DVI Receivables XIV, LLC v. Rosenberg (In re Rosenberg)

DVI Receivables XIV, LLC v. Rosenberg (In re Rosenberg), Case No. 13-14781 (11th Cir. Feb 27, 2015)
Affirmed in part, vacated in part, and remanded. Adopting analysis and reasoning of Glannon v. Carpenter (In re Glannon), 245 B.R. 882, 894-95 (D.Kan.2000) re scope of award for attorney's fees and costs under § 303(i)(1) as encompassing all phases of a §303 proceeding, and affirming award of (1) fees for dismissal, (2) appellate fees, and (3) fees on fees. Vacated and remanded with respect to fees and costs incurred with respect to §303(i)(2) bad faith claims as prematurely entered and holding such fees and costs to be deducted from the 2012 Attorney Fee Order, and to reconsider such fees and costs along with a motion to supplement.
Procedural context:
Appeal from district court for the Southern District of Florida affirming the bankruptcy court's final order awarding attorney's fees and costs, pursuant to 11 U.S.C § 303(i)(1), reviewing the bankruptcy court's factual findings for clear error and its legal conclusions de novo.
Nutshell Holding - §303(i)(1)'s stick is bigger than some realized. Of additional interest is, to put it broadly, a substance over form issue - that could be called "you can't hide the petitioner behind a bunch of SPE's ("special purpose entities"). Facts: - SPE entities (securitized equipment leases) filed involuntary 7 against Rosenberg. Petition was dismissed, and fees and costs awarded to appellee Rosenberg. Petitions were filed on behalf of SPE entities by the Director of Operations for their successor servicer ("Lyon"). Five of the SPE's had been administratively dissolved, and there was no evidence of any correspondence between the SPEs and Lyon authorizing such action. The bankruptcy court found that Lyon (though not a listed petitioner) and the SPEs were "intertwined." As such, the issue on appeal was whether Lyon was an actual petitioner, and thus could be held liable under §303(i)(1). On appeal the 11th Circuit could not say that the bankruptcy court erred with respect to liability. The award of attorney fees and costs under §303(i)(1) is a stick intended to discourage frivolous involuntary filings. The core of this appeal boils down to how big is the stick - which of the following four categories of fees does it encompass. 1- fees incurred to obtain the dismissal, 2 - fees incurred to sustain the appeal ("Appellate fees"), 3 - "fees of fees" - fees incurred in an adversary proceeding to recover the preceding two, 4 - fees incurred to prosecute under§303(i)(2) ("Bad Faith fees"). Both the Appellate fees, and the Bad Faith fees are issues of first impression within the Circuit. The 11th Circuit, did not adopt the 9th Circuit's decision in Higgins v. Vortex Fishing Sys., Inc. 379 F.3d 701, 708-09 (9th Cir. 2004) which precluded an award of appellate fees. In holding Appellate fees are included under §303(i)(1), the Court noted that (1) Rule 38 was not the exclusive vehicle for such awards, (2) the absence of express limiting language, and (3) that Rule 303(i)(1) is a fee-shifting statute. The 11th Circuit adopted both the analysis and reasoning of Glannon v. Carpenter (In re Glannon), 245 B.R. 882, 894-95 (D.Kan.2000) to hold attorney fees with respect to Bad Faith claims are included under §303(i)(1). The Court did vacate and remand the fees with respect to Bad Faith claims on solely on the basis that such claims were premature. The bad-faith proceedings had only just begun at the time of the initial award.
Hull, Julie Carnes, and Walker (John M. Walker, 2nd Circuit sitting by designation)

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