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Receiver asks appeals court to vacate denials of fees; PNC contends nondisclosure and conflict
Summary
At oral argument in the Enri receivership appeal, receiver counsel asked the panel to vacate orders denying compensation and remand to approve January and February fee requests; PNC Bank countered that roughly $200,000 in insurer reimbursements were material and that counsel’s payment source created a conflict or, at minimum, a nondisclosure warranting denial.
Linda Clapham, counsel for the receiver in the Enri receivership matter, asked an appellate panel to vacate trial-court orders that denied compensation to the receiver and its lawyers and to remand with directions to approve the receiver’s January and February fee requests. "First, the receiver requests that these orders denying compensation for the receiver and its counsel be vacated and this matter be remanded with directions to enter those orders approving the January and February fee requests," Clapham told the court.
The appeal centers on two related theories pressed by PNC Bank. Jan Chilton, who represented PNC at argument, told the panel that the trial court reasonably found either a conflict of interest or material nondisclosure. Chilton said the record shows "a large amount of money was paid, over $200,000 in the course of 7 months," and argued that the receiver, as an agent of the court, had a duty of "full, fair and timely disclosure" about payments and potential loyalties.
Why it matters: The parties dispute whether insurer reimbursement of defense fees—here, Catlin’s payments—creates an allegiance that could reduce incentives to pursue all available recoveries for the receivership estate, and whether the trial court was entitled to withhold fee approval because the reimbursements were not disclosed in a way the court could evaluate.
Clapham told the panel that the firms identified in the record—Beck, Chase and Winneker Reardon—were hired to defend the receiver against PNC’s malpractice claim and that their only client in that role was the receiver. "The only client of Beck Chase and Winneker is the receiver," she said, arguing there was "no conflict" because the receiver paid counsel and Catlin reimbursed the receiver, not counsel directly.
Chilton urged the court to treat nondisclosure itself as a sufficient basis for the trial court’s rulings. He emphasized the timing of PNC’s objections, saying PNC began to object to fee requests after the receiver signaled it would challenge PNC’s claim. Chilton argued that, even if insurer payments conserve estate resources by covering defense costs, the record showed material reimbursements that the trial court should have been told about, and that some of the receiver’s actions appeared to favor payment of fees over protecting creditor recoveries.
The panel pressed both sides on the legal standard and the practical consequence of requiring court permission for routine reimbursement. The chair repeatedly asked how insurer reimbursement produced the kind of adverse interest envisioned by statute, noting that funds held by an insurer are not estate assets and that accepting defense funds can preserve the estate by avoiding outlays from estate coffers.
Clapham also said the receiver’s profit-and-loss statements submitted to the trial court reflected Catlin’s reimbursements and argued that requiring prior leave for every reimbursement would be unworkable. She asked the panel, should it vacate the orders, to confirm the receiver’s right to seek reimbursement of defense fees from Catlin "under the terms of the insurance contract." She concluded her argument after the panel had no further questions.
No decision was announced at the argument. The panel heard the parties’ competing positions on conflict and disclosure and will issue a written decision resolving whether the trial court properly denied compensation or whether remand is required.
