Timothy Frazin v. Haynes & Boone, L.L.P.
732 F.3d 313
| 5th Cir. | 2013Background
- Frazin filed a Chapter 13 petition and separately sued Lamajak, Inc. for contract, promissory estoppel, and quantum meruit.
- Frazin sought to employ Griffith & Nixon as special counsel; fees would be paid after court-approved fee applications.
- After partial trial, a jury awarded Frazin $4,000,000 for breach of contract, $1,400,000 for promissory estoppel, and $1,125,000 for quantum meruit; totals and fees were updated in district proceedings.
- Lamajak settled for $3.2 million; proceeds were held in trust pending fee applications for the Attorneys.
- Frazin filed state-law counterclaims against the Attorneys for negligence, DTPA violations, and breach of fiduciary duty; bankruptcy court ruled against negligence and DTPA, found breach of fiduciary duty but no damages, and awarded the Attorneys’ fees; district court affirmed.
- Court addresses Stern v. Marshall to determine whether bankruptcy court could render final judgments on state-law counterclaims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Stern limit bankruptcy court authority to enter final judgments on state-law counterclaims? | Frazin argues Stem requires district/Article III court final adjudication for such counterclaims. | Attorneys contend core proceedings can yield final judgments in some circumstances; prior circuit law allowed it for all core proceedings. | Stem limits final judgments on certain state-law counterclaims; part of Stem overruled Hudson Shipbuilders as to that type. |
| Are Frazin's malpractice claims core and thus resolvable in bankruptcy court alongside fee applications? | Malpractice arises from the same acts as fee applications and should be adjudicated in bankruptcy court. | Claims are independent of fee proceedings and may require Article III adjudication. | Malpractice claims were necessarily resolved in the fee-application process; bankruptcy court could enter final judgment on them. |
| Are Frazin's breach of fiduciary duty claims core and permissible in bankruptcy court? | Breach-of-fiduciary-duty claim seeks fee forfeiture tied to fee applications. | Court can adjudicate in context of fee proceedings and duty analysis. | The breach-of-fiduciary-duty action was resolved in ruling on fee applications; final judgment permissible. |
| Did the bankruptcy court have jurisdiction to enter final judgment on the DTPA counterclaim? | DTPA claims are core or arise from fee dispute; should be adjudicated by bankruptcy court. | DTPA claim was not necessary to resolve the fee applications and should not have final judgment entered. | Bankruptcy court lacked jurisdiction to enter final judgment on the DTPA counterclaim; factual determinations were part of the process but the final judgment on the claim was improper. |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (core vs. non-core and Article III division of powers in bankruptcy)
- Hudson Shipbuilders, Inc. (In re Hudson Shipbuilders, Inc.), 794 F.2d 1051 (5th Cir. 1986) (earlier view allowing final judgments in all core proceedings)
- In re Southmark Corp., 163 F.3d 925, 163 F.3d 925 (5th Cir. 1999) (malpractice claims inseparable from bankruptcy context; core/related discussion)
- Katchen v. Landy, 382 U.S. 323 (1966) (example where bankruptcy process allows adjudication within claims process)
- Osherow v. Ernst & Young, L.L.P. (In re Intelogic Trace, Inc.), 200 F.3d 382 (5th Cir. 2000) (fees award linked to malpractice claims; res judicata considerations)