Red Carpet Corp. v. Miller

Red Carpet Corp. v. Miller

Opinion

 [*1577]  In July 1976, appellant Red Carpet Corporation filed a petition for Chapter XI Reorganization. In August 1976, the debtor corporation retained John Miller as its attorney. Mr. Miller represented the corporation during the confirmation of its reorganization plan and in various adversary proceedings. In April 1979, the corporation dismissed Mr. Miller. Mr. Miller then filed an application for fees and reimbursement of costs in an amount in excess of $ 37,000. In March 1980, the bankruptcy court held an evidentiary hearing on Mr. Miller's fee application. In April 1980, before the bankruptcy court had ruled on the fee application, appellant filed a Motion to Surcharge Attorney for Debtor in [**2]  Possession, alleging negligence, improper fee splitting, improper fee arrangements, and breach of trust by Mr. Miller and his firm. Appellant sought to have Mr. Miller held personally liable for money damages -- surcharged -- in the same way that bankruptcy trustees and receivers have been in the past.

On June 29, 1981, the bankruptcy court determined that it had no jurisdiction to enter a money judgment against an attorney for a debtor in possession. The bankruptcy court noted that appellant debtor had raised most of the instant affirmative allegations in its defense against appellee Miller's application for attorney's fees. The bankruptcy court stated that, consonant with its jurisdiction, it would still consider those allegations, together with evidence presented to support them, when it considered Mr. Miller's fees application. With regard to that application, the bankruptcy court had heard evidence on the questions of negligence, improper fee splitting, improper fee arrangements and breach of trust. On December 14, 1981, the bankruptcy court issued its order allowing Mr. Miller attorney's fees and expenses. An appeal of that decision is now pending in the district court. (N.  [**3]  D.Fla., No. MCA-82-205). In this opinion, we do not consider the issues which the bankruptcy court treated in that second order, and which are not before this court.

On December 16, 1981, the district court affirmed the bankruptcy court's order in the instant case, noting that the parties agreed that the bankruptcy court retained jurisdiction to require appellee to return fees already awarded as well as to deny appellee fees on future petitions. Thus, the district court properly recognized that a bankruptcy court can deny an attorney for a debtor in possession his fees on account of his wrongdoing or negligence but cannot additionally assess against him money damages for losses due to such wrongdoing or negligence. We affirm.

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