In re Blair House Assocs. Ltd. P'ship
| Decision Date | 18 February 2022 |
| Docket Number | Case No. 21-20110 |
| Citation | 639 B.R. 276 |
| Parties | IN RE: BLAIR HOUSE ASSOCIATES LIMITED PARTNERSHIP. |
| Court | U.S. Bankruptcy Court — District of Maine |
James D. Poliquin, Esq., Daniel Cummings, Esq., Norman, Hanson & DeTroy, LLC, Portland, ME, for Blair House Associates Limited Partnership.
FURTHER ORDER ON REQUEST FOR AWARD OF ATTORNEY'S FEES AND PUNITIVE DAMAGES
Forcing a party into a bankruptcy liquidation against its will is an extraordinary measure. To prevent creditors from abusing this process, Congress created remedies. Here, Ellen Hancock, as the trustee of the Hillman Mather Adams Norberg Trust, improperly instigated the liquidation of Blair House Associates Limited Partnership. Therefore, she, in her capacity as the trustee of the Hillman Mather Adams Norberg Trust is liable to Blair House for attorney's fees of $48,030 and $100,000 in punitive damages.
On May 5, 2021, Ellen Hancock (Ms. Hancock), as Trustee of the Hillman Mather Adams Norberg Trust (the "Trust"), commenced this involuntary bankruptcy liquidation against Blair House Associates Limited Partnership ("Blair House"). . The Trust is a limited partner of Blair House. General Holdings, Inc. ("General Holdings"), which maintains that it is Blair House's sole general partner, sought dismissal of the petition. (D.E. 4, 14, 15, 16, 17 and 18). After oral argument on June 23, 2021, the Court dismissed the involuntary petition. (D.E. 22).
On August 17, 2021, the Court granted General Holdings’ motion for an award of attorney's fees and punitive damages on behalf of Blair House and against Ms. Hancock. In doing so, the Court applied the standards set forth in In re K.P. Enterprise, 135 B.R. 174, 177 (Bankr. D. Me. 1992) and held that Ms. Hancock's commencement of this involuntary bankruptcy proceeding against Blair House was in bad faith and that an award of fees and punitive damages was appropriate. (D.E. 29). The Court instructed the parties to confer to see if they could reach a compromise on the amount of the award, and if they could not, Blair House was ordered to file papers in support of its claim for attorney's fees and punitive damages. (D.E. 31).
The parties failed to reach an agreement, and, on behalf of Blair House, General Holdings submitted papers, including the affidavit of James D. Poliquin, Esq., dated September 15, 2021, and billing statements in support of its claim for an award of $48,030 in fees and $100,000 in punitive damages. (D.E. 33). The Trust objected.1 (D.E. 34).
The Bankruptcy Code provides several varieties of relief to a putative debtor when it is forced into bankruptcy improperly: the award of attorney's fees and costs regardless of the intent of the petitioner; and the award of actual and punitive damages if the petitioner acted in bad faith.
If the court dismisses a petition under this section other than on consent of all petitioners and the debtor, and if the debtor does not waive the right to judgment under this subsection, the court may grant judgment-- (1) against the petitioners and in favor of the debtor for-- (A) costs; or (B) a reasonable attorney's fee; or (2) against any petitioner that filed the petition in bad faith, for-- (A) any damages proximately caused by such filing; or (B) punitive damages.
11 U.S.C. § 303 (i).2
The use of the word "or" does not limit the availability of these remedies: in appropriate circumstances a court may impose costs, reasonable attorney's fees, and damages. K.P. Enterprise, 135 B.R. at 177 ; Kenneth N. Klee, Legislative History of the New Bankruptcy Code , 54 AM. BANKR. L.J. 275, 296-297 (1980); § 14:32 HON. JOAN M. FEENEY, ET AL. , 2 BANKRUPTCY LAW MANUAL § 14:32 (5th ed. 2021-2022). An award under § 303(i) lies in the discretion of the bankruptcy court. In Re K.P. Enterprise, 135 B.R. at 177.
The award of fees, costs or damages is only appropriate if (1) the court dismisses the petition, (2) the petitioning creditors and debtor did not consent to the dismissal, and (3) the debtor did not waive the right to obtain relief under § 303(i). There is no dispute that the first two conditions were met: the Court dismissed the petition over the Trust's objections.
The Trust maintains, however, that Articles 6.6(a), 6.8, 6.9 and 7.1 of the Second Amended and Restated Limited Partnership Agreement of Blair House Associates Limited Partnership dated November 1, 1993 (D.E. 26-1) operate as a waiver by Blair House of a § 303(i) award. This argument is unpersuasive.
Waiver is a voluntary or intentional relinquishment of a known right and may be inferred from the acts of the waiving party... If a party in knowing possession of a right acts inconsistently with the right or that party's intention to rely on it, the right is deemed waived... To bar enforcement of a known right, the waiver, however established, must have induced a belief in the party who is claiming reliance on that waiver that the waiving party intended voluntarily to relinquish his rights.
Blue Star Corp. v. CKF Properties, LLC, 980 A.2d 1270, 1277 (Me. 2009) (internal citations and quotations omitted); Portland Dev. Corp. v. M/V Nova Star, 2016 WL 4660914, at *4 (D. Me. Sept. 7, 2016) ; In re Mitchell, 2012 WL 5995443, at *10 (10th Cir. BAP (Colo.) Dec. 3, 2012), aff'd, 554 Fed. Appx. 756 (10th Cir. 2014) ().
Putting aside the broader question of whether such a contractual relationship could ever divest a court of its inherent and statutory powers to protect the orderly and appropriate conduct of its business, to enforce or implement court orders or rules, or to prevent an abuse of process, there is absolutely nothing in Articles 6.6(a), 6.8, 6.9 and 7.1 of the limited partnership agreement, nor anywhere else within the agreement, that manifests any intent by Blair House to specifically forgo the right to an award under § 303(i).
With all three preconditions to the entry of an award under § 303(i) having been satisfied, the Court addresses the attorney's fee award first.
It is well-established in this district that, generally, a debtor who succeeds in the dismissal of an involuntary petition will be awarded its fees. K.P. Enterprises., 135 B.R. at 177 This Court already determined that an award of fees was appropriate given that it was not reasonable for Ms. Hancock to believe that the amounts the Trust claimed that Blair House owed to it were not contingent or subject to a bona fide dispute, as is required by § 303(b)(2).
Thus, the sole remaining issue as to attorney's fees is whether the amount sought on behalf of Blair House is reasonable.3
Reasonable hourly rates vary depending on the nature of the work, the locality in which it is performed, the qualifications of the lawyers, and other criteria. United States v. One Star Class Sloop Sailboat, 546 F.3d 26, 37–38 (1st Cir. 2008) (internal citations and quotations omitted); see also, In re Lopez, 405 B.R. 24, 30 (B.A.P. 1st Cir. 2009). This Court is familiar with the hourly rates of attorneys with similar levels of expertise and experience as Mr. Poliquin, Mr. Cummings and Mr. Geismer, given its regular review of fee applications, as well as its familiarity with the docket of bankruptcy cases in Maine. In re Mailman Steam Carpet Cleaning Corp., 196 F.3d 1, 8 (1st Cir. 1999) ; Fed.R.Evid. 201. The hourly rates of $300 charged on behalf of Blair House in this instance are very reasonable.
Similarly, the amount of time spent by Mr. Poliquin, Mr. Cummings, and Mr. Geismer, as set forth in Exhibit A to Mr. Poliquin's affidavit, was also reasonable given the circumstances created by Ms. Hancock's filing of the involuntary petition. The billing details submitted as Exhibit A to the Affidavit of James D. Poliquin (D.E. 33-1) describe reasonable and necessary services performed for the benefit of Blair House in both defending against the involuntary petition and managing the impact of that filing upon Blair House's regulatory obligations as well at its relationship with the U.S. Department of Agriculture Rural Development ("RD"). The cost of those services was unnecessarily amplified by the filing of an Amended Involuntary Petition in the eleventh hour changing the claims on which the proceeding was premised.
None of the defects other courts have found troubling are present in Exhibit A. See, e.g., In re Navient Sols., LLC, 627 B.R. 581, 592 (Bankr. S.D.N.Y. 2021) ().
In addition to the fees supported by Exhibit A, Blair House asked for $3,000 of fees for services it anticipated needing after August 31, 2021 to bring this case to a close. At the rate of $300 per hour this amounts to 10 additional hours of services. This Court reviewed the docket in this case and the docket in the District Court Case. Blair House's request for an additional $3,000 is reasonable and will be awarded.
By commencing this proceeding, the Trust, through its representative, Ms. Hancock created an existential crisis which compelled Blair House to incur legal expenses. This Court, having reviewed Mr. Poliquin's affidavit and the attached time and billing entries, concludes, in light of the particulars of this case, that an award of $48,030 in legal fees against Ms. Hancock, in her capacity as Trustee of the Trust, is reasonable and appropriate.4
The filing of an involuntary bankruptcy is "an extreme remedy with serious consequences to the alleged debtor, such as loss of credit standing, inability to transfer assets and carry on business affairs, and public embarrassment." In re Reid, 773 F.2d 945, 946 (7th Cir. 1985) ; see also , In re...
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