Barron & Newburger, P.C. v. Texas Skyline, Ltd. (In Re Woerner)

783 F.3d 266, 2015 WL 1591143
CourtCourt of Appeals for the Fifth Circuit
DecidedApril 9, 2015
Docket13-50075
StatusPublished
Cited by67 cases

This text of 783 F.3d 266 (Barron & Newburger, P.C. v. Texas Skyline, Ltd. (In Re Woerner)) 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
Barron & Newburger, P.C. v. Texas Skyline, Ltd. (In Re Woerner), 783 F.3d 266, 2015 WL 1591143 (5th Cir. 2015).

Opinions

[268]*268EDWARD C. PRADO, Circuit Judge:

This case concerns a bankruptcy court’s order reducing the fees a debtor’s counsel received under 11 U.S.C. § 330. On May 13, 2010, on the eve of a major state-court judgment against him, Debtor Clifford Woerner1 filed'a voluntary petition under Chapter 11 of the Bankruptcy Code. Appellant Barron & Newburger (“B & N”), a law firm, represented.- Woerner in his Chapter 11 bankruptcy. On April ■ 20, 2011, the bankruptcy court converted the case to Chapter 7.

Its services terminated, B & N filed an application for fees in excess of $130,000. The bankruptcy court allowed approximately $20,000 and disallowed the remainder, finding that the additional fees were unreasonable. The district court affirmed. B & N appealed, contending that the bankruptcy court misapplied Fifth Circuit precedent and 11 U.S.C. § 330 in reducing the fees awarded to it. In an opinion issued on July 15, 2014, a panel of this Court affirmed the district court’s judgment. In re Woerner, 758 F.3d 693, 702 (5th Cir.2014). However, all three members of the panel specially concurred to call for en banc reconsideration of In re Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir.1998), the opinion interpreting § 330 that controlled the appeal. In re Woerner, 758 F.3d at 702-06 (Prado, J., specially concurring).

We granted rehearing en banc to reexamine our decision in Pro-Snax. In re Woerner, 771 F.3d 820 (5th Cir.2014) (per curiam). We now recognize that the retrospective, “material benefit” standard enunciated in Pro-Snax conflicts with the language and legislative history of § 330, diverges from the decisions of other circuits, and has sown confusion in pur circuit. Correspondingly, we overturn Pro-Snax ’s attorney’s-fee rule2 and adopt the prospective, “reasonably likely to benefit the estate” standard endorsed by our sister circuits.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Events Before Woerner Filed for Bankruptcy

In 2006, Woerner and Texas Skyline, Ltd. formed a limited partnership for the purpose of undertaking a real estate venture. Within the partnership, DPRS — a company Woerner owned — -was the sole general partner, Woerner was a limited partner with a 49.99% interest in the partnership, and Texas Skyline was the sole investor and a limited partner in the project. Over the course of the next three years, Woerner misappropriated funds from the partnership for personal use. When Texas Skyline discovered Woerner’s activities, it sued him in state court for breach of the partnership agreement and breach of fiduciary duties. The case proceeded to a bench trial on April 27, 2010. After the parties rested, the state court announced an oral ruling in favor of Texas Skyline arid set a remedies hearing for May 14, 2010.

Woerner and his state-court trial counsel met with B & N on May 4, 2010 to discuss filing for bankruptcy. B & N agreed to the representation and filed Woerner’s voluntary petition for Chapter 11 bankruptcy relief on May 13 — the night before the state-court remedies hearing. That filing triggered the Bankruptcy Code’s automatic stay provision, which [269]*269brought the state-court proceeding to a halt. . See 11 U.S.C. § 362(a).

B. B & N Litigates Woerner’s Chapter 11 Case

In the ensuing eleven months, B & N provided services that it claimed were worth $134,800 in legal fees. On May 18, 2010, with B & N’s assistance, Woerner filed mandatory disclosure documents with the bankruptcy court — namely, schedules and a statement of financial affairs.

B & N also defended Woerner in adversary proceedings that were brought to prevent Woerner from discharging liabilities. On August 4, 2010, Texas Skyline initiated an adversary proceeding with the bankruptcy court under 11 U.S.C. § 523(a)(4) for breach of fiduciary duty. Texas Skyline then fought to lift the stay of the state-court judgment. Woerner contested and lost, and the stay of state-court proceedings was lifted. Woerner also contested adversary proceedings brought by John Baker II, one of the other active creditors in this case. On November 2, 2010, Woer-ner filed Amended Schedules (b) and (c) and also amended his Statement of Financial Affairs.

B & N helped Woerner negotiate with his creditors. Woerner and the adversarial creditors agreed to mediation with a bankruptcy judge. Talks with Texas Skyline broke down, but on December 17, 2010, B & N filed a Joint Motion to Cpm-promise with the bankruptcy court, which B & N maintained would have resolved this case. Yet Baker insisted that the settlement was merely a proposal, objected to it, and refused to execute it. For these negotiation services, B & N sought over $6,000.

B & N also investigated the concealment of some of Woerner’s assets and subsequently amended Woerner’s financial disclosures to include approximately $9,000 of additional personal assets, including investments, jewelry, firearms, and fur coats that were not originally disclosed. This concealment prompted Baker to move to convert Woerner’s case from a Chapter 11 reorganization to a Chapter 7 trustee-administered liquidation. See 11 U.S.C. § 1112(b)(1) (requiring the bankruptcy court to convert or dismiss a Chapter 11 case upon finding “cause”). Texas Skyline moved to intervene in the motion to convert. B & N litigated Woerner’s attempts to press for a motion to approve the settlement and oppose the motion to convert. The billing records show that the firm (1) prepared a motion to sell some of Woer-ner’s personal property for the purpose of funding an appeal from the state-court judgment; (2) started investigating potential causes of action against Texas Skyline and Baker; (3) drafted a disclosure statement and reorganization plan; and (4) deposed a representative from Texas Skyline about potential mismanagement of partnership assets.

C. Woerner’s Case Is Converted to Chapter 7, Ending B & N’s Representation

The bankruptcy court conducted a hearing on the pending motions, denying the motion to approve the settlement and' granting the motion to convert on April 20, 2011. As the bankruptcy court summarized in its oral ruling on the fee application, “the Court found that it was appropriate to convert this case to Chapter 7 because the Court was of the opinion ... that [Woerner] w[as] not forthright as [a] Debtor[] under the Bankruptcy Code in terms of listing [his] assets and giving proper evaluations.” On September 3, 2011, B & N filed an application for approximately $134,000 in fees under § 330. Following the U.S. Trustee’s objection, B & N amended its fee application. B & N [270]

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Bluebook (online)
783 F.3d 266, 2015 WL 1591143, Counsel Stack Legal Research, https://law.counselstack.com/opinion/barron-newburger-pc-v-texas-skyline-ltd-in-re-woerner-ca5-2015.