Lazarus, Michel & Lazarus v. Prentice

Background

A. Música & Son was a New York importing firm run by partners Antonio and Philip Música that faced an involuntary bankruptcy petition filed in the Southern District of New York on March 19, 1913. On the same day the partners were arrested in New Orleans and about $75,000 in cash and roughly $50,000 in notes, mortgages, and insurance policies were found with them. The Eastern District of Louisiana confirmed a temporary receiver and ordered the property turned over to the trustee elected in New York. On April 28, 1913, a New Orleans law firm, Lazarus, Michel & Lazarus, intervened claiming $15,000 in attorney fees and asserting assignments dated April 1, 1913.

Reasoning

The Court addressed whether that intervention turned the matter into an appealable controversy. It explained that the filing of the bankruptcy petition put the bankrupts’ property into the custody of the original bankruptcy court, so later assignments could not defeat that control. The Louisiana court acted in an ancillary, summary role to protect and hold property for the New York bankruptcy court, and claims for fees arising in contemplation of bankruptcy are to be reviewed by the original bankruptcy court. Because the intervention did not create a plenary, appealable dispute, the Circuit Court of Appeals was correct to affirm dismissal of the intervention and the attempted further appeal could not proceed here.

Real world impact

The ruling requires the law firm to pursue any fee claim in the original New York bankruptcy proceeding rather than by intervening in the Louisiana ancillary process. It confirms that courts seizing bankrupt property act to preserve assets for the court with primary bankruptcy authority, and that such ancillary actions do not automatically create appeals to higher courts. The Supreme Court dismissed the attempted appeal.