In re Sweports, Ltd.

511 B.R. 522, 2014 WL 2742812, 2014 Bankr. LEXIS 2692, 59 Bankr. Ct. Dec. (CRR) 179
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedJune 18, 2014
DocketNo. 12 B 14254
StatusPublished
Cited by6 cases

This text of 511 B.R. 522 (In re Sweports, Ltd.) 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 Sweports, Ltd., 511 B.R. 522, 2014 WL 2742812, 2014 Bankr. LEXIS 2692, 59 Bankr. Ct. Dec. (CRR) 179 (Ill. 2014).

Opinion

MEMORANDUM OPINION

A. BENJAMIN GOLDGAR, Bankruptcy Judge.

Before the court in this dismissed chapter 11 case are two applications for compensation: the second and final application of Neal L. Wolf (“Wolf’) as counsel to the Official Committee of Unsecured Creditors, and the final application of Pierre Benoit & Associates, Inc. (“Benoit”), finan--cial consultant to the Committee. For the reasons discussed below, the applications will be denied for lack of jurisdiction.

1. Background

The chapter 11 case was filed on April 9, 2012, originally as an involuntary case. (Dkt. No. 1). The debtor, Sweports, Ltd., eventually consented to an order for relief in November 2012, and thereafter the case was treated as a voluntary one with Swe-ports as debtor-in-possession.

Shortly after the order for relief was entered, the' U.S. Trustee appointed an Official Committee of Unsecured Creditors under section 1102 of the Bankruptcy Code, 11 U.S.C. § 1102(a)(1). The Com[524]*524mittee sought permission to retain Wolf as its counsel, and that request was granted. Much later, the Committee sought permission to retain Benoit as its financial consultant. That request was also granted.

Meanwhile, Sweports proposed a plan of reorganization, and when the exclusivity period lapsed, the Committee filed a plan of its own.

In January 2014, after extensive litigation, the court held an evidentiary hearing on confirmation of the competing plans. At the end of March 2014, the court issued a lengthy written order in which it denied confirmation of both the Sweports plan and the Committee plan. The order not only denied confirmation, it invited the U.S. Trustee to move under section 1112(b) to convert or dismiss the case.

The U.S. Trustee accepted the invitation and moved for conversion to chapter 7 or alternatively for dismissal. When the motion was presented on April 30, 2014, no party in interest sought conversion, and no party opposed dismissal. The motion was therefore granted and the case dismissed. (Dkt. No. 772). The dismissal order said simply: “This case is dismissed.” (Id.). On May 15, 2014, the case was closed. (Dkt. No. 787).

On May 23, 2014, nearly a month after the case was dismissed and more than a week after it was closed, Wolf filed his second and final application for compensation. (Dkt. No. 788).1 In the application, Wolf requests $775,735 in attorney’s fees and $6,580.95 in expenses for the period June 1, 2013, to April 30, 2014, and $1,133,492.74 in attorney’s fees and $7,924.65 in expenses as final compensation. (Id.). On May 28, 2014, Wolf filed a final application for Benoit seeking $95,058.75 in fees and $1,659.38 in expenses. (Dkt. No. 791). Sweports objects to the applications, arguing the court lacks jurisdiction to consider them.

2. Discussion

The applications will be denied for lack of jurisdiction. Because the case has been dismissed, there is no longer an estate from which Wolf and Benoit can be paid and so no point in considering whether and how much they should be paid from it. The applications are moot.

Section 327(a) of the Code permits a trustee to employ professionals, including attorneys. 11 U.S.C. § 327(a). In the case of a committee appointed under section 1102 of the Code, section 1103(a) authorizes the committee to employ professionals, 11 U.S.C. § 1103(a), and section 328(a) authorizes the committee to employ professionals under section 327(a), 11 U.S.C. § 328(a). Under sections 330(a)(1)(A) and (B), the bankruptcy court is authorized to award reasonable compensation and reimbursement of expenses to any professional employed under sections 327 or 1103. 11 U.S.C. §§ 330(a)(1)(A), (B). Committee professionals seeking compensation — professionals like Wolf and Benoit — can apply to the court to have their compensation approved under section 330. See In re Northwest Airlines Corp., 382 B.R. 632, 644 (Bankr.S.D.N.Y.2008); In re Recycling Indus., Inc., 243 B.R. 396, 400 (Bankr.D.Colo.2000).

But an application under section 330 is necessary and appropriate only “when a professional is seeking an award payable from the [bankruptcy] estate.” In re McDonald Bros. Constr., Inc., 114 B.R. 989, 994 (Bankr.N.D.Ill.1990). That is because “ ‘[t]he funds of a bankruptcy estate [525]*525are trust funds. The Court has a duty to see that these funds are administered in a manner consistent with the intent of the Bankruptcy Code.’ ” Id. at 994 (quoting In re Ross, 88 B.R. 471, 475 (Bankr.M.D.Ga.1988)). When a professional will be compensated from a source other than the estate, the professional “need not, and should not,” apply to the bankruptcy court to have his compensation approved. Id.; Barron v. Countryman, 432 F.3d 590, 595 (5th Cir.2005) (noting that the “Code requires court approval [of compensation] paid from the estate of the debtor” and not “from a source other than the debtor’s estate” (emphasis in original)).

In this case, there is no longer a bankruptcy estate. The case was dismissed on April 30. Unless the court “orders otherwise,” the dismissal of a bankruptcy case “revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case....” 11 U.S.C. § 349(b)(3). The estate itself ceases to exist. Koo v. VNO Shops on Lake (In re Koo), No. CC-12-1558(KiTaKu), 2013 WL 5460138, at *3 (9th Cir. BAP Oct. 1, 2013) (“The dismissal order terminates the bankruptcy estate”); Commonwealth v. Pappalardo (In re Steenstra), 307 B.R. 732, 738 (1st Cir. BAP 2004); Jefferson-Pilot Inves., Inc. v. Capital First Realty, Inc., No. 10 C 7633, 2012 WL 1952656, at *3 (N.D.Ill. May 29, 2012); In re Slaughter, 141 B.R. 661, 663 (Bankr.N.D.Ill.1992) (noting that “dismissal terminates the estate”). The court here did not “order otherwise,” and the Sweports bankruptcy estate consequently ceased to exist on April 30, 2014.

Because there is no longer a bankruptcy estate, there is no longer an estate from which compensation can be paid to Wolf or Benoit. Cf. Jefferson-Pilot, 2012 WL 1952656, at *3 (noting that when there is “no longer an estate,” there is no longer any “cash in which the estate has an interest” (internal quotation and ellipses omitted)). With the estate’s disappearance, the court’s duty to oversee its administration, see McDonald, 114 B.R. at 994, has likewise disappeared. At this stage, reviewing the two applications from Wolf and Benoit and making determinations under section 330 about the reasonableness of their compensation would be pointless, a purely academic exercise having no effect on Wolf, Benoit, Sweports, or anyone else.

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Cite This Page — Counsel Stack

Bluebook (online)
511 B.R. 522, 2014 WL 2742812, 2014 Bankr. LEXIS 2692, 59 Bankr. Ct. Dec. (CRR) 179, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-sweports-ltd-ilnb-2014.