S.S. Retail Stores Corp. v. Ekstrom (In re S.S. Retail Stores Corp.)

216 F.3d 882
CourtCourt of Appeals for the Ninth Circuit
DecidedJune 30, 2000
DocketNo. 99-16413
StatusPublished
Cited by10 cases

This text of 216 F.3d 882 (S.S. Retail Stores Corp. v. Ekstrom (In re S.S. Retail Stores Corp.)) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
S.S. Retail Stores Corp. v. Ekstrom (In re S.S. Retail Stores Corp.), 216 F.3d 882 (9th Cir. 2000).

Opinion

DAVID R. THOMPSON, Circuit Judge:

OVERVIEW

After filing for Chapter 11 bankruptcy reorganization, S.S. Retail Corporation (“the Debtor”) filed an application with the bankruptcy court to employ the law firm of Gibson, Dunn & Crutcher LLP (“Gibson, Dunn”) as its counsel. The United States Trustee (“UST”) objected, arguing Gibson, Dunn was not a “disinterested person” because one of its partners had served as an assistant secretary of the Debtor up until two weeks before the Debtor filed its petition in bankruptcy. The bankruptcy court held that any disqualification of the partner for lack of disinterestedness should not be imputed to Gibson, Dunn and approved Gibson, Dunn as the Debtor’s counsel. The UST appealed to the district court. The district court dismissed the appeal, holding that the relief the UST sought was disgorgement of the fees and costs paid to Gibson, Dunn, and it would be inequitable to grant that relief. This appeal followed.

We have jurisdiction pursuant to 28 U.S.C. § 158(d), and we affirm. We conclude that the district court did not err by holding that it would be inequitable to require Gibson, Dunn to disgorge the fees and costs awarded by the bankruptcy court and thus we do not decide whether 11 U.S.C. § 327(a) requires that a partner’s alleged disinterestedness be imputed to his law firm.

BACKGROUND

The Debtor, after filing for Chapter 11 bankruptcy reorganization, filed an application with the bankruptcy court, pursuant to 11 U.S.C. § 327(a), seeking authorization to employ Gibson, Dunn as its counsel. In the application, the Debtor disclosed that Lawrence Calof, one of Gibson, Dunn’s partners, had resigned as the Debtor’s assistant secretary two weeks before the Debtor filed its Chapter 11 petition. Nevertheless, Gibson, Dunn asserted that it was a “disinterested person” under 11 U.S.C. § 101(14).

The UST filed an objection to the Debt- or’s application to employ Gibson, Dunn. The UST asserted that Calofs recent service as the Debtor’s assistant secretary rendered Gibson, Dunn not a “disinterested person” pursuant to § 327(a) because a disinterested person must not have served as an officer of the debtor “within two years before the date of the filing of the [bankruptcy] petition.” 11 U.S.C. § 101(14)(D). On May 23, 1996, over the UST’s objection, the bankruptcy court authorized Gibson, Dunn’s employment. Approximately two months later, the UST renewed its objection, and the bankruptcy court again approved Gibson, Dunn’s employment, holding that even if Calof was not a “disinterested person,” his interest was not attributable to Gibson, Dunn and thus Gibson, Dunn could serve as the Debtor’s counsel.

The UST appealed the bankruptcy codrt’s ruling to the United States Bankruptcy Appellate Panel of the Ninth Circuit (“BAP”). The BAP affirmed, Concluding that although Calof was not a disinterested person and thus was himself disqualified to act as the Debtor’s counsel, his disqualification was not attributable to Gibson, Dunn. The UST appealed the BAP’s decision to this court. On December 17, 1998, we held that we did not have jurisdiction to review the bankruptcy court’s order because it was not a final order as required by. 28 U.S.C. § 158(d). See In re S.S. Retail Stores Corp., 162 F.3d 1230 (9th Cir.1998).

[884]*884Meanwhile, between January 9, 1997 and December 11, 1997, the bankruptcy court approved three fee applications filed by Gibson, Dunn, awarding Gibson, Dunn a total of $268,632.04 in fees and expenses. On July 9, 1998, the bankruptcy court approved Gibson,- Dunn’s last fee application for $20,155.24, and affirmed all previously awarded fees and expenses. In total, Gibson, Dunn received $288,787.28 in fees and expenses for serving as the Debtor’s counsel during the bankruptcy proceedings. The UST objected to all of these fees, consistently contending that Gibson, Dunn was not a disinterested person and therefore should never have been employed as the Debtor’s counsel.

On July 21, 1998, the bankruptcy court entered its final decree,' closing the Debt- or’s bankruptcy case. Then armed with a final order, the UST appealed the bankruptcy court’s approval of Gibson, Dunn as the Debtor’s counsel. This time the UST appealed to the United States District Court. The district court dismissed the appeal, holding that it would be inequitable to require Gibson, Dunn to disgorge the fees and expenses it had been paid.

The UST appeals. The Debtor challenges the appeal, contending it is equitably moot. Alternatively, the Debtor argues that the district court’s dismissal of the appeal should be affirmed on equitable grounds, and even if Calof is not a disinterested person, his interest should not be imputed to Gibson, Dunn.

ANALYSIS

I. Equitable Mootness

An appeal from a bankruptcy court’s order is equitably moot “when, in the absence of a stay, events occur that make it impossible for the appellate court to fashion effective relief.” In re Spirtos, 992 F.2d 1004, 1006 (9th Cir.1993) (citing In re Roberts Farms, Inc., 652 F.2d 793 (9th Cir.1981)). In Roberts Farms, we dismissed an appeal because the appellant did not obtain a stay of the bankruptcy court’s confirmation of a Plan of Arrangement and, as a result, a significant portion of the plan had been carried out before the appeal could be heard. We reasoned that overruling the bankruptcy court’s confirmation of the plan would “create an unmanageable, uncontrollable situation for the Bankruptcy Court” to undo the portion of the plan that had been carried out and thus the appeal was equitably moot. See Roberts Farms, 652 F.2d at 797.

We have also held, however, that an appellant’s failure to obtain a stay before appealing a bankruptcy court’s award of fees does not necessarily render the appeal equitably moot. See In re Cascade Roads, Inc., 34 F.3d 756 (9th Cir.1994); In re Spirtos, 992 F.2d 1004 (9th Cir.1993); In re International Envtl. Dynamics, Inc., 718 F.2d 322 (9th Cir.1983). In International Environmental Dynamics, even though the appellant failed to obtain a stay before appealing the bankruptcy court’s order granting the debtor’s counsel attorney fees, we held that the appeal was not equitably moot because the counsel was a party before the bankruptcy court and knew the appellant contested the fee award. See International Envtl. Dynamics, 718 F.2d at 326; see also Cascade Roads,

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216 F.3d 882, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ss-retail-stores-corp-v-ekstrom-in-re-ss-retail-stores-corp-ca9-2000.