Butler v. Indiano (In Re Ponce Marine Farm, Inc.)

259 B.R. 484, 2001 U.S. Dist. LEXIS 3590, 2001 WL 276848
CourtDistrict Court, D. Puerto Rico
DecidedMarch 9, 2001
DocketCiv. 98-1580(JP)
StatusPublished
Cited by8 cases

This text of 259 B.R. 484 (Butler v. Indiano (In Re Ponce Marine Farm, Inc.)) is published on Counsel Stack Legal Research, covering District Court, D. Puerto Rico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Butler v. Indiano (In Re Ponce Marine Farm, Inc.), 259 B.R. 484, 2001 U.S. Dist. LEXIS 3590, 2001 WL 276848 (prd 2001).

Opinion

OPINION AND ORDER

PIERAS, Senior District Judge.

The Court has before it an appeal pursuant to 28 U.S.C. § 158(a) from the March 30, 1998 Opinion and Order of the United States Bankruptcy Court for the District of Puerto Rico, finding that Appellee and former counsel for Debtors, Stuart Wein-stein Bacal (“Weinstein”), should have disclosed a potential conflict of interest on or before February 15, 1996 and approving his application for compensation only for his representational activities prior to that date, and further approving, with minor downward adjustments, the reimbursement of expenses. The issues before this *489 Court are whether the bankruptcy court erred in concluding that Weinstein was a “disinterested person” within the meaning of section 101(14) of the Bankruptcy Code; whether the bankruptcy court erred in finding that Weinstein’s duty to disclose the potential conflict attached on February 15, 1996; whether the bankruptcy court erred in approving Weinstein’s retention of professionals sua sponte and nunc pro tunc; and whether that court erred in approving the payment of costs over the U.S. Trustee’s objections. After careful review of the record and the arguments presented, the decision of the bankruptcy court is hereby AFFIRMED.

I. BACKGROUND

The following summary of facts is drawn from the bankruptcy court’s Opinion and Order of March 80, 1998. Debtor Ponce Marine Farm, Inc. petitioned for relief under Chapter 11 of the Bankruptcy Code on March 8, 1993, and Debtor Midwest Trading Company, Inc. filed a Chapter 11 bankruptcy petition on May 14, 1993 (collectively, “Debtors”). The bankruptcy court substantially consolidated these cases on June 10, 1993. On June 15, 1993, the Bankruptcy Court approved the employment of the law firm of Indiano, Williams & Weinstein-Bacal as counsel for Debtors, with Weinstein serving as lead counsel until Debtors terminated the relationship in August 1997. Debtors’ Chapter 11 cases involved numerous lawsuits against individuals, corporations, banking institutions, and the federal government, and the litigation related thereto extended over a period of several years. Two settlement agreements, resulting in Martech Enterprises, L.C.’s (“Martech”) acquisition of Debtors’ mortgages, rest at the core of the dispute concerning the Weinstein’s application for attorney’s fees.

The first settlement agreement involved Debtors and Cooperativa de Ahorros y Crédito de la Policía de Puerto Rico (“Poli-Coop”). On February 8, 1994, Debtors objected to a secured claim by Poli-Coop for more than $2.5 million. After much litigation, Debtors and Poli-Coop reached an agreement in which Poli-Coop agreed to sell its secured claim for less than its face value to Martech. The second settlement agreement at issue involved Debtors and the Royal Bank of Canada (“Royal Bank”). On April 21, 1994, Debtors objected to a secured claim of approximately $300,000 by Royal Bank. Counsel for Debtors successfully negotiated an agreement in which Royal Bank assigned its interest to Martech for less than its face value. On February 15, 1996, Weinstein filed motions for approval of the two settlement agreements with the bankruptcy court; the court approved both agreements on April 11,1996.

In or around August 1997, John P. White, President of the Debtor corporations, informed the U.S. Trustee’s Office that Weinstein’s father and brother were investors in Martech. At that same time, Weinstein’s representation of Debtors terminated. In a declaration dated November 25, 1997 and submitted to the bankruptcy court, Weinstein confirmed that his father and brother were investors in Mar-tech. Weinstein had not made an official disclosure prior to that date.

The U.S. Trustee filed an Objection to the Application for Compensation, asserting that Weinstein’s family’s connection constituted a conflict of interest that should be sanctioned by the denial of fees. The bankruptcy court determined that no actual conflict of interest existed, that Weinstein had zealously represented Debtors throughout the proceedings, and that Weinstein’s efforts had only benefitted the estate. It concluded, however, that Wein-stein should have made a full disclosure to the court because his father and brother’s connection to Martech constituted a potential conflict of interest. The court then determined that Weinstein should have disclosed that potential conflict on February 16, 1996, the date on which Weinstein filed the applications for the approval of the settlement agreement between Mar- *490 tech and Debtors with the bankruptcy-court, and it denied compensation for the period subsequent to that date.

The U.S. Trustee further opposed the approval of fees charged for travel time, conferences, and other expenses. The bankruptcy court reduced Weinstein’s fees for travel time and conferences, but denied the majority of the U.S. Trustee’s remaining objections to expenses, including its opposition to the reimbursement of expenses for a wetlands expert and a photographer, and to numerous billing entries alleged to be insufficiently detailed to permit a fair assessment of their reasonableness.

II. STANDARD OF REVIEW

The Bankruptcy Court’s findings of fact shall be upheld unless they are clearly erroneous, and its conclusions of law are reviewed de novo. See T I Fed. Credit Union v. DelBonis, 72 F.3d 921, 928 (1st Cir.1995); Matter of Rosa, 196 B.R. 231, 234 (D.Puerto Rico 1996) (Pieras, J.).

III. DISCUSSION

A. Disinterestedness

The Bankruptcy Code permits the employment of attorneys or other professional persons to represent or assist the trustee in carrying out the trustee’s duties. See 11 U.S.C. § 327(a). To ensure that all professionals appointed pursuant to § 327(a) “tender undivided loyalty and provided untainted advice and assistance in furtherance of their fiduciary responsibilities,” Rome v. Braunstein, 19 F.3d 54, 58 (1st Cir.1994), qualification for appointment as an attorney is limited to “disinterested persons” who do not possess or represent “an interest adverse to the estate.” 11 U.S.C. § 327(a); see also In re Martin, 817 F.2d 175, 179 (1st Cir.1987). The purpose of the disinterestedness requirement is “to prevent even the appearance of a conflict irrespective of the integrity of the person or firm under consideration.” Martin, 817 F.2d at 181 (quoting In re Codesco, Inc., 18 B.R. 997, 999 (Bankr. S.D.N.Y.1982)); see also In re Matter of Consolidated Bancshares, Inc., 785 F.2d 1249, 1256 n.

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Bluebook (online)
259 B.R. 484, 2001 U.S. Dist. LEXIS 3590, 2001 WL 276848, Counsel Stack Legal Research, https://law.counselstack.com/opinion/butler-v-indiano-in-re-ponce-marine-farm-inc-prd-2001.