In February 2022, Bering Straits filed a proof of claim asserting a general unsecured claim against the debtor in the amount of $1,516,745.69.2 The TSI members filed an objection to the proof of claim in June 2024, alleging that the proof of claim was the result of a “duplicate billing of transportation costs.” They allege that allowance of the proof of claim would result in double recovery and would violate the False Claims Act.

Bering Straits responded by filing a motion to stay the TSI members’ objection, alleging both that the TSI members lack standing to prosecute the claim objection and that the objection is premature at this stage of the Chapter 7 case.4 Shortly thereafter, the TSI members sought to take discovery on their claim objection, serving subpoenas on certain Bering Straits employees. On September 5, 2024, Bering Straits moved to quash the subpoenas served by the TSI members.

The Court’s preliminary observation is that the TSI members’ objection to Bering Straits’ proof of claim, and all discovery related thereto, should be stayed pending resolution of the fraudulent conveyance claim asserted by the trustee against the TSI members. The allowance or disallowance of the Bering Straits claim may or may not make a practical difference to the TSI members. If the TSI members prevail on the trustee’s fraudulent conveyance action or if their liability (plus the value of the other assets in the estate) is less than the debtors’ total indebtedness without considering the Bering Straits claim, then the allowance or disallowance of the Bering Straits claim will make no economic difference to the TSI members. The TSI members will have a practical stake in the allowance or disallowance of the Bering Straits claim only if their liability to the estate (plus the value of the other assets in the estate) is greater than the estate’s indebtedness without the Bering Straits claim. The Court is thus inclined, subject to hearing the parties’ arguments, to quash the subpoena requests without prejudice to the TSI members’ right to re-serve them if it turns out that the allowance or disallowance of the Bering Straits claim will make an economic difference to the TSI members.

Appellants TooBaRoo, LLC and InfoDeli, LLC appeal the bankruptcy court’s order granting the Chapter 7 Trustee’s amended application to employ Spencer Fane LLP as special counsel. We ordered the parties to brief the preliminary issue of this court’s jurisdiction to hear the appeal.1 Specifically, we ordered the parties to brief whether the bankruptcy order is final under 28 U.S.C. § 158(a)(1), and alternatively, whether this court may review the order under 28 U.S.C. § 158(a)(3). For the reasons stated below, we dismiss the appeal for lack of jurisdiction.

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Because the bankruptcy court’s order is not final under 28 U.S.C. § 158(a)(1), and review under 28 U.S.C. § 158(a)(3) is not appropriate, we lack jurisdiction over the appeal.

There is also no dispute that if the amounts payable to Kroll and to Miller Friel had been included in the original escrow amounts, then the amounts of cash paid to the secured lenders would have been reduced – just as Rabobank and the secured creditors had previously agreed, and just as the Plan contemplated. Paying the claims out of monies that otherwise would be distributed to the secured lenders therefore will just put them in the same position that they would, and should, have been in if the mistake had not occurred. However, the Liquidating Trustee has raised the question of whether the Liquidating Trust Agreement permits him to pay the “shortfall” out of any amounts other than the escrow accounts. He has contended that Riveron’s fees should be reduced by the full amount of the shortfall in those accounts to make up for the “damage” to the secured lenders that has allegedly resulted from Riveron’s mistake.

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For the foregoing reasons, Riveron’s final application for the payment of fees and reimbursement of expenses shall be GRANTED, except that Riveron’s approved fees shall be reduced by $20,000. In addition, the Liquidating Trustee is authorized and directed to pay all allowed professional fee claims and all other allowed administrative expenses, regardless of whether the previously-established escrow accounts were sufficient to cover those sums, and if necessary such payments shall be made out of amounts that otherwise would have been payable to the holders of Class A trust interests.

The dispute among the parties to this contested matter has been bubbling for years and now appears to be at a full boil.1 National Brokers of America, Inc. (“NBOA” or the “Debtor”), a health insurance brokerage firm, was owned jointly by founder Alan Christopher Redmond (“Redmond”) and Jason Scott Jordan (“Jordan”). To say that the partnership between Redmond and Jordan did not go well would be an understatement. After Redmond forced Jordan out of NBOA, the pair sued and counter-sued each other in a state court battle royale that concluded with a judgment in Jordan’s favor in the amount of $13 million. About one (1) year later, Jordan sued Redmond and others in state court, seeking, inter alia, to pierce the corporate veil of Redmond’s new company, Bene Market, LLC (“Bene”).

The Debtor, protected by the automatic stay, is not an active party to either of these lawsuits. Notwithstanding this critical fact, NBOA filed a Motion for Enforcement of the Automatic Stay (doc. #179, the “Motion”) in this Court, alleging that the automatic stay was violated in the two (2) state court actions. The Motion asks for various forms of relief, including the voiding of the state court judgment, the extension of the automatic stay to third parties, and the imposition of sanctions against Jordan and his lawyers.

As discussed below, because the Debtor, whose estate is being administered by the chapter 7 trustee, is not itself threatened by the pursuance or enforcement of litigation, it lacks standing to seek certain relief sought in the Motion. In the alternative, the facts and law do not support a finding that the stay has been violated with regard to the Debtor or that the stay should be extended to non-debtor parties.

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The Code makes clear that a bankruptcy debtor has every right to scream foul when a stay violation has occurred. The automatic stay prevents creditors from collecting or attempting to collect from the bankrupt. The provision is meant to ensure an orderly process; no creditor gets to sneak ahead. Thus, on its face, the Motion—seeking to stall an allegedly crafty plot to grab NBOA’s assets—makes sense.

However, a closer look reveals the Motion is not meant to protect the rights or assets of the Debtor, whose estate is in the hands of the Trustee and being administered for the benefit of creditors. The Debtor is essentially no longer a player in its own bankruptcy case. One must wonder - particularly given the extent and character of this long feud - what motivated NBOA to move here and now for the relief sought. Perhaps Redmond’s involuntary chapter 11 will shed light on the matter. In the meantime, and for the reasons discussed, the Motion will be denied.

VBF argues that Cassels cannot assert the attorney-client privilege here because the privilege belongs to the client—and no client has asserted it. . . . VBF argues that because no client has asserted the privilege—only VBF Canada’s lawyers (Cassels) have—the privilege has not been properly asserted.

VBF’s argument incorrectly assumes that the attorney may not assert the privilege on the client’s behalf. “[I]t is universally accepted that the attorney-client privilege may be raised by the attorney.”

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VBF next argues that Cassels, through both its affirmative conduct and its failure to act in this case, has waived the attorney-client privilege. Cassels responds by asserting that “Debtors’ recognition that the attorney-client privilege belongs to the client and not to Cassels” means Cassels could never waive the privilege, and thus “renders the remainder of Debtors’ Brief seeking to turn an alleged discovery violation into dispositive relief without support and no further response is necessary.” The Court rejects this simplistic argument for the same reasons noted above. Cassels can and did assert the privilege—and thus can also waive it.

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In its Ruling on Motion for Contempt (Doc. 117), the Court previously found that Cassels had impliedly waived the privilege by failing to comply with the Court’s February 21, 2020 discovery order—in particular by failing to provide a privilege log to accompany the assertion of the privilege. However, the Court revisted and revised this Ruling later in the case (Doc. 196). The second ruling reduced the sanction imposed and noted that the sanction was for failure to provide a privilege log. The sanction has now been paid and a privilege log has been provided.

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Questions may very well remain on whether the privilege log is sufficient based on the facts of the case. Those questions will be decided after the evidentiary hearing on whether there is a basis for the assertion of the attorney client privilege on all documents (thirty-one boxes) identified as being covered by the privilege. After that hearing, the Court will make a finding on the contours of the privilege, whether it covers all documents identified, and any other remaining arguments VBF has made about waiver of the privilege by Cassels’ conduct in this case.