Collier v. Washington
| Decision Date | 31 March 2016 |
| Docket Number | CIVIL ACTION NO. 15-01484 (lead),c/w CIVIL ACTION NO. 15-01853 (member) |
| Parties | GLAY H. COLLIER, II AND MCBRIDE AND COLLIER, LLC, Appellants v. ANGELA DENISE WASHINGTON Appellee |
| Court | U.S. District Court — Western District of Louisiana |
Pending before the Court is the consolidated Appeal of Glay H. Collier, II and McBride and Collier, LLC (collectively "the Collier Appellants")1 from the April 7 and May 28, 2015 Memorandum Opinions of Bankruptcy Judge Jeffrey Norman (hereinafter "the Bankruptcy Court") in In re Washington, Bankruptcy Case No. 10-30666 and Adversary Proceeding No. 14-03017. In the April 7, 2015 Memorandum Opinion, the Bankruptcy Court awarded damages to Appellee Angela Washington ("Washington") and attorneys' fees to the Chapter 13 Trustee, as well as imposing a sanction against the Collier Appellants. In the May 28, 2015 Memorandum Opinion, the Bankruptcy Court also awarded Washington attorneys' fees and costs.
For the following reasons, the Bankruptcy Court's Opinions are AFFIRMED IN PART AND REVERSED IN PART, and Collier's Appeal is GRANTED IN PART AND DENIED IN PART. This matter is REMANDED to the Bankruptcy Court to the extent that furtherproceedings are necessary.
Washington filed a Chapter 13 case in the Bankruptcy Court for the Western District of Louisiana in 2010. The plan was confirmed on July 28, 2010.
Because of increased post-confirmation expenses, on June 13, 2011, Washington converted her Chapter 13 case to a Chapter 7 case. Washington's attorneys' fees to the Collier Appellants were paid via debit charges on her account through August 2011.
However, the discharge of Washington's Chapter 7 was cancelled for failure to file the required financial management course certification pursuant to 11 U.S.C. §§ 727(a)(11) and 1328(g)(1). Her case was closed on February 28, 2012.
From the time of her initial filing until October 7, 2014, Washington was represented by the Collier Appellants. On October 6, 2014, Washington moved through her new attorney, Sam O. Henry, IV, to reopen her Chapter 7 case and to obtain a discharge.2
On October 22, 2014, Washington filed a Motion to Show Cause Why Attorneys' Fees Should Not Be Disallowed, to Compel Glay H. Collier, II, to Disgorge Attorneys' Fees and for Sanctions. In her motion, which was deemed an adversary complaint, Washington alleged that (1) the Collier Appellants violated 11 U.S.C. §§ 527 and 528 by failing to provide certain disclosures and a written contract detailing the services to be provided and thus are liable for attorneys' fees and costs pursuant to 11 U.S.C. § 526(c)(2); (2) the Collier Appellants collected fees post-petition in violation of the automatic stay under 11 U.S.C. § 362 by debiting her bankaccount; and (3) the Collier Appellants refused to file her required financial management course certification because of her non-payment of legal fees, causing her case to be closed without a discharge. As a result, Washington claimed that she lost her automobile and had her wages garnished.
On February 20, 2015, the Collier Appellants filed a motion for summary judgment, which the Bankruptcy Court granted in part and denied in part. The Bankruptcy Court granted the motion to the extent that Washington claimed the Collier Appellants had refused to file her financial management course certification, but denied the motion on her claims under 11 U.S.C. §§ 362, 527, and 528.
On April 2, 2015, the Bankruptcy Court held a trial on the adversary proceeding.
In the April 7, 2015 Memorandum Opinion, the Bankruptcy Court ruled that the Collier Appellants violated 11 U.S.C. §§ 526(a)(1) and (a)(3)(A) by misrepresenting to Washington, as an "assisted person," that they would take all actions to ensure she received a discharge in her Chapter 7 case. The Bankruptcy Court also found that the Collier Appellants violated these sections by failing to investigate and take remedial action to see that Washington was discharged.
The Bankruptcy Court also ruled that the Collier Appellants violated 11 U.S.C. §§ 527 and 528 by failing to make the required disclosures and failed to provide her with a contract. The document that was given to Washington did not clearly and conspicuously detail the services that the Collier Appellants would provide her and the fees for those services.
Finally, the Bankruptcy Court found that the Collier Appellants violated 11 U.S.C. § 362 by debiting post-petition payments from Washington's bank account.
Based on these findings, the Bankruptcy Court ordered the following:• The Collier Appellants were ordered to pay damages and returned attorneys' fees of $2,377.04 for a violation of 11 U.S.C. § 526(c)(2)(A);
• Collier was ordered to pay Washington insufficient fund fees in the amount of $102 and to refund her attorneys' fees of $600, for a total of $702.00, for a violation of 11 U.S.C. §362(k) as an additional basis of recovery;3
• Collier was ordered to pay Washington punitive damages of ten times actual damages, which is equal to $7,020.00.
• Collier was ordered to pay a civil penalty of $20,000.00, pursuant to 11 U.S.C. § 526(c)(5)(B).
• A hearing was set on Washington's request for attorneys' fees and costs.
• Finally, Collier was referred for disciplinary proceedings.
On May 21, 2015, a hearing was held on Washington's request for attorneys' fees and costs. Washington's contingency fee agreement with her attorneys was filed in the record and showed that she would be entitled to 50% of all money or property collected as a result of settlement or trial. The Collier Appellants challenged her right to recover more than 50% of actual costs, including returned attorneys' fees.
On May 28, 2015, Judge Norman issued a second Memorandum Opinion relying on In re Repine, 536 F.3d 512 (5th Cir. 2008), to award attorneys' fees that were incurred in prosecuting the 11 U.S.C. § 362 claim. Judge Norman determined that Washington should be awarded attorneys' fees of $19,817.93 and costs of $199.41 for a total of $20,017.34.
This appeal followed. The Collier Appellants raised four issues on appeal: (1) whether the Bankruptcy Court committed an error of law or an abuse of discretion in imposing a civilpenalty of $20,000; (2) whether the Bankruptcy Court committed an error of law in finding that Washington's claims under §§ 526(c)(2)(A), 527, and 528 of the Bankruptcy Code had not prescribed; (3) whether the Bankruptcy Court committed an error of law in finding that Washington's claims under 11 U.S.C. § 362 were timely filed and not otherwise barred by the doctrine of laches; and (4) whether the Bankruptcy Court committed an error of law by awarding Washington attorneys' fees in the amount of $19,817.93.
All briefing is complete, and the Court now issues this Opinion.
This Court has jurisdiction over the Collier Appellants' appeal from the Bankruptcy Court's Opinions pursuant to 28 U.S.C. § 158(a). In this regard, a district court functions as an appellate court, reviewing the bankruptcy court's findings of fact for clear error and the bankruptcy court's conclusions of law de novo. In re Eldercare Properties, Ltd., 568 F.3d 506, 515 (5th Cir. 2009). Mixed questions of fact and law are reviewed de novo. In re Canion, 196 F.3d 579, 584 (5th Cir.1999). A decision to impose sanctions is reviewed for "an abuse of discretion." In re Smyth, 242 B.R. 352, 357 (W.D.Tex.1999) (citing Goldin v. Bartholow, 166 F.3d 710, 722 (5th Cir.1999)). A court "by definition abuses its discretion when it makes an error of law." In re Superior Crewboats, Inc., 374 F.3d 330, 334 (5th Cir. 2004) (citations omitted); In re Cahill, 428 F.3d 536, 539 (5th Cir. 2005) () (citation omitted).
The Collier Appellants argue that the Bankruptcy Court improperly imposed a civil penalty without a motion having been brought by the U.S. Trustee, the debtor, or the Bankruptcy Court itself. Thus, they contend that they were denied due process because they had no notice via the Complaint, via motion, or via the pretrial memorandum that civil penalties were at issue.
Washington states that she did not request imposition of a penalty and thus declines to respond to this argument in her brief.
The Court must still consider, on the record, whether the Bankruptcy Court's imposition of a penalty was an error of law or abuse of discretion.4 The Bankruptcy Court relied on 11 U.S.C. § 526(c)(5) to impose a civil penalty of $20,000. That statute provides:
11 U.S.C. § 526(c)(5) (emphasis added).
In this case, it is undisputed that no motion was filed by the U.S. Trustee or Washington. The Bankruptcy Court could, however, impose a sanction on its own motion if it found that theCollier Appellants violated § 526(c)(6) or engaged in a clear and consistent pattern or practice of violating this section.
In In re Sustaita, 438 B.R. 198 (B.A.P. 9th Cir. 2010), aff'd, 460 Fed. App'x 627 (9th Cir. 2011), the Bankruptcy Appellate Panel ("BAP") for the Ninth Circuit Court of Appeals addressed this issue. In that case, the bankruptcy court relied on § 526(c)(5)(B) to impose a $100,000 civil penalty...
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