In Re Riverside-Linden Investment Co., Debtor. Estes & Hoyt, a Professional Corporation Ralph O. Boldt, Trustee v. Kathryn Crake Earl Hafer

Appellant law firm Estes & Hoyt appeals the bankruptcy court’s ruling, affirmed by the Bankruptcy Appellate Panel of the Ninth Circuit, that it is not entitled to certain attorney’s fees it charged pursuant to its role as counsel for the trustee of a Chapter 7 debtor’s estate. Appellee Kathryn Crake, fifty percent general partner in the debtor, objects to these fees, as does appellee Earl Hafer, an unsecured creditor of the debtor.

I.

The bankruptcy court disallowed certain fees charged by appellant law firm Estes & Hoyt (“E & H”) in connection with its representation of a Chapter 7 trustee. The court based its ruling that the trustee had exceeded his duties on a number of facts. First, the trustee extensively investigated the unopposed claim of creditor Earl Hafer (“Hafer”), despite the fact that the estate was solvent. Second, the trustee refused to distribute assets of the solvent estate to the partners who comprised the debtor partnership in response to Kathryn Crake’s (“Crake”) motion for distribution of the estate. Instead, immediately after Crake made her motion, the trustee commenced an investigation of Crake’s partnership interest and filed a motion to subordinate or…