[Federal Register Volume 61, Number 97 (Friday, May 17, 1996)]
[Rules and Regulations]
[Pages 24889-24892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11799]
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DEPARTMENT OF JUSTICE
28 CFR Part 58
United States Trustees; Guidelines Relating to the Bankruptcy
Reform Act of 1994
AGENCY: Department of Justice.
ACTION: Final internal procedural guidelines.
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SUMMARY: The Department of Justice is establishing internal procedural
guidelines for reviewing applications for compensation and
reimbursement of expenses filed by case trustees and professionals
under section 330 of Title 11, United States Code. These procedural
guidelines are not intended to supersede local rules, but are to be
read as complementing the procedures set forth in local rules.
To keep all published rules, regulations, and guidelines pertaining
to the United States Trustee Program in one section of the Code of
Federal Regulations, the title to 28 CFR 58 will be amended to include
the Bankruptcy Reform Act of 1994.
EFFECTIVE DATE: January 30, 1996.
FOR FURTHER INFORMATION CONTACT:
Martha L. Davis, General Counsel, or Kathleen Dunivin Schmitt,
Attorney, (202) 307-1399. This is not a toll-free number.
SUPPLEMENTARY INFORMATION: This action is in response to the Bankruptcy
Reform Act of 1994, which amended 28 U.S.C. 586(a)(3)(A) to direct
United States Trustees to review applications for compensation and
reimbursement of expenses in accordance with procedural guidelines
adopted by the Executive Office for United States Trustees. The
guidelines are to be applied uniformly by the United States Trustees,
except when circumstances warrant different treatment.
[[Page 24890]]
Executive Order 12866
These guidelines have been drafted and reviewed in accordance with
Executive Order 12866, section 1(b), Principles of Regulation. The
Director, Executive Office for United States Trustees, has determined
that these guidelines are not a ``significant regulatory action'' under
Executive Order 12866 section 3(f), Regulatory Planning and Review.
These guidelines pertain to the internal management of the Department
and as such are not subject to central Office of Management and Budget
review pursuant to section 6 of Executive Order 12866. Accordingly,
these guidelines have not been reviewed by the Office of Management and
Budget pursuant to Executive Order 12866.
Regulatory Flexibility Act
The Director, Executive Office for United States Trustees, in
accordance with the Regulatory Flexibility Act (5 U.S.C. Sec. 605(b)),
has reviewed these guidelines and by approving them certifies that
these guidelines will not have a significant economic impact on a
substantial number of small entities.
List of Subjects in 28 CFR Part 58
Bankruptcy, Trusts, and Trustees.
For the reasons set forth in the preamble, the Department of
Justice proposes to amend 28 CFR part 58 as follows:
PART 58--REGULATIONS RELATING TO THE BANKRUPTCY REFORM ACTS OF 1978
AND 1994
1. The heading of Part 58 is revised to read as set forth above.
2. The authority citation for Part 58 continues to read as follows:
Authority: 28 U.S.C. 509, 510, 586(e), 588(d).
3. Appendix A is added to Part 58 to read as follows:
Appendix A to Part 58--Guidelines for Reviewing Applications for
Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. 330
(a) General Information. (1) The Bankruptcy Reform Act of 1994
amended the responsibilities of the United States Trustees under 28
U.S.C. 586(a)(3)(A) to provide that, whenever they deem appropriate,
United States Trustees will review applications for compensation and
reimbursement of expenses under section 330 of the Bankruptcy Code,
11 U.S.C. 101, et seq. (``Code''), in accordance with procedural
guidelines (``Guidelines'') adopted by the Executive Office for
United States Trustees (``Executive Office''). The following
Guidelines have been adopted by the Executive Office and are to be
uniformly applied by the United States Trustees except when
circumstances warrant different treatment.
(2) The United States Trustees shall use these Guidelines in all
cases commenced on or after October 22, 1994.
(3) The Guidelines are not intended to supersede local rules of
court, but should be read as complementing the procedures set forth
in local rules.
(4) Nothing in the Guidelines should be construed:
(i) To limit the United States Trustee's discretion to request
additional information necessary for the review of a particular
application or type of application or to refer any information
provided to the United States Trustee to any investigatory or
prosecutorial authority of the United States or a state;
(ii) To limit the United States Trustee's discretion to
determine whether to file comments or objections to applications; or
(iii) To create any private right of action on the part of any
person enforceable in litigation with the United States Trustee or
the United States.
(5) Recognizing that the final authority to award compensation
and reimbursement under section 330 of the Code is vested in the
Court, the Guidelines focus on the disclosure of information
relevant to a proper award under the law. In evaluating fees for
professional services, it is relevant to consider various factors
including the following: the time spent; the rates charged; whether
the services were necessary to the administration of, or beneficial
towards the completion of, the case at the time they were rendered;
whether services were performed within a reasonable time
commensurate with the complexity, importance, and nature of the
problem, issue, or task addressed; and whether compensation is
reasonable based on the customary compensation charged by comparably
skilled practitioners in non-bankruptcy cases. The Guidelines thus
reflect standards and procedures articulated in section 330 of the
Code and Rule 2016 of the Federal Rules of Bankruptcy Procedure for
awarding compensation to trustees and to professionals employed
under section 327 or 1103. Applications that contain the information
requested in these Guidelines will facilitate review by the Court,
the parties, and the United States Trustee.
(6) Fee applications submitted by trustees are subject to the
same standard of review as are applications of other professionals
and will be evaluated according to the principles articulated in
these Guidelines. Each United States Trustee should establish
whether and to what extent trustees can deviate from the format
specified in these Guidelines without substantially affecting the
ability of the United States Trustee to review and comment on their
fee applications in a manner consistent with the requirements of the
law.
(b) Contents of Applications for Compensation and Reimbursement
of Expenses. All applications should include sufficient detail to
demonstrate compliance with the standards set forth in 11 U.S.C.
Sec. 330. The fee application should also contain sufficient
information about the case and the applicant so that the Court, the
creditors, and the United States Trustee can review it without
searching for relevant information in other documents. The following
will facilitate review of the application.
(1) Information about the Applicant and the Application. The
following information should be provided in every fee application:
(i) Date the bankruptcy petition was filed, date of the order
approving employment, identity of the party represented, date
services commenced, and whether the applicant is seeking
compensation under a provision of the Bankruptcy Code other than
section 330.
(ii) Terms and conditions of employment and compensation, source
of compensation, existence and terms controlling use of a retainer,
and any budgetary or other limitations on fees.
(iii) Names and hourly rates of all applicant's professionals
and paraprofessionals who billed time, explanation of any changes in
hourly rates from those previously charged, and statement of whether
the compensation is based on the customary compensation charged by
comparably skilled practitioners in cases other than cases under
title 11.
(iv) Whether the application is interim or final, and the dates
of previous orders on interim compensation or reimbursement of
expenses along with the amounts requested and the amounts allowed or
disallowed, amounts of all previous payments, and amount of any
allowed fees and expenses remaining unpaid.
(v) Whether the person on whose behalf the applicant is employed
has been given the opportunity to review the application and whether
that person has approved the requested amount.
(vi) When an application is filed less than 120 days after the
order for relief or after a prior application to the Court, the date
and terms of the order allowing leave to file at shortened
intervals.
(vii) Time period of the services or expenses covered by the
application.
(2) Case Status. The following information should be provided to
the extent that it is known to or can be reasonably ascertained by
the applicant:
(i) In a chapter 7 case, a summary of the administration of the
case including all moneys received and disbursed in the case, when
the case is expected to close, and, if applicant is seeking an
interim award, whether it is feasible to make an interim
distribution to creditors without prejudicing the rights of any
creditor holding a claim of equal or higher priority.
(ii) In a chapter 11 case, whether a plan and disclosure
statement have been filed and, if not yet filed, when the plan and
disclosure statement are expected to be filed; whether all quarterly
fees have been paid to the United States Trustee; and whether all
monthly operating reports have been filed.
(iii) In every case, the amount of cash on hand or on deposit,
the amount and nature of accrued unpaid administrative expenses, and
the amount of unencumbered funds in the estate.
(iv) Any material changes in the status of the case that occur
after the filing of the fee
[[Page 24891]]
application should be raised, orally or in writing, at the hearing
on the application or, if a hearing is not required, prior to the
expiration of the time period for objection.
(3) Summary Sheet. All applications should contain a summary or
cover sheet that provides a synopsis of the following information:
(i) Total compensation and expenses requested and any amount(s)
previously requested;
(ii) Total compensation and expenses previously awarded by the
court;
(iii) Name and applicable billing rate for each person who
billed time during the period, and date of bar admission for each
attorney;
(iv) Total hours billed and total amount of billing for each
person who billed time during billing period; and
(v) Computation of blended hourly rate for persons who billed
time during period, excluding paralegal or other paraprofessional
time.
(4) Project Billing Format. (i) To facilitate effective review
of the application, all time and service entries should be arranged
by project categories. The project categories set forth in Exhibit A
should be used to the extent applicable. A separate project category
should be used for administrative matters and, if payment is
requested, for fee application preparation.
(ii) The United States Trustee has discretion to determine that
the project billing format is not necessary in a particular case or
in a particular class of cases. Applicants should be encouraged to
consult with the United States Trustee if there is a question as to
the need for project billing in any particular case.
(iii) Each project category should contain a narrative summary
of the following information:
(A) a description of the project, its necessity and benefit to
the estate, and the status of the project including all pending
litigation for which compensation and reimbursement are requested;
(B) identification of each person providing services on the
project; and
(C) a statement of the number of hours spent and the amount of
compensation requested for each professional and paraprofessional on
the project.
(iv) Time and service entries are to be reported in
chronological order under the appropriate project category.
(v) Time entries should be kept contemporaneously with the
services rendered in time periods of tenths of an hour. Services
should be noted in detail and not combined or ``lumped'' together,
with each service showing a separate time entry; however, tasks
performed in a project which total a de minimis amount of time can
be combined or lumped together if they do not exceed .5 hours on a
daily aggregate. Time entries for telephone calls, letters, and
other communications should give sufficient detail to identify the
parties to and the nature of the communication. Time entries for
court hearings and conferences should identify the subject of the
hearing or conference. If more than one professional from the
applicant firm attends a hearing or conference, the applicant should
explain the need for multiple attendees.
(5) Reimbursement for Actual, Necessary Expenses. Any expense
for which reimbursement is sought must be actual and necessary and
supported by documentation as appropriate. Factors relevant to a
determination that the expense is proper include the following:
(i) Whether the expense is reasonable and economical. For
example, first class and other luxurious travel mode or
accommodations will normally be objectionable.
(ii) Whether the requested expenses are customarily charged to
non-bankruptcy clients of the applicant.
(iii) Whether applicant has provided a detailed itemization of
all expenses including the date incurred, description of expense
(e.g., type of travel, type of fare, rate, destination), method of
computation, and, where relevant, name of the person incurring the
expense and purpose of the expense. Itemized expenses should be
identified by their nature (e.g., long distance telephone, copy
costs, messengers, computer research, airline travel, etc,) and by
the month incurred. Unusual items require more detailed explanations
and should be allocated, where practicable, to specific projects.
(iv) Whether applicant has prorated expenses where appropriate
between the estate and other cases (e.g., travel expenses applicable
to more than one case) and has adequately explained the basis for
any such proration.
(v) Whether expenses incurred by the applicant to third parties
are limited to the actual amounts billed to, or paid by, the
applicant on behalf of the estate.
(vi) Whether applicant can demonstrate that the amount requested
for expenses incurred in-house reflect the actual cost of such
expenses to the applicant. The United States Trustee may establish
an objection ceiling for any in-house expenses that are routinely
incurred and for which the actual cost cannot easily be determined
by most professionals (e.g., photocopies, facsimile charges, and
mileage).
(vii) Whether the expenses appear to be in the nature
nonreimbursable overhead. Overhead consists of all continuous
administrative or general costs incident to the operation of the
applicant's office and not particularly attributable to an
individual client or case. Overhead includes, but is not limited to,
word processing, proofreading, secretarial and other clerical
services, rent, utilities, office equipment and furnishings,
insurance, taxes, local telephones and monthly car phone charges,
lighting, heating and cooling, and library and publication charges.
(viii) Whether applicant has adhered to allowable rates for
expenses as fixed by local rule or order of the Court.
Exhibit A--Project Categories
Here is a list of suggested project categories for use in most
bankruptcy cases. Only one category should be used for a given
activity. Professionals should make their best effort to be
consistent in their use of categories, whether within a particular
firm or by different firms working on the same case. It would be
appropriate for all professionals to discuss the categories in
advance and agree generally on how activities will be categorized.
This list is not exclusive. The application may contain additional
categories as the case requires. They are generally more applicable
to attorneys in chapter 7 and chapter 11, but may be used by all
professionals as appropriate.
Asset Analysis and Recovery: Identification and review of
potential assets including causes of action and non-litigation
recoveries.
Asset Disposition: Sales, leases (Sec. 365 matters), abandonment
and related transaction work.
Business Operations: Issues related to debtor-in-possession
operating in chapter 11 such as employee, vendor, tenant issues and
other similar problems.
Case Administration: Coordination and compliance activities,
including preparation of statement of financial affairs; schedules;
list of contracts; United States Trustee interim statements and
operating reports; contacts with the United States Trustee; general
creditor inquiries.
Claims Administration and Objections: Specific claim inquiries;
bar date motions; analyses, objections and allowances of claims.
Employee Benefits/Pensions: Review issues such as severance,
retention, 401K coverage and continuance of pension plan.
Fee/Employment Applicants: Preparation of employment and fee
applications for self or others; motions to establish interim
procedures.
Fee/Employment Objections: Review of and objections to the
employment and fee applications of others.
Financing: Matters under Secs. 361, 363 and 364 including cash
collateral and secured claims; loan document analysis.
Litigation: There should be a separate category established for
each matter (e.g., XYZ Litigation).
Meetings of Creditors: Preparing for and attending the
conference of creditors, the Sec. 341(a) meeting and other
creditors' committee meetings.
Plan and Disclosure Statement: Formulation, presentation and
confirmation; compliance with the plan confirmation order, related
orders and rules; disbursement and case closing activities, except
those related to the allowance and objections to allowance of
claims.
Relief From Stay Proceedings: Matters relating to termination or
continuation of automatic stay under Sec. 362.
The following categories are generally more applicable to
accountants and financial advisors, but may be used by all
professionals as appropriate.
Accounting/Auditing: Activities related to maintaining and
auditing books of account, preparation of financial statements and
account analysis.
Business Analysis: Preparation and review of company business
plan; development and review of strategies; preparation and review
of cash flow forecasts and feasibility studies.
[[Page 24892]]
Corporate Finance: Review financial aspects of potential
mergers, acquisitions and disposition of company or subsidiaries.
Data Analysis: Management information systems review,
installation and analysis, construction, maintenance and reporting
of significant case financial data, lease rejection, claims, etc.
Litigation Consulting: Providing consulting and expert witness
services relating to various bankruptcy matters such as insolvency,
feasibility, avoiding actions, forensic accounting, etc.
Reconstruction Accounting: Reconstructing books and records from
past transactions and bringing accounting current.
Tax Issues: Analysis of tax issues and preparation of state and
federal tax returns.
Valuation: Appraise or review appraisals of assets.
Dated: April 25, 1996.
Joseph Patchan,
Director.
[FR Doc. 96-11799 Filed 5-16-96; 8:45 am]
BILLING CODE 4410-01-M