Counsel Concerns

Legal Services After Bankruptcy Post-Petition Filed

The U.S. Bankruptcy Appellate Panel for the Tenth Circuit decided that a law firm that represented a debtor in litigation over the production and distribution of a motion picture wasn't entitled to attorney fees for work done on the film litigation after the debtor/client filed for bankruptcy but before the bankruptcy plan was confirmed. In Re Lacy, 335 B.R. 729 (2006). Stinky Love Inc. (SLI) had sued Nesbit Lee Lacy regarding contracts and investments in the movie 'Love Stinks.' The law firm of Bennett & Fairshter LLP (BF) served as Lacy's counsel in the dispute. Lacy filed for bankruptcy after a losing an initial ruling in the film litigation. SLI subsequently won a judgment against Lacy that was affirmed by the California Court of Appeal. SLI and Lacy then agreed to a stipulation of $6.26 million as SLI's unsecured claim. BF didn't file an application to have the bankruptcy court approve its postpetition legal work as an administrative expense.

In denying BF's request for post-petition fees, the bankruptcy appellate panel emphasized: 'It is very well-established that an attorney whose employment is not approved by the court in accordance with [11 U.S.C.] Sec. 327 is not entitled to be paid his or her fees or costs from assets of the estate. ' Furthermore, BF's Postpeti-tion Fee Claim would not be allowable or payable under the confirmed plan to which it is bound. The plan expressly states that administrative expenses of the estate, such as the postpetition, pre-confirmation professional fees and costs that comprise BF's Postpetition Fee Claim, are payable only to the extent that they are allowed, and allowance of such claims is contingent on the professional filing an application with the bankruptcy court within thirty days following the plan's effective date. It is undisputed that BF has not filed an application seeking approval of its Postpetition Fee Claim.'

Malicious Prosecution

The Court of Appeal of California, Second Appellate District, Division Five, reversed a lower court ruling that had granted an anti-SLAPP motion by attorneys sued for malicious prosecution for pursuing film-financing litigation. Hoffman v. Chodos, B183042. (California's anti-SLAPP statute is meant to strike suits against parties that grow out of their participation in right-of-petition or free-speech activities.) Attorneys Michael Chodos and Hillel Chodos had represented Artisan Pictures, which sued film executive Peter Hoffman and others over the terms of cash-flow insurance for a slate of motion pictures. The trial court granted summary judgment in favor of Hoffman on Artisan's fraud claim. Hoffman then sued the lawyers.

The court of appeal explained in its unpublished opinion: 'An attorney may be held liable for malicious prosecution when he commences a lawsuit properly, but then continues to prosecute it after learning it is not supported by probable cause. ' Hoffman has made a prima facie showing that no reasonable attorney would have thought the allegations against Hoff-man in the second amended complaint were supportable based on the facts known to the Attorneys, and after discovery failed to provide any proof to support the allegations against Hoff-man, no reasonable attorney would have continued the action by opposing Hoffman's motion for summary judgment and repeatedly appealing the summary judgment decision in Hoff-man's favor.' The court of appeal also found a prima facie case of malice by the attorneys, noting: 'Continuing to vigorously pursue the lawsuit after receiving notice that there were no facts to support it, admitting that there was no factual basis to support the pleadings, and failing to develop a factual basis to prove the lawsuit, permits a strong inference of malice.'

Malicious Prosecution

The Court of Appeal of California, Second Appellate District, Division Three, affirmed a ruling against the Academy of Motion Pictures Arts & Sciences and its attorneys in a malicious prosecution the academy and counsel filed. Quinn Emanuel Urquhart Oliver & Hedges LLP v. LaTorraca and Goettsch, B171111. Comedian Kerman, the author of a book about gaining access to concerts and sports events without a ticket, obtained a press pass for the 1997 Academy Awards ceremony in Los Angeles. He nevertheless was detained inside the Shrine Auditorium and arrested for unlawful activity, though the charge was later dropped. Kerman then hired lawyers to file suit against the academy and its counsel, which then sued Kerman and his attorneys for malicious prosecution. The trial court concluded in the latter case that Kerman and his attorneys had probable cause to file their suit over his arrest

The court of appeal noted in an unpublished opinion: 'Here, the undisputed evidence showed the press pass issued to Kerman did not indicate any restrictions other than it would expire at 2 p.m. on March 24, 1997. Further, Kerman continually asserted he was not provided with any written statement of access restrictions … and that he was not orally advised of access restrictions on the press pass. Further, Kerman informed his attorneys that he was directed by security guards toward the main entrance of the Shrine Auditorium and that he walked unchallenged through the main entrance of the Shrine.'

Regarding the Quinn firm, the court of appeal added: 'The undisputed facts indicate Quinn attorneys were directly involved in the events herein from the inception. The investigative report from [private investigators] states four of its agents met with [Quinn partner] David Quinto on March 21, 1997, two days before the incident, when they began surveillance of Kerman. Quinto came to the Shrine on the day of the incident and provided [Los Angeles police] with a copy of Kerman's book, to assist them in the arrest of Kerman for trespass. Further, despite the City Attorney's contemplated dismissal of the criminal action against Kerman, [Christopher] Tayback of the Quinn firm wrote a letter to urge continued prosecution of Kerman. The Tayback letter acknowledged the Academy had instructed its personnel not to stop Kerman 'since he would be arrested upon sneaking in.' ' These undisputed facts made it tenable to assert that Quinn orchestrated a plan to set up Kerman for a trespass charge and committed the underlying torts [alleged in Kerman's suit] during the execution of that plan.'

Legal Services After Bankruptcy Post-Petition Filed

The U.S. Bankruptcy Appellate Panel for the Tenth Circuit decided that a law firm that represented a debtor in litigation over the production and distribution of a motion picture wasn't entitled to attorney fees for work done on the film litigation after the debtor/client filed for bankruptcy but before the bankruptcy plan was confirmed. In Re Lacy, 335 B.R. 729 (2006). Stinky Love Inc. (SLI) had sued Nesbit Lee Lacy regarding contracts and investments in the movie 'Love Stinks.' The law firm of Bennett & Fairshter LLP (BF) served as Lacy's counsel in the dispute. Lacy filed for bankruptcy after a losing an initial ruling in the film litigation. SLI subsequently won a judgment against Lacy that was affirmed by the California Court of Appeal. SLI and Lacy then agreed to a stipulation of $6.26 million as SLI's unsecured claim. BF didn't file an application to have the bankruptcy court approve its postpetition legal work as an administrative expense.

In denying BF's request for post-petition fees, the bankruptcy appellate panel emphasized: 'It is very well-established that an attorney whose employment is not approved by the court in accordance with [11 U.S.C.] Sec. 327 is not entitled to be paid his or her fees or costs from assets of the estate. ' Furthermore, BF's Postpeti-tion Fee Claim would not be allowable or payable under the confirmed plan to which it is bound. The plan expressly states that administrative expenses of the estate, such as the postpetition, pre-confirmation professional fees and costs that comprise BF's Postpetition Fee Claim, are payable only to the extent that they are allowed, and allowance of such claims is contingent on the professional filing an application with the bankruptcy court within thirty days following the plan's effective date. It is undisputed that BF has not filed an application seeking approval of its Postpetition Fee Claim.'

Malicious Prosecution

The Court of Appeal of California, Second Appellate District, Division Five, reversed a lower court ruling that had granted an anti-SLAPP motion by attorneys sued for malicious prosecution for pursuing film-financing litigation. Hoffman v. Chodos, B183042. (California's anti-SLAPP statute is meant to strike suits against parties that grow out of their participation in right-of-petition or free-speech activities.) Attorneys Michael Chodos and Hillel Chodos had represented Artisan Pictures, which sued film executive Peter Hoffman and others over the terms of cash-flow insurance for a slate of motion pictures. The trial court granted summary judgment in favor of Hoffman on Artisan's fraud claim. Hoffman then sued the lawyers.

The court of appeal explained in its unpublished opinion: 'An attorney may be held liable for malicious prosecution when he commences a lawsuit properly, but then continues to prosecute it after learning it is not supported by probable cause. ' Hoffman has made a prima facie showing that no reasonable attorney would have thought the allegations against Hoff-man in the second amended complaint were supportable based on the facts known to the Attorneys, and after discovery failed to provide any proof to support the allegations against Hoff-man, no reasonable attorney would have continued the action by opposing Hoffman's motion for summary judgment and repeatedly appealing the summary judgment decision in Hoff-man's favor.' The court of appeal also found a prima facie case of malice by the attorneys, noting: 'Continuing to vigorously pursue the lawsuit after receiving notice that there were no facts to support it, admitting that there was no factual basis to support the pleadings, and failing to develop a factual basis to prove the lawsuit, permits a strong inference of malice.'

Malicious Prosecution

The Court of Appeal of California, Second Appellate District, Division Three, affirmed a ruling against the Academy of Motion Pictures Arts & Sciences and its attorneys in a malicious prosecution the academy and counsel filed. Quinn Emanuel Urquhart Oliver & Hedges LLP v. LaTorraca and Goettsch, B171111. Comedian Kerman, the author of a book about gaining access to concerts and sports events without a ticket, obtained a press pass for the 1997 Academy Awards ceremony in Los Angeles. He nevertheless was detained inside the Shrine Auditorium and arrested for unlawful activity, though the charge was later dropped. Kerman then hired lawyers to file suit against the academy and its counsel, which then sued Kerman and his attorneys for malicious prosecution. The trial court concluded in the latter case that Kerman and his attorneys had probable cause to file their suit over his arrest

The court of appeal noted in an unpublished opinion: 'Here, the undisputed evidence showed the press pass issued to Kerman did not indicate any restrictions other than it would expire at 2 p.m. on March 24, 1997. Further, Kerman continually asserted he was not provided with any written statement of access restrictions … and that he was not orally advised of access restrictions on the press pass. Further, Kerman informed his attorneys that he was directed by security guards toward the main entrance of the Shrine Auditorium and that he walked unchallenged through the main entrance of the Shrine.'

Regarding the Quinn firm, the court of appeal added: 'The undisputed facts indicate Quinn attorneys were directly involved in the events herein from the inception. The investigative report from [private investigators] states four of its agents met with [Quinn partner] David Quinto on March 21, 1997, two days before the incident, when they began surveillance of Kerman. Quinto came to the Shrine on the day of the incident and provided [Los Angeles police] with a copy of Kerman's book, to assist them in the arrest of Kerman for trespass. Further, despite the City Attorney's contemplated dismissal of the criminal action against Kerman, [Christopher] Tayback of the Quinn firm wrote a letter to urge continued prosecution of Kerman. The Tayback letter acknowledged the Academy had instructed its personnel not to stop Kerman 'since he would be arrested upon sneaking in.' ' These undisputed facts made it tenable to assert that Quinn orchestrated a plan to set up Kerman for a trespass charge and committed the underlying torts [alleged in Kerman's suit] during the execution of that plan.'