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Modanlo v. Rose

United States District Court, D. Maryland, Southern Division

March 20, 2019

CHERYL E. ROSE, Appellee.



         Appellant Nader Modanlo is an Iranian-American former aerospace executive with a lengthy history as a participant in federal legal proceedings, both as a debtor and as a convicted white-collar criminal. See generally United States v. Madanlo, 762 F.3d 403 (4th Cir. 2014). This appeal marks the culmination of a 16-year-long Chapter 7 bankruptcy case involving one of his companies, Final Analysis, Inc. ("FAI"). See In re Final Analysis, Inc., Bankr. No. 01-20139 TJC.

         Modanlo brought this appeal in September 2017, seeking to challenge a bankruptcy court order approving attorney's fees for the law firm representing the trustee as special counsel. I dismissed the appeal in a July 2, 2018 memorandum opinion and order, holding that Modanlo had waived his right to contest the firm's application for compensation. See July 2018 Mem. Op., ECF No. 30. Modanlo now seeks to alter or amend the Court's judgment pursuant to Rule 59(e) of the Federal Rules of Civil Procedure. See ECF Nos. 34, 35.

         Modanlo has not identified a "clear error of law" in the prior judgment. See Robinson v. Wix Filtration Corp., 599 F.3d 403, 407 (4th Cir. 2010). His motion, accordingly, will be denied.


         The FAI bankruptcy case stretches back to September 2001, when the company's creditors filed an involuntary petition against it under Chapter 7 of the Bankruptcy Code. See In re Final Analysis, Inc., 389 B.R. 449, 451 (Bankr. D. Md. 2008). Soon after the case commenced, the Chapter 7 trustee, Cheryl Rose, asked the bankruptcy court for authorization to hire attorney James M. Hoffman as special counsel to oversee the "extensive legal servies" the case would require.[1]ECF No. 34-1. Rose sought to place Hoffman under a general retainer, explaining his responsibilities would include: (1) representing the trustee in suits relating to the bankruptcy case; (2) investigating and prosecuting potential fraudulent conveyance actions or other avoidance actions; (3) assisting in the preparation of pleadings, motions, and other filings required to administer the estate; and (4) advising the trustee in connection with the liquidation of estate property. See Id. ¶ 3. The court approved the request. See December 2001 Order, ECF No. 34-2.

         Section 330(a) of the Bankruptcy Code authorizes a bankruptcy court to award special counsel and other professionals "reasonable compensation for actual, necessary services" and "reimbursement for actual, necessary expenses." 11 U.S.C. § 330(a)(1). In the years that followed, Hoffman and his then firm, Shulman, Rogers, Gandal, Pordy and Ecker, P.A. ("Shulman Rogers"), applied for and received compensation for their services under this provision seven times. See ECF No.4, Exs. 1, 6, 14, 374 43, 49, 55. Hoffman would later file four more requests for compensation, but by then he was no longer affiliated with Shulman Rogers. One of those applications, approved in January 2010, sought compensation for his work while a principal at Goren, Wolff, Orenstein and Hoffman, LLC. See ECF NO.4, Exs. 68, 72. Three others were approved while he was affiliated with another law firm, Offit Kurman, P.A. See ECF No.4, Exs. 74, 78, 79, 83; ECF NO.3, Exs. 42, 50.

         This appeal concerns the last of Hoffman's applications. In that filing, dated July 13, 2017, Hoffman asked the bankruptcy court to authorize the trustee to pay $43, 713.50 in compensation to Offit Kurman, plus a $7, 366.40 fee enhancement. See Offit Kurman Final Appl., ECF No.3, Ex. 50. Modanlo objected to the request, arguing that the special counsel's time entries were lacking detail and that some of the special counsel's work was not compensable. See ECF NO.3, Ex. 47. Rose, the trustee, sought to strike Modanlo's response in opposition to the application, asserting Mondolo had filed it "for the improper purpose of harassing [Offit Kurman and] causing needless expense to the Trustee." Mot. to Strike 7, ECF No., , Ex. 48. The trustee's motion argued Modanlo had "waived his right to object to administrative expenses of the professionals"" in 2004, when he and Rose entered into a settlement agreement to resolve their various disputes in connection with the bankruptcy case.[2] Id. 8.

         The bankruptcy court agreed. See Final Order, ECF NO.3, Ex. 50. In an August 2017 order granting Hoffman's application, the court stated Modanlo had "no right to object" to the application, as he had "contractually bargained away his right to object to the compensation of professionals as a creditor in this case." Id.

         Modanlo appealed the bankruptcy court's order.[3] See ECF No. 1. On July 2, 2018, I granted Offit Kurman's motion to dismiss the appeal, concluding that Modanlo had indeed waived his right to challenge the special counsel's application. July 2018 Mem. Op., ECF No. 30. Modanlo has since filed a motion for reconsideration, ECF No. 34. That motion has been fully briefed. See ECF Nos. 34, 353 367.7. No. hearing is necessary. See Fed. R. Bankr. P. 8019(b)(3); Loc.R. 105.6.


         A district court "sits as an appellate tribunal in bankruptcy." In re Birmingham, 846 F.3d 88, 92 (4th Cir. 2017). As such, it reviews the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. See Id. A finding of fact "is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." In re Rood, No. DKC 12-1623, 2013 WL 55650, at *2 (D. Md. Jan. 2, 2013) (quoting In re Fitzwater, No. 11-934, 2022 WL 4339559, at *2 (S.D.W.V. Sept. 21, 2022)). "With respect to the bankruptcy court's application of law to the facts, the district court reviews for abuse of discretion." Id.

         Here, Modanlo seeks to amend a judgment of this Court pursuant to Rule 59(e) of the Federal Rules of Civil Procedure. See Mot. for Recons. 1, ECF No. 34. A district court's power to grant or deny a Rule 59(e) motion is discretionary. See Robinson v. Wix Filtration Corp., 599 F.3d 403, 411 (4th Cir. 2010). The rule provides that a court may alter or amend a judgment "if the movant shows either (1) an intervening change in the controlling law, (2) new evidence that was not available at trial, or (3) that there has been a clear error of law or a manifest injustice." Id. at 407.

         "A Rule 59(e) motion is not a vehicle for parties to recapitulate arguments considered by the Court before rendering its original decision." IFCO Sys. N. Am., Inc. v. Am. Home Assurance Co., 797 F.Supp.2d 660, 671 (D. Md. 2011). It is likewise not an opportunity "to raise arguments which could have been raised prior to the issuance of the judgment, nor . . . to argue a case under a novel legal theory that the party had the ability to address in the first instance." Pac. Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998). Where, however, the court has misapprehended the facts or arguments or is persuaded its judgment was plainly erroneous, the court may grant the motion. See Steven S. Gensler, Federal Rules of Civil Procedure: Rules and Commentary 234-35 (2018 ed.).


         Modanlo's Rule 59(e) motion purports to raise "four independent but related reasons" for amending the Court's judgment dismissing his appeal. Mot. for Recons. 1. Two of those assertions essentially attack the Court's interpretation of the 2004 settlement agreement. The first is that I erred in concluding Modanlo's objection to the special counsel's application was barred as an "adverse" action, as defined in Paragraph 3.a of the settlement agreement. See Suppl. Mot. 7-9, ECF No. 35. The second is that, even if "adverse," the objection was nevertheless permissible under other terms contained in the agreement. See Id. at 9-11.

         Modanlo's motion does not alter my view that he waived his right to contest counsel's application. Nevertheless, to clear up any possible misunderstandings, I will take a moment here to further detail my reasoning.


         Modanlo has raised a dispute over the interpretation of a contract, and so I start, as one must, with a recitation of the pertinent provisions. Paragraph 3, which bears the subject line, "Modanlo Group Objections & Further Participation in ...

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