500 B.R. 163
Bankr. M.D. Fla.2013Background
- Creditors investigated the Debtors’ alleged Ponzi scheme in state court after suing Engler and Private Commercial Office.
- Creditors filed involuntary bankruptcy petitions in March 2008 and obtained an order for relief in April 2008; Tar-dif became Trustee.
- Creditors’ counsel Fowler White rendered pre-petition services investigated assets and grounds for filing, later serving as special counsel to the Trustee.
- Creditors seek administrative expenses under 11 U.S.C. § 503(b)(3)(A) for pre-petition work and under § 503(b)(3)(B) for post-petition work aiding asset recovery.
- Court preliminarily approved fee requests; Trustee objected to most amounts; summary judgment briefing ensued.
- Court holds pre-petition work not recoverable unless it would not have been done but for the involuntary case; post-petition work requires court-approved recovery under § 503(b)(3)(B).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether pre-petition research is recoverable under § 503(b)(3)(A). | Creditors: work directly related to filing; includes pre-petition research. | Trustee: work would have been done anyway; not direct to petition. | Not recoverable; pre-petition work would have occurred absent filing. |
| Whether pre-petition work would have been done but for the involuntary case, affecting recoverability. | Research was directly related to filing and essential. | Work would have occurred regardless of petition. | Court adopts bright-line that pre-petition work that would have been done anyway is not recoverable. |
| Whether post-petition fees can be recovered under § 503(b)(3)(B) without prior court approval. | Creditors contributed to estate recovery; should be reimbursed. | Prior court approval required; absent it, no recovery. | Prior court approval required; no recovery for post-petition fees. |
| Whether any extraordinary circumstances justify nunc pro tunc approval to allow post-petition recovery. | Alternatively, such approval should be available to avoid chilling creditor participation. | No extraordinary circumstances; cannot bypass explicit requirement. | No nunc pro tunc relief; three tests require prior approval and none satisfied. |
Key Cases Cited
- In re Hanson Indus., Inc., 90 B.R. 405 (Bankr.D.Minn.1988) (pre-petition fees only recoverable if closely tied to filing; timing not sole test)
- In re Baldwin-United Corp., 79 B.R. 321 (Bankr.S.D.Ohio 1987) (pre-petition research may be allowable; contextualized for involuntary cases)
- In re Crazy Eddie, Inc., 120 B.R. 273 (Bankr.S.D.N.Y.1990) (recognizing limitations of broad administrative expense recovery)