In Re: DBDR LIMITED PARTNERSHIP, Debtor.
UNITED STATES TRUSTEE, Appellee. DBDR LIMITED PARTNERSHIP, Appellant, Bankr. No. 11-41177-JDP.
MEMORANDUM DECISION AND ORDER
EDWARD J. LODGE, District Judge.
Appellant's attorney, Randal J. French of the law firm, Bauer & French, appeals the Bankruptcy Court's order denying his application for employment. Debtor DBDR Limited Partnership ("Debtor" or "DBDR"), who had filed for bankruptcy under Chapter 11 of the Code, sought to employ Mr. French and had paid him a retainer of $10, 000 prior to filing. The application for approval of employment characterized the retainer as an "advance payment retainer" from the Debtor. However, the bankruptcy court found that the advance payment retainer was really a security retainer, and therefore, was property of the bankruptcy estate. The court's finding required that French seek approval and authorization pursuant to § 330 of the Code before he could draw against it to pay his fees. Because the employment application did not contemplate that the retainer would be reviewed under § 330, the bankruptcy court denied the application.
The Trustee raised two jurisdictional arguments on appeal, contending that this Court lacks jurisdiction because DBDR failed to comply with Rule 8002. This Court concurs, and will dismiss the appeal for lack of jurisdiction.
Mr. French, on behalf of chapter 11 debtor in possession DBDR, filed on July 15, 2011, an application to employ Bauer & French to represent DBDR in its chapter 11 bankruptcy case. The employment application disclosed DBDR agreed to pay $225 per hour for all services rendered; that DBDR had already paid $10, 000, of which $8, 961 was an advance payment retainer; that after Bauer & French had applied the retainer, DBDR would have no further right to the amounts paid; but that Bauer & French would credit the retainer against all time expended and would account for all time and expenses incurred. The employment application did not seek employment under any specific provision of the Bankruptcy Code.
The United States Trustee objected to the application, arguing that DBDR retained an interest in the unearned portion of the retainer, and that interest was property of the bankruptcy estate under § 541. Because the fee agreement would allow the firm to receive compensation from the bankruptcy estate without review under § 330(a), the Trustee requested that the employment application be denied.
On October 21, 2012, the bankruptcy court held a hearing on the application to employ Bauer & French, the firm's fee application, and the Trustee's motion to disgorge the $8, 961 retainer. On December 14, 2012, the bankruptcy court issued an oral ruling, finding that the fee agreement was, in actuality, a disguised security retainer and the unearned portion at the time the petition was filed became property of DBDR's bankruptcy estate. The bankruptcy court held that, notwithstanding the language of the fee agreement, when the retainer was paid the fees had not been earned, and would not be earned until counsel provided the post-petition services in the Chapter 11 case. The bankruptcy court further held that the Code required prior court approval, and that the retention agreement was inappropriate in the context of the case. The bankruptcy court denied the application for employment.
The oral ruling of December 14, 2012, constituted the order appealed from. The initial time for filing a notice of appeal was fourteen days, and expired December 28, 2012. DBDR timely filed a motion for extension on December 24, 2012. The bankruptcy court granted the motion, authorizing the filing of a notice of appeal on or before January 18, 2013. On January 18, 2013, DBDR filed a second motion to extend, which motion was granted the same date, purportedly extending the appeal deadline to February 8, 2013. The notice of appeal was filed on January 25, 2013.
In addition to arguing the bankruptcy court's decision should be affirmed on the merits, the Trustee argues that the appeal should be dismissed as untimely, because the bankruptcy court had no authority to grant a second extension based on the motion filed by DBDR and the court's findings granting the second motion.
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. § 157(b)(2)(A) and § 1334(b). This Court has jurisdiction over final orders of the bankruptcy court. 28 U.S.C. § 158(a). The order denying Mr. French's application for employment, however, was not a final order, but was interlocutory. Sec. Pac. Bank Washington v. Steinberg ( In re Westwood Shake & Shingle, Inc. ), 971 F.2d 387, 389 (9th Cir. 1992) (when the "underlying bankruptcy court order involves the appointment or disqualification of counsel, courts have uniformly found that such orders are interlocutory.").
Appellant did not file the requisite motion for leave to appeal. See Rule 8003(a) (outlining the requirements of a motion for leave to appeal). But, in the absence of the required motion, and presuming the notice of appeal was timely, the Court may grant leave to appeal and consider the notice as a motion for leave to appeal. Fed.R.Bankr.P. 8003(c); 28 U.S.C. § 158(a)(3) (the district court has jurisdiction to hear appeals from interlocutory orders and decrees with leave of the court). The Court now turns to Trustee's argument that the notice of appeal was not timely. A finding of untimeliness would preclude the Court from exercising its discretion to hear the appeal, because it would lack jurisdiction.
The Trustee argues that the notice of appeal was untimely because DBDR sought not one, but two, extensions of the time period, which Trustee argues is not permissible under Rule 8002(c) absent a finding of excusable neglect. Rule 8002(a) prescribes a fourteen-day period from the date of entry of the order appealed from. Rule 8002's deadline is jurisdictional, and a failure to file a timely notice of appeal bars appellate review. Wiersma v. Bank of the West ( In re Wiersma ), 483 F.3d 933, 938 (9th Cir. ...