In re Brown

Decision Date18 October 1988
Docket NumberBankruptcy No. 88 B 17914,88 B 02217,88 B 02218,88 B 03051 and 88 B 03341-88 B 03343.
Citation94 BR 526
CourtU.S. Bankruptcy Court — Northern District of Illinois
PartiesIn re Isaac & Aza BROWN, Raul P. Morales, Thresia A. Florence, Donna M. Groebe, Clint & Carolyn M. Jones, Eddie L. Loyd, Major & Hattie Roberson, Debtors.

Thomas Holstein, Chicago, Ill., pro se.

Jack McCullough, Chicago, Ill., Chapter 13 Trustee.

Clifford Meacham, Office of the U.S. Trustee, Chicago, Ill.

Marc S. Shuger, Chicago, Ill., pro se.

Craig Phelps, Chicago, Ill., Chapter 13 Trustee.

RECOMMENDATIONS TO DISTRICT COURT FOR FINDINGS OF FACT AND CONCLUSIONS OF LAW IN PROCEEDING FOR POSSIBLE CRIMINAL CONTEMPT UNDER BANKRUPTCY RULE 9020

JACK B. SCHMETTERER, Bankruptcy Judge.

On March 19, 1987 following hearing held, this Court recommended to the District Court that attorney Thomas Holstein be censured and given limited supervision from practicing under Chapter 13 of 11 U.S.C. On November 17, 1987, the District court accepted this Court's recommendation and entered an order of limited suspension of Mr. Holstein from such practice in Disciplinary Proceeding 87 D 17. He was banned from filing new Chapter 13 cases pending further review. On March 3, 1988, this Court acting for Chief Judge Schwartz who was absent from the District ordered the above-entitled case assigned here for limited purpose of holding hearing under Bankr.R. 9020 to determine whether Thomas Holstein acted in criminal contempt by filing new Chapter 13 cases before this Court in wilful violation of the said order of limited suspension, and whether attorney Marc S. Shuger had aided Mr. Holstein in doing so.

Pursuant to Bankr.R. 9020 and the District Court General Order of Reference of Bankruptcy matters entered July 20, 1984, this Court held such hearings on March 4th, 10th, and 11th, 1988, following notice to said attorneys, to the United States Trustee, and to the Standing Chapter 13 Trustees. The United States Trustee appeared and participated; the Standing Trustees appeared by their representatives.

Motions were filed and ruled on, evidence was taken, and the hearing concluded on March 11th. On the same day Mr. Holstein filed a post-trial Motion for Directed Verdict or in the Alternative for Directed Findings. On March 31, 1988 he filed his memorandum in support of that motion. The United States Trustee filed his brief ("Statement") with respect thereto on May 6, 1988.

For reference by the District Court Executive Committee, there are transmitted along with these Recommendations copies of the following referred to hereinbelow:

Tab No. 1 Recommendation of this CourtMarch 19, 1987
Tab No. 2 Order of Executive Committee in 87 D 17 — November 17, 1987
Tab No. 3 Order and Notice of March 3, 1988 for hearing under Bankr.R. 9020
Tab No. 4 Hearing transcript — March 4, 1988
Tab No. 5 Hearing transcript — March 10, 1988
Tab No. 6 Hearing transcript — March 11, 1988
Tab No. 7 Respondents\' "Complaint" filed before this Court to remove contempt proceeding to District Court in proceeding No. 87 D 17, treated by this Court as a motion
Tab No. 8 Respondents\' Exhibit 1 admitted at hearing, showing transmittal of Executive Committee Order to Mr. Holstein on December 4, 1987
Tab No. 9 Respondents\' Motion for Directed Verdict filed March 11, 1988
Tab No. 10 Supporting Memorandum filed by Messrs. Holstein and Shuger — March 31, 1988
Tab No. 11 "Statement" of U.S. Trustee filed May 6, 1988
Tab No. 12 Order of Bankruptcy Judge Erwin I. Katz entered March 21, 1988 in In re Brown, No. 87 B 17914

This Court's recommended Findings of Fact and Conclusions of Law follow. Pursuant thereto, this Court recommends that Respondents' motion for Directed Verdict on Constitutional and procedural grounds be denied, but that neither Mr. Holstein nor Mr. Shuger be found to have wilfully violated or wilfully aided the violation of the order entered with respect to Mr. Holstein in Disciplinary Proceeding No. 87 D 17 on November 17, 1987.

Recommended Findings of Fact

1. Following hearing held, on March 19, 1987, this Court found that attorney Thomas Holstein who is admitted to practice before the District Court failed to represent his clients competently in certain bankruptcy proceedings before this Court under Chapter 13 of Title 11 U.S.C., in violation of Canon 6 and DR 6-101(A)(3); and that he effectively withdrew from representing such clients without court permission in violation of DR 2-110. Therefore it was recommended that he be censured and given limited suspension from filing new Chapter 13 cases until he demonstrated that he had adequate staff and procedures so as to afford representation of counsel in court for his clients in those cases. Tab No. 1.

2. On November 17, 1987, the Executive Committee entered an order which was transmitted by the District Court Attorney Admissions Coordinator to all judges of the Bankruptcy Court. That order approved this Court's recommendation and provided in pertinent part:

". . . that until further order of the Executive Committee the Clerk of this Court and the Clerk of the Bankruptcy Court are directed to accept no new filings by Thomas Holstein of any Chapter 13 cases. . . . "

and

". . . that 90 days from the date of this order the Chief Judge of the Bankruptcy Court is directed to survey the Bankruptcy Judges as to whether Thomas Holstein has demonstrated that he has satisfactorily represented his clients in his pending bankruptcy cases, and 30 days thereafter report his recommendation to the Executive Committee as to whether the ban on filing new Chapter 13 cases should be lifted."
Tab No. 2.

3. Certain Chapter 13 filings in cases set forth in the caption hereto were called to this Court's attention by the Clerk of this Court, the Standing Chapter 13 Trustees, and by an attorney who communicated concerning one case. From those filings it appeared that Mr. Holstein with help of Mr. Shuger might have violated the "ban on filing" new Chapter 13 cases imposed on him by the Executive Committee Order. Therefore in the absence from the District of the Chief Bankruptcy Judge and at his request and with his authority, this Court reassigned each of the above-entitled cases to this Court for the limited purpose of holding a contempt hearing pertaining to the foregoing. Notice was sent to Messrs. Holstein and Shuger, and also to the United States Trustee and the two Chapter 13 Standing Trustees. Pursuant to Bankr.R. 9020 and the District Court General Order of Reference as to bankruptcy matters entered July 10, 1984, attorneys Holstein and Shuger were on March 3, 1988 ordered to appear March 4, 1988 for hearing as to whether said attorneys or either of them acted in criminal contempt of the aforesaid order of November 17, 1987 in 87 D 17, and whether such new Chapter 13 filings should be referred to the attention of the Executive Committee. Tab No. 3.

4. The foregoing order was based on facts appearing from the face of Petitions filed in the following Chapter 13 bankruptcy proceedings in this District Bankruptcy Court, of which the Court takes judicial notice:

In re Brown, No. 87 B 17914, filed by attorney Holstein as sole attorney for Debtor on December 4, 1987, seventeen days after the Executive Committee Order;
In re Morales, No. 87 B 2217 (filed February 15, 1988); In re Florence, No. 88 B 2218 (filed February 16, 1988); In re White, No. 88 B 1719 (filed February 5, 1988); and In re Jackson, No. 88 B 1722 (filed February 5, 1988) all signed by Marc Shuger but naming Mr. Holstein as additional counsel for Debtor.
In re D\'Acensio, No. 88 B 1720 (filed February 5, 1988); In re Cubie, No. 88 B 1721 (filed February 5, 1988); In re Roberson, No. 88 B 3343 (filed March 2, 1988); In re Loyd, No. 88 B 3342 (filed March 2, 1988); In re Jones, No. 88 B 3341 (filed March 2, 1988); and In re Groebe, No. 88 B 3051 (filed February 26, 1988) all signed by Mr. Shuger, but showing Mr. Holstein as "Trial Attorney" and/or "Referring Attorney" and/or attorney sharing fees, and all apparently produced with use of Mr. Holstein\'s software program for Chapter 13 cases and on his equipment.

5. On March 4, 1988, Mr. Holstein requested a continuance which was granted until March 11th. He also reported that he had not been served with or learned of the Executive Committee Order until December 4, 1988, when he learned of it from the Bankruptcy Clerk after filing the Brown case. (Tab No. 4, p. 9.) Mr. Shuger stated that he accepted the other cases as referrals from Mr. Holstein, disclosed therein the fee sharing arrangements, considered those filings his professional responsibility, and did not understand the Executive Committee Order to bar Holstein from referring cases to others. (Tab No. 4, pp. 12-13.)

6. At the hearing held March 11th and 12th, 1988, both Mr. Holstein and Mr. Shuger testified, and also the Bankruptcy Clerk Wayne Nelson was called by the Court as a witness. (Tab Nos. 5 and 6.) Respondent filed with this Court in open court what is termed a "Complaint" to remove this proceeding from the Bankruptcy Court to the District Court (Tab No. 7) but never to the knowledge of this Court moved the District Court to remove the proceeding from this Court. The "Complaint" was never to our knowledge docketed as a case or matter before the District Court. This Court accepted it as a form of motion before this Court. (Tab No. 5, p. 16.)

7. From the record of proceedings referred to hereinabove and the testimony of witnesses and Respondent's document admitted into evidence (Tab No. 8) this Court finds that the District Court Attorney Admissions Coordinator did on November 19, 1987 serve copies of the Executive Committee Order on the judges of the Bankruptcy Court (Tab No. 2) but not on Mr. Holstein. Nor did this Court or the Clerk of the Bankruptcy Court serve a copy on Mr. Holstein at that time. Since the order in question instructed our Bankruptcy Clerk Mr....

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