Harrington v. Nickless

487 B.R. 12
CourtDistrict Court, D. Massachusetts
DecidedFebruary 20, 2013
DocketCivil Action No. 12-11475-DPW; Bankruptcy No. 10-19012-HJB
StatusPublished
Cited by2 cases

This text of 487 B.R. 12 (Harrington v. Nickless) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Harrington v. Nickless, 487 B.R. 12 (D. Mass. 2013).

Opinion

MEMORANDUM AND ORDER

DOUGLAS P. WOODLOCK, District Judge.

This is an appeal challenging a bankruptcy court order awarding fees and expenses to David M. Nickless, attorney for the Debtor, for services performed after the appointment of a Chapter 11 trustee to administer the bankruptcy estate.

I. BACKGROUND

International Gospel Party Boosting Jesus Groups (“IGP” or “the Debtor”), a Massachusetts non-profit organization represented by Nickless, filed the underlying Chapter 11 case on August 19, 2010. On October 15, 2010, the bankruptcy court approved the appointment of a Chapter 11 Trustee to administer the bankruptcy estate.

The Debtor’s sole asset was a piece of real property on Massachusetts Avenue in Boston. The bankruptcy court authorized the Trustee to sell the property, over objection made by Nickless on behalf of IGP. The property was sold in July 2011 for $1,326,001, which satisfied all secured and unsecured claims, as well as administrative costs, and left a surplus of about $285,000.

[14]*14In September 2011, the Trustee moved to dissolve the Debtor or to convert the case to Chapter 7 liquidation proceedings. Nickless, again on behalf of IGP, opposed the Trustee’s motion. On November 7, 2011, the bankruptcy court denied the Trustee’s motion. Instead, the court ordered the Trustee to hold in escrow funds necessary to satisfy the only remaining claim in the bankruptcy — by Jeff Ross, a real estate broker who had appealed the denial of a commission for his involvement in the property sale1 — and to return the surplus funds to the Debtor. The court also “authorized the Debtor to pay any earned but unpaid fees to Debtor’s counsel and that, as all creditors and interested parties will have been paid in full, the normal and usual requirement that Debt- or’s counsel file with the court a Fee Application and Narrative is waived.”

Earlier, on October 20, 2011, the Massachusetts Attorney General had brought suit in state Superior Court against IGP’s directors for diverting the organization’s assets for personal use. On October 28, the state court had enjoined the Trustee from distributing to IGP any surplus funds it might have been entitled to receive upon dismissal of the bankruptcy, and ordered the Trustee to hold those surplus funds in escrow while the Attorney General pursued her claims against the directors.

Thus unable to be paid from surplus funds returned to the Debtor, Nickless filed a fee application with the bankruptcy court in January 2012. Without objection, the court ordered the bankruptcy estate to pay Nickless the fees and expenses incurred prior to the appointment of the Chapter 11 Trustee. Those pre-appointment fees are not at issue in this appeal.

In dispute, however, are $10,345.45 in fees and expenses Nickless incurred after appointment of the Chapter 11 Trustee. The bankruptcy court concluded that making the requested award from the estate would be inconsistent with 11 U.S.C. § 330(a), as interpreted by the Supreme Court in Lamie v. U.S. Trustee, 540 U.S. 526, 124 S.Ct. 1023, 157 L.Ed.2d- 1024 (2004). Nevertheless, because the Debt- or’s sole asset had been sold and all claims had been paid, the court found cause to dismiss the bankruptcy proceeding pursuant to 11 U.S.C. § 1112(b). At that point, surplus funds would typically re-vest in IGP; but the bankruptcy court also found cause under 11 U.S.C. § 349(b)(3) to pay Nickless’ fees and expenses from the surplus funds.2 The bankruptcy court was of the view that Lamie dealt only with the proper distribution of estate funds, and had no bearing on its treatment of non-estate funds following dismissal of the bankruptcy proceeding.

The United States Trustee for the bankruptcy now appeals the bankruptcy court’s June 28, 2012 Order awarding Nickless fees and expenses for services performed following appointment of the Chapter 11 Trustee.

II. STANDARD OF REVIEW

I review the bankruptcy court’s findings of fact for clear error, its legal [15]*15conclusions de novo, and its discretionary-decisions for abuse of discretion. Palmacci v. Umpierrez, 121 F.3d 781, 785 (1st Cir.1997); In re Gonic Realty Trust, 909 F.2d 624, 626 (1st Cir.1990).

III. ANALYSIS

A. Section 330(a)

11 U.S.C. § 330(a) governs fee awards for professional services performed in connection with bankruptcy proceedings. Although a prior version of section 330(a) permitted compensation to various professionals, including “the debtor’s attorney,” 11 U.S.C. § 330(a) (1988), Congress amended the statute in 1994 to remove “the debtor’s attorney” from the list of professionals eligible for a fee award, 11 U.S.C. § 330(a) (2006). Both iterations of the statute, however, permit compensation for “a professional person employed under section 327 or 1103” of title 11. Id. Section 327, in turn, allows a trustee to employ an attorney to assist him, id. § 327(a), and to employ an attorney who has represented the debtor, subject to certain conditions, id. § 327(d).

In Lamie, the Supreme Court held’ that section 330(a) did not authorize a fee award to a debtor’s attorney for legal services performed after the bankruptcy court had converted a Chapter 11 restructuring into a Chapter 7 liquidation proceeding and appointed an estate trustee. The Court concluded that the appointment of a trustee “terminated [the debtor’s] status as debtor-in-possession and so terminated [the attorney’s] service under § 327 as an attorney for the debtor-in-possession.” Lamie, 540 U.S. at 532, 124 S.Ct. 1023. Because the attorney was never subsequently employed by the trustee and approved by the court pursuant to section 327, the Court held section 330(a) did not authorize compensation to the attorney from estate funds. Id. at 538-39,124 S.Ct. 1023.

The bankruptcy court properly found Lamie applicable here. It makes no difference that this case involves a dispute about an award for fees incurred following the appointment of a trustee in a Chapter 11-as opposed to Chapter 7 — proceeding. In fact, Lamie cited with approval Andrews & Kurth L.L.P. v. Family Snacks, Inc. (In re Pro-Snax Distributors), 157 F.3d 414

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Cite This Page — Counsel Stack

Bluebook (online)
487 B.R. 12, Counsel Stack Legal Research, https://law.counselstack.com/opinion/harrington-v-nickless-mad-2013.