Case Law
Decision Date
21
Mar 2019
Name
IN RE A TOP NEW CASTING, INC., Debtor
Attorney(s)
James M. Joyce, Esq., 4733 Transit Road, Lancaster, New York 14043, Attorney for the Debtor, Hodgson Russ LLP, Garry M. Graber, Esq., 140 Pearl Street, Suite 100, Buffalo, New York 14202-4014, Attorney for Creditor Bodum USA, Inc., Office of the U.S. Trustee, Joseph W. Allen, Esq., Olympic Towers, 300 Pearl Street, Suite 401, Buffalo, New York 14202-2523, Attorney for U.S. Trustee, The debtor in this Chapter 11 case has moved under 11 U.S.C. § 327(e) for authority to employ special counsel. The focus of the present dispute is whether the Court should also allow the debtor to pay a retainer of $20,000 to the proposed attorney., Based on a stipulation signed by counsel for the debtor and for Bodum, this Court previously granted partial relief from the automatic stay under 11 U.S.C. § 362, "for the sole purpose of permitting final resolution of all matters, including appeals, remaining to be adjudicated and/or ruled on" in the trade dress infringement action. This stay relief expressly excluded any acts to collect on the final judgment. Hoping to reverse the trial decision, the debtor has now moved to employ James Benak, Esq., to serve as its special counsel on an appeal to the United States Court of Appeals for the 7th Circuit. In papers signed by its principal, the debtor advises that Benak is familiar with the case, in that he had represented the debtor at the trial. The proposed employment agreement calls for the debtor to advance a retainer of $20,000. Although this sum is to be paid from property of the bankruptcy estate, the debtor's principal has guaranteed and agreed to pay any legal fees in excess of the retainer. Notwithstanding any fee arrangement, however, the debtor's counsel has agreed that any allowances will require the further approval of this Court., "The trustee, with the court's approval, may employ for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debtor, if in the best interests of the estate, and if such attorney does not represent or hold any interest adverse to the debtor or to the estate with respect to the matter on which such attorney is to be employed.", Attorneys for Bodum and for the Office of the United States Trustee appeared at the hearing on the motion for authority to appoint special counsel. Bodum objected to employment that would require the use of estate assets to pay a retainer. If authorized, a payment of $20,000 would dissipate the majority of the debtor's available cash. As the holder of approximately eighty percent of all claims, Bodum argued that the estate should instead reserve those funds for payment on account of outstanding obligations. This creditor complained that otherwise, the debtor essentially asks Bodum to finance litigation against itself., This Court expresses no view on the likelihood of success on any appeal of Bodum's outstanding judgment. Rather, we merely find no reason to reject the debtor's exercise of its business judgment on the questions of whether and how to pursue an appeal. In particular, the Court finds no reason for concern with regard to the amount of a retainer, especially inasmuch as those funds serve only as security and remain property of the estate until such time as this Court approves a fee allowance., Although Bodum has obtained a non-final judgment, it has no perfected lien against assets of the debtor. With regard to the use of estate assets, therefore, it holds only the same interest as any other unsecured creditor. From a practical perspective, Bodum may have more to lose from the proposed financing of an appeal. However, its opposition carries no special weight with regard to the justification for retention of counsel, which here depends on whether the proposed employment will fulfill the best interests of the bankruptcy estate.
ABI Membership is required to access the full summary of In re A Top New Casting, Inc. Please sign in if you are already an ABI member, or otherwise you may Become an ABI Member