Peter A. Crawford v. Wolverine Proctor & Schwartz, LLC et al

Filing 20

Judge Douglas P. Woodlock: MEMORANDUM AND ORDER entered AFFIRMING the decision of the bankruptcy regarding compensation, except as to certain deposition transcripts. Accordingly the compensation award shall be decreased in the amount of $695.15. (Woodlock, Douglas)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

In re WOLVERINE, PROCTOR &
SCHWARTZ, LLC,

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Debtor.
-----------------------------PETER A. CRAWFORD,
Appellant,
Cross-Appellee,

RILEY LAW GROUP LLP, JANET
E. BOSTWICK, P.C., and
VERDOLINO & LOWEY, P.C.,
Appellees,
Cross-Appellants.

CIVIL ACTION NO.
12-11983-DPW

MEMORANDUM AND ORDER
March 26, 2015
Before me are cross appeals from an order of the bankruptcy
court regarding fees requested by the Trustee, her counsel, and
her professionals.

Two aspects of the bankruptcy court’s order

on Applications for Compensation are at issue.

In one, an

unsuccessful claimant challenges the award of fees and costs
incurred by the Trustee in the defense against his claim.

In

the other, the Trustee challenges the reduction in compensation
for unsuccessfully opposing the claim of the primary debt

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holder; the unsuccessful claimant, who was not directly involved
in that matter, supports reduction.
Appellant Peter Crawford lost his substantive claim for
violation of an employment contract he brought against the
bankrupt company at every relevant outpost of the federal court
system - in the Bankruptcy Court, in this court, before the
United States Court of Appeals for the First Circuit, and through denial of his application for certiorari and denial of
his application for rehearing on the denial of certiorari - in
the Supreme Court of the United States.

Using the foothold

provided by a de minimis claim in the bankrupt estate he
acquired after losing his own claim with finality, Mr. Crawford
now brings this appeal seeking to deprive the Trustee, her
counsel, and her experts of professional fees incurred in the
defense of the extended litigation initiative he pursued.
The Trustee and her professionals, for their part, appeal
the bankruptcy court order reducing their fees in connection
with litigation – unrelated to the Crawford matter – against
Tencara, LLC, which acquired secured debt as the result of a
recapitalization transaction.

The Trustee pursued the Tencara

litigation on the basis that the lender could properly be
characterized as an insider and knew the debtor was
undercapitalized.

Mr. Crawford supports the reduction the
2

bankruptcy court ordered in the Trustee’s compensation for the
Tencara litigation.
I. BACKGROUND
The Debtor, Wolverine, Proctor & Schwartz (“WPS”), LLC,
designed and manufactured custom industrial equipment, such as
ovens and drying equipment, for the food and other industries.
Mr. Crawford served as the Chief Operating Officer of the
Debtor’s predecessor, WPS, Inc., from 1999 until 2002.

On

January 12, 2005, Mr. Crawford filed a complaint against WPS,
Inc. in this court alleging breach of contract for failure to
pay a bonus set out in the employment agreement between Mr.
Crawford and WPS, Inc.

Crawford v. Wolverine, Proctor &

Schwartz, Inc., Civ. Action No. 05-10078-DPW (D. Mass.) (Compl.,
Jan. 12, 2005, Dkt. No. 1).

While that action was pending, WPS,

LLC - which acquired substantially all of the operating assets
and liabilities from WPS, Inc. - filed for Chapter 7 bankruptcy
on April 1, 2006.

In re Wolverine, Proctor & Schwartz, LLC, No.

06-10815-JNF (Bankr. D. Mass.) (Voluntary Petition, Apr. 1,
2006, Dkt. No. 1).
I dismissed all active motion practice in the breach of
contract litigation before me without prejudice pending the
outcome of the bankruptcy proceeding.

Crawford, Civ. Action No.

05-10078-DPW, 2006 WL 2121747, at *1 (D. Mass. July 21, 2006).
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Mr. Crawford thereafter filed his claims in the bankruptcy court
and pursued them unsuccessfully through bankruptcy proceedings. 1
Meanwhile, the Trustee unsuccessfully pursued litigation on
behalf of the bankruptcy estate against Tencara.

Ultimately, on

September 10, 2012, the bankruptcy court confirmed the Trustee’s
Final Report and ruled on fee applications from the Trustee, her
counsel, and her professionals, as described below.

See In re

Wolverine, No. 06-10815-JNF, 2012 WL 3930360, at *1-2 (Bankr. D.
Mass. Sept. 10, 2012).
The cross appeals before me regarding the compensation
rulings of the bankruptcy court involve a complex factual and
procedural history involving a number of different but related
litigation matters and a variety of claims and objections in the
bankruptcy proceeding.

This history falls broadly into two

categories, each of which I briefly summarize below.
1

The Crawford litigation was pursued to conclusion as a
bankruptcy proceeding. It was resolved by me as Civ. Action No.
07-10279-DPW (D. Mass.), upon withdrawal of the reference of the
Crawford dispute. Meanwhile, the bankruptcy court continued to
administer the bankruptcy generally under No. 06-10815-JNF
(Bankr. D. Mass.). I consolidated the withdrawal of reference
in the bankruptcy matter concerning Mr. Crawford’s bankruptcy
claim with Mr. Crawford’s initial complaint in this court, Civ.
Action No. 05-10078-DPW. Mr. Crawford thereafter filed a
separate action asserting a quantum meruit theory to pursue his
claim, Civ. Action No. 08-10048-DPW, which was consolidated with
Civ. Action Nos. 05-10078-DPW and 07-10279-DPW. See Crawford v.
Wolverine, Proctor & Schwartz, Inc., Civ. Action No. 08-10048DPW (D. Mass.) (Order re: Consolidation, Sept. 2, 2008, Dkt. No.
44).
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A.

The 2001 Recapitalization and the Crawford Litigation
In 2001 - while Mr. Crawford was acting as Chief Operating

Officer - WPS, Inc. recapitalized.

In that transaction, three

related private equity funds invested $14 million in a new
entity called WPS, LLC, which would later acquire the operating
assets and liabilities of its predecessor, WPS, Inc.

Citizens

Bank of Massachusetts accepted $11.5 million of this investment
in satisfaction of approximately $21.5 million of debt.

As a

result, WPS, Inc. saw an approximately $10 million gain that
formed the basis of Mr. Crawford’s breach of contract action.
According to Mr. Crawford’s employment agreement, he was
entitled to a yearly bonus equal to five percent of the
profitability of WPS, Inc.

The formula set out in the agreement

to measure profitability includes, as one of its variables,
“EBITDA,” meaning Earnings Before Interest, Taxes, Depreciation,
or Amortization.

The dispute in Mr. Crawford’s breach of

contract action and subsequent claims centered on the meaning of
“Earnings” as used in “EBITDA.”

Under the definition that WPS

advanced, earnings means operating income.

Under the definition

that Mr. Crawford advanced, earnings means net income.

This

distinction was vital because under the WPS definition, Mr.
Crawford would be entitled to no bonus, whereas under Mr.
Crawford’s definition, his bonus would be substantial.
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Indeed,

in his bankruptcy claim, Mr. Crawford sought $885,582.37 and
treble damages.
In preparation for the 2008 trial in the matter, which I
conducted upon the withdrawal of the reference to the bankruptcy
court, the Trustee engaged Keith Lowey of Verdolino & Lowey,
P.C. (“V&L”) as an expert witness.

Mr. Lowey prepared an expert

report asserting that “[f]or purposes of computing EBITDA . . .
Earnings . . . is comprised of operating income . . . .”

Mr.

Lowey also testified consistent with this report at the 2008
trial as an expert on behalf of the Trustee.

However, before

submitting the case to the jury, I was forced to declare a
mistrial when two jurors conducted independent internet research
into the meaning of EBITDA.
Just before the 2008 trial, Mr. Crawford had sought to
amend his complaint to add a new theory of recovery: quantum
meruit.

When I denied his motion, Mr. Crawford filed a separate

complaint in this court based on the same operative facts, but
asserting a quantum meruit theory.

See Crawford v. Wolverine,

Proctor & Schwartz, Inc., Civ. Action No. 08-10048-DPW (D.
Mass.) (Compl., Jan. 14, 2008, Dkt. No. 1).

After the 2008

trial ended in a mistrial, I consolidated the actions, and the
parties sought discovery on the new quantum meruit theory of
recovery which Mr. Crawford asserted.
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See id. (Order re:

Consolidation, Sept. 2, 2008, Dkt. No. 44); id. (Scheduling
Order, Sept. 2, 2008, Dkt. No. 43).

The quantum meruit theory

was a belated response to the Trustee’s strategy of pursuing an
alternative defense that there was no meeting of the minds
sufficient to make the employment agreement binding.
additional discovery closed on December 20, 2008.

The

Two weeks

before the second trial, in 2009, both parties dropped these
competing positions as to quantum meruit.
The second trial took place from June 15 to June 22, 2009
and resulted in a jury verdict in favor of the Trustee.
Lowey did not testify during the trial.

Mr.

After the verdict, the

Trustee moved for costs, including $417.95 for the March 27,
2007 deposition transcript of Mr. Crawford’s designated expert,
Mr. Georgiou, and $278.20 for the April 30, 2007 deposition
transcript of Mr. Lowey.

Mr. Crawford opposed the Trustee’s

motion for costs with respect to these two deposition
transcripts on the ground that neither expert testified during
the 2009 trial.

At a hearing on December 3, 2009, I agreed.

I

accordingly ordered the award of costs requested by the Trustee
less these two transcript costs.

See Crawford, Civ. Action No.

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08-10048-DPW (D. Mass.) (Memo & Order, Sept. 14, 2010, Dkt. No.
150). 2
For his part, Mr. Crawford moved after trial for judgment
as a matter of law and for a new trial.

I denied both motions.

See Crawford v. Wolverine, Proctor & Schwartz, Inc., Civ. Action
No. 07-10279-DPW (D. Mass.) (Memo. & Order, Sept. 14, 2010, Dkt.
No. 182).

On appeal, the First Circuit affirmed.

See Crawford,

Nos. 10-1068, 10-1334, 10-2230 (Judgment, 1st Cir. Apr. 20,
2011).

Mr. Crawford then appealed to the U.S. Supreme Court,

which denied certiorari.

See Crawford, 132 S. Ct. 578 (Mem.)

(Nov. 14, 2011) (No. 11-304).

Undaunted, Mr. Crawford

petitioned the Supreme Court for rehearing on his petition, but
to no avail.

See Crawford, 132 S. Ct. 1079 (Mem.) (Jan. 9,

2012).
With his multi-million dollar claim as thoroughly
extinguished as it conceivably could be, Mr. Crawford no longer
had money at stake or standing to assert himself in any
continued WPS bankruptcy proceedings.

Yet, demonstrating the

fervent resilience evident throughout his litigation, Mr.
Crawford purchased another’s claim in the bankruptcy for $60.52,
which the bankruptcy court concluded gave him standing to
2

I address in Section IV, infra, Mr. Crawford’s assertion of a
one dollar arithmetic error in this award.
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challenge the approval of the Trustee’s final fee applications.
See In re Wolverine, 2012 WL 3930360, at *1 & n.1.
B.

2005 Recapitalization and Tencara Litigation
In 2005, still facing financial trouble, the WPS business

was again recapitalized.

The private equity owners determined

that the most viable option for the business was to convey it
back to Deepak Kulkarni, the quondam Chief Executive Officer and
one of Mr. Crawford’s adversaries in his employment agreement
litigation.

See Riley v. Tencara (In re Wolverine, Proctor &

Schwartz, LLC) (“Tencara”), 447 B.R. 1, 13-14 (Bankr. D. Mass.
2011).

Mr. Kulkarni reacquired the WPS business through a

complex transaction in 2005 involving the creation of multiple
new entities and various asset transfers.

The bankruptcy court

determined that the transaction “can best be described as a
leveraged buy-out of WPS, Inc. by entities controlled by
Kulkarni.”

Id. at 34.

In total, Mr. Kulkarni and the WPS

entities paid some $5.5 million to reacquire the business,
representing an approximately $3.5 million loan from
CapitalSource Finance, LLC and an approximately $2 million loan
from Tencara, LLC, $1.9 million of which went to WPS, LLC.

This

extinguished the $14 million debt to the private equity firms.
Also as part of this 2005 recapitalization, WPS, LLC assumed the
liabilities of WPS, Inc., including any potential liability
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flowing from Mr. Crawford’s litigation and subsequent bankruptcy
claim, as discussed above.

Id. at 14-17.

The sole member and

manager for Tencara was David Callan, who also personally funded
Tencara. Id. at 7.
The loan from Tencara to the WPS entities was secured by
all of the assets of WPS, LLC.

Tencara, 447 B.R. at 15.

Mr.

Callan and Mr. Kulkarni were close personal friends and business
colleagues who traveled and socialized together extensively,
frequently discussed the financial and business affairs of WPS,
and worked together officially at a company called Longlite,
LLC, which Mr. Callan created and in which Mr. Kulkarni owned a
10% interest.

Id. at 7, 9-10.

They also regularly lent each

other cash, and as a result of this and their close relationship
generally, Mr. Callan conducted only limited diligence into WPS
financial information before approving the loan as the manager
of Tencara.

Id. at 17.

Despite the 2005 recapitalization, WPS, LLC continued to
experience financial difficulties, and in March 2006, Mr. Callan
provided, at Mr. Kulkarni’s request, an additional $295,000
through Tencara to cover payroll and certain other expenses.
Id. at 21.

When WPS, LLC declared bankruptcy, Tencara held a

fully secured claim for approximately $1.9 million.
4-5.

See id. at

After a number of bids and offers for sale, the Trustee
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sold WPS’s assets to a company called CPS Holdings for $8.2
million.

The bankruptcy estate also acquired $500,000 by

settling a license dispute with the WPS affiliate in the United
Kingdom for a total estate of approximately $8.7 million.
at 6.

Id.

Tencara filed a proof of claim on July 31, 2006,

asserting that WPS, LLC owed $1,896,476.67, including the
remaining principal amount of the loan; all accrued and owing
fees, charges, and interest; and attorney’s fees and costs.

Id.

at 5.
The Trustee conducted examinations of Mr. Callan and Mr.
Kulkarni pursuant to Fed. R. Bankr. P. 2004.

She then brought

suit against Tencara on May 1, 2007 seeking to recharacterize
the Tencara loan as equity rather than debt, contending Mr.
Callan should be treated as an insider.

See Tencara, 447 B.R.

at 7; cf. Hirsh v. Tarricone (In re A. Tarricone, Inc.), 286
B.R. 256, 263-64 (Bankr. S.D.N.Y. 2002) (“creditors with no
direct relationship with the debtor (other than as creditor) may
be deemed non-statutory insiders by virtue of their close
personal relationship with persons who are statutory insiders”).
She later amended the complaint seeking equitable subordination,
contending it should have been clear at the time the loan was
extended that WPS, LLC was undercapitalized.
at 4.

Tencara, 447 B.R.

During the Tencara litigation, the Trustee’s expert, Mr.
- 11 -

Lowey, testified that “it should have been apparent . . . that
three years of deteriorating financial results . . . would leave
the Debtor undercapitalized and its creditors at risk from its
certain business failure.”

Id. at 22.

Tencara filed motions to dismiss both the original and
amended complaints for failure to state a claim, which the
bankruptcy court denied.

Tencara, 447 B.R. at 4.

The

bankruptcy court also denied Tencara’s motion for summary
judgment on May 22, 2009, finding genuine issues of material
fact regarding, among other issues, whether Mr. Callan’s
friendship with Mr. Kulkarni was close enough to merit treating
him as an insider and whether a disinterested lender would have
made a similar loan.

See id.

The Trustee represents that

Tencara’s settlement demands increased, despite the bankruptcy
court’s rulings on the dispositive motions in the Trustee’s
favor, and the parties were unable to reach an agreement to
resolve the litigation.
After a seven-day trial from May 24 to July 6, 2010, the
bankruptcy court ruled for Tencara on all counts, concluding
that Mr. Callan was not an insider and that “the majority of
factors, most particularly the intent of the parties, weigh
heavily in favor of characterization of the advance as a loan.”

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See Tencara, 447 B.R. at 40-41.

The Trustee did not appeal this

decision.
C.

The Fee Applications
Following the completion of the Crawford and Tencara

trials, the Trustee filed her Final Report, and she, along with
her counsel and her professionals, filed final applications for
compensation with the bankruptcy court for both matters.
re Wolverine, 2012 WL 3930360, at *1-2.

See In

Mr. Crawford, relying

on “his tenuous standing” based on his purchase of a claim for
$60.52, filed an objection to the Final Report and the fee
applications, contending that the awards granted in both the
Crawford and Tencara matters should be substantially less than
requested for a variety of reasons.

Id. at *1, *3.

The bankruptcy court held a hearing on April 12, 2012.
at *1.

Id.

At the hearing, the court heard oral argument on the

question whether Mr. Crawford had standing but not on the
substance of Mr. Crawford’s objection.

Id. at *1.

Instead, the

court directed the Trustee to file a written motion to strike,
and allowed Mr. Crawford three days to respond.

The court then

informed Mr. Crawford:
You’ve said everything that I think you need to say
and I don’t think you need reiterate anything else in
person.
So if I allow the motion to strike, I will
not consider your objection; if I deny the motions to
strike I will consider your written objection.
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The bankruptcy court issued its ruling on September 10, 2012
without holding another hearing.

Id. at *1.

The court

concluded that Mr. Crawford had standing but denied his request
for an evidentiary hearing on his objection, concluding that the
court could rule on his objection on the papers, because “the
material facts necessary to decide [the] contested matter are
not in dispute” and an evidentiary hearing would be “unnecessary
and unwarranted.”

Id.

After considering the fee applications and Mr. Crawford’s
objections, the bankruptcy court approved the requested fees for
the Crawford litigation, including the Trustee’s requested
commission and expenses reimbursement and V&L’s requested fees,
and rejected Mr. Crawford’s objection to these amounts.
*6, *8.

Id. at

However, the court reduced the requested legal fees for

the Tencara litigation by fifty percent, sustaining Mr.
Crawford’s objection that the fees requested were excessive.
See id. at *6, *8.

Accordingly, the court subtracted

$205,106.18 from the $1,205,196.22 in compensation for legal
services and reimbursement for expenses requested by the Riley
Law Group LLC, and subtracted $39,840,75 from the $716,909.58 in
compensation for legal services and reimbursement for expenses
requested by the Trustee’s counsel, Janet E. Botswick, P.C.
- 14 -

Id.

at *8.

The court did not reduce V&L’s fees for the Tencara

litigation because “its actions were directed by the Trustee and
her co-counsel.”

Id. at *7.
II. STANDARD OF REVIEW

A district court has jurisdiction to hear an appeal of a
decision of a bankruptcy court under 28 U.S.C. § 158(a).

A

district court reviews a bankruptcy court decision “in the same
manner” as the court of appeals would review a district court
decision.

Casco Northern Bank v. DN Assocs. (In re DN Assocs.),

3 F.3d 512, 515 (1st Cir. 1993).

Legal conclusions are reviewed

de novo, and factual findings are reviewed for clear error.

Id.

“[C]onsiderable deference” is given to the “factual
determinations and discretionary judgments made by a bankruptcy
judge, such as may be involved in calculating and fashioning
appropriate fee awards.”

Id.

Accordingly, the bankruptcy

court’s quantification of fees is reviewed for abuse of
discretion.

Sullivan v. Pappalardo (In re Sullivan), 674 F.3d

65, 68 (1st Cir. 2012) (citing In re DN Assocs., 3 F.3d at 515).
Indeed, “the bankruptcy court’s award of reasonable fees [is] an
area in which the court of first instance enjoys particularly
great leeway.”

Prebor v. Collins (In re I Don’t Trust), 143

F.3d 1, 3 (1st Cir. 1998).

A district court or appellate court

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“will set aside a fee award only if it clearly appears that the
[bankruptcy] court ignored a factor deserving significant
weight, relied upon an improper factor, or evaluated all the
proper factors (and no improper ones), but made a serious
mistake in weighing them.”

In re Sullivan, 674 F.3d at 68

(quoting Gay Officers Action League v. Puerto Rico, 247 F.3d
288, 292–93 (1st Cir. 2001)).
III. DISCUSSION
A.

Legal Standard
Section 330 of the bankruptcy code governs fee awards in

bankruptcy proceedings.

See 11 U.S.C. § 330.

That statute

permits the bankruptcy court to award a Chapter 7 trustee and
her professionals “reasonable compensation for actual, necessary
services” and “reimbursement for actual, necessary expenses.”
Id. § 330(a)(1)(A)-(B).

An award may not include compensation

for services not “reasonably likely to benefit the debtor’s
estate,” services not “necessary to the administration of the
case,” or for services that are unnecessarily duplicative.

Id.

§ 330(a)(4)(A)(i)-(ii).
The compensation payable to a Chapter 7 trustee is treated
as a commission, which is calculated initially using a statutory
formula as a percentage of “all moneys disbursed or turned over

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in the case by the trustee to parties in interest, excluding the
debtor, but including holders of secured claims.”
§§ 326(a), 330(a)(3), (7).

See 11 U.S.C.

Section 326 states the maximum

percentages that may be awarded, and section 330 permits the
court to award compensation less than the amount requested.
id. §§ 326(a), 330(a)(2).

See

Consequently, the amount generated by

the statutory formula is not “an entitlement, nor is it presumed
to be reasonable.

[Rather,] [i]t is a statutory cap that the

court is to consider as part of its reasonableness inquiry.”

In

re Bank of New Eng. Corp., 484 B.R. 252, 283 (Bankr. D. Mass.
2012) (footnotes and citations omitted); see In re Wolverine,
2012 WL 3930360, at *4 (“a trustee’s commission under § 326(a)
is not a per se entitlement to the total amount of the
commission calculated using the statutory formula, and the court
still must determine the reasonableness of the Chapter 7
trustee’s commission”).
An award of fees for professional services begins with a
lodestar calculation, based on the hourly rate multiplied by the
reasonable number of hours expended, and is adjusted based on a
reasonableness assessment guided by the statutory criteria.

See

In re Sullivan, 674 F.3d at 69; Coopers v. Lybrand (In re Bank
of New Eng. Corp.), 142 B.R. 584, 586 (D. Mass. 1992) (citing

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Boston & Maine Corp. v. Moore, 776 F.2d 2, 7 (1st Cir. 1985)).
Section 330(a)(3) directs a court to “consider the nature, the
extent, and the value of [the] services” provided, “taking into
account all relevant factors,” including “the time spent”; “the
rates charged”; the reasonableness of the request compared to
“the customary compensation charged by comparably skilled
practitioners”; “whether the services were necessary to the
administration of, or beneficial at the time at which the
service was rendered toward the completion of, a case”; and
“whether the services were performed within a reasonable amount
of time commensurate with the complexity, importance, and nature
of the problem, issue, or task addressed.” 3

11 U.S.C.

§ 330(a)(3).
In explaining the determination of a fee award, the
bankruptcy court “need not proceed line by line through the fee
3

The factors listed in 11 U.S.C. § 330(a)(3) apply to
determinations of “the amount of reasonable compensation to be
awarded to an examiner, trustee under chapter 11, or
professional person.” Compensation for a Chapter 7 trustee is
noticeably absent from this list. However, 11 U.S.C. § 326(a)
provides that a Chapter 7 trustee may be awarded “reasonable
compensation under section 330 . . . for the trustee’s
services.” Although the factors listed in § 330(a)(3) do not
explicitly govern the reasonableness analysis for a Chapter 7
trustee award, at a minimum, they can inform the inquiry. I
find no error in the bankruptcy court’s application of the
§ 330(a)(3) factors to its assessment of the reasonableness of
the trustee compensation award. See In re Wolverine Proctor &
Schwartz, LLC, No. 06-10815-JNF, 2012 WL 3930360, at *6 (Bankr.
D. Mass. Sept. 10, 2012).
- 18 -

application,” providing a “comprehensive accounting”; it “need
only be sufficiently detailed to allow a reviewing court to
ascertain the trial court’s thought processes and glean the
basis for its award.”

In re Sullivan, 674 F.3d at 70-71

(internal quotation marks and citations omitted); see Bogan v.
City of Boston, 489 F.3d 417, 430 (1st Cir. 2007).
B.

Crawford Litigation Fees
I begin with my review of the bankruptcy court’s award of

all requested fees and expenses related to the Crawford
litigation.

Mr. Crawford attributes error to the bankruptcy

court’s decision not to permit an evidentiary hearing on his
objection, contending that this error requires that the record
be viewed in the light most favorable to him on appeal.
Substantively, Mr. Crawford contends that the Trustee went above
and beyond in defending the estate against his claims – which,
he implies, it should have been clear to the Trustee would be
unsuccessful from the beginning — and that the costs the Trustee
incurred in doing so were excessive and unnecessary.
Specifically, he asserts that the bankruptcy court erred in
awarding V&L expert witness fees and costs, including deposition
transcript costs; that the Trustee expended unnecessary funds in
taking the lead role in the defense when there were other

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defendants who had a larger stake in the outcome of the case,
and in advancing a “meeting of the minds” defense to Mr.
Crawford’s quantum meruit claim; that the court failed to weigh
appropriately the value of the benefit to the estate against the
costs of litigation and thereby gave inadequate consideration to
a key factor in the reasonableness analysis; that the court
failed to recognize that the duplication of effort and the
disproportionality of resources between the parties made the
requested fees unreasonable; and finally that the court
considered improper factors in conducting its assessment. 4

The

Riley firm and Botswick contend that several of Mr. Crawford’s
arguments may not be considered on appeal because they are
waived.

I address this threshold issue first before turning to

Mr. Crawford’s claim of error in the denial of an evidentiary
hearing and then to the merits of each of his contentions.
1.

Waiver

After filing a notice of appeal, an appellant must file a
statement of issues to be presented.
8006.

See Fed. R. Bankr. P.

waived.

If an issue is not identified in this statement, it is
City Sanitation, LLC v. Allied Waste Servs. of Mass.,

LLC (In re Am. Cartage, Inc.), 656 F.3d 82, 91 (1st Cir. 2011).
4

Because none of the parties challenge the bankruptcy court’s
determination that Mr. Crawford had standing, I decline to
review that ruling.
- 20 -

The statement need not “be precise to the point of pedantry”;
rather, “[a]n issue that is not specifically enumerated may be
deemed preserved if the substance of the issue reasonably can be
inferred from an issue or issues that are listed.”

Id.

However, “absent the most extraordinary circumstances, legal
theories not raised squarely in the lower court cannot be
broached for the first time on appeal.”

Banco Bilbao Vizcaya

Arg. v. Wiscovitch-Rentas (In re Net-Velazquez), 625 F.3d 34, 40
(1st Cir. 2010) (quoting Teamsters, Chauffeurs, Warehousemen &
Helpers Union, Local No. 59 v. Superline Transp. Co., 953 F.2d
17, 21 (1st Cir. 1992)).
Mr. Crawford has satisfied the Rule 8006 requirement for
all but one of his arguments: 5 that the Trustee expended
unnecessary funds by taking a lead role in the Crawford
5

Contrary to the Trustee’s contention, the other issues raised
in this appeal that were not precisely described in the
statement of issues are easily and appropriately inferred from
the notice’s general language. For instance, the Trustee argues
that Mr. Crawford did not appeal the denial of his request for
an evidentiary hearing. However, Mr. Crawford includes as one
of the issues presented: “After a Bankruptcy Court denies a
requested evidentiary hearing, does a District Court review the
Bankruptcy Court’s findings of fact under a clearly erroneous
standard, or does it view the proffered evidence in a light most
favorable to the appellant?” The substance of Mr. Crawford’s
objection to — and appeal from — the denial of his request for
an evidentiary hearing is clear and can reasonably be inferred
from the specifically enumerated issue: whether such a denial
alters the standard of review. See City Sanitation, LLC v.
Allied Waste Servs. of Mass., LLC (In re Am. Cartage, Inc.), 656
F.3d 82, 91 (1st Cir. 2011).
- 21 -

litigation when other defendants held a larger stake in the
outcome of the case.

Mr. Crawford does not point to any

argument he raised before the bankruptcy court that might fairly
constitute the contention that the Trustee should not receive
fees for taking the lead role in the Crawford litigation, nor
can this argument be fairly inferred from the only distantly
related argument in his statement of issues that the Trustee,
her counsel, and her professionals unnecessarily duplicated each
others’ work.

See In re Net-Velazquez, 625 F.3d at 40.

Because

Mr. Crawford did not raise this argument before the bankruptcy
court, it is waived, and I decline to address it on appeal.

See

id. at 40-41. 6
2.

Denial of an Evidentiary Hearing

The bankruptcy court heard argument on the issue of Mr.
Crawford’s standing but considered his substantive objections to
the fee requests on the papers, determining that an evidentiary
hearing was “unnecessary and unwarranted” because “the material
facts necessary to decide this contested matter are not in
dispute.”

In re Wolverine, 2012 WL 3930360, at *1.

Mr.

Crawford contends that the bankruptcy court’s denial of his
request for an evidentiary hearing was in error, and that I
6

If I were to reach this argument, I would — as my disposition
of Mr. Crawford’s related issues suggests — find it to be
without merit.
- 22 -

accordingly must consider the evidence in the light most
favorable to him.
To shape the discussion, I reiterate that my review of the
bankruptcy court’s legal conclusions is de novo and of its
discretionary and fact-based judgments is for abuse of
discretion.

In re DN Assocs., 3 F.3d at 515.

Under 11 U.S.C.

§ 330(a)(1)(A), a bankruptcy court may award reasonable
compensation and expenses “[a]fter notice to the parties in
interest . . . and a hearing.”

However, the First Circuit has

stated that “[a] hearing – much less an evidentiary hearing – is
not required in every instance.”

In re I Don’t Trust, 143 F.3d

at 3 (citing 11 U.S.C. § 102(1)(A)-(B) (1993)).

A bankruptcy

appellate panel of the First Circuit has interpreted In re I
Don’t Trust to stand for the proposition that an “evidentiary
hearing is not required under § 330(a)(1)(A)” and a matter may
be heard on the papers “as long as the parties had a fair
opportunity to offer relevant facts and arguments to the court
and to confront their adversaries’ submissions.”

Cabral v.

Shamban (In re Cabral), 285 B.R. 563, 576 (B.A.P. 1st Cir. 2002)
(citing In re I Don’t Trust, 143 F.3d at 3). 7
7

I recognize that in most of the cases on this issue in this
circuit, the appellant alleging error in the lack of an
- 23 -

The proceedings below afforded Mr. Crawford fair and ample
opportunity to present his arguments and to confront the
submissions of his adversaries.

Mr. Crawford has been an active

participant in the bankruptcy proceeding and the corresponding
litigation regarding his claims from the beginning, and he fully
briefed his objections before the bankruptcy court and again in
this appeal.

The bankruptcy court held a hearing on the fee

applications and determined that a further evidentiary hearing
was not warranted, based on its determination that no material
facts were in dispute.

Mr. Crawford identifies no disputed

factual issues relevant to the fee award that would suggest that
this determination was in error.

He merely launches

impermissible collateral attacks on issues from the Crawford
litigation that already have been resolved against him with
deadening finality.
hearing.

Those issues do not justify an evidentiary

See Miller v. Nichols, 586 F.3d 53, 60 (1st Cir. 2009)

(“Issue preclusion reflects the fundamental principles that
courts should not revisit factual matters that a party
evidentiary hearing did not request one. This has been a basis
for the denial of any error on appeal. See, e.g., Prebor v.
Collins (In re I Don’t Trust), 143 F.3d 1 (1st Cir. 1998);
Cabral v. Shamban (In re Cabral), 285 B.R. 563, 576 (B.A.P. 1st
Cir. 2002); Beal Bank, S.S.B. v. Waters Edge Ltd. P’ship, 248
B.R. 688, 694 (D. Mass. 2000). Clearly, given the request for
an evidentiary hearing by Mr. Crawford, the facts are different
here, but they do not warrant a different result.
- 24 -

previously litigated and another court actually decided.”).
Under these circumstances, the bankruptcy court was well within
its discretion to consider Mr. Crawford’s fee objections on the
papers.
Even if the bankruptcy court had erred in denying a
hearing, the appropriate remedy is not — as Mr. Crawford
imaginatively suggests — the substitution of the governing
standard of review for one of his choosing.

The bankruptcy

court’s decision to consider a matter on the papers does not
alter the well-settled standards of review.

If the bankruptcy

court erred in this determination, the proper mechanism for
correction would be to remand, not to resort to an artificial
evidentiary standard construed to require all reasonable
inferences in Mr. Crawford’s favor.

Furthermore, Mr. Crawford

may not contort the denial of an evidentiary hearing into an end
run around equally well-settled principles of res judicata and
collateral estoppel in order to reopen the evidence on the
substantive claims underlying the Crawford litigation.
Miller, 586 F.3d at 60.

See

I therefore decline to alter the

standard of review or reverse the bankruptcy court’s
determination that an evidentiary hearing was unnecessary here.

- 25 -

3.

Unnecessary Expenses: V&L Expert Witness Fees and Costs
a. Expert Witness Fees

Mr. Crawford asserts that the bankruptcy court should have
reduced the award of fees to V&L for Mr. Lowey’s service as an
expert as excessive and unnecessary, because Mr. Lowey did not
testify at the 2009 trial, his testimony was “discredited,” and
his expert report was “false.”

Mr. Crawford further contends

that the incurring of expenses related to this expert witness
was futile where he would not ultimately testify.
finds no support in the record.

This position

In fact, the travel of the

multifront litigation Mr. Crawford has pursued demonstrates that
Mr. Crawford has failed to support these assertions time and
time again.
This is a fruitless attempt to reopen the argument
regarding the definition of EBITDA, which was tried to
completion before a jury in the Crawford litigation.

The jury

in the 2009 trial conclusively resolved the meaning of EBITDA
for these purposes, finding against Mr. Crawford, and
determining that his employment agreement did not include
extraordinary gains such as loan forgiveness by Citizens Bank.
Although Mr. Lowey did not testify at the 2009 trial, his expert
services surely informed the Trustee’s efforts to develop and

- 26 -

prove her proposed definition of EBITDA, which was ultimately
successful.
The Trustee’s retention of Mr. Lowey as an expert through
the 2009 trial, including the fees incurred in preparing him to
testify, was also properly recognized by the bankruptcy court as
a reasonable and necessary expense.

Mr. Crawford, who was first

to present his case, indicated in the pre-trial status report
that he intended to call his own expert, but ultimately he did
not.

Until Mr. Crawford concluded his case, the Trustee could

not have known whether she would have to call Mr. Lowey in
response to an expert called by Mr. Crawford.

In light of the

jury verdict in the 2009 trial, which is entirely consistent
with Mr. Lowey’s position, Mr. Crawford’s contention that the
Trustee was “forced to abandon” Mr. Lowey’s testimony because he
was “discredited” at the 2008 trial is at odds with the actual
course and outcome of the case.

As the bankruptcy court

recognized, Mr. Crawford has simply refused to acknowledge the
results adverse to him throughout this litigation.
Wolverine, 2012 WL 3930360, at *6.

See In re

The fees V&L accumulated

were reasonable and necessary to prepare for trial in light of
Mr. Crawford’s representations, and the bankruptcy court
appropriately awarded them.

- 27 -

b. Deposition Transcript Costs
Mr. Crawford argues that the bankruptcy court is bound by
my determination not to award costs for deposition transcripts
of Mr. Lowey and Mr. Georgiou, Mr. Crawford’s quondam expert,
because neither expert testified during the 2009 trial.

See

Crawford, Civ. Action No. 07-10279-DPW (D. Mass.) (Memo. &
Order, Sept. 14, 2010, Dkt. No. 182).

Accordingly, he asserts

that the bankruptcy court erred in awarding the full amount of
fees and costs requested, which included these transcript costs
of $696.15.
The Trustee asserts that my ruling and the bankruptcy
court’s ruling were pursuant to different rules that are not
mutually exclusive in their reach.

My ruling denied the award

of deposition transcript costs to the Trustee, thereby not
requiring Mr. Crawford to pay them, pursuant to Fed. R. Bank. P.
7054.

In contrast, the bankruptcy court’s ruling allowed

reimbursement of the Trustee and her professionals from the
estate for the deposition transcript costs they incurred,
pursuant to 11 U.S.C. § 330.

I concluded under Rule 7054 that

Mr. Crawford did not have to reimburse the Trustee for the
deposition transcript costs; the bankruptcy court concluded
under § 330 that the estate should do so.

- 28 -

In making this

distinction, the Trustee focuses on the different standards
governing the payment of deposition transcript costs under Fed.
R. Bankr. P. 7054 and 11 U.S.C. § 330.
Section 1920 of Title 28 of the U.S. Code enumerates the
types of costs that may be awarded pursuant to Fed. R. Bank. P.
7054, and its parallel provision, Fed. R. Civ. P. 54.

That

statute permits a court to tax as costs “fees for printed or
electronically recorded transcripts necessarily obtained for use
in the case.”

28 U.S.C. § 1920(2).

The First Circuit has

stated that “[i]f depositions are either introduced in evidence
or used at trial, their costs should be taxable to the losing
party.”

Templeman v. Chris Craft Corp., 770 F.2d 245, 249 (1st

Cir. 1985).

If the depositions were not put in evidence or used

at the trial, “[i]t is within the discretion of the district
court to tax deposition costs if special circumstances warrant
it.”

Id.

Considering whether special circumstances warrant

awarding the costs does not require a departure from the
statutory language.

The focus is on “whether the costs were

necessary to resolution of the case.”

Gochis v. Allstate, 162

F.R.D. 248, 251 (D. Mass. 1995) (emphasis added); see also
Rodriguez-Garcia v. Davila, 904 F.2d 90, 100 (1st Cir. 1990)
(“If costs were reasonably necessary to the maintenance of the

- 29 -

action, then they are allowable.”).

Indeed, an assessment of

the necessity of the deposition and the acquisition of the
deposition transcript has guided courts’ analysis after
Templeman.

See, e.g., Papas v. Hanlon, 849 F.2d 702, 704 (1st

Cir. 1988); Roggio v. Grasmuck, 18 F. Supp. 3d 49, 61 (D. Mass.
2014).

However, the burden is on the party requesting the

deposition transcript costs to explain why acquiring the
transcripts was necessary.

See Roggio, 18 F. Supp. 3d at 61;

Hillman v. Berkshire Med. Ctr., Inc., 876 F. Supp. 2d 122, 12728 (D. Mass. 2012).
This analysis under Fed. R. Bankr. P. 7054 is not
meaningfully different on its face from that involving the award
of costs under 11 U.S.C. § 330, which permits the award of
“reasonable compensation for actual, necessary services” and
“reimbursement for actual, necessary expenses.”
§ 330(a)(1)(A)-(B) (emphasis added).

11 U.S.C.

Section § 330(a)(4)(A)

specifically excludes from such an award services that are not
“necessary to the administration of the case.”
I conducted this analysis on a withdrawal of the reference
to the bankruptcy court and found that the deposition costs were
not necessary to the maintenance of the action; therefore, I
concluded that Mr. Crawford would not be required to pay the

- 30 -

cost to the Trustee.

The Trustee had a fair opportunity to

contest this ruling directly and chose not to do so.

Instead,

she returned to the bankruptcy court to contend effectively that
this reasonableness and necessity determination was incorrect.
In doing so, the Trustee sought the very same costs as
reasonable and necessary, despite my earlier conclusion —
binding on the bankruptcy court — that they were not.

That she

sought to be reimbursed by the estate for them, rather than by
Mr. Crawford, is in this setting immaterial.
I conclude that the Trustee and her professionals are — as
a practical matter — estopped from challenging the necessity or
propriety of an award of costs for these transcripts in this
proceeding.

Cf. Rodriguez-Garcia v. Miranda-Marin, 610 F.3d

756, 770 (1st Cir. 2010).

It has long been established that

“where the trustee in bankruptcy unsuccessfully litigates an
issue outside the bankruptcy court, the decision against him is
binding in the bankruptcy court.” Heiser v. Woodruff, 327 U.S.
726, 733-34 (1946).

The issue of the necessity of the

deposition transcript costs has already been litigated and
decided by me on the merits after a full and fair opportunity
for the Trustee and her professionals to be heard in this
bankruptcy litigation.

See Crawford, Civ. Action No. 07-10279-

- 31 -

DPW (D. Mass.) (Memo. & Order, Sept. 14, 2010, Dkt. No. 182).
The Trustee and her professionals chose not to offer any
opposition to Mr. Crawford’s objection to the award of costs at
that time.

Id.

Because I conclude the Trustee was effectively precluded
from relitigating — at least without seeking reconsideration by
me — the issue of the necessity of the deposition costs in the
bankruptcy proceeding through her fee application, I conclude
the bankruptcy court erred by permitting the reopening of this
issue and including these fees in its award.
4.

Unnecessary Expense: The Meeting of the Minds Defense

Mr. Crawford contends that the bankruptcy court should have
considered the “lack of meeting of the minds” defense that the
Trustee asserted to be unnecessary and to have generated equally
unnecessary discovery.

Consequently, he contends that the

bankruptcy court erred in including costs for mounting this
defense of the fee award.

The bankruptcy court included these

expenses and services in the fee award when it held that “the
services rendered by the Trustee, her co-counsel and her
accountant, in objecting to Crawford’s improper claim were
necessary and the fees they incurred in rendering these services
were reasonable.”

In re Wolverine, 2012 WL 3930360, at *6.

- 32 -

Determining which defenses to press with respect to claims
that are brought are complicated decisions of litigation
strategy.

The Trustee in bankruptcy must exercise “care,

diligence, and skill in deciding which claims to prosecute, and
how far.”
Cir. 1995).

See In re Taxman Clothing Co., 49 F.3d 310, 315 (7th
In exercising these duties and in endeavoring to

maximize the value of the estate, the Trustee may have a duty
“to abandon [a theory or defense] once it became reasonably
obvious that further litigation would cost more than it was
likely to bring into the estate.”

Id.

But a Trustee is not

required to abandon a defense while it is still viable.

The

Trustee’s decision to assert that there was no meeting of the
minds sufficient to make the employment agreement binding was an
appropriate defense at the time.

Having acquired intimate

knowledge of the litigation, I have no difficulty concluding
that the Trustee operated within the bounds of her duty in
pursuing a litigation position in the face of a vigorously
asserted theory.

See id.

When it became clear that this

defense was unlikely to succeed, and a reasonable lawyer would
have abandoned it, the Trustee properly did so.
Mr. Crawford places curious emphasis on the fact that this
abandonment ultimately came “on the eve of the 2009 Trial,” but

- 33 -

this is precisely when Mr. Crawford abandoned the theory that
had made the defense worth pursuing.

The parties appear to have

been locked in a standoff, with Mr. Crawford asserting a claim
for quantum meruit and the Trustee defending on the basis that
there was no meeting of the minds.

Both asserted that their

positions were unnecessary if only the other would drop its
contention first.

The Trustee unsuccessfully moved to dismiss

the quantum meruit claim, and thereafter reasonably conducted
discovery necessary to evaluate and defend the case.

After

discovery, the Trustee again moved for dismissal or summary
judgment, and in his opposition, Mr. Crawford stood fast by his
quantum meruit claim.

The Trustee’s discovery and trial

preparation on the meeting of the minds defense were reasonable
and necessary to defend against the contentions Mr. Crawford
asserted, and the Trustee did not have a duty to abandon her
defense when Mr. Crawford continued to threaten pursuit of his
new theory of recovery.

When Mr. Crawford ceased pursuing this

theory, the Trustee abided by her duty to abandon the claim and
did so at the time a reasonable lawyer in her position would
have done so.

See In re Taxman, 49 F.3d at 315.

The bankruptcy

court therefore did not err in concluding that the costs
incurred in pursuing this defense were necessary and reasonable.

- 34 -

5.

Expenses Not Reasonably Likely to Benefit the Estate in
Light of the Magnitude of the Claim

Mr. Crawford next argues that the bankruptcy court erred by
overestimating the value of the benefit to the bankruptcy estate
that the Trustee sought in the Crawford litigation.

The

bankruptcy court awarded all fees requested in the Crawford
litigation, reasoning that “the Trustee was successful in
obtaining disallowance of Crawford’s proofs of claim in the sum
of $3,088,765.65.”

In re Wolverine, 2012 WL 3930360, at *6.

Mr. Crawford claims that this overestimates the true value of
the Trustee’s litigation success and therefore the benefit to
the estate.

He contends that the Trustee should have known that

the estate would not need to pay the vast majority of his claim
if he were successful, since a large portion of the claim, as
treble damages, constituted a penalty, and even the base
unsecured claim would not be fully satisfied under the
anticipated pro rata distribution of the estate’s assets.
Accordingly, Mr. Crawford argues that the effort the Trustee
expended and the more than $800,000 in fees she incurred in
defending against a purportedly $3 million claim were not
proportional to the actual benefit the Trustee was reasonably
likely to — and indeed did — achieve in not having to pay the
approximately $224,000 of that claim that Mr. Crawford would
- 35 -

have received if he were successful.

This argument misconstrues

the legal standard and is wholly without merit, inappropriately
seeking to penalize the Trustee for defending against Mr.
Crawford’s relentless pursuit of a claim well beyond what he
could actually receive.
Services rendered in an effort “to conserve as much of [the
estate] as possible for creditors” are generally calculated to
benefit the estate, in contrast to those services taken to
benefit someone other than the estate and its creditors.

Widett

v. D’Andria, 241 F.2d 680, 682 (1st Cir. 1957); see In re Bank
of New Engl. Corp., 134 B.R. 450, 470 (Bankr. D. Mass. 1991).
The key considerations in the inquiry into whether a service is
beneficial to the estate are reasonableness and necessity.
Professionals must “exercise reasonable judgment,” but they need
not “guarantee success.”

In re Ne. Express Reg’l Airlines,

Inc., 235 B.R. 695, 697-98 (Bankr. D. Me. 1999); see In re Casco
Bay Lines, Inc., 25 B.R. 747, 755-56 (B.A.P. 1st Cir. 1982).
The benefit to the estate accordingly is not measured solely in
monetary gain, assessed through a calculation of the monetary
value to the estate of pursuing or defending against a claim as
compared to the cost to the estate of doing so, but through a

- 36 -

more holistic consideration of the benefit to the estate. 8

See

In re Casco Bay Lines, 25 B.R. at 756 (“[T]ime spent upon an
issue which an attorney ultimately loses may be beneficial in
connection with aims of the estate in general.”); see also 11
U.S.C. § 330(a)(4)(A)(ii)(I).
Mr. Crawford takes issue with the Trustee defending against
the entirety of his $3 million claim, contending that the true
value of the claim was far lower.

At best, the estate could

have satisfied only approximately $224,000 of the approximately
$885,500 judgment Mr. Crawford sought. 9

Accordingly, Mr.

8

Judge Barliant of the Bankruptcy Court of the Northern District
of Illinois has explained the shift away from a focus on economy
and toward a focus on necessity following the reenactment of the
Bankruptcy Code in 1978:
[T]he modern construction of “benefit to the estate”
that attorneys’ services must result in monetary benefit
to the estate is not an application of the pre-Code
doctrine of “benefit to the estate”; rather it is a
judicially created descendant of the very different
doctrine of “economy” or “conservation of the estate.”
But that doctrine was overruled by section 330 of the
Code and should not be re-introduced into compensation
analysis under cover of the ‘benefit to the estate’
rubric. . . . The issue under section 330(a) is whether
services for which compensation is sought are “necessary
services.”
In re Lifschultz Fast Freight, Inc., 140 B.R. 482, 488 (Bankr.
N.D. Ill. 1992).
9

Mr. Crawford’s claim included a non-penalty dimension of
$885,582.37. The full amount of his claim for $3,088,765.65
included more than $2 million in treble damages, constituting a
- 37 -

Crawford perversely asserts that the more than $800,000 the
Trustee expended in defending against his claim was not in
proportion to the potential benefit to the estate — presumably a
savings of about $224,000.
Mr. Crawford’s focus on the ultimate numbers ignores the
fact that he himself advanced litigation positions challenging
the classifications of his requested relief into a penalty
dimension of over $2 million — which would be subordinated and
never paid by the bankruptcy estate — and a non-penalty
dimension of $885,582.37 — which would be partially satisfied
through the pro rata distribution of assets to general unsecured
claims - and seeking to ensure full payment of the judgment if
penalty under the meaning of 11 U.S.C. § 726(a)(4). Under 11
U.S.C. § 726(a)(4), a bankruptcy estate must first pay all
secured claims, then all unsecured claims, and only if all
unsecured claims are satisfied does the estate pay fines,
penalties, or multiple damages. In this case, there are more
than $13 million in allowed general unsecured claims, but the
estate only has slightly more than $3 million to distribute.
The Trustee was well aware that the large majority of Mr.
Crawford’s claim would be subordinated as a penalty and never
assessed against the bankruptcy estate. Mr. Crawford also
should have been aware, from the earliest stages of this
litigation, that no penalty claims would be satisfied. In
addition, these numbers made clear that even the non-penalty
claim Mr. Crawford advanced, as an unsecured claim, could not be
fully satisfied. Where there are insufficient funds to satisfy
the entirety of the unsecured claims, they will be satisfied pro
rata. See 11 U.S.C. § 726(b). Mr. Crawford estimates that even
if he were successful, the estate would only owe him
$224,050.29, accounting for his estimated 23.5% pro rata
satisfaction of the various claims against the estate. See In
re Wolverine, 2009 WL 3930360, at *1.
- 38 -

he were successful.

Despite the clear classification of

penalties such as treble damages at the bottom of the
satisfaction hierarchy, Mr. Crawford consistently asserted
during the litigation that the entire amount of his claim
constituted a general unsecured claim and that no part of it
would be subject to subordination.

Mr. Crawford finally

acknowledged that the penalty portion of his claim would be
subordinated more than two years into the litigation but
continued to assert the claims on appeal.
Mr. Crawford asserts that the Trustee’s knowledge of the
clear state of the law subordinating penalties somehow obligated
her not to pursue an objection to the entirety of the claim or
otherwise pull her punches in defense of the estate.

In these

circumstances, the Trustee had no choice but to defend against
the full amount of the claim Mr. Crawford asserted, including
the penalty portion, and she has maintained since she first
filed objections to Mr. Crawford’s claim that the claim for
treble damages constituted a penalty subject to subordination.
To fail to advance this position in defense of the estate, even
where the law is abundantly clear to both the court and to Mr.
Crawford, might be viewed as assent to his claim and a
suggestion that the bankruptcy estate would owe the full amount

- 39 -

of the claim if he were successful.

It would be nonsensical to

hold that where a bankruptcy Trustee believes a claim against
the estate invalid, she cannot recover fees for pursuing an
objection to the claim when she turns out to be correct that the
estate owes nothing to the claimant.
In prosecuting his unsuccessful claim, Mr. Crawford
fruitlessly sought review to the First Circuit and the U.S.
Supreme Court, where his efforts were summarily rejected.
supra, Section I.A.

See

Furthermore, after the sunk costs of

litigation at the trial level, the Trustee had an obligation to
pursue the case to its completion; the marginal increase in fees
incurred defending the appeals could not have justified
conceding the claims (appealed in the full amount of over $3
million) that she had spent more than six years and hundreds of
thousands of dollars defending.
In short, the Trustee objected to and defended against Mr.
Crawford’s claims on terms set by Mr. Crawford himself.

The

litigation was “hotly contested, factually complicated,” and the
subject of lengthy discovery, dispositive motion practice, two
trials, post-trial motions, and appeals.
2012 WL 3930360, at *6.

See In re Wolverine,

Since Mr. Crawford pressed the courts

to award him the full amount of over $3 million, including on

- 40 -

his numerous appeals, the Trustee’s defense against those claims
at each of these stages of the litigation was reasonable and
necessary, even where the monetary benefit to the estate of
succeeding in this litigation may not have exceeded the ultimate
costs of pursuing it.

The bankruptcy court properly considered

the full value of the claim asserted in the Crawford litigation
in awarding the Trustee’s requested fees.

Having zealously

forced the Trustee to engage with his claim and then having
failed to prevail, Mr. Crawford cannot complain that the Trustee
should have simply stopped defending the estate because his
claims were so clearly unsuccessful from the beginning.

The

bankruptcy court did not err in considering Mr. Crawford’s claim
to be valued at over $3 million for these purposes and in
determining that the efforts of the Trustee and her
professionals in defending against this claim were reasonably
likely to benefit the estate.
6.

Unnecessary Duplication of Services

Mr. Crawford contends that the Trustee brought too many
resources to bear against him, and that this should be grounds
for reducing the award of fees.

He argues that because various

experts and attorneys attended the 2008 and 2009 trial, the
Trustee engaged in unnecessary duplication of efforts.

- 41 -

See 11

U.S.C. § 330(a)(4)(A)(i); see also In re ACT Mfg., Inc., 281
B.R. 468, 484 (Bankr. D. Mass. 2002).

However, Mr. Crawford

does not contend that the bankruptcy court failed to consider
the possibility of duplication of effort.

Indeed, he cannot.

The bankruptcy court specifically acknowledged that it must
“disallow compensation for unnecessary duplication of services,”
and specifically mentioned Mr. Crawford’s objection that “there
was inefficient duplication of effort between the Trustee’s
attorneys.”

In re Wolverine, 2012 WL 3930360, at *3, *5.

Mr. Crawford has offered no explanation — other than
asserting that he disagrees — or authority to support a finding
that the bankruptcy court may have abused its discretion in
awarding the full amount of requested fees in the Crawford
litigation.

He merely complains of “the enormous resources

brought to bear against a solitary pro se litigant,” apparently
underestimating the level of havoc he has wreaked on the orderly
resolution of this bankruptcy.

The Crawford litigation covered

many issues and spanned many years and multiple dockets.

It was

certainly reasonable for the Trustee to have counsel and experts
in attendance at the trial in order to be apprised of any and
all significant developments that might bear on the rest of the
litigation.

As for the extent of the attendance and billing,

- 42 -

the Trustee offered the bankruptcy court evidence of admirable
billing discretion, often having counsel attend the trials
without billing their time.

Having presided over the litigation

myself, I cannot find that the bankruptcy court abused its
discretion in awarding full fees.
7.

Consideration of Improper Factors

Finally, Mr. Crawford identifies two components of the
bankruptcy court’s decision that he contends were improper
considerations in the fee calculation.

Both claims of error are

without merit.
First, remarkably, Mr. Crawford blames the Trustee for the
mistrial in 2008 and asserts that the bankruptcy court failed to
credit this view.
mistrial.

Neither party is responsible for the

Two jurors — who were instructed not to engage in any

independent research but nevertheless did — caused the mistrial.
Mr. Crawford blames the Trustee’s expert as somehow prompting
independent research, but no argument or evidence presented at
trial justifies or excuses a juror disregarding the court’s
instructions not to undertake such an exercise.

A party is

entitled to put on the evidence she chooses, and the court
cannot fault any party for a juror’s independent and
contumacious conduct even if it was somehow related to the

- 43 -

evidence presented.

To hold otherwise would be to chill a

party’s right to put on her case, no matter how technical or
complex, based upon apprehensions of juror misconduct.

The

bankruptcy court properly held that the 2008 mistrial was “no
fault of the Trustee or her professionals,” and properly refused
to discount fees incurred as a result of jury or misconduct.

In

re Wolverine, 2012 WL 3930360, at *6.
Second, Mr. Crawford suggests that the bankruptcy court
erred by considering the size of the claim he purchased to
maintain his objections and his motivation in pursuing these
objections in determining the reasonableness of the Trustee’s
requested fees.

The bankruptcy court did not rely on any

improper factors when it stated that “[t]he Court agrees with
the Trustee that Crawford’s objection to the professionals’ fee
Applications is improperly motivated by his refusal to accept
the final disallowance of his claim.”

Id. at *6.

The basis for Mr. Crawford’s status as an objector to the
fee applications merits acknowledgment.

Mr. Crawford originally

brought a claim seeking more than $3 million.

Having exhausted

his appeals and lost both his case and any chance of recovery,
Mr. Crawford purchased a new claim for an insignificant sum
relative to his original claim - $60.52 as compared to

- 44 -

$3,088,765.55 - purely for the purpose of gaining standing to
oppose the Trustee and her professionals’ request for fees.
id. at *1 & n.1.

See

Mr. Crawford knew, before he purchased this

claim, that he was guaranteed to lose money, even if he proved
successful at reducing or eliminating the fees requested,
because the bankruptcy estate does not have sufficient funds to
satisfy the entirety of the general unsecured claims.

I

therefore agree that Mr. Crawford’s fee objections are motivated
by a retaliatory purpose and reflect his characteristic lack of
proportion in approaching this litigation.

Strictly speaking,

Mr. Crawford’s improper and vindictive motivation is ultimately
not material to evaluation of the reasonableness of the fees
requested.

The bankruptcy court opinion does not indicate that

it considered the size of Mr. Crawford’s claim or his improper
motive in determining the reasonableness of the fees.
Nevertheless, these factors provide a context for understanding
Mr. Crawford’s otherwise incomprehensible arguments and his
disregard of the collateral estoppel bar to much of his
challenge to the fees sought by an adversary who successfully
prevailed against him.

- 45 -

8.

Conclusion

The bankruptcy court properly considered whether the
requested fees and expenses satisfied the requirements of 11
U.S.C. §§ 326 and 330 and did not place weight on any improper
factors in doing so.

Accordingly, I will affirm its

determination of the appropriate fees and costs in the Crawford
litigation, except to the extent that the deposition transcript
costs, which I have previously determined not to be necessary,
shall be ordered excluded from the award.
C.

Tencara Litigation Fees
The Trustee and her professionals cross appeal the

bankruptcy court’s reduction of their requested fees relating to
the Tencara litigation, in which the Trustee unsuccessfully
attempted to recharacterize the Tencara loan as equity rather
than debt, or alternatively equitably to subordinate it to the
claims of all other creditors.

They allege that the bankruptcy

court made three errors: (1) it failed to evaluate the
likelihood of success appropriately, (2) it failed to balance
the potential benefit of the litigation against the incremental
costs of continuing the litigation properly, and (3) it
improperly engaged in hindsight analysis by considering the
ultimate result obtained in the litigation.

- 46 -

Although all three

of these claims of error at their core stem from the a common
source — the bankruptcy court’s assessment of whether pursuing
the Tencara litigation was reasonably likely to benefit the
estate, as required for compensation under 11 U.S.C. § 330 — I
will separately evaluate each in turn.
1.

Likelihood of Success

The Trustee and her professionals assert that the
bankruptcy court’s holding that it “should have become clear
. . . after the close of discovery . . . that they were unlikely
to be able to succeed on any of the counts . . .” in the Tencara
litigation, In re Wolverine, 2012 WL 3930360, at *7, is clearly
erroneous for both the recharacterization and equitable
subordination claims in light of the record and the Trustee’s
initial success on her dispositive motions.
Likelihood of success is a consideration that speaks to the
necessity of the service and whether it is “reasonably likely to
benefit the estate.”

See 11 U.S.C. §§ 330(a)(3)(C),

330(a)(4)(A)(ii)(I).

As noted above, Trustees and their counsel

must exercise reasonable judgment “in deciding which claims to
prosecute, and how far.”

In re Taxman, 49 F.3d at 315; see In

re Ne. Express, 235 B.R. at 697-98.

When a reasonable lawyer

“would have abandoned the lawsuit” because “it became reasonably

- 47 -

obvious that further litigation would cost more than it was
likely to bring into the estate,” 10 a professional may be
penalized by a fee reduction for not abandoning that litigation.
In re Taxman, 49 F.3d at 315; see In re McLean Wine Co., 463
B.R. 838, 850-51 (Bankr. E.D. Mich. 2011) (discussing In re
Taxman and noting that “counsel for the trustee has a fiduciary
duty to realistically weigh the maximum possible success of any
litigation against the costs to be incurred pursuing the
litigation”).

This is an objective assessment made from the

standpoint of the time at which the services are rendered.

See

In re Taxman, 49 F.3d at 315; McLean, 463 B.R. at 851; see also
11 U.S.C. §§ 330(a)(3)(C), 330(a)(4)(A)(ii)(I).
a. Recharacterization
A bankruptcy court may recharacterize debt as equity where
“a creditor has contributed capital to a debtor in the form of a
loan, but the loan has the substance and character of an equity
contribution.”

Aquino v. Black (In re AtlanticRancher, Inc.),

279 B.R. 411, 433 (Bankr. D. Mass. 2002) (quoting In re Kids
Creek Partners, 212 B.R. 898, 931 (Bankr. N.D. Ill. 1997)). As
10

It bears noting the distinction between defending the estate,
where pursuit of the litigation initiative is ultimately in the
hands of an opponent, as in the Crawford litigation, and
deciding when and how to prosecute a claim which is ultimately
in the hands of the Trustee. That distinction justifies
different approaches in evaluating the reasonableness of the
Trustee’s exercise of judgment.
- 48 -

the Trustee and the bankruptcy court both recognized, there is
something of a circuit split regarding the appropriate test for
when to permit recharacterization, 11 and there is no controlling
precedent in the First Circuit. 12

See Tencara, 447 B.R. at 24,

37 (quoting In re AtlanticRancher, 279 B.R. 411).
Some courts follow the lead of a 1986 Eleventh Circuit
case, Estes v. N&D Properties, Inc. (In re N&D Properties,
Inc.), 799 F.2d 726 (11th Cir. 1986), and employ a two-part test
for recharacterization.

See In re First NLC Fin. Servs., LLC,

415 B.R. 874, 879-80 (Bankr. S.D. Fla. 2009).

In In re N&D

Properties, the court stated that “[s]hareholder loans may be
deemed capital contributions . . . [1] where the trustee proves
initial under-capitalization or [2] where the trustee proves
that the loans were made when no other disinterested lender

11

There is also somewhat of a circuit split over the power of a
bankruptcy court to recharacterize debt in the first instance.
However, most circuits now agree that “the bankruptcy court has
the inherent authority to properly characterize a purported
claim as debt or equity.” Riley v. Tencara (In re Wolverine,
Proctor & Schwartz, LLC) (“Tencara”), 447 B.R. 1, 24 (Bankr. D.
Mass. 2011); see In re First NLC Fin. Servs., LLC, 415 B.R. 874,
878-79 (Bankr. S.D. Fla. 2009) (noting that the Third, Fourth,
Sixth, Tenth, and Eleventh Circuits “recognize the power of
bankruptcy courts to recharacterize debt as equity”).
12
Despite advancing this position in their opening brief, the
Trustee and her professionals distance themselves in their reply
brief from the idea that two distinct lines of case law can be
discerned. The cases cited in their opening brief support the
circuit split the Trustee initially recognized, however.
- 49 -

would have extended credit.”

N&D Props., 799 F.2d at 733

(citation omitted; emphasis added).
More recent circuit court decisions have employed a multifactor test to determine if recharacterization is appropriate.
See, e.g., Cohen v. KB Mezzanine Fund II, LP (In re Submicron
Sys. Corp.), 432 F.3d 448, 455-56 (3d Cir. 2006); Fairchild
Dornier GMBH v. Official Comm. of Unsecured Creditors (In re
Official Comm. of Unsecured Creditors of Dornier Aviation (N.
Am.), Inc.), 453 F.3d 225, 234 (4th Cir. 2006); Sender v. Bronze
Group, Ltd. (In re Hedged-Invs. Assocs., Inc.), 380 F.3d 1292,
1298-99 (10th Cir. 2004); Bayer Corp. v. Masco Tech, Inc. (In re
Autostyle Plastics, Inc.), 269 F.3d 726, 749-50 (6th Cir. 2001);
see also In re First NLC, 415 B.R. at 880 (collecting cases).
These factors, which are to be considered in the aggregate and
in the context of the specific facts of a given case, typically
include the adequacy of capital contributions, the ratio of
shareholder loans to capital, the amount or degree of
shareholder control, the availability of similar loans from
outside lenders, and other relevant considerations.

See, e.g.,

Blasbalg v. Tarro (In re Hyperion Enters., Inc.), 158 B.R. 555,
561-62 (D.R.I. 1993).

- 50 -

The Eleventh Circuit two-part test is more favorable to the
Trustee because she would need to prove only initial
undercapitalization.

See In re N&D Props., 799 F.2d at 733; cf.

In re AtlanticRancher, 279 B.R. at 434-35 (“[I]f this Court were
to rely upon the two N&D Properties factors alone, the Trustee
would prevail on his recharacterization count.”).

Under a

multi-factor test, however, the Trustee bears the burden of
satisfying several factors, including undercapitalization, and
demonstrating that “the transaction [was] not a loan at all,” In
re Dornier Aviation, 453 F.3d at 234, but was rather “intended
. . . as something else.” 13

In re AutoStyle, 432 F.3d at 455-56.

The presiding bankruptcy judge here had addressed this
circuit split in a 2002 case, In re AtlanticRancher, 279 B.R. at
433-34, and adopted the multi-factor approach.
B.R. at 24, 29. 14

See Tencara, 447

Given the presiding judge’s prior articulation

13

In their original brief on appeal, the Trustee and her
professionals appear to concede that they could not have
satisfied a multi-factor test for recapitalization, emphasizing
instead that they “could not have predicted” that the bankruptcy
court would decline to follow the N&D Properties test. Yet in
their reply brief, the Trustee and her professionals contend
that they were confident after motion practice that they would
prevail under a multi-factor analysis as well, citing a variety
of facts they contend they were able to prove.
14
In In re AtlanticRancher, the bankruptcy judge acknowledged
the multi-factor test articulated by the Sixth Circuit in In re
AutoStyle. In re AtlanticRancher, 279 B.R. at 431-32. She
ultimately employed a shorter list of factors set forth in a
District of Rhode Island case, Blasbalg v. Tarro (In re Hyperion
- 51 -

of her position, the Trustee and her professionals no doubt
discovered early in their research that they would have an
uphill battle attempting to persuade the judge either (1) to
adopt the two-part In re N&D Properties test over the hybrid
multi-factor test the court had already adopted in In re
AtlanticRancher;(2) to recharacterize the debt on a showing of
undercapitalization and non-statutory insider status alone, a
position which the judge’s opinion in In re AtlanticRancher
suggested she would reject and which has been rejected
explicitly by other courts; or (3) to conclude that the multifactor test weighed in favor of recharacterization.

See In re

AtlanticRancher, 279 B.R. at 434 (recognizing that the In re
Hyperion court, whose multi-factorial test she adopted, had
“specifically rejected the notion that undercapitalization alone
justifies recharacterization of debt to equity”) (citing In re
Hyperion, 158 B.R. at 561)); see also In re Dornier Aviation,
453 F.3d at 234 (“a claimant’s insider status and a debtor’s
undercapitalization alone will normally be insufficient to
support the recharacterization of a claim.”).
Enters., Inc.), 158 B.R. 555, 561 (D.R.I. 1993), and explicitly
rejected the view that undercapitalization alone would be
sufficient to justify recharacterization. See In re
AtlanticRancher, 279 B.R. at 434 (citing In re Hyperion, 158
B.R. at 561). The suggestion by the Trustee that In re
AtlanticRancher “followed and expanded upon N&D Properties” is
an inaccurate characterization of that opinion.
- 52 -

In her memorandum following the Tencara trial, the
presiding bankruptcy judge not surprisingly relied on her
AtlanticRancher decision and concluded that the multi-factor
tests employed more recently in the Fourth and Third Circuits
were “more compelling than the test set forth in N&D Properties”
because they “permit a more thorough evaluation of the substance
of the challenged loan and the parties intent.”
B.R. at 24, 29, 30. 15

Tencara, 447

Utilizing this multi-factor approach, the

bankruptcy court concluded that the Trustee had demonstrated
undercapitalization but that there was no “indicia of control
exerted by Tencara in the affairs of the Debtor” and instead
that there was support for “Callan’s testimony that Tencara made
the $1.9 million loan to the Debtor based on an assessment of
collateral values, as well as cash flow.”
38-39.

Tencara, 447 B.R. at

Accordingly, the court concluded “that the $1.9 million

advanced by Tencara to the Debtor was a loan,” because “[t]he
only direct evidence of the parties’ intent was the unequivocal
testimony of Callan and Kulkarni that . . . [the] advance was
intended to be a loan,” and the inferences from the other
available evidence did not warrant a different conclusion.
15

Id.

The judge also predicted “that the First Circuit would follow
[the recent decisions from the Fourth and Third Circuits] in
utilizing factors culled from tax cases.” Tencara, 447 B.R. at
29.
- 53 -

at 40.

The court recognized, however, that “some factors, such

as undercapitalization, Tencara’s subordination of its debt to
that of CapSource, and the Debtor’s use of the funds to satisfy
existing debt rather than to acquire capital assets, as well as
Tencara’s payment of payroll and CapSource in the sum of
$295,000, might suggest that the advance was equity.”

Id.

However, “the majority of factors, most particularly the intent
of the parties, weigh heavily in favor of characterization of
the advance as a loan.”

Id. at 40-41.

With this context, I reach the claimed error.

When the

Trustee and her professionals sought an award of fees for
pursuing the Tencara litigation, the bankruptcy court reduced
the fees because it concluded that the Trustee and her
professionals “did not objectively and impartially evaluate the
merits or the risk of loss to the estate in the Tencara
Litigation before the trial,” and “[t]he attorneys did not
adequately analyze the weaknesses of the Trustee’s case against
Tencara in light of the magnitude of its secured claim.”
Wolverine, 2012 WL 3930360, at *6.

In re

The court determined that

the Trustee and her professionals were not at fault “for
investigating the validity of Tencara’s secured claim,
commencing the action, and conducting discovery,” but that “it

- 54 -

should have become clear to the Trustee’s co-counsel after the
close of discovery, during the trial preparation phase of the
case . . . that they were unlikely to be able to succeed on any
of the counts.”

Id. at *7.

In other words, the court reduced

the fees because it concluded that the Trustee and her
professionals should have known that they could not prove the
facts necessary to justify recharacterization under a multifactor assessment.
The Trustee and her professionals protest that their
initial victories defending against Tencara’s motions to dismiss
and for summary judgment afforded them the reasonable belief
that they might succeed at trial.

This overstates the

bankruptcy court’s pre-trial rulings.

The bankruptcy court

denied Tencara’s motions to dismiss and for summary judgment
because the Trustee’s pleadings and the evidence read in the
light most favorable to the Trustee were sufficient to raise
genuine issues of material fact regarding recharacterization. 16
16

In denying Tencara’s motion for summary judgment, the
bankruptcy court recognized the application of the multi-factor
tests to the recapitalization issue and found “that the record
shows that there are numerous genuine issues of material fact
which preclude entry of judgment in favor of Tencara,” including
“whether the friendship and business relationship between Mr.
Kulkarni and Mr. Callan subjects the so-called ‘2005
Transaction’ to a heightened level of scrutiny; 2) whether the
Debtor’s capital structure was such that a prudent lender would
not have made a similar loan to the Debtor in 2005; 3) whether
- 55 -

Success on a motion to dismiss or for summary judgment is not an
indication of the quality of a party’s factual case; it is
merely a determination that the issues must be put to a finder
of fact.
Here, however, where the governing legal standard involves
a “highly fact-dependent” multi-factorial inquiry, a reasonable
lawyer could, at least in theory, believe that there was some
merit to her case when the judge – who is to serve as the factfinder at a bench trial – identified several outstanding factual
issues that precluded judgment as a matter of law.
Dornier Aviation, 453 F.3d at 234.

See In re

Indeed, it is apparent from

the court’s ultimate ruling in the case that some – and not
merely one – of the factors were satisfied.

See Tencara, 447

B.R. at 40.
But the standard is not whether there was a chance of
success; the question is whether at some point “it became
the debtor was undercapitalized during all relevant periods and,
if so, whether undercapitalization caused the failure of the
Debtor; 4) whether the 2005 Transaction was an arm’s length
transaction; 5) whether Tencara exerted any influence or control
over the Debtor, and, if so, the extent of such influence or
control; 6) whether and to what extent Tencara performed
diligence in making the decision to advance money to the Debtor;
and 7) whether the economic reality of the circumstances of the
2005 Transaction and the parties’ intent warrant treatment of
the 2005 Transaction as an equity investment as opposed to a
debt.” Tencara, No. 07-01179 (Bankr. D. Mass.) (Order, May 22,
2009, Dkt. Doc. 101).
- 56 -

reasonably obvious that further litigation would cost more than
it was likely to bring into the estate.”
at 315.

In re Taxman, 49 F.3d

The bankruptcy court’s reasoning in reducing the fees

suggests it was Mr. Kulkarni’s testimony that was likely to be,
and ultimately was, fatal to the Trustee’s case.

See In re

Wolverine, 2012 WL 3930360, at *7 (noting that the Trustee and
her professionals lacked the evidentiary basis to succeed,
“particularly in the absence of compelling testimony from Mr.
Kulkarni whom the Trustee relied upon as a key witness,” and
“whose testimony and credibility had the potential to either
support or undermine the Trustee’s claims for relief”).

The

bankruptcy court implicitly reasoned that a reasonable lawyer
would have determined after conducting Kulkarni’s deposition
that he was unlikely to provide the testimony needed to tip the
multi-factorial assessment in the Trustee’s favor.

A reasonable

lawyer, by the bankruptcy court’s assessment, should have known
at the close of discovery — in light of the limitations of Mr.
Kulkarni’s testimony — that the evidence itself was far from
sufficient to substantiate the account of the facts the Trustee
sought to pursue.

That reasonable lawyer would have considered

this weakness in relation to the “costs that the estate would be
obligated to pay in the event the action against Tencara was

- 57 -

unsuccessful,” In re Wolverine, 2012 WL 3930360, at *6, and
would have decided to abandon course to save the bankruptcy
estate further expense.
The bankruptcy court reached these conclusions regarding
how far a reasonable lawyer would go in pursuing this claim on
these facts by viewing them through the lens of the legal
standard the presiding judge had herself selected and applied in
this case – that is, the presiding judge’s articulation of the
multi-factor test.

From the different perspective that a judge

in a review function can provide — where the legal standard, its
precise contours, and the framework for its application have not
been clearly defined in this circuit — a reasonable lawyer
receiving an adverse decision under the multi-factor test and
believing that she had a meritorious claim might have considered
the pursuit of an appeal challenging the bankruptcy court’s
articulation of the multi-factor test and its application to the
facts as a reasonable next step.
Even if I were to conclude that the bankruptcy court erred,
however, this would not result in a more favorable outcome for
the Trustee under my own reading of the case.

The Trustee did

not go as far as she could have in pursuing her remedies for
demonstrating the reasonableness of her conduct of the Tencara

- 58 -

litigation.

After receiving an adverse decision, the Trustee

chose not to appeal the court’s articulation of the multi-factor
test and application of it to the facts.

The Trustee knew that

the presiding judge held a particular view on the scope of the
test that was not favorable to her case, but she also should
have known that I, as the judge who would address an appeal in
the first instance, the First Circuit or ultimately the Supreme
Court facing the established circuit split, could take a
different approach on de novo review.

The Trustee voted with

her boots when she abandoned her claim without appeal.

Having

made that decision, presumably on a cost/benefit analysis, she
cannot now argue that the claim had a greater likelihood of
success than the bankruptcy court attributed to it.

This may in

theory be a circumstance “[w]hen abandonment is not the
obviously right course [or] when reasonable professionals could
differ over the right course.”

In re Taxman, 49 F.3d at 315.

In such circumstances, “the professional is not to be penalized,
just as a trustee is not to be surcharged for a discretionary
judgment that later proves to have been mistaken.”

Id.

But hypothetical differences are not sufficient to warrant
displacement of the bankruptcy judge’s actual ruling under the
highly deferential standard that applies to my review on this

- 59 -

appeal.

See In re DN Assocs., 3 F.3d at 515.

I cannot say that

the bankruptcy court committed clear error in assessing the
likelihood of success using its own understanding of the
applicable legal standard, where another articulation of the
test has not been adopted in this circuit.

As a result, I will

not disturb the bankruptcy court’s award on this basis. 17
b. Equitable Subordination
Similar to recharacterization, equitable subordination
“permits a bankruptcy court to rearrange the priorities of
creditors’ interests.”

See Capitol Bank & Trust Co. v. 604

Columbus Ave. Realty Trust (In re 604 Columbus Ave. Realty
Trust), 968 F.2d 1332, 1353 (1st Cir. 1992).

Equitable

subordination is authorized by 11 U.S.C. § 510(c) and similarly
requires a fact-intensive analysis.

A court may equitably

subordinate a claim if (1) the claimant engaged in inequitable
conduct, (2) the misconduct resulted in injury to creditors or
some unfair advantage for the claimant, and (3) equitable
subordination would not be inconsistent with the Bankruptcy
Code.

See In re 604 Columbus Ave., 968 F.2d at 1353; see also

11 U.S.C. § 510(c).

Undercapitalization and insider status are

not sufficient for equitable subordination; instead, there must
17

Given the disposition of the issue on the basis of the multifactor test, it is unnecessary to reach the question of insider
status, and I decline to do so.
- 60 -

be some separate identifiable “inequitable conduct.”

In re 604

Columbus Ave., 968 F.2d at 1353.
The Trustee nevertheless apparently believed that
undercapitalization would be highly relevant, if not
determinative, with respect to equitable subordination, as she
did with her recapitalization claim.

The Trustee points to the

bankruptcy court’s finding that Mr. Kulkarni “shamelessly used
his positions . . . to advance his personal financial interests
. . .” to demonstrate some inequitable conduct.
B.R. at 42.

Tencara, 447

But the bankruptcy court went on to indicate that

“the Court does not find that Callan and Kulkarni engineered the
2005 transaction . . . with the intention of benefitting
Kulkarni personally.”

Id.

Indeed, the existing private equity

owners of the company concluded that “the most viable option for
the business was to transact it back to Deepak Kulkarni.”
Just as with the recapitalization claim, the evidence
available at the close of discovery apparently made it clear to
the bankruptcy court that the Trustee faced disabling difficulty
establishing the inequitable conduct necessary to justify
equitable subordination under First Circuit precedent.

When

paired with the accruing interest costs, this low likelihood of
success, by the bankruptcy court’s assessment, would have led a

- 61 -

reasonable lawyer to believe that continuing to challenge the
validity of the Tencara claim against the estate would no longer
provide a benefit to the estate.

The court did not commit clear

error in so concluding. 18
2.

Incremental Costs

The bankruptcy court’s determination that a reasonable
lawyer would not have pursued the case past discovery is based
on two implicit conclusions: first, that the Trustee was
unlikely to succeed, as discussed above, and second, that the
costs of continuing to pursue the anticipatedly unsuccessful
litigation outweighed the potential benefit to the estate from a
financial perspective.

The Trustee contends that the bankruptcy

court erred not only in its first conclusion but also in its
incremental cost assessment.

As discussed above, the bankruptcy

court held that it “cannot fault the Trustee and her
professionals for investigating the validity of Tencara’s
secured claim, commencing the action, and conducting discovery,”
but that “it should have become clear . . . after the close of
discovery . . . that they were unlikely to succeed.”
18

In re

Even if it did, as with the recharacterization claim above, it
would be immaterial. The Trustee abandoned her claim upon
receipt of the bankruptcy court’s Tencara decision by choosing
not to appeal it; this suggests that she herself believed she
was unlikely to succeed. She cannot now argue that her claim had
a greater likelihood of success than the bankruptcy court
attributed to it, or that her decision not to appeal suggests.
- 62 -

Wolverine, 2012 WL 3930360, at *7.

The bankruptcy court

accordingly reduced the fees requested by the Trustee’s cocounsel for the Tencara litigation by fifty percent.

Id.

Although the opinion does not explain how the court identified
fifty percent as the appropriate reduction, the Trustee observes
that “[a] reasonable estimate would be that one-half of the
total litigation fees would be incurred for trial,” and that the
bankruptcy court must have based the reduction amount on this
estimate.
The Trustee essentially contends that the bankruptcy court
did not adequately consider the amounts at stake and the costs
that would be incurred in further pursuing the litigation when
it determined that the costs outweighed the potential benefits.
However, the Trustee’s alternative calculation of the costs and
benefits of proceeding with the litigation identifies April 1,
2010, as the determinative date.

This is when, by her own

report, “[t]he Trustee’s Professionals began preparing for trial
in earnest.”
analysis.

This is the wrong date on which to base the

The bankruptcy court held that the Trustee should

have known she was unlikely to succeed at the close of
discovery, which occurred in December 2008 19 — this is the time
19

Fact discovery closed in November 2008, and expert discovery
closed in December 2008. Tencara filed its motion for summary
- 63 -

frame from which the costs and benefits must be calculated. 20
The Trustee suggests an ambiguity in the bankruptcy court’s
decision in this regard, however.

The court stated that the

Trustee’s co-counsel should have known “after the close of
discovery, during the trial preparation phase of the case,” that
the case would be unsuccessful.
3930360, at *7.

In re Wolverine, 2012 WL

To be sure, the close of discovery and the

beginning of trial preparation are not necessarily coincident.
Nonetheless, as a general principle, once discovery is closed
and summary judgment motions are filed, the parties presumably
know their own hand and a good deal about the hand held by their
opponents, and can meaningfully assess the strength of the case
they can present.

Accordingly, I conclude that it is immaterial

whether the bankruptcy court calculated the reduction from the
close of discovery or from the time at which the Trustee and her
professionals actually began to prepare for trial.
The cost-benefit analysis is essentially the same
regardless of the date on which the court bases the analysis.
The Trustee sought to disallow the principal of the Tencara loan
at approximately $1.9 million.

See Tencara, 447 B.R. at 5.

The

judgment on January 9, 2009, and the court denied the motion on
May 22 of that year.
20
Mr. Crawford also does not provide an analysis based on any
date in late 2008; instead, he offers analyses based on the ends
of the fee periods on July 1, 2008 and April 1, 2009.
- 64 -

default rate of interest on this loan amounted to $19,000 per
month.

For every month the Trustee proceeded with the

litigation, the potential judgment increased by $19,000.

As of

January 1, 2009, the loan had already accrued $608,000 in
interest. 21

By January 2011, the date the bankruptcy court

issued its decision in the adversary Tencara proceeding, the
loan would accrue another $456,000 for a total of over $1
million in interest alone.

Tencara’s litigation costs over this

period also rose from less than $300,000 at the close of
discovery to more than $1 million by the end of the litigation.
Mr. Crawford, in furtherance of his objection to awarding
fees for the Tencara litigation, uses an expected value
calculation (the accuracy of which the Trustee does not contest)
to determine the threshold probability of success above which it
would make economic sense to pursue the litigation based on the
cost of abandoning the litigation at the close of discovery, the
benefit in the event the Trustee wins, and the cost in the event
the Trustee loses.

At the close of discovery, this percentage

is somewhere between 33.7% and 46.5%; surely it did not increase
at any later point in the litigation.

Based on the bankruptcy

court’s determination that the Trustee should have known she was
21

This is calculated from April 1, 2006, the date of the
petition.
- 65 -

unlikely to prevail, as discussed above, it is reasonable to
conclude that the Trustee’s probability of success was lower
than this threshold.

I cannot say that the bankruptcy court

made a clear error in determining that pursuing the litigation
would not be reasonably likely to benefit the estate
financially, where interest and litigation costs continued to
accrue each month the case was pending.
2012 WL 3930360, at *6-7.

See In re Wolverine,

Moreover, the Trustee’s own decision

not to pursue an appeal suggests that she did make a financial
determination that the case was not worth pursuing further, just
after the point at which the bankruptcy court, in exercising its
own judgment, determined that a reasonable lawyer would have
done so.
Although the parties discuss the effect of settlement
negotiations, the issue of settlement has no relevance in this
analysis.

The Trustee and Tencara negotiated based on the

amount at stake and their perceived chances of prevailing on
their respective positions.

When the parties were unable to

reach settlement, the Trustee faced the decision whether to
abandon the litigation or press on.
at 315.

See In re Taxman, 49 F.3d

Even if I were to assume that Tencara’s settlement

positions were entirely unreasonable, the Trustee and her co-

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counsel would not be absolved of their duty to choose the path
reasonably likely to benefit the estate.

See id.

Accordingly, because the cost-benefit analysis of pursuing
the litigation after the close of discovery seems to indicate
that the Trustee should not have pursued the case, I find no
clear error in the bankruptcy court’s finding consistent with
this analysis.
3.

Consideration of the Results Obtained

Finally, the Trustee and her professionals argue that the
bankruptcy court impermissibly engaged in hindsight analysis by
considering the results of the Tencara litigation in reducing
its award of fees.

See In re Wolverine, 2012 WL 3930360, at *7

(concluding that “a reduction in compensation . . . is required
in view of the results obtained”).
There is a split in authority over the question whether a
court may deny or reduce fees when the services do not result in
a material benefit to the estate.

Section 330, on its face,

focuses the compensation inquiry on the time at which the
services were rendered, rather than when the result is realized.
See 11 U.S.C. § 330(a)(3)(C) (court shall consider “whether the
services were necessary to the administration of, or beneficial
at the time at which the service was rendered toward the

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completion of, a case”); id. § 330(4)(A)(ii)(I) (court shall not
allow compensation for services not “reasonably likely to
benefit the debtor’s estate”).
Since the Bankruptcy Code’s reenactment in 1978, courts
have relied on a lodestar analysis to assess reasonableness
under § 330(a).
Cir. 2009).

See In re Lopez, 405 B.R. 24, 30-31 (B.A.P. 1st

In so doing, many courts consider reasonableness

factors articulated in cases involving fee-shifting in addition
to those factors specifically enumerated in § 330(a).

See,

e.g., In re UNR Indus., Inc., 986 F.2d 207, 208-10 (7th Cir.
1993).

Among these factors is “the results obtained,” which

finds its origin in a twelve-factor test for the award of
attorneys’ fees that preceded the widespread adoption of the
lodestar approach. 22

See Johnson v. Ga. Highway Express, Inc.,

488 F.3d 714, 717-19 (5th Cir. 1974) (listing twelve commonly
employed factors for calculating a fee award), abrogated in part
by Blanchard v. Bergeron, 489 U.S. 87 (1989); see also
Blanchard, 489 U.S. at 91-95 (noting that following Hensley v.
Eckerhart, 461 U.S. 424 (1983), the lodestar approach became the
primary method for determining fee awards); Blum v. Stenson, 465
22

The Johnson factors, including the “results obtained”
consideration, have since been integrated into the lodestar
calculation. See Pennsylvania v. Del. Valley Citizens’ Council
for Clean Air, 478 U.S. 546, 564-65 (1986) (discussing Blum v.
Stenson, 465 U.S. 886, 898-900 (1984)).
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U.S. 886, 898-900 (1984) (“results obtained” factor is fully
encapsulated in lodestar amount and cannot serve as independent
basis for increasing fee award); Hensley, 461 U.S. at 434 n.9
(noting that many Johnson factors “are subsumed within” lodestar
calculation).

As a result, in employing the lodestar approach

to calculating a fee award under § 330(a), some courts consider
the results obtained, despite its apparent contradiction of the
emphasis in § 330(a) on the reasonableness at the time the
services were rendered.

See, e.g., Andrews & Kurth L.L.P. v.

Family Snacks, Inc. (In re Pro-Snax Distribs., Inc.), 157 F.3d
414 (5th Cir. 1998) (requiring an “identifiable, tangible, and
material benefit to the estate” for a fee award under § 330(a));
see also Gregory W. Bachmann, Note, Professional Fees in
Bankruptcy: Tailoring the Johnson Factors to Suit Bankruptcy, 1
Am. Bankr. Inst. L. Rev. 453, 455-56 (1993).
Other courts, however, take a very different approach.
Maintaining that they are giving effect to the congressional
intent evidenced by the enumeration of specific factors for
consideration in § 330(a), several courts have declined to rely
on fee-shifting precedent and lodestar adjustment factors in
calculating fees under § 330(a) and have instead emphasized that
the reasonableness inquiry looks to the time services were

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rendered and does not employ the benefit of hindsight.

See,

e.g., In re Ames Dep’t Stores, Inc., 76 F.3d 66, 72 (2d Cir.
1996) (section 330 requires courts to consider “what services a
reasonable lawyer or legal firm would have performed in the same
circumstances” (citing In re Taxman, 49 F.3d at 315)), abrogated
on other grounds by Lamie v. U.S. Trustee, 540 U.S. 526 (2004);
Roberts, Sheridan & Kotel, P.C. v. Bergen Brunswig Drug Co. (In
re Mednet), 251 B.R. 103, 108 (B.A.P. 9th Cir. 2000) (“The
statute does not require that the services result in a material
benefit to the estate in order for the professional to be
compensated; the applicant must demonstrate only that the
services were ‘reasonably likely’ to benefit the estate at the
time the services were rendered.”); In re Value City Holdings,
436 B.R. 300, 306 (Bankr. S.D.N.Y. 2010) (“To condition
professional fees on . . . outcomes would introduce a risk
factor to professional services in bankruptcy that is beyond the
scope of section 330.”).
The stance within the First Circuit is somewhat unclear on
this issue.

The courts of this circuit have long employed the

lodestar approach for calculating fees in bankruptcy and nonbankruptcy proceedings.

See, e.g., Furtado v. Bishop, 632 F.2d

915, 920 (1st Cir. 1980); In re Lopez, 405 B.R. at 30-31.

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In

1982, a bankruptcy appellate panel of the First Circuit
recognized the tension between the “results obtained” lodestar
consideration and the statutory language of “reasonably likely
to benefit the estate.”
755-56.

See In re Casco Bay Lines, 25 B.R. at

The In re Casco Bay Lines panel considered how the

Johnson factors could be used in determining a reasonable hourly
fee in a bankruptcy case under § 330(a) and noted that the court
should consider “the disallowance of compensation for time spent
litigating issues and claims upon which the party seeking the
fee did not ultimately prevail.”

Id. at 755.

However, it also

observed that “success” under the lodestar analysis could not be
directly correlated with “benefit” under § 330; instead, “time
spent upon an issue which an attorney ultimately loses may be
beneficial in connection with the aims of the estate in
general.”

Id. at 756.

As a result, the panel cautioned that

the lodestar approach “should be tempered with a view towards
the need for the services at the time they were rendered.”

Id.

A bankruptcy judge in the District of Maine later interpreted
Casco Bay Lines to mean that “[i]n the bankruptcy context,
rather than considering ‘success’ achieved, ‘benefit’ to the
estate is more appropriately weighed.”
509, 521 n.53 (Bankr. D. Me. 1991).

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In re Saturley, 131 B.R.

More recently, another bankruptcy appellate panel, in an
opinion authored by the bankruptcy judge whose decision is under
review here, indicated that the results obtained is indeed a
central consideration in the lodestar calculation and adjustment
of a fee award under § 330(a).
31.

See In re Lopez, 405 B.R. at 30-

The panel stated that “the degree to which the prevailing

party succeeds is a crucial factor in shaping a fee award.
Success is evaluated in terms of the number of successful
claims, the relief actually achieved, and the societal
importance of the vindicated right.”
marks and citations omitted).

Id. (internal quotation

The First Circuit has also

indicated some support for the view that the results obtained is
a relevant consideration under § 330(a).

In In re Sullivan, 674

F.3d at 69, the First Circuit stated that “[t]he section 330
factors mirror those encapsulated in the traditional lodestar
approach to calculating attorneys’ fees,” implicitly recognizing
— but not explicitly holding — that considerations such as the
results obtained may be relevant in adjusting the lodestar.
Although the First Circuit appears to permit consideration
of the result obtained in determining the reasonableness of a
requested fee, there is some uncertainty as to the weight the

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ultimate result should have, 23 and that this consideration is not
of determinative importance in the § 330 analysis where the
23

First Circuit precedent in the context of attorney fee
awards under the Civil Rights Attorney Fees Award Act, 42 U.S.C.
§ 1988, which permits a fee award for the “prevailing party,”
provides some, albeit limited, guidance on this issue. The
First Circuit, following signs from the Supreme Court, has
generally considered the results obtained to be a significant
factor in fee calculations but has cautioned against defining
the term too narrowly.
In Hensley v. Eckerhart, 461 U.S. 424, 434-36 (1983), the
Supreme Court emphasized that “the most critical factor” both
within and as an adjustment to a lodestar calculation, is the
degree of success obtained, and offered guidance for when a
prevailing party’s limited success should lead to a reduction in
the fee award The Court spoke in terms of degree, rather than
exact calculations, recognizing that in complex civil rights
litigation, “the range of possible success is vast,” and [t]here
is no precise rule or formula” for taking the degree of success
into account. Id. at 436; see Farrar v. Hobby, 506 U.S. 103,
114-15 (1992) (discussing and applying Hensley principles).
The First Circuit, recognizing that results obtained is “a
preeminent consideration in the fee-adjustment process”
involving the lodestar calculation, has explicitly defined the
“results obtained” to encompass, broadly, “a plaintiff’s success
claim by claim, . . . the relief actually achieved, . . . [and]
the societal importance of the right which has been vindicated.”
See Coutin v. Young & Rubicam Puerto Rico, Inc., 124 F.3d 331,
338 (1st Cir. 1997). These measures, in combination,
“potentially bear upon the amount of an ensuing fee award.” See
id. at 338-41.
In Coutin, the district court judge had taken into
consideration the “limited success” of the plaintiff – meaning
that she had obtained a far smaller damages award from the jury
than she had sought - in awarding only $5,000 of the $52,000
requested in attorney’s fees. Id. at 336, 338. The First
Circuit, employing its broad definition of results obtained,
reasoned that a judge “can take [a] small judgment into
reasonable account in massaging the lodestar,” but “may not
automatically reduce a fee award in proportion to a judgment
that is significantly less than the plaintiff sought.” Id. at
340. Going through each measure of success in turn, the First
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statute expressly identifies other key factors.

Nonetheless,

the bankruptcy court here rested its determination that a
“substantial reduction of fees” was warranted on “[t]he result
obtained, namely judgment in favor of the Defendant, and the
complete lack of any benefit to the estate resulting from the
litigation.”

In re Wolverine, 2012 WL 3930360, at *6; see id.

at *7 (emphasizing that the litigation “was unsuccessful” and
“[t]he result was harmful from the perspective of creditors,”
and that “a reduction in compensation . . . is required in view
of the results obtained”).

In placing such great weight on the

result obtained, particularly where this factor is of uncertain
Circuit concluded that “the more than 90% fee reduction that the
court imposed cannot be justified on the basis of limited
success,” because while “the ratio of the damages requested to
the judgment received” was not favorable to the plaintiff, she
had achieved 100% success from a claim-by-claim standpoint, and
the relief afforded was “substantial in absolute terms.” Id. at
340-41. As a result, her “success” as the First Circuit defined
it was not nearly as limited as the district court judge had
considered it to be, and the court vacated the order awarding
fees and remanded for further proceedings. See id. at 342.
Although Coutin and other cases indicate that the results
obtained and the degree of success is a relevant consideration
in calculating and adjusting the lodestar in the “prevailing
party” context, the First Circuit has not directly addressed
whether it carries equal weight under § 330, where the statutory
language provides a specific list of considerations.
Consequently, reliance upon cases from the “prevailing party”
context must be undertaken with considerable caution and
attention to nuance since § 330 does not require a Trustee to be
a “prevailing party” as a necessary condition to fee recovery.

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import in the § 330 analysis, the bankruptcy court comes close
to “a serious mistake in weighing” the proper factors for
consideration under § 330.

See In re Sullivan, 674 F.3d at 68.

Reversal of a bankruptcy court’s fee award on appeal would
be appropriate where, after reviewing the record as a whole, I
am left with “the irresistible conclusion that a mistake has
been made.”

United States v. One Star Class Sloop Sailboat, 546

F.3d 26, 35 (1st Cir. 2008) (internal quotation marks omitted).
Here, the bankruptcy court appears to have based its decision to
reduce the Tencara litigation fees in some part on “a mistaken
impression of applicable legal principles,” Taylor v.
Hosseinpour-Esfahani, 198 B.R. 574, 577 (9th Cir. B.A.P. 1996)
(citation omitted), namely that the result obtained constitutes
a significant, if not determinative, factor in reducing a
lodestar amount.
However, reversal and remand are not appropriate
dispositions where, as here, it is also apparent the bankruptcy
court would reach the same conclusion using the correct
balancing of factors.

The bankruptcy court concluded that “it

should have become clear to the Trustee’s co-counsel after the
close of discovery . . . that they were unlikely to be able to
succeed on any of the counts,” In re Wolverine, 2012 WL 3930360,

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at *7, a finding that I affirmed above.

The court determined

that “both of the law firms employed by the Trustee as her cocounsel did not objectively and impartially evaluate the merits
or the risk of loss to the estate in the Tencara Litigation
before the trial,” id. at *6, and that the costs of continuing
to pursue the litigation when it became clear that the Trustee
was unlikely to prevail outweighed the benefit to the estate of
further pursuit.

The language finding that the law firms

employed by the Trustee “did not objectively and impartially
evaluate the merits” seems unintentionally overstated to the
degree it might be read to suggest self dealing by fee churning.
The record contains no basis for such a suggestion.

That said,

the language conveys the bankruptcy court’s finding that pursuit
of the Tencara litigation through trial was not a reasonable
exercise of judgment.
Ultimately, when “a reasonable lawyer would have abandoned
the lawsuit,” a professional may be penalized by a fee reduction
for not doing so.

In re Taxman, 49 F.3d at 315.

Here, the

bankruptcy court’s decision can be supported by proper factors,
namely that the services provided in furthering the Tencara
litigation after the close of discovery were not reasonably
likely to benefit the estate and should be excluded from the fee

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award under 11 U.S.C. § 330(a)(4)(A)(ii)(I).

That the

bankruptcy court may have placed undue emphasis on another
consideration – the results obtained – and used overwrought
language in doing so does not change this outcome.

Accordingly,

reversal or modification of the bankruptcy court’s judgment is
not necessary.
IV. Belated Assertion of One Dollar Arithmetic Error
Finally, I address Mr. Crawford’s motion to correct an
arithmetic error in my award of costs to the Trustee in the
Crawford litigation.

On September 14, 2010, I awarded the

Trustee costs “in the amount of $2,903.65, resulting from the
deletion of the costs claimed for the deposition transcripts of
Messrs. Georgiou and Lowey.”

See Crawford, Civ. Action No. 07-

10279-DPW (D. Mass.) (Memo. & Order, Sept. 14, 2010, Dkt. No.
182).
dollar.

This awarded amount contains an arithmetic error of one
The full costs requested totaled $3,598.80.

After

subtracting $278.20 for the transcript of Mr. Lowey and $417.95
for the transcript of Mr. Georgiou, the correct amount of the
award should have been $2,902.65.
Mr. Crawford paid the awarded amount of $2,903.65 without
objection and did not raise the issue during the more than 18
months between the award and filing his brief on this appeal.

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He then filed a Rule 60(a) motion to correct the arithmetic
error. 24

In re Wolverine, Civ. Action No. 07-10279-DPW (D. Mass)

(Rule 60(a) Motion, Apr. 25, 2012, Dkt. No. 190); see Fed. R.
Civ. P. 60(a); Fed. R. Bankr. P. 9024 (adopting the relevant
portions of Rule 60 for bankruptcy proceedings).
Rule 60(a) does not impose a time limit for correcting a
clerical mistake.

Under Rule 60(a), “[t]he court may correct a

clerical mistake . . . whenever one is found . . . .”

See Scola

v. Boat Frances, R., Inc., 618 F.2d 147, 152 & n.1 (1st Cir.
1980) (“The concept implied is that Rule 60(a) (which is
unlimited in time) deals with mechanical corrections that do not
alter the operative significance of the judgment, that could not
affect a party’s interest in taking an appeal, and that,
therefore, can reasonably be made at any time.”).

Contrast Fed.

R. Civ. P. 60(c) (“A motion under Rule 60(b) must be made within
a reasonable time” and in some cases “no more than a year after
the entry of the judgment or order or the date of the
proceeding.”).
24

I denied this motion on March 29, 2013, noting that I would
offer further explanation of that ruling here. See In re
Wolverine, Civ. Action No. 07-10279-DPW (D. Mass) (Memo. &
Order, March 29, 2013, Dkt. No. 197). Mr. Crawford appealed the
ruling to the First Circuit, which dismissed the appeal for lack
of jurisdiction in light of my indication that I would give the
ruling further consideration here in connection with the appeal
of the bankruptcy court’s final fee award. See In re Wolverine,
No. 13-1554 (Judgment, 1st Cir. June 20, 2014).
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However, Rule 60(a) does not require a court to correct a
clerical error, and instead vests courts with discretion in
deciding whether to do so, through its use of the permissive
“may” rather than “shall.”

Fed. R. Civ. P. 60(a); see Diaz v.

Jiten Hotel Mgmt., Inc., 741 F.3d 170, 174-75, 176 (1st Cir.
2013) (district courts have “narrowly circumscribed authority”
and are “free to correct such mistakes”).

I find and conclude

Mr. Crawford effectively waived his right to challenge the one
dollar arithmetic error by failing to raise the issue within a
reasonable time.

See Crawford, Civ. Action No. 07-10279-DPW (D.

Mass.) (Memo. & Order, Mar. 29, 2013, Dkt. No. 197).

I will not

relieve him of his obligation to track calculations before
paying an award when he has slept on his right to do so for an
extended time.

Finality in a case, especially one such as this,

has its own value.
V. CONCLUSION
For the reasons set forth more fully in Section III, I
AFFIRM the decision of the bankruptcy court regarding
compensation, except insofar as it approved the requested costs
for deposition transcripts of Mr. Lowey and Mr. Georgiou in the

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Crawford litigation, accordingly I ORDER the award decreased in
the amount of $696.15.
For the reasons set forth more fully in Section IV, I have
DENIED Mr. Crawford’s unreasonably belated motion to correct a
one dollar arithmetic error as one in which Mr. Crawford may be
deemed to have acquiesced.

/s/ Douglas P. Woodlock
DOUGLAS P. WOODLOCK
UNITED STATES DISTRICT

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