Burton Perlman
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
______________
Burton Perlman
United States Bankruptcy Judge
Chapter 7
Judge Burton Perlman
ORDER ON MOTION OF U.S. TRUSTEE TO DETERMINE EXCESSIVENESS OF
ATTORNEY FEES
I. Background.
The four cases listed in the caption are all chapter 7 bankruptcy cases, and in each of them the attorney of record for the debtor or debtors is Carol Jean Destocki (hereafter "Destocki".) In each case the U.S. Trustee has filed a Motion to Determine Excessiveness of Attorney Fees. A single hearing was held on all of the motions on June 1, 2012. The U.S. Trustee and Destocki appeared at the hearing. Joint debtors Bobby Shane and Amy Michelle Murrell were also present at the hearing. At the hearing Amy Michelle Murrell testified about the experience of the Murrells with Destocki in connection with their bankruptcy case. As to the other three cases the circumstances leading to the motions were related by the U.S. Trustee.
At the hearing, the Court was provided by Destocki with a copy of the papers which she requires that a prospective client fill out before she will accept representation.
At the conclusion of the hearing, the Court reserved decision. Destocki practices in Ironton, Ohio in Lawrence County. That area is a considerable distance from the Court, which sits in Cincinnati, and the Court deemed it an undue imposition to require that these debtors appear in Cincinnati. The U.S. Trustee was therefore directed to secure affidavits from the debtors in the above cases. The Court also directed Destocki to furnish the Court with the payment facts with regard to each of the above cases. Destocki has now complied with that direction. The U.S. Trustee also furnished the Court with affidavits in compliance with the direction of the Court. In addition, the U.S. Trustee obtained the affidavit of John A. Schuh, an attorney representing Ford Motor Credit Company in regard to a proposed reaffirmation agreement where the debtor is David Heighton, debtor in case no. 11-15449. Heighton was also a client of Destocki. The U.S. Trustee also included an affidavit by Beth Ann Rist for whom Destocki filed a bankruptcy case no. 11-15231.
II. Pertinent Law.
The several motions here in question brought by the U.S. Trustee are based on 11 USC § 329 which provides:
§ 329 Debtor's transaction with attorneys
(a) Any attorney representing a debtor in a case under this title, or in connection with such a case, whether or not such attorney applies for compensation under this title, shall file with the court a statement of the compensation paid or agreed to be paid, if such payment or agreement was made after one year before the date of the filing of the petition, for services rendered or to be rendered in contemplation of or in connection with the case by such attorney, and the source of such compensation.
(b) If such compensation exceeds the reasonable value of any such services, the court may cancel any such agreement, or order the return of any such payment, to the extent excessive, to-
(1) the estate, if the property transferred-
(A) would have been property of the estate; or
(B) was to be paid by or on behalf of the debtor under a plan under chapter 11, 12, or 13 of this title; or
(2) the entity that made such payment.
See In re West 398 B.R. 629, 647 (Bankr. E.D. Ark. 2009) "[l]f all of the services rendered by the attorney do not warrant the compensation provided, the court may order the return of the compensation as excessive. ").
III. Discussion.
The Court turns now to a decision on the motions of the U.S. Trustee separately in each of the four cases in which motions have been filed. A. Bobby Allen and Gloria Jean Jeffers. Case No. 11-15018.
In response to the request by the U.S. Trustee, the Jeffers submitted an affidavit. In it they referred to a complaint they have filed in the Court of Common Pleas, Lawrence County in Ironton, Ohio against Destocki and her law firm, case no. 12PI000366. The Jeffers say that the facts alleged in the complaint, which is attached to their affidavit, are true and accurate. With respect to the Jeffers case, Destocki informs the Court that no balance is due. The affidavit evidence by the Jeffers is that they paid Destocki $1,499.00 for their bankruptcy. Before filing, Destocki required payment of another $248.00, which was paid.
The Jeffers say that they retained and paid Destocki on April 24, 2011. Their petition was not filed until August 17, 2011. The § 341 Meeting was initially scheduled to be held October 19, 2011. The Jeffers appeared as did Destocki at the creditors meeting on October 19, 2011, but the hearing was adjourned because documents required by the trustee were not at hand. The adjourned creditors meeting was held December 13, 2011. The Jeffers appeared, but Destocki did not. The Jeffers own a 2010 Ford F-150 truck. They received a reaffirmation agreement from Ford Motor Credit Company, LLC, which they signed and left in the hands of Destocki. The reaffirmation agreement was not filed and their F-150 truck was repossessed. At that time, the Jeffers had been current on their truck payments.
On the evidence presented, the Court finds it was improper for Destocki not promptly to file the bankruptcy case upon retention by the Jeffers. It was improper for Destocki not to be prepared for the first §341 Meeting, and failing to appear at the reset hearing. It was improper for Destocki not to see to it that the reaffirmation agreement signed by the Jeffers was returned to Ford Motor Credit, causing the vehicle to be repossessed.
Because of our findings outlined above, the Court holds that Destocki's representation of the Jeffers was not conducted reasonably. The Jeffers are entitled to a full refund of the fees paid Destocki. This will exclude the court filing fee. After deducting $299.00 court filing fee, the Jeffers paid Destocki $1,448.00. Because of Destocki's improper conduct, the Court holds that the entire fee should be returned by Destocki to the Jeffers.
B. Bobby Shane and Amy Michelle Murrell. Case No. 11-15801.
Destocki has informed the Court that the Murrells were charged $1,300.00 for attorney's fees. The Murrells had paid $652.00 towards attorney's fees and $299.00 for filing fee. The balance due on attorney's fees is $648.00.
The Murrell case was filed September 26, 2011.
At the June 1, 2012 hearing, Amy Michelle Murrell stated that they had retained Destocki on August 1, 2011 and paid a retainer and the filing fee on that date. The § 341 Meeting was set for November 16, 2011. Debtors appeared, but Destocki did not. The 341 Meeting was reset to December21, 2011. Unfortunately, Bobby Murrell's mother died and Chris Destocki (son of Carol Jean) advised the Murrells that the hearing would be reset. Destocki did not inform the trustee. The §341 Meeting was then continued to January 18, 2012 and again continued to February 15, 2012. Bobby Murrell appeared at the January date for the §341 Meeting, but Destocki did not.
Destocki practices with her husband, who is an attorney. Her husband had the original retention conference with the Murrells. Debtors did not meet Destocki until the February 15, 2012 § 341 Meeting. All meetings and communications of debtors with the Destocki office were with Chris Destocki, son of Destocki and her husband. Chris Destocki is not an attorney. The Murrells had gotten behind in their house payments and were desirous of reaffirming on their house obligations. Chris Destocki informed the Murrells that they would not lose their home and that they would not have to make a payment until after their case was discharged. The Murrells never received a reaffirmation agreement from Destocki. The Murrells received a discharge on June 12, 2012.
Destocki and her husband were having serious health problems during the periods referred to by the Murrells, and Destocki said that this accounts for failures to appear and other inadequacies.
It is the conclusion of the Court that there has been a failure on the part of Destocki to see to it that the Murrells were adequately represented in their dealings with the trustee after the case was filed. The Court is not informed about the status of the Murrells desire to retain their home. Under the circumstances, the Court concludes that a full refund of amounts paid by the Murrells to Destocki is unwarranted, but the Court holds that the fee to Destocki is limited to what has already been paid by the Murrells and no further payment to Destocki will be required.
C. Shirley Mae Lykins. Case No. 11-15427.
In regard to this case, the only information provided by Destocki is that no balance is due by way of attorney's fee from the debtor. We have no basis therefore to contest the statement by the U.S. Trustee that debtor was charged an attorney's fee of $1,150.00 in her case.
This case was filed September 3, 2011. Debtor went to Destocki's law firm more than two years earlier, in March 2009, and Destocki's firm was retained to file her case then. At the same time, Destocki's firm was hired to file a bankruptcy case for Shirley Mae Lykins' son, Jeffrey, case no. 11-16161. Destocki's firm also charged him an attorney's fee of $1,150.00. Both Shirley Mae and Jeffrey Lykins filed affidavits in response to the U.S. Trustee's request. In her affidavit, debtor says that she went to the Destocki firm in March 2009 when she signed her papers and started paying fees. The case was not filed until September 3, 2011. Before the case was filed, debtor had to go to credit counseling three times, because counseling reports have a limited life. Debtor repeatedly went to the Destocki office before the case was filed but was always given excuses, as to why the case had not been filed.
The docket shows that a certificate of credit counseling was filed with the petition on September 3, 1011. The § 341 Meeting was set for November 1, 2011. That meeting was continued to December 13, 2011. That §341 Meeting was continued to January 3, 2012, at which time the meeting occurred. On January 9, 2012, a financial management course certificate was filed by the debtor. An Order discharging her was entered January 17, 2012.
Debtor and Destocki were present for the November 1, 2011 § 341 Meeting, but the meeting was continued because debtor's mortgage was not provided, though debtor had provided the mortgage to Destocki. Destocki did not appear at the continued §341 meeting on December 13, 2011. Debtor and Destocki did appear at the January 3, 2012 § 341 Meeting.
What do appear to be established facts are that there was an undue delay between debtor's retention of Destocki in March of 2009 and the filing of her bankruptcy case on September 3, 2011. In the interim, despite multiple visits to the Destocki office, debtor could get no explanation for the delay. Further, Destocki was not prepared at the first setting of the § 341 Meeting, which was then continued. Destocki was not present at the second setting, and the §341 Meeting was again continued.
Under these circumstances, the Court concludes that Destocki has not behaved in a reasonable manner in regard to this debtor, though the case was filed, and a discharge did issue. The delay in filing was unconscionable. We hold that the retainer fee, $1,150.00, paid by the debtor to Destocki should be returned to debtor by Destocki.
D. Joshua David Scott and Jessica Leigh Scott. Case No. 11-14300.
Destocki informed the Court that attorney fees in the amount $1,150.00 had been charged in this case. Of that $626.00 has been paid.
Debtors furnished no affidavit statement in response to the request by the U.S. Trustee. The only evidence before the Court is the docket in the case. The Court has no information regarding the date on which debtors retained Destocki to file their bankruptcy case. Their case was filed July 13, 2011. A certificate of credit counseling was filed with the petition. The § 341 Meeting was noticed for September 6, 2011. That meeting was continued to November 1, 2011. That meeting was continued to December 13, 2011, and once again to January 5, 2012. The trustee notes in his report of January 24, 2012 that on September 6, 2011, debtors did not appear, attorney requested a continuance and the hearing was continued to November 1. The report continues that on November 1 documents needed to conduct the § 341 Meeting were unavailable, and the hearing was continued to December 13. On December 13 neither debtors nor counsel appeared, and the hearing was reset to January 3, 2012. On January 3, 2012, debtors and Destocki appeared. Destocki was directed to file amended schedules within two weeks. The docket fails to show the filing of amended schedules. The trustee filed a final report on April 10, 2012. The docket does not show that a discharge has been granted.
In this instance, there is little evidence before the Court in connection with the motion of the U.S. Trustee. What is apparent is that there are numerous continuances of the § 341 Meeting. In addition, Destocki has failed to comply with a requirement by the Trustee for amendments. The conduct of Destocki in this case does not meet the reasonable standard, but there is lacking specificity in what is before the Court. The Court does hold that debtors need not pay any further amounts to Destocki.
It appears that the U.S. Trustee is urging that a standard fee of $1,150.00 to file a simple bankruptcy case is excessive. This Court is unwilling to reach that conclusion. A market system operates in the field of attorney fee as in other economic areas.
SO ORDERED. Copies to: Default List