Mandel v. Mastrogiovanni Schorch and Mersky et al
Filing
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MEMORANDUM OPINION ON APPEAL FROM BANKRUPTCY COURT. IT IS THEREFORE ORDERED that the bankruptcy court's March 28, 2012 Order Regarding the Debtor's Objections to Claim Nos. 27 and 28 is AFFIRMED. Signed by Judge Ron Clark on 3/31/2017. (baf, )
**NOT FOR PRINTED PUBLICATION**
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
IN RE:
EDWARD MANDEL
Debtor.
____________________________________
EDWARD MANDEL,
Appellant,
v.
MASTROGIOVANNI SCHORSCH &
MERSKY, et al.,
Appellees.
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CIVIL ACTION No. 4:12-CV-313
JUDGE RON CLARK
VSL
MEMORANDUM OPINION ON APPEAL FROM BANKRUPTCY COURT
Appellant Edward Mandel (debtor) appeals the bankruptcy court’s March 28, 2012 Order
Regarding the Debtor’s Objections to Claim Nos. 27 and 28 (the “Claim Allowance Order”), in
which the bankruptcy court allowed Rosa Orenstein (“Orenstein”) a claim in the amount of
$315,553.00 and allowed Mastrogiovanni, Schorsch, and Mersky, P.C. (“MSM”) a claim in the
amount of $155,517.00.
Previously, this court dismissed this appeal for Mandel’s lack of standing. Mandel
appealed this court’s dismissal. The Fifth Circuit reversed and remanded, ordering this court to
consider the appeal on the merits and holding that Mandel has standing because the debt that is the
subject of the Claim Allowance Order has not yet been discharged.1
The court affirms the bankruptcy court’s ruling.
1
The dischargeability proceeding is currently pending before the bankruptcy court.
1
I.
BACKGROUND
The underlying facts stem from litigation surrounding the founding and dissolution of
White Nile, an internet search engine start-up, begun by Steven Thrasher, Mandel, and Jason
Coleman (“White Nile litigation”). The court has stated the underlying facts in detail in a previous
Memorandum Opinion regarding Mandel’s objections to the claims of Steven Thrasher, Jason
Coleman, and White Nile. See In re Mandel, No. 4:15-cv-715, 2006 WL 7374428 (E.D. Tex. Dec.
20, 2016). Relevant to this appeal are facts surrounding the dispute over the appointment of, and
the fees awarded to, Rosa Orenstein, as Receiver for White Nile, and Rosa Orenstein’s retention
of MSM as independent counsel, both in the White Nile litigation.
On November 1, 2008, when the litigation between Mandel and Thrasher, Coleman, and
White Nile was in state court, the state court appointed Orenstein as receiver for White Nile.
Mandel, who asserts an interest in White Nile, entered into an agreed Order to pay 52.5% of
Orenstein’s fees. This Order provided Orenstein with the authority, subject to further order of the
court, to (1) “direct and control White Nile’s participation in this litigation”; (2) “take actual
possession of all White Nile’s books and records, including but not limited to all files of White
Nile’s current and prior counsel in this litigation, and all bank accounts of White Nile”; and (3)
“take constructive possession of all of White Nile’s other property.”2 Nov. 2008 Order Appointing
Receiver, Ex. 48, at p. 1.3 The November 2008 Order also stated that Orenstein had “no authority
to retain independent counsel, consultants, experts, or professionals without leave of court after
notice to all parties and hearing.” Nov. 2008 Order Appointing Receiver, Ex. 48, at p. 2.
2
This Order was signed by Judge Mary Murphy.
3
All exhibits referenced in this Order are exhibits that were admitted by the bankruptcy
court at its trial on Claims Nos. 27 and 28.
2
On May 29, 2009, the state court entered a second Order Appointing Receiver, again
providing Orenstein with the power to direct and control White Nile’s participation in litigation,
take actual possession of White Nile’s records, and take constructive possession of all White Nile’s
other property.4 May 2009 Order Appointing Receiver, Ex. 49, at pp. 1–2. Unlike the November
2008 Order, the May 2009 Order did not include a provision prohibiting Orenstein from retaining
independent counsel.
On September 15, 2009, the state court entered an Order approving
Orenstein’s request to designate MSM as independent counsel and approving payment to both
Orenstein and MSM.
Payment Order, Ex. 50. Among other things, the court found that
Orenstein’s “determination that she required the ongoing services of independent counsel was
appropriate and within her authority” and that Orenstein’s engagement of independent counsel was
“in compliance with the Texas Rules of Professional Conduct.” Payment Order, Ex. 50, at p. 2.
The Payment Order also designated MSM as Orenstein’s independent counsel and provided that
Mandel would pay 52.5% of MSM’s and Orenstein’s fees and that Thrasher would pay 47.5% of
their fees. The state court further approved Orenstein’s and MSM’s fees up to September 9, 2009,
specifically finding their fees to be fair, reasonable, and necessary. Payment Order, Ex. 50.
Mandel made several payments to Orenstein and MSM following the September 15 Order
but eventually claimed to be unable to pay his portion of all of their fees. Orenstein continued to
conduct discovery regarding Mandel’s claim pursuant to state court orders.
On January 25, 2010, Mandel filed a petition for relief under Chapter 11 of the Bankruptcy
Subsequently, Orenstein entered into a settlement agreement regarding Thrasher’s
Code.
obligation to pay 47.5% of her reasonable fees and expenses, under which she received a settlement
payment in the total amount of $380,000. Orenstein used a portion of that payment to pay the law
4
This Order was signed by Judge Eric V. Moye.
3
firms of Hunton & Williams, L.L.P. and Hankinson Levinger. L.L.P. for the legal assistance that
they provided to her as receiver.
Orenstein filed a proof of claim for $332,160.61, seeking allowance of her fees and
expenses through December 2, 2011. MSM filed a proof of claim for $163,701.75, seeking
allowance of their fees and expenses for providing Orenstein legal assistance when she was
receiver through December 2, 2011.
Mandel asserted numerous objections to Orenstein’s and MSM’s claims. On December 2,
2011, the bankruptcy court orally overruled Mandel’s objections, reasoning:
(a) [Mandel] argued that Orenstein did not have the right to retain counsel
to represent her, specifically, Hunton & Williams and Hankinson Levinger. The
Court found, as a matter of fact and law, that Orenstein has the authority to hire
counsel to represent her in the performance of her duty as a receiver. The Court
further found that this authority is not unfettered inasmuch as the state court orders
appointing Orenstein only require the Debtor to pay her reasonable and necessary
expenses.
(b) [Mandel] argued that Orenstein is not entitled to recover fees spent on
her efforts to collect her fees and expenses from [Mandel]. The state court,
however, instructed Orenstein to investigate [Mandel’s] claim that he lacked the
financial ability to comply with the orders appointing the receiver. Orenstein and
her counsel are entitled to recover fees and expenses for so-called “collection
efforts” since those efforts were co-extensive with the state courts orders regarding
the investigation of the Debtor’s financial ability to comply with the state court’s
orders.
(c) [Mandel] asserted that he should be excused from payments to
Orenstein, because this Court entered an order that contradicts his asserted interest
in White Nile, and the state court entered an order approving a settlement between
Thrasher and White Nile. The Court overruled this objection to the claims of
Orenstein and MSM, because [Mandel’s] obligation to Orenstein and her counsel
is not dependent on his interest in White Nile, if any. [Mandel’s] obligation to pay
Orenstein’s fees and expenses arises out of the agreement of the parties and the
orders of the state court.
(d) [Mandel] asserted that this Court, having excused Orenstein from the
trial on [Mandel’s] objections to the claims of Coleman, Thrasher and White Nile,
relieved Orenstein from her duties as receiver and modified the state court orders
appointing her. [Mandel], however, misinterprets this court’s order. This court
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was simply allowing Orenstein to not appear at trial without violating her fiduciary
duties when the claims she was asserting were duplicative of the derivative claims
asserted by Thrasher for White Nile, and there was a significant risk of nonpayment
to her and her counsel.
(e) [Mandel] argued that Orenstein’s fees should be discounted, because she
“lost twelve or thirteen” matters,” [sic] according to [Mandel’s] counsel. The Court
overruled that objection to the extent it related solely to the number of losing
matters. The fact that Orenstein did not ultimately prevail on all of her legal
challenges does not mean that she cannot recover fees and expenses, but goes,
instead, to the reasonableness of her fees and expenses.
(f) [Mandel] argued that Orenstein should not recover any fees or expenses
in connection with her participation in [Mandel’s] bankruptcy case. The Court
overruled this objection to the claims of Orenstein and MSM, because the orders
appointing Orenstein as receiver authorize her to direct and control White Nile’s
participation in this case in order to protect White Nile’s claims against this estate.
Orenstein, in fact, participated in this case to protect White Nile’s claims against
this estate.
(g) Finally, [Mandel] argued that Orenstein is not entitled to be paid for her
fees and expenses incurred in her collection efforts in this Court. The Court
overruled this objection, in part. Orenstein’s right to be paid is contractual in
nature. Under Texas state law, Orenstein is entitled to be paid for her collection
efforts due to [Mandel’s] breach of his agreement to pay her fees. Orenstein,
however, is not entitled to be paid for her own time spent in this Court seeking to
collect her fees from [Mandel’s] estate.
In re Mandel, No. 10-40219 (Bankr. E.D. Tex. Mar. 28, 2012) (findings of fact and conclusions
of law re: Mandel’s objections to claim nos. 27 and 28). After announcing this ruling, the parties
introduced evidence and argument regarding Mandel’s remaining objections to the claims of
Orenstein and MSM that: (1) Orenstein and MSM filed their claims in an estimated amount as of
the petition date and failed to attach sufficient documentation, and therefore, their claims lacked
prima facie validity; and (2) attorney’s fees that are the subject of the claims were unreasonable
and to some extent, unnecessary.
Ultimately, the bankruptcy court found that Orenstein and MSM did not take frivolous or
unreasonable legal positions in their non-bankruptcy litigation with Mandel, but did occasionally
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make inexplicable choices in the bankruptcy case, and found that Orenstein was entitled to an
allowed unsecured claim in the amount of $315,553.00 for her fair, reasonable, and necessary
receiver’s fees and expenses and that MSM was entitled to an allowed unsecured claim in the total
amount of $155,517.00 for MSM’s fair, reasonable, and necessary attorney’s fees.
II.
ISSUES PRESENTED
Mandel raises the following issues on appeal:
(1) whether the bankruptcy court committed reversible error in concluding that the
Receivership Orders authorized Orenstein to represent White Nile in Mandel’s bankruptcy case,
such that Orenstein and MSM could be compensated by Mandel for such services;
(2) whether the bankruptcy court committed reversible error in concluding that Orenstein
and MSM were acting within the scope of the Receivership Orders so as to be entitled to
compensation thereunder;
(3) whether the bankruptcy court committed reversible error in awarding Orenstein
compensation for services that she performed as an attorney, since the Receivership Orders did not
authorize her to provide such services;
(4) whether the bankruptcy court committed reversible error in awarding Orenstein
compensation for service she performed as legal counsel, as well as the legal services of Hunton
& Williams, L.L.P. and Hankinson Levinger, L.L.P., since the Receivership Orders did not
authorize the retention of these attorneys or of Orenstein as legal counsel;
(5) whether the bankruptcy court, applying section 38.001 of the Texas Civil Practice and
Remedies Code, committed reversible error in awarding fees and expenses to Orenstein and MSM
for multiple proceedings in which they lost; and
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(6) whether the bankruptcy court committed reversible error in concluding that pre-petition
unsecured creditors, such as Orenstein and MSM, are entitled to post-petition attorney’s fees and
expenses under the Bankruptcy Code.
III.
STANDARD OF REVIEW
District courts review bankruptcy rulings and decisions under the same standards employed
by federal courts of appeal: a bankruptcy court’s findings of fact are reviewed for clear error, and
its conclusions of law are reviewed de novo. In re Nat’l Gypsum Co., 208 F.3d 498, 504 (5th Cir.
2000). A finding of fact is clearly erroneous only if, based on all of the evidence, the district court
is left “with the definite and firm conviction that a mistake has been made.” Robertson v. Dennis,
330 F.3d 396, 401 (5th Cir. 2003). “This standard plainly does not entitle a reviewing court to
reverse the finding of the trier of fact simply because it is convinced that it would have decided
the case differently.” Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573 (1985). “Where
there are two permissible views of the evidence, the factfinder’s choice between them cannot be
clearly erroneous.” In re Renaissance Hosp. Grand Prairie Inc., 713 F.3d 285, 294 (5th Cir. 2013).
Due regard must be given to the opportunity of the bankruptcy court to judge the credibility of the
witnesses. FED. R. BANKR. P. 8013; Matter of Herby’s Foods, Inc., 2 F.3d 128, 131 (1993).
IV.
A.
ANALYSIS
The bankruptcy court did not err in concluding that the Receivership Orders
authorized Orenstein to represent White Nile in Mandel’s bankruptcy case.
Mandel first argues on appeal that the bankruptcy court committed reversible error in
concluding that the Receivership Orders authorized Orenstein to represent White Nile in Mandel’s
bankruptcy case, such that Orenstein and MSM could be compensated by Mandel for such
services. “A receiver has only that authority conferred by the Court’s order appointing [her].”
Clay Expl., Inc. v. Santa Rosa Operating, LLC, 442 S.W.3d 795, 800 (Tex. App.—Houston [14th
7
Dist.] 2014, no pet.) (quoting Ex Parte Hodges, 625 S.W.2d 304, 306 (Tex. 1981)). Receivership
orders, “like other written instruments, are to be construed as a whole toward the end of
harmonizing and giving effect to all the court has written.” Clay Expl., Inc., 442 S.W.3d at 800
(quoting Constance v. Constance, 544 S.W.2d 659, 660 (Tex. 1976)).
The Receivership Orders specifically authorized Orenstein to “direct and control White
Nile’s participation in this litigation.” Nov. 2008 Order Appointing Receiver, Ex. 48, at p. 1; May
2008 Order Appointing Receiver, Ex. 49, at p. 1. “The ordinary purpose of a receivership is to
take full charge and possession of property involved in litigation, in order to protect, defend and
preserve it, impound and hold it subject to the order of the court, or, if necessary, to administer or
manage it, ‘upon a principle of justice for the benefit of all concerned,’ pending final determination
of the litigation and the rights of the parties.” Staggs v. Pena, 133 S.W.2d 212, 214 (Tex. Civ.
App. 1939, no writ) (internal citation omitted).
In this case, Orenstein was charged with directing and controlling White Nile’s
participation in litigation of claims against White Nile in order to protect, defend, and preserve the
property of White Nile. After Mandel voluntarily filed for bankruptcy and removed the White
Nile litigation to the Bankruptcy Court, Orenstein’s position as Receiver remained important as
she worked to preserve White Nile’s claims against Mandel’s estate, as Mandel was one of the
founders and shareholders of White Nile. The bankruptcy court did not err in concluding that the
Receivership Orders authorized Orenstein to represent White Nile in Mandel’s bankruptcy case.
Mandel’s first point of error on appeal is overruled.
B.
The bankruptcy court did not err in concluding that Orenstein and MSM were acting
within the scope of the Receivership Orders.
Mandel’s second issue on appeal is that the bankruptcy court committed reversible error in
concluding that Orenstein and MSM were acting within the scope of the Receivership Orders so
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as to be entitled to compensation thereunder. Mandel does not brief this issue separate and apart
from his first issue on appeal. This issue is therefore waived. See Adams v. Unione Mediterranea
Di Scurta, 364 F.3d 646, 653 (5th Cir. 2004). Mandel’s appeal on this ground is overruled as
waived, and in the alternative, it is denied for the reasons stated above.
C.
The bankruptcy court did not err in awarding Orenstein compensation for services
that she performed as an attorney.
Mandel’s next argument on appeal is that the bankruptcy court committed reversible error
in awarding Orenstein compensation for services that she performed as an attorney, since the
Receivership Orders did not authorize her to provide such services. Specifically, Mandel takes
issue with the bankruptcy court allowing Orenstein to recover attorney’s fees and costs for her
efforts to collect payment owed by Mandel under the Receivership Orders and Payment Order.5
When Mandel claimed to be unable to pay the fees owed to Orenstein, the state court
ordered Orenstein and Mandel to engage in discovery related to Mandel’s alleged inability to pay
Orenstein’s fees. Dec. 1 Trans., Dkt. # 22, at p. 146. Multiple parties, the undersigned, and Judge
Rhoades, the learned bankruptcy court Judge in this matter, have commented on Mandel’s
litigiousness, throughout the eight long years of Mandel’s bankruptcy litigation, and all of the
related adversary proceedings, state court proceedings, federal district court proceedings, and
endless appeals of nearly every outcome in nearly every court. Mandel’s resistance to Orenstein’s
request for information supporting his claim that he could no longer afford to pay his portion of
Mandel’s appellant brief is not a model of clarity. The list of issues presented at the
beginning of his brief does not correspond with the headings throughout his brief, and several parts
of his briefing seem unrelated to his list of issues presented. The court has expended numerous
resources attempting to piece together Mandel’s brief. To the extent that Mandel’s argument that
Orenstein is not entitled to attorney fees is not actually an argument that Orenstein is not entitled
to attorney fees for her collection efforts, this issue on appeal is waived. See Adams v. Unione
Mediterranea Di Scurta, 364 F.3d 646, 653 (5th Cir. 2004).
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her fees and expenses forced both Orenstein and the state court to spend many hours enforcing
Orenstein’s request for payment.
Orenstein is a highly experienced bankruptcy attorney. There is some evidence in the
record that she viewed questions and tasks both as a bankruptcy attorney and as Receiver for White
Nile. For example, at the bankruptcy court’s trial on this matter, counsel for Mandel asked
Orenstein, “What amount of the $250,000 you are seeking today are for your services as Receiver
and what amount of it is for your’s or your law firm’s services as attorneys?” Dec. 1 Trans., Dkt.
# 22, at p. 81. Orenstein responded, “It’s very hard to divide those up because my brain doesn’t
fully—I’m reading this document only as a Receiver. My legal training comes in. If I’m reading
things, I’m analyzing them as a lawyer, as well.” Dec. 1 Trans., Dkt. # 22, at p. 81. Mandel points
to no time entry, and the court can find none, in which Orenstein attempts to recover fees solely in
her capacity as an attorney for herself, unrelated to her capacity as Receiver. Orenstein’s
experience as an attorney was necessary to her performance as Receiver in this matter, given the
state court’s orders for Orenstein to pursue Mandel’s assertions that he could not afford payment,
given Mandel’s litigiousness, and given the complexity of the legal and factual issues in this case.
Orenstein is entitled to fees to the extent that they are co-extensive with court-ordered and
necessary collection efforts for payments owed under the Receiver Orders and Payment Order.
Mandel’s appeal on this issue is overruled.
D.
The bankruptcy court did not err in awarding compensation to Orenstein for her own
legal services as well as the legal services of Hunton & Williams, L.L.P. and
Hankinson Levinger, L.L.P.
Next, Mandel argues that the bankruptcy court committed reversible error in awarding
Orenstein compensation for service she performed as the legal counsel, as well as the legal services
of Hunton & Williams, L.L.P. and Hankinson Levinger, L.L.P., since the Receivership Orders did
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not authorize the retention of these attorneys or of Orenstein as legal counsel. For the reasons
outlined above, any argument related to Orenstein collecting fees related to her collection efforts
for fees owed under the Receiver or Payment Orders is overruled.
The bankruptcy court already found that Orenstein and MSM “occasionally brought
multiple lawyers to hearings in the [bankruptcy court] for no obvious reason.” In re Mandel, No.
10-40219 (Bankr. E.D. Tex. Mar. 28, 2012) (findings of fact and conclusions of law re: Mandel’s
objections to claim nos. 27 and 28). As a result of Orenstein and MSM bringing extra attorneys
to proceedings in the bankruptcy court, the bankruptcy court reduced the claim that Orenstein was
seeking from $332,160.61 to $315,553.00 and reduced the claim that MSM was seeking from
$163,701.75 to $155,517.00. In re Mandel, No. 10-40219 (Bankr. E.D. Tex. Mar. 28, 2012)
(findings of fact and conclusions of law re: Mandel’s objections to claim nos. 27 and 28). The
bankruptcy court accounted for the unauthorized retention of superfluous attorneys in determining
the total amount of the claim allowed. Mandel’s argument on this issue is overruled.
E.
The bankruptcy court did not commit reversible error in awarding fees and expenses
to Orenstein and MSM for the proceedings in which they lost.
Next, Mandel argues that the bankruptcy court committed reversible error in applying
section 38.001 of the Texas Civil Practice and Remedies Code to award fees and expenses to
Orenstein and MSM for multiple proceedings in which they lost. The bankruptcy court did not
cite to or reference section 38.001 of the Texas Civil Practice and Remedies Code in the Findings
of Fact and Conclusions of Law. In re Mandel, No. 10-40219 (Bankr. E.D. Tex. Mar. 28, 2012)
(findings of fact and conclusions of law re: Mandel’s objections to claim nos. 27 and 28). Rather,
the bankruptcy court awarded Orenstein fees under Bergeron v. Sessions, 561 S.W.2d 551, 554
(Tex. Civ. App.—Dallas 1997, writ ref’d n.r.e.), and the bankruptcy court awarded both MSM and
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Orenstein only fees that were “reasonable and necessary,” as outlined in the Payment Order.
Payment Order, Ex. 50.
1.
Orenstein’s Compensation
A receiver’s compensation is to be determined by the overall value of her services, not by
the receiver’s win/loss record. Bergeron, 561 S.W.2d at 552. The “controlling” factors in
determining this value are:
(1)
the nature, extent and value of the administered estate;
(2)
the complexity and difficulty of the work;
(3)
the time spent;
(4)
the knowledge, experience, labor, and skill required of, or devoted by the
receiver;
(5)
the diligence and thoroughness displayed; and
(6)
the results accomplished.
Id. at 554–55.
a.
The nature, extent, and value of the administered estate
Orenstein was appointed Receiver to protect the assets of White Nile. White Nile’s most
valuable asset was its intellectual property, the ownership of which was highly litigated due to its
potentially high future rate of return. This factor weighs in favor of a higher value of compensation
for Orenstein’s services.
b.
The complexity and difficulty of the work
Although Orenstein was appointed Receiver in a state court proceeding, Mandel
subsequently removed the case to the bankruptcy court. The bankruptcy proceedings surrounding
White Nile spun off several adversary proceedings, several appeals, challenges before the patent
office, a remand to state court, and appeals in state court, among other things. The vast proceedings
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and issues before these courts show the complexity and difficulty of services as Receiver for White
Nile. This factor weighs in favor of a higher value of compensation for the Receiver’s services.
c.
The time spent
Mandel again objects vaguely and broadly to the time that Orenstein spent as Receiver in
this case. However, Mandel objects to no specific time entries before this court and objected to
no specific time entries before the bankruptcy court. As noted above, Orenstein spent a tremendous
amount of time as Receiver in this case, due to the litigiousness of the parties (primarily Mandel)
and the highly contentious issues in this case. This factor weighs in favor of a higher value of
compensation for Orenstein.
d.
The knowledge, experience, labor, and skill required of, or devoted by
Orenstein
Orenstein is a highly experienced attorney, as discussed above, and her experience was
required in light of the complexity of the issues in this case. This factor weighs in favor of a higher
value of compensation for Orenstein.
e.
The diligence and thoroughness displayed
Orenstein was thorough. The bankruptcy court already accounted for the times in which
Orenstein was overly thorough by not agreeing to certain orders that may have saved the estate
money, or by bringing too many counsel to certain hearings. This factor weighs slightly in favor
of a higher value of compensation for Orenstein.
f.
The results accomplished
As Mandel notes, Orenstein did not win every matter that she pursued on behalf of White
Nile. However, this is but one of the six controlling factors that the court must consider. Moreover,
her arguments and positions on the issues which she lost were neither frivolous nor a waste of
resources. Upon reviewing the Bergeron factors, the court finds that the bankruptcy court did not
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err in holding that Orenstein is entitled to an allowed unsecured claim in the amount of $315,553.00
for her fair, reasonable, and necessary receiver’s fees and expenses.
2.
MSM’s Compensation
Likewise, the bankruptcy court did not base its allowance of MSM’s claim for fees on
section 38.001 of the Texas Civil Practice and Remedies Code. The bankruptcy court correctly
noted that Orenstein’s authority to retain outside counsel such as MSM was not unfettered, as
previous state court orders only required Mandel to pay Orenstein and MSM “reasonable and
necessary” expenses. See Nov. 2008 Order Appointing Receiver, Ex. 48; May 2009 Order
Appointing Receiver, Ex. 49; Payment Order, Ex. 50. The bankruptcy court reduced MSM’s claim
by approximately $8,000, finding that some of MSM’s claim fees were not “fair, reasonable, and
necessary.” Mandel’s argument that the bankruptcy court erroneously awarded fees under section
38.001 of the Texas Civil Practice and Remedies Code is overruled, as it is clear from the
bankruptcy court’s Findings of Fact and Conclusions of Law that section 38.001 was not the basis
for the bankruptcy court’s allowance of either Orenstein’s or MSM’s claim.
F.
The bankruptcy court did not err in concluding that Orenstein and MSM are entitled
to post-petition attorney’s fees and expenses.
Mandel’s final issue on appeal is whether the bankruptcy court committed reversible error
in concluding that pre-petition unsecured creditors, such as Orenstein and MSM, are entitled to
post-petition attorney’s fees and expenses under the Bankruptcy Code. “Obligations which arise
out of [pre-petition] contracts, but are due [post-petition], are [pre-petition] debts.” In re E. Tex.
Steel Facilities, Inc., 117 B.R. 235, 242–43 (Bankr. N.D. Tex. 1990).
The Receivership Orders were agreed orders between Mandel, or Mandel’s attorney and
representatives, White Nile or its representatives, and Thrasher, or Thrasher’s attorney and
representatives. Under Texas law, agreed orders are treated as contracts between the parties to the
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agreed order. See, e.g., In re Thornburg, 277 B.R. 719, 726 (Bankr. E.D. Tex. 2002); Keys v.
Litton Loan Serv., L.P., No. 14-07-00809, 2009 WL 4022178, at *2–3 (Tex. App.—Houston [14th
Dist.] 2009, no pet.); West v. Brenntag Sw., Inc., 168 S.W.3d 327, 337 (Tex. App.—Texarkana
2005, pet. denied). Mandel agreed to pay 52.5% of Orenstein’s fees. Nov. 2008 Order Appointing
Receiver, Ex. 48; May 2008 Order Appointing Receiver, Ex. 49.
Because Mandel’s obligation to pay Orenstein’s and MSM’s fees arose from a pre-petition
contract, they are properly considered pre-petition fees and expenses. The bankruptcy court
therefore awarded only pre-petition fees and expenses. Mandel’s appeal on this ground is
overruled.
V.
CONCLUSION
IT IS THEREFORE ORDERED that the bankruptcy court’s March 28, 2012 Order
Regarding the Debtor’s Objections to Claim Nos. 27 and 28 is AFFIRMED.
So ORDERED and SIGNED this 31st day of March, 2017.
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