In re Sanders

540 B.R. 911

In re: Anna Marie Sanders, Debtor.

Case No. 13–11065–JKO

United States Bankruptcy Court, S.D. Florida, Fort Lauderdale Division .

Signed November 18, 2015

Tina M. Talarchyk, Esq., The Talarchyk Firm, Palm Beach, FL, Douglas C. Broeker, Esq., Miami, FL, for Debtor.

ORDER ON MOTION TO RECUSE

John K. Olson, Judge, United States Bankruptcy Court

This dismissed Chapter 11 case is before the Court on the Motion (the “Recusal Motion”) [ECF 290] filed on January 29, 2015, by the Debtor and her counsel, Tina M. Talarchyk, seeking an order of recusal of this judge pursuant to 28 U.S.C. §§ 455(a)and (b), 28 U.S.C. § 144, and the Code of Judicial Conduct for United States Judges, Canons 2 and 3.

Background

The Debtor filed her case on January 17, 2013. She has been represented throughout the case by attorney Tina M. Talarchyk who appeared through three different law firms during the course of the representation. In her application to be retained as Debtor's counsel through her then-firm, Talarchyk Merrill, LLC, (the “Retention Application”) [ECF 17], Talarchyk stated under penalty of perjury that

18. ....TALARCHYK MERRILL will retain all remaining amounts of the Retainer in trust during the pendency of this case to be applied to any professional fees, charges and disbursements that remain unpaid at the end of this Chapter 11 Case.

19. TALARCHYK MERRILL will provide the Debtor with periodic (no less than monthly) invoices for services rendered and disbursements incurred. During the course of this Chapter 11 Case, the issuance of periodic invoices will constitute requests for interim payment against the total reasonable fees and reimbursable expenses to be determined at the conclusion of this Chapter 11 Case. Interim and final payments are to be made on account of such invoices only in accordance with orders of the Court.[Emphasis added.]

Affidavit of Tina M. Talarchyk in Support of Application of the Debtor for Entry of an Order Authorizing the Retention and Employment of Talarchyk Merrill, LLC as Attorneys for the Debtor–in–Possessionnunc pro tunc [ECF 17, page 21 of 23].

Although a Chapter 11 Plan [ECF 207] and Disclosure Statement [ECF 208] were filed, the Debtor withdrew both [ECF 220] and moved to dismiss the case [ECF 219] after objections were filed to the Plan [ECF 215] and Disclosure Statement [ECF 218]. The case was dismissed by Order (the “Dismissal Order”) [ECF 225] entered March 10, 2014. The Dismissal Order was drafted by Talarchyk and contained the following two relevant decretal paragraphs:

4. This Court shall retain jurisdiction to review fee applications of professionals in the instant case.

* * *

6. The Debtor shall not pay any professionals without further order of Court.

The Court was accordingly required to consider the various fee applications filed by other professionals in the case [ECF 231, 232, 233] and by Talarchyk on behalf of Talarchyk Merrill, LLC [ECF 234] and The Talarchyk Law Firm [ECF 235]. The United States Trustee filed an Objection [ECF 244] to these two Talarchyk fee applications, and the Objection to each was sustained by Order [ECF 250, 251] which denied the applications without prejudice to the filing of amended applications.

Talarchyk filed amended applications for Talarchyk Merrill [ECF 245] and The Talarchyk Firm [ECF 246],¹the latter seeking fees in the amount of $190,755 together with expenses of $846. Talarchyk Newburgh, LLC, through its member Steven S. Newburgh, filed an Objection [ECF 258] to The Talarchyk Firm's second application [ECF 246], which was sustained by Order [ECF 261] entered September 8, 2014. That Order authorized The Talarchyk Firm to file a second amended fee application within 21 days. No further fee application by The Talarchyk Firm was filed.

The application of Talarchyk Merrill [ECF 245] and a new application [ECF 265] filed September 19, 2014, by Talarchyk for Talarchyk Newburgh were ruled upon by the Court by Order (the “Fee Order”) [ECF 270] entered December 8, 2014. Talarchyk filed a Motion (the “Reconsideration Motion”) [ECF 271] for reconsideration of the Fee Order on December 21, 2014. The Reconsideration Motion was denied by Order (“Reconsideration Order”) [ECF 273] entered January 14, 2015. The Reconsideration Order reiterated the direction to Talarchyk contained in the Fee Order that she deliver to the Court at the evidentiary hearing scheduled for January 30, 2015, and that she file and serve “the entirety of the documents required by the Court's order at [ECF 270], including a complete accounting of all deposits into, and all disbursements from any and all trust accounts that relate to the Debtor's Chapter 11 case.” SeeFee Order at page 10, ¶ 3; Reconsideration Order at page 2, ¶ 3.

On January 28, 2015, Talarchyk filed an Emergency Ex ParteMotion (the “Motion to Continue”) [ECF 280] seeking to continue the scheduled January 30, 2015 hearing. The Motion to Continue and accompanying affidavits describe the severe medical condition of the elderly Debtor's 85–year–old husband and his urgent need for medical procedures to treat his lung cancer. The Debtor represented that she is her husband's sole caregiver and that she wishes to attend the scheduled evidentiary hearing. The Court granted the Motion to Continue in part, cancelling any evidentiary hearing but requiring Talarchyk to appear and to deliver the trust account records [ECF 281].

Trust Account Records

The Second Talarchyk Merrill Fee Application [ECF 245] represents that the Firm is holding $23,787 in its “fee retainer” account. This is consistent with the Retention Application [ECF 17] in which Talarchyk Merrill disclosed that on or about January 14, 2013, Talarchyk Merrill had received a fee retainer of $23,787 from the Debtor, together with the filing fee of $1,213, aggregating $25,000. The Retention Application recites that Talarchyk Merrill “will retain [the entire amount] of the Retainer in trust during the pendency of this case to be applied to any professional fees, charges and disbursements that remain unpaid at the end of the Chapter 11 Case.” [ECF 17, ¶¶ 22–23]. As noted above, the Dismissal Order [ECF 225], which was drafted by Talarchyk, provided for the express retention of jurisdiction by this Court for the award of all professional fees in the case and prohibited the payment of any professional fees except upon Court order.

No orders allowing fees or costs to Talarchyk, Talarchyk Merrill, Talarchyk Newburgh, or The Talarchyk Firm were entered by this Court prior to the Fee Order [ECF 270]. But the Talarchyk Newburgh Application [ECF 265] states that the “Balance remaining in fee retainer account, not yet awarded” is $2,917.Since no fees were previously awarded to any of the lawyers or law firms, this Court asked rhetorically why the balance in the Talarchyk Merrill or Talarchyk Newburgh trust account was not the full retainer of $23,787 which Talarchyk represented would be held in trust until “the end of the Chapter 11 Case”? The difference between these two sums is $20,870,which is precisely the amount of fees and costs sought by Talarchyk Merrill in the Second Talarchyk Merrill Fee Application [ECF 245]. By implication, it appeared to the Court that Talarchyk had caused $20,870 to be disbursed from the Talarchyk Merrill trust account without authorization. In furtherance of this Court's statutory obligations under 11 U.S.C. § 330to consider and rule upon fee applications, as well as the provisions of the Dismissal Order, Talarchyk was directed to account for all trust account transactions related to the Debtor or the Debtor's case.

To summarize: the only issue pending before the Court on January 29, 2015, the date the Recusal Motion was filed, was the direction to Talarchyk to deliver the relevant trust account records on the following day. The Recusal Motion must be considered before any further action can be taken by this Court since, under § 455(a), recusal is required whenever a judge's impartiality “might reasonably be questioned.” A judge faced with a recusal motion could, in the judge's discretion, leave the motion to a different judge to decide. But there are no reported cases or accepted principal of law which compels that judge to do so. In re United States,158 F.3d 26, 34 (1st Cir.1998); accord,United States v. Heldt,668 F.2d 1238, 1271 (D.C.Cir.1981). Indeed, some case authority states that because there is no provision for the transfer of disqualification motions to another judge, the motion to disqualify “must be decided by the judge whose disqualification is sought.” Cohee v. McDade,472 F.Supp.2d 1082, 1084 (S.D.Ill.2006).

Effect of Appeal

On January 27, 2015, Talarchyk filed a Notice of Appeal [ECF 277] which appealed from the Order (the “Fee Order”) [ECF 270] which granted in part the fee application [ECF 245] of Talarchyk Merrill and the fee application [ECF 265] of Talarchyk Newburgh; directed an accounting; and set an evidentiary hearing. The Notice of Appeal [ECF 277] also appealed from the Order [ECF 273] denying Talarchyk's Motion [ECF 271] for reconsideration of the Fee Order and from the separately-docketed Order [ECF 274] setting the evidentiary hearing on January 30, 2015.

The district court has jurisdiction over final judgments, orders and decrees of bankruptcy courts under 28 U.S.C. § 158(a)(1)and, “with leave of the [district] court, from other interlocutory orders and decrees” under § 158(a)(3).

Significant case law exists regarding what constitutes a final order in the context of a bankruptcy case. Because a bankruptcy case is often of a protracted nature and involves multiple parties, appellate courts generally have applied a broader pragmatic or flexible definition of finality to bankruptcy appeals. Barben v. Donovan (In re Donovan),532 F.3d 1134, 1136–37 (11th Cir.2008). In other words, the “unique nature of bankruptcy procedure dictates that [appellate courts] take a pragmatic approach to finality.” Bonner Mall P'ship v. U.S. Bancorp.Mortg....