Faricy Law Firm, P.A. v. A.P.I., Inc. (In re A.P.I., Inc.)

537 B.R. 902, 2015 Bankr. LEXIS 3085, 61 Bankr. Ct. Dec. (CRR) 151
CourtUnited States Bankruptcy Court, D. Minnesota
DecidedSeptember 9, 2015
DocketBKY 05-30073; ADV 15-3096
StatusPublished
Cited by3 cases

This text of 537 B.R. 902 (Faricy Law Firm, P.A. v. A.P.I., Inc. (In re A.P.I., Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Faricy Law Firm, P.A. v. A.P.I., Inc. (In re A.P.I., Inc.), 537 B.R. 902, 2015 Bankr. LEXIS 3085, 61 Bankr. Ct. Dec. (CRR) 151 (Minn. 2015).

Opinion

[904]*904ORDER ON PETITIONER’S MOTION FOR ABSTENTION AND REMAND

GREGORY F. KISHEL, CHIEF UNITED STATES BANKRUPTCY JUDGE

In early 2005, Debtor A.P.I., Inc. filed for relief under Chapter 11. It did so because it was faced with a multi-part problem: multiple, substantial claims in litigation against it, for damages based on plaintiffs’ exposure to asbestos in materials sold or installed by it; at least one very large unsatisfied judgment on such liability; and substantial contests with its liability insurers over the continuation of coverage for such liability. The Bankruptcy Code made certain very specialized remedies available to the Debtor and it sought them. See In re A.P.I., Inc., 331 B.R. 828 (Bankr.D.Minn.2005).

On December 6, 2005, the court confirmed the Debtor’s plan of reorganization. Under the plan, a trust for the benefit of claimants on asbestos-related claims was established. Provisions were made for the funding of the trust by the Debtor from its assets and by insurers cashing-out their residual coverage liability. Asbestos-exposure claims against the Debtor and against settling insurers were channeled into the trust. And, procedures for the administration of the trust and the processing and payment of claims were established. The Chapter 11 case was closed on February 29, 2008.

In June, 2015, the proceeding at bar was commenced in the Minnesota State District Court for the Second Judicial District, Ramsey County. The respondent is the trust established under the Debtor’s plan (henceforth, “the A.P.I. Trust” or “the Trust”). The petitioner (henceforth, “the Faricy Firm” or “Faricy”) is a law firm that seeks relief against the A.P.I. Trust on an assertion that they once had an attorney-client relationship.

After this proceeding was commenced, the Debtor’s Chapter 11 case was reopened on application of the Trust. The reopening enabled the Trust to remove this proceeding to this court pursuant to 28 U.S.C. § 1452(a), under the Trust’s assertion of the federal bankruptcy jurisdiction.

The Faricy Firm promptly filed a motion for abstention and remand pursuant to 28 U.S.C. §§ 1334(c)(1) — (2) and 1452(b). The motion was called for hearing on August 26, 2015. Justin P. Weinberg, Briggs and Morgan, P.A., appeared for the A.P.I. Trust. John H. Faricy, Jr., Faricy Law Firm, P.A., appeared for the Faricy Firm.

BACKGROUND: PARTIES’ POSITIONS

The Faricy Firm commenced this proceeding under a document entitled “Petition for Attorneys’ Lien Pursuant to Minn. Stat. § 481.13.” The Firm alleges generally that it provided substantial legal services for the Debtor and for the A.P.I. Trust on matters of liability insurance coverage, under a retention that began in August, 2002. It pleads that the engagement got under way with the commencement of coverage litigation on the Debtor’s behalf against several liability insurers — in particular, for the purposes of the matter at bar, the Home Insurance Company. Faricy did continue to represent the Debt- or on this sort of matter after the Chapter 11 filing.1 Faricy asserts that it carried [905]*905forward in the same matters after the confirmation of the Debtor’s plan, to represent the A.P.I. Trust as successor to the Debtor on modified terms for compensation.

Faricy then enumerates the services said to have been rendered for the A.P.I. Trust'on claims against the Home Insurance Company and that insurer’s later liquidator. After that, it is alleged that the A.P.I. Trust “terminated its relationship with” the Faricy Firm on August 31, 2012; and that, some two and a half months later, the A.P.I. Trust executed a settlement agreement that quantified and allowed the A.P.I. Trust’s claims in the Home liquidation proceeding.2

Then, it is pled, in late 2014 “the [A.P.I.] Trust wrote to [the] Faricy [Firm] refusing to compensate [it] for its services making a number of false claims including that [it] never represented the Trust with respect to its claims as to Home.” Faricy also alleges that the A.P.I. Trust “took the unfounded position that [the] Faricy [Firm] expended ‘no time and labor’ on the Home claim.”

Faricy filed its petition in the Ramsey County District Court in mid-June, 2015. It requests declaratory relief under Minn. Stat. § 481.13 and common-law and equitable theories, to the effect that it has two “lien[s] for compensation against the [A.P.I.] Trust.” One is identified to a sum certain ($1,075,000.00) and one is “for thirty-three percent of any additional amounts that the [A.P.I.] Trust is entitled to receive or receives from the Home Liquidator

On July 29, 2015, the A.P.I. Trust removed Fancy’s lien proceeding to this court. In its notice of removal, the Trust asserted that “[t]he' Bankruptcy Court has subject matter jurisdiction over” Fancy’s claims to an attorney’s lien “pursuant to 28 U.S.C. § 1334.”3 The Trust then asserted core-proceeding status for this action, citing 28 U.S.C. §§ 157(b)(2)(A),(K), and (O). To bolster its assertion of jurisdiction, the Trust alleged that the “issues are important to the administration of the confirmed plan” in the underlying bankruptcy case.

Shortly after that, the A.P.I. Trust filed its response to Fancy’s petition [Dkt. No. 3]. This document has many responsive and affirmative allegations. Most of them go to the underlying issue of liability for the attorney’s fees to which the Faricy Firm asserts an entitlement. The major thrust of the response is that an attorney’s lien may not be imposed because the Trust does not owe any fees that would be secured by a lien. However, the allegation most directly related to the purpose of the petition is also most pertinent to the mo[906]*906tion at bar. It is found in the “Affirmative Defenses” of the Trust’s response:

31. Faricy’s Petition for an Attorney’s Lien is barred by an injunction ordered by this Court [i.e., the bankruptcy court] wherein no lien, of any kind, can be placed against the Trust or property of the Trust.
The motion at bar followed quickly.

The Faricy Firm argues that the removal of this matter was “not well-taken” and abstention (toward a return to the Ramsey County District Court) is imperative. It argues reasons that go back to two points in the recounted history of these parties’ engagement.

First, Faricy argues, the Trust — and not the Debtor — was its client for the work it performed on coverage matters involving the Home Insurance Company that resulted in the settlement and a subsequent payment from the Home Liquidator to the A.P.I. Trust. Second, it insists, its right to fees arose under an agreement that it and the A.P.I. Trust entered on January 7, 2009 — three-plus years after the Debtor’s plan was confirmed and nearly a year after this case was closed.

In the alternative, the Faricy Firm urges abstention if there is federal jurisdiction, under the mandate of 28 U.S.C. § 1334(c)(2) or pursuant to 28 U.S.C.

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Bluebook (online)
537 B.R. 902, 2015 Bankr. LEXIS 3085, 61 Bankr. Ct. Dec. (CRR) 151, Counsel Stack Legal Research, https://law.counselstack.com/opinion/faricy-law-firm-pa-v-api-inc-in-re-api-inc-mnb-2015.