Nunc Pro Tunc Approval Of Employment Application In Bankruptcy — Acevedo Distinguished (In re Moore)

By: Donald L Swanson

“Because Congress did not include a temporal limitation in § 327, the Court finds it inconsistent with the provisions of Title 11 to insert one”; and

The U.S. Supreme Court, in Acevedo, “did not change the existing authority of the [bankruptcy] court to approve employment that has commenced before the motion was brought.”

–From In re Moore opinion, Case No. 21-70299, Western Arkansas Bankruptcy Court (issued August 25, 2021, Doc. 144).  What follows is a summary of this opinion.

Background

Debtor files his chapter 11 bankruptcy on March 5, 2021.

Nearly four months later (on June 29, 2021), Debtor files an application to approve employment of a CPA, asking that such approval be “effective nunc pro tunc” to the bankruptcy filing date.  

An application for court approval of employment, effective at an earlier date, is commonly referred to as a “nunc pro tunc” application.  This typically happens because of an oversight or because there was not enough time to file the application before the professional’s services are required.

This Court has historically approved such requests, if the movant properly serves the application and no valid objection is filed.

Sec. 327 of the Bankruptcy Code governs the employment of professional persons, and Fed. R. Bankr. P. 2014 dictates the procedure in applying for an order of employment.

Supreme Court’s Acevedo Opinion

The United States Supreme Court “recently reiterated the acceptable parameters of nunc pro tunc relief” in Roman Catholic Archdiocese of San Juan v. Acevedo Feliciano, ––– U.S. ––––, 140 S. Ct. 696 (2020).

Since Acevedo, some bankruptcy courts have questioned the propriety of entering nunc pro tunc orders approving applications to employ professionals under § 327.

The nunc pro tunc order in Acevedo arises from these facts:

• On February 6, 2018, the Archdiocese removes the case from a Puerto Rico court to the federal district court;
• Beginning March 16, 2018, (while the federal court has jurisdiction over the case) the Puerto Rico court enters certain payment and seizure orders against the Archdiocese; and
• Then, the case is remanded to the Puerto Rico court—the remand order is nunc pro tunc, stating that remand is effective as of March 13, 2018 (three days before entry of the first payment and seizure order).

The Acevedo opinion:

• cites to the federal removal statute provision that, once a notice of removal is filed, “the State court shall proceed no further unless and until the case is remanded”; and
• finds that the nunc pro tunc remand order was ineffective to create jurisdiction in the state court at a time when none existed;

The Acevedo opinion also references long-standing Supreme Court precedent that nunc pro tunc (“now for then”) orders:

• “reflect the reality” of what has already occurred;
• presuppose a decree “allowed, or ordered, but not entered, through inadvertence of the court”;
• “are not some Orwellian vehicle for revisionist history—creating ‘facts’ that never occurred in fact”; and
• “cannot make the record what it is not.”

The Acevedo opinion emphasizes that nunc pro tunc relief is a remedy for court error or inadvertence: the remedy “corrects a mistake in the record to make the record accurately reflect a past event that [has] actually occurred.”

Bankruptcy Court’s In re Moore Opinion

–First Conclusion

The Bankruptcy Court’s first conclusion in the In re Moore opinion is this:

• “there is no court error or court delay to correct”;
• “true nunc pro tunc relief as defined by the Supreme Court in Acevedo is inapplicable here”;
• “Acevedo did not change the existing authority of the [bankruptcy] court to approve employment that has commenced before the motion was brought”; and
• “Acevedo prohibited . . . using nunc pro tunc relief to create a fact in the record that did not occur (a remand on a certain date in the past),” but the employment application seeks court approval of a fact that did occur (the CPA’s employment on March 5, 2021).

–Second Conclusion

The Bankruptcy Court’s second conclusion in the In re Moore opinion is this:

• The Court has authority to approve the Application with an earlier effective date of March 5, 2021;
• Nothing in § 327 or Rule 2014 dictates a specific timeframe within which an application to employ must be filed—Congress included such time requirements in other Code sections;
• Sec. 327(a) neither expressly sanctions nor expressly forbids the post facto authorization of outside professional services—Courts have repeatedly remarked this ambiguity—and 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, without explicitly prohibiting authorization after the fact; and
• Because Congress did not include a temporal limitation in § 327, the Court finds it inconsistent with the provisions of Title 11 to insert one.

–A Caution

The Bankruptcy Court’s In re Moore opinion adds this caution in footnote 7:

• “parties should not interpret this holding as a license to wait indefinitely for court approval”; and
• “When a professional performs work prior to court approval . . . , the professional risks not being compensated for the work in the event the court declines to approve a subsequent application to employ.”

–Ruling

The Bankruptcy Court’s opinion ends with this ruling:

“For all of the above stated reasons, the Court approves the debtor’s Application to employ Ms. Jackson with an effective date of March 5, 2021.”

Conclusion

Here’s a “thank you” to Hon. Bianca M. Rucker, U.S. Bankruptcy Judge in the Western Arkansas Bankruptcy Court, for this helpful In re Moore analysis.

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