In re Spiegel

FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER ALLOWING IN PART INTERIM COMPENSATION AND REIMBURSEMENT OF EXPENSES OF ADELMAN & GETTLEMAN, ATTORNEYS FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS

Timothy A. Barnes, Judge.

TOTAL FEES	$ 213,680.50	TOTAL COSTS	$ 1,246.58
REQUESTED:	REQUESTED:
TOTAL FEES REDUCED:	$ 11,581.50	TOTAL COSTS REDUCED:	$ 0.00
TOTAL FEES ALLOWED:	$ 202,099.00	TOTAL COSTS ALLOWED:	$ 1,246.58
TOTAL FEES AND COSTS ALLOWED: $ 203,345.58

The matter coming on to be heard on the Third Interim Fee Application of Adelman & Gettleman, Ltd. for Allowance and Payment of Interim Compensation and Reimbursement of Expenses as Counsel to the Official Committee of Unsecured Creditors and For Shortened Notice Thereof [Dkt. No. 686] (the "Application") filed by Howard L. Adelman, Nicholas R. Dwayne, and the law firm of Adelman & Gettleman, Ltd. (the "Applicant"), counsel to the Official Committee of Unsecured Creditors (the "Committee") of Marshall Spiegel (the "Debtor"); the court having conducted hearings on the Application on October 12, 2022, January 4, 2023, and February 22, 2023, (the "Hearings") and at the final Hearing on the Application having tentatively announced its ruling on the issue of standing raised in relation to the Application but not having ruled on the Application's propriety; and the court having considered the arguments raised at the Hearings and the following filings in relation to the Application:

(i) Combined Objection of Marshall Spiegel and Matthew Spiegel to Third Interim Fee Application of Adelman &amp Gettlement [sic], Ltd., [Dkt. No. 739] (the "Joint Objection") was filed on behalf of the Debtor and the Debtor's son, Matthew Spiegel ("Matthew")

(ii) Objection of 1116-22 Greenleaf Building, LLC to Third Interim Fee Application of Adelman & Gettleman, Ltd. for Allowance and Payment of Interim Compensation and Reimbursement of Expenses as Counsel to the Official Committee of Unsecured Creditors and for Shortened Notice Thereof [Dkt. No. 736] ("Greenleaf Objection") filed by 1116-22 Greenleaf Building, LLC ("Greenleaf");

(iii) Reply in Support of Third Interim Fee Application of Adelman & Gettleman, Ltd. for Allowance and Payment of Interim Compensation and Reimbursement of Expenses as Counsel to the Official Committee of Unsecured Creditors [Dkt. No. 752] (the "Reply");

(iv) Response of 1116-1122 Greenleaf Building, LLC to Standing Issue Presented in Committee Counsel's Reply in Support of its Third Application for Interim Compensation [Dkt. No. 790];

(v) Sur-Reply/Response of Matthew Spiegel to Standing Argument Raised by Committee Counsel [Dkt. No. 792]; and

(vi) Sur-Reply to Third Interim Fee Application of Adelman & Gettleman, Ltd. For Allowance and Payment of Interim Compensation and Reimbursement of Expenses as Counsel to the Committee of Unsecured Creditors and for Shortened Notice Thereof [Dkt. No. 798] (the "Sur-Reply").

NOW, THEREFORE, THE COURT FINDS THAT:

A. At the Hearing on October 12, 2022, the court conducted an initial Hearing on the Application and entered an order setting objection deadlines with respect thereto. Order [Scheduling Application for Compensation] [Dkt. No. 696] (the "First Scheduling Order");

B. On November 30, 2022, in accordance with the timing set forth in the First Scheduling Order, the Joint Objection and the Greenleaf Objection were filed;

C. On December 14, 2022, in accordance with the timing set forth in the First Scheduling Order, the Applicant filed the Reply. In the Reply, the Applicant argued that because the Application only sought relief from the Debtor, Matthew and Greenleaf lacked a pecuniary interest in the outcome of the decision. Further, the Applicant argued neither party had filed a proof of claim, they were not scheduled as creditors and they were not receiving a distribution from the Debtor's Fourth Amended Plan of Reorganization [Dkt. No. 728];

D. At the Hearing on January 4, 2023, the court ordered supplemental briefing on the issue of standing raised in the Reply. Order Scheduling Briefing [Dkt. No. 771] (the "Second Scheduling Order");

E. On January 16, 2023, the Debtor filed Debtor's Fifth Amended Chapter 11 Plan of Reorganization [Dkt. No. 776] (the "Fifth Amended Plan"). In the Fifth Amended Plan, the Debtor listed Matthew as a class 7 creditor holding a claim of $ 475,000;

F. On February 2, 2023, in accordance with the timing set forth in the Second Scheduling Order, Matthew and Greenleaf each filed sur-responses to the Application;

G. On February 9, 2023, in accordance with the timing set forth in the Second Scheduling Order, the Applicant filed the Sur-Reply;

H. On February 16, 2023, the Debtor amended his Schedules E/F [Dkt. No. 805] (the "Amended Schedules") to list Matthew as having an unsecured claim of $ 475,000.00 for "other"

though the "other" is not specified. The previously filed Schedules E/F had not listed Matthew as a creditor; and

I. On February 22, 2023, the court conducted the final Hearing on the Application, at which Hearing the court announced its preliminary ruling on the question of standing and took the remainder of the Application under advisement.

NOW, THEREFORE, THE COURT FURTHER FINDS THAT:

J. This court has addressed standing in bankruptcy matters before. In re Sindesmos Hellinikes-Kinotitos of Chicago, 607 B.R. 898, 914-18 (Bankr. N.D.Ill. 2019) (Barnes, J.). There, the court observed that the Seventh Circuit precedent appears to blend Article III standing and its prudential limitations into the so-called "pecuniary interest" rule. Id. at 916 (citing Cult Awareness Network, Inc. v. Martino (In re Cult Awareness Network, Inc.), 151 F.3d 605, 607 (7th Cir. 1998)). "To have standing to object to a bankruptcy order, a person must have a pecuniary interest in the outcome of the bankruptcy proceedings. Only those persons affected pecuniarily by a bankruptcy order have standing to appeal that order." Cult Awareness, 151 F.3d at 607;

K. The Seventh Circuit has more recently addressed the issue of standing in bankruptcy proceedings in In re C.P. Hall Co., 750 F.3d 659 (7th Cir. 2014). There, the Seventh Circuit noted that "to become a party to the bankruptcy proceeding [a movant] had to show not merely standing but that 'a legislatively conferred cause of action encompasses' its claim." Id. at 661 (quoting Lexmark Int'l., Inc. v. Static Control Components, Inc., 572 U.S. 118, 127 (2014). Further, the Seventh Circuit stated that to be heard, a party must be "someone who has a legally recognized interest in the debtor's assets," not just someone who "may suffer collateral damage from a ruling in a bankruptcy proceeding." Id.;

L. In light of these standards, Matthew and Greenleaf lacked standing to file their respective objections to the Application;

M. Prior to the filing of the Amended Schedules, Matthew clearly lacked standing in this matter. He had no direct pecuniary interest in the outcome of the Application and had no legally recognized interest in the Debtor's assets as a result of his status as the Debtor's presumptive heir;

N. Both the Fifth Amended Plan and the Amended Schedules each have the hallmarks of blatant attempts of the Debtor to confer standing on his son. As to the Fifth Amended Plan the inclusion of a noncreditor in a plan as a method of conferring standing is questionable, at best. See, e.g., In re Pajian, 785 F.3d 1161, 1165 (7th Cir. 2015);

O. As to the Amended Schedules, though their filing is also of questionable provenance, the presumptions available to scheduled claims under applicable law operate to dictate a different result. As the Amended Schedules list Matthew as a creditor and amendments to schedules are liberally permitted under Fed.R.Bankr.P. 1009, the Debtor's amendments are presumptively valid unless a statutory basis for disallowing them exists. See, e.g., Law v. Siegel, 571 U.S. 415, 416 (2014) ("[A] court may not refuse to honor a debtor's invocation of an exemption without a valid statutory basis."). The court presumes the Supreme Court means such a principle to apply to all amended schedules;

P. By adding Matthew as a creditor, the Debtor has created a claim for him. See 11 U.SC. § 1111(a) ("A proof of claim or interest is deemed filed under section 501 of this title for any claim or interest that appears in the schedules filed under section...