In re Pomrenke Mining, LLC
| Decision Date | 05 August 2020 |
| Docket Number | Case No. 19-00083-GS |
| Parties | In re: POMRENKE MINING, LLC, Debtor. |
| Court | U.S. Bankruptcy Court — District of Alaska |
Northwest Gold Diggers, LLC (NWG) has objected to Proof of Claim No. 6 (Claim) filed by attorney Carol Bavousett Mattick (Mattick) for pre-petition legal services provided to the debtor. For the reasons stated below, the court will overrule the objection in part and sustain the objection in part.
FACTS
NWG is an Alaskan limited liability company engaged in off-shore gold mining in Nome, Alaska. It is co-owned by Steven and Christine Pomrenke, and their son Shawn. The company, and Shawn Pomrenke in particular, gained some notoriety from his ongoing participation with the Discovery Channel for a reality television show featuring the gold mining operations. In 2016, Jon Keith Byer (Byer) approached the Pomrenkes to discuss expanding their gold mining operation. Byer was the manager of two entities, Blue Water Gold, LLC and Blue Water Mining, LLC (Blue Water Entities), interested in investing in, and expanding, NWG's gold operations.
Ultimately, NWG agreed to create a new entity, Pomrenke Mining, LLC, to expand and continue NWG's operations. NWG and the Blue Water Entities comprise the members of Pomrenke Mining. NWG and Blue Water Gold contributed the majority of assets to the new company pursuant to an Asset Purchase Agreement (APA) drafted by Mattick, counsel for the Blue Water Entities. The APA was executed contemporaneously with the Pomrenke Mining Company Agreement, which served to "set forth in full [the] respective rights and obligations" of the initial three members of Pomrenke Mining: the Blue Water Entities and NWG.1 Both documents were dated June 10, 2016, and were signed by Steven and Shawn Pomrenke, who at the time of signing were each 50% equity holder in NWG.2 As set forth in the Company Agreement, also drafted by Mattick, NWG acquired a minority interest in Pomrenke Mining with the balance of the membership interests owned by the Blue Water Entities.3 Byer was designated the president and chief operating officer of Pomrenke Mining.4 Steven and Shawn Pomrenke, together with Byer, comprised the board of managers for the company.5 The Pomrenkes, who live in Nome, were to run the mining operations. Byer, who resides in Texas, was responsible for the day to day matters, and was charged with raising investments to provide working capital to the new business with the intent of expanding its operations.
Mattick is a practicing attorney admitted to the State Bar of Texas since 1984.6 She issued an engagement letter (First Engagement Letter) dated February 15, 2016 to Byer as manager of the Blue Water Entities.7 Per the First Engagement Letter, Mattick was retained to "put together a structure for [the] proposed business combination with [NWG] and an equity financing of thecombined entity."8 She identified the effective date of the representation as December 1, 2015.9 Byer signed the First Engagement Letter as manager of both Blue Water Entities, and as an individual guarantor.10
Several months after the execution of the Company Agreement and APA, Mattick prepared a second engagement letter (Second Engagement Letter) dated September 1, 2016, which was intended to be "a formal agreement with the new company, Pomrenke Mining, LLC."11 Under the Second Engagement Letter, Pomrenke Mining retained Mattick as counsel to provide the following representation:
My firm has and will continue to provide corporate and securities legal services to Pomrenke Mining including preparation of two information disclosure packages, one for use with potential traditional lenders and one for use with potential equity investors; ensuring compliance with notice filing requirements of any securities offerings, preparation of employment or consulting agreements or other contracts, and documentation of corporate governance actions and changes to governing documents.12
Mattick listed her billing rate at $350.00/hour, and estimated a total of $50,000.00 in legal fees for the services to be provided.13 Additionally, the Second Engagement Letter provided that "[a]ny invoice remaining unpaid for more than 30 days from the date of invoice will bear interest at a rate of eighteen percent (18%) per annum."14 The effective date of the Second EngagementLetter was July 1, 2016.15 It was signed by Byer as president and chief operating officer of Pomrenke Mining.16
Mattick's retention by Pomrenke Mining under the terms of the Second Engagement Letter was ratified by the board of managers of Pomrenke Mining pursuant to a unanimous written consent dated September 12, 2016 (Consent).17 The Consent was signed by Byer on September 12, 2016, and by Steven and Shawn Pomrenke on September 14, 2016.18
According to her billing statements to the Blue Water Entities, Mattick stopped sending invoices to them as of June 2016.19 Mattick actually began billing Pomrenke Mining in July 2016, but those fees are not included as part of her Claim against Pomrenke Mining.20 Mattick's October 2016 billing statement shows that the outstanding balance billed to Pomrenke Mining was paid on October 15, 2016, to bring her fees current. Accordingly, her Claim begins with invoices from October 2016, the month after the Second Engagement Letter and the board of managers' Consent.21 The initial unpaid invoice demonstrates that less than a month after her Second Engagement Letter she raised her hourly billing rate to $375.00.22 She testified that she did not provide written noticeof the hourly rate increase to Pomrenke Mining.23 Mattick sent her billing statements to Pomrenke Mining in care of its treasurer and secretary Desoree McDougal, Byer's daughter, who also resides in Texas. She continued to submit billing statements to Pomrenke Mining thorough March 2019.24
Mattick's billings demonstrate that most of her time was spent attempting to assist Pomrenke Mining with issues relating to procuring investments or on corporate matters. NWG does not take issue with these billings, at least not directly. Mattick concedes, however, that throughout her representation of Pomrenke Mining, she invoiced it for some services that she performed for the Blue Water Entities.25 For instance, Mattick acknowledged that of the 24 hours she billed to Pomrenke Mining in October 2017, six of those hours were attributable exclusively to the Blue Water Entities.26 This is the most time she billed to Pomrenke Mining in any one month for work related to the Blue Water Entities. Of the 30 months Mattick billed Pomrenke Mining, 13 of the monthly billing statements included some billings for the Blue Water Entities.27 These ranged from half an hour to the six hours billed in October 2017.
In June 2018, Mattick once again began to represent the Blue Water Entities on an active basis and restarted billing the Blue Water Entities separately.28 According to these statements, and Mattick's testimony, the Blue Water Entities began discussions with David Young regarding hisinterest in Pomrenke Mining.29 Young is part owner in Arctic Sea Mining, owners of an inland mining company in Nome and an off-shore mining vessel.30 Originally, Young was thought to be a prospective investor in Pomrenke Mining, and was initially approached by Shawn Pomrenke.31 Shawn Pomrenke then introduced Young to Byer.32 After reviewing the APA, Young shifted his interest from investing in Pomrenke Mining to acquiring Byer's interests in Pomrenke Mining.33
Thereafter, Mattick's work concerning Young was directed toward the possibility of him acquiring the Blue Water Entities's interests.34 She testified that she did not know that Shawn Pomrenke initially approached Young as a potential investor in Pomrenke Mining.35 Mattick billed no time to Pomrenke Mining in June 2018, but starting in late June and continuing in July 2018 she billed the Blue Water Entities for work related to Young and his interest in the Blue Water Entities.36 From this point forward Mattick actively represented the Blue Water Entities in soliciting Young to purchase control of Pomrenke Mining by acquiring the Blue Water Entities's interests and billedsignificant amounts of time on this endeavor.37 The deal with Young did not, however, come to fruition.38
The relationship between the Pomrenkes and Byer deteriorated throughout the summer of 2018.39 Byer had not procured the needed investment for Pomrenke Mining, which was never profitable. As the mining season concluded, Mattick began to work on matters related to the management of Pomrenke Mining, which included expanding the board and consideration of liquidation. Ultimately, Byer caused Steven and Shawn Pomrenke to be removed from their officer positions in the company. Mattick billed Pomrenke Mining for miscellaneous matters during 2019 until the company filed for bankruptcy on March 15, 2019.
The following summarizes Mattick's billings, and includes the fees billed to Pomrenke Mining but attributable to the Blue Water Entities to demonstrate the intermittent nature of those billings.40 The chart also includes Mattick's separate billings for the Blue Water Entities resuming in June 2018, and the resulting shift of her focus from Pomrenke Mining to the Blue Water Entities.
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