believe this case is ripe for argument called lies at the basis of judges fears decision here having to do with whether you can use trust assets to liquidate and collect the assets they're held in trust this is especially important where in the case before the court now the trustee the packet obligat is the front and solvent that was not the case and alan cup and co was a district court case and nothing to do with bankruptcy there was no way when the bankruptcy was filed that the two debtors were in a position to collect the primary asset that they held  receivable they needed a way to do it following the supreme court's decision in starting versus marshall the trustee can't do it because the these are assets that are not part of the estate and they're held for the benefit not of the estate but of a special group of creditors and trustees disc disqualified can't  and it's its whole point was to get the maximum amount of money to the beneficiaries the unpaid sellers the growers the the other suppliers requested but what is the difference between a packet trust day if there was one or the bankruptcy trustee and him being of console what is the distinction what was his role compared to to possibly groups came out would be if he was the special counsel this is kind of a hybrid thing let's let's remember that under the ph ca the the get her or let's call it the basically the debtor trustee holds them in trust for his creditors that's what it's all about now if he can't collect it because he's defunct given the new money the all these assets just have to be liquidated who's going to do it somebody has to do it money is just not going to magically appear in his bank account so mr stokes took on the obligation to do several things first of all in the initial orders the ppaca claimants and beneficiaries were required to submit claims to the court which they did and it's a very simple claims for how much they were owed and whether they were beneficial or aca yes they did actually actually there but they're both there actually both and they have a super priority so they have to be evaluated and they can get technical at times the debtor's records have to be consulted the debtor staff was actually paid with pack stokes now stokes had to then get all the claims in either file objections or deal with objections that one claimant against the was kind of like a special master things that he couldn't resolve he had to report to the court in the court would would then make some kind of determination on qualification which the courts clearly had had jurisdiction to do and then once he gets all of that done he's got to go out and collect those accounts receivable because otherwise there's not going to be any money to pay anybody warden well actually there was your honor there was there was there was a lot of back and forth but so it was appointed pursuant to the the bankruptcy code provision three twenty seventy right so that's that's that was an application or of appointment comes from that bankruptcy code provision why shouldn't he be treated like any other three twenty seven the appointee and it's not the doesn't get any money but he has to get in line with the bank with other three twenty seventy professionals who were hired in through the bankruptcy court because he wasn't hired in the estate your honor but he was what basis in the basis what basis is there other than that provision of the bankruptcy code to appoint him well there is the order and and the pack of beneficiaries motion to appoint him specially he was actually operating for them we had to a state's going on here you had the debtors estate the traditional kind of thing and estate and one could be administered with whatever assets were valuable but the other one there was nothing available to do it so you have to be able to use work and a half years i think they just made the last distribution a few months ago three years man did an outstanding job for people who otherwise make up with cations it was all on notice there were no secrets he didn't just take the money and hold it that was my mistake and allan coe ok that was my fault this whole deal w they were joking about right oh so order of the bankruptcy judge three of them your honor three different bankruptcy judges judge clark judge acker and judge got every one of them now we've brought to the court's attention the recent decision the supreme court in wellness that's wellness international network first issue reef for a very particular reason judge as wrote in his decision appears to apply the concept of consent it's very strict the pelleas did not sign anything they didn't formally consent to mr and they waited eight months while he collected the four million dollars while he resolved claims objections including their own and brought an adversary proceeding two of them as a matter of anybody he had he would have no legal authority but he wasn't debtors counsel and he was really acting to help the beneficiaries of the trust exclusively in your brief says his job was to work for the trust itself so how how was he any different lawyer judge and and i wasn't the trust eight i had a number of clients in the case the c h robinson counsel had a number of clients in the case the third party case that  that account receivable arose out of and my father's rule was that written agreements keep honest people honest and i had an agreement but i security interest in the debtors property includes some of it being pure state property but but other it's part of that being part of the pack bringing an adversary proceeding to declare that part of the they of that the assets that were claimed by the bank again the bankruptcy judge is overseeing this absolutely this is of bankruptcy proceeding adversary proceeding in the bankruptcy and that's when judge acard said you know what boys i want everybody to go to mediation i want everybody there everybody is go represented by counsel in one form or another or you're going to be there in person and you're not going to waste our time and that's what was done i missed how many companies were there under ppaca that were owed money i think it's something upwards of eighty eighty eighty a lot of them were pro se your honor ok and who objected to this besides kingdom fresh because they've got to be careful because they're holding that money in trust for the their creditors there's a distribution chain of well the the the domino effect of the failure of a produce house is part of of what brought the pca trust up front it was one guy fails and the next guy fails and the next guy fails and sooner or later you're going to get to as the term was from fork to farm you're going to have a grower a farmer who can't get paid because this guy down the chain failed and it was to protect the entire food chain and distribution i see my time's up i can i'm sorry that i didn't have more keep may please this honorable court my name is michael j keaton and i have the great honor of representing kingdom fresh produce iconic company five brothers jewel isco produce rio bravo produce produce first i would like to thank the court for the honor of appearing today this is obviously a highlight many attorneys career to argue a case this high and certainly in my mind the issues that i see in this case boil down to two things one is the debtors believe that they found a better way they found a better way than what congress has in the statute right now the statute says don't touch pac money until the beneficiaries are paid judges are said that three times i have three orders from judge as one hundred twelve pages over all of the reasons why the belief that you found a better way to manage trust assets doesn't fly when the law is unambiguous congress specifically put trust assets outside the reach of a bankruptcy estate for one reason they don't want administrative expense claims to gobble up non estate property you cannot use something this circuit has said the bankruptcy estate cannot benefit from something the bankruptcy estate does not the special master thing what judge clark didn't take into consideration after some district topping he alternately lost his appointment as a judge because he didn't have a very good record for following the law quite frankly the the fact is bankruptcy the rule of bankruptcy procedure nine zero three one isn't title the title of the rule is no special masters in title eleven that means no bankruptcy court whether it's a chapter seven or chapter eleven can have special masters you know how to do any going to be collected and how we how did it work going to get done if you don't put somebody there to do it all the same way it's been done hundred four if it stays in the district court you can have special masters ok no problem the problem in this case is the debtors attorney didn't understand how an hour in bankruptcy court and we're in bankruptcy port court because you put in there you wanted them to be in bankruptcy this debtors counsel mr stokes was counsel for the defendants in the district court case is the for a year in district court mr stokes represented them both in the district court cases represented the individuals that owned the companies and fought off creditor claims for over a year then he gets together with debtors council and says hey let's put them in bankruptcy so we put them in bankruptcy in january of two thousand and eleven so a year of district court litigation after a year of district or litigation they put them in bankruptcy then the package order gets entered in january of two thousand and twelve ok that's when mr stokes is why i was really working for the trust the trust was my client even though nine zero three one says the trust can't be your client ok so then represent the greater no stocks as representing the debtors and the principals of the debtors who are kind of like guarantors from the beginning ok and he's going to be even before that but so then he comes in to the bankruptcy case and tries  this special master routine when we point out nine o three one says you can't do that and a bankruptcy judge even you know you did you pointed out did you write an objection in and pointed out that it could not be done we did not file an objection to the retention order because it wasn't right but that time until because bankruptcy claims especially ministry of expense claims are unique in that there's an allowance procedure and then there's a payment procedure you can allow claim even though there's no money to pay you you can allow the claim to be allowed so it's like you did the work you do you should get paid what you should get paid from your client your client was the bankruptcy estate and what happened was after a year of representing his client as this like special master when you can't be a special master he realized that two things one is i can't be a special master so i got to find another way to get paid and that's when he went to the debtors attorney said now with a three twenty seven a council that's the overall bankruptcy cup they have to do everything special counsel gets brought in under three twenty seventy for special things like you know like  a and i trust matter or you know med mal claim or something like that where three twenty seven is a bankruptcy specialist he's not a trademark i so they bring in three twenty seven special councils but they're councils for the debtors or state they have to be retained and compensated under the bankruptcy code you can't just kind of make up this position of i was working for the trust the trust is not a party in this case trust was never a party in this case who is your client he kept morphing into basically he were every had in this case we showed up at the me haitian at one point saying that well first i was representing the debtors then i was representing the principles and the debtors then i was representing the trust and then when that didn't work i said well i'm representing the packer creditors so so the very same packer creditors that you spent a year litigating against in district court then you spent a year objecting to their claims to get paid under ppaca and now after you found out that you the state is administratively insolvent and can't pay you on your administrative expense claim that they don't have the money to pay you so you'll get an allowed claim for fees are you saying you had no problem with him get appointed i have no problem with him getting appointed because get paid the motion contrary to what counsel just set up here it's not true i have the motion to retain mr sto so you can't do this not because i don't want you to get paid i want you to get paid but you wouldn't be the first three twenty seven e counsel on the planet to not actually get money you'll get an allowed claim but there might not be enough assets in the estate left to pay that claim that's all nobody is saying you didn't do the work and we saying you didn't do a good job or whatever what we're concerned about of my clients are scared senseless about is if you start approving the use of non estate property to pay your state's administrative expense claims you're gutting the whole point of the package trust congress put this money outside the reach of the bankruptcy court as hey we don't want you bankruptcy guys dipping this money so we're going to put it over here so five forty one d doesn't even cover it it's not a state property and factors there's a great case right out of this circle so several of them  springs in two thousand and nine you can surcharge and on the state property for state expenses that was following the seventh circuit precedent saying the same thing matter of holstein leasing in one thousand nine hundred five said the same thing georgia pacific sigmas i'm sorry oh yeah those are all in the bridge up their own brief i'm a big fan of like you know just read the book and i'm sure you have now george pacific even said now in bankruptcy debtors sol permissible activity with regard to non est property is to turn it over to the beneficial on so since one thousand nine hundred four there is then a person to do what mr stokes did in this case and then guy isn't going to fall these assets are going to just get wasted just because some debtors attorney can't dip into non est property what's going to happen is what happens in every case either stays in district court and there's a special master appointed to do all this or they put it into bankruptcy and the first thing the three twenty seven a council does is say look which one of you creditors want to come in and like run this and use handed off to the creditors and then say look i can i can abandon that any trustee in bankruptcy or in chapter eleven debtors council can abandon the asset if it's of an inconsequential value to the estate which nine estate property under a federal statute is are you saying that th order in an e mail to mr stokes we've laid out six reasons why this proposed order can't fly not only did he not respond to that he submitted that agreed to our draft order t bankruptcy court and represented on the record that all the packer creditors agreed in this judge when that's not the case at all so you objected in an email to mr stokes not to the court objected in an e mail to mr stokes that's absolutely correct and i said listen it's not an issue now if you want to do this you can't do it the bankruptcy court can't do it so if we need to flip it on appeal we will but you cannot do this you cannot do this because as as a special master ninety three one blocks your way you cannot do it no bankruptcy judge can approve this so it's instantly reversible on appeal the second problem with him is as a three twenty seven he payment so at first he tried to get paid as this special master that doesn't work because a nine zero three one and then he switched the timeline to twenty seven the motion to retain him is three twenty seven eight counsels or three twenty seven he counsels five and three twenty seven the bankruptcy court a court granted that order now only four and a half months later he submitted his first be application so as much as coun wants to come up and say wow he really worked for two and a half years and we didn't know anything about anything the fact of the matter is he was only in this position of three twenty seven counsel for four and a half months before he filed the application and we immediately objected to it  bankruptcy but you didn't seek that and the bankruptcy court didn't on its own say i i grant leave to appeal and here is my big if you page opinion so how do you how was there any appellate jurisdiction in the district court over the first two  one look at one fifty eight twenty eight u s c one fifty a a three c specifically says a notice of appeal can be taken by the district court can be taken as a motion for leave to appeal and by taking up the issues on appeal and actually biting down the district court granted that motion and covered that in his one hundred twelve pages of reasons why you can't do this mr even though he didn't say i grant you leave to appeal right there's no indication he ever gets a discretionary decision even though it's not final should i still address it because it will help speed things along you can you point to any indication that the district judge exercise that discretion sure he wrote one hundred  twelve pages of opinion on that appeal so he clearly took the appeal and granted it as a motion for leave to appeal and i top of that what we have is the two for your tires that were flipped the first time mr stokes then went back on the third fia location at the time he had to preorder got vacated and reversed he had a pending motion for reconsideration then he goes to the bankruptcy court and says i still want more money can you give me more money and the bankruptcy court said ok here's more money even though you've already been flipped on the first two feet order and at that hearing the bankruptcy court asked me like listen you're taking this money at your own peril if the judge as or doesn't change his opinion you might have to give this back are you prepared to do that he said i'm prepared to do that so he said fine then i have no problem give it to you because the second two bankruptcy court judges they just didn't want to like change horses midstream that was their kind of thing that they looked at it is like listen this is a my order you know judge clark put this you know that you were in this position i'm just going to sit here and let it ride and if i get reversed on the third one so be it you said you put the money back so there's no harm to you guys fresh so here's the money first thing mr stokes did even though there was clearly an interested party with a disputed your right to that money first thing rug that's true that it has to be addressed down the road but bottom line is there's a lot wrong here mr stokes came in in this created position that there is absolutely no legal basis for and there's actually a bankruptcy rule directly on point saying you can't possibly be this but you can but you can't get paid are this money are you don't know early on he said he was a special master i didn't work for the debtor i didn't work for the for the estate i didn't work for the court he said he represented the trust itself so he he created this position and he even said in one of his briefs he said he was trying to be innovative and judges are just you know kind of like had a very good point it's like look if you want to be innovative if you want to change the law go go talk to your congressman there's five hundred thirty five members of congress that change laws you don't come to a court asking us to change the law to make it easier to administer fact there's a how does your appeal on the fees it looks to me like what  against on one of the debtors you have seven percent of the pocket claims and eighty percent or so against the other one how can you appeal more than this that seven or eight percent of the attorneys fees when everyone else is fine with giving those those fines well they're not fine the if you regularly remain idea i guess circumvention orders icon or circumvention agreements as mr stokes is holding on to probably about sixty seventy cents on the dollar undisputed money now he went out to packer creditors in this letter and said look if you don't sign this agreement that basically says you won't object to my third free application if you don't sign this i'm not going to disperse and i'm going to tie up your money for another two or three years with appeals so it was basically negotiation by hostage taking in my opinion so i'm not going to disperse under the undisputed portion of your money unless you agree that i can get paid despite what the courts say but whatever the reason seems they're not they're not appealing the fee how is any more than your seven or eight percent at stake and what's at stake here is the violations of the law i mean my client is over and over and over again take the conflict issue because there were clearly conflicts he won in that mediation actively soliciting creditors to be his or their attorneys when he still representing the debtor so it's so now you're representing the debtor you previously represented the principals and you're currently representing creditors he represented everyone in that room except the bank at the same time it did  client i'm sorry did he represent your client no of course we didn't do and then i did from his work no actually he objected to our client we spent money overcoming his objections to our claim now he wants us to pay him for fighting against us now what's interesting is his first you know look asian he wasn't appointed until three twenty seven is three twenty seven he comes his first the application covered all the way back to january of two thousand and twelve so he's trying to get paid through a few locations three twenty seven council for work three and a half months prior to him even getting appointed as three twenty seventy so that there not only is there  benefit to this we had to pay for the pilots had to pay me to defend against his objections to our claims so how can you sit there and fight against the packer creditors for  he was on the job four and a half months before his first be application and are written objections came in at that time because now he's asking for payment from the trust account that congress said look you cannot touch this money to pay administrative expense just can't so that was when it first crystallized into an issue that we could take to the district court and say i was fearful of this but when he wants to be retained as a state counsel by when he wants to be paid from a state funds they were filed december eighth two thousand and eleven and the bankruptcy was filed in january two thousand and twelve one month not one year second of all mr stokes never represented the principals number at the mediation hearing that you were discussing everybody had their own counsel randy pohlmann an attorney who represented the principal the bank had its attorney and the debtors counsel langley in iraq who would was the debtors counsel throughout the matter was their bank had its counsel in the mediation order to everybody and some of the pro se he's asked him to represent them at the hearing now there was no conflict because he already functionally represented them represented their interests importantly counsel mentioned hey this is something you've got to do in the district court so he was served with the order saying that mr stokes was going to have to be paid out of the trust council knew full well that the p s a trust s that's can't be used to administer the state he has very powerful remedy withdraw the reference take it up to the district court even though he consented to it before but the whole thing back in the district court right then and there not wait seven eight nine months a year right then right now before stokes does a thing and then we'll see how the district court wants to handle it there was no appeal from that order either and he had plenty of time to appeal that order and as to keaton's associate i'll not assume the parents mr kelly on behalf of all these the a police here they did nothing about that order and they knew full well that if they didn't do something about it that stokes was going to be paid from the trust and they did nothing beneficial distributions the same as everybody else did ok the the objection situation was a something of a mess because well as to stokes may have accepted or objected to t beneficiaries word verse to each other in that sense because when an objection to one claim was sustained distribution to the next guy went up so it works it was filed by debtors counsel langley and barack and then it was drafted by another attorney another pack attorney for other creditors who were all involved they were reach a decision and decide whether this was a rotten deal or not so i'm sorry