In re Clark, Bankruptcy Case No. 06-62407-aer13 (Bankr.Or. 8/21/2009), Bankruptcy Case No. 06-62407-aer13.
| Decision Date | 21 August 2009 |
| Docket Number | Bankruptcy Case No. 09-61608-aer13.,Bankruptcy Case No. 09-61605-aer7.,Bankruptcy Case No. 06-62407-aer13.,Bankruptcy Case No. 09-61309-aer13.,Bankruptcy Case No. 08-62785-aer13.,Bankruptcy Case No. 09-61563-aer13.,Bankruptcy Case No. 09-61553-aer7.,Bankruptcy Case No. 09-61595-fra7.,Bankruptcy Case No. 08-62216-aer13.,Bankruptcy Case No. 09-61567-aer13.,Bankruptcy Case No. 09-61596-aer7. |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Oregon |
| Parties | In Re: MELISSA CLARK, Debtor. DAVID C. & MARY C. HOUTS, Debtors DONALD & JOLEE TAYLOR, Debtors. TED C. & JUDY A. BERGE, Debtors. PHILLIP K. & KELLY D. GALLOWAY, Debtors. KRISTI B. CARAWAY, Debtor. SAMUEL T. & BEVERLY A. BARNARD, Debtors. DAVID A. CHILSON, Debtor. JAMES D. MOONEY, Debtor. RAYMOND L. & KATHLEEN A. WELLER, Debtors. JUSTIN D. WILSON, Debtor. |
This matter comes before the court on orders to show cause in each of the above-captioned cases why attorney Keith Hayes' fees should not be reduced or denied and why his current suspension should not be continued for an additional 90 days. An evidentiary hearing was held on August 3, 2009, after which the matters were taken under advisement.
Background:
On March 26, 2009, this court entered its Memorandum Opinion and Order in Clark, Houts and Taylor suspending attorney Keith Hayes from practice before the United States Bankruptcy Court for the District of Oregon for 90 days (the March 26th Order). Under the March 26th Order, the suspension began 60 days from the Order's entry ( the grace period). During the grace period Mr. Hayes was permitted to take appropriate action to conclude his existing cases or find substitute counsel; he could not, however, file new cases. In addition, as part of the March 26th order, in the Clark case, Mr. Hayes was ordered to disgorge $2,950 to the Chapter 13 Trustee and $750 to legal insurer ARAG, North America Inc. by April 20, 2009, all without prejudice to any claims Ms Clark may have to the funds.
On March 31, 2009, Mr. Hayes filed an Amended Motion to Modify the March 2 6th Order (the Amended Motion). The Amended Motion sought authority to file new cases through April 6, 2009. In support of the Amended Motion Mr. Hayes filed a Declaration stating in pertinent part:
1. I became aware of the Court's [March 26th] order in this case on March 31, 2009 while checking ECF electronic notification ....
2. At this time, I have a number of clients who have significant financial issues with time pressure on them who need to file for relief under the bankruptcy code. They are clients who have pending garnishments, foreclosure dates and pending lawsuits.
3. If the cases are not filed in the immediate future, those persons will lose money through garnishment or other seizure, or lose property through foreclosure.
4. Because of the deadlines involved, it would be logistically impossible for them to find substitute counsel or file the cases pro se with the deadlines they are facing.
5. Because of the risk of financial hardship and loss involved, and the difficulty of finding substitute counsel, I am asking that the Court modify the [March 2 6th] Order to provide for an effective date of April 6, 2009.
6. This is to allow the filing of cases for persons who previously retained me prior to the date of the [March 2 6th] order and who have a significant deadline approaching.
7. This declaration is made in good faith, is based on personal knowledge, and not made for the purpose of delay.
Based on the Amended Motion and Declaration, this court entered an order on April 1, 2009, allowing Mr. Hayes to file new cases through April 3, 2009, but all other provisions of the March 26th Order remained in effect.
The New Cases:
Between April 1, and April 3, 2009, Mr. Hayes filed 35 cases on behalf of debtors, 30 under Chapter 7 of the Bankruptcy Code and 5 under Chapter 13. Among them were Berge (Chapter 13); Galloway,(Chapter 7); Caraway (Chapter 7; Barnard (Chapter 7); Chilson (Chapter 7); Moonev (Chapter 13); and Weller (Chapter 13) (collectively, the new cases). Mr. Hayes did not notify his clients in the new cases that he had been suspended.
The schedules, statements of financial affairs, plans, proofs of claims and other documents filed in the new cases indicate:
a) no tax debt subject to collection by levy or otherwise;
b) no secured debt, no delinquent secured debt or no intent by the debtor(s) to retain the collateral;
c) no lawsuits or administrative proceedings to which the debtor was a party within one year of the petition, and no judgments obtained by creditors before the one year; and
d) no property attached, garnished or seized under any legal or equitable process within one year of the petition and no indication that any continuing garnishment, attachment, execution, seizure, forced sale, or levy was pending on the date of the petition.
From the evidence adduced, this court is clearly convinced there was no immediate need or exigency to file any of the new cases.1
In the new Chapter 7 cases, Mr. Hayes charged his normal flat fee of $850 and collected either all or a portion of it before the filing. In the new Chapter 13 cases, Mr. Hayes charged his normal flat fee of $4,000 for the entire case and collected $500 before filing, with the remainder to be paid through the Chapter 13 plan.
In the new Chapter 7 cases, the meetings of creditors required under 11 U.S.C. § 341(a)2 (meetings) were set in Salem, Oregon, on May 29, 2009. This was during Mr. Hayes' suspension. Mr. Hayes was aware of this setting, at the latest, on April 3, 2009 (Chilson), and April 6, 2009 (Galloway, Caraway and Barnard), when he received e-service of the notice of bankruptcy filing with the meeting date thereon. Mr. Hayes contracted with attorney R. Brooke Holstedt to appear for him at the meetings,3 however he waited until a day or two before the meetings to transfer the case files to Mr. Holstedt and then only went over about half of the files with him.
In the new Chapter 13 cases, the confirmation hearing was set for June 16, 2009. Mr. Hayes received e-notice thereof on April 3, 2009 (Berae and Weller), and April 6, 2009 (Mooney), respectively. On May 13, 2009, Mr. Hayes received notice that the confirmation hearing in each case had been reset to June 25, 2009. Both of these dates were during Mr. Hayes' suspension. Mr. Hayes did not advise his clients that if objections to confirmation were filed, he would not be able to attend the confirmation hearings. Mr. Weller testified that he first learned of Mr. Hayes' suspension when he called the Chapter 13 Trustee's office before the June 25th hearing to discuss modifications to the plan. Mr. Weller further testified that he had attempted to contact Mr. Hayes beforehand to discuss the Trustee's pending objections to confirmation but his calls were not returned. This court finds Mr. Weller's testimony to be credible.
In Mooney and Berge, no objections to confirmation were filed, accordingly, the confirmation hearing was not held. In Weller, ninety minutes before the June 25th hearing, Mr. Hayes faxed a letter to the court requesting that confirmation hearings that morning, in cases in which he was attorney of record, be continued. The letter stated Mr. Hayes was working on finding substitute counsel for his clients and that Mr. Holstedt, whom he had been working with, was not available for that day's hearings. The Wellers appeared pro se at the hearing. The court set the matter over to allow them to procure new counsel.4
Wilson:
The Wilson Chapter 7 case was filed through Mr. Hayes on March 26, 2009. Mr. Hayes charged and received his normal flat fee of $850.
On June 5, 2009, the Office of the United States Trustee (UST) moved to dismiss the case under § 707(b) as an abuse of the provisions of Chapter 7. Before then the UST had repeatedly attempted, unsuccessfully, to contact Mr. Hayes to discuss the motion and obtain documents.
On June 9, 2009, Mr. Hayes received e-mail notice of a July 15, 2009, hearing on the UST's motion. The July 15th hearing was duly convened. At the time, the court's docket indicated no substitution of counsel for Mr. Hayes. No one appeared at the hearing on Mr. Wilson's behalf. Mr. Hayes has offered no evidence as to why substitute counsel had not been procured.
Mr. Hayes has not disgorged $2,950 to the Chapter 13 Trustee in Clark as required by the March 26th Order. He testified he was attempting to work out an agreement with the Trustee to make payments from monies due him on other cases.5 He offered no other excuse or justification (such as inability) for his failure to abide. In light of the fact that Mr. Hayes filed 35 cases by April 3, 2009 (and likely collected some fees in each case, as was his practice) this court infers that he did have the financial ability to comply with the March 26th Order but willfully chose not to do so.
Discussion:
The UST has recommended that all of Mr. Hayes' fees be denied in the matters at bar and that he be suspended for an additional 90 days. For the reasons that follow, this court adopts the UST" s recommendations.
Fee Disgorqement:
The court may examine the reasonableness of Mr. Hayes' compensation under § 329(b). "Reasonableness" under § 329(b) is measured by § 330's standards. American Law Ctr. PC v. Stanley (In re Jastrem), 253 F.3d 438, 443 (9th Cir 2001). The court considers the nature, extent and value of services rendered taking into account all relevant factors including those set out in § 330(a)(3), and excluding those services described in § 330(a)(4)(A). If the compensation exceeds the reasonable value of the services, the court may cancel the agreement or order disgorgement of any fees, to the extent excessive, to the estate (if the fees would have been estate property or were to be paid under a Chapter . . . 13 plan), or to the debtor. § 329(b) (1)-(2).
Even before he filed the new cases...
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