# Cook and Sons Mining, Inc.

> United States Bankruptcy Court, E.D. Kentucky · October 19, 2020

URL: https://www.frixlaw.com/law-library/cases/10457894

## Case

- **Court:** United States Bankruptcy Court, E.D. Kentucky
- **Decided:** October 19, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10457894

## Opinion text

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
PIKEVILLE DIVISION

IN RE

COOK AND SONS MINING, INC. CASE NO. 03-70789

DEBTOR

MEMORANDUM OPINION
AND ORDER

James D. Asher seeks approval of a contingency fee in Debtors’ Special Counsel James
Asher’s Application for Final Allowance of Compensation and Reimbursement of Accrued
Expenses and Contingency Fees and related papers. [ECF Nos. 1348, 1357, 1359.] Hearings
were held on August 20 and September 17, 2020. [ECF Nos. 1355, 1360.] Asher stated that no
other evidence is forthcoming and asked for a decision on the record. [ECF No. 1355.]
Asher was retained as special counsel on a contingent fee basis years ago, and he
received payment for the work in 2007. The case was reopened over a decade later to administer
a contract-based reimbursement of unearned premiums for insurance coverage unrelated to
Asher’s special counsel engagement. There is no support for a contingent fee related to the
current refund of unearned premiums, so the Application is denied.
I. FACTS.
A. The Bankruptcy Case.
The Debtors are Cook and Sons Mining, Inc., and Earnest Cook & Sons, Mining, Inc.
They filed voluntary chapter 11 bankruptcy petitions on August 25, 2003. [Case No. 03-70789,
ECF No. 1; Case No. 03-70790, ECF No. 1.] The cases were substantively consolidated. [Case
No. 03-70789, ECF No. 336; Case No. 03-70790, ECF No. 60.] The Debtors attempted to
restructure as an operating entity, but they ultimately ceased operations. The Debtors then
pursued a liquidating plan of reorganization [ECF No. 634], which was confirmed on August 15,
2004 [ECF No. 692].
The Plan created a liquidating entity called the Reorganized Debtor. [ECF No. 634,
Art. 6.] All assets of the Debtors’ estates became property of the Reorganized Debtor at

confirmation. [Id.] The Plan further established a Post-Confirmation Committee that consisted
of members of the unsecured creditors committee in the bankruptcy case. [Id.] The Plan granted
the Post-Confirmation Committee the power to make all decisions for the Reorganized Debtor
and its assets. [Id.]
The Post-Confirmation Committee was assisted by a Disbursing Agent, who held the
assets and wrote checks to distribute funds to creditors. [Id.] The Disbursing Agent could also
perform other tasks assigned by the Post-Confirmation Committee but had no decision-making
authority. [Id.] W. Thomas Bunch was appointed Disbursing Agent. Bunch’s law firm, Bunch
& Brock, represented the Debtors and the Reorganized Debtor.

B. Asher’s 2003 Appointment as Special Counsel.
On October 30, 2003, the Debtors sought authority to appoint James D. Asher as “Special
Counsel under Code Section 327(e)” on a contingent fee basis (“Employment Application”).
[ECF No. 242.] The Employment Application provided that the Debtors would employ Asher
for the “special and specific purposes” listed. [Id.] The relevant work involved insurance related
to the Debtors’ preparation plant and related equipment. [Id.]
Attached to the Employment Application were two contingency fee agreements executed
by the Debtors and Asher on October 28, 2003 (“Contingency Fee Agreements”). [Id.] One
Contingency Fee Agreement addressed damages related to the collapse of a silo based on
insurance coverage provided by Underwriter’s at Lloyd’s of London (“Lloyds”). The other
Contingency Fee Agreement addressed water damages related to the same insurance coverage.
The Contingency Fee Agreements contemplated compensation based on a percentage of the
recovery for authorized work, if approved by required periodic and final fee applications. [Id.]
Asher was approved as special counsel for the Debtors on November 18, 2003. [ECF

No. 285.] The terms of the Order were consistent with the Employment Application and
Contingency Fee Agreements.
C. The Letcher Circuit Court Litigation and Settlement.
Asher filed an action styled Earnest Cook and Sons Mining, Inc. v. Underwriters at
Lloyd’s, London, and CS&W Insurance Services, Inc., Case No. 04-CI-165, in the Letcher
Circuit Court on April 29, 2004. [ECF No. 1348-2 at ¶ 4.] The Debtor Earnest Cook & Sons
Mining, Inc.1 alleged in the initial Complaint that it asked CS&W Insurance Services, Inc., its
insurance broker (“CS&W Insurance”), to procure an insurance policy covering the coal
preparation plant and related property for the period September 22, 2002, to September 22, 2003.

[Id., Exh. C at ¶ 6.] The property insurance was a condition to a mortgage loan secured by the
coal preparation plant and related property. [Id., Exh. C at ¶ 9.]
According to allegations in the Complaint, CS&W Insurance told the Debtor that Policy
No. GEP 5005 issued by Lloyds was in place. [Id., Exh. C at ¶ 6.] The Complaint argued that
Policy No. GEP 5005 (“Lloyds Policy”) provided coverage:
to and for [the Debtor] against, in particular but not limited to, loss or damage to
its property and/or equipment, both above and below ground equipment,
incidental structures and contents, specifically including the plaintiff’s coal
preparation plant, building and contents, and further insurance the plaintiff for
debris removal expenses and loss to others, including but not limited to, raw coal;

1 A reference to Debtor related to the state court litigation refers to the plaintiff.
that said policy provided coverage for the preparation plant of $5,000,000 and for
contents of $100,000.

[Id.]
The Debtor’s raw coal silo blew out and collapsed in early 2003 and coverage under the
Lloyds Policy was denied. [Id., Exh. C at ¶¶ 7, 8.] The Debtor argued coverage was denied
because CS&W Insurance was negligent and breached its duty when placing the insurance. [Id.,
Exh. C at ¶ 9.]
Asher filed a First Amended Complaint on July 17, 2006. [ECF No. 1348-2, Exh. D.]
The First Amended Complaint added claims against another party involved in placing the
insurance, Casualty & Surety, Inc. (“Casualty”). [Id., Exh D. at ¶ 2.] The First Amended
Complaint also added earlier insurance periods and alleged CS&W Insurance was responsible for
the failure to refund unearned premiums caused “by listing the same pieces of equipment on
more than one schedule.” [Id, Exh. D at ¶ 8.]
Asher filed a Second Amended Complaint on December 4, 2006, that named two more
defendants, James Allen and Crawford and Company (“Crawford”). [ECF No. 1348-2, Exh. E at
1.] The Second Amended Complaint claimed that Allen and Crawford performed a negligent
inspection of the coal preparation plant that ultimately contributed to the silo damage and denial
of coverage under the Lloyds Policy. [Id., Exh. E at 2-4.] The Second Amended Complaint also
alleged that Lloyds, CS&W Insurance, Casualty, and Crawford knew Allen was not qualified to
perform the inspection. [Id.]

On January 19, 2007, the Letcher Circuit Court decided the Debtor’s silo was covered by
the Lloyds Policy. [ECF No. 1348-2 at ¶ 9.] The state court defendants appealed the decision.
[Id. at ¶ 10.] On August 7, 2007, the Kentucky Court of Appeals entered an order granting the
Debtor’s motion to dismiss the appeal and remanded the matter for further proceedings. [Id.
at ¶ 11.] The matter settled in November 2007 for payments of $1,250,000.00 from Lloyds,
$1,000.00 from Lexington Insurance Co., and $11,500.00 from CS&W Insurance. [ECF
No. 1294.] Asher received $451,134.77 for his contingent fee and expenses on
December 24, 2007. [Id.]
D. The Discovery of the AIG Reimbursed Premiums.

The Post-Confirmation Committee filed the Final Report in Chapter 11 Proceeding a few
months later on May 16, 2008 [ECF No. 1308], and moved to close the case [ECF No. 1310].
The motion was granted [ECF No. 1311], and the bankruptcy case was closed on June 9, 2008
[ECF No. 1313]. A final decree discharging the Post-Confirmation Committee was entered on
June 11, 2008. [ECF No. 1313.]
Over a decade later, Matthew B. Bunch, a lawyer with Bunch & Brock, moved to reopen
the case. [ECF No. 1315.] A representative of AIG Insurance contacted Bunch & Brock
because the insurance company was holding “Return Premiums of approximately $367,472” that
it would not turn over without a court order (“AIG Reimbursed Premiums”). [Id. at ¶ 4.] The

case was reopened on September 24, 2018, to issue the order and allow the Court to administer
the AIG Reimbursed Premiums. [ECF No. 1318.]
The AIG Reimbursed Premiums arose from insurance policies issued by American
International Group, aka AIG Global Energy, d/b/a National Union Fire Insurance Company of
Pittsburg, PA (“AIG/National Union”). [See ECF Nos. 252, 1331.] The AIG Reimbursed
Premiums are made up of the following:
Premium Earned Commission Reimb. Premium
Contract # Policy Period Refund / (Due) Refund / (Due) Refund / (Due)
968400 09/25/00-09/25/01 $49,106 $6,744 $42,362
968402 09/25/02-09/25/03 ($377,472) ($24,006) ($353,466)
968403 09/25/03-04/12/04 $771,224 $92,650 $678,574
$367,470
[ECF No. 1331-1.]
AIG/National Union provided workers compensation, automobile, and general liability
insurance coverage. [ECF No. 252.] The majority of the AIG Reimbursed Premiums arise from
the 2003-04 period, which only lasted six months because the Debtors’ cases became
administratively insolvent. The workers compensation coverage accounted for the vast majority

of the premiums paid and recovered. For example, the premium reimbursement for workers
compensation coverage in 2003-04 was 83% of the $771,224.00 gross refund. [Id.]
CS&W Insurance placed the insurance coverage for the first two policy years, but it was
replaced by South West Insurance Agency (“South West”) for the final 2003-04 period. [See
ECF No. 122.] South West did not have a part in the Lloyds insurance coverage and was not a
target of the Letcher Circuit Court litigation.
E. Asher’s Fee Application.
Despite receiving payment for the work he was hired to do, Asher now seeks to recover
one-third of the AIG Reimbursed Premiums, $146,988.73, based on his contingent fee

arrangement. [ECF No. 1348.] Asher supports his request with (i) his own affidavits; (ii) an
affidavit from his legal assistant, Misty Slone; and (iii) an affidavit from W. Thomas Bunch, II, a
member of Bunch & Brock during the bankruptcy case and now. [ECF Nos. 1348-1, 1348-2,
1348-3, 1359-1.] Asher also submitted deposition transcripts from the Letcher Circuit Court
litigation. [ECF Nos. 1357-1, 1357-2, 1357-3.]
Asher destroyed any other relevant files in anticipation of his retirement in 2013. [ECF
No. 1348-2 at ¶ 18.] The information provided attempts to explain the circumstances
surrounding the Contingency Fee Agreements, Asher’s appointment as special counsel, the
subsequent state court litigation and settlement, and Asher’s investigation into premium refunds
and adjustments.
II. Jurisdiction and Administration of the Estate.
The Bankruptcy Court has jurisdiction to decide whether Asher is entitled to fees from
the AIG Reimbursed Premiums. The Plan recognized the continuing jurisdiction of the

Bankruptcy Court to determine all claims and act as necessary to carry out the Plan. [ECF
No. 634, Art. 7.2.] This is consistent with the jurisdiction granted by 28 U.S.C. § 1334. Further,
this is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (B), and (O). Venue is proper
pursuant to 28 U.S.C. § 1409.
The Plan provided that all assets of the Debtors were transferred to the Reorganized
Debtor and held by the Disbursing Agent. [ECF No. 634, Art. 6.] So the Reorganized Debtor,
operating for the benefit of the creditors, is the only entity that may claim ownership of the AIG
Reimbursed Premiums. [Id.; see also ECF No. 1331.] As such, the Court has an obligation to
exercise jurisdiction to administer the asset. See, e.g., Scharmer v. Carrollton Mfg. Co., 525

F.2d 95, 98–99 (6th Cir. 1975) (when new assets are discovered, the case is reopened to
administer the assets).
W. Thomas Bunch had retired, so Matthew B. Bunch offered, and was appointed, to act
as the Disbursing Agent to administer the AIG Reimbursed Premiums. [ECF Nos. 1315, 1318.]
But the Plan provides that the Disbursing Agent may only act under the authority of the Post-
Confirmation Committee, which was disbanded in 2008. Therefore, the Bankruptcy Court must
approve any distribution of the AIG Reimbursed Premiums. See Scharmer supra; see also In re
Kieffer, 306 B.R. 197, 206 (Bankr. N.D. Ohio 2004) (the bankruptcy court has an independent
duty to review a request for compensation).
III. Discussion.
Asher argues he was retained to pursue insurance claims, so he is entitled to a contingent
fee on the AIG Reimbursed Premiums. [ECF No. 1348.] This argument is not supported by the
engagement papers in the record or Kentucky law requiring strict interpretation of contingent fee
agreements. Further, even if the engagement papers had some arguable relationship to recovery

of the AIG Reimbursed Premiums, Asher is not entitled to payment under the applicable
provisions of the Bankruptcy Code. His work had nothing to do with a contract-based recovery
that occurred more than a decade after his special counsel relationship with the Debtors ended.
A. Asher Was Not Hired or Approved to Pursue Unearned Premiums from
AIG/National Union.

Asher argues that the scope of his employment included pursuit of unearned premiums
from AIG/National Union. The Employment Application and related engagement papers do not
support Asher’s broad interpretation of the scope of his employment. Asher was only employed
to pursue insurance coverage and related damages from Lloyds and the parties that placed the
insurance, including CS&W Insurance.
1. The Engagement Papers Do Not Contemplate Employment Related to the
AIG/National Union Insurance Coverage.
The Debtors sought to employ Asher for a specific special purpose under 11 U.S.C.
§ 327(e). [ECF No. 242.] Section 327(e) allows retention of an attorney who has represented
the debtor “for a specified special purpose … if in the best interest of the estate.” 11 U.S.C.
§ 327(e). The Employment Application has equivalent language, indicating that Asher was
retained “for the following special and specific purposes.” [ECF No. 242.] The identified
special purposes include an unrelated collection action and:
Legal services rendered in the prosecution and collection of claims and/or causes
of action against only the following entities with compensation to be paid to
Asher on a contingency fee basis according to the terms and conditions set forth
in the attached agreements, subject to Court approval thereto, regarding the filing
of :
(i) Underwriters Lloyd’s at London regarding the collapse of the Debtors’ silo
and the damages resulting therefrom; and
(ii) C S & W Insurance Services, Inc., National Casualty Company, Casualty &
Surety, Inc. American Safety Risk Retention Group, Inc., James Godfrey or
any other related party thereto regarding water damage claim.
[Id. (emphasis supplied).]
The description of the special and specific purposes is restrictive; it is not broad and open
to expansive interpretation. The listed purposes only apply to the entities described.
AIG/National Union is not listed and there is no way to make a connection because the insurance
coverage is unrelated.
a. A Lawyer Retained Under § 327(e) Is Only Entitled to Compensation for
Work Related to the Specified Special Purpose.
A court does not consider whether an attorney retained for a specified special purpose
under § 327(e) is disinterested, so a specific description of the required work is mandatory. In re
Licking River Mining, LLC, 562 B.R. 351, 355 (Bankr. E.D. Ky. 2016); see also In re Polaroid
Corp., 424 B.R. 446, 452 (Bankr. Minn. 2010) (the § 327(e) lawyer “is truly more of a ‘hired
gun’” retained only for the job in the retention papers); In re Running Horse, L.L.C., 371 B.R.
446, 451 (Bankr. E.D. Cal. 2007) (the court must determine that the scope of work is limited to a
special purpose); In re Fretter, Inc., 219 B.R. 769, 779 (Bankr. N.D. Ohio 1998) (the plain
language of § 327(e) contemplates employment on one specific matter). The lawyer must seek
court approval if the work goes beyond the specified special purpose. See In re Brierwood
Manor, Inc., 239 B.R. 709, 717-18 (Bankr. D. N.J. 1999) (chapter 11 counsel assisting chapter 7
trustee after conversion needed court approval pursuant to § 327(e)).
The Employment Application limits the work “only” to the entities listed. “Only” means,
“[w]ithout anyone or anything else.”3 THE AMERICAN HERITAGE DICTIONARY OF ENGLISH
LANGUAGE 1265 (3d ed. 1992). “Attorneys who render services beyond the specified scope of
their retention risk denial of compensation for such unauthorized services.” COLLIER ON
BANKRUPTCY ¶ 327.04[9][c] (Richard Levin & Henry J. Sommer eds., 16th ed.); see also In re

Licking River Mining, LLC, Case No. 14-10201, 2015 WL 5601284, at *13 (Bankr. E.D. Ky.
September 22, 2015) (counsel assumes the risk of reduced compensation for unnecessary
services); Brierwood Manor, 239 B.R. at 717 (compensation is not allowed for work outside the
scope of employment “irrespective of the benefit to that Trustee or the estate”); In re Imperial
Corp. of America, 181 B.R. 501, 506-07 (Bankr. S.D. Cal. 1995) (no compensation is allowed
for general services or if the lawyer was conflicted).
Asher’s employment as special counsel was approved based on the information provided
by the Debtors that is in the Employment Application or otherwise in the record. Asher was only
retained to deal with the Lloyds Policy and any related coverage issues. It is improper to

extrapolate beyond the specified special purpose in the record. See In re Polaroid Corp., 424
B.R. at 452 (special counsel is limited to the job specified in the retention papers); In re Air
South Airlines, Inc., Case No. C/A No. 97-07229-W, 1998 WL 34020727, at *6 (Bankr. D. S.C.
1998) (approval under § 327(e) limits the scope of employment).

3 Case law almost uniformly finds that “only” means just that: “only”. See, e.g., Util. Workers Union of Am., Local
118 v. Ohio Edison Co., 172 F.3d 51 (6th Cir. 1998) (recognizing that the word “only” indicates a limitation in a
contract provision); Cont'l Ins. Co. of City of New York v. Fortner, 25 F.2d 398, 400 (6th Cir. 1928) (finding that an
insurance policy stating that a building was to be occupied “‘only for dwelling purposes’ intended to exclude use of
the building for general business purposes.”); Caston Sch. Corp. v. Phillips, 689 N.E.2d 1294, 1298 (Ind. Ct. App.
1998) (recognizing that the word “only” used in a statute operated as a “limiting word”); Indiana Rd. Mach. Co. v.
Lebanon Carriage & Implement Co., 78 S.W. 861, 862 (Ky. 1904) (finding that a contract limited the applicability
of a certain provision by using the word “only”); Wilkinson v. Rosser's Ex'r, 104 S.W. 1019, 1021 (Ky. 1907)
(finding that the word “only” used in a codicil limited a bequest).
b. The Lloyds Policy and AIG/National Union Insurance Coverage Are
Unrelated.
The Lloyds Policy insured the preparation plant and related equipment. See supra at
Part I.C. The AIG/National Union policies provided business-related coverage, including
workers compensation, automobile, and general liability insurance. See supra at Part I.D. The
AIG/National Union policies were in place for several years and were part of a risk management
program described in the Debtors’ Motion for Order Authorizing the Assumption of Certain
Insurance Contracts with AIG filed on November 3, 2003 (“Motion to Assume”). [ECF
No. 252.]
The Motion to Assume explained that the Debtors received multi-level discounts for
purchasing the package of insurance products that did not include anything related to the Lloyds

Policy or the property making up the preparation plant. [Id.] There is no correlation between the
Lloyds Policy and the workers compensation, automobile, and general liability insurance
coverage provided by AIG/National Union.
c. Asher’s Certified Declaration Confirms His Understanding of the
Limited Engagement.

The Declaration of Proposed Attorney required by Federal Rule of Bankruptcy Procedure
2014 attached to the Employment Application is similarly restrictive. [ECF No. 242, Exh. 3.]
The Declaration is Asher’s notarized statement, under penalty of perjury, that he was not
disqualified from representing the Debtor. The Declaration confirms Asher understood he was
only retained to pursue state court litigation related to the Lloyds insurance policy for the silo
and water damage and CS&W Insurance and others involved with placing the coverage (and the
unrelated collection action). [Id., Exh. 3 at ¶ 5.]
2. The Contingency Fee Agreements Do Not Contemplate Employment Related
to the AIG/National Union Insurance Coverage.
a. The Contingency Fee Agreements Do Not Address the AIG/National
Union Insurance Coverage.
The first Contingency Fee Agreement attached to the Employment Application relates to
the silo damages and the second addresses water damages. [ECF No. 242.] The record and
Asher do not explain whether the Debtors ever pursued the water damage claim, but the
Contingency Fee Agreements are substantially the same and neither supports a claim to the AIG
Reimbursed Premiums.
Section One of the first Contingency Fee Agreement, titled Statement and Subject of
Employment, provided:
Clients hereby retain and employs [sic] Attorney to represent Clients for
Underwriters Lloyd’s at London regarding the collapse of a silo and damages
resulting therefrom and pursuit of, all applicable insurance proceeds, if any, and
any and all other causes of action that Attorney deems necessary (referred to as
“Claim”). Clients now empower Attorney to file such legal action(s) as may be
advisable in Attorney's judgment, and Clients agree to fully cooperate with
Attorney in pursuit of this Claim or cause of action.

[Id. (emphasis supplied).]
Section One of the second Contingency Fee Agreement is consistent, but the italicized
portion is “against CS&W Insurance Services, National Casualty Company, Casualty & Surety
Inc., American Safety Risk Retention Group, Inc., James Godfrey and any other party thereto
regarding water damage claim(s) and damages resulting therefrom …” [Id.]
Section Two of the Contingency Fee Agreements sets out certain percentages of recovery
based on the stage of the proceeding when resolution occurs. [Id.] Asher was entitled to 33.33%
of the recovery if resolved before or after the case was scheduled for trial. [Id.] This is the
percentage Asher recovered from the Lloyds settlement and the amount requested by the
Employment Application.
Nothing in the Contingency Fee Agreements even hints at work related to AIG/National
Union or the recovery of unearned premiums from that insurance coverage. If Asher was
entitled to a percentage recovery of unearned premiums related to insurance other than the
Lloyds Policy, i.e., the AIG/National Union coverage, then this information was required in the
Contingency Fee Agreements.

b. Contingency Fee Agreements Are Strictly Construed.
The Contingency Fee Agreements do not grant Asher authority to represent the Debtors
regarding any insurance coverage. The plain language limits recovery to silo and water damages
covered by the Lloyds Policy and claims against the parties that placed that coverage.
Agreements providing for payment of contingency fees for Kentucky attorneys are strictly
construed.
A contingency fee agreement is a contract. In re Sulzer Hip Prosthesis and Knee
Prosthesis Liability Litig., 290 F. Supp. 2d 840, 848 (N.D. Ohio 2003) (“The contingency fee
agreement … is, of course, a contract, and questions regarding the interpretation and

enforcement of contingency fee contracts are normally questions of state law.”). Interpretation
of a contract is a question of state law. Davis v. Siemens Med. Solutions USA, Inc., 399 F. Supp.
2d 785, 792 (W.D. Ky. 2005).
Kentucky courts will enforce a contract “strictly according to its terms and will assign
those terms their ordinary meaning” absent ambiguity. Id. (citing Frear v. P.T.A. Indus., Inc.,
103 S.W.3d 99, 106 (Ky. 2003)). A contractual term is ambiguous if it is “reasonably
susceptible to different or inconsistent interpretations.” Id. Any ambiguity in the language of a
contingency fee contract is construed strictly against the attorney and in favor of the client.
Weinberg v. Gharai, 338 S.W.3d 307, 313 (Ky. Ct. App. 2011); see also Alioto v. Hoiles, 531 F.
App'x 842, 849 (10th Cir. 2013) (“If any ambiguity exists, the construction favoring the client
controls.”)
Asher points to some phrases in the Contingency Fee Agreements to suggest they
expanded his representation beyond the specified special purpose listed. The obligation to
strictly construe contingency fee agreements does not allow this latitude. Further, the language

is not ambiguous when read in context.
Section One of the Contingency Fee Agreements refers to “all applicable insurance
proceeds”. [ECF No. 242.] The “applicable” insurance proceeds are specifically described.
[Id.] Applicable is defined as having “reference to” a particular object or idea or “fit or suitable
for its purpose.” OXFORD ENGLISH DICTIONARY (3d Ed. 2008). “Applicable” is an adjective that
is only understood by the object or idea that it references. “Applicable insurance proceeds” are
those applicable to “the collapse of a silo and damages resulting therefrom” and “water damage
claim(s) and damages resulting therefrom.”
A similar analysis controls the phrase that follows in Section One: “and any and all other

causes of action that Attorney deems necessary.” Like the applicable insurance proceeds, “any
and all other causes of action” relates back to the recovery for damages to the silo or water
damage at the beginning of the sentence in Section One. Further, the general authority to pursue
necessary causes of action is part of the entire sentence; it is not an open-ended invitation to sue
any person for any offense.
Asher also points to Sections Four and Ten to suggest his representation had few or no
limits. Section Four grants Asher an attorney’s lien on the “Claim or cause of action.” [ECF No.
242.] Section Ten addresses the Clients’ fraud if they try to settle in a manner that excludes
Asher. [Id.] Both Section Four and Section Ten are common terms in contingency fee
agreements that protect the attorney, but only as to the specified special purpose of the
representation - i.e., the “Claim” defined in Section One of the Contingency Fee Agreements.
The Debtors and Asher drafted the Contingency Fee Agreements with specificity by
setting out the particular defendants and claims that he was retained to pursue. No part of the
Contingency Fee Agreements expands the scope of Asher’s duties beyond the specified special

purpose.
B. Asher is Not Entitled to Fees Under 11 U.S.C. § 328 or § 330.
The preceding discussion confirms the engagement papers did not retain Asher to recover
unearned premiums. Asher was engaged to pursue a different insurance carrier that provided
unrelated insurance coverage and the parties that procured that coverage. Further, even if Asher
is given the benefit of the doubt, he has not satisfied his burden to justify a right to payment
under the applicable provisions of the Bankruptcy Code. In re Sharp, 367 B.R. 582, 585 (Bankr.
E.D. Mich. 2007).
1. Professionals Are Entitled to Reasonable Compensation for Work
Performed.

There is no set method of compensation for a debtor’s attorney employed under
11 U.S.C. § 327. Most professionals involved in a bankruptcy case are compensated on an
hourly fee basis, which is reviewed for reasonableness according to 11 U.S.C. § 330. The Sixth
Circuit uses the lodestar method to assess the reasonableness of fees in bankruptcy cases subject
to § 330. Boddy v. U.S. Bankr. Ct. (In re Boddy), 950 F.2d 334, 337 (6th Cir. 1991). Under this
method, “the court will arrive at an attorney’s fee by first determining the ‘lodestar’ amount,
which is calculated by ‘multiplying the attorney’s reasonable hourly rate by the number of hours
reasonably expended.’” Id. (quoting Grant v. George Schumann Tire & Battery Co., 908 F.2d
874, 879 (11th Cir. 1990)).
Other arrangements for compensation are also permitted. Section 328(a) allows retention
under § 327 “on any reasonable terms and conditions of employment, including on a retainer, on
an hourly basis, or on a contingent fee basis.” 11 U.S.C. § 328(a). The benefit of approval under
§ 328(a) is the avoidance of uncertainty through pre-approval of the “representation and fee
arrangement prior to performing the contemplated services.” Nischwitz v. Miskovic (In re

Airspect Air, Inc.), 385 F.3d 915, 920-21 (6th Cir. 2004) (quoting In re Barron, 325 F.3d 690,
693 (5th Cir. 2003) (internal quotation marks omitted)).
The Employment Application and Contingency Fee Agreements address state court
litigation for tort and contract claims. Tort litigation is an appropriate service paid through a
contingent fee arrangement. See Gaskill v. Gordon, 160 F.3d 361, 363 (7th Cir. 1998). The
same is true for the contract-based portion of the dispute.
Asher suggested during oral argument that his contingent fee arrangement was pre-
approved pursuant to § 328(a) and there is no room for review of his entitlement to the requested
fee. The Order approving the Employment Application might have approved the contingency

fee arrangement for the silo and water damage claims, but anything else was still subject to
review. Further, Asher’s request for a contingency fee does not withstand scrutiny under any
section of the Bankruptcy Code. So Asher is not entitled to a fee even if his alleged services
were part of his approved representation.
2. The Engagement Papers Contemplate a Review of the Fees for
Reasonableness.
Whether a fee application is analyzed under § 328 or the reasonableness standard of
§ 330 is determined by considering the “totality of the circumstances, looking at both the
application and the bankruptcy court’s order.” Nischwitz, 385 F.3d at 922. Factors to consider
include “whether the debtor's Application for appointment specifically requested fee pre-
approval, whether the court’s order assessed the reasonableness of the fee, and whether either the
order or the Application expressly invoked § 328.” Id. The totality of the circumstances require
a reasonableness review under § 330; the fees were not pre-approved under § 328.
Initially, a review of the Employment Application and Order show only a mere mention
of § 328, but no express invocation of § 328(a). [See ECF Nos. 242, 285.] Also, the

Employment Application requires Court approval of a request for fees “no more often than every
120 days as provided in Section 327, 328 and 331 of the United States Bankruptcy Code…”
[ECF No. 242.] The Order contains similar language. [ECF No. 285.] The Employment
Application and Order also directed Asher to apply for final compensation at the conclusion of
the proceedings. [ECF Nos. 242, 285.] Periodic fee applications are a part of a review for
reasonableness, not a pre-approved contingent fee arrangement.
More significant for the AIG Reimbursed Premiums, any pre-approval of fees would only
have applied to the clearly described work on which the contingency fee is based. The
Employment Application and Contingency Fee Agreements do not address recovery of unearned

premiums from AIG/National Union. Instead, the Employment Application and Contingency
Fee Agreements address contract and tort litigation related to losses covered by, and failure to
pay under, the unrelated Lloyds insurance coverage. See supra at Part III.A and Part III.B.1.
These limitations weigh heavily against a conclusion that any contingent fee was pre-
approved. “Under the Code, approval of compensation for ‘actual, necessary services rendered’
under § 330, rather than pre-approval under § 328, forms the default rule.” Nischwitz, 385 F.3d
at 921. Based on this analysis, a § 330(a) lodestar review is the best way to determine any
reasonable compensation due to Asher.
Asher suggested that the Plan obviated the need for Court approval because the Post-
Confirmation Committee could approve his fees. [ECF No. 1348.] That argument might justify
the unapproved payment of Asher’s fees related to the 2007 settlement, but it cannot work now.
There is no Post-Confirmation Committee to sign off on the fees, so this Court has an obligation
to review the Fee Application. See In re Kieffer, 306 B.R. at 206 (the bankruptcy court must

approve a fee application even if there are no objections).
3. The Fee Application Fails a Review for Reasonableness.
A lodestar review requires fees that are: “(1) reasonable; (2) incurred for services that
were actually rendered; and (3) incurred for services that were necessary.” In re Allied
Computer Repair, Inc., 202 B.R. 877, 883 (Bankr. W.D. Ky. 1996) (emphasis in original).
Relevant factors addressing reasonable compensation include:
(A) the time spent on such services;
(B) the rates charged for such services;
(C) whether the services were necessary to the administration of, or beneficial
at the time at which the service was rendered toward completion of, a case
under this title;
(D) whether the services were performed within a reasonable amount of time
commensurate with the complexity, importance, and nature of the
problem, issue, or task addressed;
(E) with respect to a professional person, whether the person is board certified
or otherwise has demonstrated skill and experience in the bankruptcy
field; and
(F) whether the compensation is reasonable based on the customary
compensation charged by comparably skilled practitioners in cases other
than cases under this title.

11 U.S.C. §§ 330(a)(3)(A)-(F).
a. Asher Has Not Proven His Work Generated the AIG Reimbursed
Premiums.
Asher points to his alleged communication with CS&W Insurance to suggest his work
ultimately resulted in delivery of the AIG Reimbursed Premiums. This argument is flawed for
several reasons. Asher never argues in his Fee Application that his communications addressed
the AIG/National Union coverage, and the deposition questions only address the Lloyds
coverage. [ECF Nos. 1348, 1357, 1359.] The lack of any physical proof evidencing a claim for
recovery of unearned premiums from AIG/National Union makes it very hard to believe Asher’s
alleged demands went beyond the Lloyds Policy. See Kieffer, 306 B.R. at 206 (Asher has the
burden of proof).

The leap is also hard to make because communicating only with CS&W Insurance was
not enough. CS&W Insurance was a defendant in the Letcher Circuit Court litigation. It is not
reasonable to conclude a plaintiff’s counsel would trust the defendant-broker to assume a
demand made during litigation addressed an unnamed carrier for unrelated insurance coverage.
Further, CS&W Insurance was not even the broker for the AIG/National Insurance
coverage for the final period that resulted in the largest part of the reimbursement. CS&W
Insurance was terminated as the Debtors’ broker for the 2003-04 AIG/National Union program
year. [ECF No. 122 (providing notice of “the change of agents … from CS&W Insurance
Services, Inc. to South West Insurance Agency, Inc.”).] South West, the last active insurance

broker for the AIG/National Union coverage and a non-party to the state court litigation, was the
logical target of a letter seeking recovery of the AIG Reimbursed Premiums. [See id.]
Also, the alleged bases for recovery of unearned premiums from each carrier is different.
The Complaint against Lloyds was amended to allege that CS&W Insurance was responsible for
the failure to refund unearned premiums “by listing the same pieces of equipment on more than
one schedule.” [ECF No. 1348-2, Exh. D at ¶ 8.] This claim involves either fraud or negligence
related to scheduling the equipment covered by the Lloyds Policy, the only defendant-insurer.
The AIG Reimbursed Premiums were recovered because the premiums for workers
compensation, automobile, and general liability insurance were based on estimates. [See ECF
Nos. 252, 1331.] The agreement with AIG/National Union contemplated a regular audit within
fifteen months of the inception of the policy. [See ECF No. 252, Exh. B at § V.] Although very
late, the AIG Reimbursed Premiums stem from a contract term and not the allegations against, or
demands to, CS&W Insurance.
Asher is not the source of the AIG Reimbursed Premiums. A mathematical computation

required by the AIG/National Union contract is unrelated to any demand for premiums related to
duplicate listings on equipment schedules for the Lloyds Policy. See Bell County Bd. Of Educ. v.
Lee, 39 S.W.2d 492, 494 (Ky. 1931) (a contingency fee is not due on voluntary payments).
b. The Amount Claimed Is Unreasonable.
Asher was allowed an hourly rate for unrelated work in the Employment Application at
$175.00. [ECF No. 242.] Using this reasonable rate, Asher must show 857 hours of work to
justify a $150,000.00 fee.
Asher did not submit time records. The only evidence of work to recover unearned
premiums comes from the meager allegations regarding file review and communications with

CS&W Insurance from Asher’s self-serving affidavits and deposition transcripts. [ECF Nos.
1348, 1357, 1359.] There is no way to infer that he spent over 850 hours attempting to collect
unearned premiums from AIG/National Union even accepting his affirmations as true.
The record shows Asher’s work related to recovery of damages for the collapse of the
silo and water damage under the Lloyds Policy. Asher received over $450,000.00 from the
settlement based on the Contingency Fee Agreements and the bankruptcy case was closed. Not
only did Asher fail to prove he was retained to recover unearned premiums on a contingent fee
basis, but any work he did do could never justify a $150,000.00 fee. See supra at Part III.A; see
also Crestwood Farm Bloodstock v. Everest Stables, Inc., 751 F.3d 434, 446-47 (6th Cir. 2014)
(the bankruptcy court may use its discretion to impose a global reduction).
4. A Review of the Employment Application Pursuant to § 328(a) Does Not
Justify Payment of a Contingent Fee.
A bankruptcy a court may adjust a fee previously approved under § 328(a):
[T]he court may allow compensation different from the compensation provided
under such terms and conditions after the conclusion of such employment, if such
terms and conditions prove to have been improvident in light of developments not
capable of being anticipated at the time of the fixing of such terms and conditions.
11 U.S.C. § 328(a). This case presents extraordinary and unusual circumstances that justify a
departure from any pre-approved compensation. See In re Smart World Technologies, LLC, 552
F.3d 228, 234-35 (2d Cir. 2009).
The extraordinary and unusual circumstances are described throughout this Opinion.
Asher was only engaged to pursue damage claims related to coverage under the Lloyds Policy
that was sourced by a terminated insurance broker. Contingency fee agreements are strictly
construed, and the contracts in this case did not address the AIG Reimbursed Premiums. Even
assuming Asher tried to pursue unearned premiums from AIG/National Union, the legal work
was extremely limited and directed at parties that would not likely have passed on the request to
AIG/National Union. The time difference between any alleged work and the payment of the
AIG Reimbursed Premiums hammers home this conclusion.
IV. CONCLUSION.
For the foregoing reasons, it is ORDERED that the Debtors’ Special Counsel James
Asher’s Application for Final Allowance of Compensation and Reimbursement of Accrued
Expenses and Contingency Fees [ECF No. 1348] is DENIED.

21

The affixing of this Court's electronic seal below is proof this document has been signed by the Judge and
electronically entered by the Clerk in the official record of this case.

ss Signed By:
AX Pee. Gregory R. Schaaf
im, ©) Me) Bankruptcy Judge
F111) a ae
CS Dated: Monday, October 19, 2020

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10457894. Public record. Not legal advice.