In Re Aov Industries, Inc. Hubert R. Bruce v. Aov Industries, Inc., in Re Aov Industries, Inc. Hubert R. Bruce v. William J. Perlstein, Disbursing Agent for the Aov Industries Fund

798 F.2d 491
CourtCourt of Appeals for the D.C. Circuit
DecidedAugust 8, 1986
Docket85-5610
StatusPublished
Cited by7 cases

This text of 798 F.2d 491 (In Re Aov Industries, Inc. Hubert R. Bruce v. Aov Industries, Inc., in Re Aov Industries, Inc. Hubert R. Bruce v. William J. Perlstein, Disbursing Agent for the Aov Industries Fund) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Aov Industries, Inc. Hubert R. Bruce v. Aov Industries, Inc., in Re Aov Industries, Inc. Hubert R. Bruce v. William J. Perlstein, Disbursing Agent for the Aov Industries Fund, 798 F.2d 491 (D.C. Cir. 1986).

Opinion

798 F.2d 491

255 U.S.App.D.C. 1, 14 Bankr.Ct.Dec. 1104,
Bankr. L. Rep. P 71,297

In re AOV INDUSTRIES, INC., et al.
Hubert R. BRUCE, Appellant,
v.
AOV INDUSTRIES, INC., et al., Appellees.
In re AOV INDUSTRIES, INC., et al.
Hubert R. BRUCE, Appellant,
v.
William J. PERLSTEIN, Disbursing Agent for the AOV
Industries Fund, Appellee.

Nos. 85-5610, 85-5343.

United States Court of Appeals,
District of Columbia Circuit.

Argued April 10, 1986.
Decided Aug. 8, 1986.

On Appeal from the United States District Court for the District of Columbia (Civil Action Nos. 84-0335, 83-3365).

Edward L. Genn, Washington, D.C., for appellant.

Max O. Truitt, Jr., with whom Carol H. Fishman, was on brief for appellees AOV Industries Fund and Wilmer, Cutler & Pickering, and Alan S. Tenenbaum, Washington, D.C., was on brief, for appellee William J. Perlstein.

Before WALD, MIKVA and STARR, Circuit Judges.

Opinion for the Court filed by Circuit Judge MIKVA.

MIKVA, Circuit Judge:

These consolidated cases make up the third appeal to this court involving the bankruptcy and reorganization of AOV Industries. In AOV I, we dismissed Hubert R. Bruce's appeal of the Reorganization Plan ("the Plan"), finding that his objections were moot because the Plan had been substantially consummated. In re AOV Industries, 792 F.2d 1140 (D.C.Cir.1986). In AOV II, 797 F.2d 1004 (D.C.Cir.1986), also released today, we remanded the case to the district court with an order to reconsider whether the law firm of White & Case had a conflict of interest in acting as general counsel to AOV.

The appeals decided in this opinion focus on the role played by the law firm of Wilmer, Cutler & Pickering ("WC & P" or "Wilmer") in these Chapter 11 proceedings. Case number 85-5610 concerns a challenge by appellant Bruce to the legal fees awarded to WC & P by the bankruptcy court. Number 85-5343 involves a challenge both to the appointment of Wilmer as counsel to the Disbursing Agent, and to a sanction imposed on Bruce by the district judge. Because we find that Wilmer apparently violated the Bankruptcy Code by simultaneously representing more than one party during the proceedings, we vacate the fee award in 85-5610 and remand for further consideration. In 85-5343, however, we affirm both the decision to dismiss the challenge to the Wilmer appointment, and the decision to sanction Bruce for unjustifiably failing to pursue his appeal.I.

Most of the pertinent facts are set forth in AOV I and AOV II, and will not be repeated here. AOV Industries and its subsidiaries filed for voluntary bankruptcy on November 6, 1981. Soon after the petition was filed, several creditors' committees were formed, including the Alla-Ohio Committee ("the Committee"), which was composed of unsecured creditors of an AOV subsidiary. On November 24, 1981, the bankruptcy court authorized the Committee to retain Wilmer, Cutler & Pickering as its counsel. See 11 U.S.C. Sec. 1103(a) (1982). The lawyer primarily responsible for representing the Committee was William J. Perlstein, a WC & P partner.

In its application to the court to become Committee counsel, Wilmer acknowledged that it represented other creditors of AOV. It maintained, however, that it was not representing any other creditor in matters related to the AOV bankruptcy. Under the pre-1984 version of Sec. 1103(b) of the Bankruptcy Code (which controls this case), a law firm that represents a creditors' committee is prohibited from simultaneously representing "any other entity in connection with the [bankruptcy] case." Cf. AOV II, at 1010-14 (discussing similar Code section).

The activities that led to the dispute in this appeal are as follows: the Alla-Ohio Committee and its lawyers were actively involved in negotiating a Disclosure Statement and Reorganization Plan for AOV. An amended Plan was approved by the bankruptcy court on June 30, 1983, and one month later the district court affirmed the confirmation. In re AOV Industries, 31 B.R. 1005 (D.D.C.1983). Bruce challenged the Plan in this court, but the panel dismissed his claims as moot. AOV I, at 1146-50.

After the Plan was confirmed, WC & P and the other lawyers and accountants who had contributed to the reorganization filed applications for fees, to be paid from the Debtor's estate. See 11 U.S.C. Sec. 330(a) (1982) ("Compensation of officers"). Wilmer originally asked for roughly $392,000 for its work on behalf of the Alla-Ohio Committee; after extensive negotiations with AOV, WC & P agreed to reduce its request to $325,000. Bruce objected to the Wilmer application.

After two days of hearings, the bankruptcy court approved Wilmer's reduced fee request in full. As discussed in AOV II, the judge used the "lodestar" method for calculating the proper level of fees. AOV II, at 1007; see also Copeland v. Marshall, 641 F.2d 880 (D.C.Cir.1980). The judge concluded that the Wilmer request was justified, even though the aggregate fees awarded to all professionals consumed a large percentage of the estate.

On appeal, the district court affirmed the award. In re AOV Industries, No. 84-0335, mem. op. (D.D.C. Mar. 25, 1985) (the "March 25 Decision"). The court rejected Bruce's claim that WC & P should have been disqualified because of its representation of other creditors while it represented the Committee. The judge found that Bruce had raised only "bald assertions ... without highlighting any particulars" of a conflict of interest. Id. at 5. She also rejected Bruce's claim that the bankruptcy court should have appointed an independent examiner to analyze all the fee requests. In number 85-5610, Bruce asks this court to overturn the district court's affirmance of the Wilmer award.

While the war on fees was being waged in one action, Bruce decided to attack on another front. The approved Plan provided for the appointment of a Disbursing Agent ("the Agent") to manage the AOV estate during reorganization. Among other things, the Agent's job was to recapture preferential payments, invest any money collected, and distribute assets to the creditors. The Plan explicitly provided that the Agent was free to retain himself or his law firm as counsel. Shortly before the Plan was confirmed, the various creditors' committees met and chose William Perlstein of the Alla-Ohio Committee and WC & P to be the Disbursing Agent. Perlstein petitioned the court for permission to retain WC & P as Agent's counsel; the appointment was confirmed on July 18, 1983.

Bruce moved to set aside the order appointing counsel, arguing, inter alia, that Wilmer should have been disqualified because of a conflict of interest created by the firm's representation of the Alla-Ohio Committee.

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