Opinion
Civil Action No. 21-cv-1727-LTB
2022-04-18
IN RE: RICHARD D. VAN LUNEN CHARITABLE TRUST, Debtor. McLeod Brock, PLLC, Appellant, v. Robertson B. Cohen, Liquidating Trustee, and CCIC I, LLC, Appellees.
Aaron A. Garber, Wadsworth Garber Warner Conrardy P.C., Littleton, CO, for Appellant. Kevin Scott Neiman, Kevin Neiman, PC, Law Offices of, Lars H. Fuller, BakerHostetler LLP, Denver, CO, for Appellee Robertson B. Cohen. Matthew T. Faga, Markus Williams Young & Hunsicker LLC, Denver, CO, for Appellee CCIC, I, LLC.
Aaron A. Garber, Wadsworth Garber Warner Conrardy P.C., Littleton, CO, for Appellant.
Kevin Scott Neiman, Kevin Neiman, PC, Law Offices of, Lars H. Fuller, BakerHostetler LLP, Denver, CO, for Appellee Robertson B. Cohen.
Matthew T. Faga, Markus Williams Young & Hunsicker LLC, Denver, CO, for Appellee CCIC, I, LLC.
MEMORANDUM OPINION AND ORDER
Babcock, JUDGE
Appellant McLeod Brock, PLLC (the "Firm" or "McLeod"), formerly Rumrell, McLeod & Brock, PLLC, appeals the United States Bankruptcy Court for the District of Colorado (the "Bankruptcy Court") Order dated April 23, 2021 (the "SJ Order") (1) granting the Liquidating Trustee's Motion for Summary Judgment; (2) granting the Liquidating Trustee's and CCIC I, LLC's Joint Motion to Disgorge Unauthorized and Undisclosed Compensation Paid to Rumrell, McLeod & Brock, PLLC (the "Disgorgement Motion"); (3) and denying the Firm's Motion to Allow Late Filing of Final Application for Compensation and Reimbursement of Expenses ("Motion to Allow Late Filing"). [Doc #1-1; Appellate Record, Doc #7, at 1243-54] Oral argument would not materially assist in the determination of this appeal. After full consideration of the record and the parties’ briefs, I AFFIRM the Bankruptcy Court's SJ Order.
I. JURISDICTION
Under 28 U.S.C. § 158(a)(1), this Court has jurisdiction to hear appeals from "final judgments, orders and decrees" of the Bankruptcy Court. There is no dispute that the order that is the subject of this appeal fully adjudicated the parties’ dispute and is final and that this Court has jurisdiction over the appeal.
II. BACKGROUND
The underlying facts are generally undisputed, unless otherwise noted. The background facts were well-stated in the SJ Order and are incorporated herein with some modification and supplementation relevant to this appeal.
The Richard D. Van Lunen Charitable Foundation (the "Foundation" or "Debtor") filed its voluntary petition under Chapter 11 of the Bankruptcy Code on May 16, 2017 ("Petition Date"). R. at 54-57. On the Petition Date, the Foundation filed a Motion for Order Establishing Interim Compensation Procedure for All Professionals and to Approve Retainer to Weinman & Associates, P.C., Debtor's bankruptcy counsel. R. at 59-68. The motion was granted on June 6, 2017. R. at 69-71 (the "Interim Procedures Order"). The Interim Procedures Order established the procedure for awarding interim compensation and reimbursement of expenses to professionals retained to represent the Debtor and required that those professionals file interim formal applications pursuant to 11 U.S.C. § 331. Id. ¶ 2.k. The Interim Procedures Order also provided that:
The Debtor, the U.S. Trustee, and the Creditors’ Committee, as well as any other party-in-interest, shall have the opportunity to formally object to or comment upon the fees and expenses contained in the monthly statements upon the filing of interim and final fee applications in accordance with Sections 330 and 331 of the Bankruptcy Code.
Id. at ¶ 2.h.
On March 6, 2018, the Foundation filed its Application to Employ Rumrell, McLeod & Brock, PLLC as Special Counsel to represent the Foundation in connection with litigation involving a foreclosure case pending in Florida state court. R. at 72-77 ("Application to Employ"). The motion was granted by order dated March 23, 2018. R. at 84 ("Order Authorizing Employment"). The Application to Employ, the attached Affidavit of Richard G. Rumrell (R. at 75-76) and the Order Authorizing Employment all recognize that the Firm would be required to submit requests for compensation to the Bankruptcy Court for approval consistent with the Bankruptcy Code and applicable rules, and that no fees would be paid to the Firm without Court approval. See Application to Employ ¶ 5 ("All fees and expenses associated with the Firm's retention and services will be paid by the Debtor's Chapter 11 estate only upon approval by the Court after a request made in accordance with the requirements of the United States Bankruptcy Code and applicable rules."); Aff. of Richard G. Rumrell ¶ 6 ("I will submit requests for payment of [the Firm's] legal fees and reimbursement of expenses to the Court pursuant to applicable law and orders of this Court."); Order Authorizing Employment (the Firm "shall not be compensated or reimbursed from assets of the Debtor's estate or from assets in which the Debtor's estate may claim an interest except after application to and approval by this Court"). The Certificate of Service attached to the Application to Employ indicates that the Application and proposed order were served on the Firm on March 6, 2018. R. at 74. Mr. Rumrell, a partner in the Firm, testified that he could not recall when he received a copy of the Order Authorizing Employment but he recalled "seeing it." R. at 943 (Rumrell Dep. 34:6-35:20); see also R. at 930 (discovery response admitting that the Firm received the Order). On February 18, 2019, the First Interim Application for Compensation and Reimbursement of Expenses ("Interim Fee Application") was filed on behalf of the Firm, requesting allowance of $35,217.98 in unpaid compensation for the period from April 30, 2018 through January 22, 2019. R. at 340-46. The Interim Fee Application was signed by Mr. Rumrell and Mr. Weinman, though Mr. Rumrell later stated in a declaration filed with the Firm's Objection to the Motion to Disgorge that Mr. Weinman prepared and filed the document. R. at 679-81. (As the Bankruptcy Court observed in a footnote in the SJ Order, throughout this contested matter, the Firm has maintained that it only sought approval of approximately 25% (or $35,217.98) of the actual fees incurred on an interim basis at the direction of counsel for the Foundation, insofar as it had been paid 75% of its interim fees pursuant to the Interim Procedures Order.) On March 11, 2019, a limited objection to the Interim Fee Application was filed by Monty Titling Trust I ("Monty") (assignor to Appellee, CCIC I, LLC), the Foundation's largest unsecured creditor, R. at 414-17 (the "Monty Objection"), requesting that the proposed order on the Interim Fee Application be revised "to provide that the fees are allowed only on an interim basis pursuant to 11 U.S.C. § 331 and the approved interim compensation procedures, subject to notice and approval on a final basis pursuant to 11 U.S.C. § 330," and that if the Interim Fee Application is granted, Monty expressly reserved the right to object to "any and all final fee applications submitted by or on behalf of the [Firm]." Id. ¶¶ 8, 9.
Mr. Weinman, on behalf of the Firm, subsequently filed a Certificate of Non-Contested Matter, stating that the Firm had conferred with Monty regarding its limited objection and that "the parties have reached a resolution of the Limited Objection in the form of a revised proposed Order attached hereto. Counsel for Monty Titling Trust I has advised undersigned [Mr. Weinman, Debtor's bankruptcy attorney] that the attached proposed order resolves Monty's limited objection." R. at 491-92, ¶ 4. On March 19, 2019, the Bankruptcy Court entered its Order granting the Interim Fee Application, adopting the language in the proposed order, stating that the court would allow "total compensation in the amount of $35,217.98 and reimbursement of expenses in the amount of $0.00, for a total sum of $35,217.98 for the time period from April 30, 2018 through January 22, 2019, such allowance being only on an interim basis pursuant to 11 U.S.C. § 331 and subject to notice and approval on a final basis pursuant to 11 U.S.C. § 330." See Order Allowing Compensation and Reimbursement of Expenses of Rumrell, McLeod & Brock, PLLC ("Order Allowing Compensation"). R. at 502-03. The Firm denies being served a copy of the Monty Objection, the revised proposed order or the Order Allowing Compensation. However, during discovery related to the Motion for Summary Judgment, Mr. Rumrell testified that he received, by email from Mr. Weinman's office: (1) a copy of the Monty Objection on March 12, 2019, the day after it was filed; (2) a copy of the revised proposed order the day it was filed; and (3) a copy of the Order Allowing Compensation either the day it was entered or the next day. R. at 952-56 (Rumrell Dep.).
On January 11, 2019, before the Firm's Interim Fee Application was filed, the Foundation and Monty filed a Joint Chapter 11 Plan of Reorganization (the "Plan") and Disclosure Statement. R. at 184-334. The Disclosure Statement was approved by the Bankruptcy Court by order dated February 1, 2019, in which the court also set a hearing for March 19, 2019 to consider confirmation of the Plan and objections. R. at 335-36. The Disclosure Statement and Plan include multiple references to the allowance of administrative claims on a final basis and to the administrative claim bar date:
Any unpaid Administrative Claims and Priority Claims shall be paid in full on the Effective Date, or as soon thereafter as such Claims are Allowed as final. Disclosure Statement at 4.
Allowed Administrative Claims shall be paid out of the unencumbered Cash in the Debtor's possession. Anticipated Administrative Claims include counsel for the Debtor and other approved professionals of the Debtor. The actual Allowed amounts may vary, and the Liquidating Trustee and any other party in interest shall have the power to review and object to any Administrative Claims before such claims are deemed Allowed as filed. Id. at 13.
Professional Fee Claims. Any Person asserting a Professional Fee Claim against the Debtor shall file with the Bankruptcy Court and serve, pursuant to Local Bankruptcy Rule 9013-1, on all Persons required to receive notice, a Final Fee Application within sixty (60) days after the Effective Date. Id. at 19.
Administrative Claim Bar Date. Any Administrative Claim or Professional Fee Claim not filed within the deadlines set forth above shall be forever barred, and the Liquidating Trustee, the Debtor, the Estate and the Liquidating Trust shall be discharged of any obligation on such Claim, to the extent the Professional Fee Claim exceeds amounts previously authorized for payment by the Bankruptcy Court. Id.
Any Person who holds, or asserts, an Administrative Claim that is a Professional Fee Claim for services rendered and expenses incurred prior to and including the Confirmation Date, shall be required to file with the Bankruptcy Court and serve, pursuant to Local Bankruptcy Rule 9013-1, on all Persons required to receive notice, a Final Fee Application within sixty (60) days after the Effective Date. Failure to timely file a final fee application as required by this section shall result in the Professional Fee Claim being forever barred, and the Liquidating Trustee, the Debtor, the Estate and the Liquidating Trust shall be discharged of any obligation on such Claim, to the extent such Professional Fee Claim exceeds amounts previously authorized for payment by the Bankruptcy Court. Plan at 16 (§ 6.1(b)).
Late Claims. No Distribution shall be made on account of any Claims filed after the applicable Bar Date.
....
EXCEPT AS OTHERWISE AGREED IN WRITING BY THE LIQUIDATING TRUSTEE, ANY AND ALL ADMINISTRATIVE CLAIMS FILED AFTER THE ADMINISTRATIVE CLAIM BAR DATE SHALL BE DEEMED DISALLOWED AND EXPUNGED AFTER THE ADMINISTRATIVE CLAIM BAR DATE WITHOUT ANY FURTHER NOTICE TO OR ACTION, ORDER OR APPROVAL OF THE BANKRUPTCY COURT, AND HOLDERS OF SUCH ADMINISTRATIVE CLAIMS MAY NOT RECEIVE DISTRIBUTIONS ON ACCOUNT OF SUCH ADMINISTRATIVE CLAIMS . Id. at 17 (§ 6.3) (emphasis in original).
The parties do not dispute that the Effective Date referred to above was April 3, 2019, which means that the Administrative Claim Bar Date (the "Bar Date") was June 2, 2019.
On February 8, 2019, counsel for the Foundation filed a Certificate of Service (the "Certificate of Service") stating the Plan, Disclosure Statement, Order Approving Disclosure Statement, and Ballot (collectively, the "Plan Documents") had been mailed to all parties in interest, including the Firm at its correct post office box address. R. at 337-39. The Firm, however, denies that it received the Plan Documents.
A Joint Modified Plan (the "Modified Plan") was subsequently filed by the Trustee and Monty on March 14, 2019 containing the identical Final Fee Application/Bar Date language quoted above. R. at 418-442 A Notice of Resolution of United States Trustee's Objection to Joint Chapter 11 Plan of Reorganization was filed simultaneously with the Modified Plan, and because the revisions to the Plan did not negatively impact any creditors, no additional notice of the Modified Plan was provided. R. at 443-90 (Notice of Resolution).
The Modified Plan was confirmed by Order dated March 19, 2019 (the "Confirmation Order"). R. at 499-501. The Confirmation Order provides, in relevant part: "All professional fees incurred pre-confirmation shall be subject to final Court approval as to reasonableness pursuant to the applicable provisions of the Bankruptcy Code." Id. ¶ 7. The Confirmation Order was mailed to the Firm through the Bankruptcy Noticing Center on March 21, 2019. R. at 507-08. The Firm admits that it was served a copy of the Confirmation Order, but notes that the Confirmation Order did not specify a deadline for seeking final approval of professional fees.
The Firm did not file an application with the Bankruptcy Court seeking final approval of its interim compensation (or any compensation) by the Bar Date. On September 4, 2019, the Trustee and Monty filed the Disgorgement Motion arguing that since the Firm failed to seek final allowance of its fees and expenses by the June 2, 2019 Bar Date, its administrative claim was barred under the terms of the confirmed Modified Plan and all monies paid to the Firm were subject to disgorgement. On September 30, 2019, the Firm filed an Objection to the Disgorgement Motion as well as a Motion to Allow Late Filing, arguing in both that the Firm did not receive adequate notice of the Bar Date and thus was denied due process. On that date (nearly four months after the Bar Date and nearly one month after the Disgorgement Motion), the Firm also filed its Final Application for Compensation and Reimbursement of Expenses ("Final Fee Application") in which it requested approval of its fees and expenses from March 23, 2018, to January 22, 2019 in the amount of $149,857.32.
The Trustee and Monty objected to the Motion to Allow Late Filing, disputing that the Firm did not receive adequate notice of the Bar Date. Additionally, the Trustee and Monty objected to the Final Fee Application due to its untimeliness as well as several substantive bases. Thereafter, the Trustee filed the Motion for Summary Judgment (in which Monty joined) requesting that the Bankruptcy Court enter judgment in his favor and against the Firm on the pending motions related to the fee dispute, to which the Firm objected.
After hearing oral arguments, the Bankruptcy Court entered the SJ Order, holding that: (1) the Firm, by merely denying receipt of the Plan Documents and explaining its document retention policy, did not rebut the presumption that a properly addressed piece of mail is considered properly served and delivered; (2) the information contained in the Plan and Disclosure Statement was clear and reasonably conveyed the required information for purposes of due process in that it clearly conveyed the duty to file a final fee application, the deadline for doing so, and the consequences for failing to do so; and (3) the Firm failed to establish the excusable neglect necessary to justify an enlargement of time to file its Final Fee Application. R. at 1243-54.
The Firm subsequently filed a Motion for Reconsideration which was denied by the Bankruptcy Court on generally the same grounds as those set forth in the SJ Order.
III. STANDARD OF REVIEW
In reviewing a bankruptcy court's decision, the district court functions as an appellate court and is authorized to affirm, reverse, modify or remand the bankruptcy court's rulings. 28 U.S.C. § 158(a). Bankruptcy court orders granting summary judgment are subject to de novo review on appeal. In re C.W. Min. Co. , 798 F.3d 983, 986 & n. 2 (10th Cir. 2015) (explaining that on de novo review of an order granting summary judgment, the court must examine the evidence in the light most favorable to the non-moving party to determine whether the moving party established that there was no genuine dispute as to any material fact and that it was entitled to judgment as a matter of law).
A bankruptcy court's order denying attorney fees and disgorgement of fees previously paid is reviewed under an abuse of discretion standard. In re Cook , 223 B.R. 782, 788 (B.A.P. 10th Cir. 1998). Under the abuse of discretion standard, "a trial court's decision will not be disturbed unless the appellate court has a definite and firm conviction that the lower court made a clear error of judgment or exceeded the bounds of permissible choice in the circumstances." Id. at 788-89 (quoting Moothart v. Bell , 21 F.3d 1499, 1504 (10th Cir. 1994) ); In re Stewart , 970 F.3d 1255, 1263 (10th Cir. 2020) ("A [bankruptcy] court abuses its discretion when it (1) fails to exercise meaningful discretion, such as acting arbitrarily or not at all, (2) commits an error of law, such as applying an incorrect legal standard or misapplying the correct legal standard, or (3) relies on clearly erroneous factual findings.") (quoting Farmer v. Banco Popular of N. Am. , 791 F.3d 1246, 1256 (10th Cir. 2015) ).
IV. ANALYSIS
In this appeal, the Firm complains that it was error for the Bankruptcy Court to treat the Firm's evidence of non-receipt of the Plan Documents as a "mere denial" of receipt and thus insufficient to rebut the presumption that the documents were received. Specifically, the Firm argues that the Bankruptcy Court's decision was based on its erroneous conclusion that the Firm was properly served with the Plan Documents and that the Bankruptcy Court: (1) misapplied the rebuttable presumption that mailed documents were received and failed to properly apply the summary judgment standard because it did not view the factual record and draw all reasonable inferences therefrom in the light most favorable to the Firm on the issue of whether the Firm received adequate notice of the Bar Date and because it improperly weighed the evidence rather than simply determining whether there was a genuine issue for trial; and (2) abused its discretion in ordering disgorgement by relying on the "clearly erroneous" factual finding that the Firm had notice of the Bar Date and in failing to give adequate consideration to the Firm's lack of experience in bankruptcy procedure and its reliance on others for assistance with the final fee application process. The Firm requests an order reversing the Bankruptcy Court's SJ Order and remanding the Disgorgement Motion and the Motion to Allow Late Filing for trial on the merits. A. Whether the Bankruptcy Court Failed to Properly Apply the Summary Judgment Standard and the Rebuttable Presumption of Receipt
As the Bankruptcy Court recognized, the law presumes delivery of a properly addressed piece of mail. Moya v. United States , 35 F.3d 501, 504 (10th Cir. 1994). See also Witt v. Roadway Exp. , 136 F.3d 1424, 1429–30 (10th Cir. 1998) (a rebuttable presumption of receipt of papers sent by U.S. mail arises on evidence that the properly addressed piece of mail is placed in the care of the postal service). The filing of a certificate of service with the court is "prima facie evidence that service occurred on the date listed on the certificate, unless [a party] offers evidence to the contrary." Portley-El v. Milyard , Civil Action No. 06-cv-00146-PSF-MJW, 2006 WL 3371642, at *1 (D. Colo. Nov. 21, 2006) (citing Chesson v. Jaquez , 986 F.2d 363, 365 (10th Cir. 1993) ); Whittaker v. Scott , 99 F.3d 1151, 1996 WL 623238, at *2 (10th Cir. 1996) (unpublished table decision).
The Bankruptcy Court also recognized that to rebut the presumption of receipt in the context of bankruptcy, more than mere denial of receipt is required. In re Loomas , 501 B.R. 461, 2013 WL 5615943, at *4, n. 38 (B.A.P. 10th Cir. Oct. 15, 2013) (unpublished) ("mere denial of receipt alone does not rebut the presumption that the mailed item was received") (citing Bosiger v. U.S. Airways, Inc. , 510 F.3d 442, 452 (4th Cir. 2007) ). Instead, more objective evidence is necessary, such as testimony from the sender that the notice was not sent, or proof that none of the intended recipients received notice, or proof that the mail was returned unclaimed. In re Williams , 185 B.R. 598, 600 (B.A.P. 9th Cir. 1995) (holding that evidence of the purported recipient's business routine regarding how it handles receipt of mail is merely a "variant of the statement of non-receipt, and does not require a conclusion that the presumption has been overcome"). "Especially in bankruptcy cases, ‘[i]f a party were permitted to defeat the presumption of receipt of notice resulting from the certificate of mailing by a simple affidavit to the contrary, the scheme of deadlines and bar dates under the Bankruptcy Code would come unraveled.’ " In re Otero Cty. Hospital Ass'n, Inc. , 551 B.R. 463, 478 (Bankr. D.N.M. 2016) (quoting Osborn v. Ricketts (In re Ricketts) , 80 B.R. 495, 497 (B.A.P. 9th Cir. 1987) ); Bosiger , 510 F.3d at 452 (affirming district court and holding that creditor's general denial of receipt of bankruptcy notice "does not constitute the strong evidence needed to overcome the presumption of receipt"). The Bankruptcy Court also noted that "due process does not require that the interested party actually receive the notice." In re Blinder, Robinson & Co., Inc. , 124 F.3d 1238, 1243 (10th Cir. 1997) (concluding that despite three claimants having not received notice by mail of liquidation proceedings in Chapter 11 bankruptcy, the trustee's actions satisfied due process because the mailing was supplemented by notice by publication).
There is no question here that the presumption of receipt of the Plan Documents was activated. The Bankruptcy Court considered the February 8, 2019 Certificate of Service which indicated service of the Plan Documents on the Firm at its correct address. SJ Order at 8. The Bankruptcy Court also considered the rebuttal evidence presented by the Firm, which consisted of Mr. Rumrell's testimony that the Firm did not receive, and its case file did not contain, the Plan Documents and that described the Firm's "document retention policy" which consisted of scanning documents received in the mail into the appropriate case file. SJ Order at 8. (Mr. Rumrell's declaration, attached as Exhibit 1 to the Firm's Objection to the Motion for Summary Judgment (R. at 1196-98), is generally consistent with his deposition testimony on this subject.) The Bankruptcy Court also noted that the Firm presented no other evidence that the Plan Documents were not received. SJ Order at 8. Indeed, Mr. Rumrell testified that he never asked Mr. Weinman, the Foundation's counsel, or anyone at Mr. Weinman's office if they actually served the Plan Documents as represented in the Certificate of Service or if documents were returned to Weinman's office as undeliverable, and that Mr. Weinman never said anything to that effect. Rumrell Dep. (R. at 934-81) 116:1-23, 140:7-12. When asked in his deposition if there were other documents from Mr. Weinman's office that were sent to but not received by the Firm, Mr. Rumrell responded that he wouldn't know. Id. at 117:21-118:3.
The Bankruptcy Court found Mr. Rumrell's rebuttal evidence to be the equivalent of a "bare denial" and thus insufficient to rebut the Trustee's prima facie evidence that the Plan Documents were properly served on the Firm. SJ Order at 9 (also noting that the address shown on the Certificate of Service was confirmed as the correct address and that the Firm received other documents in the case, including the Confirmation Order, at the same address). Based on a lack of evidence to rebut the presumption of receipt, as well as "controlling Tenth Circuit authority," the Bankruptcy Court concluded that the Firm was properly served with the Plan, Disclosure Statement and notice of the confirmation hearing. SJ Order at 8-9. (While Blinder , a published Tenth Circuit Court of Appeals decision, would be controlling authority, Loomas , an unpublished BAP decision, is not. See 10th Cir. BAP L.R. 8026-6. Nevertheless, Loomas is persuasive authority.)
The Firm argues that the Bankruptcy Court improperly weighed the evidence, and asserts, based on In re Wooten , 620 B.R. 351 (Bankr. D.N.M. 2020), that "[w]here, as here, ‘a party's denial of receipt is supported by evidence, the issue becomes one of fact to be resolved based on the strength of the evidence and the credibility of the witnesses.’ " Open. Br. at 22, citing Wooten at 355. However, in Wooten , the creditor presented substantial, uncontradicted evidence to support its denial of receipt, including the creditor's testimony and documented evidence of vexing mail delivery problems from multiple other senders to the creditor's street address for about a year around the time of the relevant bankruptcy mailings. Id. at 355. Here, the Firm presented no other evidence to support Mr. Rumrell's testimony that he did not receive the documents. Moreover, Wooten was not decided in the context of a motion for summary judgment.
The Firm also cites Witt for the proposition that evidence denying receipt creates a credibility issue that must be resolved by the trier of fact. Open. Br. at 22-23, citing Witt , 136 F.3d at 1430. In Witt , a Title VII employment case decided in district court against the plaintiff on a motion for summary judgment based, in part, on statute of limitations grounds, the appellate court reversed on the issue of presumption of the plaintiff's receipt of a right-to-sue letter, which started the clock on his limitations period. The appellate court criticized the district court for completely ignoring the plaintiff's affidavit testimony that he did not receive the right-to-sue letter until over six weeks after it was sent to him. Id. at 1430. I do not find Witt to be persuasive. Even assuming Witt stands for the proposition that mere denial of receipt is enough to create a credibility issue that must be resolved by the trier of fact in a Title VII employment case, in the bankruptcy context, as discussed above, mere denial has been held to be insufficient to rebut the presumption of receipt, see, e.g., Loomas, supra , including in the context of a summary judgment motion. For example, in both Bosiger and Otero , despite conflicting deposition testimony regarding receipt, the courts there granted (or in the case of Bosiger , affirmed) summary judgment, finding that evidence of denial of receipt alone did not raise a genuine issue of material fact, and those courts did so without making a credibility determination. Bosiger , 510 F.3d at 452-53 ; Otero , 551 B.R. at 479. Rather, as here, the decisions were based on a determination that testimony denying receipt alone, assuming its truth, is insufficient as a matter of law to rebut the presumption of receipt.
The Firm also cites Rosenthal v. Walker , 111 U.S. 185, 4 S.Ct. 382, 28 L.Ed. 395 (1884) (in which the Supreme Court first acknowledged the "mailbox rule") for the proposition that a jury should decide whether letters were actually received when evidence to the contrary exists. Rosenthal , however, does not represent blanket authorization, on a summary judgment motion, to find a fact issue or require a credibility determination every time a party denies (without corroboration) having received a mailing. In fact, the appeal in Rosenthal did not challenge a summary judgment ruling, but rather related to the lower court's evidentiary ruling admitting into evidence at the jury trial copies of certain mailed letters that the intended recipient denied ever having received. Id. at 193, 4 S.Ct. 382.
As the Bankruptcy Court acknowledged in its SJ Order, summary judgment is appropriate if the pleadings, answers to interrogatories, admissions, or affidavits show that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Celotex Corp. v. Catrett , 477 U.S. 317, 322, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "There is a genuine issue of material fact if a rational jury could find in favor of the nonmoving party on the evidence presented." Fassbender v. Correct Care Sols., LLC , 890 F.3d 875, 882 (10th Cir. 2018) (quotations omitted). The moving party, who bears the initial burden of making a prima facie demonstration of the absence of a genuine issue of material fact, may carry its burden by showing that there is an absence of evidence to support the nonmoving party's case. Celotex , 477 U.S. at 323, 325, 106 S.Ct. 2548 ; Adler v. Wal-Mart Stores, Inc. , 144 F.3d 664, 670 (10th Cir. 1998). The burden then shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When applying this standard, courts "view the evidence and draw all reasonable inferences therefrom in the light most favorable to the party opposing summary judgment." Atl. Richfield Co. v. Farm Credit Bank of Wichita , 226 F.3d 1138, 1148 (10th Cir. 2000). The Bankruptcy Court further acknowledged that at the summary judgment phase, the judge's function is not to weigh the evidence himself and determine the truth of the matter, but to determine whether there is a genuine issue for trial. SJ Order at 6, citing Anderson , 477 U. S. at 249-50, 106 S.Ct. 2505.
I do not agree with the Firm that its evidence of non-receipt created a credibility issue or a disputed issue of material fact that the trier of fact must decide. Rather, as the Bankruptcy Court concluded, the evidence – Mr. Rumrell's denial of receipt and his description of the Firm's document retention policy – assuming its truth, is simply insufficient as a matter of law to rebut the presumption of receipt. The Bankruptcy Court's decision was based on the Firm's lack of the additional evidence necessary to rebut the presumption, not the credibility of Mr. Rumrell or an improper weighing of the evidence. Without additional corroborating or objective evidence, the Bankruptcy Court was justified in concluding, based on Loomas and Blinder , as well as Bosiger and Otero , that the Firm's evidence failed to rebut the presumption as a matter of law. After examining the evidence in the light most favorable to the Firm, I conclude that the Bankruptcy Court properly applied the summary judgment standard and the rebuttable presumption of receipt in ruling that the Firm was properly served with the Plan Documents.
The Bankruptcy Court also concluded that the language in the Plan Documents "was clear as to the Firm's duties to file a final fee application, as well as the consequences for failing to do so," and thus complied with due process requirements. SJ Order at 9, citing Mullane v. Cent. Hanover Bank & Tr. Co. , 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950) ("The notice must be of such nature as reasonably to convey the required information ...."). The court referenced what it considered "unequivocal" language in the Disclosure Statement that "Any Person asserting a Professional Fee Claim against the Debtor shall file with the Bankruptcy Court and serve, pursuant to Local Bankruptcy Rule 9013-1, on all Persons required to received notice, a Final Fee Application within sixty (60) days after the Effective Date." Id. , quoting Disclosure Statement at 19. The Bankruptcy Court also cited a provision in the Plan which states in bold, capitalized typeface that "... ANY AND ALL ADMINISTRATIVE CLAIMS FILED AFTER THE ADMINISTRATIVE BAR DATE SHALL BE DEEMED DISALLOWED AND EXPUNGED AFTER THE ADMINISTRATIVE CLAIM BAR DATE ...." Id. , quoting Plan at 17 (§ 6.3).
The Firm argues that certain other language in the Plan was not so clear. Specifically, the Firm refers to the following language from the Joint Modified Plan (which is identical to the language in the Plan, quoted in the Background section above):
Failure to timely file a final fee application as required by this section shall result in the Professional Fee Claim being forever barred, and the Liquidating Trustee, the Debtor, the Estate and the Liquidating Trust shall be discharged of any obligation on such Claim, to the extent such Professional Fee Claim exceeds amounts previously authorized for payment by the Bankruptcy Court .
Modified Plan (R. at 433) § 6.1(b) (emphasis added).
Essentially, the Firm's argument is that assuming it had received (and read) the Plan Documents, it would not have understood (based on the highlighted language in § 6.1(b) above) that failure to file a final fee application could result in disgorgement of amounts previously authorized for payment.
I disagree that this provision is confusing as to the requirement to file a final fee application and the related risk of disgorgement. First, the language in § 6.1(b) does not negate the requirement of filing a final fee application by the Bar Date. To the contrary, throughout the Plan, including § 6.1(b) itself, a final fee application is clearly referred to as mandatory, and the consequences for failure to comply include disgorgement. Indeed, § 6.3 of the Plan (quoted above) includes, in capitalized and bold typeface, a stern warning of the consequences of filing a late claim. The Firm's convenient after-the-fact interpretation of § 6.1(b) as somehow making the filing of a final fee application optional is unreasonable also because it would nullify the requirements set forth not only in the Plan Documents, but also in §§ 330 and 331 of the Bankruptcy Code and the bankruptcy court procedural rules, as well as in the numerous other documents the Firm received in the case. I therefore agree with the Bankruptcy Court that the Plan Documents reasonably conveyed the information required to determine that a final fee application was necessary and to ascertain the filing deadline.
B. Whether the Bankruptcy Court Abused its Discretion in Denying the Firm's Motion to Allow Late Filing and in Granting the Trustee's Disgorgement Motion
The Firm argues that in denying the Firm's Motion to Allow Late Filing and granting the Trustee's Disgorgement Motion, the Bankruptcy Court misapplied the law and that disgorgement was not mandated based on the equities of the case.
1. Whether the Bankruptcy Court Misapplied Legal Standards
The Firm first argues that the Bankruptcy Court's decision to deny the Motion to Allow Late Filing and to grant the Disgorgement Motion should be reversed because both decisions were based on the Bankruptcy Court's misapplication of the summary judgment standard and the law governing rebuttal of the presumption of receipt which resulted in the erroneous factual finding that the Firm had notice of the Bar Date. Since I have already concluded above that the Bankruptcy Court's decision regarding the Firm's receipt of notice of the Bar Date and the need to file a final fee claim is supported by the evidence (or the Firm's lack thereof) and that the Bankruptcy Court did not misapply the law regarding rebuttal of the presumption of receipt or the summary judgment standard in so deciding, I will move on to the Firm's second argument.
2. Whether the Penalty of Disgorgement Was Mandated by the Equities of the Case
The Firm argues that the Bankruptcy Court abused its discretion when it ordered disgorgement because the court failed to give adequate consideration to the Firm's circumstances and the equities of the case. Those claimed circumstances include the lack of notice of the Bar Date, the Firm's lack of bankruptcy experience, the Firm's lack of knowledge of the need to file a final fee application and its dependence on other bankruptcy counsel representing the estate who gave the Firm little guidance.
The Bankruptcy Court considered the equities of the case in making its determination that there was no excusable neglect to support an enlargement of time for the Firm to submit its Final Fee Application and in ultimately ordering disgorgement. SJ Order at 9-11 (applying the factors set forth in Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. , 507 U.S. 380, 395, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993) ). The factors considered by the Bankruptcy Court were the length of the delay (which, at nearly four months, the court considered excessive), the Firm's fault in the delay, and the reason for the delay, all of which the court found weighed heavily in favor of the Trustee. Regarding these factors, the Bankruptcy Court acknowledged the Firm's asserted lack of bankruptcy experience, but concluded that "ignorance does not ensure relief from the consequences that come from failing to follow certain requirements." SJ Order at 10-11. The court also considered as unreasonable the Firm's reliance on other professionals of the Debtor, as those professionals had no duty to keep the Firm notified and reminded of deadlines related to the Firm's fee claims. The Bankruptcy Court also looked unfavorably on the Firm's lack of diligence in failing to read or follow up on documents it received which clearly indicated that a final fee application was required. Those documents (discussed in the Background section above) provided notice (or, at a minimum, put the Firm on inquiry notice) that a final fee application was required. If these documents weren't enough put it on notice that a final fee application was required, the Firm also received several final fee applications filed in the case by other professionals in May of 2019, but Mr. Rumrell never inquired as to why these notices were being served. R. at 976-78 (Rumrell Dep. 163:12-172:18). The fact that the Firm either ignored these documents or was confused but failed to follow up was considered by the Bankruptcy Court to be inexcusable.
The Bankruptcy Court also considered whether the late filing caused prejudice to the estate and determined that this factor weighed slightly in favor of the Firm due to the minor effect the late filing would have on the administration of the estate. And, while the court found that there was no bad faith on the part of the Firm, it noted that "the Firm's lack of diligence in apprising itself of its obligations and reliance on other estate professionals does not leave the Firm wholly without fault." SJ Order at 11. On balance, the Bankruptcy Court concluded that there was no excusable neglect sufficient to excuse the Firm's untimely Final Fee Application. Without a final fee application, and thus no fees to award under § 330, the Bankruptcy Court ordered disgorgement, directing the Firm to return to the Trustee all funds paid for post-petition work performed. Id. at 11.
The Firm argues that its "bungled" Interim Fee Application -- which it claims should have been in the amount of $151,428.07, instead of $35,217.98, as filed -- is another factor weighing heavily against disgorgement because it was "no surprise to any interested party" that the Firm's total fees were at the higher amount. However, a "bungled" interim fee application seeking only $35,217.98 in fees (even if the higher amount could have been extrapolated from the exhibits to the filing) is no substitute for a mandatory final fee application. In addition, it should have come as no surprise to Mr. Rumrell (even without bankruptcy experience) the fact that the Firm's Interim Fee Application was merely temporary (and not final) considering that the document he signed was styled "First Interim Application for Compensation and Reimbursement of Expenses of Rumrell, McLeod & Brock, PLLC." R. at 340-46 (emphasis added). See Black's Law Dictionary (11th ed. 2019) (defining "interim" as "[d]one, made, or occurring for an intervening time; temporary or provisional").
The Firm relies on In re Raabe , No. 14-13200 MER, 2015 WL 4622808 (Bankr. D. Colo. July 31, 2015) (Romero, J.), a Chapter 13 case, for the proposition that when fees and expenses paid to professionals are reasonable, the court may excuse technical deficiencies in fee-related filings. The Raabe court noted that § 331 of the Bankruptcy Code (which is controlling in the instant case) does not apply in Chapter 13 cases. Id. , at *2. In addition, the Raabe court held that "[u]nder the limited circumstances of this case, the Court will refrain from ordering [debtor's counsel] to disgorge the fees he received post-petition," and warned that "in the future, [debtor's counsel] and other attorneys who represent Chapter 13 debtors are advised to be on notice that they must have their post-petition fees and expenses approved before they are paid, and must update their disclosure of compensation as necessary. If they do not, their fees will be subject to disgorgement." Id. Clearly, the "limited circumstances" present in Raabe , a Chapter 13 case dealing with less than $3000 in fees, are not present here.
The Firm also cites Fitzgibbons v. Zeman (In re Matney ), 407 B.R. 443, 2009 WL 613139 (B.A.P. 10th Cir. March 11, 2009) (unpublished), aff'd , 365 F. Appx. 126 (10th Cir. 2010) (unpublished), another Chapter 13 case, in which the BAP affirmed the bankruptcy court's order awarding $4,750 in attorneys’ fees previously paid to the attorney, despite the fact that the attorney fee disclosure statement was untimely. Id. , at *6, *7 (recognizing, however, that under § 329 of the Code, the bankruptcy court "would have been well within its discretion" to deny, as untimely, all requested fees and order disgorgement). However, the trustee in Fitzgibbons did not seek disgorgement of the fees already paid to the attorney and the court denied the remainder of the fees as unnecessary.
The only other case cited by the Firm that is potentially relevant here is Beirne, Maynard & Parson, LLP v. Cypresswood Land Partners, I , No. H-09-2620, 2010 WL 11209854 (S.D. Tex. June 8, 2010), a bankruptcy appeal in which the district court, reversing, in part, the bankruptcy court, held that "the late filing of the final request for fees would not justify the disgorgement of fees previously approved by the bankruptcy court. Therefore, insofar as the bankruptcy court relied on the wording of the Amended Plan to disgorge past fees in the amount of $126,638.06, that portion is reversed." See Open. Br. at 28, citing Beirne , at *12. However, the district court, on a subsequent motion to reconsider, amended this portion of its order and reversed itself, holding that the bankruptcy court was correct when it ordered disgorgement of all interim attorney fees paid based on the late filing – three weeks after the deadline set in the Chapter 11 plan. See Beirne, Maynard & Parson, L.L.P. v. Cypresswood Land Partners, I , 2011 WL 13324169, at *14 (S.D. Tex. March 31, 2011). On reconsideration, the district court reasoned that even though the Plan did not contain express language to the effect that the late filing of a final fee application could result in disgorgement of fees that were previously approved on an interim basis, such language was not necessary because the Code authorizes that result. Relying on § 330(a)(5) of the Code, the district court, on reconsideration, held that since the bankruptcy court found that the law firm was not entitled to any compensation due to its late filing of its final fee application (despite interim approval of the entire fee amount of $126,638.06), the amount of interim compensation exceeded the zero amount awarded as a final fee. Id. Therefore, rather than support the Firm's position, Beirne actually supports the Liquidating Trustee.
Like the court in Beirne , the Bankruptcy Court here applied § 330 of the Bankruptcy Code, which provides that interim fees awarded under § 331 may be disgorged if not approved as final:
The court shall reduce the amount of compensation awarded under this section by the amount of any interim compensation awarded under section 331, and, if the amount of such interim compensation exceeds the amount of compensation awarded under this section, may order the return of the excess to the estate.
11 U.S.C. § 330(a)(5). In addition, Local Bankruptcy Rule 2016-2(a) provides that "[p]ursuant to 11 U.S.C. §§ 330 and 331 and this Rule, the Court may authorize the debtor to pay professionals’ interim fees and expenses subject to final approval." Local Bankruptcy Rule 2016-2(b)(8) & (9) also require that interim and final fee applications be filed pursuant to 11 U.S.C. §§ 330 and 331 and that interim payments are subject to disgorgement. L.B.R. 2016-2(b)(8)(E) ("All Interim Advance Payments are subject to the interim and final fee applications filed with the Court pursuant to 11 U.S.C. §§ 330 and 331, and therefore subject to disgorgement."); L.B.R. 2016-2 (b)(9) (requiring compliance with § 330 and 331 for interim and final compensation approval).
While disgorgement may seem a harsh result to the Firm, as the Bankruptcy Court acknowledged, that is no reason to reverse. I conclude that the Bankruptcy Court properly considered the circumstances and equities of this case and did not abuse its discretion in ordering disgorgement under these circumstances. The Firm knew, or should have known, of the requirement to file a final fee application. Even if it was unaware of the Bar Date deadline, it was inexcusable for the Firm to not follow up. I agree with the Bankruptcy Court that rules and deadlines are meant to be followed. The Firm's failure to read the documents and its lack of diligence in informing itself of the relevant rules, requirements, and deadlines, and instead relying on other professionals, was, as the Bankruptcy Court noted, inexcusable and done at its own peril.
V. CONCLUSION
IT IS THEREFORE ORDERED that the United States Bankruptcy Court for the District of Colorado's Order dated April 23, 2021 is AFFIRMED.