____________________________________________________________

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

MEMORANDUM OPINION

Warren Power (Warren) filed this adversary proceeding in April, 2003, to recover a judgment for

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unpaid invoices against the debtor Bemis Construction (Bemis), to recover on certain statutory bonds

issued by Mid Continent Casualty Company (Mid Continent), and to obtain a decree equitably

subordinating the claims of all other creditors to its claim. Warren supplied Bemis with parts and tools that

Bemis used in its road-construction equipment and machinery. After nearly two years of pretrial discovery

and other litigation activity, Bemis and Mid Continent tendered offers of judgment to Warren under Fed.

R. Bankr. P. 7068 and Fed. R. Civ. P. 68. Warren filed acceptances of both offers, but maintained its

entitlement to substantial attorneys fees and costs, under Fed. R. Civ. P. 68 and Oklahoma statutory law.

The Court entered judgment in accord with the accepted offers, but reserved the issue of Warren's

entitlement to costs and fees.1

On February 10, 2005, the Court convened an evidentiary hearing on Warren's Combined Notice

of Acceptance of Offers and Motion to Establish Procedures (Procedure Motion),2 Warren's Motion to

Recover Costs and Attorney Fees (Fees Motion),3 and Warren's Motions to Amend Judgment (Motions

to Amend).4 Having heard the evidence presented on that date and reviewed the authorities submitted by

counsel, the Court is prepared to rule.5

FACTUAL BACKGROUND

1 Dkt. 86 (Bemis) and Dkt. 88 (Mid Continent).

2 Dkt. 85.

3 Dkt. 90.

4 Dkt. 97 (Bemis) and Dkt. 99 (Mid Continent).

5 Except as otherwise noted, all docket entry references are to the above-captioned adversary

proceeding.

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1. The Underlying Legal Dispute.

Bemis filed for chapter 11 relief in this Court on September 27, 2002. Bemis was a road

construction and grading contractor that worked extensively on public works projects in the state of

Oklahoma. At the time of filing, Bemis's counsel informed the Court that a liquidation in chapter 11 was

the only likely result, but that the orderly completion and billing of Bemis's outstanding projects in

bankruptcy would benefit all of the parties in interest.

 Mid Continent, as surety, issued the performance and payment bonds for most of Bemis's

Oklahoma road projects. Early on, Mid Continent took the position that it was subrogated to Bemis's

accounts arising out of the projects and that, by virtue of its subrogation, it claimed a superior interest in

Bemis's accounts receiveable as well as an inchoate interest in the rest of Bemis's assets.6 Thus, any claims

disputes with Bemis subcontractors or suppliers on bonded jobs implicated the interests of Mid Continent.

If those claims were deemed valid, Mid Continent might be liable under its bond. Were Mid Continent to

pay those claims under the bond and assert further subrogation rights against Bemis, the bankruptcy estate

would be affected.

Warren provided parts, tools and repairs for the heavy machinery used by Bemis in various road

construction projects. At the petition date, Bemis owed Warren $124,835 on account of these

transactions. Contemporaneously with the commencement of this adversary proceeding against Mid

6 Bemis's commercial lenders have just settled another adversary proceeding with Mid Continent concerning the relative priority of the lenders' and Mid Continent's interest in Bemis's receivables and assets. See Mid Continent Casualty Co. v. Bemis Construction, Inc., et al., Adv. No. 03-5049 (Bankr. D. Kan.), Dkt. 93.

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Continent and Bemis, Warren filed a proof of claim in the bankruptcy case.7 Bemis objected to Warren's

claim.

Mid Continent disputes Warren's bond claim because it alleges that some or all of what Warren

provided to Bemis was not job-specific (i.e., that it was not used or consumed in the bonded jobs). Mid

Continent discovered and analyzed hundreds of Warren invoices to determine if any of them could be tied

to a specific job and, if so, whether or not they represented the furnishing of materials which were used or

consumed in a bonded job.8 As many of the parts provided by Warren were machinery parts that were

likely installed on Bemis's equipment and not necessarily consumed in the course of any one particular

job, Mid Continent denied most of the claim as being for capital rather than consumable expense. Warren

disputed the applicability of the used or consumed standard, asserting instead that the Oklahoma statute

assures repayment of all indebtedness owed by the bond obligor. Had this dispute not been settled, the

legal question at trial would have centered on the meaning of the Oklahoma public works laws and the

scope of Mid Continent's bond coverage.

2. Procedural History.

Warren muddied the waters by filing in the bankruptcy case a proof of claim for unpaid rental

expenses and by asserting that its claim was secured.9 On the same day, April 15, 2003, Warren

commenced this adversary proceeding, filing a complaint in which it prayed for a judgment against Bemis

for the unpaid rentals.10 Warren also sued Mid Continent to enforce its bond claim and sought a

declaratory judgment that the bond was not property of Bemis's bankruptcy estate. Bemis objected to

Warren's proof of claim on the basis that it had rented nothing from Warren11 and filed an answer setting

up the same as a defense.12 Bemis also stated that it had only done business with Warren Cat, not

Warren Power.

On July 11, 2003, Warren filed an amended complaint and an amended proof of claim deleting the

references to rentals and instead asserted that its claims were based on unpaid invoices for parts.13 Warren

still sought to collect its unpaid accounts in the adversary proceeding and reasserted the other claims set

out above. This Court entered a scheduling minute order on September 18, 2003.14 After a year of

discovery efforts (punctuated, it appears, by numerous informal discovery disputes), Warren again sought

leave to amend its complaint, this time to assert that all of the creditors' claims should be equitably

subordinated to Warren's claim. This motion to amend was not filed until September 30, 2004 and the

amended complaint was not filed until December 2, 2004 (Second Amended Complaint).15 The

defendants offered Warren judgment on the Second Amended Complaint on December 13 and 15,

10 Dkt. 1.

11 Case No. 02-14893, Dkt. 280.

12 Dkt. 11.

13 Dkt. 16; Case No. 02-14893, Claim No. 70.

14 Dkt. 21.

15 See Dkt. 49 (motion to amend); Dkt. 66 (order granting leave November 23, 2004) and

Dkt. 68 (second amended complaint).

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2004.16

As is this Court's practice, it conducted an initial scheduling conference pursuant to Fed. R. Civ.

16. 16(b) on the Amended Complaint on September 18, 2003. Warren's Oklahoma counsel, Messrs.

Richard Ogden and Russell Wantland participated in the conference by phone.17 Their local counsel,

William Wells, appeared at this conference and at all hearings in the case. At that time, the Court entered

an order outlining a discovery schedule that terminated discovery on January 15, 2004, and required the

submission of a final pretrial order on February 15, 2004.18 By mutual motion of the parties, the discovery

deadline was extended to April 16, 2004, the pretrial order deadline was extended to May 14, 2004, and

the final pretrial conference was reset to June 17, 2004.19 On April 27, 2004 the parties entered into

another agreed amended scheduling order that extended discovery to July 31, 2004 and extended the

deadline for a final pretrial order and conference.20 Notably, there are no deposition notices in the record

and, indeed, no discovery notices of any kind were filed by any party until June 30, 2004 when Bemis filed

a notice of service of written discovery upon Warren.21 Warren apparently propounded some written

16 Dkt. 69 (Mid Continent offer) and Dkt. 72 (Bemis offer).

17 Prior to the February 10, 2005 hearing, Warren's Oklahoma counsel did not personally

appear in this Court.

18 Dkt. 21. This Court typically allows for a 120-day discovery period followed by a 30-day time frame in which counsel must prepare and submit a pretrial order. This scheduling is more than ample for most adversary proceedings.

19 Dkt. 30.

20 Dkt. 37.

21 Dkt. 40.

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discovery because Bemis filed an objection to it on July 7, but there is no notice of the issuance of

discovery requests by Warren in the record. Again at the instance of counsel, the Court extended the

discovery deadline to September 30, 2004 and continued the final pretrial order to October 31, 2004.22

On September 30, 2004 Warren sought leave to file its Second Amended Complaint,23 along with

a request for extension of the discovery deadlines.24 The amendment was allowed although the Second

Amended Complaint was not formally filed until December 2, 2004.25 The parties submitted and the Court

entered an Agreed Scheduling Order on November 18, 2004 which extended discovery, dispositive

motions, and the final pretrial order deadline to December 30, 2004.26 In November of 2004, Warren

issued a flurry of deposition notices and took George Bemis's deposition pursuant to notice on November

11.27

On December 13, 2004, Mid Continent filed a Notice of Offer of Judgment (MC Offer).28 On

December 15, 2004, Bemis filed its Notice of Offer of Judgment (Bemis Offer).29 On December 20,

Warren filed separate Notices of Acceptance of both offers.30 Curiously, on the same day, Warren also

filed a Motion for Summary Judgment.31 When the Clerk did not immediately enter judgment in

accordance with the accepted offers, Warren filed a Motion to Establish a Post-Acceptance Procedure

in which it argued at length that despite having accepted the offers, it remained entitled to additional

attorneys fees and costs.32 The Clerk entered Judgments on January 3, 2005.33 On January 3, 2005,

Warren filed a Motion to Recover Costs and Attorney's Fees with numerous exhibits.34 Then, on January

12, 2005, after the Judgments were entered, Warren filed its Motion to Amend the judgments to add to

each a reference to costs.35 Warren filed three pleadings seeking essentially the same relief, an award of

attorneys fees and costs amounting to some $126,586.93 for which it curiously asserts Mid Continent and

Bemis are jointly liable.

3. The Offers of Judgment

The MC Offer is clear. In it, MC offers Warren judgment for the claims alleged in Plaintiffs'

Petition [sic] in the amount of $40,000.36 Warren's acceptance of this offer states that Warren accepts

Defendant, Mid-Continent Casualty Company's, Offer of Judgment in the amount of $40,000.00 . . . , but

30 Dkt. 79 (Mid Continent) and Dkt. 80 (Bemis).

31 Dkt. 78.

32 Dkt. 85 (Procedure Motion).

33 Dkt. 86 and Dkt. 88.

34 Dkt. 90 (Fees Motion).

35 Dkt. 97 and Dkt. 99 (Motions to Amend).

36 Dkt. 69.

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also states that by operation of Rule [footnote omitted], Warren is entitled to costs accrued including

reasonable attorney's fees as of the date of the Offer of Judgment.37

The Bemis Offer is also straightforward. In it Bemis offers Warren a judgment on the following

terms: (1) Bemis offers the allowance of an unsecured, non-priority claim in the amount of $124,835.53 with

recovery to be limited to whatever Warren's pro-rata recovery might be, said claim amount to be reduced

by whatever Warren recovers from Mid Continent; and (2) a declaration that the surety bonds are not the

property of the estate.38 As it did with Mid Continent, Warren's acceptance accepts . . . in the amount of

$124,835.53" and recites that, by Rule it remains entitled to attorneys fees and costs, an application for

which will follow.39

The use of Rule 68 procedure is, in this Court's experience, rare, and especially so in this District's

Bankruptcy Court. Warren's acceptances were filed shortly before the Christmas holiday and were not

brought to this Court's attention until after December 25, 2005, when the Court was on vacation. After

review of the acceptances, this Court instructed the Clerk to enter judgments that granted Warren judgment

against Mid Continent in the sum of $40,000" and against Bemis allowing Warren a general, unsecured,

non-priority claim in the amount of $124,835.53," limited as set forth in Bemis offer, and a declaration that

the surety bonds are not property of Bemis' bankruptcy estate. Each judgment also recognized that Warren

asserted a right to accrued costs and reasonable attorneys fees as of the date of the Offer of Judgment and

that this issue remained for determination by the Court.40

4. Communications Concerning the Offers and Acceptance.

At the evidentiary hearing, many letters and e-mails between and among counsel for the parties were

admitted into evidence. Richard Ogden testified about his understanding of the offers and his acceptance

of them on behalf of his client, Warren. Susan Saidian testified about Bemis's offer. Larry Lerner testified

about Mid Continent's offer.

With respect to the MC Offer, it appears that all communication between Lerner and Ogden had

broken down by the middle of 2004. The documents admitted into evidence contain a number of Lerner's

file notes indicating that Ogden was, at best, unreliable in returning Lerner's calls about settlement and

scheduling, beginning in March of 2004 and extending throughout the case.41 In one of Lerner's letters to

Ogden, he notes that Ogden had failed to contact him to follow up on settlement discussions for over seven

months.42 Ogden essentially admitted this under cross examination. When the Court asked Ogden why

he did not simply pick up the phone and confer with Lerner about the offer and acceptance, he stated that

he should have called [Lerner] but that doing so had not occurred to him. The Court finds that Mid

Continent unambiguously accepted MC's Offer of $40,000 and concludes that Warren's right to recover

costs and fees is a legal issue that will be discussed below.

40 Dkt. 86 (Bemis) and Dkt. 88 (Mid Continent).

41 See Ex. CC (File note, March 23, 2004, no callback from Ogden after initial settlement

discussions; further notation of no callback April 14, 2004); Ex. OO (September 30, 2004 letter from Martin Bauer, Mid Continent's local counsel, to Russell Wantland, Ogden's partner, stating inter alia their agreement that Ogden will return Larry Lerner's calls which have been made weekly to discuss the status of your review of the records . . . .).

42 See Ex. UU.

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There was more discussion among counsel in connection with the Bemis Offer. Notably, Bemis's

counsel, Ms. Saidian, wrote Ogden a letter in November of 2003 (a full year prior to the Bemis Offer),

offering to allow Warren's claim in the same amount ultimately allowed in the judgment.43 On December

26, 2004, Saidian wrote Ogden and told him that the only sums you can recover from the estate will be in

accordance with the offer . . . your client will not be able to receive any amounts for sums due for anything

other than unpaid invoices.44 Saidian goes on to state that Warren's proof of claim (and Bemis's Offer)

does not include any other fees or costs. More important is Saidian's trial testimony that she spoke with

Wantland via phone and he confirmed Warren's view that the Bemis Offer did not include an award of any

fees. When Ogden challenged Saidian's testimony on cross examination, she did not waiver. Moreover,

when Saidian so testified on direct, Ogden lodged no objection to her testimony. Wantland was present in

Court during this testimony at trial, but did not testify to rebut Saidian's testimony. From Saidian's credible

testimony and Wantland's silence, this Court finds that Wantland indeed confirmed Saidian's understanding

that the Bemis Offer excluded attorneys fees and costs and that Warren thereafter accepted it.

The Court notes that, after the trial and record closed, after Warren had submitted its closing brief

on February 22, 2005 as authorized by the Court45 and Bemis had submitted its closing brief on March 3,

43 See Ex. R. (Please understand that given that we have agreed that you will have an

unsecured claim in the bankruptcy less any amounts your receive from the bond company, the debtor is not particularly interested in participating in voluminous depositions, as it does create a cost for the estate.).

44 See Ex. BBB.

45 Dkt. 114.

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2005,46 Wantland filed a Supplemental Affidavit.47 Because this affidavit was filed after the close of the

evidence and without leave of the Court, this Court struck it sua sponte without reviewing the document at

length.48 From its cursory review and from statements made in Warren's closing memoranda, the Court

concludes that the document, supposedly affirmed as true by Wantland, was submitted by way of a back-

door impeachment of Saidian's trial testimony. Warren had the chance to present Wantland's rebuttal

testimony at trial where he could have been cross-examined by Bemis's counsel, but Warren declined to

do so. Failing to call Wantland as a witness and then subsequently submitting his affidavit testimony after

the record was closed is poor practice if not sanctionable.49

As to the Bemis Offer, the Court finds that the parties' agreement expressly excluded the payment

of attorneys fees to Warren in addition to the allowance of its claim in bankruptcy. As set forth below, this

finding logically follows from the posture and conduct of the case. All of Warren's fees claimed in

connection with this litigation arose post-petition. Warren's claim for unpaid invoices arose pre-petition.

There is no evidence in the record that Warren incurred or makes a claim for attorneys fees incurred in

46 Dkt. 117.

47 Dkt. 118.

48 Dkt. 120.

49 The Court notes that Warren also submitted an affidavit of Wantland with its closing brief

(Dkt. 114, Ex. 9), which like the Supplemental Affidavit stricken by the Court, purports to impeach Saidian's testimony concerning her phone call with Wantland. The submission of this affidavit in support of its closing brief is not any more appropriate than the Supplemental Affidavit, having come after a closed record. The closing trial briefs authorized by the Court were for submission of legal authorities and argument; it is not an opportunity to submit additional evidence or conduct a trial by affidavit.

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connection with this claim before the bankruptcy case was filed.50 11 U.S.C. § 502(b) makes plain that the

amount of an allowed claim is determined as of the date of filing the bankruptcy petition.

5. Attorney Fees and Costs.

Warren seeks costs and fees ranging from $126,586.9351 to $139,260.70,52 plus pre- and post-

judgment interest, for what amounts to a $40,000 recovery from Mid Continent and the allowance of a claim

by Bemis which could conceivably have a cash value to Warren of less than $10,000. The Court has

carefully examined Warren's monthly statements of time and expense submitted in support of its fee request.

At trial, Warren presented a series of exhibits in support of its fee request. The first exhibit contains

monthly statements by Mullinix, Ogden, Hall, Andrews & Ludlam (Mullinix Firm) and local counsel

William Wells from November 11, 2002 until December 30, 2004.53 There are a number of red-highlighted

entries in this exhibit. Ogden testified that these highlighted entries are for work done by the Mullinix Firm

in connection with either the main bankruptcy case or adversaries other then this one and, accordingly,

Warren does not seek reimbursement of the highlighted fees from Bemis and MC. The second exhibit

consists of the Mullinix Firm's billing from January 1, 2005 through February 9, 2005, the day prior to the

50 Indeed, Warren's proof of claim filed April 15, 2003 expressly excluded attorney fees and costs, as did its amended proof of claim filed June 23, 2003. See Claim No. 68 and No. 70.

51 In its Motion for Fees filed January 3, 2005, Warren sought fees and costs totaling

$126,586.93 based on over 740 hours of attorney time. See Dkt. 90, Ogden Affidavit. This same affidavit was received into evidence at trial as Ex. 4.

52 As explained infra at page 13-14, this figure is derived from Warren's summary presented at trial as Ex. 3, and is purportedly more accurate than Ex. 4, Ogden's Affidavit. The number of attorney hours compiled in Ex. 3 is over 1,000.

53 Ex. 1.

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scheduled evidentiary hearing.54 This statement totals $29,355.75 in attorney time, all of which was

expended in preparing and defending the fee request. The third fee exhibit consists of a summary of fees

incurred on various task categories by attorney from the beginning of the Mullinix Firm's engagement until

the receipt of the MC Offer on December 13, 2004 and the Bemis Offer on December 20, 2004.55 While

Warren asserts that Bemis and MC are jointly and severally liable for Warren's fees in this case, Warren

also appears to assert that each defendant is jointly liable for different amounts of fees.56

The record also contains an affidavit by Ogden57 prepared in anticipation of trial which asserts that

the fees earned in prosecuting the adversary proceeding up to the time of the entry of judgment is

$96,818,59, with additional costs of $10,891.17.58 The affidavit also describes post-judgment fees in the

amount of $18,256.25 and costs of $620.92. The affidavit supports a total request for fees and expenses,

before and after judgment, of $126,586.93. In his testimony, Ogden stated that the affidavit may be

inaccurate in some respects and that the most accurate record of fees and expenses is found in the Exhibit

3 summary. The total fee exposure supported by Exhibit 3 (subject to Ogden's redactions at trial and the

Court's comments below), is $103,205.71 in fees through the date of the offers, $16,012.50 in fees from

54 Ex. 2.

55 Ex. 3.

56 See Ex.3. As Ogden has testified, some $96,086.96 in fees were incurred by Warren

before MC's Offer was made on December 13, 2004. But, on December 15, 2004, when Bemis's Offer was made, the joint fee burden had increased to $103,205.71. It is hard to understand how these parties are jointly and severally liable for the additional $7,000 claimed against Bemis.

57 Ex. 4.

58 Of the fees incurred up to entry of judgment, $91,973.75 were the Mullinix Firm's fees and

$4,844.84 were local counsel's fees.

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the date of acceptance to judgment (as corrected at trial), and $18,358.75 in fees post-judgment. Exhibit

3 contains no summary of pre-judgment costs and expenses. Post-judgment costs reflected in Exhibit 3 are

$1,683.74, much higher than that contained in Ogden's affidavit. Exhibit 3 would appear to support a total

request for fees and expenses, before and after judgment, of $139,260.70. It is not clear how one

reconciles the discrepancies in figures between Exhibit 3 and 4.

Compounding the confusion in these numbers is the inconsistency of hourly rates requested by the

Mullinix Firm. Ogden testified that his normal rate was $175, but that Warren is such a good client that he

reduced his rates in this case to $145. Yet, on Exhibits 3 and 4, he reports his rate as $175, thereby

increasing the bottom line on those exhibits. There is similar inconsistency in Wantland's rate which is billed

to Warren at $90, but stated on Exhibit 3 as $150. John Barbush's rate is billed at $135 but reported in

Exhibit 3 at $150. On the detailed monthly billing statements,59 Ogden's hourly rate started at $135 in 2003

and went up to $145 a couple of months into the case. Wantland's hourly rate started at $90 in 2003,

increased to $125, and was billed at $145 by December of 2004. Barbush's hourly rate was billed at $135

and $145 in the monthly statements.

Many of the entries on the statements are often batched, making it difficult to determine how much

time the attorney spent doing a particular task. For instance, on March 26 and March 27, 2003, Barbush's

time reflects 10.1 hours of batched entries.60 The Court cannot determine from batched entries what

increments of time were spent on what tasks and, in the bankruptcy context, such time entries are usually

59 See Ex.1. These monthly statements appear to be the billings submitted to Warren and from which Warren paid the Mullinix Firm.

60 Ex. 1, p. 4536.

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dishonored.61

It appears that preparation of the original complaint and proof of claim, both of which were based

on the erroneous premise that Warren was owed rental payments took, between Barbush and Ogden, nearly

fifteen hours.62 Preparation of the summons and cover sheet took over 1.5 hours in attorney time.63 The

original complaint was 6 pages long, including the prayer and signature block of counsel. And this is only

the start.

In the July, 2003 billing, Barbush billed six hours to research bankruptcy law on the debtor's

objection, presumably to Warren's proof of claim.64 This objection was 3 pages in length and asserted

that debtor lacked sufficient documentation from Warren to prove that it had done business with Warren

Power as opposed to Warren Cat.65 Barbush slapped on another 3.0 hours for preparation of the First

Amended Complaint which is identical to the Complaint, save that the reference to rental agreements is

replaced by a reference to invoiced parts.66

61 See Judge Nugent's Professional Fee and Expense Guidelines, effective January 31, 2002. The complete text of the Guidelines may be found on the Court's website www.ksb.uscourts.gov under the Judges' Corner link.

62 Ex. 1, pp. 4536 and 4538.

63 Ex. 1, p. 4538. There is an additional entry for drafting of the summons but the amount of

time devoted to that task cannot be determined from the batched entry of 3/27/03. Ex. 1, p. 4536.

64 Ex. 1, page 4543, 6/11/03 entry.

65 In May, 2003, Ogden billed 2.6 hours reviewing answer to Warren's adversary complaint.

See Ex. 1, p. 4541, 5/22/03 and 5/26/03 entries. Mid Continent's answer was approximately 4 pages in length and Bemis's answer was 2 ½ pages.

66 Ex. 1, p. 4544, 6/12/03 entry. A like simple revision was made to Warren's proof of claim but between Ogden, Barbush, and Wantland, no less than four time entries involving 7.1 hours of time

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Later, on August 28, 2003, Ogden billed 3.0 hours for working with John Barbush regarding the

pretrial/status conference and Rule 26(f) conference. Not to be outdone, Barbush also billed his time

talking with Ogden and work on preparing for the discovery conference.67 On September 2, Ogden and

Barbush spent another five hours preparing for the Rule 26(f) conference.68 Thereafter, Wantland, Ogden

and Barbush devoted nearly 6 hours preparing for and participating by telephone in the Court's routine

scheduling conference.69

In short, a review of the Mullinix Firm's monthly statements reveals that very little substantive legal

work was done on the adversary in 2003. There was minimal activity regarding discovery and scheduling

of depositions in late 2003, but it does not appear much, if any, of this materialized.70 At trial, both Ogden

and Lerner testified about a lengthy conference call held between them on March 23, 2004 where the parties

reviewed each and every one of Warren's invoices. Mid Continent made a settlement offer to Warren

amending and reviewing the proof of claim were billed. See Ex. 1, p. 4544, 6/12/03 and 6/19/03 entries. The Court notes that it is impossible to determine precisely how much time was devoted to revising the proof of claim due to the batched time entries and that all but 3 hours of this time was redacted by Ogden.

67 Ex. 1, p. 4548.

68 Ex. 1, p. 4550. Yet another 2.75 hours was spent by Ogden and Barbush preparing the

Rule 26(f) report. Id., 9/4/03 and 9/5/03 entries.

69 Ex. 1, p. 4551, 9/15/03, 9/16/03, 9/17/03 and 9/18/03 entries. This Court schedules pretrial scheduling conferences in its cases about 10-15 minutes apart. The perfunctory scheduling conferences consist of a review of the parties' Rule 26(f) report and the setting of discovery and other scheduling deadlines.

70 Ex. 1, pp. 4556, 4557, 4559.

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based upon Mid Continent's analysis of the invoices.71 At this point, it became clear that Mid Continent

disputed liability for those invoices for parts that were not used or consumed in a bonded project. Warren

had maintained that no such showing was required in order for it to recover against the bond. At this point,

the Mullinix Firm began to research the bond coverage issue.72 In his direct examination, Ogden stated that

the high fees in this case were, in great part, due to the burden of having to analyze each invoice and tracing

whether the part was used or consumed by Bemis in a bonded project. Yet, only a few hours of attorney

time were devoted to that task which, according to Ogden, was performed by Debbie Smith, a former

Bemis employee who now works for Warren.73

Ogden also attributed much time to the lack of cooperation among counsel. The Court notes,

however, that no discovery motions other than those seeking deadline extensions were ever filed.

According to the monthly billing statements, discovery in this adversary proceeding did not heat up until late

summer of 2004.

The Court received proffered expert testimony from Thomas J. Lasater, a Kansas attorney and a

well-respected member of the Bar of this Court. Lasater's proffered testimony was to the effect that the

fees and time incurred by the Mullinix firm were reasonable and that the time spent litigating about the Offers

71 Even though the settlement offer was made on March 23, 2004, it does not appear that the Mullinix Firm communicated the offer to Warren until nearly a month later (Ex. 1, p. 4570, 4/19/04 entry) and drafted a formal responded to Mid Continent's offer in May, 2004, although it is not apparent that the response was ever sent. (Ex. 1, p. 4572, 5/6/04 entry).

72 Ex. 1, pp. 4567, 4569-4571.

73 See Ex. 1, p. 4572, 5/6/04 entry for attorney Wantland of 3.70 hours conducted review of

invoices with Deborah Smith and Paula Green Ant [sic] Warren Cat. Wantland logged an additional 
4.40 hours reviewing invoices on 7/23/04 (Ex. 1, p. 4580) and 1 hour on 8/12/04 (Ex. 1, p. 4583).

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themselves was reasonably necessary as well. No one cross-examined Lasater. Notwithstanding his

excellent standing and reputation, the Court attributes little weight to his proffered testimony.

Mid Continent's counsel, Larry Lerner, testified that his firm's fees for defending this action were

between $35,000 and $40,000. Susan Saidian testified that her firm's fees for defending on Bemis's behalf

were $7,800.

CONCLUSIONS OF LAW

1. Rule 68 and Attorneys' Fees as to MC Offer

Did MC's Offer include attorneys fees and did Warren's acceptance, which included language

reserving its right to recover fees and costs, operate as a valid acceptance under Rule 68? These are the

core legal issues in this case.

We start with the actual language of Rule 68:

At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property or to the effect specified in the offer, with costs then accrued.74

If the plaintiff rejects the offer and proceeds to trial, the defendant will be entitled to recover from the plaintiff

all costs incurred after the date of the offer if the plaintiff recovers less at trial than was offered. The obvious

purpose of the Rule is to facilitate settlement by forcing plaintiffs to carefully consider the substance of offers

before they accept or reject them and by penalizing plaintiffs whose view of the value of their cases is later

not shared by the finder of fact at trial.

There is no Tenth Circuit authority squarely on point on the issue before the Court. The leading

74 Fed. R. Civ. P. 68 (Emphasis added).

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Supreme Court case concerning Rule 68 is Marek v. Chesny,75 but it, too, is factually distinguishable.

Marek involved a civil rights case where the defendants' pretrial offer of judgment was rejected by the

plaintiff and the plaintiff ultimately obtained a judgment amount less, following trial, than the defendants'

pretrial offer. The Supreme Court stated the issue before it in Marek was whether attorney's fees incurred

by a plaintiff subsequent to an offer of settlement under Federal rule of Civil Procedure 68 must be paid by

the defendant under [the fee-shifting statute] 42 U.S.C. § 1988, when the plaintiff recovers a judgment less

than the offer.76 The Supreme Court answered the question no. This Court also notes that the language

in the pretrial offer of judgment made by defendants in Marek is markedly different from the terms of the

offers made by Mid Continent and Bemis in this case.77

Both parties in the current controversy argue that Marek supports their position, citing to different

portions of language in the opinion addressing the validity of the pretrial offer. Warren seizes upon dicta in

Marek stating that a court is obligated by Rule 68 to include an amount for costs in the judgment if the offer

of judgment does not explicitly include costs. The plaintiff in Marek argued unsuccessfully that it was

incumbent upon defendants to bifurcate or itemize the respective amounts offered for the substantive claim

and the costs. Marek holds that a defendant's offer need not itemize what is being tendered in the judgment:

This construction of the Rule best furthers the objective of the Rule, which is to encourage settlements. If defendants are not allowed to make lump-sum offers that would, if accepted, represent their total liability, they would understandably be reluctant to make settlement offers. As the Court of Appeals observed, "many a defendant would be unwilling to make

75 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed. 2d 1 (1985).

76 473 U.S. at 3.

77 Id. at 3-4. The defendants' offer in Marek was for a sum, including costs now accrued and

attorney's fees, of ONE HUNDRED THOUSAND ($100,000) DOLLARS.

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a binding settlement offer on terms that left it exposed to liability for attorney's fees in whatever amount the court might fix on motion of the plaintiff."78

The Marek Court also concluded that where the underlying statute defines 'costs' to include attorney's fees,

we are satisfied such fees are to be included as costs for purposes of Rule 68.79 In the present matter,

Warren has claimed attorneys fees under an Oklahoma fee-shifting statute that taxes attorney's fees as costs

when a vendor recovers a judgment.80 Thus, under the authority of Marek, the Court can conclude as a

matter of law that MC's Offer was valid and that it subsumed attorney's fees when it tendered a judgment

for the claims alleged in Plaintiff's petition and those claims included attorneys fees and costs.81 A

resolution of the validity of the offer does not, however, dispose of the question before the Court today.

Several Circuit Courts of Appeal have opined on the offer and acceptance process contemplated

by Rule 68.82 In McCain v. Detroit II Auto Fin. Center,83 the Sixth Circuit found that the acceptance of

78 Id. at 6-7 (citation omitted).

79 Id. at 9.

80 OKLA. STAT. tit. 12, § 936 (2002).

81 Against Mid Continent, Warren alleged that Mid Continent was liable for the full amount of

parts, tools and repair services utilized on the construction projects under which it issued payment bonds, along with interest, costs and attorney fees and in its prayer for relief, Warren sought judgment against Mid Continent in the amount of $124,835.53, along with interest, costs and a reasonable attorney fee. See Second Amended Complaint. Dkt. 68 (Emphasis added.).

82 As noted previously, this Court's review of the Rule 68 cases decided by the Tenth Circuit Court of Appeals does not provide any guidance for the appropriate analysis of Rule 68 offers and acceptances implicated by the facts of this case. See e.g., First Nat. Bank of Turley v. Fidelity & Deposit Ins. Co. of Maryland, 196 F.3d 1186 (10th Cir. 1999) (determining whether judgment obtained after trial is greater than rejected Rule 68 offer requires court to compare offer with sum of jury award and pre-offer costs); Dalal v. Alliant Techsystems, Inc., 182 F.3d 757 (10th Cir.1999) (review of fee award to plaintiff in age discrimination case as prevailing party after plaintiff rejected defendant's Rule 68 offer of judgment and recovered less than offer); Sussman v. Patterson, 108

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an offer as to all claims and causes of action was sufficient to include attorneys fees where such fees were

part of the statutory damages contemplated, but that the plaintiff would still be entitled to seek costs. The

plaintiff's subsequent request for attorneys fees was denied on that basis. Applying basic principles of

contract law, the Sixth Circuit concluded that the offer was unambiguous. Nor was there an issue as to the

validity of the acceptance of the offer because the acceptance was unambiguous and did not voice a

reservation or intention to seek additional fees.

In Nordby v. Anchor Hocking Packaging Co.,84 the Seventh Circuit found an offer of judgment

plus costs to be unambiguous and when the plaintiff accepted the offer, the Court concluded that since

attorneys fees were part of the substantive relief sought by the plaintiff, acceptance of the offer prevented

the plaintiff from returning for an attorney's fee award after judgment was entered. The court stated that

F.3d 1206 (10th Cir. 1997) (review of attorney's fees award in connection with acceptance of offer of judgment; cutoff date for fees and costs under Rule 68 is date of offer); Driver Music Co., Inc. v. Commercial Union Ins. Companies, 94 F.3d 1428 (10th Cir. 1996) (determination of whether plaintiff was prevailing party at trial under Oklahoma statute); Stubblefield v. Windsor Capital Group,74 F.3d 990 (10th Cir. 1996) (appellate court lacked jurisdiction to review the grant of a Rule 60(b) motion vacating a judgment entered pursuant to Rule 68); Arkla Energy Resources, a Div. of Arkla, Inc. v. Roye Realty and Developing, Inc., 9 F.3d 855 (10th Cir. 1993) (Costs and attorney fees were not required under Rule 68 where ambiguous offer, which did not clarify the value of the offer, was made); Fry v. Board of County Com'rs of County of Baca, State of Colo., 7 F.3d 936 (10th Cir. 1993) (Rule 68 is limited to cases where the offeree, not the offeror, prevails at trial); Knight 
v. Snap-On Tools Corp., 3 F.3d 1398 (10th Cir.1993) (attorney fees not defined as costs under fee shifting state statute involved; plaintiff could not recover post-offer costs where jury award was less than offer of judgment); American Ins. Co. v. El Paso Pipe and Supply Co., 978 F.2d 1185 (10th Cir.1992) (analysis of whether plaintiff was prevailing party after Rule 68 offer was rejected and case went to trial); Mock v. T.G. & Y. Stores Co., 971 F.2d 522, 527 (10th Cir. 1992) (Rule 68 offer for sum certain not mentioning prejudgment interest was deemed to include prejudgment interest).

83 378 F.3d 561 (6th Cir. 2004).

84 199 F.3d 390 (7th Cir. 1999).

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there is no ambiguity in an offer that encompasses relief on all counts. A subsequent application for fees was

not necessarily evidence of something other than acceptance. Judge Posner stated that:

Granted, the contract-law analogy is just that, an analogy, for the reason stated earlier: the consequences of rejecting a Rule 68 offer are more serious than those of rejecting an ordinary contract offer. But the appropriate adjustment is to insist that the Rule 68 offer be completely unambiguous, not that it use the magic words "attorneys' fees."85

In so holding, the Seventh Circuit joins the Sixth and Eleventh Circuits in eschewing the magic words

approach to interpreting offers of judgment and their acceptances.86

The Nordby Court also expressly disagreed with the Eighth Circuit holding in Stewart v.

Professional Computer Centers, Inc.87 There, the plaintiff was offered judgment on any or all counts.

When plaintiff accepted the offer, she also stated that she would seek attorney's fees as part of her costs

in accordance with Fed. R. Civ. P. 54. The district court thereafter granted plaintiff an award of fees.

Applying principles of contract law, the Eighth Circuit determined that the plaintiff's acceptance, with its cavil

concerning attorney's fees, did not evidence an objective manifestation of mutual assent. Because the

acceptance was not valid, the Eighth Circuit concluded that the district court's award of fees should be

reversed and remanded with instructions to grant relief from the judgment. The contract principles or

85 Id at 392 (Emphasis added).

86 See Arencibia v. Miami Shoes, Inc., 113 F.3d 1212 (11th Cir. 1997) (Plaintiff's suit under

the Fair Labor Standards Act where attorney's fees were sought were included in offer of judgment that was silent as to attorney's fees and costs and district court could not reserve jurisdiction to award attorney's fees.).

87 148 F.3d 937 (8th Cir. 1998).

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magic words approach is also favored by the Ninth Circuit.88

This Court is troubled by the magic words approach because it seems to offer plaintiffs an

opportunity to manipulate, as Warren may have done, the Rule 68 process. Warren unambiguously

accepted the MC Offer, but asserted by operation of Rule, its entitlement to attorney's fees and stated

it would apply for them. Thus, to the extent there is ambiguity in the offer and acceptance, it is Warren that

introduced the ambiguity by accepting the offer, but also demanding attorney's fees. And, even if Warren's

response to MC's Offer was ambiguous, the existence of the ambiguity does not void the agreement;

instead, it allows the Court to consider parol evidence to determine the actual intentions of the parties.

Even applying a strict contract analysis to these facts and considering parol evidence, the Court

would still be convinced that Warren intended to accept a $40,000 offer of judgment from Mid Continent.

There is ample testimony in the record to support the finding that Mid Continent's previous offer in March,

2004, was less than $16,000. This offer was predicated on Mid Continent's understanding and

interpretation of the Oklahoma public works statute that a person furnishing materials for a public works

project only has a lienable claim as to those items used or consumed in the project itself. Mid Continent

was only able to satisfy itself that parts invoiced for $16,000 of the $124,000 claimed by Warren could be

attributed to specific jobs and were used or consumed in them. In addition, Mid Continent's spreadsheet

which matches up each Warren invoice with a job or other disposition of the parts sold, reflects the existence

of a $7,000 credit in favor of Bemis.89 Finally, a good many of the parts sold by Warren were delivered

88 Nusom v. Comh Woodburn, Inc., 122 F.3d 830 (9th Cir. 1997) (Offer of judgment for specific sum together with costs, but is silent as to attorney fees, is ambiguous and does not preclude plaintiff, after accepting offer, from seeking fees under federal Truth in Lending Act statute.).

89 See Ex. NN.

24

not to job sites but rather to lockboxes strategically placed around Oklahoma where contractors could pick

up their parts. Lerner testified that, in his analysis for Mid Continent, he gave Warren credit for lockbox

parts as well as parts delivered to shop – parts purchased by Bemis to be held as reserve inventory against

future breakdowns. The Court finds credible Lerner's testimony that the difference between the initial

$16,000 and the later $40,000 offered was intended to pay accrued fees and costs.

Mid Continent issued its offer on December 13, 2004. There is no mention of Warren's receipt of

the MC Offer in the Mullinix Firm's time records until December 15.90 On that day, it appears that attorney

TMS spent first 6.2 hours, then 8.4 hours researching the law concerning offers of judgment. Ogden spent

2.75 hours in the same effort. On December 16, Ogden's time record shows Receipt of. . . offer to

confess judgment with a billing of 0.2 hours.91 On December 17, various lawyers spent some 7.9 hours

researching the law on offers of judgment and attorney's fees. On December 19, Wantland billed some 2.3

hours in the same endeavor. On December 21, Wantland drafted a letter to all counsel regarding the offers

of judgment after which attorney TMS undertook a 8.2 hour effort to research and draft Warren's Motion

to Establish Post-Acceptance Procedure.92 December 22 featured over 13 hours of billing on the offer of

judgment, followed by 10 more hours on December 23, 2.3 hours on Christmas Eve and another 2.0 hours

on December 26.93 Nowhere in this concerted effort to deal with Mid Continent's three-line offer of

90 Ex. 1, p. 4607.

91 Ex. 1, p. 4608. All of these entries have been redacted from Warren's attorney's fees

request.

92 Ex. 1, p. 4609.

93 Ex. 1, p. 4609-10.

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judgment is there a phone call or letter to Mid Continent's counsel. Ogden admitted at trial that he should

have called [Lerner or Bauer]. This suggests to the Court that Warren was in no doubt as to what MC's

Offer meant. If the offer had been ambiguous, Warren's counsel could easily have confirmed its meaning

with Mid Continent's counsel and simply failed to do so. Instead, Warren chose to accept the MC Offer

and then expend over fifty attorney hours on finding a way to recover its attorney's fees. Indeed, in Ogden's

letter to counsel dated December 21 (before the Post-Acceptance Procedure Motion was filed), Ogden

states unequivocally that Warren has accepted the offers of both Mid Continent and Bemis.94

The Court also notes that after receiving the December 13 MC Offer, Warren continued to prepare

its summary judgment motion and filed the same on December 20, the same day its notice and acceptance

of the MC Offer was filed.95

From all of this, the Court concludes that Warren had every intention of accepting the MC Offer

as made, but also of attempting to enhance its recovery by seeking fees later. The fact that no Warren

lawyer made any inquiry of Mid Continent counsel about the meaning of the MC Offer and that Warren's

counsel immediately undertook the fifty hour effort described above belies Ogden's testimony that he did

not know what Mid Continent was doing when they offered $40,000. If Warren did not wish to accept

$40,000, a simple one line pleading rejecting the offer would have been sufficient. Warren's activities do

not amount to a counter-offer and this Court finds Warren's acceptance to be unequivocal and binding.

2. Rule 68 and Attorneys' Fees as to Bemis Offer

The terms and language of the Bemis Offer differ from the MC Offer but the Court concludes that

94 Ex. AAA.

95 Dkt. 78 and 79.

26

a similar result must obtain. The debtor offered Warren the allowance of an unsecured, non-priority claim

in the full amount of Warren's proof of claim, $124,835.53, and Warren's pro-rata recovery thereon.

Warren's proof of claim was exclusive of interest, attorney's fees and costs. This is the most that Warren

could have recovered in Bemis's bankruptcy as a general unsecured creditor.

 There are additional compelling factual and legal reasons to hold that Warren is not entitled to

attorney's fees upon its acceptance of Bemis's Offer. First, there is the unimpeached testimony of Ms.

Saidian that Wantland told her he understood the offer to allow Warren's claim in the Bemis bankruptcy did

not include attorney's fees. Second, Bemis had been in bankruptcy more than two years when it made the

offer to Warren. Despite Warren's repeated assertion that its claim was something other than a general

unsecured claim, there is nothing in the record that would support such a legal conclusion. The attorney's

fees requested by Warren against Bemis began accruing on October 15, 2002, the date of the first time

entry by Ogden. The Bemis bankruptcy petition was filed on September 27, 2002. There is simply no legal

basis for a creditor to tack post-petition attorney's fees onto a pre-petition claim unless one, and only one

condition exists: the creditor must hold an over-secured claim.96 In that event, the creditor is entitled, where

its contract so provides, to receive attorneys fees and interest in addition to its claim. Here, Warren has no

collateral. Indeed, because Warren's claims arise out of bonded public works projects, Warren could

not take a lien in the underlying property. If there are Warren documents that would support the attachment

and perfection of a security interest in the parts sold by Warren to Bemis, those documents have not been

placed in evidence. What is in evidence are Warren's responses to Bemis's First Requests for Admission,

96 11 U.S.C. § 506(b).

27

in which Warren responds to a Bemis request that Warren admit it is not a secured creditor:

Admitted only that a security agreement was not executed by Bemis for parts installed and service performed on Bemis equipment during the year 2002 . . . .97

Without a secured claim, Warren had no right to any post-petition enhancements under § 506(b).

Because the attorney's fees it demands are for services rendered post-petition, Warren cannot recover them

as part of its allowed claim under 11 U.S.C. § 502(b) which states, in part, that the Court shall determine

the amount of such claim in lawful currency of the United States as of the date of the filing of the petition .

. . . As of the date of filing, Warren had incurred none of the fees requested and, accordingly, is not entitled

to have them allowed as part of its unsecured claim.

The Bemis Offer did not include costs and attorney's fees as a matter of law, and as supported by

the parol evidence adduced at trial. Wantland confirmed this fact before Warren communicated its

unequivocal acceptance of the Bemis Offer.

3. Warren's Request for Fees

Even if Warren were legally entitled to costs and attorney's fees in addition to what was contained

in the offers, its request would be denied for several reasons. As a preliminary matter, the Court observes

that Warren's attorney's fees and costs would, in any event, be limited by Rule 68 itself. The cutoff date

for accrued costs (and attorney fees) is the date of the offer of judgment.98

The Court's review of Warren's fee request is made more difficult by the fact that Warren has not used the

97 Ex. KK, Request No. 9, p.5.

98 See Sussman v. Patterson, 108 F.3d 1206 (10th Cir. 1997). Thus, Warren would not be

entitled to costs and attorney's fees accruing after December 13, 2004 (MC Offer) and December 15, 2004 (Bemis Offer). None of Warren's exhibits purport to show the costs and attorney's fees accrued as of these dates and in fact, Warren seeks recovery of post-judgment attorney's fees and costs.

28

appropriate time period. As the fee applicant, Warren has the burden of establishing its entitlement to an

award and the reasonableness of its fees and costs.99

1. D. Kan. R. 54.2

The Rules of Practice for the United States District Court for the District of Kansas apply in this

Court unless they are expressly modified by local bankruptcy rule. When Ogden and Wantland were

admitted to practice before this Court pro hac vice, they subjected themselves to compliance with these

rules. Notwithstanding that, neither one complied with D. Kan. R. 54.2 which expressly provides that [t]he

court will not consider a motion to award statutory attorneys fees made pursuant to Fed. R. Civ. P. 54(d)(2)

until the moving part shall have first advised the court in writing that after consultation promptly initiated by

the moving party, the parties have been unable to reach an agreement with regard to the fee award.

Nowhere in the pleadings does this Court find such written advice. That alone is sufficient basis to deny the

attorney's fees requested by Warren.

2. Poor Documentation and Duplicative Billing

Warren's fee documentation demonstrates billing practices that border on abusive at worst and

evidence poor billing judgment at best. The documents themselves are of questionable value because of

the numerous batched entries,100 inconsistencies, excessive time for routine tasks, apparent unproductive

time, and duplications pointed up previously in this Memorandum Opinion. Moreover, applying the familiar

standards that govern the allowance of attorneys fees, there is simply no justification for what the Mullinix

99 Mares v. Credit Bureau of Raton, 801 F.2d 1197, 1201 (10th Cir. 1986), quoting Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 76 L.Ed. 2d 40 (1983).

100 See In re Recycling Industries, Inc., 243 B.R. 396, 406 (Bankr. D. Colo. 2000) (discussing reasons that practice of lumping is universally disapproved by bankruptcy courts).

29

Firm charged, particularly in relation to the result its client, Warren, agreed to accept.

The Mullinix Firm's monthly statements betray the lawyers' apparent conclusion that because this

case in some way implicated a fee-shifting statute, economical and efficient prosecution of this case was no

longer necessary. This Court simply does not believe that a business client of even passing sophistication

would unquestioningly pay lawyers' bills like these. Certainly this Court is required to apply at least that

level of scrutiny to the instant application.

The lodestar formulation (reasonable hours multiplied by reasonable hourly rates) is the normal

starting point for determining the reasonableness of a statutory fee award.101 The number of hours spent by

the Mullinix Firm over the approximate two year period this adversary proceeding has been pending are

excessive and unproductive. An inordinate amount of time was devoted to preparation for routine

scheduling conferences and repeated extensions of scheduling deadlines. Indeed, very little time was spent

on substantive legal work during the entire first year of the adversary. Little, if any, discovery activity is

evident from the monthly billings. After Mid Continent communicated its initial settlement offer in March,

2004, there was a lengthy delay before the Mullinix Firm zeroed in on the key legal issue raised by Mid

Continent. The monthly statements suggest that it was not until the Fall of 2004 that the Mullinix Firm

focused its discovery and research efforts on the core used or consumed legal issue. Indeed, the Court

questions whether the Mullinix Firm has not devoted more time and energy post-offer to the recoverability

of attorney's fees than it has to the merits of Warren's claim against the bond.

As to the reasonableness of the hourly rates, the Court has previously noted the inconsistencies in

101 Brown v. Phillips Petroleum Co., 838 F.2d 451, 453-54 (10th Cir. 1988).

30

the rates between the Mullinix Firm's billing statements and the affidavits and trial exhibits submitted in

support of its application. The Court is also hamstrung by the lack of any evidence presented regarding the

reasonableness of the hourly rates. And as noted previously, the Court discounted the proffered expert

testimony of local attorney Thomas J. Lasater as to the reasonableness of the total fee request.102

The Court concludes that the lodestar fee sought by the Mullinix Firm here far exceeds the bounds

of reasonableness. Nothwithstanding this conclusion, the Court adheres to its duty to further evaluate the

requested fees. In Ramos v. Lamm,103 the Tenth Circuit Court of appeals adopted the twelve Johnson104

factors to gauge the reasonableness of a fee request and whether any adjustment should be made to the

lodestar fee.105 The Court has reviewed the Mullinix Firm's fee request in light of those Johnson factors

not subsumed in the lodestar analysis that are pertinent here: (1) the novelty and difficulty of the issues; (2)

the requisite skill; (3) preclusion of other employment; (4) time limitations; (5) amount involved and results

obtained; (6) experience, reputation and ability of attorneys; (7) undesirability of case; and (8) the nature

and length of the professional relationship with the client. With these factors and the lodestar formulation

102 See Ramos v. Lamm, 713 F.2d 546, 555 n. 6 (10th Cir. 1983) (Noting court disdain for the practice of presenting experts to testify as to the total fee that should be awarded in a given case and finding such practice to be unhelpful.)

103 713 F.2d 546 (10th Cir. 1983), overruled on other grounds by Pennsylvania v.

Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 107 S.Ct. 3078, 97 L.Ed. 2d 585 (1987).

104 Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).

105 The lodestar formulation itself incorporates a number of the Johnson factors (e.g. the time

and labor required) and the Tenth Circuit has concluded that the Johnson factors are appropriately used to determine the reasonableness of attorney's fees in bankruptcy cases. See In re Permian Anchor Services, Inc., 649 F.2d 763, 768 (10th Cir. 1981).

31

in mind, the Court makes the following comments.

Warren argued at trial and in its papers that its fees were necessitated by Mid Continent's legal

analysis of its claim. Stated briefly, Warren believes that the Oklahoma public works statute entitles it to

recover from the bond any indebtedness owed Warren and incurred by Bemis in the course of a bonded

project. Mid Continent differs, asserting that notwithstanding the language of the public works statute, the

only bonded indebtedness is that which Bemis incurred in acquiring materials or parts that were used or

consumed in the particular bonded project. Both Ogden and Lerner testified as to their view of the

Oklahoma case law in this connection.

Certainly the collation and attribution of nearly 400 invoices to various job sites is laborious. It

appears, however, that most of this work was done by Mid Continent. An exhibit that attributes invoices

to particular jobs where possible, was prepared by Mike Dill, one of Mid Continent's vice presidents, from

documents discovered from Warren.106 Warren hired a former employee of Bemis, Debbie Smith, to

perform a similar analysis. There is some reference in the statements of the Mullinix Firm to lawyer

involvement in the collation process, but by no means does this activity make up more than a fraction of the

Mullinix Firm's work. As noted above, little time was spent by the Warren lawyers communicating with their

counterparts for Mid Continent and Bemis. Whether or not this Court agrees that the used or consumed

standard is the applicable view of Oklahoma bond law, much of the time incurred by the Mullinix Firm seems

to have been unnecessary. If the used or consumed standard was the stumbling block in the case, an early

motion for summary judgment based on Debbie Smith's work might have afforded this Court an opportunity

106 Ex. NN.

32

to rule on the legal merits of that issue. Instead, the parties repeatedly sought to extend discovery and no

summary judgment motion was filed until the day Warren accepted the Mid Continent and Bemis offers.

Warren asserts that Bemis should be jointly liable for its attorneys fees. Setting aside the fact that

unsecured claimants are not entitled to post-petition fees, Warren pursued other strategies against Bemis

that in hindsight were simply wrong-headed. Warren had to file two proofs of claim and amend its complaint

before accurately setting out the predicate for its claim. Over a year before the Bemis Offer was made,

Bemis informally offered Warren the allowance of an unsecured claim (all that it ultimately recovered) and

Warren refused. Although Ogden denied receiving this offer, Saidian's December 20, 2003 letter contains

it.107 Apparently, Warren never responded. By mischaracterizing the nature of its claim as unpaid rentals

and repeatedly asserting (apparently without any justification) that it held a secured claim, Warren invited

Bemis's objections. It then filed a separate demand that all other unsecured claims be equitably

subordinated to its claim, but failed, as Ogden admitted on the stand, to name as defendants or serve any

of the other creditors whose interests were at stake.

There is no reason that Warren should have included Bemis in this adversary proceeding at all. It

is a commonplace of bankruptcy law that bonds or other forms of assurance of a debtor's performance are

rarely the property of the bankruptcy estate.108 Warren did not need to file an adversary proceeding to

107 Ex. R (Please understand that given that we have agreed that you will have an unsecured claim in the bankruptcy less any amounts you receive from the bond [sic] company, the debtor is not particularly interested in participating in voluminous depositions, as it does create a cost for the estate.)

108 See William L. Norton, Jr., 2 BANKRUPTCY LAW AND PRACTICE 2D, § 36:7, p. 36-31 (2004) (Nor is the automatic stay violated when a surety makes payment on the debtor's behalf, because the surety's duty to pay is unaffected by the debtor's bankruptcy.); Globe Const. Co. v. Oklahoma City Housing, 571 F.2d 1140 (10th Cir. 1978), cert. denied 439 U.S. 835 (1978) (general contractor's bankruptcy did not bar claims against surety that had issued performance bond to

33

secure that finding. Warren's proof of claim served the same purpose as a complaint against Bemis in

asserting what Warren was entitled to recover from the Bemis estate. And, as noted, Warren's half-baked

equitable subordination effort was not even brought against the proper parties.

Finally, Warren mounted an unnecessary and expensive effort to convince Bemis to prosecute a bad

faith refusal to pay insurance claim against Mid Continent on behalf of the estate.109 While this may have

had some tactical value to Warren, the Court cannot see how this claim would have benefitted the estate.

Instead, the Court views this sally as merely another way for Warren's counsel to take advantage of a fee-

shifting statute to maximize their fees at the expense of Mid Continent and the Bemis estate.

The Court is convinced that the time and labor required was substantially less than the Mullinix Firm

expended in this case. The questions at hand were neither novel nor difficult, except that Warren's litigation

approach vastly complicated the prosecution and adjudication of this case. Similarly, had this case been

efficiently handled, it would have required no extraordinary legal talent. Time limitations were not an issue

for most of the case's duration. Ogden and Wantland appear to be competent lawyers and scriveners,

although their judgment in the pursuit of many facets of this matter is open to question. There was certainly

nothing undesirable about the case and Warren was a long-standing client of Ogden's. All of these

general contractor; surety bonds not property of estate); In re Dunbar, 235 B.R. 465 (9th Cir. BAP 1999) (contractor's bond was not property of estate); In re Lockard 884 F.2d 1171 (9th Cir. 1989) (contractor's license bond was not property of estate); In re McLean Trucking Co., 74 B.R. 820 (Bankr. W.D.N.C. 1987) (surety bonds not property of estate).

109 KAN. STAT. ANN. § 40-256 (2000) establishes a cause of action against insurers who fail, without just cause or excuse, to pay valid insurance claims. The independent intentional tort of bad faith is not recognized in Kansas (Spencer v. Aetna Life & Casualty Ins. Co., 227 Kan. 914, 611 P.2d 149 (1980)) but is available under Oklahoma law (Christian v. American Home Assur. Co., 577 
P.2d 899 (Okla. 1977)) and may be applied to surety companies (Worldlogics Corp. v. Chatham Reinsurance Corp., 108 P.3d 5 (Okla. Civ. App. 2004)).

34

conclusions cut against the extraordinarily high fees requested by Warren.

Perhaps the most damning factor is that of the amount involved and results obtained.110 Here,

Warren will recover $40,000 from Mid Continent and, when the final distribution is made, some small

fraction of its claim against Bemis. The evidence suggests that distribution may not reach $10,000 because

of the scarcity of resources in the Bemis estate. Thus, Warren will receive less than half of its original

demand and an even smaller proportion of the fees it claims. Assuming Warren were legally entitled to a

fee award in addition to the judgments (an argument this Court has rejected), this Court could not possibly

countenance an award of fees in excess of $135,000, especially when the case did not reach trial.

The Court accordingly concludes that Warren is not entitled to recover any costs or fees, the same

having been unambiguously provided for in the Mid Continent Offer and excluded by the Bemis Offer.

Warren accepted both offers. In the alternative, the Court finds that Warren failed to demonstrate the

reasonableness or necessity of incurring fees over $135,000 in pursuit of a $124,835 claim and upon which

it ultimately accepted payment of $40,000 and the allowance of an unsecured claim in the Bemis case.

Because of the inconsistencies in the Mullinix Firm's statements, summaries, and Ogden's testimony, Warren

did not meet its burden of proving that its fee request is reasonable, assuming it was entitled to receive one

in these circumstances. Accordingly, Warren's Motion to Establish Post-Acceptance Procedure, Motion

for Fees and Costs, and Motions to Amend Judgment are DENIED. Bemis and Mid Continent will present

the appropriate orders.

110 Hensley v. Eckerhart, 461 U.S. 424, 436, 103 S.Ct. 1933, 76 L.Ed. 2d 40 (1983) (the most critical factor is the degree of success obtained; lodestar fees may be an excessive amount where only partial or limited success is achieved)

35

NOTICE TO COUNSEL

Counsel are reminded that Motions to Alter or Amend this Order must be filed within ten days of

this Order's being entered on the docket under Fed. R. Civ. P. 59(e) as it is applied to bankruptcy by Fed.

18. Bankr. P. 9023. Motions to alter and amend judgment serve a limited purpose. Such motions are only

appropriate when a court has misapprehended the facts, a party's position, or controlling law.111 It is not

appropriate to revisit issues already addressed or advance arguments that could have been raised in prior

briefing.112 Grounds warranting a motion to reconsider include (1) an intervening change in the controlling

law; (2) new evidence previously unavailable, and (3) the need to correct clear error or prevent manifest

injustice.113 Any such motion filed in this matter shall be limited to 10 pages in length, inclusive of any

attachment, cover page, and appropriate certificates of service.

IT IS SO ORDERED.

# # #

111 See Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000).

112 Id.  See also, Van Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir. 1991).

113 Servants, 204 F. 3d at 1012; Brumark Corp. v. Samson Resources, Corp., 57 F.3d

941, 948 (10th Cir. 1995).

36