Watson v. Gill (In re Watson)
- Summarized by David Hercher , U.S. Bankruptcy Court, District of Oregon
- 9 years 6 months ago
- Citation:
- In re Watson, BAP No. CC-14-1351-DTaKu (9th Cir. B.A.P. June 25, 2015).
- Tag(s):
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- Ruling:
- The bankruptcy court properly exercised its discretion to approve retroactively a chapter 7 trustee’s employment of a law firm. Not-for-publication memorandum.
- Procedural context:
- The trustee sought retroactive approval of his employment of a law firm. The bankruptcy court granted retroactive approval and approved the firm’s fee application. The debtor appealed, and the BAP affirmed.
- Facts:
- The trustee engaged a law firm without initially seeking court approval of the employment. The firm assisted the trustee to negotiate and obtain court approval of a settlement resulting in the only recovery for the estate. In the course of preparing its fee application, the firm discovered that it had not sought or obtained approval of its employment
Retroactive approval of employment of a professional person is available in exceptional circumstances. To establish exceptional circumstances, the applicant must (1) give a satisfactory explanation for the failure to obtain pre-employment approval and (2) show that its services conferred a significant benefit on the estate. Here, the bankruptcy court found that the firm’s delay in applying for approval of employment was inadvertent and harmless, and those characterizations find support in the record. The bankruptcy court thus did not abuse its discretion in determining that the law firm satisfactorily explained its failure to make a timely application. The bankruptcy court was not required to find the law firm’s explanation satisfactory, and if it had not, the BAP would be disinclined to reverse.
There was no dispute that the firm’s services provided a significant benefit to the estate. Other factors that the bankruptcy court was permitted, but not required, to consider also supported retroactive approval: the estate was not prejudiced by the delay; the fees were reasonable in relation to the size of the estate; and there was no pattern of inattention or negligence on the part of the law firm.
- Judge(s):
- Randall L. Dunn, Laura S. Taylor, and Frank L. Kurtz, Bankruptcy Judges.
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