In re Franklin Savings Corp.

169 B.R. 212, 1994 Bankr. LEXIS 964, 1994 WL 314851
CourtUnited States Bankruptcy Court, D. Kansas
DecidedJune 15, 1994
DocketBankruptcy No. 91-41518-11
StatusPublished
Cited by2 cases

This text of 169 B.R. 212 (In re Franklin Savings Corp.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Franklin Savings Corp., 169 B.R. 212, 1994 Bankr. LEXIS 964, 1994 WL 314851 (Kan. 1994).

Opinion

MEMORANDUM OPINION

JOHN T. FLANNAGAN, Bankruptcy Judge.

Debtor Franklin Savings Corporation appears by its attorneys, R. Pete Smith and Jonathan A. Margolies of McDowell, Rice & Smith, Kansas City, Missouri. The Resolution Trust Corporation (“RTC”) appears by its attorneys, Michael J. Belfonte and Erlene W. Krigel of Krigel & Krigel, P.C., Kansas City, Missouri. The Office of Thrift Supervision (“OTS”) appears by its attorneys, Martin Jefferson Davis of Washington, D.C. and Joann E. Corpstein of Overland Park, Kansas. The United States Trustee, John E. Foulston, appears by his attorney, Jeffrey W. Rockett.

Franklin Savings Corporation filed its Application of Debtor for Authority to Employ Special Counsel (“Application”) on July 28, 1993. The Application requests authority to employ the law firms of Rouse, Hendricks, German, May & Shank, P.C. (“Rouse Firm”) and Sidley & Austin as special counsel to assist debtor with an appeal from the District Court to the Tenth Circuit Court of Appeals.

The appeal involves whether debtor is liable for $122,019.60 of costs incurred by OTS in what the parties refer to as the “OTS litigation,” to wit: Franklin Savings Corporation v. Office of Thrift Supervision, Case No. 90-2054-S (D.Kan), Case No. 90-3272 (10th Cir.). In this case, Franklin Savings Corporation sued to reverse an OTS order placing Franklin Savings Association under conservatorship as authorized by FIRREA.

[214]*214Following a successful appeal to the Tenth Circuit Court of Appeals in the “OTS Litigation,” OTS filed a bill of costs with the Clerk of the District Court. The Clerk taxed the costs against Franklin Savings Corporation. The District Court then reviewed the Clerk’s action and found that the Tenth Circuit’s ruling in the conservatorship appeal entitled OTS to the costs. However, since the Tenth Circuit ruling was issued before the debtor filed this bankruptcy case, the District Court ruled that OTS’s actions had violated the bankruptcy automatic stay. Because OTS had failed to obtain relief from the stay, the District Court decided that OTS had waived its right to the costs. This decision was entered on January 21,1993; the OTS filed a Notice of Appeal from the ruling on March 17, 1993. Hence, debtor wants to employ special counsel to handle this “taxed cost” appeal.

Although not indicated in its caption, the Application requests that the firms be employed nunc pro tunc as of the date of the filing of the Notice of Appeal on March 17, 1993, some two months before the filing of the Application. Under D.Kan.Bk.Rule ■9004.1, the nunc pro tunc nature of the Application should have been included in the pleading caption.

The RTC filed a limited objection to the Application on August 6, 1993. While it did not object to the employment of the firms per se, it did oppose paying the firms with tax refund monies that RTC claimed to own. The ownership of the tax refund monies has been the focal point of this bankruptcy case. Since the filing of the RTC’s response, this Court has ruled that the tax refund monies are property of the bankruptcy estate and has denied the RTC’s request for a stay of the use of the tax refund monies pending the outcome of RTC’s appeal of the tax refund decision. In denying the request for stay, the Court allowed the debtor to use the tax refund monies for the payment of professionals, subject to certain limitations. The RTC’s objection is now moot and does not require a ruling.

The OTS objected to the Application on August 26,1993, stating that Sidley & Austin should not be employed, nunc pro tune or otherwise. Apparently, Sidley & Austin represented the debtor as special counsel in petitioning the Supreme Court for a writ of certiorari in the OTS litigation. However, Sidley & Austin concluded its representation of the debtor before the taxation of costs became an issue. The OTS further points out that the debtor had already filed its one and only brief as appellee in the “taxed cost” appeal by the time it filed its Application here on July 28, 1993.

The United States Trustee filed his objection to the Application on August 27, 1993, complaining that there were no “extraordinary circumstances” alleged to justify appointing the firms nunc pro tunc. He also complains that debtor failed to follow D.Kan. Bk.Rule 9004.1. by omitting the words “nunc pro tune” from the caption of the Application, thereby obscuring its true nature.

Franklin Savings Corporation filed an omnibus response on September 13, 1993, directed at the objections of both the OTS and the United States Trustee. In this pleading (debtor raises other points in a subsequently filed Motion to Strike), debtor claims that the OTS objection should fail because it amounts to an interference with the debtor’s right to choose its own counsel, and that the Court should overrule the United States Trustee’s objection to avoid an inequitable result.

After filing its Application, debtor issued a Notice With Opportunity for Nonevidentiary Hearing on Application of Debtor for Authority to Employ Special Counsel filed August 6, 1993. The notice stated that if objections to the Application were filed on or before August 26, 1993, a non-evidentiary hearing would be held on September 14, 1993.

Although such objections were timely filed, the September 14, 1993, hearing did not occur because on August 30, 1993, Martin Jefferson Davis of the OTS filed a motion for continuance of the hearing. The motion states that counsel for the debtor had no objection to the continuance. The Court granted the continuance by order dated September 1, 1993, continuing the hearing to October 4, 1993.

On October 4,1993, the debtor appeared at the hearing and filed a Motion to Strike the [215]*215Objections to Debtor’s Application for Authority to Employ Special Counsel directed at the positions of the OTS and the United States Trustee. Paragraph 4 of the motion sets out D.Kan.Bk.Rule 2014.1B which appears under the caption “Application for Employment Of Professionals.”

B. Objection of United States Trustee. The United States Trustee shall have fifteen days after the filing of such an application [to employ] in which to file any objections to the application with the court. The trustee, debtor or committee shall have fifteen days after the filing of any objections to file an answer or response and serve such upon the United States Trustee. The United States Trustee shall have ten days after the filing of the response by the trustee, debtor or committee in which to file either: (1) a statement that the response is adequate and the objection is withdrawn; or (2) a statement that the response is inadequate and requesting an evidentiary hearing. The United States Trustee’s failure to file an objection to the application or to file a statement after the trustee, debtor or committee has made a response, shall be deemed a waiver of any objection and the court may forthwith enter an Order approving the employment of the professional person.

Under this rule, the United States Trustee has 15 days from the filing of an application to employ counsel to file and objection to the application. The debtor then has 15 days to answer or respond. If the debtor answers or responds, the United States Trustee has 10 more days within which to file a statement either withdrawing his objection or asking for an 'evidentiary hearing. If the United States Trustee fails to file a statement, his objection is deemed waived.

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Cite This Page — Counsel Stack

Bluebook (online)
169 B.R. 212, 1994 Bankr. LEXIS 964, 1994 WL 314851, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-franklin-savings-corp-ksb-1994.