After the debtor’s chapter 11 case was converted to a case under chapter 7, the bankruptcy court entered orders granting fees to counsel for Susan Rhiel, the chapter 7 Trustee (the “Trustee”), denying the fees requested by Cupps & Garrison, LLC (“C&G”), debtor’s chapter 11 counsel, and requiring C&G to disgorge its pre-petition retainer so that the administrative expenses from the chapter 7 case could be paid. C&G has appealed those orders.
The issues presented in these appeals are: Whether the bankruptcy court misapplied Bankruptcy Code Section 726 and applicable state law regarding security retainers when it denied C&G’s fee application, granted the fee application of the Trustee, acting as her own counsel, and ordered C&G to disgorge its pre-petition retainer; and whether the bankruptcy court lacked jurisdiction to order disgorgement.
The Panel AFFIRMS the bankruptcy court’s August 17, 2010 order granting the fee application of the Trustee’s counsel; VACATES the August 10, 2010 order denying C&G’s fee application and the October 15, 2010 order directing disgorgement, and REMANDS the case for factual determinations regarding the allowance of fees and the character of the retainer received by C&G.