IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
|DO NOT PUBLISH
This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
DENNIS T. FLYNN, No. 95-11204
Memorandum of Decision
Debtor Dennis T. Flynn commenced this Chapter 11 case in May, 1995. He remained a debtor
in possession until October 27, 1995, when the case was converted to Chapter 7 due to his failure
to comply with court rules and U.S. Trustee guidelines.
On December 19, 1995, Flynn's counsel made application to employ Lynn A. Friedman as
a tax specialist to deal with a large IRS claim. The application falsely represented that the case
was still in Chapter 11 and that Flynn was a debtor in possession. Friedman, who has little
experience in bankruptcy matters, was not a party to the misrepresentations. On December 26,
1995, the court signed the order approving Friedman's employment.
Friedman was successful in reducing the IRS claim by approximately $400,000. The
reduction of this claim enabled the Flynn to avoid liquidation of all of his assets and permitted
him to obtain financing as a means of paying his creditors and the expenses of administration in
full. The reduction benefitted both the estate and Flynn personally.
Friedman did not realize until Flynn objected to her request for payment that there was any
problem with the order appointing her. Friedman had worked with Flynn's attorney on a
previous bankruptcy matter. In that matter, the attorney had handled all of the paperwork to get
Friedman appointed by the Court. Friedman relied upon the attorney to do so in the instant case
as well. Friedman knew that she had a court order appointing to represent the debtor estate and
believed that she would be paid.
Considering the benefit rendered to the estate, the trustee has rightly moved the court for a
retroactive order making Friedman his employee so that she can be paid. Flynn and the U.S.
Trustee have objected.
Flynn is clearly estopped from objecting to the motion. His attorney obtained the order upon
which Friedman relied by making serious misrepresentations to the court. A party may not
profit by his counsel's misdeeds.
The U.S. Trustee correctly notes that retroactive orders may not be made absent exceptional
circumstances. In Re Atkins
, 69 F.3d 970, 974 (9th Cir. 1995). However, the U.S. Trustee goes
on to argue that no exceptional circumstances have been shown here. The court quite disagrees.
This is not a case where the professional never obtained an order. An order was obtained, but
it was invalid through no fault of Friedman. Since Friedman rendered valuable services to the
estate in reliance on the order, the court finds that exceptional circumstances do exist and that
equity not only permits but in fact demands that Friedman be paid from the estate.
For the foregoing reasons, the trustee's motion will be granted. Counsel for the trustee shall
submit an appropriate form of order. Any party objecting to the amount of Friedman's fees may
set an appropriate hearing.1
1. The court will not consider Flynn's "counterclaim" against Friedman for allegedly
disclosing confidential information. However, any award will be without prejudice to Flynn's
right to bring a civil action against Friedman in state court.
Dated: July 27, 1998 _______________________