Rubin & Rubin, P.A. v. Office of the U.S. Tr. (In re NNN 400 Capitol Ctr. 16 LLC)
| Decision Date | 29 September 2021 |
| Docket Number | Civ. No. 20-1266-CFC,Bankr. No. 16-12728-JTD (Jointly Administered),Civ. No. 20-1260-CFC, Civ. No. 20-1267-CFC,Adv. No. 18-50384-JTD, Civ. No. 20-1261-CFC, Civ. No. 20-1262-CFC |
| Parties | IN RE: NNN 400 CAPITOL CENTER 16 LLC, et al., Debtors. Rubin & Rubin, P.A., Appellant, v. Office of the United States Trustee, et al., Appellees. Rubin Law Associates, P.A., Appellant, v. Office of the United States Trustee, et al., Appellees. |
| Court | U.S. District Court — District of Delaware |
Christopher Page Simon, Michael Louis Vild, Cross & Simon, LLC, Julia Bettina Klein, Klein LLC, Wilmington, DE, for Appellant Rubin & Rubin, P.A.
Benjamin A. Hackman, U.S. Department of Justice Office of the United States Trustee, Wilmington, DE, Robert J. Schneider, Jr., U.S. Department of Justice - U.S. Trustee NJ Office of the United States Trustee, Newark, NJ, for Appellee Office of the United States Trustee.
Sommer L. Ross, Duane Morris LLP, Wilmington, DE, for Appellee Wells Fargo Bank, N.A., LNR Partners, LLC, Berkadia Commercial Mortgage LLC, Little Rock-400 West Capitol Trust, Taconic Capital Advisors, LP.
Somera Road Inc., Pro Se.
Brett D. Fallon, Faegre Drinker Biddle & Reath LLP, Wilmington, DE, for Appellee Somera Road Inc.
Appellant1 Rubin & Rubin, P.A. ("Rubin & Rubin" or "R&R") has appealed two separate sanctions orders issued by the Bankruptcy Court: (1) Order re Motion for Clarification (Adv. D.I. 810), dated September 4, 2020 ("Clarification Order"), which sets a deadline for the payment of certain sanctions previously ordered in the August 9, 2019 Memorandum Order (Adv. D.I. 247-1) ("Fee-Shifting Order")—as modified by the October 9, 2019 Order (Adv. D.I. 302, 303) ("Reconsideration Order")—in connection with false and/or materially incomplete disclosures regarding Rubin & Rubin's retention as special litigation counsel to Debtors under 11 U.S.C. § 327(e) ; and (2) the Memorandum Opinion and Order, dated September 4, 2020 (Adv. D.I. 811) (together, "Disqualification Order"), which disqualified Rubin & Rubin from serving as Debtors' counsel under § 327(e), denied Rubin & Rubin's fees, and directed Rubin & Rubin to return payments to Debtors. Appellant Rubin Law Associates, P.A. has also appealed the Disqualification Order. Both Orders are final,2 and the Court has jurisdiction over this appeal pursuant to 28 U.S.C. § 158(a)(1). The Court will affirm the Orders.
"Rubin & Rubin, P.A." is a fictitious trade name used by the combination of Rubin Law Associates, P.A. ("RLA"), which is a law firm owned by Guy B. Rubin, Esq., and "I Mark Rubin P.A.," a law firm owned by Guy Rubin's brother Mark Rubin, Esq. (A277-A278). Guy and Mark Rubin have practiced law using the firm name "Rubin & Rubin" for almost 30 years. (A260; see also A266 (declaration of Mark Rubin stating that in its representation of Debtors "Rubin & Rubin, P.A. has acted as a single law firm, which it is").3
Debtors are 32 tenant-in-common entities created to acquire an ownership interest in an office building in Little Rock, Arkansas ("Property"). The Property secured a loan. Debtors failed to repay that loan, and foreclosure proceedings were initiated. Debtors filed for chapter 11 bankruptcy protection on December 9, 2016 after refinancing attempts failed.
On December 20, 2016, Debtors filed an application to employ Rubin & Rubin to serve as special counsel under § 327(e) to, among other things, advise Debtors regarding the foreclosure action and refinancing efforts, "including the retention and management of experts for such services[.]" (A236-A237). Debtors originally retained Rubin & Rubin in April 2016, to assist in their pre-petition refinancing effort. (A240). In his statement in support of the application, Mark Rubin stated that Rubin & Rubin had no connections with any creditors or other parties in interest. (A247). He further stated that, other than requesting to have the bankruptcy estate pay for its services and expenses, Rubin & Rubin had "no proposed arrangement to compensate [it]" and "ha[d] not ... agreed to share ... any compensation another person or party has received or may receive." (A249-A251).
On March 1, 2017, the Bankruptcy Court authorized Rubin & Rubin's employment. (A254-A257). At no time during the bankruptcy cases have Appellants sought or obtained court authorization to employ Guy Rubin, Mark Rubin, RLA, or I. Mark Rubin, P.A. to serve as special counsel under § 327(e) separately from Rubin & Rubin. Throughout the chapter 11 cases, Rubin & Rubin filed fee applications in the name of "Rubin & Rubin, P.A.," and the Bankruptcy Court's orders allowed compensation to "Rubin & Rubin, P.A." (See LA0080, LA0409, LA0192, LA0555, LA0260, LA0453, LA0506, LA0252, LA0256, LA0335, LA600).4 Mark and Guy Rubin sought and obtained admission pro hac vice in the Bankruptcy Proceedings, and signed certifications identifying their law firm as "RUBIN AND RUBIN, P.A." (LA0039, LA0372).
On April 13, 2018, Debtors filed a complaint against the Lender-Appellees5 and Somera Road, Inc., initiating the Adversary Proceeding. (Adv. D.I. 1). Thereafter, Lender-Appellees learned that "Rubin & Rubin, P.A." is a fictitious trade name. (A277-A278). On May 21, 2019, Lender-Appellees deposed Mark Rubin in connection with the Adversary Proceeding, and he testified that: (1) Rubin & Rubin is a trade name under which Mark and Guy Rubin operate their law firms, I. Mark Rubin, P.A. and RLA; (2) I. Mark Rubin, P.A. and RLA have an oral agreement to work together on the bankruptcy cases; and (3) I. Mark Rubin, P.A. and RLA are "affiliated" for purposes of the bankruptcy cases. (LA1278, LA1283, LA1286, LA1307 at 18:10-17, 20:3-16, 32:21-25, 117:16-20).
Lender-Appellees raised these disclosure issues with the Bankruptcy Court on June 19, 2019; the Bankruptcy Court asked the parties to brief the "serious" issue of "what representations were made to the Court regarding the retention of Rubin & Rubin" also asked the UST to "weigh in." (LA1369-40 ("6/19/2019 Tr.") 20:25-21:13). Lender-Appellees filed a motion (Adv. D.I. 211 & 212) ("Show Cause Motion") seeking an order for a rule to show cause why Rubin & Rubin should not be disqualified from serving as counsel to Debtors and required to disgorge its fees in connection with its failure to disclose the fee-sharing arrangement between I. Mark Rubin, P.A. and RLA. Lender-Appellees argued that, if Rubin & Rubin did not exist as a separate firm, then I. Mark Rubin, P.A. and RLA violated the prohibition against fee-sharing. 11 U.S.C. § 504. In response, Debtors argued that I. Mark Rubin, P.A. and RLA "have held themselves out as a partnership—and not as individual entities—for the past thirty years under the Rubin & Rubin banner." (Adv. D.I. 216 at 3). Debtors also stated that: (i) neither component firm "has its own website or email domain"; (ii) they both use Rubin & Rubin's website and email address; (iii) Guy and Mark Rubin are identified as partners on Rubin & Rubin's website; and (iv) "[a]s far as the public is concerned, they are both ‘Rubin & Rubin, P.A.’ " Id. Debtors further argued that, as "of counsel" to Rubin & Rubin, Guy Rubin was essentially a "member" of Rubin & Rubin for fee-sharing purposes. (Adv. D.I. 216 at 10-11).
Mark Rubin filed a supporting declaration stating under penalty of perjury that "[in] representing the Debtors in this matter both pre- and post-petition, Rubin & Rubin, P.A. has acted as a single law firm, which it is." (A266). Guy Rubin filed a declaration stating under penalty of perjury that: (i) he is "of counsel" to Rubin & Rubin (A271); (ii) his "skills and experience as a trial attorney are part of the services that the firm [Rubin & Rubin] provides to its clients" (A272); and (iii) and "[his] loyalties ... run[ ] through Rubin & Rubin" (A273).
The Bankruptcy Court held a hearing on the Show Cause Motion on July 23, 2019 ("Show Cause Hearing"). (Adv. D.I. 240 ("7/23/2019 Tr.")). One of the Debtors' attorneys, Eric D. Freed, affirmatively represented to the Court at this hearing that: (Id. at 26:13-15).
On August 9, 2019, the Bankruptcy Court entered an order (Adv. D.I. 247) ("Fee-Shifting Order") finding that "[t]he [ § 327(e) ] retention application and verified statement made no mention that Rubin & Rubin, P.A. was a fictitious trade name, nor did it identify any of the firms that operate under the Rubin & Rubin umbrella." (A278). The court further found that, "as a matter of longstanding practice, the two firms regularly represent themselves to the public as Rubin & Rubin, which is the name displayed outside of the office building." (A282). The court concluded that, although they are "two distinct legal entities, ... the two firms operating as Rubin & Rubin are for all intents and purposes a partnership, with fee sharing among its partners, I. Mark Rubin, P.A. and [RLA]" (Id. ) As a result, the court held that RLA and I. Mark Rubin, P.A. did not violate § 504 by sharing the fees Rubin & Rubin received for its work as Debtors' special counsel. (Id. ) The court found, however, that Mark and Guy Rubin should have disclosed the existence of their firms and Rubin & Rubin's fictitious name status, and explained that "[t]he duty to disclose under Rule 2014 is so important that the failure to disclose is an independent ground for disqualification and/or disgorgement of fees." (A280). The court did not disqualify Rubin & Rubin at that time because it concluded that Mark and Guy Rubin were "not accustomed to the stringent disclosure requirements mandated by the Bankruptcy Rules." (A280-A281). The court directed Mark and Guy Rubin to "update the required disclosures to provide full and accurate information" and to "pay the Defendants' attorneys' fees and...
To continue reading
Request your trial
-
Carickhoff v. Goodwin (In re Decade, S.A.C. LLC)
... ... On July ... 16, 2018 (“the Petition Date”), the Debtors ... cite this Court's decision in In re NNN 400 ... Capital , 632 B.R. 243 (D. Del. 2021), ... [ 4 ] See Rubin & Rubin, P.A. v ... Office of the United ... 158(a)(1).” In re NNN 400 Capitol ... ...
-
In re Final Analysis, Inc.
...a continuing duty to disclose connections under Rule 2014. Id. at 3 n.10, 2011 Bankr. LEXIS 4827 at *11 n.10; In re NNN 400 Capitol Ctr. 16 LLC , 632 B.R. 243, 261 (D. Del. 2021) ("These obligations begin with the application to be employed and continue throughout the case; failure to compl......
-
Rubin & Rubin, P.A. v. Beskrone (In re NNN 400 Capitol Ctr. 16)
...29, 2021, this Court issued an Order and accompanying Opinion affirming the Prior Orders. In re NNN Capitol Center 16 LLC, et al., 632 B.R. 243 (D. Del. 2021) ("Opinion"). II. Standard of Review The bankruptcy court's legal conclusions are reviewed de novo, and its factual findings are revi......