Case BHL-7A Doc 443 Filed 12/20/11 EOD 12/20/11 19:33:32 Pg 1 of 8

Transcription

1 Case BHL-7A Doc 443 Filed 12/20/11 EOD 12/20/11 19:33:32 Pg 1 of 8 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF INDIANA NEW ALBANY DIVISION IN RE: ) ) THOMAS P. GIBSON and ) Case No BHL-7A PATSY M. GIBSON, ) ) Debtors. ) OBJECTION OF FIFTH THIRD BANK TO APPLICATION OF CHAPTER 7 TRUSTEE FOR AN ORDER AUTHORIZING THE EMPLOYMENT AND RETENTION OF RUBIN & LEVIN, P.C. AS SPECIAL LITIGATION CO-COUNSEL Fifth Third Bank ( Fifth Third ), by and through undersigned counsel, hereby submits this Objection to the Application of Chapter 7 Trustee for an Order Under 11 U.S.C. 327 and 328 Authorizing the Employment and Retention of Rubin & Levin, P.C. as Special Litigation Co-Counsel to the Trustee on an Hourly and Contingency Fee Basis and Approving Fee Agreement (Docket No. 429) (the Application ). In support of this Objection, Fifth Third respectfully states as follows: Actual, unwaivable conflicts exist as between Rubin & Levin s present representations and proposed representations, prohibiting retention. 1. Each of the parties presently represented or proposed to be represented by Rubin & Levin, P.C. ( Rubin and Levin ) have filed significant proofs of claims in the related bankruptcy case of Eastern Livestock Co., LLC ( Eastern ). By way of example, Superior has repeatedly asserted that it is both a secured creditor and that it is the beneficiary of a constructive trust which would remove from the Eastern estate assets otherwise available to satisfy creditors of Eastern, depleting the Eastern estate. Were Rubin & Levin to also represent the Gibson Trustee 1, the interests of Superior (excluding as many assets from the Eastern estate 1 Referred to in the Application as the Chapter 7 Trustee.

2 Case BHL-7A Doc 443 Filed 12/20/11 EOD 12/20/11 19:33:32 Pg 2 of 8 as possible) and the interests of the Gibson Trustee (maximizing recovery for the Gibson estate and unsecured creditors) would be in direct and unavoidable conflict the more assets that Rubin & Levin can potentially secure for Superior 2, the more direct and negative the impact on the recovery prospects for the Gibson Trustee, the Gibson estate, and the unsecured creditors in the Gibson case. Whose interests would Rubin & Levin pursue? When Rubin & Levin appear in a matter, whose interests is it representing? 2. As an initial matter, Fifth Third notes that Rubin & Levin has not correctly disclosed to this Court or to parties in interest who it presently represents, or in what capacity. In the Application, Rubin & Levin purportedly represent only the East-West Trustee and Superior as creditors in the Gibson case. See, Application 8. In the Affidavit of John C. Hoard, Rubin & Levin purportedly represents (a) the East-West Trustee in his capacity as trustee in the East- West case, as interested party in the Eastern case and Friona Adversary, and as interested party in the Gibson case; (b) Superior as a petitioning creditor in the East-West case 3 and crossdefendant in the Friona Adversary; and (c) Joplin as a creditor in East-West Trucking and crossdefendant in the Friona Adversary. See, Affidavit 6a-c. A cursory review of both the dockets and claim registers of the East-West, Eastern, and Gibson cases reveal that Rubin & Levin actually represents the following entities in the following capacities: Trustee Michael J. Walro (1) In his capacity as Trustee in the East-West case; (2) As creditor in the Eastern case; (3) As interested party in the Friona Adversary; and (4) As interested party in the Gibson case. 2 Recall that Superior does not assert that it is an unsecured creditor Superior s claims are for, in essence, 100 cents dollars either by way of an alleged security interest or owing to a theory of constructive trust. This is a fundamentally different prospect than representing two unsecured creditors, who may facially have conflicting claims but whose recovery is not actually and actively reduced by payment on allegedly competing unsecured claims. 3 The East-West case is a voluntary filing, and as such, has no petitioning creditors.

3 Case BHL-7A Doc 443 Filed 12/20/11 EOD 12/20/11 19:33:32 Pg 3 of 8 Superior (1) As petitioning creditor in the Eastern case; and (2) As cross-defendant in the Friona Adversary. Joplin (1) As a creditor in the Eastern case; and (2) As a cross-defendant in the Friona Adversary. Not only has Rubin & Levin failed to correctly disclose its present representations and conflicts, Rubin & Levin has failed to satisfy the provisions of S.D.Ind. B by obtaining written conflict of interest waivers from its present clients and serving copies of such waivers upon the Service List 4 in this case. In addition, Rubin & Levin has failed to file a Rule 2019 notice. 3. Fifth Third notes that, in accordance with 11 U.S.C. 327(c), where an actual conflict exists, the application shall be disapproved. It is not possible for Rubin & Levin to rest on its vague assurances that neither Superior, Joplin, nor the East-West Trustee object to the proposed added retention by the Gibson Trustee actual conflicts are simply not capable of waiver. As the conflicting and directly oppositional loyalties owed by Rubin & Levin to Superior, Joplin, and the East-West Trustee and the proposed representation of the Gibson Trustee create an actual conflict, Fifth Third respectfully requests that the Application be denied. The proposed retention of Rubin & Levin is nothing more than an improper litigation tactic. 4. At a hearing held on December 14, 2011 in the Eastern case, Superior (through counsel Rubin & Levin) vehemently objected to the payment of fees and expenses of counsel to the Eastern Trustee, alleging that Fifth Third had controlled the administration of the Eastern case for the sole benefit of Fifth Third. The Court rejected that allegation by approving the fee applications. 4 As defined in S.D.Ind. B

4 Case BHL-7A Doc 443 Filed 12/20/11 EOD 12/20/11 19:33:32 Pg 4 of 8 5. At this same hearing on behalf of its client Superior, Rubin & Levin leveled other charges against Fifth Third including potential claims for equitable subordination. This same firm now seeks to be retained by the Gibson Trustee to act as lead counsel on all matters within the scope of its representation 5 in other words, to act as lead counsel with respect to all matters related to the investigation, prosecution or settlement of chapter 5 causes of action. A claim for equitable subordination is found under 11 U.S.C Thus, Rubin & Levin proposes the impossible: to fairly evaluate potential claims against Fifth Third, while at the same time representing a client whose animus towards Fifth Third could not be more clear. 6. The Gibson trustee has a fiduciary duty not to waste bankruptcy estate assets. Allowing the dissipation of the Gibson estate s assets to fund a third party s litigation in a different case would clearly violate that duty. Yet, that would be the effect of granting the proposed motion the Gibson estate s assets would be dissipated in administrative expense claims for legal fees and costs to fund investigations and litigation against Fifth Third. Such a conflict is not waivable. 7. Moreover, there is no need for the requested relief. Nowhere does the Gibson Trustee assert that Rubin & Levin is the only firm willing to take the representation on a reduced fee/contingency basis. To the extent that the target is Fifth Third, the Hoover Hull firm is already looking into potential causes of action and the discovery produced will already be available to all via the web site established in accordance with the discovery protocol. To the extent that the target is other than Fifth Third, there is no reason that any number of other unaffiliated firms could not undertake the representation. 5 This condition of Rubin & Levin s proposed engagement is hidden under the Miscellaneous heading contained at 12 of the Engagement Letter, attached to the Application as Exhibit B.

5 Case BHL-7A Doc 443 Filed 12/20/11 EOD 12/20/11 19:33:32 Pg 5 of 8 The Trustee has already retained general counsel. 8. The Application seeks appointment and retention of Rubin & Levin under 11 U.S.C. 327(a), permitting a trustee to retain counsel to assist in carrying out the trustee s duties under the Bankruptcy Code. In the instant case, the Gibson Trustee has previously retained Dale & Eke P.C. ( Dale & Eke ) as general counsel. 9. The Application is silent as to why Dale & Eke, the Gibson Trustee s current counsel, is unable to continue to assist the Gibson Trustee and therefore why additional counsel appointment is necessary. Further, the role that such additional counsel is expected to play is unclear from the Application. While purportedly seeking to engage Rubin & Levin as special counsel for purposes including but not limited to investigation and pursuit of chapter 5 causes of action, the engagement leaves open the potential for a much more significant (and duplicative) role of Rubin & Levin as a second general counsel. Accordingly, Fifth Third objects to the retention of Rubin & Levin, stating that such engagement adds unnecessary costs and expenses to the estate and has significant potential to duplicate work between two professional legal firms engaged under 327(a). The Fee Agreement is inadequately disclosed and is excessive. 7. The Application and Proposed Order repeatedly state that Rubin & Levin will be entitled to compensation on an hourly and a contingency fee basis. See, Application at 6 & 7 and Order at second ordinal paragraph (emphasis added). See, also, Rubin & Levin will also receive a Contingency Fee at 13, and the proposed hourly and percentage contingency fee is comparable at 14 (emphasis added in each instance). At other points in the Application,

6 Case BHL-7A Doc 443 Filed 12/20/11 EOD 12/20/11 19:33:32 Pg 6 of 8 it is suggested that the hourly fees may be deducted from the contingency fee 6. This lack of clarity leaves open the potential for the Gibson Trustee to be inadvertently obligated to pay hourly rates plus some additional compensation possibly as much as an additional 35% contingency upon certain estate recoveries. It should further be noted that the Application fails to disclose that Rubin & Levin are also entitled to reimbursements for travel, photocopying, calls, consulting fees and other expenses 7 in addition to the hourly and/or contingent fee arrangement. Such fee arrangement is both unclear and excessive, particularly in light of the concerns previously raised by Fifth Third regarding the potential for abuse of this particular retention, and the possible use of the Gibson estate to fund an otherwise unrelated vendetta against Fifth Third. For the reasons set forth herein, Fifth Third respectfully requests that the relief requested in the Application be DENIED. Respectfully submitted, /s/ Randall D. LaTour Randall D. LaTour (admitted pro hac vice) VORYS, SATER, SEYMOUR AND PEASE LLP 52 East Gay Street Columbus, OH Telephone: (614) Facsimile: (614) RDLatour@vorys.com Counsel for Fifth Third Bank 6 It is further unclear whether all hourly fees will be credited 100% or dollar-for-dollar against any contingency due and owing, whether only hourly fees attributable to certain tasks or actions may be credited, whether only a portion of hourly fees may be credited, or what is to occur if hourly rates paid exceed any contingency fee earned. 7 See, Engagement Letter, 4-5.

7 Case BHL-7A Doc 443 Filed 12/20/11 EOD 12/20/11 19:33:32 Pg 7 of 8 CERTIFICATE OF SERVICE I hereby certify that on this 20 th day of December, 2011, a copy of the foregoing Objection of Fifth Third Bank to Application of Chapter 7 Trustee for an Order Authorizing the Employment and Retention of Rubin & Levin, P.C. as Special Litigation Co-Counsel was served electronically through the Court s CM/ECF System to the following parties who are listed on the Court s Electronic Mail Notice List: T. Kent Barber kbarber@dlgfirm.com, dlgecf@dlgfirm.com;dlgecfs@gmail.com Lisa Koch Bryant courtmail@fbhlaw.net W. Brian Burnette bburnette@afpfirm.com John R. Carr jrciii@acs-law.com, sfinnerty@acs-law.com Deborah Caruso dcaruso@daleeke.com, mthomas@daleeke.com Bret S. Clement bclement@acs-law.com, sfinnerty@acs-law.com Dustin R. DeNeal dustin.deneal@bakerd.com, patricia.moffit@bakerd.com;sarah.herendeen@bakerd.com Laura Day DelCotto ldelcotto@dlgfirm.com, dlgecf@dlgfirm.com;dlgecfs@gmail.com Daniel J. Donnellon ddonnellon@ficlaw.com, knorwick@ficlaw.com Trevor L. Earl tearl@rwsvlaw.com Sarah Stites Fanzini sfanzini@hopperblackwell.com, mroth@hopperblackwell.com Sandra D. Freeburger sfreeburger@dsf-atty.com, smattingly@dsf-atty.com Terry E. Hall terry.hall@bakerd.com, sharon.korn@bakerd.com;sarah.herendeen@bakerd.com John C. Hoard johnh@rubin-levin.net, marie@rubin-levin.net;vickie@rubinlevin.net;atty_jch@trustesolutions.com John Huffaker john.huffaker@sprouselaw.com, lynn.acton@sprouselaw.com;rhonda.rogers@sprouselaw.com Edward M King tking@fbtlaw.com, dgioffre@fbtlaw.com James A. Knauer jak@kgrlaw.com, hns@kgrlaw.com Erick P Knoblock eknoblock@daleeke.com Randall D. LaTour RDLatour@vorys.com, khedwards@vorys.com;bjtobin@vorys.com Elizabeth Marie Lally elally@rubin-levin.net, marie@rubin-levin.net;mcruser@rubinlevin.net David L. LeBas dlebas@namanhowell.com, koswald@namanhowell.com Kim Martin Lewis kim.lewis@dinslaw.com, lisa.geeding@dinslaw.com;patrick.burns@dinslaw.com Karen L. Lobring lobring@msn.com John Hunt Lovell john@lovell-law.net, sabrina@lovell-law.net;shannon@lovelllaw.net;paula@lovell-law.net John Frederick Massouh john.massouh@sprouselaw.com Michael W. McClain mike@kentuckytrial.com, laura@kentuckytrial.com Allen Morris amorris@stites.com, dgoodman@stites.com Michael Wayne Oyler moyler@rwsvlaw.com

8 Case BHL-7A Doc 443 Filed 12/20/11 EOD 12/20/11 19:33:32 Pg 8 of 8 Kathryn L Pry kpry.trustee@att.net, IN36@ecfcbis.com Jeffrey E. Ramsey jramsey@hopperblackwell.com, mhaught@hopperblackwell.com Susan K. Roberts skr@stuartlaw.com, lbt@stuartlaw.com Mark A. Robinson mrobinson@vhrlaw.com, dalbers@vhrlaw.com Mark J. Sandlin msandlin@goldbergsimpson.com, ekearfott@goldbergsimpson.com, Richard A. Schwartz Rick@ks-laws.com, april@ks-laws.com;kim@kslaws.com;suki@ks-laws.com;ecfmailschwartz@gmail.com Fred R Simon fredsimon09@gmail.com, pam3339@gmail.com Meredith R. Thomas mthomas@daleeke.com U.S. Trustee ustpregion10.in.ecf@usdoj.gov Stephen A. Weigand sweigand@ficlaw.com Charles R. Wharton Charles.R.Wharton@usdoj.gov, Charles.R.Wharton@usdoj.gov James T Young james@rubin-levin.net, ATTY_JTY@trustesolutions.com;lemerson@rubin-levin.net;carmen@rubin-levin.net I further certify that on December 21 st, 2011 a copy of the foregoing Objection of Fifth Third Bank to Application of Chapter 7 Trustee for an Order Authorizing the Employment and Retention of Rubin & Levin, P.C. as Special Litigation Co-Counsel was served by first class U.S. Mail, postage prepaid and properly addressed upon the following: Fouts & Co., LLC 400 Marott Center 342 Massachusetts Avenue Indianapolis, IN Patsy M Gibson 7536 Tandy Road Lanesville, IN Thomas P Gibson 7536 Tandy Road Lanesville, IN /s/ Randall D. LaTour Randall D. LaTour