Court Opinion

ID: 9688755
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:03:08.285881+00
Date Added: 2024-06-11T18:18:41.866274
License: Public Domain

MONTALI, Bankruptcy Judge,
concurring and dissenting.
I
I agree with the majority’s conclusion in Part I that the amended order approving the employment of GGL & T must be reversed. As pointed out in the discussion, the amended application lacked all of the supporting papers necessary to determine whether GGL & T was eligible for employment under Bankruptcy Code section 327(a), the section relied upon by appellee. There has never been a proper employment of GGL & T under that section and Rule 2014(a). In my view this defect is fatal to appellees’ case.
GGL & T has steadfastly refused without justification to disclose the details of its arrangements with Arrow, even up to the time of oral argument on this appeal. It should not be rewarded for such arrogance, nor should it be given anything else other than its outright termination as counsel to the trustee. If Arrow wants to pay for GGL & T’s work, so be it. The estate should not. See Neben & Starrett, Inc. v. Chartwell Financial Corp. (In re Park-Helena Corp.), 63 F.3d 877 (9th Cir.1995) (court must ensure attorneys representing estate do not have adverse interests; forfeiture of all fees for non-disclosure not inappropriate); Atkins v. Wain, Samuel & Co. (In re Atkins), 69 F.3d 970, 974 (9th Cir.1995) (factors to show exceptional circumstances for retroactive approval of employment include satisfactory explanation for failure to obtain proper approval).
Reversal of the amended employment order should make reversal of the bankruptcy court’s two refusals to disqualify GGL & T follow as a matter of course.
II
Where I depart from the majority’s analysis is in Part II, where it proceeds to give the trustee and his now-disqualified special counsel a road map to follow a trail they never considered in an attempt to salvage their attempt to pursue appellants. The majority begins with a false assumption to reach the conclusion that GGL & T’s employment constituted an authorization for Arrow to seek to recover assets for the benefit of the estate as permitted by Bankruptcy Code section 503(b)(3)(B).
It suggests that “... the record presents the pattern of § 503(b)(3)(B)’s authorization for creditors to sue in the trustee’s name .... ” We look to the record for facts, not patterns. As a matter of fact, Arrow did nothing. It asked for nothing. No one other than the majority ever thought of § 503(b) as a solution to the dilemma presented. No party contemplated the availability of § 503(b) or requested relief under it. In Godon, the trustee and the creditor entered into a compromise, governed by Rule 9019. That agreement did not mention §§ 503(b)(3) or (b)(4). Godon, 275 B.R. at 561. At the hearing someone raised the possibility of reaching the same result under § 503(b). I can only guess who was that creative. Thus, the statement by the majority that “.. .the court could permit GGL & T to prosecute the adversary proceeding as counsel to Arrow on the basis of § 503(b)(3)(B) permission to recover property for the benefit of the estate” is wholly unsupported in the record and is wholly speculative.
Our duty on the Bankruptcy Appellate Panel is to correct error; it is not to draft trial briefs for parties who fail to achieve *200.what they attempt. We should not be outlining alternativés for unsuccessful litigants. GGL & T failed miserably in its efforts to apt as the trustee’s counsel. If and when Arrow seeks permission for its attorneys to sue in the trustee’s name, the bankruptcy court should consider all relevant factors. It is impermissible, indeed unseemly, for this court to outline Arrow’s legal approach to a matter never presented to the bankruptcy court. We are neither qualified to act as a party’s advocate, nor authorized to issue advisory opinions.
In sum, while it is true that we can affirm for any reason, and perhaps even for reasons not even raised by the parties at the bankruptcy court or on appeal, we cannot change the underlying events in order to get to a result we wish to reach. Here the majority imports a section of the Bankruptcy Code that allows fees to be paid to a creditor who first obtains authority to recover an asset transferred or concealed by the debtor, and then actually recovers it. In fact, the trustee applied (for the reasons stated above, in a sloppy manner) to employ GGL & T as his special counsel. There has been no authorization for Arrow to do anything. Nor has there been any recovery of property transferred or concealed. The action brought by GGL & T against appellants seeks far more than the recovery of property within the purview of § 503(b)(3)(B); it includes counts based upon fraud, breach of contract and conspiracy. Since there has been no recovery at all, GGL & T’s willingness to be paid only out of any recovery makes any stretching of section 503(b)(3) to cover these facts premature as well as inappropriate. Finally, there has been no request for compensation.
We should simply reverse the orders on appeal and let the chips fall where they may.
III
I also reject the majority’s intimation at Part III that appellants lack appellate standing. Appellees failed to raise standing as an issue at. the bankruptcy court, and the majority correctly states that the issue has been waived. There is no suggestion in the majority’s discussion that our jurisdiction is implicated. If it were, this appeal would have to be dismissed. The record reflects that appellees have never raised the issue of appellants’ standing, and in my opinion the defense, if valid at all, has been waived twice.
IV
The majority does not treat with the issue of whether GGL & T’s representation of appellee has been tainted by a disqualifying conflict of interest. The majority has declined to elaborate on the issue; I would simply resolve the matter by observing that the trustee was pressured by the bankruptcy court to go forward with a settlement that he thought was opposed by creditors, and that he no longer supported himself. Thus it would be difficult, if not impossible, to accuse GGL & T, his counsel, of a disqualifying conflict when it was acting in a manner consistent with the wishes not only of Arrow, but of the trustee, its putative client, as well. That being said, the issue of disqualification based upon a conflict is moot in my mind, as set forth above, because there has never been (and never should be) a proper authorization of GGL & T’s employment.