In re Sweports, Ltd.

No. 14-2423 (8th Cir. Jan. 9, 2015).
Dismissal of a bankruptcy case does not divest the bankruptcy court Rather, a bankruptcy court retains ancillary jurisdiction to “tie up loose ends,” such as to rule on an application for allowance of fees under 11 U.S.C. § 330.
Procedural context:
Following dismissal of a chapter 11 case, certain professionals properly retained by the official committee of unsecured creditors filed an application for allowance of fees and expenses under 11 U.S.C. § 330. The bankruptcy court denied the application as moot, concluding that upon dismissal of the case the court no longer had authority to issue any further order relating thereto. The professionals appealed.
The official committee of unsecured creditors appointed in this chapter 11 case retained certain professionals (collectively, “Wolf”) to represent it in the case. After court rejected plans of reorganization filed by each of the debtor and committee, the case was dismissed to permit creditors to pursue their own remedies individually. Rather than delay dismissal to allow for adjudication of fee applications, which Wolf believed would be prejudicial to his clients, Wolf filed fee applications after dismissal of the case. In reversing the bankruptcy court’s order denying the fee applications for lack of jurisdiction, the court of appeals observed that there is “a critical difference…between determining an entitlement to fees and ordering payment of fees.” While it was true that bankruptcy court could no longer order the debtor to pay any allowed fees of Wolf out of estate assets (the estate having revested in the debtor and extinguished following dismissal of the case), that did equate to a lack of jurisdiction to rule on the allowance of such fees. Far from being of no value to Wolf, an order allowing fees and expenses would give Wolf the means to pursue collection in state court similar to other creditors.
Posner, Williams, and Tinder.

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