Andrews & Kurth L.L.P. v. Family Snacks, Inc. (In Re Pro-Snax Distributors, Inc.)

157 F.3d 414, 40 Collier Bankr. Cas. 2d 1218, 12 Tex.Bankr.Ct.Rep. 517, 1998 U.S. App. LEXIS 26873, 33 Bankr. Ct. Dec. (CRR) 463, 1998 WL 685377
CourtCourt of Appeals for the Fifth Circuit
DecidedOctober 20, 1998
Docket97-11128
StatusPublished
Cited by119 cases

This text of 157 F.3d 414 (Andrews & Kurth L.L.P. v. Family Snacks, Inc. (In Re Pro-Snax Distributors, Inc.)) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Andrews & Kurth L.L.P. v. Family Snacks, Inc. (In Re Pro-Snax Distributors, Inc.), 157 F.3d 414, 40 Collier Bankr. Cas. 2d 1218, 12 Tex.Bankr.Ct.Rep. 517, 1998 U.S. App. LEXIS 26873, 33 Bankr. Ct. Dec. (CRR) 463, 1998 WL 685377 (5th Cir. 1998).

Opinion

STEWART, Circuit Judge:

This case, one of first impression in this circuit, calls for us to determine whether a Chapter 11 debtor’s attorney may be compensated for work done after the appointment of a trustee under § 330(a) of the Bankruptcy Code. It arises from a lengthy and acrimonious dispute between a debtor, Pro-Snax Distributors, Inc. (“Pro-Snax” or “Debtor”), and several of its creditors in the wake of the filing of an involuntary Chapter 7 petition. Mission Foods/Fiesta Jiminez, a division of Gruma, Inc., Family Snacks, Inc. d/b/a Guy’s Foods, and Guiltless Gourmet (together, the “Petitioning Creditors” or “Ap-pellees”) seek to restrict the payment of fees to the law firm of Andrews & Kurth L.L.P. (“A&K” or “Appellant”), contending that the legal services rendered by A&K after the appointment of a Chapter 11 trustee were barred by statute. Deciding the case on the equities, the bankruptcy court found in favor of A&K and awarded fees for some of the services rendered. The district court reversed, ruling that, notwithstanding legislative history suggesting a contrary intent, the plain language of the statute at issue precluded an award of fees to A&K. A&K timely appealed this ruling. While sympathizing with A&K’s plight and acknowledging reports that Congress plans to amend the statute at issue to cover an award of fees in exactly this situation, we are bound by the language of the statute precluding such an award at present and thus affirm the judgment of the district court.

BACKGROUND

1. Procedural History

On August 10, 1995, the Petitioning Creditors filed an involuntary petition under Chapter 7 against Pro-Snax, and an interim Chapter 7 trustee was appointed on August 31, 1995. 1 From the earliest stages of the bankruptcy proceeding, it was obvious to the bankruptcy court that this case would present “a constant litigation background” because mutual suspicions between the Debtor and the Petitioning Creditors would prohibit any meaningful negotiations between them. On September 13,1995, the Debtor exercised its statutory right by consenting to relief under Chapter 11 and converted the proceeding thereto. Prior to the filing of the involuntary petition and through the conversion to a Chapter 11 action, A&K had provided legal services to the Debtor.

On October 16, 1995, the bankruptcy court denied the Petitioning Creditors’ motion to reconvert the proceeding to Chapter 7 and appointed a Chapter 11 trustee to oversee the case. Concurrently, the Debtor filed its first plan of reorganization and disclosure statement. A&K assisted in the preparation of this plan. 2 Hearings on the re-organization plan were held on February 13, 1996, and, based largely on the objections of the *417 Petitioning Creditors, the plan was denied confirmation. 3 Immediately thereafter, the Petitioning Creditors again moved for reconversion to Chapter 7, and this time, on February 20,1996, the bankruptcy court granted the motion.

A&K’s employment as counsel for the Debtor was authorized by the bankruptcy court nunc pro tunc on July 1,1996, the date on which A&K filed its Application for Compensation and Reimbursement (“Fee Application”), for the period September 13, 1995 through May 31, 1996. In the Fee Application, A&K sought payment of $44,638 in fees and $10,725.37 in expenses. The Petitioning Creditors objected to the payment of fees, but on September 30, 1996, after a hearing-on the subject, the bankruptcy court awarded fees and expenses to A&K. 4

On October 2, 1996, the Petitioning Creditors filed a Motion for Reconsideration of the Order. The motion was denied on November 20, 1996, and the trustee paid A&K’s fees and expenses out of the estate. At no time did the trustee or any other creditor object to A&K’s Fee Application or the bankruptcy court’s order.

The Petitioning Creditors filed a Notice of Appeal to the United States District Court for the Northern District of Texas. That court reversed the bankruptcy court’s ruling that fees could be awarded for services provided after the appointment of the Chapter 11 Trustee, and remanded the case for a recalculation of the fee award. See Family Snacks, Inc. v. Andrews & Kurth, L.L.P., 212 B.R. 834, 835 (N.D.Tex.1997). A&K then timely filed this appeal.

II. Bankruptcy Court’s Holding

The crux of this dispute centers on whether the Bankruptcy Code provides for an award of attorneys’ fees to A&K for its services rendered to the Debtor in this case. The key statutory provision construing this issue is 11 U.S.C. § 330. After acknowledging that 11 U.S.C. § 503(b)(2) provides an administrative priority (i.e., over unsecured creditors) for fees awarded under 11 U.S.C. § 330, the bankruptcy court concluded- — on the basis of extensive findings on the record — that A&K could be awarded compensation from the bankruptcy estate under § 330(a)(1) for work done as “the debtor’s attorney” after the appointment of the Chapter 11 trustee. See In re Pro-Snax Distributors, Inc., 204 B.R. 492, 495-97 (Bankr.N.D.Tex.1996). Section 330(a)(1) provides, in pertinent part, that

[a]fter notice to the parties in interest and the United States Trustee and a hearing,
... the court may award to a trastee, an examiner, a professional person employed under section 327 or 1103—
(A) reasonable compensation for actual, necessary services rendered by the trustee, examiner, professional person, or attorney ...; and
(B) reimbursement for actual, necessary expenses. 5

11 U.S.C. § 330(a)(1).

The bankruptcy court noted that the current version of § 330(a) did not explicitly provide for an award payable to the “debtor’s attorney” — and indeed that the words “or to *418 the debtor’s attorney” were removed from the statute by the 1994 amendments — but nevertheless concluded that the statute was vague and did not preclude an award of compensation in A&K’s favor. In particular, the court (1) distinguished two cases urged by the Petitioning Creditors as advocating a narrow reading of amended § 330(a)(1) (ie., which precluded such compensation); 6

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Bluebook (online)
157 F.3d 414, 40 Collier Bankr. Cas. 2d 1218, 12 Tex.Bankr.Ct.Rep. 517, 1998 U.S. App. LEXIS 26873, 33 Bankr. Ct. Dec. (CRR) 463, 1998 WL 685377, Counsel Stack Legal Research, https://law.counselstack.com/opinion/andrews-kurth-llp-v-family-snacks-inc-in-re-pro-snax-distributors-ca5-1998.