KASURI BYCK, LLC et al v. OFFICE OF THE UNITED STATES TRUSTEE

Filing 6

OPINION filed. Signed by Judge Anne E. Thompson on 6/27/2017. (mmh)

RECEIVED

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
lnre:

JUN 2 7 2017,
AT 8:30
WILLIAM T. WALSH
CLERK

SILICON ALLEY GROUP INC.,
On Appeal from an Order for
the United States Bankruptcy
Court, District of New Jersey

Debtor.

KASURI BYCK, LLC,
Appellant,
Civ. No. 16.-8825

v.
OPINION
OFFICE OF THE UNITED STATES
TRUSTEE,
A

ellee.

THOMPSON, U.S.D.J.
This matter has come before the Court on an appeal brought by Kasuri Byck, LLC
("Appellant'') of an Order issued by the Bankruptcy Court on November 23, 2016 (the "Order").
(ECF Nos. 1, 4). The Order required Appellant to disgorge all fees received in connection with
its representation of Silicon Alley Group, Inc. ("Debtor") in the above-referenced case in the
Bankruptcy Court. (ECF No. 1-1). The Office of the United States Trustee ("Appellee")
opposes Appellant's appeal. (ECF No. 5). The Court has decided the appeal based on the
submissions of the parties and without oral argument pursuant to Local-Civil Rule 78.l(b). For
the reasons below, the November 23, 2016 Order of the Bankruptcy Court will be affirmed.

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BACKGROUND
The Court assumes the parties' familiarity with the facts of this case and only summarizes
here those facts pertinent to the Court's Opinion. On April 28, 2016, Harrison Byck, Esq.-..an
attorney of Appellant's firm-.filed a chapter 11 bankruptcy petition for Debtor. (In re Silicon

Alley Group, Inc., Case No. 16-18244 CMG, ECF No. 1). On June 16, 2016, Debtor filed an
application to employ Appellant as Counsel for Debtor. (Case No. 16-18244 CMG, ECF No.
17). On August 24, 2016, the Bankruptcy Court later granted that application retroactive to June
16, 2016. (Case No. 16-18244 CMG, ECF No. 52). However, while Debtor's application to
employ Appellant was pending, Appellant moved to withdraw as counsel. (Case No. 16-18244
CMG, ECF No. 35). Appellant's motion to withdraw was granted. (Case No. 16-18244 CMG,
ECF No. 70). The Bankruptcy Court also granted Debtor's application to hire new counsel.
(Case No. 16-18244 CMG, ECF No. 48).
On October 4, 2016 Appellant filed a fee application requesting a fee award of $7,187.20
and reimbursement of$1,717.00 in expenses. (Case No. 16-18244 CMG, ECF No. 93). On
October 5, 2016, Debtor, through new counsel, moved the Bankruptcy Court for an order
directing, inter alia, the return of all moneys paid to Appellant. (Case No. 16-18244 CMG, ECF
No. 94). On October 21, 2016, the United States Trustee also objected to Appellant's fee
application. (Case No. 16-18244 CMG, ECF No. 114).
On November 15, 2016, the Bankruptcy Court held a hearing on Appellant's fee
application. (Case No. 16-18244 CMG, ECF Entry Dated 11/15/16). At the hearing, the
Bankruptcy Court found that, for a number of reasons, Appellant had not earned a fee in this
case. The Bankruptcy Court determined that Appellant would be required to disgorge all fees
received in connection with its representation of Debtor.

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On November 23, 2016, the Bankruptcy Court entered an order requiring Appellant to
disgorge "all fees received for representation of Debtor." (Case No. 16-18244 CMG, ECF No.
120). On November 29, 2016, Appellant appealed from the Bankruptcy Court's November 23,
2016 Order. (ECF No. 1). Appellant filed his briefin this Court on February 27, 2017 (ECF No.
4), and Appellee filed a response on March 27, 2017 (ECF No. 5). This appeal is presently
before the Court.
JURISDICTION AND LEGAL STANDARD

District courts have jurisdiction over appeals from decisions of bankruptcy judges under
28 U.S.C. § 158(a). Bankruptcy Rule 8013 states that a district court ''may affirm, modify, or
reverse a bankruptcy judge's judgment, order, or decree or remand with instructions for further
proceedings." Fed. R. Bank. P. 8013. The district court "review[s] the bankruptcy court's legal
determinations de novo, its factual findings for clear error and its exercise of discretion for abuse
thereof/' In re Am. Pad & Paper Co., 478 F.3d 546, 551 (3d Cir. 2007); see also Fed. R. Bank.
P. 8013 (directing that "[f]indings of fact ... shall not be set aside unless clearly erroneous, and

due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of
witnesses.'}
DISCUSSION

Appellant appears to argue that the Bankruptcy Court erred in ordering that Appellant
disgorge all fees received in connection with its representation of Debtor in the case in
Bankruptcy Court. 1

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The Bankruptcy Court did not specify which statutory provision it based its decision on, nor is
Appellant's brief clear about which statute it bases its motion on. Nonetheless, the Court will
discuss both statutes cited in the proceedings in the Bankruptcy Court, 11 U.S.C. § 330 and 11
u.s.c. § 329.
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Under.11 U.S.C. § 330(a)(l)(A), a Court may award "reasonable compensation for
actual, necessary services" performed by an attorney in a Bankruptcy case. "In determining the
amount of reasonable compensation to be awarded ... the Court shall consider the nature, the
extent, and the value of such services, taking into account all relevant factors, including(A) the time spent on such services;
(B) the rates charged for such services;
(C) 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 under
this title;
(D) 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;
(E) with respect to a professional person, whether the person is board certified or
otherwise has demonstrated skill and experience in the bankruptcy field; and
(F) whether the compensation is reasonable based on the customary compensation
charged by comparably skilled practitioners in cases other than cases under this
title." 11 U.S.C. § 330(a)(3).
A Court cannot allow compensation for unnecessarily duplicative services or services
that were not "reasonably likely to benefit the debtor's estate or necessary to the administration
of the case." 11 U.S.C. 330(a)(4)(A). The language of§ 330 stating that the Court "may award"
reasonable compensation "imbues the Court with discretionary authority." Jn re Busy Beaver
Bldg. Centers, Inc., 19 F.3d 833, 841 (3d Cir. 1994).
Additionally, under 11 U .S.C. § 329(b), a Court may order the return of attorneys' fees
paid if such fees exceed the reasonable value of the services rendered. See 11 U.S.C. § 329(b).
"Pursuant to§ 329, courts have ordered attorneys to disgorge their fees for services they
rendered to their debtors-clients because such services were of no value." In re Vargas, 251 B.R.
157, 166-67 (Bankr. D.N.J. 2001) (citations omitted).

In this case, at the November 15th hearing, the Bankruptcy Court cited multiple instances
where Appellant's representation of debtor was inadequate or inappropriate. Specifically, the
Bankruptcy Court found that Appellant had failed to tum over client documents to Debtor's new

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counsel,2 and the Court stated, "That's not proper representation of your client. It's not a
professional way for an attorney to act." (Appendix p. 175 (Al 75), Tr. at 24:18-24:19). The
Bankruptcy Court also determined that Appellant had "completely dropped" the proverbial
"ball" by failing to timely oppose--or at the very least, failing to disclose a potential conflict of
interest and request an extension of time to oppose-..-a motion regarding Debtor's use of ca~h
collateral early on in the case. (Al 75-Al 76, 24:20-25:14). The Court further determined that
certain filings made by Appellant were incorrect or improper. (Al 76-Al 77, Tr. at 25:15-26:13).
Ultimately, the Court found that Appellant "did not contribute to any progress that was made in
this case." (Al 77, Tr. 26:14-26:16). As a result, the Bankruptcy Court found that no fee was
earned, and it ordered Appellant to disgorge all fees previously received for its representation of
Debtor. Having considered Appellant's arguments, this Court is not persuaded that the
Bankruptcy Court erred in making such a determination. Therefore, this Court will affirm the
November 23, 2016 Order of the Bankruptcy Court.

CONCLUSION
For the reasons stated above, the November 23, 2016 Order of the Bankruptcy Court will
be affirmed. An appropriate order will follow.

Isl Anne E. Thompson
ANNE E. THOMPSON, U.S.D.J.

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Appellant argued that it assumed that it needed the Court's permission to tum over client
documents to new counsel. However, as the Bankruptcy Court noted, Appellant never asked for
permission from the Bankruptcy Court to tum over these documents. (Al 75, Tr. at 24:8-24:19).
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