2008 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-25-2008

In Re:Richardson Ind

Precedential or Non-Precedential: Non-Precedential

Docket No. 07-2502

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Recommended Citation

"In Re:Richardson Ind " (2008). 2008 Decisions. Paper 1529.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 07-2502

________________

IN RE: RICHARDSON INDUSTRIAL CONTRACTORS, INC.,

 Debtor

HARRY A. RICHARDSON,

 Appellant

ANDREA DOBIN,

 Trustee

____________________________________

On Appeal From the United States District Court

For the District of New Jersey

(D.C. Civil Action No. 05-cv-00501)

District Judge: Honorable Garrett E. Brown, Jr.

_______________________________________

Submitted Under Third Circuit LAR 34.1(a)

FEBRUARY 12, 2008

Before: SLOVITER, BARRY AND GREENBERG, CIRCUIT JUDGES.

(Opinion Filed: February 25, 2008 )

____________

 OPINION

____________
 In his briefs, Richardson repeatedly emphasizes the disparity between this $75,000 1

settlement and RICI’s alleged $1,421,000 injury. Before the settlement, however, RICI

already had been awarded and paid $800,000, so it appears that only approximately

$600,000 remained in dispute. As explained below, the reasonableness of this settlement

is not before the Court.

PER CURIAM

Harry A. Richardson appeals pro se from the District Court’s orders affirming the

Bankruptcy Court’s denial of his motion to appoint independent special counsel and

declining to reconsider that ruling. We will dismiss this appeal as moot.

I.

Richardson was an unsecured creditor in the Chapter 7 bankruptcy of Richardson

Industrial Contractors, Inc. (“RICI”), which declared bankruptcy in 2003. One of its

assets was a breach of contract claim that had been pending in the Eastern District of New

York since 1991 (the “EDNY action”). In December 2003, just days before that action

was to be dismissed for RICI’s failure to obtain counsel, the Bankruptcy Court appointed

Patrick Tobia under 11 U.S.C. § 367 to serve as special litigation counsel to the trustee

for the sole purpose of prosecuting that action. Tobia also represented certain secured

creditors in the RICI bankruptcy. At a hearing on December 10, 2003, the trustee argued

that this joint representation gave rise to no actual or potential conflict of interest because

all creditors had an identity of interest in maximizing recovery in the EDNY action. The

Bankruptcy Court agreed, and approved Tobia’s retention. Richardson did not appeal.

In March 2004, Tobia reached an agreement in principle to settle the EDNY action

for $75,000. In September 2004, the trustee filed a motion with the Bankruptcy Court to 1
approve the settlement under Bankruptcy Rule 9019(a). Richardson objected, and filed a

cross-motion to disqualify Tobia and replace him with “independent” special counsel. 

Richardson argued that the settlement amount was unreasonably low and that Tobia was

operating under a conflict of interest because entering into the settlement was in the

interests of Tobia’s secured-creditor clients but not in the interests of the creditors as a

whole. On November 1, 2004, the Bankruptcy Court heard argument, announced its

intention to approve the settlement, and deemed Richardson’s motion moot. The court

entered a summary order that same day denying Richardson’s motion. Richardson

appealed that order to the District Court, which dismissed the appeal because

Richardson’s brief was untimely. This Court reversed, see In re Richardson Indus.

Contractors, Inc., 189 Fed. Appx. 93 (3d Cir. 2006), and the District Court subsequently

entered the orders at issue here affirming the Bankruptcy Court (April 2, 2007) and

declining to reconsider that ruling (May 4, 2007).

In the interim, on January 5, 2005, the Bankruptcy Court entered an order finally

approving the settlement in the EDNY action, and that action was later settled. 

Richardson sought to appeal the settlement approval, but the District Court dismissed his

appeal as untimely and this Court ultimately affirmed. See In re Richardson Indus.

Contractors, Inc., 190 Fed. Appx. 128 (3d Cir. 2006). The Bankruptcy Court authorized

Tobia to distribute the settlement proceeds in November 2005, then entered the final

bankruptcy decree in June 2006. Richardson did not seek or obtain a stay of the

Bankruptcy Court’s approval of the settlement or the distribution of its proceeds. 
 Although we do not reach the merits of this appeal, we note that Richardson’s 2

position appears to lack merit. The Bankruptcy Court was authorized to disqualify Tobia

only if his concurrent representation of RICI and certain secured creditors gave rise to an

actual or potential conflict of interest. See 11 U.S.C. § 327(c); In re Marvel Entm’t

Group, Inc., 140 F.3d 463, 476-77 (3d Cir. 1998). We would review the Bankruptcy

Court’s decision for abuse of discretion. See In re Pillowtex, 304 F.3d at 250; In re

Marvel, 140 F.3d at 470. Our review of the record reveals nothing suggesting that the

Richardson also did not appeal the Bankruptcy Court’s authorization of that distribution,

and has not appealed from the final decree.

II.

Richardson’s appeal suffers from a threshold deficiency, which becomes apparent

when we clarify the issue actually before this Court. Richardson devotes the majority of

his briefs to attacking the reasonableness of the EDNY settlement. The Bankruptcy

Court’s approval of that settlement, however, is not before us, and Richardson lost the

right to challenge it by failing to file a timely appeal. Instead, the only issue before us is

whether the Bankruptcy Court properly denied Richardson’s motion to disqualify Tobia

and appoint different special counsel to prosecute (rather than settle for $75,000) the

EDNY action. Any relief on this issue, however, would effectively invalidate the

approval of the settlement, which Richardson has forfeited the right to challenge. 

Moreover, the settlement has been accomplished, its proceeds have been distributed, and

the RICI bankruptcy has been closed, none of which Richardson sought to appeal or stay. 

Under these circumstances, this appeal is now moot. See In re Highway Truck Drivers &

Helpers Local Union # 107, 888 F.2d 293, 297 (3d Cir. 1989); In re Cantwell, 639 F.2d

1050, 1053-54 (3d Cir. 1981). Accordingly, this appeal will be dismissed.2
Bankruptcy Court abused its discretion here. Richardson argues that Tobia’s settlement

of the EDNY action reveals a conflict because it had the effect of securing a recovery for

his secured-creditor clients sooner than they otherwise would have gotten it and left

Richardson, an unsecured creditor, with no recovery at all. But Richardson has never

presented any evidence that Tobia’s recommendation of the settlement was motivated by

anything other than his assessment of its merits. Indeed, as one of Tobia’s securedcreditor clients notes, the secured creditors’ claims were far from satisfied in this

bankruptcy, and they too, just like Richardson, would have preferred a greater recovery. 

The mere fact that the settlement netted insufficient proceeds to provide for any recovery

by the unsecured creditors would not establish a conflict of interest, because the

settlement appears to have netted insufficient proceeds to satisfy the claims of Tobia’s

secured-creditor clients as well.