In re: Wolverine, Proctor & Schwartz, LLC, 1:07-cv-10279

Background

Wolverine, Proctor & Schwartz (WPS) filed Chapter 7; Trustee pursued administration including litigation and sale of assets. Peter Crawford, former COO, asserted a breach-of-contract claim (including a large treble-damages component) tied to EBITDA treatment; he lost at trial, on appeal, and on certiorari. After those losses he purchased a de minimis bankruptcy claim ($60.52) and objected to the Trustee’s fee applications.
The Trustee defended the Crawford claim (two trials, appeals), retained counsel and an expert (Keith Lowey), and prevailed; the Trustee sought reimbursement of fees and costs from the estate.
Separately, the Trustee sued Tencara, LLC to recharacterize a 2005 loan (and/or equitably subordinate it) based on undercapitalization and alleged insider relationships; the bankruptcy court found for Tencara at bench trial.
At final fee applications the bankruptcy court approved the Crawford-related fee requests (subject to an earlier district-court disallowance of two deposition transcript costs), but reduced the Trustee’s and co-counsel’s requested fees for the Tencara litigation by roughly 50% as excessive and not reasonably likely to benefit the estate.
District court reviews the bankruptcy court’s factual findings for clear error and legal conclusions de novo, with considerable deference to discretionary fee quantifications; Section 330 governs allowance of trustee and professional fees (reasonableness, necessity, benefit to estate).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether bankruptcy court erred in allowing full Crawford-related fees and expenses (including expert and transcript costs)	Crawford: Trustee spent excessive/ unnecessary resources defending an ultimately futile claim; expert fees and transcripts were unnecessary; duplication of effort and disproportionality warrant reductions	Trustee/Riley/Botswick: defenses, experts, and staffing were reasonable and necessary given claim size, procedural posture, and litigation positions Crawford pressed	Affirmed award for Crawford litigation fees except transcript costs for Lowey & Georgiou ($696.15) excluded because district court previously disallowed them under Rule 7054; otherwise no abuse of discretion.
Whether denial of an evidentiary hearing on the fee objections required viewing the record in Crawford’s favor	Crawford: Denial was error and demands de novo factual view favoring him	Trustee: Hearing not required where material facts not disputed and parties had fair opportunity to brief; court may decide on papers	Denial was within discretion; no reversible error and standard of review unchanged.
Whether fees for Tencara litigation should have been reduced (likelihood of success / cost-benefit / hindsight)	Trustee/co-counsel: trial posture and pretrial rulings justified continued pursuit; reduction improperly relied on hindsight and undervalued prospects	Bankruptcy court/Crawford: after close of discovery it became clear success was unlikely; continued costs outweighed expected benefit so fee reduction appropriate	Reduction affirmed. Although bankruptcy court gave weight to results, district court finds sufficient independent basis (unreasonable to continue after close of discovery) to uphold fee reduction.
Whether Crawford waived challenges or may belatedly correct minor arithmetic error in prior cost award	Crawford: preserved issues and seeks $1 clerical correction	Trustee: some arguments waived; arithmetic correction untimely	Most unraised theories waived; Rule 60(a) correction denied as untimely/acquiesced; one-dollar challenge waived.

Key Cases Cited

Casco Northern Bank v. DN Assocs., 3 F.3d 512 (1st Cir.) (standard of appellate review of bankruptcy court decisions)
In re Sullivan, 674 F.3d 65 (1st Cir. 2012) (deferential review of bankruptcy fee awards; lodestar guidance)
Prebor v. Collins (In re I Don’t Trust), 143 F.3d 1 (1st Cir. 1998) (hearing not required in every §330 fee proceeding)
Templeman v. Chris Craft Corp., 770 F.2d 245 (1st Cir. 1985) (taxability of deposition transcript costs if used at trial or special circumstances exist)
Heiser v. Woodruff, 327 U.S. 726 (1946) (prior litigated issue against trustee binding in bankruptcy)
In re Taxman Clothing Co., 49 F.3d 310 (7th Cir.) (trustee’s duty to weigh litigation costs against likely recovery; abandonment rule)
Coutin v. Young & Rubicam Puerto Rico, Inc., 124 F.3d 331 (1st Cir.) (results obtained as an important fee-adjustment consideration in lodestar context)
Hensley v. Eckerhart, 461 U.S. 424 (1983) (lodestar method and role of degree of success in fee awards)