395 F.3d 198 (5th Cir. 2004), 03-10268, In re Coho Energy Inc.

Docket Nº:03-10268, 04-10173.
Citation:395 F.3d 198
Party Name:In the Matter of COHO ENERGY INC., Debtor. Gibbs & Bruns LLP, Cross-Appellee, v. Coho Energy Inc., Appellee-Cross-Appellant, v. Thomas & Culp LLP, Appellant-Cross-Appellee. Coho Energy Inc., Appellee-Cross-Appellant, v. Gibbs & Bruns LLP, Cross-Appellee, Thomas & Culp LLP, Appellant-Cross-Appellee. In the Matter of Coho Energy, Inc., Coho Resources
Case Date:December 20, 2004
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 198

395 F.3d 198 (5th Cir. 2004)

In the Matter of COHO ENERGY INC., Debtor.

Gibbs & Bruns LLP, Cross-Appellee,

v.

Coho Energy Inc., Appellee-Cross-Appellant,

v.

Thomas & Culp LLP, Appellant-Cross-Appellee.

Coho Energy Inc., Appellee-Cross-Appellant,

v.

Gibbs & Bruns LLP, Cross-Appellee,

Thomas & Culp LLP, Appellant-Cross-Appellee.

In the Matter of Coho Energy, Inc., Coho Resources, Inc., Debtors.

Gibbs & Bruns, LLP, Appellee,

v.

Thomas & Culp LLP, Appellant.

Nos. 03-10268, 04-10173.

United States Court of Appeals, Fifth Circuit

December 20, 2004

Page 199

[Copyrighted Material Omitted]

Page 200

Marc Sands Culp (argued), Law Offices of Marc S. Culp & Associates, Denton, TX, for Thomas & Culp LLP.

Gerald C. Conley, Tonya M. Gray, Andrews & Kurth, Dallas, TX, for Coho Energy Inc.

Thomas S. Hoekstra, Eric Gordon Walraven, Brian N. Hail (argued), Jeffrey Richard Erler, Godwin Gruber, Dallas, TX, for Gibbs & Bruns LLP.

Appeals from the United States District Court for the Northern District of Texas.

Before BENAVIDES, DENNIS and CLEMENT, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

The following case arises from two law firms' consecutive representation of a single debtor in a settlement of a breach of contract by a capital venture firm. Both firms and the debtor appeal the firms' fee awards from bankruptcy court, and one firm appeals the subsequent settlement between the other two parties. For the reasons below, this Court dismisses the settlement appeal and affirms the district court's fee award.

I. FACTS AND PROCEEDINGS

Coho Energy, Inc. ("Coho") is a publicly traded oil and gas exploration and production company. In March, 1999, after a contract dispute for an infusion of capital from Hicks, Muse, Tate & Furst Equity

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("Hicks Muse"), Coho hired law firm Thomas & Culp ("Thomas") to represent Coho in the resulting litigation. Thomas agreed to represent Coho for a thirty-percent contingent fee. Approximately three months later, Coho filed for Chapter 11 bankruptcy protection. The bankruptcy court approved Thomas as counsel in the Hicks Muse litigation and approved the contingent fee arrangement under 11 U.S.C. § 328 (authorizing the bankruptcy court to approve professionals' fees).

Upon confirmation of Coho's Chapter 11 Plan of Reorganization, the bankruptcy court appointed a new CEO and President, Michael Y. McGovern. He immediately wrote to the bankruptcy judge to address "problems that have arisen in the relationship between Coho and its counsel in the litigation involving Hicks, Muse." Coho subsequently fired Thomas and hired another law firm, Gibbs & Bruns ("Gibbs") to continue the Hicks Muse litigation. The bankruptcy court again approved a thirty-percent contingency fee arrangement, this time with Gibbs.

Coho and Thomas could not agree on what fees Thomas was owed for its work to prepare the litigation before it was fired. The fee agreement between Coho and Thomas contained an arbitration clause. Thomas moved the bankruptcy court for arbitration of the fee dispute in October, 2000. The court largely adopted Thomas's recommended order in January, 2001, which identified three discrete issues for the panel of arbitrators to decide: first, whether Thomas was terminated "for cause;" second, the reasonable fee that Thomas would be paid under a theory of quantum meruit; and third, the reasonably estimated sum of money Thomas would have earned under the contingent fee contract if it had not been fired (damages). The panel concluded in July, 2001 that Thomas was fired for cause, that the value of quantum meruit was $2.9 million and that, in the alternative, full contract damages were equal to $5.9 million. During the arbitration, Coho, represented by Gibbs, settled with Hicks Muse for $8.5 million. The arbitrators had not been informed of this settlement.

In January, 2002, the bankruptcy court heard a motion by Thomas to enforce the arbitration panel's quantum meruit finding, a motion by Coho to approve its $8.5 million settlement with Hicks Muse, and the application of Gibbs for its thirty-percent stake in the outcome of the Hicks Muse settlement according to its fee agreement. There was no objection either to Gibbs's application for $2.55 million--the thirty percent of the $8.5 million settlement--and the court awarded the amounts on January 10, 2002. Also on January 10, 2002, the bankruptcy court reduced Thomas's arbitrated award of $2.9 million to $2.55 million due to the "unanticipated developments" of the low settlement amount, according to 11 U.S.C. § 328(a). On January 22, 2002, Thomas objected in the Northern District of Texas to the bankruptcy court's reduction of the arbitration award. On January 28, 2002, Coho moved the bankruptcy court to set aside the judgment and recommended that Thomas receive $956,000 in fees. Thomas replied, again arguing for the original arbitration award of $2.9...

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