In re El-Amin, Bankruptcy No. 96-33556. Adversary No. 96-3146-T.

• Decision Date: 03 August 2000
• Docket Number: Bankruptcy No. 96-33556. Adversary No. 96-3146-T.
• Citation: 252 BR 652
• Court: U.S. Bankruptcy Court — Eastern District of Virginia
• Parties: In re Sa'ad EL-AMIN, Debtor. Wal-Mart Stores, Inc., Plaintiff, v. Sa'ad El-Amin, Valerie L. Vaughan, Internal Revenue Service, El-Amin & Crawford, P.C., El-Amin & Associates, Carolyn Adams, Defendants.

252 B.R. 652 (2000)

In re Sa'ad EL-AMIN, DebtorWal-Mart Stores, Inc., Plaintiff, v.Sa'ad El-Amin, Valerie L. Vaughan, Internal Revenue Service, El-Amin & Crawford, P.C., El-Amin & Associates, Carolyn Adams, Defendants.

Bankruptcy No. 96-33556. Adversary No. 96-3146-T.

United States Bankruptcy Court, E.D. Virginia, Richmond Division.

August 3, 2000.

Sa'ad El-Amin, Richmond, Virginia, debtor pro se.

Philip C. Baxa, James M. Nolan, Mays & Valentine L.L.P., Richmond, Virginia, for Wal-Mart Stores, Inc.David R. Simonsen, Jr., Richmond, Virginia, for Valerie Vaughan.

James B. Thorsen, W. Reilly Marchant, Thorsen, Marchant & Scher, Richmond, Virginia, Deborah C. Stanley, Special Assistant United States Attorney, Richmond, Virginia, for Internal Revenue Service.

David D. Hopper, Mezzullo & McCandlish, Richmond, Virginia, for Carolyn Adams.

Sherman B. Lubman, Richmond, Virginia, Chapter 7Trustee.

Gregg Nivala, Office of the U.S. Trustee, Richmond, Virginia, Assistant United States Trustee.

MEMORANDUM OPINION

BLACKWELL N. SHELLEY, Bankruptcy Judge.

Currently before the court is Valerie Vaughan's ("Vaughan")March 9th, 2000Motion to Alter or Amend Findings and/or for Reconsideration of this court's Order and Memorandum Opinion (the "Motion to Reconsider" or "Motion").This Motion to Reconsider is brought pursuant to rules 52(b)and59(a) and (e) of the Federal Rules of Civil Procedure, made applicable in bankruptcy proceedings by rules 7052(b)and9023 of the Federal Rules of Bankruptcy Procedure.These rules permit a court, upon motion of a party, to amend its findings of fact and to amend its judgment in appropriate circumstances.Rule 59(e) also permits a court to grant a new trial.In her Motion, Vaughan requests that this court amend its findings and reconsider or vacate the order in its Memorandum Opinion of February 28, 2000(the "Opinion").Two parties, the trustee of the bankruptcy estate in this case and Carolyn Adams, a creditor in this case("Adams") have filed memoranda in opposition to Vaughan's Motion.For the reasons stated below, the court grants the Motion.The finding that Vaughan should pay the sum of $5,000 to the bankruptcy estate of Sa'ad El-Amin will be amended, and the amount will be changed to $10,978.50.The court will also amend its order to reflect this change.

DISCUSSION

The purpose of rules 52(b)and59(a) and (e) is to permit the trial court to correct glaring errors of law or fact that are discovered upon reconsideration of an opinion, or to otherwise amend findings or a judgment in light of newly discovered evidence or an intervening change in the law.SeeNational Metal Finishing Co. v. BarclaysAmerican/Commerical, Inc.,899 F.2d 119, 123(1st Cir.1990).Courts have considerable discretion in deciding whether to grant motions pursuant to rule 52 or rule 59.SeeCentral Fidelity Bank v. Cooper(In re Cooper),116 B.R. 469, 471(Bankr.E.D.Va.1990).However, these rules do not permit a losing party to simply repeat old arguments already considered and rejected or to raise new legal theories that should have been raised earlier.SeeNational Metal Finishing,899 F.2d at 123.

In the Opinion, this court made numerous findings of fact.A brief summary is as follows: Valerie Vaughan was at different times represented by several different attorneys in two lawsuits, one against Wal-Mart Stores, Inc., and another against Jeff Faries.One of these attorneys was Sa'ad El-Amin, the debtor in this bankruptcy case ("El-Amin").Adams, a creditor of El-Amin's, claimed an interest in whatever fees El-Amin had earned in connection with Vaughan's two lawsuits.Adams had brought garnishment actions against Wal-Mart and against Vaughan.The lawsuit against Wal-Mart ended in a settlement and the district court in which the case had been pending awarded El-Amin $36,706.50 in legal fees.After El-Amin filed his bankruptcy petition.Wal-Mart filed the complaint that commenced this adversary proceeding.In this complaint, Wal-Mart sought to pay the $36,706.50 into the registry of the court and have the court determine the proper disposition of the funds.

On September 26, 1996, Vaughan filed an answer to Wal-Mart's complaint and a counterclaim for declaratory judgment.By this time, she had dismissed El-Amin from representing her in any capacity and was represented by attorney James B. Thorsen("Thorsen").Thorsen had been successful in obtaining a $1.5 million award in Vaughan's lawsuit against Jeff Faries.There was a dispute as to whether El-Amin was entitled to any of this money for some of the work he had done on the Faries case prior to his dismissal.To resolve this dispute, Thorsen proposed in the answer and counterclaim that Vaughan pay $10,978.50 into the registry of the court in full satisfaction of any obligation she might have to El-Amin arising out of the Faries suit.Thorsen also set aside this amount in a CD.Upon payment of this amount, Vaughan was to be absolved of any liability for the funds to any other party in the adversary proceeding.On October 17, Adams filed an answer to Vaughan's counterclaim in which she asserted that any fees earned in connection with El-Amin's representation of Vaughan belong to El-Amin and Crawford, P.C. Adams further claimed that her garnishment of Wal-Mart and Vaughan gave her a first priority lien on those fees and that no other party has an interest superior to hers.She asked that Vaughan be ordered to pay the funds she claimed to hold over to the court.

Also on October 17, 1996, Vaughan personally sent a letter to the clerk of the bankruptcy court, accompanied by several documents that she wanted the court to review.The documents were timesheets and bills El-Amin had sent to Vaughan that purported to reflect the work he had done in the Faries case.She did not notify any of the other parties to this adversary proceeding that she was doing this, and Adams claims to have been unaware of the existence of this letter until this court issued its Opinion.Despite the lack of proper notice, the letter and the documents were docketed in the adversary file as an ordinary pleading.In the letter, Vaughan seems to deny that she owes El-Amin $10,978.50, although she acknowledges that he"is entitled to the proper amount for services rendered, not attorney fees desired."She believes that this amount would be "around $5,000."

In November 1996, Vaughan again changed attorneys, this time replacing Thorsen with her current counsel, David Simonsen("Simonsen").Thorsen continued to hold the $10,978.50 in a CD for Vaughan.Simonsen informed the other parties that the draft order Thorsen had circulated, which would have effectuated the payment of $10,978.50 into the registry of the court, was not going to be entered and should be disregarded.Counsel for Adams had requested that some changes be made to the first draft order, and Simonsen told the other parties that he would prepare and circulate a new draft order.However, no such order was ever circulated and the $10,978.50 was never paid into the court.Instead, in June 1998, Jim Thorsen liquidated the CD in which he had put the money and released it to Vaughan.No action was taken on Vaughan's counterclaim for declaratory judgment for approximately three years¹, during which time the El-Amin bankruptcy was converted to chapter 7.Also during this period the clerk incorrectly closed this adversary proceeding while Vaughan's interpleader action was still outstanding and unresolved.

Finally, on September 29, 1999, the chapter 7trustee filed a motion to approve compromise.The compromise requested that the funds referenced in Vaughan's answer and counterclaim from September 1996, along with the funds Wal-Mart had already paid into the court, be paid over to the trustee for administration as assets of the chapter 7 estate.Vaughan objected to the approval of this compromise, arguing that she did not owe any money to El-Amin.She also filed her motion to withdraw her counterclaim for declaratory judgment, which was the subject of this hearing.Adams filed two pleadings in which she generally opposed the relief Vaughan sought.She asserted that she had been led to believe that Vaughan's counsel was safeguarding the $10,978.50, and that now that money was gone.Adams also claimed that she had released her garnishment actions once the parties had reached a tentative agreement about the disposition of the funds.If Vaughan were permitted to withdraw her counterclaim, Adams would be forced to re-commence her garnishment actions and litigate the issue of Vaughan's liability to a now defunct corporation, long after the fact.For these reasons, Adams asked that Vaughan's motion to withdraw be denied and that she be ordered to pay the funds into the court.The trustee filed a memorandum in support of Adams' position.

These facts were essentially undisputed, although Vaughan of course disputes that she should have to pay anything to El-Amin's bankruptcy estate.In its Opinion, the court drew the following inferences from these facts:

There is ample evidence to suggest that Vaughan's present counsel, Simonsen, did not perform as expected and exhibited a willingness to allow this matter to wither on the vine by creating delay and confusion rather than attempting to resolve the matter.It appears that Simonsen never circulated a revised order as promised, did not take responsibility for safeguarding the funds when he became counsel, never notified the trustee or parties when the CD was liquidated, generally failed to keep the other parties informed, never inquired at the clerk's office why the adversary proceeding was listed as closed when Vaughan still had this interpleader outstanding, and never took action to withdraw the interpleader motion for three years (from November 1996 through October 1999) until the chapter 7trustee filed a motion to effect a compromise in reliance upon that document.

The court...