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In re Zachary Allen ; Tiara Donegan

Summarizing by Lars Fuller

Lazzo, et al. v. Rose Hill Bank et al. (In re Schupbach Investments, L.L.C.)

Lazzo, et al. v. Rose HIll Bank, et al. (In re Schupbach Investments, L.L.C.), Case No. 14-3277 (10th Cir. November 3, 2015). Published.
Approving retroactive employment of debtor’s professionals requires a showing of extraordinary circumstances and simple neglect will not justify nunc pro tunc approval. Upon confirmation of a plan and appointment of a liquidating trustee, a debtor’s status as debtor in possession terminates and debtor is stripped of all rights, powers and duties of a bankruptcy trustee including the ability to seek payment from the estate of post confirmation attorney’s fees.
Procedural context:
Creditors appealed bankruptcy court’s approval of (i) retroactive employment of debtor’s counsel, (ii) fees incurred prior to approval of employment, and (iii) fees incurred after confirmation of a competing plan that transferred all of debtor’s property to the secured creditors and a liquating trust. The BAP reversed. Since the BAP is a subordinate tribunal, the 10th Circuit independently reviews the bankruptcy court’s decision. Legal determinations are reviewed de novo and factual findings reviewed for clear error. The 10th Circuit affirmed the BAP's decision.
Debtor’s counsel failed to file his employment application on the petition date and only did so about a month later at the US Trustee’s prompting. Counsel explained that the failure to file the application was because a “whole bunch of first day motions” had to be filed and the application was forgotten. Counsel failed to request retroactive employment and only did so several months later. The bankruptcy court allowed retroactive approval. Creditors filed a competing plan that was confirmed and all of debtor’s secured property was turned over to the secured creditors and ownership interests in debtor were cancelled. Debtor was dissolved and all of its remaining property and rights were conveyed to a liquidating trust.
Tymkovich, Holmes, McHugh (Tymkovich)

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