Seawalk Investments, LLC

ORDERED.

Dated: January 16, 2025 _

SG

Jacob ra

Unitéd States Bankruptcy Judge

UNITED STATES BANKRUPTCY COURT

MIDDLE DISTRICT OF FLORIDA

JACKSONVILLE DIVISION

www.flmb.uscourts.gov

In re: Case No. 3:19-bk-1010-JAF

SEAWALK INVESTMENTS, LLC,

Chapter 11

Debtor.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This case is before the Court upon a remand from the United States District

Court. What is now at issue in this over five-year two-party dispute is the extent to

which Seawalk Investments, LLC (“Debtor”) is obligated to pay the almost

$300,000.00 in attorney’s fees incurred by Sky Enterprises, LLC (“Sky”), Debtor’s

secured creditor. Upon an extensive review of the record of this case and briefs filed

by the parties, the Court makes the following Findings of Fact and Conclusions of

Law.1

Findings of Fact

I. General Background

On March 21, 2019 (the “Petition Date”), Debtor filed a Chapter 11 bankruptcy

petition.2 Debtor is a Florida limited liability company that owns a mixed-use

commercial property consisting of short-term lodging and long-term residential rental

spaces, as well as retail/commercial space (the “Property”), located in Jacksonville

Beach, Florida.3 The Debtor has two members/owners, an individual named James

R. Stockton, and a company named Bebe LLC.4 On its schedules, Debtor valued the

Property at $3.75 million and listed the debt owed to NLA Jacksonville, LLC

(“NLA”), the first mortgage holder on the Property, at $735,000.00, thus asserting an

equity cushion for NLA of over $3 million.5

The Amended and Restated Renewal Promissory Note (the “Note”), which

memorialized the mortgage debt (the “Mortgage Debt”), provided for the payment by

Debtor of NLA’s reasonable attorney’s fees incurred in the collection of the Mortgage

Debt, otherwise incurred in protecting and preserving the lien of the Mortgage, and

1 See Fed. R. Bankr. P. 7052. The Court issued Findings of Fact and Conclusions of Law on

October 28, 2021 (“Seawalk I”) on this same issue. See 2021 WL 5016600 (Bankr. M.D. Fla.

Oct. 28, 2021). The Findings of Fact in Seawalk I are incorporated herein and are reiterated

in large part for purposes of clarity.

2 Doc. 1.

3 Seawalk I, 2021 WL 5016600, at *1.

4 Id.

5 Doc. 23.

incurred in enforcing, sustaining, protecting, or defending the lien or priority of the

Mortgage against all persons.6 Mr. Stockton executed a personal guaranty as to the

Mortgage Debt.

II. Insurance Proceeds and Cash Collateral

In November 2018, a fire occurred at the Property. The fire was small, but a

dispute arose between NLA and Debtor as to how the insurance proceeds should be

used. This dispute and Debtor’s inability to obtain the insurance proceeds caused the

filing of this bankruptcy case.7 The Court previously found that as of the Petition Date,

Debtor was not in default on the Note.8

Litigation as to the insurance proceeds and cash collateral issues between

Debtor and NLA was protracted. On April 8, 2019, Debtor filed an emergency motion

to use cash collateral, to which NLA filed a limited objection.9 After a hearing on April

6 Sky’s Ex. 1, September 1, 2021 hearing on Motion to Determine Amount of [Sky]’s Secured

Claim. The Note provides in pertinent part:

PAYMENT OF COSTS. In the event of a default, Borrower covenants and agrees to

pay all and singular the costs, taxes, fees, and expenses, including Lender's reasonable

attorneys' fees (including on appeal and in bankruptcy), documentary stamp taxes,

intangible taxes and other excise taxes, and the cost of title evidence, incurred or

expended at any time by Lender in the collection of the loan evidenced hereby and/or

foreclosure of the Mortgage or otherwise incurred in protecting and preserving the

lien of the Mortgage or in enforcing Lender's rights under this Promissory Note, the

Mortgage, or under any other instrument evidencing and/or securing the indebtedness

evidenced hereby, or in enforcing, sustaining, protecting, or defending the lien or

priority of the Mortgage against any and all persons, including, but not limited to, lien

claimants or the exercise of the power of eminent domain or other governmental

power of any kind. (emphasis added).

7 Seawalk I, 2021 WL 5016600, at *1.

8 Id. Sky disputes this, alleging that the Note matured on June 20, 2018, prior to the Petition

Date. The Court’s conclusions in these Findings of Fact and Conclusions of Law would not

change even if the record was clear that the Note had matured prior to the Petition Date.

9 Docs. 16, 26.

18, 2019, the Court granted Debtor’s motion on an interim basis based upon the

parties’ agreement.10

On June 7, 2019, almost two months after the cash collateral hearing, Debtor

submitted a proposed order on cash collateral.11 NLA objected to the proposed order,

asserting that Debtor’s proposed monthly budget for maintenance increased from an

agreed $300.00 monthly to $2,900.00, essentially retroactively authorizing what NLA

alleged was Mr. Stockton’s unauthorized post-petition use of cash collateral.12 NLA

sought another hearing on cash collateral prior to the entry of an order authorizing the

use of cash collateral, which the Court scheduled for June 25, 2019.13 At the June 25,

2019 hearing, the parties informed the Court they intended to file a joint motion and

agreed order establishing procedures for the disbursement of the insurance proceeds.14

The Court granted use of cash collateral on an interim basis until a further hearing on

July 22, 2019.15 On July 19, 2019, the Court entered an Agreed Order Authorizing

Debtor’s Interim Use of Cash Collateral and Providing Adequate Protection.16

III. The Teresa L. Hapsis Trust’s Secured Claim

On June 19, 2019, the Teresa L. Hapsis Trust (the “Trust”) filed a secured proof

of claim in the amount of $390,271.08, which was designated as Claim 4. Claim 4,

10 Doc. 27.

11 Doc. 33.

12 Doc. 35.

13 Docs. 35, 37.

14 Doc. 47.

15 Id.

16 Doc. 55.

which is secured by a mortgage on the Property, was signed under penalty of perjury

and never amended. Claim 4 did not list a value for the Property and listed $0 of the

claim as unsecured.

IV. NLA/Sky’s Secured Claim

On July 3, 2019, NLA filed a secured proof of claim in the amount of

$750,967.07, which was designated as Claim 5.17 Claim 5 indicated the original

principal balance on the Note was $975,000.00, over $200,000.00 more than the

amount owed as of the Petition Date.18 Claim 5, which was signed under penalty of

perjury and never amended, indicated that the value of the Property was unknown and

listed $0 of the claim as unsecured.19

V. Extensive Plan, Discovery, and Other Bankruptcy Litigation

On July 17, 2019, Debtor filed a disclosure statement and Chapter 11 plan of

reorganization (the “Plan”), which provided for $4,850.67 monthly payments to NLA

($735,000.00 amortized over twenty years at 5% interest) with a balloon payment due

on October 1, 2029.20 On July 22, 2019, the Court entered an Order Conditionally

Approving the Disclosure Statement, Scheduling Confirmation Hearing [for August

17 Sky’s Ex. 1, September 21, 2021 hearing on Motion to Determine Amount of [Sky]’s

Secured Claim.

18 Id.

19 Id.

20 Docs. 52, 53.

28, 2019], and Fixing Deadlines.21 The Trust, NLA, and the United States Trustee

filed objections to confirmation of the Plan.22

On August 9, 2019, the Court entered a Second Agreed Order Authorizing

Debtor’s Interim Use of Cash Collateral and Providing Adequate Protection and

setting a final hearing for October 10, 2019.23 On August 20, 2019, NLA filed a Motion

for Entry of an Order Establishing Procedures for Disbursement of Insurance Proceeds

to Pay for Remediation of Fire Damage (the “Disbursement Motion”) in which it

alleged that it had prepared and sent to Debtor what it hoped would be an agreed order

regarding the insurance proceeds.24 However, it alleged Debtor waited three weeks to

respond and then provided its own “stripped-down version on a take-it-or-leave-it

basis.”25

Likely recognizing that the Plan was not going to be confirmed prior to the

expiration of the exclusivity period on September 17, 2019, on August 26, 2019,

Debtor filed a Motion to Extend the Exclusive Period for filing a Chapter 11 Plan,

seeking an extension of the exclusivity period until January 15, 2020.26 The Trust27

and NLA filed objections to the Motion to Extend Exclusivity.28

21 Doc. 58.

22 Docs. 74, 76, 77.

23 Doc. 66.

24 Doc. 75.

25 Id.

26 Doc. 86.

27 At that time the Trust was Debtor’s second largest creditor and held an approximate

$425,000.00 debt secured by a purchase money security interest in the Property second in

priority to NLA’s mortgage.

28 Docs. 90, 98.

On August 27, 2019, the Trust filed an Expedited Motion to Appoint a Trustee

and/or Examiner.29 The Court scheduled a trial on the Disbursement Motion, the

Motion to Extend Exclusivity, the Motion for Approval of Disclosure Statement,

Confirmation of the Plan, and the Motion to Appoint Trustee and/or Examiner for

September 9, 2019.30 At the September 9, 2019 trial, the Court granted the Motion to

Extend Exclusivity and continued the other matters to November 6, 2019.31 On

September 18, 2019, the Court entered an order granting the Motion to Extend

Exclusivity to January 15, 2020.32

On October 10, 2019, the Court held a final hearing on the Motion to Use Cash

Collateral and Determine Adequate Protection,33 which it granted by order dated

October 23, 2019.34 The Court found that NLA was adequately protected by its lien

interest in the Property.35 On October 31, 2019, Debtor filed several § 1129(b)36

motions, including as to NLA.37

On November 4, 2019, Debtor and the Trust filed a Motion to Approve

Compromise (resulting from mediation), which provided Debtor would pay the

$425,000.00 owed to the Trust by November 1, 2021, under terms of a modified loan

29 Doc. 91.

30 Docs. 102, 106, 104, 105, 107.

31 Doc. 124.

32 Doc. 129.

33 Doc. 135.

34 Doc. 142.

35 Id.

36 Hereinafter, all code sections refer to the United States Bankruptcy Code located at Title

11 of the United States Code unless otherwise noted.

37 Docs. 147, 148 (as to NLA), 149, 150, 151. These are commonly referred to as cramdown

motions.

that included payments at a 6% interest rate and 20-year amortization, along with a

balloon payment in November 2021, with an option to extend the payment deadline.38

The Court approved the compromise by Order dated December 2, 2019.39

On November 5, 2019, Debtor filed an Amended Chapter 11 Plan of

Reorganization (the “First Amended Plan”).40 The First Amended Plan incorporated

the settlement agreement between Debtor and the Trust but did not affect the treatment

of NLA.41 On November 6, 2019, NLA filed an Expedited Motion to Convert the Case

to Chapter 7 or Dismiss Case (the “Motion to Convert”).42 Alleging numerous

improprieties by Debtor, the Motion to Convert sought conversion of the case to

Chapter 7, or alternatively, dismissal of the case with a one-year injunction on

refiling.43 The Court scheduled a hearing on the Motion to Convert for December 3,

2019.44

On November 6, 2019, the Court conducted the rescheduled trial on the

Disbursement Motion, the Motion for Approval of Disclosure Statement, and

Confirmation of the First Amended Plan. The Court conditionally approved the

Disclosure Statement and set a rescheduled trial on final approval of the Disclosure

Statement, Confirmation of the First Amended Plan, the Motion to Convert, and

38 Doc. 157.

39 Doc. 175.

40 Doc. 160.

41 Id.

42 Doc. 161.

43 Id.

44 Doc. 165.

Debtor’s § 1129(b) Motion as to NLA for April 2, 2020.45 On November 15, 2019, the

Court entered an order governing the insurance proceeds.46 Repairs were completed,

and full operation of the Property resumed in August 2020.47

VI. Sky Acquires NLA’s Claim

On February 3, 2020, several months after Debtor had filed the Plan and the

First Amended Plan, which provided for full payments, with interest, to NLA, Sky

purchased the Mortgage Debt from NLA.48 The purchase price was $760,000.00. On

February 17, 2020, NLA filed a notice of transfer of claim indicating it had transferred

its claim to Sky on February 7, 2020.49

Jean Bakkes, the principal of Sky, first offered to purchase the Property in 2012

or 2013.50 Mr. Bakkes testified that he learned in early 2018 that his purported longtime

friend, Gus Hapsis, the beneficiary of the Trust, had not received any interest or other

payments from Debtor on the debt owed to the Trust pursuant to a prior agreement

between Debtor and the Trust.51 Mr. Bakkes asserted that he was concerned Mr.

Hapsis would not receive any money if NLA foreclosed on the Property. Because of

Mr. Bakkes’ alleged concern, Sky reached out to NLA in early 2018 about purchasing

the Mortgage Debt, but NLA was not interested in selling the Mortgage Debt at that

45 Doc. 178.

46 Doc. 167.

47 Seawalk I, 2021 WL 5016600, at *1.

48 Seawalk I, 2021 WL 5016600, at *3.

49 Doc. 185.

50 Seawalk I, 2021 WL 5016600, at *4.

51 Id.

time.52 However, Sky approached NLA again after the bankruptcy was filed, and NLA

agreed to sell the Mortgage Debt to Sky.53 Sky did not seek an appraisal of the Property

and did not inspect the Property prior to purchasing the Mortgage Debt.54

Furthermore, Sky’s purchase of the Mortgage Debt was for the full balance owed at

that time with no discount given.55 The undiscounted purchase price is telling and

supports the proposition that Sky purchased the Mortgage Debt in an effort to acquire

the Property.

The Court previously found that Mr. Bakkes’ testimony was not credible56 and

that Sky’s singular purpose in this bankruptcy case was to wrest the Property from

Debtor.57 Mr. Bakkes’ testimony, which attempts to portray Sky as a “white knight”

of sorts as to the Trust’s position, belies Sky’s actions, especially in the context of Sky’s

clear efforts to acquire the Property. Mr. Bakkes’ failure to acknowledge the reality

that Sky purchased the Mortgage Debt from NLA primarily to acquire the Property

further calls into question his credibility.

52 Id.

53 Id.

54 Id.

55 Id. at 3; Mr. Bakkes testified to the following during his August 5, 2020 deposition:

Q: “Is it fair to say that Sky purchased [Claim 5] for a hundred cents on the dollar?”

A: “I don’t know the filing numbers or anything, sir. I know that we bought [Claim 5] for a

price.”

Q: “For full price, correct?”

A: “Yes.”

Q: “Did you ask for a discount; did Sky ask for a discount?”

A: “Sure. When we bought the mortgage, we tried to negotiate a price and NLA was not

prepared to consider anything below a hundred cents on the dollar.” (Doc. 413-5, pp. 64-65).

56 Seawalk I, 2021 WL 5016600, at *4.

57 Id., at *8.

VII. Post-Sky Note Acquisition Bankruptcy Litigation

On March 13, 2020, Debtor filed a Motion to Require Mediation with Sky,58

and, on March 17, 2020, Debtor filed a Motion to Continue the matters scheduled for

trial on April 2, 2020 (the Motion for Final Approval of Disclosure Statement,

Confirmation of the First Amended Plan, and Debtor’s § 1129(b) Motion as to Sky

(Sky having purchased NLA’s Claim)).59 Sky filed a consent to the continuance,60 and

by order dated March 20, 2020, the Court continued trial on the scheduled matters to

July 16, 2020.61 After a hearing held on April 30, 2020,62 the Court entered an order

on May 4, 2020 requiring mediation between Debtor and Sky.63 The mediation was

unsuccessful.

On May 12, 2020, Debtor filed a Second Amended Plan of Reorganization (the

“Second Amended Plan”).64 While the Second Amended Plan did not indicate the

monthly payment amount to be made to Sky, it provided for monthly payments to Sky

in an amount sufficient to pay $735,000.00, amortized over twenty years with a

balloon payment due on July 15, 2030.65 The Second Amended Plan provided for a

58 Doc. 190.

59 Doc. 193.

60 Doc. 198.

61 Doc. 203.

62 Doc. 210.

63 Doc. 208.

64 Doc. 212.

65 Id.

3.46% interest rate if Sky did not vote to accept the Plan prior to June 2, 2020, and a

5% interest rate if Sky voted to accept the Plan on or before June 1, 2020.66

On July 7, 2020, Debtor filed a Motion to Strike the Motion to Convert on the

basis that NLA no longer had a claim in the case, having transferred its claim to Sky.67

By order dated July 9, 2020, the Court granted the Motion to Strike.68 On that same

day, Debtor filed a supplemental disclosure statement.69

On July 9, 2020, Sky sought a continuance of the July 16, 2020 hearings on the

Motion for Final Approval of Disclosure Statement, Confirmation of the Second

Amended Plan, and Debtor’s § 1129(b) Motion as to Sky because of Sky’s attorney’s

recent shoulder injury and resulting surgery, which entailed a lengthy recovery and

rendered him unable to properly prepare for the hearings.70 Although Debtor objected

to a continuance,71 by order dated July 13, 2020, the Court continued the hearing to

August 7, 2020.72

On July 22, 2020, Sky filed its own Expedited Motion to Convert Case or in the

Alternative Dismiss with Injunction (“Sky’s Motion to Convert”),73 which the Court

scheduled for hearing on August 7, 2020. On July 24, 2020, Sky filed its own

66 Id.

67 Doc. 222.

68 Doc. 224.

69 Doc. 226.

70 Doc. 227.

71 Doc. 228.

72 Doc. 230.

73 Doc. 239.

Disclosure Statement and Plan of Reorganization (“Sky’s Plan”),74 which the Court

also scheduled for hearing on August 7, 2020.75

On August 5, 2020, Debtor filed a Third Amended Chapter 11 Plan of

Reorganization (the “Third Amended Plan”).76 The Third Amended Plan also

provided for monthly payments to Sky in an amount sufficient to pay $735,000.00,

amortized over twenty years, with a balloon payment due on July 15, 2030. However,

the Third Amended Plan changed the interest rate to 4.16% and added § 7.16, titled

Bar to Certain Actions by Creditors, which included the following injunctive language

(the “Plan Injunction”):

With regard to any creditor which holds a claim that arose

prior to the Petition Date and is dealt with under this Plan,

so long as the Reorganized Debtor is not in a Material

Default of the Plan relating to such creditor, no creditor

having recourse against any-third party that is actively

involved in the regular operations of the Reorganized

Debtor’s business may pursue such third-party on a claim

or debt that is dealt with under this Plan. In the event of a[n]

Material Default, such creditor may pursue such action

after providing written notice [to] the Reorganized Debtor.

The Plan Injunction prohibited Sky from seeking to enforce its guaranty against Mr.

Stockton during the pendency of the Third Amended Plan unless Debtor was in

material default of the Third Amended Plan but did not attempt to discharge or release

74 Docs. 243, 244

75 By notices dated August 6, 2020, the August 7 hearings on Motion for Final Approval of

Debtor’s Disclosure Statement, Confirmation of the Second Amended Plan, the § 1129(b)

motion as to Sky, and Sky’s Emergency Motion to Convert Case were moved to August 26,

2020 (Docs. 287, 288) as a result of Debtor’s counsel’s exposure to COVID-19.

76 Doc. 282.

Mr. Stockton’s debt to Sky. The Third Amended Plan also added § 7.15, which

provided that if Debtor defaulted on its plan payments, it had six months to list the

Property, enter into a binding contract for the sale of the Property, and sell the

Property.

On August 6, 2020, Sky filed an Expedited Motion for Entry of an Order

Conditionally Approving Sky’s Disclosure Statement and Scheduling a Plan

Confirmation Hearing on Sky’s Plan on August 26, 2020,77 which the Court granted

by order dated August 18, 2020 (“Order Approving Sky’s Disclosure Statement and

Scheduling Confirmation”).78 On August 24, 2020, Debtor filed an Emergency Motion

for Reconsideration of the Order Approving Sky’s Disclosure Statement and

Scheduling Confirmation,79 which the Court scheduled for hearing along with the

other hearings on August 26, 2020.80

On August 24, 2020, Sky filed an objection to the Third Amended Plan, arguing

that § 7.16 constituted an impermissible third-party release under § 524(e) of the

Bankruptcy Code.81 On that same day, Sky filed a brief in opposition to confirmation

of the Third Amended Plan which stated: “Debtor may not discharge the liability of

non-debtors. Debtor proposes to limit Sky’s ability to enforce a guarantee against Mr.

Stockton.”82 In its post-trial brief in opposition to confirmation, Sky objected to § 7.16,

77 Doc. 290.

78 Doc. 294.

79 Doc. 304.

80 Doc. 310.

81 Doc. 299.

82 Doc. 301.

referring to it as a third-party bar order. However, no version of Debtor’s plan of

reorganization ever proposed a full release as to a non-debtor, and Sky’s filings to date

have failed to recognize the Plan Injunction never included a full release of Mr.

Stockton’s guaranty liability.83

On September 11, 2020, the Court entered an Order Granting Final Approval

of Debtor’s Disclosure Statement.84 On that same day, the Court entered an Order

Granting Debtor’s Emergency Motion for Reconsideration of the Order Approving

Sky’s Disclosure Statement and Scheduling Confirmation.85

On October 5, 2020, Sky filed a Rule 3012 Motion to Determine the Amount

of Secured Claim by which it sought to have the following included in its secured

claim: 1) attorney’s fees of $172,722.99; 2) expert witness costs of $25,000.00; and 3)

other costs of $7,369.50,86 which the Court scheduled for preliminary hearing on

November 16, 2020.87 At that hearing, the Court scheduled a trial on the Motion to

Determine the Amount of Secured Claim for January 28, 2021.88 After multiple

continuances, the trial was ultimately held on September 21, 2021.

83 This type of plan injunction is very common in bankruptcy reorganizations, allowing

debtors to reorganize, pay their secured creditors as proposed, and preserve guarantee

obligations of non-debtors as long as the debtor is performing under a confirmed plan. That

is exactly what Debtor proposed here. Sky’s characterization of this proposed injunction as a

release and corresponding challenges to confirmation based on such an argument lack merit.

84 Doc. 336.

85 Doc. 337.

86 Doc. 350.

87 Doc. 351.

88 Docs. 369, 370.

On October 15, 2020, the Court held a trial on: 1) Sky’s Motion to Convert; 2)

Confirmation of the Third Amended Plan; and 3) the Amended § 1129(b) Motion as

to Sky. The Court took the matters under advisement.89

On October 14, 2020, the Court held a hearing on the Motion for Approval of

Sky’s Disclosure Statement. On October 22, 2020, the Court entered an order

approving Sky’s disclosure statement and scheduled a confirmation hearing on Sky’s

plan of reorganization for January 14, 2021,90 which was later continued to January

28, 2021,91 and then again continued to February 18, 2021.92 At the February 18, 2021

hearing the Court took the confirmation of the Third Amended Plan under

advisement. The parties filed voluminous briefs as to all the matters under advisement,

and briefing was concluded on June 28, 2021.93

On January 21, 2021, Mr. Stockton filed a Motion for Third Party Injunction,

or, in the Alternative, for an Order Staying Litigation Against [Mr. Stockton].94 Mr.

Stockton sought to enjoin Sky from prosecuting a pending state court action to enforce

his personal guaranty of the Mortgage Debt until the Court ruled on the matters under

advisement. After a hearing on the Motion on February 3, 2021, the Court entered an

89 Doc. 359.

90 Doc. 362.

91 Doc. 401.

92 Doc. 420.

93 Docs. 474, 475, 476, 477, 478, 479, 480, 483.

94 Doc. 404.

order granting the Motion on February 16, 2021, thus staying the pending state court

action until further order of the Court.95

On August 20, 2021, Sky filed its First Supplement to its Motion to Dismiss, or

alternatively, Motion to Compel Debtor to File its Monthly Operating Reports for

April, May, and June 2021.96 On August 27, 2021, the Court entered an Order

Granting the Motion to Compel and ordering the Debtor to file the outstanding

Monthly Operating Reports by September 10, 2021.97

VIII. Sky’s Claim for Attorney’s Fees

On August 25, 2021, Sky filed a First Supplement to its Rule 3012 Motion to

Determine the Amount of its Secured Claim.98 Sky now sought: 1) $294,383.39 for its

attorney’s fees, comprised of $72,858.59 for attorney David Lienhart of the Lienhart

Law Firm, and $221,524.80 for the Ferrelle Burns Law Firm, represented by David

Burns and Ashley Dodd; 2) $25,000.00 for expert witness fees; and 3) $12,005.70 for

other costs.99 These attorneys’ respective hourly billable rates were $275.00, $350.00,

and $245.00.

Sky submitted into evidence Leinhart Law Firm, P.A. (“LLF”) invoices

covering the period from March 21, 2019 to December 15, 2020 (the “LLF

95 Doc. 428.

96 Doc. 486.

97 Doc. 488.

98 Doc. 487.

99 Sky’s Ex. 6a, September 21, 2021 hearing on Motion to Determine Amount of [Sky]’s

Secured Claim.

Invoices”)100 and Ferrelle Burns, P.A. (“FB”) invoices covering the period from

February 4, 2020 to July 8, 2021 (the “FB Invoices”).101

The LLF Invoices total $67,753.00 in attorney’s fees and $1,918.14 in costs and

are broken down as follows:

• March 21, 2019 to April 30, 2019 with fees of

$9,927.50 and costs of $289.90;

• April 25, 2019 to June 28, 2019 with fees of $9,653.75

and costs of $214.88;

• July 1, 2019 to August 30, 2019 with fees of

$17,288.75 and costs of $1,184.73;

• September 1, 2019 to December 18, 2019 with fees of

$17,791.00 and costs of $169.88;

• February 4, 2020 to August 25, 2020 with fees of

$10,000.00 and costs of $58.75; and

• August 26, 2020 to December 15, 2020 with fees of

$3,092.00.102

The FB Invoices total $218,967.50 in attorney’s fees and $5,598.23 in costs and

are broken down as follows:

• February 4, 2020 to March 27, 2020 with fees of $16,808.00 and

costs of $148.40;

• April 1, 2020 to August 28, 2020 with fees of $94,661.00 and costs

of $813.63

100 Sky’s Exs. 7, 10, September 21, 2021 hearing on Motion to Determine Amount of [Sky]’s

Secured Claim.

101 Sky’s Exs. 7, 9, September 21, 2021 hearing on Motion to Determine Amount of [Sky]’s

Secured Claim.

102 Sky’s Exs. 7, 10, September 21, 2021 hearing on Motion to Determine Amount of [Sky]’s

Secured Claim.

• September 1, 2020 to December 31, 2020 with fees of $35,094.50

and costs of $1,069.90;

• January 4, 2021 to March 25, 2021 with fees of $34,068.50 and

costs of $3,528.00; and

• April 2, 2021 to July 8, 2021 with fees of $38,335.50 and costs of

$38.30.103

Bradley Markey, a bankruptcy attorney since 2002, testified as Sky’s expert

witness in support of Sky’s claim for attorney’s fees. Of the approximate $286,000.00

in attorney’s fees Mr. Markey believed were sought by Sky,104 he designated

$213,000.00 for general bankruptcy work and $73,000.00 for Sky to protect its

position. Mr. Markey attributed $36,000.00 of the $73,000.00 to Sky’s preparation of

its own plan of reorganization and disclosure statement.

Mr. Markey opined that Sky was entitled to attorney’s fees of $250,000.00.105

Mr. Markey thought there was some duplication of effort between the attorneys and

excessive discovery, so he reduced for that duplication. Mr. Markey acknowledged

that he had not studied the Third Amended Plan in terms of payout to creditors and

that Sky did not ask him to consider its interest in acquiring Debtor’s property as part

of his opinion.106

103 Sky’s Exs. 7, 9, September 21, 2021 hearing on Motion to Determine Amount of [Sky]’s

Secured Claim.

104 As the Court noted, Sky sought attorney’s fees of $294,383.39.

105 September 21, 2021 hearing on Motion to Determine Amount of [Sky]’s Secured Claim,

Tr. at pp. 33-34.

106 Id. at pp. 36-37.

IX. Seawalk I

On October 28, 2021, the Court entered the following: 1) Findings of Fact and

Conclusions of Law;107 2) an Order Valuing the Property at $4.75 million;108 3) an

Order Valuing Sky’s Secured Claim at approximately $811,000.00, finding the

principal balance owed was approximately $742,000.00, accrued interest was

approximately $19,000.00, and allowed attorney’s fees were $50,000.00;109 and 4) an

Order Denying Sky’s Motion to Convert or Dismiss the Case.110 The Court made the

following findings: 1) Sky’s Plan was a liquidation plan, which proposed to effectively

purchase the Property for $1.75 million;111 2) Sky’s Plan provided for the payment of

all debts in full upon confirmation and a transfer of all Debtor’s assets to Sky, with

Debtor’s equity holders receiving nothing; 3) Sky’s Plan was not proposed in good

faith but was instead proposed for the purpose of obtaining title to the Property; and

4) Sky’s Plan did not satisfy the best interest of creditors test as set forth in § 1129(a)(7)

because Debtor’s creditors would receive more in a Chapter 7 liquidation than under

Sky’s Plan.112 The Court rejected Sky’s argument that the Third Amended Plan’s

treatment unfairly discriminated against Sky vis a vis the Trust and found that the

107 Seawalk I, 2021 WL 5016600, at *1.

108 Doc. 532.

109 Doc. 533.

110 Doc. 534.

111 Notably this $1.75 million proposed purchase price is far less than the value of the Property.

This is another sign Sky was focused on acquiring the Property rather than protecting and

enforcing its rights under the Note.

112 Seawalk I, 2021 WL 5016600, at *6-10.

Third Amended Plan was both fair and equitable as to Sky and feasible.113 Finally, the

Court found that the Plan Injunction satisfied the Dow Corning114 factors and was

essential to the reorganization.115 The Court found that the Third Amended Plan met

all of the requirements for confirmation and directed Debtor to submit an order

confirming the Third Amended Plan,116 which the Court entered on November 5,

2021.117

In awarding Sky only $50,000.00 of the $294,383.39 in fees it sought to have

included in its secured claim, the Court reasoned:

The Court finds for the following reasons that the fees

incurred by Sky in this case are entirely disproportionate to

its risk and would not have been incurred by a typical

creditor in Sky's position. Most importantly, NLA

Jacksonville, and subsequently Sky, was at all times

oversecured and had a very significant equity cushion.

Simply put, while there was a risk of default, there was no

risk of loss to Sky because of the value of the Property. The

Debtor was not in default when the case was filed. The

Debtor did not challenge NLA’s lien position. The Debtor

had filed a plan of reorganization that called for full

payment with interest to NLA, and cash collateral issues

were resolved, before Sky purchased the Primary Mortgage

Debt. The Court finds that Sky's singular purpose in this

bankruptcy case was to wrest the Property from the Debtor,

not to protect its lien. The Court finds that a similarly

113 Id., at *10-13.

114 At the time of the entry of Seawalk I, the Court was bound to follow Seaside Eng’g &

Surveying, Inc., 780 F.3d 1070 (11th Cir. 2015), which had adopted the test set forth in In re

Dow Corning Corp., 280 F.3d 648, 658 (6th Cir. 2002).

115 Id., at *12.

116 Id., at *13.

117 Doc. 538.

situated creditor would have incurred no more than

$50,000.00 in attorney's fees to protect its position.118

X. Appeal of Seawalk I

On November 12, 2021, Sky filed Notices of Appeal as to the Findings of Fact

and Conclusions of Law,119 the Order Valuing the Property,120 the Order Valuing Sky’s

Secured Claim,121 and the Order Confirming the Third Amended Plan.122 On August

29, 2023, the United States District Court (the “District Court”) entered an Order

affirming the Court’s Findings of Fact and Conclusions of Law and corresponding

orders on all issues except the Court’s determination of attorney’s fees (the “District

Court Order”).123 The District Court remanded on that issue because the Court failed

to discuss what a reasonable number of hours would be, and the District Court was

therefore unable to determine how the Court calculated the fees.124 The District Court

noted that it did not prejudge what a reasonable fee would be and did not exclude the

possibility that the $50,000.00 fee award was appropriate.125 However, the District

Court noted that this Court must explicitly show that it conducted the lodestar or some

other appropriate analysis in arriving at a reasonable fee.126

118 Id., at *8.

119 Doc. 540.

120 Doc. 541.

121 Doc. 542.

122 Doc. 543.

123 Sky Enters., LLC v. Seawalk Invs., LLC, Case No. 3:21-cv-1148-TJC, Doc. 28.

124 Id.

125 Id.

126 Id.

On September 25, 2023, Sky filed a notice of appeal of the District Court Order

to the Eleventh Circuit Court of Appeals. On April 23, 2024, the Eleventh Circuit

dismissed the appeal for lack of jurisdiction, finding that the District Court Order did

not end the litigation on the merits.

XI. Briefing Order

On May 6, 2024, the Court entered an Order Directing Meet and Confer

Conference and Briefing on Attorney’s Fees Allowed as Part of [Sky’s] Secured Claim

(the “Briefing Order”).127 The Briefing Order required the parties to file detailed briefs

to enable the Court to determine the reasonableness of Sky’s requested fees.

Specifically, the Briefing Order directed Sky to: 1) file billing statements for the

requested fees which itemize time by project categories that Sky believed were critical

to protecting and preserving its lien on the Property or enforcing its rights under the

Note; 2) include activity descriptions of all of the work completed with no combined

activity descriptions or time allotments; 3) file an initial accompanying brief which

provided information by project category as to the types of services performed, the

necessity for performing the services, the results obtained, and the benefit to the

bankruptcy estate; and 4) provide reasons for substantial time billed relating to a

specific activity as well as provide factual and legal support to satisfy the

reasonableness requirement of § 506(b).128

127 Doc. 692.

128 Id.

The Briefing Order directed Debtor to file an answer brief to Sky’s initial brief

detailing why Debtor asserted specific billings and specific activities failed to satisfy

the reasonableness requirement of § 506(b), along with corresponding factual and legal

support. The Briefing Order required the parties to file a joint stipulation of all key

facts they agreed to and all key disputed facts. Finally, the Briefing Order required that

the parties include a memorandum of fact and law citing all portions of the record and

all legal authority upon which they relied to support their respective positions as to the

allowance of the fees.129

XII. Sky’s Brief and Attached Fee Summaries

On August 15, 2024, Sky filed its Brief in Support of Including Attorney’s Fees

in its Secured Claim130 to which it attached summaries of the LLF Invoices (the “LLF

Fee Summary”)131 and the FB Invoices (the “FB Fee Summary”).132

A. LLF Fee Summary

The LLF Fee Summary breaks down the LLF Invoices into the following

categories:

1. Initial Analysis and assessment of Debtor, affiliated

companies occupying premises, fire, and current

operation, appraisal, prior BK. Cash Collateral and

Insurance Proceeds and 341 hearing for total fees of

$22,112.50

2. Guarantor Enforcement for total fees of $962.50

129 Id.

130 Doc. 701.

131 Doc. 701, Ex. 2.

132 Doc. 701, Ex. 1

3. Discovery for total fees of $5,718.75

4. Motions to Compel Discovery for total fees of

$2,365.00

5. General Case Administration for total fees of

$11,759.00

6. Debtor’s Plan of Reorganization for total fees of

$8,580.00

7. Confirmation Hearings for total fees of $962.50

8. Settlement (Including Mediation) for total fees of

$2,282.50

The LLF Fee Summary does not include the LLF Invoices for the periods from

February 4, 2020 to August 25, 2020 and from August 26, 2020 to December 15, 2020.

B. FB Fee Summary

The FB Fee Summary breaks down the FB Invoices into the following

categories:

1. General Case Administration for total fees of $56,883.00

2. Discovery for total fees of $51,827.00, which includes a sub-

category of Motions to Compel representing fees of $1,827.00

3. Attendance and Preparation for Hearings and Trials (Other than

Confirmation) for total fees of $8,354.50

4. Confirmation Hearings for total fees of $86,056.50

5. Debtor’s Plan and Disclosure Statement for total fees of $8,087.50

6. Sky’s Plan and Disclosure Statement for total fees of $10,587.50

7. Mediation/Settlement for total fees of $6,168.00

XIII. Value of the Property

From the inception of the case on March 21, 2019 until the entry of the October

28, 2021 Order Valuing the Property at $4.75 million, NLA and subsequently Sky were

at all times oversecured and could not have reasonably believed otherwise. Even Sky’s

own expert valued the Property at $2.6 million, well in excess of Sky’s secured claim.

Sky also filed Claim 5 acknowledging it was fully secured, under penalty of perjury.

Conclusions of Law

I. Allowance of Attorney’s Fees

A proof of claim in a bankruptcy case is deemed allowed unless a party in

interest objects. If a party in interest objects, the Court must determine the amount of

the claim and allow such claim except to the extent an exception set forth in § 502(b)

applies. Section 502(b)(1) disallows a claim that “is unenforceable against the debtor

and property of the debtor, under any agreement or applicable law…”133

In analyzing whether attorney’s fees claimed by an oversecured creditor, such

as Sky, are allowed as part of its claim, a court must first determine whether the claim

is allowed under § 502 and, if so, whether the fees claimed are reasonable pursuant to

§ 506.134 Once a claim is allowed, § 506 “deals with the entirely different, more narrow

133 11 U.S.C. § 502.

134 In re Reorganized Lake Diamond, Assocs., LLC, 367 B.R. 858, 865 (Bankr. M.D. Fla. 2007)

(citing In re Welzel v. Advocate Realty Invs., LLC (In re Welzel), 275 F.3d 1308 (11th Cir. 2007)).

question of whether certain types of claims should be considered secured or

unsecured.”135

“Reasonable fees are those necessary to the collection and protection of a

creditor's claim and include fees for those actions which a similarly situated creditor

might have taken. The fees must be cost justified by the economics of the situation and

necessary to preserve the creditor's interest in light of the legal issues involved. A

secured creditor is not entitled to compensation for its attorney’s fees for every action

it takes by claiming that its rights have been [a]ffected.”136

An oversecured creditor’s attorney’s fees may be treated as part of its secured

claim if the fees are reasonable and the agreement between the creditor and the debtor

gives rise to the claim.137 “The Congressional intent behind the enactment of § 506(b)

was to ensure that oversecured creditors do not lose their reasonable claims for

attorney’s fees simply due to the fact that their collateral is worth more than the

underlying claim-rather than [to serve] as a blank check for oversecureds to accrue

legal fees beyond the scope of protecting their interests. Just because a creditor

135 In re Welzel, 275 F.2d at 1318.

136 In re Digital Products Corp., 215 B.R. 478, 482 (Bankr. S.D. Fla. 1997).

137 See 11 U.S.C. § 506 providing in pertinent part that:

(b) To the extent that an allowed secured claim is secured by

property the value of which, after any recovery under subsection

(c) of this section, is greater than the amount of such claim, there

shall be allowed to the holder of such claim, interest on such

claim, and any reasonable fees, costs, or charges provided for

under the agreement or State statute under which such claim

arose.

authorizes legal work does not mean that a debtor should pay for it.”138 “A secured

creditor can recover only attorney’s fees which are incurred to achieve the ‘objective

of payment’ or ‘reasonably necessary to enforce [a] debtor’s obligations to collect the

amount remaining due pursuant to those obligations.’”139 Furthermore, the claimant,

in this case Sky, has the burden of establishing that its fees are allowable under § 506(b),

including establishing that its fees are reasonable in the context of its position in the

case.140

A. Lake Diamond

The Court must first determine whether the attorney’s fees which Sky seeks as

part of its claim are enforceable under the Note and therefore allowed under § 502.

The Court previously dealt with this issue in In re Reorganized Lake Diamond

Associates.141 In Lake Diamond, the Chapter 11 debtor had previously borrowed money

from a bank to purchase a golf course community, which secured the bank’s claim.

Approximately eight months after the debtor filed the bankruptcy petition, Silver

Capital (“Silver”) purchased the bank’s claim for approximately $7 million. As part of

its plan of reorganization, the debtor agreed to sell the property for $8.7 million, which

exceeded Silver’s acquired claim by approximately $2 million. The debtor filed a

138 Seawalk I, 2021 WL 5016600, at *7 (internal citations and quotations omitted).

139 In re Canal Asphalt, Inc., 2017 WL 1956849, at * 7 (Bankr. S.D.N.Y. May 10, 2017) (internal

citations omitted).

140 Id.; In re Pan Am. Gen. Hosp., LLC 385 B.R. 855, 869 (Bankr. W.D. Tex. 2008) (secured

creditor bears burden of proving reasonableness of its fees); In re 900 Corp., 327 B.R. 585, 595

(Bankr. N.D. Tex. 2005).

141 In re Reorganized Lake Diamond Assocs., 367 B.R. at 858.

motion seeking an order approving procedures by which it would solicit higher and

better offers for the purchase of the property and conduct an auction thereof.

Silver, in order to purportedly protect its interest, served discovery upon the

debtor and the prospective purchaser of the property. The discovery sought to ascertain

the identity of the purchaser’s principals and the purchaser’s ability to close on the

purchase. Silver sought a continuance of the bid procedures hearing until it could

conduct the purchaser’s deposition, which the Court denied. At the bid procedures

hearing, Silver objected to the proposed break-up fee and offered to purchase the

property for $8,850,000.00, which the debtor rejected. The buyer ultimately agreed to

a reduction in the break-up fee, and the Court approved the bid procedures. A

deposition of Silver’s corporate designee revealed that Silver purchased the bank’s

claim for the purpose of acquiring the property and was not concerned with its ability

to be paid in full, i.e., it would not have purchased the bank’s claim if did not believe

the property would yield as much as the secured debt.

The Court conducted the auction, which included bidding by Silver and other

interested prospective purchasers, with the original prospective purchaser submitting

the highest bid of $12,900,000.00, almost twice the amount owed to Silver. After the

sale of the property closed, Silver received full payment on its filed secured claim.

Fourteen months later, Silver filed a motion seeking payment from the debtor

of its approximate $147,000.00 of attorney’s fees which it alleged were incurred in

collecting or enforcing payment. Silver had filed three pleadings in the case, two of

which were joinders to other pleadings, and appeared before the Court at the bid

procedures hearing, the auction, and the confirmation hearing, at which it did not

participate. The debtor objected to the fees, arguing that: 1) Silver was interested only

in purchasing the property, not in holding the debt; and 2) payment of the debt was

never at risk.

The Court noted that it viewed §§ 502 and 506 in conjunction with one another

“to disallow those fees under § 502 which would not be allowed by a Florida state

court applying nonbankruptcy law, and to allow fees incurred by Silver in its sincere

attempts at protecting its interest in the [p]roperty, which are within the scope of the

Loan Documents.”142 The Court further noted that while the mortgage at issue defined

attorney’s fees broadly, it also included the qualifying term “reasonable,” and that in

determining what “reasonable” encompassed under the loan documents, Florida law

(the applicable law under the loan documents) “dictates that such fees are typically

those incurred by a secured creditor in protecting its debt.”143 The Court stated:

Thus, if a Florida state court were to award attorneys’ fees

pursuant to the Loan Documents, considering that the

documents use language customary within the lending

industry, the totality of the circumstances of the case suggest

that a Florida state court would disallow much of Silver’s

claimed fees pursuant to state law. As a result, the Court

finds that it is not equitable for Silver’s counsel to be

rewarded for the actions they took with respect to the

Chapter 11 Case. Given the legal issues involved, the fees

incurred by Silver are not cost justified by the economics of

the situation, and must be disallowed under § 502(b)(1).144

142 Id. at 867.

143 Id.

144 Id. at 868.

The Court found that Silver’s participation in the case stonewalled rather than

facilitated the debtor’s reorganization, that Silver acquired the secured debt to best

position itself to purchase the property, and that it did so with no downside.145

The Court disallowed the fees incurred by Silver: 1) in acquiring the bank’s

claim; 2) in attempting to purchase the property; and 3) as a result of overzealousness

and a lack of restraint. Of the 506.65 hours expended by the three law firms Silver

retained, the Court disallowed 474.95 hours. Turning to § 506, the Court found that

only 31.7 hours were reasonable and should be allowed as part of Silver’s secured

claim.

Other cases dealing with claims for attorney’s fees and costs from oversecured

creditors focus on the core issue of whether the fees and costs were reasonably

necessary to the collection and protection of a creditor's claim and analyze

reasonableness only under § 506 without discussing or addressing § 502.146 The analysis,

under both the Note terms and applicable law, is whether the fees are reasonable and

145 Id. at 871.

146 In In re Sirios, Case No. 20-16709 (Bankr. Co. Jan. 5, 2024) (disallowing $92,434.50 of the

$157,347.00 in fees sought by oversecured creditor on the basis that they were unreasonable

pursuant to Colorado law and § 506); In re Heritage Hotel Assocs., LLC, 2021 WL 2646533

(Bankr. M.D. Fla. June 28, 2021) (disallowing $85,175.90 of the $134,707.50 in fees sought

by oversecured creditor on the basis that they were unreasonable pursuant to § 506 because

the creditor’s actions were overzealous, were not taken to protect its secured claim, were not

cost justified, and were not those that a similarly situated creditor would have taken); In re A

& B Assocs., L.P., 2019 WL 1470892, at *41 (Bankr. S.D. Ga. Mar. 29, 2019) (disallowing

$265,770.65 of $965,770.65 in fees sought by oversecured creditor with substantial equity

cushion on basis that they were unreasonable pursuant to § 506 because creditor’s actions

were disproportionate to its risk, and the fees would not have been incurred by a typical

creditor in the same position).

should be included in Sky’s claim. If found not to be reasonable, then Debtor is not

responsible for such fees and costs.

B. Lodestar Method

In determining reasonable attorney’s fees, Florida applies the federal lodestar

method.147 The lodestar is the product of the number of hours reasonably expended

and a reasonable hourly rate.148 “A reasonable hourly rate is the prevailing market rate

in the relevant legal community for similar services by lawyers of reasonably

comparable skills, experience, and reputation.”149 Although the lodestar is strongly

presumed to result in a reasonable fee, the court must then look to the factors set forth

in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974) to determine

whether to reduce or enhance the lodestar.150

In Caplan, the Eleventh Circuit stated:

Although “there is a ‘strong presumption’ that the lodestar is the

reasonable sum the attorneys deserve,” we have instructed that, in

determining whether the lodestar amount is reasonable, “the [district]

court is to consider the 12 factors enumerated in Johnson v. Georgia

Highway Express [].” Those twelve factors are:

(1) the time and labor required; (2) the novelty and difficulty

of the questions; (3) the skill requisite to perform the legal

service properly; (4) the preclusion of employment by the

attorney due to acceptance of the case; (5) the customary

fee; (6) whether the fee is fixed or contingent; (7) time

limitations imposed by the client or the circumstances; (8)

the amount involved and the results obtained; (9) the

experience, reputation, and ability of the attorneys; (10) the

147 In re 218 Jackson, LLC, 646 B.R. 533, 538 (Bankr. M.D. Fla. 2022).

148 In re Caplan v. All American Auto Collision, Inc., 36 F.4th 1083, 1090 (11th Cir. 2022).

149 Norman v. Hous. Auth. of Montgomery, 836 F.2d 1292, 1299 (11th Cir. 1988).

150 In re Caplan, 36 F.4th at 1089.

“undesirability” of the case; (11) the nature and length of

the professional relationship with the client; and (12)

awards in similar cases.

Along with these factors, and in calculating the lodestar

amount, a district court should “exclude ... hours that were

not ‘reasonably expended.’” Courts are considered experts

on the reasonableness of the number of hours expended and

the hourly rates requested. Indeed, a district court “may

consider its own knowledge and experience concerning

reasonable and proper fees and may form an independent

judgment either with or without the aid of witnesses as to

value.”151

II. Analysis

As noted, Sky has the burden of proof to establish the fees and costs it incurred

were necessary to the collection and protection of its claim, and the claim includes

only fees for those actions which a similarly situated creditor might have taken. Quite

simply, Sky has failed to meet its burden of proof in this case. Furthermore, removing

any burden of proof from the analysis, Sky’s actions in attempting to obtain ownership

of the Property are so intertwined with what would have been reasonable actions, it is

virtually impossible to separate out what was reasonable and what was not. Even when

given further opportunity to brief the matter after the District Court Order, Sky

continued to lump fees together and failed to demonstrate the reasonableness of its

actions as compared to its rights under the Note and applicable law.

Additionally, the time entries in the FB Fee Summary152 are not set forth in

chronological order, and most time entries fail to support any basis to be awarded as

151 Id. at 1089-1091 (citations omitted).

152 Doc. 701, Ex. 1.

reasonable. Sky’s effort to sort time entries into larger categories is lacking in places.

For example, the general case administration category is filled with discovery,

guaranty enforcement, and plan related matters. Additionally, there appears to be

duplication of work between Sky’s two law firms that would warrant reduction of

amounts sought. All of this makes it extremely difficult for the Court to determine

what is reasonable. Thus, the Court is tasked with trying to decipher hundreds of

billing entries for what should be allowed. Having now thoroughly reviewed Sky’s

billing statements and studied the record in the case numerous times, the Court finds

its original $50,000.00 attorney’s fees award to Sky to have been reasonable but adjusts

that award slightly down based on the analysis below.

The Court also notes that while Mr. Markey is a well-respected, experienced

bankruptcy lawyer, in this bankruptcy case, he was paid to provide focused testimony

to support the reasonableness of Sky’s and NLA’s fees and costs. While Mr. Markey’s

testimony is credible as to a reasonable fee for Sky’s intended actions to acquire the

Property, there are missing pieces in his opinion for what was actually necessary to the

collection and protection of Sky's claim. Notably, Sky’s specific actions were not part

of his opinion. For example, Mr. Markey did not testify as to the legal standards set

forth in Lake Diamond and its progeny as to fee entitlement for oversecured creditors

and how that body of law would impact his opinion. Furthermore, Mr. Markey did

not distinguish between a reasonable fee for a creditor acquiring a clearly oversecured

loan to try to leverage the purchase into owning the property versus what was in fact

necessary to the collection and protection of Sky's claim. Mr. Markey also

acknowledged that Sky did not ask him to consider its interest in acquiring the

Property as part of his opinion, and he had not studied the Third Amended Plan in

terms of payout to creditors. These are major factors in considering what was in fact

necessary as to the collection and protection of Sky’s purchased, oversecured claim.

It is also worth comparing the Trust’s activities in the case to those of Sky. The

Trust, which was in an inferior lien position to Sky, filed its original Claim 4 in the

amount of $390,271.08. The Trust and Debtor successfully mediated the Trust’s claim

treatment on or about October 30, 2019, whereby the Trust was allowed a claim in the

amount of $425,000.00, an amount approximately $35,000.00 above its original claim

amount. This additional amount, assuming it primarily represents attorney’s fees and

costs, accounts for less than 10% of the Trust’s original claim. Additionally, the

settlement was accomplished months prior to Sky acquiring NLA’s claim.

NLA, on the other hand, filed its superior lien position claim in the amount of

$750,967.07 and sold that claim to Sky for $760,000.00. Sky then took an aggressive

litigation approach and seeks almost $295,000.00 in fees and costs. This fee request is

almost 40% of the original claim amount and is from a lender that was never at any

real risk of non-payment. There is a compelling argument that Sky’s fees and costs

should have been less than the Trust’s fees and costs.

At the time of the Trust’s October 30, 2019 settlement, there were 157 docket

entries in this bankruptcy case, and the case had been pending for just over 7 months.

When Sky acquired NLA’s claim on February 3, 2020, approximately three months

after the Trust’s and Debtor’s settlement, the bankruptcy case had 184 docket entries

and had been pending just under 11 months. As this opinion is written, there are over

700 docket entries with the following benchmarks:

Docket entries 184 to 375 from February 3, 2020 to December 31, 2020

Docket entries 376 to 580 from January 1, 2021 to December 31, 2021

Docket entries 581 to 675 from January 1, 2022 to December 31, 2022

While many of these entries are not directly related to Sky’s discovery and

litigation activities, that is nonetheless a lot of activity for a small single asset real estate

case153 involving a clearly oversecured creditor.

The record is clear that the vast majority of Sky’s actions were intended to try

to take ownership of the Property and not to simply collect and protect its interest as

was originally contracted for in the Note. As a result, the Court must consider actions

a similarly situated creditor might have taken and how the equation changes when a

party acquires a loan for the purpose of trying to take control of collateral, in this case

the Property. In doing so, the Court looks to its own expertise to round out the analysis

of the attorney’s fees and costs Sky should be entitled to recover.154

153 Doc. 38, Order Determining Case is a Single Asset Real Estate Case.

154 “The court is itself an expert on the question [of reasonable attorney’s fees] and may

consider its own knowledge and experience concerning reasonable and proper fees and may

form an independent judgment either with or without the aid of witnesses as to the

reasonableness of the fee request.” In re Dependable Component Supply, Inc. v. Carrefour

Informatique Tremblant, Inc., 572 F. App’x 796, 802 (11th Cir. 2014) (citing Norman v. Hous.

Auth. of Montgomery, 836 F.2d at 1303); See also In re Caplan, 36 F.4th at 1090 (affirming District

Court’s reduction of requested attorney’s fees that were “grossly disproportionate to the

context and circumstances of th[e] case”); Loranger v. Stierheim, 10 F.3d 776, 781 (11th Cir.

1994); Campbell v. Green, 112 F.2d 143, 144 (5th Cir. 1940); and In re 218 Jackson LLC, 646 B.R.

at 538.

A. Specific Bases to Deny Sky’s Fees and Costs – Lienhart Law Firm,

P.A.

The LLF Invoices range from March 21, 2019 to December 15, 2020 and total

$67,753.00.155 The LLF Fee Summary covers eight categories of billing with entries

from March 21, 2019 to December 18, 2019 totaling $54,742.75. There are extensive

redactions to the LLF Invoices and the LLF Fee Summary that make it difficult to

determine reasonableness, and Sky’s briefing does not address LLF’s redactions.

Further, there are several entries related to enforcing a guaranty, but also questions as

to whether the loan was in default. Regardless, Sky’s briefing and the corresponding

record do not support awarding fees for aggressively enforcing the guaranty here.

Rather, such guaranty enforcement appears to be part of the efforts to put pressure on

Debtor and Mr. Stockton. The Court does find that the hourly rate of $275.00 for

David Lienhart is reasonable. Upon review, however, the Court finds that an

experienced bankruptcy attorney representing a similarly oversecured creditor that

was not trying to acquire Debtor’s Property would have incurred far less fees during

the respective time periods, as set forth below, in this bankruptcy case. The Court turns

to the hours reasonably expended with the analysis focused on the LLF Invoices.

155 Sky’s Exs. 7, 10 from September 21, 2021 hearing on Motion to Determine Amount of

[Sky]’s Secured Claim. This number differs from $72,858.59, the amount set forth in Sky’s

Claim Calculation Worksheet admitted as Exhibit 6a at the September 21, 2021 hearing, but

the Court will base its analysis and award on the actual invoices submitted into evidence at

the hearing.

1. LLF’s Invoice for March 21, 2019 to April 30, 2019

LLF’s invoice for the period of March 21, 2019 to April 30, 2019 in the amount

of $10,217.40 with $9,927.50 for fees and $289.90 for costs notes certain actions that

fall outside of what a similarly situated creditor might have taken. One questionable

area of billing here is the extensive amount of fees NLA incurred in connection with

the fight over insurance proceeds and Debtor’s proposed use of cash collateral. Sky

has failed to provide adequate bases for purposes of fee allowance as to why NLA was

so aggressive in pursuing these matters. As a vastly oversecured creditor, there was

virtually no reason for NLA to take any exception with Debtor’s use of cash collateral.

Furthermore, certain entries such as those for conducting due diligence on a new

tenant, permit applications, inspection, and Airbnb do not appear to be necessary to

the collection and protection of Sky’s claim.

An experienced bankruptcy lawyer representing a similarly situated wholly

oversecured creditor would have incurred less fees during this time period in the

bankruptcy case. That said, there was rightful work done by LLF to familiarize itself

with the case, such as review of the filings in this case and Debtor’s prior bankruptcy

case. Based on the foregoing, the Court finds $3,300.00 (12 hours) to be a reasonable

amount of fees for LLF’s first Invoice for the period of March 21, 2019 to April 30,

2019. Furthermore, $39.90 of costs in the first Invoice appear reasonable. There is not

sufficient evidence in the record to support the $250.00 title search/foreclosure

commitment update charge in this Invoice.

2. LLF’s Invoice for April 25, 2019157 to June 28, 2019

LLF’s Invoice for the period of April 25, 2019 to June 28, 2019 in the amount

of $9,868.63 with $9,653.75 for fees and $214.88 for costs contains charges for actions

that largely fall outside of those a similarly situated creditor might have taken. In

addition to reasons noted to disallow fees from LLF’s prior Invoice, the billing here

includes continued efforts focused on insurance proceeds, amounts for unnecessary

discovery, and a litigation plan. Again, Sky fails to provide an adequate basis for

purposes of fee allowance as to why it and its predecessor NLA were so aggressive in

pursuing these matters.

An experienced bankruptcy lawyer representing a similarly situated wholly

oversecured creditor that was not trying to acquire the Property would have incurred

far less fees during this time period in the bankruptcy case. Based on the foregoing, the

Court finds $2,750.00 (10 hours) to be a reasonable amount of fees for LLF’s second

Invoice for the period of April 25, 2019 to June 28, 2019. Furthermore, the $214.88 of

costs in the second LLF Invoice appear reasonable.

3. LLF’s Invoice for July 1, 2019 to August 30, 2019

LLF’s Invoice for the period of July 1, 2019 to August 30, 2019 in the amount

of $18,413.48 with $17,228.75 for fees and $1,184.73 for costs represents fees for

actions that largely fall outside of those a similarly situated creditor might have taken.

In addition to reasons noted to disallow fees from LLF’s prior Invoices, the billing here

157 It is unclear to the Court why LLF’s second Invoice includes a charge for April 25, 2019,

a date that should have been included in the first Invoice.

includes continued efforts focused on amounts for unnecessary discovery. Again, Sky

fails to provide an adequate basis for purposes of fee allowance as to why Sky and its

predecessor NLA were so aggressive in pursuing these matters and, specifically for this

third Invoice, why such extensive discovery was needed. The charges related to Mr.

Stockton’s 2004 examination appear very excessive. The charge of $2,392.50 on

August 19, 2019 representing 8.42 hours of time for planning and preparation and

another $962.50 representing 3.30 hours for conducting the 2004 examination in a case

that arguably should not have had any discovery should not be allowed. Even if there

was a small need for such an examination, the fees and costs that would have been

incurred in doing so by an experienced bankruptcy lawyer should have been a fraction

of what NLA actually incurred.

Based on the foregoing, the Court finds $3,300.00 (12 hours) to be a reasonable

amount of fees for LLF’s third Invoice for the period of July 1, 2019 to August 30,

2019. Furthermore, $225.75 of costs appear reasonable. This represents allowing the

costs in this Invoice except for the $225.00 of subpoena charges and two-thirds of the

$150.80 for 2004 examination exhibits and $373.14 (half was noted as being

reimbursed by the Trust).

4. LLF’s Invoice for September 1, 2019 to December 18, 2019

LLF’s Invoice for the period of September 1, 2019 to December 18, 2019 in the

amount of $17,960.88 with $17,791.00 for fees and $169.88 for costs (after a discount)

again represent fees for actions that fall largely outside of actions a similarly situated

creditor might have taken. In addition to reasons noted to disallow fees from LLF’s

prior Invoices, the billing here includes amounts for unnecessary discovery,

appointment of a trustee or examiner, and dismissal or conversion of the bankruptcy

case.

The driving force behind the above actions was clearly Sky’s attempts to acquire

the Property, and the allowance of fees and costs for these actions is not supported by

the record in this bankruptcy case. Based on the foregoing, the Court finds $2,750.00

(10 hours) to be a reasonable amount of fees for LLF’s fourth Invoice for the period of

September 1, 2019 to December 18, 2019. Furthermore, $138.45 of costs in the fourth

Invoice appear reasonable. This represents allowing the costs except those related to

document production and Sky’s Motion to Dismiss.

5. LLF’s Invoice for February 4, 2020 to August 25, 2020

LLF’s Invoice for the period of February 4, 2020 to August 25, 2020 in the

amount of $10,058.75 with $10,000.00 for fees and $58.75 for costs (after a discount)

again represents fees for actions that fall largely outside of actions a similarly situated

creditor might have taken. In addition to reasons noted to disallow fees from LLF’s

prior Invoices, the billing here includes transactional costs for the loan that should not

be borne by Debtor, continued efforts focused on amounts for unnecessary discovery,

appointment of a trustee or examiner, and dismissal or conversion of the bankruptcy

case.

The Court finds that the majority of actions Sky chose to pursue during this time

period were not reasonable and would not have been taken but for its interest in trying

to acquire the Property. Based on the foregoing, the Court finds $1,925.00 (7 hours) to

be a reasonable amount of fees for LLF’s fifth Invoice for the period of February 4,

2020 to August 25, 2020. Furthermore, none of the costs in the fifth LLF Invoice

appear reasonable.

6. LLF’s Invoices for August 26, 2020 to December 15, 2020

LLF’s Invoices for August 26, 2020 to December 15, 2020 in the collective

amount of amount of $3,092.00 again represent fees for actions that fall largely outside

of actions a similarly situated creditor might have taken. In addition to reasons noted

to disallow fees from LLF’s prior Invoices, the billing here includes entries that appear

duplicative.

Simply stated, it was not necessary for both LLF and FB to attend the

confirmation trial and to challenge confirmation of Debtor’s plan. Based on the

foregoing, the Court finds $500.00 to be a reasonable amount of fees for LLF’s Invoices

for the period of August 26, 2020 to December 15, 2020.

In total, the Court finds that Sky is entitled to recover $14,525.00

(approximately 53 hours at a $275.00 hourly rate)158 in fees and $618.98 in costs under

the LLF Invoices from Debtor as reasonable and part of its secured claim in this

bankruptcy case.

158 The Court notes that 53 hours of attorney time is on the higher end of what would have

been reasonably required to protect Sky’s interest in this bankruptcy case for the work by

LLF.

7. LLF’s Fee Summary

As noted, the LLF Fee Summary covers eight categories of billing with entries

from March 21, 2019 to December 18, 2019 totaling $54,742.75. The LLF Fee

Summary includes numerous redactions, and there is no explanation of the $9,950.25

difference between the LLF Invoices totaling $67,753.00 and the $54,742.75 in the

LLF Fee Summary. Comparing the LLF Fee Summary to the LLF Invoices discussed

in detail above does not alter the Court’s view on the reasonable amount of fees that

should be allowed for the LLF portion of Sky’s claim for attorney’s fees and costs.

B. Specific Bases to Deny Sky’s Fees and Costs – Ferrelle Burns, P.A.

The Court will focus its analysis as to the FB fee portion of Sky’s claim through

discussing the FB Fee Summary below, but as a starting point will set forth the FB

Invoices, which range from February 4, 2020 to July 8, 2021 and total $218,967.50.

The invoices are as follows: (i) FB’s Invoice for the period of February 4, 2020 to

March 27, 2020 seeks fees of $16,808.00 and costs of $148.80; (ii) FB’s Invoice for the

period of April 1, 2020 to August 28, 2020 seeks fees of $94,661.00 and costs of

$813.63; (iii) FB’s Invoice for the period of September 1, 2020 to December 31, 2020

seeks fees of $35,094.50 and costs of $1,069.90; (iv) FB’s Invoice for the period of

January 4, 2021 to March 25, 2021 seeks fees of $34,068.50 and costs of $3,528.00;

and (v) FB’s Invoice for the period of April 2, 2021 to July 8, 2021 seeks fees of

$38,335.50 and costs of $38.30.

1. FB Fee Summary

In the FB Fee Summary, which totals $229,791.00,159 Sky breaks its fees paid to

FB into the following seven project categories: 1) general case administration; 2)

discovery with a subcategory of Motions to Compel; 3) attendance and preparation for

hearings and trials other than confirmation; 4) confirmation hearings; 5) Debtor’s plan

and disclosure statement; 6) Sky’s plan and disclosure statement; and 7)

settlement/mediation. The Court finds that the hourly rates of $300.00-$350.00 for

David Burns and $245.00 for Ashley Dodd are reasonable. The Court turns to the

hours reasonably expended using the category billing in the FB Fee Summary.160

2. General Case Administration

Sky seeks an award of $56,883.00 for general case administration. Debtor

objects to the fees based on the billable hours being lumped together, the inclusion of

fees that are labeled as no charge, and the inclusion of tasks that were unnecessary to

protect Sky’s interest (specifically the hours expended working on Sky’s Plan, the

opposition to the temporary third-party injunction, and the Motion to Convert or

Dismiss). Initially, the Court notes that Sky’s brief did not list the total number of

hours of attorney’s fees it seeks for any of the project categories. Because more than

one attorney worked on the case, and the attorneys’ hourly billable rates differ, it is

159 Doc. 701, Ex. 1. There is an almost $11,000.00 discrepancy between the $218,967.50 total

of the FB Invoices and the FB Fee Summary, which Sky again fails to explain.

160 The Court has also thoroughly reviewed the FB Invoices admitted as Exhibits 7 and 9 at

the September 21, 2021 hearing on the Motion to Determine Amount of [Sky]’s Secured

Claim. Were the Court to go over each FB Invoice as it did with the LLF Invoices, the result

here would not change.

virtually impossible for the Court, without adding up the dozens of entries in each

project category, to determine the exact number of hours Sky seeks for each project

category. The Court can therefore only determine a range of hours.

Section A of the FB Fee Summary contains 138-time entries for general case

administration. Most of these time entries have multiple tasks lumped together with

no associated specific time. Examples of time entries in the general administration

category that were not necessary to the collection and protection of Sky’s claim

include:

- Feb 17, 2020 preparation for and meeting with . . . regarding

aggressive approach to pursuing hotel, operating numbers of hotels . . .

- February 26, 2020 telephone call with Walker regarding

estimation of costs for Sky to refurbish and operate Seawalk in

conjunction with 221 property; correspondence with Greg S. regarding

same

- March 20, 2020 strategy regarding continuance and advantageous

positions to take as to Debtor

- April 17, 2020 receipt and review of McClure’s proof of claim161

- May 1, 2020 correspondence with client regarding McClure claim

- July 24, 2020 research Airbnb rates for Seawalk and measures

required by Airbnb for renters . . .

- October 1, 2020 Additional correspondence with client regarding

preparation of liquidation analysis and additional changes to 3012

motion . . . preparation of rough liquidation analysis

- October 6, 2020 preparation of supplement to Sky’s Plan of

Reorganization to include liquidation analysis

161 On April 16, 2020, McClure Electrical Contractors, Inc. filed an unsecured proof of claim

in the amount of $10,479.80 for labor and materials. Why Sky needed to do any work with

respect to the McClure claim is not substantiated by the record in any way.

Many of these 138-time entries are not even related to case administration in whole or

in part.

In general, a clearly oversecured creditor with virtually no risk such as Sky

would have little to do for general case administration. Assuming Sky had acted as

most oversecured creditors would, its general case administration actions would have

been limited to: reviewing the bankruptcy case filings to ensure Sky was accurately

characterized as a secured creditor; noting case deadlines; communicating only when

necessary with counsel for Debtor and Sky’s representatives; preparing a proof of

claim; reviewing monthly operating reports; and monitoring filings not directly related

to Sky. Some of this general case administration also appears to have been performed

by LLF: thus, there was duplication between FB and LLF in certain areas. An

experienced bankruptcy lawyer should have been able to easily accomplish these tasks

in less than 15 hours of time. Giving Sky the benefit of the high end of this range and

using FB’s highest hourly rate of $350.00, the Court finds $5,250.00 (15 hours) to be a

reasonable amount of FB’s fees for general case administration in this case.

3. Discovery

Section B of the FB Fee Summary contains 90-time entries for discovery with

an additional 10 entries for motions to compel. Again, many of these time entries have

multiple tasks combined with no specific time referenced for each individual task. In

all, Sky seeks an award of $51,827.00 for discovery. Upon review, the Court finds that

the vast majority of discovery Sky conducted in this case was not necessary to the

collection and protection of its claim.

In general, a clearly oversecured creditor such as Sky would have little need to

conduct discovery beyond participating in a creditors’ meeting162 at which Debtor’s

representative must appear to testify. Sky’s inquiries at this point should have been

narrowly focused on questions aimed at confirming its position was secured,

confirming Debtor had no basis upon which to challenge Sky’s lien, and addressing

related matters. Sky’s reasonable fees and costs for preparing for and participating in

a Section 341 Meeting of Creditors in this case would be 3 to 4 hours.

Giving Sky the benefit of the doubt that some additional discovery was needed

does not translate to 100-time entries and $51,827.00 in fees. Even if the Court

considers what discovery beyond the § 341 Meeting of Creditors would have been

reasonable, if Sky’s actions had resembled those typically taken by an oversecured

creditor, its discovery actions would have been limited to discovery as to Debtor’s

reorganization and proposed Plans. An experienced bankruptcy lawyer should have

been able to easily accomplish these tasks in less than 6 to 8 hours of time in addition

to 3 to 4 hours for preparing and participating in the § 341 Meeting of Creditors. Giving

Sky the benefit of the high end of this range and using FB’s highest hourly rate of

$350.00, the Court finds $4,200.00 (12 hours) to be a reasonable amount of fees for

discovery in this case.

162 Section 341 of the Bankruptcy Code requires the Office of the United States Trustee to

convene a meeting of creditors in all bankruptcy cases, and § 1116 requires a small business

debtor to attend such meeting.

4. Attendance and Preparation for Hearings and Trials Other

than Confirmation

Sky seeks an award of $8,354.50 for attending and preparing for non-

confirmation trials and hearings. There were a number of hearings in this case, but the

number and extent of those hearings was driven up by Sky’s actions aimed at acquiring

the Property. The Court finds a similarly situated creditor would not have occurred as

much in hearing and trial time as FB did in this case and will approve two-thirds of

the $8,354.50 requested in this category, allowing $5,570.00.

5. Confirmation Hearings

A review of Section D of the FB Fee Summary reflects 70-time entries for

confirmation hearings totaling $86,056.50. Trial on confirmation of the Third

Amended Plan was extended over August 26, 2020, August 27, 2020, and October 14,

2020. There was an extensive process for Debtor to confirm its plan and, as discussed

in more detail below, the responsibility to expeditiously advance confirmation of a

plan falls primarily on a debtor. That said, Sky’s clear intention to try to wrest

ownership of the Property from Debtor is inextricably intertwined with the extensive

confirmation process. This is highlighted by Sky’s assertion that Debtor’s plan had a

release when it did not and challenging confirmation on a feasibility basis when Sky

was clearly oversecured and not at risk of not being paid in full on its claim.

Sky’s advancing specious arguments in opposition to confirmation, coupled

with its intentions, again make it difficult to parse out what portion of the $86,056.50

sought is reasonable. Additionally, Sky’s efforts to challenge Debtor’s plan on a

feasibility basis with experts and extensive litigation were not warranted in this case.

Sky should have recognized that even if Debtor’s plan failed, Sky would have been

fully protected at all times and able to recover the full balance of its claim. Most

Chapter 11 cases do not have such extensive challenges to feasibility. Sky’s decision to

pursue this course of action was ill advised because it should have known it was highly

unlikely to prevail on this issue, especially considering its vastly oversecured position.

Even assuming Sky had acted as most oversecured creditors would, its

confirmation actions would have been limited to challenging its treatment under

Debtor’s Plans and negotiating commercially reasonable plan terms. Furthermore,

similarly to the Trust, if Sky had sought to resolve this relatively simple dispute instead

of challenging confirmation in an effort to obtain ownership of the Property, its fees

would have been substantially less in this category. An experienced bankruptcy lawyer

should have been able to protect Sky’s interest in the plan confirmation process for far

less than $86,056.50. The most efficient way to resolve this matter would have been

through negotiation of plan terms early in the case, which should have taken less than

10 to 15 hours. However, if Sky did indeed have to file objections because such

negotiations, which the Court is not privy to, were not productive, then an experienced

bankruptcy lawyer should have been able to prepare and prosecute a fair and focused

plan objection in less than 20 hours of attorney time.

Based on the foregoing, the Court finds 25 hours of time for Sky to attend the

confirmation hearing and related matters is more than reasonable in this case and

awards $8,750.00 as a reasonable amount of fees for confirmation hearings in this case.

6. Debtor’s Plan and Disclosure Statement

Sky seeks an award of $8,087.50 for work related to Debtor’s Plan and

Disclosure Statement with 12-time entries ranging from April 28, 2020 to September

11, 2020. This work seems to overlap and be duplicative of the work for confirmation

hearings, and Sky fails to set forth an adequate basis as to why this category of fees is

reasonable given the extensive fees it already seeks for confirmation hearings. With

the bases discussed thus far and considering that an experienced bankruptcy lawyer

should have been able to review Debtor’s plans and disclosure statements for purposes

of reasonably enforcing the Note in 10 to 12 hours, the Court finds 12 hours of time is

more than reasonable for this billing category and awards Sky $4,200.00 as a

reasonable amount of fees for Debtor’s plan and disclosure statement in this case.

7. Sky’s Plan and Disclosure Statement

Sky seeks an award of $10,587.50 for work related to Sky’s Plan and Disclosure

Statement with 17-time entries ranging from June 23, 2020 to October 30, 2020. An

experienced bankruptcy lawyer could have adequately protected Sky’s interest in the

plan confirmation process without filing its own plan and disclosure statement, which

was neither required nor warranted. Moreover, Sky’s plan was not confirmable. Based

on the foregoing and other bases already discussed above, the Court finds Sky should

not be awarded any fees in connection with its plan and disclosure statement.

8. Mediation/Settlement

Sky seeks an award of $6,168.00 for work related to mediation/settlement with

11-time entries ranging from March 9, 2020 to August 4, 2020 for

mediation/settlement. The Court generally encourages parties to try to resolve matters

through settlement and mediation. In this bankruptcy case, had Sky focused on

settlement of its rights under the Note rather than trying to leverage into ownership of

the Property, the fees it incurred would have been substantially less. Nevertheless, the

Court finds time spent in settlement and mediation to be reasonable in this case and

awards Sky $6,168.00 of fees for mediation/settlement.

9. FB Costs Summary

Finally, the Court will allow the following costs from FB’s Invoices:

(a) FB’s Invoice for the period of February 4, 2020 to March 27, 2020 seeks

costs of $148.80, of which the Court will allow $48.40, comprised of a $21.40 PACER

fee and a $27.00 charge for recording the assignment of mortgage as to the Property.

The Court will not allow the remaining $100.00 because it is not clear what the charge

is for.

(b) FB’s Invoice for the period of April 1, 2020 to August 28, 2020 seeks costs

of $813.63, the vast majority of which are related to third party discovery, which the

Court does not find to be reasonable. The Court will allow PACER fees of $73.80 and

a Courtcall fee of $22.50 for total costs of $96.30.

(c) FB’s Invoice for the period of September 1, 2020 to December 31, 2020

seeks costs of $1,069.90, which are almost entirely related to third party discovery and

Sky’s Plan and Disclosure Statement, which the Court finds to be unreasonable. The

Court finds that reasonable costs for this period total $124.60.

(d) FB’s Invoice for the period of January 4, 2021 to March 25, 2021 seeks

costs of $3,528.00, none of which relate to reasonable activities in protecting Sky’s

interest and none of which will be allowed.

(e) FB’s Invoice for the period of April 2, 2021 to July 8, 2021 seeks costs

of $38.50. The Court finds the costs, which represent PACER charges, to be reasonable

and will allow them.

Therefore, based on the above, the Court will allow FB’s costs in the amount of

$307.80.

C. NLA’s and Sky’s Remaining Costs

In addition to the foregoing and to the extent not clearly discussed, costs

associated with actions that were focused on acquiring the Property should not be

taxed to the Debtor. These include costs of appraisals, expert witnesses, and third-

party discovery. They also include costs associated with Sky’s efforts to: (i) seek

dismissal of the bankruptcy case, (ii) appoint an examiner or trustee, and (iii) prepare

and seek confirmation of Sky’s plan of reorganization.

In total, the Court finds that Sky is entitled to recover from Debtor $34,138.00

in fees (approximately 97.5 hours at a $350.00 hourly rate)163 and $307.80 in costs

under the FB Invoices as reasonable and part of its secured claim in this bankruptcy

case.

163 The Court again notes that 97.5 hours of attorney time is on the higher end of what would

have been reasonably required to protect Sky’s interest in this bankruptcy case for the work

done by FB.

D. Lodestar factors

Having discussed the evidence before the Court and the reasonableness of

Sky’s fees and costs from the perspective of an experienced bankruptcy lawyer

representing a clearly oversecured creditor seeking to protect its interest, the Court

now turns to the lodestar factors.

(1) The time and labor required: As discussed above, the time and labor

required to protect Sky’s interest was far less than the time actually spent by Sky.

The primary reason for the excessive time and labor is that Sky was focused on

acquiring the Property rather than seeking to protect its interest.164

(2) The novelty and difficulty of the questions: This bankruptcy case was a

relatively straightforward single asset real estate case. There is nothing novel or

difficult about an unchallenged first mortgage holder with a large equity cushion

that is receiving adequate protection payments.165 There were no novel or difficult

questions presented. Rather, Sky, in its attempts to acquire the Property,

unnecessarily made what should have been a quick and simple reorganization into

a tangled and disjointed process that resulted in excessive attorney’s fees and costs.

(3) The skill requisite to perform the legal service properly: This was not a

complex bankruptcy case, and the skill to properly represent NLA and Sky in

164 See In Re Reorganized Lake Diamond Assocs., 367 B.R. at 875-876.

165 Id. at 876 (noting that similar circumstances warranted “very limited legal interaction.”).

protecting their interest would be categorized at best as a moderate level. As noted,

an experienced bankruptcy lawyer focused on protecting Sky’s interest rather than

trying to litigate its way into ownership would have expended far less time in

representing NLA and Sky to protect their interest.

(4) The preclusion of employment by the attorney due to acceptance of the

case: “Typically, preclusion of employment presumes that an attorney does not

generally engage in the sort of representation for which fees are being requested and,

therefore, is prevented from undertaking a customary amount of additional work

due to the increased time demand of that particular case.”166 There is no real

evidence here as to this factor nor is this factor overly relevant to this bankruptcy

case.

(5) The customary fee: This has been discussed at length. A customary fee for

an oversecured creditor would be substantially less than what Sky seeks. Such a

customary fee would be more in line with the fees incurred by the Trust, which

appear to be approximately $35,000.00.

(6) Whether the fee is fixed or contingent: This factor is not overly relevant

here. The fee was neither fixed nor contingent. Typically secured creditors in

bankruptcy cases such as this one engage lawyers who bill hourly.

(7) Time limitations imposed by the client or the circumstances: This factor

is not relevant here.

166 In re King, 546 B.R. 682, 730 (Bankr. S.D. Tex. 2016).

(8) The amount involved and the results obtained: The amount involved is

the amount of Sky’s claim of approximately $750,000.00. The result obtained by

Sky was largely a huge loss. If Sky had acted as a similarly situated creditor, it would

have incurred substantially less fees and achieved a far better result.

(9) The experience, reputation, and ability of the attorneys: The Court has no

qualms with the experience, reputation, and ability of the attorneys in this case. The

Debtor, NLA, and Sky had good counsel representing them. The issue here was

client driven action, primarily by Sky in attempting to acquire the Property.

(10) The “undesirability” of the case: There is no evidence that would suggest

this was an undesirable case.

(11) The nature and length of the professional relationship with the client:

This factor is not overly relevant here. Whether this was Sky’s counsel’s first

representation of Sky or whether there was a long-term attorney-client relationship

would not impact the amount of reasonable time expended to protect Sky’s interest.

(12) Awards in similar cases: As discussed in the context of the Lake Diamond

case, other cases analyzing fees for oversecured creditors, and the Trust’s fees, the

amount Sky seeks to recover for attorney’s fees and costs greatly exceeds awards in

prior similar cases.

Upon a review of the Johnson factors, the Court does not find that an

adjustment, either up or down, under the lodestar method analysis is warranted in

this case.

Conclusion

For over two decades, one of the Court’s primary areas of expertise in the

private sector was the representation of secured creditors and debtors in Chapter 11

single asset real estate cases. Undeniably, this case should have been a relatively simple

Chapter 11 real estate case. However, Sky’s actions, despite its status as a well

oversecured creditor, are the primary reason this case became complicated and

protracted. To give some deference to Sky, Debtor’s efforts and diligence in advancing

this case to confirmation can be called into question just as Sky’s motives have been.

Perhaps it was NLA’s and Sky’s overly aggressive actions to try to leverage into

owning the Property or the coronavirus pandemic that resulted in it taking over 30

months to confirm a plan,167 but that is an unusually long time for a relatively simple

Chapter 11 real estate case to get to confirmation, and Debtor bears some of the

responsibility. Whatever the reason, the amount Sky is entitled to recover for fees and

costs was increased by certain actions of Debtor during the course of the case, and the

Court recognized this in awarding fees in what would be the higher range of

reasonableness for a case like this one.

The Court also notes a question of credibility in Sky’s position and its ties to the

Trust, especially after the Trust cut a deal. NLA and the Trust were clearly working

167 An April 23, 2024 report from the American Bankruptcy Institute Task Force on

Subchapter V Chapter 11 Cases notes the average duration of a standard Chapter 11 case is

470 days, which is less than half the time Debtor took to achieve confirmation of a plan. See

Final Report of the American Bankruptcy Institute Subchapter V Task Force, p. 6. (citing written

statement of the Honorable Hannah Blumenstiel, United States. Bankruptcy Court for the

Northern District of California).

together to help improve their respective positions. The Trust, which was also

oversecured but to a lesser extent than Sky in a junior lien position, settled with

relatively low fees. Sky in a superior lien position did not and aggressively pursued

ownership of the Property. Hindsight is 20/20, but had Sky settled as the Trust did, it

would have a modified loan with far less attorney’s fees and costs incurred. Rather,

very similarly to the creditor in Lake Diamond, Sky elected to try to litigate its way into

ownership of the Property and now tries to spin that effort into having protected its

rights. As an oversecured creditor, Sky took on the risk, its efforts failed, and it is not

entitled to recover the majority of the fees and costs sought. Based on the foregoing,

the Court finds that Sky is allowed $48,663.00 in attorney’s fees and $926.78 in costs,

for a total of $49,589.78. The Court will enter a separate order consistent with these

Findings of Fact and Conclusions of Law.

Attorney Kevin Paysinger is directed to serve a copy of this order on interested

parties and to file a proof of service within three days of the date of the order.