Trustee's compensation must be "reasonable" pursuant to 362 and 330

In Re B&B Autotransfustion Services, Inc
Bankruptcy Case No. 07-00136-TLM
Decision Date: 1/18/2011
Chapter 7

Creditor won a jury verdict against Debtor in a wrongful death lawsuit. Debtor appealed. The Idaho Supremen Court affirmed the $3 million judgment. Debtors insurance refused to settle Creditor's judgment. Debtor subsequently filed a bad faith lawsuit agasint the insurance company. Debtor later filed a petition for chapter 7 relief and listed as an asset the bad faith lawsuit against the insurance company.
The insurance company offered a compromise in the amount of $1.5 million which was accepted and approved under Federal Rule of Bankruptcy Procedure 9019(a).
The Trustee in this case requested compensation in the amount of $70,000 for his services in distributing the $1.5 million. Creditor objected. Trustee admitted that $70,000 was "fair," but that $35,000 was also a "fair" amount under Bankruptcy Code 326 and 330.
The Court relied on In Re Healy, 2010 WL 3719916 (Bankr. D. Idaho Sept. 16, 2010) in deciding whether the Trustee's compensation requested was a "reasonable compensation" under 326 and 330. After looking at the Trustee's non-itemized record of services rendered the Court held the Trustee's services were competent but limited and the $35,000 requested compensation was unreasonable. In cases where the amount of money disbursed by the trustee are high in relation to the services performed require the court to assess whether the "commission fee" or the "implied hourly rate" is reasonable. The Court, in this case, found the compensation amount of $16,000 to be reasonable.

Full decision can be found at: http://www.id.uscourts.gov/decisions-bk/B&B_decision.pdf

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