In Re: East Coast Foods, Inc.

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JS-6

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6 UNITED STATES DISTRICT COURT

7 CENTRAL DISTRICT OF CALIFORNIA

8 LOS ANGELES DIVISION

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IN RE: EAST COAST FOODS, INC. CASE NO. CV 20-10982 MWF

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ORDER RE: CONSOLIDATED

12 APPEAL FROM THE UNITED

13 STATES BANKRUPTCY COURT’S

ORDERS

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Before the Court is an appeal from the United States Bankruptcy Court (the

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Honorable Sheri L. Bluebond, United States Bankruptcy Judge). Appellant Clifton

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Capital Group, LLC (“Clifton Capital”) appeals two orders of the Bankruptcy Court:

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(1) the Order Granting the Application for Payment of Final Fees and/or Expenses

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(the “Second Fee Order”) in the amount of $1,155,944.71; and (2) the Order

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Granting Motion to Strike Declarations of John L. Sadd, Jed Sanford, and Sam

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White Filed by Clifton Capital Group, LLC (“Clifton Capital”), in Opposition to

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Trustee’s Final Fee Application (the “Strike Order”) (collectively, the “Orders”).

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The Bankruptcy Court entered the Orders in connection with its granting of the

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Fourth and Final Application for Compensation and Reimbursement of Fees and

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Expenses (the “Final Fee Application”), filed by Bradley D. Sharp, the former

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chapter 11 trustee (the “Trustee”) in the bankruptcy case of East Coast Foods, Inc.

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(“ECF”).

1 Appellant Clifton Capital submitted its Opening Brief (“OB”) on February 2,

2 2021. (Docket No. 15). On May 14, 2021, Appellee Bradley D. Sharp, Chapter 11

3 Trustee, submitted his Reply Brief (“AB”). (Docket No. 16). On June 11, 2021,

4 Clifton Capital submitted its Reply Brief (“RB”). (Docket No. 23). The Court has

5 read and considered the papers filed in this appeal and held a Zoom video hearing

6 on July 7, 2021.

7 For the reasons discussed below, the Court rules as follows:

8  The Second Fee Order is AFFIRMED. The Bankruptcy Court neither erred

9 nor abused its discretion in awarding the Trustee a fee enhancement above the

10 lodestar figure.

11  The Strike Order is AFFIRMED. The Bankruptcy Court neither erred nor

12 abused its discretion in granting the Trustee’s motion to strike Clifton

13 Capital’s declarations submitted in connection with its supplemental brief on

14 remand because the Trustee did not introduce any new evidence in his

15 supplemental brief.

16 I. BACKGROUND

17 On November 18, 2018, the Bankruptcy Court granted the Trustee’s Final Fee

18 Application (the “First Fee Order”), on the basis that the requested fee was

19 reasonable because it equaled the amount set forth under 11 U.S.C. § 326(a), or

20 alternatively, because “this was an exceptional case” warranting compensation in

21 excess of the lodestar figure. See In re East Coast Foods, Inc., CV 18-0098 MWF,

22 2019 WL 6893015 at *4 (C.D. Cal. Dec. 18, 2019).

23 On December 19, 2019, the Court entered the Order Re the Bankruptcy

24 Court’s Order (the “Prior Order”), reversing and remanding the Bankruptcy Court’s

25 order on the basis that Bankruptcy Court did not make detailed findings as to why

26 the Trustee is entitled to an amount significantly higher than the lodestar figure.

27 (Id.).

1 In so doing, the Court held as follows: (1) the lodestar approach is

2 “presumptively reasonable” for purposes of determining the Trustee’s compensation

3 under 11 U.S.C. § 330; (2) the Trustee must “come forward with specific evidence

4 showing why the results obtained were not reflected in either his standard hourly

5 rate or the number of hours allowed” and “must also show that the bonus is

6 necessary to make the award commensurate with compensation for comparable

7 nonbankruptcy services”; and (3) if the Bankruptcy Court determines that a bonus is

8 justified, it must make detailed findings that actually support that determination.

9 (Id.) (citing In re Manoa Finance Co., Inc., 853 F.2d 687, 692 (9th Cir. 1988)). The

10 Court also noted that “while the Bankruptcy Court observed that the Trustee faced

11 various challenges in this action, it is not clear why such considerations would not

12 have been encompassed in the lodestar figure, or would justify such a substantial

13 bonus.” (Id. at *4).

14 On remand, the parties provided supplemental briefing in light of this Court’s

15 ruling, and the Bankruptcy Court held a continued hearing on the Trustee’s Final

16 Fee Application (the “Fee Application”). At that hearing, the Bankruptcy Court

17 stated:

18 It’s difficult for a lower court on remand to adjudicate an issue when it

firmly believes the appellate court made an error of law on appeal. This

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court remains of the view that Congress intended for the compensation

20 formula set forth in Section 326(a) to be presumptively reasonable and

generally in the nature of a commission . . . and that the citations offered

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by the District Court are not on point.

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(Excerpts of Record (“ER”) 7-8) (Docket No. 16)). The Bankruptcy Court

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nonetheless acknowledged that this Court’s prior decision was “law of the case” and

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that the Bankruptcy Court “need[s] to follow it, but it kind of makes it a little bit —

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you know, I have to do it with a couple of brain cells tied behind my back. It makes

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[it] a little more challenging.” (ER 8-9).

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1 The Bankruptcy Court ultimately determined on remand that the lodestar

2 amount in this case is $758,951.70 (the “Lodestar”). (ER 10-12, 30-31). The

3 Bankruptcy Court then awarded the Trustee compensation with the same fee

4 enhancement as before, in the total amount of $1,155,844.71. (ER 17-18, 42-44).

5 The Bankruptcy Court also entered findings of fact and conclusions of law in

6 support of the Second Fee Order. (ER 45-100). Finally, the Bankruptcy Court

7 entered the Strike Order, striking certain declarations submitted by Clifton Capital.

8 (ER 101-102).

9 The Court incorporates by reference the factual and procedural background

10 set forth in the Prior Order as if fully set forth herein. (See Prior Order at 2-4).

11 II. STANDARD OF REVIEW

12 A bankruptcy court’s conclusions of law are reviewed de novo, and findings

13 of fact are reviewed for clear error. Zurich Am. Ins. Co. v. Int’l Fibercom, Inc., 503

14 F.3d 933, 940 (9th Cir. 2007). Pertinent to this appeal, a bankruptcy court’s award

15 of professional fees “will not [be] disturb[ed] . . . unless the bankruptcy court abused

16 its discretion or erroneously applied the law.” In re Strand, 375 F.3d 854, 857 (9th

17 Cir. 2004). “A bankruptcy court abuses its discretion if it applies the wrong legal

18 standard or its findings are illogical, implausible or without support in the record.”

19 In re Cook Inlet Energy LLC, 583 B.R. 494, 500 (B.A.P. 9th Cir. 2018).

20 III. LEGAL STANDARD

21 Pursuant to § 330, a bankruptcy court “may award to a trustee, . . . or a

22 professional person employed under section 327 or 1103 (A) reasonable

23 compensation for actual, necessary services rendered by the trustee . . . ; and (B)

24 reimbursement for actual, necessary expenses.” 11 U.S.C. § 330(a)(1)-(2).

25 In determining reasonable compensation for a chapter 11 trustee, courts shall

26 consider

27 the nature, the extent, and the value of such services, taking into account

all relevant factors, including — (A) the time spent on such services; (B)

1 the rates charged for such services; (C) whether the services were

necessary to the administration of, or beneficial at the time at which the

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service was rendered toward the completion of, a case under this title;

3 (D) whether the services were performed within a reasonable amount of

time commensurate with the complexity, importance, and nature of the

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problem, issue, or task addressed; (E) with respect to a professional

5 person, whether the person is board certified or otherwise has

demonstrated skill and experience in the bankruptcy field; and (F)

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whether the compensation is reasonable based on the customary

7 compensation charged by comparably skilled practitioners in cases other

than cases under this title.

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9 Id. § 330(a)(3). Section 326(a) sets a statutory cap for chapter 11 trustee

10 compensation depending on the amount disbursed to creditors. Id. § 326(a).

11 A trustee has the burden of demonstrating that its requested compensation is

12 reasonable and satisfies these requirements. See Hale v. United States Trustee (In re

13 Basham), 208 B.R. 926, 931-32 (B.A.P. 9th Cir. 1997).

14 The primary method used to determine a reasonable fee under § 330(a)(3) is

15 to calculate the lodestar. See In re Buckridge, 367 B.R. 191, 201 (Bankr. C.D. Cal.

16 2007) (citing In re Eliapo, 468 F.3d 592, 598 (9th Cir. 2006); Yermakov v.

17 Fitzsimmons (In re Yermakov), 718 F.2d 1465, 1471 (9th Cir. 1983)). The lodestar

18 is computed by multiplying the number of hours reasonably expended by a

19 reasonable hourly rate. See Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S. Ct.

20 1933, 1939, 76 L. Ed. 2d 40 (1983).

21 IV. DISCUSSION

22 A. Standing

23 As a preliminary matter, the Court rejects the Trustee’s argument that Clifton

24 Capital lacks standing to bring this appeal. (See AB at 43). In the Prior Order,

25 faced with the exact same evidence and argument, the Court concluded that Clifton

26 Capital had standing to bring this appeal because the record indicated that the estate

27 did not have sufficient capital to pay all creditors:

1 Although neither party provides case law directly on point on the issue,

the Court finds Clifton Capital’s argument to be more persuasive.

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Clifton Capital’s claim is “subordinated to . . . all allowed and secured

3 and unsecured claims and approved administrative expenses.” (SER 46;

AB at 15-16). This is important because to date, there is not sufficient

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capital to pay all creditors. Because the increased compensation to the

5 Trustee will further subordinate Clifton Capital’s claim, the Court

concludes that Clifton Capital is directly and adversely affected by the

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Final Fee Order, giving it standing to pursue this appeal. See Salomon

7 v. Logan (In re International Envtl. Dynamics, Inc.), 718 F.2d 322, 326

(9th Cir. 1983) (“[I]n a case involving competing claims to a limited

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fund, a claimant has standing to appeal an order disposing of assets from

9 which the claimant seeks to be paid.”); In re P.R.T.C., Inc., 177 F.3d 774,

778 (9th Cir. 1999) (“A creditor does . . . have a direct pecuniary interest

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in a bankruptcy court’s order transferring assets of the estate.”).

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(Prior Order at 5) (emphasis added).

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The Trustee acknowledges that the Court previously rejected this argument

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and that “no new facts have arisen that bear on this question.” (AB at 4). Because

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the Court has already rejected this argument, the Court declines to address it in

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detail here. The Court is satisfied that Clifton Capital has standing for the same

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reasons set forth in the Prior Order.

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B. Specific Evidence in Support of Fee Enhancement

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Clifton Capital argues that the Bankruptcy Court erred in awarding the

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Trustee a fee enhancement above the lodestar figure of $758,951.70 because the

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Trustee failed to show that (1) the bonus was necessary to make the award

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commensurate with compensation for comparable nonbankruptcy services; and (2)

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the quality of the results obtained were not reflected in its standard hourly rate or the

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number of hours allowed. (OB at 19-20) (citing Prior Order at 4).

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In In re Manoa Finance Co., Inc., the Ninth Circuit explained that “[t]here is

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a strong presumption that [an award based on the lodestar] was ‘reasonable

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compensation.’” 853 F.2d at 692. Therefore,

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1 [i]n order to justify a bonus [beyond the lodestar figure], appellant must

come forward with specific evidence showing why the results obtained

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were not reflected in either his standard hourly rate or the number of

3 hours allowed. He must also show that the bonus is necessary to make

the award commensurate with compensation for comparable

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nonbankruptcy services.

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Id. “If the bankruptcy court determines that a bonus is justified, it must make

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detailed findings in support of that determination.” Id. (emphasis added).

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When granting a fee enhancement, courts may not rely on factors subsumed

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within the initial calculation of the lodestar. In re Buckridge, 367 B.R. at 204 (citing

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Blum v. Stenson, 465 U.S. 886 (1984)). Factors typically subsumed into the

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lodestar, and which cannot serve as an independent basis for an upward adjustment,

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include: (1) the novelty and complexity of the issues, (2) the special skill and

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experience of the professional, (3) the quality of the services, and (4) the results

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obtained. Id. at 202; see also In re Manoa Fin. Co., Inc., 853 F.2d at 691. Because

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these factors are ordinarily accounted for in the lodestar figure, “they can support an

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upward adjustment only when it is shown by specific evidence that they are not fully

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reflected in the lodestar.” In re Manoa Fin. Co., Inc., 853 F.2d at 691 (citations

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omitted).

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With respect to the first requirement — that the award be commensurate with

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compensation for comparable nonbankruptcy services — the Court notes that there

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is no direct analog to a chapter 11 trustee outside of bankruptcy, and there is no easy

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benchmark against which to measure. On the one hand, Clifton Capital points out

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that the Trustee repeatedly represented below that “[t]he rates provided are the

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normal hourly rates which [the Trustee] charges to its regularly paying, non-

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bankruptcy clients for similar services.” (ER 933). On the other hand, the

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Bankruptcy Court reasoned that, outside of the bankruptcy context, a professional

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performing services similar to the Trustee might be entitled to a fee enhancement:

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1 Unlike with attorneys and other professionals who provide services

outside of bankruptcy similar to those they provide in bankruptcy cases,

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there is no such thing as a chapter 11 trustee outside of bankruptcy. The

3 closest analog may be a chief restructuring officer hired to run a

company. It is not uncommon for such non-bankruptcy professionals to

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be entitled to success fees or bonuses when they deliver exceptional

5 results. For a company such as the Debtor, a CRO could easily be

entitled to additional compensation in the form of a success fee or bonus

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in excess of the fee enhancement sought by the Trustee in this case.

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(ER 95).

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The Court determines that this reasoning is sound, and that the Bankruptcy

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Court’s conclusion therefore was not an abuse of discretion. See In re Cook Inlet

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Energy LLC, 583 B.R. at 500 (“A bankruptcy court abuses its discretion if it applies

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the wrong legal standard or its findings are illogical, implausible or without support

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in the record.”).

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With respect to the second requirement — that the quality of the result

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obtained was not already reflected in the Lodestar calculations — the Bankruptcy

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Court explained that this was an exceptionally difficult and complex case, and that

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the complexities of this case did not necessarily result in an increase in the number

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of hours spent by the Trustee and its staff. (ER 14). Specifically, the Bankruptcy

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Court found this to be an exceptional case for the following reasons:

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[t]he trustee assumed control over an operating business with several

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locations and was called upon to keep those restaurants operating in a

21 profitable manner while dealing with the fact that there were effectively

no internal controls, no reliable accounting methods or records, a toxic

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corporate culture that had resulted in large employee tort claims, years

23 of unfiled tax returns and unpaid sales taxes, an owner who had siphoned

off and was attempting to continue to siphon off estate assets and

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resources to benefit or support other business and his competing

25 restaurants, numerous related party contracts and a principal who failed

to cooperate in discovery or obey court orders. The analogy that comes

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to mind here is of the plate-spinners that used to appear on the Ed

27 Sullivan show who worked furiously to keep multiple plates in the air at

the same time.

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(ER 86).

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The Bankruptcy Court reasoned that, “[i]n light of the high level of expertise

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and experience required to perform these tasks in the manner in which they were

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performed,” “[t]he number of hours spent working on the case is not a measure of

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the difficulty or skill level required to perform the required services in an

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exceptional manner.” (Id.). The Bankruptcy Court specifically noted that, “if the

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complexities merely increased the number of hours that the trustee spent working on

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the case, this would be reflected in, and therefore compensated by, the lodestar

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calculation.” (Id.).

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Given that the complexity of the case and the special skill of the professional

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are typically subsumed into the lodestar, the question becomes whether the Trustee

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has shown “by specific evidence” that they are not fully reflected in the Lodestar.

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See In re Manoa Fin. Co., Inc., 853 F.2d at 691.

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The Bankruptcy Court’s thorough analysis of the record demonstrates that the

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Bankruptcy Court relied on the specific evidence set forth above in concluding that

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the complexity is not accurately reflected in the Lodestar. This is a factual question

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and the Bankruptcy Court is in the best position to make this determination.

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Because the Bankruptcy Court’s conclusion is based on specific evidence and is

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neither implausible nor illogical, the Court determines that the Bankruptcy Court did

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not abuse its discretion.

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C. Risk of Underpayment or Loss

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Clifton Capital argues that the Bankruptcy Court erred by basing its award of

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a bonus to the Trustee on a risk of underpayment or loss. (OB at 22). Specifically,

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Clifton Capital argues that (1) risk of underpayment or loss cannot be considered as

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a matter of law under § 330; and (2) even if it could be considered, the record

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establishes that there was no risk of nonpayment in this case. (Id.).

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1 With respect to the first point, Burlington v. Dague, 505 U.S. 557 (1992), and

2 In re Cedic Dev. Co., 219 F.3d 1115 (9th Cir. 2000), are instructive. In Burlington,

3 the Supreme Court held that enhancements to the lodestar figure are not permitted

4 based on risk of loss or contingency risk. 505 U.S. at 564-67 (“[E]nhancement for

5 contingency is not permitted under the fee-shifting statutes at issue.”). In Cedic, the

6 bankruptcy court awarded a fee enhancement because the attorney’s hourly rates did

7 not take into account the results obtained or the risk of nonpayment. 219 F.3d at

8 1116. The district court reversed the bankruptcy court, interpreting Burlington as

9 prohibiting enhancements based on risk of nonpayment. Id. The Ninth Circuit

10 expressly rejected that reading of Burlington, reversed the district court, and

11 reinstated the fee award. Id. at 1116-17. The Ninth Circuit distinguished Burlington

12 as a case about contingent fees:

13 City of Burlington is a case about contingent fees. It holds that the risk

created by a contingency fee does not justify an increase beyond the

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lodestar. The case is not controlling here, because the risk of

15 nonpayment by Cedic was not created by any contingency in the merits

of the litigation but by the conduct of Cedic that suggested that it didn’t

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like to pay its lawyers.

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Id. (citations omitted). The Ninth Circuit explained “that the general principles

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applicable to fee-shifting statutes ‘may require some accommodation to the

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peculiarities of bankruptcy.’” Id. at 1116-17 (quoting Manoa, 853 F.2d at 691).

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Here, the Bankruptcy Court explained that the risk of underpayment stemmed

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from (1) the risk of the Trustee being awarded less in fees than the Trustee might be

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awarded on an hourly fee basis, and (2) the risk that the Trustee may receive only a

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pro rata distribution of fees if the estate has insufficient funds to pay for the full cost

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of services rendered:

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[I]n addition to the inherent risk of underpayment faced by all chapter

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11 professionals, chapter 11 trustees face an additional underpayment

27 risk because of § 326(a). In the Court’s experience, because of §

326(a), chapter 11 trustees are very often awarded less fees than they

1 would be awarded on hourly-fee bases.

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This was true in this case for the first two interim periods. For the first

3 interim period, the Trustee requested fees of $252,997.09, while hours

spent multiplied by hourly rates charged for non-trustee matters totaled

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$347,741.50. After the second interim period, the Trustee had been

5 paid $524,184.36 pursuant to § 326(a), while hours spent multiplied by

hourly rates charged for non-trustee matters totaled $566,133.00. If the

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case had faltered during those interim periods, the fee awarded would

7 have been less than any amount calculated in accordance with hourly

rates charged by the Trustee’s firm for non-trustee matters.

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9 Because of § 326(a), chapter 11 trustees face a double risk of

underpayment. First, the amount of fees awarded is very often less

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than the amount they would be awarded if their fees were based on

11 hourly rates charged by their firms for their non-trustee services.

Second, based on that already-reduced amount, the trustee may receive

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only a pro rata distribution. This double risk is not “priced into” the

13 normal hourly rate charged by a firm for the trustee’s non-trustee

services.

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15 (ER 88-91).

16 On the one hand, the inherent risk of underpayment here faced by all chapter

17 11 professionals does somewhat resemble a contingent fee: the Trustee’s

18 entitlement to a fee award here is contingent upon the quality of his performance

19 because he may receive only a pro rata distribution of fees if the estate has

20 insufficient funds to pay for the full cost of services rendered. The Bankruptcy

21 Court explained that “this inherent risk of underpayment is already priced into the

22 hourly rates identified by attorneys, accountants, and other estate professionals when

23 they are being employed under § 327(a) of the Code.” (ER 89).

24 On the other hand, the Trustee faces an additional risk of underpayment

25 because of § 326(a): the Trustee may be awarded less in fees than he would be

26 awarded on an hourly-fee basis. The Bankruptcy Court recognized that this “double

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1 risk is not ‘priced into’ the normal hourly rate charged by a firm for the trustee’s

2 non-trustee services.” (ER 91).

3 Given that the Trustee here faced two different types of underpayment risk,

4 and that this “double risk” was not priced into the normal hourly rate, the Court

5 determines that the risk of underpayment here is likely not the type of “contingent

6 fee” that cannot justify an increase beyond the Lodestar pursuant to Burlington. See

7 Burlington, 505 U.S. at 559 (a contingent fee is one where the party’s attorneys

8 assume “the risk of receiving no payment at all for their services”). This conclusion

9 is consistent with the Ninth Circuit’s determination in Cedic that “the general

10 principles applicable to fee-shifting statutes ‘may require some accommodation to

11 the peculiarities of bankruptcy.’” 219 F.3d at 1116-17 (quoting Manoa, 853 F.2d at

12 691). Therefore, the Court determines that the Bankruptcy Court did not err by

13 basing its Lodestar enhancement on a risk of underpayment or loss.

14 With respect to Clifton Capital’s second point, Clifton Capital argues that

15 there was never a real risk of underpayment here because the Trustee inherited “an

16 operating, successful, and profitable business generating millions of dollars in

17 revenue and more than sufficient funds to pay the Trustee and estate professionals.”

18 (OB at 24). Clifton Capital points out that, “[a]t the time of each of Trustee’s four

19 fee applications, the estate had more than enough cash on hand to pay not only the

20 Trustee’s requested fees and expenses, but all administrative fees and costs.” (Id.).

21 Clifton Capital is essentially arguing that the Trustee’s job in managing the business

22 here was not difficult enough to create a significant risk of the business becoming

23 insolvent.

24 This argument does not even attempt address the specific factual findings set

25 forth by the Bankruptcy Court as to why the managing the business was particularly

26 difficult here:

27 In light of the numerous challenges this trustee faced and the manner in

which the trustee rose to the occasion to resolve these challenges,

1 producing exceptional results, this Court finds that the trustee utilized in

connection with the administration of this estate levels of strategic

2

thinking and diplomacy above and beyond those normally employed by

3 a trustee in a chapter 11 case. The trustee assumed control over an

operating business with several locations and was called upon to keep

4

those restaurants operating in a profitable manner while dealing with the

5 fact that there were effectively no internal controls, no reliable

accounting methods or records, a toxic corporate culture that had resulted

6

in large employee tort claims, years of unfiled tax returns and unpaid

7 sales taxes, an owner who had siphoned off and was attempting to

continue to siphon off estate assets and resources to benefit or support

8

other business and his competing restaurants, numerous related party

9 contracts and a principal who failed to cooperate in discovery or obey

court orders.

10

11 (ER 86). In light of all of the difficulties faced by the Trustee, the fact that the estate

12 had enough cash on hand to pay the Trustee’s requested fees and expenses, as well

13 as all administrative fees and costs, appears to support, rather than discount, the

14 Bankruptcy Court’s conclusion that the Trustee produced exceptional results under

15 these circumstances. And Clifton Capital has failed to explain why the difficulties

16 identified by the Bankruptcy Court did not put the business in any real danger of

17 insolvency. The Bankruptcy Court’s factual findings are supported by the record.

18 Therefore, the Court is not convinced by Clifton Capital’s conclusory assertion that

19 there was no real risk of underpayment here.

20 Accordingly, the Second Fee Order is AFFIRMED.

21 D. Strike Order

22 Clifton Capital argues that the Bankruptcy Court erred by striking the

23 declarations that Clifton Capital submitted in response to the Trustee’s supplemental

24 brief on remand. (OB at 52). Specifically, Clifton Capital argues that it is entitled

25 to present countervailing evidence because the Trustee’s supplemental brief cited to

26 evidence not previously submit in connection to the Final Fee Application. (Id.)

27 (citing In re Colusa Reg’l Med. Ctr., 604 B.R. 839, 852 (B.A.P. 9th Cir. 2019)

1 against it and an opposing party should have both the ability to do so in writing and

2 to produce counterevidence.”)). The Court disagrees.

3 Clifton Capital acknowledges that the Trustee’s supplemental brief did not

4 introduce new evidence. (OB at 53). The supplemental brief cited to the same

5 evidence introduced in the Trustee’s original reply brief, i.e., evidence that was

6 already in the record. (Id.) (“Clifton Capital took issue with these ‘four pages of

7 things’ at the original hearing on the Final Fee Application, pointed out that the

8 Trustee had raised new arguments and purported evidence in his reply, and

9 requested the opportunity to respond before the Court ruled.”).

10 When discussing this precise issue before the Bankruptcy Court on remand,

11 Clifton Capital represented to the Bankruptcy Court that it was comfortable with the

12 record as it currently existed, and that it would seek additional discovery only in the

13 event that the Trustee attempted to provide additional evidence in the supplemental

14 brief:

15 So if we’re limited to the record as is, we’re comfortable with that. To

the extent, however, that Mr. Sharp attempts to provide any additional

16

evidence that’s not currently in the record to support an enhancement,

17 we feel that we should be entitled to discovery on that additional

evidence, and then a supplement — and then a briefing schedule that’s

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— flows from that.

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(ER 2109). Because the Trustee’s supplemental brief cited to evidence previously

20

submitted in connection with its reply brief, the Trustee’s supplemental brief did not

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introduce new evidence.

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Even assuming that the Bankruptcy Court should have stricken the evidence

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submitted in connection with the Trustee’s reply brief in the first place — a

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conclusion this Court does not endorse — Clifton Capital failed to raise this issue in

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its first appeal, and has therefore waived its right to make that argument here.

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Accordingly, the Strike Order is AFFIRMED.

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1||V. CONCLUSION

2 The Second Fee Order is AFFIRMED. The Bankruptcy Court neither erred

3 || nor abused its discretion in awarding the Trustee a fee enhancement above the

4 || Lodestar.

5 The Strike Order is AFFIRMED. The Bankruptcy Court neither erred nor

6 || abused its discretion in granting the Trustee’s motion to strike Clifton Capital’s

7 ||newly submitted declarations because the Trustee did not introduce any new

8 || evidence.

9 IT IS SO ORDERED.

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1 | DATED: August 6, 2021. hse YV. a),

13 MICHAEL W. FITZGERALD

14 United States District Judge

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7 CC: Bankruptcy Court

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