Justia Federal District Court Opinions

Avrum Dannen, serving both as Trustee and, pursuant to order, as Attorney for the Trustee in this bankruptcy matter, appeals from an order of the district court reducing the allowance for legal services provided him by the bankruptcy judge.

Out of an estate of $6,220.00, the bankruptcy judge awarded Dannen a total of $3,150.00 $3,000.00 for legal services and $150.00 for services as trustee. A major factor in the bankruptcy judge's decision appears to have been his finding that the estate on its face had appeared to be "no asset," before Dannen succeeded in establishing, apparently after considerable contest, that a prior conveyance of real estate by the bankrupt to a trust was void, thus enabling the real estate to be sold as an asset of the estate.

Pursuant to a local Bankruptcy Rule,1 see e. g., In re Hamilton Distributors, Inc., 440 F.2d 1178, fn. 2 (7th Cir. 1971), the district court automatically reviewed the allowance because it exceeded a specified percentage of the net estate. Without affording appellant a hearing and without making findings other than saying that "in light of the work required to be performed and benefit to the estate, the fee is indefensible," the district court reduced the attorney fee to $650.00.

The district court's language implies that the bankruptcy judge abused his discretion. Assuming that was the court's view, there is some question whether the record sustains it. More fundamentally, appellant Dannen was provided no opportunity to be heard in the district court to defend the award.² While the local rule does not on its face provide for such a hearing, we hold that procedural fairness demands that allowances should not be reduced on automatic review without giving at least the persons adversely affected an opportunity to be heard.

We have cast this decision as a published opinion for future guidance in the Northern District of Illinois, and because some past opinions of this court have been silent as to the procedural issues associated with automatic review of attorneys' fees in bankruptcy cases. See, e. g., In re Hamilton Distributors, Inc., supra; In re Midwest Engineering and Equipment Co., 440 F.2d 326 (7th Cir. 1971). We intimate no view whether or not a reduction is appropriate in this case, nor, if appropriate, as to the amount.

Reversed and remanded for proceedings not inconsistent with this opinion.

Reversed.