[00:00:00] Speaker 00:
Would you like to reserve some time?

[00:00:02] Speaker 00:
Yes, six minutes.

[00:00:03] Speaker 00:
Six minutes, okay.

[00:00:04] Speaker 00:
Quick question.

[00:00:05] Speaker 00:
There's three related appeals.

[00:00:06] Speaker 00:
We want to handle them all in one argument, right?

[00:00:09] Speaker 04:
Yes, they're closely related enough that we're just going to give the 15 minutes for all three appeals.

[00:00:13] Speaker 04:
Please go ahead.

[00:00:14] Speaker 00:
Okay, that's great.

[00:00:15] Speaker 00:
All right, thank you.

[00:00:17] Speaker 00:
So this case about the Chapter 7 trustees' compensation is professionals.

[00:00:24] Speaker 00:
It's about preserving meaningful limits to protect the estate.

[00:00:30] Speaker 00:
because the code and the law are designed to protect against the exact outcome in this case, which is a case that would have been a 100% payout to all creditors and a surplus to the debtor, having nearly the entire state eaten up by professionals and the trustee, double and triple billing for the same tasks, pursuing meaningless or meritless litigation, and taking actions that resulted in no benefit to the estate and that could never have benefited the estate.

[00:00:58] Speaker 00:
So this court can reverse on several grounds.

[00:01:03] Speaker 00:
The first is the failure to apply the correct legal standards.

[00:01:06] Speaker 00:
The bankruptcy court didn't address five of the six factors under Section 330 about reasonableness, and the court didn't address the gatekeeping requirement that fees are not compensable unless they are reasonably likely to benefit the estate.

[00:01:23] Speaker 01:
That argument would apply to the attorney for the trustees fees.

[00:01:28] Speaker 01:
What about the statutory fees for the trustee?

[00:01:32] Speaker 00:
It also applies and is not, it's not inapplicable.

[00:01:35] Speaker 00:
However, this panel has ruled in the Salgado-Nava case that the trustee's commission is to be treated as a commission unless there's extraordinary circumstances.

[00:01:44] Speaker 00:
So this case is about extraordinary circumstances, which is that the trustee violated his duties to the estate and to the debtor in a surplus estate by eating up those fees.

[00:01:54] Speaker 00:
So our argument is that the... How do we know it was a surplus estate?

[00:01:59] Speaker 04:
I mean, there was this proof of claim that would have rendered it a non-surplus estate, right?

[00:02:04] Speaker 00:
No, the original claim from my client, the ex-wife, for about $80,000, there was sufficient funds in the estate to pay her entire claim plus the other four claims and have a surplus of about $17,000 to the debtor.

[00:02:20] Speaker 04:
Well, that assumes zero administrative expenses, right?

[00:02:23] Speaker 00:
No, that assumes the trustee gets his commission, his full commission.

[00:02:28] Speaker 00:
This was a simple case.

[00:02:29] Speaker 00:
It was just selling one asset, which was the house, which my client lived in.

[00:02:32] Speaker 00:
And she bought the debtors half of the house pursuant to the settlement agreement.

[00:02:38] Speaker 00:
That was negotiated with a few emails.

[00:02:40] Speaker 00:
And so very quick, didn't require any legal counsel, didn't require anything.

[00:02:45] Speaker 00:
And so he just liquidated the one asset.

[00:02:47] Speaker 00:
There was enough money to pay everybody.

[00:02:49] Speaker 00:
But the trustee and his professionals decided to pursue this litigation and delegate his responsibilities.

[00:02:59] Speaker 04:
You're saying the trustee should have handled this case without counsel, without an accountant?

[00:03:03] Speaker 00:
Well, he would need an accountant to do the tax returns for the estate.

[00:03:06] Speaker 00:
So we are not objecting to those fees.

[00:03:08] Speaker 00:
That's about $4,000, I believe, for the accountant to do that because that's reasonable and necessary, of course.

[00:03:15] Speaker 00:
As far as an attorney, it might not be unreasonable to have hired an attorney to do a few things, maybe the motion to approve the sale or something.

[00:03:24] Speaker 00:
It's not necessary trustees do it without that.

[00:03:26] Speaker 00:
But it was definitely not necessary to do the vast majority of the work that was done.

[00:03:31] Speaker 04:
But where do you think the cutoff is?

[00:03:33] Speaker 04:
Where should counsel have stopped?

[00:03:36] Speaker 04:
Or where should the trustee have told counsel to stop or both?

[00:03:40] Speaker 00:
Well, there's a few points.

[00:03:42] Speaker 00:
First is the issue of double and triple billing.

[00:03:44] Speaker 00:
So he should not have let his, he should have delegated his jobs, the trustee's jobs, to investigate the claims and the estate and the assets.

[00:03:52] Speaker 00:
to his counsel.

[00:03:53] Speaker 00:
And the billing records of counsel show that they were doing all the work that the trustee is supposed to do, the basic first round investigation and get an asset gathering or document gathering.

[00:04:02] Speaker 00:
And he paid the accountant for the same thing.

[00:04:04] Speaker 00:
And he took his own commission for doing those same things.

[00:04:07] Speaker 00:
So delegation that he should have stopped.

[00:04:09] Speaker 00:
As far as the objection to the claim should have never been filed because it only succeeded on one of the several categories.

[00:04:18] Speaker 00:
And that was kind of a long shot legal argument about interpreting a family court order.

[00:04:22] Speaker 00:
It would be maybe not unreasonable to object on that ground alone and spend maybe a few thousand dollars to see how it goes.

[00:04:30] Speaker 00:
That might not be unreasonable.

[00:04:33] Speaker 00:
But that's not what happened.

[00:04:34] Speaker 00:
They objected to all the claims, all the categories of the claims.

[00:04:38] Speaker 00:
Well, four out of the six.

[00:04:40] Speaker 00:
And there was no conceivable basis to win three of the four they objected to.

[00:04:44] Speaker 00:
There's no evidence on the record.

[00:04:46] Speaker 00:
It's all undisputed facts.

[00:04:48] Speaker 00:
Nothing.

[00:04:48] Speaker 00:
The experts report doesn't address anything except to say, well, there's not enough evidence for me to make

[00:04:52] Speaker 00:
calculation basically.

[00:04:55] Speaker 00:
So they shouldn't have filed the claim objection at all.

[00:04:58] Speaker 00:
If they did they should have only objected maybe to the one the one claim about child support based on the legal argument only about interpreting family court orders.

[00:05:09] Speaker 00:
So that's what should have happened I think in a perfect world.

[00:05:11] Speaker 00:
However in this case we have what's interesting in at the first hearing on the claim objection, counsel for the trustee and the bankruptcy court openly acknowledged

[00:05:21] Speaker 00:
that further litigating this claim objection was no benefit to the estate.

[00:05:26] Speaker 00:
Express acknowledgments on the record that pursuing the litigation didn't benefit anyone.

[00:05:31] Speaker 00:
The bankruptcy court ordered the parties to go to mediation and settle it.

[00:05:36] Speaker 00:
The history of settlement offers in this case is extremely important.

[00:05:39] Speaker 00:
It shows that the trustee was intentionally defeating settlement to turn fees.

[00:05:45] Speaker 00:
That's what they show.

[00:05:47] Speaker 00:
Because right after the first hearing, a settlement offer was made by the trustee.

[00:05:50] Speaker 00:
which is basically to allow the rest of the claim as is, basically to stop.

[00:05:55] Speaker 00:
My client tried to accept that, and she wouldn't allow acceptance of that offer.

[00:05:59] Speaker 00:
So our client made the same offer back.

[00:06:02] Speaker 00:
It was rejected.

[00:06:04] Speaker 00:
But the case settled, I think two years later after all the appeals, for basically the same thing.

[00:06:11] Speaker 00:
So that shows that there was no intent to reasonably litigate the case.

[00:06:16] Speaker 00:
So to answer your question, when should the trustee have drawn the line,

[00:06:21] Speaker 00:
It is, excuse me, after they all admitted on the record that there was no purpose to be served further.

[00:06:29] Speaker 04:
If you want to get some water we can stop the clock real quick and let you get some water.

[00:06:42] Speaker 00:
Thank you.

[00:06:44] Speaker 00:
This case is unique in the sense that all the parties agreed on the most important facts in the case.

[00:06:51] Speaker 00:
that from the first hearing on the claim objection, no further purpose was served by litigating the claim.

[00:06:56] Speaker 00:
None.

[00:06:56] Speaker 00:
In fact, everyone admitted it harmed the estate.

[00:06:59] Speaker 00:
The Bankruptcy Court admitted that expressly.

[00:07:01] Speaker 00:
The Council for the Trustee admitted it expressly.

[00:07:04] Speaker 00:
Everyone agreed.

[00:07:07] Speaker 00:
But the problem is, litigation didn't stop.

[00:07:09] Speaker 00:
They filed an abstention motion instead of just settling or dropping it.

[00:07:13] Speaker 00:
They defended the appeals, which they didn't have to do.

[00:07:18] Speaker 00:
All of those things.

[00:07:20] Speaker 00:
So the only time they finally stopped was when they ran out of money.

[00:07:25] Speaker 00:
In fact, it's alleged in the papers that they incur, I think, something like 130-something thousand in fees, but the trustee's counsel claims to voluntarily have waived the fees for the Ninth Circuit Appeal so that that leaves enough for the trustee to get his 10,000 and then 14,000 to one creditor.

[00:07:41] Speaker 00:
So basically this case is they turned a 100% surplus case into basically 0% to four creditors and only 20% to one creditor.

[00:07:51] Speaker 00:
The extraordinary circumstances test in the Salgo Nevada case is very important here because the trustee's actions violate his statutory duties to administer the state expeditiously, because it just dragged it out.

[00:08:08] Speaker 00:
It's been now, I think, four years.

[00:08:09] Speaker 00:
Creditors are going to get nothing, or depending on how this appeal comes out, they will get paid, but four years late.

[00:08:16] Speaker 00:
So everybody was harmed, and so the failure to

[00:08:22] Speaker 00:
Well, the trustee is in control of the settlement offers.

[00:08:26] Speaker 00:
In the litigation, he's also in control of whether you, I don't know how much control, well, there's no evidence on the record of how much control he exerted, but failing to supervise counsel.

[00:08:37] Speaker 00:
But really, the question here, because the failure to apply the legal standards mandates reversal with the de novo standards, because they didn't address the reasonable likelihood to benefit the estate of any of the litigation, because it was a surplus estate,

[00:08:52] Speaker 00:
If the claim was reduced, that would only benefit the debtor by increasing his surplus.

[00:08:59] Speaker 00:
That's not the estate, so none of that work is compensable at all.

[00:09:03] Speaker 00:
So we're requesting that not only does this court vacate the orders, but determine the amount to be paid by either disallowing all compensation or determining the allowed amounts, because the triple and double billing is a serious issue.

[00:09:16] Speaker 00:
Because there's no dispute that some work that benefited the estate was done.

[00:09:19] Speaker 00:
The property was sold.

[00:09:21] Speaker 00:
things like that.

[00:09:22] Speaker 00:
The debtor's homestead exemption was denied.

[00:09:25] Speaker 00:
So some work was done.

[00:09:28] Speaker 04:
You're at the six minute mark.

[00:09:29] Speaker 04:
I just want to point that out to you.

[00:09:30] Speaker 00:
Yes, thank you.

[00:09:31] Speaker 00:
So this court can decide who should get paid how much so there's not triple billing.

[00:09:35] Speaker 02:
That would be asking us to make findings of fact.

[00:09:39] Speaker 00:
Yes.

[00:09:40] Speaker 02:
We don't do that.

[00:09:41] Speaker 00:
Well, the record is sufficiently clear.

[00:09:43] Speaker 00:
This court can make a ruling on the record in front of it.

[00:09:49] Speaker 00:
So it's not so much findings of fact as

[00:09:52] Speaker 00:
Well, we think all the compensation should be denied because of the failure to meet their burden.

[00:09:56] Speaker 00:
Nobody submitted declarations that address the standards or any of that.

[00:10:00] Speaker 01:
Yes.

[00:10:00] Speaker 00:
Wouldn't it be more appropriate for us to remand for the trial court to make those decisions to look at the... Normally, yes, but here there's the problem is there's no record of facts of admissible evidence to a rule on allowance of any fees.

[00:10:13] Speaker 00:
No trustee compensation can be allowed because there's no declaration, no time records, no nothing.

[00:10:18] Speaker 00:
It's two pages.

[00:10:19] Speaker 00:
The accountant, same thing.

[00:10:20] Speaker 00:
There's no admissible evidence.

[00:10:21] Speaker 00:
There's no declaration.

[00:10:22] Speaker 00:
So his time records are inadmissible hearsay.

[00:10:24] Speaker 00:
So there's no grounds to award any fees to the trustee under those extraordinary circumstances, if this court finds extraordinary circumstances.

[00:10:32] Speaker 00:
And then for the trustee's attorney, there are time records, but they're uncategorized under the guidelines.

[00:10:42] Speaker 00:
So the court could do that, but it's not necessary.

[00:10:48] Speaker ?:
Thank you.

[00:10:57] Speaker 03:
Good morning.

[00:10:58] Speaker 03:
Good morning, Your Honors.

[00:10:59] Speaker 03:
Jean Barnier for the Appellees, the Chapter 7 trustee, Timothy Hoffman, Baconegie, and Barnier, his attorneys in this matter, and Bachecki and Cromm, who were the accountants in this matter.

[00:11:12] Speaker 03:
There's only one issue before this court, and that was, did Judge Blumensteel, was she correct in awarding the administrative fees?

[00:11:19] Speaker 03:
That's her job, and she did it, and that answer is yes.

[00:11:23] Speaker 03:
Now, a review of the bankruptcy court's decision to award administrative fees.

[00:11:28] Speaker 01:
Was there a mistake of law, though, for the judge?

[00:11:32] Speaker 01:
The bankruptcy judge said she was required to defer to the business judgment.

[00:11:39] Speaker 01:
Is the business judgment a standard that applies to fee applications or is that just a standard that should be applied to whether or not you sell a house for a specific price?

[00:11:50] Speaker 03:
I believe, Your Honor, you're taking Judge Blumenstiel's comments slightly out of context what she was referring to, because as you've listened to the appellant attack the trustee's decision-making, that was what her reference was to.

[00:12:03] Speaker 03:
I am not going to second-guess what the trustee did rather selling the house as business judgment.

[00:12:08] Speaker 03:
And to be honest, as Judge Jarosławski used to say, no good deed goes unpunished when we chose to sell the house allowing the ex-wife and her two children to remain in the home rather than selling it.

[00:12:20] Speaker 03:
As you are very well aware, the trustee's fees, based on a statutory interpretation, if we had sold the house to someone else, would have been much greater in this case.

[00:12:31] Speaker 03:
So no, I do not believe that that is an essential part, because if you read Judge Blumenstiel's decision, she identifies Section 330 very correctly and refers to elements within it.

[00:12:44] Speaker 03:
Specifically, what the appellant has been unable to do is to point to any of Judge Blumenstiel's findings

[00:12:50] Speaker 03:
that were illogical, implausible, or without support in the record.

[00:12:56] Speaker 04:
Let me ask you about one task that stands out to me, and that is the filing of the motion to abstain.

[00:13:04] Speaker 04:
Why was that necessary?

[00:13:05] Speaker 04:
Why not just withdraw the rest of the claim objection?

[00:13:08] Speaker 03:
Because, Your Honor, at that point, we looked at this case, and I've been representing Chapter 7 trustees for 20 years.

[00:13:17] Speaker 03:
My partner, now deceased, for 40 years.

[00:13:20] Speaker 03:
We had the situation where we knew we had funds left over.

[00:13:23] Speaker 03:
We did not see the benefit to litigate.

[00:13:26] Speaker 03:
So in that case, you're right.

[00:13:28] Speaker 03:
We could have said turn it over to the debtor.

[00:13:31] Speaker 03:
This is what we're going to close it out.

[00:13:33] Speaker 03:
And withdraw it and go ahead and do it.

[00:13:35] Speaker 03:
But what we saw was, due to the litigantist, Ms.

[00:13:39] Speaker 03:
Shea, that it was smarter to say we're going to abstain the bankruptcy courts out so that she no longer has jurisdiction here.

[00:13:47] Speaker 03:
And then let them go back to Marin's superior court, a place they're both very familiar with, the debtor and his ex-wife, and allow that money to be figured out.

[00:13:58] Speaker 04:
But wouldn't a simple withdrawal of the claim objection done the same thing?

[00:14:01] Speaker 04:
And couldn't you have basically done that maybe even without bankruptcy court approval?

[00:14:08] Speaker 04:
Certainly without a motion.

[00:14:10] Speaker 03:
That definitely was a possibility.

[00:14:12] Speaker 03:
When we weighed out our offices in consultation with the trustee who went through,

[00:14:17] Speaker 03:
and also given Judge Blumensteel's instructions that this should have been settled and it was not.

[00:14:22] Speaker 03:
And I need to address that point why it wasn't settled.

[00:14:25] Speaker 03:
Given my 20 years and your experience, you know that bankruptcy trustees generally settle.

[00:14:31] Speaker 03:
Our headache was that we had an insistence from Ms.

[00:14:35] Speaker 03:
Shea throughout all the settlement discussions that the attorney's fees that had she had accrued be included in her claim.

[00:14:44] Speaker 03:
And we read the decision from the district court.

[00:14:47] Speaker 03:
We read Judge Blumenstiel's on that.

[00:14:49] Speaker 03:
And they said, no, it cannot be included.

[00:14:51] Speaker 03:
So in good faith, the trustee believed he could not include that in it.

[00:14:56] Speaker 03:
So could that have been a possibility?

[00:14:58] Speaker 03:
You're right, Your Honor.

[00:14:59] Speaker 03:
Maybe we should have done that.

[00:15:01] Speaker 03:
But we did not.

[00:15:02] Speaker 03:
We chose to motion to abstain.

[00:15:03] Speaker 03:
It was not that costly to do.

[00:15:05] Speaker 03:
What the costs became and what Ms.

[00:15:08] Speaker 03:
Shea and her attorney continue to do is take comments out of

[00:15:13] Speaker 03:
Context and Judge Blumenstiel says that she said you are not that is exactly wrong of what we said It was miss it was miss Shea who said let's go appeal this there in our expert opinion Excuse me in his in the of a checky crumb opinion if you read that he believes that the debtor owed At most a thousand dollars based on it and one of the confusion comes about is that miss Shea is

[00:15:40] Speaker 03:
did not quite understand the MOU.

[00:15:43] Speaker 03:
And you, I'm sure, are all familiar with them in terms of payments.

[00:15:46] Speaker 04:
Why does the trustee have to get involved in the fight between the ex-spouses?

[00:15:49] Speaker 03:
That's what we're trying not to do.

[00:15:51] Speaker 04:
I mean, when she files a claim... You would draw the objection to the claim.

[00:15:55] Speaker 04:
That's the way out.

[00:15:57] Speaker 03:
That was not brought up, Your Honor.

[00:15:59] Speaker 03:
Judge Blumenstiel didn't suggest it.

[00:16:01] Speaker 03:
The trustee did not consider it.

[00:16:03] Speaker 03:
Our offices didn't consider it.

[00:16:05] Speaker 03:
And that, as a matter of fact, we did not do that.

[00:16:08] Speaker 03:
In hindsight, maybe, but- In hindsight, it's always 2020, I know.

[00:16:13] Speaker 03:
Perhaps it would have been the way to do it, but the withdrawal from claim, this issue still would have been there.

[00:16:20] Speaker 03:
They wouldn't have gone away.

[00:16:22] Speaker 03:
And this way, there was money that was sent.

[00:16:25] Speaker 03:
Rent Superior, go figure this out.

[00:16:27] Speaker 03:
Our opinion was that the debtor only owed at most $1,000 to Ms.

[00:16:34] Speaker 03:
Chay based on our accountant's findings.

[00:16:37] Speaker 02:
But then you're spending the creditor's money, granted it's Ms.

[00:16:42] Speaker 02:
Shea's money, to litigate something that's only going to benefit the debtor.

[00:16:47] Speaker 02:
I'm sorry, Your Honor, I'm not quite... When you're continuing with this claim litigation,

[00:16:54] Speaker 02:
You were, you were accruing attorney's fees, which are coming directly out of the pocket of Ms.

[00:17:02] Speaker 02:
Shea or maybe Ms.

[00:17:04] Speaker 02:
Shea and the debtor.

[00:17:05] Speaker 02:
You're doing it, there's a lot of saying, you have to do it for the benefit of the debtor, but how can you spend creditors' money for the benefit of the debtor?

[00:17:13] Speaker 02:
Creditors get paid first.

[00:17:15] Speaker 03:
You're right, Your Honor, and she should have.

[00:17:18] Speaker 03:
Instead, when we said, okay, we're going to stop litigation, which is what Judge Blumenstiel said to do, our office has said to do, and instead of saying, okay, we will do that, we have appeals, and they kept going, and they did not stop.

[00:17:36] Speaker 04:
under the Mr. Shea was not, was Mr. Shea at the table of the mediation?

[00:17:40] Speaker 03:
Ms.

[00:17:40] Speaker 03:
Shea?

[00:17:41] Speaker 03:
I'm sorry, she's, uh, no, she, no, she, oh yeah, I'm sorry, with, in front of Judge Hammond.

[00:17:45] Speaker 04:
I'm sorry, I'm sorry.

[00:17:46] Speaker 04:
The ex-husband.

[00:17:48] Speaker 03:
Ex-husband.

[00:17:48] Speaker 03:
No, he was not.

[00:17:50] Speaker 03:
He was not a part of that party.

[00:17:51] Speaker 03:
He was not a party to it.

[00:17:53] Speaker 03:
And that's not what Judge Blumen still ordered either.

[00:17:55] Speaker 03:
She ordered just the two parties in to settle things.

[00:17:58] Speaker 04:
Maybe, thinking out loud, maybe that's the flaw, right?

[00:18:00] Speaker 04:
The real contesting parties weren't there.

[00:18:04] Speaker 04:
Maybe that's the

[00:18:06] Speaker 03:
Your honor, I'm always- 2020 hindsight.

[00:18:09] Speaker 03:
No, no, no, I appreciate that.

[00:18:12] Speaker 03:
And I'm always uncomfortable discussing settlement in front of judges.

[00:18:15] Speaker 03:
I just- No, I'm with you.

[00:18:17] Speaker 03:
I'm with you.

[00:18:17] Speaker 03:
But it's been raised, and I understand regarding fees.

[00:18:21] Speaker 03:
I think the Ninth Circuit, it's a little wishy washy in my opinion on when it can be done.

[00:18:26] Speaker 03:
We tried to do that, and I sent that settlement offer to the debtor and his council, and they rejected it.

[00:18:34] Speaker 03:
So at that point, the trustee had no choice but to go further.

[00:18:37] Speaker 03:
Do I think this was a waste of colossal time on the court's part and everyone's part?

[00:18:41] Speaker 03:
Yeah, I do.

[00:18:43] Speaker 03:
I don't deny that.

[00:18:44] Speaker 03:
But I think, as Judge Blumenstiel points out, the burden is on Ms.

[00:18:48] Speaker 03:
Shea for refusing to say, OK, I stop.

[00:18:53] Speaker 03:
Instead, she keeps going.

[00:18:55] Speaker 03:
What the paper suggests from the appellant is that if a trustee's

[00:19:04] Speaker 03:
pushed forward and said, oh, it's going to cost too much to litigate, we cave.

[00:19:09] Speaker 03:
You, I'm sure, have lots of Chapter 7 attorneys.

[00:19:11] Speaker 03:
That was not our office's position.

[00:19:13] Speaker 03:
We actually ended up doing the work because we believed it was right.

[00:19:16] Speaker 03:
So in hindsight, could we have done those things?

[00:19:20] Speaker 03:
Perhaps.

[00:19:21] Speaker 03:
But based on the accountants' report, which was never rebutted, which Judge Blumenstiel relied on, we had no choice but to go forward because of the acts of the appellant.

[00:19:35] Speaker 03:
If you have no further questions, I'll rest.

[00:19:38] Speaker 04:
Thank you very much.

[00:19:43] Speaker 04:
Okay, Mr. Christensen, you've got four and a half minutes.

[00:19:46] Speaker 04:
Thank you.

[00:19:49] Speaker 00:
A couple of points.

[00:19:51] Speaker 00:
The council's description of the settlement offer is not accurate based on the record.

[00:19:56] Speaker 00:
We did not reject a settlement offer, the original one after the hearing, for the amount, which is to allow the rest of the claim.

[00:20:03] Speaker 00:
So the first settlement offer they made

[00:20:05] Speaker 00:
We tried to accept it once we could figure out what it was because it wasn't clear what it was and there's only two days to accept by the time We got clarification from them.

[00:20:12] Speaker 00:
We tried to accept.

[00:20:12] Speaker 00:
She said no so that was it was refused by the trustee We made an identical counteroffer that was rejected by the trustee So it was not settlement was not frustrated on our end which our record is very thorough which shows that second

[00:20:27] Speaker 00:
About the motion to abstain, counsel said that they did that because it wasn't that expensive.

[00:20:32] Speaker 00:
Based on my review, it's over $30,000 is what they spent on it.

[00:20:36] Speaker 00:
Well, what they billed the estate, and they claim they waived another amount similar to that.

[00:20:43] Speaker 00:
The expert report was rebutted.

[00:20:45] Speaker 00:
It's not unrebutted.

[00:20:47] Speaker 00:
And there's no evidence that it was relied on by the bankruptcy court, because the only ruling by the bankruptcy court was the issue of law interpreting family court orders.

[00:20:53] Speaker 00:
which was not addressed by the expert.

[00:20:55] Speaker 02:
So it was... I think she said at the fee hearing, though, that she found it helpful and she relied on it.

[00:21:00] Speaker 00:
Well, I do recognize that, but the record does not support that finding.

[00:21:04] Speaker 00:
And so one of our arguments here is that the record does not support the factual findings.

[00:21:09] Speaker 02:
And even if it was found helpful... Well, she could rely on it without making a finding a fact about it, right?

[00:21:14] Speaker 00:
Sure.

[00:21:15] Speaker 00:
That's best possible, yes.

[00:21:17] Speaker 00:
But that's not really relevant to the legal standard here, which is

[00:21:21] Speaker 00:
whether it's compensable.

[00:21:22] Speaker 00:
Their work for the report is not compensable because it was not reasonably likely to benefit the estate.

[00:21:27] Speaker 00:
It was not admissible.

[00:21:28] Speaker 00:
All it said was basically there's not enough evidence for me to make calculations.

[00:21:33] Speaker 00:
That's basically what it said.

[00:21:34] Speaker 00:
And so it wouldn't have been admissible at trial.

[00:21:38] Speaker 00:
So we objected to it.

[00:21:39] Speaker 00:
But it never came to the judge never ruled on it because there was never an evidentiary hearing set.

[00:21:43] Speaker 00:
So also the argument that our client

[00:21:51] Speaker 00:
the creditor was overly litigious and drove up the fees, again, that is not the legal standard.

[00:21:56] Speaker 00:
Doesn't matter how litigious any party is, the trustees got a duty to minimize expenses to benefit the estate.

[00:22:04] Speaker 00:
All Chapter 7 trustees know to not spend more money than what they could recover.

[00:22:10] Speaker 02:
Yeah, go ahead.

[00:22:11] Speaker 02:
I changed my mind.

[00:22:14] Speaker 00:
Okay.

[00:22:14] Speaker 00:
So what we would, I mean, this case is really about

[00:22:19] Speaker 00:
Well, it's about enforcing the legal standards for what is reasonably likely to benefit the estate.

[00:22:25] Speaker 00:
That's the critical issue here.

[00:22:27] Speaker 00:
There was no findings made on that.

[00:22:28] Speaker 00:
It was not addressed.

[00:22:30] Speaker 00:
But even if it were to be addressed on remand, the evidence plainly shows that it could never have benefited the estate in a surplus estate.

[00:22:38] Speaker 02:
So if there's always a surplus of state, does that mean, I mean, you look at a state at the beginning and it's possibly surplus, right?

[00:22:45] Speaker 02:
Does the trustee just roll over at that point, goes, oh, look, there's plenty of money.

[00:22:49] Speaker 02:
We don't look into anything?

[00:22:51] Speaker 00:
Well, it's on a case by case basis, certainly.

[00:22:53] Speaker 00:
But yes, well, the trustee's duties and what he's professionally compensated for are not the same thing.

[00:23:01] Speaker 00:
So the trustee has argued it's his duty to investigate and object to claims.

[00:23:05] Speaker 00:
Sure, that's fine.

[00:23:05] Speaker 00:
That doesn't mean his counsel gets compensated from the estate to object to those claims.

[00:23:10] Speaker 00:
So whether they object or not, they can't get compensated if it's a surplus estate because they're only going to benefit the debtor.

[00:23:18] Speaker 04:
It's hard for me to accept the proposition that a trustee has to either do legal work on him or her own when a trustee is not required to be a lawyer or hire a lawyer who will do it pro bono.

[00:23:29] Speaker 04:
I mean, I can't follow that.

[00:23:32] Speaker 00:
Well, it's not asking to do it pro bono, but it's just keeping in mind

[00:23:35] Speaker 00:
The practicality, because it's all very practical.

[00:23:38] Speaker 00:
We want people to get their money as fast as they can.

[00:23:41] Speaker 00:
So if there's a legitimate reason to object that's going to serve the greater purpose, then fine.

[00:23:46] Speaker 00:
But how many Chapter 7 trustees send out demand letters to recover preferences, and they just don't follow up?

[00:23:52] Speaker 00:
Because it's a slam dunk recovery.

[00:23:55] Speaker 00:
But for $5,000 or $10,000, it's going to cost them more in legal fees to get it back.

[00:23:58] Speaker 00:
So they don't litigate meritorious claims, because it's too expensive.

[00:24:01] Speaker 00:
It's a practical analysis, and that's what's happening here.

[00:24:04] Speaker 00:
So what we would like is, I mean, reversal we think is mandatory, but we think it should be with an order that no compensation is allowed to the accountant because there's no substantial, there's no evidence at all, and they can't admit new evidence down on remand.

[00:24:19] Speaker 00:
And to the trustee under the extraordinary circumstances test, extraordinary circumstances exist here.

[00:24:25] Speaker 00:
So his fees have to be analyzed under the legal standards, and there's no evidence to do that.

[00:24:29] Speaker 00:
And for the trustees' attorney's fees, on remand, they should be limited to review of only those fees that are not for the claim objection, because that's not compensable, and not compensable for any of the hours that she spent doing the trustees' job, like investigating, but only a very narrow category of things where it's compensable.

[00:24:49] Speaker 04:
Thank you very much.

[00:24:50] Speaker 00:
Thank you.

[00:24:50] Speaker 04:
The matter is submitted.

[00:24:51] Speaker 04:
We'll be making a written decision.

[00:24:53] Speaker 04:
Thank you.

[00:24:53] Speaker 04:
Thank you.