Appeals court says attorneys are due fees in bankruptcy

Wednesday, Sept. 25, 2002 | 10:48 a.m.

CARSON CITY -- A federal appeals court has ruled that two Las Vegas law firms are entitled to more than $1 million in fees in the handling of the bankruptcy case of a man who claimed their representation did nothing to benefit him.

The U.S. 9th Circuit Court of Appeals Tuesday, in upholding the fee awards, said Darrel Smith raised some legitimate issues, but it criticized Smith, saying the dispute over the fees "was occasioned by a stubborn refusal of the debtor (Smith) to recognize valid claims by attorneys."

The court said Smith's "continuing battles with his lawyers have been extraordinarily wasteful of the resources available in bankruptcy."

The court said John Peter Lee Ltd. was entitled to $1 million for its work and Edward & Hale Ltd. should receive $222,364.

Edward & Hale was hired by Smith for a suit against a group of defendants arising out of his community property claims against the property of his former wife Mitzi Stauffer Briggs Smith, a one-time owner of the Tropicana hotel.

Smith estimated he would get $9 million from the property, but he received only $80,000. His voluntary Chapter 11 bankruptcy was converted to Chapter 7. He was forced to sell a Maxfield Parrish painting, "Daybreak," for $3.9 million to help pay off the debts.

Smith did not dispute the amount of the claims but argued the bankruptcy law does not permit the award of fees in bankruptcy to debtor's attorneys. And he disputed the two firms did anything to help in the case.

The court, in an opinion written by Judge Richard Cudahy, found there was no duplication of services by the two law firms and their work benefited the case.

The court also rejected Smith's claim that Bankruptcy Judge Robert C. Jones should have stepped aside because the judge had formed an opinion early in the case and did not change it as more evidence was presented.

The court said, "There is no evidence that Judge Jones had such deep-seated antagonism or favoritism as to render a fair judgment impossible."

Cudahy wrote, "Even if Judge Jones clung to his opinion, a little stubbornness is not ordinarily grounds for disqualification."