Feldman v. Elizabeth Buffenmeyer, Wolf, Baldwin & Assoc., P.C. (In re Buffenmeyer)
| Decision Date | 07 July 2021 |
| Docket Number | Bky. No. 19-16950 (PMM),Adv. No. 20-0018 (PMM) |
| Citation | 629 B.R. 372 |
| Parties | IN RE: Elizabeth Ann and Jeffrey Scott BUFFENMEYER, Debtors. Lynn E. Feldman, Chapter 7 Trustee, Plaintiff v. Elizabeth Buffenmeyer, Wolf, Baldwin & Assoc., P.C., The Arc of Chester County, and Northstone Insurance Co., Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Chilton G. Goebel, III, German, Gallagher & Murtagh, Philadelphia, PA, Benjamin Sorisio, Meyer, Darrash, Buckler, Bebenek & Eck, Pittsburgh, PA, for Defendant NorthStone Insurance Company.
Kevin K. Kercher, Law Office of Kevin K. Kercher, Esq, PC, Whitehall, PA, for Defendant Wolf, Baldwin & Associates, P.C.
Charles Laputka, Laputka Law Office, Allentown, PA, for Defendant Elizabeth Buffenmeyer.
Holly Smith Miller, Gary F. Seitz, Gellert Scali Busenkell & Brown, LLC, Philadelphia, PA, for Plaintiff Lynn E. Feldman, Chapter 7 Trustee.
Eden R. Bucher, Leisawitz Heller Abramowitch Phillips PC, Wyomissing, PA, Pro Se.
Prior to Elizabeth and Jeffrey Buffenmeyer ("the Debtors")1 filing for chapter 7 bankruptcy relief, Ms. Buffenmeyer suffered an injury at her job at the Arc of Chester County (the "Arc"), where she was employed as a home health aide. The injury meant both that the Debtor was unable to return to full-time employment and that she was entitled to workers' compensation for her disability.
Pre-petition, the Debtor received regular workers' compensation payments from the Arc. Post-petition, Ms. Buffenmeyer was awarded $85,000.00 (the "Compensation Payment"), which was the result of a demand made on her behalf by Wolf, Baldwin & Associates, PC ("the Firm"), a law firm representing the Debtor in the workers' compensation dispute and negotiations. Ms. Buffenmeyer received $68,000.00 of the Compensation Payment. The Firm was entitled to twenty percent (20%) of the Compensation Payment, or $17,000.00 (the "Contingency Fee"). The Contingency Fee, like the sum paid directly to the Debtor by Arc, was made after the bankruptcy filing and without authorization from this court.
The chapter 7 trustee (the "Trustee") seeks to avoid the entire $85,000.00 Compensation Payment. In filing this adversary proceeding, the Trustee sets out to recover the funds as an unauthorized post-petition transfer and further asserts that the Debtor's claimed exemption of the money must be denied. The Trustee alleges that the Debtor's attempt to hide the asset warrants denial of her discharge pursuant to §§ 727(a)(2)(B), (a)(4), and (a)(6). The Debtor counters that because the Compensation Payment is fully exempt, it is not property of the estate subject to the Trustee's claw back. Ms. Buffenmeyer also rejects the idea that discharge should be denied due to alleged malfeasance.
For its part, the Firm asserts both that the Compensation Payment is exempt and that it is a good faith transferee, meaning there is no basis for the Trustee to avoid and recover its Contingency Fee.
The Debtor, the Trustee, and the Firm each filed a Motion for Summary Judgment (the "Motions"), agreeing in principle that there is no issue of fact for trial2 and that all, or most, of this matter may be adjudicated on a legal basis. For reasons discussed below, including my determination that the Debtor's allowed exemption of the Compensation Payment is a preliminary and dispositive issue, I find that:
Summary judgment on all counts will, therefore, be granted to the Debtor and the Firm.
The Debtors filed for chapter 7 bankruptcy protection on November 5, 2019. The same day, Lynn E. Feldman was appointed chapter 7 Trustee.
The Compensation Payment was disclosed on the Debtors' schedules. It is listed as an asset on both the Debtors' original and amended schedules A/B and originally listed as 100% exempt pursuant to 11 U.S.C. § 522(d)(11)(E) on Schedule C. Doc. # 1 at 17 in the main case.3 Amended Schedule C, filed on January 10, 2020, lists the Compensation Payment as either partially or fully exempt pursuant to three (3) statutory provisions:
The Debtors' Schedule of Financial Affairs states that the Debtor received income of $12,965.00 from workers' compensation in the ten (10) months preceding the bankruptcy filing. Doc. # 1 at 41 in the main case. Amended Schedule I reports that the Debtor receives $1,625.00 per month from workers' compensation. Doc. # 25 at 2 in the main case.
Following the disclosure of the Compensation Payment at the § 341 Meeting of Creditors, (which was concluded on January 10, 2020) the bankruptcy case was changed from a no-asset to an asset case. Doc. #16 in the main case.
The Trustee commenced this Adversary Proceeding on February 5, 2020 and alleges the following causes of action: 1) avoidance and recovery of post-petition transfer pursuant to 11 U.S.C. § 549 ; § 550, and § 551 (Counts I & II); 2) disallowance of claims pursuant to 11 U.S.C. § 502 (Count III); 3) objection to discharge pursuant to §§ 727(a)(2)(B), (a)(4), and (a)(6) (Counts IV & V); and 4) objection to the Debtor's exemption of the Compensation Payment (Count VI). The Trustee named as defendants the Debtor (but not Mr. Buffenmeyer), the Firm, the Arc, and NorthStone Insurance Company ("NorthStone"), the Arc's insurer.
Following a failed attempt by the parties to mediate, on September 14, 2020, I granted the Arc and NorthStone's motion to dismiss them from this action. Doc. # 43. The remaining Defendants are the Debtor and the Firm, who have each answered the Complaint. See doc. #’s 6 & 9.
Separately, and previously, I denied the Debtor's Motion for Judgment on the Pleadings pursuant to an Opinion and Order dated December 9, 2020. Doc. #’s 51 & 52.
On February 23, 2021, each of the remaining three (3) parties filed a Motion for Summary Judgment: doc. # 57 (the "Debtor's Motion"), doc. #59 (the "Trustee's Motion"), and doc. #61 (the "Firm's Motion"). The parties responded to each other's Motions; the Debtor and Trustee filed Replies. The matter is now ripe for adjudication.
The following facts are taken from the Complaint and pleadings and are not in dispute.
On March 1, 2019, the Debtor, a home health aide, was injured at work while lifting a patient. As a result of being unable to work after the injury, the Debtor received workers' compensation benefits from the Arc for her full biweekly earnings for the period April 2, 2019 to May 23, 2019. After this time, the Debtor returned to work and was placed on "light office duty," receiving a "partial loss of earnings."
Debtor's Motion at Ex. B, p.2; Firm's Motion at Ex. A. The Debtor continued to receive partial disability benefits until August 2, 2019, when she stopped working altogether and began receiving payment of full disability to supplement or replace her lost income.
Shortly after her injury, in April 2019, the Debtor engaged the Firm to represent her in pursuit of a workers' compensation claim. The Arc was working at cross purposes and in September 2019 filed a petition to terminate the Debtor's workers' compensation benefits. In October 2019 (pre-petition), the Firm demanded $122,000.00 from the Arc to settle the Debtor's claim. On November 25, 2019 (post-petition) the Debtor and Arc reached a "Compromise and Release Agreement by Stipulation Pursuant to Section 449 of the Workers' Compensation Act," (the "Agreement"), Debtor's Motion at Ex. A, pursuant to which the Debtor granted a comprehensive release in exchange for a total payment from the Arc of $85,000.00. The Agreement was approved by a workers' compensation judge on December 12, 2019. Pursuant to the terms of the Agreement, on December 13, 2019 (also post-petition), the Debtor received $68,000.00 of the settlement amount and the Firm received the remaining $17,000.00. The Continency Fee was paid to the Firm pursuant to the Debtor and Firm's contingency agreement (the "Contingency Contract"). Firm's Motion at Ex. A, pg. 7.
The Agreement between the Arc and Debtor provides, inter alia , that:
Employer/Insurer will pay $85,000.00 to the Claimant from which she will pay an attorney's fee of 20%, or $17,000.00, leaving net the balance of $68,000.00 as consideration for her full and final release of all claims pursuant to the Workers' Compensation Act including but not limited to past, present, and future wage loss, specific loss, disfigurement, and medical benefits of any kind arising out of or from her March 1, 2019 injury ... The Claimant understands and agrees that this resolution is final and completely resolves all claims to workers' compensation benefits she may have had against the Employer/Insurer ....
Agreement at 2 (emphasis in original).
On December 13, 2019, NorthStone funded the settlement. The Debtor did not notify the Arc, NorthStone, or the Firm of her bankruptcy filing and did not seek or obtain bankruptcy court approval for entering into the Agreement. See, McCabe Affidavit at doc. #62 at ¶8.
At her § 341 Meeting of Creditors, the Debtor first disclosed to the Trustee that she had entered into the post-petition settlement. After the § 341 Meeting, the Debtor amended her schedules to include both the existence of the Agreement and the settlement amount.
As stated above,...
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