In re Rose
| Decision Date | 18 August 2004 |
| Docket Number | No. 04-32423.,No. 04-32550.,No. 04-31905.,No. 04-31145.,No. 04-31752.,No. 04-31701.,No. 04-31700.,No. 04-32328.,No. 04-31327.,No. 04-31270.,No. 04-31499.,04-31145.,04-31270.,04-31327.,04-31499.,04-31700.,04-31701.,04-31752.,04-31905.,04-32328.,04-32423.,04-32550. |
| Citation | 314 B.R. 663 |
| Parties | In re Michael Kenneth ROSE, Debtor. Peggy Ann Buckner, Debtor, Clyde E. Steele, Debtor, Douglas Ray Smith, Debtor, Ingrid Anna Lynch, a/k/a Ingrid Anna Beverly, Debtor, Heather Rhanae Barnette, Debtor, Claudia Sebring, Debtor, Silia Jean Jackson, Debtor, Josh Wiley, Tracey Wiley, a/k/a Tracey Stephens, Debtors, Johnny Richardson, Mary Richardson, Debtors, Regina Ann Hance, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Tennessee |
Charles F. Vihon, Esq., Western Springs, IL, for Kristin Motley.
Harry S. Mattice, Jr., Esq., United States Attorney, Suzanne H. Bauknight, Esq., Pamela G. Steele, Esq., Knoxville, TN, for United States of America appearing specially for Richard F. Clippard, Esq., United States Trustee, Region 8.
John P. Newton, Jr., Esq., Knoxville, TN, for Debtor, Michael Kenneth Rose.
Richard M. Mayer, Esq., Knoxville, TN, for Debtor, Peggy Ann Buckner.
John H. Fowler, Esq., Sevierville, TN, for Debtor, Clyde E. Steele.
Brandt W. Davis, Esq., Knoxville, TN, for Debtor, Silia Jean Jackson.
William T. Hendon, Knoxville, TN, Chapter 7 Trustee for Debtor, Michael Kenneth Rose.
Ann Mostoller, Esq., Oak Ridge, TN, Chapter 7 Trustee for Debtors, Peggy Ann Buckner, Clyde E. Steele, and Josh and Tracey Wiley.
Michael H. Fitzpatrick, Esq., Knoxville, TN, Chapter 7 Trustee for Debtors, Douglas Ray Smith and Regina Ann Hance.
Sterling P. Owen, IV, Knoxville, TN, Chapter 7 Trustee for Debtors, Ingrid Anna Lynch, Heather Rhanae Barnette, and Claudia Sebring.
Dean B. Farmer, Esq., Knoxville, TN, Chapter 7 Trustee for Debtors, Silia Jean Jackson and Johnny and Mary Richardson.
MEMORANDUM ON BANKRUPTCY PETITION PREPARER SHOW CAUSE ORDERS AND ON RELATED OBJECTION AND MOTION
This matter was heard on July 13, 2004, on the court's sua sponte Orders entered on April 9 and May 17, 2004,1 requiring Kristin Motley (Ms. Motley), a bankruptcy petition preparer, to appear (1) so that the court might determine whether the $214.00 total fee paid by the Debtors to Ms. Motley in each of these eleven bankruptcy cases for "document preparation services" is in excess of the value of the services rendered, (2) to show cause why certain specified services rendered to the Debtors by Ms. Motley should not be found to constitute violations of 11 U.S.C.A. § 110 (West 1994 & Supp.2004), including 11 U.S.C.A. § 110(k), which prohibits a bankruptcy petition preparer from engaging in the unauthorized practice of law, and (3) to show cause why a fine should not be imposed against her in each case, and/or why she should not be enjoined from engaging in the proscribed conduct. Also before the court are the Respondent's Objection to Order to Show Cause filed on June 9, 2004 (Objection), and the Respondent, Kristin Motley's, Motion for Certification of a Question to the Supreme Court of Tennessee filed on July 7, 2004 (Motion for Certification).
On July 7, 2004, Ms. Motley filed the Respondent, Kristin Motley's, Brief With Respect to the Matter of the Unauthorized Practice of Law, and on July 9, 2004, the United States of America (United States), appearing specially on behalf of Richard F. Clippard, United States Trustee, Region 8 (U.S.Trustee), filed the Memorandum of the United States of America in Support of Sanctions and an Injunction Against Kristin Motley d/b/a We the People Forms and Service Center of Knoxville.2 Additionally at the close of proof on July 13, 2004, Ms. Motley's counsel requested permission to file a supplemental post-trial memorandum, and pursuant to the court's authorization, filed the Respondent, Kristin Motley's, Post-Trial Brief filed on July 23, 2004 (Post-Trial Brief). In her Post-Trial Brief, Ms. Motley restated the issues raised in her Objection to the court's Show Cause Orders, in addition to, for the first time, advancing arguments that she has been denied proper due process, challenging the authority of Congress to enact § 110 under the Bankruptcy Clause of the United States Constitution, and arguing that § 110(h), (i), and (j) are vague and overbroad. In response, the United States filed the Post-Hearing Brief of the United States of America in Support of Sanctions and an Injunction Against Kristin Motley d/b/a We the People Forms and Service Center of Knoxville on July 28, 2004.3
The record before the court consists of two Affidavits filed by Ms. Motley, thirteen exhibits entered into evidence at the July 13, 2004 hearing, and the testimony of Ms. Motley and Tracey Wiley, one of the Debtors. Additionally, pursuant to Federal Rule of Evidence 201, the court takes judicial notice of all documents filed in each of the eleven bankruptcy cases.
This is a core proceeding. 28 U.S.C.A. § 157(b)(2)(A), (O) (West 1993).
Ms. Motley, together with her husband, owns Motley 4, LLC. Through this company, Ms. Motley operates We the People Forms & Service Centers of Knoxville (We the People of Knoxville), a franchise of We the People Forms & Service Centers USA, Inc. (We the People USA), which provides legal document preparation services. Ms. Motley is not an attorney licensed to practice law in the State of Tennessee, and she testified that neither she nor her husband has ever worked in a law office. At issue in these eleven (11) bankruptcy cases is Ms. Motley's preparation of the Chapter 7 bankruptcy petitions, statements, and schedules for a fee in each case of $199.00 plus a copy charge of $15.00. In addition to bankruptcy document preparation, Ms. Motley testified that We the People of Knoxville offers the preparation services for approximately fifty other types of legal documents, including, among others, uncontested divorces, powers of attorney, name changes, wills, and trusts. Ms. Motley opened We the People of Knoxville in January 2004, and she is its only employee, although she testified that her husband occasionally assists her by answering phones. She purchased the franchise in September 2003, for $89,500.00, and she pays a monthly fee of 25% of her gross profits to We the People USA. In exchange, We the People USA provides Ms. Motley with the assistance of a supervising attorney, the assistance of a typist/processor, television advertisements, corporate support, documents for distribution, and use of the company's name.
Each of the eleven bankruptcy cases that were the subject of the July 13, 2004 hearing were filed by the Debtors, pro se, utilizing the services of Ms. Motley and We the People of Knoxville.4 In eight of the cases, Nos. 04-31145, 04-31270, 04-31327, 04-31499, 04-31700, 04-31701, 04-31752, and 04-31905, the court, sua sponte, entered the April 9, 2004 Order, directing Ms. Motley to perform the following actions in each case: (1) file an affidavit by April 22, 2004, detailing the time, nature, and extent of the services rendered by Ms. Motley and a co-employee, Heather Silas (Ms. Silas), to the respective Debtors; (2) file a copy of all documents and instructions provided each Debtor prior to preparing their respective bankruptcy petitions; (3) file a copy of all documents given to her by the Debtors to assist in the preparation of the respective bankruptcy petitions; and (4) appear before the court on April 29, 2004, at which time the court would determine whether the $214.00 fee charged to and paid by each Debtor for "document preparation services" exceeded the value of the services rendered.5
On April 15, 2004, Ms. Motley filed two motions relevant to the issues presently before the court: (1) Respondent, Kristin Motley's, Motion for Joint Administration for Procedural Purposes Only, requesting that Case Nos. 04-31145, 04-31270, 04-31327, 04-31499, 04-31700, 04-31701, 04-31752, and 04-31905, be jointly administered for procedural purposes to facilitate resolution of the common issues raised by the court's March 2, 2004 Order; and (2) Respondent, Kristin Motley's, Motion to Reschedule Production and Hearing, requesting an extension of time within which to file the documents required by the March 2, 2004 Order, and requesting a continuance of the April 29, 2004 hearing. On April 21, 2004, the court entered two Orders in each of the affected cases. The first Order directed the joint administration of the eight cases "solely for procedural purposes," and the second Order continued the April 29, 2004 hearing to May 13, 2004, extending the time within which Ms. Motley was to produce the required documents to May 6, 2004.
On May 6, 2004, Ms. Motley filed an identical Affidavit (May 6, 2004 Affidavit) in each of the original eight cases that only partially complied with the directives set forth in the April 9, 2004 Order.6 Accompanying each of the May 6, 2004 Affidavits was a packet of six documents that Ms. Motley stated were provided to each Debtor at the initial interview. This packet includes a Bankruptcy Document Preparation Agreement, Chapter 7 Voluntary Petition Customer Information Workbook, Tennessee Step By Step Guide to the Bankruptcy Workbook, Bankruptcy Overview — Chapter 7 Tennessee, Federal Bankruptcy Courts — Where to File Your Petition, and Tennessee Bankruptcy Exemptions.7 COLL. TRIAL EX. 1. Additionally, Ms. Motley filed copies of the Customer Information Workbook completed and signed by the Debtors in each of the original eight cases. TRIAL EXS. 2 through 9.
On May 13, 2004, the court held the hearing directed by the April 9, 2004 Order; however, the court did not hear any proof. Instead, after discussions with counsel for Ms. Motley and the U.S. Trustee, the court entered...
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