In re BARRY SISKIN, Debtor. BARRY SISKIN, Appellant, - against - ROBERT L. GELTZER, Appellee.
11 Civ. 9468 (NRB)
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


June 20, 2012, Decided

June 20, 2012, Filed

MEMORANDUM AND ORDER

NAOMI REICE BUCHWALD Click for Enhanced Coverage Linking Searches
UNITED STATES DISTRICT JUDGE

I. Introduction

Barry Siskin (the "appellant" or "debtor") appeals pro se from the Memorandum Decision and Order Overruling Debtor's Objection to Professional Compensation (the "Bankruptcy Order") entered by United States Bankruptcy Judge Stuart M. Bernstein of the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") on October 13, 2011, which granted the compensation and expenses sought by the duly-appointed trustee, Robert L. Geltzer (the "appellee" or "Trustee") and his professional agents. For the reasons stated below, the Bankruptcy Order and its award of fees and expenses is affirmed.

II. Background1


This appeal stems from the bankruptcy proceedings surrounding the liquidation of appellant's estate. An attorney and solo practitioner who represented plaintiffs in personal-injury suits, appellant originally filed for bankruptcy on January 28, 2002, hoping to secure protection under Chapter 11 of Title 11 of the United States Code. Voluntary Petition (Chapter 11), In re Siskin, No. 02-10373 (SMB) (Bankr. S.D.N.Y. Jan. 28, 2002) (ECF #1).2 Apparently precipitating appellant's voluntary filing was his successful litigation of a particular case in state court in which judgment was awarded but subsequently vacated by the trial court. Allegedly required to make restitution of the fees that he had earned from the case but already paid out to various of his creditors, appellant, was compelled to file for bankruptcy before the Court of Appeals ultimately reinstated the judgment in 2003. See Woodson v. Mendon Leasing Corp., 100 N.Y.2d 62, 790 N.E.2d 1156, 760 N.Y.S.2d 727, 2003 N.Y. LEXIS 953 (2003).




During the bankruptcy proceedings, American Transit Insurance Company ("American Transit"), the insurer of one of the original defendants in Woodson and appellant's largest creditor, obtained a series of orders compelling appellant to produce documentation or provide information. After the initial order, subsequent orders often directed the production of information whose turnover had earlier been commanded. See Order Directing Debtor to Appear for Examination, Directing the Debtor to Produce Documents, and Granting Creditor Leave to Serve Interrogatories, Aug. 14, 2002 (ECF #27); Order Compelling Discovery, Oct. 4, 2002 (ECF #52); Order, Oct. 4, 2002 (ECF #53); Order Directing Debtor to Produce Documents and Answer Interrogatory and Scheduling Compliance Conference, Dec. 13, 2002 (ECF #90); Order Directing Debtor to Produce Documents, Execute and Affirm an Affidavit, and Answer an Interrogatory, Scheduling a Motion for Sanctions, and Denying a Stay Pending Appeal, Jan. 29, 2003 (ECF  [*4] #97). Appellant's noncompliance with the Bankruptcy Court's directions resulted in a $72,000 compensatory sanction in favor of American Transit, further straining his fiscal position. Order Imposing Monetary Discovery Sanction, Directing Further Discovery Compliance, and Scheduling Compliance Conference, Mar. 13, 2003 (ECF #111).

Following motions filed by the United States Trustee and the United States of America, which the State of New York and appellant's original bankruptcy counsel supported, the Bankruptcy Court signed an order converting the case to one for liquidation under Chapter 7 of Title 11 of the United States Code. See Application of the United States Trustee to Convert this Chapter 11 Case to a Chapter 7 Case or, in the Alternative, to Dismiss this Chapter 11 Case, Feb. 28, 2003 (ECF #101); Declaration of Paul de la Vega, Dec. 2, 2004 (ECF #145); Statement in Further Support of the Motions to Convert or Dismiss, Jan. 19, 2005 (ECF #150); Statement in Response to Motion to Convert or Dismiss, Jan. 21, 2005 (ECF #151); Affidavit in Support of Motion to Convert or Dismiss, Dec. 23, 2005 (ECF #189); Order Converting Chapter 11 Case to a Chapter 7 Case, Jan. 26, 2006 (ECF  [*5] #193).3



At the conversion hearing held on January 26, 2006, the State of New York claimed that appellant owed approximately $39,000 in connection with unpaid withholding taxes for his employees and that he had failed to file any withholding tax returns after September 2003. The United States Trustee added that appellant was late and/or delinquent in filing his operating reports. Appellant's original bankruptcy counsel did not dispute any of the above charges. See Jan. 26, 2006 Hearing Transcript, at 3:5-8:7 (ECF #212). In explaining its decision to convert the case to Chapter 7, the Bankruptcy Court cited the lack of progress in the case as well as appellant's failure to pay administrative expenses, to timely file tax returns and operating reports, and to adhere to the obligations of a debtor-in-possesion under Chapter  [*6] 11. Id. at 11:8-12:6.

Upon conversion of the case, the United States Trustee appointed the Trustee. Appointment of Interim Trustee and Trustee, Jan. 27, 2006 (ECF #194). The Trustee retained Bryan Cave LLP ("Bryan Cave") to represent him as counsel in the bankruptcy proceedings. Order Authorizing Retention of Bryan Cave LLP as General Counsel for the Trustee, Feb. 7, 2006 (ECF #201). Bryan Cave was later replaced by Squire, Sanders & Dempsey L.L.P., which is now known as Squire Sanders (U.S.) L.L.P. ("Squire Sanders"). Order Authorizing Retention of Squire., Sanders & Dempsey L.L.P. as Substitute General Counsel to the Trustee, Sept. 2, 2008 (ECF #303). The Trustee also retained Davis, Graber, Plotzker & Ward, LLP ("Davis Graber") to serve as his accountant. Order Authorizing Trustee to Employ Accountant, Feb. 7, 2006 (ECF #202). The fee applications at issue in this appeal are those from the Trustee, Bryan Cave, Squire Sanders, and Davis Graber.

The Trustee was obligated to determine the portion of appellant's assets that belonged to the bankrupt estate and to safeguard and evaluate estate property, including the files and records of appellant's sole proprietorship. To that end, the  [*7] Trustee changed the locks on the door to appellant's law office. Appellant's Br. 24-26, 29; Appellant's Reply Br. 17; Bankruptcy Order 8-9.

Appellant's reluctance and/or inability to provide requested information and documentation continued after the conversion of his case. Though appellant asserted that he represented plaintiffs in more than 440 cases pending at one or another stage of litigation, the status and potential value of those cases was not clear to the Trustee from the information that appellant provided. See Affirmation in Support of Trustee's Motion for Order Authorizing Retention of Evaluators, Mar. 6, 2006, at ¶ 4 (ECF #215). The Trustee therefore hired three personal-injury lawyers to evaluate the worth of the pending cases to the estate and was authorized by the Bankruptcy Court to operate appellant's law practice for ninety days so that he could pay employees for assisting with this work. The Bankruptcy Court found that this limited continued operation of appellant's law practice was in the best interests of the estate and of appellant's former clients. See Order Authorizing the Continued Operation of the Debtor's Business for a Limited Period, Mar. 29, 2006. (ECF  [*8] #231); Stipulation and Order Pertaining to Agreement Between Chapter 7 Trustee and the Debtor Barry Siskin, July 19, 2006 (ECF #254).

In July 2006, appellant was permitted to resume control of his law practice's operations. The parties stipulated at this time that the Trustee would not be responsible for expenses incurred by the law practice or the debtor after June 1, 2006, with the exception of a limited allowance to be paid in two installments. Stipulation and Order, July 19, 2006 (ECF #254). The conflicting demands placed on estate assets by appellant, who was trying to operate his law practice, and by the Trustee, who was trying to evaluate estate assets and liquidate the estate, exacerbated what was an existing tension between the parties.

It appears that appellant remained uncooperative during this time period in terms of producing documents and providing information, and eventually the parties agreed, inter alia, that appellant would have to provide certain case specific information related to his inventory and file monthly accountings of his fees pursuant to a regular schedule. See Order Authorizing Trustee's Examination of the Debtor Barry Siskin and Directing Production of  [*9] Documents, Mar. 27, 2006 (ECF #229); Stipulation and Order Pertaining to Agreement Between Chapter 7 Trustee and the Debtor Barry Siskin, July 19, 2006 (ECF #254). In order to facilitate these disclosures, the Bankruptcy Court established, a system by which documents covered by the attorney-client privilege and work-product doctrine would be protected to the greatest extent possible. See April 18, 2006 Hearing Transcript, (ECF #241); Order Denying Debtor's Motion for a Protective Order and Reconsideration, Apr. 27, 2006 (ECF #240); Order Directing Debtor to Afford Trustee Access to Debtor's Records, July 27, 2009 (ECF #318).

Notwithstanding these arrangements, the Trustee considered appellant's compliance with production requirements insufficient and commenced an adversary proceeding, since dismissed, to deny appellant a discharge based on his failure to keep and preserve records and his withholding of books and records from the Trustee and his professional agents. See Complaint, Geltzer v. Siskin, Adv. Proc. No. 08-1381 (S.D.N.Y. Bankr. July 31, 2008) (ECF #1). See also Order to Show Cause Regarding Trustee's Motion to Compel Compliance with Prior Orders of this Court and for Additional  [*10] Relief, Geltzer v. Siskin, Adv. Proc. No. 08-1381 (S.D.N.Y. Bankr. July 16, 2009) (ECF #10). The Trustee eventually obtained an order from the Bankruptcy Court directing appellant to grant access to his business and financial records as well as his" law practice's case files. Order Directing Debtor to Afford Trustee Access to Debtor's Records, July 27, 2009 (ECF #318).

During this same time period, on June 4, 2009, the Appellate Division, First Department, suspended appellant from the practice of the law due to his inability to account for decreases in the balance of funds in the escrow accounts that he was obliged to maintain on behalf of his clients. See In re Siskin, 65 A.D.3d 58, 880 N.Y.S.2d 276 (1st Dep't 2009). On October 12, 2010, appellant was disbarred as a result of his failure to seek reinstatement, withdraw from pending legal matters, or respond to inquiries by the Disciplinary Committee for the First Judicial Department. See In re Siskin, 78 A.D.3d 112, 909 N.Y.S.2d 411 (1st Dep't 2010).

Following the liquidation of appellant's estate, on May 12, 2011, the Trustee filed his final report (the "Final Report"), which contained his request for commissions. Trustee's Final Report,  [*11] May 12, 2011 (ECF #329). In the preceding months, the professionals retained by the Trustee had filed their final applications for compensation and reimbursement of expenses. See Application of Squire, Sanders & Dempsey L.L.P. for Compensation and Reimbursement, Apr. 21, 2011 (ECF #333); Affidavit of Andrew W. Plotzker in Support of Application of Davis, Graber, Plotzker & Ward, LLP for Compensation and Reimbursement of Expenses, Feb. 23, 2011 (ECF #334); Application of Bryan Cave LLP for Compensation and Reimbursement, Apr. 25, 2011 (ECF #335).

Pursuant to 11 U.S.C. § 326, the cap on the Trustee's commission is $25,934.50, and he sought that amount from the Bankruptcy Court. In support of his application, the Trustee submitted time records indicating that he spent 161.1 hours on the case, representing services valued at $75,923 under the lodestar method, which, as discussed below, involves multiplying the reasonable billing rate by the reasonable number of hours expended. Trustee's Application for Compensation and Reimbursement of Expenses, May 12, 2011 (ECF #332). See Blum v. Stenson, 465 U.S. 886, 898-901, 104 S. Ct. 1541, 79 L. Ed. 2d 891 (1984).

The three professionals initially sought final fees aggregating $343,485.00  [*12] but agreed to reduce their requests by approximately 45% and ultimately submitted applications that together totaled $187,925.90. See Statement of the United States Trustee with Respect to Applications for Final Commissions, Compensation, and Reimbursement of Expenses, July 1, 2011 (ECF #331). In addition, the Trustee and his professionals collectively sought expenses totaling $8,454.78.

Appellant filed an objection to the fee requests. Declaration in Opposition, filed on Sept. 6, 2011 (ECF #346), which was overruled in the Bankruptcy Order, from which appellant filed a notice of appeal on October 27, 2011. Notice of Appeal, Oct. 27, 2011 (ECF #351).

On appeal, appellant alleges that the work performed by appellee and his professional agents did not benefit the estate and was undertaken for the sole purpose of benefitting themselves. Appellant argues that appellee and his agents should not be compensated for the time spent on such activities. Debtor's Designation of Record and Issues on Appeal ("DDRIA") 6, 7-8, 14-16; Appellant's Br. 5-8, 24-25, 30-32; Appellant's Reply Br. 3-4, 11-13, 15-21, 22. Appellant also claims that the Bankruptcy Court ignored his factual submissions while simply  [*13] accepting those of the Trustee as true. DDRIA 16-18; Appellant's Br. 2-3, 8-9. The Trustee in turn argues that we should uphold the Bankruptcy Order and has further moved for appellant to be sanctioned for filing this allegedly frivolous appeal. Appellees' Br. 2.

III. Discussion

HN1Go to the description of this Headnote.When reviewing a bankruptcy court's decision, we "accept[] its factual findings unless clearly erroneous but review[] its conclusions of law de novo." DG Creditor Corp. v. Dabah (In re DG Acquisition Corp."), 151 F.3d 75, 79 (2d Cir. 1998). See also Olin Corp. v. Riverwood Int'l (In re Manville Forest Prods.), 209 F.3d 125, 128 (2d Cir. 2000).

HN2Go to the description of this Headnote.In bankruptcy proceedings, "[a] fee applicant bears the burden of proof on his claim for compensation" and "must submit contemporaneous time records." In re Brous, 370 B.R. 563, 569 (Bankr. S.D.N.Y. 2007) (a computerized summary will suffice). A bankruptcy court has an independent duty to review and evaluate all applications for professional fees, even in the absence of an objection. 11 U.S.C. § 330(a)(1); Fed. R. Bankr. P. 2017(b); In re Keene Corp., 205 B.R. 690, 695 (Bankr. S.D.N.Y. 1997). See Matter of Ferkauf, Inc., 42 B.R. 852, 853 (Bankr. S.D.N.Y. 1984), aff'd, 56 B.R. 774 (S.D.N.Y. 1985).  [*14] However, "[b]ankruptcy courts enjoy wide discretion in determining reasonable fee awards, which discretion will not be disturbed by an appellate court absent a showing that it was abused." Bernheim v. Damon and Morey, L.L.P., Nos. 06-3386-BK (LEAD), 06-3389-BK (CON), 2007 U.S. App. LEXIS 15530, 2007 WL 1858292, at *1 (2d Cir. June 28, 2007) (summary order) (citing inter alia Dickinson Indus. Site v. Cowan, 309 U.S. 382, 389, 60 S. Ct. 595, 84 L. Ed. 819 (1940)). See also In re Emergency Beacon Corp., 71 B.R. 117 (S.D.N.Y. 1987) (applying abuse-of-discretion standard and affirming award of fees to trustee and his professional agents).

The Trustee's Final Report and the assorted applications of his professional agents provided the Bankruptcy Court with sufficiently detailed billing records to identify the substance as well as the amount of work performed in connection with appellant's estate. See, e.g., Application for Final Professional Compensation for Robert L. Geltzer, July 11, 2011 (ECF #332); Application for Final Professional Compensation for Squire Sanders, July 11, 2011 (ECF #333); Application for Final Professional Compensation for Davis Graber, July 11, 2011 (ECF #334); Application for Final Professional Compensation for Bryan Cave,  [*15] July 19, 2011 (ECF #335). Having reviewed the Bankruptcy Order as well as the underlying record of the bankruptcy proceedings in light of these fee and expense applications, we easily conclude that the Bankruptcy Court did not abuse its discretion in awarding the fees and expenses that had been requested.

A. The Bankruptcy Court's award of fees and expenses to the Trustee does not reflect an abuse of discretion.

HN3Go to the description of this Headnote.The award of fees and expenses for trustees in cases under Chapter 7 is governed by 11 U.S.C. §§ 326 and 330. Section 326(a) fixes a trustee's maximum compensation according to a sliding percentage scale of "all moneys disbursed or turned over in the case by the trustee to parties in interest." 11 U.S.C. § 326(a). There is a presumption that the fee award will match the percentage calculation under § 326, though a trustee is not entitled to the statutory maximum as a matter of right. See 6 Collier On Bankruptcy ¶ 721.03 (16th ed. 2010). Rather, the court must begin by assessing the reasonableness of a trustee's requested compensation under 11 U.S.C. § 330 before applying the cap established pursuant to § 326(a). In re Brous, 370 B.R. at 568-69.

HN4Go to the description of this Headnote.Section 330(a)(1) authorizes the  [*16] award of "reasonable compensation for actual, necessary services rendered by the trustee," as well as any "actual, necessary expenses." 11 U.S.C. § 330(a)(1). The "necessary" standard is interpreted broadly, to include any services that benefit the estate, and trustees will not be compensated for services that do not meet this standard. In re Keene, 205 B.R. at 695. In order to determine whether the services were "necessary," courts objectively evaluate whether the services provided were reasonably likely to benefit the estate under the circumstances at the time that the services were rendered. See In re Kohl, 421 B.R. 115, 128-29 (Bankr. S.D.N.Y. 2009) ("[c]ourts should not use the benefit of hindsight to determine whether the work of a [trustee] was necessary" but rather "must determine whether the work was reasonable at the time it was performed"). Finally, any commission awarded pursuant to a statutory allowance must not represent a windfall to a trustee. In re Brous, 370 B.R. at 571.

The customary approach to determining whether a fee requested for necessary services is reasonable is the two-step lodestar test, which involves first multiplying the reasonable billing rate by the  [*17] reasonable number of hours expended and then evaluating whether additional fee enhancements are appropriate. See id. at 570 (citing, inter alia, Blum v. Stenson, 465 U.S. 886, 898-901, 104 S. Ct. 1541, 79 L. Ed. 2d 891 (1984)).

After reviewing the Final Report, the Bankruptcy Court agreed with the Trustee that pursuant to the lodestar method a fee request of $75,923 was reasonable. See Bankruptcy Order 13-14. The Bankruptcy Court found that the Trustee's expenditure of 161.1 hours to liquidate the appellant's estate was warranted by the multiple obstacles that he faced due to appellant's failure to maintain adequate records or refusal to provide such records. See Bankruptcy Order 4, 13-14.4 The Trustee did not seek any fee enhancements. See Trustee's Application for Compensation and Reimbursement of Expenses, May 12, 2011 (ECF #329-1).



We find nothing in the record on appeal to indicate that the Bankruptcy Court abused its discretion in finding that "the services [of the Trustee] were reasonable and necessary in light of the circumstances of the case" and awarding the Trustee the compensation that he requested. Bankruptcy Order 13. As discussed above, appellant repeatedly failed to provide information and documentation despite orders from the Bankruptcy Court to do so. His actions significantly impeded the ability of the Trustee and his professional agents to perform their duties as administrators of the estate. He created additional work for the Trustee, dragging out the evaluation and liquidation process and obliging the Trustee to bring several motions for compliance and to institute a separate adversary proceeding. The amount of work that the Trustee was required to perform fully supports a conclusion that the number of hours spent working on the liquidation of this estate was reasonable and necessary under the circumstances.

The appellant's arguments against the award of fees to the Trustee are unavailing. HN5Go to the description of this Headnote.The Trustee "owes a fiduciary duty both to the debtor and to the creditors as a group," Germain v. Connecticut Nat. Bank, 988 F.2d 1323, 1330 n. 8 (2d Cir. 1993),  [*19] and a bankruptcy court may deny fees and expenses in the event of a serious breach of a trustee's fiduciary obligations. See Matter of Arlan's Dep't Stores, Inc., 615 F.2d 925, 943 (2d Cir. 1979). However, appellant's baseless allegations that the Trustee breached his fiduciary obligations fall well short of credibly demonstrating any misfeasance on the part of the Trustee, let alone wrongdoing sufficient to preclude compensation from the estate. Further, contrary to appellant's wild speculation, there is zero risk of a windfall in this case. A reasonable award of fees and expenses here would far exceed the actual award permitted under the statutory cap of § 326.

B. The Bankruptcy Court's award of fees and expenses to the professional agents of the Trustee similarly does not reflect an abuse of discretion.

HN6Go to the description of this Headnote.A trustee may employ professionals, with court approval, to "represent or assist the trustee" in performing his duties. 11 U.S.C. §§ 327(a), 328(a). Each of the officials whose fees are contested were duly appointed and confirmed by orders of the Bankruptcy Court. Order Authorizing Retention of Bryan Cave L.L.P. as General Counsel for the Trustee, Feb. 7, 2006 (ECF #201); Order Authorizing  [*20] Trustee to Employ Accountant, Feb. 7, 2006 (ECF #202); Order Authorizing Retention of Squire, Sanders & Dempsey L.L.P. as Substitute General Counsel to the Trustee, Sept. 2, 2008 (ECF #303). The three professionals initially sought an aggregate of $343,485 in compensation but agreed to reduce their fee requests by approximately 45%. See Statement of the United States Trustee with Respect to Applications for Final Commissions, Compensation and Reimbursement of Expenses, July 1, 2011 (ECF #331).

HN7Go to the description of this Headnote.A duly-appointed professional may seek compensation for actual, necessary services rendered and expenses incurred in the administration of the case pursuant to 11 U.S.C. § 330(a-).A request for professional compensation must conform to the Federal Rules of Bankruptcy Procedure and the fee guidelines of the United States Trustee. See 28 U.S.C. § 586(a)(3)(A); Fed. R. Bankr. P. 2016(a). Pursuant to § 330(a) (3), professionals in bankruptcy cases are to be compensated for reasonable fees and expenses, "taking into account all relevant factors, including," inter alia, consideration of customary compensation for such professionals in non-bankruptcy matters. 11 U.S.C. § 330(a)(3). In evaluating the  [*21] award of professional fees, "courts objectively consider whether the services rendered were reasonably likely to benefit the estate from the perspective of the time when such services were rendered." In re Value City Holdings, Inc., 436 B.R. 300, 305 (Bankr. S.D.N.Y. 2010). HN8Go to the description of this Headnote.Pursuant to 11 U.S.C. § 328(c), a court may deny compensation to a professional who is or becomes a not disinterested person or who "represents or holds an interest adverse to the interest of the estate with respect to the matter on which such professional is employed." 11 U.S.C. § 328(c).

As already discussed and as the Bankruptcy Court found, appellant's refusal and/or inability to cooperate with the Trustee and his professional agents significantly impeded the performance of their duties as administrators of the estate and created a need for the provision of additional services such as the Issuance of numerous production orders See Bankruptcy Order 4, 13-14. See also Appellees' Br. at 4, 6, 8, 9-10. We find no evidence in the record on appeal to support a claim that the Bankruptcy Court abused its discretion in finding that the services listed in the Final Report were reasonable and necessary at the time they  [*22] were rendered. Finally, appellant's suggestion that the professional agents were not disinterested is made without benefit of any support.

C. The other actions of the Trustee and his professional agents that appellant separately contests were performed in fulfillment of the Trustee's overriding duty to expeditiously liquidate the estate pursuant to 11 U.S.C. § 704.

In addition to disputing the award of fees to the Trustee and his professional agents, appellant raises a number of broad issues that go to the general legality and propriety of the manner in which the Trustee and these agents executed their responsibilities. While these allegations appear only tangentially relevant to his claim that the requested and awarded compensation is unreasonable, we nonetheless interpret them as arguments bearing on whether the hours billed by the Trustee and these agents were used for appropriate purposes.

HN9Go to the description of this Headnote.Section 704(a)(1) of Title 11 requires a trustee to perform those basic tasks necessary to liquidate a debtor's property, providing the trustee with wide-ranging authority over the debtor's assets. See 11 U.S.C. § 704(a)(1). The trustee's primary purpose is "to collect, liquidate, and distribute  [*23] estate property thereby closing the estate 'as expeditiously as is compatible with the best interests of [the] parties.'" In re Bell, 225 F.3d 203, 221-222 (2d Cir. 2000) (brackets in original) (quoting § 704(a)(1)). Thus, we examine appellant's further allegations in light of the discretion that a trustee is properly afforded in his administration of the estate. See In re Siegel, 204 B.R. 6, 8 (Bankr. W.D.N.Y. 1996) ("[i]n a Chapter 7 proceeding, the administration of assets is generally left to the sound discretion of the trustee").

a. Alleged Failure to Assist with Tax Returns

First, appellant generally faults the Trustee for failing to provide sufficient assistance with filing tax returns and asserts that the Trustee failed to file tax returns when in control of the estate. Debtor's Declaration in Opposition, Sept. 6, 2011 (ECF #346) 32; Appellant's Br. 31-32; Appellant's Reply Br. 23. HN10Go to the description of this Headnote.When a trustee is operating a debtor's business, the trustee has a duty to pay all taxes accruing against the estate during the bankruptcy proceedings. See 26 U.S.C. § 6012(b)(3); 28 U.S.C. § 960; 6 Collier on Bankruptcy ¶ 721.03 (16th ed. 2010). However, appellant has not so much as identified the  [*24] tax returns that were purportedly within the Trustee's responsibility for submission or assistance. As a result, his conclusory allegations are insufficient for us to find that the Bankruptcy Court overlooked a lack of diligence on the part of the Trustee let alone abused its discretion in awarding fees to the Trustee.5




b. Alleged Breach of Attorney-Client Privilee

Second, appellant asserts that the Trustee breached the attorney-client privilege between appellant and his former clients numerous times when evaluating the worth of the bankrupt estate. Debtor's Declaration in Opposition, Sept. 6, 2011 (ECF #346) 12-13; Appellant's Br. 26; Appellant's Reply Br. 17.

In March 2006, the Bankruptcy Court found that a thorough evaluation of the files of debtor's pending cases would be in the best interests of the estate. Order Authorizing the Continued Operation of Debtor's Business for a Limited Period, Mar. 29, 2006 (ECF #231) 2-3. In light of this finding, the Bankruptcy Court ordered that the examination of appellant's files by the Trustee and his professional agents would not be deemed a waiver of either the attorney-client privilege or work-product doctrine and further indemnified the Trustee and his agents "with respect to any claim based upon any such privilege asserted by any [c]lient of the [d]ebtor's [l]aw [p]ractice." Id. at 3. In successive  [*26] orders, the Bankruptcy Court repeatedly addressed this issue in an attempt to safeguard documents covered by the attorney-client privilege and work-product doctrine to the greatest extent possible under the circumstances. See Transcript of Hearing Held on April 18, 2006, (ECF #241); Order Denying Debtor's Motion for a Protective Order and Reconsideration, Apr. 27, 2006 (ECF #240); Order Directing Debtor to Afford Trustee Access to Debtor's Records, July 27, 2009 (ECF #318). While appellant objected to many of these orders, he did not appeal any of them to this Court, and they are accordingly not properly before us to review now.

It is not controversial that HN11Go to the description of this Headnote.a "trustee in bankruptcy is entitled to investigate all aspects of the debtor's financial condition, including the examination of his business books and records." In re Kaufman, 68 B.R. 391, 393 (Bankr. S.D.N.Y. 1986). The files of appellant's then pending cases contained information necessary to expeditiously liquidate the bankrupt estate, and the Trustee and his professional agents should be compensated for carrying out this court-ordered review. We find nothing in the record to indicate that the Trustee's evaluation of the law  [*27] practice's files was not in the best interests of the estate at the time or that the manner in which the Trustee and his agents did so was improper. As such, pursuant to 11 U.S.C. § 330(a)(1), the Trustee and his agents should be compensated for the time that they spent evaluating these files under the supervision of the Bankruptcy Court.

c. Conflicts Regarding the Use of Estate Resources

Third, appellant asserts that the Trustee engaged in a host of activities that were detrimental to his continued operation of the law practice. In particular, appellant objects to the Trustee's use of his law practice's resources in evaluating the estate's assets while appellant sought to utilize those resources to continue operating the practice, as he was authorized to do pursuant to orders of the Bankruptcy Court. See Order Authorizing the Continued Operation of the Debtor's Business for a Limited Period, Mar. 29, 2006 (ECF #231); Stipulation and Order Pertaining to Agreement Between Chapter 7 Trustee and the Debtor Barry Siskin, July 19, 2006 (ECF #254).

HN12Go to the description of this Headnote."[T]he trustee is allowed to use his best business judgment in deciding when 'to use valuable property of the estate.'" Frostbaum v. Ochs, 277 B.R. 470, 475 (E.D.N.Y. 2002)  [*28] (brackets in original) (quoting Orion Picture's Corp. v. Showtime Networks, Inc., 4 F.3d 1095, 1098 (2d Cir. 1993)). As the Bankruptcy Court noted in the Bankruptcy Order, the Trustee's use of estate assets to ensure the orderly and expeditious liquidation of the estate made a certain degree of tension between the parties somewhat inevitable. Bankruptcy Order 9, 14. While appellant repeatedly decries the staff demoralization and workplace cutbacks that allegedly resulted from the Trustee's actions and places much of the blame for his law practice's diminished profitability upon the Trustee, see Appellant's Br. 27-29, 31-33; Appellant's Reply Br. 18-21, 22-24, it is apparent that the Trustee utilized estate resources in order to assess the value of the bankrupt estate and collect fees owed to the estate pursuant to authorization from the Bankruptcy Court and in fulfillment of his overriding duty to expeditiously liquidate the estate. We find no reason to conclude that the Trustee's conduct was a breach of his fiduciary obligations, let alone one so egregious as to preclude his compensation.6


D. The Trustee's request that appellant be sanctioned pursuant to Federal Rule of Bankruptcy Procedure 8020 is denied.

The Trustee's brief in opposition to this appeal requests that sanctions be imposed on appellant pursuant to Federal Rule of Bankruptcy Procedure 8020. Appellees' Br. 14-15. However, HN13Go to the description of this Headnote.Rule 8020 requires a separately filed motion or notice from the court as well as a reasonable opportunity to respond. See Fed. R. Bankr. P. 8020. These requirements have not been met, and accordingly, we need not reach the question of whether appellant's claim was brought frivolously.

* * *

The length of this-Memorandum and Order should not be interpreted as an indication that this Court regarded any issue that the appellant raised as meritorious. Indeed given the appellant's disbarment for invasion of his escrow accounts and failure to respond to the inquiries of the Disciplinary Committee for the First Judicial Department  [*30] we find it ironic--to say the least--that he accuses the Trustee of breaches of fiduciary duty and excessive effort. Moreover, we note that Bankruptcy Judge Bernstein should be commended for his careful and patient supervision of this case.

IV. Conclusion7

For the reasons stated above, the Bankruptcy Order and its award of fees and expenses is affirmed.

Dated: New York, New York

June  [*31] 20, 2012

/s/ Naomi Reice Buchwald Click for Enhanced Coverage Linking Searches

NAOMI REICE BUCHWALD Click for Enhanced Coverage Linking Searches

UNITED STATES DISTRICT JUDGE