
A. Does the Bankruptcy Court Have the Power and Duty to Review Fee Applications Sua Sponte?
Because the bankruptcy court reduced the paralegal fee request sua sponte we must first consider whether it possessed the power to do so. Under § 330(a) of the Code, bankruptcy courts
may
award reasonable compensation for actual, necessary services rendered by the attorney and by paraprofessionals employed by the attorney, the reasonableness to be based on (i) the nature of the services, (ii) the extent of the services, (iii) the value of the services, (iv) the time spent on the services, and (v) the cost of comparable services in non-bankruptcy cases.
We think the answer is straightforward. Rule 2017(b) expressly spells out the power of the bankruptcy court to review fee applications (with respect to a debtor’s attorney) on its own initiative, providing that:
on the court’s own initiative, the court after notice and a hearing may determine whether any payment of money or transfer of property, or any agreement therefor, by the debtor to an attorney after entry of an order for relief in a ease under the Code is excessive ... if the payment, transfer, or agreement is for services in any way related to the case.
No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement orders or rules, or to prevent an abuse of process.
Beyond possessing the power, we think the bankruptcy court has a
duty
to review fee applications, notwithstanding the absence of objections by the United States trustee (“UST”), creditors, or any other interested party, a duty which the Code does not expressly lay out but which we believe derives from the court’s inherent obligation to monitor the debtor’s estate and to serve the public interest.
See
In re Wonder Carp. of America,
[T]he integrity of the bankruptcy system ... is at stake in the issue of a bankruptcy judge’s performance of the duty to review fee applications sua sponte. The public expects, and has a right to expect, that an order of a court is a judge’s certification that the result is proper and justified under the law.... Nothing better serves to allay [public perceptions that high professional fees unduly drive up bankruptcy costs] than the recognition that a bankruptcy judge, before a fee application is approved, is obliged to [review it carefully] and find it personally acceptable, irrespective of the (always welcomed) observation of the [United States trustee] or other interested parties.
Id.
at 968;
accord Rheam TV,
Indeed,
Some courts have reasoned that the UST, not the bankruptcy court, has the duty to review fee'applications. Congress has clearly delegated to the UST the discretion to assure that fee awards and expense reimbursements are reasonable, a delegation which may at first blush appear exclusive.
See
It is not the trustee’s responsibility to review all fee applications, since Congress plainly only delegated to the trustee the
discretion
to review a fee application.
See
Moroever, at least before some benches, objections to fee applications by parties other than the UST are also relatively uncommon.
See, e.g., Rheam IV,
Attorneys for the creditors may also be reluctant to oppose fee requests, whether because of perceived professional courtesy,
see In re Hamilton Hardware Co.,
We are keenly aware that many bankruptcy courts have bemoaned their duty to review fee applications as a thankless, onerous burden, one which consumes a significant share of a bankruptcy judge’s time,
see
Gordon Bermant, Patricia A. Lombard & Elizabeth C. Wiggins,
A Day in the Life: The Federal Judicial Center’s 1988-89 Bankruptcy Court Time Study,
65 Am.Bankr.L.J. 491, 513-14 (1991). But in holding that bankruptcy courts have an independent duty to review fee applications even absent objections, we find support in legions of cases decided by bankruptcy and district courts spanning nearly two-thirds of all federal districts
8
as
That said, we deem it necessary at this juncture to restate in this context what we have stressed in another: that we
do not intend that a district [or bankruptcy] court, in setting an attorney[’s] fee, become enmeshed in a meticulous analysis of every detailed facet of the professional representation. It ... is not our intention that the inquiry into the adequacy of the fee assume massive proportions, perhaps even dwarfing the case in chief.
Lindy Bros. Builders, Inc. v. American Radiator & Std. Sanitary Corp.,
B. Did K & L Forfeit Its Right to Compensation for Time Spent by Its Paralegals by Failing to Meet the Specificity Requirements of the Local Rule?
The bankruptcy court apparently ruled that, because K
&
L did not meet the specificity requirements of applicable bankruptcy rules, including Local Bankruptcy Rule of Procedure 9016.1, it forfeited its right to compensation.
See In re Busy Beaver,
In any event, we are convinced that if the bankruptcy court plans to disallow certain items of compensation,
To make the hearing meaningful, the court should first apprise the applicant of the particular questions and objections it harbors, a role which the adversary in a statutory fee case would typically play.
See Rhewm IV,
In sum, if after initial review the bankruptcy court determines that, while the fee applicant made a good faith effort to comply with the particularization requirements of
III. THE QUESTION OF “CLERICAL SERVICES,” AND THE STANDARD FOR ASSESSING THE REASONABLENESS OF FEES
A. Introduction
The district court determined that certain enumerated services were clerical in nature, and then disallowed remuneration therefor on the basis that, as a matter of law,
all
clerical services are included as overhead in attorneys’ fees.
18
We disapprove of any approach that allows a court confronted with undisputed, credible, contrary evidence of market practices in the record to rely solely on its own judgment to designate services as either clerical or paraprofessional and to allow or disallow compensation for those services on the basis of such designation alone. As we demonstrate below, the principal purpose of the 1978 amendments to
B. The Teachings of the Statutory Text and Legislative History
As just stated, the type of service affects the reasonableness of the rate of compensation sought by a professional or paraprofessional under
The remaining
The legislative history of
It is true that, before the 1978 amendments, the Code favored economy of the estate over competitive compensation to debtors’ attorneys.
See, e.g., In re Manoa Fin. Co.,
Some bankruptcy courts have justified departures from the statute’s transparent mandate on the ground that preserving the debtor’s estate is of greater import than compensating attorneys for their paralegals’ fees. Were the statute’s meaning and purpose ambiguous, we might find room to agree with them. But here Congress has unmistakably and expressly made a policy choice favoring full compensation for debtors’ attorneys over greater proportionate compensation to the debtors’ creditors, and when in our constitutional republic a statute is constitutional, courts are not at liberty to substitute their favored policies for those Congress enacts, no matter how unwise the court finds them to be. 25
In conclusion, the classification of services as clerical or non-clerical does not decide the question of compensability under
■ C. The Application of the Market Approach to the Role of Paralegals in Bankruptcy Proceedings
The past two decades have witnessed a remarkable transformation of the legal market, converting once. loyal and steadfast clients into sophisticated consumers of legal
The bankruptcy court was concerned that the tasks for which K & L charged for its paralegals’ time did not require the exercise of professional judgment, and that compensation for such services would unfairly burden the estate. As is true with recently graduated attorneys, entry-level paralegals perform the more mundane tasks in the paralegal work spectrum, some of which may resemble those tasks generally deemed “clerical” in nature. Yet even with these tasks, paralegals may have to bring their training or experience to bear, thereby relieving attorneys of the burden of extensive supervision and ensuring the proper completion of tasks involving the exercise, or
potential exercise,
of some paraprofessional judgment. Of course, the appropriate rate the attorney will command for paralegal services will ordinarily parallel the paralegal’s credentials and the degree of experience, knowledge, and skill the task at hand calls for.
See infra
at 855 n. 34;
cf. Jenkins,
The bankruptcy court held that clerical services — those services not requiring the exercise of professional legal judgment — must be included in “overhead.”
27
See
For example, the combination of the paralegal’s effort in retaining and instructing a legal secretary with the legal secretary’s effort in performing the task may exceed the' paralegal’s effort in performing the task alone.
28
Or, a legal secretary may lack the judgment needed in selecting and collating the documents to copy, and the expense of having a paralegal or attorney first instruct the legal secretary and then review his or her work for thoroughness and accuracy combined with the legal secretary’s time (albeit subsumed within overhead) may exceed the expense of having the paralegal or attorney personally perform the task in the first place. Or, a legal secretary may simply be unavailable in time to meet a pressing deadline.
29
Generally speaking, attorneys commonly perform intermittent tasks not calling for their particular level of expertise, ■ and nonetheless present non-bankruptcy clients with bills reflecting a single (“blended”) hourly rate.
See In re Vogue,
In keeping with the market approach, it is critical that courts allow attorneys the same leeway in the types of tasks billed for at their (and their paralegals’) established rate as non:bankruptcy clients permit their attorneys (and their attorneys’ paralegals), or Congress’ manifest intent to provide fully competitive income to bankruptcy attorneys would be transgressed.
Cf. Jenkins,
Like any sophisticated consumer of legal services, the bankruptcy court should compare the costs of “equivalent” practitioners of the art (including their billing structures) as well as the applicant’s billing practices with “equivalent” clients. Which legal or paralegal services are properly included as the overhead of attorneys’ fees, then, are presumably reflected accurately in the services for which attorneys charge their non-bankruptcy clients.
30
The market billing
Although this case does not present us with a pressing need to define precisely how a bankruptcy court should verify the market rates, if any, for select clerical services, we observe that certainly a bankruptcy judge’s experience with fee petitions and his or her expert judgment pertaining to appropriate billing practices, founded on an understanding of the legal profession, will be the starting point for any analysis. 31 By starting point we mean to suggest that a bankruptcy judge should use his or her experience and expertise to locate the questionable charges and fees, and once having questioned a charge or fee may properly require the applicant to meet the burden to prove the market would recompense him or her for that charge.
Then the court should carefully consider relevant, competent evidence submitted with the fee application, provided as a supplement to the fee application, or presented at a hearing,
see supra
Part II.B, even if the evidence directly contradicts the court’s own judgment.
See In re Continental III. Sec. Litig.,
As another basis for adjudging the reasonableness of charges for services, upon
We understand that even under this market-driven framework, some services paralegals now perform at some firms may go uncompensated. K & L argues that in those cases economic considerations will drive firms to have attorneys perform the disallowed tasks. Both the district and bankruptcy courts rejected this argument, explaining that if a service is not compensa-ble to a paralegal, it most likely will also not be compensable to an attorney. We entirely agree with that conclusion. At least absent justifying circumstances (such as time pressures not brought on by a lack of diligence, the excusable non-availability of a less experienced employee, or an inability to delegate the task efficiently, perhaps because the learning curve renders effective delegation infeasible), “[w]hen an experienced attorney does clerk’s work, he or she should be paid clerk’s wages.”
In re Vogue,
Finally, because
While bankruptcy fees are commonly calculated using the lodestar method, we note in closing that, contrary to the apparent view of the Sixth Circuit Court of Appeals,
see In re Boddy,
IV. CONCLUSION
Because neither the bankruptcy court nor the district court applied the correct legal standard, the district court’s opinion and order will be vacated and the case remanded to the district court with directions to remand to the bankruptcy court with instructions to reconsider K & L’s initial fee application in light of .the foregoing opinion.
Notes
. We attempted to secure the services of a practicing lawyer or law professor to act as amicus curiae in support of the position of the bankruptcy court and district court but, despite several months of effort, were unsuccessful.
. Busy Beaver's reorganization proved successful when on March-31, 1992 the bankruptcy court confirmed its amended plan of reorganization.
. Indicative of the lack of adversariness in many bankruptcy fee proceedings, counsel for the unsecured creditors’ committee joined K & L in seeking reconsideration and requested the bank-raptcy court to disburse compensation to K & L for all the paralegal services included in its fee application.
. Throughout this opinion we use the shorthand “firm” to include all attorneys, whether employed in law partnerships, by professional corporations, or as solo practitioners.
.
(a) After notice to any parties in interest and to the United States trustee and a hearing, ... the court may award ... to a professional person employed under section 327 or 1103 of this title, or to the debtor’s attorney—
(1) reasonable compensation for actual, necessary services rendered by such ... professional person, or attorney, as the case may be, and by any paraprofessional persons employed by such ... professional person, or attorney, as the case may be, based on the nature, the extent, and the value of such services, the time spent on such services, and the cost of comparable services other than in a case under this title....
.
Compare In re Gulph Woods Corp.,
. That .section provides in pertinent part:
(a) Each United States trustee, within the region for which such United States trustee is appointed, shall—
(3) supervise the administration of cases and trustees in cases under chapter 7, 11, or 13 of title 11 by, whenever the United States trustee considers it to be appropriate—
(A) monitoring applications for compensation and reimbursement filed undersection 330 of title 11 and, whenever the United States trustee deems it to be appropriate, filing with the court comments with respect to any of such applications^]
.
See, e.g., In re Cascade Oil Co.,
. E.g., 2 Collier on Bankruptcy ¶ 330.05[2][a], at 330-37 (15th ed. Lawrence P. King ed. 1993) ("[T]he ultimate responsibility for assessing the reasonableness of compensation awarded to professionals and other officers of the estate remains ... with the judiciary.”); R.E. Ginsburg, Bankruptcy ¶ 4501 (1985) ("Even if no party in interest objects ... the court should review the application to make sure' the compensation sought has been earned and is reasonable.”); see also Harold Lavien, Fees as Seen from the Bankruptcy Bench, 89 Com.L.J. 136, 138 (1984).
. The Joint Explanatory Statement, which described the floor managers' compromise on the Bankruptcy Reform Act of 1978 to both chambers, explains: "Attorneys’ fees in bankruptcy cases can be quite large and should be closely examined by the court." 124 Cong. Rec. 32,394 (1978) (Joint Explanatory Statement) (remarks of Rep. Edwards) (emphasis added), reprinted in 1978 U.S.C.C.A.N. 6436, 6442; accord 124 Cong. Rec. 33,994 (1978) (Joint Explanatory Statement) (remarks of Sen. DeConcini), reprinted in 1978 U.S.C.C.A.N. 6505, 6511.
.
See In re York Int’l Bldg., Inc.,
. We also think it not befitting the stature of a federal bankruptcy judge to spend wasteful hours poring over fee applications to tabulate and cross-reference unorganized billing statements. Bankruptcy courts might consider prescribing procedures for the submission of organized, coherent, readable fee applications. Guidance may be found in Alan Hirsch & Diane Sheehey, The Award and Management of Attorneys’ Fees in the Federal Courts (Federal Judicial Center, Washington, D.C. forthcoming 1994). Moreover, today one can readily find computer software which automatically summarizes, correlates, and in other ways renders comprehensible involved legal bills, Perhaps the bankruptcy courts should consider requiring professionals submitting lengthy fee applications to submit them also on a computer disk in a format readable by a specified commercially available computer program, or simply requiring the professionals to tabulate the fee requests in several different conducive ways, such as by person, by day, and by activity/assignment.
. The relevant portion of that Rule provides:
Application for Compensation or Reimbursement. An entity seeking interim or final compensation for services ... from the estate shall file an application setting forth a detailed statement of (1) the services rendered [and] time expended ..., and (2) the amounts requested.
. The relevant portion of the local Rule states:
All entries shall conform to the following:
1. List each service or task separately and state the amount of time expended in its performance;
2. Identify the subject matter of any correspondence. or phone call and the party with whom you have communicated if the service involves telephone and/or written correspondence;
3. Identify where appropriate, and in the interest of clarity, the subject matter of any hearing or trial with specificity including the case, or adversary number if the service involved is attendance at a hearing or trial;
4. Identify any pleading with specificity if the service involves preparation of a pleading[.]
Local Bankr.R.P. 9016.1 (W.D.Pa.1992).
.
"[A]fter notice and a hearing”, or a similar phrase—
(A) means after such notice as is appropriate in the particular circumstances, and such opportunity for a hearing as is appropriate in the particular circumstances; but
(B) authorizes an act without an actual hearing if such notice is given properly and if — •
(i) such a hearing is not requested timely by a party in interest; or
(ii) there is insufficient time for a hearing to be commenced before such act must be done, and the court authorizes such act....
. See,
e.g., In re Beverly Mfg. Corp.,
Blum v. Witco Chem. Corp.,
At the hearing, held after notice of the court's concerns and/or objections, the court should allow the applicant a reasonable opportunity to present legal arguments and/or evidence, as the case may be, to clarify or supplement the petition and accompanying affidavit. Of course, the anatomy of the hearing lies within the sound discretion of the bankruptcy judge, and would not necessarily require the presentation of oral testimony. For example, the type of hearing which "is appropriate in the particular circumstances” might simply be an oral hearing (whether in court or more informally, as by teleconference) at which the applicant submits argument based upon the papers. The essential point is that the court should give counsel a meaningful opportunity to be heard.
.
Compare, e.g., In re Nucorp Energy,
In
In re Vogue,
The question is really factual in nature ...: Do attorneys normally bill their clients for the time spent in preparing their bill [or] the time spent meeting with a client to explain, discuss, negotiate or haggle over (the practical equivalent of appearing in court on a fee' application) their bill?
The court realized, too, that certain procedures for bill approval unique to bankruptcy cases may alter the answer to the above questions to the extent that the bankruptcy procedures are materially more onerous, but the court concluded that the fee applicant in the case before it had failed to proffer any evidence of either a practice of billing such services in non-bankruptcy cases, or of material differences between non-bankruptcy and bankruptcy review procedures (as the court would require before it would grant compensation for such work if non-bankruptcy clients did not pay for such work).
See id.
at 720, 724. Thus, for example, if a fee applicant can demonstrate that non-bankruptcy clients require substantially less documentation and are considerably more deferential to the professional's exercise of judgment concerning which fees are billable (resulting in considerable savings of effort defending bills), etc., the court could meet
Of course, to prevent "double counting," the fee applicant would not also be able to include in his or her hourly rate an extra (in comparison to non-bankruptcy attorneys) overhead charge based on time spent preparing bankruptcy fee applications. The foremost aspiration of
. Although, as presaged
supra
at 840, the district court did cite two cases remunerating a fee applicant for clerical services
{In re Wolverine Knitting Mills, Inc.,
. Not being confronted with the question, we express no view about whether legal secretaries can be deemed "paraprofessionals” within the meaning of
. We understand that this Court stated in
In re Meade Land & Dev. Co.,
. The most familiar formula courts in this circuit use to calculate attorneys' fees is undoubtedly the "lodestar” approach, an approach with its roots in common fund cases and fee-shifting statutes. Under the lodestar analysis, a court first establishes a reasonable hourly rate (corresponding to the value of the services and the cost of comparable services in
.We include the House Committee on the Judiciary’s full explanation of
Section 330 authorizes compensation for services and reimbursement of officers of the estate. It also prescribes the standards on which the amount of compensation is to be determined. As noted above, the compensation allowable under this section is subject tothe maxima set out in sections 326, 328, and 329. The compensation is to be reasonable, for actual necessary services rendered, based on the time, the nature, the extent, and the value of the services rendered, and on the cost of comparable services other than in a case under the bankruptcy code. The effect of the last provision is to overrule In re Beverly Crest Convalescent Hospital, Inc., 548 F.2d 817 (9th Cir.1976, as amended 1977), which set an arbitrary limit on fees payable, based on the amount of a district judge’s salary, and other, similar .cases that require fees to be determined based on notions of conservation of the estate and economy of administration. If that case were allowed to stand, attorneys that could earn much higher incomes in other fields would leave the bankruptcy area. Bankruptcy specialists, who enable the system to operate smoothly, efficiently, and expeditiously, would be driven elsewhere, and the bankruptcy field would be occupied by those who could not find other work and those who practice bankruptcy law only occasionally almost as a public service. Bankruptcy fees that are lower than fees in other areas of the legal profession may operate properly when the attorneys appearing in bankruptcy cases do so intermittently, because a low fee in a small segment of a practice can be absorbed by other work. Bankruptcy specialists, however, if required to accept fees in all of their cases that are consistently lower than fees they could receive elsewhere, will not remain in the bankruptcy field.
This subsection provides for reimbursement of actual, necessary expenses. It further provides for compensation of paraprofessionals employed by professional persons employed by the estate of the debtor. The provision is included to reduce the cost of administering bankruptcy cases. In nonbankruptcy areas, attorneys are able to charge for a paraprofessional's time on an hourly basis, and not include it in overhead. If a similar practice does not pertain in bankruptcy cases, then the attorney will be less inclined to use paraprofessionals even where the work involved could easily be handled by an attorney’s assistant, at much lower cost to the estate. This provision is designed to encourage attorneys to use paraprofessional assistance where possible, and to insure that the estate, not the attorney, will bear the cost, to the benefit of both the estate and the attorneys involved.
H.R.Rep. No. 595 at 329-30, reprinted in 1978 U.S.C.C.A.N. at 6286.
. That report provided in pertinent part:
[E]conomy in administration is the basic objective ....
The reference to "the cost of comparable services” in a nonbankruptcy case [in§ 330 ] is not intended as a change of existing law. In a bankruptcy case fees are not a matter for private agreement. There is inherent a "public interest” that "must be considered in awarding fees,” Massachusetts Mutual Life Insurance Co. v. Brock,405 F.2d 429 , 432 (C.A.5 1968), cert. denied,395 U.S. 906 [89 S.Ct. 1748 ,23 L.Ed.2d 220 ] ([1969]). An allowance is the result of a balance struck between moderation in the interest of the estate and its security holders and the need to be "generous enough to encourage” lawyers and others to render the necessary and exacting services that bankruptcy cases often require, In re Yale Express System, Inc.,366 F.Supp. 1376 , 1381 (S.D.N.Y. 1973). The rates for similar kinds of services in private employment is one element, among others, in that balance. Compensation in private employment noted in subsection (a) is a point of reference, not a controlling determinant of what shall be allowed in bankruptcy cases.
S.Rep. No. 989, 95th Cong., 2d Sess. 40 (1978) (footnote omitted), reprinted in 1978 U.S.C.C.A.N. 5787, 5826.
. Specifically, the Joint Explanatory Statement read by the respective floor managers in each chamber of Congress provided in this -regard:
Section 330(a) contains the standard of compensation adopted in H.R. 8200 as passed by the House rather than the contrary standard contained in the Senate amendment.... [B]ankruptcy legal services are entitled to command the same competency of counsel as other cases. In that light, the policy of this section is to compensate attorneys and other professionals serving in a case under title [11] at the same rate as the attorney or other professional would be compensated for performing comparable services other than in a case under title [11]. Contrary language in the Senate report accompanying S. 2266 is rejected, and Massachusetts Mutual Life Insurance Company v. Brock,405 F.2d 429 , 432 (5th Cir.1968) is overruled. Notions of economy of the estate in fixing fees are outdated and have no place in a bankruptcy code.
124 Cong.Rec. 33,994 (1978) (Joint Explanatory Statement) (remarks of Sen. DeConcini) (emphasis added), reprinted in 1978 U.S.C.C.A.N. 6505, 6511. The slight differences between the Senate and House versions of the Joint Explanatory Statement are not manifested in the above excerpt, see the identical language at 124 Cong.Rec. 32,394-95 (1978) (Joint Explanatory Statement) (remarks of Rep. Edwards), reprinted in 1978 U.S.C.C.A.N. 6436, 6442. We accord the Joint Explanatory Statement the weight due a conference report, as in this instance the statement fulfilled that role. See 124 Cong.Rec. 32,392 (1978) (Joint Explanatoiy Statement) (remarks of Rep: Edwards), reprinted in 1978 U.S.C.C.A.N. at 6437; 124 Cong.Rec. 33,992 (1978) (Joint Explanatory Statement) (remarks of Sen. DeConcini), reprinted in 1978 U.S.C.C.A.N.-at 6505-06.
.
See, e.g., Tennessee Valley Auth. v. Hill,
. K & L contends, as does
amicus curiae
the National Federation of Paralegal Associations, Inc., that the types of services the district court disallowed are the types of services for which paralegals are trained and that they are within the scope of paralegal's responsibilities as defined by National Federation of Paralegal Associations, Inc.,
Paralegal Responsibilities
at 1-2. Br. for Appellant at 23 n. 9, 35; Br. for
Amicus Curiae
National Federation of Paralegal Assocs., Inc. at 11. But this contention misses the point, for the germane question under
. Overhead for purposes of bankruptcy reimbursement has been defined as "all continuous administrative or general costs or expenses incident to the operation of the firm which cannot be attributed to a particular client or case.”
In re Wildman,
. The cost of having the legal secretary perform the task is relevant even when not itemized and separately billed to the client because an improvement in overall productivity accomplished by efficiently allocating tasks between the various occupations employed in a law firm will reduce overall secretarial labor costs and, in an efficient market, correspondingly reduce the overhead component for secretarial labor in that firm’s attorneys’ fees.
. Indeed, K & L contends that some of the disallowed paralegal services illustrate precisely this point. In particular, it argues that the bankruptcy court entered numerous interim orders at the commencement of Busy Beaver's petition authorizing Busy Beaver to continue its day-today operations — orders pertaining to the use of cash collateral, the continuation of customer policies, the payment of pre-petition wages and employee benefits, the ability to honor pre-petition deposits and credit card charge backs, the retention of counsel, etc. — and directed K & L to serve the interim motions and related orders overnight on various creditor groups composed of up to 120 creditors. K & L argues that "[i]n order to comply timely with the Bankruptcy Court’s direction, the paralegal's role was to ensure that the appropriate pleadings and orders were served upon the creditors to whom the Bankruptcy Court had directed service to be made,” that "[c]ollating the appropriate documentation involved the paralegals providing services which had intertwined professional and clerical components,” and that "[t]he critical timing and need to ensure compliance with service requirements would not have permitted the delegation of the responsibilities solely to legal secretaries.” Br. of Appellant at 7.
.We find that the Supreme Court's reasoning concerning compensation for paralegals under civil rights fee-shifting statutes transfers smoothly to the bankruptcy context:
All else being equal, the hourly fee charged by an attorney whose rates include paralegal work in her hourly fee, or who bills separately for the work of paralegals at cost, will be higher than the hourly fee charged by an attorney competing in the same market who bills separately for the work of paralegals at "market rates.!’ In other words, the prevailing "market rate” for attorney time is not independent of the manner in which paralegal time is accounted for. Thus, if the prevailing practicein a given community were to bill paralegal time separately at market rates, fees awarded the attorney at market rates for attorney time would not be fully compensatory if the court refused to compensate hours billed by paralegals or did so only at "cost.” Similarly, the fee awarded would be too high if the court accepted separate billing for paralegal hours in a market where that was not the custom.
Jenkins,
.
See, e.g., In rePatronek,
. Judge Posner, who penned In re Continental Illinois Securities Litigation, wrote in the context of reversing a district court for discounting attorneys' hourly rates from those that the attorneys regularly billed:
It is apparent what the district judge's mistake was. He thought he knew the value of the class lawyers' legal services better than the market did.... He may have been right in some ethical or philosophical sense of "value” but it is not the function of judges in fee litigation to determine the equivalent of the medieval just price. It is to determine what the lawyer would receive if he were selling his services in the market rather than being paid by court order.
. That section provides in relevant part:
Any attorney representing a debtor in a case under this title, or in connection with such a case, ... shall file with the court a statement of the compensation paid or agreed to be paid, if such payment or agreement was made after one year before the date of the filing of the petition, for services rendered or to be rendered in contemplation of or in connection with the case by such attorney
.
See, e.g., In re Office Prods. of America, Inc.,
. The aforementioned principle of responsible billing applies not only to the selection of which classification of employee within a law firm should perform a given task, but also to what genre of law firm should represent the debtor. A run-of-the-mill bankruptcy case does not warrant the lofty fees of nationally-renowned law firms,
see In re Vogue,
. See generally Robert E. Litan & Steven C. Salop, Reforming the Lawyer-Client Relationship Through Alternative Billing Methods, Judicature, Jan.-Feb. 1994, at 191; Steven Brill, Replacing the Hourly Rate, Am. Law( Sep. 1992] at 6; Deborah Graham, Billing Methods: Firms Begin to Tinker, Legal Times, May 20, 1985, at 1.