454 B.R. 592
Bankr. D.N.J.2011Background
- Debtors filed chapter 11, plans confirmed; Post-Confirmation Trustee appointed.
- Respondents (DM, Capstone, NM) were treated as allowed administrative claimants under the Plan and to be paid pro rata from recoveries.
- Consent Order (Oct 16, 2008) resolved objections and awarded final, not interim, compensation to Respondents.
- Estate was administratively insolvent at confirmation; Trustee proposes disgorgement to achieve 79.43% pro rata distribution among administrative claimants.
- Trustee seeks disgorgement from Respondents totaling approximately $576,148. + more; Respondents contend final order precludes disgorgement and argue against reconsideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are final fee awards subject to disgorgement under 11 U.S.C. § 330(a)(5)? | Gavin argues implicit possibility of disgorgement in Plan/Consent Order to achieve pro rata | Respondents contend final awards are not subject to disgorgement and Consent Order is final | Final fee awards are not subject to disgorgement under § 330(a)(5). |
| Can relief from the Consent Order be granted under Rule 60(b) for a final order? | Plan Trustee seeks relief to reallocate payments to satisfy pro rata distribution | Final order cannot be vacated; relief untimely and inappropriate | Rule 60(b) relief is unavailable; time limits barred and no extraordinary circumstances shown. |
| Should equitable considerations grant relief from the final Consent Order? | Equity requires disgorgement to equalize distributions among administrative claimants | Settlement relied upon; no express carve-out for disgorgement; finality favors Respondents | Equities weigh against disgorgement; finality and settlement reliance favored. |
Key Cases Cited
- Specker Motor Sales Co. v. Eisen, 393 F.3d 659 (6th Cir. 2004) (interim fees may be disgorged; final treatment distinguished)
- In re Lochmiller Indus., Inc., 178 B.R. 241 (Bankr.S.D. Cal. 1995) (interim awards disgorgement; final awards treated differently)
- Specker Motors I, 300 B.R. 687 (Bankr.W.D. Mich. 2003) (interim payments subject to disgorgement; final not plainly so)
- St. Joseph Cleaners, Inc., 346 B.R. 430 (Bankr. W.D. Mich. 2006) (interim payments subject to disgorgement; finality not dispositive)
- In re Shop N' Go P'ship (Schwab v. United States, IRS), 261 B.R. 810 (Bankr. M.D. Pa. 2001) (final settlements discussed; policy of settlements favored)
- Begier v. IRS, 496 U.S. 53 (1990) (equality of distribution among creditors; plan distributions)
- In re Anolik, 207 B.R. 34 (Bankr. D. Mass. 1997) (settlement integrity and expectations aiding finality)