SKY ENTERPRISES, LLC

v.

SEAWALK INVESTMENTS, LLC

1 Some of these fees were incurred when NLA still owned the primary mortgage debt. (Doc. 3-4 at 9). 2 The bankruptcy court determined that expert witness fees and costs are not taxable to a non-prevailing party, and Sky does not discuss why that The parties do not dispute that the value of Sky’s secured claim includes reasonable attorneys’ fees. See (Doc. 3-4 at 9) (“The promissory note associated with the Primary Mortgage Debt provides that [the Debtor] agrees to pay [Sky]’s attorney’s fees incurred in protecting and preserving its lien and or in enforcing its rights under the note.”) (citation omitted) (alterations in original). Sky is entitled to recover attorneys’ fees to enforce its rights despite being an oversecured creditor. See 11 U.S.C. § 506(b) (“To the extent that an allowed secured claim is secured by property the value of which . . . is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement . . . under which such claim arose.”). “[A] party seeking relief under [§ 506(b)] must demonstrate: (1) that its claim is oversecured in excess of the fees and costs requested; (2) that the agreement between the secured party and the debtor provides a claim for attorneys’ fees and costs; and (3) that the fees and costs sought are reasonable.” In re Reorganized Lake Diamond Assocs., LLC, 367 B.R. 858, 874 (Bankr. M.D. Fla. 2007). The first two elements are undisputed here. In considering the final element, in In re Reorganized Lake Diamond (also a Chapter 11 case with a § 506(b) attorneys’ fee issue), the bankruptcy court conclusion was incorrect. (Doc. 3-4 at 16) (citing In re Unnerstall, No. 6:17-BK- 00336-KSJ, 2018 WL 1989936, at *8 (Bankr. M.D. Fla. Apr. 25, 2018)). stated that: The federal lodestar approach is utilized in determining reasonable attorneys’ fees. [In re Pak, 252 B.R. 215, 220 (Bankr. M.D. Fla. 2000)] (citation omitted). Under the lodestar approach, courts consider the number of hours of service reasonably devoted to the case multiplied by the attorneys’ reasonable rates, and reduced or enhanced according to the twelve-factor test enumerated in Johnson v. Georgia Highway Express, Inc., 488 F. 2d 714 (5th Cir. 1974)[,. Pak, 252 B.R. at 220 (citing Grant v. George Schumann Tire & Battery Co., 908 F. 2d 874, 877 (11th Cir. 1990)). Therefore, a court must “1) determine the nature and extent of the services rendered; 2) determine the value of those services; and 3) consider the factors laid out in [Johnson] and explain how they affect the award.” Grant, 908 F. 2d at 877–78 (citation and footnotes omitted); see also Pak, 252 B.R. at 219 (citing Grant, 908 F. 2d at 877). In considering the Johnson factors, however, “[e]ach . . . factor . . . must be considered in light of the other factors, and ‘a genuine balance must be struck by the bankruptcy judge.’” Grant, 908 F. 2d at 879 (quoting In re U.S. Golf Corp., 639 F. 2d 1197, 1205 (5th Cir.1981)). In re Reorganized Lake Diamond, 367 B.R. at 875 (alterations in original). The Johnson factors include: (i) time and labor expended; (ii) novelty and difficulty of the questions raised; (iii) skill required to properly perform the legal services rendered; (iv) attorney’s opportunity cost in pursuing the matter; (v) customary fee for like work; (vi) whether the fee is fixed or contingent; (vii) time limitations imposed by the client or circumstances; (viii) amount in controversy and the results obtained; (ix) experience, reputation, and ability of the attorney; (x) undesirability of the case within the legal community in which the case arose; (xi) nature and length of the professional relationship between attorney and client; and (xii) attorney’s fee awards in similar cases. Johnson, 488 F. 2d at 717–19. Further, [i]n making a fee determination, the Court must consider not only the fee agreement but the overall fairness and reasonableness of the fee under all of the circumstances. Reasonable fees are those necessary to the collection and protection of a creditor’s claim and include fees for those actions which a similarly situated creditor might have taken. The fees must be cost justified by the economics of the situation and necessary to preserve the creditor’s interest in light of the legal issues involved. A secured creditor is not entitled to compensation for its attorneys[’] fees for every action it takes by claiming that its rights have been [a]ffected.” In re Reorganized Lake Diamond, 367 B.R. at 867 (quoting In re Digital Prods. Corp., 215 B.R. 478, 482 (Bankr. S.D. Fla. 1997)) (determining fees in the § 506(b) context) (emphasis added). Here, the bankruptcy court discussed why a similar creditor would not have incurred as many fees as Sky did. (Doc. 3-4 at 16). It cited facts such as Sky’s significant equity cushion, that Sky had no risk of loss, and Sky’s ulterior motive to buy the property. Id. The bankruptcy court then found that $50,000 in fees (out of the $294,383.39 requested) was appropriate. Id. The bankruptcy court provided a sufficient explanation as to why Sky should not be awarded its full attorneys’ fees; however, it did not discuss what a reasonable number of hours would be, the Johnson factors, or generally how it determined the $50,000 figure. The Court is unable to determine how the bankruptcy court calculated the amount of Sky’s attorneys’ fees. See In re Grunau, 376 B.R. at 333 (“[T]he bankruptcy court acknowledged the lodestar method but did not engage in a lodestar analysis. However, the court did not state that it found such an analysis unnecessary or inappropriate.”); see also In re Reorganized Lake Diamond, 367 B.R. at 875 (engaging in the lodestar analysis). The Court does not prejudge what a reasonable fee would be and does not exclude the possibility that the $50,000 fee award is appropriate. However, the bankruptcy court must explicitly show that it conducted the lodestar or some other appropriate analysis® 1n arriving at a reasonable fee. Accordingly, it is hereby ORDERED: