In re Final Analysis, Inc.
| Decision Date | 31 March 2022 |
| Docket Number | Case No. 01-21039-TJC |
| Citation | 640 B.R. 633 |
| Parties | IN RE: FINAL ANALYSIS, INC., Debtor |
| Court | U.S. Bankruptcy Court — District of Maryland |
Lynn A. Kohen, L. Jeanette Rice, Office of the U.S. Trustee, Greenbelt, MD, for U.S. Trustee.
Cheryl E. Rose, Gaithersburg, MD, Pro Se.
Ann E. Schmitt, Washington, DC, for Debtor.
Irving Edward Walker, Cole Schotz P.C., Baltimore, MD, James M. Hoffman, Offit Kurman, P.A., Bethesda, MD, for Trustee Cheryl E. Rose.
James M. Hoffman, Offit Kurman, P.A., Bethesda, MD, Ann E. Schmitt, Washington, DC, for Debtor Final Analysis, Inc.
Cheryl E. Rose, Gaithersburg, MD, for Special Counsel James M. Hoffman.
Cheryl E. Rose, Gaithersburg, MD, Trustee, Pro Se.
James M. Hoffman, Offit Kurman, P.A., Bethesda, MD, Special Counsel, Pro Se.
Two related matters are before the Court. Cheryl Rose, the Chapter 7 Trustee (the "Trustee") for the estate of the Debtor, Final Analysis, Inc., filed the Application for Authorization to Employ James M. Hoffman, Esq., Offit Kurman, P.A. and Prior Employers as Special Counsel to the Trustee the ("Supplemental Employment Application"). ECF 1502. James Hoffman, as Special Counsel to the Trustee, filed the Response of Special Counsel to Order to Show Cause Concerning Retention and Disclosure Matters. ECF 1503. These matters result from a filing by Nader Modanlo asserting numerous deficiencies in the retention and disclosures of Special Counsel and his law firms over the twenty-year history of this case. ECF 1476. Early in the case, the Court approved the retention of Mr. Hoffman as Special Counsel, but the three firms that employed him were not retained and he did not submit disclosures required by Federal Rule of Bankruptcy Procedure 2014(a) when he joined new firms. Mr. Modanlo asserted that the firms were improperly awarded compensation because the Court never approved their retention. He also contended only one of the firms filed the disclosures required by Rule 2014(a), and the firm's disclosure excluded a substantial direct conflict. He contended no disclosures were submitted for the two subsequent firms the Special Counsel joined, and one of them had substantial conflicts.1
The Court has carefully reviewed the pertinent submissions and the docket in this case. A hearing is not necessary because the facts and legal arguments are adequately presented in the pleadings submitted. See L.B.R. 9013-1(b)(4). For the reasons that follow, the Court will dissolve the order to show cause with one exception. A recent disclosure establishes that Special Counsel had an actual, direct conflict representing the Trustee in one limited, self-contained contested matter. The Court will issue a sanction for the failure to make the necessary disclosure and for representing the Trustee in that contested matter. The Court also concludes the Supplemental Employment Application is not necessary. Under Rule 2014(b), Special Counsel's retention as a "named attorney" was sufficient to enable the attorneys in his firms to be employed and compensated.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a), and Local Rule 402 of the United States District Court for the District of Maryland. This matter is a "core proceeding" under 28 U.S.C. § 157(b)(2)(A) and the Court has statutory and Constitutional authority to enter a final order.
"This case has a long and contentious history dating back to September 4, 2001." ECF 1049 at p. 2. The Trustee, Final Analysis Communication Services, Inc., an affiliate of the Debtor, Mr. Modanlo, Michael Ahan, and others have been involved in extensive litigation in numerous courts. Trials have been held in the Circuit Court for Montgomery County, the United States District Court for the District of Maryland, and the bankruptcy court. Id. In 2014, in an appeal involving Mr. Modanlo's criminal proceedings, the United States Court of Appeals for the Fourth Circuit described the then state of the ongoing and extensive litigation in various courts. See United States v. Modanlo, 762 F.3d 403, 405-407 (4th Cir. 2014).
In 2013, Mr. Modanlo was convicted of ten counts of criminal conduct related to his commercial relationship with the Republic of Iran in connection with activities related to his work with the Debtor. Modanlo v. Rose , 2018 WL 741386 (D. Md. Feb. 5, 2018). On January 15, 2016, President Obama granted Mr. Modanlo executive clemency and commuted his sentence. Id . at ECF 16-2. Since that time, virtually all of the litigation in this case has been initiated by Mr. Modanlo. See e.g. , ECF 1377, 1384, 1395, 1397, 1398, 1411, 1412, 1419, 1420, 1422, 1450, 1451, 1476, 1481, and 1487.
In what appeared to be a final step to resolving the case, the Trustee filed the Motion to Authorize Destruction of Various Books, Records and Files Held by Special Counsel. ECF 1474. Mr. Modanlo filed a thirty-five page cross-motion raising numerous challenges. ECF 1476. He argued, as summarized above, that Special Counsel failed to make the necessary disclosures, was not properly retained, and should be sanctioned by the denial of compensation and the disgorgement of fees. Id. at pp. 4-16.
The Court ruled that Mr. Modanlo waived his right to bring such challenges in a settlement agreement he entered into with the Trustee in 2004. ECF 1495. Nevertheless, in light of its independent duty to ensure that professionals are properly retained after full disclosure, the Court issued the order to show cause requiring Special Counsel to address the retention and disclosure issues. ECF 1497. Special Counsel responded to the order to show cause and filed four verified statements of disinterestedness. ECF 1502-1, 1507, 1508, and 1513. The Trustee filed the Supplemental Employment Application seeking Court approval of three firms that employed Special Counsel during the case. ECF 1502 and 1503.
Mr. Modanlo sent a letter to the Court again requesting permission to respond to the Supplemental Employment Application and Special Counsel's response to the show cause order. ECF 1514. For the reasons set forth in a contemporaneous order, the Court will deny Mr. Modanlo's request.
The creditors of the Debtor filed an involuntary petition against it on September 4, 2001. The Court entered an order for relief under Chapter 7 on October 16, 2001. ECF 12. After the Trustee was appointed, she filed an application to retain herself as counsel for the Trustee. ECF 17. The application was approved by order entered October 31, 2001. ECF 22.
The Trustee retained Mr. Hoffman as Special Counsel under a general retainer to (l) represent her in suits relating to the bankruptcy case; (2) investigate and prosecute potential avoidance actions; (3) assist in the preparation of pleadings, motions, and other filings required to administer the estate; and (4) advise her on matters concerning the liquidation of estate property. ECF 38. On November 26, 2001, she filed an Application for Authorization to Employ James M. Hoffman as Special Counsel for the Trustee (the "Employment Application"). Id. At the time, Mr. Hoffman was employed by Shulman, Rogers, Gandal, Pordy & Ecker, P.A. ("Shulman Rogers"). The Employment Application stated that Mr. Hoffman had no connections or adverse interest to the Trustee or to the estate but disclosed that Verizon, a creditor of the Debtor, was a client of Shulman Rogers in unrelated matters. Id. at ¶¶7-8. An Order Authorizing Employment of James M. Hoffman as Special Counsel for the Trustee was entered on December 14, 2001.2 ECF 55. The Employment Application did not seek the retention of Shulman Rogers, and the order approving the retention did not approve the firm as counsel for the estate.
On September 9, 2002, Mr. Hoffman filed the First Application for Allowance of Interim Compensation and Reimbursement of Expenses of [Shulman Rogers] as Special Counsel to Chery E. Rose, Chapter 7 Trustee. ECF 178. The application named Mr. Hoffman and Shulman Rogers as "Applicants." Id. The application states that "Applicants were retained as special counsel to the Trustee pursuant to an Order entered by this Court on December 14, 2001." Id. at p. 2. In addition to Mr. Hoffman's service, the application sought compensation for the fees for seven other timekeepers. Id. at pp. 6, 8-15. The application was approved by order entered on December 9, 2002. ECF 196.
Mr. Hoffman filed six subsequent applications for compensation while employed at Shulman Rogers. ECF 273, 404, 499, 576, 621, and 1033, as supplemented by 1044. Each was titled "[Second through Seventh] Application for Allowance of Interim Compensation and Reimbursement of Expenses of [Shulman Rogers] as Special Counsel to [the Trustee]." Each named Mr. Hoffman and Shulman Rogers as "Applicants" and stated words to the effect that Applicants were retained as Special Counsel to the Trustee pursuant to an Order entered by the Court on December 14, 2001. Each disclosed the fees of other attorneys at the firm who worked on the matter and included the required lodestar analysis. Each was approved by the Court after proper notice.
Mr. Hoffman ended his employment with Shulman Rogers on August 22, 2008, and began employment as a principal with Goren, Wolff, Orenstein, and Hoffman, LLC ("Goren Wolff"). ECF 1059. On December 15, 2009, he filed the Eighth Application for Allowance of Interim Compensation and Reimbursement of Expenses for James M. Hoffman, Esquire and [Goren Wolff] as Special Counsel to [the Trustee]. ECF 1059. The application named Mr. Hoffman and the firm of Goren Wolff, as "Applicant" and stated that "Applicant was retained as special counsel to the Trustee pursuant to an Order entered by this Court on December 14, 2001." Id. at 2. Mr. Hoffman was the only timekeeper provided for in this application. See, id. at 15-16. The application was approved by order entered on January 20,...
To continue reading
Request your trial