Opinion ID: 707566
Heading Depth: 3
Heading Rank: 1

Heading: Satisfactory Explanation

Text: 38 The bankruptcy court found that Wain, Samuel offered a satisfactory explanation for its failure to secure prior judicial approval of its engagement because the firm's work during June, July, and August of 1991 was performed on an emergency basis. It also excused the firm's failure to seek pre-employment approval because it found the debtors led the firm to believe that they would secure the requisite court approval. 39 The bankruptcy court found that Wain, Samuel's services in assisting the debtors in litigating against the IRS were rendered in an emergency setting. The court found that the services related to the same urgent subject matter and were performed on an intensive basis during a three-month period. The court was careful to distinguish, and to disallow payment for, services which it determined were not performed on an emergency basis. 40 The debtors admit that they initially engaged Wain, Samuel's services on an emergency basis, as they urgently needed help in responding to the IRS interrogatories, 7 but claim that the emergency project comprised only the draft interrogatories which the firm completed by early June. It is undisputed that Wain, Samuel was promptly paid for the work to which the debtors refer. The debtors have failed to come forward with any evidence to support their position. Wain, Samuel's services subsequent to June 7 were, as the bankruptcy court found, directly related to the same urgent subject matter. Over the next two and one-half months, on Whitley's request, Wain, Samuel elaborated on its interrogatory responses, went over its responses with Whitley to prepare him to take key depositions, and met with the U.S. Attorney to discuss the tax litigation. It was not error for the bankruptcy court to find that the debtors urgently needed Wain, Samuel's assistance and that these tasks were undertaken on an emergency basis. 41 In addition, the bankruptcy court essentially found that Wain, Samuel reasonably relied upon the debtors' repeated representations that they would secure the court's approval. Contrary to the debtors' assertion in their brief, the bankruptcy court found that Atkins misled the firm: he represented that he would take care of the application to the Court and never told the applicant clearly ... you aren't representing me.... 42 The debtors fail to successfully challenge Setzen's declaration, credited by the trial court, that the debtors repeatedly assured the firm that they would seek the court's approval and that the firm would be paid for its services. Setzen asserts: 43 Throughout this process, we endeavored to have our appointment confirmed by the Court. We made repeated and continual requests of Mr. Atkins and Mr. Bassell, who repeatedly assured us that we would be officially appointed and our fees paid. 44 In fact, the debtors have admitted that they promised the firm both that they would have the firm officially appointed and that the debtors would pay the firm for its services. Before the bankruptcy court, the debtors argued that although they promised the firm that it would be paid, they were referring only to the initial work performed in drafting the interrogatory responses. Wain, Samuel correctly points out that this contention is not sensible and was implicitly rejected by the bankruptcy court. The debtors had already paid Wain, Samuel for what the debtors referred to as the initial work and acknowledged that fact in their brief before the bankruptcy court. Thus, the admitted promise to pay can only logically be construed to refer to the remainder of the two and one-half month IRS litigation project. 45 Although the debtors admit that they promised they would obtain court approval and that they never followed through, they claim that they were only referring to the services for which Wain, Samuel was already paid. It was not erroneous for the bankruptcy judge to credit Setzen's version of the events over the unsworn statements of the debtors. 46 Finally, the debtors claim that even if Wain, Samuel relied upon the debtors' assurances, such reliance was unreasonable because the debtors' refusal to sign the letters prepared at their bankruptcy attorney's request sent a clear message that they no longer wished to employ the firm. However, the record reveals that those letters were prepared in November of 1991, well after Wain, Samuel had completed its work on the IRS project. And even after the debtors refused to sign the letters, they continued to assure Setzen that the firm would be paid. Even assuming that this refusal to sign the letters sent a message, the message was sent only after Wain, Samuel had completed its work on the IRS project and in the context of continuing assurances. 8 47 We agree that the emergency nature of the services, coupled with the firm's reasonable reliance on the debtors' representations that they would obtain court approval, constitute a satisfactory explanation for Wain, Samuel's failure to obtain pre-employment court approval. The record amply supports the bankruptcy court's findings on this issue.