# U ni te d S ta te s B an kr up tc y A pp el la te P an el For the Eig hth Circu it

__ __ __ __ __ __ __ __ __ __ __ __ __ _
No. 1 6- 60 31

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I n r e : S t e p h e n D

. M c C o r

m i c k
, a l s o k n o w n a s S t e v e D

. M c C o r

m i c k ; K a r e n A

. M c C o r

m i c k

ll ll ll ll ll ll ll ll ll ll l Deb to r s

----- ----- ----- ----- ----- -----

St ep he n D. Mc Co rm ic k; Karen A. McCo rm ic k

ll ll ll ll ll ll ll ll ll ll l Deb to rs - App el la nt s

v.

St ari on Fin an ci al

ll ll ll ll ll ll ll ll ll ll l

Mov an t - Ap

pe ll ee

__ __ __ __ __ __ App eal fro m

Uni te d S ta te s B an kr up tc y Co ur t fo r th e Dis tri ct of No rth Dako ta - Farg o

__ __ __ __ __ __
Su bm it te d: Apri l 2 6, 2 01 7 Fil ed : M ay

18 , 20 17

__ __ __ __ __ __
Befo re SALADINO, Ch ie f Ju dg e, FEDERMAN an d S HODEEN, Ban kr up tc y Ju dg es

.

__ __ __ __ __ __
SALADINO, Chi ef J ud ge

.On Mar ch 10
, 20 14
, th e ba nk ru pt cy co u r t de ni ed St ari on Fi na nc ia l’s 1 (“ St ari on ”) m ot io n to c o mp el pa y m en t of St ari on ’s at to rn ey s’ fees an d ex pe ns es in

acco rd an ce wit h th e co nf irmed Ch ap te r 11 pl an of reo rg an iz at io n an d gr an t e d th e Deb to rs ’ m ot io n to di sa ll ow Stari on ’s at to rn ey s’ fees an d co st s. St ari on ap pe al ed to th is pa ne l, an d we rev ers ed th e de ci si on of th e ba nk ru pt cy co ur t an d rem an de d th e

cas e fo r co ns id erat io n of th e is s u e s as to ti m el in es s an d reas on ab le ne ss of th e
req ue st ed fees an d c os ts

. 2

The Deb to rs S t ep he n D. an d Karen A. McC or m ic k no w ap pe al fro m th e ba nk ru pt cy co u r t ’s or de r gr an ti ng in pa rt an d de nyin g in pa rt St ari on ’s m ot io n to

co m pe l pa y m en t of fees un de r th e co nf irmed pl an of reo rg an iz at io n, an d gr an ti ng in

p a r t an d de nyin g in pa rt th e Deb to rs ’ m ot io n to di sa ll ow at to rn ey s’ fees an d c o s t s cl ai m ed by St ari on

. W e ha ve juri sd ic ti on of th is ap pe al fro m en try of th e ba nk ru pt cy

co ur t’s fin al or de r pu rs ua nt to 28 U.S.C. § 15 8( b)

. Fo r th e reas on s se t fo rth be lo w, we affi rm

.

BACKGROUND

Pri or to ba nk ru pt cy fil in g, th e Deb to rs were en ga ge d in a va rie ty of bu si ne ss es , i n c l u d in g co ns tru ct io n, real es ta te in ve st m en t, an d de ve lo pm en t. The Deb to r s
op erat ed th ei r bu si ne ss es in di vi du al ly an d th ro ug h a nu m be r of li m it ed li ab il it y

co m pa ni es th at th ey own ed an d co nt ro ll ed
, in cl ud in g Mi st y W at ers , LLC; St ev e an d
Karen McC or m ic k, LLC; an d C on st ru ct io n F in an ci al Serv ic es , LLC.

The Hon or ab le Sh on K. Has ti ng s, Ch ie f Ju dg e, Uni te d St at es Ban kr up tc y 1 Co ur t fo r th e Dis tri ct of No rth Dako ta

.
St ar io n Fin

. v. McCo rmi ck (In re McCo rmi ck)
, 52 3 B.R. 15 1 (B.A.P. 8t h Ci r. 2 20 14 ). St ari on ap pe al ed th at de ci si on to th e Eig ht h Ci rcu it Co ur t of App eal s, whi ch di sm is se d th e ap pe al as in te rlo cu to ry a s t he is su es on rem an d ha d no t y et be en de ci de d b y

th e b an kr up tc y

co ur t.

-2

-Ove r th e co ur se of se ve ral y ears th e Deb to rs , th ei r c o mp a n i es , an d St ari on

en te red in to a se rie s of lo an tra ns act io ns th at in cl ud ed ex ecu ti on by th e Deb to rs an d
th ei r co m pa ni es of a nu m

be r of lo an do cu m en ts , in cl ud in g pr om is so ry no te s se cu red by m or tg ag es en cu m

be rin g va rio us pa rcel s of real es ta te

. The Deb to rs al so ex ecu te d

pe rs on al gu aran te es of t he ob li ga ti on s owed to St ari on by th e en ti ti es own ed by the
Deb to rs

.

Defau lt s un de r th e lo an s res ul te d in a wor ko ut ag reem en t da te d Ju ly 26
, 20 12
,

am on g St ari on , th e Deb to rs , an d th ei r co m pa ni es

. As pa rt of th at ag reem en t, St ari on
ag reed to fo rb ear fro m ex erci si ng it s de fau lt rem ed ie s un de r cert ai n co nd it io ns

. The
Deb to rs an d th ei r co m

pa ni es reaf

fir m ed th ei r ob li ga ti on s to St ari on u n d e r t he lo an do cu m en ts an d th e Deb to rs an d Mi st y W at ers , LLC ex ecu te d a ne w m or t g a g e

en cu m be rin g a de ve lo pm en t cal le d Mi st y W at ers fo r up to $7 m il li on

. The Deb to rs 3
al so ex ecu te d an d de li ve red co nf es si on s of jud gm en t, ap pa r en tl y to se cu re th ei r
gu aran ty ob li ga ti on s. The wor ko ut ag reem en t pr ov id ed th a t th e co nf es si on s of jud gm en t co ul d be im medi at el y fil ed wit h th e cl erk of th e co ur t an d tra ns cri be d to

su ch ot he r juri sd ic ti on s as Sta rio n d es ire d. Th e jud gm en ts were en te red on Ju ly 27,
20 12 , i n Bu rle ig h C ou nt y , No rth Dak ot a, an d St ari on pr om pt ly t ran sc rib ed th em to

ot he r co un ti es in Nor th Dak ot a, th ereb y crea ti ng jud gm en t li en s in co un ti es whe re th e Deb to rs own ed real est at e.

The Deb to rs fil ed a vo lu nt ary Ch ap te r 11 pe ti ti on on Aug us t 29
, 20 12
, an d on Aug us t 9, 20 13
, fil ed a se co nd a men d e d pl an of reo rg an iz at io n. St ari on fil ed it s ob jecti on to co nf

irmatio n ra is in g a nu m

be r of ob jecti on s, inc lu di ng : “ St ari on , as a n

ov ers ecu red cred it or is en ti tl ed to it s at to rn ey ’s [f]ees

. The Pl an do es no t pr ov id e fo r
pa y m en t [o f] Stari on Fin an ci al ’s att or ne y ’s fees cla im .”

St ari on al read y ha d m or tg a g e s on th is pr op ert y an d it ap pe ars th is ne w 3

m or tg ag e was to cro ss -co ll at eral iz e al l of th e de b t o w e d t o St ari on wit h th e Mi st y W at ers pro pe rty.

-3

-St ari on , th e Deb to rs , an d th ei r co m pa ni es se tt le d St ari on ’s pl an ob jecti on wit h

an ad de nd um to th e Deb to rs ’ se co nd am en de d p la n da te d Sep te m be r 10
, 20 13 (“ St ari on Adde ndum ”). The St ari on Add en du m id en ti fie d al l of th e ob li ga ti on s owe d 4

to St ari on by th e Deb to rs an d th ei r co m pa ni es , an d ag reed th at th e to ta l in de bt ed ne ss

owe d to St ari on as of Ju ly 1 , 2 01 3, in cl ud ed pr in ci pa l of $6 ,2 7 2
, 1 1 6.5 6, in te res t of $3 14 ,24 2.8 6, an d in te res t accr ua l at a da il y rat e of $1 ,01 9.2 3. The pa rti es ag reed up on
t h e p la n tre at m en t an d rep ay m en t te rm s fo r th at in de bt ed ne ss

. Am on g ot he r
pr ov is io ns , th e St ari on Add en du m st at ed :

Co ll ect io n Co st s. Deb to rs ag ree to pa y St ari on ’s al lo wab le
at to rn ey ’s f

ees an d co st s as so ci at ed wit h bo th Deb to rs ’ b a n k ru pt cy pr oc eed in gs in cl ud in g bu t no t li m it ed to

reas on ab le at to rn ey s’ fees
, co ns ul ti ng , ap pr ai sa l, fil in g fees
, la te fees
, et c. (co ll ect iv el y refe rred to as “ Fees ”)
t h r ou gh th e Pl an

. The pr oc ed ur e fo r al lo wan ce of su ch
at to rn ey s’ fees an d c os ts wil l b e as pro vi de d i n t he Pla n.

On Sep te m

be r 13
, 20 13
, th e Deb to rs ’ pl an , in co rp or at in g th e St ari on Add en du m , was co nf

irmed by th e ba nk ru pt cy co ur t. Sect io n 8.0 1( c) of th e co nf irmed pl an de fin es “ All owa bl e Att or ne y s’ Fees an d Cos ts ” as “ a cl ai m ag ai ns t th e de bt or s fo r an ov ers ecu red cred it or ’s at to rn ey ’s fees an d co st s in cu rred in co nn ect io n wit h th e cred it or ’s s e c ur ed cl ai m .” Tha t se ct io n go es on to de sc rib e th e pr oc ed ur e fo r al lo wan ce o f th e fee s an d c os ts as f ol lo ws:

Any All owa bl e Fees an d Co st s m us t be ap pr ov ed by Deb to rs be fo re pa y m en t is di sb ur se d. At le as t te n da y s pr io r to th e Effec ti ve Date of th e Pl an , t he cred it or an d/ or it s co un se l, s ha ll su bm it an it em iz ed st at em en t (ref le ct in g da te , a de sc rip ti on o f t h e se rv ic es , in crem en ts of ti m e sp en t, an d ho ur ly rat e be in g ch arg ed ), to t h e Deb to rs an d

The Deb to rs al so fil ed a Ch ap te r 11 cas e fo r on e o f t h e ir co m pa ni es , Mi st y 4 W at ers , LLC. The Add en du m was i nt en de d t o re so lv e p la n t reat m en t i n b ot h cas es

.

-4

-th ei r co un se l, fo r ap pr ov al

. If th e pa rti es can no t co m e to an ag reem en t or res ol ut io n as to th e am ou nt of th e All owa bl e Att or ne y s’ Fees an d Co st s to be pa id
, th e m at te r sh al l be de te rm in ed by th e Ban kr up t c y Co ur t, up on no ti ce an d he ari ng

. No pa y m en t of All owa bl e Att or ne y s’ Fees an d C os ts wil l be du e un ti l ei th er th e ag reem en t of th e pa rti e s

or a fin al de te rm in at io n by th e Ban kr up tc y Co ur t th at th os e

am ou nt s ar e d ue un de r th e Pl an

.

On Octo be r 3, 20 13
, St ari on su bm it te d an it em iz ed st at em en t to th e Deb to rs fo r

va rio us co st s in cl ud in g in te res t, la te fees
, real es ta te ta xe s, an d ap pr ai sa l an d

en gi ne eri ng fees

. A few da y s la te r on Octo be r 7, 20 13
, St ari on su bm it te d an up da te d

st at em en t th at in cl ud ed it s at t or ne y s’ f ees . Ta ki ng th e po si ti on th at St ari on was no t

en ti tl ed to th es e am ou nt s ba se d up on th e pl an or 11 U.S.C. § 5 0 6 ( b )
, t h e Deb to rs refu se d to pa y th e am ou nt s req u e st ed fo r ap pr ai sa l an d en gi ne eri ng co st s, an d th e
at to rn ey s’ fees an d e xp en se s.

St ari on fil ed a m ot io n re qu es ti ng th e b an kr up tc y co ur t t o c om pe l p ay m en t o f
it s fees in th e am ou nt of $1 25 ,01 4.6 4 ba se d up on th e pl an an d 11 U.S.C. § 50 6( b)

. On
th e sa m e da y , th e Deb to rs fil ed a m ot io n se ek in g d i s a l l o w an ce of th e fee req ue st

co nt en di ng th at th ere is no ag r e e men t fo r th e pa y m en t of fees ; th e fee req ue st was

un ti m el y ; an d t he fees were n ot reas on ab le

.

BANKRUPTCY

COURT’S

FIRST DECIS

ION

On Mar ch 10
, 20 14
, th e ba nk ru pt cy co ur t is su ed it s or de r de n yi n g St ari on ’s

m ot io n to co m

pe l pa y m en t of at to rn ey s’ fees a n d co st s, an d gr an ti ng th e Deb to rs ’

m ot io n se ek in g di sa ll owa nc e of St ari on ’s req ue st

. The co ur t be ga n i t s a n al y si s by

no ti ng th e te rm s of th e St ari on Add en du m an d th e pl an , an d de te rm i n e d t h a t “ bo th
Deb to rs an d St ari on ag ree th at th e Co ur t’s an al y si s reg ard in g St ari on ’s el ig ib il it y to

-5

-reco ve r at to rn ey fees is co nf in ed to li m it s ou tl in ed in se ct io n 50 6 of th e Ban kr up tc y Co de .”

Si nc e § 50 6 al lo ws an ov ers ecu red cred it or to reco ve r reas on ab le fees an d co st s
pr ov id ed fo r un de r th e ag reem en t un de r whi ch th e cl ai m aro se , th e ba nk ru pt cy co ur t fir st lo o k e d a t whe th er St ari on ’s cl ai m was ov ers ecu red

. The co ur t no te d th at

“ Deb to rs do no t di sp ut e St ari on ’s cl ai m th at it is ov ers ecu red

. In fact
, in th ei r br ie fs
, Deb to rs refe r to St ari on ’s cl ai m as ov ers ecu red .” App aren tl y , St ari on wou ld no t ha ve 5
be en ov ers ecu red ba se d so le ly on it s m or tg ag e li en s, bu t beca m e ov ers ecu red whe n th e co nf es si on s of jud gm en t were en te red an d tra ns cri be d to ot he r co un ti es – th ereb y

crea ti ng li en s o n a dd it io na l re al est at e o wne d b y th e Deb to rs

.

Nex t, th e ba nk ru pt cy co ur t lo ok ed at whe th er fees an d co st s were al lo wed

un de r an ag reem en t un de r whi ch th e cl ai m aro se as req ui r ed by § 50 6 of th e Ban kr up tc y Co de

. It hel d th at “ St ari on ’s jud ic ia l lie ns ‘aros e’ un de r th e Ju dg m en ts , whi ch whe n en te red by th e cl erk an d reco rd ed un de r Nor th Dak ot a la w crea te d li en s

on real pr op ert y

. N.D.C.C. § 28 -2 0- 13

. Co ns eq ue nt ly, th e do cu m en ts th is Co ur t lo ok s
to fo r an ag reem en t gi vi ng ris e to th e cl ai m fo r at to rn ey f e e s a n d c o st s are th e Ju dg m en ts .” Rel y in g up on a Nor th Dak ot a st at ut e th at di sf av or s pa y m en t of at to rn ey fees
, th e ba nk ru pt cy co ur t co nc lu de d th at th e ab se nc e of “ a cl au se or se nt en ce [in th e jud gm en t] en ti tl in g St ari on to co ll ect at to rn ey fees ” was fat al to St ari on ’s req ue st fo r
pa y m en t. As a res ul t of th at de ci si on , th e ba nk ru pt cy co ur t di d no t reac h th e ad di ti on al is su es rai se d by th e D e b t o r s reg ard in g th e ti m el in es s of th e fees req ue st

an d th e reas on ab le ne ss of th e fees

. Acco rd in gl y , St ari on ’s m ot io n to co m pe l pa y m en t

was de ni ed an d th e Deb to rs ’ m ot io n di sa ll owi ng th e fees was gr an te d. St ari on
ap pe al ed th e b an kr

up tc y co ur t’s ru li ng

.

Bas ed up on fo ot no te 9 in th e ba nk ru pt cy co ur t’s or de r, th is el em en t is de em ed 5
to ha ve be en co nc ed ed by the pa rti es

.

-6

-FIRST B.A.P. DECISION

On ap pe al
, th e Deb to rs ag ai n co nc ed ed th at St ari on is an ov ers ecu red cred it or , bu t arg ue d th at it is ov ers ecu red on ly be cau se of th e jud gm en t li en s it ob ta in ed by
vi rtu e of th e co nf

es si on s of jud gm en t on ot he r pr o p ert y of th e Deb to rs in va rio us

co un ti es in Nor th Dak ot a. Bec au se th e jud gm en ts do no t st at e an y t h i n g a b o ut

at to rn ey s’ fees
, th e Deb to rs as se rte d th at St ari on ha d no rig ht to f e es si nc e it was

ov ers ecu red on ly by

vi rtu e o f th e jud gm en ts

.

In ou r op in io n of Decem

be r 24
, 20 14
, we ag reed wit h St ari on th at in ad di ti on
to th e co nf

es si on s o f jud gm en t, i ts cla im als o “ aro se ” u nd er t he va rio us pro m is so ry

no te s, m or tg ag es , lo an ag reem en ts , wor ko u t a g r e em en t an d ot he r lo an -rel at ed
do cu m en ts

. All of th os e do cu m en ts were st il l in effe ct an d it is un di sp ut ed th at th ey

co nt ai ne d pr ov is io ns fo r co ll ect io n of at to rn ey s’ fees an d ex pe ns es

. W e reject ed th e Deb to rs ’ arg um en t th at we sh ou ld lo ok on ly to th e jud gm en ts as th e ag reem en ts un de r whi ch th e cl ai m aro se

. W e rev ers ed th e de ci si on of t h e b an kr up tc y co ur t an d

rem an de d fo r fu rth er pr oc eed in gs as to th e rem ai ni ng is su es – whe th er th e req ue st fo r fees was t im el y

an d wh et he r th e fee s wer e rea so na bl e.

SEC OND BANKRUPTCY COURT DECISI

ON

On Sep te m

be r 20
, 20 16
, th e ba nk ru pt cy co ur t is su ed it s or de r gr an ti ng in pa rt

an d d en y in g i n p art St ari on ’s m ot io n t o c om pe l an d g ran ti ng in pa rt a nd de nyin g i n
pa rt th e Deb to rs ’ m ot io n to di sa ll o w a t t o rn ey s’ fees

. W it h reg ard to ti m el in es s, th e

co ur t n ot ed th at St ari on ack no wled ge d i ts att or ne y s’ fee s ub m is si on was t hr ee d ay s la te un de r th e pr oc ed ur e s e t f o r t h in th e co nf

irmed pl an

. The co ur t lo ok ed to st at e

co nt ract la w to de te rm in e whe th er th e la te su bm is si on was fat al to St ari on ’s rig ht to

co ll ect fees

. The co ur t fo un d th at th e un ti m el y su bm is si on was no t a m at eri al br each

an d wo ul d n ot ba r St ari on fro m co ll ect in g i ts fees

.

-7

-The ba nk ru pt cy co ur t th en en ga ge d in a rev ie w of th e r e as on ab le ne ss of th e

fees in cu rred by Stari on . After an an al y si s o f th e ti m e en tri es an d ex pe rt te st im on y , th e ba nk ru pt cy co ur t award ed St ari on at to rn ey s’ fees a n d ex pe ns es in th e red uc ed

am ou nt of $ 83 ,12 2.9 5, an d d is al lo wed fees in th e am ou nt $2 7,7 54 .00 . Th e Deb to rs fil ed th is ap pe al

.

ST ANDARD OF

REVIEW

A ba nk ru pt cy c ou rt’s fin di ng s of fact are rev ie wed fo r cl ear erro r an d it s

co nc lu si on s of la w are rev ie wed de no vo

. Fir st Na t’l Ban k v. Pon to w , 11 1 F.3 d 60 4,
60 9 (8 th Ci r. 19 97 ) (q uo ti ng Mil le r v. Far mer s Home Admi n. (In re Mil le r)
, 16 F.3 d
24 0, 24 2- 43 (8 th Ci r. 19 94 )). In th is cas e we rev ie w de no vo th e ba nk ru pt cy co ur t’s
in te rp ret at io n an d ap pl ic at io n of 11 U.S.C. § 50 6( b)

. W eg ne r v. Gru ne wa ld t , 82 1 F.3 d
13 17
, 13 20 (8 th Ci r. 19 87 ); W hi te v. Co or

s Dis tr ib ut in g, Co

. (In re W hi te )
, 26 0 B.R.
87 0, 87 4 (B.A.P. 8t h Ci r. 20 01 ). Fact u a l d e te rm in at io ns co nc ern in g an award of

at to rn ey ’s fees are r e vi ewed un de r a cl earl y erro ne ou s st an da rd
, whi le th e co ur t’s
d e t e r mina ti on of th e am ou nt of th e fee award is rev ie wed fo r ab us e of di sc ret i o n

. Li tt o n M ic ro wa ve Co ok in g Pro d. v. Levi to n Mfg

. Co

. , 15 F.3 d 79 0, 79 5 (8 th Ci r. 19 94 ). The ba nk ru pt cy co ur t’s fin di ng as to th e m at eri al te rm s of th e pl an was on e of
fact an d th us su bjec t to th e cl earl y erro ne ou s st an da rd of rev ie w. For d v. Fir st Mun

. Lea si ng Co rp

. , 83 8 F .2d 99 4, 9 97 (8t h C ir. 1 98 8)

.

DIS CUS SI ON

The Deb to rs ra i s e t hr ee is su es on ap pe al

. Fi rs t, th e Deb to rs arg ue th at th e ba nk ru pt cy co ur t’s fir st or de r da te d Mar ch 10
, 20 14
, was co rrec t an d sh ou ld no t ha ve be en rev ers ed by th is pa ne l. Seco nd
, th e Deb to rs arg ue th at in it s se co nd or de r da te d
S e pt em be r 20
, 20 16
, th e ba nk ru pt cy co ur t erre d in de te rm in in g th at St ari on ’s

un ti m el y su bm is si o n o f a r e q ue st fo r fees was no t a m at eri al br each of th e pl an

.

-8

-Fi na ll y , th e D e b t o r s a r g u e th at al l of St ari on ’s fees sh ou ld be di sa ll owe d du e to

eg reg io us bi ll in g p ract ic es by its att or ne y s.

La w o f t he Ca se

.

W it h it s fir st is su e on ap pe al
, t h e D e b t o rs are tryin g to rev is it th e is su es we de ci de d whe n th is cas e fir st ap pe ared be f or e th is pa ne l. Fo r it s pa rt, St ari on arg ue s th at th is pa ne l’s fir st de ci si on is “ la w of th e cas e” an d sh ou ld no t be rev is it ed at th is
ti m e. W e ag ree.

Und er th e la w-o f-t he -cas e do ct rin e, “ ‘a co ur t sh ou ld n o t

reo pe n is su es de ci de d in earl ie r s t a ge s of th e sa m e l it ig at io n.’” In re Ray no r , 61 7 F.3 d 10 65
, 10 6 8 ( 8 t h Ci r.20 10 ) (q uo ti ng Ago st in i v. Felt on , 5 21 U.S. 2 03 , 2 36
, 11 7 S. Ct

. 19 97
, 13 8 L. Ed. 2d 39 1 (1 99 7) ). Thi s po li cy of de fere nc e “ pr ev en ts th e rel it ig at io n of a se t t l e d i ss ue in a

cas e an d req ui res co ur ts to ad he re to de ci s i on s m ad e in

ear l i e r pr oc eed in gs in or de r to en su re un ifo rm it y of de ci si on s, pr ot ect th e ex pe ct at io ns of th e p art ie s, an d
pr om ot e jud ic ia l eco no m y .” Id

. (in te rn al qu ot at io n m ark s

om it te d)

. . . . “ [T]he do ct rin e do es no t app ly if th e co ur t is

co nv in ced th at [it s pr io r de ci si on ] is cl earl y erro ne ou s an d

wou ld wor k a m an ife st in

jus ti ce.” Pep

pe r v. Uni te d St at es , 56 2 U.S. 47 6, 13 1 S. Ct

. 12 29
, 12 50 –5 1, 17 9 L. Ed. 2d 19 6 (2 01 1) (s eco nd al te rat io n in o r ig in al ) (in te rn al qu ot at io n

m ark s o m it te d)

.

W on g v. W el ls Far go Ban k N.A.
, 78 9 F.3 d 88 9, 89 8 (8 th Ci r.), cer t. de ni ed
, 13 6 S. Ct

. 50 7 (2 01 5)

.

W e are no t c o n v i n c e d th at ou r pr io r de ci si on was cl earl y erro ne ou s or th at it

wou ld wor k a m an ife st in jus ti ce i n t h i s ap pe al

. The Deb to rs ’ arg um en t is
, ag ai n, ba se d on th e th eo ry th at “ St ari on ’s cl ai m of ov ers ecu red st at us was on ly po ss ib le by

-9

-vi rtu e of th e two jud gm en t li en s whi ch aro se by op erat io n of l a w ” an d were no t

“ co ns en su al ,” an d th at th e jud gm en ts di d no t co nt ai n ap pr op ria te la ng ua ge pr ov id in g fo r th e reco v e ry of at to rn ey s’ fees

. Fo r se ve ral reas on s, we be li ev e th e Deb to rs ’ 6

arg um en ts , whi le crea ti ve , ob sc ur e th e rea l i ss ue

.

The Deb to rs ’ po si ti o n i g n o r es th e di sc us si on in ou r pr io r op in io n whe re we

no te d th at th e jud gm en t li e n s w ere on ly on e pi ece of St ari on ’s se cu red cl ai m

. St ari on ’s se cu red cl ai m was m ad e up of no t on ly th e in de bt ed ne ss owe d un de r th e jud gm en ts , bu t al so in de bt ed ne ss owe d on st il l-o ut st an di ng pr om is so ry no te s se cu red by m or tg ag es en cu m

be rin g v ari ou s o th er parc el s of real e st at e. It is un di sp ut ed th at th e no te s, m or tg ag es , wor ko ut ag reem en t, an d ot he r lo an do cu m en ts co m pr is in g th e

se cu red cl ai m of St ari on co nt ai n e d th e ap pr op ria te la ng ua ge reg ard in g reco ve ry of

at to rn ey s’ fees an d co st s un de r § 50 6( b)

. De b t o rs se em to be sa y in g th at whe n a

se cu red c l a i m is m ad e up of m ul ti pl e do cu m en ts an d ag reem en ts , ever y si ng le
do cu m en t an d ag reem en t co ns ti tu ti ng a pa rt of th at cl ai m m u s t co nt ai n ap pr op ria te

at to rn ey fe e la ng ua ge

. Deb to rs ha ve fai le d to ci te to an y su pp or t fo r th at po si ti on

. Here, as di sc us se d in ou r earl ie r op in io n, St a r i o n ’s se cu red cl ai m aro se un de r a

nu m be r of di ffer en t ag reem en ts , m an y of wh ic h c on ta in att or ne y fee p ro vi si on s.

The D e b t or s fu rth er arg ue th at th e ot he r lo an do cu m en ts were so m eh ow

m erg ed in to th e co nf

es si on s of jud gm en t by op erat io n of la w. Aga in
, Deb to rs are si m pl y in co rrec t. The jud gm en ts were no t en te red as pa rt of a su it on th e pr om is so ry

no te s or fo recl os ur e of th e m or tg ag es

. In st ead
, th e co nf es si on s of jud gm en t were jus t

on e el em en t of a m

ul ti -fac et ed wor ko ut ag re e men t th at ad dr es se d se ve ral it em s of
in de bt ed ne ss owe d to St ari on – m uc h m or e th an si m

pl y th e de bt fo r whi ch jud gm en t

Aga in
, Deb to rs ha ve ack no wled ge d th at St ari on is ov ers ecu red an d th at is su e 6 is no t b efo re u s.

-1 0-was co nf

es se d. The co nf

es si on s of jud gm en t cl earl y were no t in te nd ed to ex ti ng ui sh 7
th e se pa rat e, an d co nt in ui ng , no te s an d mo r tg ag es or ot he r ob li ga ti on s un de r th e

wo r k o u t ag reem en t as th os e do cu m en ts rem ai ne d in effe ct , pa y m en t te rm s were

res tru ct ur ed an d ad di ti on al co ll at eral wa s p r o v id ed un de r th e wor ko ut ag reem en t

– al l in ad di ti on to th e co nf

es si on s o f jud gm en t.

Fi na ll y , we a r e no t ev en co nv in ced th at it was ne ces sa ry fo r th e ba nk ru pt cy

co ur t to en ga ge in an an al y si s un de r § 50 6( b)

. We n ot e th at whe n th e Deb to rs fil ed
th ei r se co nd am en de d p l a n , S t a rio n ob jecte d fo r a va rie ty of reas on s, in cl ud in g th e fai lu re to pr o v i d e f

o r t he pa y m en t of St ari on ’s at to rn ey s’ fees as an ov ers ecu red
cred it or

. St ari on ’s pl an ob jecti on s were se tt le d by vi rtu e of a do cu m en t refe rred to as th e “ St ari on Add en du m ” to th e pl an

. Tha t ad de nd um sp eci fic al ly st at es th at “ Deb to rs
ag ree to pa y St ari on ’s al lo wab le at to rn ey ’s fees an d co st s

. . .” an d th at th e pr oc ed ur e fo r do in g so is se t fo rth in th e pl an

. The pl an cl earl y al lo ws St ari on to reco ve r it s fees

. It is di si ng en uo us fo r th e Deb to rs to no w arg ue th at St ari on is no t en ti tl ed to se ek fees

an d co st s un de r th e pl an aft er ag reei ng to do so fo ll owi ng a pl an ob jecti on th at

sp eci fic al ly rai se d th e is su e. It is as if th e Deb t o r s a r e pl ay in g a ga m e of “ go tc ha ”

us in g s em an ti cs aft er g et ti ng Sta rio n t o s et tl e it s p la n o bjec ti on s.

Acco rd in gl y , ou r pr io r op in io n was no t cl earl y erro ne ou s no r d o e s it wor k a

m an ife st in

jus ti ce in th is cas e. Th e refo re, it is la w of th e cas e an d wil l no t be

reo pe ne d.

It ap pe ars th at th e co nf

es si on s of jud gm en t were fo r th e D e b t o r s’ po te nt ia l 7
pe rs on al li ab il it y

on cert ai n g ua ran te ed ob li ga ti on s, b ut th e reco rd is les s t ha n c le ar

on th is po in t.

-1 1-Ti meli ne ss

.

The Deb to rs ’ ne xt arg um e n t is th at th e ba nk ru pt cy co ur t erre d in us in g th e

m at eri al it y fact or s se t fo rth in Res ta te m en t (Sec on d) of Co nt ract s § 24 1 whe n fin di ng th at St ari on ’s un ti m el y su bm is si on of it s at to rn ey s’ fee st at em en t was no t a m at eri al
br each of th e pl an

. The Deb to rs as se rt th at “ th e co rrec t an al y si s th at sh ou ld ha ve be en

un de rta ke n by th e Ban kr up tc y Co ur t was th e ba si c co nt ract in te rp ret at io n an al y si s of
whe th er, un de r th e Pl an , ti m e was of th e es se nc e in req ui rin g St ari on to su bm it th e fee by a da te cert ai n. ” If so , Deb to rs arg ue th at St ari on ’s fai lu re to ab id e by th e de ad li ne is fat al to th e fee cla im reg ard le ss of wh et he r th e b reac h was m at eri al

.

Deb to rs ’ cri ti ci sm of th e ba nk ru pt cy co ur t’s an al y si s is as to ni sh in g si nc e it is

pr eci se ly th e an al y si s Deb to rs arg ue d (in th ei r po st -h eari ng br ie f to th e ba nk ru pt cy

co ur t) th at th e co ur t sh ou ld us e. Deb to rs sp eci fic al ly arg ue d th e m at eri al it y is su e an d
th e Res ta te m en t fact or s to th e b an kr up tc y co ur t – wit ho ut m en ti on of t im e be in g of
th e es se nc e. W e wil l no t no w en te rt a i n an is su e th at was no t fir st rai se d in th e ba nk ru pt cy co ur t. Si ng le to n v. W ul ff
, 42 8 U.S. 10 6, 12 0 (1 97 6) (“ It is th e ge ne ral ru le
, of co ur se , t ha t a f

e d e r a l ap pe ll at e co ur t do es no t co ns id er an is su e no t pa ss ed up on be lo w.”); Rob in so n v. St ewa rd (In re St ewa rd )
, 82 8 F.3 d 67 2, 68 3- 84 (8 th Ci r. 20 16 ).
In an y ev en t, Deb to rs ack no wled ge th at th e co nf irmed pl an do es no t co nt ai n a “ ti m e is of th e e s s e n c e ” c l au se an d we are no t pe rs ua de d th at an y of th e pl an la ng ua ge in di cat es th at ti m e is of t he ess en ce re ga rd in g t he att or ne y fee cl ai m pro ced ur e.

As th e ba nk ru pt cy co ur t no te d, a co nf irmed Ch ap te r 11 pl an “acts li ke a

co nt ract th at bi nd s th e pa rti es th at pa rti ci pa te in th e pl an .” Gen

. Elec

. Ca pi ta l Co rp

.

v. Dia l Bus. Forms

, In c. (In re Dia l Bus. Forms )
, 34 1 F.3d 73 8, 7 44 (8t h C ir. 2 00 3) (ci ta t io n an d in te rn al qu ot at io n m ark s om it te d)

. W e rev ie w th e ba nk ru pt cy co ur t’s
in te rp ret at io n of a co nt ract de no vo

. Arve st Ban k v. Co ok (In re Co ok )
, 50 4 B.R. 49 6,
50 2 (B.A.P. 8t h Ci r. 20 14 ). Howev er, th e ba nk ru pt cy co ur t is
, in th e fir st in st an ce, in
th e be st po si ti on to in te rp ret it s own or de rs , in cl ud in g it s pl a n c o nf irmatio n or de r.

-1 2-Ape

x Oil Co

. v. Sp ar ks (In re Ape x Oil Co .)
, 40 6 F.3 d 53 8, 54 2 (8 th Ci r. 20 05 ) (ci ti ng In re Ch ic ag o, Mil w a u k e e , S t. Pau l & Pac if

ic R.R. Co

. , 6 F.3 d 11 84
, 11 94 (7 th
Ci r.19 93 )).

The ba nk ru pt cy co ur t co rrec tl y rev ie wed th e le ngt h of the de la

y an d de te rm in ed
th at no pr ejud ic e ha d be en cau se d to th e Deb to rs as a res ul t of th e de la y

. The Deb to rs ’

on ly arg um en t re g a r d i n g t im el in es s ap pe ars to be th at th e Deb to rs ne ed ed to kn ow ho w m uc h to pa y to th e cred it or on th e effe ct iv e da te of th e pl an

. W e ag ree wit h th e b a nk ru pt cy co ur t th at th e rel at iv el y sh or t de la y in su bm it ti ng th e req u e s t s f o r
at to rn ey s’ fees di d no t pr e ju d i ce th e Deb to rs (in fact
, as a res ul t of th e m ul ti pl e
ap pe al s, th e Deb to rs st il l ha ve no t pa id th e fees ) an d was no t a m at eri al br each of th e pl an th at sh ou ld pro hi bi t St ari on ’s rig ht to co ll ect it s fe es an d c os ts un de r th e p la n.

Rea so na bl en es s.

The Deb to rs ’ fin al arg um en t is th at St ari on ’s fee req ue st s sh ou ld be di sa ll owe d
be cau se of it s at to rn ey s’ “ Egre gi ou s Prac ti ces of Co ns is te nt ly Usi ng Two Att or ne y s fo r t h e S am e Task s an d Ram pa nt ‘Blo ck Bi ll in g.’” In th is arg um en t, th e Deb to rs
act ua ll y ag reed wit h th e ba nk ru pt cy co ur t’s co nc lu si on th at St ari on ’s pr act ic es of

us in g two at to rn ey s an d bl oc k bi ll in g res ul te d in un reas on ab ly hi gh
, du pl ic at iv e, an d

un cl ear fee it em iz at io ns

. Howev er, th e Deb to rs be li ev e th at su ch act iv it ie s sh ou ld

“ pr oh ib it St ari on fro m co ll ect in g an y fees at al l.” In s u p po rt, th e Deb to rs ci te to a Dis tri ct of Mi nn es ot a cas e st at in g: “ W he re a fee ap pl ic at io n in cl ud es bo th al lo wab le

an d n on al lo wab le ser vi ces wit h no reas on ab le m ean s of dif fere nt ia ti ng be twee n th e
two gr ou ps of se rv ic es , al l co m pe ns at io n fo r su ch se rv ic es sh ou ld be di sa ll owe d.” In

re Dai g C or p. , 48 B.R. 1 21 , 13 6 (D. M in n. 1 98 5)

.

Howev er, a cl os e read in g of th e Dai g cas e rev eal s th at it do es no t st an d fo r th e
pr op os it io n th at al l co m

pe ns at io n m

us t be de ni ed fo r bl oc k bi ll in g or fo r ut il iz in g two

at to rn ey s. In st ead
, Dai

g in vo lv ed a si tu at io n whe re th ere was no way to de te rm in e th e

-1 3-reas on ab le ne ss of th e fees fo r sp ec i f i c s e r vi ces . No ta bl y , t he Deb to rs do no t ci te to

a si ng le cas e bi nd in g up on th is pa ne l an d su pp or ti ng th ei r po si ti on

. W e rev ie w th e ba nk ru pt cy co ur t’s de ci si on in de te rm in in g th e reas on ab le ne ss of at to rn ey s’ fees fo r

an ab us e of di sc ret io n. Pen dl et on v. Qui kTr ip Co rp

. , 56 7 F.3 d 9 8 8
, 99 4 (8 th Ci r. 20 09 ). Here, th e ba nk ru pt cy co ur t cl earl y ex am in ed th e ti m e en tri es , th e co ur t do ck et ,

an d th e w o r k p e r f

or m ed an d ap pr op ria te ly m ad e it s ad jus tm en ts

. The ba nk ru pt cy

co ur t d id no t ab us e it s d is cret io n b y red uc in g t he fees in st ead of d en y in g a ll fees

.

CONCL USI

ON

Fo r th e rea so ns st at ed , we affi rm th e d eci si on of t he ba nk ru pt cy co ur t.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

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