MEMORANDUM OPINION AND ORDER GRANTING AWARD OF ATTORNEYS’ FEES Pending before this Court is Navient Solutions, LLC’s (“Navient”) Motion for Attorneys’ Fees and Costs Pursuant to 11 U.S.C. §303(i). (“Motion,” ECF Doc. # 54.) In support of the Motion, Navient filed the declaration of Stephen E. Hessler. (“Hessler Declaration,” ECF Doc. # 55.) The Motion was filed in response to the decision of this Court dismissing the involuntary chapter 11 bankruptcy petition filed by Sarah Bannister, Brandon Hood, and Labarron Tate (collectively, the “Petitioning Creditors”) and later joined by Public Interest Capital, LLC (“PICAP”).1 (See “Order,” ECF Doc. # 42, 6 (“Navient has not waived the right to seek judgment against the Petitioners, Counsel, Public Interest Capital, LLC (‘PICAP’), and counsel for PICAP pursuant to section 303(i) of the Bankruptcy Code and this Court may, upon subsequent proceedings initiated by Navient, take under advisement additional proceedings related to the Involuntary Case pursuant to section 303(i) of the Bankruptcy Code.”); “Opinion,” ECF Doc. # 45, at 29 n.15.)2 The Motion seeks to recover fees and costs in the total amount of $609,385.44 against Austin C. Smith (“Smith”) and Smith Law Group LLP (together with Smith, “Petitioning Creditors’ Counsel”), PICAP, and Michael B. Wolk (“Wolk”) and Law Offices of Michael B. Wolk, P.C. (together with Wolk, “PICAP Counsel”) to the fullest extent of the law. Navient is not seeking attorneys’ fees and costs from the Petitioning Creditors. Below is a chart summarizing the fees and expenses sought by the Motion: Firm Time Period Hours Fees Requested Expenses Requested Total Kirkland & Ellis LLP (“Kirkland”) 02/10/21-03/19/21 510.5 $524,050.80 $2,903.54 $526,954.34 McGuireWoods LLP (“McGuireWoods”) 02/08/2021-02/26/2021 123.8 $81,431.10 -$81,431.10 The objection deadline was April 15, 2021 at 4:00 p.m. On April 15, 2021, before the deadline had passed, Petitioning Creditors’ Counsel filed a response in opposition to the Motion. (“Smith Objection,” ECF Doc. # 60.)3 On April 19, PICAP and PICAP Counsel filed their opposition to the Motion. (“PICAP Objection,” ECF Doc. # 63, and together with the Smith Objection, the “Objections.”) On April 19, 2021, Navient filed its reply to the Objections. (“Reply,” ECF Doc. # 64.) On April 20, 2021, PICAP and PICAP Counsel filed a letter in response to the Reply with the subject as “APPLICATION by PICAP Nonparties (a) to strike new arguments in Navient reply brief filed late yesterday [Dkt 64] or, alternatively, to grant leave to the PICAP Nonparties to file a sur-reply, in response to Navient new arguments, by a date to be designated by the Court and, in addition, (b) for Court consideration of the legal reasons herein from the PICAP Nonparties as an authorized sur-reply to Navient new arguments and (c) related relief.” (“Application,” ECF Doc. # 66.) On April 21, 2021, Navient filed a reply to the Application. (“Application Reply,” ECF Doc. # 68.) That same day, PICAP filed a reply to the Application Reply. (ECF Doc. # 69.) Following dismissal of an involuntary petition, section 303(i)(1) permits the alleged debtor to recover “a reasonable attorney’s fee.” Based upon a review of the attorneys’ affidavits and time records submitted, and the arguments in support of and opposition to the application, the Court finds and concludes that the amount of fees and expenses Navient seeks to recover for the work of Kirkland & Ellis and McGuireWoods is not reasonable. As explained in this Opinion, Navient is awarded fees and costs in the substantially reduced amounts set forth below. I. BACKGROUND On February 8, 2021, the Petitioning Creditors filed an involuntary petition against Navient (ECF Doc. # 1) with an attached supplement (ECF Doc. # 1-1). On February 10, 2021, the Petitioning Creditors filed an amended involuntary petition. (“Involuntary Petition,” ECF Doc. # 2.) On February 17, 2021, Navient filed a motion to dismiss the Involuntary Petition. (“Motion to Dismiss,” ECF Doc. # 14.) On February 25, 2021, this Court held a hearing on the Motion to Dismiss (the “MTD Hearing”). Smith did not attend the MTD Hearing. Wolk attended the MTD Hearing on behalf of PICAP. The Court orally granted the Motion to Dismiss at the MTD Hearing and subsequently entered the Order that same day. The Opinion followed on March 8, 2021. In response to the dismissal of the involuntary action, Navient filed the Motion on March 29, 2021. On April 9, 2021, the Petitioning Creditors’ Counsel filed a motion under Federal Rule of Bankruptcy Procedure 8007 seeking (a) a stay of enforcement of the Bankruptcy Court’s dismissal orders to the extent such dismissal orders adjudicate merits issues pending appeal and (b) an immediate interim stay pending appeal. (“Petitioning Creditors’ Stay Motion,” ECF Doc. # 57.) On April 11, 2021, PICAP filed an emergency motion to stay Navient’s post-dismissal legal fee application under 11 U.S.C. §303(i)(1). (“PICAP’s Stay Motion,” ECF Doc. # 58.) On April 13, 2021, this Court entered an order denying the Petitioning Creditors’ Stay Motion and PICAP’s Stay Motion. (ECF Doc. # 59.) On April 22, 2021, this Court held a hearing on the Motion (the “Fee Hearing”). After hearing arguments from the parties, the Court took the matter under submission. II. PARTIES’ CONTENTIONS A. Smith Objection In the Smith Objection, Petitioning Creditors’ Counsel argues that the Motion should be denied because (I) the Motion is time-barred under Rule 54(d)(2)(B)(i); (II) Navient is not entitled to an award of its attorneys’ fees and costs based on the totality of the circumstances where the involuntary petition and joinder did not lack merit under sections 303 and 305, Petitioning Creditors’ Counsel acted reasonably, and Smith did not intend to harm Navient’s reputation; (III) Navient is not entitled to an award of its attorneys’ fees and costs incurred in connection with this involuntary case because it was dismissed due to abstention; and (IV) the attorney fee award requested is unreasonable. In support of this last argument, Petitioning Creditors’ Counsel contends that (1) the assignments were overstaffed between and within the two firms, where Kirkland had five partners bill 200 hours; (2) the descriptions of services rendered were insufficiently detailed; (3) there was duplication of services between and within the two law firms; (4) some services were provided by individuals with unnecessarily high hourly rates; (5) there were excessive hours spent on some services, including numerous conferences and calls among the Kirkland team; (6) some services were ministerial; (7) some requested costs are actually overhead expenses; and (8) the documentation of services rendered does not appear to be in the form of contemporaneous time records. B. PICAP Objection In summary, the PICAP Objection claims that Navient’s Motion should be denied for the following reasons: (1) this Court lacks jurisdiction because Article III of the United States Constitution divested the Bankruptcy Court of the power to adjudicate any non-jurisdictional issues on the merits; (2) Federal Rules of Bankruptcy Procedure 1018 and 1003, as well as Supreme Court precedent, preclude Navient from even asserting, in its post-dismissal proceeding, that PICAP purportedly became, or was allowed by this Court to intervene and become, a “joinder creditor” in the case; (3) the Motion is time barred under Rule 54(d)(2)(B)(i); (4) the American Rule applies here and imposes a presumption against legal fee shifting liability; (5) PICAP’s three-page filing on February 23, 2021 is not the “but for” cause of all the legal fees incurred by Navient, because such legal fees were incurred by Navient in response to the involuntary case papers filed by Petitioning Creditors and in connection with Navient’s motion to dismiss filed on February 17, 2021; (6) fee shifting liability is not allowed where an involuntary case is dismissed on abstention grounds under 11 U.S.C. §305; (7) under 11 U.S.C. §303(i)(1), this Court should decline to impose any legal fees involving the “totality of the circumstances” relevant to the very limited litigation acts by PICAP and PICAP Counsel; and (8) PICAP and PICAP Counsel have a right to a jury trial. C. Navient’s Reply In the Reply, Navient argues (I) the fee motion is not time-barred; (II) Navient is entitled to fees and costs based on the totality of the circumstances; (III) this Court’s alternative section 305 finding does not negate this Court’s section 303 findings; (IV) the fees sought in the Motion are reasonable; and (V) the PICAP Objection should be stricken as untimely and also fails on the merits. In support of the last argument, Navient contends (1) section 303(i) requests are an exception to the “American Rule”; (2) PICAP and PICAP Counsel may be held liable on the same grounds as the Petitioning Creditors; and (3) PICAP and PICAP Counsel are not entitled to a jury trial because attorneys’ fees are awarded as an equitable remedy collateral to and separate from the decision on the merits. D. PICAP’s Application The Application states that Navient has raised new arguments that were not set forth in Navient’s original papers and asks that this Court (a) strike the new arguments in the Reply that were not set forth in the Motion or Hessler Declaration or, alternatively, grant leave to PICAP and PICAP Counsel to file a sur-reply brief in response to Navient’s new arguments by a date to be designated by this Court, and (b) consider the initial legal reasons in the Application as an authorized sur-reply to the new arguments in the Reply that were not contained in Navient’s original motion papers. In summary, PICAP and PICAP Counsel argue that there has been “sandbagging” on the part of Navient. However, Navient’s arguments in the Reply are all clearly responsive to the arguments in the Objections and do not constitute the sort of sandbagging that requires relief from this Court. Accordingly, this Court DENIES the Application. III. LEGAL STANDARD Bankruptcy Code section 303(i) reads as follows: (i) If the court dismisses a petition under this section other than on consent of all petitioners and the debtor, and if the debtor does not waive the right to judgment under this subsection, the court may grant judgment — (1) against the petitioners and in favor of the debtor for — (A) costs; or (B) a reasonable attorney’s fee; or (2) against any petitioner that filed the petition in bad faith, for — (A) any damages proximately caused by such filing; or (B) punitive damages. 11 U.S.C. §303(i) (emphasis added). It is within the discretion of this Court to grant an award pursuant to section 303(i). In re Anmuth Holdings LLC, 600 B.R. 168, 184 (Bankr. E.D.N.Y. 2019) (“It is settled law that an award under §303(i) is within the discretion of the Bankruptcy Court.”). In this Circuit, “[t]here is a presumption that costs and attorneys’ fees will be awarded to a putative debtor where an involuntary petition is dismissed. The petitioner bears the burden of proof on justifying a denial of costs and fees.” See In re TPG Troy, LLC, 492 B.R. 150, 162 (Bankr. S.D.N.Y. 2013) (citing In re Mountain Dairies, 372 B.R. 623, 637 (Bankr. S.D.N.Y. 2007)); see also In re Skyworks Ventures, Inc., 431 B.R. 573, 576 (Bankr. D.N.J. 2010) (awarding attorneys’ fees and costs is the “majority rule”); In re Silverman, 230 B.R. 46, 50 (Bankr. D.N.J. 1998) (fees and costs are “typically…awarded upon dismissal” of an involuntary petition); In re K.P. Enter., 135 B.R. 174, 177 (Bankr. D. Me. 1992) (fairness dictates that attorney’s fees and costs generally should be awarded upon an involuntary case’s dismissal). While the presence of bad faith is germane to the analysis, “[u]nder the terms of the statute, bad faith is not a prerequisite to an award of costs and attorney’s fees under §303(i)(1).” Lubow Mach. Co. v. Bayshore Wire Prods. Corp. (In re Bayshore Wire Prods. Corp.), 209 F.3d 100, 105 (2d Cir. 2000). Because section 303(i)(1) is a “fee-shifting provision,” attorneys’ fees and costs incurred in preparing and litigating the section 303(i) motion itself may be included in the award. See Orange Blossom Ltd. P’ship v. S. Cal. Sunbelt Developers, Inc. (In re S. Cal. Sunbelt Developers, Inc.), 608 F.3d 456, 461-62 (9th Cir. 2010). In deciding whether to award fees and costs: Most of the courts…have adopted a “totality of the circumstances” test, in which certain factors are to be considered. These include (1) the merits of the involuntary petition; (2) the role of any improper conduct on the part of the alleged debtor; (3) the reasonableness of the actions taken by the petitioning creditors; and (4) the motivation and objectives behind the filing of the petition. In re Taub, 438 B.R. 761, 775 (Bankr. E.D.N.Y. 2010) (quoting 2 COLLIER ON BANKRUPTCY 303.11 (Alan N. Resnick & Henry J. Sommer eds. 16th ed.)). Section 303(i) and the case law interpreting it do not set forth standards for determining whether and to what extent attorneys’ fees are warranted. In re Fox Island Square P’ship, 106 B.R. 962, 970 (Bankr. N.D. Ill. 1989). At a minimum, the time records submitted should clearly identify the nature of the work performed, its reasonable necessity and relevance to defense of the involuntary petition, and the time expended. Id. (citing In re Wavelength, 61 B.R. 614, 621 (B.A.P. 9th Cir. 1986)); York Int’l Bldg., Inc. v. Chaney, 527 F.2d 1061, 1068 (9th Cir. 1975). IV. DISCUSSION A. The Motion Is Not Time-Barred The Objections argue that because the Motion was filed over 14 days from the entry of the Order, the Motion is time-barred under Rule 54(d) of the Federal Rules of Civil Procedure, made applicable in bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 7054. Rule 54(d)(1) provides that “[u]nless a federal statute, these rules, or a court order provides otherwise, costs — other than attorney’s fees — should be allowed to the prevailing party.” FED R. CIV. P. 54(d)(1); See Klein v. Cap. Fin., Inc. (In re Cap. Fin., Inc.), No. RS 02-19544-MG, 2007 WL 7535047, at *5 (B.A.P. 9th Cir. Nov. 14, 2007) (“Capital Finance”). Rule 54(d)(2)(B)(i) requires a legal fee motion to be filed within 14 days after the entry of judgment. FED. R. CIV. P. 54(d)(2)(B)(i). Rule 54(a) provides that a “judgment” means “a decree and any order from which an appeal lies.” FED. R. CIV. P. 54(a). However, Rule 54(d) does not apply to attorneys’ fees awarded under section 303(i). “The key distinction is that §303(i) is substantive law providing an independent claim to an alleged debtor whenever an involuntary petition is dismissed without the alleged debtor having waived that claim.” Capital Finance, 2007 WL 7535047, at *5. Section 303(i) is “intended to be the exclusive remedy for regulating abuse of the involuntary bankruptcy process.” Wechsler v. Macke Int’l Trade, Inc. (In re Macke Int’l Trade, Inc.), 370 B.R. 236, 245 (B.A.P. 9th Cir. 2007) (citing Miles v. Okun (In re Miles), 430 F.3d 1083, 1089-91 (9th Cir. 2005)). Prior to the incorporation of Rule 54 into the Bankruptcy Rules, courts determined that Rule 54 should not apply to a section 303(i) request. See, e.g., DVI Receivables XIV, LLC v. Rosenberg (In re Rosenberg), 500 B.R. 174, 180-81 (S.D. Fla. 2013), aff’d in part, vacated in part and remanded, 779 F.3d 1254 (11th Cir. 2015) (“[Putative debtor] filed his Fee Motion [under section 303(i)] more than twenty-one days after the issuance of the Dismissal Order [in violation of local bankruptcy rule 7054-1(F)], but Judge Cristol did not find the Motion untimely because the Dismissal Order expressly reserved jurisdiction on the issue of fees and costs without imposing any time limitation.”); In re Imani Fe, LP, 2012 WL 5418983, at *6 (B.A.P. 9th Cir. Nov. 7, 2012) (“[N]either [Civil Rule 54(d) and LBR 7054-1] regarding prevailing parties apply to motions for fees under §303(i). Section 303(i) provides the alleged debtor an independent cause of action for attorneys’ fees when it successfully defends against an involuntary petition.”); Capital Finance, 2007 WL 7535047, at *7 (“[A]ttorney’s fees and costs are under the umbrella of §303(i), which encompasses all the potential remedies that may be available to an alleged debtor who defeats an involuntary petition. As such, attorney’s fee and cost claims are not the type of claims required to be asserted within the time frame of L.B.R. 7054-1(f).”). One post-incorporation of Rule 54 case cited by Navient also finds that Rule 54 does not apply. See Nat’l Med. Imaging, LLC v. U.S. Bank, N.A. (In re Nat’l Med. Imaging, LLC), 570 B.R. 147, 157 (Bankr. E.D. Pa. 2017) (“Nat’l Med. Imaging”) (“[S]ection 303(i) claims are not subject to a statute of limitations (whether contained in the Bankruptcy Code or borrowed from state law), but must be brought within a reasonable amount of time that does not prejudice Defendants.”). Additionally, none of the cases cited in the Objections concern the applicability of Rule 54(d) to a section 303(i) request or find that Rule 54(d) applies to a section 303(i) request. Here, the Motion needs only to be filed “within a reasonable amount of time that does not prejudice” Petitioning Creditors’ Counsel, PICAP, and PICAP Counsel. Id. The Motion was filed on March 29, 2021, which is thirty-two days after entry of the Order, twenty-one days after issuance of the Opinion, seventeen days after the entry of the Order Denying Motion for Reconsideration, and three days after the deadline to appeal had expired. Petitioning Creditors’ Counsel, PICAP, and PICAP Counsel have not shown that there was any prejudice to them. Even if Rule 54 applies, the request is still timely. Rule 54 provides an exception to its 14-day limit if “a statute or a court order provides otherwise.” FED. R. CIV. P. 54(d)(2)(B). In the Order, I reserved ruling on Navient’s section 303(i) request subject to further briefing. (See Order
5-6; Opinion, at 29 n.15.) Moreover, although the Ninth Circuit BAP in Capital Finance determined that Rule 54 and a similar local rule did not apply to a section 303(i) request, it found that even if such rules did apply, the bankruptcy court’s explicit reservation of jurisdiction under section 303(i) in the dismissal order was an implicit extension of time. See Capital Finance, 2007 WL 7535047, at *7 (“The Panel concludes that this discussion, together with the court’s express reservation of jurisdiction, in the dismissal order, ‘to award attorney’s fees, costs, actual damages and punitive damages on any motion brought by Capital Finance, Inc.’ was an implicit extension of time, for purposes of L.B.R. 7054-1(f).”). Accordingly, this Court CONCLUDES that the Motion is not time-barred. B. The Bankruptcy Court Has Authority to Award Fees and Costs Under Section 303(i)(1) PICAP argues that the bankruptcy court lacks “jurisdiction” to award fees and costs because only an Article III judge may do so. The argument is wrong for several reasons. The “jurisdiction” of the bankruptcy court is clear. The issue of “authority” of a bankruptcy judge is more complicated, but a bankruptcy judge has authority to award fees and costs under section 303(i)(1). Bankruptcy courts have jurisdiction under 28 U.S.C. §§1334(a) and 157(a), and the district court’s general order of reference. The issues of jurisdiction and authority of the bankruptcy courts were addressed by the Supreme Court in Stern v. Marshall, 564 U.S. 462 (2011). Importantly, Stern did not alter the subject matter jurisdiction of the bankruptcy courts. As the Supreme Court stated, “[s]ection 157 allocates the authority to enter final judgment between the bankruptcy court and the district court. That allocation does not implicate questions of subject matter jurisdiction.” Id. at 480 (emphasis added) (citations omitted). The bankruptcy court has the authority to enter final orders or judgment in matters that are “core,” generally where they “arise under” the Bankruptcy Code, or “arise in” bankruptcy cases. While certain statutorily core claims that were tried in courts at law at the time of the adoption of the Constitution require an Article III judge to enter final orders or judgments, absent consent, fee shifting statutes such as section 303(i)(1) that permit a bankruptcy court to award fees and costs in cases pending before them do not fall into that category. Navient did not seek an award of damages or punitive damages under section 303(i)(2) so the Court has no reason to address whether, absent consent, the bankruptcy court could award such relief.4 C. Navient Is Entitled to Some Fees and Costs Based on the Totality of the Circumstances Petitioning Creditors’ Counsel argues that based on the totality of the circumstances, Navient is not entitled to an award of attorneys’ fees and costs because the Involuntary Petition was not deficient, Petitioning Creditors’ Counsel acted reasonably in filing the Involuntary Petition, and counsel did not file the Involuntary Petition to harm Navient’s reputation. (See Smith Objection
