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Full title: Objection to application for compensation by U.S. Trustee US Trustee re: 359 Application for Compensation with hearing. An affidavit or verification, Memorandum of law, Proof of service, Proposed order. (Wencil, Sarah) (Entered: 07/08/2021)

Document posted on Jul 7, 2021 in the bankruptcy, 13 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

For professions hired under 11 U.S.C. §§ 327 and 1103, compensation and reimbursement of expenses is allowed through Section 330(a), which provides in part: (a)(1) As property of the estate, [the retainer] remains available for release and application to other administrative-expense claims – albeit only upon court direction after appropriate motion, and only in extraordinary circumstances.(“Debtors’ attorneys, however, experience financial risk even with an “evergreen” retainer, since they could be compelled to disgorge such retainers if in a particular case there were insufficient assets to pay all similarly-situated or superior administrative claimants”); Snyder v. Dewoskin (In re Mahendra), 131 F.3d 750, 756 (8th Cir.Historically, in Minnesota, there were two types of liens that attorneys could take as a retainer for services: the "retaining lien" and the "charging lien."In re Kinderhaus Corp., 58 B.R. 94, 97 (Bankr. D. Minn. 1986).” 124 B.R. at 560.

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UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA In re: Tea Olive I, LLC d/b/a/ Stock + Field, Chapter 7 Debtor. BK 21-30037 U.S. TRUSTEE'S OBJECTION TO FIRST APPLICATION FOR ALLOWANCE OF FEES AND EXPNESES OF ACCOUNTANT FEBRUARY 24, 2021 THROUGH MAY 31, 2021 (COPELAND BUHL 7 COMPANY PLLP) COMES NOW the Acting United States Trustee (UST) and objects to the First Application for Allowance of Fees and Expenses of Accountant February 24, 2021 through May 31, 2021 (Copeland Buhl & Company PLLP) (the Application/Applicant) (Doc. 359). In support of his objection, he states the following: 1. A hearing has been scheduled in this matter on July 13, 2017 at 9:30 a.m. before the United States Bankruptcy Court, Courtroom No. 2B, U.S. Bankruptcy Court, U.S. Courthouse, 316 North Robert Street, St. Paul, Minnesota. 2. The Application arises under 11 U.S.C. § 330(a). The UST has standing to object to the Application pursuant to 11 U.S.C. § 307 and 28 U.S.C. § 586. 3. The petition for Chapter 11 reorganization was filed by the debtor on January 10, 2021. This application was filed on June 14, 2021. The debtor converted the case to chapter 7 on June 23, 2021. 4. The UST does not object to the award of the fees and reimbursement of expenses pursuant to Section 330(a) and the allowance of the award as a chapter 11 administrative expense under Section 503(b)(2).

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5. The UST objects to the application of the retainer to the allowed fees. Under Minnesota law and the law of the Eighth Circuit, the retainer became property of the estate at the time of conversion. In addition, it is not clear at this stage in the chapter 7 case whether there are sufficient funds to pay all similarly situated allowed chapter 11 administrative expenses. The retainer should be included in the distribution to all creditors under the priority scheme at 11 U.S.C. § 726. WHEREFORE, the United States Trustee requests that the Bankruptcy Court deny any distribution of the allowed fees through the application of the retainer or other such authorization for payment. Dated: July 8, 2021 JAMES L. SNYDER Acting United States Trustee, Region 12 /s/ Sarah J. Wencil Sarah J. Wencil Trial Attorney Office of U.S. Trustee Iowa Atty. No. 14014 U.S. Courthouse, Suite 1015 300 South Fourth Street Minneapolis, MN 55415 TELE: (612) 334-1350

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VERIFICATION I, Sarah J. Wencil, trial attorney for the United States Trustee, named in the foregoing pleading declare under penalty of perjury that the foregoing is true and correct according to the best of my knowledge, information and belief. Executed on: July 8, 2021 /s/ Sarah J. Wencil Sarah J. Wencil Trial Attorney IA ATTY NO 14014 1015 U.S. Courthouse 300 South Fourth Street Minneapolis, MN 55415 TELE: (612) 334-1350

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UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA In re: Tea Olive I, LLC d/b/a/ Stock + Field, Chapter 7 Debtor. BK 21-30037 MEMORANDUM OF LAW The Acting United States Trustee (UST) submits this Memorandum of Law in support of his objection to the Notice of Hearing and First Application for Allowance of Fees and Expenses of Accountant February 24, 2021 through May 31, 2021 (Copeland Buhl & Company PLLP) (Application/Applicant). Statute and Law Governing Compensation of Professionals For professions hired under 11 U.S.C. §§ 327 and 1103, compensation and reimbursement of expenses is allowed through Section 330(a), which provides in part: (a)(1) After notice to the parties in interest and the United States Trustee and a hearing, and subject to sections 326, 328, and 329, the court may award to a trustee, an examiner, a professional person employed under section 327 or 1103 — (A) reasonable compensation for actual, necessary services rendered by the trustee, examiner, professional person, or attorney and by an paraprofessional person employed by any such person; and (B) reimbursement for actual, necessary expenses. 11 U.S.C. § 330(a). An award under Section 330(a) is allowed as an administrative expense under 11 U.S. C. § 503.

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Retainer is Property of Estate It is settled law in the Eighth Circuit that a retainer remains property of the debtor until counsel applies the retainer to “earned” legal services: Under the ethical rules applicable in most jurisdictions, the security retainer monies remain property of the client until counsel applies them to legal services actually performed. The debtor’s equitable interest in the unearned portion of the retainer becomes property of the estate upon the filing of the bankruptcy petition. To withdraw the retainer, counsel is required to file a fee application with the bankruptcy court pursuant to 11 U.S.C. § 330 (1994), and the court could require the debtor's counsel to surrender the unearned portion as "property of the estate" pursuant to § 542. Snyder v. Dewoskin (In re Mahendra), 131 F.3d 750, 756 (8th Cir. 1997). (citation omitted); see also Lavender v. Wood Law Firm, 785 F.2d 247, 248 (8th Cir. 1986)(“holding that a professional hired to represent the estate “must give notice to creditors and receive court approval prior to being compensated by the estate.”). In In re Fitzsimmons Trucking, Inc., a chapter 11 case, a Minnesota bankruptcy court recognized that it was impermissible for a lien to attach to an attorney retainer in a chapter 11 case and that the attorney retainer remained property of the estate. 124 B.R. 556, 560 (Bankr. D. Minn. 1991) (Kishel, J.). The court stated: The impressment of a lien against an attorney retainer in a Chapter 11 case is wholly impermissible. Until actually applied in satisfaction of an allowed claim for interim or final compensation, an attorney’s retainer held in trust is property of the estate. 11 U.S.C. § 541(d); In re Kinderhaus Corp., 58 B.R. 94, 97 (Bankr. D. Minn. 1986). As property of the estate, [the retainer] remains available for release and application to other administrative-expense claims – albeit only upon court direction after appropriate motion, and only in extraordinary circumstances. In re Ahlers, 794 F.2d 388, 393-94 n. 2 (8th Cir. 1986), rev’d in part on other grounds, 485 U.S.

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197, 108 S. CT. 963, 99 L. Ed.2d 169 (1988).” Id. The terms of the trust relationship between counsel and its debtor-client limit the availability of the retainer to purposes other than satisfaction of counsel’s claims. In re Kinderhaus Corp., 58 B.R. at 97. They are, however, the only such limitation. ...[U]nder Minnesota law the attorney for a trustee cannot assert a lien against the res of the trust. Truesdale v. Phila. Trust, Safe Deposit & Ins. Co., 63 Minn. 49, 52, 65 N.W. 133 (1895). Id. See also In re Benjamin’s-Arnolds, Inc. 123 B.R. 830, 840 (Bankr. D. Minn. 1990) (Dreher, J.) (“Debtors’ attorneys, however, experience financial risk even with an “evergreen” retainer, since they could be compelled to disgorge such retainers if in a particular case there were insufficient assets to pay all similarly-situated or superior administrative claimants”); Snyder v. Dewoskin (In re Mahendra), 131 F.3d 750, 756 (8th Cir. Dec. 17, 1997). Historically, in Minnesota, there were two types of liens that attorneys could take as a retainer for services: the "retaining lien" and the "charging lien." See Akers v. Akers, 233 Minn. 133, 46 N.W.2d 87 (1951). The retaining lien was a lien in all money or property in the possession of the attorney. Akers v. Akers, 233 Minn. 133, 46 N.W.2d 87 (1951). In In re Fitzsimmons Trucking, Inc., the court noted that the "retaining lien was abolished by the Minnesota legislature in 1976. 124 B.R. 556, 560 (Bankr. D. Minn. 1991) (citing 1976 Minn.Sess.L., c. 304, § 2; Boline v. Doty, 345 N.W.2d 285, 288 (Minn.App.1984)). The other type of retainer, the "charging lien," has been codified at MINN. STAT. § 481.13. See In re Fitzsimmons, 124 B.R. 556, 560 (Bankr. D. Minn. 1991). The Minnesota Court of Appeals, in St. Cloud Nat’l Bank & Trust Co. v. Brutger, 488 N.W.2d 852 (Minn. App. 1992), held that a lien did not attach to a law firm’s retainer account and that the account was subject to levy by a creditor of the client. The Court noted that “[i]t is well-established that advance payments for future services are client funds until earned....”

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Id. at 84. The Court concluded that the retainer funds were not earned when the retainer was received from the client and that no attorney’s lien existed in a retainer under Minnesota law, except the statutory lien located at MINN. STAT. §481.13 (1990), which creates a lien in the proceeds of an underlying lawsuit or cause of action for work performed by an attorney in that lawsuit. Id. at 855. The Eighth Circuit also noted in In re Pierce: " [T]he only method of obtaining an attorney's lien in Minnesota is by complying with Minn. Stat. § 481.13." 809 F.2d 1356, 1359-60 (8th Cir. 1986). The remaining consideration is when the retainer becomes “earned” or in other words, whether a lien attaches as services are performed in the Chapter 11 case. Under Minnesota law, an attorney for a trustee cannot assert a lien against the res of the trust. Truesdale v. Phila. Trust, Safe Deposit & Ins. Co., 63 Minn. 49, 52, 65 N.W. 133 (1895). As noted in In re Fitzsimmons: “Until actually applied in satisfaction of an allowed claim for interim or final compensation, an attorney’s retainer held in trust is property of the estate. 11 U.S.C. § 541(d); In re Kinderhaus Corp., 58 B.R. 94, 97 (Bankr. D. Minn. 1986).” 124 B.R. at 560. Therefore, since attorney fees are not “earned” until approved by the Bankruptcy Court under Sections 330 or 331, the retainer was property of the estate upon conversion of the case to chapter 7. The retainer funds should be available to the estate to be disbursed by the chapter 7 trustee in accordance with the priorities established at Section 726. The Estate May be Administratively Insolvent The payment of the fee is also not warranted because the estate may be administratively insolvent. Nothing in the Code provides guidance as to the timing of payment of allowed administrative expenses. Thus, the issue is left to the discretion of the Court. See In re Chips 'N

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Twigs, Inc., 58 B.R. 109 (Bankr. E.D. Pa. 1986). In Chips 'N Twigs, the bankruptcy court refused to permit immediate payment of the creditors committee’s professional fees: Quite simply, interim fees can be paid only when it is reasonably clear that the assets of the estate will be sufficient to pay all administrative expenses. The majority of the cases addressing this issue have thusly concluded. In Re Colter, Inc., 53 B.R. 958, 961 (Bankr. D. Colo. 1985); In Re American Resources Management Corp., 51 B.R. 713 (Bankr. D. Utah 1985); American International Airways, Inc., 47 B.R. 716, (Bankr. E.D. Pa.1985); In Re IML Freight, Inc., 52 B.R. 124 (Bankr. D. Utah 1985). The case law also supports the correlative principle that interim fees under § 331 cannot be paid from assets that would otherwise be payable to a creditor holding a superiority. In Re Mobile Air Drilling Co., Inc., 53 B.R. 605, 609 (Bankr. N.D. Ohio 1985); In Re Roblin Ind., Inc., 52 B.R. 241 (Bankr. W.D.N.Y. 1985); In Re Becker, 51 B.R. 975 (Bankr. D. Minn.1985). The third pertinent point is that interim compensation cannot be paid from property of the estate to the extent that that property is encumbered by a creditor's security interest. General Electric Credit Corp. v. Levin & Weintraub (In Re Flagstaff Foodservice Corp.), 739 F.2d 73 (2d Cir. 1984); General Electric Credit Corp. v. Peltz (In Re Flagstaff Foodservice Corp.), 762 F.2d 10 (2d Cir. 1985); In Re Winslow Center Assoc., 57 B.R. 317 (Bankr. E.D. Pa. 1986); In Re Fazio, 57 B.R. 316 (Bankr. E.D. Pa. 1986). 58 B.R. at 111; see also In re Alberto, 121 B.R. 531, 538 (Bankr. N.D. Ill. 1990) (“Presence of sufficient funds in the estate to allow interim compensation without jeopardizing claims of equal priority held by others is a factor to be considered.”); In re Robin Industries, Inc., 16 B.R. 695, 697 (Bankr. N.D. Ga. 1982) (“Applications for interim compensation are to be decided on a case by case basis, considering factors such as . . . the presence of sufficient funds in the estate to allow interim compensation without jeopardizing claims of equal priority held by others.”). In this case, the status of the administrative claims is unknown. This case was recently converted to chapter 7. No distributions should be permitted on an interim basis until it is clear that all similarly situated claimants will be paid on an equal pro rata basis. Conclusion

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The UST requests that the Bankruptcy Court sustain his objection to the Application. The UST’s objections to the Application are reasonable and objective on behalf of all creditors of the estate. Dated: July 8, 2021 JAMES L. SNYDER Acting United States Trustee Region 12 /s/ Sarah J. Wencil Sarah J. Wencil Trial Attorney Office of U.S. Trustee Iowa Atty. No. 14014 U.S. Courthouse, Suite 1015 300 South Fourth Street Minneapolis, MN 55415 TELE: (612) 335-1350

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UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA In re: Tea Olive I, LLC d/b/a/ Stock + Field, Chapter 7 Debtor. BK 21-30037 UNSWORN CERTIFICATE OF SERVICE The undersigned states under penalty of perjury that she electronically filed the Objection. A copy of the objection was sent by U.S. Mail Postage-Prepaid to: Copeland Buhl Attn: Sean F. Hauenstein 800 East Wayzata Boulevard, Suite 300 Wayzata, MN 55391 Electronic service was made by CM/ECF on the following parties: • Samuel M. Andre sandre@fredlaw.com, stimm@fredlaw.com;sstallings@fredlaw.com,autodockets@fredlaw.com • James C. Brand jbrand@fredlaw.com, stimm@fredlaw.com,autodockets@fredlaw.com • Gregory A Bromen gbromen@nilanjohnson.com, dbunnell@nilanjohnson.com • Greta M Brouphy gbrouphy@hellerdraper.com, hepting@hellerdraper.com;vgamble@hellerdraper.com • Michael A. Cavallaro mcavallaro@btlaw.com, sgronberg@btlaw.com • Samuel R. Coleman samuel@theacademylawgroup.com, denise@theacademylawgroup.com;candace@theacademylawgroup.com • Leslie A Collins lcollins@hellerdraper.com, hepting@hellerdraper.com;vgamble@hellerdraper.com • Clinton E. Cutler ccutler@fredlaw.com, stimm@fredlaw.com,sstallings@fredlaw.com,autodockets@fredlaw.com • Spencer Lee Daniels danielslaw@sbcglobal.net

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• Michael A. DiGiacomo digiacomom@ballardspahr.com, phxdocketingbkr@ballardpahr.com;hartt@ballardspahr.com;morganv@ballardspahr.com • Donlin, Recano & Company Inc ljordan@donlinrecano.com, nefrecipients@donlinrecano.com;skim@donlinrecano.com;ecalderon@donlinrecano.com;rwong@donlinrecano.com • Douglas S Draper ddraper@hellerdraper.com, hepting@hellerdraper.com;vgamble@hellerdraper.com • Thomas Flynn tflynn@larkinhoffman.com, bpeppersack@larkinhoffman.com;abeeby@larkinhoffman.com;aschaal@larkinhoffman.com;bankruptcy@larkinhoffman.com • Steven E. Fox sfox@riemerlaw.com • Craig S. Ganz ganzc@ballardspahr.com, phxdocketingbkr@ballardpahr.com;hartt@ballardspahr.com;morganv@ballardspahr.com • John A. Halpern john@halpernlawfirm.com • Karl J. Johnson kjjohnson@taftlaw.com, johnsonkj@gmail.com,mkoneczny@taftlaw.com,vrittenbach@taftlaw.com • Steven R. Kinsella skinsella@fredlaw.com, sstallings@fredlaw.com;autodockets@fredlaw.com • Jeffrey D. Klobucar jklobucar@bassford.com, dcarlson@bassford.com • Connie A. Lahn clahn@btlaw.com, marobinson@btlaw.com;sofia.shaw@btlaw.com • Cameron A. Lallier clallier@foleymansfield.com, jlavaque@foleymansfield.com;drousseau@foleymansfield.com • Thomas Lallier ECF_Notices@foleymansfield.com, drousseau@foleymansfield.com;jlavaque@foleymansfield.com;TLallier@Foleymansfield.com • John D. Lamey bankrupt@lameylaw.com, MGangi@lameylaw.com;ewise@lameylaw.com • Emily M McAdam emcadam@fredlaw.com, sstallings@fredlaw.com;autodockets@fredlaw.com • Steven W Meyer smeyer@foxrothschild.com • Charles E. Nelson nelsonc@ballardspahr.com, simonk@ballardspahr.com • Steven C. Opheim sopheim@dudleyandsmith.com, wmaclennan@dudleyandsmith.com • Paul L. Ratelle pratelle@fwhtlaw.com, lsmith@fwhtlaw.com • Jason M Reed jason.reed@maslon.com, jason.reed85@gmail.com • Ian M. Rubenstrunk irubenstrunk@winthrop.com, tcooke@winthrop.com • Aaron M. Scott ascott@foxrothschild.com, kpeterson@foxrothschild.com

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• George H. Singer singerg@ballardspahr.com, johnsonma@ballardspahr.com • Patti J. Sullivan patti@pattisullivan.com, mn11@ecfcbis.com • Amy J. Swedberg amy.swedberg@maslon.com, sue.sjodahl@maslon.com • Kesha L. Tanabe kesha@tanabelaw.com, kesha.tanabe@gmail.com • US Trustee ustpregion12.mn.ecf@usdoj.gov • Gary D. Underdahl gunderdahl@askllp.com, lmiskowiec@askllp.com;kcasteel@askllp.com Dated: July 8, 2021 /s/ Sarah J. Wencil Sarah J. Wencil Office of the US Trustee

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UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA In re: Tea Olive I, LLC d/b/a/ Stock + Field, Chapter 7 Debtor. BK 21-30037 ORDER At St. Paul, Minnesota. The First Application for Allowance of Fees and Expenses of Accountant February 24, 2021 through May 31, 2021 (Copeland Buhl & Company PLLP) [Doc. 359] came before the undersigned. Appearances were noted on the record. Based on the pleadings, the file and the arguments of the parties, and the Court being fully advised of the premises -- IT IS HEREBY ORDERED: 1. Copeland Buhl & Company, PLLP’s fees in the amount of $14,341 incurred between February 24, 2021, through May 31, 2021 are allowed. 2. No disbursement is authorized at this time without prejudice to the right of the applicant to receive a disbursement in the future. William F. Fisher U.S. Bankruptcy Judge

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