Herrera v. Dishon (In Re Digerati Technologies, Inc.)

Case: 17-20002 Document: 00514314986 Page: 1 Date Filed: 01/19/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
January 19, 2018
No. 17-20002
Lyle W. Cayce
Clerk
In the Matter of: DIGERATI TECHNOLOGIES, INCORPORATED, formerly
known as ATSI Communications, Incorporated, also known as HD Energy
Services, Incorporated (Disputed); ARTHUR L. SMITH,
Debtors,
GILBERT A. HERRERA; HERRERA PARTNERS,
Appellants,
v.
TERRY DISHON; HURLEY FAIRVIEW, L.L.C.; SHEYENNE RAE HURLEY,
Appellees.
In the Matter of: DIGERATI TECHNOLOGIES, INCORPORATED, formerly
known as ATSI Communications, Incorporated, also known as HD Energy
Services, Incorporated (Disputed); ARTHUR L. SMITH,
Debtors,
GILBERT A. HERRERA; HERRERA PARTNERS,
Appellants,
v.
TERRY DISHON; SHEYENNE RAE HURLEY; HURLEY FAIRVIEW, L.L.C.,
Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:15-CV-227
Case: 17-20002 Document: 00514314986 Page: 2 Date Filed: 01/19/2018
No. 17-20002
Before STEWART, Chief Judge, and JOLLY and OWEN, Circuit Judges.
PER CURIAM:*
Digerati Technologies, Inc. (Digerati) filed for Chapter 11 bankruptcy.
The bankruptcy court approved Digerati’s request for Gilbert A. Herrera and
Herrera Partners (HP), in their role as investment bankers, to assist in the
sale of Digerati’s two wholly-owned subsidiaries, Hurley Enterprises, Inc., and
Dishon Disposal, Inc. That court later denied HP’s application for professional
fees in full after finding that the application was insufficiently detailed, the
services did not, and were not reasonably likely to, benefit the estate, and that
HP had failed to disclose a connection with Digerati’s counsel. The district
court affirmed, as do we.
The standard of review is abuse of discretion. 1 A bankruptcy court
abuses its discretion if it “fails to apply the proper legal standard . . . [or] bases
an award on findings of fact that are clearly erroneous.” 2 “A finding of fact is
clearly erroneous only if ‘on the entire evidence, the court is left with the
definite and firm conviction that a mistake has been committed.’” 3
The bankruptcy court did not abuse its discretion in finding that the
services were not “reasonably likely to benefit the estate” at the time they were
performed 4 and that Herrera failed to make a required disclosure. 5 Services
rendered to an estate are compensable only if, at the time they were rendered,
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
1 In re Cahill, 428 F.3d 536, 539 (5th Cir. 2005) (per curiam).
2 In re Evangeline Ref. Co., 890 F.2d 1312, 1325 (5th Cir. 1989).
3 In re Dennis, 330 F.3d 696, 701 (5th Cir. 2003) (quoting In re Perez, 954 F.2d 1026,
1027 (5th Cir. 1992)).
4 In re Woerner, 783 F.3d 266, 276 (5th Cir. 2015) (en banc).
5 FED. R. BANKR. P. 2014 (requiring that an application to employ “state . . . all of the
person’s connections with . . . [the debtor’s] attorneys”).
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No. 17-20002
they were reasonably likely to benefit the estate. 6 Among the factors relevant
to this determination are “what services a reasonable [professional] would
have performed in the same circumstances.” 7 The bankruptcy court found that
HP did not perform the services of a reasonable investment banker. Although
the facts are disputed, we are not “left with the definite and firm conviction
that a mistake has been committed.” 8
Herrera also failed to disclose certain information pertinent to the
application to employ Herrera and HP as Digerati’s investment banker.
Failure to disclose such information “is sufficient grounds to . . . deny
compensation.” 9 Again, though the facts were disputed, we cannot say based
on the record before us that denying compensation was an abuse of discretion.
* * *
We AFFIRM the judgment of the district court.
6 See Woerner, 783 F.3d at 276.
7 Id.
8 Dennis, 330 F.3d at 701 (quoting In re Perez, 954 F.2d 1026, 1027 (5th Cir. 1992)).
9 In re W. Delta Oil Co., Inc., 432 F.3d 347, 355 (5th Cir. 2005) (quoting In re Crivello,
134 F.3d 831, 836 (7th Cir. 1998)); see In re Am. Int’l Ref., Inc., 676 F.3d 455, 465-66 (5th Cir.
2012).
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