Larry Bresnick

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
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In re Chapter 11
LARRY BRESNICK,
Case No. 07-41580-CEC
Debtor(s).
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OPINION
APPEARANCES:
Lawrence F. Morrison
Lawrence Morrison PC
110 East 59th Street
23rd Floor
New York, NY 10022
Attorney for Debtor
Gregory Messer
Law Offices of Gregory Messer, PLLC
26 Court Street
Suite 2400
Brooklyn, NY 11242
Chapter 11 Trustee
Valerie Millman
Office of the United States Trustee
271 Cadman Plaza East
Suite 4529
Brooklyn, NY 11201
Gary F. Herbst
Donna M. Fiorelli
LaMonica Herbst & Maniscalco, LLP
3305 Jerusalem Avenue
Wantagh, NY 11793
Attorneys for Chapter 11 Trustee
Douglas J. Pick
Pick & Zabicki LLP
369 Lexington Avenue
12th Floor
New York, NY 10017
Attorneys for Official Committee of
Unsecured Creditors
CARLA E. CRAIG
Chief United States Bankruptcy Judge
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This matter comes before the Court on the application of Lawrence Morrison P.C.
("Morrison"), counsel to the debtor in this case, for compensation for services rendered to the
debtor before and after the appointment of a chapter 11 trustee. Because § 330(a)(1) of the
Bankruptcy Code does not authorize the payment of compensation to an attorney for a debtor,
other than a debtor-in-possession, Lamie v. United States Trustee, 540 U.S. 526 (2004), and
because no other statute provides authority for the requested compensation to be paid from the
estate, the request is denied, to the extent it seeks compensation for the period after the Trustee
was appointed.
Jurisdiction and Venue
This Court has jurisdiction over this core proceeding under 28 U.S.C. §§ 1334(b) and
157(b)(2)(A) and (B), and the Eastern District of New York standing order of reference dated
August 28, 1986. This decision constitutes the Court's findings of fact and conclusions of law to
the extent required by Federal Rule of Bankruptcy Procedure 7052.
Facts
The relevant facts are not in dispute. This case was commenced by the filing of a
voluntary petition under chapter 11 of the Bankruptcy Code on March 30, 2007. On May 15,
2007, this Court entered an order authorizing the retention of Morrison pursuant to § 327(a) of
the Bankruptcy Code as counsel to the debtor and debtor-in-possession. Morrison also
represented the debtor in the case of In re Block 7094 Associates, LLC, Case No. 07-41576, an
entity affiliated with the debtor.
On June 25, 2007, the United States Trustee's motion for the appointment of a chapter 11
trustee was granted, and on June 28, 2007, an order was entered approving the United States
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Trustee's appointment of Gregory Messer as chapter 11 trustee for the debtor's estate (the
"Trustee"). The Trustee retained the firm of Lamonica, Herbst and Maniscalco to represent him
pursuant to § 327 of the Bankruptcy Code. The United States Trustee also appointed a creditors'
committee (the "Committee") pursuant to § 1102 of the Bankruptcy Code, and the Committee
retained counsel with Court approval pursuant to § 1103 of the Bankruptcy Code. The Trustee
did not retain Morrison for any purpose, and Morrison continued to represent the debtor.
In March, 2009, the principal parties in interest in this case, including the Trustee, the
Committee, the debtor, the debtor's wife, and The Cohen Group-PP, LLC, signed a stipulation
resolving certain claims against the estate and providing for dismissal of the case. Morrison
signed the stipulation on behalf of the debtor and Block 7094.
Morrison now seeks compensation pursuant to § 330(a) of the Bankruptcy Code for work
performed before and after the Trustee was appointed. The United States Trustee opposes this
application to the extent it seeks compensation for work performed after the Trustee was
appointed.
Discussion
Section 330(a)(1) provides as follows:
After notice to the parties in interest and the United States Trustee
and a hearing, and subject to sections 326, 328 and 329, the court may
award to a trustee, a consumer privacy ombudsman appointed under
section 332, an examiner, an ombudsman appointed under section
333, or a professional person employed under section 327 or 1103 –
(A) reasonable compensation for actual, necessary
services rendered by the trustee, examiner,
ombudsman, professional person, or attorney and by
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any paraprofessional person employed by any such
person; and
(B) reimbursement for actual, necessary expenses.
11 U.S.C. § 330(a)(1).
The Supreme Court addressed the meaning of this provision in In re Lamie, 540 U.S. 526
(2004). In that case, the petitioner, like Morrison, was retained with bankruptcy court approval
pursuant to § 327 of the Bankruptcy Code "to prepare, file, and prosecute a chapter 11
bankruptcy proceeding" on behalf of ESI, a debtor-in-possession. Lamie, 540 U.S. at 531-532.
Section 327, which authorizes the trustee to retain professionals, including attorneys, with court
approval, also provides authority for the retention of counsel by a debtor-in-possession in a
chapter 11 case, because a debtor-in-possession, pursuant to § 1107(a) of the Bankruptcy Code,
has (with certain exceptions not relevant here) all of the rights, powers, functions and duties of a
trustee. 11 U.S.C. §§ 327, 1107(a).
Three months after the commencement of the ESI chapter 11 case, the case was converted
to chapter 7, and a chapter 7 trustee was appointed. Id. at 532. As the Supreme Court noted,
"[t]his terminated ESI's status as a debtor-in-possession and so terminated petitioner's service
under § 327 as an attorney for the debtor-in-possession." Id. The petitioner sought compensation
from the estate for services provided after that date, including filing and amending various
schedules and reports, and appearing at a hearing on an adversary proceeding. Id.
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In considering whether the petitioner could receive compensation from the estate for legal
services performed after the conversion of the case to chapter 7, the Court looked to § 330(a)(1)
of the Bankruptcy Code. Prior to its amendment in 1994, § 330(a)(1) provided that the court may
award compensation to "the debtor's attorney," in addition to professional persons retained under
§ 327 or § 1103 of the Bankruptcy Code. The 1994 amendment to § 330(a)(1) deleted the words
"or to the debtor's attorney" from the list of persons entitled to seek compensation from the
estate. The petitioner urged the Supreme Court to find, as the Second, Third and Ninth Circuits
had, that the omission of the quoted words was a drafting error, and that Congress had intended
§ 330(a)(1) to continue to allow compensation to be paid by the estate to a debtor's chapter 7
attorney. Id. at 531, 533.
The Supreme Court declined to adopt the interpretation of § 330(a)(1) urged by the
petitioner, holding instead that "§ 330(a)(1) does not authorize compensation awards to debtors'
attorneys from estate funds, unless they are employed as authorized by § 327." Id. at 538. This
holding precludes Morrison from obtaining compensation for work performed for the debtor after
the Trustee was appointed in this case. Although Morrison's retention as attorney for the debtor-
in-possession was initially authorized pursuant to § 327, that authorization was terminated when
the Trustee was appointed. Upon the appointment of the Trustee, the debtor ceased to be a
debtor-in-possession. See § 1101(a). At that point, the Trustee became vested with the sole right
and obligation to administer property of the estate, and the debtor became obligated to turn over
all property of the estate to the Trustee, pursuant to § 542 of the Bankruptcy Code. 11 U.S.C. §§
542, 1106, 1108.
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As one court explained:
Under the Code, the debtor remains the debtor in possession unless
and until a trustee is appointed by court order under Section 1104.
When a trustee is appointed, the debtor is no longer a debtor "in
possession"- the trustee succeeds to all the rights and properties of the
debtor, which is thereby displaced from its property interests. The
appointment of a trustee effects a statutory transfer or assignment of
the debtor's property, including its contractual relationships, from the
debtor to the trustee.
In re Footstar, Inc., 323 B.R. 566, 571 (Bankr. S.D.N.Y. 2005). Whether or not the debtor in fact
turned all such assets over to the Trustee, and whether or not the Trustee chose to administer
those assets, the debtor's status as a debtor-in-possession terminated when the Trustee was
appointed. 11 U.S.C. § 1101; Footstar, 323 B.R. at 571.
For this reason, after the appointment of the Trustee, Morrison's authorization to act
pursuant to § 327 as attorney for the debtor-in-possession also terminated, as the debtor was no
longer a debtor-in-possession. Accordingly, Morrison may not obtain compensation from the
estate pursuant to § 330(a)(1) for work performed after that date.
Conclusion
For the foregoing reasons, Morrison's application for compensation for work performed
after the date of the appointment of the Trustee is denied. A separate order will issue.
Dated: Brooklyn, New York
June 23, 2009
/s/Carla E. Craig
CARLA E. CRAIG
Chief United States Bankruptcy Judge
Case 1-07-41580-cec Doc 243 Filed 06/23/09 Entered 06/23/09 15:56:18

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
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In re Chapter 11
LARRY BRESNICK,
Case No. 07-41580-CEC
Debtor(s).
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MAILING CERTIFICATE
I, Vivian Greene, hereby affirm that on June 23, 2009 a copy of a decision and order was
served on the parties named below by United States Postal Service first class mail,
telecommunication, facsimile or any other delivery method, as follows:
Lawrence F Morrison
Lawrence Morrison PC
110 East 59th Street
23rd Floor
New York, NY 10022
Gary F. Herbst
Donna M. Fiorelli
LaMonica Herbst & Maniscalco, LLP
3305 Jerusalem Avenue
Wantagh, NY 11793
Gregory Messer
Law Offices of Gregory Messer, PLLC
26 Court Street
Suite 2400
Brooklyn, NY 11242
Douglas J Pick
Pick & Zabicki LLP
369 Lexington Avenue
12th Floor
New York, NY 10017
Diana G. Adams
Office of the United States Trustee
271 Cadman Plaza East
Suite 4529
Brooklyn, NY 11201
Dated: Brooklyn, New York
June 23, 2009
/s/Vivian Greene
Vivian Greene
Case 1-07-41580-cec Doc 243 Filed 06/23/09 Entered 06/23/09 15:56:18