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In re Birch Grove Landscaping & Nursery, Inc.

Name
IN RE BIRCH GROVE LANDSCAPING & NURSERY, INC., Debtor
Attorney(s)
Daniel E. Brick, Esq., 91 Tremont Street, P.O. Box 604, North Tonawanda, NY 14120-0604, Attorney for Trustee, Andreozzi Bluestein LLP, Daniel F. Brown, Esq., of counsel, 9145 Main Street, Clarence, NY 14031, Attorney for Jason and Jennifer Burford, Birch Grove Landscaping & Nursery, Inc. ("Birch Grove") filed a petition for relief under Chapter 11 of the Bankruptcy Code on September 18, 2015. Then, during the pendency of this case in Chapter 11, the debtor in possession commenced an adversary proceeding to avoid various pre-petition transfers that were allegedly made to a former owner, to the decedent's estate of that former owner, to his surviving spouse, and to an affiliated corporation. One of these alleged transfers involved the granting of a security interest in personal property that was subject also to the contested lien of another creditor. Pursuant to 11 U.S.C. § 363(f), upon a finding that the security interests were in bona fide dispute, this Court authorized a series of sales of the collateral. Completed in June of 2017, these sales generated net proceeds of $225,310.71. By agreement, counsel for the debtor was to hold this sum in escrow until further order of the Court., At the request of the debtor, this case was converted to Chapter 7 on July 17, 2017. Then on April 4, 2018, the Court granted the application of the Chapter 7 trustee to employ the law firm of Zdarsky, Sawicki & Agostinelli, LLP, as special counsel. As stated in the trustee's application, the special purpose of employment was "to investigate and prosecute claims under Chapter 5 of the Bankruptcy Code and various provisions of the New York Debtor and Creditor Law." The application for employment further recited that for its services, special counsel would be compensated "on a contingent fee basis of 25% with a minimum fee of $10,000 based on actual time incurred." As anticipated at the time of its appointment, special counsel focused its attention on prosecution of the adversary proceeding that the debtor in possession had already commenced against the decedent's estate of the former owner., On March 6, 2019, special counsel filed a motion on behalf of the Chapter 7 trustee to approve a compromise of the outstanding adversary proceeding and to authorize payment of a contingent fee. With some minor modifications not relevant to the present dispute, the Court approved a settlement stipulation under which the trustee will receive sixty percent of the sale proceeds in full satisfaction of all claims against the defendants in the adversary proceeding. Consequently, the trustee waived recovery of allegedly fraudulent conveyances in an unspecified but substantially greater amount. From the net proceeds of $225,310.71 that are now held in escrow, the bankruptcy estate will receive $135,186.43. A contingent fee of 25 percent of this recovery would result in an allowance for attorney fees in the amount of $33,796.60. Although it asserts a right to the contingent fee, special counsel acknowledges that at customary billing rates, its attorneys recorded time having a value of less than $6,000., In the present instance, more than seven months transpired between the designation of a trustee on July 17, 2017, and entry of an order appointing special counsel on April 4, 2018. During that interval, pursuant to Bankruptcy Rule 7016 and Rule 16 of the Federal Rules of Civil Procedure, this Court scheduled seven pretrial conferences for the adversary proceeding against the estate of the debtor's prior owner. All were adjourned due largely to the trustee's inability to secure special counsel. Already knowing the difficulties that the trustee had encountered, this Court was satisfied with his brief additional explanation for the request to employ Zdarsky, Sawicki & Agostinelli, P.C., on a contingent fee basis. As stated in paragraph 6 of his motion, the trustee believed that "[t]his contingent fee arrangement will eliminate the risk of depletion of the estate in the prosecution of the Claims" and "that this contingent fee arrangement is in the interests of creditors as well as compensating the counsel for time spent in preparing and analyzing the matter." Prior to approving the retention, the Court also had benefit of a statement from the Office of the United States Trustee that it had no opposition to the appointment on the stated terms.

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