In re Walsh

538 B.R. 466, 2015 WL 5643283
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedSeptember 24, 2015
DocketCase No. 08 B 06424
StatusPublished
Cited by6 cases

This text of 538 B.R. 466 (In re Walsh) 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 Walsh, 538 B.R. 466, 2015 WL 5643283 (Ill. 2015).

Opinion

[468]*468 AMENDED MEMORANDUM OPINION

Jacqueline P. Cox, U.S. Bankruptcy-Judge

This matter is before the Court on Freeborn & Peters LLP’s (“Freeborn”) Motion For Award of Compensation and Reimbursement of Expenses and Allowance of Administrative Expense (“Fee Application”) for post-petition, pre-conversion services. The Chapter 7 Trustee, Catherine L. Steege, Esq. (“Trustee”), and Sixty Thirty Condominium Association (“Condo Association”) filed separate objections to Freeborn’s Fee Application.

On May 12, 2015, the Court conducted a hearing concerning .the Fee Application. It thereafter allowed counsel to file supplemental briefing, and the matter was taken under advisement. The Court has considered the submissions of the parties, the arguments of counsel, as well as the applicable law, and for the reasons set forth below, Freeborn’s Fee Application is denied, Freeborn’s administrative claim is disallowed, and both objections are sustained.

I. Jurisdiction

This Court has jurisdiction to hear this matter pursuant to 28 U.S.C § 1334(a) and the District Court’s Internal Operating Procedure 15(a). This is a core proceeding as to which this Court may enter a final order pursuant to 28 U.S.C. § 157(b)(2)(A) — matters concerning the administration of the estate and § 157(b)(2)(B) — allowance or disallowance of claims against the estate.

II. Facts and Background A. The Underlying Litigation

The sole asset of the estate is a $339,010.28 judgment (the “Judgment”) entered in favor of John F. Walsh (the “Debtor” or “Walsh”) against Wright Development Group, LLC (“Wright”). In 2007, Walsh was the president of the Condo Association. On October 4, 2007, Wright sued Walsh and other parties for defamation in the Circuit Court of Cook County, Illinois (the “Litigation”).1 Wright’s Complaint sought damages against Walsh and others for defamation based on statements made by Walsh during his tenure as president of. the Condo Association at a meeting in July 2007 attended by a Chicago alderman’s aides regarding problems with the construction of the condominium building at 6030 N. Sheridan, which statements were printed in a local newspaper.

Walsh retained Freeborn to perform legal services on his behalf in the Litigation. At that time, Freeborn represented the Condo Association in at least three lawsuits pending between the Condo Association and Wright.2 The Condo Association states that it indemnified Walsh for liability and attorney’s fees in connection with the Litigation, and all invoices were sent to and paid by the Condo Association.3 Walsh did not pay (nor was he required to pay) any legal fees for the Litigation.

On April 15, 2008, in the defamation case, Walsh filed a Motion to Dismiss the [469]*469Complaint (the “ICPA Dismissal Motion”) under the Illinois’ Citizen Participation Act, 735 ILCS 110/1, et seq. (the “ICPA”) on the ground that the Complaint was a Strategic Lawsuit Against Public Participation (a “SLAPP ”) and asked for attorney’s fees under the anti-SLAPP statute. The trial court denied Walsh’s ICPA Dismissal Motion. Walsh also pursued a motion to dismiss Wright’s Complaint for failure to state a claim for which relief could be granted, pursuant to 735 ILCS 5/2-615 (“Section 2-615”), which was granted on September 26, 2008.

Although Wright’s Complaint was dismissed, Walsh filed an appeal because he was denied statutory immunity from liability and mandatory attorney’s fees — redress available only under the ICPA. The Appellate Court dismissed Walsh’s appeal on the ground that the issue was moot based upon the dismissal of Wright’s Complaint under Section 2-615.

As counsel to Walsh, Freeborn sought review by the Illinois Supreme Court. On October 21, 2010, the Illinois Supreme Court found in Walsh’s favor.4 The Court unanimously found that the Complaint was a SLAPP action and that, as a victim of a SLAPP, Walsh was entitled to immunity under the ICPA. The Court remanded the case “to the circuit court to award Walsh reasonable attorney fees and costs incurred in connection with the [ICPA] motion.”5

On remand, Freeborn submitted a request for fees and costs incurred in connection with the ICPA Dismissal Motion. The trial court held evidentiary hearings on the attorney’s fee petition on September 8 and October 5, 2011. On January 3, 2012, the trial court entered final judgment in favor of Walsh and against Wright in the amount of $339,010.28, finding that all of Walsh’s attorney’s fees and expenses were reasonable and allowable under the ICPA. The Judgment covers services rendered by Freeborn and Sanchez Daniels & Hoffmann LLP (“Sanchez”) both prior to the Petition Date and during the chapter 13 case.6 On February 15, 2011 and March 12, 2013, pursuant to 770 ILCS 5/1, Freeborn served Notices of Attorney’s Lien in connection with the Litigation via certified mail on Wright and its counsel in the amounts of $183,034.47 and $261,807.28 (amended), respectively.

B. Walsh’s Bankruptcy Case

On March 18, 2008 (the “Petition Date”), less than six months after the start of the Litigation and less than one month before filing the ICPA Dismissal Motion, Attorney Donna B. Wallace, on behalf of Walsh, filed a voluntary petition for relief under chapter 13 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”). The Debtor did not schedule Wright as a creditor, nor did he list the claim for attorney’s fees against Wright or the pending Litigation in his Statement of Financial Affairs. On that same date, the Debtor filed a proposed chapter 13 plan (the “Plan”). [470]*470On May 12, 2008, the Bankruptcy Court confirmed the Debtor’s Plan.

On December 1, 2011, before the Debtor completed the payments required under the confirmed Plan, he filed a notice of voluntary conversion of his chapter 13 bankruptcy case to chapter 7. Notably, the conversion occurred only two to three months after the state trial court held evidentiary hearings on Walsh’s fee petition. , Neither the Debtor nor Freeborn informed the Trustee about the pending state court litigation or the Illinois Supreme Court decision holding that the Debtor was entitled to recover attorney’s fees.

On January 19, 2012, one week after the Judgment was entered in state court, the Trustee held the § 341 meeting of creditors. The Debtor testified that he was not suing anyone at the time he filed bankruptcy and that there was no one he could sue who owed him money. Subsequently, the Trustee filed a no-asset report. The Debtor received a discharge on March 20, 2012; the bankruptcy case was closed on March 23, 2012.

C. Wright’s Request to Vacate the State Court Judgment and the Reopening of Walsh’s Bankruptcy Case

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Cite This Page — Counsel Stack

Bluebook (online)
538 B.R. 466, 2015 WL 5643283, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-walsh-ilnb-2015.