Summary
This Ninth Circuit Bankruptcy Appellate Panel opinion addresses whether a bankruptcy court abused its discretion in approving final fee applications for a Chapter 7 trustee and his professionals when their compensation exceeded the distribution to unsecured creditors. The panel reaffirms that a chapter 7 trustee’s statutory commission is presumptively reasonable under the Bankruptcy Code and that a mere disproportion between fees and creditor distributions does not automatically constitute "extraordinary circumstances" warranting a reduction. The court affirmed the lower court's decision, emphasizing that bankruptcy courts must evaluate extraordinary circumstances on a case-by-case basis rather than applying per se rules.
Topics
Practice areas
Questions Presented
- Whether the bankruptcy court abused its discretion in approving the final fee applications for the Trustee, LEA, and SBFB.
Holdings
- The bankruptcy court did not abuse its discretion; the fee applications were affirmed.
Key quotations
““But for the work of the Trustee and his professionals, there would be nothing in this case for anyone. I am convinced of that.”” (at 9)
““The test for allowing fees and expenses for the Chapter 7 trustee and his professionals is not whether it provides for a … ‘meaningful distribution to unsecured creditors’ ….”” (at 10)
Factual background
TBH19, LLC owned a Beverly Hills property encumbered by a first‑position lien and junior liens. After converting from Chapter 11 to Chapter 7, the trustee sold the property for $63.1 million, negotiated a carve‑out of $3.75 million, and set aside $700,000 for unsecured creditors. The trustee, his accountant (LEA), and counsel (SBFB) filed fee applications that the bankruptcy court approved.
Procedural history
The bankruptcy court approved interim and final fee applications for the Chapter 7 trustee, his accountant, and counsel after the sale of a heavily encumbered Beverly Hills property and a carve‑out of $3.75 million for administrative expenses and unsecured‑creditor distribution. The HAR parties objected, arguing the fees were unreasonable, but the court found no abuse of discretion and affirmed the fee awards.