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never mentioned to the Court of Appeals that the Settlement existed or that it potentially mooted the Claim Appeal. Only when the Channel Parties filed a motion in the bankruptcy court requesting that monies be disbursed to pay their claim did the Debtor allege that the claim had been released under the Settlement. The bankruptcy court denied the Debtor's objection and the BAP affirmed.
Issues: "Whether a party's failure to timely inform the court of appeals of a settlement that it believes disposes of a pending appeal precludes the party from asserting the affirmative defense of settlement and release in a later proceeding."
Rules: "The obligation to inform the court of a potential settlement is of such critical importance to the maintenance of orderly proceedings and to the prevention of needless delay that a lawyer who fails to fulfill that obligation may be subject to sanctions." The Debtor's failure to raise the release issue in the prior appeal is a waiver of the right to raise it as an affirmative defense in later proceedings.
Holding: Affirmed.
Reasoning: "Permitting a case to proceed to a decision on the merits before asserting of the previously available defense 'undermines the integrity of the judicial system,' 'wastes judicial resources,' and 'imposes substantial costs upon the litigants.'" The court rejected the Debtor's arguments that it could not raise the Settlement at oral argument of the Claim Appeal because an appellate court does not consider matters that are before it for the first time; the court provides that, essentially, it was not the Debtor's decision to make at that point in time but the court's, and, in any event, the Debtor's legal conclusions on this point was incorrect.
Facts: The Debtor owns and operates a Holiday Inn Hotel in Tennessee (the "Hotel"). The Debtor declared bankruptcy when a dispute arose over the property improvement plan (the "PIP") that was included in the Debtor's pre-petition franchise documents with Holiday Hospitality Franchising, Inc. ("Holiday Inn"). To finance the franchise, the Debtor had entered into certain loans with CW Capital Asset Management, LLC (the "Trust"). At the inception of the case, the Trust was oversecured. The case was very contentious and the Trust ultimately hired two lawyers - Venable LLP and Williams & Prochaska. The Trust sought recovery of the legal fees and expenses it incurred from both lawyers in this case under § 506(b).
Issues: Whether the Trust was entitled to recover all of its fees and expenses under § 506(b).
Rules: 11 U.S.C. § 506(b) allows a creditor with an oversecured claim to recover "any reasonable fees, costs, or charges provided for under the agreement or State statute under which such claim arose." However, § 506(b) is not a blank check for oversecured creditors to act without limits; the fees must be reasonable. "'Reasonable' fees are those that are 'necessary to the collection and protection of a creditor's claim,' and may include 'participation in the bankruptcy proceeding until the collateral is sold, a plan is confirmed or the case is converted or dismissed.'" Certain factors are employed to determine the reasonableness of fees. The burden of proof on all fee matters is on the applicant.
Holding: The bankruptcy court's allowance and disallowance of certain fees that were requested by the Trust as being unreasonable under § 506(b) is affirmed.
Reasoning: In considering the factors for determining reasonableness, the bankruptcy court is not required to address each line item of a fee application but is required to make findings with enough detail and exactness as the case allows and should be explicit enough so that an appellate court can
