United States District Court, W.D. Louisiana, Shreveport Division
KEVIN R. MOLLOY
LUCY G. SIKES
MAURICE HICKS, JR. MAGISTRATE, JUDGE
the Court is an appeal (Record Document 1) of the Bankruptcy
Court's Order (Bankruptcy Record Document 41) denying
Appellant Kevin R. Molloy's (“Appellant”)
“Application for Compensation by Attorney for Debtor
Requesting an Ex Parte Order Approving Compensation”
and the subsequent Order (Bankruptcy Record Document 45)
denying Appellant's “Motion to Vacate Order.”
For the reasons which follow, the Bankruptcy Court's
orders are REVERSED.
AND PROCEDURAL BACKGROUND
February 26, 2015, the Debtor Mario C. Marshall
(“Debtor”) filed a voluntary petition under
Chapter 13 of the United States Bankruptcy Code. At that
time, the Debtor maintained full time employment as a tow
truck driver for Tow Masters. See Record Bankruptcy
Case 15-10350, Page ID #55. The Debtor filed his Chapter 13
bankruptcy petition in an effort to prevent the seizure of
his 2011 Ford F-150, upon which Shreveport Federal Credit
Union maintained a lien. See Record Bankruptcy Case
15-10350, Page ID #44.
Debtor's Section 341 meeting of creditors, held on April
6, 2015, the Debtor informed the Trustee and Debtor's
counsel (Appellant) that he left his employment at Tow
Masters in order to begin working as an independent taxi
driver through the IP Taxi Service. The Chapter 13 Trustee
objected to the Debtor's proposed Chapter 13 plan, in
part, on the basis of the Debtor's new employment and
requested verified copies of all pay records from the date of
hire. See Record Bankruptcy Case 15-10350, Page ID
30, 2015, the Debtor filed a “Corrected Amended Chapter
13 Plan Before Confirmation and Amended Schedules I and J,
” (Record Bankruptcy Case 15-10350, Page ID #177),
reflecting the Debtor's anticipated new income and
expenses. See Record Bankruptcy Case 15-10350, Pages
ID #190-196. The Chapter 13 Trustee filed an “Objection
to the Amended Plan” and requested that the Debtor
provide the Trustee with income records. See Record
Bankruptcy Case 15-10350, Page ID #205.
records were provided to the Chapter 13 Trustee and, on
August 25, 2015, an “Amended Chapter 13 Plan Before
Confirmation” was filed to resolve the Trustee's
objection and to surrender a rent-to-own television and
recliner. See Record Bankruptcy Case 15-10350, Page
ID #216. Nonetheless, the Chapter 13 Trustee objected to the
amended Chapter 13 plan, questioning the feasibility of the
Debtor's plan based upon the reduced income reflected in
the Debtor's records. After the Debtor had a number of
confirmation hearings on his Chapter 13 plan and continued to
make payments, the Debtor decided to convert his Chapter 13
case to one under Chapter 7.
the Debtor's approval and before any motion to convert
the case had been filed, Appellant filed an
“Application for Compensation by Attorney for Debtor
Requesting an Ex-Parte Order Approving Compensation”
(the “Application”). See Record
Bankruptcy Case 15-10350, Pages ID #259-261. The Application
sought ex-parte attorney fees pursuant to Local Bankruptcy
Rule 2016-1. See id. The compensation for attorney
fees sought in the Application were for services provided in
the Chapter 13 case. See id. The Application
recognized that the Debtor intended to convert his case to
one under Chapter 7. See id. On January 25, 2016,
the Bankruptcy Court denied the Application for the following
See Harris v. Viegelahn, 2015 WL 2340847,
Supreme Court has held that plan payments in the hands of a
chapter 13 trustee return to the debtor upon conversion.
Chapter 13 trustees cannot pay creditors from accumulated
plan payments after conversion; such an act would contravene
348(3)'s termination of their services, and distribute
property to creditors that is not part of the estate in the
converted case pursuant to 348(f)(1).
Record Bankruptcy Case 15-10350, Page ID #262.
response to the Court's denial of the Application, the
Appellant filed a “Motion to Vacate Order” on
January 27, 2016, asking the Bankruptcy Court to reconsider
its denial of the fee application as Harris v.
Viegelahn does not apply to prevent the payment of
attorney fees prior to a Chapter 13 case. See Record
Bankruptcy Case 15-10350, Pages ID #264-267. On January 28,
2016, the Court entered an “Order Denying Motion to
Vacate and Request for Expedited Hearing” and provided
written reasons for the denial. See Record Document 1-1.
Appellant filed the instant appeal on February 2, 2016.
See Record Document 1. In support of the appeal,
Appellant filed a brief on April 18, 2016. See
Record Document 4. No. opposition brief has been filed.
United States Bankruptcy Court has the authority to issue
final orders pursuant to 28 U.S.C. § 157(b). This United
States District Court for the Western District of Louisiana,
Shreveport Division has subject matter jurisdiction, pursuant
to 28 U.S.C. § 158(a)(1) and 28 U.S.C. § 1334(b),
to hear appeals from a final order of the Bankruptcy Court.
“Final orders” of a Bankruptcy Court under 28
U.S.C. § 158 include both (1) “a final
determination of the rights of the parties to secure the
relief they seek” and (2) “a final disposition of
a discrete dispute within the larger bankruptcy case.”
Bartee v. Tara Colony Homeowners Ass'n (In re
Bartee), 212 F.3d 277, 282 (5th Cir. 2000).
Standard of Review
reviewing a bankruptcy court decision, a district court
functions as an appellate court and applies the standards of
review generally applied in federal courts of appeal. See
In re Webb,954 F.2d 1102, 1103-04 (5th Cir. 1992).
Because the same standard of review applies to both the
District Court and Court of Appeals when these Courts are
reviewing the decisions of a Bankruptcy Court, the District
Court is tasked with reviewing “the bankruptcy
court's award of attorney fees for abuse of
discretion.” In re Woerner, 783 F.3d 266, 270
(5th Cir. 2015). According to the Fifth Circuit,
“‘[a]n abuse of discretion occurs where the
bankruptcy court (1) applies an improper legal standard or
follows improper procedures in calculating the fee award, or
(2) rests its decision on finding of fact that are clearly
erroneous.'” Id. at 270-271, citing In
re Cahill, 428 F.3d 536 at 539 (5th Cir. 2005). Legal
conclusions are reviewed de novo. See Id.; In re
Herby's Foods, Inc., 2 F.3d 128, 130 (5th Cir.
1993). A bankruptcy court's findings of fact are reviewed
for clear error, with proper deference to that court's
opportunity to make credibility ...