In re Schupbach Invs., L.L.C.

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APPEAL FROM THE UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE TENTH CIRCUIT. (BAP Nos. 13-077-KS and 13-078-KS).

Submitted on the briefs:^[*]

Mark J. Lazzo, Mark J. Lazzo, P.A., Wichita, Kansas, for Appellants.

J. Michael Morris, Klenda Austerman, LLC, Wichita, Kansas, for Appellees.

Before TYMKOVICH, Chief Judge, HOLMES and McHUGH, Circuit Judges.

OPINION

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TYMKOVICH, Chief Judge.

Mark J. Lazzo served as legal counsel for Schupbach Investments, L.L.C. (Debtor), in its Chapter 11 bankruptcy case. After confirming a liquidation plan for the Debtor, the bankruptcy court entered a final fee order approving certain disputed fee applications filed by Mr. Lazzo. Rose Hill Bank (RHB), a creditor of the estate, and Carl B. Davis, the trustee of the Schupbach Investments Liquidation Trust (Trust), appealed the final fee order to the Bankruptcy Appellate Panel (BAP). The BAP reversed those portions of the bankruptcy court's order that (1) confirmed post facto approval of Mr. Lazzo's employment, and allowed fees incurred prior to approval of his employment, and (2) allowed postconfirmation fees.^[1] The Debtor, Mr. Lazzo, and his law firm, Mark J. Lazzo, P.A. now appeal from the BAP's decision. We affirm.

BACKGROUND

The Debtor's business involved the purchase, renovation, rental, and sale of residential real estate in Wichita, Kansas. Its primary assets included rental properties that were mortgaged to creditors. Jonathan and Amy Schupbach (Schupbachs) owned and operated the Debtor. RHB was its largest creditor.

In March 2011, the Debtor retained Mark J. Lazzo, P.A., as bankruptcy counsel.^[2] The Debtor filed its Chapter 11 petition on May 16, 2011. At the time it filed the petition, it failed to submit an application to employ Mr. Lazzo as its attorney. Mr. Lazzo did submit a signed " Disclosure of Compensation of Attorney for Debtor" form at the time of filing, in which he disclosed his representation of the Debtor, the agreed hourly rate, and the retainer he had received. Aplt. App. at 128.^[3]

I. The Employment Applications

One month after Debtor filed its Chapter 11 petition, the United States Trustee

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notified Mr. Lazzo that an application for approval of his employment had not yet been filed. Mr. Lazzo later explained that he had prepared an employment application along with the petition, but he had neglected to file it because he had to prepare and file a " whole bunch of first day motions . . . regarding rents involving eight different creditors" and the application " got lost in that work." Aplee. Supp. App., Vol. I at 166-67. On June 17, 2011, shortly after he received the notice from the United States Trustee, Mr. Lazzo filed his initial employment application. This initial application, however, did not explicitly request post facto approval of his employment from the filing date of the petition.

Mr. Lazzo did not clarify that he sought approval of his employment post facto to the petition date until several months later, on September 1, 2011, when he filed a supplemental employment application. Various creditors objected to Mr. Lazzo's request for post facto employment. After a hearing, the bankruptcy court granted the application, reasoning that Mr. Lazzo had " substantially complied" with the requirement to seek approval because (1) he filed his disclosure form at the time of the Debtor's petition, (2) " [a]ll the facts and circumstances surrounding the filing of this case and everything that was going on are sufficient ...