In re John Richards Homes Building Co.

523 B.R. 83, 2014 Bankr. LEXIS 5067, 60 Bankr. Ct. Dec. (CRR) 114, 2014 WL 7260920
CourtUnited States Bankruptcy Court, E.D. Michigan
DecidedDecember 18, 2014
DocketNo. 02-54689
StatusPublished
Cited by3 cases

This text of 523 B.R. 83 (In re John Richards Homes Building Co.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re John Richards Homes Building Co., 523 B.R. 83, 2014 Bankr. LEXIS 5067, 60 Bankr. Ct. Dec. (CRR) 114, 2014 WL 7260920 (Mich. 2014).

Opinion

ORDER: (1) GRANTING IN PART AND DENYING IN PART JOHN RICHARDS HOMES BUILDING CO., LLC’S MOTION FOR AN ADDITIONAL AWARD OF ATTORNEY FEES AND COSTS AND FOR AN AWARD OF PREJUDGMENT INTEREST (DKT. NO. 1278); AND, (2) DENYING JOHN RICHARDS HOMES BUILDING CO., LLC’S MOTION TO REINSTATE THE 2011 PUNITIVE DAMAGES AWARD OR, IN THE ALTERNATIVE, REFER THE PUNITIVE DAMAGES REQUEST TO THE DISTRICT COURT (DKT. NO. 1283)

MARK A. RANDON, Bankruptcy Judge.

I. INTRODUCTION

More than twelve years have passed since Kevin Adell wrongfully filed an invol[85]*85untary bankruptcy petition against John Richards Homes Building Co., LLC (“JRH”). The filing succeeded in destroying JRH’s business. But Adell’s victory, was pyrrhic: his petition and post-filing misconduct resulted in judgments against him totaling $8.5 million in compensatory damages, punitive damages, attorney fees, and postjudgment interest; forced him to seek personal bankruptcy protection in Florida; and, embroiled him in years of self-financed litigation — far beyond the month-long duration of his improvidently filed petition.

Dissatisfied with the $8.5 million Adell has already paid, JRH moves to: (1) receive an additional $864,000.00 attorney fees and costs award; (2) obtain prejudgment interest of $1.87 million on its prior fees and costs award; and, (3) have an additional $2.8 million punitive damage award — recently rejected by the Sixth Circuit Court of Appeals as improper under 11 U.S.C. § 105(a) and the Court’s inherent authority — revived as a punitive damage award under 11 U.S.C. § 303(i), or referred to the district court. JRH’s motions are fully briefed. The Court heard argument on September 15, 2014; it then required the parties’ dispute mediated, which was unsuccessful.

For the reasons discussed below, the Court orders Adell to pay JRH a final attorney fee of $20,000.00. In all other respects, JRH’s motions are without merit and DENIED.

II. PROCEDURAL HISTORY

The Court highlights the case history, which has been adequately summarized in previous opinions. See e.g., In re John Richards Homes Bldg. Co., LLC, 475 B.R. 585 (E.D.Mich. July 16, 2012).

Because Adell’s involuntary Chapter 7 bankruptcy petition against JRH was filed in bad faith, his conduct deemed “reprehensible,” and the petition an “extreme case of abuse of the bankruptcy process,” in 2003, the Michigan bankruptcy court entered a judgment against him and in favor of JRH for $6.4 million under 11 U.S.C. § 303(i): $4.1 million in compensatory damages, $2 million in punitive damages, and $313,230.68 in attorney fees and costs. The bankruptcy court’s judgment was affirmed by the United States District Court for the Eastern District of Michigan and the Sixth Circuit. After his efforts to seek personal bankruptcy protection in Florida failed, Adell finally paid the judgment with postjudgment interest in 2006.

Within days of Adell’s payment, JRH’s counsel, Honigman Miller Schwartz and Cohn (“Honigman”), filed a second fee application for postjudgment services under section 303(i), and JRH moved for additional punitive damages based on Adell’s postjudgment conduct — this time based on 11 U.S.C. § 105(a) and the court’s inherent authority.1 On October 27, 2011, the bankruptcy court awarded Honigman an additional $1.8 million in attorney fees and costs for services rendered between January 15, 2003 and September 24, 2009; JRH was awarded an additional $2.8 million in punitive damages (collectively, “the 2011 Fee and Cost Award”). Significantly, the court awarded JRH additional punitive damages — under section 105(a) or its inherent authority — for Adell’s “unnecessary and abusive bankruptcy filing,” finding “for the most part, the record supported] the facts on which JRH’s motion ... [was] based.” (Emphasis added).

To maintain the status quo pending appeal, Adell deposited $5,119,612.00 (the 2011 Fee and Cost Award, plus 10 percent) [86]*86into a court registry interest-bearing account (“registry account”) and obtained a stay through certiorari review of the United States Supreme Court (“November 2011 Stay Order”).

On appeal, the district court affirmed Honigman’s award of attorney fees, but reversed the bankruptcy court’s award of punitive damages; on cross appeal, the Sixth Circuit affirmed the order of the district court holding, with respect to JRH’s additional $2.8 million punitive damages claim, that:

bankruptcy courts do not have a general statutory power to impose serious non-compensatory punitive damages. While § 105(a) establishes some punitive sanction power, that power is limited to sanctions that are necessary or appropriate to enforce the Bankruptcy Code. Additionally, § 105(a) is prospective rather than retrospective; as such, that provision is best read not to encompass a power to award criminal-like punitive sanctions. Therefore, while § 105(a) grants bankruptcy courts the authority to award mild noncompensatory punitive damages, it does not provide a basis for awarding serious noncompensatory punitive damages. There is no other statutory basis for such an award.
* * *
Likewise, no other circuit has found that bankruptcy courts have a broad, inherent power to impose substantial noncom-pensatory punitive sanctions.

In re John Richards Homes Bldg. Co., L.L.C., 552 Fed.Appx. 401, 415 (6th Cir.2013) cert. denied sub nom. Adell v. John Richards Home Bldg. Co., — U.S.-, 134 S.Ct. 2136, 188 L.Ed.2d 1125 (2014) (internal citations omitted).

On May 5, 2014, the United States Supreme Court denied certiorari review. Thus, only Honigman’s attorney fee award survived appeal.

Because there was a final adjudication of the 2011 Fee and Cost Award, the Bankruptcy Court Clerk was ordered to: (1) immediately disburse to Honigman $1,859,812.59 from the registry account; and, (2) immediately disburse to Adell the remaining amount, including accrued interest.

The pending motions followed.

III. ANALYSIS

A. JRH is Entitled to a Modest Award of Additional Attorney Fees

JRH requests approximately $864,000.00 in additional attorney fees it claims to have paid Honigman for services rendered between September 25, 2009 and May 1, 2014. It argues that a substantial portion of these fees were incurred in obtaining— and then defending Adell’s appeals of— Honigman’s $1.8 million cost and fee award. But these fees also include amounts JRH paid Honigman to obtain its $2.8 million punitive damage award in the bankruptcy court — and to pursue its appeal of the district court’s reversal of that award. Without reviewing all of Honig-man’s relevant detailed billings,2

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523 B.R. 83, 2014 Bankr. LEXIS 5067, 60 Bankr. Ct. Dec. (CRR) 114, 2014 WL 7260920, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-john-richards-homes-building-co-mieb-2014.