In re Larosa Greenhouse, LLP

565 B.R. 304

IN RE: LAROSA GREENHOUSE, LLP, Debtor.

Case No.: 15–30672–ABA

United States Bankruptcy Court, D. New Jersey.

Signed March 13, 2017

David A. Kasen, Esquire, Kasen & Kasen, Cherry Hill, NJ, for Debtor.

Andrea Dobin, Esquire, Trenk DiPasquale, et al., Trenton, NJ, Trustee.

Lauren Bielskie, Esquire, Office of the United States Trustee, Newark, NJ 07102.

OPINION

Andrew B. Altenburg, Jr. United States Bankruptcy Judge

INTRODUCTION

LaRosa Greenhouse, LLP ("Debtor") filed a motion seeking to modify its chapter 12 confirmed plan. The motion sought to extend certain deadlines for the Debtor to make payments and to make other adjustments due to, inter alia , Debtor's counsel's intention to seek further post-confirmation compensation from the Debtor and/or the bankruptcy estate. Section 1229 of title 11 permits a debtor to modify a plan post-confirmation under certain circumstances. But the issues presented here are: 1) whether Debtor's counsel is entitled to compensation for post-confirmation services to be paid by the Debtor and/or the bankruptcy estate; and 2) whether the Debtor can modify its chapter 12 plan post-confirmation to address the payment of post-confirmation fees and expenses especially here, where a confusedly-drafted confirmation order has created alternative interpretations. For the reasons that follow, the answer to these questions is: yes.

JURISDICTION AND VENUE

This matter before the court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B), (L), and (O), and the court has jurisdiction pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a) and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23, 1984, as amended on September 18, 2012, referring all bankruptcy cases to the bankruptcy court. The following constitutes this court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052.

PROCEDURAL HISTORY

This matter is before the court on the Debtor's Motion for Modification of Chapter 12 Plan after Confirmation Pursuant to § 1229(a) of the Bankruptcy Code , filed October 28, 2016 in which the Debtor sought permission to: (1) extend the time to pay the balance of the October 2016 installment due under the confirmed plan to unsecured creditors on or before December 31, 2016; (2) extend the time to pay the balance of the chapter 12 trustee's attorney's fees and costs on or before December 31, 2016; and (3) postpone determination of whether Debtor's counsel's allowed fees and expenses were less than $136,500 until such time as the court entered an order respecting Debtor's counsel's final application for fees and expenses. Issues were raised with regard to whether Debtor's counsel could seek further compensation from the estate post-confirmation and whether that final application should be calculated against the $136,500 amount set forth in the order confirming the Debtor's plan. By order dated December 5, 2016, this court granted the Debtor's first two requests but held in abeyance the third pending submissions of parties in interest. After the submissions, the court conducted a telephonic hearing on February 8, 2017 on the remaining issues. After considering the arguments of the parties and initially concluding that the Debtor's reading of the confirmation order was incorrect, the court promptly reconsidered its position and took the matter under advisement. The matter is now ripe for determination.

FACTUAL BACKGROUND

The relevant facts are as follows. On November 2, 2015, the Debtor filed a voluntary petition for relief under chapter 12 of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq . (the "Bankruptcy Code"). On the same day, the Debtor filed an Application for Retention of Professional to retain Kasen & Kasen as counsel for the Debtor as a debtor in possession. On November 4, 2015, Andrea Dobin, Esquire, was appointed the chapter 12 trustee ("Trustee"). On November 24, 2015, the court entered an Order Authorizing Retention of Attorneys for Debtor (Doc. No. 48).

On January 29, 2016, the Debtor filed the Debtor's Chapter 12 Plan of Reorganization (the "Plan") (Doc. No. 75). The Plan included the following provision: "Kasen & Kasen has an administrative expense priority claim against the Debtor in the approximate amount of $100,000. This claim, to the extent it is allowed under 11 U.S.C. § 503(b), shall be paid from the Debtor's future income from on-going operations ...." Id. The Plan also proposed that non-priority general unsecured creditors would receive pro-rata distribution of a total of $62,020 over a three year period.

After Debtor's negotiations with the Trustee and its creditors prior to the confirmation hearing, the court confirmed the Plan with the parties to submit an order on consent. The parties then negotiated the terms of and the court entered an Order Confirming Chapter 12 Plan on April 19, 2016 (the "Confirmation Order") (Doc. No. 115) that included the following paragraphs:

IT IS FURTHER ORDERED that if and to the extent that the allowed fees and expenses of Debtor's counsel is less than $136,500, the difference between the allowed fees and expenses and $136,500 will be paid to the general unsecured creditors through the plan, as an addition to the distribution to be made in October, 2016 set forth below;

IT IS FURTHER ORDERED that general unsecured creditors shall be paid in accordance with the following payment schedule:

Month, Year       Payment to General Unsecured Creditors
October, 2016     $15,000.00
October, 2017     $25,000.00
October, 2018     $42,335.00

Thus, pursuant to the Confirmation Order, non-priority general unsecured creditors were now to receive a total of $82,335 paid pro rata, plus the difference between Debtor's counsel's allowed fees and expenses and $136,500,¹ if any (the "Difference Payment").

This resulted in a potential increase of the amount to be paid to the unsecured creditor class proposed in the Plan. Thereafter, on June 8, 2016, the Court entered an Order Amending Confirmation Order (the "Amended Confirmation Order") (Doc. No. 124). The Amended Confirmation Order clarified a secured creditor's lien retention but otherwise kept all provisions of the Confirmation Order in full force and effect.

At the time of the Confirmation Order, there were no allowed fees and expenses of Debtor's counsel. Then, on July 18, 2016, Kasen & Kasen filed an Application for Interim Allowance to Counsel for Debtor (the "Interim Fee Application") (Doc. No. 131). In the Interim Fee Application, counsel requested an award of fees for the period of September 17, 2015 through July 14, 2016 in the amount of $163,555.00 plus expenses of $1,737.24, with a credit of $36,500.00 on account of a prepetition retainer. The Trustee objected to the Interim Fee Application (Doc. No. 146). On September 1, 2016, the Court issued an oral opinion (Doc. No. 149), and entered an Order Granting Allowances , granting Kasen & Kasen fees in the reduced amount of $123,000.00 and expenses in the amount of $1,737.24 for a total of $124,737.24 (Doc. No. 150) ("Allowance Order"). These were and remain the only allowed fees as of the end of October 2016 and to date.

On October 28, 2016, more than 180 days from the date of the entry of the Confirmation Order,² the Debtor filed a Motion for Modification of Chapter 12 Plan After Confirmation Pursuant to § 1229(a) of the Bankruptcy Code ("Motion to Modify Plan") (Doc. No. 159). The purpose of the Motion to Modify Plan was to extend certain deadlines for the Debtor to make payments pursuant to the Plan and Confirmation Orders. Relevant to this discussion, the Certification in Support of the Motion to Modify Plan (Doc. No. 159–2) contained the following paragraphs:

11. The Order Confirming Plan also indicates that to the extent that the allowed counsel fees and expenses of the debtor's counsel were less than $136,500.00, the difference between those allowed fees and expenses and $136,500.00 would be paid to the general unsecured creditors through the Plan as an addition to the distribution to be made in October, 2016. The allowed amount of counsel fees and expenses as allowed to the attorneys for the debtor in accordance with their Interim Fee Application for Fees and Expenses was $124,737.24 ($123,000.00 fees and $1,737.24 expenses awarded). Thus the difference between $136,500.00 and the amount allowed for interim fees and expenses is $11,762.76.

12. Debtor's counsel expects to shortly file an additional fee application for services rendered and expenses incurred after July 14, 2016, which is the end date of the initial Interim Application.

13. To the extent that after a Final Fee Application there is still a difference between $136,500 and the total fees and expenses allowed, the debtor can and will pay any balance due under the Order Confirming Plan to be distributed to unsecured creditors.

14. The debtor is asking that the confirmed plan be modified in accordance with this Certification to allow the debtor to pay the remaining balance of $7,500.00 to the allowed unsecured creditors by December 31, 2016, the remaining balance due to the attorneys for the Chapter 12 Trustee by December 31, 2016, and to postpone any obligation to pay the difference between allowed fees and expenses to the attorneys for the debtor and $136,500.00 until after a Final Fee Application is decided.

Id.³

The Trustee filed a Certification in Response to Debtor's Motion to Modify Chapter 12 Plan (Doc. No. 161). She argued that Debtor's counsel is not permitted to file an additional fee application because "by analogy to Chapter 11, in this post-confirmation Chapter 12 case, the Debtor's counsel is no longer obligated or entitled to file a fee application to have its fees 'allowed' such that they impact the Chapter 12 Estate generally." Id. The Trustee also noted that by filing an additional fee application, Kasen & Kasen was seeking to reduce the Difference Payment. Id.

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