In the

United States Court of Appeals

For the Seventh Circuit

No. 08-1881

IN RE:

INGERSOLL, INC. et al.,

Debtors-Appellees,

APPEAL OF:

BAISE & MILLER, P.C.

Appeal from the United States District Court

for the Northern District of Illinois, Western Division.

No. 07 C 50098—Philip G. Reinhard, Judge.

ARGUED JANUARY 23, 2009—DECIDED APRIL 15, 2009

Before BAUER, EVANS, and WILLIAMS, Circuit Judges.

EVANS, Circuit Judge. Although many have tried to put

a stake through the heart of this fee dispute which

refuses to die, all have failed to do the trick. We, as the

sixth forum to take a stab at it, are next in line. Now

creeping along as a bankruptcy appeal, the case is here

after stops at the District of Columbia Bar Attorney/Client

Arbitration Board, the Superior Court of the District of

Columbia, the Superior Court of Delaware, the federal

bankruptcy court for the Northern District of Illinois, and
2 No. 08-1881

finally the federal trial court for that district. Baise &

Miller, P.C., the Washington, D.C. law firm in this dispute, is here today appealing an order barring its claim

for additional fees under 11 U.S.C. § 105 of the bankruptcy code. In resolving the firm’s appeal, we must go

back in time to when this saga all began.

The Ingersoll Cutting Tool Company (ICTC), since

its inception in the late 1800s, was at the forefront of the

metal cutting tool industry. For the vast majority of that

time it was a family-owned enterprise, handed down

from its founder, Winthrop Ingersoll, to future generations. But that changed in 2001, when Israeli-based Iscar,

Ltd. took over in a sale allegedly “masterminded” by the

first outside board members in ICTC’s history. Prior to

the sale, ICTC was owned by the Gaylords, descendants of

Mr. Ingersoll and the appellees in this case. They claim

they had no desire to sell the company but were duped

by the nonfamily CEO and certain directors. According

to them, a corporate chauffeur overheard these individuals scheming and laughing in a limousine, reveling

in their plan to “take down” ICTC and ship it “overseas

where it belonged.” Whether this actually occurred is

unknown—the Gaylords never managed to get a statement from the chauffeur—but it doesn’t make much of a

difference. What is important is that when the Gaylords

caught wind of this plan, they tried with all their might

to stop the sale, retaining Baise & Miller to act on their

behalf. And when the law firm failed to make a difference—and sought more money for its services—the

Gaylords found themselves trading one battle (over

their company) for another (over legal fees).
No. 08-1881 3

The Gaylords first contacted Baise & Miller in late

November 2000. They explained to partner Marshall

Miller that they needed to stop the sale, and Miller

agreed to help by filing a motion for a temporary restraining order and a preliminary injunction. Miller allegedly

told them not to worry; he was friends with a judge

in Delaware who “owed him a favor,” so getting the sale

enjoined was no big deal. What’s more, Miller supposedly said he had contacts in the media who could sling

mud at Iscar. He even said he spoke with a three-star

lieutenant general (Jim Williams) who was ready to

investigate the company on international security

grounds. So Miller could handle this thing, no sweat.

But he would need help from another lawyer, David

Margules of Bouchard, Margules & Friedlander.

Miller and Margules held a phone conference with the

Gaylords on December 1. (The Gaylords lived in Illinois;

Miller in Washington, D.C.; and Margules in Delaware.)

Margules introduced himself, described his background

and experience, and told the Gaylords that this sort of

thing was his “bread and butter.” Bouchard Margules and

Friedlander v. Gaylord, 2005 WL 2660043, *2 (Sup. Ct. Del.

Aug. 31, 2005). But despite all that—and Miller’s “friends”

in high places—the Gaylords weren’t sold.

The deal wasn’t sealed until the two attorneys flew to

Rockford, Illinois, and met the Gaylords in person. You

see, the Gaylords were old-school to a fault: face-to-face

meetings were important, but if they went well, they

were happy to trust an agreement to a handshake and

a promise. In fact, Robert Gaylord, who was more or less
4 No. 08-1881

in charge before he passed away during this litigation,

conducted “multi-million dollar” deals on this basis. So

he thought nothing of reaching an oral agreement to pay

Miller a $100,000 retainer, with the understanding that

Margules would be paid out of those funds as well.

A few days later, Miller sent the Gaylords a letter

“memorializing” their oral agreement. It contained some

surprises. After reciting the $100,000 retainer and the fact

that Margules would submit his fees to Miller (not the

Gaylords), the letter discussed a contingency fee. The

Gaylords were shocked. Thinking they had an agreement

for a capped fee of $100,000, they refused to sign the

contract.

In the meantime, Margules decided he needed a

bigger piece of the action. Margules previously reached a

deal with Miller where he would receive $25,000 of the

retainer based on the expectancy that he would do a

quarter of the work. However, as a preliminary injunction hearing drew closer—by this point they had filed

suit in Delaware’s Chancery Court, a court of equity

known mainly for its decisions on corporate matters—Margules saw that he was doing a greater

percentage of the work. So Margules asked Miller for

more money, and “Miller arbitrarily decided on a new

retainer figure, $250,000, because that was the next ‘notch’

up.” Bouchard Margules and Friedlander, 2005 WL 2660043

at *2.

Back at the negotiating table with the Gaylords, Miller

assured them that $250,000 was the outside figure, and

that he would return any unused portion of the fee.
No. 08-1881 5

Robert Gaylord agreed to the deal reluctantly; he was

willing to pay $250,000 if need be, “but not a penny more.”

Id. at *3. Unfortunately, the agreement was never put in

writing, and this caused headaches as the fees escalated

well beyond the $250,000 cap.

For all that, the litigation was unsuccessful. The Delaware court denied injunctive relief, and the sale was

consummated. Then came the fee dispute. As agreed,

the Gaylords deposited $250,000 into Baise & Miller’s

escrow account. But well after the representation came

to a close, the Gaylords hadn’t received any invoices

from Miller detailing the costs and fees. It turns out there

was a logical (if unreasonable) explanation for the delay:

the total fees from Miller and Margules outstripped the

escrow fund. When the Gaylords finally received the

invoices from both attorneys—Margules had been billing

Miller all along but received only partial payment—the

total came to almost $390,000. Outraged by the request for

another $140,000 on top of the “outside figure,” the

Gaylords wrote Miller and insisted he had it wrong. They

explained that the agreement was for no more than

$250,000, and if Miller and Margules had trouble apportioning the money, that was their problem. Miller didn’t

back down. While continuing to demand more money,

though, he partially satisfied Margules by paying him

$134,205.13—roughly $60,000 short of the total claimed.

When the Gaylords also refused to budge, Baise &

Miller filed an action in the D.C. Superior Court. The

court stayed the case, however, because the Gaylords

agreed to arbitration before the D.C. Attorney/Client
6 No. 08-1881

Arbitration Board. The board issued its ruling in late

2004, but unfortunately it failed to decide the critical

issue—whether $250,000 represented the Gaylords’ maximum liability to both law firms. This is what the board

said:

The total fees and costs to be (or to have been)

payable by [the Gaylords] to [Baise & Miller] total

$199,514.44. [The Gaylords] paid $250,000 to [Baise &

Miller’s] trust/escrow account. [Baise & Miller] has

paid $134,205.13 (of the $250,000) to Bouchard,

Margules & Friedlander. [Baise & Miller] paid to

itself the remaining sum of $115,794.87.

This award does not resolve the issues of whether

[Baise & Miller]’s action in paying $134,205.13 to

Bouchard, Margules & Friedlander was reasonable

or appropriate and expresses no opinion as to how

that issue should be resolved. In addition, this award

does not resolve, nor express any opinion as to, the

reasonableness or recoverability of any fees or costs

assessed by the law firm of Bouchard, Margules &

Friedlander to [the Gaylords] or to [Baise & Miller].

This decision was not exactly a model of clarity, and it

caused problems down the road. The fairest interpretation, however, is that the Gaylords didn’t owe

Miller any more money (they were seemingly entitled to

a refund); to the extent Miller retained less than his due,

he couldn’t look to the Gaylords for compensation; and

Margules would either have to look to Miller for any

shortfall or bring his own claim against the Gaylords.
No. 08-1881 7

Despite our read, Miller saw things differently. In a

motion to confirm the award filed with the D.C.

Superior Court, Miller contended that the board’s

decision meant the Gaylords owed him more money. We

find that argument baffling, but the Superior Court’s

response seems even more so. That court said that “the

award makes clear that [the Gaylords] owe [Baise &

Miller] $199,514.44 and that the [arbitration board] is

taking no position on the amounts owed by [the

Gaylords] to [Margules].” Fair enough (though we

might quibble with the word “owe,” since the Gaylords

already paid Miller well over that sum). But then we get

this: “It is not challenged that [the Gaylords] have paid

[Baise & Miller] $115,794.87. Deducting that amount

from the award yields a balance of $83,719.57, which is

the proper judgment amount here.” So the Superior

Court ordered the Gaylords to pay an additional

$83,719.57. We see no way to square that with the

board’s decision and the fact that the Gaylords had

already paid Miller $250,000. Miller may have been

entitled to nearly $200,000 of that sum, but it wasn’t the

Gaylords fault he remitted so much to Margules that just

over $115,000 remained. In purporting to enforce the

arbitration, the Superior Court effectively determined

(without analysis and without meaning to) that Miller

was justified in paying Margules some $135,000 and

that there was no fee agreement capped at $250,000—issues

that the arbitration board expressly declined to resolve.

Though they vigorously disagreed with the decision,

the Gaylords paid Miller the additional $83,719.57 to

put the matter to rest.
8 No. 08-1881

As if that were not complication enough, the Delaware

Superior Court also had something to say. Margules

brought suit against the Gaylords in that forum to

recover the extra $60,000 that he had unsuccessfully

sought from Miller. The Gaylords maintained the

position that they had only contracted with Miller, and

for a fixed fee at that. Unlike the D.C. court, however,

the Delaware court produced a ruling that was at least

facially reasonable. Following a bench trial, the court

found that there was no contract between the Gaylords

and Margules, but that there was “a capped fee agreement between the Gaylords and Baise [&] Miller for

$250,000.” Bouchard Margules and Friedlander, 2005 WL

2660043 at *6. Taking into account the arbitration decision, the court summed up as follows:

[Margules] was a subcontractor to Baise [&] Miller’s

contract with the Gaylords. . . . If the DC arbitration

board awarded Baise [&] Miller $199,514.44 for its

work under the $250,000 retainer, then $50,485.56

remains in the Baise [&] Miller escrow account. The

Court finds that any money owed to [Margules]

would have to be addressed directly with Baise [&]

Miller, the general contractor.

Id.

That makes sense. Yet the Delaware Superior Court

dismissed the Gaylords’ cross-claim against Baise &

Miller. Even though the facts showed that the Gaylords

had indeed overpaid Baise & Miller, the court held that
No. 08-1881 9

At least that appears to be the case. The record before us 1

doesn’t contain the Delaware Superior Court’s order of dismissal, but uncontested pleadings state the cross-claim was

indeed dismissed on this basis. And the bankruptcy court

echoed that ruling down the road. Although the Gaylords

still maintain that they overpaid Baise & Miller, their position

on appeal does not rest on that assertion. That is probably for

the better, because the scope of this appeal does not permit us

to rule on that issue. In any event, we consider the matter

settled and, even if we could, do not purport to disturb the

earlier decisions of the state courts. Of course, that does not

stop us from critiquing the D.C. court’s decision which, again,

we find rather troubling.

aspect of the dispute was res judicata. Despite the 1

possible injustice, that seems correct. The doctrine of

claim preclusion is premised on the idea that, when a

claim has been fully litigated and come to judgment on

the merits, finality trumps. See Nevada v. United States,

463 U.S. 110, 129-30 (1983); Hicks v. Midwest Transit, Inc.,

479 F.3d 468, 471-72 (7th Cir. 2007).

But shelve the inconsistency for now, while we turn to

the bankruptcy court’s role in this saga. When ICTC was

sold to Iscar, the Gaylords found themselves in a tough

spot. ICTC was the “crown jewel” of Ingersoll International, Inc. (Ingersoll), the parent company still held by

the Gaylords. According to the Gaylords, ICTC accounted

for over 90 percent of the profit of Ingersoll. So without

ICTC, Ingersoll was a shell of its former self; it couldn’t

keep up with its creditors, and before long it filed for

bankruptcy. And because the Gaylords didn’t see “one
10 No. 08-1881

dime” from the sale of ICTC, they had no means to launch

a rescue attempt.

Ingersoll and its subsidiaries filed a petition for voluntary bankruptcy under Chapter 11 in April 2003. The

Gaylords were not debtors in that case, but they were

intimately involved in the proceedings insofar as

Ingersoll was the family company. And when the bankruptcy court confirmed a liquidation plan in September 2005, the Gaylords gained a measure of protection.

Section 9.1 of the plan provided that the Gaylords

shall be released from any and all claims and causes of

action by all creditors, parties-in-interest, directors,

officers, shareholders, agents, affiliates, parent entities,

successors, assigns, predecessors, members, partners,

managers, employees, insiders, agents and representatives of the Debtors and their estates arising from

or relating to the Gaylord Actions, including, without limitation, any claims, causes of action, and counterclaims by any present or former party to any of

the Gaylord Actions.

The “Gaylord Actions” were identified as the “non-bankruptcy causes of action captioned Gaylord, et al. v. Doar,

et al., C.A. 18542-NC and that portion of the lawsuit

captioned Gaylord, et al. v. Barnes & Thornburg, et al.,

No. 03 L 000023 which is a derivative action on behalf of

the Debtors.” The first case, Gaylord, et al. v. Doar, et al.,

C.A. 18542-NC, was the injunctive case in the Delaware

court where Miller and Margules served as counsel.

When the plan was confirmed (following an objection

period), the debtors served copies of the plan on creditors
No. 08-1881 11

and parties-in-interest. Miller received a copy as a party-ininterest.

Earlier, though, in April 2005, Miller filed another claim

in the D.C. Superior Court. This time, Miller sought

consequential damages for the Gaylords’ alleged breach

of the D.C. arbitration agreement. Because the Gaylords

continued to litigate their case against Miller in the Delaware Superior Court after they had agreed to binding

and exclusive arbitration in D.C., Miller contended that

they were responsible for costs and fees wrongfully

incurred in Delaware.

Which, finally, brings us to the issue that prompted

this appeal. When Miller failed to dismiss his latest suit

following confirmation of the bankruptcy plan, the

Gaylords filed a motion in the bankruptcy court seeking

injunctive relief and sanctions. Proceeding under 11

U.S.C. § 105—which gives a bankruptcy court the power

to issue any “necessary or appropriate” order to carry

out the provisions of the bankruptcy code—the Gaylords

asked the court to enjoin Miller from maintaining

further litigation and to hold him in contempt. They

contended that Miller violated the release language

contained in section 9.1 of the bankruptcy plan, on the

theory that Miller’s claim “arose from” or was “related to”

one of the Gaylord Actions. Miller disagreed, of course,

arguing that his case was only indirectly connected

with the Delaware action.

The bankruptcy court ruled on the matter in December 2005, identifying the central issue as whether

Miller’s claim was governed by the release provision. The
12 No. 08-1881

court decided that it was. Noting that the release was

intended to be a shield for the Gaylords, the court held

that it was sufficient “to encompass the dispute” between

the Gaylords and Miller. And the court found it of no

moment “whether that dispute is characterized as a fee

dispute or a breach of arbitration agreement dispute”

because it “is related to the derivative action.” But

that wasn’t the end of the matter, because the court

also had to decide whether § 105 authorized the release.

The court acknowledged that this was a unique situation

in that nondebtors (the Gaylords) were being released

from a noncreditor (Miller) of the bankrupt (Ingersoll).

Relying on In re Metromedia Fiber Network, Inc., 416 F.3d

136 (2d Cir. 2005), however, the court held the release

valid because it was central to the negotiation and

ultimate success of the plan. So the bankruptcy court

enjoined Miller from pursuing his breach-of-arbitration

claim (though it declined to impose sanctions).

Miller appealed to the district court. He seemed to have

better luck there—at least at first—as the district court

implied that the ruling below could only be sustained if

Miller was indeed a creditor of one of the debtors. The

district judge asked the bankruptcy court to resolve

that issue on remand.

But on remand the bankruptcy court arguably strayed

from the district court’s order. The bankruptcy judge

explained that his prior ruling was based not on Miller’s

status as a creditor—which in his view Miller was not—but

rather on the idea that the release was needed to ensure

the success of the bankruptcy plan. Apart from the
No. 08-1881 13

creditor issue, the judge felt his original rationale, rooted

in § 105, remained adequate to support his decision. So

he stuck with it.

The district court had no problem with this. Even if the

bankruptcy court went beyond the strict letter of the

remand order, the district court was satisfied because the

bankruptcy judge provided the “clarification” it was

seeking. The court rejected Miller’s argument on

appeal that the bankruptcy judge had improperly gone

beyond the scope of the remand order and violated his

due process rights, and so affirmed the ruling without

further ado.

The case now finds it way to us, hopefully the last

judges to chime in. “We review a district court’s decision

to affirm the bankruptcy court de novo, which allows us

to ‘assess the bankruptcy court’s judgment anew, employing the same standard of review the district court

itself used.’ ” In re Boone County Utilities, LLC, 506 F.3d

541, 542 (7th Cir. 2007) (quoting In re Kmart Corp., 381 F.3d

709, 712 (7th Cir. 2004)).

Miller makes two arguments. First, he renews his contention that the release is inapplicable to his claim for

breach of the arbitration agreement. Second, he argues

that the district court erred as a matter of law in affirming

the bankruptcy court when that court went beyond the

call of the remand order.

We take these arguments in reverse order. In United

States v. Husband, 312 F.3d 247, 251 (7th Cir. 2002), we

made the unremarkable observation that where the

remanding court identifies a “discrete” or “particular”
14 No. 08-1881

issue, the lower court is generally limited to that question.

But on the other hand, we affirmed our previous statement that the “scope of the remand is determined not

by formula, but by inference from the opinion as a

whole.” Id. (quoting United States v. Parker, 101 F.3d 527,

528 (7th Cir. 1996)). In other words, “[t]he court may

explicitly remand certain issues exclusive of all others;

but the same result may also be accomplished implicitly.”

It follows as a corollary that a court may implicitly issue

a nonexclusive remand order. This might happen when

a court seeks clarification and identifies what it believes

(but is not certain) is the dispositive issue, which is

what happened here. The way we read it, the district

court doubted the bankruptcy ruling could be sustained if Miller was not a creditor, so it asked the bankruptcy judge to resolve that issue, which he did. But the

district court did not rule that the § 105 rationale was

flawed, so the bankruptcy judge was within his rights

to expand upon that rationale, explaining exactly what

he meant. See United States v. Morris, 259 F.3d 894, 898

(7th Cir. 2001) (stating that a lower court is generally “free

to address issues that the appellate court left undecided”). This view of events seems particularly convincing in light of the district court’s reaction. The

district court, clearly in the best position to know the

scope of its own remand order, said it received the “clarification” it sought. We see no basis to disagree.

On, then, to the meat of the matter: Did the bankruptcy court properly determine that Miller’s breach-ofarbitration claim was barred by the release in the bankruptcy plan? We see two sub-issues in this question. First,
No. 08-1881 15

as the bankruptcy court itself noted, we have to determine whether the release (valid or not) is by its terms

broad enough to cover Miller’s claim. We think it clearly

is. Under the release, Miller’s claim need only “arise from”

or “relate to” one of the Gaylord Actions. Because Miller

was counsel in one of those cases, and the breach-ofarbitration claim was predicated on a fee dispute arising

from that litigation, it is a covered claim.

The next sub-issue—determining whether the release

is legally valid—is the trickier of the two. Section 105 of

Title 11 authorizes a bankruptcy court to “issue any order,

process, or judgment that is necessary or appropriate to

carry out the provisions of [the bankruptcy code].” 11

U.S.C. § 105(a). This “residual authority” is consistent

with a bankruptcy court’s “traditionally broad” equitable

powers, In re Airadigm Comm., Inc., 519 F.3d 640, 657

(7th Cir. 2008), which also make an appearance within

the context of reorganization plans. Similar to § 105,

11 U.S.C. § 1123(b)(6) allows a court to include in a

plan “any other appropriate provision not inconsistent

with the applicable provisions of [the bankruptcy

code].” In Airadigm, we held that these two provisions—and the “residual authority” to which they

speak—“permit[] the bankruptcy court to release third

parties from liability to participating creditors if the

release is ‘appropriate’ and not inconsistent with any

provision of the bankruptcy code.” Airadigm, 519 F.3d

at 657. The release in that case—which shielded a

nondebtor from the claims of a creditor over the

creditor’s objection—fit the bill because it was narrow

and essential to the reorganization plan as a whole. We
16 No. 08-1881

emphasized that the release did not amount to “ ‘blanket

immunity’ for all times, all transgressions, and all omissions.” Id. Rather, it applied “only to claims ‘arising out

of or in connection with’ the reorganization itself and

d[id] not include ‘willful misconduct.’ ” Id. Just as importantly, we noted that the third party would not have

participated without the release, and its participation

was “essential” to the plan’s success. Id.

Our decision in Airadigm echoed the Second Circuit’s

earlier ruling in Metromedia, the case relied on by the

bankruptcy judge. Although the Second Circuit rejected

the release in Metromedia, it held that bankruptcy

courts have the authority—in limited cases—to bar

nonconsenting creditors from suing third parties.

Metromedia, 416 F.3d at 141. The court identified similar

considerations and, like us, preached caution. See id. at

143 (“A nondebtor release in a plan of reorganization

should not be approved absent the finding that truly

unusual circumstances render the release terms

important to success of the plan . . . .”). A nondebtor

release should only be approved in “rare cases,” the

court explained, because it is “a device that lends itself to

abuse.” Id. at 141, 142. This is especially true when the

release provides blanket immunity: “In form, it is a

release; in effect, it may operate as a bankruptcy discharge arranged without a filing and without the safeguards of the Code.” Id. at 142.

In this case, however, the release does not provide

blanket immunity. As in Airadigm—and in contrast to

Metromedia—it is narrowly tailored and critical to the
No. 08-1881 17

plan as a whole. The release only covers claims arising

from or relating to two cases (the Gaylord Actions), so it

is far from a full-fledged “bankruptcy discharge

arranged without a filing and without the safeguards of

the Code.” The Gaylords can still be sued by any

number of creditors with independent claims. Just as

importantly, the bankruptcy court found that the release

was an “essential component” of the plan, the fruit of

“long-term negotiations” and achieved by the exchange

of “good and valuable consideration” by the Gaylords

that “will enable unsecured creditors to realize distribution in this case.” After reviewing the record, we

agree.

On the other hand, we acknowledge that this is not a

straightforward application of Airadigm and Metromedia.

Those cases were different in that the plans shielded

nondebtors from suit by creditors of the bankrupt. As the

bankruptcy court stated, the case before us is one step

removed—the Gaylords are nondebtors, but Miller is not

a creditor of Ingersoll. But we don’t think that is

dispositive when the party whose claim was extinguished received fair notice and an opportunity to object.

And there is nothing in the bankruptcy code that tells

us otherwise.

Yet, it is important to note in all this what we are not

saying. We are not saying that a bankruptcy plan purporting to release a claim like Miller’s is always—or even

normally—valid. In the unique circumstances of this

case, however, we believe it is. We go no further than

to apply the rule we adopted in Airadigm to the facts at
18 No. 08-1881

The motion to intervene filed by trustee Christopher G. Bryan 2

is denied as moot. Bryan only sought to intervene to file a

motion to dismiss the appeal because he feared reversal

would disrupt the bankruptcy plan. Since we maintain the

status quo, Bryan effectively gets what he wants.

4-15-09

hand. In most instances, releases like the one here will

not pass muster under that rule. Bankruptcy litigants

should keep that in mind when they sit down at the

negotiating table.

But perhaps there is a broader lesson in this case, a

lesson for litigants of all types: Good advocacy does not

exist in a vacuum; it must be balanced with a willingness to compromise, to behave reasonably, and, sometimes, to leave well enough alone. If these counterweights are neglected, things can get ugly in a hurry.

This case illustrates the point. What started as a simple

fee dispute ended as a multi-year, multi-court monster

that, as far as we can tell, benefitted no one. Baise &

Miller had a number of opportunities to avoid this result.

The judgment of the district court is AFFIRMED.2