The opinion of the court was delivered by: John G. Koeltl, District Judge:
Kenneth Heller appeals from an order of the United States Bankruptcy Court for the Southern District of New York (Bernstein, J.) entered on January 11, 2010, denying his claim for legal fees and expenses. See In re Ruby G. Emanuel, 422 B.R. 443 (Bankr. S.D.N.Y. 2009). The appellant has also moved for an order directing non-party appellee Jacoby & Meyers ("J&M") to disclose the name and contact information of the mediator in a related, settled state court action. See Emanuelv. Sheridan Transp. Corp., 779 N.Y.S.2d 168, 172-74 (App. Div. 2004). In response, J&M has filed a motion for sanctions. The appellant has also sought to stay decision of the appeal pending decision of a motion for an evidentiary hearing.
I. On December 17, 1992, the husband of the debtor in the bankruptcy proceeding below was severely injured while performing repairs on a barge in dry dock at the Brooklyn Navy Yard. His injuries rendered him a quadriplegic, and ultimately resulted in his death 20 months later. Emanuel, 779 N.Y.S.2d at 170-71. The debtor, individually and as the administrator of her husband's estate, retained the appellant to file a wrongful death action against the barge owner and other entities, asserting claims for negligence and for violations of the Jones Act, 46 U.S.C. § 2101 et seq., and the New York Labor Law. Prior to the trial, on July 28, 1997, the debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 701, et seq. By order dated August 10, 1999, the trustee of the bankruptcy estate retained the appellant, on a contingency fee basis, to prosecute the wrongful death action as special counsel. In re Emanuel, 422 B.R. at 445 & n.1.
The Jones Act and Labor Law claims were dismissed before trial, but the negligence claim was tried to a jury in 1999. The jury found the barge to be unseaworthy and the defendants to be negligent. The jury awarded the debtor nearly $25 million in damages, but the trial court reduced that amount to $7,613,566. Following the entry of judgment, both sides appealed. Id.
The Appellate Division vacated the judgment and remanded the case for a new trial. It noted that the decedent "fell squarely within the longshoreman category and squarely outside that of seaman," Emanuel, 779 N.Y.S.2d at 174, and that, as a result, special standards of liability for cases involving seamen did not apply to the case. Because the trial court had mistakenly instructed the jury on the basis of those standards, "the court's jury instructions on the issue of negligence did not accurately reflect the law," id. at 175, and a new trial was warranted. A dissenting justice would have reversed the judgment below, rather than remanding for a new trial, on the ground that the evidence presented at trial was insufficient as a matter of law to establish the defendants' negligence. Id. at 182-83 (Marlow, J., dissenting).
On June 24, 2004, the appellant was disbarred on charges not related to this case, including a "24-year history of sanctions, [and] his perverse and persistent refusal to accept adverse rulings, reflective of an utter contempt for the judicial system . . . ." In re Heller, 780 N.Y.S.2d 314, 319 (1st Dep't 2004).
After the appellant was disbarred, the Bankruptcy Court approved the retention of J&M as substitute special counsel to the trustee, on a contingency fee basis. In re Emanuel, 422 B.R. at 446. J&M sent a letter to the appellant requesting the files in the wrongful death case. The appellant refused the request. Id. J&M obtained an order to show cause why it should not be substituted as counsel of record for Emanuel, and why the appellant should not be forced to turn over the case files in his possession. The appellant opposed the motion, and cross-moved for an order granting costs of $300,000 to $400,000, and legal fees of $12,184,332.50, on a quantum meruit theory. He asked that J&M be required to pay these sums immediately or to secure the obligation, as a condition to the release of the case files.
On January 13, 2006, the New York State Supreme Court issued an order substituting J&M as counsel for Emanuel and directing the appellant "to turn over the complete, original file of the underlying action" to J&M by February 16, 2006. It warned that failure to comply would result in sanctions. Id. at 447. The appellant did not comply, and on March 28, 2006, the state court issued an order directing the appellant to show cause why he should not be held in contempt. A second, similar order to show cause was issued by the court on December 26, 2006. The appellant again failed to respond, and was held in contempt of court pursuant to an order dated January 26, 2007. The order stated that the appellant could purge himself of the contempt by turning over all records within 20 days. He failed to do so, and on February 26, 2007, a warrant was issued for his arrest. In re Emanuel, 406 B.R. 634, 635 (Bankr. S.D.N.Y. 2009). The appellant was arrested and sentenced to 30 days' incarceration and a $10,000 fine. The Appellate Division temporarily stayed the incarceratory portion of his sentence, but the stay was dissolved May 8, 2007. Id. On May 29, 2009, the Appellate Division affirmed the order of contempt and the appellant's sentence, and found that his failure to comply with the trial court's previous orders had caused "resulting prejudice to plaintiff's right to a new trial in this action for maritime wrongful death." Emanuel v. Sheridan Transp. Corp., 870 N.Y.S.2d 912, 913 (2009).
Without the benefit of the appellant's files, which were never produced, J&M continued its representation of the debtor in the wrongful death action, and procured a $3.65 million settlement that the trustee accepted. On August 18, 2008, the trustee filed a motion to approve the settlement, to award J&M attorney fees, and to deny the appellant compensation. On November 10, 2008, the Bankruptcy Court approved the settlement and authorized distributions from the settlement proceeds to various creditors and the debtor. In re Emanuel, 422 B.R. at 447-48. It reserved decision, however, on the allocation of fees as between the appellant and J&M, on the ground that an evidentiary hearing would be required to resolve the appellant's quantum meruit claim.
On July 1, 2009, the Bankruptcy Court held such a hearing. Id. at 446. The arrest warrant for the appellant stemming from the state court contempt order was outstanding, and the appellant did not appear at the evidentiary hearing. The evidence adduced at the hearing on his behalf consisted of the following: (1) testimony by John Coulter, a maritime attorney who had worked with the appellant on the case, (2) testimony by an associate, Susan Harmon, and (3) time records created by Harmon.
Coulter testified as to the appellant's reputation as a maritime lawyer. The Bankruptcy Court appears to have given this testimony little weight, on account of the fact that "Coulter ha[d] apparently been working with Heller on this matter, and was charging him $200.00 per hour for his testimony." Id. at 450 n.8. The bankruptcy judge found Coulter's testimony to be "sincere," but attributable to "his loyalty to one who is essentially his client." Id.
The time records purported to catalog the work the appellant and Harmon had done in the course of the state court litigation. However, Harmon testified that the records, while dating back to 1992, had been created in August 2005; that she had based her time entries on her memory of what had occurred, but that she had no current recollection of the work, and was not even sure the time records introduced at the hearing were the same ones she had prepared in 2005; that the time entries were "rough estimates" and "guesses"; and that she had assigned time "arbitrarily." Id. The Bankruptcy Court also noted that the time records were "inaccurate on their face," because they "included entries relating to services rendered prior to the accident and after Heller's disbarrment"; in many cases were missing times, dates, or descriptions of the work allegedly performed; contained duplicate entries; and contained entries that were "wildly excessive." Id. at 451 & n.11. For these reasons, the Bankruptcy Court concluded that the records were not "probative or credible," id. at 450, and did not provide a "reasonable approximation" of the time the appellant had spent working on the case, id. at 451.
The Bankruptcy Court also found Harmon's testimony to be incredible as a whole. When confronted with an affidavit that contradicted her testimony, she "conceded that the affidavit was 'literally not true,'" invoked her rights under the Fifth Amendment to the United States Constitution, and refused to answer further questions on the subject. Id. at 450 n.10.
The Bankruptcy Court noted that the appellant could not point to any tangible benefit he had provided to the debtor, because he had "ultimately lost the [wrongful death] case." Id. at 451. It noted that the state court had found that the appellant's failure to turn over his files to J&M "caused 'resulting prejudice to [the debtor's] right to a new trial,'" because the files contained evidence that could not be located elsewhere. Id. at 452 (citing Emanuel, 870 N.Y.S.2d at 913). It rejected the appellant's argument that the state court Record on Appeal, to which J&M had access, contained everything J&M needed to litigate the case, on the grounds that: (1) the appellant had not offered the Record on Appeal into evidence, and thus there was no way to know "what it contained[,] much less that it contained everything that J&M needed"; (2) the Record on Appeal "filled only one or two boxes, while Heller had 43 boxes"; and (3) many potentially important items, ...