Herrera-Edwards v. Moore (In re Herrera-Edwards)

524 B.R. 845, 25 Fla. L. Weekly Fed. B 139, 73 Collier Bankr. Cas. 2d 128, 2015 Bankr. LEXIS 291, 60 Bankr. Ct. Dec. (CRR) 154
CourtUnited States Bankruptcy Court, M.D. Florida
DecidedJanuary 29, 2015
DocketCase No. 8:12-bk-15725-KRM; Adv. No. 8:14-ap-247-KRM
StatusPublished

This text of 524 B.R. 845 (Herrera-Edwards v. Moore (In re Herrera-Edwards)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Herrera-Edwards v. Moore (In re Herrera-Edwards), 524 B.R. 845, 25 Fla. L. Weekly Fed. B 139, 73 Collier Bankr. Cas. 2d 128, 2015 Bankr. LEXIS 291, 60 Bankr. Ct. Dec. (CRR) 154 (Fla. 2015).

Opinion

MEMORANDUM OPINION ON OBJECTIONS TO CLAIMS FILED ■ BY ERIC L. MOORE

K. RODNEY MAY, United States Bankruptcy Judge

Since 1997, the debtor, Bambi Alicia Herrera-Edwards (“Herrera-Edwards” or “debtor”) has received royalty income derived from the music compositions of her late husband, Bernard Edwards. In this adversary proceeding, she is challenging claims filed by Eric L. Moore, who holds himself out as a “treasure hunter” of artists’ royalties.1 He has filed multiple claims in this case (the latest being Claim No. 18) and a counterclaim in this adversary proceeding, seeking up to $10 million from the debtor’s royalty income, for alleged services under a pre-petition Consulting Agreement.2 Alternatively, he [849]*849makes the same claim, as an administrative expense or for quantum meruit, for providing post-petition services to the debtor’s bankruptcy estate.

Herrera-Edwards contends that the Consulting Agreement was procured by fraud and that Moore, a convicted felon, did not discover anything she did not already own or that her lawyers were not already working to recover. She argues that he is ineligible for an administrative expense claim because his employment was never approved by the court. She asks that Moore be made to repay about $45,000, a payment he received as compensation under the Consulting Agreement shortly before the Chapter 11. After hearing testimony over 6 days, considering the documentary evidence, and post-trial briefs, the Court is compelled to conclude that the debtor’s objections should be sustained, Mr. Moore’s claims should be disallowed, judgment should be entered on all counts for plaintiff, and judgment entered against Mr. Moore on his counterclaim.

BACKGROUND FACTS

Herrera-Edwards is currently employed as an airline flight attendant. At one time, however, she was married to the late Bernard Edwards, a co-founder — along with the debtor’s cousin, Nile Rodgers — of the American diseo/funk band Chic. Together, Mr. Edwards and Mr. Rodgers authored and performed many popular song's including “Le Freak,” “We are Family,” “Dance, Dance, Dance,” and “Gettin’ Jiggy with It.”

Mr. Edwards died in 1996. His share of the music copyrights was included in his estate, which was probated in Connecticut. The debtor asserted substantial tort claims against the probate estate, but settled them in 1997 in exchange for a 37.5% interest in Edwards’ copyrights.

Since 1997, Herrera-Edwards has received royalty payments from an intermediary, Jess S. Morgan & Co., Inc. (“JSM”).3 The royalty income flows through several levels of payors — from ASCAP to Warner/Chappel Music (“Warner/Chappel”) to JSM, each of which takes a fee before disbursing.4 It was not until the fall of 2010, after comparing her royalty payments to those of her cousin, that Herrera-Edwards came to suspect that she had been underpaid for years. (7/15 Tr. pp. 15 — 16).5

Between 2010 and September 2012, the debtor hired various lawyers, accountants, and financial advisers to resolve her debts and recover the suspected royalty underpayments. By this time, she had accrued a substantial federal income tax debt and attempted to borrow against her royalty income to resolve it. In the midst of these difficulties, Mr. Moore came to be involved in her financial affairs.

1. The Debtor’s Copyright Interests.

On July 9, 1997, Edwards’ probate estate and its beneficiaries settled substantial tort claims filed by Herrera-Edwards.6 Initially, the parties executed a hand-written mediation settlement agreement, dated [850]*850July 9, 1997. They executed a more detailed agreement on July 30, 1997. (Pl.’s Ex. 5). The same day, the probate court held a hearing on the settlement. (Pl.’s Ex. 3). The fully executed July 30, 1997 Agreement was filed under seal in the probate case on August 28, 1997. (PL’s Ex. 5).

Herrera-Edwards and Edwards’ probate estate later entered into another agreement, dated August 21, 1997, referred to as the “Co-Publishing Agreement.” (PL’s Ex. 6). The Co-Publishing Agreement provided for (a) the sale and assignment to Herrera-Edwards of 37.5% of all of the probate estate’s right, title, and interest in the Edwards’ compositions and copyrights; and (b) her relinquishment to the probate estate of “administration rights” to the copyrights.7

It appears that the two settlement agreements and the Co-Publishing Agreement were parts of a single settlement transaction.8 As a result, Herrera-Edwards received an outright ownership interest (except for administration rights) in 37.5% of the copyrights owned by the Edwards estate. All parties to these three 1997 agreements were represented by counsel. This 37.5% ownership in Edwards’ copyrights is the principal asset in this Chapter 11 case.

To address his cousin’s suspicions of underpayment, Nile Rodgers arranged for her to consult with Richard Leher, a highly regarded entertainment attorney with Greenberg Traurig LLP, in Los Angeles, and Michael Ostin, a music executive. (7/15 Tr. pp. 16-17). In the fall of 2010, they reviewed Herrera-Edwards’ royalty statements and the probate settlement documents. They concluded that her payments did not seem to reflect her full royalty rights. (5/22 Tr. pp. 184-86, 188-90; 7/15 Tr. p. 17). They believed that she had not been receiving “record,” “artist,” or “producer” royalties. (5/22 Tr. pp. 188-90).

Instead of hiring Mr. Leher, who commanded a premium billing rate, Herrera-Edwards selected Morgan & Morgan, P.A., who agreed to work on a 40% contingency fee to recover the unpaid royalties.9 (5/23 Tr. pp. 22-24). She provided Daryl Rou-son, Tucker Byrd, and Clay Townsend at Morgan & Morgan with all of the probate documents. (5/23 Tr. p. 24). After review and analysis of the documents over several months, the Morgan & Morgan lawyers prepared a draft complaint to recover the unpaid royalties. (5/23 Tr. p. 28).

2. Mr. Moore Becomes Interested in the Debtor’s Financial Affairs.

In late 2010, Herrera-Edwards needed funds. Marvin Washington, Herrera-Edwards’ investment advisor, suggested that she pursue a loan. Washington introduced [851]*851her to Chuck Biddle, who had a connection to a lender, Music Royalty Consulting, Inc. (“MRCI”). (7/15 Tr. p. 20). Biddle brought in his associate, Mr. Moore, to help him and Washington close a loan.10 (5/22 Tr. p. 44).

Without her knowledge, Washington sent Biddle and Moore copies of Herrera-Edwards’ documents. (7/15 Tr. pp. 20-22; Pi’s Exs. 9, 10). Washington told Herrera-Edwards that Moore was considered a “closer” and that Biddle had contacted Moore for assistance so that Moore could help Biddle close a deal with MRCI. (7/15 Tr. p. 26). Although he and Herrera-Edwards did not meet until July 2012, Moore began gathering information about her and her royalty rights. (Pl.’s Exs. 10, 14; 7/15 Tr. pp. 20-24). But, this initial effort to borrow funds stalled.

The debtor resumed discussions with MRCI in 2011, without the direct involvement of Moore.

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Bluebook (online)
524 B.R. 845, 25 Fla. L. Weekly Fed. B 139, 73 Collier Bankr. Cas. 2d 128, 2015 Bankr. LEXIS 291, 60 Bankr. Ct. Dec. (CRR) 154, Counsel Stack Legal Research, https://law.counselstack.com/opinion/herrera-edwards-v-moore-in-re-herrera-edwards-flmb-2015.