In re: Jim Slemons Hawaii, Inc.

FILED
OCT 12 2011
1
SUSAN M SPRAUL, CLERK
2 U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5
6 In re: ) BAP No. HI-10-1284-JuPaD
) BAP No. HI-10-1403-JuPaD
7 JIM SLEMONS HAWAII, INC., ) BAP No. HI-10-1404-JuPaD
) BAP No. HI-10-1405-JuPaD*
8 Debtor. ) (related appeals)
______________________________)
9 JIM SLEMONS HAWAII, INC.; ) Bk. No. 09-01802
ANTHONY P. LOCRICCHIO, )
10 )
Appellants, )
11 )
v. ) M E M O R A N D U M**
12 )
OFFICE OF THE UNITED STATES )
13 TRUSTEE; CONTINENTAL )
INVESTMENT COMPANY, LTD., )
14 )
Appellees. )
15 ______________________________)
16
Argued and Submitted by Video Conference on September 22, 2011
17 at Pasadena, California
18 Filed - October 12, 2011
19 Appeal from the United States Bankruptcy Court
for the District of Hawaii
20
21
22
*
23 While not formally consolidated, these four related
appeals were heard at the same time and were considered together.
24 This single disposition applies to the four appeals, and the
clerk is directed to file a copy of this disposition in each
25 appeal.
26 **
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8013-1.
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1 Honorable Robert J. Faris, Chief Bankruptcy Judge, Presiding***
Honorable Lloyd King, Recalled Bankruptcy Judge, Presiding****
2 _______________________
3 Appearances: Anthony P. Locricchio, Esq. argued for Appellant
Jim Slemons Hawaii, Inc. and himself pro se;
4 Noah M. Schottenstein, Esq. argued for Appellee
Office of the United States Trustee; and Jerrold
5 K. Guben, Esq., of O’Connor, Playdon & Guben LLP,
argued for Appellee Continental Investment
6 Company, Ltd.
_________________________
7
8 Before: JURY, DUNN, and PAPPAS, Bankruptcy Judges.
9
10 Appellant, chapter 111 debtor Jim Slemons Hawaii, Inc.,
11 appeals from five orders entered by the bankruptcy court:
12 (1) Order Denying Debtor’s Motion To Disqualify Bankruptcy
13 Judge (BAP No. 10-1284);
14 (2) Order Regarding Motion To Set Aside Judgment Re:
15 Termination Of Non-Residential Lease (BAP No. 10-1403);
16 (3) Order Regarding Motion to Pay § 365(d)(3)
17 Administrative Expense and Request For Payment of Sublessee
18 Rents (BAP No. 10-1404);
19 (4) Order Regarding Motion To Pay Only Certain Rent
20 Payments And to Have Credited $85,000 Plus Interest And
21 Penalties Against Rent Payments For Remainder Of August And All
22
***
23 Judge Faris entered all the orders on appeal except for
the Order Denying Debtor’s Motion To Disqualify Bankruptcy Judge
24 (BAP No. 10-1284).
25 ****
Judge King entered the Order Denying Debtor’s Motion To
26 Disqualify Bankruptcy Judge (BAP No. 10-1284).
1
27 Unless otherwise indicated, all chapter, section and rule
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
28 to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
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1 Of September And To Set Evidentiary Hearing And Permit Discovery
2 Sworn Depositions On This Matter (BAP No. 10-1405); and
3 (5) Order Dismissing Case (BAP No. 10-1284).
4 Appellant, Anthony P. Locricchio (“Locricchio”), debtor’s
5 bankruptcy counsel, appeals the Order Denying Application for
6 Professional Compensation By Debtor’s Counsel (BAP No. 1284).
7 For the reasons stated, we AFFIRM each of these orders.
8 I. FACTS
9 On March 21, 1983, Slemons Enterprises, Inc. (“SEI”), as
10 lessee, and appellee, Continental Investment Company, Ltd.
11 (“CIC”), as lessor, entered into a lease for three parcels of
12 real property located on Kamehameha Highway, Aiea, Hawaii. In
13 1992, SEI assigned the lease to debtor. Debtor and CIC entered
14 into a second lease dated April 15, 1993, for two additional
15 parcels of real property also located on Kamehameha Highway
16 (hereinafter, we refer to the 1983 lease and the 1993 lease as
17 the “Lease”).
18 Debtor’s monthly lease payments to CIC were $61,300. To
19 meet its obligation, debtor subleased the property to Tony
20 Hawaii Corp. (“Tony Honda”) for $42,632 per month and Car
21 Stereo, Inc. (“Car Stereo”) for $10,000 per month, with the
22 remaining subleases to other parties to make up the difference.
23 Debtor did not conduct any business on the leased property.
24 At some point, a portion of the leased property became
25 subject to an eminent domain proceeding by the City of Honolulu
26 for the development of a fixed rail system. Debtor evidently
27 concluded that the portion of the leased property that was not
28 subject to the eminent domain proceeding was extremely valuable
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1 because it could be used for parking and passenger services.
2 The record indicates that debtor’s relationships with Tony
3 Honda, Car Stereo, and CIC were strained prior to debtor’s
4 bankruptcy filing. Debtor alleged that CIC wrongfully collected
5 rental payments directly from Tony Honda. Debtor further
6 alleged that CIC was engaged in conspiracy with Tony Honda and
7 Car Stereo to oust it from the property. According to debtor,
8 CIC’s motivation as lead conspirator was to obtain the
9 condemnation funds for itself and develop the property for a
10 parking and passenger services area for the nine years remaining
11 on debtor’s Lease.2
12 In March 2009, debtor defaulted on the Lease.
13 Bankruptcy Events
14 On August 10, 2009, debtor filed a chapter 11 bankruptcy
15 case to prevent eviction by CIC. Debtor’s petition described
16 its business as a single real estate lease that it subleased and
17 showed Jim Slemons as debtor’s 100% owner. Debtor’s schedules
18 showed that the Lease was the main asset of the bankruptcy
19 estate, with debtor’s only source of income from its subtenants.
20 In Schedule B, Debtor listed a condemnation claim against the
21 City of Honolulu in the estimated amount of $750,000. The
22 schedules further showed that debtor had no secured creditors
23 and three unsecured creditors, one of which was CIC listed with
24 a disputed claim of $225,000.
25 Under § 365(d)(4)(A) and (B), the deadline for debtor to
26
27
2
We describe the disputes between the parties in further
28 detail below.
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1 assume the Lease or move for an extension of time to assume was
2 December 8, 2009. The record reveals that Locricchio’s failure
3 to abide by these statutory directives led to the rejection of
4 the Lease and the eventual dismissal of debtor’s case.
5 A. Locricchio’s Employment
6 On September 28, 2009, appellant Locricchio filed his
7 application to be employed as debtor’s attorney. The United
8 States Trustee (“UST”) objected on the grounds that Locricchio
9 failed to make the appropriate disclosures under § 329(a) and
10 Rule 2016(b). The UST also questioned Locricchio’s experience
11 in the chapter 11 arena due to a number of administrative issues
12 that arose soon after the filing of the case.3
13 On October 19, 2009, the bankruptcy court heard the matter
14 and tentatively approved Locricchio’s employment conditioned on
15 his providing the necessary disclosures. The court also
16 expressed its view that Locricchio and debtor should consider
17 associating with an attorney who had chapter 11 experience.4
18 One day later, Locricchio provided the necessary
19 disclosures. On January 1, 2010, the court entered the order
20 approving his employment.
21 ///
22
23
3
Among other things, the UST complained that debtor had not
24 filed a Statement of Financial Affairs, had not opened a proper
debtor-in-possession bank account, did not have a Federal Tax
25
Identification number, did not have a General Excise Tax license,
26 had not filed a designation of responsible person, and had not
filed an operating report for August 2009.
27
4
Locricchio represented at the hearing on these appeals
28 that he specialized in eminent domain proceedings.
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1 B. CIC’s Motion For Timely Payment of Post-Petition Rent
2 On August 25, 2009, CIC moved for the timely payment of
3 postpetition rent under § 365(d)(3).
4 On October 7, 2009, CIC filed a supplemental pleading in
5 support of its motion to address debtor’s statement in its
6 August 2009 operating report that CIC had wrongfully taken the
7 June and July 2009 rental checks from Tony Honda. CIC
8 maintained that Tony Honda’s rental payments directly to CIC
9 were consistent with an agreement in effect since October 21,
10 1998.
11 CIC’s supplemental pleading also revealed that prior to
12 debtor’s bankruptcy filing, on July 7, 2009, Locricchio wrote to
13 Tony Honda’s counsel, Ms. Sugimura, directing that Tony Honda
14 make its rental payments to debtor rather than to CIC.
15 Locricchio also stated that debtor would have the bankruptcy
16 court make a determination whether Tony Honda’s conduct caused
17 debtor economic harm.5 In response to the letter, Tony Honda
18 evidently paid its August 2009 rent to debtor.
19 CIC also stated that it paid the real property taxes for
20 July 1, 2009 to December 31, 2009, even though debtor was
21 required to make those payments under the Lease. Finally, CIC
22 stated that it credited all amounts received, whether from Tony
23 Honda or debtor, to debtor’s account and attached the supporting
24 documentation.
25 On October 8, 2009, debtor opposed CIC’s motion. Debtor’s
26
27
5
This statement was made more than a month before the
28 bankruptcy case was filed.
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1 opposition was based on CIC’s alleged lack of standing to bring
2 the motion because the motion and memorandum in support
3 occasionally referred to CIC as Consolidated Investment Company,
4 Ltd. rather than Continental Investment Company, Ltd. Debtor
5 made no other arguments in opposition.
6 On October 9, 2009, CIC filed a second supplement to its
7 motion further clarifying that the payments made by Tony Honda
8 to CIC were authorized by the October 21, 1998 letter agreement.
9 CIC also attached accounting records for May, June and July 2009
10 and renewed its request for an order requiring debtor to pay
11 postpetition rent as it became due.
12 On the morning of October 19, 2009 — the day of the hearing
13 on CIC’s motion — debtor filed a pleading labeled as a motion
14 without notice of a hearing date. In the motion, debtor sought
15 to (1) obtain a $85,000 credit against rent payments due CIC for
16 the remainder of August and all of September; (2) pay the
17 October rent; and (3) set an evidentiary hearing for the
18 resolution of various disputes (hereinafter, the “Rent Offset
19 Motion”). The factual basis for the offset of postpetition rent
20 was CIC’s alleged conspiracy with Tony Honda to deprive debtor
21 of sublease funds and CIC’s attempt to force debtor out of
22 bankruptcy so that CIC could use the property to profit for
23 itself.
24 Debtor described its dispute with Car Stereo, which had
25 defaulted on its rent payments postpetition. Debtor contended
26 that Car Stereo refused to pay its rent because of an “alleged
27 fraudulent agreement” where debtor had orally agreed to pay 75%
28 of Car Stereo’s electric bill. Debtor asserted that no such
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1 agreement ever existed. Debtor also alleged that the owners of
2 Car Stereo fraudulently altered the sublease document between
3 debtor and itself to extend the term of lease at the same rent.
4 Because Car Stereo and Tony Honda were represented by
5 Ms. Sugimura, debtor implied in its motion that Car Stereo was
6 also part of the conspiracy with Tony Honda and CIC to oust
7 debtor from the property.
8 The Rent Offset Motion also described other disputes
9 between debtor and Tony Honda. Debtor alleged that Tony Honda
10 had subleased the property without debtor’s permission and had
11 kept the rental payments for itself. Further, to add to
12 debtor’s troubles, Tony Honda had informed debtor that it would
13 not pay debtor rent beginning with the October 2009 payment.
14 Tony Honda’s reason for withholding rent was due to debtor’s
15 alleged failure to abide by an agreement which required debtor
16 to complete some environmental remediation work on the property
17 leased to Tony Honda. Debtor maintained that it had already
18 paid for that work.
19 In the end, debtor’s thirty-six page motion sought an
20 offset of rent of $85,000 for the months of August and September
21 2009 due to CIC’s wrongful collection of prepetition rents from
22 Tony Honda in June and July 2009 and an undisclosed amount of
23 damages due to the alleged wrongful conduct of its subtenants
24 and CIC.
25 At the October 19, 2009 hearing, the bankruptcy court
26 stated that it had not read debtor’s papers that were filed that
27 morning because they were untimely. The court further explained
28 that it would address whether the August and September rents had
-8-
1 to be paid when the Rent Offset Motion came on for hearing. The
2 court also summarily rejected debtor’s opposition based on the
3 “typo” in the name of CIC in its pleadings. Finally, the court
4 granted CIC’s motion, but opined that it was unclear what the
5 consequences would be if debtor did not comply with § 365(d)(3).
6 After some discussion with CIC’s counsel about possible
7 consequences, the court observed that the nonpayment of rent
8 could be a factor in considering whether to grant debtor an
9 extension of time to assume the Lease or if CIC sought to lift
10 the stay.6 However, the court concluded by stating that these
11 issues would be left for “another day.” Hr’g Tr. (October 19,
12 2009) at 17:1-4.
13 The court entered the order granting CIC’s motion on
14 November 9, 2009. The order clearly stated that debtor was
15 required to pay the monthly rent or prorated monthly rent for
16 the postpetition period from the petition date; it did not
17 relieve debtor from paying August or September rent. Although
18 the order was inconsistent with the court’s statements at the
19 hearing that it would leave the issue of offset for “another
20 day,” debtor did not appeal the November 9, 2009 order and it
21 became a final order in the case.
22 On November 22, 2009, debtor tendered $80,300 to CIC for
23 postpetition rent and other obligations. Because CIC had
24
6
As described below, debtor construes the court’s comments
25 as a “threat” that it would deny debtor any extension of time to
26 assume the Lease if it was not current on postpetition rent.
Throughout its briefs, debtor uses this alleged “threat” to show
27 the bankruptcy judge’s bias and prejudice against it and to
explain why debtor never filed a motion for an extension of time
28 (because it would have been denied).
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1 calculated the postpetition amount due as $347,606.27, CIC
2 returned the check to debtor on December 3, 2009, contending
3 that debtor’s payment did not comply with the bankruptcy court’s
4 November 9, 2009 order and that debtor was now in default. It
5 was at this point that Locricchio contends he first learned
6 about the contents of the November 9, 2009 order, which he
7 claims was fraudulently submitted and obtained by CIC’s counsel.
8 C. CIC’s Motion To Terminate The Lease
9 The December 8, 2009, deadline for assuming the Lease came
10 and went without debtor filing a motion to assume the Lease.
11 § 365(d)(4)(A). Moreover, debtor did not move to extend the
12 time to assume the Lease under § 365(d)(4)(B) within the 120-day
13 period. As a result, on December 23, 2009, CIC filed a motion
14 seeking (1) a declaration from the bankruptcy court that the
15 Lease was terminated and (2) an order directing debtor to
16 surrender the premises (the “Lease Termination Motion”).
17 On January 8, 2010, debtor filed an opposition, contending,
18 among other things, that its Rent Offset Motion barred CIC from
19 seeking to terminate the Lease until the court ruled on the
20 various disputes. Debtor further asserted that its Rent Offset
21 Motion made clear that it had assumed the unexpired Lease under
22 § 365(d)(4). Finally, debtor maintained that once CIC filed its
23 motion seeking timely payment of the postpetition rent, it was
24 barred from claiming that debtor had not assumed the Lease.
25 At the January 19, 2010 hearing, the court took the matter
26 under advisement due to debtor’s complaint that CIC gave debtor
27 twenty-seven days notice instead of twenty-eight days. The
28 court gave debtor until February 11, 2010, to file a
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1 supplemental memorandum and CIC’s counsel was given to
2 February 18, 2010, to file a reply.7 Debtor requested a further
3 extension to February 18, 2010, which the bankruptcy court
4 granted, and the time for CIC’s reply was extended to
5 February 25, 2010.
6 In debtor’s supplemental pleading filed on February 18,
7 2010, debtor accused the bankruptcy judge of being biased and
8 stated that it would be filing a motion to disqualify him.
9 On February 22, 2010, before the filing of CIC’s reply, the
10 bankruptcy court issued a Memorandum Decision, finding that the
11 Lease was rejected on December 9, 2009, by operation of law
12 under § 365(d)(4). Citing Sea Harvest Corp. v. Riviera Land
13 Co., 868 F.2d 1077 (9th Cir. 1989), the bankruptcy court
14 rejected debtor’s argument that its Rent Offset Motion
15 constituted a properly noticed and timely motion to assume the
16 Lease. The court also observed that a debtor must pay
17 postpetition rent under § 365(d)(3) even if it later decided to
18 reject the lease. Finally, because debtor had mentioned in its
19 papers that it intended to file a motion for recusal, the
20 bankruptcy judge addressed the issue in the Memorandum Decision,
21 concluding there was no basis for his disqualification.
22 The court entered judgment for CIC on March 3, 2010 (the
23 “Termination Judgment”).
24
25
7
26 CIC filed its motion on December 23, 2009, and the hearing
was set for January 19, 2010. Because the motion was filed
27 during the holiday season and Locricchio did not participate in
the court’s non-mandatory electronic filing system which provides
28 immediate notice, the court gave debtor additional time.
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1 D. Debtor’s Recusal Motion
2 On February 23, 2010 — one day after the court issued its
3 Memorandum Decision terminating debtor’s Lease — debtor filed a
4 motion to disqualify Bankruptcy Judge Robert Faris (the “Recusal
5 Motion”). Debtor alleged that the judge overlooked CIC’s
6 procedural irregularities and considered pleadings it should
7 have stricken. Specifically, debtor asserted that the court
8 should have stricken CIC’s Lease Termination Motion because of
9 the insufficient notice (twenty-seven days instead of twenty-
10 eight). Debtor also alleged that CIC’s counsel was part of a
11 “bankruptcy club,” which was a social luncheon gathering of
12 bankruptcy attorneys that the bankruptcy judge regularly
13 attended, and which excluded some attorneys from attending.
14 Finally, debtor alleged that the court rushed out its
15 February 22 memorandum on CIC’s Lease Termination Motion due to
16 the possible delay caused by debtor’s notice of its yet-to-be-
17 filed Recusal Motion.
18 Debtor’s motion was set for hearing on April 26, 2010,
19 before recalled Bankruptcy Judge Lloyd King.8 On April 7, 2010,
20 debtor filed an ex parte motion to stay the hearing so that it
21 could conduct an investigation into the court’s internal
22 procedures. The investigation would supposedly uncover whether
23 Judge Faris had improperly back-dated his Memorandum Decision
24
25 8
A federal judge who is the subject of a recusal motion may
26 hear that motion himself. United States v. Sibla, 624 F.2d 864,
867-68 (9th Cir. 1980). To avoid any appearance of conflict or
27 bias, some districts or divisions use a procedure that had a
different judge rule on a recusal motion. The District of Hawaii
28 used this optional procedure.
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1 from February 24 to February 22 due to debtor’s pending Recusal
2 Motion. Judge King denied debtor’s ex parte motion by
3 Memorandum Decision and an order entered April 9, 2010.
4 At the April 26, 2010 hearing, Judge King denied debtor’s
5 Recusal Motion.
6 On May 5, 2010, Judge King issued a Memorandum Decision,
7 finding that (1) Locricchio had not offered any evidence that if
8 luncheon meetings were held and Judge Faris participated, the
9 attendees precluded him, or any other attorney, from attending;
10 (2) although debtor had insufficient notice of CIC’s motion to
11 terminate the Lease, the notice deficiency resulted in no
12 prejudice to debtor because Judge Faris gave debtor the
13 opportunity to file a supplemental pleading; (3) debtor failed
14 to cite any case law that would require a court to deny a motion
15 (versus continuing it) due to insufficient notice; and (4) Judge
16 Faris did not err by issuing his Memorandum Decision granting
17 CIC’s motion to terminate the Lease prior to the hearing on
18 debtor’s motion to disqualify him. Judge King concluded by
19 stating that debtor’s allegations of bias against Judge Faris
20 lacked factual and legal support.9
21 The bankruptcy court entered the order denying debtor’s
22 Recusal Motion on May 5, 2010.
23 E. The May 24, 2010 Hearing On Various Motions
24 Meanwhile, the parties to this appeal filed various
25 motions.
26
9
27 Judge King commented that debtor’s original and
supplemental memoranda in support of its Recusal Motion did not
28 contain a single citation to a statute, rule, or reported case.
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1 On February 4, 2010, Locricchio filed an application for
2 interim fees, requesting $39,647.40 for his services (the “Fee
3 Application”). On February 25, 2010, the UST objected to the
4 Fee Application on the grounds that Locricchio failed to follow
5 the UST’s guidelines for fee applications or discuss any of the
6 factors in § 330(a) to assist the court in determining the
7 reasonableness of the fees. CIC also objected, arguing that its
8 postpetition rent had administrative priority over debtor’s
9 counsel’s fees.
10 On April 5, 2010, debtor moved to set aside the Termination
11 Judgment under Rule 9023 (the “Set Aside Motion”). Debtor’s
12 motion essentially rehashed the same arguments it made in the
13 Recusal Motion. In other words, debtor argued that the
14 bankruptcy judge’s alleged bias was debtor’s sole argument for
15 setting aside the Termination Judgment.
16 On April 7, 2010, CIC moved for payment of administrative
17 rent for the period August 10, 2009 (the petition date), to
18 December 9, 2009 (the rejection date)(the “Administrative Rent
19 Motion”). Debtor did not oppose the motion.
20 On April 26, 2010, the UST moved to dismiss debtor’s case
21 under § 1112(b) for “cause” (the “Dismissal Motion”). The UST
22 asserted that debtor had no possibility of a successful
23 reorganization without the Lease. Debtor responded by stating
24 that it would not oppose the motion.
25 These motions, along with debtor’s Rent Offset Motion
26 ///
27 ///
28 ///
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1 filed on October 19, 2009,10 were noticed for a hearing on
2 May 24, 2010.
3 On May 20, 2010, the bankruptcy court issued a tentative
4 decision regarding the various motions. The court granted the
5 UST’s Dismissal Motion on the ground that debtor could not
6 reorganize without the Lease, its primary asset. The court
7 further stated that it was inclined to deny all other pending
8 motions as moot due to its decision to dismiss the bankruptcy
9 case.
10 At the May 24, 2010 hearing, the bankruptcy court granted
11 the UST’s Dismissal Motion. The court also decided that it
12 needed to rule on debtor’s Set Aside Motion and found it
13 untimely. The court requested that the parties focus their
14 arguments on whether the remaining motions should be addressed
15 by the bankruptcy court or litigated in state court.
16 Debtor argued that the remaining motions should be
17 litigated in state court. CIC argued that the matter of
18 Locricchio’s Fee Application and its request for administrative
19 rent under § 365(d)(3) were within the bankruptcy court’s
20 exclusive jurisdiction. The UST argued for dismissal with the
21 rent issue decided by the state court. The court took the
22 matters under advisement.
23 In a May 27, 2010 Memorandum Decision, the bankruptcy court
24 denied debtor’s Set Aside Motion on the grounds that it was
25
10
26 On January 12, 2010, debtor filed a notice that the Rent
Offset Motion would be heard on February 16, 2010. Therefore, by
27 the time debtor noticed the hearing, the date for assuming the
Lease — December 8, 2009 — had passed. The hearing for the Rent
28 Offset Motion was continued from February 16 to May 24, 2010.
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1 untimely and did not meet the standards for altering or amending
2 a judgment; i.e., the debtor did not demonstrate a manifest
3 error of law or fact or produce any newly discovered evidence.
4 Citing Pavelich v. McCormick, Barstow (In re Pavelich),
5 229 B.R. 777, 780-81 (9th Cir. BAP 1999), the bankruptcy court
6 also found that it had jurisdiction post-dismissal over its own
7 orders and to dispose of ancillary matters that were otherwise
8 not moot. However, the court stated that it did not view its
9 jurisdiction over the amount of the rent or compensation due
10 debtor’s attorney as exclusive. Nonetheless, the court found it
11 would be unfair to avoid deciding the pending motions because
12 debtor was holding $95,000 cash that, without a ruling, it could
13 freely use after the dismissal of its case to the detriment of
14 CIC. Accordingly, the court exercised its discretion to decide
15 the remaining motions.
16 First, the court denied Locricchio’s Fee Application in its
17 entirety. The bankruptcy court found that Locricchio’s services
18 were not beneficial to the estate because he missed the deadline
19 for assumption of the Lease under § 365(d)(4) and, as a result,
20 debtor lost its most valuable asset. The bankruptcy court also
21 denied the application on the alternative ground that it lacked
22 information required by Rule 2016 and, although the UST pointed
23 out the deficiencies, Locricchio made no effort to correct them.
24 Next, the court denied debtor’s Rent Offset Motion which
25 alleged CIC’s misconduct and interference with its business
26 relationships was grounds for relieving debtor from the
27 statutory requirement under § 365(d)(3) of paying postpetition
28 rent for the months of August and September. The court observed
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1 that in response to debtor’s allegation that CIC had wrongfully
2 collected rent from Tony Honda, CIC had produced a 1998 letter
3 agreement that authorized those payments. The court found that
4 debtor had never offered any reason why the agreement might be
5 invalid. Thus, the court concluded that there was no legitimate
6 dispute that debtor owed the full amount of the rent due under
7 the Lease, minus any amounts which the subtenants paid to CIC.
8 Third, the court granted CIC’s Administrative Rent Motion.
9 The court noted that debtor filed no opposition to this motion.
10 The court further noted that debtor failed to comply with its
11 November 9, 2009 order, which required debtor to timely pay all
12 postpetition rents until further order. Therefore, the court
13 directed debtor and its counsel to remit all of the estate’s
14 cash to CIC in partial satisfaction of CIC’s administrative
15 claim and reserved jurisdiction to enforce this requirement.
16 The court entered the order denying Locricchio’s Fee
17 Application on June 29, 2010. The court entered the orders
18 denying debtor’s Set Aside Motion and Rent Offset Motion on
19 July 13, 2010, and the corresponding judgments on July 26, 2010.
20 The court entered the order granting CIC’s Administrative Rent
21 Motion on July 13, 2010, and corresponding judgment on July 26,
22 2010. Finally, the court entered the order granting the UST’s
23 Dismissal Motion on July 13, 2010.
24 Debtor timely appealed each of the orders involved in these
25 four appeals. Further, as discussed below, Locricchio timely
26 appealed the order denying his Fee Application.
27 II. JURISDICTION
28 The bankruptcy court had jurisdiction over this proceeding
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1 under 28 U.S.C. §§ 1334 and 157(b)(2)(A). We have jurisdiction
2 under 28 U.S.C. § 158.
3 III. ISSUES
4 A. Whether the bankruptcy court erred in denying debtor’s
5 Recusal Motion;
6 B. Whether the bankruptcy court erred in denying debtor’s
7 Set Aside Motion;
8 C. Whether the bankruptcy court erred in denying
9 Locricchio’s Fee Application;
10 D. Whether the bankruptcy court erred in granting CIC’s
11 Administrative Rent Motion;
12 E. Whether the bankruptcy court erred in denying debtor’s
13 Rent Offset Motion; and
14 F. Whether the bankruptcy court erred in granting the
15 UST’s Dismissal Motion.
16 IV. STANDARDS OF REVIEW
17 We review under an abuse of discretion standard, a
18 bankruptcy court’s decision to (1) deny a motion for recusal of
19 a bankruptcy judge, (2) deny a motion for reconsideration under
20 Rule 9023, (3) grant an award of attorney’s fees, and (4) grant
21 a motion to dismiss a debtor’s case for cause under § 1112(b).
22 See Berry v. U.S. Tr. (In re Sustaita), 438 B.R. 198, 208 (9th
23 Cir. BAP 2010) (recusal motion); Diker v. Dye (In re Edelman),
24 237 B.R. 146, 150 (9th Cir. BAP 1999) (reconsideration under
25 Rule 9023); Leichty v. Neary (In re Strand), 375 F.3d 854, 857
26 (9th Cir. 2004) (attorney’s fees); Marsch v. Marsch (In re
27 Marsch), 36 F.3d 825, 828 (9th Cir. 1994) (dismissal of chapter
28 11 case for cause).
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1 We follow a two-part test to determine objectively whether
2 the bankruptcy court abused its discretion. United States v.
3 Hinkson, 585 F.3d 1247, 1261–62 (9th Cir. 2009)(en banc). If we
4 determine that the court erred under either part of the test, we
5 must reverse for an abuse of discretion. Id. First, we
6 “determine de novo whether the [bankruptcy] court identified the
7 correct legal rule to apply to the relief requested.” Id.8 Second, we examine the bankruptcy court’s factual findings under
9 the clearly erroneous standard. Id. at 1262 n.20. We must
10 affirm the court’s factual findings unless those findings are
11 “(1) ‘illogical,’ (2) ‘implausible,’ or (3) without ‘support in
12 inferences that may be drawn from the facts in the record.’” Id.13 Whether CIC was entitled to an administrative rent claim
14 under § 365(d)(3) involves a question of law. A bankruptcy
15 court’s conclusions of law are reviewed de novo. In re Strand,
16 375 F.3d at 857. We also review due process challenges de novo.
17 Price v. Lehtinen (In re Lehtinen), 564 F.3d 1052, 1058 (9th
18 Cir. 2009).
19 V. DISCUSSION
20 A. CIC’s Motion To Dismiss Or Strike Debtor’s Briefs In BAP
Nos. 10-1403, 10-1404 And 10-1405
21
22 CIC moved to dismiss the appeals for BAP Nos. 10-1403,
23 10-1404 and 10-1405 under Rule 8010, or, alternatively, strike
24 debtor’s briefs under Rule 8006 and debtor opposed.11 On
25
11
26 Debtor sought and obtained permission to file a single
brief in each of the three appeals not to exceed forty pages.
27 Debtor explains that it was impossible to cover all the issues in
a single brief so it abandoned that approach in favor of filing a
28 (continued...)
-19-
1 February 1, 2011, a motions panel of this court denied CIC’s
2 motion without prejudice for reconsideration by the merits
3 panel. On reconsideration, we also deny CIC’s motion.
4 Rule 8010 requires, among other things, a table of
5 contents, a statement of the basis of appellate jurisdiction, a
6 statement of issues presented, the applicable standard of
7 appellate review, and a statement of the case. Rule
8 8010(a)(1)(A-D). Rule 8010(a)(1)(E) states that the “argument
9 shall contain the contentions of the appellant with respect to
10 the issues presented, and the reasons therefore, with citations
11 to the authorities, statutes and parts of the record relied on.”
12 Although debtor’s briefs are mostly noncompliant with
13 Rule 8010, we decline to dismiss the appeals on this basis. The
14 issues involved are not complex and we may rely on the relevant
15 authorities and the record that was before the bankruptcy court
16 to evaluate the merits of these appeals. Kyle v. Dye (In re
17 Kyle), 317 B.R. 390, 393 (9th Cir. BAP 2004) (noting that
18 although summary dismissal is within the Panel’s discretion, it
19 should first consider whether informed review is possible in
20 light of the record provided).
21 Rule 8006 provides that the record on appeal from a
22 bankruptcy court decision consists of designated materials that
23 became part of the bankruptcy court’s record in the first
24 instance. On December 13, 2010, debtor filed a Supplemental
25 Designation of the Record, seeking to include in the record
26
11
27 (...continued)
separate brief in each of the appeals. Apparently, this change
28 caused some compliance problems with Rule 8010.
-20-
1 numerous orders, pleadings and documents that were entered on
2 the bankruptcy court’s docket after the entry of the orders and
3 judgments in these appeals. Rule 8006 does not permit items to
4 be added to the record on appeal to this Panel if they were not
5 part of the record before the bankruptcy court. Kirshner v.
6 Uniden Corp. of Am., 842 F.2d 1074, 1077-78 (9th Cir. 1988).
7 Because debtor may have referred to these documents in its
8 briefs, CIC seeks to have the briefs stricken with instructions
9 to debtor not to include or refer to any of these supplemental
10 orders, pleadings or documents. At this juncture, we consider
11 it unproductive and unnecessary to strike the briefs, with
12 instructions to debtor to delete references to these orders,
13 pleadings or documents. It is sufficient that we simply do not
14 consider debtor’s supplemental designation of the record in
15 evaluating debtor’s arguments and we have not done so.
16 B. The Order Denying Debtor’s Recusal Motion (BAP No. 10-1284)
17 Debtor’s main theory for reversal in all four appeals
18 centers on the bankruptcy judge’s bias and prejudice against it.
19 Therefore, we review first the court’s order denying debtor’s
20 Recusal Motion.
21 Initially, we note that on October 18, 2010, debtor filed a
22 motion for reconsideration of the May 5, 2010, order denying its
23 Recusal Motion. In an October 29, 2010 Memorandum Decision and
24 separate order of the same date, Judge King denied debtor’s
25 motion for lack of jurisdiction due to debtor’s pending appeal
26 of the May 5, 2010 order. On November 30, 2010, debtor filed a
27 notice of appeal of the order denying its motion for
28 reconsideration (BAP No. 10-1469). On February 11, 2011, the
-21-
1 Panel dismissed the appeal as untimely. Therefore, debtor’s
2 filing of the motion for reconsideration is of no consequence to
3 us in this appeal.
4 In its appellate brief, debtor describes alleged incidents
5 of judicial bias and misconduct that are much different than
6 those raised in the bankruptcy court and addressed by Judge
7 King’s Memorandum Decision. One of the new alleged incidents
8 includes CIC’s attorney submitting the November 9, 2009 order to
9 Judge Faris which misstated the court’s ruling on CIC’s motion
10 for the timely payment of postpetition rent; i.e., debtor
11 maintains that the court ruled that it did not have to pay
12 postpetition rent for August or September whereas the order
13 stated that debtor was to pay all postpetition rent due. Debtor
14 asserts that the judge’s signing of the allegedly fraudulent
15 order indicates that CIC’s counsel and the judge were working in
16 concert. Debtor further alleges that at the October 19, 2009
17 hearing on CIC’s motion for the timely payment of postpetition
18 rent, the bankruptcy court threatened to deny debtor an
19 extension of time to assume or reject the Lease as a consequence
20 for its nonpayment of the postpetition rent.12
21
12
Debtor recites these arguments in some fashion in all of
22
its briefs. Debtor overlooks the fact that the November 9, 2009
23 order for the payment of postpetition rent — which it contends is
fraudulent — is a final order. Moreover, the bankruptcy court’s
24 comments regarding the consequences to a debtor for nonpayment of
postpetition rent were entirely consistent with Ninth Circuit
25 case law. See Sw. Aircraft Servs., Inc. v. City of Long Beach
26 (In re Sw. Aircraft Servs., Inc.), 831 F.3d 848 (9th Cir. 1987).
In In re Sw. Aircraft Servs., Inc., the Ninth Circuit held that
27 the bankruptcy court had discretion to consider all the
particular facts and circumstances involved in each bankruptcy
28 case and to decide whether the consequence of a violation of
(continued...)
-22-
1 Presumably debtor relies on Polaroid Corp. v. Eastman Kodak
2 Co., 867 F.2d 1415 (1989), as authority for allowing these new
3 examples of alleged judicial bias and misconduct to be raised
4 for the first time on appeal. According to debtor, Polaroid
5 holds that a recusal motion “has no time limits.” Thus, debtor
6 contends that it is not prohibited from raising new examples of
7 bias for the judge’s disqualification at “anytime.” We are not
8 persuaded that the holding in Polaroid stretches so far.
9 In Polaroid, the judge made numerous rulings and issued
10 orders in the case for six and half years before she
11 disqualified herself after learning that her mother-in-law had
12 an interest in Kodak. After she disqualified herself, Kodak
13 filed a motion to disqualify and sought to vacate orders that
14 were entered six and half years earlier. The district court
15 denied the motion and the court of appeals affirmed. The court
16 held that although there was no time limit to file a motion for
17 recusal, under the circumstances of the case and due to the
18 passage of time, granting the motion would produce a result that
19 was inequitable and unfair. Id. at 1419.
20 The facts of this case are far afield from those in
21 Polaroid. Judge Faris did not disqualify himself and Judge King
22 found no basis for granting debtor’s Recusal Motion on the facts
23
12
24 (...continued)
§ 365(d)(3) should be forfeiture of the unassumed lease, some
25 other penalty, or no penalty at all. Id. at 854. The court held
26 that the “failure to make payments under subsection (d)(3)
constitutes simply one element to be considered, along with all
27 the other relevant factors, in determining whether cause exists
under subsection (d)(4) to extend the [120]-day period for
28 assumption or rejection.” Id. at 853-54.
-23-
1 debtor alleged. Moreover, the newly asserted incidents of bias
2 raised in this appeal were considered in connection with
3 debtor’s second motion to recuse Judge Faris. On August 3,
4 2011, Judge King issued a Memorandum Decision and separate order
5 on that motion.13 That order is now the subject of a separate
6 appeal (BAP No. 11-1464). Accordingly, we do not address the
7 propriety of the November 9, 2009 order or debtor’s other newly
8 asserted allegations in this appeal.
9 Otherwise, debtor’s opening brief fails to pinpoint with
10 any degree of specificity how Judge King abused his discretion
11 by denying debtor’s Recusal Motion. Therefore, any assignment
12 of error has also been waived on appeal. Laboa v. Calderon,
13 224 F.3d 972, 981 n.6 (9th Cir. 2000) (issues not specifically
14 and distinctly argued in the appellant’s opening brief are
15 waived on appeal). As debtor’s appeal raises no substantial
16 question, we summarily affirm Judge King’s ruling on the merits.
17 There are simply no facts in the record that could create a
18 reasonable doubt concerning the bankruptcy judge’s impartiality.
19 See Seidel v. Durkin (In re Goodwin), 194 B.R. 214, 222 (9th
20 Cir. BAP 1996) (evaluations of bias or prejudice are judged from
21 an objective perspective).
22 C. The Order Denying Debtor’s Set Aside Motion (BAP No. 10-
1403)
23
24 Debtor sought to set aside the Termination Judgment under
25
26 13
We take judicial notice of the documents docketed and
27 imaged at Dkt. Nos. 353 and 354 in the underlying bankruptcy
case. Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293
28 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
-24-
1 Rule 9023. Rule 9023 provides that a motion to alter or amend a
2 judgment shall be filed no later than fourteen days after entry
3 of judgment. The bankruptcy court entered the Termination
4 Judgment on March 3, 2010, and debtor did not file its Set Aside
5 Motion until April 5, 2010, thirty-three days later. Thus,
6 debtor’s Set Aside Motion was untimely and the bankruptcy court
7 properly denied debtor’s Set Aside Motion on this ground.
8 Because of the untimely filing, we observe that the scope
9 of our review in this appeal is limited to the order denying
10 debtor’s Set Aside Motion. Debtor’s notice of appeal for BAP
11 No. 10-1403 designated and attached only the order denying its
12 Set Aside Motion, not the underlying order that resulted in the
13 Termination Judgment.14 Our 9th Cir. BAP Rule 8001(a)(1)
14 requires the notice of appeal to designate the order or judgment
15 from which an appeal is taken. There is no reason to depart
16 from our rule when debtor’s Set Aside Motion was untimely filed.
17 Compare Wall St. Plaza, LLC v. JSJF Corp. (In re JSJF Corp.),
18 344 B.R. 94, 99 (9th Cir. BAP 2006) (Panel may depart from its
19 rule when a motion under Rule 9023 is timely filed, there is no
20 prejudice to the parties and they have fully briefed the
21 issues).15
22
14
23 Any appeal of that Judgment on July 13, 2010, when these
appeals were filed, would have been untimely.
24
15
In any event, at the hearing on these appeals, Locricchio
25 offered no satisfactory reason for not seeking an extension of
26 time to assume or reject the Lease. When questioned by the
Panel, Locricchio explained that he did not move for an extension
27 of time because once CIC wrongly declared debtor in default of
its payments under the Lease, debtor lost its opportunity for a
28 (continued...)
-25-
1 D. The Orders Granting CIC’s Administrative Rent Motion (BAP
No. 10-1404) And Denying Debtor’s Rent Offset Motion (BAP
2 No. 10-1405)
3 Because the subject matter of the orders granting CIC’s
4 Administrative Rent Motion and denying debtor’s Rent Offset
5 Motion are so interrelated, we consider them together.
6 Debtor’s briefs in these appeals include its mantra-like
7 arguments regarding the fraudulent nature of the court’s
8 November 9, 2009 order, the bankruptcy court’s alleged threat to
9 deny debtor’s motion for an extension of time to assume or
10 reject the Lease, and the wrongful nature of CIC’s acts or those
11 of its counsel. None of those arguments were directly before
12 the bankruptcy court.16 Debtor offers no other clear legal basis
13 for reversing the bankruptcy court’s decisions in its briefs.
14 Section 365(d)(3) provides:
15 The trustee shall timely perform all the obligations
of the debtor, except those specified in section
16 365(b)(2), arising from and after the order for relief
under any unexpired lease of nonresidential real
17 property, until such lease is assumed or rejected,
notwithstanding section 503(b)(1) of this title. . . .
18
19 “[Section] 365(d)(3) makes clear that a debtor must perform all
20 obligations owing under a lease — particularly the obligation to
21
15
22 (...continued)
third party to buy out the remaining time on its Lease.
23 According to Locricchio, moving for more time was irrelevant
because it would not bring the buyer back to life, and without a
24 buyer, debtor could not file a plan with any prospect of being
confirmed. Because of these statements, it is difficult to
25 ascertain the reason for debtor’s appeal of the order denying its
26 motion to set aside the Termination Judgment.
16
27 As mentioned by the bankruptcy court in its May 27, 2010
Memorandum Decision, debtor did not file an opposition to CIC’s
28 Administrative Rent Motion.
-26-
1 pay rent at the contract rate — until the lease is rejected.”
2 Pac. Shores Dev., LLC v. At Home Corp. (In re At Home Corp.),
3 392 F.3d 1064, 1068 (9th Cir. 2004). If a debtor fails to
4 timely pay postpetition rent, the lessor’s right to payment
5 becomes an administrative claim for the accrued liability on the
6 unpaid rent. See Towers v. Chickering & Gregory (In re
7 Pacific-Atlantic Trading Co.), 27 F.3d 401, 403–405 (9th Cir.
8 1994). Accordingly, through the plain language of § 365(d)(3)
9 and Ninth Circuit case law, CIC was entitled to an
10 administrative claim for the unpaid postpetition rent as a
11 matter of law.
12 Moreover, nowhere did debtor cite any authority which
13 supported its request for an offset of postpetition rent.
14 Debtor could not use § 553 for several reasons. Section 553
15 does not establish independent setoff rights in bankruptcy but
16 merely preserves setoff rights to the same extent they are
17 allowed under state law. United States v. Gould (In re Gould),
18 401 B.R. 415, 423 (9th Cir. BAP 2009), aff’d, 603 F.3d 1100 (9th
19 Cir. 2010). Debtor has pointed to no Hawaii law which would
20 authorize offset under these circumstances. Further, the Lease
21 contained a provision that prohibited the abatement of rent:
22 “Non-abatement of Rent. Except as otherwise provided herein the
23 rent shall not abate, diminish or cease.” Thus, the Lease does
24 not authorize the abatement of rent on these facts and debtor
25 has not argued otherwise.
26 In addition, the plain language of § 553 demonstrates that
27 the statute is inapplicable. Section 553 states that a creditor
28 may assert setoff as a defense to a claim brought by the debtor
-27-
1 against a creditor. Carolco Television, Inc. v. Nat’l Broad.
2 Co. (In re De Laurentiis Entm’t Grp. Inc.), 963 F.2d 1269, 1277
3 (9th Cir. 1992) (emphasis in original). Here, debtor is
4 asserting offset as a defense to CIC’s claim for postpetition
5 rent. Finally, § 553 requires that “each debt or claim sought
6 to be offset must have arisen prior to the filing of the
7 bankruptcy petition.” United States v. Carey (In re Wade Cook
8 Fin. Corp.), 375 B.R. 580, 594 (9th Cir. BAP 2007). Debtor
9 seeks to offset the prepetition rent paid by Tony Honda to CIC
10 against its obligation to pay postpetition rent under
11 § 365(d)(3). Plainly debtor cannot meet the timing requirement
12 under the statute.17
13 In reality, debtor’s offset argument is a bit of a red
14 herring. It was unnecessary for the court to resolve whether
15 debtor was entitled to offset its postpetition rent owed to CIC
16 against CIC’s alleged wrongful collection of prepetition rents
17 from Tony Honda before granting CIC’s Administrative Rent
18 Motion. CIC’s administrative rent claim was far greater than
19 what debtor had in its account.18 Debtor sought a credit or
20
21 17
The bankruptcy court’s May 27, 2010 Memorandum Decision
22 does not discuss § 553. Debtor may have been able to rely on
§ 558 which provides that “[t]he estate shall have the benefit of
23 any defense available to the debtor as against any entity other
than the estate . . . .” However, nowhere did debtor provide any
24
authority that it had setoff rights under state law. See In re
25 PSA, Inc., 277 B.R. 51, 54 (Bankr. D. Del. 2002) (holding that “a
right to setoff must be established under state law so that the
26 debtor then may assert the setoff as a defense reserved by
§ 558.”).
27
18
Debtor never opened a debtor-in-possession bank account.
28
Instead, monies were held in Locricchio’s trust account.
-28-
1 offset of $85,000 in its Rent Offset Motion; however, the amount
2 of CIC’s administrative rent claim was $307,975.68 and the
3 amount remaining in debtor’s account was $95,218.54. Therefore,
4 even if the court allowed the $85,000 offset as debtor
5 requested, debtor’s estate would still owe CIC a substantial
6 amount in administrative rent.
7 Finally, because the court denied Locricchio’s fees — a
8 decision which we affirm on appeal — there were no other allowed
9 and unpaid administrative expenses asserted against debtor’s
10 estate. Therefore, CIC was entitled to all the funds in
11 debtor’s estate as of the date of the dismissal despite debtor’s
12 asserted offset. In sum, we discern no errors in the bankruptcy
13 court decision to grant CIC’s Administrative Rent Motion and
14 deny debtor’s Rent Offset Motion.
15 E. The Order Denying Locricchio’s Fee Application (BAP No. 10-
1284)
16
17 The UST filed a motion to dismiss Locricchio’s appeal of
18 the order denying his Fee Application on the ground that it was
19 untimely. Citing In re Strand, 375 F.3d at 858, the motions
20 panel denied the UST’s motion on the grounds that the fee order
21 was interlocutory, the appeal of which became timely by the
22 July 13, 2010 order dismissing debtor’s case
23 On appeal, the UST again raises the issue whether this
24 court has jurisdiction over the appeal of the bankruptcy court’s
25 order denying Locricchio’s Fee Application because it was
26 untimely. The UST incorporates her arguments concerning lack of
27 jurisdiction in her previously filed motion to dismiss and
28 argues that the facts in In re Strand are distinguishable from
-29-
1 those in this case. In In re Strand, the court approved an
2 initial fee application of $22,012.50 but authorized payment of
3 $16,510. The attorney then filed a second, final fee request.
4 The Ninth Circuit held it was proper for the bankruptcy court to
5 adjust its first award when determining the final compensation
6 amount. Id. at 858.
7 While we give deference to motions panel decisions made in
8 the course of the same appeal, we have an independent duty to
9 decide whether we have jurisdiction. Couch v. Telescope, Inc.,
10 611 F.3d 629, 632 (9th Cir. 2010). In re Strand holds that
11 orders determining interim compensation in an ongoing bankruptcy
12 proceeding are generally considered interlocutory in nature.
13 375 F.3d at 858. However, the interim nature of Locricchio’s
14 fee request was rendered final by the entry of the July 13,
15 2010, order dismissing debtor’s case. See Worldwide Church of
16 God v. Phila. Church of God, Inc., 227 F.3d 1110, 1114 (9th Cir.
17 2000) (noting that prior interlocutory orders are “merged into
18 final judgment”); Munoz v. Small Bus. Admin., 644 F.2d 1361,
19 1364 (9th Cir. 1981) (noting that “an appeal from the final
20 judgment draws in question all earlier non-final orders and all
21 rulings which produced the judgment”). Therefore, Locricchio’s
22 appeal was timely and we have jurisdiction to consider its
23 merits.
24 Locricchio again incorporates the arguments made in all
25 these appeals regarding the bankruptcy judge’s bias against
26 debtor. Locricchio also vaguely refers to a due process
27 violation that he describes as an “ambush.” According to
28 Locricchio, the court stated in its tentative ruling that it
-30-
1 would not decide his Fee Application and then, at the hearing,
2 the court changed its ruling and denied his fees. Locricchio
3 contends that he should have been allowed to amend and add to
4 his application.
5 The facts alleged by Locricchio do not constitute a due
6 process violation. “The fundamental requisite of due process of
7 law is the opportunity to be heard ‘at a meaningful time and in
8 a meaningful manner.’” Mathews v. Eldridge, 424 U.S. 319, 333
9 (1976). Our review of the record shows Locricchio had ample
10 opportunity to amend and add to his application after the UST
11 objected to it. The Fee Application was filed on February 4,
12 2010 and the UST objected on February 25, 2010. Since the
13 hearing was postponed until after the Recusal Motion was
14 determined, Locricchio had over two months to amend his
15 application before the hearing on May 24, 2010. Per the local
16 bankruptcy rules, replies are due seven days before a hearing.
17 As a consequence, Locricchio’s reply was due before the
18 bankruptcy court issued its tentative ruling. Furthermore,
19 Locricchio had the opportunity to present oral argument at the
20 hearing. Under these circumstances, the court gave Locricchio
21 his full due process rights.
22 The legal standard to determine the allowance of fees
23 involves statutory interpretation and construction of § 330(a).
24 Ferrette & Slater v. U.S. Tr. (In re Garcia), 335 B.R. 717, 722
25 (9th Cir. BAP 2005). Under § 330(a)(1), after notice and a
26 hearing, the court may award an attorney employed under § 327:
27 (A) reasonable compensation for actual, necessary
services rendered by the . . . attorney . . .; and
28
-31-
1 (B) reimbursement for actual, necessary expenses.
2 Under § 330(a)(2), “the court may . . . award compensation that
3 is less than the amount of compensation that is requested.” In
4 turn, § 330(a)(3) provides:
5 In determining the amount of reasonable compensation
to be awarded, the court shall consider the nature,
6 the extent, and the value of such services, taking
into account all relevant factors, including–
7
(A) the time spent on such services;
8 (B) the rates charged for such services;
(C) whether the services were necessary to the
9 administration of, or beneficial at the time at which
the service was rendered toward the completion of, a
10 case under this title;
(D) whether the services were performed within a
11 reasonable amount of time commensurate with the
complexity, importance, and nature of the problem,
12 issue, or task addressed; and
(E) whether the compensation is reasonable based on
13 the customary compensation charged by comparably
skilled practitioners in cases other than cases under
14 this title.
15 Finally, § 330(a)(4) provides that “the court shall not allow
16 compensation for . . .(ii) services that were not —
17 (I) reasonably likely to benefit the debtor’s estate; or
18 (II) necessary to the administration of the case.”
19 The record shows that the court applied the correct legal
20 standards when making its ruling. First, the record supports
21 the court’s factual finding that Locricchio’s services did not
22 benefit the estate. Locricchio missed a crucial deadline that
23 caused debtor to lose the main asset of its estate.
24 Nonetheless, it is plainly evident from the record in these
25 appeals that Locricchio seeks to blame everyone else for his
26 misstep rather than accept responsibility.
27 Second, even under the most lenient standards, Locricchio’s
28 billing statements were woefully inadequate. He simply
-32-
1 describes his services as a two-hour “meeting with Jim Slemons”
2 or a three hour “meeting re Reorganization Plan.” Other time
3 entries simply give the date, the amount of time, and the name
4 of the document worked on. There simply was not enough detail
5 for the court to determine whether the fees requested were
6 reasonable.
7 Locricchio had the burden of proof to demonstrate
8 entitlement to the requested fees, which includes providing the
9 proper documentation for the time worked. Hensley v. Eckerhart,
10 461 U.S. 424, 437 (1983). The record shows that Locricchio
11 failed to meet his burden of proof. Accordingly, we discern no
12 error with the court’s decision to deny his fees in their
13 entirety.
14 F. The Order Granting the UST’s Dismissal Motion (BAP No. 10-
1284)
15
16 Section 1112(b)(1) provides that a bankruptcy court shall
17 convert or dismiss a case, whichever is in the best interests of
18 creditors and the estate, if “cause” is established. The
19 “substantial or continuing loss to or diminution of the estate
20 and the absence of a reasonable likelihood of rehabilitation”
21 constitute “cause” to dismiss a chapter 11 case.
22 § 1112(b)(4)(A).
23 Here, the UST moved to dismiss debtor’s case due to its
24 loss of the Lease. Debtor did not oppose the UST’s motion in
25 the bankruptcy court nor does it argue on appeal that the
26 dismissal itself was improper. Debtor’s only challenge to the
27 order on appeal rests on its assertion that the court improperly
28 retained jurisdiction to enforce its directive to debtor and
-33-
1 Locricchio to remit the estate’s cash to CIC as partial
2 satisfaction of its administrative rent claim.19 A bankruptcy
3 court has ancillary jurisdiction to enforce its own orders. Sea
4 Hawk Seafoods, Inc. v. State of Alaska (In re Valdez Fisheries),
5 439 F.3d 545, 549 (9th Cir. 2006).
6 Therefore, based on the record before us, we summarily
7 affirm the court’s decision to dismiss debtor’s case.
8 VI. CONCLUSION
9 Having determined that there is no basis for reversal for
10 any of the court’s decisions, we AFFIRM each of the orders on
11 appeal.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
19
27 The order dismissing the case specifically stated that
the court was retaining jurisdiction to enforce the payment of
28 administrative rent.
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