Advantage Healthplan, Inc. v. Potter

Page 521

391 B.R. 521

ADVANTAGE HEALTHPLAN, INC., Appellant, v. Patrick J. POTTER, et al., Appellees.

Civil Action No. 08-166 (CKK).

United States District Court, District of Columbia.

July 14, 2008.

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REDACTED VERSION

MEMORANDUM OPINION

COLLEEN KOLLAR-KOTELLY, District Judge.

The bankruptcy case underlying the above-captioned appeal involves a Plan of Reorganization (the "Plan") approved by the United States Bankruptcy Court for the District of Columbia ("Bankruptcy Court") in In re The Greater Southeast Community Hospital Foundation, Inc., et al., Case No. 99-01159. Appellant Advantage Healthplan, Inc. ("Advantage") is one of the two current members of the Plan Committee established by the Plan. This appeal is also purportedly brought by Elliot R. Wolff, President of Advantage and Advantage's corporate representative on the Plan Committee. However, appellees contest Mr, Wolff's standing on appeal. Appellees in this action are the Plan Committee itself, the Plan Committee's former counsel, Pillsbury Winthrop Shaw Pittman LLP, and Patrick J. Potter, a partner at the Pillsbury law firm who formerly served as Plan Agent pursuant to the Plan (collectively, with the Pillsbury law firm, "Pillsbury"). During the course of the underlying bankruptcy proceeding, a fee dispute arose between the Plan Committee and Pillsbury. On December 21, 2007, the Bankruptcy Court entered an Order approving a settlement of the fee dispute (hereinafter "Settlement Approval Order"). Advantage appeals both the Settlement Approval Order and a previous Order, signed by the Bankruptcy Court on December 20, 2007 and entered on the Bankruptcy Court docket on December 21, 2007, which struck an Objection to the proposed settlement filed by Mr. Wolff on behalf of Advantage (hereinafter "Striking Order").

Currently pending before this Court are a number of initial motions, filed before the parties filed their appellate briefs, as well as the actual appeal. The initial motions include: (1) Pillsbury's [5] Motion for Summary Affirmance of the Striking Order, which is joined by the Plan Committee, see Docket No. [17]; (2) Pillsbury's [13] Motion to Strike Elliot Wolff As Appellant, also joined by the Plan Committee, see Docket No. [16]; (3) and Pillsbury's [22] Motion to Suspend Briefing on Advantage's appeal pending resolution of the initial motions. The Court has conducted a searching review of the parties' various filings, the voluminous record of the Bankruptcy Court proceedings before the Court on appeal, and the relevant statutes and case law. Based upon the foregoing, the Court shall GRANT [5/17] Appellees' Motions for Summary Affirmance of the Striking Order and shall AFFIRM the Striking Order. In addition, the Court shall GRANT [6/16] Appellees' Motions to Strike Elliot Wolff as Appellant, finding that Mr. Wolff lacks standing to appeal the Bankruptcy Court's Orders. As the parties have already completed briefing on Advantage's appeal, the Court shall DENY AS MOOT Pillsbury's [22] Motion to Suspend Briefing, and shall DENY [33] Advantage's Motion for Oral Argument, concluding that the issues presented in this appeal may be resolved on the extensive briefing filed by all parties. Finally, the Court shall AFFIRM the Settlement Approval Order, and shall DISMISS this appeal in its entirety.

I. BACKGROUND

The following facts are relevant to all of the initial motions the Court resolves in this Memorandum Opinion, as well as to Advantage's appeal.

A. Nature of the Bankruptcy Case, Plan, and Confirmation Order

As noted above, this appeal arises from the jointly administered bankruptcy case of the Greater Southeast Community Hospital Foundation, Inc. ("GSCHF") and three GSCHF affiliates (collectively, "Debtors"). Brief of Appellee The Plan Committee (hereinafter "Plan Comm.App. Br.") at 2. The Debtors filed petitions for relief under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court in 1999. Id.; Brief of Appellants (hereinafter "Appellant's Br.") at 5. On October 23, 2001, the Bankruptcy Court entered an order (the "Confirmation Order") confirming the Debtors' Second Amended Joint Plan (the "Plan"). Joint Appendix ("JA") at 29-87, 88-129.¹

The Plan created the Plan Committee, as well as a Plan Agent, to take control of the assets of the Debtors' bankruptcy estates, including the Debtors' causes of action against third parties. Id.; Plan Comm.App. Br. at 2, 6.² The Plan Committee was originally comprised of three members: a bondholder representative (Eaton Vance), Advantage (with Mr. Wolff serving as corporate representative), and Welcome Home Inc. (with Stanley Zupnik serving as corporate representative). Pillsbury's Appellee Brief at 7 (citing JA 551, 1044); Appellant's Br. at 5-6. Eaton Vance resigned from the Plan Committee in June of 2007, leaving Advantage and Welcome Home as the members of the Plan Committee. Plan Comm.App. Br. at 6, Pillsbury App. Br. at 7; Appellant's Br. at 6. The Plan also provided for the appointment of a Plan Agent. Appellant's Br. at 6. Patrick J. Potter assumed the role of Plan Agent on March 31, 2006, and following Potter's appointment as Plan Agent, the Pillsbury law firm served as counsel to the Plan Agent and the Plan Committee. Id.

B. The PricewaterhouseCoopers Litigation

In 2002, pursuant to its powers and duties under the Plan, the Plan Committee filed suit against PricewaterhouseCoopers, LLP ("PwC") in the United States District Court for the District of Columbia, seeking damages based upon PwC's alleged prebankruptcy petition accounting malpractice. Plan Comm.App. Br. at 6; Pillsbury App. Br. at 8. That case is still pending and has not advanced past the pleading stage. See The Plan Committee v. PricewaterhouseCoopers, LLP, 335 B.R. 234 (D.D.C.2005) and The Plan Committee v. PricewaterhouseCoopers, LLP, Civil Action No. 02-01487, 2007 WL 1191917 (D.D.C. Apr.20, 2007).³ In May 2007, the Plan Committee asked Pillsbury, which did not represent the Plan Committee in connection with the PwC litigation, for assistance in remedying certain defects identified in the Plan Committee's complaints in that litigation. Plan Comm.App. Br. at 7; Pillsbury App. Br. at 9. In particular, Pillsbury sought and obtained a Bankruptcy Court Order clarifying the authority of the Plan Committee to pursue the PwC complaint. Plan Comm.App. Br. at 7; Pillsbury App. Br. at 9; JA 551-53.

C. The Fee Dispute Litigation and Settlement

A fee dispute subsequently arose between the Plan Committee and Pillsbury over Pillsbury's requested payment of $137,000 in legal fees and costs. Plan Comm.App. Br. at 7; Pillsbury App. Br. at 9; JA 267-75. On August 3, 2007, Pillsbury commenced a contested matter with the Bankruptcy Court by filing motions within the bankruptcy case seeking Plan Committee payment of the requested fees, as well as authority for Pillsbury and Potter to resign as Plan Committee counsel and Plan Agent, respectively. Plan Comm.App. Br. at 7; Pillsbury App. Br. at 9; Appellant's Br. at 6; JA 267-75. Thereafter, the Plan Committee terminated the services of Pillsbury and Potter, leaving the fee dispute as the sole issue. Plan Comm.App. Br. at 7; Appellant's Br. at 6. Between August and December 2007, the Plan Committee and Pillsbury conducted extensive litigation over the fee dispute before the Bankruptcy Court. Plan Comm.App. Br. at 8; Pillsbury App. Br. at 9. That litigation included significant discovery and multiple rounds of briefing and hearings on whether the Bankruptcy Court had jurisdiction to try the fee dispute. Pillsbury App. Br. at 9-10; Plan Comm.App. Br at 8. On November 15, 2007, Bankruptcy Judge S. Martin Teel, Jr. issued an Order setting forth his decision (made during a November 8, 2007 hearing) that the Bankruptcy Court had subject matter jurisdiction to try the fee dispute. JA 323-64, 365. The fee dispute litigation before the Bankruptcy Court also included a motion for summary judgment by Pillsbury and an initial hearing on that motion. Pillsbury App. Br. at 10. The fee dispute was scheduled for trial before Bankruptcy Judge Teel on January 8, 2008. Id.; JA 1051.

The evidence proffered by Pillsbury demonstrates that in late November 2007, the Plan Committee approached Pillsbury regarding settling the fee dispute and, on November 29, 2007, Mr. Zupnik-acting on behalf of the Plan Committee-offered to pay Pillsbury $100,000 in settlement of the fee dispute. JA 964-65 (11/30/07 e-mail from P. Potter to counsel for Plan Committee confirming Mr. Zupnik's authority; 11/30/07 e-mail from Plan Committee counsel, copied to Mr. Wolff, Mr. Zupnik and Mr. Potter, confirming Mr. Zupnik's "authorization] by the Plan Committee to discuss a resolution of the fee dispute between the Plan Committee and [Pillsbury]"; 12/2/07 e-mail from Plan Committee counsel, copied to Mr. Wolff, Mr. Zupnik and Mr. Potter, advising that Mr. Zupnik had "specific authority from the Plan Committee to resolve the dispute. If the proposal is beyond that authority, he will need to obtain further authority from the Committee"). Pillsbury declined that offer, and according to both Pillsbury and the Plan Committee, on December 10, 2007, Plan Committee counsel telephoned Pillsbury and proposed a payment of $130,000. Pillsbury App. Br. at 11; Plan Comm.App. Br. at 8; JA 995 (Tr. of 12/14/07 Hrg. at 5). Pillsbury and the Plan Committee maintain that Pillsbury accepted, subject to standard mutual release language, and that Plan Committee counsel responded by accepting Pillsbury's condition. Pillsbury App. Br. at 11; Plan Comm.App. Br. at 8; JA 995. Plan Committee counsel subsequently prepared a draft settlement agreement, to which Pillsbury made non-substantive edits. Pillsbury App. Br. at 11; Plan Comm.App. Br. at 8; JA 995-97 (12/14/07 Hrg. Tr. at 5-7).

For its part, Advantage asserts that counsel for the Plan...