In re Forever Green Athletic Fields, Inc.

In re: Forever Green Athletic Fields, Inc., Debtor.

Bankruptcy No. 12-13888-MDC

UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Entered: May 4, 2017

May 3, 2017

Chapter 7

MEMORANDUM

INTRODUCTION

This Court held a hearing on February 23, 2016 (the "Hearing"), to address the Motion for a Third Award of Attorneys' Fees and Costs dated January 18, 2016 [Docket No. 146] (the "Motion"), filed by Forever Green Athletic Fields, Inc. ("Forever Green"). In the Motion, Forever Green requests this Court assess Charles C. Dawson ("Mr. Dawson"), Kelli L. Dawson ("Mrs. Dawson," collectively with Mr. Dawson, the "Dawsons") and Cohen Seglias Pallas Greenhall & Furman, P.C. ("Cohen Seglias," collectively with the Dawsons, the "Petitioning Creditors") with a third fee award to reimburse Forever Green for its attorneys' fees and costs incurred as a result of the Petitioning Creditors' filing of a Chapter 7 Involuntary Petition dated April 20, 2012 (the "Involuntary Petition"). Specifically, Forever Green seeks an award in the total amount of $93,136.83 consisting of attorneys' fees in the amount of $91,269.00 and costs in the amount of $1,867.83. This amount is in addition to two prior §303(i) awards in the total amount of $124,281.91 (the "Prior Fee Awards") previously granted by this Court to Forever Green and assessed, joint and severally, against the Petitioning Creditors.

Prior to the Hearing, Cohen Seglias filed an Objection dated February 11, 2016 [Docket No. 148] (the "Objection"). Despite receiving adequate notice of the Motion and the scheduled date of the Hearing, the Dawsons did not file a response to the Motion or otherwise appear at the Hearing. After hearing the arguments of Forever Green and Cohen Seglias, this Court requested from Forever Green additional information categorizing the services provided by its various attorneys.¹ Having received this information and the parties' post-hearing papers, this Court finds that Cohen Seglias has overcome the presumption of its liability for an award attorneys' fees under §303(i). For the reasons elaborated herein, this Court will exercise its discretion and enter a judgment in favor of Forever Green and against Mr. Dawson, only, in the total amount of $72,585.60.

PROCEDURAL HISTORY

The history of this case has been well documented.² This case was initiated on April 20, 2012, by the filing of the Involuntary Petition by the Petitioning Creditors and dismissed by this Court on November 1, 2013. Since then, this case traveled from this Court to the Third Circuit interspersed with a brief visit to the Philadelphia Court of Common Pleas. Much of this history addressed the attempts by the Petitioning Creditors to challenge the merits of this Court's rationale for refusing the Petitioning Creditors' attempt to invoke this Court's jurisdiction. With the issuance of its Opinion dated October 16, 2015, the Third Circuit affirmed the merits of this Court's dismissal of the Involuntary Petition.

On January 28, 2016, Forever Green filed the Motion to seek reimbursement of its fees and costs incurred during the period of October 1, 2014 through December 31, 2015. Thereafter, Forever Green filed an addendum to the Motion characterized as a "Supplemental Fees and Costs of Maschmeyer Karalis P.C. for the period from January 1, 2016 through January 31, 2016, in Further Support of the Motion" [Docket No. 149] (the "Supplemental Request"). Collectively, the Motion and the Supplemental Request seek reimbursement of Forever Green's fees and cost incurred in connection with four categories of service. As characterized by the parties in a Joint Stipulation of Facts dated February 29, 2016 [Docket No. 153] (the "Joint Stipulation"), the four categories of service are: (1) the appellate proceedings held by the Third Circuit that addressed the merits of this Court's dismissal of the Involuntary Petition; (2) the §303(i) proceedings held by this Court wherein Forever Green has sought reimbursement from thePetitioning Creditors of Forever Green's fees and costs; (3) the offset proceedings held by the Philadelphia Court of Common Pleas and, after removal, by this Court wherein Cohen Seglias sought to offset from its §303(i) liability the amount of Forever Green's pre-petition indebtedness; and (4) Forever Green's collection efforts wherein Forever Green sought to collect the amount of this Court's prior §303(i) awards from the Petitioning Creditors. To provide the necessary additional context for this Court's decision, this Court will elaborate upon the history of each of these four categories of service.

Appellate Proceedings

Pursuant to the Motion, Forever Green seeks a §303(i) award to reimburse it for its fees and costs incurred in connection with appellate proceedings litigated before the Third Circuit. The Motion seeks reimbursement of the entirety of Forever Green's fees and costs incurred in connection with matters addressed by the Third Circuit. The Supplemental Request does not include fees incurred in connection with the appeal. In total, Forever Green seeks reimbursement of $39,378.50 in fees and $994.45 in costs incurred in connection with the appellate proceedings.

By way of background, this Court entered an Order dated November 1, 2013 [Docket No. 65] (the "Dismissal Order"), dismissing the Involuntary Petition filed by the Dawsons and Cohen Seglias (collectively, the "Petitioning Creditors"). As elaborated by this Court's Memorandum dated November 1, 2013 [Docket No. 64] (the "Dismissal Memorandum"), issued in support of the Dismissal Order, this Court determined that Mr. Dawson had invoked this Court's jurisdiction for an improper purpose. On this basis, this Court dismissed the Involuntary Petition as a bad faith filing. At the time this Court dismissed the Involuntary Petition, this Court scheduled for December 6, 2013, a hearing for its consideration of whether Forever Green was entitled to a §303(i) award (the "§303(i) Hearing").

The Petitioning Creditors filed a Notice of Appeal dated September 12, 2013, seeking review by the District Court of the merits of this Court's decision. After receiving the parties' briefs, the District Court sustained this Court's decision and issued a Memorandum dated August 13, 2014 (the "DistrictCourt Memorandum"),³ explaining its decision. Shortly thereafter, the Dawsons filed a Notice of Appeal dated September 12, 2014, seeking review by the Third Circuit. Of significance, Cohen Seglias was not identified as a party to the Dawsons' appeal.⁴ Ultimately, the Third Circuit issued an Opinion dated October 16, 2015, affirming this Court's Dismissal Order.⁵ Thereafter, the record was returned to this Bankruptcy Court.

The §303(i) Proceedings

Pursuant to the present Motion and the Supplemental Request, Forever Green also seeks reimbursement of its fees and costs relating to its present request for a §303(i) award that Forever Green has incurred for the period running from the entry of the Prior Fee Awards through the end of January 2016. In total, Forever Green seeks reimbursement of $19,332.00 in fees and $621.33 in costs incurred in furtherance of its presentation, pursuant to the Motion and the Supplemental Request, of its present request for a third §303(i) award. These amounts do not relate to the prior §303(i) proceedings held by this Court that began immediately after this Court's dismissal of the Involuntary Petition.

The history of the §303(i) proceedings began with this Court's dismissal of the Involuntary Petition. Consistent with the instructions issued by this Court in the Dismissal Order, the parties were originally scheduled to participate in the §303(i) Hearing on December 6, 2013. In addition, this Court instructed the parties that they may file memoranda addressing whether Forever Green was entitled to a §303(i) award.⁶ On December 2, 2013, Forever Green filed its memorandum in support of its request for a §303(i) award as well as two declarations containing an accounting of its fees and costs incurred. For whatever reason, the Petitioning Creditors did not file any brief addressing merits of Forever Green's request. However, the Petitioning Creditors filed an Expedited Motion dated December 3, 2013 [Docket No. 75], requesting this Court stay its consideration of Forever Green's request for a §303(i) award. Atthe hearing scheduled for December 6, 2013, this Court addressed the Petitioning Creditors' request to stay the §303(i) proceedings.⁷

At the December 6 hearing, this Court concluded that the issues implicated by the Petitioning Creditors' appeal did not preclude this Court's consideration of whether the putative Debtor was entitled to a §303(i) award. Transcript of December 6, 2013 Hearing ("Transcript December 6, 2013"), 9:8-19.⁸ Despite finding that it retained jurisdiction to consider the merits of Forever Green's request for §303(i) damages, this Court decided it would issue a stay of the §303(i) proceedings conditioned upon the posting of a bond by the Petitioning Creditors in the amount of $1,000,000 on or before December 20, 2013. In the event that the Petitioning Creditors failed to post this bond, this Court continued the §303(i) Hearing to January 13, 2014.

The Petitioning Creditors failed to post the bond. The Petitioning Creditors again declined to file any brief addressing the merits of Forever Green's request for an initial §303(i) award. Rather, on the eve of the scheduled January 13 hearing,⁹ the Petitioning Creditors once again attempted to block the continuing of the §303(i) proceedings. In their Motion dated January 13, 2014 [Docket No. 99], the Petitioning Creditors sought to relitigate the issues considered by this Court at the December 6 hearing and provided no explanation of why this Court should alter its conclusion that a stay was warranted only upon the posting of an appeal bond. For the reasons stated at the January 13 hearing,¹⁰ this Court denied the Petitioning Creditors' request to...