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trust established under debtors' confirmed Chapter 11 plan without leave to designate successor trustee. and
(9) no further reduction in the $3.9 million fee sought by debtors' attorneys, which itself represented a voluntary 28% reduction in fees initially requested pursuant to voluntary settlement with the UST, was warranted.
ix. In re Cargo Transportation Services, Inc., 502 B.R. 875 (Bankr. M.D. Fla. 2013)
Issue: Chapter 11 plan trustee brought adversary proceeding to recover, as alleged preferences, payments that debtor had made within 90 days of its own Chapter 11 filing in settlement of preference claims asserted against it by plan trustee in another case. Trustee sought to recover from law firm to which these settlement payments were made as representative of plan trustee in this other case, and law firm asserted that it acted as mere conduit in connection with challenged transfers. Parties cross-moved for summary judgment.
Holding: The Bankruptcy Court, Michael G. Williamson, J., held that law firm that represented plan trustee in unrelated Chapter 11 case acted as mere conduit in receiving payments in settlement of preference claims. Initial recipient seeking to take advantage of "control test" must establish not only that it did not have control over the assets, i.e., that it merely served as conduit for assets that were under actual control of the debtor-transferor, but also that it acted in good faith and as innocent participant in the underlying transfer. In this case, law firm that represented plan trustee in unrelated Chapter 11 case acted as mere conduit in receiving payments in settlement of preference claims asserted by plan trustee against company that later filed for bankruptcy relief, and was not liable, as initial transferee, on settlement payments that it accepted in good faith within 90 days of the payor's own bankruptcy filing, during the preference period applicable in payor's bankruptcy case, notwithstanding that portion of these payments ultimately made their way back into firm's account as its one-third contingency fee. Law firm never exercised any legal control over settlement funds that it received, but merely held funds in trust for delivery to plan trustee in accordance with orders of bankruptcy court in this unrelated Chapter 11 case, which controlled every step of process in approving and implementing terms of settlement.
x. In re Quigley Company, Inc., 500 B.R. 347 (Bankr. S.D.N.Y. 2013)
Issue: United States Trustee objected to fee applications filed by Chapter 11 debtor's attorneys, and by law firms representing unsecured creditors' committee and legal representative for future asbestos personal injury claimants.
Holdings: The Bankruptcy Court, Stuart M. Bernstein, J., held that: (1) Test for what is a reasonable fee for bankruptcy counsel is objective one, that considers what services a reasonable lawyer or law firm would have performed in same circumstances.
©2014 William L. Norton III
