Fountain Powerboat Industries, Inc.

IN 	THE 	UNITED 	STATES 	DISTRICT 	COURT
FOR 	THE 	EASTERN DISTRICT 	OF NORTH 	CAROLINA
EASTERN DIVISION
NO. 	4:10-CV-117-H
LIBERTY 	ASSOCIATES, 	L.C. , 	)
)
Appellant, 	)
)
)
v. 	) 	ORDER
)
)
JACOBS 	CAPITAL, 	LLC, 	et 	al. , 	)
)
Appellees. 	)
ON APPEAL 	FROM 	THE 	UNITED 	STATES 	BANKRUPTCY 	COURT
FOR THE 	EASTERN DISTRICT OF NORTH 	CAROLINA
GREENVILLE 	DIVISION
This 	matter 	is 	before 	the 	court 	on 	appeal 	from 	an 	order 	of
the 	United 	States 	Bankruptcy 	Court 	for 	the 	Eastern 	District 	of
North 	Carolina 	awarding 	Jacobs 	Capital, 	LLC, 	fees 	in 	the 	amount
of 	$370,000 	pursuant 	to 	11 	U.S.C. 	§ 	330. 	The 	parties 	have
thoroughly 	briefed 	the 	issues 	on 	appeal, 	and 	the 	matter 	is 	now
ripe 	for 	adjUdication.
BACKGROUND
Prior 	to 	filing 	for 	relief 	under 	Chapter 	11, 	Fountain
Powerboats, 	Inc., 	and 	its 	wholly 	owned 	subsidiaries 	("Fountain"
or 	"the 	company") 	entered 	into 	an 	Engagement 	Agreement 	with
Jacobs 	Capital, 	LLC 	("Jacobs 	Capi tal") . 	Jacobs 	Capi tal 	agreed
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to 	act 	as 	the 	exclusive 	financial 	advisor 	to 	Fountain 	and 	to
provide 	valuation 	services, 	consulting 	services 	and 	transaction
advisory 	services 	"in 	connection 	with 	the 	company's 	efforts 	to
raise 	additional 	capital 	and/or 	sell 	all 	or 	substantially 	all"
of 	the 	company's 	assets.
On 	August 	24, 	2009, 	Fountain 	filed 	a 	Chapter 	11 	petition
and 	moved 	for 	an 	order 	authorizing 	the 	immediate 	auction 	and
sale 	of 	substantially 	all 	of 	its 	assets 	pursuant 	to 	11 	U.S.C.
§363(f). 	Fountain 	also 	moved 	to 	employ 	Jacobs 	Capital 	pursuant
to 	the 	terms 	set 	forth 	in 	the 	Engagement 	Agreement. 	At 	the 	time
of 	filing 	the 	bankruptcy 	petition, 	all 	of 	Fountain's 	assets 	were
encumbered 	by 	a 	blanket 	lien 	in 	favor 	of 	Regions 	Bank, 	N .A. ,
which 	was 	subsequently assigned 	to 	FB 	Investments, 	LLC.
The 	bankruptcy 	court 	determined 	that 	the 	value 	of
Fountain's 	assets 	would 	be 	best 	realized 	by 	public 	auction 	and
approved 	Fountain's 	proposed 	sale 	procedures. 	(Order 	Approving
Sale 	[DE 	#2-5].) 	On 	October 	15, 	2009, 	the 	bankruptcy 	court
granted 	Fountain's 	motion 	to 	employ 	Jacobs 	Capital 	as 	its
investment 	banker 	for 	purposes 	of 	the 	bankruptcy 	proceedings.
(Order 	Granting Mot. 	Employ 	Investment 	Banker 	[DE 	#2-11] .)
Prior 	to 	the 	scheduled 	auction, 	Fountain 	moved 	to 	postpone
the 	sale, 	indicating 	that 	it 	had 	received 	an 	alternative
proposal 	from 	Liberty 	Associates, 	L.C. 	("Liberty"), 	in 	which
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Liberty 	had 	offered 	to 	assist 	Fountain 	by 	providing 	post-
petition 	financing 	and 	funding 	a 	proposed 	plan 	of
reorganization. 	The 	bankruptcy 	court 	denied 	Fountain's 	motion
to 	postpone 	the 	sale 	(Order 	Denying 	Mot. 	postpone 	Sale 	[DE 	#2
8]), 	and 	FB 	Investments, 	LLC, 	the 	lienholder, 	submitted 	the 	only
bid. 	On 	October 	23, 	2009, 	the 	bankruptcy 	court 	disallowed 	the
§ 	363 	sale 	and 	permitted 	Fountain 	to 	pursue 	reorganization 	with
Liberty's 	assistance. 	(Order 	Denying 	Sale 	[DE 	#2-12] )
Fountain 	and 	Liberty 	then 	filed 	a 	Disclosure 	Statement 	and
Joint 	Plan 	of 	Reorganization 	dated 	November 	20, 	2009. 	The 	joint
plan 	provided 	that 	all 	administrative 	claims 	would 	be 	paid 	in
full 	on 	the 	effective 	date 	with 	funds 	to 	be 	provided 	by 	Liberty,
and 	the 	disclosure 	statement 	estimated 	an 	administrative 	claim
of 	$450,000 	for 	"Debtors' 	investment 	banker, 	Jacobs 	Capital."
(Disclosure 	Stmt. 	[DE 	#2-43].)
On 	January 	20, 	2010, 	Jacobs 	Capital 	filed 	an 	interim
application 	for 	compensation, 	to 	which 	Liberty 	objected.
Following 	a 	hearing, 	the 	bankruptcy 	court 	deemed 	the 	application
a 	final 	fee 	application 	and 	approved 	compensation 	to 	Jacobs
Capital 	in 	the 	amount 	of 	$370,000 	pursuant 	to 	11 	U.S.C. 	§ 	330.
Liberty 	appeals 	the 	bankruptcy 	court's 	order, 	arguing
(1) 	that 	the 	compensation 	sought 	by 	Jacobs 	Capital 	was 	not
supported 	by 	the 	Engagement 	Agreement; 	(2) 	the 	bankruptcy 	court
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erred 	by 	unilaterally 	modifying 	the 	fee 	application 	and 	awarding
Jacobs 	Capital 	fees 	on 	a 	basis 	other 	than 	that 	sought 	in 	its 	fee
application; 	and 	(3) 	the 	fees 	awarded 	to 	Jacobs 	Capital 	are 	not
reasonable 	because 	there 	is 	no 	nexus 	between 	the 	tasks 	performed
by Jacobs 	Capital 	and 	the 	outcome 	of 	the 	bankruptcy proceedings.
COURT'S 	DISCUSSION
In 	reviewing 	the 	decision 	of 	a 	bankruptcy 	court, 	a 	district
court 	acts 	as 	an 	appellate 	court 	and 	evaluates 	the 	decision
under 	the 	standards 	set 	forth 	in 	Rule 	8013 	of 	the 	Federal 	Rules
of 	Bankruptcy 	Procedure. 	Questions 	of 	law 	are 	reviewed 	de 	novo,
whereas 	findings 	of 	fact 	may 	be 	set 	aside 	only 	if 	clearly
erroneous. 	See 	Fed. 	R. 	Bankr. 	P. 	8013; 	Terry 	v. 	Meredith 	(In 	re
Meredith), 	527 	F.3d 	372, 	375 	(4th 	Cir. 	2008).
The 	court 	has 	carefully 	reviewed 	the 	parties' 	arguments 	and
the 	bankruptcy 	court's 	order 	in 	light 	of 	the 	evidence 	presented
and 	finds 	no 	reversible 	error. 	Jacobs 	Capital 	is 	entitled 	to
reasonable 	compensation, 	pursuant 	to 	Bankruptcy 	Code 	§ 	330 (a) ,
for 	the 	post-petition 	services 	rendered 	by 	it 	in 	this 	matter.
Having 	considered 	the 	factors 	applicable 	to 	§ 	330(a) 	fee 	awards
and 	for 	the 	reasons 	set 	forth 	in 	the 	bankruptcy 	court's 	order,
the 	court 	finds 	that 	$370,000 	is 	a 	reasonable 	amount 	to
compensate 	Jacobs 	Capital 	for 	its 	various 	services. 	The 	fact
that 	the 	bankruptcy 	court 	calculated 	the 	fee 	award 	using 	a
4
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different 	formula 	than 	that 	propounded 	by 	Jacobs 	Capital 	is 	of
no 	consequence. 	Accordingly, 	the 	court 	AFFIRMS 	the 	bankruptcy
court's 	order 	entered 	May 	7, 	2010. 	The 	clerk 	is 	directed 	to
close 	this 	case.
"j~
This 	~'cray of 	April 	2011.
~--------Senior 	United States 	District 	Judge
At 	Greenville, 	NC
#31
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