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In re United Plastic Recycling, Inc.

United States District Court, M.D. Alabama, Northern Division

November 3, 2017

IN RE UNITED PLASTIC RECYCLING, INC.

          MEMORANDUM OPINION AND ORDER

          W. KEITH WATKINS CHIEF UNITED STATES DISTRICT JUDGE.

         In its September 29, 2017 Memorandum Decision, the bankruptcy court determined that Gilpin Givhan, P.C. (“Gilpin”) was entitled to far less compensation than it requested for its role as special counsel. Gilpin ultimately requested $110, 151.00 in professional fees, and the court reduced that amount by 35%, resulting in an award of $71, 598.00. Gilpin now seeks leave to file an interlocutory appeal challenging the bankruptcy court's decision, asking this court to reverse the bankruptcy court's limitation on Gilpin's professional fee award for its work as special counsel. Because Gilpin cannot show that this case warrants interlocutory review, its Motion for Allowance of Leave to Appeal (Doc. # 1-3) is due to be denied.

         I. JURISDICTION AND VENUE

         The court has jurisdiction to review the Order of the bankruptcy court under 28 U.S.C. § 158(a), which provides district courts with jurisdiction “to hear appeals . . . with leave of the court, from interlocutory orders and decrees, of bankruptcy judges.” Venue is proper because an appeal “shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving.” Id.

         II. FACTS AND PROCEDURAL HISTORY

         In 2014 and through the first nine months of 2015, United Plastic Recycling, Inc. and United Lands, LLC (collectively, “United”) experienced more than $2 million in operating losses in addition to significant losses resulting from the decrease in value of United's inventory. (Dec. at 3.)[1] United owed Renasant Bank approximate $7.3 million, and Renasant held mortgages and security interests in substantially all of United's property. (Dec. at 3.) The loan became due on September 15, 2015. (Dec. at 3.) On September 23, 2015, United's majority owner and manager took his life, resulting in a $6 million insurance policy payout to United. (Dec. at 4.) On October 16, 2015, United, with a new manager, filed petitions for bankruptcy pursuant to Chapter 11 of the Bankruptcy Code, which the bankruptcy court later consolidated for joint administration on November 20, 2015. (Dec. at 2.)

         Gilpin made its Application for Employment of Professional Persons on October 30, 2015, and the bankruptcy court appointed it special counsel on November 20, 2015, (Doc. # 1-3, at 1), because of its familiarity with United and United's business operations. (Dec. at 8.) According to Gilpin, it provided “substantial legal services . . . to both developer [and] buyer” and “provide[d] access to due diligence in the process.” (Doc. # 1-3, at 2.)

         Eventually, on January 4, 2017, the bankruptcy court entered a final order approving the sale of substantially all of United's assets. (Doc. # 1-3, at 2.) On January 24, 2017, Gilpin submitted its Application to Approve Professional Fees and Expenses, requesting $130, 191.91 under 11 U.S.C. § 330. (Doc. # 1-3, at 2; see Dec. at 5.) It later “clarified” its application, (Doc. # 1-3, at 2), to change the total to $119, 965.75 in professional fees before later decreasing that amount by 10% in response to the bankruptcy court's concerns. (Dec. at 9.)

         In its decision issued on September 29, 2017, the bankruptcy court further reduced Gilpin's professional fee award, cutting the amount by an additional 35% to bring the total to $71, 598.00. (Dec. at 10.) The bankruptcy court criticized Gilpin's work, specifically noting how it found much of Gilpin's work to be unnecessary:

It appears that much of Gilpin's work was done under the assumption that work necessary in the sale of a corporation outside of § 363 is also necessary in a § 363 sale. This is a false assumption; thus, much unnecessary work was done and a significant reduction in fees is appropriate.
Second, in reviewing Gilpin's application, the Court detects little or no attempt to avoid duplicating efforts of Memory and Day, counsel for the Debtor. . . . Gilpin should have been selling assets, not flyspecking loan documents and the file.

(Dec. at 9.) Because so much of Gilpin's work did not advance the sale of the assets-the reason United hired Gilpin-the court saw fit to reduce Gilpin's award by 35%. (Dec. at 10.) See Loranger v. Stierheim, 10 F.3d 776, 783 (11th Cir. 1994) (The court “need not engage in an hour-by-hour analysis. Rather, once the district court determines how many hours were actually devoted to the conduct of the federal litigation, it may then reduce that figure in gross if a review of the . . . fee request warrants such a reduction.”).

         Subsequently, Gilpin filed this Motion for Allowance of Leave to Appeal the bankruptcy court's interlocutory order in accordance with 28 U.S.C. § 158(a).

         III. ...


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