TooBaRoo, LLC v. Jill Olsen

United States Bankruptcy Appellate Panel
For the Eighth Circuit
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No. 24-6006
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In re: Western Robidoux, Inc.,
Debtor.
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TooBaRoo, LLC; InfoDeli, LLC
Creditors – Appellants
v.
Jill Denise Olsen
Trustee – Appellee
Spencer Fane LLP
Interested party – Appellee
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Appeal from United States Bankruptcy Court
for the Western District of Missouri
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Submitted: August 13, 2024
Filed: October 21, 2024
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Before RIDGWAY, SURRATT-STATES, and JONES, Bankruptcy Judges.
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JONES, Bankruptcy Judge.
Appellants TooBaRoo, LLC and InfoDeli, LLC appeal the bankruptcy court’s
order granting the Chapter 7 Trustee’s amended application to employ Spencer Fane
LLP as special counsel. We ordered the parties to brief the preliminary issue of this
court’s jurisdiction to hear the appeal.1 Specifically, we ordered the parties to brief
whether the bankruptcy order is final under 28 U.S.C. § 158(a)(1), and alternatively,
whether this court may review the order under 28 U.S.C. § 158(a)(3). For the reasons
stated below, we dismiss the appeal for lack of jurisdiction.
BACKGROUND
Attorney Daniel Blegen has represented Debtor Western Robidoux, Inc.
(“WRI”) in connection with certain federal litigation since 2014. In 2014, WRI and
members of the family who operated WRI hired Blegen and his former law firm,
German May, PC, to represent them. Another family member, Breht Burri, and
certain entities controlled by him, eventually filed a federal lawsuit against them.
Breht Burri is the sole member of Appellants TooBaRoo, LLC and InfoDeli, LLC.
The 	federal 	suit 	was 	filed 	in 	May 	2015, 	and 	involved 	several 	claims 	and
counterclaims, including claims of copyright infringement.
While the federal suit was pending, WRI filed a chapter 11 bankruptcy case.
WRI sought bankruptcy court approval to employ Blegen and his former firm as
special 	counsel 	in 	the 	pending 	federal 	litigation. 	Appellants 	opposed 	the
employment of Blegen, arguing, inter alia, he held interests adverse to the estate by
representing both WRI and certain members of the family that controlled WRI. The
bankruptcy court rejected Appellants’ arguments and approved the application to
1 The parties’ briefs were due on August 6, 2024. Appellants filed their brief
on August 7, 2024, and later moved for a retroactive one-day extension of time.
Appellants’ motion is granted. The brief, filed on August 7, 2024, is deemed timely
filed.

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employ Blegen and his former firm as special counsel under Section 327(e) of the
Bankruptcy Code.
WRI and its co-defendants were largely successful in the federal litigation,
obtaining summary judgment in their favor on the copyright issues, a jury verdict in
their favor on all counts tried, two judgments in favor of WRI on its counterclaims,
and an order awarding WRI attorney’s fees and costs. Appellants filed a notice of
appeal, and WRI filed a cross-appeal.
Meanwhile, Blegen left his former firm and joined Spencer Fane. 	WRI
notified the bankruptcy court of Spencer Fane’s representation of the debtor in the
federal litigation. WRI later filed an application with the bankruptcy court to employ
Blegen and Spencer Fane as special counsel to represent WRI in defending the
judgment on appeal. At the time of the application, two appeals were pending in the
federal litigation. 	No objection was filed, and the bankruptcy court approved the
application. Shortly thereafter, the Eighth Circuit docketed a third notice of appeal
in the federal litigation, and later, a fourth appeal was filed.
In July 2021, WRI’s bankruptcy case was converted to a chapter 7 case, and
Jill Olsen was appointed Chapter 7 Trustee. Ms. Olsen asked the bankruptcy court
to confirm that Blegen could continue his employment on the same terms and
conditions as previously approved by the court. No objections were filed, and the
bankruptcy court approved Blegen’s retention.
In December 2022, the Chapter 7 Trustee filed a motion to approve Spencer
Fane’s application for fees and expenses. Appellants opposed the motion, arguing
that Spencer Fane held or represented interests adverse to the bankruptcy estate.
After the bankruptcy court held an evidentiary hearing on the motion, the parties
requested mediation, however, that proved to be unsuccessful.
Because it was unclear whether the prior orders authorizing employment of
special counsel were broad enough to include the third and fourth appeals, the

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Chapter 7 Trustee filed an amended application to employ Spencer Fane. 	In her
amended application, the Chapter 7 Trustee sought clarification that Spencer Fane
may be employed as special counsel to represent the bankruptcy estate in all the
appeals related to the federal litigation. 	Appellants objected to the amended
application, again arguing that special counsel held interests adverse to the estate.
By this time, Spencer Fane no longer represented the members of the family that
controlled WRI because they had retained separate counsel in the federal litigation.
Nonetheless, Appellants argued the Chapter 7 Trustee might later assert fraudulent
transfer claims against the family members. 	Appellants also argued that Spencer
Fane had not apportioned its legal fees appropriately among all appellees to the
federal litigation and that the amount of its fees was disproportionate to the size of
the bankruptcy estate.
The bankruptcy court, in a detailed opinion, granted the amended application
over Appellants’ objection. The court declined to disqualify counsel under Section
327(c) of the Bankruptcy Code and found employment proper under Section 327(e).
Specifically, the bankruptcy court found the estate’s interests in defending the
appeals were aligned with the family members’ interests, and the alleged conflicts
raised by Appellants were not actual conflicts but were based on mere conjecture.
The 	court 	explained 	that 	the 	Bankruptcy 	Code 	contains 	certain 	procedural
safeguards in the event that potential conflicts later ripen into actual conflicts of
interest. The bankruptcy court also found Spencer Fane had considerable expertise
and longevity in the complex federal litigation and that it would be more cost
effective to keep Blegen as special counsel. 	Appellants now appeal the order
granting the Chapter 7 Trustee’s amended application to employ Spencer Fane as
special counsel.
DISCUSSION
We have an independent obligation to examine our jurisdiction. 	Dwyer v.
Cohn (In re Dwyer), 244 B.R. 426, 428 (B.A.P. 8th Cir. 2000). 	This court has
jurisdiction over appeals “from final judgments, orders, and decrees,” and from

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certain interlocutory orders, with leave of the court. 28 U.S.C. § 158(a), (b)(1). The
Eighth Circuit applies “a broader, more flexible concept of finality in bankruptcy
cases than [it does] in nonbankruptcy cases.” Sec. Nat’l Bank of Sioux City v. Vera
T. Welte Testamentary Tr. (In re Vera T. Welte Testamentary Tr.), 96 F.4th 1034,
1038 (8th Cir. 2024) (quoting Ritchie Special Credit Invs. v. U.S. Tr., 620 F.3d 847,
852 (8th Cir. 2010)).
In evaluating whether a bankruptcy order is final, the appellate court must ask
“whether ‘it finally resolves a discrete segment of [the bankruptcy] proceeding,’ that
is, a ‘relevant judicial unit of the proceeding.’” 	Id. (alteration in original) (quoting
Off. Comm. of Unsecured Creditors v. Farmland Indus. (In re Farmland Indus.),
397 F.3d 647, 650 (8th Cir. 2005)). 	As explained by the United States Supreme
Court, bankruptcy orders are final for purposes of appeal “if they finally dispose of
discrete disputes within the larger case.” Bullard v. Blue Hills Bank, 575 U.S. 496,
501 (2015) (quoting Howard Delivery Serv. Inc. v. Zurich Am. Ins. Co., 547 U.S.
651, 657 n.3 (2006)); see also Ritzen Grp., Inc. v. Jackson Masonry, LLC, 589 U.S.
35, 37 (2020).
To determine whether the order resolves a discrete segment of the bankruptcy
proceeding, the Eighth Circuit evaluates three primary factors:
(1) [the extent to which] the order leaves the bankruptcy court nothing
to do but execute the order; (2) the extent to which delay in obtaining
review would prevent the aggrieved party from obtaining effective
relief; [and] (3) the extent to which a later reversal on that issue would
require recommencement of the entire proceeding.
In re Vera T. Welte Testamentary Tr., 96 F.4th at 1038 (second alteration in original)
(quoting In re Farmland Indus., 397 F.3d at 650).
The Eighth Circuit has not expressly ruled on whether bankruptcy orders
regarding the employment of professionals are final for purposes of appeal. 	A

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majority of the circuits have found such orders are not final. See, e.g., In re Cont’l
Inv., 637 F.2d 1 (1st Cir. 1980); Minh Vu Hoang v. Rosen (In re Minh Vu Hoang),
473 F. App’x 263 (4th Cir. 2012); Foster Sec., Inc. v. Sandoz (In re Delta Servs.
Indus.), 782 F.2d 1267 (5th Cir. 1986); Cottrell v. Schilling (In re Cottrell), 876 F.2d
540 (6th Cir. 1989); Matter of Devlieg, Inc., 56 F.3d 32 (7th Cir. 1995); Sec. Pac.
Bank Wash. v. Steinberg (In re Westwood Shake & Shingle, Inc.), 971 F.2d 387 (9th
Cir. 1992); Spears v. U.S. Tr., 26 F.3d 1023 (10th Cir. 1994). 	But see U.S. Tr. v.
Bloom (In re Palm Coast, Matanza Shores Ltd. P’ship), 101 F.3d 253 (2d Cir. 1996)
(relying on lower court’s determination that bankruptcy order hiring real estate
consultant was “final” and noting nothing in the order indicated the decision would
be reconsidered); F/S Airlease II, Inc. v. Simon, 844 F.2d 99 (3d Cir. 1988) (relying
on factors different from Eighth Circuit factors to hold that an order authorizing nunc
pro tunc employment of a broker was final). In addition, at least two decisions of
this panel have found such orders are not final.2 See FL Receivables Tr. v. Gilbertson
Rests., LLC (In re Gilbertson Rests., LLC), 315 B.R. 845 (B.A.P. 8th Cir. 2004);
McGehee v. Cox (In re Griffin), 310 B.R. 610 (B.A.P. 8th Cir. 2004); see also Big
Mac Marine, Inc. v. Jensen, 305 B.R. 309 (D. Neb. 2004) (district court order finding
same).
For the reasons stated below, the court finds the order approving the
employment of Spencer Fane as special counsel did not resolve a discrete segment
of the bankruptcy proceeding, and, therefore, it is not a final order under 28 U.S.C.
§ 158(a)(1).
First, there is more left for the bankruptcy court to do than merely execute the
order. The bankruptcy court will continue to be involved with issues concerning the
employment of Spencer Fane until its employment as special counsel comes to an
2 Other decisions of this panel have not addressed the issue of finality, but
nonetheless have ruled on the merits of the order. See Unsecured Creditors’ Comm.
v. Pelofsky (In re Thermadyne Holdings Corp.), 283 B.R. 749 (B.A.P. 8th Cir. 2002);
Blumenthal v. Myers (In re M&M Mktg.), 426 B.R. 796 (B.A.P. 8th Cir. 2010), aff’d
sub nom. In re M&M Mktg., 397 F. App’x 258 (8th Cir. 2010).

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end. Orders approving employment of professionals “do not conclusively determine
any issues under §§ 327 or 330, because a professional may always be removed or
replaced during the course of a bankruptcy, and interim fee awards are subject to
modification and possibly forfeiture.” 	In re Union Home & Indus., 376 B.R. 298,
302 (B.A.P. 10th Cir. 2007). 	Indeed, as recognized by the bankruptcy court, the
Bankruptcy Code contains safeguards to protect the bankruptcy estate if potential
conflicts later ripen into actual conflicts. 	See 11 U.S.C. § 328(c). In addition, the
bankruptcy court will continue to review and rule upon Spencer Fane’s requests for
fees and reimbursement of expenses. 	See 11 U.S.C. § 330(a)(1). 	Appellants may
lodge objections to the fee requests, and the bankruptcy court will be tasked with
deciding the issues. In fact, many of the objections raised by Appellants to Spencer
Fane’s employment, such as the proper amount of legal fees and apportionment of
legal fees between parties, may be raised in response to the fee applications. Instead
of having several appeals related to the employment of Spencer Fane, all issues
regarding employment and compensation can be subject to appellate review when
the engagement is complete and the allowance or disallowance of fees and expenses
is made final. Allowing review of the employment order at this point will encourage
“piecemeal litigation, which is the fundamental policy concern underlying the
finality requirement for appellate review.” 	In re Gilbertson Rests., LLC, 315 B.R.
at 849.
Second, a delay in obtaining appellate review of the order will not prevent
Appellants from obtaining effective relief. 	Rather, delaying review will prevent
piecemeal appeals of similar issues and will allow all related disputes to be addressed
and determined at one time. As stated above, under the Bankruptcy Code and Rules,
Appellants may renew their objections if conflicts arise in the future. 	They retain
the ability to object to Spencer Fane’s fee applications, including the final fee
application. 	See 11 U.S.C. §§ 328, 330. After the bankruptcy court rules on these
issues, the appellate court “will be in a better position to conduct an appropriate and
thorough 	review 	of all 	issues 	relating to 	[Spencer Fane’s] employment 	and
compensation as an attorney in this case.” In re Union Home & Indus., 376 B.R. at
303.

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Third, a later reversal on the issue of Spencer Fane’s employment will not
require recommencement of either the bankruptcy case or the federal litigation. As
special counsel for the bankruptcy estate in the federal litigation, Spencer Fane
advises and takes directions from the Chapter 7 Trustee. Spencer Fane is merely an
agent for the estate, serving at the pleasure and under the direction of the Chapter 7
Trustee. 	Contrary to the assertions of Appellants, no actions would need to be
ratified or revisited because it is the Chapter 7 Trustee, not her counsel, who has
final say as to how the litigation proceeds. As acknowledged by Spencer Fane, it is
possible that a later reversal may have an impact on the compensation to be awarded
to special counsel, but that is a risk Spencer Fane is willing to take.
Appellants heavily rely on the case of Ritchie Special Credit Investments Ltd.
v. U.S. Trustee, 620 F.3d 847 (8th Cir. 2010), in support of their position that the
order employing special counsel is final. 	We find the facts in the Ritchie case
distinguishable to the facts of this case.3 Ritchie involved the bankruptcy court’s
approval of Douglas A. Kelley as Chapter 11 Trustee in two jointly administered
bankruptcy cases over the objection of a creditor. 	The order being appealed in
Ritchie was neither an order employing special counsel nor an order employing
counsel for the estate; rather, it was an order approving Kelley’s appointment as
Chapter 11 Trustee. 	Once appointed, Kelley had all the powers afforded trustees
under the Bankruptcy Code, including, inter alia, avoidance powers, authority to use
or sell property of the estate, power to sue and be sued, power to abandon property
from the estate, power to compromise controversies, and power to formulate and
propose a plan of reorganization. 	Kelley would be using his own discretion and
judgment in making decisions for the estate on a daily basis. Unlike a Chapter 11
Trustee, Spencer Fane is merely employed as special counsel to represent the
bankruptcy estate in outside litigation. It does not have any of the powers granted
3 Although we find the facts of Ritchie distinguishable, the Ritchie case
evaluated the same three elements as the courts did in 	In re Vera T. Welte
Testamentary 	Trust, 	In 	re 	Farmland 	Industries, 	Inc., 	and 	In 	re 	Gilbertson
Restaurants, LLC.

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to trustees to make decisions for the estate. 	Instead, it takes instructions from its
client representative, the Chapter 7 Trustee.
Ritchie is also distinguishable because in finding the order appointing a
Chapter 11 Trustee to be final, the Eighth Circuit explained it was joining the
majority of its sister circuits that had considered the issue, citing cases from the First,
Third, Fourth, and Fifth Circuits. While those circuits have found orders appointing
Chapter 11 Trustees final, three of the four circuits have found bankruptcy orders
regarding the employment of professionals are not final for purposes of appeal. See
In re Cont’l Inv. Corp., 637 F.2d at 4 (1st Cir.); In re Minh Vu Hoang, 473 F. App’x
at 263 (4th Cir.); In re Delta Servs. Indus., 782 F.2d at 1272 (5th Cir.). For all of
these reasons, we find Ritchie is distinguishable to this case.
We find the order approving the amended application to employ Spencer Fane
as special counsel does not resolve a discrete segment of the bankruptcy proceeding.
This issue is neither one that would “exist as [a] stand-alone lawsuit[] but for the
bankrupt status of the debtor,” nor one that “alters the status quo and fixes the rights
and obligations of the parties.” Bullard, 575 U.S. at 501–02. The bankruptcy court
will 	continue 	to 	be 	involved 	with 	issues 	concerning 	the 	employment 	and
compensation of Spencer Fane. Thus, the order is not a final order under 28 U.S.C.
§ 158(a)(1).
Although the order is not final, this court may review certain interlocutory
orders under 28 U.S.C. § 158(a)(3), with leave of the court. We may exercise our
discretion to review interlocutory orders if:
(1) the question at issue is one of law; (2) the legal question is
controlling; (3) there exists a substantial ground for difference of
opinion concerning the correctness of the bankruptcy court’s resolution
of that question of law; and (4) there is a finding that a review of the
legal 	question 	at 	issue 	would 	materially 	advance 	the 	ultimate
termination of the litigation.

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In re Gilbertson Rests., LLC, 315 B.R. at 849 (citing Gen. Elec. Corp. v. Mach., Inc.
(In re Mach., Inc.), 275 B.R. 303, 306 (B.A.P. 8th Cir. 2002)). Review under Section
158(a)(3) is to be granted “sparingly and only in exceptional cases.” 	Id. (citing In
re Mach., Inc., 275 B.R. at 306). As explained in their brief, Appellants did not file
a motion for leave to appeal because they believed the order was final. While this
court has discretion under Rule 8004(d) of the Federal Rules of Bankruptcy
Procedure to treat Appellants’ notice of appeal as a motion for leave to appeal or to
order Appellants to file a motion for leave to appeal, both parties agree that our
review under Section 158(a)(3) is not appropriate because some or all of the requisite
elements are not present here. 	Accordingly, we decline to review the order under
28 U.S.C. § 158(a)(3).
Because the bankruptcy court’s order is not final under 28 U.S.C. § 158(a)(1),
and review under 28 U.S.C. § 158(a)(3) is not appropriate, we lack jurisdiction over
the appeal. The appeal is dismissed.
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