Chief Bankruptcy Judge Maureen A. Tighe of Woodland Hills, Calif., rejected the U.S. Trustee’s contention that Roman Catholic Archdiocese of San Juan, Puerto Rico v. Acevedo Feliciano, 140 S. Ct. 696 (2020), bars a professional from being compensated for services performed before the professional’s retention was approved by court order.
Judge Tighe held that Acevedo “does not change the existing authority of the court to approve employment that has commenced before the motion was brought.”
In Acevedo, the Supreme Court virtually banned the entry of orders nunc pro tunc, but Judge Tighe quoted the Ninth Circuit Bankruptcy Appellate Panel as interpreting Acevedo to mean “that jurisdiction in the federal courts must emanate from the United States Constitution or a statute and cannot be created by the actions of a court.” In re Merriman, 616 B.R. 381, 392 (B.A.P. 9th Cir. 2020). To read ABI’s reports on Acevedo and Merriman, click here and here.
Routine Retention Application Approved
In a chapter 7 case, the trustee filed what Judge Tighe called a “routine application” to retain accountants “for the usual necessary estate services.” The U.S. Trustee had no question about the accountants’ disinterestedness nor the necessity for the services.
Rather, the U.S. Trustee argued that the accountant could not be paid for services rendered before entry of the retention order.
“Unlike many sections of the Bankruptcy Code,” Judge Tighe said, “neither [Section 327 nor 330] has a temporal requirement for when the application should be filed.” In addition, she said, Bankruptcy Rule 2014(a) “also has no deadline for filing the employment application.”
Judge Tighe cited several cases after Acevedo allowing retroactive application of bankruptcy court orders, including In re Miller, 620 B.R. 637 (Bankr. E.D. Cal. 2020); In re Roberts, 618 B.R. 213, 217 (Bankr. S.D. Ohio 2020); and In re Benitez, 2020 WL 1272258, *2 (Bankr. E.D.N.Y. March 13, 2020). To read ABI’s reports on those cases, click here, here and here.
There is no statutory prohibition on retroactive retention orders, Judge Tighe said, because Section 327(a) requires the “court’s approval,” not the “court’s prior approval.” Furthermore, she said, there are circumstances where “professional assistance is needed before the noticed hearing [on a retention application] can be held.”
Judge Tighe explained that the ability to make retention retroactive “is not license to wait indefinitely for court approval.” When there has been a delay, the judge said that “caselaw adequately addresses this situation.” She set out the “body of law [to determine] when a delay is too long to warrant the payment of fees or denial of employment.”
“Imposing any nunc pro tunc requirements here where the application was brought timely is too broad and not necessary under Acevedo,” Judge Tighe held.
Judge Tighe approved the retention as “a common and appropriate exercise of the trustee’s duties, performed without delay.” She said it “is important not to start treating timely employment applications as something extraordinary and unnecessarily erect additional costs and risks on the estate.”
Observations
Contrary to common understanding, the Latin phrase nunc pro tunc does not mean “retroactive,” although it has often been used (incorrectly) to mean “retroactive.”
Acevedo told us what nunc pro tunc actually means and when it may be used properly: The term is correctly used when a court took an action but failed to enter an order at that time. Beyond definitional clarification, Acevedo stood for the unremarkable proposition that a court may not enter an order effective as of a date when the court had no jurisdiction.
Under principles enunciated in Acevedo, there should be few circumstances when a bankruptcy court cannot make an order retroactive, because a bankruptcy court assumes in rem jurisdiction over the debtor and estate property on the filing of the petition.
That explains why a bankruptcy court can, for example, annul the automatic stay. The court possessed jurisdiction immediately on filing.
Acevedo could come into play if the court’s order depended entirely on personal jurisdiction over a nondebtor who was not yet subject to personal jurisdiction. Even so, the presence of estate property might bestow subject matter jurisdiction sufficient to have an effective order in the absence of personal jurisdiction over the nondebtor. In those circumstances, however, constitutional principles such as due process could come into play.
Chief Bankruptcy Judge Maureen A. Tighe of Woodland Hills, Calif., rejected the U.S. Trustee’s contention that Roman Catholic Archdiocese of San Juan, Puerto Rico v. Acevedo Feliciano, 140 S. Ct. 696 (2020), bars a professional from being compensated for services performed before the professional’s retention was approved by court order.
Judge Tighe held that Acevedo “does not change the existing authority of the court to approve employment that has commenced before the motion was brought.”
In Acevedo, the Supreme Court virtually banned the entry of orders nunc pro tunc, but Judge Tighe quoted the Ninth Circuit Bankruptcy Appellate Panel as interpreting Acevedo to mean “that jurisdiction in the federal courts must emanate from the United States Constitution or a statute and cannot be created by the actions of a court.”