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bankruptcy court granted the Plan Administrator's motion to disburse the money in the Fund to pay his attorneys' fees.
Issues: Whether the appeal is equitably moot and "[w]hether the Wooleys' secured claims exceed the $2,867,600 they have already received and, if so, whether disbursal of the $500,000 reserve was in error."
Rules: "'An order compelling disgorgement of attorneys' fees and expenses would not require the bankruptcy court to unravel a complicated bankruptcy plan' but instead 'would require only that one party disgorge the money it has received, money that would then be distributed pursuant to the bankruptcy court's final decree.'" Dismissal for equitable mootness is inappropriate when an appeal of the chapter 11 plan was based solely on professional compensation.
Holding: The Wooleys are entitled to more than what they have already received and the district court erred in affirming the bankruptcy court's order allowing the disbursal of the Fund moneys because the Wooleys had no secured claims in excess of what they had already received.
Reasoning: The court first found that it had jurisdiction to hear the appeal and overruled the Plan Administrator's arguments that (1) the Wooleys' appeal was untimely; (2) the Wooleys' failed to exhaust their remedies in the bankruptcy court; (3) that this action collaterally attacked the adversary proceeding; and (4) that the action was equitably moot. In finding that the appeal was not equitably moot, the court said that there were no third party creditors that would be affected by the return of the $500,000 since it was paid to the Plan Administrator's attorney. Then the court held that, based on the record before it, because the Wooleys were oversecured, they were entitled to more than what they had already received and that a genuine issue remained unresolved over the amount of the Wooleys' secured claim. Thus, the attorney was to disgorge the fees he received in an amount no greater than $500,000 pending the bankruptcy court's determination of the amount of the Wooleys' claim.
Facts: The FCC awards spectrum licenses for specific time periods. Licenses are auctioned off and entities may pay for the licenses in installments. But, if a successful bidder is in default, its license is automatically canceled. In 1996, Airadigm Communications, Inc. (the "Debtor") was the highest bidder on 15 licenses (the "Licenses"), and it entered into an agreement with the FCC to pay for the Licenses in quarterly installments, plus interest, over a ten-year period. The FCC had a perfected security interest in the Licenses until such time as they were paid off by the Debtor. In 1999, the Debtor defaulted on its payments to the FCC and declared Chapter 11 (the "1999 Bankruptcy"). The FCC allowed the Debtor to continue to use the Licenses but cancelled them and filed a proof of claim (the "FCC POC") for $64.5 million. The FCC POC was filed as an unsecured claim since the Licenses had been cancelled by operation of law; however, the FCC noted that if they had not been cancelled, it would be a secured creditor. In 2000, the FCC objected to the Debtor's plan of reorganization (the "Plan") due to the fact that the Plan treated the FCC as an unsecured creditor. However, the Plan was confirmed and the FCC did not appeal. In 2003, the Supreme Court decided FCC v. Next-Wave Personal Commn's, Inc., 537 U.S. 293 (2003) in which it held that the FCC could not cancel licenses just because a debtor had filed for bankruptcy. Thereafter, the FCC reinstated the Debtor's licenses and thus became a secured creditor. In 2006, the Debtor filed a second chapter 11 bankruptcy (the "2006 Bankruptcy"). The Debtor and the FCC agreed (the "Stipulation") that the original FCC POC would be allowed in the 2006 Bankruptcy, without affecting the parties' rights and the FCC ultimately sought that it be paid interest on the FCC POC. The bankruptcy court denied the FCC pre-1999 interest and denied the FCC interest in the period between the 1999 Bankruptcy and confirmation of the Plan. However, the bankruptcy court allowed interest for the period
