Western Robidoux, Inc.

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF MISSOURI

In re: )

) Case No. 19-50505-BTF

WESTERN ROBIDOUX, INC., )

) Chapter 7

Debtor. )

ORDER APPROVING GERMAN MAY, PC’S FINAL FEE APPLICATION

German May, PC (GM) seeks the court’s final approval under Rule 2016(a) of

the Federal Rules of Bankruptcy Procedure of its application for compensation of fees

and expenses it incurred as special counsel for debtor Western Robidoux, Inc. (WRI)

from October 28, 2019, through June 30, 2020.

Creditors InfoDeli, LLC; TooBaRoo, LLC; and Breht C. Burri1 (collectively, the

objectors), object to the final fee application on two grounds. First, the objectors

contend that GM cannot establish the reasonableness of its fees as 11 U.S.C.

§ 330(a)(3) requires, and, therefore, GM is not entitled to the fees and expenses it

incurred as special counsel. Second, the objectors contend that GM represented an

interest adverse to the estate and ask this court to exercise its discretion under 11

U.S.C. § 328(c) to disallow all of GM’s fees and expenses.

For the reasons explained below, the court determines (1) GM has established

the reasonableness of its fees under the factors set forth in § 330(a)(3), and (2) GM

did not hold or represent an interest adverse to the estate in its role as special counsel.

Consequently, the court APPROVES GM’s final fee application.

1 Breht is the sole member of both TooBaRoo, LLC and InfoDeli, LLC.

JURISDICTION

The court has jurisdiction over GM’s fee application under 28 U.S.C. §§ 1334

and 157(a). This matter is statutorily core under 28 U.S.C. § 157(b)(2)(A) and is

constitutionally core. No party has contested the court’s jurisdiction or authority to

adjudicate GM’s final fee application. The court, therefore, has the authority to hear

this matter and make a final determination.

BURDEN OF PROOF

The professional seeking compensation bears the burden of proving it is

entitled to all fees and expenses. Chamberlin v. Kula (In re Kula), 213 B.R. 729, 736

(B.A.P. 8th Cir. 1997). The professional seeking compensation should not take its

burden lightly because every dollar expended on legal fees is a dollar less available

to creditors. In re Dille, No. 18-42994, 2021 WL 864201, at *2 (Bankr. W.D. Mo. Mar.

8, 2021).

BACKGROUND

This case comes with a long and tortuous history. The court derives the

following background information from the fee application and attached exhibits, the

statements counsel for each party made at oral argument, and the record in this case.

WRI operated a commercial printing and marketing business from the late

1800s until it ceased operation in 2021. Final Fee Appl. ¶ 3, ECF No. 276. Connie

Burri is WRI’s president and majority shareholder, holding a 71.2% interest.

Statement of Financial Affairs 59–61, ECF No. 55. Her three sons, Peter Burri, Brian

Burri, and Breht Burri, each hold a 9.6% interest in WRI. Id.

In early 2014 a dispute arose between the objectors, on one side, and WRI,

Cindy Burri, Brian Burri, Peter Burri, and Connie Burri (collectively, the individual

Burris), on the other. In anticipation of litigation stemming from that dispute, WRI

and the individual Burris retained GM as their counsel.

In May 2015 InfoDeli and Breht sued WRI and the individual Burris in federal

district court, alleging thirteen counts including federal copyright infringement and

breach of a joint venture agreement. InfoDeli, LLC v. W. Robidoux, Inc., No. 15-

00364, 2015 WL 13850106 (W.D. Mo. May 12, 2015). WRI and the individual Burris

counterclaimed against InfoDeli and Breht. The district court dismissed three of

InfoDeli and Breht’s thirteen counts, including breach of the joint venture agreement,

for lack of subject matter jurisdiction. In response, TooBaRoo sued WRI in Missouri

state court for, among other things, breach of the joint venture agreement.

TooBaRoo, LLC v. W. Robidoux, Inc., 614 S.W.3d 29 (Mo. App. W.D. 2020).

While the state and federal litigation was pending, WRI commenced this

bankruptcy case. ECF No. 1. WRI asked the bankruptcy court to employ Daniel

Blegen and GM as special counsel under § 327(e) in the state and federal litigation.

The objectors opposed WRI’s motion to employ GM as special counsel on several

grounds, including that GM also held or represented an interest adverse to the estate

by representing the individual Burris in the state and federal litigation.

At the hearing on December 20, 2019, the court determined that WRI

established the elements outlined in § 327(e), including that GM did not hold or

represent an interest adverse to the estate. The court also determined that requiring

WRI to hire substitute counsel to defend it on such short notice would be extremely

prejudicial and detrimental to WRI because of the cost associated with hiring

replacement counsel and increased risk of adverse judgments. Order Granting Mot.

To Employ Daniel Blegen of German May, PC, ECF No. 102.

At the December 2019 hearing, the court warned Blegen to be careful not to

bill the estate any legal fees for matters that solely benefited the individual Burris.

The court also cautioned GM to monitor possible future conflicts that might arise

between WRI and the individual Burris because such conflicts could prevent GM from

continuing to simultaneously represent all parties.

At the December 2019 hearing, the parties disagreed about whether the

district court had previously dismissed all counts against the individual Burris. In

2016, the district court dismissed InfoDeli and Breht’s tortious interference count

against a co-defendant, explaining that the Copyright Act preempted the tortious

interference count. The next day, mistakenly believing the order dismissing the

tortious interference count against the co-defendant also dismissed that count

against the individual Burris, the district court denied as moot a motion to dismiss

the tortious interference count against the individual Burris. The district court

ultimately dismissed all other counts against the individual Burris. To correct the

discrepancy between the actual and intended effects of the 2016 order dismissing the

tortious interference count against the co-defendant, the district court ultimately

dismissed the tortious interference count against the individual Burris on the first

day of the March 2020 federal trial.

WRI obtained a complete defense verdict in the federal litigation, jury awards

of $250,000 each against InfoDeli and Breht on WRI’s counterclaims, and an award

of $698,302 for attorneys’ fees. The objectors’ appeal is currently pending before the

Eighth Circuit. In the state litigation, the jury awarded TooBaRoo a total of

$1,290,206 in damages and pre-judgment interest against WRI.

In May 2021 GM filed its final fee application with this court. The objectors

object to the final fee application on two primary grounds. First, they allege the fees

incurred did not benefit the estate, were unreasonable, and were not for actual,

necessary services. Second, they contend a direct, non-waivable conflict of interest

existed between WRI and the individual Burris.

The court held a hearing on August 10, 2021, on GM’s final fee application.

The court admitted GM’s amended exhibits 1–5 and the objectors’ exhibits A–C, F–P,

W–CC, and GG–II. The court took judicial notice of ECF No.’s 102, 113, 114, 119,

122, 123, and 125.

In the fee application, GM originally requested $326,840 in fees and $21,102.59

in expenses for a total of $347,942.59. Because GM already applied a $45,011.73

retainer, the net amount GM originally sought in its final fee application was

$302,930.86. At the August 10 hearing, GM voluntarily withdrew ten time entries

and one expense from its application, reducing its request by a total of $2,142.50 in

fees and $142.86 in expenses. The final amounts GM asks the court to approve are

$324,697.50 in fees and $20,959.73 in expenses for a total of $345,657.23. After

applying the retainer, the net amount is $300,645.50.

Blegen credibly testified at the hearing in support of GM’s final fee application.

He testified that he has been an attorney for twenty-three years and has been

managing litigation for twenty years. He further testified that he defended WRI in

the state and federal litigation and prosecuted its counterclaims in the federal

litigation. He described the experience of the professionals who worked on these

matters, the division of work among them, and the professionals’ billing entries and

rates. Specifically, he explained that from October 2019 through December 2020 GM

drafted briefs in the state court appeal, submitted thoroughly litigated motions in

limine, prepared for and tried a two-week federal jury trial, and drafted post-trial

briefing.

Blegen also testified that GM’s services benefited WRI by successfully

defending against a federal lawsuit seeking $6 million in damages, providing WRI

with competent counsel in the state and federal litigation, and successfully

prosecuting counterclaims against the objectors in the federal litigation that resulted

in an award of $500,000 in damages and $698,302 in attorneys’ fees.

The objectors focused their cross examination of Blegen on the alleged “non-

waivable conflict” between WRI and the individual Burris. They argue that WRI

should have wanted the objectors to obtain a judgment against the individual Burris

in the federal litigation because TooBaRoo would credit any amount InfoDeli and

Breht collected against the individual Burris under that judgment against WRI’s $1.2

million obligation under TooBaRoo’s state court judgment.

ANALYSIS

Sections 330 and 328(c) govern the court’s determination of the present

dispute. Section 330 entitles special counsel to reasonable compensation for actual

and necessary services and reimbursement for actual, necessary expenses. 11 U.S.C.

§ 330(a)(1)–(3). But § 328 empowers the court to disallow otherwise actual,

necessary, and reasonable fees if the special counsel represents or holds an interest

adverse to the estate. 11 U.S.C. § 328(c).

A. GM’s services and expenses are actual and necessary, and GM’s fees

are reasonable

The court may approve a special counsel’s fee application under § 330 if (1)

counsel’s services and expenses are actual and necessary, and (2) counsel’s fees are

reasonable. 11 U.S.C. § 330(a)(1)(A).

The court has discretion when it awards fees and expenses under § 330(a), and

it may independently determine whether the fees are actual and necessary. In re

Meyer, 185 B.R. 571, 574 (Bankr. W.D. Mo. 1995) (citing Cont’l Ill. Nat’l Bank & Trust

Co. of Chi. v. Charles N. Wooten, Ltd. (In re Evangeline Refining Co.), 890 F.2d 1312,

1326–27 (5th Cir. 1989)). But a fee application that specifies the nature of the

services rendered, the time expended, and the expenses incurred is a prerequisite to

the court making that determination. Id.; Fed. R. Bankr. P. 2016(a).

Here, GM actually incurred fees and expenses in the state and federal

litigations. GM submitted detailed invoices describing the services it rendered, and

expenses it incurred, identifying each professional who rendered the services and the

time each professional spent on the services. These invoices satisfy the prerequisite

and show GM performed actual services and incurred expenses for the estate.

Further, GM heeded the court’s admonition and maintained separate detailed

billing records to avoid billing the estate for work that only benefited the individual

Burris. To the extent GM initially sought compensation for work it performed for the

individual Burris, the court determines GM cured any such defects by filing amended

exhibits separately invoicing work it performed for WRI and the individual Burris.

Thus, all fees and expenses GM presently seeks in its application are “actual” under

§ 330.

The services GM rendered and expenses GM incurred in the state and federal

litigation were also necessary to defend WRI against the objectors’ multi-million-

dollar copyright infringement claims and to prosecute WRI’s counterclaims. WRI

obtained a complete defense verdict in the federal litigation and judgments totaling

$500,000 on its counterclaims for tortious interference against Breht and InfoDeli.

WRI also obtained a $698,302 award of attorneys’ fees and costs under the Copyright

Act. Had WRI not retained competent counsel, the objectors might have prevailed in

the federal litigation. GM’s services, therefore, were necessary to preserve the value

of WRI’s bankruptcy estate.

Further, it was necessary for GM to represent WRI to minimize attorneys’ fees.

GM has represented WRI in the federal and state litigations since 2014. Blegen

intimately understood the complex facts and legal issues of the federal litigation.

This court approved WRI’s application to employ GM on the eve of trial. Had the

court required WRI to retain replacement counsel, the estate would have incurred

additional and unnecessary costs to bring that counsel up to speed. It was, therefore,

necessary for GM and Blegen to continue to act as counsel for WRI.

Once a professional has shown its services and expenses are actual and

necessary, it must then show the fees it incurred are reasonable. 11 U.S.C.

§ 330(a)(1)(A). In determining whether fees are reasonable, the court considers:

(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 the

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).

GM has shown its fees are reasonable under factors (A), (B), (C), (D), and (F).

Factor (E) does not apply to the court’s analysis.

GM has shown its fees are reasonable under factors (A), (B), and (F). From

October 28, 2019, through June 30, 2020, GM billed the estate 1119.1 hours. This is

a reasonable amount of time for counsel to have spent preparing for and litigating a

federal jury trial and state court appeal. The average billing rate GM charged was

$270.61 per hour. Blegen—a partner at GM who has twenty years’ experience

managing litigation, and the responsible attorney for this litigation—charged $400

per hour for his services. Blegen testified that GM offered its services to the estate

at a “significant discount” below its usual rates. Based upon the court’s familiarity

with the hourly rates in Kansas City, the court finds these rates reasonable and in

line with Kansas City rates. Thus, as to factors (A), (B), and (F), GM’s fees are

reasonable.

GM satisfies factor (C) as to the federal litigation because GM provided

competent services to WRI and effectively and economically protected WRI’s

interests, thus benefiting the estate. By the time the court approved GM’s

employment in late 2019, the parties had completed their pretrial briefing and were

ready to conduct a federal jury trial. GM had already dedicated thousands of hours

and billed over $2.6 million in legal fees defending WRI and the individual Burris

since late 2014. Its attorneys were well acquainted with the litigation. If the court

required WRI to employ counsel unfamiliar with the years-long litigation, the estate

would have incurred substantial and unnecessary expenses to replace GM and would

have potentially risked an adverse judgment. Consequently, GM’s services in the

federal litigation were necessary to the administration of and beneficial toward the

completion of the case.

The objectors argue that GM’s services in the federal litigation were not

beneficial because the estate will be unable to collect on the counterclaim judgments

and fee award. This argument ignores entirely that GM’s services benefited the

estate by liquidating and reducing to zero WRI’s potential liability in the federal

litigation. The objectors’ argument also ignores that uncertainty concerning future

collectability is inherent in all litigation. The objectors’ unproven statements that

WRI will never collect on the judgments do not negate the value of the services GM

performed in obtaining the fee award and judgment for the estate. The judgments

and fee award may be valuable assets of the estate, for example, by providing possible

setoff value against TooBaRoo’s $1.2 million judgment. Thus, WRI’s bankruptcy

estate benefited from GM’s services in the federal litigation.

GM’s services representing WRI in the state court appeal also benefitted WRI’s

bankruptcy estate at the time GM rendered the services because, if successful, the

appeal would have relieved the estate of a $1.3 million obligation. Like in the federal

litigation, GM’s competency and familiarity with the state litigation benefitted the

estate by saving the estate time and money. Thus, as to factor (C), GM’s fees are

reasonable.

GM satisfies factor (D) because the time it spent is commensurate with the

complexity, importance, and nature of a two-week federal jury trial, pre- and post-

trial motions, and state court appeal. InfoDeli and Breht initially brought thirteen

counts and named sixteen defendants in the federal litigation. The case involved

complex legal issues and factual disputes. GM’s services were important to the estate

because the litigation put WRI at risk of significant liability. GM performed the

services within a reasonable amount of time commensurate with the complexity,

importance, and nature of the tasks GM addressed. Thus, as to factor (D), GM’s fees

are reasonable.

Because GM has established its services and expenses are actual and

necessary and its fees are reasonable, the court determines GM has satisfied its

burden under § 330. Having made that determination, the court next analyzes

whether it should nonetheless disallow GM’s fee application under § 328(c).

B. GM does not hold or represent an interest adverse to the estate

Even if a professional establishes its fees are actual, necessary, and reasonable,

§ 328(c) empowers the court to disallow professional fees if the professional holds or

represents an interest adverse to the estate that arises during the professional’s

employment. 11 U.S.C. § 328(c). Thus, § 328 penalizes a professional’s failure to avoid

ongoing, disqualifying adverse interests. Rome v. Braunstein, 19 F.3d 54, 58 (1st Cir.

1994). The court may exercise discretion to approve or deny compensation under

§ 328(c). Pruss v. Pelofsky (In re Sauer), 222 B.R. 604, 609 (B.A.P. 8th Cir. 1998)

(“[a]lthough § 328(c) confers considerable discretion on the court, it does not compel

the disallowance or disgorgement of fees”).

A party holds an interest adverse to the estate if it possesses or asserts an

economic interest that would lessen the value of the bankruptcy estate or create an

actual or potential dispute between the party and the estate. Blumenthal v. Myers (In

re M&M Marketing, LLC), 426 B.R. 796, 802 (B.A.P. 8th Cir. 2010). An attorney

represents an adverse interest if its client holds any such interest. Id. at 803.

To establish that GM represented an interest adverse to the estate, the

objectors must show one of two things: either the individual Burris’ economic

interests lessened the value of the bankruptcy estate; or the individual Burris’

economic interests created an actual or potential dispute between them and the

estate.

The objectors appear to argue that the individual Burris’ economic interest in

defending against the federal litigation (1) created an actual dispute between the

individual Burris and the estate because any judgment InfoDeli and Breht received

against the individual Burris would have reduced the objectors’ ability to collect

against WRI in satisfaction of TooBaRoo’s state court judgment; (2) created a

potential dispute between WRI and the individual Burris because WRI could have

filed a cross claim in the federal litigation seeking contribution from the individual

Burris for WRI’s liability under TooBaRoo’s state court judgment; and (3) lessened

the value of the estate because the federal court dismissed the individual Burris,

which prevented any benefit to the estate under the preceding two arguments. For

these reasons, the objectors argue the court should disallow the fee application

because GM represented an interest adverse to the estate.

Importantly, the court already determined GM did not hold or represent an

interest adverse to the estate when it approved WRI’s application to employ GM as

special counsel. The court finds the objectors have not shown any change in

circumstance that would create an adverse interest.

The individual Burris do not possess or assert an economic interest that would

lessen the value of the estate. The objectors have not convincingly explained how a

potential judgment in favor of InfoDeli and Breht against the individual Burris for

tortious interference would reduce TooBaRoo’s judgment against WRI for breach of

the joint venture. There appears to be a lack of mutuality to prevent setoff. Thus,

the individual Burris’ interest in dismissal of the federal litigation did not conflict

with the estate’s interest in reducing WRI’s liability under the state court judgment.

Even if setoff were legally viable, it might produce a net benefit to the estate

as circumstances stand. Counsel for the objectors stipulated at the December 2019

hearing that Breht, InfoDeli, and TooBaRoo are the same entity. GM raised this very

possibility in its suggestions in support of the fee application. With the individual

Burris dismissed as parties, WRI obtained judgments totaling $500,000 and an award

of $698,302 in attorneys’ fees against InfoDeli and Breht in the federal litigation. If

the objectors are all the same entity, mutuality may exist for setoff. Because setoff

of WRI’s judgments and award against TooBaRoo’s judgment would significantly

reduce the estate’s liability to TooBaRoo, the possibility of setoff does not create a

conflict between the individual Burris and WRI, but instead may create a net benefit

to the bankruptcy estate.

The individual Burris also do not possess or assert an economic interest that

creates an actual dispute between them and the estate. WRI and the individual

Burris shared a common interest in defending against the objectors in the federal

litigation because all defendants faced close to $6 million in liability based on common

factual allegations. Obtaining dismissal of the individual Burris as parties prevented

the federal jury from receiving evidence of the joint venture and tortious interference.

This was a litigation tactic that proved successful. Had the district court not

precluded the tortious interference count, evidence relating to that count may have

prejudiced all defendants, WRI included. In the federal litigation, WRI and the

individual Burris shared common interests in seeking the dismissal of the individual

Burris as defendants under the tortious interference count. Accordingly, the

individual Burris’ interest in the dismissal did not create an actual dispute between

the Burris and the estate.

Though the objectors can envision circumstances in which the individual

Burris’ interests in dismissal could have harmed WRI, those theoretical

circumstances never came to fruition. Section 328 does not require this court to

speculate as to what might have happened and disallow counsel’s fees because the

court can imagine an outcome in which the interests of the individual Burris and WRI

might not align. The court need only look to the outcome of the federal litigation to

determine that the district court’s dismissal of the tortious interference count did not

harm WRI. That outcome persuades the court to exercise its discretion to allow GM’s

fees despite any potential adverse interest.

The court, therefore, determines GM did not hold or represent an interest

adverse to the estate during its representation of WRI in the state and federal

litigation and exercises its discretion to allow GM’s fees.

CONCLUSION

For the reasons explained above, the court APPROVES GM’s final fee

application. The court awards GM a total of $345,657.23, which includes $324,697.50

in fees and $20,959.73 in expenses. After applying the retainer, the net amount

remaining unpaid is $300,645.50.

It is so ordered.

Dated: 10/21/2021 /s/ Brian T. Fenimore___________

United States Bankruptcy Judge