Counsel Concerns

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