
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                              _________________________          No. 94-2215                       IN RE:  DONALD JARVIS and JOYCE JARVIS,                                       Debtors.                              __________________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF RHODE ISLAND                 [Hon. Francis J. Boyle, Senior U.S. District Judge]                                         __________________________                              __________________________                                        Before                                Selya, Circuit Judge,                                        _____________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Boudin, Circuit Judge.                                          _____________                              __________________________               Andrew  S.  Richardson,  Trustee  in  Bankruptcy,  with whom               ______________________          Boyajian, Harrington & Richardson was on brief, for appellant.          _________________________________               Robert D. Wieck,  Special Counsel for the  Estate, with whom               _______________          MacAdams & Wieck, Inc. was on brief, for appellees.          ______________________                              __________________________                                    April 28, 1995                             __________________________                     SELYA,  Circuit Judge.   Under 11  U.S.C.    327(a) and                    SELYA,  Circuit Judge.                            _____________          Fed.  R. Bankr.  P.  2014(a), a  Chapter  11 trustee  may  employ          professionals, with the  bankruptcy court's  approval, to  assist          him in  fulfilling his  duties.1   In  this appeal,  we uphold  a          ruling denying an afterthought  application for the employment of          a  professional.   In the  process, we  address two  questions of          novel  impression in this circuit.  First, may a bankruptcy court          approve a professional's employment  when no application is filed          until after the services in question have been rendered?  Second,          if  belated  applications  are  cognizable  at  all,  what  legal          standard should the bankruptcy courts apply in passing upon them?                    We  hold, in  general  concordance with  several  other          circuits, that a  bankruptcy court  may grant such  a post  facto                                                                ____  _____          application,  but only  if it  can be  demonstrated (1)  that the          employment satisfies the statutory requirements, and (2) that the                                        ____________________               1The statute provides that                    the trustee, with  the court's approval,  may                    employ  one  or more  attorneys, accountants,                    appraisers,     auctioneers,     or     other                    professional  persons,  that do  not  hold or                    represent an interest  adverse to the estate,                    and  that  are   disinterested  persons,   to                    represent or assist  the trustee in  carrying                    out the trustee's duties . . . .           11 U.S.C.    327(a) (1988).   Bankruptcy Rule 2014(a)  implements          the  statute.   It provides  in pertinent  part that  a trustee's          application for the employment  of a professional person pursuant          to section 327(a)  shall state, inter  alia, "the specific  facts                                          _____  ____          showing  the necessity for the employment, the name of the person          to be employed,  the reasons for the  selection, the professional          services  to  be rendered,  [and]  any  proposed arrangement  for          compensation . . . ."   Although the statute and the rule operate          in tandem, we  shall for  simplicity's sake refer  mainly to  the          former.                                          2          delay  in  seeking  court approval  resulted  from  extraordinary          circumstances.   Relatedly,  we  hold  that tardiness  occasioned          merely   by   oversight  cannot   qualify  as   an  extraordinary          circumstance under the second prong of the aforesaid test.                                          I                                          I                                          _                                Statement of the Case                                Statement of the Case                                _____________________                    The material facts are  not in dispute.  On  August 27,          1992, the  debtors, Donald  and Joyce Jarvis,  filed a  voluntary          petition seeking relief under Chapter  11 of the Bankruptcy Code.          On February 17,  1993, the bankruptcy  court appointed Andrew  S.          Richardson, a veteran insolvency lawyer, as trustee.                    In executing his duties, Richardson deemed it desirable          to evaluate several parcels  of real estate in which  the debtors          held ownership interests.  To this end, he retained Peter Scotti,          a  prominent Rhode  Island appraiser  and broker.   Although both          Richardson  and  Scotti were  familiar  with the  need  for prior          judicial approval of professional employment,  neither man sought          authorization  from the  bankruptcy  court before  or during  the          period in which services were rendered.                    Scotti did  yeoman work  for the  estate.   Among other          things,  he arranged a sale  of a two-acre  parcel in Portsmouth,          Rhode  Island,  for  $275,000.    The  bankruptcy  court  granted          Richardson's  petition  for  permission  to  sell  the  land  and          approved  the sales  agreement  (which made  provision  for a  5%          brokerage  commission).   When  the time  came  to pay  the  fee,          Richardson realized that the  court had never authorized Scotti's                                          3          employment.   He then assembled  a "Nunc Pro  Tunc Application to          Employ  Broker" and  submitted it  to the  bankruptcy court  in a          belated effort to remedy the oversight.2                    After holding a hearing,  the bankruptcy court found no          extraordinary circumstances  and denied the application.   See In                                                                     ___ __          re  Jarvis, 169  B.R.  276, 277-79  (Bankr.  D.R.I. 1994).    The          __________          trustee appealed to  the district  court.  On  October 26,  1994,          that court, ruling  ore tenus, refused to disturb  the bankruptcy                              ___ _____          court's order.  This appeal ensued.                                          II                                          II                                          __                                      Discussion                                      Discussion                                      __________                                          A.                                          A.                                          _                                Post Facto Authorization                                Post Facto Authorization                                ________________________                    In surveying  the terrain  occupied by section  327(a),          the threshold  question is whether  the statute permits  the post                                                                       ____          facto  authorization of  professional services  at all.   Because          _____          this  inquiry is strictly a matter of statutory construction, our          power of  interpretive scrutiny  is plenary.   See,  e.g., United                                                         ___   ____  ______          States v. Holmquist, 36  F.3d 154, 158 (1st Cir.  1994), petition          ______    _________                                      ________          for cert. filed (U.S. Dec. 27, 1994) (No. 94-7485); United States          ___ _____ _____                                     _____________          v. Gifford, 17 F.3d 462, 472  (1st Cir. 1994); Liberty Mut.  Ins.             _______                                     __________________          Co. v.Commercial Union Ins. Co.,978 F.2d 750, 757(1st Cir. 1992).          ___   _________________________                                        ____________________               2Although  courts  and   lawyers  routinely  describe   such          applications, as  did Richardson, by using  the appellation "nunc          pro  tunc,"  we   agree  with  Judge  Easterbrook   that  such  a          designation is unfaithful to  the accepted usage of that  term in          connection  with  the correction  of court  records.   See  In re                                                                 ___  _____          Singson,  41 F.3d  316, 318-19  (7th Cir. 1994).   To  avoid this          _______          linguistic snare, we prefer the term "post facto."                                                ____ _____                                          4                    If  possible, a  statute should be  construed in  a way          that conforms  to the  plain meaning  of its  text.3  See,  e.g.,                                                                ___   ____          Estate of Cowart v. Nicklos  Drilling Co., 112 S. Ct. 2589,  2594          ________________    _____________________          (1992);  Pritzker v.  Yari, 42  F.3d 53,  67-68 (1st  Cir. 1994),                   ________     ____          petition for cert. filed,  63 U.S.L.W. 3692 (U.S. Mar.  13, 1995)          ________ ___ _____ _____          (No.  94-1517);  Holmquist, 36  F.3d at  159.   When  a statute's                           _________          language is ambiguous, however,  a court must often  venture into          extratextual  territory  in  order   to  distill  an  appropriate          construction.  See Pritzker, 42 F.3d at 67; see also  Sullivan v.                         ___ ________                 ___ ____  ________          CIA, 992  F.2d 1249,  1252 (1st Cir.  1993) (noting the  power of          ___          courts to  "look behind statutory language"  when the legislature          "blow[s] an uncertain trumpet").                    In this  instance,  the  statutory  language,  for  all          intents and  purposes, is indeterminate.   Section 327(a) neither          expressly  sanctions   nor  expressly  forbids  the   post  facto                                                                ____  _____          authorization  of outside  professional  services.   Courts  have          repeatedly remarked this ambiguity.  See, e.g., In re Singson, 41                                               ___  ____  _____________          F.3d 316, 319 (7th Cir.  1994); In re Triangle Chems.,  Inc., 697                                          ____________________________          F.2d 1280, 1289 (5th Cir. 1983).  What is more, Rule 2014(a) does          not fill  the void. The most that fairly can  be said is that the          language   of  both   statute   and   rule   contemplates   prior          authorization,  see  Triangle Chems.,  697  F.2d  at 1284,  1289;                          ___  _______________                                        ____________________               3There  are, of  course,  certain exceptions  to this  rule.          See, e.g., United States Nat'l Bank v. Independent Ins. Agents of          ___  ____  ________________________    __________________________          Am., Inc., 113  S. Ct.  2173, 2186 (1993)  (discussing "a  simple          _________          scrivener's error"); Sullivan  v. CIA, 992  F.2d 1249, 1252  (1st                               ________     ___          Cir.  1993)  (observing  exception  when  an  absurd  or  legally          unacceptable result  would otherwise  obtain).  The  case at  bar          does not require us to probe the exceptions to the general rule.                                          5          Stephen R.  Grensky, The  Problem Presented by  Professionals Who                               ____________________________________________          Fail to Obtain Prior  Court Approval of Their Employment,  62 Am.          ________________________________________________________          Bankr. L.J. 185,  188-89 (1988),4 without explicitly  prohibiting          authorization after the fact.                    The  discerned ambiguity in  section 327(a) necessarily          moves us  beyond the four  corners of the statute's  text.  Since          there  appears  to  be  no explicatory  legislative  history,  we          proceed to a consideration of the overarching equitable design of          the Chapter 11 process.  See Pioneer Inv. Servs. Co. v. Brunswick                                   ___ _______________________    _________          Assocs.  Ltd.   Partnership,  113  S.  Ct.   1489,  1495  (1993).          ___________________________          Bankruptcy courts, after all, are courts of equity, traditionally          governed  by equitable principles.   See, e.g., Bank  of Marin v.                                               ___  ____  ______________          England, 385 U.S. 99,  103 (1966); In re  Arkansas Co., 798  F.2d          _______                            ___________________          645, 648 (3d Cir. 1986);  Triangle Chems., 697 F.2d at 1288.   In                                    _______________          light  of the  purposefully  nonmechanical nature  of equity,  we          think  it  is  appropriate   that  bankruptcy  courts  should  be          permitted to entertain  post facto applications for  professional                                  ____ _____          services  under section  327(a).   We  so  hold, thereby  joining          several of our  sister circuits.  See, e.g., Singson,  41 F.3d at                                            ___  ____  _______          319-20; In  re Land, 943 F.2d 1265,  1267-68 (10th Cir. 1991); In                  ___________                                            __          re F/S  Airlease II,  Inc., 844  F.2d 99,  105  (3d Cir.),  cert.          __________________________                                  _____          denied, 488 U.S. 852 (1988); In re THC Fin. Corp.,  837 F.2d 389,          ______                       ____________________          392 (9th Cir. 1988); Triangle Chems., 697 F.2d at 1289.                               _______________                                        ____________________               4For  what it  may  be worth,  we  note that  Mr.  Grensky's          article bears  the alternative title  "Nunc Pro  Tunc Est  Bunc."                                                 ________________________          While  this alternative is rhythmic, the piece is rarely cited in          that fashion.  Sic biscuitas disintegrat.                         ___ _________ ___________                                          6                                          B.                                          B.                                          _                       Nature of the Power; Standard of Review                       Nature of the Power; Standard of Review                       _______________________________________                    Because  the  bankruptcy  court's  power  to  entertain          belated  applications  for  the  employment  of  professionals is          equitable  in  nature,  we  believe  that  the  court's  ultimate          decision  to  grant  or  deny such  applications  is  necessarily          discretionary.   The cases  and the commentators  are in  accord.          See Arkansas, 798 F.2d at 650; Triangle Chems., 697 F.2d at 1289;          ___ ________                   _______________          see also 2 Lawrence P. King,  Collier on Bankruptcy   327.02,  at          ___ ____                      _____________________          327-20  (15th  ed.  1995)  [hereinafter  Collier  on  Bankruptcy]                                                   _______________________          ("Generally  it has  been  concluded that  bankruptcy courts  are          empowered with discretion to grant nunc pro tunc retention orders                                             ____ ___ ____          and allow compensation.").                    By  like token,  the  bankruptcy court's  ruling on  an          attempt to secure post  facto approval of an application  for the                            ____  _____          employment of a  professional should be reviewed by  the district          court under the  abuse-of-discretion rubric.  See  Land, 943 F.2d                                                        ___  ____          at 1266.   In the event of a further appeal, the court of appeals          will independently review the bankruptcy court's ruling for abuse          of  discretion,  ceding  no  special deference  to  the  district          court's previous determination.   See Grella  v. Salem Five  Cent                                            ___ ______     ________________          Sav. Bank, 42  F.3d 26, 30 (1st Cir.  1994) (describing levels of          _________          appellate review in bankruptcy cases).                                          C.                                          C.                                          _                            The Appropriate Legal Standard                            The Appropriate Legal Standard                            ______________________________                                          7                    By   recognizing   the   discretionary   authority   of          bankruptcy  courts  to  consider post  facto  applications  under                                           ____  _____          section 327(a), we have  reached the end of the  beginning rather          than the  beginning of the end.   We must yet  select the precise          legal  yardstick by which  such applications are  to be measured.          We  conclude  that  the   applicant  must  demonstrate  both  the          professional  person's  suitability   for  appointment  and   the          existence of extraordinary circumstances sufficient to excuse the          failure to file a timely application.5                      A  bankruptcy  court   confronted  by   a  post   facto                                                               ____   _____          application for the employment of  a professional should begin by          inquiring into  suitability; the  timing of the  application does          not  matter unless the court makes a supportable finding that the          services were reasonably necessary for the due performance of the          trustee's duties, that the  professional is licensed or otherwise          qualified to render such services, and that the disinterestedness          requirements of section 327(a) are not at risk.   In other words,          the  bankruptcy   court  must   satisfy  itself  that,   had  the          application been  filed on time, the court  would have authorized          the professional's employment then and there.                                        ____________________               5In connection  with post facto applications,  courts appear                                    ____ _____          to use  the terms "extraordinary  circumstances" and "exceptional          circumstances" interchangeably.  Compare,  e.g., F/S Airlease II,                                           _______   ____  _______________          844 F.2d at 105  (referring to extraordinary circumstances) with,                                                                      ____          e.g., Triangle Chems., 697 F.2d at 1289 (referring to exceptional          ____  _______________          circumstances).   From all that  we can discern,  any differences          between these terms are  semantic and, in this context,  we treat          them as fungible.                                          8                    Assuming that the application clears this first hurdle,          the bankruptcy court must  next, in the exercise of  its informed          discretion, decide whether the particular circumstances attendant          to the  application  are sufficiently  extraordinary  to  warrant          after-the-fact  approval. See F/S  Airlease II, 844  F.2d at 105.                                    ___ ________________          In  fleshing out the extraordinary circumstances requirement, the          Third Circuit  has indicated that bankruptcy  courts may consider          several factors, including                    whether  the applicant  or some  other person                    bore   responsibility    for   applying   for                    approval;  whether  the  applicant was  under                    time  pressure  to   begin  service   without                    approval;  the  amount  of  delay  after  the                    applicant learned that  initial approval  had                    not been  granted; [and] the  extent to which                    compensation to the applicant  will prejudice                    innocent third parties . . . .          Id. at 105-06 (quoting Arkansas,  798 F.2d at 650).  Although  we          ___                    ________          do not regard this compendium of considerations as exhaustive, it          is a useful checklist and we commend it to the bankruptcy courts.                    The second half of this two-part test has deep roots in          both precedent and policy.  A virtually unbroken skein of federal          appellate    cases    have    determined   that    "extraordinary          circumstances," or  something very close thereto,  see supra note                                                             ___ _____          5, constitutes the appropriate legal standard.  See,  e.g., Land,                                                          ___   ____  ____          943 F.2d at 1267-68;  F/S Airlease II, 844 F.2d at  105; Triangle                                _______________                    ________          Chems., 697 F.2d at 1289; In re Kroeger Properties & Dev.,  Inc.,          ______                    ______________________________________          57 B.R. 821, 822-23 (Bankr. 9th Cir. 1986); see also 2 Collier on                                                      ___ ____   __________          Bankruptcy, supra,   327.02,  at 327-20.  Indeed, apart  from the          __________  _____          Seventh Circuit,  which recently adopted a  slightly more lenient                                          9          "excusable neglect"  standard, Singson, 41 F.3d  at 319-20, those                                         _______          courts of appeals that have considered the matter are consentient          in their  views.   We  can discern  no basis  for rejecting  this          imposing array of well-reasoned opinions.                    The  policies underlying  the  Chapter 11  process also          favor adoption  of the  extraordinary circumstances test.   Prior          approval is to  be preferred  because it  permits the  bankruptcy          court to supervise the administration of the estate more closely,          and minimizes the chance that the court will be confronted with a          fait  accompli.     To achieve  these  desirable ends,  the prior          ____  ________          approval  requirement  must  have  teeth.   A  relatively  strict          standard,  such  as   extraordinary  circumstances,  serves  this          purpose.   At  the same time, it  encourages compliance with  the          statute and  eliminates opportunities for manipulation.   See id.                                                                    ___ ___          at  319;  see  also   Kroeger  Properties,  57  B.R.  at   822-23                    ___  ____   ___________________          (suggesting   that  restricting   post  facto   authorization  to                                            ____  _____          situations  involving  extraordinary   circumstances  will   curb          general  nonobservance  of  section 327(a)'s  requirements);  see                                                                        ___          generally 2 Collier  on Bankruptcy, supra,    327.02, at  327-20.          _________   ______________________  _____          Finally, a rule that lends itself to a relatively small number of          exceptions will  inevitably help  to conserve overtaxed  judicial          resources.    We  find  that these  policy  considerations  point          unerringly toward a stricter, rather than a softer, standard.                    We hold, therefore, that a bankruptcy court may, in its          discretion,  grant  a  post  facto  application for  professional                                 ____  _____          services,  provided that  the  applicant can  demonstrate,  inter                                                                      _____                                          10          alia, the existence of  extraordinary circumstances sufficient to          ____          justify  the application's untimeliness.6                                          D.                                          D.                                          _                                      The Merits                                      The Merits                                      __________                    Having settled upon the  proper legal standard, we make          short shrift  of the merits  of this appeal.   We assume arguendo                                                                   ________          that the bankruptcy  court would have  authorized the trustee  to          employ  Scotti had a timely request been forthcoming.  Withal, no          such  request  was made.    Because  the trustee's  tardiness  in          seeking approval  was due  entirely to inadvertence,  our inquiry          reduces to  whether mere oversight  falls within the  universe of          extraordinary   circumstances  that   may   justify  post   facto                                                               ____   _____          authorization of a professional's employment. We conclude that it          does not.                      Our conclusion is buttressed by nothing less than logic          and experience, on one hand, and by precedent, on the other hand.          Logic   and  experience   dictate   that  if   the  category   of          extraordinary  circumstances   were  expanded  to   include  mere          oversight,  the  modifying  adjective  "extraordinary"  would  be          completely emptied  of its  meaning.  Consequently,  the standard          itself would  be stripped  of its efficacy.   At some  point, one          must  pause and  inquire, like  Alice to  Humpty  Dumpty, whether                                        ____________________               6In  so  holding,  we  respectfully decline  to  follow  the          Seventh  Circuit's transplantation  of  "excusable neglect"  from          Fed. R. Bankr. P. 9006(b)(1)  to Fed. R. Bankr. P. 2014(a).   See                                                                        ___          Singson, 41 F.3d at 319-20.  We are both more concerned on policy          _______          grounds  about the risk of  condoning or encouraging  any form of          neglect  and less convinced that the term "excusable neglect" can          be coherently administered over time.                                          11          words are infinitely elastic.  See generally Lewis Carroll, Alice                                         ___ _________                _____          in Wonderland 163 (D.  Gray ed., 1971) ("When I use a  word . . .          _____________          it  means just  what  I choose  it  to mean     neither more  nor          less.").                    The weight  of authority pushes in  the same direction.          Most courts have flatly refused to accept mere oversight, without          more, as a  legitimate basis  for granting  post facto  approval.                                                      ____ _____          See,  e.g.,  Land, 943  F.2d at  1268  ("Simple neglect  will not          ___   ____   ____          justify  nunc pro tunc approval of a debtor's application for the          employment  of  a  professional.");  Arkansas, 798  F.2d  at  651                                               ________          (holding that "a  mere showing of oversight"  does not constitute          extraordinary circumstances);  In re  Shirley, 134 B.R.  940, 943                                         ______________          n.4 (Bankr. 9th  Cir. 1992) ("Mere negligence does not constitute          an exceptional circumstance justifying the entry of a retroactive          order.").  But see Triangle Chems., 697 F.2d at 1289.  This tenet                     ___ ___ _______________          prevails even though the  professional's services have benefitted          the estate.  See F/S Airlease II, 844  F.2d at 108; In re Grimes,                       ___ _______________                    ____________          115 B.R. 639, 649 (Bankr. D.S.D. 1990); In re Mason, 66 B.R. 297,                                                  ___________          307 (Bankr. D.N.J. 1986); In re Ladycliff Coll., 35 B.R. 111, 113                                    _____________________          (Bankr. S.D.N.Y. 1983); In re Morton Shoe Cos., 22 B.R.  449, 450                                  ______________________          (Bankr. D. Mass. 1982).                    To  the extent that the  outcome of this appeal demands          further justification   and we  think it does not   it  should be          noted that,  here, the  bankruptcy court  was  not only  applying          section  327(a) and  Fed.  R. Bankr.  P.  2014(a), but  also  was                                          12          applying  its  own  local  rule.7    The  significance  of   this          circumstance is three-fold.   First, the rule  gives plain notice          of  the  "extraordinary circumstances"  standard.    Second, once          local rules have been properly promulgated, lawyers and litigants          are duty bound to comply with them.  See Air Line Pilots Ass'n v.                                               ___ _____________________          Precision  Valley Aviation,  Inc.,  26 F.3d  220,  224 (1st  Cir.          _________________________________          1994).  Third, a special  degree of deference   above  and beyond          the   traditional  standards  of   decisionmaking  and  appellate          oversight   attaches to a court's interpretation of its own local          rules. See,  e.g., id. (explaining that  "[d]istrict courts enjoy                 ___   ____  ___          broad latitude in administering local rules" and "are entitled to          demand  adherence  to  specific mandates  contained  [therein]");          United  States  v. Diaz-Villafane,  874  F.2d 43,  46  (1st Cir.)          ______________     ______________          (remarking "the widely-accepted idea that a district court should          be accorded  considerable latitude  in applying  local procedural          rules of its own making"), cert. denied, 493 U.S. 862 (1989).                                     _____ ______                                         III                                         III                                         ___                                      Conclusion                                      Conclusion                                      __________                                        ____________________               7The applicable local rule provides in full:                    Absent extraordinary  circumstances, nunc pro                    tunc   Applications    for   appointment   of                    professional persons pursuant to Sections 327                    and   1103  of   the  Bankruptcy   Code,  and                    Bankruptcy Rule 2014, will not be considered.                    An  Application is considered timely if it is                    filed within thirty (30)  days of the date of                    the filing of the  petition in bankruptcy  or                    the date the professional commences rendering                    services, whichever occurs later.          D.R.I. Bankr. R. 25(A)(1).                                          13                    To recapitulate, we hold that under 11 U.S.C.    327(a)          and Fed. R.  Bankr. P.  2014(a), a bankruptcy  court may, in  its          discretion, consider an application  to approve the employment of          a professional  even  though the  professional person's  services          have  already  been rendered.   But  the  court should  grant the          authorization  only if  it  can be  shown  that the  professional          person  meets all the requirements of section 327(a) and that the                                                               ___          untimeliness  of  the  application  results   from  extraordinary          circumstances.   Because the lack of punctuality in this case was          attributable entirely to inadvertence, the district court did not          err in affirming  the bankruptcy court's denial  of the trustee's          post  facto application.  Mere oversight does not fall within the          ____  _____          realm of extraordinary circumstances for these purposes.                    Although we need go no further, we elect to add a final          note.  We are aware that Scotti rendered valuable services to the          estate, and we take no pleasure in denying him the  fruits of his          labor.   But we do what we must, for the greater good lies not in          the  transient  lure  of  ad   hoc  decisionmaking,  but  in  the                                    __   ___          evenhanded application of the rule of law.          Affirmed.          Affirmed.          ________                                          14
