Case 2:18-cv DN Document 16 Filed 10/03/18 Page 1 of 19

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1 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 1 of 19 David E. Leta (1937) Jeffrey D. Tuttle (14500) SNELL & WILMER L.L.P. 15 W. South Temple, Suite 1200 Salt Lake City, UT Telephone: (801) Facsimile: (801) dleta@swlaw.com jtuttle@swlaw.com Counsel for RaPower-3, LLC IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, CENTRAL DIVISION UNITED STATES DEPARTMENT OF JUSTICE, TAX DIVISION, Petitioner, RaPower-3, LLC, Respondent. Civil No. 2:18-cv-608-DN Bankruptcy Case No Judge David Nuffer REPLY IN SUPPORT OF FEE APPLICATION BY SNELL & WILMER L.L.P AND REQUEST FOR ORAL ARGUMENT Snell & Wilmer L.L.P. ( S&W 1 ) submits this reply (this Reply ) in support of its Fee Application 2 and in response to the United States Opposition to Fee Application by Snell & Wilmer L.L.P. [Dkt. No. 13] (the Objection ). 1 Capitalized terms not otherwise defined herein shall have the meaning described thereto in the Fee Application (defined below). 2 Fee Application of Snell & Wilmer L.L.P. for Compensation and Reimbursement of Expenses as General Bankruptcy Counsel for RaPower-3, LLC Incurred for the Period from June 29, 2018 Through and Including August 22, 2018 [Dkt. No. 12] (the Fee Application ) filed on September 5, 2018.

2 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 2 of 19 TABLE OF CONTENTS I. INTRODUCTION... 4 II. ARGUMENT... 5 A. The facts and circumstances of the Injunction Case and the bankruptcy filing do not warrant denial or reduction of S&W s fees and expenses... 5 i. S&W s prepetition diligence was reasonable in light of the circumstances... 5 a. RP3 had the right to file bankruptcy... 5 b. RP3 reasonably believed that bankruptcy was the appropriate path to preserve its appeal rights in light of the DOJ s proposed receivership order... 6 ii. S&W s efforts helped maintain the status quo... 7 B. The dismissal of the Bankruptcy Case did not strip S&W of its interest in the Retainer nor of its ability to be paid from such funds... 9 C. S&W s fees and expenses were necessary and reasonable in light of the circumstances and applicable Tenth Circuit standards i. S&W s services were reasonable, necessary, and benefitted the estate ii. Even assuming, arguendo, that the estate did not benefit from some of S&W s services, all of the services were undertaken to benefit the estate iii. The DOJ s request for fee reductions is arbitrary and based on improper hindsight reasoning a. Relief from Stay/Adequate Protection Issues b. Other Contested Matters c. Meeting of and Communications with Creditors d. Case Administration e. Fee/Employment Applications III. REQUEST FOR ORAL ARGUMENT AND PAGE CERTIFICATION IV. CONCLUSION

3 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 3 of 19 TABLE OF AUTHORITIES Federal Cases Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct (2015) In re Casco Bay Lines, Inc., 25 B.R. 747 (B.A.P. 1st Cir. 1982) In re Jensen-Farley Pictures, Inc., 47 B.R. 557 (Bankr. D. Utah 1985)... 13, 15 In re Kitts Dev., LLC, 474 B.R. 712 (Bankr. D.N.M. 2012)... 12, 13 In re Lederman Enterprises, Inc., 997 F.2d 1321 (10th Cir. 1993) In re Market Center East Retail Property, Inc., 730 F.3d 1239 (10th Cir. 2013) In re Schupbach Investments, LLC, 521 B.R Sino Clean Energy Inc., et al. v. Robert S. Seiden, 2018 WL (9th Cir. 2018)... 4 Federal Statutes 11 U.S.C Section 109 of the Bankruptcy Code... 5 Section , 15 Section 330(a)(1)(A)-(B) of the Bankruptcy Code State Statutes Utah Code Utah Code (2)

4 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 4 of 19 I. INTRODUCTION Every entity, even one accused of tax fraud, has a fundamental, statutory right to seek bankruptcy relief under Title 11 of the United States Code (the Bankruptcy Code ). 3 And, it has the right to be represented by counsel in doing so. Bankruptcy counsel is entitled to be paid for their actual, necessary and reasonable services rendered in the case. The Court s rulings and preliminary findings against RaPower-3 ( RP3 or Debtor ) do not deprive RP3 or its bankruptcy counsel of these rights. Moreover, the Court s findings are disputed and on appeal. 4 The objective of the bankruptcy was to preserve the Debtor s appeal rights, and that objective has been accomplished. If successful, the appeal will eliminate the DOJ s claims and benefit the Debtor s other creditors. Had the bankruptcy not been filed, and had the Court entered the DOJ s proposed form of receivership order, RP3 would have lost its right to file bankruptcy as well as its right to appeal. 5 The DOJ s position appears to be that, since RP3 lost at trial and has been found by this Court to have filed bankruptcy in bad faith, it no longer had any rights and, by extension, S&W is not entitled to be paid for its services. This is not the law. RP3 s bankruptcy estate (and subsequent receivership estate) were preserved and possibly enhanced by the bankruptcy filing. S&W filed the Fee Application to be transparent 3 Unless otherwise specified herein, all section references shall be to 11 U.S.C. 101 et seq. 4 Defendants in the Injunction Case, including RP3, recently submitted 60 plus pages of objections to the DOJ s proposed findings of fact and conclusions of law. In short, there are hotly contested issues that are a long way from being fully resolved. Absent bankruptcy, RP3 was at risk of losing its ability to have a voice in that fight. The sheer volume of docket activity in the Injunction Case shows deeply disputed procedural and substantive issues. It is an untenable position to say that RP3 had no reason to worry about critical issues or no right to protect its ability to choose its own counsel in this fight. 5 See Sino Clean Energy Inc., et al. v. Robert S. Seiden, 2018 WL (9th Cir. 2018). 4

5 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 5 of 19 about the services it rendered, and the possessory, attorney s lien that it has on the Retainer funds. S&W has fully complied with the fee application guidelines established by the Office of the United States Trustee, and the Fee Application contains sufficient detail and support for the relief requested. Moreover, the DOJ has not carried its burden. The Objection does not show why any of S&W s specific services were excessive, unnecessary or wasteful. It does not show how, or why, those services could have been performed in a more efficient or less costly manner. Instead, the DOJ rehashes the disputed findings in the Injunction Case and draws broad, dismissive conclusions from those disputed findings. The Fee Application should be approved and the fees and expenses requested therein awarded. II. ARGUMENT A. The facts and circumstances of the Injunction Case and the bankruptcy filing do not warrant denial or reduction of S&W s fees and expenses. i. S&W s prepetition diligence was reasonable in light of the circumstances. a. RP3 had the right to file bankruptcy. The preliminary findings of fact and conclusions of law in the Injunction Case did not strip RP3 of its federal rights. The DOJ claims that S&W was dismissive of this Court s preliminary findings and orders when it helped file and prosecute RP3 s bankruptcy. That is not true. All debtors, even those against whom fraud claims have been asserted, have a fundamental, statutory right to file bankruptcy. 6 Indeed, individuals and entities against whom adverse 6 In a section appropriately titled Who may be a debtor, Section 109 of the Bankruptcy Code lays out the threshold requirements for filing bankruptcy. Notably absent are any prohibitions against a solar company, a network marketing company, or a company that has been found to have been engaged in a tax scheme. 5

6 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 6 of 19 judgments have been or could be entered file bankruptcy every day, in every jurisdiction in the country. Adverse judgments are often the impetus for bankruptcy relief. b. RP3 reasonably believed that bankruptcy was the appropriate path to preserve its appeal rights in light of the DOJ s proposed receivership order. The bankruptcy filing was not an effort to prohibit this Court from entering its judgment and was not filed in bad faith. RP3 acknowledged that liquidating the DOJ s claim before this Court was appropriate. 7 Rather, the DOJ s proposed receivership order failed to preserve RP3 s right to appeal. That right, which has now been successfully preserved in the final Receivership Order 8, was in jeopardy. Had this Court entered the DOJ s proposed order, RP3 s management would have lost all power to file bankruptcy or appeal. Those powers would have vested in the Court s receiver. The Objection does not dispute this point. Preservation of appeal rights is a worthy justification for filing a bankruptcy. Nevertheless, this Court ruled that RP3 filed its bankruptcy in bad faith. RP3 did not appeal this ruling because its appeal rights were immediately preserved in the Receivership Order that was entered the same day, and, thus, the vital protections for which it sought protection in bankruptcy have been preserved. S&W reasonably believed that RP3 s appeal rights could not be preserved with certainty in any other way other than by filing bankruptcy. 9 S&W, with the information it had available to it after reasonable inquiry and due diligence, and based on its legal judgment, believed the filing to be in good faith, and in the best interest of all of RP3 s creditors. 7 See Debtor s Response to Motion to Vacate Stay [Injunction Case Dkt. No. 434], pgs 3-5, and RP3 s Consent to Withdrawal of the Reference (defined below) [Dkt. No. 4], pg See this Court s Memorandum Decision and Order Freezing Assets and to Appoint a Receiver [Injunction Case Dkt. No. 444] (the Receivership Order ). 9 See Declaration of Jeff Tuttle in Support of Snell & Wilmer L.L.P.s Fee Application, attached as Exhibit A hereto (the Tuttle Declaration ),

7 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 7 of 19 Moreover, in light of the DOJ s vehement opposition to granting reasonable appeal rights during the month-long post-petition negotiations on the form of the receivership order, S&W s concerns were well founded. The DOJ suggests that appeal rights were never the issue. Instead, without any proof, the DOJ insinuates that something more nefarious was at play. The record shows otherwise. RP3 reasonably, and legitimately, believed its appeal rights were in jeopardy outside of bankruptcy. It believed that it could obtain debtor in possession financing to cover its bankruptcy expenses while prosecuting an appeal. 10 In the end, because it could not secure such financing, it chose to abandon the bankruptcy effort, having made its point about its appeal rights during the Bankruptcy Case. ii. S&W s efforts helped maintain the status quo. In light of the Court s pre-bankruptcy rulings, S&W took every step possible, both prepetition and postpetition, to preserve the Debtor s assets and respect the Court s injunction. S&W instructed that the Retainer be paid from an outside, independent source. 11 S&W also instructed RP3 to retain outside, independent accounting assistance to help meet its disclosure and reporting requirements under the Bankruptcy Code. These accounting services also were funded from outside sources. S&W took care not to use assets that were subject to the injunction even for statutorily required administrative services. The objective was to obtain sufficient debtor in possession financing, from funds that were not subject to the Freeze Motion 12, so that the Debtor could pay its ongoing bankruptcy expenses. The efforts taken by S&W successfully 10 To be perfectly clear, RP3 was not intending to use the bankruptcy court as an appellate court; rather, the appeal would be taken in the regular course to the Tenth Circuit Court of Appeals. 11 See Tuttle Declaration, United States Second Motion to Freeze the Assets of Defendants Neldon Johnson, RaPower-3, LLC, International Automated Systems, Inc., and R. Gregory Shepard and to Appoint a Receiver [Injunction Case Dkt. No. 414] (the Freeze Motion ) filed on June 22,

8 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 8 of 19 preserved the status quo. The receivership estate is now the same or greater than it was on June 22, 2018 when the DOJ filed the Freeze Motion. S&W knew that Glenda Johnson provided the Retainer from her individual funds. Ms. Johnson had no obligations to the DOJ, and was not subject to any of this Court s Orders. She was free to contribute her own funds to RP3 if she chose to do so. S&W instructed that the Retainer funds should be contributed prepetition to RP3 as additional capital, 13 and it believed that Ms. Johnson had done so. 14 Thus, S&W made its required 2016(b) disclosure and prosecuted the Bankruptcy Case with that understanding. 15 Through a subsequent review of RP3 s bank statements, S&W learned that the Retainer had not been contributed to RP3. 16 Instead, the funds were deposited directly into the attorney trust account of NSDP and then directly wire transferred from that trust account to the trust account of S&W. Despite reasonable inquiry, S&W has not seen any documentation evidencing a donation or capital contribution made by Ms. Johnson to RP3. 17 Accordingly, S&W now believes, based on the evidence it has seen, that the funds were never contributed to RP3 and still belong to Ms. Johnson. 18 Nevertheless, in the Objection the DOJ suggests that it is likely that the Retainer funds constitute funds of the receivership estate, citing only to the fact that Glenda Johnson, who is an employee of RP3, received funds from RP3 three years ago. It is undisputed that Ms. Johnson is not a defendant in this case. She is not subject to the jurisdiction of this Court and there is no 13 See Tuttle Declaration, See Tuttle Declaration, See Tuttle Declaration, See Tuttle Declaration, See Tuttle Declaration, See Tuttle Declaration, 17. 8

9 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 9 of 19 order restricting, freezing or limiting her right and ability to use her own property as she wishes. Moreover, as explained below, the source of the Retainer is irrelevant on the question of S&W s fee application. The only question is whether the unused portion of the Retainer should be returned to Ms. Johnson or to the Receiver. In fact, the DOJ cannot dispute that the Retainer funds are outside the Freeze Motion and that no funds that are subject to the Freeze Motion are being used to pay the Fee Application. The Retainer constitutes new, independent funds contributed for the specific purpose of paying S&W s attorneys fees. B. The dismissal of the Bankruptcy Case did not strip S&W of its interest in the Retainer nor of its ability to be paid from such funds. In the Objection, the DOJ argues that the Court cannot consider S&W s Fee Application because there is no bankruptcy estate. If the DOJ truly believes this contention, then there was no reason for S&W to file the Fee Application, or seek Court approval for its fees. Since there is no bankruptcy estate, S&W should just pay itself from the Retainer and return the balance of the money to Ms. Johnson. But, S&W stands behind its services and its conduct. It is not afraid to subject the same to this Court s scrutiny. The DOJ knows that there is no bankruptcy estate because this Court dismissed the bankruptcy before it ruled on S&W s application for employment 19 and before S&W could file its Fee Application. Thus, S&W was faced with two options: (a) pay itself from the Retainer without any judicial oversight, and return the balance of the money to Ms. Johnson, or (b) file the Fee Application. Since S&W s services were rendered during the Bankruptcy Case, it elected to take the high road and seek Court approval, even if had no statutory duty to do so. This 19 The DOJ never objected to S&W s employment as counsel for RP3. 9

10 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 10 of 19 approach should be condoned, not criticized. S&W is being open, transparent, and forthright. S&W has a statutory attorney s lien on the Retainer pursuant to Utah Code This lien is for the balance of compensation due from a client on any money or property owed by the client that is the subject of or connected with work performed for the client, including any funds held by the attorney for the client, including any amounts paid as a retainer to the attorney by the client[.] 20 In short, S&W s interest in the Retainer is greater than any interest of the DOJ, Ms. Johnson, any other creditor, or the forthcoming receiver. If Glenda Johnson is the source of the Retainer, then the funds were paid by a nondefendant who was not subject to the Freeze Motion. There is nothing in the existing court orders or in the Bankruptcy Code that prevents a non-defendant, non-debtor from using their own money to support RP3 s bankruptcy efforts. In the Objection, the DOJ relies on language in the Receivership Order stating that the receivership property also consists of assets that RP3 controls. But, there are no findings that RP3 controls any of Ms. Johnson s individual funds, or, specifically, that the Retainer constitutes funds that RP3 controls. 21 Moreover, Ms. Johnson is not before the Court. In effect, through its Objection, the DOJ is asking this Court to deprive a non-defendant of her individual property without due process of law. This is a bridge too far. If Glenda Johnson is the source of funds, then S&W has a lien on those funds and is entitled to use them to pay its allowed fees. 20 See Utah Code (2). 21 Glenda Johnson is an employee of RP3. She consistently has been disclosed as such in the Bankruptcy Case. She appeared at the initial debtor meeting and was scheduled to appear at the 341 meeting of creditors in her capacity as an employee. She signs the checks and handles the books for RP3. RP3 does not control her individual funds. The fact that Ms. Johnson, as an employee, got paid by RP3 three years before the bankruptcy is scant evidence with which to oppose the Fee Application. 10

11 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 11 of 19 If the funds were, in fact, contributed by Glenda Johnson to RP3, then such funds were not subject to any receivership order, or indeed the prepetition Freeze Motion. Under this scenario, the Retainer funds would have been received by RP3 on June 29, 2018 when they were transferred to S&W s trust account. The Receivership Order was entered almost two months later on August 22, Once transferred to S&W, the Retainer funds became subject to S&W s attorneys lien. S&W rendered actual and necessary services in reliance on those funds. The dismissal of the bankruptcy case does not give a subsequently-appointed receiver a superior interest in the money. In short, the Retainer funds were either the property of a non-defendant, non-debtor individual whose assets are not subject to any orders of this Court, or they are assets of RP3 that were not subject to the Freeze Motion, but are subject to S&W s prior, possessory attorneys lien. Either way, S&W is not misstating the source of funds to gain any advantage, because no advantage exists. It simply is seeking fair compensation for actual, necessary and reasonable services rendered. C. S&W s fees and expenses were necessary and reasonable in light of the circumstances and applicable Tenth Circuit standards. Despite dismissal of the Bankruptcy Case, the Court should apply the relevant bankruptcy standards in evaluating and approving the Fee Application. Section 330(a)(1)(A)-(B) of the Bankruptcy Code permits the Court to award reasonable compensation and reimbursement to a professional person whose employment has been approved under 327 for actual, necessary services rendered and for actual, necessary costs expended. In determining the amount of reasonable compensation, the Court must consider the nature, extent and value of such services based on time spent, rates charged and whether such services were necessary to the 11

12 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 12 of 19 administration of the case. The evaluation is made at the time the services are rendered, not in hindsight. 22 i. S&W s services were reasonable, necessary, and benefitted the estate. Absent bankruptcy, there was a significant risk that the debtor would have lost its right to file bankruptcy and pursue an appeal. If the receiver had been given the broad, unlimited powers that the DOJ proposed, then the Debtor would not have been able to choose its own counsel, elect relief under Title 11, or pursue an appeal. The bankruptcy filing prevented the potential loss of these rights. Furthermore, by preserving an appeal, the Debtor was protecting the interests of its other creditors and investors from the DOJ s possible substantial and incorrect claim. In addition, by placing RP3 in bankruptcy, S&W preserved the company s assets from further waste and diminution. S&W also created a Retainer fund that did not previously exist. If the balance of the Retainer is deemed to be an asset of the receivership, S&W s efforts also resulted in an unanticipated windfall for the receivership estate. With S&W s assistance, RP3 fulfilled its disclosure and reporting obligations under the Bankruptcy Code. Even if RP3 s appeal fails, the receiver and creditors will benefit from the information provided by RP3. ii. Even assuming, arguendo, that the estate did not benefit from some of S&W s services, all of the services were undertaken to benefit the estate. Courts use a different standard of benefit when reviewing fee applications. Benefit to the estate should be measured as of the time the services are provided, not at the time the Court ultimately reviews the fee application. In re Kitts Dev., LLC, 474 B.R. at 720. (emphasis added). Moreover, even if the services did not ultimately provide a benefit to the estate, those service 22 See In re Schupbach Investments, LLC, 521 B.R. 449, Nos. KS , BR , KS (10th Cir. BAP, Nov. 25, 2014) and In re Kitts Dev., LLC, 474 B.R. 712, 720 (Bankr. D.N.M. 2012). 12

13 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 13 of 19 may still be paid. In fact, [h]ours may be reasonably and necessarily spent, and, therefore, be compensable under Section 330 even though the effort did not result in a benefit to the estate. In re Jensen-Farley Pictures, Inc., 47 B.R. 557, 587 (Bankr. D. Utah 1985). 23 Only if the trustee (or debtor in possession) and his or her counsel knew or should have known from the outset that the service would not benefit the estate, would the fees not be compensable. 24 Thus, the question is whether the services had a reasonable likelihood of benefitting the estate when they were undertaken, regardless of whether the services actually benefitted the estate. Additionally, even if the fees do not meet this standard, the fees still could be deemed necessary if the services were unavoidable in that they were required to enable the debtor to perform its statutory duties. All of Snell & Wilmer s services were intended to benefit the estate at the time they were undertaken, or were necessary in fulfilling the Debtor s statutory duties, and, therefore, they should be approved and paid. Specifically, much of S&W s time was spent on issues related to the preservation of appeal rights (inextricably linked with the bankruptcy claims administration process), efforts to obtain debtor-in-possession financing (that would allow RP3 to fulfill its objectives in bankruptcy while preserving the status quo), and on assisting RP3 to fulfill its disclosure and 23 In this Court s view, a result-based analysis of fees requested under Sections 330 and 331 should be applied primarily in cases in which a bonus or premium fee is sought for extraordinary results. (citing In re Casco Bay Lines, Inc., 25 B.R. 747, (B.A.P. 1st Cir. 1982). This is consistent with Congress change to [t]he standard governing allowance of fees under the former Bankruptcy Act and related Rules of Bankruptcy Procedure, which emphasized conservation of the estate and economy of administration, which was replaced with one designed to be generous enough to attract professional persons of the highest ability to the practice of bankruptcy law. Id. ( Congress substituted reasonableness and actual and necessary for benefits conferred as the test for fee allowances under the [Bankruptcy] Code. ) (citing Collier on Bankruptcy , at (15th ed. 1984)). 24 In re Kitts Dev., LLC, 474 B.R. at 722 ( This Court believes that benefit to the estate for the purposes of determining whether compensation should be awarded to debtor s counsel in a Chapter 11 case should be measured by whether there is a reasonable possibility of achieving success in the bankruptcy case that will benefit the estate. ); see In re Lederman Enterprises, Inc., 997 F.2d 1321, (10th Cir. 1993). 13

14 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 14 of 19 reporting obligations as a debtor in possession. These services were reasonably calculated to benefit the estate when rendered, or were required by the Bankruptcy Code. The ultimate failure of the Bankruptcy Case does not alter the fact that the services were reasonably undertaken in the exercise of S&W s best legal judgment for the benefit of the Debtor and its creditors. iii. The DOJ s request for fee reductions is arbitrary and based on improper hindsight reasoning. In the Objection, the DOJ contends that because RP3 was adjudged to be a fraud at the trial level, it therefore loses every right it had to appeal that judgment, file bankruptcy, etc. The argument is misdirection. S&W was not part of the Injunction Case, is not dismissive of the Court s findings and rulings in that case, and is certainly not attempting to re-litigate the Injunction Case in the context of a Fee Application. The only issue before the Court relates to fees and expenses incurred by S&W as a result of its representation of RP3. In objecting to the Fee Application, the DOJ has not addressed any of the specific entries and makes only general, unsupported assertions. Objections should be as specific as possible and generalized and conclusory statements that the applicant is seeking too high a fee, unsupported by averments that challenge certain hours as excessive or the like, will not justify a fee reduction. See In re Jensen-Farley Pictures, Inc., 47 B.R. at 585. (emphasis added). Rather than specify issues with certain entries, the DOJ s approach is to broadly state that RP3 is a fraud and filed its bankruptcy case in bad faith; therefore, by extension, all services rendered related to the Bankruptcy Case should be categorically denied. This is not a meritorious analysis. Unlike 14

15 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 15 of 19 fee-shifting statutes, in the Tenth Circuit the payment of fees under 330 of the Bankruptcy Code does not depend on whether one party has prevailed over the other. 25 Arguing in the alternative, again without reference to specific entries, the DOJ broadly asserts that certain categories of fees should be denied. The Objection again lacks the required specificity, but S&W addresses each of these categories below: a. Relief from Stay/Adequate Protection Issues The DOJ s position is that S&W filed an objection to the Motion to Vacate in the Injunction Case and then took a contrary position in the Bankruptcy Case. Even a casual glance at the actual pleadings discredits this contention. RP3 s limited objection on the Motion to Vacate was filed because, pursuant to this Court s General Reference Order 26, the bankruptcy court should decide stay issues in the first instance and, more importantly, because the DOJ appeared to be asking for appointment of a receiver over a debtor in bankruptcy, which was not permitted by the Bankruptcy Code. The Debtor s Response to Motion to Vacate Stay clearly stated this position. The Debtor s subsequent Consent to Withdrawal of the Reference 27 reaffirmed RP3 s position that it did not oppose entry of all orders, a statement that was consistent with the Debtor s Response to Motion to Vacate Stay. S&W always intended for final orders to be entered by this Court as that was the only way to kickstart the appeals process. These arguments were not frivolous, meritless, or unreasonable. Representing RP3 s interests on 25 In re Market Center East Retail Property, Inc., 730 F.3d 1239, 1248 (10th Cir. 2013). 26 See Local District Court Rule DUCivR Bankruptcy Referral of Bankruptcy Matters to Bankruptcy Judges (the General Reference Order ). 27 Debtor RaPower-3, LLC s Limited Response to Creditor United States Department of Justice, Tax Division s Motion to Withdraw the Reference [Dkt. No. 4] ( Consent to Withdrawal of the Reference ) filed on August 15,

16 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 16 of 19 these matters is a service that benefits the estate and was reasonably likely to do so when the services were undertaken. Fees in this category should be approved. b. Other Contested Matters The DOJ objects because it claims fees included in this category were solely for contesting the DOJ s efforts to get the Bankruptcy Case dismissed with prejudice. A review of the time entries shows that, at most, $7, was incurred in responding to the DOJ s motion to dismiss. The DOJ provides no reason why the remaining amounts (approximately $4,500) in this category should be denied. RP3 was entitled to counsel to represent it in asserting positions it believed were warranted, including the defense of bad faith claims. Also, for the reasons pointed out in the pleadings, S&W s efforts opposing conversion and appointment of a trustee benefitted the estate and its creditors. The time entries show that S&W did not charge $1, in this category. The remaining fees in this category should be approved. c. Meeting of and Communications with Creditors The DOJ conflates general communications with creditors and the 341 Meeting of Creditors. Only $1,024 of the requested fees relates to participation in the 341 meeting and the ramifications of management s failure to appear (i.e. the motion to continue was a no charge ; reviewing the DOJ s objection to the motion to continue; follow up correspondence with the client). Notably among the time entries are S&W s attempts to reach DOJ s counsel and avoid a trip to Utah. 28 Contrary to the assertions in the Objection, S&W did not instruct the manager for RP3 that it need not appear at the 341 meeting or that attendance was optional. 29 RP3 decided 28 See Tuttle Declaration, See Tuttle Declaration,

17 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 17 of 19 the day before the 341 meeting to seek dismissal of its Bankruptcy Case. 30 S&W reasonably believed that RP3 had accepted a DOJ proposal for a stipulated dismissal. 31 A 341 meeting does not take place in a dismissed case, and S&W reasonably believed that the case was going to be dismissed. It was not until approximately three hours prior to the scheduled meeting time that counsel for the DOJ advised S&W that it would not stipulate to the dismissal. 32 Without enough time for RP3 s manager to drive to Salt Lake City from Oasis, Utah, S&W was left with no choice but to file a motion to continue the 341 meeting and lay the facts before the bankruptcy court. Any insinuation that this was gamesmanship or the result of nefarious motives on behalf of S&W is erroneous. Clearly, the DOJ had a role in the two-day miscommunications that preceded the 341 meeting. For the above reasons, the $1,024 related to participation in the 341 meeting and subsequent activities thereto should be allowed. The DOJ does not raise any specific objections to the remaining fees in this category. They likewise should be approved as efforts to communicate with other creditors and fulfill the Debtor s obligations. d. Case Administration The DOJ makes a blanket objection to the requested fees in this category, with no specific objection or additional narrative, other than the contention that the services took too long. 33 The services in this category are very much of the type that directly benefitted the estate 30 See Tuttle Declaration, See Tuttle Declaration, See Tuttle Declaration, Although no specific issue was taken with this category in the Objection, the DOJ misconstrues the purpose of S&W s statement in the Fee Application that Jeff Tuttle went to RP3 s headquarters and observed a demonstration of technology. The DOJ blatantly attempts to couch S&W s statement as a challenge to this Court s determination regarding the insufficiency of existing technology of RP3. That is simply not true. Again, S&W was not involved in the Injunction Case and is not challenging a single finding of this Court related thereto. As clearly spelled out in the Fee Application, S&W s 17

18 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 18 of 19 or, to the extent they did not, were at the very least reasonably likely to benefit the estate when they were undertaken. Time spent in this category includes corresponding with and providing information to the office of the United States Trustee, assisting RP3 gather information, assisting RP3 satisfy its reporting and disclosure obligations, including preparation of its statements and schedules, and advising RP3 s management and outside professionals (counsel and accountants) regarding bankruptcy duties. It is not surprising, or unusual, that this category represents almost 50% of the fees requested in the Fee Application. These types of services often comprise the bulk of the work related to chapter 11 cases, particularly in the early stages. e. Fee/Employment Applications The DOJ objects to fees spent in this category only to the extent they were incurred preparing the Fee Application. However, section V.A., 38 of the Fee Application clearly states that, in addition to the other $9, S&W has written off, S&W is not charging [RP3] for its fees related to the preparation of the [Fee Application], even though, under applicable law it has a right to do so. See Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2167 (2015). None of the fees requested in the Fee Application includes time spent preparing the Fee Application. 34 The DOJ blanket objection should be overruled. statement related to new technology, was in the context of due diligence and related to a potential new sources of debtor in possession financing (i.e. technologies that could be contributed to RP3 and used to produce revenue) for the benefit of the bankruptcy estate and its creditors. S&W s efforts to this end had nothing to do with the Injunction Case or with evaluating the merits of this Court s findings. 34 In fact, despite clearly being entitled to compensation for the preparation, S&W has written off or no charged an additional $20, related to the Fee Application alone, bringing the total discount of fees in S&W s representation of RP3 to $30,

19 Case 2:18-cv DN Document 16 Filed 10/03/18 Page 19 of 19 III. REQUEST FOR ORAL ARGUMENT AND CERTIFICATION Pursuant to Local Rule DUCivR 7-1(f), S&W requests that this Court set this matter for hearing, so that the Court may hear oral argument related to the Fee Application. S&W is aware of the Court s preferred policy of asking questions at hearing, as opposed to hearing conventional arguments or repeated contents of memoranda, and S&W believes the Court may benefit from such an opportunity. The DOJ requests a very extreme remedy and has broadly objected to S&W s fees with no attempt to specify or to distinguish S&W from RP3 as is warranted, and indeed required, in the context of reviewing the services in a fee application. S&W also certifies that it has complied with the page count limits ordered by this Court. IV. CONCLUSION. S&W provided reasonable and necessary services that benefitted RP3 s bankruptcy estate and its creditors. To the extent such services are determined to have not ultimately been successful or beneficial, they were reasonably calculated to benefit the estate when performed. Thus, under applicable law, S&W is entitled to the reimbursement and compensation it seeks in the Fee Application. S&W should be allowed to pay this award from the Retainer, with the balance of the Retainer remitted according to the direction of the Court. DATED: October 3, SNELL & WILMER L.L.P. /s/ Jeff Tuttle David E. Leta Jeff D. Tuttle Counsel for RP3, LLC 19