United States Court of Appeals

for the Fifth Circuit

No. 20-60718

In the Matter of: Community Home Financial Services, 

Incorporated,

Debtor,

Edwards Family Partnership, L.P.; Beher Holdings 

Trust, 

Appellees,

versus

Kristina M. Johnson, Trustee for Community Home Financial Services, 

Incorporated, 

Appellants.

Appeal from the United States District Court

for the Southern District of Mississippi 

USDC No. 3:18-CV-158

Before Elrod, Willett, and Engelhardt, Circuit Judges.

Jennifer Walker Elrod, Circuit Judge:

The bankruptcy court awarded fees to the bankruptcy debtor’s

counsel for work performed prior to the appointment of a trustee. Creditors 

United States Court of Appeals

Fifth Circuit

FILED

March 5, 2021

Lyle W. Cayce

Clerk

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appealed the fee award to the district court. After a two-and-a-half-year 

delay, the district court vacated the fee award. Because the district court 

improperly assessed the benefit of counsel’s services to the estate from 

hindsight, rather than assessing the reasonableness and likely benefit from 

the time the services were rendered, we REVERSE the district court’s 

judgment and REMAND.

I.

This dispute arises from the bankruptcy proceedings for Community 

Home Financial Services, Inc. (CHFS), which is not a party to this appeal. 

Heavily indebted to the appellants—Edwards Family Partnership, Inc. and 

Beher Holdings Trust—and others, CHFS entered Chapter 11 bankruptcy to 

restructure its debts in May of 2012. In re Cmty. Home Fin. Servs., No. 12-

1703, 2015 WL 8113699, at *2–3 (Bankr. S.D. Miss. Dec. 7, 2015). 1

Throughout the bankruptcy, the two largest creditors were the 

appellants, Edwards Family and Beher.2 CHFS remained the debtor in 

possession, and CHFS’s president acted as its designated representative. Id. 

at *2. With the approval of the bankruptcy court, Derek A. Henderson and 

Wells Marble & Hurst, PLLC represented CHFS. Id.; see 11 U.S.C. § 327.

1 The parties have made it difficult to construct an accurate factual and procedural 

history by omitting record citations, including incorrect record citations, and making 

slightly incorrect factual assertions. We remind counsel of their duty to support “[e]very 

assertion in briefs regarding matter in the record . . . by a reference to the page number of 

the original record.” 5th Cir. R. 28.2.2; see also Fed. R. App. P. 28(a)(6), (b).

2 The bankruptcy court’s opinion notes that the two entities tried to characterize 

themselves as a single entity called the “Edwards Entities.” “The advantage of this tactic 

is the suggestion that there is only a single creditor in the Bankruptcy Case.” But Edwards 

Family and Beher are, in fact, distinct, with the former being “a limited partnership formed 

under the laws of Delaware” and the latter being a “trust formed under Bermuda law.”

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As counsel for CHFS, Henderson and Wells Marble initiated a series 

of adversary proceedings against Edwards Family and Beher between August 

2012 and November 2013 challenging the priority of certain claims. 

Meanwhile, Henderson and Wells Marble proposed a reorganization plan on 

January 29, 2013. 2015 WL 8113699, at *9.

Both Edwards Family and Beher objected to the plan and moved to 

appoint a trustee and to convert the bankruptcy to a Chapter 7 case. Id. The 

bankruptcy court held confirmation of the proposed reorganization plan in 

abeyance. Id. As a result, Henderson and Wells Marble responded to these 

motions as they continued to pursue the adversary proceedings. Id. Wells 

Marble withdrew as counsel for CHFS on November 13, 2013.

As the bankruptcy case proceeded, CHFS’s president transferred “all 

but approximately $7,500.00 from” CHFS’s account—over $9 million in 

cash—to a Panamanian account. In re Cmty. Home Fin. Servs., 571 B.R. 714, 

718 (Bankr. S.D. Miss. 2017). CHFS’s president then fled the country and 

“set up a ‘rogue’ operation of CHFS’s business” out of new branch offices 

in Panama and Costa Rica. Id.

On December 20, 2013, Henderson filed a disclosure informing the 

bankruptcy court that CHFS’s president had transferred those funds and 

moved CHFS’s principal place of business from Jackson, Mississippi to 

Panama. Id. Three days after the disclosure, the bankruptcy court appointed 

an emergency trustee, and then it appointed Kristina Johnson as Trustee on 

January 21, 2014. Id. at 719. Henderson withdrew as counsel on March 6, 

2014.

Both Henderson and Wells Marble sought fees for the services they 

performed in connection with the adversary proceedings before Johnson was 

appointed as Trustee. Wells Marble sought fees for its services from May 1, 

2013 through October 31, 2013, approximately two weeks before Wells 

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Marble withdrew as counsel. Henderson sought fees for his services from 

September 2, 2013 through December 28, 2013, approximately three weeks 

before Johnson was appointed as Trustee.

The bankruptcy court awarded fees to both Henderson and Wells 

Marble in December 2015 and January 2016. Edwards Family and Beher 

timely appealed the awards. In September of 2017, the district court affirmed 

in part but remanded for further findings of fact regarding the fees awarded 

for “commencing and then litigating certain Adversary Proceedings in the 

bankruptcy matter.”

On February 27, 2018, the bankruptcy court once again awarded fees 

to Henderson and Wells Marble in connection with the adversary 

proceedings. The bankruptcy court concluded that those services “were 

necessary to the administration of the bankruptcy case and reasonably likely 

to benefit the bankruptcy estate.” The bankruptcy court emphasized that 

the adversary proceedings were necessary “to create a clear path for an exit 

strategy in the Bankruptcy Case” and to “reduc[e] and reclassif[y]” certain 

claims.”

Edwards Family and Beher filed a notice of appeal to the district court 

on March 13, 2018.3

 On August 5, 2020, the district court vacated the fee 

award. In the district court’s view, Henderson and Wells Marble’s decision 

to pursue adversary proceedings “was not a good gamble.”

3 Consolidated appeals of the bankruptcy court’s rulings on the merits of the 

adversary proceedings were also pending in the district court. In response to a petition for 

writ of mandamus, we advised the district court to rule on those consolidated appeals

within 60 days. In re Johnson, Trustee for Cmty. Home Fin. Servs. Corp., 814 F. App’x 881 

(5th Cir. 2020). The district court’s ruling on the fee award at issue in this case came two 

days after our order on the petition for writ of mandamus.

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Henderson, Wells Marble, and the Trustee appealed, arguing that the 

district court improperly evaluated the benefit of the adversary proceedings 

retrospectively. Edwards Family and Beher moved to dismiss the Trustee 

for lack of standing. We carried that motion with the case.

Henderson and Wells Marble then settled their fee dispute with 

Edwards Family and Beher, and those parties jointly moved to dismiss 

Henderson and Wells Marble from the appeal on October 13, 2020. We 

granted that motion on October 14, 2020. The only remaining appellant is 

the Trustee.

With the Henderson and Wells Marble fee disputes settled, Edwards 

Family and Beher moved to dismiss the appeal as moot. The Trustee 

opposed the motion. In the Trustee’s view, the case remains live because the 

Trustee has an ongoing duty throughout the pendency of a bankruptcy 

proceeding to represent the interests of the bankruptcy estate in the award of 

fees. In the alternative, the Trustee moved to vacate the district court’s 

judgment if we should dismiss this appeal as moot. We carried those motions 

with the case.

II.

In reviewing a district court’s ruling on a bankruptcy court’s fee 

award, we review the bankruptcy court’s decision using the same standard of 

review as the district court. Okla. State Treasurer v. Linn Operating, Inc. (In 

re Linn Energy, L.L.C.), 927 F.3d 862, 866 (5th Cir. 2019). “We therefore 

review the bankruptcy court’s award of attorneys’ fees for abuse of 

discretion.” In re Cahill, 428 F.3d 536, 539 (5th Cir. 2005). “[A]s a second 

review court,” we review “the bankruptcy court’s conclusions of law de 

novo and its findings of fact for clear error.” 927 F.3d at 866 (quoting 

Viegelahn v. Lopez (In re Lopez), 897 F.3d 663, 668 (5th Cir. 2018)).

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III.

Edwards Family and Beher contend that their settlement with 

Henderson and Wells Marble mooted this appeal. The Trustee, however, 

asserts that the case remains live notwithstanding the settlement. For the 

reasons stated herein, we agree with the Trustee.

“Article III’s ‘case or controversy’ requirement permits federal 

courts to adjudicate only live disputes—a party must retain a ‘legally 

cognizable interest in the outcome’ of an issue, or its resolution is moot.” 

Hinkley v. Envoy Air, Inc., 968 F.3d 544, 548 (5th Cir. 2020) (quoting 

Campanioni v. Barr, 962 F.2d 461, 464 (5th Cir. 1992)). “A controversy 

becomes moot where, as a result of intervening circumstances, there are no 

longer adverse parties with sufficient legal interest to maintain the 

litigation.” Scruggs v. Lowman (In re Scruggs), 392 F.3d 124, 128 (5th Cir. 

2004) (quoting Chevron U.S.A., Inc. v. Traillour Oil Co., 987 F.2d 1138, 1153 

(5th Cir. 1993)).

In the view of Edwards Family and Beher, there is no longer any party 

with sufficient legal interest in this case because the Trustee did not have a 

legal interest to begin with:

The dispute regarding the fee awards has now been fully 

resolved by compromise between the only parties with a legally 

cognizable interest in the dispute: Henderson and Wells 

Marble on one side (the parties who applied for fees), and the 

Edwards Entities on the other (the creditors who objected to 

the fees). . . . The Trustee has filed a principal brief on the 

merits, but the Trustee always lacked a direct interest in the 

judgment, and the underlying dispute is now moot.

Thus, Edwards Family and Beher effectively collapse the mootness question 

with the question of the Trustee’s standing. Edwards Family and Beher, 

however, have an incorrect understanding of trustee standing.

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Edwards Family and Beher point to the test for standing for interested 

parties in a bankruptcy: “a bankruptcy appellant must . . . show that he was 

‘directly and adversely affected pecuniarily by the order of the bankruptcy 

court.’” Furlough v. Cage (In re Technicool Sys., Inc.), 896 F.3d 382, 385 (5th 

Cir. 2018) (quoting Fortune Nat. Res. Corp. v. U.S. Dep’t of Interior, 806 F.3d 

363, 365 (5th Cir. 2015)). A bankruptcy trustee, however, is distinct from all 

other bankruptcy parties because the trustee is responsible for the 

administration of the bankruptcy estate.

The Fourth Circuit has noted that trustees can never establish that 

they were pecuniarily affected by a bankruptcy order because trustees “never 

have pecuniary interests in cases.” U.S. Trustee for the W. Dist. of Va. (In re 

Clark), 927 F.2d 793, 795 (4th Cir. 1991) (involving a United States trustee); 

see also Richman v. First Woman’s Bank (In re Richman), 104 F.3d 654, 657 

(4th Cir. 1997) (determining that the bankruptcy trustee had standing as “the 

representative of the bankrupt’s estate”). Trustee standing does not arise 

from the trustee’s pecuniary interest, but rather from the trustee’s “official 

duty to enforce the bankruptcy law in the public interest.” In re Clark, 927 

F.2d at 796 (citing Sec. & Exch. Comm’n v. U.S. Realty & Improvement Co., 

310 U.S. 434, 460 (1940)).

The First, Sixth, and Ninth Circuits have also recognized the 

inadequacy of a pecuniary-interest test for trustee standing. See In re Plaza 

de Diego Shopping Ctr., Inc., 911 F.2d 820, 824 (1st Cir. 1990) (citing

Morgenstern v. Revco D.S., Inc. (In re Revco), 898 F.2d 498, 499 (6th Cir. 

1990)) (determining that the United States trustee had standing without a 

pecuniary interest); Moneymaker v. CoBen (In re Eisen), 31 F.3d 1447, 1451 n.2 

(9th Cir. 1994) (quoting Hancock Bank v. Jefferson, 73 B.R. 183, 185 (Bankr. 

S.D. Miss. 1986)) (“Once appointed a trustee, the debtor’s assets and claims 

pass to the trustee, making the trustee ‘the proper party in interest . . . .’”).

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Our own cases have implicitly recognized that trustee standing does 

not depend on a pecuniary interest. For example, we have previously held, 

in a Chapter 7 case, that “[i]n the bankruptcy context, the bankruptcy trustee 

is the real party in interest with respect to claims falling within the bankruptcy 

estate.” United States ex rel. Spicer v. Westbrook, 751 F.3d 354, 362 (5th Cir. 

2014). A trustee’s standing comes from the trustee’s duties to administer 

the bankruptcy estate, not from any pecuniary interest in the bankruptcy. See 

id.

In light of the explicit statements from our sister circuits and the 

implicit guidance from our own caselaw, we hold that the Trustee in this case 

has standing and this case is not moot because the payment of fees to 

Henderson and Wells Marble directly affects the administration of the 

bankruptcy estate. Even though Henderson and Wells Marble have settled 

their fee dispute with Edwards Family and Beher, the Trustee remains tasked 

with ensuring that only proper payments are made from the bankruptcy 

estate. It is immaterial whether the Trustee or Edwards Family and Beher 

will ultimately prevail on this appeal. See Texas v. United States, 945 F.3d 355, 

383 (5th Cir. 2019) (“[C]ourts cannot fuse the standing inquiry into the 

merits.”). Rather, the district court order presents an issue of the 

administration of the estate, meaning the Trustee has a “sufficient legal 

interest to maintain the litigation,” such that this appeal is not moot. In re 

Scruggs, 392 F.3d at 12.

IV.

In In re Woerner, we held that “if a fee applicant establishes that its 

services were ‘necessary to the administration’ of a bankruptcy case or 

‘reasonably likely to benefit’the bankruptcy estate ‘at the time at which [they 

were] rendered,’ then the services are compensable.” Barron & Newburger, 

P.C. v. Texas Skyline, Ltd. (In re Woerner), 783 F.3d 266, 276 (5th Cir. 2015) 

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(internal citation omitted) (quoting 11 U.S.C. § 330(a)(3)(C), (4)(A)). In 

awarding fees, hindsight is irrelevant; retrospect is irrelevant; “material 

benefit to the bankruptcy estate” is irrelevant. Id. at 273–74. “What matters 

is that, prospectively, the choice to pursue a course of action was 

reasonable.” Id. at 274.

Despite clear Fifth Circuit law that the services must be reasonable at 

the time they were rendered, the district court vacated the fee awards to 

Henderson and Wells Marble for their services related to the adversary 

proceedings. The district court determined that the decision to pursue 

adversary proceedings “was an expensive course of action from the outset. 

. . . [I]t would have been more cost-effective, faster, and better for the estate 

to pay off the few unsecured creditors rather than hire professionals to litigate 

Adversary Proceedings quibbling about their priority.” “This was not a good 

gamble.”

The district court was wrong to vacate the bankruptcy court award 

based on its own retrospective assessment of the propriety of the adversary 

proceedings without giving the “the deference that is the hallmark of abuseof-discretion review.” Gen. Elec. Co. v. Joiner, 522 U.S. 136, 143 (1997). The 

district court should have looked at the reasonableness of pursuing the 

adversary proceedings from the time Henderson and Wells Marble provided 

their services. See, e.g., In re Raygoza, 556 B.R. 813, 824 (Bankr. S.D. Tex. 

2016); 1 Bankruptcy Law Manual § 4:38 n.10 (5th ed. 2020). Viewed 

prospectively, pursuit of the adversary proceedings was “necessary to the 

administration of the case” to resolve otherwise unsettled disputes about the 

priority of claims. See 11 U.S.C. § 330(a)(1)(A), (a)(3), (a)(4)(A)(ii).

* * *

We REVERSE the judgment of the district court and REMAND for 

the district court to reinstate the bankruptcy court’s fee award. Accordingly, 

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the appellees’ motion to dismiss the Trustee from the appeal for lack of 

standing is DENIED, and the appellees’ motion to dismiss the appeal as 

moot is DENIED. The appellant’s alternative motion to vacate the 

judgment of the district court is DENIED AS MOOT.

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