In re Barron
- Reporters:
- ,
- Before:
- Reavley, E. Grady Jolly, Jones
E. GRADY JOLLY, Circuit Judge:
Cynthia Daniels appeals the award of attorneys’ fees by the bankruptcy judge for her representation of a bankrupt‘s estate. Though we have previously addressed the issue in this case, it appears that, although the bankruptcy judge approved a one-third contingency fee for Daniels’ agreeing to pursue a disputed claim for the bankrupt‘s estate, and she was 100% successful in obtaining and collecting the judgment, the bankruptcy judge reduced her fee. The bankruptcy court relied on an exceрtion to
I
The factual background of this case is stated succinctly in this Court‘s previous opinion in this case, In re Barron, 225 F.3d 583, 584-585 (5th Cir. 2000). In pertinent part, Attorney Cynthia Daniels sought approval of a fee arrangement from the bankruptcy court to pursue an action on behalf of the bankruptcy estate, which arоse from a divorce and remarriage of the debtor and her husband. Daniels’ application stated she was willing to work on a one-third
After the arrangement was approved, Daniels sent the contemplated demand letter to Mr. Barron, and received no response. At this point, Daniels filed a complaint against Mr. Barron. After unsuccessful attempts by Mr. Barron to settle for less than the amount owed, Daniels moved for summary judgment after conducting three depositions. After a hearing, the court granted judgment against Mr. Barron for the full balance of $160,000 in August 1997. In re Barron, 225 F.3d at 584-85. Mr. Barron immediately tendered full payment to the court.
Daniels then filed an application seeking $53,333.33, one third of the recovered judgment, in attorneys’ fees. The Barrons objected to the application, as did a creditor who objeсted to her
On remand, the judge essentially reiterated his earlier holding, writing: “With all due respect, [the standard mandated by the Fifth Circuit] is the standard that was applied by this court when rendering its decision.” In re Barron, No. 95-10538, slip op. at 3 (Bankr. N.D. Miss., May 22, 2001). The court added the additional observation that Daniels had had a relatively easy time collecting the judgment from Mr. Barron and thus the reduction in her fee award was reasonable. The district court affirmed the compensation award, and Daniels timely appeals to this court.
This court reviews a bankruptcy court‘s determination of attorneys’ fees for abuse of discretion. In re Fender, 12 F.3d 480, 487 (5th Cir. 1994). This “abuse of discretion standard includes review to dеtermine that the discretion was not guided by erroneous legal conclusions.” In re Coastal Plains, Inc., 179 F.3d 197, 205 (5th Cir. 1999) (quoting Koon v. United States, 518 U.S. 81, 100 (1996)). Consistent with this review, this court reviews a bankruptcy court‘s conclusions of law de novo. In re Texas Securities, Inc., 218 F.3d 443, 445 (5th Cir. 2000). Specific findings of fact are reviewed for clear error. Fender, 12 F.3d at 487.
Sections 328 and 330 of the Bankruptcy Code govern attorneys’ fees in representing bankruptcy estates. Under
The case law of this circuit, as reflected in National Gypsum and In re Texas Securities, 218 F.3d at 445-46, has not always clearly delineated
On remand, the bankruptcy court relied on three factors to find the previously approved compensation improvident. First, that it “did not anticipate the substantial amount of the subsequent recovery;” second, that the adversary proceedings becamе a “slam dunk;” and third, that the judgment was collected from Mr. Barron with “relative ease.” The bankruptcy court stated that it did not actually anticipate these developments at the time, but, apparently because of the lack of clarity in our previous opinion, it failed to explain why these developmеnts were incapable of being anticipated at the time the award was approved. We hold, as a matter of law, that none of these facts or developments was “not capable of being anticipated” within the meaning of
As its first factor, the bankruptcy court candidly admits that it “did not anticipate the substantial amount of the subsequent recovery . . . .” However, the bankruptcy court does not explain why this factor was incapable of being foreseen. On remand, the bankruptcy judge addresses this ‘development’ by stating that “[t]his court could have and perhaps should have quoted the language of
Indeed, the amount of eventual recovery was reasonably foreseeable; the bankruptcy court had a copy of the disрuted property settlement agreement, which clearly contemplated a bargained-for consideration of $210,000 for the parcels of real estate exchanged between the Barrons. Because $50,000 had been paid on that debt, the balance that remained was $160,000. Moreover, the Barrons nеver disputed the amount, only the validity of the obligation. Mr. Barron was not insolvent and it never appeared that he would not be able to pay the judgment. Consequently, this ground for departing from the approved fee arrangement is inadequate.
Second, the bankruptcy court stated that the adversary proсeedings became a “slam dunk” to justify its conclusion that the fee arrangement was improvident. However, it has not been said how this development was incapable of being anticipated. In fact, the record indicates that this argument could have been anticipated. Creditors argued to the bankruptcy judge before the plan‘s adoption that Daniels’ services were not needed, precisely because the proceedings would prove easy. One creditor even stated “all that is needed is a demand letter.” Thus, the exchange demonstrates that not only was ease of litigation capable of being foreseen, there is evidence that it actually was foreseeable. Although the judge stated that “...[t]o me this was not a doubtful case. The
Finally, the bankruptcy judge added another ground to support his conclusion that the fees were improvidently awarded: the ease with which collection was effectuated by Dаniels. “In many cases, obtaining a judgment is the easiest step. . . . The attorney for the trustee was not required to issue garnishment, levy execution, or force the sale of the remaining parcels of property.” However, the bankruptcy judge does not articulate how this development was incapable of bеing anticipated; nor does it appear that it was in fact incapable of being anticipated. There is no evidence that Mr. Barron did not have funds with which to pay an eventual judgment or that he would be inclined to avoid his obligation. Although there was no certainty that Daniels would be able to collect the judgment, it seems to us one could equally reasonably anticipate that he might not unreasonably avoid payment, even if there was some possibility that collection would not be easy. On the evidence before the bankruptcy court either scenario was capable of being anticipated, and neither was incapable of being anticipated. Thus, this ground is inadequate to demonstrate that a pre-approved fee arrangement was “improvident.”
In sum, we think that the bankruptcy court departed from the contingency fee arrangement approved under
REVERSED and REMANDED for entry of judgment.
A pox on all their houses! The panel‘s discussion euphemizes what was going on here -- a useless and blatant perversion of bankruptcy. Mrs. Barron filed this Chapter 7 bankruptcy case to avoid paying a judgment owed to her divorce lawyers after she remarried Mr. Barron. She then tried, unsuccessfully, to have the case dismissed, but the trustee pleaded on behalf of “the сreditors’ interest.” Four of the six creditors are attorneys, one a private investigator, and they were altogether owed less than $50,000. Mrs. Barron was due to receive, either in real property or in unmatured installments, $160,000 from her then-and-again husband as part of their divorce settlement. For unknown reasons, Mr. Barron refused to pay off his wife‘s debts.
Understandably, there was confusion at the outset as to the enforceability of a divorce property settlement for a couple who have remarried. The inexorable bankruptcy-driven “logic” of this situation led to the appointment of Ms. Daniels as special counsel, on a contingency fee, with the mission of recovering value from Mr. Barron to pay off the attorney-creditors.
With the same sort of bankruptcy-driven logic, the panel concludes that the bankruptcy court should not have cut Ms. Daniels’ fee, even after she recovered ‘way more than was necessary to pay the creditors and the trustee, and herself became the
But what definitely should have been anticipated was the needless cost in time and administrative fees generated by Mrs. Barron‘s bad-faith resort to bankruptcy in the first place. See