Wednesday, June 08, 2022

What Is the Difference Between Clerical and Compensable?

 A short order crossed my desk the other day in In re Preferred Ready-Mix, Case No. 21-33369 (Bankr. S.D. Tex. 6/6/22), Dkt. #207. A creditor filed an application for administrative expense. No one objected. However, the Court reduced the fees requested by $73.50 to reflect time spent electronically filing documents. While this little case involves much smaller dollars than the Supreme Court opinion in Siegel v. Fitzgerald, No. 21-411 (U.S. 6/6/22), which came out the same day, it will affect many more cases.

A Little Background

When it comes to professional compensation, there are three types of services. First, there are professional services, which require the skill and knowledge of an attorney and, are compensable at rates which can exceed over $1,000 per hour in some cases. Then there are para-professional tasks, where are those which require skill and knowledge, but do not require a licensed attorney and are compensated at lower rates. Finally, there are clerical tasks, which do not require specialized knowledge and are not compensable because they are deemed to be part of a firm's overhead. 

What Judge Norman Ruled

In his Judge Norman stated:

The Court notes that no objection to the application has been filed. However, the Court has an independent duty to review fee applications, notwithstanding the absence of objections by the United States Trustee, creditors, or any other interested party. The Supreme Court has held that the lodestar method of fee calculation is the method by which federal courts should determine reasonable attorney fees under federal statutes which provide for such fees. The lodestar is computed by multiplying the number of hours reasonably expended by the prevailing hourly rate in the community for similar work. The first step in the lodestar method is to evaluate the time entries submitted by the Applicant and determine which are allowable. This step involves considering whether the services which the Applicant billed were reasonable or necessary. The services performed must be legal in nature, rather than clerical. This application contains instances of the applicant’s billing for work which is routinely performed by secretaries and should not be billed to the client. Case law suggests that “ministerial tasks” (typing, file organization, document preparation, searching or filing documents on PACER, etc.) performed by a professional or paraprofessional should not be allowed as a separate charge because it is part of the office overhead, which should already be built into the counsel’s hourly rate. This Court considers ECF filing to be clerical work, and therefore, should not be allowed as a separate charge. The instant fee application contains several instances where counsel billed for filing ECF documents. Therefore, those entries containing secretarial tasks will be struck.

What are Clerical Tasks?

 According to Judge Norman, filing documents on ECF is a  secretarial task. This suggests that filing documents on CM/ECF is a routine task to be performed by a low level employee and certainly does not require the assistance of an attorney. When electronic filing first came out, there was a debate over whether it would ever be permissible for an attorney to give his staff access to his e-filing credentials. The logic was that the orders adopting e-filing expressly provided that inputting an attorneys' login and password constituted his signature upon the document. Since an attorney could not ethically allow his secretary to sign his name to a pleading, it was reasoned that an attorney could not authorize his secretary to file a pleading or motion on his behalf. However, when the courts began offering e-filing courses aimed at attorney staff, it was at least an implicit acknowledgement that the courts did not treat the use of e-filing credentials as being the same as a signature.

The consensus is now that e-filing in bankruptcy by attorney staff is ethical, but is it clerical? Judge Norman gave several examples of other tasks that are considered clerical:  typing, file organization, document preparation and searching or filing documents on PACER. As someone who supervises clerical staff, I would add making copies, mailing documents and putting documents in the file to the list. 

What distinguishes this list from compensable para-professional tasks? I think it is a matter of training and skill. While it does require training and skill to type a document in Microsoft Word or to print out postage on, the skill required is not inherently legal. In other words, these are skills that anyone working in an office would be expected to know or learn. On the other hand, para-professionals may charge for tasks that require skills and knowledge unique to the legal field, and in particular, those unique to bankruptcy.

I would argue that e-filing documents requires sufficient skill and knowledge that a para-professional may charge for those services. In order to file a document electronically, a user must be able to know how the e-filing menu interacts with the local rules of the particular court. An example involving two first-day pleadings may help. In an operating chapter 11 case, it is common to file a motion for use of cash collateral and a motion to pay employee wages as first day motions. In the Southern District of Texas, any pleading requiring expedited consideration must be labelled as an emergency motion, be filed using the emergency motion event code and must contain special language as part of the negative notice. In the Western District of Texas, there is a specific event code for motions for use of cash collateral but not for motions to pay employee wages. Motions to pay employee wages must be uploaded as a generic document. In the Southern District proposed orders are attached to the associated motion but are not uploaded. In the Western District of Texas, proposed orders are both attached to the pleading and are uploaded. These are not distinctions that a mere secretary, someone who could just as easily work in a law office or a dentist's office, would know.  

This was brought home to me when I filed a Chapter 11 case in the Southern District this week. I used to have a legal assistant who was skilled in e-filing. However, my current assistant has not received this training yet. As a result, I had to do the e-filing myself. Because I have not filed many Chapter 11 cases in the Southern District (yet), it took me some time to figure out how to formulate the pleadings and how to e-file them. It took me an hour to upload the case and three first day motions (one of which was rejected). For me, this was a throw-back to the days when only attorneys were allowed to e-file. (Since my case was in Judge Norman's court, I billed the time but no-charged it). 

Judge Jernigan Debuts Her Second Novel

Judge Stacey C.G. Jernigan is best known for the writing she publishes from her office at 1100 Commerce Street. I was able to locate 270 of her opinions on LEXIS. Some of my favorites are In re Tinsley, 2010 Bankr. LEXIS 4156 (Bankr. N.D. Tex. 20100 about a cowboy trying to keep the ranch he inherited from his father and In re Pearson, 2020 Bankr. LEXIS 972 (Bankr. N.D. Tex. 2020) in which Judge Jernigan cited an article that I wrote. Lee v. Weatherford (In re Weatherford), 2022 Bankr. LEXIS 144 (Bankr. N.D. Tex. 2020) is an opinion about whether a debt arising from a bar brawl was nondischargeable and is just the type of case a Texas judge might encounter.  However, Judge Jernigan is also a novelist. This summer I have enjoyed reading He Watches All My Paths (2019) and Hedging Death (2022).

Sunday, June 05, 2022

Fiffth Circuit Restricts Rooker-Feldman Doctrine Allowing Race to the Courthouse

The Fifth Circuit has issued a new decision restricting application of the Rooker-Feldman doctrine and repudiating a prior precedent.  Miller v. Dunn, Case No. 20-11054 (5th Cir. 6/2/22), which can be found here. Under the new rule, which brings the Fifth Circuit in line with other courts, Rooker-Feldman does not apply to a state court decision which is the subject of a pending appeal.

Rooker-Feldman is one of several doctrines which enforces comity between state and federal courts. The Rooker-Feldman doctrine, which is based on Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983) means that a federal court may not review and reverse a determination of a state court. Rooker-Feldman applies to "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005).

Thursday, June 02, 2022

Judge Michael Parker Addresses the Dead Debtor Problem

 While it is not pleasant to contemplate, sometimes a debtor passes away before his case is completed. This raises the question of whether the case can go to completion and how to complete the financial management class. Judge Michael Parker addressed this issue in one of his first published opinions as a judge. (This is actually his third opinion, but the first one that I had the time to write about).  In re Ibarra, Case No. 19-52413 (Bankr. W.D. Tex. 6/1/2022), which can be found here.

What Happened

The Debtor filed Chapter 13 and confirmed a plan in 2019. The Debtor passed away on October 9, 2021 prior to completing payments under the Plan and before completing a personal financial management course. The debtor's probate estate representative and daughter made the remaining payments under the plan and moved for an order waiving the debtor's obligation to complete a financial management course. As the Judge succinctly stated, "Death prevents the Debtor from completing a financial management course." Opinion, p. 1.