Luster v. Thomas et al

Filing 7

MEMORANDUM RULING granting 5 Bankruptcy Appellant's Brief filed by John W Luster and this matter is remanded to the United States Bankruptcy Court, Western District of Louisiana, Shreveport Division for further proceedings consistent with this Court's ruling. Signed by Judge S Maurice Hicks on 08/25/2016. (crt,McDonnell, D)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT DIVISION

JOHN W. LUSTER

CIVIL ACTION NO. 15-0402

VERSUS

JUDGE S. MAURICE HICKS, JR.

JOHN MONK THOMAS (DECEASED),
ET AL.

MAGISTRATE JUDGE HORNSBY

MEMORANDUM RULING
Before the Court is an appeal filed by John W. Luster (“Luster”). See Record
Document 5. The appeal is unopposed. For the reasons set forth below, Luster’s appeal
is GRANTED and the matter is REMANDED to the United States Bankruptcy Court,
Western District of Louisiana, Shreveport Division for further proceedings consistent with
this Court’s ruling.
I.

BACKGROUND
This appeal arises out of a United States Bankruptcy Court’s refusal to grant nunc

pro tunc approval of an Application to Employ Counsel pursuant to 11 U.S.C. § 327(a)(1).
See Record Document 5. Luster is the Chapter 7 bankruptcy trustee in In Re: John Monk
Thomas (Deceased) and Tracy Jo Patterson Thomas, Case No. 12-12853, pending in the
United States Bankruptcy Court, Western District of Louisiana, Shreveport Division. See
Record Document 2-1 at 7, ¶ 1. Luster began rendering legal services to the estate no
later than October 15, 2013.

See Record Document 5. In late November or early

December 2014, Luster discovered that due to a clerical error, the Application to Employ
Counsel had not been filed in 2013 when he was appointed as the Chapter 7 trustee. See
id. Luster immediately prepared and filed the Application to Employ Counsel seeking nunc

pro tunc relief. A hearing was held on December 29, 2014, with additional briefing
requested by the presiding judge, and a final hearing was held on January 26, 2015. The
Bankruptcy Court then issued its Order Approving in Part and Denying in Part the
Application for Appointment of Attorney for Estate Nunc Pro Tunc on January 27, 2015.
See Record Document 1-1.
While serving as the Chapter 7 trustee, Luster filed motions to sell movable and
immovable property of the estate, filed motions to pay secured creditors, and filed a
discharge complaint. See Record Document 2-1 at 7, ¶ 4. He spent 66.30 hours on these
tasks. See id. at 7, ¶ 5. Luster has estimated the cost of his fees owed as $19,890.00 and
his expenses incurred as $1,199.38. See Record Document 5. No objection has been filed
to the relief sought by Luster in the instant appeal. Thus, the record remains unquestioned
as to the quality and/or timeliness of the work performed by Luster. Likewise, it is
undisputed that the estate and creditors directly benefitted from Luster’s work.
II.

LAW AND ANALYSIS
A.

Standard of Review

The standard of review as established by the Fifth Circuit is that a bankruptcy court’s
rulings on nunc pro tunc employment are reviewed for abuse of discretion. See Matter of
Briscoe Enterprises, Ltd., 994 F. 2d 1160, 1170 (5th Cir. 1993). For conclusions of law
reached by the bankruptcy court, the Court should review such conclusions de novo. See
Matter of Inter Urban Broadcasting of St. Louis, 174 B.R. 441, 444 (E.D. La. 1994).
B.

Jurisdiction

This Court has jurisdiction of this appeal under 28 U.S.C. § 158(a)(1), as this
proceeding is an appeal from a final order of the United States Bankruptcy Court for the
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Western District of Louisiana.
C.

Analysis

The question addressed by Judge Norman was whether the application should be
retroactive to the date Luster first did the work for the Chapter 7 estate or should
compensation begin on the date of the application.

Judge Norman reasoned that

bankruptcy courts retain equitable powers and in the exercise of sound discretion may
grant approval nunc pro tunc under exceptional circumstances. See In re Little Greek
Restaurant, 205 B.R. 484 (Bankr. E.D. La. 1996).

Judge Norman emphasized the

“exceptional circumstances” standard that was used by the Fifth Circuit in In re Triangle
Chemicals, Inc., 697 F. 2d 1280, 1282 (5th Cir. 1983). The critical issue as applied by the
Bankruptcy Court to this set of facts was whether the negligent oversight of Luster rose to
the level of “exceptional circumstances.”
Luster argues in his brief that a portion of the Triangle holding was implicitly
overruled by the United States Supreme Court in Pioneer Ins. Servs. v. Brunswick Assocs.
Ltd. P’ship, 507 U.S. 380, 113 S.Ct. 1489 (1993). Although it deals with a different issue,
whether to permit a tardy claim in a Chapter 11 bankruptcy case to relate back, Luster
believes it is applicable to these facts of the instant matter. Pioneer rejects the line of
cases requiring a showing of “exceptional circumstances” and instead directed lower courts
to apply the less stringent “excusable neglect” standard made applicable by Federal
Bankruptcy Rule 9006 to the late claim analysis.
In the event this Court believes Triangle is the correct legal standard, Luster argues
that Judge Norman misapplied the standard to the facts and circumstances by failing to
consider all of the factors commonly considered by courts in granting/denying nunc pro tunc
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relief. The factors used by the Pioneer court include (1) danger of prejudice to debtor, (2)
the length of the delay, including whether it was within the reasonable control of the
movant, and (3) whether the movant acted in good faith. This Court agrees that Pioneer
has implicitly overruled Triangle and that Luster has adequately satisfied the three Pioneer
factors. Additionally, while the Court is cognizant that this case involves a Chapter 7
trustee and Pioneer relates to a Chapter 11 issue, the reasoning of Pioneer is sufficiently
applicable to this case to control the outcome.
This Court first notes that no opposition has been filed by the Appellees in this
matter. It is significant that the Appellees do not have an objection to Luster being paid for
services rendered, even though the Application to Employ Counsel was not timely filed due
to a clerical error. It is also important to note that Luster completed an extensive amount
of work, totaling more than 66 hours, which directly benefitted the estate, the debtor and
the Bankruptcy Court. This Court agrees that “extraordinary circumstances” is the latest
standard espoused by the Fifth Circuit when evaluating the nunc pro tunc application and
believes that the factual circumstances of this case rise to the level of extraordinary
circumstances. The debtor and estate received the benefit of the work performed by Luster
and it would be a disservice to prevent Luster from receiving payment for the work he
performed. The exceptional circumstances presented by the facts of this case should
result in Luster receiving payment for services rendered.

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III.

CONCLUSION
For the reasons set forth above, the appeal filed by Luster (Record Document 5) is

GRANTED and this matter is REMANDED to the United States Bankruptcy Court, Western
District of Louisiana, Shreveport Division for further proceedings consistent with this Court’s
ruling.
THUS DONE AND SIGNED at Shreveport, Louisiana, this 25th day of August, 2016.

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