Bankruptcy: Ninth Circuit BAP Issues An Illuminating Opinion On Block Billing And Travel Time Issues

 

Although Germane In Bankruptcy Context, Case May Be Helpful in Non-Bankruptcy Cases.

     You readers of our blog are a constant source of inspiration. Today, we thank attorney Andrew L. Fagan of Santa Rosa for alerting us to a recent unpublished Ninth Circuit BAP decision that has interesting discussions of block billing and reimbursement of attorney travel time.

     To some extent, this next decision is of most interest to debtor/trustee/creditor committee bankruptcy practitioners, who must have their fees evaluated and approved by bankruptcy courts (after complying with stringent U.S. Trustee Office guidelines). However, there are some important nuggets in the case which may have far broader significance in non-bankruptcy contexts.

     In re Shari L. Thomas, BAP No. CC-08-1307-HMoPa (BAP 9^th Cir. Jul. 6, 2009) (not for publication) had this to say on these two issues:

     · A bankruptcy court has discretion to reduce, rather than disallow, compensation based on fee applications where a portion or all of the fees are based on "lumped entries" (aka block billing)—Mendez v. County of San Bernardino, 540 F.2d 1109, 1129 (9^th Cir. 2008) (reduce hours due to block billing, but not make an across-the-board reduction or rejection of all hours); Darling Int'l., Inc. v. Baywood Partners, Inc., 2007 WL 4532233 at * 9 (N.D. Cal. 2007) (as a percentage penalty for lumping, most courts make an adjustment ranging from 5% to 30%, consistent with a California State Bar's committee's finding that block billing may increase time by 10% to 30%);

     · The amount of total "lumped" fees does not dictate the percentage of reduction, with the Thomas appellate panel sustaining 10% reduction as a remedy for lumped entries—see also Gundlach v. N.A.A.C.P., 2005 WL 2012738 at *4 (M.D.Fla. 2005) (30% reduction where all fees based on lumped entries); Spalding Lab., Inc. v. Ariz. Biological Control, Inc., 2008 WL 2227501 at *4 (C.D.Cal. 2008) (15% reduction where all fees based on lumped entries); Ambriz v. Arrow Fin. Serv., LLC, 2008 WL 2095617 at *4 (C.D.Cal. 2008) (20% reduction where attorneys respectively lumped 17% and 9% of time as lumped entries); In re Recycling Indus., Inc., 243 B.R. 396, 407 (Bankr. D.Colo. 2000) (5% reduction when 10% of fees based on lumped billing entries).

     · There is no consensus among courts on what should be allowed for professional's travel time under the bankruptcy compensation statute. Although some districts have general orders and established policies (examples: 50% of ordinary rate applies to travel time up to 100% for lost opportunities, depending on district), bankruptcy courts have wide discretion in this area. A dissenting bankruptcy judge in Thomas disagreed with the majority's full approval of a lawyer's travel time request. See also In re Babcock & Wilson Co., 526 F.3d 824, 828-829 (5^th Cir. 2008) (travel time compensated at 50% of ordinary rate); In re McKeeman, 236 B.R. 667 (BAP 8^th Cir. 1999) (same).