Sky Enters. v. Seawalk Invs.
Docket Number | 3:21-cv-1148-TJC |
Decision Date | 29 August 2023 |
Parties | SKY ENTERPRISES, LLC, Appellant, v. SEAWALK INVESTMENTS, LLC, Appellee. |
Court | U.S. District Court — Middle District of Florida |
ORDER
Appellant Sky Enterprises, LLC appeals four of the bankruptcy court's orders: (1) Findings of Fact and Conclusions of Law (Doc. 3-4); (2) Order Confirming Debtor Seawalk Investments, LLC's Third Amended Chapter 11 Plan of Reorganization (Doc. 3-616); (3) Order Valuing Debtor's Real Property (Doc. 3-620); and (4) Order Valuing Sky Enterprises, LLC's Secured Claim (Doc. 3-623). Sky raises the following six issues on appeal:
(Doc. 9 at 11). On March 27, 2023, the Court held oral argument on all six issues, the record of which is incorporated by reference. (Doc. 22).
“A bankruptcy court's conclusions of law are reviewed de novo while its findings of fact are reviewed under the clearly erroneous standard.” In re Gunn, 387 B.R. 856, 860 (M.D. Ala.), affd, 317 Fed.Appx. 883 (11th Cir. 2008) (citing Gen. Trading Inc. v. Yale Materials Handling Corp., 119 F.3d 1485, 1494 (11th Cir. 1997)). “Valuation is a mixed question of law and fact.” In re Westport Holdings Tampa, LP, 604 B.R. 82, 87 (M.D. Fla. 2019) (citing In re Seaside Eng'g & Surveying, Inc., 780 F.3d 1070, 1075 (11th Cir. 2015)). “Selection of a valuation method is a legal matter subject to de novo review, and findings made under that standard are facts subject to clear error review.” Id. (citing In re Seaside, 780 F.3d at 1075). “The Court reviews a bankruptcy court's award or denial of attorney's fees for an abuse of discretion.” In re Grunau, 376 B.R. 322, 328 (M.D. Fla. 2007) (Howard, J.) ( ).
The Court reviewed the parties' briefs, the bankruptcy court record (including the bankruptcy court's orders, hearing transcripts, and the parties' other filings), and heard oral argument from the parties. The Court concludes that the bankruptcy court's conclusions of law were correct, and its factual findings regarding the approval of Seawalk's plan, rejection of Sky's plan, and the $4.75 million valuation of the Property were not clearly erroneous.
The Court determines that the case should be remanded to the bankruptcy court to clarify its attorneys' fee determination. Sky requested that the bankruptcy court value its claim at $1,092,761.49 ($741,960.76 in principal balance; $19,411.64 in accrued interest; $294,383.39[1] in attorneys' fees; $25,000 in expert witness costs; and $12,005.70 in other costs). (Doc. 3-4 at 9, 15). The bankruptcy court agreed with the principal balance and interest calculations, but it cut attorneys' fees to $50,000 and declined to award expert witness fees and other costs.[2] Id. at 16.
The parties do not dispute that the value of Sky's secured claim includes reasonable attorneys' fees. See (Doc. 3-4 at 9) () (citation omitted) (alterations in original). Sky is entitled to recover attorneys' fees to enforce its rights despite being an oversecured creditor. See 11 U.S.C. § 506(b) (). “[A] party seeking relief under [§ 506(b)] must demonstrate: (1) that its claim is oversecured in excess of the fees and costs requested; (2) that the agreement between the secured party and the debtor provides a claim for attorneys' fees and costs; and (3) that the fees and costs sought are reasonable.” In re Reorganized Lake Diamond Assocs., LLC, 367 B.R. 858, 874 (Bankr. M.D. Fla. 2007). The first two elements are undisputed here.
In considering the final element, in In re Reorganized Lake Diamond (, )the bankruptcy court stated that:
The federal lodestar approach is utilized in determining reasonable attorneys' fees. [In re Pak, 252 B.R. 215, 220 (Bankr. M.D. Fla. 2000)] (citation omitted). Under the lodestar approach, courts consider the number of hours of service reasonably devoted to the case multiplied by the attorneys' reasonable rates, and reduced or enhanced according to the twelve-factor test enumerated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974)[,. Pak, 252 B.R. at 220 (citing Grant v. George Schumann Tire & Battery Co., 908 F.2d 874, 877 (11th Cir. 1990)). Therefore, a court must “1) determine the nature and extent of the services rendered; 2) determine the value of those services; and 3) consider the factors laid out in [Johnson] and explain how they affect the award.” Grant, 908 F.2d at 877-78 (citation and footnotes omitted); see also Pak, 252 B.R. at 219 (citing Grant, 908 F.2d at 877). In considering the Johnson factors, however, “[e]ach . . . factor . . . must be considered in light of the other factors, and ‘a genuine balance must be struck by the bankruptcy judge.'” Grant, 908 F.2d at 879 (quoting In re U.S. Golf Corp., 639 F.2d 1197, 1205 (5th Cir.1981)).
In re Reorganized Lake Diamond, 367 B.R. at 875 (alterations in original). The Johnson factors include:
In re Reorganized Lake Diamond, 367 B.R. at 867 (quoting In re Digital Prods. Corp., 215 B.R. 478, 482 (Bankr. S.D. Fla. 1997)) (determining fees in the § 506(b) context) (emphasis added).
Here the bankruptcy court discussed why a similar creditor would not have incurred as many fees as Sky did. (Doc. 3-4 at 16). It cited facts such as Sky's significant equity cushion, that Sky had no risk of loss, and Sky's ulterior motive to buy the property. Id. The bankruptcy court then found that $50,000 in fees (out of the $294,383.39 requested) was appropriate. Id. The bankruptcy court provided a sufficient explanation as to why Sky should not be awarded its full attorneys' fees; however, it did not discuss what a reasonable number of hours would be, the Johnson factors, or generally how it determined the $50,000 figure. The Court is unable to determine...
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