21 BK 12369
In a chapter 7 case, a dispute between creditors arose regarding the proper disposition of funds from a settlement of a malpractice claim against the Debtor. The Debtor was formerly the attorney for two creditors, Brent Duke (“Duke”) and 21 Century Smoking, Inc. (“21”). Pre-petition, the district court entered monetary sanctions against the Debtor and his former clients. Post-petition, the bankruptcy court approved the Trustee’s compromise with Duke and 21, which settled their malpractice claims against the Debtor, by stipulating that Duke and 21 each had a $625,000 nonpriority general unsecured claim against the Debtor. Soon thereafter, Duke and 21’s new attorney in district court, Mr. Kevin Salam, filed a petition for adjudication of his asserted attorney’s lien in bankruptcy court. After Mr. Salam’s lien was adjudicated without objection, this court entered an order directing the chapter 7 Trustee to pay Attorney Salam a share of Duke and 21’s claims. Thereafter, the district court entered an order seeking to transfer Duke and 21’s claims against the Debtor in bankruptcy court to three other creditors. Those creditors moved for relief from this court’s order adjudicating the lien, asserting the bankruptcy court’s order and the district court order were in conflict. The creditors also moved to enforce the district court orders transferring the claims from Duke and 21 to them. In denying both of those creditors’ motions, this court ruled that at the time the transfer order was entered, Duke and 21 no longer possessed the claims and, for that reason, they could not be transferred to the moving creditors.