In re Campanella
| Decision Date | 10 April 1997 |
| Docket Number | Bankruptcy No. 96-31974DAS. |
| Citation | 207 BR 435 |
| Parties | In re Anthony J. CAMPANELLA, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Anthony J. Campanella, Philadelphia, PA, pro se.
Gloria M. Satriale, Chester Springs, PA, Trustee.
John D. McLaughlin, Jr., Frederic Baker, Philadelphia, PA, Assistant United States Trustees.
Presently before this court is the issue of whether this court should take measures to protect debtors from the practice of the Divorce and Bankruptcy Center, Inc. ("the Center"), whose sole principal is non-attorney Richard Kramer, of selling "bankruptcy kits" consisting of written instructions for filing bankruptcy, many of which are erroneous or misleading. The result which we reach is similar to that of In re Evans, 153 B.R. 960 (Bankr.E.D.Pa.1993). We are not completely convinced that the Center is engaged in the unauthorized practice of law, but we are quite certain that the Center has grossly overcharged ANTHONY J. CAMPANELLA ("the Debtor") and its other bankruptcy customers for the "services" provided, in light of the obsolete, misleading, and basically useless information incorporated in the kits. We also find that, in the Debtor's case, this practice violated Federal Rule of Bankruptcy Procedure ("F.R.B.P.") 1006(b)(3). Therefore, we herein order that the Center refund the total fee charged plus tax of $147.34 charged to the Debtor for the sale of a bankruptcy kit to him. We will further enjoin the Center from continuing to distribute bankruptcy kits in all of its places of business in New Jersey and New York.
The Debtor filed the underlying voluntary individual Chapter 7 bankruptcy case pro se on December 10, 1996. On that same day, he also filed an Application ("the Application") seeking to obtain a waiver of the Chapter 7 filing fees under the in forma pauperis ("IFP") pilot program ("the IFP Program")1 in which this district is one of six participants. Noting that the Debtor's monthly gross income disclosed in the Application ($2,640) exceeded the monthly expenses disclosed in the Application ($1,103) by over $1,500, we scheduled a hearing on the Application, as opposed to granting it, on January 9, 1997. Though not disclosed on Local Bankruptcy Form ("L.B.F.") 2016.1,2 we learned, through the Debtor's testimony at that hearing, that he had allegedly paid a fee of $175 to the Center, at a Cherry Hill, New Jersey, location, for certain services in connection with his bankruptcy filing as a charge for "assisting the Debtor in filing or preparing his papers."
In light of this discovery, we issued an order of January 10, 1997, requiring the Center to respond to inquiries regarding what services were provided to the Debtor, what sum was charged, the identities of other debtors which the Center assisted in filing bankruptcy petitions, and how the Center's services are advertised, as we do in all cases where substantial sums paid to lay advocates are disclosed on L.B.R. 2016.1 or are otherwise uncovered. In that order, we further directed that the Debtor and a representative from the Center appear at a hearing on February 27, 1997, to show cause why the Center should not be compelled to refund any sums charged to the Debtor, why it should not be permanently enjoined from assisting persons in filing bankruptcy petitions, why it should not be permanently enjoined from any violations of 11 U.S.C. § 110, and why it should not be subjected to the penalties set forth in 11 U.S.C. § 110. We also expressed an intention to deny the Debtor's IFP Application and to establish a schedule to pay the filing fees in installments at that hearing. After the February 27, 1997, hearing we established a schedule requiring the Debtor to pay four installments of $43.75 by April 30, 1997.
The fee charged to the Debtor was disclosed as $139.00 plus a six (6%) percent sales tax, or $147.34. In response to the inquiry as to why no refund should be made, Kramer stated that "the Court has no basis or precedent to order a refund of the sale of do it yourself pro se kits and forms." With regard to the names and case numbers of any other bankruptcy cases for which the Center charged debtors a fee for assisting them, Kramer replied: Finally, of the Center's advertisements, Kramer responded: Kramer was subsequently orally requested to supply a copy of the kit to the court, and he did so shortly before the hearing.
The Debtor, Kramer, and an Assistant United States Trustee ("UST") appeared at the February 27, 1997 hearing. The Debtor testified that, while he drove around the block, his girlfriend picked up the bankruptcy kit and paid the requested fee for him to the Center, and that he then gave the kits to his sister to fill out the bankruptcy papers for him. The Debtor made no further inquiries of the Center after obtaining the forms from it. He was uncertain what role the kit had played in the completion of his forms by his sister, or whether she had ever contacted the Center again.
Although the Debtor's financial affairs appear simple, the Schedules were filled out with a significant number of errors. Except for a car, no property, even clothing, was listed or claimed as exempt. No choice of the federal or state exemptions was made in exempting the car. The form was left completely blank at all places where "None" was requested to be entered, if applicable. The Schedules I and J reflected over $1,000 excess monthly income, which could have triggered a motion under 11 U.S.C. § 707(b), and which did totally undermine the merit of the IFP Application.3
Kramer's testimony revealed that he is no stranger to the issue of the unauthorized practice of law. He testified that other offices of the Center, its predecessors, and he himself had been the subjects of charges of unauthorized practice of law for over ten years in New Jersey, where the Center has six places of business, in addition to an office in Manhattan.
An opinion published as New Jersey State Bar Ass'n v. Divorce Center of Atlantic County, 194 N.J.Super. 532, 477 A.2d 415 (1984) (cited hereinafter as "N.J. Bar"), describes a suit by the plaintiff Bar Association against Kramer and his Atlantic County business to prevent its sale of divorce kits on the ground that their sale constituted the unauthorized practice of law. The N.J. Bar court thusly described the respondents' services:
The practice followed by the Divorce Center . . . goes beyond the selling of legal forms. The exchange between the representative of the Divorce Center and the customer includes the giving of advice and the interpretation of raw data for purposes of completing the various pleadings . . . The use of the advertising scheme, when combined with the manner in which the information is gathered and interpreted both verbally and in writing, creates an impression to the customers that the services rendered by defendants include expertise, guidance and advice in the area of divorce. The so-called "typing" service, for example, appears to be a veiled way of providing claimed expertise and guidance which go well beyond the mere typing of a form. . . . The proofs also included evidence of encouragement from representatives of the Divorce Center to have customers falsify information as part of the divorce complaint.
194 N.J.Super. at 536, 477 A.2d at 417. While the court determined that New Jersey followed the "liberal view," per Annot., Sale of Books or Forms Designed to Enable Layman to Achieve Legal Results Without Assistance of Attorney as Unauthorized Practice of Law, 71 A.L.R.3d 1000, 1008-09 (1976) (cited hereinafter as "Annot."), that sale of do-it-yourself legal kits and instructions alone does not constitute the unauthorized practice of law, 194 N.J.Super. at 538, 477 A.2d at 418, it found that the services offered by Kramer and his Center went far beyond the mere sale of such kits and instructions. Id. at 536, 477 A.2d at 417. Thus, the court held that Kramer and the Center had committed the unauthorized practice of law. Id. at 543, 477 A.2d at 420-21.
During the hearing and in his post-hearing submission, Kramer expressed, with an air of overbearing arrogance laced with vitriol directed at attorneys generally, and the UST in particular, that the N.J. Bar opinion had completely vindicated him and his practices. Like many of Kramer's assertions, these statements were more than slightly inaccurate.
The bankruptcy kit supplied to the Debtor which is in issue here is comprised of "Book 1 Chapter 7 Personal Bankruptcy Guide" and Book 2, which is simply a copy of the official bankruptcy forms which Kramer testified that he purchased for $12 to $14 from "Blumberg," apparently a stationery store. Kramer contended that the official forms were purposefully devised by lawyers to be incomprehensible to lay persons and that the mysteries of the forms could be unlocked by the use of his kits, the text of which he wrote himself, allegedly after consultation with lawyers. As training for this undertaking,...
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