McLeod Brock, PLLC v. Cohen (In re Richard D. Van Lunen Charitable Trust)

• Decision Date: 18 April 2022
• Docket Number: Civil Action No. 21-cv-1727-LTB
• Citation: 598 F.Supp.3d 1114
• Parties: IN RE: RICHARD D. VAN LUNEN CHARITABLE TRUST, Debtor. McLeod Brock, PLLC, Appellant, v. Robertson B. Cohen, Liquidating Trustee, and CCIC I, LLC, Appellees.
• Court: U.S. District Court — District of Colorado

598 F.Supp.3d 1114

IN RE: RICHARD D. VAN LUNEN CHARITABLE TRUST, Debtor.McLeod Brock, PLLC, Appellant,

v.Robertson B. Cohen, Liquidating Trustee, and CCIC I, LLC, Appellees.

Civil Action No. 21-cv-1727-LTB

United States District Court, D. Colorado.

Signed April 18, 2022

Aaron A. Garber, Wadsworth Garber Warner Conrardy P.C., Littleton, CO, for Appellant.

Kevin Scott Neiman, Kevin Neiman, PC, Law Offices of, Lars H. Fuller, BakerHostetler LLP, Denver, CO, for Appellee Robertson B. Cohen.

Matthew T. Faga, Markus Williams Young & Hunsicker LLC, Denver, CO, for Appellee CCIC, I, LLC.

MEMORANDUM OPINION AND ORDER

Babcock, JUDGE

Appellant McLeod Brock, PLLC (the "Firm" or "McLeod"), formerly Rumrell, McLeod & Brock, PLLC, appeals the United States Bankruptcy Court for the District of Colorado (the "Bankruptcy Court") Order dated April 23, 2021 (the "SJ Order") (1) granting the Liquidating Trustee's Motion for Summary Judgment; (2) granting the Liquidating Trustee's and CCIC I, LLC's Joint Motion to Disgorge Unauthorized and Undisclosed Compensation Paid to Rumrell, McLeod & Brock, PLLC (the "Disgorgement Motion"); (3) and denying the Firm's Motion to Allow Late Filing of Final Application for Compensation and Reimbursement of Expenses ("Motion to Allow Late Filing"). [Doc #1-1; Appellate Record, Doc #7, at 1243-54] Oral argument would not materially assist in the determination of this appeal. After full consideration of the record and the parties’ briefs, I AFFIRM the Bankruptcy Court's SJ Order.

I. JURISDICTION

Under 28 U.S.C. § 158(a)(1), this Court has jurisdiction to hear appeals from "final judgments, orders and decrees" of the Bankruptcy Court. There is no dispute that the order that is the subject of this appeal fully adjudicated the parties’ dispute and is final and that this Court has jurisdiction over the appeal.

II. BACKGROUND

The underlying facts are generally undisputed, unless otherwise noted. The background facts were well-stated in the SJ Order and are incorporated herein with some modification and supplementation relevant to this appeal.

The Richard D. Van Lunen Charitable Foundation (the "Foundation" or "Debtor") filed its voluntary petition under Chapter 11 of the Bankruptcy Code on May 16, 2017 ("Petition Date"). R. at 54-57. On the Petition Date, the Foundation filed a Motion for Order Establishing Interim Compensation Procedure for All Professionals and to Approve Retainer to Weinman & Associates, P.C., Debtor's bankruptcy counsel. R. at 59-68. The motion was granted on June 6, 2017. R. at 69-71 (the "Interim Procedures Order"). The Interim Procedures Order established the procedure for awarding interim compensation and reimbursement of expenses to professionals retained to represent the Debtor and required that those professionals file interim formal applications pursuant to 11 U.S.C. § 331. Id. ¶ 2.k. The Interim Procedures Order also provided that:

The Debtor, the U.S. Trustee, and the Creditors’ Committee, as well as any other party-in-interest, shall have the opportunity to formally object to or comment upon the fees and expenses contained in the monthly statements upon the filing of interim and final fee applications in accordance with Sections 330 and 331 of the Bankruptcy Code.

Id. at ¶ 2.h.

On March 6, 2018, the Foundation filed its Application to Employ Rumrell, McLeod & Brock, PLLC as Special Counsel to represent the Foundation in connection with litigation involving a foreclosure case pending in Florida state court. R. at 72-77 ("Application to Employ"). The motion was granted by order dated March 23, 2018. R. at 84 ("Order Authorizing Employment"). The Application to Employ, the attached Affidavit of Richard G. Rumrell (R. at 75-76) and the Order Authorizing Employment all recognize that the Firm would be required to submit requests for compensation to the Bankruptcy Court for approval consistent with the Bankruptcy Code and applicable rules, and that no fees would be paid to the Firm without Court approval. See Application to Employ ¶ 5 ("All fees and expenses associated with the Firm's retention and services will be paid by the Debtor's Chapter 11 estate only upon approval by the Court after a request made in accordance with the requirements of the United States Bankruptcy Code and applicable rules."); Aff. of Richard G. Rumrell ¶ 6 ("I will submit requests for payment of [the Firm's] legal fees and reimbursement of expenses to the Court pursuant to applicable law and orders of this Court."); Order Authorizing Employment (the Firm "shall not be compensated or reimbursed from assets of the Debtor's estate or from assets in which the Debtor's estate may claim an interest except after application to and approval by this Court"). The Certificate of Service attached to the Application to Employ indicates that the Application and proposed order were served on the Firm on March 6, 2018. R. at 74. Mr. Rumrell, a partner in the Firm, testified that he could not recall when he received a copy of the Order Authorizing Employment but he recalled "seeing it." R. at 943 (Rumrell Dep. 34:6-35:20); see also R. at 930 (discovery response admitting that the Firm received the Order).

On February 18, 2019, the First Interim Application for Compensation and Reimbursement of Expenses ("Interim Fee Application") was filed on behalf of the Firm, requesting allowance of $35,217.98 in unpaid compensation for the period from April 30, 2018 through January 22, 2019. R. at 340-46. The Interim Fee Application was signed by Mr. Rumrell and Mr. Weinman, though Mr. Rumrell later stated in a declaration filed with the Firm's Objection to the Motion to Disgorge that Mr. Weinman prepared and filed the document. R. at 679-81. (As the Bankruptcy Court observed in a footnote in the SJ Order, throughout this contested matter, the Firm has maintained that it only sought approval of approximately 25% (or $35,217.98) of the actual fees incurred on an interim basis at the direction of counsel for the Foundation, insofar as it had been paid 75% of its interim fees pursuant to the Interim Procedures Order.) On March 11, 2019, a limited objection to the Interim Fee Application was filed by Monty Titling Trust I ("Monty") (assignor to Appellee, CCIC I, LLC), the Foundation's largest unsecured creditor, R. at 414-17 (the "Monty Objection"), requesting that the proposed order on the Interim Fee Application be revised "to provide that the fees are allowed only on an interim basis pursuant to 11 U.S.C. § 331 and the approved interim compensation procedures, subject to notice and approval on a final basis pursuant to 11 U.S.C. § 330," and that if the Interim Fee Application is granted, Monty expressly reserved the right to object to "any and all final fee applications submitted by or on behalf of the [Firm]." Id. ¶¶ 8, 9.

Mr. Weinman, on behalf of the Firm, subsequently filed a Certificate of Non-Contested Matter, stating that the Firm had conferred with Monty regarding its limited objection and that "the parties have reached a resolution of the Limited Objection in the form of a revised proposed Order attached hereto. Counsel for Monty Titling Trust I has advised undersigned [Mr. Weinman, Debtor's bankruptcy attorney] that the attached proposed order resolves Monty's limited objection." R. at 491-92, ¶ 4. On March 19, 2019, the Bankruptcy Court entered its Order granting the Interim Fee Application, adopting the language in the proposed order, stating that the court would allow "total compensation in the amount of $35,217.98 and reimbursement of expenses in the amount of $0.00, for a total sum of $35,217.98 for the time period from April 30, 2018 through January 22, 2019, such allowance being only on an interim basis pursuant to 11 U.S.C. § 331 and subject to notice and approval on a final basis pursuant to 11 U.S.C. § 330." See Order Allowing Compensation and Reimbursement of Expenses of Rumrell, McLeod & Brock, PLLC ("Order Allowing Compensation"). R. at 502-03. The Firm denies being served a copy of the Monty Objection, the revised proposed order or the Order Allowing Compensation. However, during discovery related to the Motion for Summary Judgment, Mr. Rumrell testified that he received, by email from Mr. Weinman's office: (1) a copy of the Monty Objection on March 12, 2019, the day after it was filed; (2) a copy of the revised proposed order the day it was filed; and (3) a copy of the Order Allowing Compensation either the day it was entered or the next day. R. at 952-56 (Rumrell Dep.).

On January 11, 2019, before the Firm's Interim Fee Application was filed, the Foundation and Monty filed a Joint Chapter 11 Plan of Reorganization (the "Plan") and Disclosure Statement. R. at 184-334. The Disclosure Statement was approved by the Bankruptcy Court by order dated February 1, 2019, in which the court also set a hearing for March 19, 2019 to consider confirmation of the Plan and objections. R. at 335-36. The Disclosure Statement and Plan include multiple references to the allowance of administrative claims on a final basis and to the administrative claim bar date:

Any unpaid Administrative Claims and Priority Claims shall be paid in full on the Effective Date, or as soon thereafter as such Claims are Allowed as final. Disclosure Statement at 4.

Allowed Administrative Claims shall be paid out of the unencumbered Cash in the Debtor's possession. Anticipated Administrative Claims include counsel for the Debtor and other approved professionals of the Debtor. The actual Allowed amounts may vary, and the Liquidating Trustee and any other party in interest shall have the power to review and object to any Administrative Claims before such claims are deemed Allowed as filed. Id. at 13.

Professional Fee Claims. Any Person asserting a Professional Fee Claim against the Debtor shall file with the Bankruptcy Court and serve, pursuant to Local Bankruptcy Rule 9013-1, on all Persons required to receive notice, a Final Fee Application within sixty (60) days

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