In re Apex Oil Co.
| Decision Date | 22 July 2002 |
| Docket Number | No. 01-3128.,01-3128. |
| Citation | 297 F.3d 712 |
| Parties | In re APEX OIL COMPANY, Debtor. Apex Oil Company, Appellant, v. Artoc Bank & Trust Limited, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Jesse R. Pierce, argued, Houston, TX, for appellant.
John D. Quinn, argued, Washington, DC (Stephen Sale, on the brief), for appellee.
Before: WOLLMAN, RICHARD S. ARNOLD, and LOKEN, Circuit Judges.
Apex Oil Company appeals the Bankruptcy Appellate Panel's decision to affirm the Bankruptcy Court's order allowing a claim of Artoc Bank & Trust in Apex's bankruptcy for $4,651,850. This amount represents about $1.7 million for wrongful setoffs by Apex, $1.19 million in prejudgment interest on that claim, and $1.76 million in attorneys' fees to Artoc as the prevailing party. Apex argues that the Court erred in rejecting its argument that Artoc was estopped to file its claim. It also contends that the attorneys' fees awarded were unreasonable. We affirm the decision to allow Artoc's claim for the amount of the setoffs, including the award of prejudgment interest. However, we reduce the allowed attorneys' fees from $1,761,850 to $1,302,860. The attorneys' fees awarded by the Bankruptcy Court were excessive and not supported by sufficient evidence.
This dispute between Apex Oil and Artoc Bank began over 20 years ago. Artoc was a secured lender to Uni Refining (Uni). As collateral for the financing, Uni assigned Artoc its accounts receivable. In 1980, Uni sold petroleum products to Apex. The invoices for these sales were stamped with a notice stating that Artoc had been granted a security interest in the amount of the invoice and directing payment to a "lockbox" account controlled by Artoc. In December 1980, Apex offset the invoice amounts it owed to Uni against amounts Uni owed Apex under different contracts. In February 1981, Uni filed for bankruptcy. In December 1981, Artoc filed suit in Texas against Apex and ten other companies to recover the amount of setoffs and direct payments made by those defendants.
Apex then filed for bankruptcy. The Texas lawsuit was therefore stayed as to Apex in 1987. Artoc filed a proof of claim in Apex's bankruptcy based on the same grounds as the Texas lawsuit, that Apex engaged in wrongful setoffs. The Bankruptcy Court rejected this contention and held that the setoffs were permissible because Apex lacked sufficient notice of Artoc's security interest in Uni's accounts receivable. The District Court affirmed.
This Court reversed. Artoc Bank & Trust, Ltd.v. Apex Oil Co., 975 F.2d 1365, 1366 (8th Cir.1992). We held that Apex received sufficient notice of Artoc's interest as an assignee of Uni's accounts receivable, so that Apex acted wrongfully in offsetting the invoices against amounts Uni owed it. Id. at 1370 (applying Tex.Bus. & Comm.Code Ann. § 9.318(a)). We noted that Apex made an estoppel argument, but that because neither the Bankruptcy Court nor the District Court had reached this issue, we would "leave it for development on remand to the Bankruptcy Court." Id. We also stated that "[i]f judgment is entered against Apex, the Bankruptcy Court should first consider ... attorneys' fees" but we expressed no view on the merits of this issue. Id.
On remand, the case stalled for several years. During this period, both parties filed motions for summary judgment, and Apex conducted discovery related to its estoppel defense. In 1996, the Bankruptcy Judge held a status conference. At this meeting, Apex's pending motion for leave to supplement the record was discussed. The Court stated that it would rule in writing on that motion after Artoc responded. Artoc did respond. However, no order was ever entered on that motion. Three years later, in 1999, the Court filed an order granting Artoc's motion for summary judgment and allowing its claim for $1.7 million. Apex moved for reconsideration. The Court denied that motion, rejected Apex's argument that it was entitled to a 28 per cent. credit against Artoc's claim as a result of an order in the Uni bankruptcy case, and allowed Artoc to add to its claim pre-petition attorneys' fees of $1,761,850. The Court also allowed $1.19 million in prejudgment interest.
Apex appealed these orders to the Bankruptcy Appellate Panel (BAP), which affirmed the Bankruptcy Court in all respects. Apex then filed the instant appeal, alleging error both on the merits of its estoppel defense and on the award of attorneys' fees.
Apex makes several arguments to support its position that Artoc should be estopped to recover the amount of the setoffs. None of them persuades us.
Apex's first complaint is that it was prejudiced because it was not allowed to supplement the summary-judgment record. As explained above, Apex's motion to supplement was apparently never ruled upon, except that it was denied by necessary implication when the Bankruptcy Court granted Artoc's motion for summary judgment. Nevertheless, we see no reversible error in this situation because Apex does not convince us that its inability to submit further evidence caused it any meaningful prejudice. First, Apex has previously stated that no material facts were in dispute on the issue of estoppel. It made this representation both in its 1990 motion for summary judgment and in its 1992 brief to this Court. Apex has not demonstrated to this Court that the alleged "new" evidence it obtained in 1993 depositions and document productions would materially alter a court's analysis of its estoppel defense. Indeed, Apex has not specified the content of this evidence at all, beyond a general statement that it would support its arguments. This is insufficient to show prejudice. We affirm the BAP on this issue.
Next, Apex urges this Court to reverse, on the merits, the Bankruptcy Court's determination that Artoc is not barred from its claim by estoppel. We decline to do so. The Bankruptcy Court correctly applied the facts at hand in deciding that Apex could not satisfy the five elements of estoppel under Texas law. Traylor v. Gray, 547 S.W.2d 644, 652 (Tex. Civ.App.1977, writ ref'd n.r.e.). For one thing, Apex behaved unreasonably in not making inquiry of Artoc after receiving notice of Artoc's security interest. Further, we agree with the Bankruptcy Court that Apex's other estoppel-related theories must fail. Apex simply has not shown any court in this lengthy litigation that Artoc engaged in any action required to support an estoppel defense.
The parties also disagree over the applicability of an order entered in 1983 by the court that confirmed Uni's plan of reorganization under Chapter 11 of the Bankruptcy Code. That order stated that any creditor "against whom money damage judgments in favor of Artoc Bank and Trust, Ltd. are awarded in the District Court Action shall receive" a 28 per cent. credit against such judgments. Appellant's App. 295. We decline to enforce this order. We agree with the BAP that the administration of Uni's plan, which is the subject matter of the order, is not properly before us. Apex cites no excuse for its neglect, from 1983 until 1999, in not bringing this order to the Bankruptcy Court's attention so that any claim based upon such a credit could be appropriately considered on a timely basis. As with the rest of the estoppel arguments, the Bankruptcy Court and the BAP properly resolved this issue in Artoc's favor.
The Bankruptcy Court awarded Artoc a total of $1,761,850 in attorneys' fees. This amount reflects the charges of two law firms. Breed, Abbot & Morgan was awarded $316,850 in pre-petition hourly fees. Fehrenbacher, Sale & Quinn was awarded $1,445,000 for pre-petition work, originally contracted for on a 50 per cent. contingency basis. We hold that Artoc did not satisfy its burden of showing that the total amount of fees awarded was reasonable and necessary. Specifically, we find abuse of discretion in the size of the fee award for work done by Fehrenbacher, Sale & Quinn and reduce this award from $1,445,000 to $986,010. However, we affirm the award for fees submitted by Breed, Abbot & Morgan.
Under Texas law, an assignee who recovers against an account debtor is entitled to recover the attorneys' fees that accrued from the pursuit of its claim. See Taubenhaus v. Jung Factors, Inc., 478 S.W.2d 149, 151-52 (). The party requesting the attorneys' fees must prove that the amount requested is "reasonable and necessary." Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 10 (Tex.1991). The Texas Supreme Court has delineated eight factors that should be considered in determining the reasonableness of a fee.
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;
(2) the likelihood ... that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex.1997). While these factors guide a court in setting a fee, trial courts possess "broad power and discretion" in determining fees. Walton v. LaBarge (In re Clark), 223 F.3d 859, 863 (8th Cir.2000). Therefore, our review of an attorneys' fee award is for abuse of discretion. See Vela v. City of Houston, 276 F.3d 659, 679 (5th Cir.2001).
Applying this standard, we affirm the attorneys' fees allowed...
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