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Case Title Date & Status Case Number(s) Judge & PDF Summary

In re Rocky Mountain Refractories

(Internal Ref: Opinion 394)


UNPUBLISHED See also 131.pdf


Judge Boulden

PDF icon 394.pdf

The court considered two issues in this case: Whether interest should be allowed on administrative trade and tax claims incurred by a debtor in possession during a chapter 11 case and, if so, whether the interest claims retain the same priority after conversion of the case to chapter 7. Relying on Nicholas v. United States. 384 U.S. 678 (1966), the court concluded that interest accrued on certain administrative claims during a chapter 11 case should be allowed after conversion of the case to chapter 7, and that the interest on those claims retains the priority of the underlying claims in the chapter 7 case. The court recognized that its decision conflicts with In re John Clay & Co., 43 B.R. 797 (Bankr. D. Utah 1984), but noted that John Clay did not address Nicholas, and that, in Small Bus. Admin. v. Preferred Door Co. (In re Preferred Door Co.), 990 F.2d 547 (10th Cir.1993), the Tenth Circuit indicated, without deciding, that interest is allowable on chapter 11 administrative claims. The court also rejected the chapter 7 trustee's argument that this outcome renders 11 U.S.C. § 726(a)(5) meaningless, noting that Nicholas makes interest on an administrative expense claim incurred during the chapter 11 case to be "an integral part of that claim."

Wilcox v. CDX Corp. (In re CDX Corp.)

(Internal Ref: Opinion 393)




Judge Clark

PDF icon 393.pdf

This court granted summary judgment in favor of Valley Asphalt determining its mechanic's lien to be valid and enforceable. The liquidator appealed the decision to the United States District Court, which issued an order remanding the matter to this court. The order on remand instructs the court, first, to decide who is the owner or real party in interest of the properties liened, which this court finds to be a threshold inquiry and issue. Further, the issues of alter ego and equitable subordination remain before the court. The court finds that the Seven Peaks Resort Entities are alter egos of one another for the limited purpose of considering the validity of the Valley Asphalt lien, that the lien is a valid and enforceable mechanic's lien, and that the SAIC lien claim obtained by the liquidator during chapter 11 proceedings, should be equitably subordinated.

In re CF&I Fabricators of Utah, Inc., 199 B.R. 986 (Bankr.D.Utah)

(Internal Ref: Opinion 392)


PUBLISHED See also 214 B.R. 16; 150 F.3d 1233


Judge Boulden

PDF icon 392.pdf

The issue before the court is whether the United States Trustee ("UST") fee, created by amendment of 28 U.S.C. § 1930(a)(6), should apply to cases with substantially consummated liquidating plans allocating all estate assets to creditors, which were confirmed prior to the amendment's January 26, 1996 effective date. Bankruptcy Code § 1127(b) prohibits modification of the confirmed plan advocated by the UST, and it prohibits modification of substantially consummated plans. The court is prevented from ruling that these debtors owe quarterly fees as of January 26, 1996, by application of the presumption against statutory retroactivity articulated in Landgraf v. USI Film Prods., 511 U.S. 244 (1994). The amendment's plain language does not indicate that the fees apply to cases confirmed prior to the date of its enactment, and the legislative history does not clearly support that Congress intended such a result. The court concludes that the amendment is impermissibly retroactive as applied to these cases, and that the UST's fees cannot be assessed and collected in Chapter 11 cases with liquidating plans allocating all estate assets to creditors, which were confirmed and substantially consummated prior to the effective date of the Amendment.

In re Collins

(Internal Ref: Opinion 391)




Judge Clark

PDF icon 391.pdf

This matter came before the court on a motion by debtor's attorney to reconsider this court's order denying her application for attorney's fees. The court denied the reconsideration motion based on the attorney's repeated failures to comply with the requirements for chapter 13 fee applications, as set forth in In re Jensen-Farley Pictures, Inc., 47 B.R. 557 (Bankr. D. Utah 1985) and documented in In re Eborn, No. 94B-25640 (Bankr. D. Utah August 10, 1995) (J. Boulden). The court ordered the attorney not to file any application for fees in any case that is currently pending before the court for which she does not have meticulous, contemporaneously maintained, and accurate time records attached. The court further ordered that, upon conversion or dismissal of any of the attorney's unconfirmed cases, the chapter 13 trustee shall return any unadministered funds directly to the debtors unless the attorney has first obtained a court order approving her fee application.

In re Briggs

(Internal Ref: Opinion 390)




Judge Boulden

PDF icon 390.pdf

The narrow issue resolved by the court was whether the debtors' chapter 13 plan, which listed unsecured creditors by name and the amounts owed to them, could be considered proofs of claim on the creditors' behalf and, if so, whether the listed claims are allowed unsecured claims that could be eliminated by an amendment to the debtors' plan. The court ruled that, because a chapter 13 plan cannot constitute either a formal debtor-filed proof of claim under Fed. R. Bankr. P. 3004 or an informal proof of claim under Clark v. Valley Fed. Sav. & Loan Assoc. (In re Reliance Equities, Inc.), 966 F.2d 1338 (10th Cir. 1992), unsecured creditors cannot rely on a debtor's chapter 13 plan to ensure payment of their claims, absent a timely filed proof of claim. Because this result is at odds with the prevailing practice in this jurisdiction, the court's ruling will be prospectively applied only to chapter 13 cases filed on or after July 1, 1996. The ruling does not affect any case-specific rulings in cases that were filed before that date.

Utah Outdoor Advertising, Inc., v. CCI, Inc. (In re CCI, Inc.)

(Internal Ref: Opinion 389)




Judge Clark

PDF icon 389.pdf

The chapter 11 plan named a liquidating agent and vested the agent with power to sell or dispose of estate assets. The liquidating agent conducted an auction in October 1995 for the sale of the real property that is the subject matter of this adversary proceeding. Plaintiff participated in the auction as an unsuccessful bidder. At the conclusion of the auction, the liquidating agent reported to the court that Michael Todd was the successful bidder. In December 1995, the plaintiff acquired, by special warranty deed, a claim to the subject property from persons who later testified that they never claimed to own the property. The chapter 11 plan vests all property of the CCI bankruptcy estate in the liquidating agent and expressly does not re-vest the property in the debtor upon confirmation. Because the subject property was still property of the estate until March 12, 1996, it remained under the protection of the automatic stay. Therefore, execution and filing of a special warranty deed that conveyed title of the subject property to plaintiff was void and without effect. It appears from the evidence that the adversary proceeding was filed only to harass, cause unnecessary delay, or needlessly increase the cost of litigation. The adversary proceeding is dismissed and the plaintiff is ordered to pay attorney's fees and damages.

In re Reorganized CF&I Fabricators of Utah, Inc.

(Internal Ref: Opinion 388)


APPEAL 116 S.Ct. 2106 See also 356.pdf & 53 F.3d 1155

90B-2672 l

U.S. Supreme Court

PDF icon 388.pdf

Concluding that characterizations in the Internal Revenue Code (IRC) are not dispositive in the bankruptcy context, the Court held that the exaction imposed by § 4971(a) of the IRC on the amount of an accumulated funding deficiency of a pension plan was a penalty, and not an excise tax entitled to seventh priority under § 507(a)(7)(E). The Court found that the exaction imposed by § 4971(a) was imposed for violating a separate federal statute (ERISA) that requires the funding of pension plans, and had an "obviously penal character." Accordingly, the Government's § 4971(a) claim was to be dealt with as an ordinary, unsecured claim in the plan. However, the Court concluded that the Government's § 4971(a) claim could not be subordinated to those of other general unsecured creditors because the "categorical reordering of priorities that takes place at the legislative level of consideration is beyond the scope of judicial authority to order equitable subordination under § 510(c)."

Broitman v. Kirkland (In re Kirkland)

(Internal Ref: Opinion 387)


APPEAL 86 F.3d 172 (10th Cir.) See also 181 B.R. 563 (D. Utah)

94PB-2210, 94PB-2209

Tenth Circuit Court of Appeals

PDF icon 387.pdf

Plaintiffs failed to show good cause for their failure to timely serve defendant with complaint and summons. The Supreme Court's decision in Pioneer Investment Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380 (1993), does not link the concept of "excusable neglect" contained in Fed. R. Bankr. P. 9006(b)(l) with the concept of "good cause" contained in Fed. R. Civ. P. 4(j), and there are several reasons not to apply the flexible "excusable neglect" concept to the "good cause" standard in Rule 4(j). The plain meaning of the term "neglect" connotes negligence or inadvertence. The plain meaning of the phrase "good cause" has no such connotation. Rule 4(j) does not use the phrase "excusable neglect." Rule 9006's allowance for late filings due to "excusable neglect" serves an equitable purpose in Chapter 11 proceedings. Rule 4(j), by contrast, applies to a wide variety of proceedings and does not have a similar, equitable purpose. Rule 4(j) operates independently from Rule 9006(b)(1), and Rule 9006(b)(1) may actually relieve litigants from the harsh consequences of Rule 4(j). As Putnam v. Morris, 833 F.2d 903 (10th Cir. 1987) explains, the definition of "good cause" appears to require "at least as much as would be required to show excusable neglect."

In re Bonneville Pac. Corp., 196 B.R. 868 (Bankr.D.Utah)

(Internal Ref: Opinion 386)


PUBLISHED See also 357.pdf and 400.pdf


Judge Allen

PDF icon 386.pdf

The court considered a motion to alter or amend its December 1992 decision that denied all compensation to counsel for the debtor in possession, Hansen, Jones & Leta and Snell & Wilmer. When representing a debtor in possession, an attorney has a duty to protect the interests of the estate rather than the interests of the debtor's principals, shareholders, officers, or directors. Inability to fulfill the role of independent professional on behalf of the fiduciary of the estate constitutes an impermissible conflict. A bankruptcy attorney who fails in this fiduciary capacity, by failing to remain free of conflicts and failing to refrain from serving a conflicting interest during a case, must be denied all compensation. Professionals who violate their fundamental ethical obligations to the bankruptcy estates they serve have not provided "valuable services" to those estates. Consequently, the motion to alter or amend the court's prior decision was denied. This decision was affirmed in part, and reversed in part in 400.pdf.

In re Home Ctr. Corp.

(Internal Ref: Opinion 385)


APPEAL Unpublished See also 384.pdf


U.S. District Court, Utah

PDF icon 385.pdf

The district court agreed with the bankruptcy court's conclusion that law firm's problems, such as a demanding workload, neglect, absence of an employee, and oversight, did not satisfy the standard of "extraordinary circumstances" under a straightforward reading of controlling law. Therefore, law firm's failure to file a timely motion for its appointment as debtor's counsel due to such circumstances cannot be excused as, "extraordinary circumstances" that might justify nunc pro tunc approval of its appointment. Accordingly, there was "no substantial basis for disagreement" with the bankruptcy court's order, and law firm's motion for leave to appeal an interlocutory order was denied.

In re Home Ctr. Corp.

(Internal Ref: Opinion 384)


UNPUBLISHED See also 395.pdf


Judge Boulden

PDF icon 384.pdf

The issue before the court was whether the facts alleged by debtor's counsel constituted "extraordinary circumstances" sufficient to warrant nunc pro tunc retroactive approval of counsel's appointment, by approximately six months, back to the date of the petition filing. Counsel did not timely move for appointment as debtor's counsel because: the filing of the case was an emergency; counsel was unusually busy with other cases the week before and two weeks after the debtor's chapter 11 petition was filed; and a much relied upon secretary/paralegal was unexpectedly absent for one day. In the Tenth Circuit, nunc pro tunc approval of the employment of debtor's counsel is only appropriate "in the most extraordinary circumstances" and, therefore, simple neglect is insufficient. Land v. First Nat'l Bank of Alamosa (In re Land), 943 F.2d 1265, 1267-68 (10th Cir. 1991). Accordingly, nunc pro tunc approval has been limited to cases where the delay in seeking approval is either due to hardship beyond the professional's control, or to the action of another whose failure was beyond the professional' s control. The court concluded that counsel failed to prove extraordinary circumstances sufficient to warrant nunc pro tunc approval.

In re Doug Turner Feedlot, Inc.

(Internal Ref: Opinion 383)




Judge Clark

PDF icon 383.pdf

At issue was the interpretation of § 224 of the 1994 Bankruptcy Act, which amended § 330(a)(1) to delete the phrase "debtor's attorney" from the list of parties to whom the court may award compensation. The court concluded that the amendment to § 330(a) can be read plainly and simply to mean that chapter 7 debtor's counsel is no longer entitled to an award of fees pursuant to § 330 of the code. Therefore, the application for an award of fees to chapter 7 debtor's counsel, pursuant to § 330, was denied. The court declined to rule on the § 503(b) portion of the application until it had received evidence described by counsel.

In re Powell

(Internal Ref: Opinion 382)




Judge Boulden

PDF icon 382.pdf

The issue before the court was whether the thirty-day objection period provided in Fed. R. Bankr. P. 4003(b) barred the chapter 7 trustee's objection to a claimed exemption, where the property claimed had been identified, but inaccurately described, and the debtor actually was not entitled to claim the property as exempt. The trustee asked the court to circumvent the rationale in Taylor v. Freeland & Kranz, 503 U.S. 638 (1992) by requiring debtor to amend her statements and schedules to accurately reflect the precise nature of the property claimed as exempt. This would have renewed the thirty-day period within which the trustee could object to the debtor's claimed exemption. The court concluded that the trustee had sufficient notice that the debtor claimed the property as exempt to prompt further inquiry, and to trigger the thirty-day period for filing objections under Fed. R. Bankr. P. 4003(b). Since the debtor fulfilled her obligation to list the property claimed as exempt with sufficient detail to place the trustee on notice that further investigation may be required, and since an objection to the claimed exemption was not timely filed, the court ordered that the debtor was entitled to the exemption and was not required to amend her list of property claimed to be exempt.

In re Rocky Mountain Helicopters, Inc.

(Internal Ref: Opinion 381)



93C-25447 thru -25450

Judge Clark

PDF icon 381.pdf

This matter came before the court on the final fee application of debtors' counsel. Concluding that the fee request was not reasonable, the court imposed its own billing judgment with an across-the-board reduction of 12% on fees incurred after the first application period. Further, the court determined that the failure of debtors' counsel to properly defend an appeal by GMAC was "a dereliction of duty" that warranted an additional fee reduction of $100,000 as a sanction. Finally, the court reduced the amounts requested for carfare and delivery expenses by 50%, and limited reimbursement for airfare, hotel, out of town meals, facsimile expenses, and overtime personnel expenses incurred after the first application period to the amount of $220,000.

In re Eborn

(Internal Ref: Opinion 380)




Judge Boulden

PDF icon 380.pdf

The matter before the court was an objection by debtor to the fee application filed by his former counsel, Sherri Flans Palmer. A fee application is a summary of detailed, contemporaneously maintained time records that is required from any attorney seeking fees before this court. Considering the disarray of the debtor's file, Palmer's egregious failure to comply with the statute and the standards of the court, Palmer's apparent lack of a cohesive billing system, and the potential adverse impact of these circumstances upon Palmer's clients and their creditors, the court determined that the application did not contain an accurate representation of time actually spent and, as a result, it was unable to determine if the time spent was reasonable, necessary, or beneficial to the estate. The court denied Palmer's fees and ordered Palmer (among other things) to file meticulous, contemporaneously maintained, and accurate time records in support of any fee applications submitted in pending or future cases, including cases in which Palmer sought fees of $900 or less.

In re Hurricane RV Park, Inc., 199 B.R. 421 (Bankr.D.Utah)

(Internal Ref: Opinion 379)




Judge Clark

PDF icon 379.pdf

The matter before the court was debtor's motion opposing tax liens filed by the Internal Revenue Service on debtor's property. By filing tax liens, the United States employed a process intended to collect or recover money or property. At issue is whether the filing of the liens was to collect a debt of the debtor. The tax liens on debtor's property were premised on the United States' theory that debtor is the "nominee, alter ego, transferee or agent" of Philip S. Fry, the vice president of debtor. Under any of these theories, the United States would be a contingent creditor of the debtor and, therefore, bound by the court's confirmation order, the provisions of 11 U.S.C. § 1141, and the 11 U.S.C. § 524 injunction. Any pre-confirmation equitable interest that Fry may have had in the debtor was extinguished by the bankruptcy confirmation process. Fry's undisputed testimony was that he does not own the debtor and holds no ownership interest in the debtor's real property. Therefore, the court ordered the United States to release each of the tax liens encumbering debtor's property within ten days.

In re Smith

(Internal Ref: Opinion 378)


APPEAL 180 B.R. 648 (D.Utah)


U.S. District Court, Utah

PDF icon 378.pdf

The district court considered debtors' appeal of an order denying their objection to a proof of claim. Debtors filed a chapter 13 petition in the bankruptcy court. Three months later, Child Support Enforcement ("CSE") filed a proof of claim asserting a debt owed by Mr. Smith for past-due child support to Ms. Rayl. Debtors filed an objection. At the conclusion of testimony, Chief Judge Clark overruled debtors' objection, finding that the agreement between Ms. Rayl and CSE does not make the claim for past-due child support a dischargeable claim and that the agreement represents essentially a contingency fee arrangement that does not change the nature of the child support obligation. The sole issue on appeal was whether the Assignment for Collection executed by Ms. Rayl was an assignment contemplated by 11 U.S.C. § 523(a)(5)(A), which would effectively transform Mr. Smith's child support debt into a dischargeable claim. The court found that Ms. Rayl's intent was not to effect the type of assignment anticipated by § 523(a)(5)(A), but simply to enter into what is essentially a contingency fee arrangement with CSE. Therefore, the bankruptcy court's order denying debtors' objection to CSE's proof of claim was affirmed.

In re Pac. Research & Dev. Corp.

(Internal Ref: Opinion 377)




Judge Boulden

PDF icon 377.pdf

This matter was before the court on the final fee application of debtor's counsel ("Applicant"). The court previously denied confirmation of debtor's chapter 11 plan because it failed to afford the protections of 11 U.S.C. § 1129 to priority tax creditors. The debtor then proposed a sale of substantially all of its assets based on terms more favorable to insiders than to other potential bidders. The court denied the sale motion and the case was converted to chapter 7. Applicant filed its fifth and final fee application requesting allowance of fees and costs. Certain taxing authority creditors objected to Applicant's fees, both as not having been beneficial to the estate and because Applicant had undisclosed conflicts of interest and performed services for the benefit of corporate insiders. Under the Tenth Circuit standards set forth in Rubner & Kutner, P.C. v. United States Trustee (In re Lederman Enters., Inc.), 997 F.2d 1321 (10th Cir. 1993), the court found that the chapter 11 fees related to the sale motion were not beneficial to the estate, and thus not necessary, because Applicant should have known that the sale motion would not be granted, based on prevailing case law. Further, Applicant was representing the interests of insiders in preparing and advocating the sale motion. Therefore, the fees incurred in relation to the sale motion were denied based on Applicant's failure to provide a benefit to the estate and because Applicant represented an interest adverse to the estate. The court noted that in chapter 7 there is no requirement that the attorney for debtor be disinterested. Thus, under the standards of 11 U.S.C. § 330, the court allowed Applicant's chapter 7 fees as actual and necessary services.

Styler v. Conoco, Inc. (In re Peterson Distrib., Inc.), 176 B.R. 584 (Bankr.D.Utah)

(Internal Ref: Opinion 376)



94PB-2343 and -2346

Judge Boulden

PDF icon 376.pdf

The defendants in three adversary proceedings filed by the chapter 7 trustee filed motions to dismiss on grounds that the 11 U.S.C. § 546(a) two-year statute of limitations had run. Debtor had filed a voluntary chapter 11 on June 28, 1991, and no trustee was appointed under 11 U.S.C. § 1104(a). On July 22, 1992, as debtor-in-possession had failed to progress toward confirmation of a reorganization plan, the court converted the case to chapter 7. An interim trustee was appointed on July 16, 1992. On August 17, 1992, as no trustee was elected under 11 U.S.C. § 702(b) and (c), the interim trustee became the permanent trustee, as provided by § 702(d). The defendants asserted that the statute of limitations began to run: 1) when the chapter 11 petition was filed; 2) when the chapter 7 interim trustee was appointed; or 3) when counsel for the interim trustee was approved. The court held that, under the plain language of § 546(a), the applicable date from which the statute of limitations begins to run is the date the permanent chapter 7 trustee begins to serve. In this case, that date was August 17, 1992. Therefore, on August 16, 1994, when trustee filed the three complaints seeking to avoid 11 U.S.C. § 547 transfers, the two-year statute of limitations had not yet run, and the court denied defendants' motion to dismiss the adversary proceedings.

Pension Benefit Guar. Corp. v. Reorganized CF&I Fabricators of Utah, Inc. (In re CF&I Fabricators of Utah, Inc.)

(Internal Ref: Opinion 375a)


APPEAL 179 B.R. 704 (D.Utah) See also 358.pdf and 150 F.3d 1293


U.S. District Court, Utah

PDF icon 375a.pdf

PBGC, the trustee of a pension plan administered by the CF&I debtors prior to filing their bankruptcy petitions, sought a determination of the priority of its claims for unpaid minimum funding contributions ("unpaid funding") and unfunded prepetition and postpetition benefit liabilities ("unfunded liability") in the bankruptcy court. The bankruptcy court ruled that: (1) unpaid funding claims were not entitled either to administrative expense priority under 11 U.S.C. § 503(b)(1)(B), or tax priority under 11 U.S.C. § 507(a)(7); (2) only a small portion of the unfunded liability claims were entitled to tax priority; and (3) the CF&I debtors were jointly and severally liable for PBGC's claims under the Employee Retirement Income Security Act ("ERISA"). Both sides appealed. The district court agreed with the bankruptcy court that the CF&I debtors' liability for unpaid funding arose prepetition and, therefore, the bankruptcy automatic stay precluded imposition of either an ERISA lien or an Internal Revenue Code lien for those claims. Since tax priority is given only to liens, not claims that never become liens, the bankruptcy court correctly ruled that the unpaid funding claims were not entitled to tax priority status. Additionally, because the unpaid funding claims were not entitled to tax priority, they were likewise not entitled to postpetition interest. The district court also agreed with the bankruptcy court that, under In re Amarex, Inc., 853 F.2d 1526 (10th Cir. 1988), the unpaid funding claims, all of which arose prepetition, did not qualify as administrative expenses. PBGC asserted tax priority with respect to a very small portion of its total unfunded liability claims, based on a statutory lien that attaches to an employer's property upon termination of a pension plan, but the district court agreed with the bankruptcy court's conclusion that, since the plan was terminated postpetition, that lien never attached. Finally, the district court held that the bankruptcy court had erred by deferring to PBGC's determination of the discount rate to be applied to its unfunded liability claims, and remanded for an independent discount rate determination. The district court then rejected the CF&I debtors' claim of improper valuation of the unpaid funding claims, as moot, and held that ERISA's joint and several liability provision was not overridden by the bankruptcy principle of equal distribution among creditors.

In re Pokorny

(Internal Ref: Opinion 375)




Judge Clark

PDF icon 375.pdf

The debtor filed an application for waiver of the chapter 7 filing fee, in which she indicated that she made a $350 payment to an attorney for services in connection with her case. Bankruptcy Rule 1006(b) (Fed. R. Bankr. P. 1006(b)) provides that a debtor may not pay their filing fee in installments if they paid an attorney for services in connection with the case. The court interpreted Rule 1006(b) to strictly prohibit debtors from paying any fees to an attorney until the filing fee is paid in full, and denied debtor's application to waive the filing fee.

Rushton v. Saratoga Forest Prods, Inc. (In re Americana Expressways, Inc.), 172 B.R. 99 (Bankr.D.Utah)

(Internal Ref: Opinion 374)




Judge Clark

PDF icon 374.pdf

This matter came before the court on two motions for summary judgment by the chapter 7 trustee, which challenged both applicability of the Negotiated Rates Act of 1993 ("NRA") and the constitutionality of the NRA itself. Trustee sought to recover over $2.9 million in freight undercharge claims from the defendant and other shippers, and application of NRA terms to those claims would result in the loss of the vast bulk of the estate's claims. The court determined that such retroactive elimination of the property rights of trustee and the estate's creditors would be more similar to a complete taking of legal rights than to simple "regulation." The court expressed serious doubt as to the NRA's constitutionality if such an interpretation of it was imposed. However, the court found that the NRA could be interpreted in a way that avoided that constitutional challenge. Thus, the property rights of an estate in bankruptcy are defined by bankruptcy law as of the commencement of the bankruptcy case. Bankruptcy law remains the law of the case unless expressly changed by Congress. In section 9 of the NRA, Congress specifically provided that the NRA would not limit or otherwise affect Title 11 of the United States Code. Accordingly, the court held that the freight undercharge claims asserted by trustee were unaffected by the NRA's provisions.

In re Griffin

(Internal Ref: Opinion 373)


APPEAL Unpublished See also 366.pdf


U.S. District Court, Utah

PDF icon 373.pdf

This matter was on appeal from a bankruptcy court ruling that a previously approved contingent fee agreement between debtor and special counsel was void under both California law and the Bankruptcy Code. The district court affirmed, first, because the bankruptcy court correctly ruled, pursuant to 11 U.S.C. § 328(a), that the agreement was improvident in light of developments not capable of being anticipated at the time the agreement was originally approved. Second, the district court agreed with the bankruptcy court's rulings that the contingent fee agreement was voidable under California's Business and Professional Code, and that debtor was not estopped from repudiating the fee contract. Third, the district court held that the bankruptcy court had not abused its discretion in awarding a "reasonable fee" of $329,713 on counsel's request for $938,617. Finally, the district court determined that the bankruptcy court also did not abuse its discretion by refusing to award prejudgment interest on the fees awarded, since such an award is required to be "otherwise equitable," which it would not have been, given the record of counsel's improper motives in dealings with the debtor.

In re Internat'l Bus. Advisors, Inc.

(Internal Ref: Opinion 372)




Judge Boulden

PDF icon 372.pdf

Court denied a motion to dismiss, or to alternately lift stay, that asserted bad faith filing in a chapter 7 case. The motion was brought by a director and 50% shareholder of the debtor, who was also an oversecured creditor foreclosing on the estate's principal asset. The debtor's only other director had signed the chapter 7 petition, without the knowledge or consent of the remaining director, for the purpose of preventing the foreclosure. The court acknowledged the general rule that corporate authorization to file bankruptcy requires a quorum and majority vote of the board, but noted that Nevada law creates an exception to the rule where one of two directors has an interest adverse to the corporation, and would have voted not to authorize the bankruptcy filing. Failure of the remaining director to obtain corporate authorization to file the bankruptcy did not constitute grounds for dismissing the case where the remaining director's interests would be protected, and equity preserved for remaining creditors and equity interest holders. The parties relied upon affidavits that were not admitted into evidence at the hearing, and that contained inadmissible evidence. The court considered the Fed. R. Civ. P. 43(e) exception to the general rule that testimony shall be taken orally in open court. The court discussed the necessity for formal admission of affidavits, but found that the parties waived any objection to the use or content of the affidavits, despite their questionable evidentiary status.

In re CF&I Fabricators of Utah, Inc.

(Internal Ref: Opinion 371)


APPEAL 169 B.R. 984 (D.Utah) reissued Jul-12-1994


U.S. District Court, Utah

PDF icon 371.pdf

In 1993, chapter 11 debtor sold substantially all of its assets to Oregon Steel, a good faith purchaser for value, in accordance with 11 U.S.C. § 363(b) and pursuant to a court approved plan of reorganization. Objecting creditors appealed, but did not seek a stay of the bankruptcy court's orders confirming debtor's reorganization plan and authorizing the sale to Oregon Steel. Noting the importance of finality in bankruptcy, the district court held that appellants' failure to seek a stay of the bankruptcy court orders rendered the appeal moot under § 363(m). The district court also rejected appellants' request to affirm the asset sale but remove the provision that the sale was free and clear of creditor claims. In so ruling, the court indicated it could not grant appellants such relief without undoing a substantially and effectively consummated plan, particularly since the free and clear term was an express condition of the sale. Removal of that condition would risk unravelling the entire sale agreement, and the court "refuse[d] to play the 'Humpty Dumpty repairman' for such an ominous task."

In re CF&I Fabricators of Utah, Inc.

(Internal Ref: Opinion 370)




Judge Boulden

PDF icon 370.pdf

Reorganized debtor objected to an application for payment of administrative claims that was filed by debtor's former in-house counsel ("Counsel"), purportedly on his own behalf and on behalf of more than 200 former employees of debtor. The application was filed on the last possible day to file administrative claims, and sought allowance of severance and layoff benefit claims as administrative expenses pursuant to 11 U.S.C. § 503(a) and (b). Counsel had no attorney-client relationship with the employees, did not obtain express authorizations to file claims on the employees' behalf, did not send the listed employees copies of the application that was filed, and subsequently withdrew his personal claim and his "representation" of the employees. The court determined that the application was not a class certification but, rather, a "class claim," which is not permitted in the Tenth Circuit pursuant to Sheftelman v. Standard Metals Corp. (In re Standard Metals Corp.), 817 F.2d 625, 630 (10th Cir. 1987), modified on other grounds, 839 F.2d 1383 (10th Cir. 1987), cert. dismissed, 109 S. Ct. 201 (1988). The court further indicated that, even if the application was not an impermissible class claim, Counsel's failure to obtain express authorization to file claims on behalf of the employees, as well as his withdrawal as the class representative, rendered the employee claims invalid. Finally, the court considered employees' request to vacate the prior bar date for their claims based on excusable neglect, but concluded that claimants had failed to prove the standards for mistake or excusable neglect that were articulated in Pioneer Inv. Servs. Co. v. Brunswick Assoc. Ltd. Partnership, 113 S. Ct. 1489 (1993).

Stockmen's Hotel, Inc. v. Porter (In re Porter)

(Internal Ref: Opinion 369)




Judge Boulden

PDF icon 369.pdf

Plaintiff filed a motion for default judgment in a nondischargeability action filed pursuant to 11 U.S.C. § 523(a)(2). The basis for the debt was a check issued by debtor to a third party that was cashed at plaintiff's business and then returned for insufficient funds. The court held that, on a motion for default judgment, plaintiff was minimally required to both establish the existence of personal and subject matter jurisdiction and make a prima facie showing of the elements of its claim. Those elements include that the debtor: (1) received value from; (2) made a false representation to; and (3) intended to defraud, the plaintiff. The court found that plaintiff failed to prove the elements of its claim that the debt should be excepted from discharge under § 523(a)(2) by a preponderance of the evidence. In so finding, the court held that issuance of a check on an account containing insufficient funds is not an implied representation that sufficient funds are on account to cover the check, relying on Williams v. United States, 458 U.S. 279 (1982). Additionally, the check itself did not amount to a written statement regarding the debtor's financial condition for purposes of § 523(a)(2)(B). The court refused to give collateral estoppel effect to a Nevada state court default judgment, as the issue of intent had not actually been litigated in that case, nor were the elements of the state statute identical to the elements required to prevent discharge under § 523(a)(2)(A) or (B). Likewise, a Nevada criminal statute that implied intent could not provide the basis for a finding of intent under § 523(a)(2). The court held the debt to be dischargeable and dismissed the adversary proceeding.

Rupp v. Larson (In re Larson)

(Internal Ref: Opinion 368)




Judge Boulden

PDF icon 368.pdf

Pursuant to a motion by the chapter 7 trustee, the court denied debtor's discharge pursuant to 11 U.S.C. § 727(a)(2), (3) and (4), due to debtor's pre-petition transfer of his home, failure to list any assets other than clothes and tools in his schedules, and failure to either keep recorded information or turn over recorded information to the trustee. The court found that, in transferring his home, debtor retained a secret interest in it, intending to hinder, defraud or delay his creditors and the bankruptcy trustee. Applying the doctrine of continuing concealment, the court held that debtor's acts occurred within the one-year period prior to filing of the petition required by § 727(a)(2)(A), and also found that debtor's acts continued after filing of the petition under § 727(a)(2)(B). The court considered whether debtor had produced records or information from which his financial condition could be ascertained, or had justified his failure to do so, in accordance with § 727(a)(3), and found that debtor had kept records, but had either failed to preserve them or had concealed them without justification. The court also considered whether debtor's failure to list numerous assets and liabilities in his schedules, including a retained equitable interest in real property, was sufficient to comprise a false oath pursuant to § 727(a)(4)(A), finding from the totality of the circumstances that debtor's failure to disclose information constituted a false oath or account, made knowingly and fraudulently, in connection with material matters related to the bankruptcy case.

CF&I Steel Corp. v. Conners (In re CF&I Fabricators of Utah, Inc.), 163 B.R. 858 (Bankr.D.Utah)

(Internal Ref: Opinion 367)




Judge Boulden

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CF&I sold two mines to Wyoming Fuel in 1983. Under a collective bargaining agreement ("CBA") between CF&I and the United Mine Workers of America, CF&I was obligated to require any successor to its operations to assume its obligation to pay non-pension benefits to retirees. Rather than requiring Wyoming Fuel to assume that obligation in the sale, CF&I agreed to continue providing those benefits itself. After the sale, CF&I paid non-pension retiree benefits to its former employees until October 1992, which was nearly two years after the filing its chapter 11 petition. The court found that, since Wyoming Fuel was a "successor," the CBA was terminated by the sale, and CF&I had no contractual liability to provide non-pension benefits after the sale, although CF&I had breached the CBA by failing to require Wyoming Fuel to assume its benefits obligation. The court also considered whether CF&I was obligated to pay retiree benefits pursuant to 11 U.S.C. § 1114. However, since CF&I did not enter bankruptcy with either a contractual or common law duty to pay retiree benefits, the court ruled that CF&I's confirmed plan of reorganization did not impermissibly alter or modify rights prohibited by § 1114 by failing to provide for payment of retiree benefits. Since neither CF&I nor Wyoming Fuel was obligated for post-sale benefit payments, the court determined that the 1974 Benefit Plan (a non-pension benefit trust fund) was liable for those benefits. CF&I asserted claims against the 1974 Benefit Plan, under 11 U.S.C. §548 and 549, seeking to avoid the post-sale benefit payments it had made. The court determined that, with respect to prepetition benefit payments, all of the elements (reserving the issue of insolvency) of § 548(a)(2)(A) avoidance had been established. Post-petition benefit payments were voidable under § 549, as they were neither allowed under Title 11 nor authorized by the court. Finally, since the 1974 Benefit Plan was legally responsible for post-sale benefit payments, the court held that § 550(a)(1) allowed recovery from it of post-sale payments that were made by CF&I, because the facts established that the 1974 Benefit Plan was an entity for whose benefit the payments were made. Moreover, § 550(a)(1) does not require that the payor intend the benefit in order to avoid the payment. Lowrey v. First Nat'l Bank (In re Robinson Bros. Drilling, Inc.), 97 B.R. 77 (W.D. Okla. 1988), aff'd sub nom. Hanover Leasing Corp. v. Lowrey (In re Robinson Bros. Drilling, Inc.), 892 F.2d 850 (10th Cir. 1989).

In re Griffin

(Internal Ref: Opinion 366)




Judge Boulden

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The court previously approved the employment of special counsel to debtor on a contingency fee basis. This matter came before the court for final approval of an application for fees and expenses from special counsel. The court found that the underlying contingency fee agreement between the applicant and the debtor was inconsistent with California law, and was therefore void. In light of the circumstances of the case, including the applicant's manipulation of the settlement amount to increase the amount of the contingency fee, the court further found that the original approval of the contingency fee agreement was improvidently granted. Due to these developments, the court determined that compensation would not be allowed under the terms of the contingency fee agreement. The court found, however, that applicant was entitled to a reasonable fee under California law. To calculate a reasonable fee, the court applied a lodestar rate of $160/hour, after making percentage reductions in hours for travel time, insufficient time entries, ineffective representation, and manipulation of the settlement.