547 B.R. 490
1st Cir. BAP2016Background
- Debtor filed Chapter 13; Attorney Jeffrey P. White represented him and sought two fee awards (2013 and 2014), both granted by the bankruptcy court.
- The Chapter 13 case was never confirmed and was dismissed June 27, 2014; the court retained jurisdiction over funds held by the trustee to adjudicate fee applications.
- Trustee mistakenly refunded plan funds to the debtor without first paying the 2014 fee award; parties unsuccessfully tried to recover the refunded funds.
- Trustee filed a Motion for Review of Fees and, by stipulation, the parties obtained a June 8, 2015 order reducing unpaid fees to $3,000, which the Trustee paid to Attorney White.
- After the Supreme Court decided Harris v. Viegelahn, the bankruptcy court vacated the June 8 order (Vacating Order), concluded Harris controlled, and denied the Trustee’s Motion for Review of Fees; Attorney White appealed.
- The Bankruptcy Appellate Panel held the Vacating Order was final, found Harris inapplicable to preconfirmation dismissal, reversed the Vacating Order, and remanded for entry of an order consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Harris v. Viegelahn requires return of trustee-held plan payments to debtor on preconfirmation dismissal, preventing payment of allowed attorney fees before refund | White: Harris is limited to conversion; in preconfirmation dismissal §1326(a)(2) and §349(b)(3) allow trustee to pay administrative expenses (attorney fees) before refunding debtor | Trustee/Bankruptcy Ct: Harris controls and requires return of funds to debtor, so prior fee payment/settlement conflicted with Harris | Harris does not apply to preconfirmation dismissal; trustee must follow §1326(a)(2) and may pay allowed administrative expenses before refunding debtor; Vacating Order was an abuse of discretion and reversed |
Key Cases Cited
- Harris v. Viegelahn, 135 S. Ct. 1829 (2015) (Supreme Court holding postpetition wages held by Chapter 13 trustee at conversion to Chapter 7 must be returned to debtor)
- Pinpoint IT Servs., LLC v. Rivera (In re Atlas IT Exp. Corp.), 761 F.3d 177 (1st Cir. 2014) (definition of a final bankruptcy order)
- Spenlinhauer v. O’Donnell, 261 F.3d 113 (1st Cir. 2001) (person-aggrieved test for appellate standing in bankruptcy appeals)
- Massachusetts v. Pappalardo (In re Steenstra), 307 B.R. 732 (1st Cir. BAP 2004) (interaction of §§ 349(b)(3) and 1326(a)(2) on dismissal; trustee may pay administrative expenses before returning funds)