United States District Court, District of Columbia
In re Trigee Foundation, Inc.
JEFFREY M. SHERMAN LERCH, EARLY & BREWER, CHTD, Appellees. NANCY DURANT, Appellant,
CHRISTOPHER R COOPER UNITED STATES DISTRICT JUDGE
Nancy Durant is a creditor of Trigee Foundation, Inc., the
debtor in possession in a closed Chapter 11 reorganization
proceeding before the United States Bankruptcy Court in this
district. Dr. Durant appeals three orders by the bankruptcy
court in that proceeding. All three stem from the court's
decision not to monetarily penalize Trigee's attorney for
failing to disclose a conflict of interest. For the reasons
that follow, the Court will affirm all three orders.
September 2012, Trigee Foundation, Inc., which operates an
apartment building in Washington, D.C., filed a voluntary
petition for reorganization under Chapter 11 of the
Bankruptcy Code, 11 U.S.C. §§ 101 et seq.
App. 263. A few days later, Trigee petitioned the bankruptcy
court to approve the retention of Jeffrey Sherman, an
attorney with Lerch, Early & Brewer (“LEB”),
to represent it during the proceedings. The bankruptcy court
approved the petition on October 2, 2012, and Sherman
represented Trigee (first as an attorney with LEB and later
as a solo practitioner) until the bankruptcy court dismissed
the case. App. 121. In January 2014, LEB filed a final
compensation application seeking fees for previously billed
time. App. 253. Trigee did not object to the final
application, and on February 4, 2014, the bankruptcy court
issued an order directing Trigee to pay LEB the approved
fees. App. 361.
two years later, in March 2016, Trigee filed a malpractice
claim in D.C. Superior Court against LEB and Sherman, which
the defendants removed to the bankruptcy court. App. 742. One
of the malpractice allegations was that Sherman had failed to
disclose to Trigee that prior to j oining LEB, he and another
LEB attorney had represented a creditor against Trigee. App.
353-94. Specifically, Sherman failed to disclose the conflict
in a Rule 2014(a) affidavit, which requires attorneys seeking
employment from a bankruptcy estate to submit a verified
statement setting forth the attorney's connections with
the debtor, the creditors, and any other party in interest.
See Fed.R.Bankr.P. 2014(a). The bankruptcy court
ultimately ruled that Trigee's malpractice action was
barred by the res judicata or collateral estoppel effect of
the fee order. App. 353. See Capitol Hill Group v.
Pillsbury, Winthrop, Shaw, Pittman, LLC, 569 F.3d 485
490-92 (D.C. Cir. 2009) (holding that a bankruptcy
court's approval of a fee application operates as a res
judicata bar to subsequent malpractice claims as long as the
debtor was on notice of the alleged malpractice at the time
the final fee application was filed). Trigee thus moved to
vacate the fee order pursuant to Federal Rule of Civil
Procedure 60(b). The bankruptcy court denied the motion as
untimely in October 2016. App. 75.
the bankruptcy court issued an order to show cause why it
should not impose sanctions against Sherman for failing to
disclose that he and another LEB attorney had previously
represented one of Trigee's creditors. App. 398-99. The
bankruptcy court held a hearing on the show cause order in
December 2016 and, after receiving testimony from Mr.
Sherman, concluded that “the evidence does not show an
intentional, as opposed to a negligent, failure” to
disclose the conflict and that “vacating the final fee
award would be an inappropriate sanction.” App. 629.
The court instead admonished Sherman to disclose future
conflicts and to include a list of clients he represented at
LEB in his conflict-check software. App. 632.
early December 2016, Dr. Nancy Durant, a creditor in the
Trigee bankruptcy proceeding and relative of Trigee's
principals, filed her own motion to vacate the fee order on
the same grounds-that Sherman failed to disclose his
conflict. App. 400. The bankruptcy court scheduled a hearing
to consider the motion for January 26, 2017. It noted,
however, that Dr. Durant faced an “uphill battle”
because the court had already found that the issue was time
barred in a previous order and had held a sanctions hearing
in which it found that Sherman had not acted intentionally in
failing to disclose his prior representation. App. 447-48.
Dr. Durant moved to reschedule the hearing to May so that she
could travel to Washington, D.C. and appear in person. App.
642. Dr. Durant was 88 years old at that time and indicated
that she had difficulty traveling by herself in the winter.
Id. She also was not represented by counsel.
Id. The bankruptcy court denied the motion, App.
656, and held the hearing as scheduled on January 26 with Dr.
Durant appearing by phone. App. 1271-1389. An attorney for
Trigee and one of its principals attended in person.
Id The bankruptcy court ultimately denied Dr.
Durant's motion to vacate the fee order the following
month. App. 741. Dr. Durant filed her notice of appeal on
February 9, 2017.
Court has jurisdiction over appeals of final orders issued by
the Bankruptcy Court. See 28 U.S.C. § 158(a)
(conferring on U.S. district courts jurisdiction over
“appeals . . . from final judgments, orders, and
decrees”). Findings of fact are reviewed for clear
error; questions of law are considered de novo. See
Foskey v. Plus Properties, LLC, 437 B.R. 1, 8
(D.D.C. 2010). In other words, the appellant “must show
that the [bankruptcy] court's holding was clearly
erroneous as to the assessment of the facts or erroneous in
its interpretation of the law and not simply that another
conclusion could have been reached.” In re WPG,
Inc., 282 B.R. 66, 68 (D.D.C. 2002).
Durant has appealed three bankruptcy court orders: (a) the
February 1, 2017 order denying her motion to vacate the fee
order; (b) the January 27, 2017 order denying her motion to
continue the hearing on the motion to vacate the fee order;
and (c) the December 22, 2016 disposal of the order to show
cause why Mr. Sherman should not be sanctioned. The Court
will affirm all three rulings.
Order Denying Motion to Vacate the Fee Order
Durant sought to have the fee order vacated on the ground
that Mr. Sherman failed to disclose in his Rule 2014(a)
statement that he had previously represented a secured
creditor whose interests were adverse to his client's in
the case. Appellant's Br. at 7. Despite having
reservations about whether Dr. Durant was the real party in
interest (as opposed to Trigee), the bankruptcy court
proceeded to the merits of the motion.
originally filed the motion under Federal Rule of Civil
Procedure 59, which permits motions “to alter or amend
judgements.” Fed.R.Civ.P. 59(e). In bankruptcy actions,
such motions must be filed with 14 days after entry of
judgment. Fed. R. Bank. P. 9023. As the bankruptcy court
explained, Dr. Durant could not obtain relief under Rule 59