Opinion

Trigee Foundation Inc v. Sherman

Court: United States Bankruptcy Court, District of Columbia
Filed: May 24, 2021
Cited by: 0 cases
Authority: More cited than 30.0%

“To demonstrate that an attorney has been negligent, a party must prove: (1) that there is an attorney-client relationship; (2) that the attorney neglected a reasonable duty; and (3

How later courts described this case

“To demonstrate that an attorney has been negligent, a party must prove: (1) that there is an attorney-client relationship; (2) that the attorney neglected a reasonable duty; and (3
ruling that res judicata barred claims against employees of a bank even though the bank was the only plaintiff in the prior foreclosure proceeding
holding that the bankruptcy court has “an independent duty to review fee applications even absent objections”
placing emphasis on the ability to consolidate a contested matter with an adversary proceeding

Written by the judges who cited it.

The opinion

The document below is hereby signed. gente,

Signed: May 24, 2021 va Van

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“Oy, CT OF a

tttha □□ BY

S. Martin Teel, Jr.

United States Bankruptcy Judge

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF COLUMBIA

In re )

)

TRIGEE FOUNDATION, INC., ) Case No. 12-00624

) (Chapter 11)

Debtor. )

)

TRIGEE FOUNDATION, INC., )

)

Plaintiff, )

)

Vv. ) Adversary Proceeding No.

) 16-10025

LERCH, EARLY & BREWER, )

CHTD., et al., )

)

Defendants. )

MEMORANDUM DECISION AND

ORDER RE PLAINTIFF’S RULE 54(b) MOTION FOR

RECONSIDERATION OF ORDER DISMISSING CLAIMS AGAINST

DEFENDANTS THAT ACCRUED PRIOR TO AND THROUGH JUNE 30, 2013

This is an action for legal malpractice brought by Trigee

Foundation, Inc. (“Trigee”) against Lerch, Early & Brewer, Chtd.

(“Lerch Early”) and Jeffrey M. Sherman regarding their services

as counsel for Trigee in its bankruptcy case, Case No. 12-00624

in this court (the “main case”), commenced on September 13,

2012.1 Sherman left Lerch Early on Friday, June 28, 2013, and

Trigee elected to proceed to be represented by Sherman as a solo

practitioner in lieu of Lerch Early.2 Sherman continued to

represent Trigee until the court dismissed Trigee’s bankruptcy

case in September 2014.

Trigee commenced this malpractice action in 2016. On

September 23, 2016, the court entered an order (“Dismissal

Order”) dismissing the malpractice damages claims relating to

services provided by the defendants through June 30, 2013. This

resulted in the dismissal of Lerch Early as a defendant, and the

dismissal of claims against Sherman other than those relating to

services he rendered as a solo practitioner after June 30, 2013.

However, the Dismissal Order was not made a final and appealable

order under Fed. R. Civ. P. 54(b). Trigee seeks reconsideration

1 Under section 1101(1) of the Bankruptcy Code (11 U.S.C.),

Trigee acted as a debtor in possession in its bankruptcy case,

and under 11 U.S.C. § 1107(a) was generally subject to the duties

of a trustee, including the duty to obtain approval of the

employment of professionals. Pursuant to 11 U.S.C. § 327(a),

Trigee obtained approval to employ Lerch Early and Sherman as its

attorneys in the bankruptcy case.

2 Lerch Early viewed Sherman’s employment as ending Sunday,

June 30, 2013, but either way, Lerch Early’s final fee

application for the period ending June 30, 2013, covered all

services Sherman performed as a Lerch Early employee. On July

10, 2013, the court entered an order formally terminating Lerch

Early’s appearance on behalf of Trigee in the bankruptcy case,

but the parties have treated Lerch Early’s services as having

terminated as of June 30, 2013: only Sherman (who was no longer a

Lerch Early employee after that date) performed services for

Trigee after that date.

of the Dismissal Order. I will deny reconsideration as to Lerch

Early but will vacate the Dismissal Order as to Sherman (but on

grounds other than those raised by Trigee).

THE DISMISSAL ORDER OF SEPTEMBER 13, 2016,

AND THE MOTION FOR RECONSIDERATION OF THAT ORDER

On January 10, 2014, Lerch Early, as Trigee’s former

counsel, filed its Final Application for Approval of Compensation

for Lerch, Early & Brewer for the Period May 2013 Through June

2013 (“Final Application”) seeking approval under 11 U.S.C.

§ 330(a) of compensation for the period May 2013 through June

2013, along with a notice of opportunity to object. The Final

Application included time billed for services rendered by Sherman

as a Lerch Early attorney during the period May 2013 through June

30, 2013.3 On the day that Lerch Early filed the Final

Application, Lerch Early sent Trigee a copy of the Final

Application with notice of the opportunity to oppose the Final

Application.

Trigee did not object to Lerch Early’s Final Application,

and on February 4, 2014, the court entered its Order Granting

Final Application for Approval of Compensation for Lerch, Early &

Brewer for the Period May 2013 Through June 2013 (“Final Fee

3 The court had previously granted Lerch Early interim

compensation pursuant to 11 U.S.C. § 331 for services rendered

prior to May 2013.

Order”) and directing Trigee to pay Lerch Early the approved

fees.

In March 2016, more than a year after the bankruptcy case

was dismissed in September 2014, Trigee filed its Complaint

asserting malpractice damages claims against Lerch Early and

Sherman in the Superior Court of the District of Columbia. Lerch

Early and Sherman removed that civil action to this court, where

it was assigned Adversary Proceeding No. 16-10025. On May 27,

2016, Lerch Early and Sherman filed a Motion to Dismiss or, in

the Alternative, for Summary Judgment on Allegations Arising from

Professional Services Performed Through June 30, 2013 (“Motion to

Dismiss”). On September 23, 2016, the court issued a Memorandum

Decision addressing that Motion to Dismiss and concluding, based

on Capitol Hill Group v. Pillsbury, Winthrop, Shaw, Pittman, LLC,

569 F.3d 485 (D.C. Cir. 2009), that the Final Fee Order in the

bankruptcy case had the res judicata (claim preclusive) effect of

barring the claims relating to services performed through

June 30, 2013.4 Consequently, also on September 23, 2016, the

court entered the Dismissal Order dismissing with prejudice the

claims arising from professional services performed by Lerch

Early and Sherman through June 30, 2013. The Dismissal Order did

4 Use of the term “res judicata” in this decision is

referring to the doctrine of claim preclusion, even though the

term “res judicata” is sometimes viewed as including collateral

estoppel, which is the doctrine of issue preclusion.

not dismiss the claims against Sherman regarding professional

services he performed after June 30, 2013.

The court did not make the Dismissal Order of September 23,

2016, final and appealable under Fed. R. Civ. P. 54(b). On

August 20, 2020, almost four years after entry of the Dismissal

Order, Trigee filed its Motion for Reconsideration, seeking to

set aside the Dismissal Order. The Motion for Reconsideration

concerns certain steps Lerch Early and Sherman took in the

bankruptcy case regarding the unsecured claim of SGA Companies,

Inc. (“SGA”).

THE MALPRACTICE DAMAGES CLAIMS RELATING

TO SERVICES RENDERED CONCERNING SGA’S CLAIM

Paragraph 27 of the Complaint alleges:

The defendants also failed to file a correct List of

Creditors. For example, Defendants did not list as

“Disputed” the claim of the architect Sassan Gharai and

his architectural firm SGA (“SGA”). That failure and the

failure to assert the statute of limitations as to SGA,

coupled with Defendants failure to file a confirmable

Plan, allowed this disputed creditor to file another Plan

that would liquidate Trigee and turn over its stock to

SGA. This mistake by Defendants was expensive and time-

consuming for Trigee. SGA’s claims were large, with

legal fees and interest. Defendants’ failure to assert

the statute of limitations and other defenses, and the

mishandling of this claim, kept Trigee from being able to

dismiss the bankruptcy until SGA’s claim was resolved.

Trigee ultimately had to settle and pay SGA $100,000 and

dismiss its appeals.

There is no dispute that Sherman, while still employed at Lerch

Early, failed to schedule SGA’s claim as disputed and that, after

he left Lerch Early on June 30, 2013, he failed to include the

statute of limitations as a ground of objection in Trigee’s

objection to SGA’s claim. I will assume (without deciding) that

each of these failures sufficed to require rejection of any

statute of limitations defense to SGA’s claim, and constituted an

act of negligence because the statute of limitations defense

would have succeeded but for such negligence.

The failure to list SGA’s claim as disputed occurred in

2012, before Lerch Early filed its Final Application on

January 10, 2014. By the time Lerch Early filed its Final

Application, Trigee was already aware that SGA’s claim had not

been scheduled as disputed, and Trigee was aware, or ought to

have been aware, of its injury arising therefrom. Two of

Trigee’s officers had been at the hearing of November 13, 2013,

at which SGA’s counsel raised the argument that the statute of

limitations was inapplicable because Trigee scheduled SGA’s claim

without an indication that it was disputed.

On November 26, 2013, the court entered an Order Overruling

Objection to Claim of SGA Companies, Inc. pursuant to the court's

oral decision at the November 13, 2013 hearing. As the holder of

this allowed claim, SGA filed a motion on December 12, 2013,

advising that it would proceed to file a competing reorganization

plan in light of Trigee’s failure to timely file a confirmable

reorganization plan that would permissibly address SGA’s claim.

For the reasons explored below, the consequence on this current

record is that the res judicata effect of the Final Fee Order

extends to any malpractice damages claims against Lerch Early

relating to the failure to list SGA’s claim as disputed.

Trigee additionally notes that its schedules were not signed

by Johnnie Mae Durant, the owner and president of Trigee, despite

a representation on the schedules that she had signed them under

penalty of perjury. However, even assuming without deciding that

the failure to obtain Ms. Durant’s signature was a factor leading

to the scheduling of the SGA claim as undisputed, it was the

listing of SGA’s claim on Trigee’s schedules as not disputed that

proximately damaged Trigee, and not the failure to obtain

Ms. Durant’s signature.5

III

FACTS

The following facts pertinent to the Motion for

Reconsideration are not in genuine dispute. They include facts

that the court previously found incident to entering the

Dismissal Order of September 23, 2016. Other recited facts are

based on filings in the bankruptcy case or adversary proceeding,

5 Trigee has not sought to amend its Complaint to assert

that the failure to obtain Ms. Durant’s actual signature caused

it damage, nor has Trigee sought relief from the Final Fee Order

in the main case based on the failure to obtain her signature.

including a transcript of the hearing of November 13, 2013, in

the bankruptcy case.

Trigee owned and operated a 96-unit residential rental

property in Washington, D.C. (the “Property”) located in the 3500

block of Minnesota Avenue, SE. On September 12, 2012, Trigee

formally retained Lerch Early and Sherman to represent Trigee in

a case under Chapter 11 of the Bankruptcy Code (11 U.S.C.). On

September 13, 2012, Sherman and Lerch Early filed a voluntary

Chapter 11 petition in this court on Trigee’s behalf, commencing

the main case and thereby staying an imminent foreclosure sale of

the Property.

LISTING, ON TRIGEE’S FILINGS,

OF SGA’S CLAIM AS NOT DISPUTED; SHERMAN’S

FAILURE TO OBTAIN “WET SIGNATURES” ON SUCH FILINGS

On September 14, 2012, Sherman filed Trigee’s list of the

creditors holding the 20 largest unsecured claims pursuant to

Fed. R. Bankr. P. 1007(d). SGA was listed as a creditor but the

list failed to indicate that SGA’s claim was disputed.

On October 11, 2012, SGA timely filed its proof of claim,6

attaching invoices dated from October 1, 2006, to February 1,

2007, issued to Faisal Khan, Rehana Khan Enterprises, LLC, for

$90,968.75, plus finance charges, for architectural work relating

to the Property.

6 Claim No. 1-1 on the Claims Register in the main case.

On October 12, 2012, Sherman filed Trigee’s Schedules, which

listed SGA’s claim on Schedule F - Creditors Holding Unsecured

Nonpriority Claims in the amount of $80,000 without indicating

that the claim was disputed. SGA’s claim was the third largest

claim on Schedule F. On November 29, 2012, Sherman filed

Trigee’s Amended Schedule F, which once again listed SGA’s claim

as being in the amount of $80,000 without indicating that the

claim was disputed. Sherman electronically filed the

Rule 1007(d) list, the initial schedules, and the Amended

Schedule F, and represented via “/s/ Johnnie Mae Durant” that

Johnnie Mae Durant had signed each of those documents under

penalty of perjury. Trigee’s Motion for Reconsideration asserts

that depositions taken in March through May 2018, after entry of

the Dismissal Order of September 23, 2016, revealed that Sherman

and Lerch Early had not obtained Johnnie Mae Durant’s actual

(“wet”) signature on any of those documents.7

The defendants’ Opposition to the Motion for Reconsideration

includes an email chain of August 26, 2013, in which Oswald

(“Ozzy”) Durant, an officer of Trigee, emailed Sherman, stating

(among other things):

SGA architects is listed on both of the two creditors

lists that I found in Pacer as not being Disputed. I

7 The evidence presented does not demonstrate that Sherman

or anyone else at Lerch Early knowingly filed any of the

documents without Lerch Early having obtained a “wet signature”

beforehand.

know I listed them as Disputed from day one. This is

not a mistake I would have made.

Sherman e-mailed a reply the same day stating:

I’d like to file the First Omnibus objection to Proofs of

Claim that I shared with you last week. . . . [B]ecause

SGA filed a Proof of Claim, it now makes no difference

whether or not it was listed as disputed, although I do

not know why it might not have been.8

Trigee has not disputed the genuineness of the email chain in its

Reply to the Opposition to its Motion for Reconsideration.

THE OBJECTION TO SGA’S CLAIM

On August 30, 2013, Sherman filed Trigee’s Omnibus Objection

to Claims, including an objection to SGA’s claim on this basis:

“Claim not liability of the Debtor; claim arises under contract

with third party.” The objection did not include as a basis that

SGA’s claim was barred by the applicable three-year statute of

limitations, even though the architectural services at issue had

8 Upon SGA’s timely filing its proof of claim, the claim

became an allowed claim pursuant to 11 U.S.C. § 502(a) unless a

party in interest were to later file an objection to the claim.

Fed. R. Bankr. P. 3003(b)(1) provides that unless a scheduled

claim is “scheduled as disputed, contingent, or unliquidated” the

claim is an allowed claim, but under Rule 3003(c)(4) a timely

filed proof of claim supersedes any scheduling of the claim.

Accordingly, if Trigee’s schedules had scheduled SGA’s debt as

disputed, SGA’s claim would still be an allowed claim pursuant to

SGA’s earlier-filed proof of claim. In that regard, it did not

matter that Sherman had failed to schedule the claim as disputed.

However, as will be seen, the failure to list the debt as

disputed on Trigee’s Rule 3007(d) list and on its Schedule F did

matter in regard to the statute of limitations.

been completed by February 1, 2007, and Trigee commenced its

bankruptcy case over five years later on September 13, 2012.9

On September 26, 2013, SGA filed an opposition (Case No. 12-

00624, Dkt. No. 305), asserting that the services rendered by SGA

were for the benefit of and used by Trigee. On November 12,

2013, SGA filed an extensive memorandum setting forth its

arguments as to why Trigee was obligated to pay for SGA’s

services even though the proposed contract had listed Rehana

Enterprises, LLC as the owner of the Property. On November 13,

2013, the court held a hearing on the objection to SGA’s claim.

A transcript of that hearing, which included the court’s oral

decision overruling the objection to the claim, is Dkt. No. 407

in the bankruptcy case (filed on February 26, 2014). Johnnie Mae

Durant was seated at Trigee’s counsel table during the hearing,

Tr. at 38, and Oswald Durant testified as a witness. During his

testimony, Oswald Durant testified that “I gave to our lawyer’s

paralegal, the schedules that she asked me for, and they redid it

in their own way.” Tr. at 22. When SGA’s attorney, Bradshaw

Rost, then advised him, Tr. at 22, that the schedules had listed

SGA as being owed $80,000, he testified that his position “was

that this was a disputed claim” and that “SGA was always

9 Once Trigee belatedly raised the statute of limitations

defense, SGA contended that the statute of limitations was

suspended by promises to pay, but the court never had occasion to

rule on that contention. For purposes of analysis, I will assume

without deciding that the statute of limitations was not tolled.

disputed.” Tr. at 23. In questioning Oswald Durant, Rost also

brought to his attention that the schedules reflected “that the

Debtor affirmed under oath . . . that it was indebted to SGA for

the sum of $80,000.”10 At the beginning of his closing argument

on behalf of SGA, Rost argued:

[Trigee] filed the schedules affirming under penalties of

perjury, that the Debtor was indebted to SGA for $80,000

for the services rendered. There’s been no amendment to

those schedules. There’s been no modification made for

it. There’s been no explanation as to why that

statement, at the time it was made, was incorrect and not

reliable.

Tr. at 66. Rost’s argument, at that juncture of the hearing, was

not addressed to the statute of limitations defense, which

Sherman had not yet raised as a defense to SGA’s claim. Instead,

Rost advanced the argument in an attempt to show the dubious

validity of Trigee’s contention that it had not incurred the

debt. However, Rost’s argument brought home the point that

Sherman had filed schedules listing the claim as not disputed

despite Oswald Durant’s position that SGA’s claim was a disputed

claim.

In turn, in his closing argument, Sherman, as Trigee’s

counsel, argued (among other things) that the claim was barred by

the statute of limitations. Tr. at 74. Rost then responded by

noting that this affirmative defense should be overruled because

10 The schedules purport to have been signed under penalty

of perjury by Johnnie Mae Durant, but the important point is that

they purport to have been signed by Trigee through an officer or

employee, and thus to have been an affirmation of Trigee.

it had not been raised previously, Tr. at 81-82, and that SGA

would have made arguments against the defense had it been raised

as such previously, including:

I believe by reaffirming the debt in their schedules,

that they have acknowledged it to be valid as of that

date, and they had revived the claim, for purposes of

the statute of limitations, to affirm under oath that

it’s owed, takes it out of the statute of limitations.

Tr. at 83. The court orally overruled the objection to SGA’s

claim, stating in relevant part:

The Debtor belatedly raised a statute of limitations

defense to the Proof of Claim, but the objection to claim

did not raise that defense. This was an evidentiary

hearing and there was no appropriate notice that the

statute of limitations would be a defense, and

accordingly, I reject the statute of limitations defense.

Tr. at 100. The court did not rule on Rost’s argument that the

scheduling of SGA’s claim as not disputed nullified the statute

of limitations.

On November 26, 2013, the court entered its order overruling

the objection to SGA’s claim and allowing the claim as a final

and appealable order pursuant to Fed. R. Civ. P. 54(b). Trigee

did not appeal the order or seek reconsideration of the order

within 14 days under Fed. R. Bankr. P. 9023.

DAMAGE TO TRIGEE

ARISING FROM THE ORDER ALLOWING SGA’S CLAIM

The order of November 26, 2013, was analogous to the entry

of a monetary judgment in a civil action in a district court.11

The imposition of this liability injured Trigee, for it fixed

SGA’s right to enforce its claim in the bankruptcy case. This

resulted in immediate adverse consequences for Trigee.

First, at the same hearing of November 13, 2013, after

ruling on the objection to SGA’s claim, the court addressed

Trigee’s proposed disclosure statement regarding its amended

plan. SGA had objected to Trigee’s proposed plan as violating

the absolute priority rule. The court would have dismissed SGA’s

objection to the disclosure statement if SGA’s claim had been

disallowed. Instead, as the claim had been upheld, and in light

of SGA’s objection to the plan, the court concluded that Trigee

was required to file a further amended plan and a disclosure

statement relating thereto. At the hearing, the court gave

Trigee until November 26, 2013, to file those documents.

Second, with an adjudicated monetary claim, SGA had rights

to pursue collection of its claim within the bankruptcy case,

including the right to file and pursue its own proposed plan and

11 A proof of claim is analogous to a complaint filed in

the District Court. See Kline v. Zueblin (In re American Export

Grp. Int’l Servs.), 167 B.R. 311, 313 (Bankr. D.D.C. 1994).

to object to any further plan Trigee proposed that was contrary

to the requirements of the Bankruptcy Code. Counsel for SGA

stated on the record at the hearing that SGA might file a

competing reorganization plan depending on the terms of Trigee’s

forthcoming further amended plan. The court indicated at the

hearing that SGA could file a competing plan by December 16,

2013, and also set a hearing for December 18, 2013, on any

amended disclosure statement regarding any further amended plan

Trigee filed by November 26, 2013, and on any competing plan SGA

filed. If SGA’s claim had been disallowed as barred by the

statute of limitations, it would not have had a right to receive

any dividend under any plan filed by Trigee that might be

confirmed or to file a competing plan.

Finally, if Sherman had preserved the statute of limitations

defense, Sherman likely would have been able to avoid putting

Oswald Durant to the burden of testifying at the hearing of

November 13, 2013, regarding the merits of SGA’s claim. That in

itself was an injury to Trigee, as its Complaint lists as some of

its damages “the fees and expenses incurred because of otherwise

unnecessary litigation and work;. . . [and] the cost of the time

and resources for Plaintiff and its employees[.]” Compl. ¶ 42.

Moreover, with SGA’s claim having been allowed, Trigee and its

employees would have to devote time and resources to determining

how to address SGA’s now-allowed claim.

TRIGEE’S AWARENESS, BEFORE LERCH EARLY FILED ITS FINAL

APPLICATION, OF THE NEGLIGENT ACTS AND THE RESULTING INJURY

The filing of the Schedule F listing SGA’s claim without

indicating that it was disputed occurred in October 2012. Oswald

Durant was aware of that failure as of August 26, 2013.

Moreover, two of Trigee’s officers, Johnnie Mae Durant and Oswald

Durant, were present at the hearing of November 13, 2013. To

review the key facts, at that hearing:

• Oswald Durant was questioned as a witness regarding

SGA’s claim being scheduled as owed $80,000, and he

testified that he had indicated to Lerch Early that the

SGA claim was disputed.

• Rost (SGA’s counsel) specifically raised the argument

that the failure to schedule the claim as disputed

resulted in the statute of limitations not being a

valid defense.

• After orally overruling the objection to SGA’s claim,

the court proceeded to treat SGA’s allowed claim as (1)

requiring Trigee to file a new plan and disclosure

statement to address SGA’s objection to the amount SGA

would recover under Trigee’s proposed Chapter 11 plan,

and (2) allowing SGA to file a competing proposed plan

that would increase SGA’s recovery.

Moreover, as discussed below, by December 2013, other events had

alerted Trigee that SGA was proceeding to exercise further rights

in the bankruptcy case as the holder of an allowed claim.

Trigee failed to file a further amended plan. As a

consequence, on December 12, 2013, SGA moved to extend the

deadline for filing a competing reorganization plan, and to

cancel the hearing of December 18, 2013. SGA’s motion stated its

decision to file a competing plan. Sherman promptly advised

Trigee of SGA’s intention to file a plan after SGA filed its

motion. The court granted SGA’s motion via an order of

December 17, 2013, giving Trigee and other parties until

January 17, 2014, to file proposed plans and disclosure

statements. The clerk’s office mailed Trigee a copy of that

order on December 19, 2013.12 Moreover, in November 2013,

Sherman had notified one or more of Trigee’s principals that SGA

had stated that it might file a competing reorganization plan.

Accordingly, prior to the filing of Lerch Early’s Final

Application on January 10, 2014, Trigee had learned that SGA’s

claim had not been listed as disputed, and the claim had been

allowed, resulting in damages to Trigee that were or ought to

have been apparent to its principals by that date.

12 The court’s docket in the main case reflects that on

December 19, 2013, the Clerk, through the Bankruptcy Noticing

Center, mailed Trigee a copy of the order granting SGA’s motion

to extend the deadline for filing a competing plan of

reorganization.

THE FINAL APPLICATION

REGARDING LEGAL SERVICES PROVIDED BY

SHERMAN AND LERCH EARLY PRIOR TO JULY 1, 2013

As noted previously, on January 10, 2014, Lerch Early, which

had ceased representing Trigee by June 30, 2013, filed its Final

Application in the bankruptcy case, along with a notice of

opportunity to object. On that same day, Lerch Early sent Trigee

a copy of the Final Application and the notice of the opportunity

to object. Trigee did not object to the Final Application, and

on February 4, 2014, the court entered its Final Fee Order.

TRIGEE’S MOTION TO RECONSIDER

THE ORDER ALLOWING SGA’S CLAIM

In relevant part, 11 U.S.C. § 502(j) provides: “A claim that

has been allowed or disallowed may be reconsidered for cause.

A reconsidered claim may be allowed or disallowed according to

the equities of the case.” With respect to the order allowing

SGA’s claim, Trigee was entitled to seek reconsideration under

Fed. R. Bankr. P. 3008 and 9024 (making Fed. R. Civ. P. 60

applicable) if it had grounds for doing so. On April 14, 2014,

four months after the November 26, 2013 order allowing SGA’s

claim, Sherman filed in the bankruptcy case Trigee’s Motion to

Reconsider Allowance of Claim – SGA Companies, LLC, which

included a defense that SGA’s claim was barred by the statute of

limitations, as well as other defenses not included in Trigee’s

original objection to SGA’s claim. On May 5, 2014, SGA filed an

opposition which, as to the statute of limitations defense,

relied on Jenkins v. Karlton, 620 A.2d 894, 904-05 (Md. 1993)

(“The statute of limitations does not extinguish the debt; it

bars the remedy only. Thus, Maryland law has long recognized

that acknowledgment of a debt barred by limitations removes the

bar to pursuing the remedy.”).13

On May 15, 2014, the court held a hearing on the Motion to

Reconsider Allowance of Claim. As held in Colley v. National

Bank of Texas (In re Colley), 814 F.2d 1008, 1010 (5th Cir.

1987), “when a proof of claim has in fact been litigated between

parties to a bankruptcy proceeding, the litigants must seek

reconsideration of the court’s determination pursuant to the

usual Rule 60 standards if they elect not to pursue a timely

appeal of the original order allowing or disallowing the claim.”

Trigee had no valid basis for reconsideration under Rule 60.

Trigee was advancing multiple defenses for the first time in its

Motion to Reconsider Allowance of Claim, having failed to do so

in its original objection to SGA’s claim. This failure could not

be considered excusable neglect qualifying for Rule 60(b)(1)

relief, even if the court applied Rule 60 less rigidly than some

13 SGA expanded on that argument in a supplemental

opposition filed on May 13, 2014.

cases suggest,14 and no other part of Rule 60 could have

authorized relief from the order.15 On that basis, the court

rejected some of the new defenses Trigee had raised in its Motion

to Reconsider Allowance of Claim.

The oral ruling that there had not been excusable neglect

logically applied as well to the statute of limitations defense

Trigee raised in the Motion to Reconsider Allowance of Claim,

although the ruling did not expressly reject the statute of

limitations defense on that basis. The court ruled that the

defense was without merit for another reason: the acknowledgment

of the debt as not disputed on the schedules removed the statute

of limitations as a defense to SGA’s claim, thus requiring

rejection of the statute of limitations defense. On June 2,

2014, the court entered an order in the bankruptcy case denying

14 See In re Yelverton, Case No. 09-00414, 2010 WL 1487850,

*1-2 (Bankr. D.D.C. Apr. 9, 2010) (quoting In re Willoughby, 324

B.R. 66, 73–74 (Bankr. S.D. Ind. 2005)). For reasons explained

in In re Bennett, 590 B.R. 156, 161 (Bankr. E.D. Mich. 2018), “a

showing of cause for purposes of reconsideration under § 502(j)

and Bankruptcy Rule 3008 minimally requires a demonstration of

grounds for relief from the order under Rule 59 or Rule 60.”

With respect to what constitutes “excusable neglect” under

Rule 60(b)(1), the court in its discretion may take into account

that § 502(j) contemplates allowance or disallowance of a claim

upon reconsideration “according to the equities of the case,” and

that is essentially what occurred in In re Yelverton. The

equities here weighed against considering Trigee’s failure to

have timely raised its new defenses to have been excusable

neglect.

15 Moreover, there was an issue of whether Rule 60(b)(1)

relief had been sought within a reasonable time as required by

Rule 60(c).

the Motion to Reconsider Allowance of Claim pursuant to the

court’s oral ruling of May 15, 2014.16

Trigee took an appeal from that order, but Trigee and SGA

reached a settlement calling for payment to SGA of $100,000,

dismissal of the bankruptcy case, and dismissal of the appeal.

On September 10, 2014, the court entered an order approving the

settlement and dismissing the bankruptcy case. On September 12,

2014, the District Court entered an order dismissing the appeal

(Case No. 1:14-cv-01192-KBJ).

THE DISMISSAL OF THE CLAIMS RELATING

TO SERVICES RENDERED THROUGH JUNE 30, 2013,

BASED ON THE RES JUDICATA EFFECT OF THE FINAL FEE ORDER

AND THE UNSUCCESSFUL EFFORTS TO VACATE THE FINAL FEE ORDER

On May 27, 2016, Lerch Early and Sherman filed their Motion

to Dismiss. They argued that Trigee’s malpractice damages claims

for services that the Lerch Early attorneys performed through

June 30, 2013, was barred by res judicata because “Trigee was

aware of that potential claim when the Second Application and the

Final Application were filed, but it failed to raise any issue

concerning the quality of the pertinent work.” Mot. to Dismiss

13. Trigee’s opposition to the Motion to Dismiss did not argue

16 The order included the qualification that the denial was

“without prejudice to any objection to the claim as including a

claim for unmatured interest as of the petition date,” but that

qualification has no impact on the issues this decision

addresses.

that when Lerch Early filed its Final Application, Trigee was

unaware of its potential malpractice damages claim arising from

the failure of Lerch Early attorneys to schedule SGA’s claim as

disputed.

On September 23, 2016, the court concluded in its Memorandum

Decision that res judicata barred all of the malpractice damages

claims arising from services rendered prior to June 30, 2013, and

entered the Dismissal Order. The failure to schedule SGA’s claim

as disputed occurred during that period. While the Memorandum

Decision did not expressly discuss this failure, it cited

Trigee’s allegation regarding that failure as among “Trigee’s

allegations . . . that Sherman and Lerch Early should be held

liable for having allowed SGA to file a competing reorganization

plan,” Mem. Dec. 22 (citing Compl. ¶¶ 27, 40-43), and concluded

that “[h]aving known by [the granting of the Final Application on

February 4, 2014] of the factual basis for raising a claim of

malpractice regarding SGA being allowed to file a competing plan,

res judicata bars Trigee’s assertion of such a claim,” id. at 23.

As noted already, Trigee did not argue that when Lerch Early

filed (or when the court granted) the Final Application, Trigee

was unaware of that potential malpractice damages claim. Even in

its Motion for Reconsideration, Trigee does not argue that it did

not learn, pursuant to the hearing of November 13, 2013, that SGA

took the position that Trigee had no statute of limitations

defense because of the failure to schedule SGA’s claim as

disputed.

As to Trigee’s allegation that Sherman failed to raise a

statute of limitations defense and other defenses in the

objection to SGA’s claim, the Memorandum Decision stated that

“Trigee’s objection to SGA’s claim was filed on August 30, 2013,

and is therefore beyond the scope of the instant motion, which is

limited to services rendered through [June 30, 2013].” Id. at

13.

As discussed below, the only reasonable inference on the

current record is that when Lerch Early filed its Final

Application, Trigee was aware (or was on inquiry notice) that it

had a potential malpractice damages claim: Trigee knew that SGA’s

claim had not been scheduled as disputed, and it knew or ought to

have known that it was thereby injured. For reasons explored

below, the consequence is that the res judicata effect of the

Final Fee Order of February 4, 2014, extends to any malpractice

damages claim relating to the failure to list SGA’s claim as

disputed.

Two efforts to set aside the Final Fee Order failed. First,

on August 8, 2016, during the pendency of the defendants’ Motion

to Dismiss, Trigee filed in the bankruptcy case a Motion to

Vacate Order Granting Final Application for Approval of

Compensation for Lerch, Early & Brewer for the Period May 2013

Through June 2013. Trigee recognized that the Final Fee Order

would not be accorded res judicata effect if it were vacated.

At a hearing of October 20, 2016, the court orally ruled that

Trigee’s Motion to Vacate must be denied, and on October 25,

2016, the court entered an order denying it.

Second, on December 7, 2016, Nancy Durant filed her own

motion to vacate the Final Fee Order. For reasons stated at a

hearing of January 26, 2017 (later supplemented by a memorandum

decision of February 10, 2017), the court entered an order on

February 1, 2017, denying Nancy Durant’s motion. An appeal

ensued (Case No. 1:17-cv-00439-CRC in the District Court). On

August 3, 2019, the District Court entered a Memorandum Opinion

and an order affirming this court’s order denying Nancy Durant’s

motion to vacate the Final Fee Order.

THE DEPOSITIONS IN THIS ADVERSARY PROCEEDING AND

TRIGEE’S MOTION FOR RECONSIDERATION OF THE DISMISSAL ORDER

Meanwhile, after the September 23, 2016 entry of the

Dismissal Order disposing of the claims relating to services

rendered through June 30, 2013, this adversary proceeding moved

forward with respect to the other claims against Sherman, as to

services he rendered after June 30, 2013. After various

amendments to the scheduling order, the court directed that

discovery was to conclude by July 2018. From March through

May 2018, Trigee took depositions of Jeffrey Sherman, John

Tsikerdanos (a former Lerch Early associate who assisted Sherman

there), and Erin Moyer (a former paralegal at Lerch Early).

Trigee asserts that those depositions demonstrate that Lerch

Early and Sherman “had filed the Schedules listing SGA’s claim as

undisputed without Plaintiff’s prior approval and without

securing a Trigee’s [representative’s] signature to any of the

filings bearing a signature for the Plaintiff’s representatives.”

Mot. for Recons. 8. On that basis, Trigee filed the instant

Motion for Reconsideration on August 20, 2020, asking the court

to vacate the Dismissal Order.

RECONSIDERATION UNDER RULE 54(b)

Motions to reconsider interlocutory orders may be granted

before the entry of a final judgment, pursuant to Federal Rule of

Civil Procedure 54(b), “as justice requires.” Cobell v. Jewell,

802 F.3d 12, 25 (D.C. Cir. 2015) (quoting Greene v. Union Mut.

Life Ins. Co. of Am., 764 F.2d 19, 22 (1st Cir. 1985) (Breyer,

J.)). As noted in Estate of Botvin ex rel. Ellis v. Islamic

Republic of Iran, 772 F. Supp. 2d 218, 223 (D.D.C. 2011):

“As justice requires” indicates concrete considerations

of whether the court “has patently misunderstood a party,

has made a decision outside the adversarial issues

presented to the [c]ourt by the parties, has made an

error not of reasoning, but of apprehension, or where a

controlling or significant change in the law or facts

[has occurred] since the submission of the issue to the

court.” Cobell v. Norton, 224 F.R.D. 266, 272 (D.D.C.

2004) (internal citation omitted). These considerations

leave a great deal of room for the court’s discretion

and, accordingly, the “as justice requires” standard

amounts to determining “whether [relief upon]

reconsideration is necessary under the relevant

circumstances.” Id.

“Ultimately, the moving party has the burden to demonstrate ‘that

reconsideration is appropriate and that harm or injustice would

result if reconsideration were denied.’” United States v. All

Assets Held at Bank Julius, Baer & Co., Ltd., 315 F. Supp. 3d 90,

97 (D.D.C. 2018) (quoting FBME Bank Ltd. v. Mnuchin, 249 F. Supp.

3d 215, 222 (D.D.C. 2017)).

Therefore I will proceed to focus on whether an injustice,

as laid out above in Estate of Botvin, would arise if I deny the

Motion for Reconsideration. On the evidence of record, no

injustice would arise from denying Trigee’s Motion for

Reconsideration. As discussed below, Trigee’s claims relating to

the listing of SGA’s claim on Schedule F as not disputed would

still be barred by res judicata on the basis that, before Lerch

Early filed its Final Application, Trigee was aware of the

failure of its Schedule F to show SGA’s claim as disputed, was

aware of SGA’s contention that this failure nullified Trigee’s

statute of limitations defense, and was aware of the other

circumstances causing its malpractice damages claim to have

accrued. Trigee alleges no misunderstanding or error of

apprehension by the court that would change this result, and I

reject Trigee’s contention that there has been a dispositive

change to either the law or to the facts in the case.

TRIGEE’S OBLIGATION TO RAISE ITS

MALPRACTICE DAMAGES CLAIMS AS PART OF THE FEE

LITIGATION IF IT HAD PROCEDURES AVAILABLE TO DO SO

In Capitol Hill Group, the Court of Appeals reasoned that a

counterclaim may be barred by res judicata “when ‘the

relationship between the counterclaim and the plaintiff’s claim

is such that the successful prosecution of the second action

would nullify the initial judgment or impair the rights

established in the initial action.’” 569 F.3d at 492, citing

Iannochino v. Rodolakis (In re Iannochino), 242 F.3d 36, 42 (1st

Cir. 2001), which in turn was quoting Restatement (Second) of

Judgments § 22(2)(b).17 By reason of that principle, the Court

of Appeals concluded:

17 Restatement (Second) of Judgments § 22(2) (Am. Law Inst.

1982) provides:

A defendant who may interpose a claim as a counterclaim

in an action but fails to do so is precluded, after the

rendition of judgment in that action, from maintaining

an action on the claim if:

(a) The counterclaim is required to be

interposed by a compulsory counterclaim statute or

rule of court, or

(b) The relationship between the counterclaim

and the plaintiff’s claim is such that successful

prosecution of the second action would nullify the

initial judgment or would impair rights

established in the initial action.

(emphasis added).

To allow CHG to litigate malpractice claims against Shaw

Pittman now, based on the same representation, would

nullify the initial judgment or impair the rights

established by Shaw Pittman in the bankruptcy fee

litigation. Unlike in regular civil litigation, “[i]n

bankruptcy . . . a successful malpractice action could

impair rights that [the bankruptcy professionals] had

gained from the order awarding them fees. Under the

relevant section of the bankruptcy code governing fee

awards, a finding of malpractice would mean that the

attorneys were not entitled to compensation for those

services found to be substandard.” Iannochino, 242 F.3d

at 42-43 (internal citation omitted); see [Southmark

Corp. v. Coopers & Lybrand (In re Southmark Corp.), 163

F.3d 925, 931 (5th Cir. 1999)] (“Award of the

professionals’ fees and enforcement of the appropriate

standards of conduct are inseparably related functions of

bankruptcy courts.”).

Id. at 492-93.

Nevertheless, res judicata does not apply where the claim

sought to be barred could not have been litigated in the prior

proceeding. Osherow v. Ernst & Young, LLP (In re Intelogic

Trace, Inc.), 200 F.3d 382, 389 (5th Cir. 2000). Accordingly, in

determining whether res judicata applies, one issue is “whether

the bankruptcy court possessed procedural mechanisms that would

have allowed [the debtor] to assert [its malpractice damages

claims]” as a defense against the Final Application. Ries v.

Paige (In re Paige), 610 F.3d 865, 873–74 (5th Cir. 2010),

quoting Intelogic Trace, 200 F.3d at 388.

As will be seen, Trigee’s legal malpractice damages claims

regarding services rendered by Lerch Early through June 30, 2013,

accrued prior to the Final Application. Accordingly, if the

applicable rules afforded a procedural mechanism under which

Trigee could have litigated its malpractice damages claims as a

defense to the Final Application, see Paige, 610 F.3d at 873–74,

the binding precedent of Capitol Hill Group required Trigee to

raise those claims against the Final Application in order for the

claims not to be barred by res judicata.

In Capitol Hill Group, 569 F.3d at 492, the Court of Appeals

noted this court’s observation that the debtor there could have

pursued its malpractice claims at the bankruptcy fee hearings,18

and necessarily concluded that the debtor there had procedures

available under the applicable rules to raise its malpractice

damages claims as a defense to its former counsel’s fee

application in the litigation of that application. As discussed

below, procedures existed here as well for Trigee to have raised

its malpractice damages claims as a defense to Lerch Early’s

Final Application.

18 Specifically, the Court of Appeals noted approvingly

this court’s observation that Capitol Hill Group “could have

pursued claims against Shaw Pittman regarding the adequacy of its

representation . . . at the bankruptcy fee hearings but that it

failed to do so and would therefore be barred from later

asserting claims based on Shaw Pittman’s representation by the

doctrine of res judicata.” 569 F.3d at 492 (quoting Capitol Hill

Grp. v. Pillsbury, Winthrop, Shaw, Pittman, LLC, 574 F. Supp. 2d

143, 147 (D.D.C. 2008) (quoting an observation this court made at

a hearing)).

EVEN THOUGH AN ASSERTION OF

TRIGEE’S MALPRACTICE DAMAGES CLAIMS

WOULD HAVE REQUIRED AN ADVERSARY PROCEEDING UNDER

RULE 7001, PROCEDURES EXISTED FOR TRYING TOGETHER THE

“INSEPARABLY RELATED” MALPRACTICE CLAIMS AND FEE APPLICATION

The Final Application was brought under Fed. R. Bankr. P.

2016(a) via an application and not via an adversary proceeding

complaint. Fed. R. Bankr. P. 7001(1) would have required that

any claim for an affirmative recovery of malpractice damages be

brought as an adversary proceeding complaint. Relying on

Davenport v. Djourabchi, 316 F. Supp. 3d 58 (D.D.C. 2018)

(“Davenport II”), modifying Davenport v. Djourabchi, 296 F. Supp.

3d 245, 255-56 (D.D.C. 2017) (“Davenport I”), Trigee argues that

the malpractice damages claims, which could be pursued only via

an adversary proceeding, could not have been litigated in the

Final Application proceeding, and thus res judicata cannot apply.

I reject that argument.

The Federal Rules of Bankruptcy Procedure were sufficiently

flexible to have permitted the court to try an adversary

proceeding complaint for malpractice damages with the Final

Application proceeding regarding the services that the defendants

had provided on or before June 30, 2013. Trigee could have

raised Lerch Early’s malpractice as a defense to the Final

Application in an objection filed in the main bankruptcy case to

the Final Application because “a finding of malpractice would

mean that the attorneys were not entitled to compensation for

those services found to be substandard,” Capitol Hill Group, 569

F.3d at 492-93 (quoting Iannochino, 242 F.3d at 42-43 (internal

citation omitted)). If it also had a malpractice damages claim,

it could have addressed both an objection to the Final

Application and its malpractice damages claim together, as

explained below.

The Final Application was an administrative matter not by

itself giving rise to a dispute between parties requiring

resolution by the court. Nevertheless, the court itself had a

duty to review the Final Application. See In Re Busy Beaver

Bldg. Ctrs., Inc., 19 F.3d 833, 843 (3rd Cir. 1994) (holding that

the bankruptcy court has “an independent duty to review fee

applications even absent objections”); McGuirl v. White, 86 F.3d

1232, 1236 (D.C. Cir. 1996). The Final Fee Order thus

constituted a judicial determination that the fees sought by the

Final Application were warranted under the standards of

11 U.S.C. § 330(a)(3).

If Trigee had filed an objection under this court’s Local

Bankruptcy Rules to the Final Application, that objection would

have given rise to a contested matter. United States v. Laughlin

(In re Laughlin), 210 B.R. 659, 661 (B.A.P. 1st Cir. 1997);

Advisory Committee Note (1983) to Rule 9014 (“If a party in

interest opposes the amount of compensation sought by a

professional, there is a dispute which is a contested

matter.”).19 An objection filed in the main case to the Final

Application could not have appropriately included an assertion of

Trigee’s malpractice damages claims because Rule 7001(1) requires

that such a claim be pursued in an adversary proceeding.

Neither Rule 7001 nor Rule 9014 would have necessarily

barred the pursuit in an adversary proceeding of an objection to

the Final Application, even though an objection to a fee

application is not one of the proceedings listed in Rule 7001 as

an adversary proceeding. This follows because the court would

have discretion under Rule 9014(c) to bless the pursuit of the

19 Under 11 U.S.C. § 330(a)(1), professionals’ fees can be

awarded only after notice and a hearing. In turn, Fed. R. Bankr.

P. 2002(a)(6) deals with required notice of the hearing on a fee

application. However, 11 U.S.C. § 102(1) provides in relevant

part:

“After notice and a hearing”, or similar phrase—

(A) means after such notice as is appropriate

in the particular circumstances, and such

opportunity for a hearing as is appropriate in the

particular circumstances[.]

Accordingly, a court can satisfy the notice requirement of

§ 330(a)(1) and of Rule 2002(a)(6) by giving parties in interest

notice of the opportunity to object to a fee application. That

is the procedure followed in this court. See LBRs 2002-1(b)(1),

2002(k), and 2016-1(b). The required notice form instructs how

to make service of any objection to the fee application.

two matters together.20 Rule 9014(c) makes most of the Rules in

the Rules’ part VII (Adversary Proceedings) applicable to a

contested matter, and then provides:

The court may at any stage in a particular matter direct

that one or more of the other rules in Part VII shall

apply. The court shall give the parties notice of any

order issued under this paragraph to afford them a

reasonable opportunity to comply with the procedures

prescribed by the order.

Accordingly, a court may direct that an objection to a fee

application may proceed by way of joinder in a complaint with a

claim for malpractice damages.21 The court may so direct even

after a complaint has been filed joining the two matters.

Accordingly, had Trigee filed an adversary proceeding complaint

that included not only its malpractice damages claims but also an

objection to the Final Application, the court would have had the

authority under Fed. R. Bankr. P. 9014(c) to authorize the filing

20 There is no rule, like Rule 3007(b), that expressly

authorizes an objection to a fee application to be joined in a

complaint asserting a claim that must be pursued by reason of

Rule 7001 as an adversary proceeding. Rule 3007(b) authorizes an

objection to a claim to be included in a complaint asserting a

Rule 7001 claim, thus making it unnecessary to obtain a court

order for authority to do so. A fee application is necessarily

asserting a claim, but Rule 3007 addresses objections to proofs

of claim, not objections to fee applications. Even though Rule

3007(b) does not apply to an objection to a fee application,

there is no apparent reason why the court ought not have

discretion to permit an objection to a fee application to be

pursued in a complaint asserting a malpractice damages claim.

21 However, when there are multiple parties asserting

objections to a fee application, the court might decide that it

makes sense to have all of the objections pursued in the main

case, and direct that such an objection filed in an adversary

proceeding complaint be re-filed in the bankruptcy case.

of the objection within the adversary proceeding complaint for

malpractice damages, thereby permitting the two matters to

proceed together in the adversary proceeding. See In re Fagan,

559 B.R. 718, 727 (Bankr. E.D. Cal. 2016) (“whether to permit a

[contested matter] to be consolidated with, or raised in, an

adversary proceeding is up to the discretion of the bankruptcy

court”); Motichko v. Premium Asset Recovery Corp. (In re

Motichko), 395 B.R. 25, 33 (Bankr. N.D. Ohio 2008).22

Assume, instead, that Trigee had elected to file an

objection to the Final Application in the main case.

Simultaneously, or shortly thereafter, Trigee could have filed an

adversary proceeding complaint under Rule 7001 to assert its

malpractice damages claims against the defendants. Trigee could

then have moved for consolidation of the Final Application

proceeding with its complaint to recover a monetary judgment on

its malpractice damages claims. See Weinberg v. Scott E. Kaplan,

22 Even without invoking Rule 9014(c), a court may uphold

the pursuit of a contested matter in an adversary proceeding

complaint by holding that it is harmless error not to dismiss the

contested matter pursued in an adversary proceeding complaint, or

that dismissing the contested matter would be elevating form over

substance. See, e.g., Sanger v. Ahn, 406 F. Supp. 3d 800, 805

(N.D. Cal. 2018), aff’d sub nom. Sanger v. Ahn (In re Ahn), 804

F. App’x 541 (9th Cir. 2020); Kilbourne v. CitiMortgage, Inc. (In

re Kilbourne), 507 B.R. 219, 223-24 (Bankr. S.D. Ohio 2014);

Motichko, 395 B.R. at 32. While a bankruptcy court has

discretion to dismiss a contested matter pursued in an adversary

proceeding complaint, see, e.g., Barrientos v. Wells Fargo Bank,

N.A., 633 F.3d 1186, 1189, (9th Cir. 2011), that does not mean

that the court is obligated to dismiss a contested matter pursued

in an adversary proceeding complaint.

LLC, 699 F. App’x 118, 121 (3d Cir. 2017), as amended (Sept. 14,

2017) (concluding that res judicata applied due to the ability to

consolidate a contested matter with an adversary proceeding).

The court has such power to consolidate because Rule 9014(c)

makes Rule 7042 applicable in contested matters. Rule 7042 makes

Fed. R. Civ. P. 42 applicable, and Rule 42(a) provides in

relevant part: “If actions before the court involve a common

question of law or fact, the court may . . . consolidate the

actions.”

Under Rule 42, a contested matter and an adversary

proceeding may be consolidated if they involve a common question

of law or fact. This follows because the Federal Rules of

Bankruptcy Procedure treat both adversary proceedings and

contested matters as “actions” for purposes of Rule 42. As a

consequence, a contested matter (one type of action) and an

adversary proceeding (another type of action) are two actions

that may be consolidated if they involve a common question of law

or fact.

In conclusion, Trigee could have tried, in the same

proceeding, both an objection to the Final Application and its

malpractice damages claims. Either it could have invoked Rule

9014(c) to seek permission to pursue both matters in an adversary

proceeding complaint, or it could have filed them separately and

then moved for consolidation under Rule 42.

The court would have had discretion in other ways to

preserve Trigee’s malpractice damages claim from becoming barred

by res judicata. If Trigee had filed an adversary proceeding

complaint asserting its malpractice claims, but needed discovery

to flesh out its complaint, Trigee could have asked that the

litigation of its objection to the Final Application (whether the

objection was filed separately in the main case or as part of the

adversary proceeding complaint) be stayed pending the outcome of

its assertion of its malpractice damages claims. Even if Trigee

was not prepared to have filed an adversary proceeding complaint,

Trigee could have asked that the litigation of the Final

Application be delayed (or the time for it to defend against the

Final Application be extended) to allow Trigee time to develop

the facts and its theories of malpractice more thoroughly in

order to file an adversary proceeding complaint. See Intelogic

Trace, 200 F.3d at 390.23 Trigee could have also asked the court

to reserve its malpractice damages claims for later adjudication

such that res judicata would not apply. See Paige, 610 F.3d at

875. The key point is that Trigee ought to have raised its

23 See also Weinberg, 699 F. App’x at 122 (“The Plaintiffs

counter that they did not know the extent of their damages at

that time. But this is no excuse for failing to oppose the

application or apprise the Bankruptcy Court of the claim. Had

the Plaintiffs done so, the court could have stayed the contested

fee application or permitted discovery on the matter. See Fed.

R. Bank[r]. P. 9014.”); Paige, 610 F.3d at 875.

concerns as to Lerch Early’s performance in some manner during

the court’s consideration of the Final Application.

Under the reasoning of Davenport II, Trigee would have had

to have been able to assert its malpractice claims in the same

proceeding (the Final Application proceeding) for res judicata to

apply. However, by way of consolidation pursuant to Fed. R.

Bankr. P. 7042, or pursuit, upon court authorization, of both

matters in an adversary proceeding complaint, the two matters,

“inseparably related” matters under Capitol Hill Group, could

have been tried together. That would have amounted to trying the

two matters in the same proceeding.

While the District Court held that Davenport did not need to

avail himself of Rule 7042, and seek to consolidate the claims in

that case for trial in order to avoid res judicata, Davenport II,

316 F. Supp. 3d at 66, 67-68, the differences between the claims

in Davenport II and Trigee’s claims, as well as the similarities

between Trigee’s claims and those considered in Capitol Hill

Group, render it inappropriate to extend that holding in

Davenport II to Trigee’s claims. Because Trigee’s claims are

fairly distinguished from those in Davenport II, such an

extension would impermissibly depart from Capitol Hill Group.

In Davenport II, the District Court relied on Hurd v.

District of Columbia Government, 864 F.3d 671, 679 (D.C. Cir.

2017), in concluding that “the first prong of the res judicata

inquiry does not look to whether a claim could have been brought

in the previous court; it examines if the second claim could have

been brought in the first proceeding.” 316 F. Supp. 3d at 68.

However, Hurd is plainly distinguishable from this case, which is

controlled instead by Capitol Hill Group.

In Hurd, the Court of Appeals addressed whether res judicata

applied to a prisoner’s damages claims against the Government

when he failed to raise them in a habeas corpus proceeding. The

Court of Appeals concluded that “because section 1983 claims

cannot be joined in a habeas proceeding, the Superior Court’s

unreviewed bench ruling was not the result of a full and fair

opportunity to litigate.” Hurd, 864 F.3d at 679. The Court of

Appeals necessarily determined that the “plaintiff was precluded

from recovering damages in the [habeas corpus proceeding] by

formal jurisdictional or statutory barriers, not by plaintiff’s

choice,” 864 F.3d at 680 (quoting Burgos v. Hopkins, 14 F.3d 787,

790 (2d Cir. 1994)), such that res judicata did not apply.

Supreme Court precedent regarding habeas corpus proceedings

makes clear that this was a proper determination in Hurd. Habeas

corpus is the exclusive remedy for a state prisoner who

challenges the fact or duration of his confinement and seeks

immediate release, even though such a claim may come within the

literal terms of § 1983. See Preiser v. Rodriguez, 411 U.S. 475,

488-490 (1973). In turn, “damages are not available in federal

habeas corpus proceedings.” Preiser, 411 U.S. at 493. If a

§ 1983 judgment would necessarily imply the invalidity of a

prisoner’s conviction or sentence, the § 1983 complaint must be

dismissed unless the plaintiff can demonstrate that the

conviction or sentence has already been invalidated (for example,

via a prior habeas corpus proceeding). Heck v. Humphrey, 512

U.S. 477, 487 (1994). Accordingly, in Hurd, the prisoner could

not have recovered § 1983 damages in the habeas corpus

proceeding, and the dismissal of the prisoner’s habeas corpus

proceeding could not have res judicata effect.

Here, in contrast to Hurd, no formal jurisdictional or

statutory barriers prevented Trigee from filing an adversary

proceeding complaint asserting its malpractice damages claim and

then obtaining a consolidation of that adversary proceeding with

the litigation of an objection to the Final Application.

In Davenport II, it would have been theoretically possible

to have consolidated Davenport’s objection to the mortgagees’

claim and a later adversary proceeding asserting Davenport’s

damages claims against the mortgagees for wrongful foreclosure

and other wrongful acts.24 No jurisdictional or statutory

barriers precluded that approach.

24 However, as a practical matter the court would have

likely rejected such an approach because it would have

unreasonably delayed confirmation of the debtor’s Chapter 13

plan.

Moreover, under Fed. R. Bankr. P. 3007(b), a debtor “may

include [its objection to a proof of claim] in an adversary

proceeding.” Accordingly, Davenport could have filed an

adversary proceeding for a recovery of damages and included in

the adversary proceeding his objection to the proof of claim.

Unlike Hurd, there were no jurisdictional or statutory barriers

precluding trying the two matters, via that route, in the same

proceeding.

The more critical issue in Davenport II was not whether

Davenport could have asserted his monetary damages claims in the

litigation of his objection to the mortgagees’ proof of claim;

plainly the two matters could have been tried together. The more

critical issue was whether the two matters should have been tried

together. See Capitol Hill Group, 569 F.3d at 490 (quoting NRDC

v. EPA, 513 F.3d 257, 261 (D.C. Cir. 2008) (“[C]laim preclusion

is also intended to prevent litigation of matters that should

have been raised in an earlier suit.”)).

The key reason that res judicata did not apply in Davenport

II was because Davenport’s later civil action for damages would

not have nullified the determination of the amount owed on the

mortgage (the issue addressed by the objection to the mortgagees’

claim). A mortgagor’s recovery of a damages claim against her

mortgagee for wrongful foreclosure does not nullify the mortgage.

Indeed, if the mortgage was on favorable terms, the mortgagor

would not want to nullify the mortgage. Accordingly, Restatement

(Second) of Judgments § 22(2)(b), as applied in Capitol Hill

Group, 569 F.3d at 492-93, would not have required res judicata

to apply to bar Davenport’s assertion of his damage claims after

entry of the order fixing the allowed amount of the mortgage

claim.

Another decision, Iannochino (relied upon in Capitol Hill

Group, 569 F.3d at 494-93) put it this way: for res judicata to

apply, the causes of action must be identical, and under

Restatement (Second) of Judgments § 24 (1982) the court must

look, first, to “whether the facts are related in time, space,

origin or motivation,” second, to “whether they form a convenient

trial unit,” and, third, to “whether their treatment as a unit

conforms to the parties’ expectations.” See Iannochino, 242 F.3d

at 46. The parties in Davenport II would not have expected that

Davenport’s damages claims and his objection to the mortgagee’s

proof of claim would be treated as a unit. In Chapter 13, a

plan’s duration cannot exceed five years. It is noteworthy that

Davenport’s bankruptcy case began in 2015 and that Davenport’s

civil action asserting his damages claims is still pending, more

than five years later. For purposes of Davenport’s obtaining a

confirmed plan, he needed to obtain a prompt determination of the

amount owed on the mortgage.25 From that viewpoint, Davenport’s

damages claims and his objection to the proof of claim did not

“form a convenient trial unit.” Nor would the treatment of the

two proceedings as a trial unit have conformed to “the parties’

expectations” when adjudication of Davenport’s damages claims was

not necessary to determine whether Davenport’s Chapter 13 plan

could be confirmed.

Stated differently, under the doctrine of res judicata, “a

claim should not be barred unless the factual underpinnings,

theory of the case, and relief sought against the parties to the

proceeding are so close to a claim actually litigated in the

bankruptcy case that it would be unreasonable not to have brought

them both at the same time in the bankruptcy forum.” E. Minerals

& Chems. Co. v. Mahan, 225 F.3d 330, 337–38 (3d Cir. 2000); see

also Weinberg, 699 F. App’x at 121. It was not unreasonable for

Davenport to forego pursuing his damage claims at the same time

as he objected to the mortgagees’ proof of claim. Those matters

turned on different sets of facts. In the bankruptcy case, the

requested relief was a determination of the amount owed: “the

bankruptcy court only was asked to determine the amount of money

25 For example, under the confirmed plan, postconfirmation

interest of 6% per annum on the allowed secured claim was to run

from the confirmation of the plan, with interest accruing before

confirmation at 10.5%. See In re Davenport, B.R. , No.

15-00540, 2020 WL 6891912, at *1-2 (Bankr. D.D.C. Nov. 24, 2020).

Delay in obtaining a confirmed plan would have prejudiced

Davenport.

due on the note; no evaluation of the legitimacy of the

foreclosure or of defendants’ actions took place.” Davenport II,

316 F. Supp. 3d at 68 n.9. In the civil action, the requested

relief was damages for wrongful foreclosure and other wrongful

acts, and Davenport was not seeking to disturb the ruling on the

proof of claim. As the District Court observed, the objection to

the mortgagees’ claim was a necessary step to Davenport’s

obtaining confirmation of a Chapter 13 plan, by way of fixing the

amount of the mortgagees’ claim for purposes of distributions

under the plan, and requiring Davenport simultaneously “to

initiate an adversary proceeding [asserting his damages claims]

to resolve other issues . . . would have complicated matters and

created an unnecessary delay in proceedings, neither of which are

goals of the doctrine of res judicata.” 316 F. Supp. 3d at 69-

70.

The District Court correctly concluded in Davenport II that

res judicata did not apply, but Davenport II is plainly

distinguishable from Capitol Hill Group and this case: the logic

in Davenport II is plainly not applicable to this case in which

the Final Application and Trigee’s malpractice damages claims

involve such “inseparably related functions” of a bankruptcy

court that they ought to have been tried together.26 See

Davenport II, 316 F. Supp. 3d at 68 n.9 (distinguishing Capitol

Hill Group and similar cases finding that “in awarding fees to

attorneys in the bankruptcy court, the bankruptcy judge had

implicitly found that the attorney’s services were acceptable so

any litigation of attorneys work should have been brought in the

bankruptcy case”). Here, in contrast to Hurd and to Davenport

II, the Final Application and the malpractice damages claim ought

to have been determined together as (1) they arose from the same

nucleus of operative facts, (2) the enforcement of standards of

conduct incident to a malpractice claim and an award of fees were

inseparably related functions of the Bankruptcy Court, and (3) a

later finding of malpractice would have nullified the earlier fee

award. These differences weigh in favor of finding that res

judicata properly applies here, even though the malpractice

26 Capitol Hill Group, as here, involved a case under

Chapter 11 of the Bankruptcy Code. Capitol Hill Grp., 574 F.

Supp. 2d at 145. As such, the Bankruptcy Court had to approve

counsel’s employment in that bankruptcy case. See 11 U.S.C.

§ 327; Capitol Hill Grp., 569 F.3d at 487. “[M]alpractice claims

against court-appointed professionals stemming from services

provided in the bankruptcy proceeding are ‘inseparable from the

bankruptcy context.’” Id. at 489 (quoting Southmark Corp., 163

F.3d at 931). The matters at issue in Capitol Hill Group were

very similar to those here: fee applications by a debtor in

possession’s counsel and malpractice claims by that counsel’s

former client concerning much of the same services as the fee

applications. Capitol Hill Grp., 569 F.3d at 488. The outcome

of subsequent litigation of those malpractice claims could have

effectively nullified the earlier fee award. Id. at 492.

damages claim could not have been asserted in any objection to

the Final Application that Trigee might have filed in the main

case. See Capitol Hill Grp., 569 F.3d at 491, 492-93; see also

Weinberg, 699 F. App’x at 121 (placing emphasis on the ability to

consolidate a contested matter with an adversary proceeding).27

For res judicata to apply, it was not necessary, under Capitol

Hill Group, that the malpractice monetary damages claims be

capable of assertion in the same filing as an objection to the

Final Application. In response to the claims asserted in the

Final Application, Trigee ought to have initiated an adversary

proceeding asserting its malpractice claims—or at least, Trigee

ought to have preserved those claims by advising the court of its

concerns with its counsel’s performance—during the pendency of

the Final Application proceeding, thus enabling the court to have

tried the “inseparably related” claims together. See Capitol

27 But see Sunrise Energy Co. v. Maxus Gas Mktg. (In re

Sunpacific Energy Mgmt., Inc.), 216 B.R. 776, 779 (Bankr. N.D.

Tex. 1997) (a preference action is not one that “could have been

brought at the same time as” a prior confirmation hearing for the

purposes of res judicata because the confirmation process

constitutes a contested matter, whereas a preference action must

be commenced as an adversary proceeding). However, Sunrise

Energy fails to recognize that in appropriate circumstances

(i.e., when the claims are sufficiently related that under res

judicata principles it would be unreasonable not to have pursued

the one claim for adjudication with the other claim), the court

can consolidate the two proceedings even though one claim is

pursued via a contested matter proceeding and the other must be

pursued via an adversary proceeding.

Hill Group, 569 F.3d at 493. Otherwise, the later assertion of

the malpractice claims would essentially seek to nullify the

Final Fee Order, contrary to Restatement (Second) of Judgments

§ 22(2)(b).

THE 2007 AMENDMENT OF RULE

3007 DOES NOT ALTER THE OUTCOME

Fee applications are governed by Fed. R. Bankr. P. 2016(a),

not Fed. R. Bankr. P. 3007, which deals with objections to proofs

of claim, see 9 Collier on Bankruptcy ¶ 3007.01 (Richard Levin &

Henry J. Sommer eds., 16th ed. 2020). Plainly Rule 3007 does not

apply to objections to fee applications because such an

application is not a proof of claim. For example, Rule 3007(a)

requires that the objection be mailed “to the person most

recently designated on the claimant’s original or amended proof

of claim as the person to receive notices,” but a fee

application, not being a proof of claim, and not filed on the

Official Form for a proof of claim, includes no such

designation.28

Nevertheless, some decisions, such as Intelogic Trace,

erroneously treated a prior version of Rule 3007 as being

applicable to objections to fee applications in ruling on the res

28 See supra note 19 (describing the rules implementing the

requirements for awarding professional fees under 11 U.S.C.

§ 330(a)(1)).

judicata effect of a failure to try together any objection to a

fee application and a malpractice damages claim. When Intelogic

Trace was decided in 2000, Rule 3007 provided:

An objection to the allowance of a claim shall be in

writing and filed. A copy of the objection with notice

of the hearing thereon shall be mailed or otherwise

delivered to the claimant, the debtor or debtor in

possession and the trustee at least 30 days prior to the

hearing. If an objection to a claim is joined with a

demand for relief of the kind specified in Rule 7001, it

becomes an adversary proceeding.

Although this older version of Rule 3007 made no mention of

proofs of claim, it was preceded (as now) by Rules 3001 through

3006 dealing with proofs of claim, and it was evident that, as

now, Rule 3007 dealt with objections to proofs of claim.29 In

contrast, administrative expense claims were governed in 2000, as

now, by Rule 2016(a), and Rule 2002(a)(6) governed notice of

hearings on fee applications. Rule 2002(a)(6) would be rendered

surplusage if Rule 3007 (which included its own notice

requirements) governed objections to fee applications, thus

violating the canon against surplusage. See City of Chicago v.

Fulton, 141 S. Ct. 585, 591 (2021). Like the current Rule 3007,

29 Under 11 U.S.C. § 501(a) and Rule 3001(a), a proof of

claim is what a creditor files to assert a claim in a bankruptcy

case. The definition of “creditor” in 11 U.S.C. § 101(10) does

not include the holder of an administrative expense claim under

11 U.S.C. § 503. As now, Rule 3007 was contained in the Rules’

Part III (Claims and Distribution to Creditors and Equity

Interest Holders; Plans), which deals with claims of creditors,

not administrative expense claims.

the older version of Rule 3007, in force when Intelogic Trace was

decided, did not apply to fee applications.

Trigee emphasizes that in Intelogic Trace, 200 F.3d at 389-

90, the Court of Appeals pointed to the version of Rule 3007 then

in effect as applicable to the objection to the fee application

at issue, and relied on Rule 3007 as one basis for concluding

that the debtor could have raised its malpractice damages claims

in defending against the fee application. The Court of Appeals

reasoned that had the debtor objected to the fee application and

included with its objection a claim for monetary damages on

account of alleged malpractice, the matter, under Rule 3007,

would have become an adversary proceeding. This erroneous

reliance on Rule 3007 in Intelogic Trace was followed in

Iannochio, 242 F.3d at 48, and in Grausz v. Englander, 321 F.3d

467, 474 (4th Cir. 2003). However, for the same reasons as here,

and in Capitol Hill Group, res judicata would still have applied

in those decisions even if Rule 3007 had been viewed (correctly)

as inapplicable.30

In 2007, before Trigee commenced its bankruptcy case in

2012, Rule 3007 was amended to provide in relevant part:

30 In Capitol Hill Group (a 2009 decision issued after Rule

3007 had been amended, but involving a case in which the fee

proceedings in the Bankruptcy Court concluded before Rule 3007

changed), the Court of Appeals did not rely on the old Rule 3007

as a basis for its decision.

(b) Demand for relief requiring an adversary proceeding

A party in interest shall not include a demand for relief

of a kind specified in Rule 7001 in an objection to the

allowance of a claim, but may include the objection in an

adversary proceeding.

Trigee relies on this limitation to emphasize that its

malpractice claims could not have been included in any objection

to the Final Application it might have filed in the main

bankruptcy case. As just noted, Rule 3007 does not and did not

apply to fee applications. Even if Rule 3007(b) did apply to the

Final Application, it provides that a party in interest may

include an objection to a claim in an adversary proceeding (as

distinct from the main bankruptcy case). Accordingly, if Rule

3007(b) did apply, Trigee’s argument is plainly without merit:

under Rule 3007(b), Trigee could have included an objection to

the Final Application in an adversary proceeding asserting

Trigee’s malpractice damages claims. Thereby, an objection to

the fee application could have been pursued in the same

proceeding as Trigee’s claim for malpractice damages.

If, as I have concluded, Rule 3007(b) did not apply to the

Final Application, the result is nevertheless the same: Trigee’s

argument does not succeed. First, as a practical matter, Trigee

likely would have been permitted to include an objection to the

Final Application in an adversary proceeding asserting its

malpractice claims. See In re Fagan, 559 B.R. at 727, and cases

cited in n.22, supra. Thereby the two matters would still have

been tried in the same proceeding.

Second, the court possessed other procedural mechanisms that

would have allowed Trigee to try its malpractice damages claims

in the litigation of any objection that Trigee might have filed

to the Final Application even if the two matters were not pursued

together in an adversary proceeding complaint. See Weinberg, 699

F. App’x at 121 (res judicata applied in light of ability to

consolidate a contested matter with an adversary proceeding);

Paige, 610 F.3d at 875 (noting the authority under Rule 9014 to

direct that Part VII Rules shall apply to a contested matter, and

concluding that, accordingly, the fee application hearing was an

effective forum for pursuing the debtor’s malpractice claims).

Trigee had an obligation to use those options in order to avoid

res judicata.

Contrary to Trigee’s view, the Advisory Committee Note to

the 2007 amendments of Rule 3007 does not support its position.

Instead, the Note strengthens the conclusion that procedural

mechanisms existed that would have permitted Trigee to litigate

any objection it might have filed to the Final Application with

an adversary proceeding asserting its malpractice damages claims.

The Advisory Committee Note states in relevant part:

The . . . amendment prohibits a party in interest from

including in a claim objection a request for relief that

requires an adversary proceeding. A party in interest

may, however, include an objection to the allowance of a

claim in an adversary proceeding. Unlike a contested

matter, an adversary proceeding requires the service of

a summons and complaint, which puts the defendant on

notice of the potential for an affirmative recovery.

Permitting the plaintiff in the adversary proceeding to

include an objection to a claim would not unfairly

surprise the defendant as might be the case if the action

were brought as a contested matter that included an

action to obtain relief of a kind specified in Rule 7001.

The rule as amended does not require that a party

include an objection to the allowance of a claim in an

adversary proceeding. If a claim objection is filed

separately from a related adversary proceeding, the court

may consolidate the objection with the adversary

proceeding under Rule 7042.

(emphasis added).31 It is Rule 7042 (making Fed. R. Civ. P. 42

applicable in adversary proceedings) and Rule 9014(c), making

Rule 7042 applicable to contested matters (such as an objection

to a claim or to a fee application), and not Rule 3007(b), that

are the grounds for the Advisory Committee Note’s observation

that the court may consolidate an objection to a claim with an

adversary proceeding.32 The Advisory Committee’s observation

regarding consolidation would be equally true when an objection

31 Trigee argues that the Note’s indication that Rule

3007(b) “does not require that a party include an objection to

the allowance of a claim in an adversary proceeding” means that

if Trigee had pursued an objection to the Final Application,

Trigee was not required to simultaneously pursue its malpractice

claims in order to avoid res judicata. However, that argument is

without merit because Rule 3007(b) does not purport to address

the issue of res judicata.

32 Rule 7042 authorizes the consolidation of adversary

proceedings involving common questions of law or fact, and the

joining of “any or all matters at issue” within such proceedings.

See supra p. 35 (further discussing Rules 7042 and 9014).

to a final fee application is pending and the debtor brings an

adversary proceeding asserting malpractice damages claims (even

though the Note addressed Rule 3007 objections to claims, not

objections to fee applications).33 It follows that res judicata

applies here even though an objection to the Final Application

could not have included an affirmative request to recover

malpractice damages.

As in Capitol Hill Group, procedures were available to

Trigee to contest the Final Application and to assert its

malpractice damages claims. That Trigee did not take advantage

of those procedures does not alter the fact that it could have

done so.

RES JUDICATA APPLIED EVEN THOUGH NO

OBJECTION WAS RAISED TO THE FINAL APPLICATION

Trigee argues in its reply to the opposition to the Motion

for Reconsideration that this case is unlike Capitol Hill Group

because it never filed an objection to the Final Application.

Reply at 6-7. The Final Fee Order was a final judgment

adjudicating Lerch Early’s entitlement to fees even though the

33 Covert, 779 F.3d at 244, involved a bankruptcy case

commenced in 2008, after Rule 3007 had been amended. The Court

of Appeals had no difficulty concluding that res judicata applied

because the plaintiffs could have brought an adversary proceeding

asserting their affirmative claims for damages during the pending

contested matter.

Final Application did not result in a dispute between parties.34

Accordingly, the court properly rejected Trigee’s argument in the

Memorandum Decision of September 23, 2016, explaining:

That the Order Granting Final Application granted the

Final Application as unopposed, does not change the

result. See Riehle v. Margolies, 279 U.S. 218, 225

(1929) (“A judgment of a court having jurisdiction of the

parties and of the subject-matter operates as res

judicata, in the absence of fraud or collusion, even if

obtained upon a default.” (citations omitted)); Law

Offices of Jerris Leonard, P.C. v. Mideast Sys., Ltd.,

111 F.R.D. 359, 361 (D.D.C. 1986) (ruling that a judgment

in favor of a law firm against its client for attorney’s

fees, as a matter of res judicata, barred that client’s

later malpractice action even if the client defaulted in

the law firm’s action to recover fees).

Mem. Dec. 35-36. Trigee does not attempt to demonstrate error in

the court’s explanation for rejecting Trigee’s argument.

Trigee had only 21 days (until January 31, 2014) to oppose

the Final Application filed on January 10, 2014. However,

outside of bankruptcy, once a law firm commences a civil action

to recover fees, thereby putting the quality of its services at

issue, the doctrine of res judicata requires the client to raise

its malpractice damages claims in the civil action if those

claims are to be preserved. See Law Offices of Jerris Leonard,

111 F.R.D. at 361. The same ought to apply in a bankruptcy case

when a law firm files a final fee application to recover fees.

34 Moreover, the court was obligated to review the Final

Application in determining that the requested fees were allowable

under 11 U.S.C. § 330(a) even though there was no objection to

the Final Application. See Busy Beaver, 19 F.3d at 843.

The three-year statute of limitations protects against claims

becoming stale, but it is not a safe harbor from this res

judicata principle.

Moreover, Trigee was aware since the hearing in the main

bankruptcy case on November 13, 2013, that there may have been

malpractice. Accordingly, it had 79 days after that hearing to

investigate its possible malpractice damages claim before the

January 31, 2014 deadline to oppose the Final Application. In

any event, “even if [the debtor] had only informed the bankruptcy

court of its concerns and not immediately sought affirmative

relief for malpractice, the bankruptcy court could have stayed

the fee hearing and permitted time for discovery and development

under the procedures available in Part VII of the Bankruptcy

Rules,” Intelogic Trace, 200 F.3d at 390, and, alternatively,

Trigee could have asked the court to reserve its malpractice

damages claims for later adjudication such that res judicata

would not apply. See Paige, 610 F.3d at 875.

EVEN IF THE MALPRACTICE DAMAGES CLAIMS

WOULD HAVE BEEN NON-CORE IN NATURE, OR WOULD HAVE

ENTAILED A RIGHT TO A JURY TRIAL, RES JUDICATA STILL APPLIES

With respect to the issue of whether procedural mechanisms

existed that would have allowed Trigee to assert its malpractice

damages claims in defending against the Final Application, Trigee

raised a new argument for the first time in its Sur-Reply to

Defendants’ Sur-Reply in Further Opposition to Plaintiff’s Motion

for Reconsideration (Dkt. No. 136 filed on January 22, 2021).

Trigee notes that the Final Application was a core proceeding in

which Trigee and Lerch Early had no right to a jury trial, but

that any adversary proceeding that Trigee could have brought

pursuing malpractice damages claims would have been treated as a

non-core proceeding and one in which Trigee would have been

entitled to a jury trial. Accordingly, Trigee argues that the

two proceedings could not have been tried together, and that it

follows that res judicata cannot apply.

The defendants have not had an opportunity to respond to

this new argument, but it is clear that res judicata applies even

if Trigee’s malpractice damages claims would have been non-core

and even if Trigee would have been entitled to a jury trial had

Trigee requested one.

1. Jurisdiction and Authority to Decide Bankruptcy

Proceedings. Putting this new argument in context requires a

review of the jurisdiction and authority of the District Court

and of the Bankruptcy Court to hear and decide bankruptcy

proceedings. Jurisdiction over bankruptcy proceedings rests on

28 U.S.C. § 1334(b), which provides (with exceptions of no

relevance here) that “the district courts shall have original but

not exclusive jurisdiction of all civil proceedings arising under

title 11, or arising in or related to cases under title 11.” In

turn, 28 U.S.C. § 157(a) allows the District Court to refer such

proceedings to the Bankruptcy Court.35 However, under 28 U.S.C.

§ 157(d), “[t]he district court may withdraw, in whole or in

part, any case or proceeding referred under this section, on its

own motion or on timely motion of any party, for cause shown.”

With the consent of the parties, a bankruptcy judge may hear

and decide a non-core proceeding.36 Absent such consent, a

bankruptcy judge may hear a non-core proceeding and issue

proposed findings of fact and conclusions of law for the District

Court’s de novo review.37 In contrast, a bankruptcy judge is

35 In this district, DCt.LBR 5011-1(a) provides: “Pursuant

to 28 U.S.C. § 157(a), all cases under Title 11 and all

proceedings arising under Title 11 or arising in or related to a

case under Title 11 are referred to the bankruptcy judges of this

District.” In other words, by local rule, the District Court has

referred to the Bankruptcy Court all proceedings falling within

the District Court’s jurisdiction under 28 U.S.C. § 1334(b).

36 28 U.S.C. § 157(c)(2) provides that “the district court,

with the consent of all the parties to the proceeding, may refer

a proceeding related to a case under title 11 to a bankruptcy

judge to hear and determine and to enter appropriate orders and

judgments, subject to review under section 158 of this title.”

37 28 U.S.C. § 157(c)(1) provides:

A bankruptcy judge may hear a proceeding that is not a

core proceeding but that is otherwise related to a case

under title 11. In such proceeding, the bankruptcy judge

shall submit proposed findings of fact and conclusions of

law to the district court, and any final order or

judgment shall be entered by the district judge after

considering the bankruptcy judge’s proposed findings and

conclusions and after reviewing de novo those matters to

which any party has timely and specifically objected.

authorized by statute to hear and decide core proceedings listed

in 28 U.S.C. § 157(b)(2), such as a fee application.38 However,

by reason of Article III of the Constitution, a bankruptcy judge

may not, unless the parties consent, decide certain matters even

though they are designated as core proceedings under 28 U.S.C.

§ 157(b)(2). See Stern v. Marshall, 564 U.S. 462 (2011).

Nevertheless, such a matter may be treated as a non-core

proceeding that the bankruptcy judge may decide upon consent of

the parties or, absent such consent, the bankruptcy judge may

issue proposed findings of fact and conclusions of law under

§ 157(c)(1). See Exec. Benefits Ins. Agency v. Arkison, 573 U.S.

25, 36 (2014) (“The statute permits Stern claims to proceed as

non-core within the meaning of § 157(c).”).

As held in Capitol Hill Group, 569 F.3d at 489-90 (citations

omitted), “malpractice claims against court-appointed

professionals stemming from services provided in the bankruptcy

proceeding are ‘inseparable from the bankruptcy context,’” and

adversary proceedings pursuing such claims “constitute . . .

proceeding[s] ‘arising in’ the bankruptcy case. Such claims

38 28 U.S.C. § 157(b)(1) provides:

Bankruptcy judges may hear and determine all cases under

title 11 and all core proceedings arising under title 11,

or arising in a case under title 11, referred under

subsection (a) of this section, and may enter appropriate

orders and judgments, subject to review under section 158

of this title [dealing with appeals of such orders and

judgments].”

therefore fall within the bankruptcy jurisdiction of the federal

courts.” “Arising in” proceedings are viewed as core

proceedings.39 Accordingly, a debtor’s claim for damages against

its lawyers that alleges malpractice as to their work in its

bankruptcy case is a core proceeding.40 Nevertheless, had Trigee

brought an adversary proceeding asserting its malpractice damages

claims during the pendency of the Final Application, Stern might

have required that the adversary proceeding be treated as a non-

core proceeding regarding the bankruptcy judge’s authority to

decide the claims. See Loveridge v. Hall (In re Renewable Energy

Dev. Corp.), 792 F.3d 1274 (10th Cir. 2015). But see Frazin v.

Haynes & Boone, L.L.P. (In re Frazin), 732 F.3d 313, 322 (5th

Cir. 2013) (stating that “the resolution of the fee application

proceedings necessarily resolved the malpractice counterclaim.

Therefore, under Stern, the bankruptcy court had the authority to

enter a final judgment rejecting Frazin’s malpractice claim on

its merits.”). I will assume, without deciding, that Stern would

39 See Southmark Corp. v. Coopers & Lybrand (In re

Southmark Corp.), 163 F.3d 925, 930 (5th Cir. 1999) (citing Wood

v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir. 1987)).

Moreover, the list of core proceedings includes “matters

concerning the administration of the estate,” “allowance or

disallowance of claims against the estate,” and “other

proceedings affecting the liquidation of the assets of the

estate.” 28 U.S.C. § 157(b)(2)(A), (B), and (O).

40 See Southmark Corp., 163 F.3d at 930-32. See also

Capitol Hill Group, 569 F.3d at 489–90; Schultze v. Chandler, 765

F.3d 945, 948 (9th Cir. 2014); Baker v. Simpson, 613 F.3d 346,

350 (2d Cir. 2010); Grausz, 321 F.3d at 471-72.

have required me to treat any malpractice damages claims Trigee

might have asserted during the pendency of the Final Application

as a non-core proceeding.

Some courts have held that a debtor has no right to a jury

trial upon filing an adversary proceeding complaint asserting its

legal malpractice damages claims during the pendency of a fee

application.41 Nevertheless, I will assume, without deciding,

that Trigee would have had a right to a jury trial had it filed

an adversary proceeding asserting its legal malpractice damages

claims during the pendency of the Final Application. Without the

consent of the parties, the bankruptcy judge could not have

conducted the jury trial.42

41 See, e.g., Billing v. Ravin, Greenberg & Zackin, P.A.,

22 F.3d 1242, 1253 (3d Cir. 1994):

We hold that an allegation of legal malpractice raised as

a defense to post-petition fees for bankruptcy counsel

likewise falls within the process of the allowance and

disallowance of claims. The debtors have no Seventh

Amendment right to trial by jury, not because of specific

waiver of Seventh Amendment rights, but because their

claim has been converted from a legal one into an

equitable dispute over a share of the estate.

42 28 U.S.C. § 157(e) provides:

If the right to a jury trial applies in a proceeding that

may be heard under this section by a bankruptcy judge,

the bankruptcy judge may conduct the jury trial if

specially designated to exercise such jurisdiction by the

district court and with the express consent of all the

parties.

However, as explained below, Trigee could still have

asserted its malpractice damages claims in defending against the

Final Application, with a trial of both matters conducted by the

District Court.

2. Core Versus Non-Core Distinction. The core versus non-

core distinction concerns whether a bankruptcy judge has

authority (absent consent of the parties) to decide a claim that

the District Court has referred to the Bankruptcy Court. It has

nothing to do with subject matter jurisdiction under 28 U.S.C.

§ 1334(b).

The District Court has authority to decide both core and

non-core proceedings within that jurisdiction, and has authority

to withdraw proceedings from the Bankruptcy Court. The better

reasoned decisions conclude that an order in a core proceeding

has res judicata effect with respect to a claim of a non-core

nature that could and should have been filed during the

litigation of the core proceeding. See Plotner v. AT & T Corp.,

224 F.3d 1161, 1173–74 (10th Cir. 2000); CoreStates Bank, N.A. v.

Huls Am., Inc., 176 F.3d 187, 197 (3d Cir. 1999); Robertson v.

Isomedix, Inc. (In re Int’l Nutronics, Inc.), 28 F.3d 965, 969–70

(9th Cir. 1994); Sanders Confectionery Prods., Inc. v. Heller

Fin., Inc., 973 F.2d 474, 483 (6th Cir. 1992); Sure–Snap Corp. v.

State Street Bank & Tr. Co., 948 F.2d 869, 875 (2d Cir. 1991);

Davenport I, 296 F. Supp. 3d at 255-56.43 Accordingly, the core

versus non-core distinction between the two types of proceedings

is not a bar to trying a debtor’s malpractice damages claims

along with its counsel’s fee application, or, therefore, to the

applicability of res judicata.

3. Jury Character Versus Non-Jury Character Distinction.

There was no right to a jury trial regarding the Final

Application, whereas I am assuming that Trigee would have had the

right to demand a jury trial of any malpractice damages claim it

asserted during the pendency of the Final Application. However,

the jury versus non-jury difference between the two proceedings

has nothing to do with subject matter jurisdiction to decide the

two matters, and (like the core versus non-core distinction) only

affects whether the bankruptcy judge would have had authority

(absent consent of the parties) to try and decide both of them.

The District Court has authority to decide both jury and non-jury

bankruptcy proceedings falling within the District Court’s

bankruptcy jurisdiction, and has authority to withdraw such

proceedings from the Bankruptcy Court. Therefore, procedural

43 Although the Seventh and the Fifth Circuits concluded

differently in Barnett v. Stern, 909 F.2d 973 (7th Cir. 1990),

and Howell Hydrocarbons, Inc. v. Adams, 897 F.2d 183 (5th Cir.

1990), those Circuits, as noted in Davenport I, 296 F. Supp. 3d

at 255 n.6, have subsequently questioned those holdings. In

Davenport II, 316 F. Supp. 3d at 68 n.8, the District Court

adhered to the view that the core versus non-core distinction had

no impact on the analysis of the res judicata issue.

mechanisms are available to permit a final fee application for

professional services (a non-jury matter) and a malpractice

damages claim relating to those services (presumed here to be a

jury matter) to be tried together. If Trigee had filed, during

the pendency of the Final Application, an adversary proceeding

complaint asserting its malpractice damages claims, the District

Court could have withdrawn both matters from the Bankruptcy Court

such that both could be tried together.44 Accordingly, any right

Trigee would have had to a jury trial on the malpractice damages

claims is not a reason to hold that res judicata does not apply.

See Grausz v. Englander, 321 F.3d at 475.45

44 Pursuant to Fed. R. Civ. P. 39(c), the District Court

could have treated the jury as an advisory jury on the Final

Application. Alternatively, the District Court could have first

tried the malpractice damages claims and then decided the Final

Application, or, it could have referred the Final Application

back to the Bankruptcy Court for a decision on the Final

Application, taking into account any collateral estoppel effect

of the jury verdict as to the malpractice damages claims.

45 That the Final Fee Order was issued without a jury trial

does not preclude it from having res judicata effect on the

malpractice damages claims asserted in this later-filed adversary

proceeding. See B & B Hardware, Inc. v. Hargis Indus., Inc., 575

U.S. 138, 150 (2015) (“As to the Seventh Amendment, . . . the

right to a jury trial does not negate the issue-preclusive effect

of a judgment, even if that judgment was entered by a juryless

tribunal.”).

THE LACK OF “WET SIGNATURES” ON TRIGEE’S SCHEDULES

Trigee contends that the defendants failed to obtain a “wet

signature” of Trigee’s principal, Johnnie Mae Durant, on its

schedules. I will assume, without deciding, that this contention

is correct. The filing of the schedules without their having

been actually signed as represented on the electronically filed

version of the schedules resulted in a misrepresentation to the

court and violated the requirement that schedules bear an actual

signature. See Fed. R. Bankr. P. 1008.

However, as noted in part II above, the harm to Trigee

proximately arose from SGA’s claim not being listed on Trigee’s

schedules as disputed, not from the failure to have Johnnie Mae

Durant actually sign the schedules nor from the misrepresentation

on the electronically filed version of the schedules that the

schedules had been signed. As this court previously noted in its

Memorandum Decision addressing Lerch Early’s Motion to Dismiss:

Only claims based on identified acts of substandard

services in the representation of Trigee that proximately

caused Trigee harm might constitute malpractice claims

upon which relief can be granted (if they were not barred

by res judicata). See Herbin v. Hoeffel, 806 A.2d 186,

194 (D.C. 2002) (“To demonstrate that an attorney has

been negligent, a party must prove: (1) that there is an

attorney-client relationship; (2) that the attorney

neglected a reasonable duty; and (3) that the attorney’s

negligence resulted in and was the proximate cause of a

loss to the client.” (Citation omitted.)).

Mem. Dec. 27-28. With respect to the malpractice damages claim

relating to the handling of the SGA claim and the accrual of that

malpractice damages claim before Lerch Early filed its Final

Application (and the resulting res judicata bar against pursuit

of the malpractice damages claim), the failure to have Johnnie

Mae Durant actually sign the schedules was of no consequence.

While it is arguable that, absent this failure, Ms. Durant would

have insisted that the schedules be revised before filing to list

SGA’s claim as disputed (i.e., but for the failure, the claim

would have been listed as disputed), the failure would not be the

proximate cause of Trigee’s injury. Instead, Sherman’s filing of

the schedules without listing SGA’s claim as disputed is what

proximately caused the loss of the statute of limitations as a

defense and the allowance of SGA’s claim. Had Sherman scheduled

the claim as disputed, the statute of limitations defense would

have been preserved, and it would not have mattered that Lerch

Early had failed to have Ms. Durant actually sign the schedules.

Accordingly, the malpractice claim regarding the scheduling of

SGA’s claim rests on the failure to schedule the claim as

disputed, not on the lack of a “wet signature” on the schedules.

THE MALPRACTICE DAMAGES CLAIMS AGAINST LERCH EARLY,

BUT NOT THOSE AGAINST SHERMAN, ACCRUED PRIOR TO

THE FILING OF LERCH EARLY’S FINAL APPLICATION

Citing Newman v. Crane, Heyman, Simon, Welch & Clar, 590

B.R. 457, 467 (N.D. Ill. 2018), Trigee emphasizes that state law

as to when a malpractice damages claim accrues, and not federal

law concerning res judicata, determines when a malpractice

damages claim accrued in analyzing whether res judicata bars it.

However, Trigee has not discussed the requirements under District

of Columbia law regarding when a malpractice damages claim

accrues other than to raise two points in the following argument:

In this case, this Honorable Court did not approve LEB’s

final fee application until February 4, 2014. That final

fee application only applied to services performed

through June 30, 2013. This Honorable Court did not even

allow the SGA claim until November 13, 2013 and did not

issue an order on a related motion for reconsideration

until on or about May 15, 2014. Accordingly, a dispute

exists as to whether the Plaintiff’s legal malpractice

claim accrued as of the time that this Honorable Court

granted the final fee application, such that res judicata

should not apply under the logic of the Davenport and

Newman decisions.

Reply at 10. Trigee correctly notes that the court did not allow

SGA’s claim until the hearing of November 13, 2013, but that is

not a point in its favor. The hearing preceded the filing of the

Final Application in January 2014, and, as Trigee notes, the

approval of the Final Application on February 4, 2014. The

injury occurred before the pendency of the Final Application.

Trigee’s other point is that its motion for reconsideration of

the allowance of SGA’s claim, under Fed. R. Bankr. P. 9024, was

not denied until after the entry of the Final Fee Order. As will

be seen, the pendency of that motion to reconsider the November

2013 ruling that injured Trigee is not a sufficient basis for

treating the malpractice damages claim as accruing after the

entry of the Final Fee Order.

The only reasonable conclusion based on the record,

including the transcript of the hearing of November 13, 2013, is

that before the filing of the Final Application in January 2014,

Trigee was on inquiry notice regarding its malpractice damages

claim arising from the failure to schedule SGA’s claim as

disputed and the entry of an order allowing SGA’s claim. As will

be seen, such inquiry notice sufficed under District of Columbia

law to cause the accrual of its malpractice damages claim against

Lerch Early prior to the filing of the Final Application. Trigee

has not attempted to show to the contrary, and, in that

circumstance, no injustice will arise upon denial of its Motion

for Reconsideration. However, pursuant to the continuous-

representation rule, Trigee’s malpractice damages claims against

Sherman did not accrue until his representation of Trigee in its

bankruptcy case terminated.

District of Columbia law controls when Trigee’s malpractice

damages claim accrued.46 See Newman, 590 B.R. at 464 (citing

Micro-Time Mgmt. Sys., Inc. v. Allard & Fish, P.C. (In re

Micro-Time Mgmt. Sys., Inc.), Case No. 91–2261, 1993 WL

7524, at *5 (6th Cir. Jan. 12, 1993)) (“State law thus governs

when the Trustee could bring its malpractice claim, even though

federal law will govern the res judicata analysis.“).

“Generally, a cause of action is said to accrue at the time

injury occurs.” Bussineau v. President & Dirs. of Georgetown

Coll., 518 A.2d 423, 425 (D.C. 1986) (citing Shehyn v. District

of Columbia, 392 A.2d 1008, 1013 (D.C. 1978); Weisberg v.

Williams, Connolly & Califano, 390 A.2d 992, 994 (D.C. 1978)).

“However, in cases where the relationship between the fact of

injury and the alleged tortious conduct is obscure as to when the

injury occurs, a ‘discovery rule’ applies to determine when the

malpractice cause of action accrued.” Id. “[F]or a cause of

action to accrue where the discovery rule is applicable, one must

know or by the exercise of reasonable diligence should know (1)

of the injury, (2) its cause in fact, and (3) of some evidence of

46 For federal res judicata purposes under Capitol Hill

Group, 569 F.3d at 491 (quoting Grausz, 321 F.3d at 474), “[w]e

look at the date the final fee order was entered . . . and ask

whether by that time [the debtor] knew or should have known there

was a real likelihood that [it] had a malpractice claim.” As

will be seen, that matches the requirement regarding accrual of a

malpractice damages claim under District of Columbia law.

wrongdoing.” Id. at 435. Accord Ray v. Queen, 747 A.2d 1137,

1141 (D.C. 2000).

Thus, a cause of action will accrue once a plaintiff has

knowledge of “some injury,” its cause in fact, and “some evidence

of wrongdoing.” Colbert v. Georgetown Univ., 641 A.2d 469, 473

(1994) (en banc). See also Morton v. Nat’l Med. Enters., Inc.,

725 A.2d 462, 468 (D.C. 1999). In other words, a legal

malpractice damages claim becomes ripe when there is client

knowledge of some injury, its cause, and related wrongdoing.

Bleck v. Power, 955 A.2d 712, 716 (D.C. 2008). The test is

whether the plaintiff was on “inquiry notice that she might have

suffered an actionable injury.” Bussineau, 518 A.2d at 427

(emphasis added). Accord Hendel v. World Plan Exec. Council, 705

A.2d 656, 661 (D.C. 1997) (“The discovery rule does not, however,

give the plaintiff carte blanche to defer legal action

indefinitely if she knows or should know that she may have

suffered injury and that the defendant may have caused her

harm.”) (emphasis added).

1. The Injury Component of the Discovery Rule. As held in

Bleck, 955 A.2d at 715, “[t]he term ‘injury’ encompasses any

‘loss or impairment of a right, remedy or interest, or the

imposition of a liability.’” (quoting 3 Mallen & Smith, Legal

Malpractice § 23:11, at 354 (2008 ed.) (“These are the spectrum

of injuries sustained by clients.”)) (emphasis added) (other

citations omitted). As noted in Olds v. Donnelly, 696 A.2d 633,

640 (N.J. 1997), “[t]he majority of courts hold that when

attorney malpractice occurs during the course of litigation, the

cause of action accrues on entry of an adverse judgment in the

trial court.”47 Here, at the latest, Trigee suffered an injury

on November 26, 2013, upon entry of the order allowing SGA’s

claim, which, under Bleck v. Power, 955 A.2d at 715, was an

imposition of liability for the purpose of when a malpractice

damages claim accrued.48

2. The Requirement Under the Discovery Rule that Trigee

Have Been Aware that an Injury May Have Occurred. Trigee learned

at the hearing of November 13, 2013, that the court intended to

enter an order allowing SGA’s claim, and that SGA, as a

consequence of being the holder of an allowed claim, was being

allowed to file a competing Chapter 11 plan. Moreover, on

December 19, 2013, the Clerk, through the Bankruptcy Noticing

47 See also Poole v. Lowe, 615 A.2d 589, 593 (D.C. 1992),

citing Wettanen v. Cowper, 749 P.2d 362, 365 (Alaska 1988), with

approval, as standing for the proposition that the “statute of

limitations commenced from entry of judgment against plaintiff by

trial court upon accepting settlement which plaintiff did not

authorize or have knowledge of, even though new counsel moved to

set aside judgment and took subsequent appeal.”

48 As illustrated by Bleck v. Power, 955 A.2d at 716, a

malpractice cause of action may accrue even prior to the entry of

the judgment in the action in which the malpractice occurred.

However, Trigee’s injury arose no later than the entry of the

order allowing SGA’s claim, and that suffices to hold that res

judicata bars the malpractice damages claim as long as the other

elements of the discovery rule are met.

Center, mailed Trigee a copy of the order granting SGA’s motion

to extend the deadline for filing a competing plan of

reorganization. Trigee was thus aware of the entry of the order

allowing SGA’s claim and thereby imposing a liability against it.

Trigee was thus aware of the injury it had suffered arising from

any acts of negligence.

3. The Requirement Under the Discovery Rule that Trigee

Should Have Known of Some Evidence of Wrongdoing. Under the

discovery rule, for the malpractice damages claim to accrue,

Trigee must have had reason to know that the failure to schedule

SGA’s claim as disputed was wrongdoing. Again, the issue is

whether Trigee had “inquiry notice that [it] might have suffered

an actionable injury.” Bussineau, 518 A.2d at 427 (emphasis

added). In other words, a malpractice damages claim accrues “at

such time a prospective plaintiff gains inquiry notice that

wrongdoing may be involved.” Bussineau, 518 A.2d at 427–28

(emphasis added).

Trigee learned by August 2013 that SGA’s claim had not been

scheduled as disputed. Even if it was not yet aware that the

failure to schedule SGA’s claim as disputed would, as a matter of

law, be a basis for SGA to nullify any statute of limitations

defense, that changed when Trigee’s principal officers (Johnnie

Mae Durant and Oswald Durant) attended the hearing of

November 13, 2013, at which SGA’s counsel, Rost, argued that the

statute of limitations defense did not apply because SGA’s claim

had not been scheduled as disputed. As stated in Wagner v.

Sellinger, 847 A.2d 1151, 1154 (D.C. 2004), “knowledge is deemed

sufficient if the plaintiff has reason to suspect that the

defendant did something wrong, even if the full extent of the

wrongdoing is not yet known,” citing Morton, 725 A.2d at 468–69

(emphasis added). Here, Trigee has not argued that it was

unaware after the hearing of November 13, 2013, that SGA’s

counsel, Rost, had contended that the statute of limitations was

inapplicable to SGA’s claim due to the failure of Lerch Early and

Sherman to schedule that claim as disputed. Rost’s argument

placed Trigee on notice that Lerch Early and Sherman might have

done something wrong (in failing to schedule SGA’s claim as

disputed) because the omission might have made the statute of

limitations unavailable as a defense to SGA’s claim.

4. The Requirement Under the Discovery Rule of Having

Reason to Know that the Negligent Act May Have Caused an Injury.

At the hearing of November 13, 2013, the court did not expressly

rule on Rost’s argument that, as a matter of law, the failure to

schedule SGA’s claim as disputed nullified the statute of

limitations as a defense to SGA’s claim. However, at the hearing

of November 13, 2013, Trigee was made aware that Rost took that

position, and that the court would be entering an order allowing

Trigee’s claim (which ensued in the Order Overruling Objection to

Claim of SGA Companies, Inc. entered on November 26, 2013, an

order of which Trigee became aware long before the filing of the

Final Application). In the words of Hendel, 705 A.2d at 661,

Trigee was on notice that the failure to schedule SGA’s claim as

disputed “may have caused” Trigee the harm because it left the

statute of limitations unavailable as a defense.

It does not matter that the court had not ruled whether

Rost’s argument was correct by the time that Lerch Early filed

its Final Application. In Weisberg, 390 A.2d at 966, the

plaintiffs’ former counsel failed to timely file their complaint

against the Government on a Federal Tort Claims Act (“FTCA”)

claim. As discussed in Bleck, 955 A.2d at 716, Weisberg, 390

A.2d at 995-96, held that “at the latest,” once the statute of

limitations defense was raised, the plaintiffs’ malpractice

damages claim against their former counsel accrued, even though

the actual dismissal of their FTCA claim occurred “well beyond

the point at which appellants suffered injury.” The plaintiffs

“as of that date were on actual notice of all the elements that

formed the basis of their [malpractice damages claim] . . . .”

Bleck, 955 A.2d at 716 n.13 (quoting Weisberg, 390 A.2d at 996).

That the wrongful act caused harm, as a matter of law, meant that

the injury attributable to the attorney’s error could not be

viewed as “uncertain or inchoate” such as to toll the injury from

accruing. See Bleck, 955 A.2d at 717 (quoting and distinguishing

Wagner, 847 A.2d at 1156).

Here, the malpractice damages claim against Lerch Early

accrued once SGA’s claim was allowed, thereby injuring Trigee,

and once Trigee was aware of Rost’s argument that the failure to

list SGA’s claim as disputed rendered the statute of limitations

defense invalid as a matter of law. As in Weisberg, there was no

need for a ruling on Rost’s argument before the malpractice

damages claim accrued:

• Trigee had already been injured by the allowance of the

claim (the equivalent of a monetary judgment, which is

treated as injury);

• Trigee was aware of that injury before the filing of

the Final Application;

• Trigee was aware of Lerch Early’s failure to schedule

SGA’s claim as disputed;

• Trigee was on inquiry notice, that (as Rost argued) the

failure, as a matter of law, barred the statute of

limitations as a defense;49 and

49 Rost’s argument at the hearing arguably placed Trigee on

actual notice that it had a malpractice cause of action. See

John Kohl & Co. P.C. v. Dearborn & Ewing, 977 S.W.2d 528, 532

(Tenn. 1998) (“[T]he plaintiff has actual knowledge of the

injury . . . where, for example, the defendant admits to having

committed malpractice or the plaintiff is informed by another

attorney of the malpractice.”) However, under District of

Columbia law, the issue is whether Trigee was at least on inquiry

notice that it might have a malpractice cause of action.

• Trigee knew that it had not authorized SGA’s claim to

be scheduled as not disputed and thus had reason to

suspect that Lerch Early had done something wrong and

that, if Rost’s argument was valid, Trigee, as a result

of that wrong, could not use the statute of limitations

defense against the allowance of SGA’s claim.50

5. The Effect of Trigee’s Right to Seek Reconsideration of

the Allowance of SGA’s Claim. Trigee implicitly argues that

Trigee’s right to seek reconsideration of the allowance of SGA’s

claim tolled the accrual of its malpractice damages claim until

after Lerch Early filed its Final Application. Reply at 10.

However, the mere right to pursue a motion for reconsideration

does not affect when a malpractice damages claim accrues, or

negate the fact that the claim has accrued if it has already

accrued. See Bleck, 955 A.2d at 717 (Rule 59(e) motion regarding

dismissal of action did not suspend the accrual of the

plaintiff’s malpractice damages claims); Knight v. Furlow, 553

50 In denying Trigee’s motion to reconsider the order of

November 26, 2013, allowing SGA’s claim, the court ruled at the

hearing of May 15, 2014, that Rost’s argument was valid as a

matter of law. In this malpractice proceeding, and any appeal

therefrom, Lerch Early and Sherman remain free to attempt to show

that Rost’s argument was incorrect. If they succeed in doing so,

the failure to have scheduled the claim as disputed could not be

a basis for malpractice damages. However, even if Lerch Early

and Sherman succeed in that regard, Trigee could not thereby seek

to recover from SGA amounts Trigee had paid SGA on its claim: the

order allowing SGA’s claim would remain in place as it would be

too late for Trigee to seek Rule 9024 relief from that order.

A.2d 1232, 1235 (D.C. 1989) (rejecting an argument “that a client

sustains no actionable injury until affirmance on appeal of an

adverse lower court judgment”). As the D.C. Circuit has noted:

At most, the Westerman defendants’ advice could have

convinced a reasonable party in Seed’s position that

there existed some chance the injury could be resolved

in further appeals. But no reasonable client could

conclude that the possibility of redressing an injury

in further proceedings means that no injury exists in

the first place.

Seed Co. Ltd. v. Westerman, 832 F.3d 325, 335 (D.C. Cir. 2016).

6. The Continuous-Representation Rule Tolled the Accrual of

Trigee’s Malpractice Claims Against Sherman.51 The Memorandum

Decision of September 23, 2016, held that the claims against

Lerch Early (the claims arising through June 30, 2013) were

barred by res judicata, despite Trigee’s assertion that, based on

Sherman having continued to represent Trigee, the continuous-

representation rule required holding that the malpractice claims

against Trigee had not accrued when the court ruled on the Final

Application. The Memorandum Decision held that the same claims

had to be dismissed as to Sherman as well (leaving only the

claims against Sherman relating to services he rendered after he

left Lerch Early), reasoning that:

51 “[U]nder the ‘continuous representation rule,’ a

client's legal malpractice claim ‘does not accrue until the

attorney's representation concerning the particular matter in

issue is terminated” (even if the client knows before then that

her attorney has made an injurious error).” Bleck, 955 A.2d at

717 (quoting R.D.H. Commc'ns, Ltd. v. Winston, 700 A.2d 766, 768

(D.C. 1997)) (footnote omitted).

The law is well established that, with exceptions of no

relevance here, the res judicata effects of a judgment

with respect to claims against an employer extends in

favor of an employee with respect to the same claims for

which the employer was vicariously liable. See

Restatement (Second) of Judgments § 51 (1982); Brunacini

v. Kavanagh, 869 P.2d 821, 825 (N.M. Ct. App. 1993)

(noting that when a law firm had previously brought an

action for legal fees, the res judicata effect of the

judgment in that action extended to bar a later

malpractice action against an employee of the law firm);

Lober v. Moore, 417 F.2d 714, 718 (D.C. Cir. 1969) (“[A]

judgment excusing the master or principal from liability

on the ground that the servant or agent was not at fault

forecloses a subsequent suit against the latter on the

same claim.”).

Mem. Dec. 39.52

The Memorandum Decision was in error in that regard. First,

in contrast to Lober v. Moore, the dismissal of the claims

against Lerch Early was not on the basis of a finding that

Sherman committed no malpractice while employed at Lerch Early,

but on the basis that any claim against the law firm was barred

by res judicata because the claim ought to have been brought when

the law firm sought a final fee award.

Second, Brunacini v. Kavanagh did not involve an attorney

who continued to represent the plaintiff after leaving the law

52 The Memorandum Decision elaborated: "Stated another way,

res judicata protects not only Lerch Early but also Sherman, who,

as a Lerch Early employee, was in privy with Lerch Early. See

Nevada v. United States, 463 U.S. 110, 129 (1983) (holding that

res judicata bars subsequent action against privy of party who

prevailed in prior action); Henry v. Farmer City State Bank, 808

F.2d 1228, 1235 n.6 (7th Cir. 1986) (ruling that res judicata

barred claims against employees of a bank even though the bank

was the only plaintiff in the prior foreclosure proceeding).”

firm. Accordingly, there was no occasion in Brunacini to address

the effect of the continuous-representation rule on whether a

judgment in favor of the law firm would preclude a judgment

against the lawyer as well.

Finally, in Seed Co. Ltd. v. Westerman, 832 F.3d at 333, the

Court of Appeals held, one month before the Dismissal Order, that

the continuous-representation rule does not toll the

statute of limitations on a claim against a firm after

the attorney providing the representation leaves the

firm and takes the client’s business with her. See

Dunn v. Rockwell, 225 W.Va. 43, 689 S.E.2d 255, 275

(2009); Beal Bank, SSB v. Arter & Hadden, LLP, 42

Cal.4th 503, 66 Cal.Rptr.3d 52, 167 P.3d 666 (2007).

In that situation, the client is no longer represented

by the original firm. The continuous-representation

rule thus no longer tolls the statute of limitations

for malpractice claims against that firm.

The Court of Appeals held, however, that the continuous-

representation rule did apply with respect to the lawyers who

left the firm. Id. at 332.53

Under Westerman, the dismissal of malpractice claims against

a lawyer’s former law firm does not preclude application of the

continuous-representation rule against the lawyer regarding the

same malpractice claims when the lawyer has continued to

53 Similarly, in Dunn v. Rockwell, 689 S.E.2d 255 (W. Va.

2009), the plaintiffs sued both Rockwell and the law firm for

malpractice. The Supreme Court of Appeals of West Virginia held

that the statute of limitations barred the malpractice claims

against the law firm. But the court held that as to Rockwell, a

remand was necessary to determine whether, under the continuous-

representation rule, the malpractice claims against him had

accrued on a later date, making the action timely as to him.

Id. at 273.

represent the client in the same matter after leaving the law

firm. Id. at 332. The rationale of the continuous-

representation rule weighs in favor of that view. “The rule aims

to avoid putting a client in the position of having to choose

betwe

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