MEMORANDUM OPINION
Presently pending before this Court is an appeal by the Trustee, Richard W. Roe-der, of the Bankruptcy Court’s February 8, 2008 order awarding him payment in the amount of $5,000.00. The appeal raises questions concerning the changes wrought by § 407 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), Pub.L. 109-8, 119 Stat. 23, 106 (April 20, 2005), relative to the compensation of trustees in Chapter 7 proceedings.
Our jurisdiction over the present bankruptcy appeal is premised upon 28 U.S.C. § 158(a). For the reasons that follow, the Bankruptcy Court’s order will be affirmed.
I. BACKGROUND
On April 14, 2006, Chapter 7 proceedings were commenced in the case of Donald W. Ward and Jean M. Ward, a/k/a Oliver’s Appliances & TV. Appellant was appointed as the Chapter 7 Trustee.
The assets in the underlying proceedings consisted of a federal income tax refund, real estate including a building, and the inventory of the business located inside the building. A sale of the real estate had been arranged prior to the commencement of bankruptcy proceedings.
On April 20, 2006, the Appellant simultaneously filed an application to be employed as attorney pro se and a motion to sell the real property. As a precursor to filing this motion, the Appellant undertook measures to determine whether there was equity in the property by ascertaining closing costs and determining which creditors had a secured interest in the property.
The motion for sale of the property was presented on May 15, 2006. No objections were filed concerning the motion, and the Bankruptcy Court confirmed the private sale by Order dated May 19, 2006. That same day, the Appellant filed an expedited motion to liquidate the inventory via a public auction in order to facilitate the transfer of the real estate to the purchaser. This motion was granted by the Bankruptcy Court on May 31, 2006.
The sale of the real property produced gross proceeds of $105,000.00 and net proceeds of $102,501.12. The sale of the inventory resulted in gross proceeds of $13,041.50 and net proceeds in the amount of $10,994.15. In addition, the Appellant received the Debtors’ federal income tax refund in the amount of $665.00 as well as $54.74 which had been earned on a money market account. The Appellant thus calculated his fee request based upon a total compensable figure of $118,761.24.
On September 9, 2006 the Appellant filed his Final Report including his Application for Compensation seeking payment in the amount of $9,188.04 plus reimbursement of $584.66 in expenses. The account was approved by the United States Trustee and no objections were filed by any party in interest. No time sheets were submitted by the Appellant in conjunction with his fee request, based on the Trustee’s position that, under 11 U.S.C.
A hearing on the Appellant’s fee application was held on December 4, 2006, at which time the court heard argument concerning the meaning of § 407 of the BAPCPA, which amended former 11 U.S.C. § 330(a)(3) and added a new provision now codified at 11 U.S.C. § 330(a)(7). At the conclusion of the hearing, the Bankruptcy Court took under advisement the issue of how 11 U.S.C. § 330(a)(3), as amended, and § 330(a)(7) collectively impact the pre-BAPCPA standard for analyzing requests for compensation by Chapter 7 trustees.
On April 13, 2007, the Bankruptcy Court issued an opinion in which it concluded that, even under post-BAPCPA law, courts are required to consider the reasonableness of fee requests when ruling on Chapter 7 fee applications.
See In re Ward,
The Appellant accepted the Bankruptcy Court’s invitation and a hearing was held on May 23, 2007. Thereafter, on February 8, 2008, the Bankruptcy Court entered an order formally awarding the Appellant $5,000.00 in compensation 2 and stating that “[t]he testimony elicited” during the May 23, 2007 hearing “did not modify the Court’s view on the amount of reasonable compensation as expressed in the OPINION of April 13, 2007.” (See Bankr.Ct. Order of 2/8/08 [1-4].)
This appeal followed in which both the Appellant and the United States Trustee, acting as Amicus Curiae, have filed briefs challenging the Bankruptcy Court’s fee award. For the sake of convenience, their arguments will be referred to collectively as arguments by the “Trustee.”
II. STANDARD OF REVIEW
In reviewing the Bankruptcy Court’s determinations, we review its legal determinations
de novo,
its factual findings for clear error, and its exercise of discretion for abuse thereof.
Interface Group-Nevada, Inc. v. Trans World Airlines, Inc. (In re Trans World Airlines, Inc.),
III. DISCUSSION
The underlying Chapter 7 proceedings were filed on April 14, 2006 and so are governed by the BAPCPA, which was fully
We begin with § 326(a), which was not amended by the BAPCPA, and which provides that the court “may allow reasonable compensation” to both Chapter 7 and 11 trustees “not to exceed” a certain percentage of the funds distributed to creditors.
3
Section 330(a)(1)(A), which was not amended in any respect material to this appeal, similarly provides that bankruptcy courts “may award” to a trustee “reasonable compensation” for the “actual, necessary services rendered” by the trustee, subject to the provisions of,
inter alia,
326(a). Prior to the BAPCPA, bankruptcy courts, in determining the amount of “reasonable compensation” to be awarded, employed what is sometimes referred to as a “lodestar” approach. Pursuant to § 330(a)(3), bankruptcy courts considered “the nature, the extent, and the value of [the trustee’s] services, taking into account all relevant factors,” such as,
inter alia,
“the time spent on such services” and the “rates charged for such services.”
4
In fact, bankruptcy courts were not limited to considering only those factors enumerated in § 330(a)(3); they could consider other factors as well, provided such additional factors related to “the nature, the extent, and the value” of the trustee’s services.
See In re Lan Associates, XI, L.P.,
Under the Code as now amended by the BAPCPA, bankruptcy courts are still authorized to award (i.e., they “may” award) trustees “reasonable compensation” for their “actual, necessary services.” 11 U.S.C.A. § 330(a)(1)(A) (2009). Further, courts are still authorized to (i.e., they “may”) award compensation in an amount that is less than that being requested — • whether on the court’s own motion or on the motion of a party in interest. Id. at § 330(a)(2). However, § 330(a)(3), by its terms, now applies only where reasonable compensation is being determined relative to the services provided by “an examiner, trustee under chapter 11, or professional person.” § 330(a)(3). 5 Moreover, § 330, as amended, now includes a new subsection (a)(7), which is key to the appeal before us:
(7) In determining the amount of reasonable compensation to be awarded to a trustee, the court shall treat such compensation as a commission, based on section 326.
11 U.S.C.A. § 330(a)(7) (2005). Section 326(a), which was not amended by the BAPCPA, continues to provide, in relevant part:
(a) In a ease under chapter 7 or 11, the court may allow reasonable compensation under section 330 of this title of the trustee for the trustee’s services, payable after the trustee renders such services, not to exceed 25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000, upon all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims.
11 U.S.C.A. § 326(a) (2009).
Here, the Appellant’s application for compensation sought a commission in the amount of $9,188.04 based on the total proceeds disbursed as a result of the sales of real estate and commercial inventory. This figure represents the maximum statutory commission permissible under 11 U.S.C. § 326. 6 The Bankruptcy Court denied this request and instead awarded a fee in the amount of $5,000.00.
The Trustee contends that the Bankruptcy Court, in making its compen
The Trustee’s position in this appeal is succinctly stated in his amicus brief as follows: “Pursuant to the BAPCPA Amendments, Chapter 7 Trustee compensation must be determined as a commission based upon the percentages provided in Section 326, absent extraordinary circumstances unrelated to Section 330(a)(3) factors.” (Amicus Br. of U.S. Trustee [5] at p. 12 of 29.) Any other interpretation, the Trustee insists, would render the new § 330(a)(7) superfluous and would disregard the fact that Chapter 7 trustee compensation was specifically excluded from the provisions of § 330(a)(3). (Amicus Br. at p. 16.) Accordingly, the Trustee argues, it was legal error for the Bankruptcy Court to consider the Appellant’s “proportionate effort” in administering the underlying Chapter 7 case because, in the Trustee’s view, “proportionate effort” is merely a “euphemism for analysis of hours spent.” (Id. at p. 26 n. 23.)
Thus, the core legal issue before me is whether bankruptcy judges, in making awards under § 326(a) are forbidden, as the Trustee posits, from considering the sort of factors enumerated in § 330(a)(3), including the amount of time spent by the trustee administering the chapter 7 proceedings or the proportionate effort expended. As of this writing, at least six courts outside of this judicial district have expressly considered this issue in some form; notably, not a single one of these courts has agreed with the Trustee’s position.
See, e.g., In re Coyote Ranch Contractors, LLC,
Nor do the cases support the Trustee’s position that the BAPCPA amendments essentially eliminated the concept that § 326(a)’s statutory formula represents a maximum, or cap, on permissible fee awards.
See, e.g., In re Phillips,
The Trustee, while acknowledging many of the foregoing decisions, nevertheless criticizes them as “hopelessly contradictory” (Amicus Br. of U.S. Trustee at p. 24) and errantly focused on a perceived inconsistency which, in the Trustee’s view, does not exist. (Id. at p. 25.) That supposed inconsistency — that compensation is to be awarded as a commission but must also be reasonable — is resolved, according to the Trustee, by Congress’ determination that the commission amount established in § 326(a) is presumptively reasonable and should not be reduced according to the factors set forth in § 330(a)(3). Indeed, the Trustee maintains that the statutory commission award should only be reduced in the most extraordinary circumstances as where, e.g., the trustee has delegated a substantial portion of the case administration or where the trustee’s administration fell below acceptable standards. (See Ami-cus Br. of U.S. Trustee at p. 17 n. 11.) I find this argument unpersuasive.
To be sure, § 330(a)(7) directs that, in determining the amount of reasonable compensation to be awarded a chapter 7 trustee, “the court
shall
treat such compensation as a commission, based on section 326.” 11 U.S.C. § 330(a)(7). As the Trustee points out, the term “commission,” though not defined in the Code, typically is understood to mean a “percentage of money taken in on sale,”
see Webster’s New World Dictionary of the American Language
285 (2d ed. 1972), or “a percentage of the money received from the transaction.”
See Black’s Law Dictionary 264
(7th ed. 1999) (cited in Amicus Br. of the U.S. Trustee [5] at p. 15 of 29). But to say
The Trustee contends that the statutory maximum amounts set forth in § 326(a) should be treated as the presumptively appropriate fee and awarded in virtually all cases under Chapter 7. Some courts, however, have interpreted the fee structure of § 326(a) as merely establishing the maximum allowable compensation, rather than a presumptive entitlement.
See, e.g., In re Phillips,
Moreover, even if § 330(a)(7) can be construed to mean that the § 326(a) compensation structure represents the presumptively appropriate fee, I am disinclined to construe the statutory scheme as narrowly as the Trustee urges. The Code’s repeated reference to awards of “reasonable compensation,”
see
11 U.S.C. § 330(a)(1)(A) (authorizing courts to award trustees “reasonable compensation”);
id
at § 330(a)(7) (“In determining the amount of reasonable compensation to be awarded ... ”);
id
at § 326(a) (authorizing courts to allow “reasonable compensation” to trustees) — together with § 330(a)(2)’s express authorization for courts to award less than the amount of compensation requested— strongly suggests that the bankruptcy courts retain meaningful discretion in making their determinations as to what constitutes “reasonable compensation.”
See In re Coyote Ranch Contractors, LLC,
In addition, I am not persuaded by the Trustee’s fundamental rationale for arguing that any and all factors enumerated in § 330(a)(3) may not be considered in the context of Chapter 7 compensation awards. The Trustee bases his argument on the fact that the BAPCPA amended § 330(a)(3) so as to reference only trustees “under chapter 11.” According to the
This argument fails to acknowledge the precise nature of the amendment to § 330(a)(3). That provision now, as before, lists certain factors that courts “shall consider” in determining the amount of reasonable compensation to be awarded. Thus, in chapter 11 cases, courts “shall” continue to consider the § 330(a)(3) factors in determining reasonable compensation. By virtue of the BAPCPA’s amendment, the statutory mandate to consider the enumerated § 330(a)(3) factors no longer applies in Chapter 7 cases. One court has interpreted this change as granting bankruptcy courts the discretion in Chapter 7 cases to base their awards on the § 326(a) statutory commission alone:
The omission of “chapter 7 trustee” from Section 330(a)(3), from being among those persons with regard to whom the court “shall” take into consideration certain Johnson-type factors, must mean that a chapter 7 trustee’s fee, calculated under the commission structure set forth in Section 326, shall be permitted to be regarded as the reasonable compensation to be paid to him in the chapter 7 case, and the court shall not be required to undertake the Johnson-type analysis contemplated in Section 330(a)(3). Whereas with chapter 11 trustees, Congress has clarified that courts must undertake a Johnson-type analysis (and award only what is justified as reasonable compensation-up to no more than the Section 326 cap), with chapter 7 trustees, courts may start and end with the cap (i.e., there is no obligation to consider the factors described in Section 330(a)(3)).
In re Coyote Ranch Contractors,
Yet it does not necessarily follow that courts making awards in Chapter 7 cases are statutorily forbidden from considering the types of factors enumerated in § 330(a)(3):
[C]ourts still, without a doubt, have discretion to award [C]hapter 7 trustees something less than what is generally requested/expected in a Chapter 7 case (i.e., less than the Section 326 commission structure). In such a situation, the court can and should consider all surrounding facts and circumstances in deciding whether to award something less than the Section 326 commission. The court believes the inquiry in such a situation may include considering the factors set forth in Section 330(a)(3). In other words, just because the court shall consider these factors in connection with a chapter 11 trustee’s fee does not mean that the court shall not consider these factors if there is an objection to the statutory commission being paid to a chapter 7 trustee.
Id. at 95. While there was no objection to the Appellant’s fee in this case, the essential logic of the court’s statutory interpretation in In re Coyote Ranch Contractors pertains here: to wit, the mere fact that Chapter 7 trustees are excluded from the ambit of § 330(a)(3) and its statutory mandate that courts “shall consider” the factors enumerated therein does not mean that courts, in making Chapter 7 compensation awards, are statutorily precluded from considering those types of factors.
Nor am I persuaded by the argument that failure to adopt the Trustee’s preferred statutory interpretation will render § 330(a)(7) superfluous. Recognizing a bankruptcy court’s inherent discretion to award commissions that are lower than the statutory maximum based on consider
Following the BAPCPA, however, the commission-based structure referenced in §§ 326(a) and 330(a)(7) will presumably free courts in many (and perhaps most) Chapter 7 cases from this mandatory, and often laborious, process. As one notable authority has observed:
New section 330(a)(7) changes current law by providing that the compensation of a trustee is to be treated as a commission, based upon the formulae in section 326(a). The primary effect of the change should be that, in the majority of cases, a trustee’s allowed fee will presumptively be the statutory commission amount.
L. King, Collier on Bankruptcy, ¶ 330.03[l][a] at pp. 330-15 (15th ed. rev’d 2006). As was further observed by the court in In re Coyote Ranch Contractors,
This makes imminent sense, from a policy standpoint. There are hundreds-times more chapter 7 cases in the bankruptcy system than chapter 11 cases where chapter 11 trustees have been appointed. It certainly, could create an administrative burden for courts and trustees if a “reasonableness” inquiry [under § 330(a)(3) ] were required in every single “asset” chapter 7 case.
This approach stands in marked contrast to that which governed Chapter 7 awards in this circuit, pre-BAPCPA. Prior to those amendments, bankruptcy courts could not consider the § 326(a) cap at all in determining reasonable compensation awards.
See In re Lan Associates,
Finally, I acknowledge the fact that trustees in Chapter 7 cases often receive little or no compensation in cases where the estate is of little or no value. Indeed, the Bankruptcy Court, recognizing this problem, commented that it has “therefore, been liberal in awarding trustee fees.”
Ultimately, this Court’s view of the post-BAPCPA statutory commission scheme and the Trustee’s competing view share much common ground. It is clear from the statutory framework that awards in Chapter 7 cases must take the form of a commission, that the commission may not exceed the amounts set forth in § 326(a), and that the courts retain discretion, even on their own motion, to award an amount lower than that which is requested. The narrow dispute here centers on the degree of discretion which bankruptcy courts retain in determining what compensation is “reasonable.” Unlike the Trustee, I believe that, even post-BAPCPA, bankruptcy courts retain substantial discretion to make a “reasonableness” determination taking into account relevant factors including not just the maximum allowable award under § 326(a), but also — in appropriate cases — the time and effort expended by the trustee on the case. Unlike the Trustee, I do not believe that this discretion is limited to only the most exceptional cases, 8 nor do I believe that the types of considerations enumerated in § 330(a)(3) can never be taken into account. I consider this view to be consistent with the plain language of the pertinent statutes as well as the case law which has been developed to date. I also find support for this view in the venerable treatise previously cited supra:
[Ljabelin the trustee’s fee as a commission does not avoid the requirement that the court also determine that the fee is “reasonable.” The 2005 Act does not alter the provision in section 330(a)(1)(A) that limits a trustee to “reasonable” compensation. Moreover, still applicable is the prohibition, set forth in section 330(a)(4), on allowance of compensation for unnecessary duplication of services, and services that were not reasonably likely to benefit the estate or necessary to the administration of the case. Accordingly, courts will continue both to test the reasonableness of a trustee’s fee, and to ensure that there is not compensation for prohibited services.
* * *
Courts may be expected to continue to assess the reasonableness of a trustee’s fee and award a fee that is less than thestatutory commission in light of the effort expended or results obtained. For example, duplicative services, unnecessary services or nonbeneficial services should continue, as under present law, to be excluded from an award of compensation as not reasonable, even if the result is an award that is less than the statutory commission.
Similarly, there may be cases where the amount of “moneys disbursed” by the trustee may be very high in relation to the services performed, presenting a risk that a trustee may be overcompensated by applying the commission percentage. Chapter 7 cases filed with a significant amount of money in existing bank accounts, or cases where the trustee has operated the business for a period of time, or other cases where there are significant disbursements without a proportionate effort by the trustee, are examples of cases where the commission fee may not be reasonable. In such cases, even if all the services were properly performed, courts will need to assess whether the implied hourly rate is so high as to render the fee not reasonable.
For these reasons, it will continue to be necessary for trustees to present detailed fee applications, including a schedule of the number of hours spent, daily time records supporting the time spent and a narrative of the trustee’s role and accomplishments supporting the compensation award.
L. King, Collier on Bankruptcy, ¶ 330.03[l][a] at pp. 330-15-830-16 (15th ed. rev’d 2006) (emphasis supplied).
In light of my foregoing conclusions, I must consider whether the Bankruptcy Court adhered to the appropriate legal standard in making its compensation award. As to this issue, I am not persuaded by the Trustee’s claim that the Bankruptcy Court utterly disregarded the change in the law relative to compensation awards for Chapter 7 trustees. The Trustee selectively quotes certain comments made by the Bankruptcy Judge during the initial December 4, 2006 hearing to suggest that the Judge did not “see any difference” between pre-BAPCPA law and post-BAPCPA law relative to the compensation of Chapter 7 trustees.
(See
Amicus Br. [5] at pp. 9-10, 25) (referencing the 12/4/06 transcript at pp. 4-6.) Notably, that transcript has not been provided to this Court as part of the appellate record but, more fundamentally, it must be observed that the Bankruptcy Judge specifically took the issue of the effect of the BAPCPA amendments under advisement at the conclusion of the December 4, 2006 hearing. Subsequently, he entered his memorandum opinion of April 13, 2007 in which he specifically discussed changes in the law.
In re Ward,
Nor am I persuaded that the Bankruptcy Court, in making its compensation award, employed the very same analysis as it would have applied in pre-BAPCPA cases. On the contrary, the Bankruptcy Court stated in its April 13, 2007 opinion that an appropriate fee based on the “typical Lodestar analysis” would have been “in the $2,000 range,”
In awarding a fee of $5,000.00, rather than the full statutory commission of $9,188.04, the Bankruptcy Court cited the fact that the Appellant’s services essentially consisted of processing a sale of real estate that had been arranged prior to bankruptcy, engaging an auctioneer to liquidate personalty, and receiving the Debtors’ tax refund. The Bankruptcy Court acknowledged that there were significant disbursements in the case but concluded that the Appellant’s proportionate efforts did not merit an award in the amount of the full statutory commission.
IY. CONCLUSION
For the reasons previously stated, I reject the Trustee’s assertion that the Bankruptcy Court committed legal error when it considered the Appellant’s proportionate efforts as a factor in fashioning its compensation award. Because the Bankruptcy Court’s February 8, 2008 Order did not involve legal error or constitute an abuse of the Court’s discretion, it must be affirmed.
An appropriate order follows.
ORDER
AND NOW, to wit, this 25th day of September, 2009, for the reasons set forth in the accompanying Memorandum Opinion,
IT IS ORDERED that the Bankruptcy Court’s February 8, 2008 Order awarding the Trustee compensation in the amount of five-thousand dollars ($5,000.00) be, and hereby is, AFFIRMED.
Notes
. That provision, which was added by the BAPCPA, states that "[i]n determining the amount of reasonable compensation to be awarded to a trustee, the court shall treat such compensation as a commission, based on section 326.” 11 U.S.C. § 330(a)(7).
. The Bankruptcy Court also awarded the Appellant full reimbursement of his expenses in the amount of $584.66 and allowed his requested compensation as Attorney Pro Se in the amount of $2,119.00. Those aspects of the Bankruptcy Court's ruling were not challenged and are not presently at issue.
. The full statutory text was as follows:
(a) In a case under chapter 7 or 11, the court may allow reasonable 4 compensation under section 330 of this title of the trustee for the trustee's services, payable after the trustee renders such services, not to exceed 25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000, upon all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims.
11 U.S.C.A. § 326(a) (2005).
. The full statutory text formerly read as follows:
(3) (A) In determining the amount of reasonable compensation to be awarded, the court shall consider the nature, the extent,
and the value of such services, taking into account all relevant factors, including—
(A) [ ] the time spent on such services;
(B) the rates charged for such services;
(C) whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title;
(D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed; and
(E) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title.
11 U.S.C.A. § 330(a)(3)(A) (2005) (footnote omitted).
. The amendment to § 330(a)(3) also includes an additional "relevant factor” to be considered in connection with the award of reasonable compensation to "a professional person” — i.e., "whether the person is board certified or otherwise has demonstrated skill and experience in the bankruptcy field.” 11 U.S.C.A. § 330(a)(3)(E) (2005). This amendment is not relevant for present purposes.
. According to the Application for Trustee's Compensation and Expenses [Doc. No. 1-3] filed with the Bankruptcy Court, the total disbursements to parties in interest, excluding die Debtor, equaled $118,761.24. Thus, applying the formula set out in 11 U.S.C. § 326(a), the Trustee calculated his commission'as follows:
25% on 1st $5,000.00 = $1,250.00
10% on next $45,000.00 = $4,500.00
5% on next $940,000.00 = $3,438.04
0% on balance over $1,000,000.00 = _0.00
TOTAL COMPENSATION: = $9,188.04
(See Appl. for Trustee's Compensation and Expenses [1-3] at ¶ 6.)
.
See Johnson v. Georgia Highway Express, Inc.,
. The Trustee posits that bankruptcy courts still retain discretion to depart from the presumptive § 326(a) fee in “rare and unusual” cases (Amicus Br. at p. 17) as where, e.g., the trustee delegated a substantial portion of case administration or his administration fell below acceptable standards. (Id. at n. 11.) Yet the Trustee provides no guidance as to what factors could possibly inform the court's discretion in these “rare and unusual” situations. Moreover, the Trustee's position is internally inconsistent: to wit, to determine reasonable compensation in a case where the trustee has delegated a substantial portion of case administration, or in a case where the trustee's performance was substandard, the bankruptcy court would necessarily have to consider factors bearing on “the nature, the extent, and the value of [the trustee’s] services” — i.e., the very sort of § 330(a)(3)-type factors which the Trustee contends are off limits in Chapter 7 cases.