In re: Two Gales, Inc., No. 10-8079 (6th Cir. 2011)
Annotate this CaseAfter a chapter 11 case was converted to a chapter 7 case, the bankruptcy court entered orders granting fees for the chapter 7 trustee's counsel, denying fees requested by chapter 11 counsel, and requiring chapter 11 counsel to disgorge its pre-petition retainer so that administrative expenses from the chapter 7 case could be paid. The Sixth Circuit vacated the denial of fees and disgorgement order and remanded for determination of whether a pre-petition retention letter between the firm and the debtor established a valid lien under Ohio law, securing payment of fees for necessary and reasonable services provided while the firm served as counsel to the debtor as debtor in possession. The bankruptcy court erred in basing its denial on 11 U.S.C. 726, which is a priority scheme for distribution on allowed claims; 11 U.S.C. 330 governs analysis of whether to allow compensation.
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