Kaye v. Hughes & Luce LLP (In Re Gadzooks Inc.)

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 9, 2008
No. 07-10813
Charles R. Fulbruge III
Clerk
In The Matter Of: GADZOOKS INC
Debtor
WILLIAM KAYE, Liquidating Trustee of the Gadzooks
Liquidating Trust
Appellee
v.
HUGHES & LUCE LLP
Appellant
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:06-CV-1900
Before GARZA and DENNIS, Circuit Judges, and MINALDI, District Judge.*
PER CURIAM:**
In this bankruptcy appeal, we are called to decide whether the bankruptcy
court employed the proper standard for calculating attorney’s fees. However,
because the district court remanded the issue to the bankruptcy court for
*
District Judge of the Western District of Louisiana, sitting by designation.
**
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
No. 07-10813
significant further proceedings, we lack jurisdiction to consider this case.
Therefore, we DISMISS the appeal.
Factual and Procedural History
Appellants Hughes & Luce LLP (“H&L”) served as counsel for the equity
security holder in the bankruptcy proceedings underlying this appeal. When
H&L sought attorney’s fees, the bankruptcy court calculated these fees according
to a “reasonable benefit” test, finding that H&L could be compensated for work
that initially appeared beneficial but was proven non-beneficial in hindsight.
The bankruptcy trustee appealed this calculation of H&L’s fees to the district
court, arguing that the bankruptcy courts should have applied a “material
benefits” test, which would provide H&L fees only for services that actually
benefitted the estate. The district court agreed with the trustee, holding that a
“material benefits” test should have been applied; thus, the district court
remanded the issue to the bankruptcy court for recalculation of fees. On appeal,
H&L challenges the district court’s ruling.
Discussion
Our standard of review is the same as the district court’s, we review the
bankruptcy court’s findings of fact for clear error and its conclusions of law de
novo; however, before addressing the merits of this case, we must first examine
our appellate jurisdiction. See In re Pratt, 524 F.3d 580, 584 (5th Cir. 2008).
“Under 28 U.S.C. § 158(d), we have jurisdiction to hear appeals from all
‘final decisions, judgments, orders, and decrees.’ We have held that ‘[w]hen a
district court sitting as a court of appeals in bankruptcy remands a case to the
bankruptcy court for significant further proceedings, the remand order is not
final and therefore not appealable under § 158(d).’” Id. (citing In re Cortez, 457
F.3d 448, 453 (5th Cir.2006)) (internal quotation marks omitted). Thus, because
the district court remanded the issue of attorneys’ fees to the bankruptcy court,
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No. 07-10813
our jurisdiction over this matter depends on whether that remand requires
“significant further proceedings.” Id.We have articulated the test for “significant further proceedings”:
To determine what constitutes significant further proceedings,
we distinguish between “those remands requiring the bankruptcy
court to perform ‘judicial functions’ and those requiring mere
‘ministerial functions.’” If the remand requires the bankruptcy court
to perform judicial functions, such as additional fact-finding, it is
not a final order and therefore it is not appealable to this court.
Remands that involve only ministerial proceedings, “such as the
entry of an order by the bankruptcy court in accordance with the
district court’s decision,” are considered final. In some instances, a
remand for the calculation of attorney’s fees may be considered a
ministerial function; however, “a remand requiring such a
calculation is not final if it necessitates further factual development
or other significant judicial activity involving the exercise of
considerable discretion, or is likely to generate a new appeal or
affect the issue that the disappointed party wants to raise on appeal
from the order of remand.”
Id. at 584-85 (internal citation omitted).
In the instant case, the district court called for significant further
proceedings in the bankruptcy court by “revers[ing] the fee award and
remand[ing] the action to the bankruptcy court for a reassessment of H&L’s fee
application.” Kaye v. Hughes & Luce, LLP, 2007 WL 2059724 at *1 (N.D. Tex.
July 13, 2007) (emphasis added). Further, the district court noted that “because
the bankruptcy court did not evaluate H & L’s fee application under the material
benefit standard, the Court finds that that court should reassess H & L’s fee
application in the first instance using that standard.” Id. at *12 n.5 (emphasis
added). Thus, the district court called for a complete re-adjudication of the
attorney’s fees issue, and such a proceeding, which will likely require further
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No. 07-10813
factual development and is likely to generate a new appeal or affect the issue
that the disappointed party wants to raise on appeal, will require the
bankruptcy court to perform a judicial function.
In Pratt, we considered a scenario similar to the one at issue here and
found a remand for reconsideration of attorney’s fees to require a “judicial
function” of the bankruptcy court and thus to constitute “significant further
proceedings.” See Pratt, 524 F.3d at 585. Just as in Pratt, in this case we lack
jurisdiction to consider this appeal; accordingly, we DISMISS the appeal.
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