In re Brown
| Decision Date | 24 August 2001 |
| Docket Number | Bankruptcy No. 01-2595-W. Adversary No. 01-80040. |
| Citation | 270 BR 43 |
| Parties | In re Anthony BROWN and Karen Braxton Brown, Debtors. Anthony R. Brown and Karen B. Brown, Plaintiffs, v. Goode, Peterson & Hemme f/d/b/a Goode, Peterson & Weintraub, also f/d/b/a Goode & Peterson, A.P.C., and John D. Rittenhouse, Defendants. |
| Court | U.S. Bankruptcy Court — District of South Carolina |
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John DeVore Compton, III, Greenwood, SC, for debtors.
Samuel Francis Crews, III, Columbus, SC, for creditor.
THIS MATTER comes before the Court upon Anthony and Karen Brown's ("Plaintiffs") Complaint seeking sanctions, actual damages, punitive damages and/or treble damages, statutory penalties, costs and attorney's fees from Defendants for their unauthorized practice of law, and related relief. Defendants defaulted in the matter, and the Court held a damages hearing with notice to Defendants at which time Plaintiffs appeared with their counsel. Defendants, however, failed to appear at the damages hearing.
After considering the pleadings, Plaintiffs' Chapter 7 filings, Plaintiffs' testimony, and counsel's arguments, the Court makes the following Findings of Fact and Conclusions of Law pursuant to FED. R. CIV. P. 52, made applicable in bankruptcy proceedings by FED. R. BKRTCY. P. 7052.1
1. The Court finds that this is a core proceeding as defined by 28 U.S.C. § 157 and that this matter is one arising in a case under Title 11. This Court has jurisdiction in this matter pursuant to 28 U.S.C. § 157(b)(1) and § 1334.
2. In their Complaint filed with the Court on March 16, 2001, Plaintiffs assert the following causes of action: Aiding and Abetting (wherein Plaintiffs seek joint and several liability of Defendants), Unauthorized Practice of Law, Unfair Trade Practices, Unconscionability, Constructive Trust, and Conversion.2
3. Despite being duly and properly served with the Summons and Complaint in this action on March 30, 2001, Defendants failed to respond. Therefore, an Entry of Default was entered by the Clerk of Court on May 14, 2001, pursuant to FED. R. BKRTCY. P. 7055.
4. A hearing on damages was held before the undersigned Judge. Both Plaintiffs testified at this hearing.
5. Prior to 1999, Plaintiffs operated a small doughnut shop in Greenwood, South Carolina. Unfortunately, in 1999 their ground lease was not renewed. This precipitated a chain of events leading to Plaintiffs' economic problems. As a result of these problems, Mrs. Brown sought counseling for her and her husband's economic troubles through her employer, Fuji Employee Assistance Program.
6. The Employee Assistance Program referred Plaintiff to Defendant, John D. Rittenhouse, for bankruptcy counseling.3
7. Defendant Rittenhouse appeared to be a member of the law firm of Goode, Peterson and Weintraub, the other Defendant herein.4 Acting as an agent for the Firm, Rittenhouse advised Plaintiffs that he could assist them in filing a petition for Chapter 7 bankruptcy protection in South Carolina.
8. Defendant Rittenhouse communicated by telephone with Plaintiffs on or about June 1, 1999, and, on or about July 1, 1999, he sent them a bankruptcy questionnaire, which they completed and returned to him on July 27, 1999.
9. In these communications, Defendant Rittenhouse held himself out as a member or affiliate of the Firm.
10. During the parties' communications, Defendant Rittenhouse failed to advise Plaintiffs that neither he nor any member of his Firm was admitted to the South Carolina Bar or to the United States District Court for the District of South Carolina. Nevertheless, Rittenhouse sought to advise Plaintiffs regarding the filing of bankruptcy in South Carolina.
11. Defendant Rittenhouse and the Firm undertook representation of Plaintiffs for a total fee of $1,680.00 and prepared a bankruptcy petition and a set of schedules.5
12. Defendant Rittenhouse prepared the bankruptcy petition and schedules and mailed them to Plaintiffs approximately one year later. On several occasions, Plaintiffs sought to contact Rittenhouse about their case and ask him why it was taking so long to file bankruptcy. Despite their efforts, they were unsuccessful in contacting Rittenhouse, but they eventually spoke with representatives of the Firm to inquire when their case would be filed. On those occasions, the Firm's representatives did not inform Plaintiffs that Rittenhouse was not affiliated with the Firm.
13. Eventually Defendant Rittenhouse contacted Plaintiffs and advised them that he referred their case to an attorney in Columbia, South Carolina, who would file the case for them. However, Rittenhouse never told Plaintiffs the name of the attorney, and Plaintiffs never received any correspondence or telephone communications from any attorney in South Carolina regarding the filing.
14. After their failed attempts to file for bankruptcy relief through Defendants, Plaintiffs sought the assistance of their present counsel of record. Present counsel prepared a new petition and set of schedules and filed these on Plaintiffs' behalf. Contemporaneously with the filing of Plaintiffs' Petition, counsel filed the instant litigation on Plaintiffs' behalf.
15. According to the fee disclosure attached to Plaintiffs' Schedules, present counsel charged Plaintiffs $1,300.00 for the filing which included a filing fee of $200.00. This fee is within the range usually charged by practitioners in the District of South Carolina for similar Chapter 7 cases.
16. Plaintiffs testified that the stress caused to Mrs. Brown as a result of Defendants' representation and mishandling of the bankruptcy filing exacerbated certain medical problems which ultimately resulted in a diminution of her earning capacity. According to her testimony, Mrs. Brown needs two medications to treat her for depression. Her earning capacity has diminished, and she earns $1,750.00 less per month than she earned when working for Fuji. She presently works cleaning houses.6
Plaintiffs' Complaint asserts various causes of action against Defendants. The causes of action that remain outstanding and have not been withdrawn by Plaintiffs are as follows: Aiding and Abetting, wherein Plaintiffs seek joint and several liability against Defendants, Unauthorized Practice of Law, Unfair Trade Practices, and Unconscionability. The Court will address these issues accordingly.
Plaintiffs allege that Defendants committed the unauthorized practice of law by undertaking the representation of Plaintiffs for the purpose of filing bankruptcy in the District of South Carolina as evidenced by the preparation of a bankruptcy petition and a set of schedules for Plaintiffs. To determine whether Defendants committed the unauthorized practice of law requires a two-step analysis examining (1) whether Defendants were authorized to practice in law in South Carolina and before this Court and (2) whether Defendants' actions constituted the practice of law.
To practice in the United States Bankruptcy Court for the District of South Carolina, an attorney must be admitted to the United States District Court for the District of South Carolina. See S.C. LOCAL BKRTCY. R. 9010-I. To be eligible for District Court admission, attorneys must be in good standing with the South Carolina bar. See S.C. LOCAL FED. CIV. R. 83.I.02. South Carolina law prohibits any person from practicing law unless the person has been admitted and sworn as an attorney. See S.C. CODE ANN. § 40-5-310 (Law. Coop.1976 & Supp.2001). These rules reflect the general principle that state law governs the practice of law within a state's borders except to the limited extent necessary for the accomplishment of federal objectives. See Rittenhouse v. Delta Home Improvement, Inc., 255 B.R. 294, 298 (W.D.Mich.2000).
Under the evidence presented, there is no indication that Defendants are authorized to practice law in South Carolina and therefore before this Court. Although Defendant Rittenhouse may have been a licensed attorney in California, no evidence indicates that he or any member of the Firm has been admitted to the South Carolina Bar or the United States District Court for the District of South Carolina.
The second step is to determine whether Defendants' activities of offering legal advice to Plaintiffs and undertaking representation of Plaintiffs for the purposes of filing bankruptcy in the District of South Carolina as evidenced by the preparation of a petition and a set of schedules constitute the practice of law. Again, this Court looks to state law to resolve professional ethics issues. See 1 COLLIER ON BANKRUPTCY ¶ 8.021 (Lawrence P. King ed., 15th ed.2001); Rittenhouse v. Delta Home Improvement, Inc., 255 B.R. 294, 297 (W.D.Mich.2000) (); In re Peterson, 163 B.R. 665, 672 (Bkrtcy.D.Conn. 1994) ().
Under South Carolina law, the practice of law is interpreted broadly. Indeed, "the practice of law is not confined to litigation, but extends to activities in other fields which entail specialized legal knowledge and ability." State v. Buyers Service Co., Inc., 292 S.C. 426, 357 S.E.2d 15, 17 (1987). In fact, conduct constituting the practice of law includes a wide range of activities, including the preparation of legal instruments and advising clients of legal matters. See id. (...
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