In re DN Associates, Bankruptcy No. 91-20417.

CourtUnited States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Maine
Citation165 BR 344
Docket NumberBankruptcy No. 91-20417.
PartiesIn re DN ASSOCIATES d/b/a Atlantic Motor Inn, Debtor.
Decision Date23 February 1994

James D. Poliquin, Norman, Hanson & DeTroy, Portland, ME, for debtor.

Robert J. Keach, Verrill & Dana, Portland, ME, for Casco Northern Bank and Second Maine Realty Corp.


JAMES B. HAINES, Jr., Bankruptcy Judge.

Following successful appellate defense of this court's August 20, 1992, fee awards, Norman, Hanson & DeTroy ("NH & D"), the debtor's counsel, and the Pilot Group ("Pilot"), the debtor's financial advisor, filed supplemental fee applications seeking fees and expenses associated with the appeals and interest on their approved fees. Casco Northern Bank, N.A. ("Casco") and Second Maine Realty Corporation ("Second Maine") object.

For the reasons set forth below, I conclude that, notwithstanding substantial consummation of the reorganization plan shortly after entry of the confirmation order, jurisdiction remains to consider the applications. Further, although the applicants are entitled to interest on their fee awards, the fees and expenses they incurred on appeal are not allowable as administrative expenses.1

Procedural History

On April 17, 1992, a joint creditor plan of reorganization proposed by, among others, Casco, DN's first mortgagee and principal Chapter 11 antagonist, was confirmed.2 Under the plan, Second Maine, a Casco subsidiary, succeeded to all of DN's assets and obligations. The plan provided for full payment of all priority claims, including allowed professional fees and expenses, on its effective date, thirty days after confirmation.3

On August 20, 1992, I approved compensation for services and reimbursement for expenses to NH & D and Pilot. In re DN Associates, 144 B.R. at 204.4 As successful appellees in the district court and in the court of appeals, neither NH & D nor Pilot requested an award of attorneys' fees.5 It is unclear whether the appellate courts awarded costs to NH & D or to Pilot, although they were entitled to them had they sought them. See Fed.R.App.P. 39(a) (if a judgment is affirmed, unless otherwise ordered, costs shall be taxed against the appellant). See also Fed.R.App.P. 39(e) (district court costs shall be taxed as costs of the appeal in favor of the party entitled to costs).

On October 21, 1993, two appeals and approximately fourteen months after this court's order approving their fee applications, Second Maine paid NH & D and Pilot. NH & D and Pilot then filed supplemental fee applications here, seeking allowance of the fees and expenses associated with defense of Casco's appeals as administrative expenses under §§ 330(a) and 503(b)(2).6 They also ask that this court award them interest from the date of the fee award orders to the date of payment.


As elsewhere, satellite litigation over fees is discouraged in bankruptcy cases. In re McLaughlin, 96 B.R. 554, 561 (Bankr. E.D.Pa.1989). Here, the satellite's launch was fueled by a heated confirmation battle. Casco's appeals boosted it on an extended flight. The sputnik did not burn up on reentry from the court of appeals. Rather, it remains aloft and, with the supplemental applications, has launched its own orbiters.

1. Jurisdiction.

Jurisdiction is a threshold issue.7 Although a final decree has yet to enter, the plan was substantially consummated8 immediately following the April 17, 1992, confirmation order. Casco asserts that "once the estate property was transferred and payments to other creditors completed under the confirmed plan . . . this Court was divested of jurisdiction to adjudicate the fee application. . . ."9 I disagree.

The plan was confirmed well before this court had heard and decided the debtors' professionals' fee applications. By that time Second Maine's succession to DN was complete and plan payments had been made. If the law were as Casco urges, this court would have been without jurisdiction to determine fees, a function basic to the role of the reorganization court, see In re Sousa, 46 B.R. 343, 346 (Bankr.D.R.I.1985); in the first instance, simply because the confirmed plan was substantially consummated in a thrice. That is not the law.

The scope of the bankruptcy court's jurisdiction shrinks upon confirmation. In re Jr. Food Mart of Arkansas, Inc., 161 B.R. 462, 463 (Bankr.W.D.Ark.1993). See e.g., 11 U.S.C. § 1141. Upon substantial consummation the court's role is further diminished. For example, a reorganized debtor loses its ability to modify the plan. 11 U.S.C. § 1127(b). Two cases relied upon by Casco and Second Maine say no more than that. In re Fansal Shoe Corp., 119 B.R. 28 (Bankr. S.D.N.Y.1990); In re Hayball Trucking, Inc., 67 B.R. 681 (Bankr.E.D.Mich.1986). A third, In re Greenley Energy Holdings of Pennsylvania, holds that a bankruptcy court's post-confirmation jurisdiction does not extend to disputes that do not affect consummation of the plan when the order of confirmation does not reserve it. 110 B.R. at 182.

We track a different trajectory. To begin, the confirmation order incorporates the plan's retention of jurisdiction provisions, including the following:

After confirmation of the Plan, and until the Consummation of the Plan, and the closing of the estate of DN Associates, the Court shall retain in the case jurisdiction for all purposes provided in the Bankruptcy Case, including without limitation, jurisdiction for the following purposes:
1. To allow or disallow claims of interests impaired or unimpaired by this Plan as provided in Section 502 of the Bankruptcy Code . . . and to hear and determine all priority claims and claims for costs and expenses of administration;
2. To enable Casco and the Kennys, and all other parties in interest, to comply with and enforce compliance with this Plan. . . . 10

The plan defines "consummation" as "the accomplishment of all things contained in or provided for in the Plan, and the entry of a final decree by the Court pursuant to Bankruptcy Rule 3022."11

The pending applications, initiated before "consummation" as the plan defines it, are efforts to enforce plan provisions governing determination and payment of administrative expenses. Thus, they fall squarely within the scope of post confirmation jurisdiction reserved to the bankruptcy court by the confirmation order.

That the applications are within the jurisdiction reserved to the bankruptcy court by the confirmation order, although significant, is not determinative. See, e.g., In re BankEast Corp., 132 B.R. 665, 667 (Bankr. D.N.H.1991); In re Greenley Energy Holdings of Pennsylvania, 110 B.R. at 181; In re Tri-L Corp., 65 B.R. 774, 779 (Bankr.D.Utah 1986); In re Allied Technology, Inc., 25 B.R. 484, 499 (Bankr.S.D.Ohio 1982). The plan and confirmation order cannot create jurisdiction where none exists. See In re BankEast Corp., 132 B.R. at 667. See generally 4 Norton Bankruptcy Law and Practice 2d (hereinafter "Norton") § 95:6 at 95-9, 95-10 (1993).

But allowance of administrative fees and expenses is fundamentally within this court's statutory jurisdiction, e.g., 11 U.S.C. §§ 330, 503, 507(a)(1); 28 U.S.C. §§ 157(b)(2)(A), 1334; and exercise of post confirmation jurisdiction over such issues is entirely proper. 11 U.S.C. § 1142. See In re Tri-L Corp., 65 B.R. at 778. See generally Norton, supra, § 95:7 (court retains jurisdiction over activities such as claims resolution, resolving disputes which affect operation of the plan as between interested parties, and resolving disputes arising under Code provisions that contemplate post confirmation activity).

Determining administrative professional fees and ordering their payment represents an aspect of plan consummation and compliance particularly appropriate to the bankruptcy court's role and expertise.12 This dispute remains within the bankruptcy court's jurisdictional gravity.

2. Fees.
a. Fee Awards in the Larger Universe.

Analysis begins with a brief review of principles governing fee allocations generally, before moving on to their place in the peculiar context of bankruptcy reorganizations.

"In the United States, the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser." Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141 (1975). The general rule is qualified only by a few judicially-created exceptions, viz the "common fund" doctrine;13 the "substantial benefit" rule;14 the "contempt" sanction;15 and the "bad faith" exception;16 by statutory exceptions;17 and by the law of contract.18

Outside the exceptions, the American Rule governs. Litigants, whether or not successful, may expect to bear their own expenses of litigation, including their legal fees, at trial and on appeal.19 The courts do not have "roving authority" to award counsel fees whenever they might consider it warranted. Roosevelt Campobello Intern. Park v. Environmental Protection Administration, 711 F.2d 431, 435 (1st Cir.1983), quoting Alyeska Pipeline, 421 U.S. at 263, 95 S.Ct. at 1624.

b. Fee Awards in the Bankruptcy Sphere.

Whether professionals retained by a debtor in possession are entitled to administrative compensation for legal fees associated with fee appeals is an open question in this circuit.20 Elsewhere, the cases are divided. One commentator has summarized the authorities as follows:

Some courts permit attorneys to receive compensation for services rendered in successfully litigating the merits of their fee applications and appealing awards. Nunley v. Jessee, 92 B.R. 152 (Bankr.W.D.Va. 1988). Other courts deny such requests where the attorneys unsuccessfully defend in that litigation. See Riverside-Linden Investment Co., 39 89 B.R. 848 (Bankr. S.D.Cal. 1988).

2 Collier on Bankruptcy ¶ 330.056 at 47 (15th ed. 1993).21

The pending applications do not present circumstances that fall within the non-statutory exceptions to the American Rule....

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