In re Agyekum, BAP No. NC-97-1820-RRYJU
| Decision Date | 06 October 1998 |
| Docket Number | BAP No. NC-97-1820-RRYJU,Bankruptcy No. 97-47332-ND. |
| Citation | 225 BR 695 |
| Parties | In re Naana G. AGYEKUM, Debtor. Aaron E. HASTINGS, dba Court Services, Appellant, v. UNITED STATES TRUSTEE, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Aaron E. Hastings, Suisun City, CA, Pro se Appellant.
Mark L. Pope, Office of United States Trustee, Oakland, CA, for United States Trustee.
Before: RUSSELL, RYAN, and JURY,1 Bankruptcy Judges.
The bankruptcy court determined that a bankruptcy petition preparer's fee was unreasonable and ordered the preparer to disgorge the amount in excess of the limit set forth in the Bankruptcy Petition Preparer Guidelines of the United States Bankruptcy Court for the Northern District of California. The petition preparer appeals. We AFFIRM.
Naana Agyekum and appellant Aaron Hastings ("Hastings"), dba Court Services, a bankruptcy petition preparer ("BPP"), entered into a written Service Agreement ("Agreement") in May 1997. Under the Agreement, Hastings agreed to prepare a chapter 72 petition for Agyekum within 15 days of receipt from her of the information necessary to prepare the petition. Agyekum agreed to pay a total fee of $135, and paid a deposit of $100 upon the execution of the Agreement.
The $135 fee included $15 in costs and a nonrefundable $25 "document license fee" for the use of "copyrighted intellectual property" prepared by Hastings. The pre-printed materials consisted of literature entitled "Fast Facts Guide" and "InfoForm Questionnaire." The Guide provided information about the bankruptcy process, and the Questionnaire functioned to obtain a client's pertinent information for the completion of a bankruptcy petition.
In June 1997, Hastings received Agyekum's Questionnaire along with a payment of $43. Agyekum paid an additional $8 over the $35 balance due because she wanted "priority handling" of her paperwork. "Priority handling" of the bankruptcy documents meant that the papers would be ready for her to file with the bankruptcy court within one day of receipt of a completed Questionnaire.
Hastings reviewed Agyekum's completed Questionnaire and determined that she had omitted 15 items of information necessary for the proper completion of the petition. Hastings sent a certified letter dated June 23, 1997 to Agyekum with a multi-page form detailing the omissions and requesting that she furnish the missing information. Hastings also assessed Agyekum a $15 penalty for her submission of an incomplete Questionnaire, as allowed under the terms of the Agreement.3 Agyekum did not respond to the letter.
On July 2, 1997, Hastings sent Agyekum a second certified letter, informing her that her failure to timely respond to Hastings' request for the submission of a completed Questionnaire would result in the cancellation of the Agreement. Hastings assessed Agyekum another $15 penalty for the delay in processing her papers. On July 23, 1997, Agyekum returned the completed multi-page form with the information requested by Hastings, with a $30 payment for the penalty charges imposed by him. One day later, on July 24, 1997, Hastings forwarded the completed petition to Agyekum via priority mail.
On July 30, 1997, Agyekum (hereinafter the "debtor") filed a voluntary chapter 7 petition and schedules in propria persona. The trustee determined that the case was a no-asset case because the schedules reflected insubstantial assets. The debtor's schedules listed no real property, personal property worth $14,108, secured claims of $12,738, and unsecured nonpriority claims of $24,891.
The petition included Hastings' § 110 Disclosure of Compensation Statement ("Compensation Statement"), which was signed by the debtor as well as Hastings. The Compensation Statement reflected that she paid Hastings a total of $173, as follows: a $120 service fee, a $25 "document license fee," and $28 in costs, consisting of $17 in postage for priority, first class and certified mailings, $7 for photocopies, $2 for supplies, and $2 for telephone charges. The "priority handling fee" of $8 and the two penalty charges totaling $30 were unaccounted for in the Compensation Statement.
The debtor also filed a Statement by Debtor Not Represented by an Attorney ("Debtor's Statement"), which contained the same information as Hastings' Compensation Statement. The debtor later filed a second Debtor's Statement on September 8, 1997, which reflected that she paid Hastings $200 for his assistance in preparing her bankruptcy petition.
On September 10, 1997, the United States Trustee (the "UST") filed a motion pursuant to § 329(b) and Rule 2017(a) for review of the fees charged by Hastings for his preparation of the debtor's petition ("motion for review"). The UST asserted that the $200 paid to Hastings by the debtor exceeded the reasonable value of his services to her. The UST requested that Hastings be ordered to disgorge the fee, to the extent that it was excessive, to the trustee.
Hastings filed an answer to the UST's motion for review in which he asserted that the imposition of extra fees were justified in situations where he must perform work after the completion of a petition as a result of a client's error or delay. Hastings maintained that such additional services were reasonably compensable. Hastings argued that the imposition of monetary penalties upon his clients functioned to curtail the problem of delays in the preparation of the bankruptcy documents. Moreover, Hastings claimed that monetary penalties provided him with an adequate remedy against clients who were uncooperative and failed to comply with the terms of the Agreement.
Hastings pointed out that the total fee of $173 was shown in both the Compensation Statement and the Debtor's Statement that were filed with the petition. Hastings provided two versions of the how he calculated the total fee. Hastings first stated that the total fee was the sum of "$100 + $43 + $30." Hastings then stated that the total fee consisted of $148 plus a "document license fee" of $25.
The court held a hearing on the motion for review in October 1997, and determined that the $173 fee charged by Hastings was excessive.4 The court found that Hastings' obligation to the debtor was only to prepare the petition based upon whatever information the debtor provided, and the fact that Hastings put forth extra efforts to procure the necessary information from the debtor did not justify additional compensation. The court found that the maximum amount of $125 allowed under the Guidelines was reasonable compensation for his services to the debtor in this case.
The court also determined that the $25 "document license fee" for the use of Hastings' "copyrighted intellectual property" was a fee that came under the purview of the Guidelines. The court found that Hastings' pre-printed materials functioned to assist debtors in the preparation of their bankruptcy petitions and that such assistance was not intellectual property. Moreover, the court noted that Hastings was in all likelihood engaging in the practice of law. The court entered an order pursuant to §§ 110(h)(1) and 329(b) which limited Hastings' fee to the $125 amount provided for by the Guidelines, and required him to disgorge the $48 which he received in excess of the maximum fee. Hastings appeals.
A bankruptcy court's finding of violations under § 110 is reviewed under the abuse of discretion standard and its conclusions of law are reviewed de novo. In re Fraga, 210 B.R. 812, 816 (9th Cir. BAP 1997).
A. Whether the bankruptcy court abused its discretion in limiting appellant's fee to the maximum amount of $125 allowed under the Guidelines.
B. Whether the bankruptcy court properly determined that appellant was not entitled to compensation for the debtor's use of appellant's pre-printed, bankruptcy-related materials.
A. Whether The Bankruptcy Court Abused Its Discretion In Limiting Appellant's Fee To The Maximum Amount Of $125 Allowed Under The Guidelines
Section 1105 governs the responsibilities and duties of bankruptcy petition preparers in rendering services to debtors. Subsection 110(h) authorizes the disallowance of fees found to exceed the value of the services rendered by BPPs and states in pertinent part:
11 U.S.C. § 110(h).
Section 329 also regulates the compensation allowed to both attorneys and lay persons who prepare bankruptcy petitions. In re Telford, 36 B.R. 92, 94 (9th Cir. BAP 1984). Section 329(b) provides:
A trial court has the power to establish a presumptive "reasonable value" of legal fees in consumer bankruptcies, and to limit fees to a certain level unless counsel establishes that services in a particular case can justify more. In re Agnew, 144 F.3d 1013, 1013 (7th Cir.1998) (...
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