Restructuring

Contributed by Abigail Lerner
Finding out you missed an important deadline is the stuff nightmares are made of.  Even more so for attorneys, where letting a court imposed deadline pass without taking the requisite action may substantially hinder the rights of clients.  In In re ASR 2401 Fountainview, LLC, however, it wasn’t the rights of its clients that the attorneys for the debtors were concerned with when they missed a deadline; rather, their ability to get paid for their services was on the line. 
ASR Fountainview, LLC and ASR 2401 Fountainview, LP owned and operated an office building in Houston, Texas.  In September 2014, the entities filed chapter 11 cases with the bankruptcy court in the Southern District of Texas, and obtained authority to employ Okin & Adams LLP as their attorneys.  After filing their cases, the debtors proposed a chapter 11 plan, calling for the sale of the debtors’ office building, payment in full of a claim filed by JP Morgan, and reduced, deferred payments to other creditors.
Following a contested hearing, the court confirmed the debtors’ plan and entered an amended confirmation order on June 15, 2015.  The plan provided, among other things, that holders of professional fee claims subject to approval by the court would be paid in cash, in full, on the later of the effective date of the plan and promptly after bankruptcy court approval.  The plan further provided that final fee applications for any professional fee claim that was not approved as of the effective date must be filed within 30 days of the effective date.  The plan explicitly provided that failing to file an application for fees by the deadline would be a waiver of any such fees.
Okin & Adams filed their final fee application approximately 20 days beyond the 30 day deadline.  Okin & Adams sought allowance of approximately $205,000 in compensation for services rendered between the commencement date and entry of the amended confirmation order.  According to Okin & Adams, its failure to timely file its final fee application was the result of excusable neglect.  The firm explained that it had mistakenly calendared the date by which fee applications must be filed for 60 days after the plan effective date instead of 30 days.
JP Morgan, among others, objected to the fee application, asserting that it was not timely filed and, accordingly, the amounts claimed were waived.  Okin & Adams argued that JP Morgan lacked standing to object, since its claim had been paid in full.  Further, the law firm informed the court that to the extent resolution of the debtors’ pending claim objections resulted in insufficient funds to pay all claims the full distribution to which they were entitled under the plan, Okin & Adams was prepared to discount its fees to ensure that all claimants would receive their promised distributions.
In analyzing whether to grant Okin & Adams’ application, the court looked to Bankruptcy Rule 9006(b)(1), which allows a court to enlarge the time by which an action may be taken where the failure to act was the result of excusable neglect.  The court noted that in determining whether a party’s conduct resulted from excusable neglect, the court must take into account all relevant circumstances surrounding the failure.  This includes:  the danger of prejudice to the adverse parties, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, and whether the party acted in good faith.
As noted above, the debtors’ attorneys’ final fee application was filed no more than 20 days after the date required under the plan and, in light of Okin & Adams’ agreement to discount its fees to ensure that all claims were paid their full distribution, the court concluded that there was no prejudice to adverse parties from the late filing of the application.  Finally, the court found that the firm acted in good faith.  The court granted the application, subject to the limitation that all other claims recover the full distribution to which they were entitled under the plan.
Although the bankruptcy court excused the debtors’ attorneys’ failure to comply with the court ordered deadline, this case should, if nothing else, serve as a reminder to attorneys to check and double check that specified dates are correctly calendared as it is almost certain that not all missed deadlines will result in a finding of excusable neglect.  By doing so we can help to prevent our nightmares – at least those relating to missed deadlines – from becoming a reality.