In Re Eckert

414 B.R. 404, 2009 Bankr. LEXIS 2149, 2009 WL 2365396
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedJuly 31, 2009
Docket19-05485
StatusPublished
Cited by8 cases

This text of 414 B.R. 404 (In Re Eckert) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Eckert, 414 B.R. 404, 2009 Bankr. LEXIS 2149, 2009 WL 2365396 (Ill. 2009).

Opinion

MEMORANDUM OPINION

JOHN H. SQUIRES, Bankruptcy Judge.

This matter comes before the Court on the interim fee application (the “Application”) of Freeborn & Peters LLP (the *407 “Applicant”), as special counsel to David E. Grochochinski, the Chapter 7 Trustee of the bankruptcy estate of Jeffery Eckert (the “Debtor”), and the objection thereto filed by Gregory Steiner and Agristar Frozen Foods, Inc. (collectively the “Objectors”). The Applicant initially sought fees of $364,395.60, plus reimbursement of expenses which totaled $37,653.04 for the period from September 1, 2006 through January 31, 2009. In response to the objection, the Applicant voluntarily reduced its claim for fees by fifteen percent to $309,736.26. For the reasons set forth herein, the Court allows the Applicant interim compensation in the sum of $140,000 and reimbursement of expenses in the sum of $29,371.49.

I. JURISDICTION AND PROCEDURE

The Court has jurisdiction to decide this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O).

II. FACTS AND BACKGROUND

Many of the relevant facts and background are contained in prior Opinions of the Court Grochocinski v. Eckert (In re Eckert), 375 B.R. 474 (Bankr.N.D.Ill.2007) (revoking the debtor’s discharge for his refusal to obey orders of court), aff'd, No. 07 C 6012, 2008 WL 4547224 (N.D.Ill. April 2, 2008); Grochocinski v. Scilossberg (In re Eckert), 388 B.R. 813 (Bankr.N.D.Ill.2008) (allowing avoidance and recovery of fraudulent transfers made by the debtor), aff'd, 402 B.R. 825 (N.D.Ill.2009). The Debtor filed his voluntary Chapter 7 petition on October 14, 2005, after hot pursuit in other fora by various of his creditors, most notably the Objectors. They were represented by the Applicant, who entered an appearance for these creditors on December 22, 2005. On February 3, 2006, the Trustee applied to employ the law firm of which he is a member, Grocho-chinski, Grochochinski & Lloyd, Ltd., as his attorneys. That application was allowed on February 10, 2006. On May 18, 2006, the Trustee applied to retain the Applicant as his special counsel. That application was allowed without objection.

Problems with the Debtor led his original and subsequent attorneys of record to withdraw in June 2006 and May 2007. The Debtor’s recalcitrance and non-compliance with discovery orders required the Applicant to file motions to compel, which resulted in sanctions and civil contempt orders directed to, among others, the Debtor, his spouse, and her counsel.

In addition to a revocation of discharge proceeding, the Applicant filed a complex avoidance and recovery action against transferees of property that had been fraudulently conveyed by the Debtor to his spouse and three individuals who were accomplices to a scheme the Debtor hatched to hinder, delay, and defraud his creditors. The Trustee was represented by the Applicant in both the revocation of discharge and avoidance and recovery adversary proceedings. The details of those proceedings are contained in the above-referenced Opinions. Ultimately, judgments in the avoidance and recovery action were obtained in favor of the Trustee and against the following individuals: the Debtor’s spouse in the sum of $281,112.99; David Schlossberg in the sums of $109,000, $120,000, and $52,357.54; Gary Laliberte in the sums of $120,000 and $52,357.54; and Marcelo Carlos in the sum of $76,207. The aggregate of these judgments totals $811,035.07. The avoidance matter was settled by most of the parties after trial. The estate has received approximately $282,000 from the settling defendants. (Docket No. 170.)

*408 The Trustee has estimated the fees for his services at approximately $15,000; his firm’s attorneys’ fees and costs at approximately $2,500; and his accountants’ fees and costs at approximately $1,500. Accordingly, the estimated additional fees for these administrative claimants total approximately $19,000. The latest annual report filed by the Trustee shows $282,247.13 on hand as of December 31, 2008. Thus, the estate appears administratively insolvent at this juncture and the prospects for additional recoveries are uncertain at best.

Among the other unrecovered assets, in addition to the settlement with most of the defendants in the avoidance action, is the unsatisfied judgment against the Debtor’s spouse in the amount of $281,112.99. The collectability of that judgment, however, is highly questionable because she has since filed her own bankruptcy case and recently confessed judgment that the debt to this estate is non-dischargeable. The judgment against Marcelo Carlos in the amount of $76,207 is also of dubious col-lectability in light of his testimony at trial regarding his precarious financial condition. The Trustee has indicated that a proposal has been made to settle the estate’s claim against the Debtor’s spouse for a sum exceeding $100,000, and the Debtor has supposedly agreed to pay the $3,000 sanctions assessed against him.

Although hope springs eternal, the Court will not consider these potential future recoveries for purposes of the instant Application because fees should be allowed and paid based on realized funds on hand, not speculative future expectations that may never ripen into cash in the estate’s account. Moreover, the conduct of the Debtor and his spouse has been anything but helpful or cooperative in the administration of this estate thus far, and the Court holds no unrealistic delusions about the reliability of their promises to pay in the future. As a result, the Court will decide this Application in the context of what has happened and what assets are presently available in the estate’s account.

III. APPLICABLE STANDARDS

Section 327(e) of the Bankruptcy Code, which authorizes a trustee to employ special counsel, provides as follows:

The trustee, with the court’s approval, may employ, for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debtor, if in the best interest of the estate, and if such attorney does not represent or hold any interest adverse to the debtor or to the estate with respect to the matter on which such attorney is to be employed.

11 U.S.C. § 327(e). “A threshold requirement under § 327(e) is that the appointment be for a ‘special purpose,’ and not to represent the trustee in ‘conducting the case.’ ” In re Neuman, 138 B.R. 683, 685 (S.D.N.Y.1992).

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Cite This Page — Counsel Stack

Bluebook (online)
414 B.R. 404, 2009 Bankr. LEXIS 2149, 2009 WL 2365396, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-eckert-ilnb-2009.