In Re:Richardson Ind , 266 F. App'x 181 ( 2008 )

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
2-25-2008
In Re:Richardson Ind
Precedential or Non-Precedential: Non-Precedential
Docket No. 07-2502
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NO. 07-2502
________________
IN RE: RICHARDSON INDUSTRIAL CONTRACTORS, INC.,
Debtor
HARRY A. RICHARDSON,
Appellant
ANDREA DOBIN,
Trustee
____________________________________
On Appeal From the United States District Court
For the District of New Jersey
(D.C. Civil Action No. 05-cv-00501)
District Judge: Honorable Garrett E. Brown, Jr.
_______________________________________
Submitted Under Third Circuit LAR 34.1(a)
FEBRUARY 12, 2008
Before: SLOVITER, BARRY AND GREENBERG, CIRCUIT JUDGES.
(Opinion Filed: February 25, 2008 )
____________
OPINION
____________
PER CURIAM
Harry A. Richardson appeals pro se from the District Court’s orders affirming the
Bankruptcy Court’s denial of his motion to appoint independent special counsel and
declining to reconsider that ruling. We will dismiss this appeal as moot.
I.
Richardson was an unsecured creditor in the Chapter 7 bankruptcy of Richardson
Industrial Contractors, Inc. (“RICI”), which declared bankruptcy in 2003. One of its
assets was a breach of contract claim that had been pending in the Eastern District of New
York since 1991 (the “EDNY action”). In December 2003, just days before that action
was to be dismissed for RICI’s failure to obtain counsel, the Bankruptcy Court appointed
Patrick Tobia under 11 U.S.C. § 367 to serve as special litigation counsel to the trustee
for the sole purpose of prosecuting that action. Tobia also represented certain secured
creditors in the RICI bankruptcy. At a hearing on December 10, 2003, the trustee argued
that this joint representation gave rise to no actual or potential conflict of interest because
all creditors had an identity of interest in maximizing recovery in the EDNY action. The
Bankruptcy Court agreed, and approved Tobia’s retention. Richardson did not appeal.
In March 2004, Tobia reached an agreement in principle to settle the EDNY action
for $75,000.1 In September 2004, the trustee filed a motion with the Bankruptcy Court to
1
In his briefs, Richardson repeatedly emphasizes the disparity between this $75,000
settlement and RICI’s alleged $1,421,000 injury. Before the settlement, however, RICI
already had been awarded and paid $800,000, so it appears that only approximately
$600,000 remained in dispute. As explained below, the reasonableness of this settlement
is not before the Court.
approve the settlement under Bankruptcy Rule 9019(a). Richardson objected, and filed a
cross-motion to disqualify Tobia and replace him with “independent” special counsel.
Richardson argued that the settlement amount was unreasonably low and that Tobia was
operating under a conflict of interest because entering into the settlement was in the
interests of Tobia’s secured-creditor clients but not in the interests of the creditors as a
whole. On November 1, 2004, the Bankruptcy Court heard argument, announced its
intention to approve the settlement, and deemed Richardson’s motion moot. The court
entered a summary order that same day denying Richardson’s motion. Richardson
appealed that order to the District Court, which dismissed the appeal because
Richardson’s brief was untimely. This Court reversed, see In re Richardson Indus.
Contractors, Inc., 189 Fed. Appx. 93 (3d Cir. 2006), and the District Court subsequently
entered the orders at issue here affirming the Bankruptcy Court (April 2, 2007) and
declining to reconsider that ruling (May 4, 2007).
In the interim, on January 5, 2005, the Bankruptcy Court entered an order finally
approving the settlement in the EDNY action, and that action was later settled.
Richardson sought to appeal the settlement approval, but the District Court dismissed his
appeal as untimely and this Court ultimately affirmed. See In re Richardson Indus.
Contractors, Inc., 190 Fed. Appx. 128 (3d Cir. 2006). The Bankruptcy Court authorized
Tobia to distribute the settlement proceeds in November 2005, then entered the final
bankruptcy decree in June 2006. Richardson did not seek or obtain a stay of the
Bankruptcy Court’s approval of the settlement or the distribution of its proceeds.
Richardson also did not appeal the Bankruptcy Court’s authorization of that distribution,
and has not appealed from the final decree.
II.
Richardson’s appeal suffers from a threshold deficiency, which becomes apparent
when we clarify the issue actually before this Court. Richardson devotes the majority of
his briefs to attacking the reasonableness of the EDNY settlement. The Bankruptcy
Court’s approval of that settlement, however, is not before us, and Richardson lost the
right to challenge it by failing to file a timely appeal. Instead, the only issue before us is
whether the Bankruptcy Court properly denied Richardson’s motion to disqualify Tobia
and appoint different special counsel to prosecute (rather than settle for $75,000) the
EDNY action. Any relief on this issue, however, would effectively invalidate the
approval of the settlement, which Richardson has forfeited the right to challenge.
Moreover, the settlement has been accomplished, its proceeds have been distributed, and
the RICI bankruptcy has been closed, none of which Richardson sought to appeal or stay.
Under these circumstances, this appeal is now moot. See In re Highway Truck Drivers &
Helpers Local Union # 107, 888 F.2d 293, 297 (3d Cir. 1989); In re Cantwell, 639 F.2d
1050, 1053-54 (3d Cir. 1981). Accordingly, this appeal will be dismissed.2
2
Although we do not reach the merits of this appeal, we note that Richardson’s
position appears to lack merit. The Bankruptcy Court was authorized to disqualify Tobia
only if his concurrent representation of RICI and certain secured creditors gave rise to an
actual or potential conflict of interest. See 11 U.S.C. § 327(c); In re Marvel Entm’t
Group, Inc., 140 F.3d 463, 476-77 (3d Cir. 1998). We would review the Bankruptcy
Court’s decision for abuse of discretion. See In re Pillowtex, 304 F.3d at 250; In re
Marvel, 140 F.3d at 470. Our review of the record reveals nothing suggesting that the
Bankruptcy Court abused its discretion here. Richardson argues that Tobia’s settlement
of the EDNY action reveals a conflict because it had the effect of securing a recovery for
his secured-creditor clients sooner than they otherwise would have gotten it and left
Richardson, an unsecured creditor, with no recovery at all. But Richardson has never
presented any evidence that Tobia’s recommendation of the settlement was motivated by
anything other than his assessment of its merits. Indeed, as one of Tobia’s secured-
creditor clients notes, the secured creditors’ claims were far from satisfied in this
bankruptcy, and they too, just like Richardson, would have preferred a greater recovery.
The mere fact that the settlement netted insufficient proceeds to provide for any recovery
by the unsecured creditors would not establish a conflict of interest, because the
settlement appears to have netted insufficient proceeds to satisfy the claims of Tobia’s
secured-creditor clients as well.