An order allowing fees is not a money judgment and cannot support the issuance of a writ of execution, according to Bankruptcy Judge S. Martin Teel, Jr. of Washington D.C.
Judge Teel granted final compensation to counsel for a chapter 11 debtor. Although that order and another directed the debtor to make payment, the awards went unpaid. Later, the chapter 11 case was dismissed without confirmation of a plan.
The debtor’s counsel prevailed on the clerk to issue a writ of execution based on the orders awarding fees.
Judge Teel quashed the writ in his July 26 opinion and order, saying that the allowance of a claim against the estate “does not constitute entry of a money judgment.” Even the direction to pay, he said, “did not convert the orders into money judgments.” Counsel should have “taken steps to address any failure by the debtor to comply with directives to pay fees” during the pendency of the chapter 11 case.
The orders allowing fees directed the debtor to make payment from estate property. Once the case was dismissed and the estate property revested in the debtor under Section 349(b)(3), Judge Teel said there was “no longer a bankruptcy estate from which the court could cause disbursement of the owed fees.”
As further evidence that the fee awards were not money judgments, Judge Teel said that the requests for payment were made in contested matters, while an adversary proceeding would have been required under Bankruptcy Rule 7001(1) to recover money.
Case law under 28 U.S.C. § 1961 also indicates that a fee award is not a money judgment. Under that provision in the Judicial Code allowing interest on money judgments, the Fourth Circuit said that bankruptcy fee awards are not entitled to interest because they are not money judgments.
Although a fee award could be a final judgment, Judge Teel alluded to an Eleventh Circuit opinion explaining that an allowed claim in bankruptcy is not a money judgment because it “‘serves a different objective from that of a money judgment – it permits the claimant to participate in the distribution of the bankrupt estate.’”
The case raises several additional questions. Even though the bankruptcy court reopened the chapter 11 case, was there subject matter jurisdiction? Since there would have been no effect on the estate, perhaps there was no “related to” jurisdiction, but there might be “arising in” or “arising under” jurisdiction.
Could counsel have used the order allowing fees to invoke offensive collateral estoppel and obtain a money judgment in state court? Would the same parties be involved, since the fee award was made against the debtor in possession and counsel would have been suing the debtor in state court?