In Re Kelley Lavone Simms-wilson

• Decision Date: 03 June 2010
• Docket Number: Bankruptcy No. 07-34061.,Adversary No. 09-03232.
• Citation: 434 B.R. 452
• Parties: In re Kelley Lavone SIMMS-WILSON, Debtor(s).Kelley Lavone Simms-Wilson; aka Austin, Plaintiff(s)v.Linebarger Goggan Blair and Sampson LLP, et al, Defendant(s).
• Court: U.S. Bankruptcy Court — Southern District of Texas

434 B.R. 452

In re Kelley Lavone SIMMS-WILSON, Debtor(s).Kelley Lavone Simms-Wilson; aka Austin, Plaintiff(s)v.Linebarger Goggan Blair and Sampson LLP, et al, Defendant(s).

Bankruptcy No. 07-34061.

Adversary No. 09-03232.

United States Bankruptcy Court,

S.D. Texas,

Houston Division.

June 3, 2010.

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Kelley L. Austin, Sugarland, TX, pro se.

John P. Dillman, Linebarger Goggan et al., Tara L. Grundemeier, Linebarger Goggan Blair, Houston, TX, for Defendants.

MEMORANDUM OPINION

MARVIN ISGUR, Bankruptcy Judge.

For the reasons set forth below, the Court holds:

1. Defendants violated 11 U.S.C. § 525(b);

2. Simms-Wilson failed to prove damages from Defendants violation of § 525(b); and

3. Defendants did not violate 11 U.S.C. § 362.

Because Simms-Wilson failed to prove damages, judgment will be issued for the Defendants.

Background

Kelley Lavone Simms-Wilson (“Simms-Wilson”) filed for chapter 13 bankruptcy relief on June 18, 2007. Defendant ¹ Linebarger, Goggan, Blair and Sampson, LLP (“Linebarger”) filed proofs of claim in Simms-Wilson's bankruptcy case on behalf of its clients Fort Bend County and Lamar Consolidated Independent School District (collectively, “Fort Bend and Lamar”) for delinquent ad valorem taxes. Simms-Wilson's bankruptcy plan was confirmed on March 25, 2008 (Doc. No. 114) and included treatment (as secured claims) of the delinquent taxes owed to Fort Bend and Lamar for the 2006 and 2007 tax years.

In March 2009, while her bankruptcy case was still pending, Simms-Wilson interviewed for an associate attorney position with Linebarger. The position entailed assisting in the representation of Linebarger's various Fort Bend County clients, including Fort Bend and Lamar, which are two of Linebarger's largest Houston clients.

Simms-Wilson was interviewed by Defendant Charles Sutton. Sutton, who is a Linebarger partner, is responsible for overseeing Linebarger's ad valorem tax collection practice in the suburban Houston, Texas region (which includes Fort Bend County). Nevertheless, Sutton was not personally involved in Simms-Wilson's bankruptcy case and had no knowledge of Simms-Wilson's delinquent taxes when Linebarger invited Simms-Wilson to the interview.

Sutton also did not learn of Simms-Wilson's delinquent taxes during the interview. Simms-Wilson informed Sutton that she was raised and currently resided in Fort Bend County. However, Sutton did not ask Simms-Wilson whether she owed any delinquent taxes to Fort Bend, Lamar, or any other tax agency. Simms-Wilson also did not directly offer information regarding her delinquent taxes.²

Although she failed to raise the issue, Simms-Wilson did not intentionally conceal her personal tax issues from Sutton during the interview. Simms-Wilson authorized Linebarger to check her credit history and Simms-Wilson was aware that attorneys from Linebarger had represented creditors in her bankruptcy case. Thus, it was reasonable for Simms-Wilson to assume that Linebarger was aware-or could, at the very least, easily become aware-of her tax and bankruptcy situation.

Sutton offered Simms-Wilson the associate position with Linebarger in late March 2009; Simms-Wilson accepted the offer shortly thereafter. Consistent with Linebarger's regular hiring practice, the firm did not perform a conflicts of interest “check” on Simms-Wilson at the time she was hired and did not inquire whether Simms-Wilson owed delinquent taxes.

Sutton became Simms-Wilson's supervisor and Simms-Wilson immediately began working on Linebarger's Fort Bend and Lamar cases, including those involving delinquent ad valorem tax collections. Sutton testified that although he took issue with two minor aspects of Simms-Wilson's initial employment, he was pleased with Simms-Wilson's overall progress and had no complaints about her actual legal work in March and April of 2009.³

On April 17, 2009, unbeknownst to Sutton, Linebarger filed a proof of claim on behalf of Fort Bend and Lamar in the amount of $6,971.78 for delinquent 2008 ad valorem taxes in Simms-Wilson's bankruptcy case. On April 28, 2009, the Court confirmed Simms-Wilson's modified chapter 13 plan. (Doc. No. 174). The modified plan included Court authorization for Simms-Wilson to pay her 2008 ad valorem taxes in full directly to Fort Bend and Lamar within 20 days. (Doc. No. 170). Simms-Wilson timely paid the 2008 delinquent taxes in accordance with the modified plan.

On the afternoon of Thursday, April 30, 2009, Sutton first became aware of Simms-Wilson's bankruptcy case and delinquent tax debts. Sutton then informed Defendant Norman Nelson-Sutton's supervisor and a member of Linebarger's Management Committee-of Simms-Wilson's delinquent taxes that afternoon.

Upon receiving the news, Nelson responded that Simms-Wilson's debts violated Linebarger's “firm policy” against owing debts to Linebarger's clients. Nelson and Sutton also discussed the potential embarrassment to which Linebarger could subject itself by employing an associate with delinquent taxes. Nelson determined that Simms-Wilson's termination would likely be the necessary course of action, but instructed Sutton to first seek additional assistance from Linebarger's human resources department before making a final decision. Nelson did not discuss any alternative measures that Linebarger could take to avoid terminating Simms-Wilson's employment.

On the following day, May 1, 2009, Sutton spoke to the human resources department about Simms-Wilson's situation. After discussing the matter with an employment law attorney, the human resources department directed Sutton to terminate Simms-Wilson.

Near the end of the May 1, 2009 work-day, Sutton notified Simms-Wilson that it was against Linebarger's firm policy ⁴ for an employee to owe delinquent taxes to a client and, therefore, he had to terminate Simms-Wilson's employment with Linebarger. Sutton informed Simms-Wilson that she never would have been hired if Sutton had known of Simms-Wilson's delinquent taxes when Simms-Wilson interviewed for the position. Sutton further stated that Linebarger had lost clients in the past when less serious issues arose, and that Linebarger was fortunate to discover Simms-Wilson's delinquent taxes before a competitor for the firm's Fort Bend clients received the information.

Simms-Wilson then asked Sutton whether she could keep her job if she paid the delinquent taxes earlier than provided for in her bankruptcy plan. Sutton said he would consider Simms-Wilson's proposition and immediately consulted Nelson to determine whether this was acceptable. Nelson and Sutton determined that they would need more time to answer Simms-Wilson's question. Eventually, May 1, 2009 ended with Sutton: (i) deciding ⁵ not to terminate Simms-Wilson, and (ii) informing Simms-Wilson that Linebarger would also explore whether payment of the delinquent taxes was an option.

On Monday, May 4, 2009, Sutton consulted with Linebarger's bankruptcy department and was informed that Simms-Wilson would be unable to pay the delinquent taxes early. Sutton then made the decision to terminate Simms-Wilson's employment and explained this decision to Simms-Wilson that afternoon. ⁶ Sutton stated that the delinquent taxes created an impermissible conflict of interest between Simms-Wilson and Fort Bend and Lamar, which could not be remedied in the near future, and thus necessitated Simms-Wilson's immediate termination.

Bridgette Smith, who was Simms-Wilson's attorney at the time, sent a letter to Linebarger, Sutton and Nelson on May 5, 2009 informing the recipients that Simms-Wilson's termination violated §§ 362 and 525 of the Bankruptcy Code. (Pl.'s ex. F). The letter demanded that Linebarger rescind Simms-Wilson's termination and compensate her for damages.

Linebarger's attorney responded to Ms. Smith on May 7, 2009. (Pl.'s ex. G). The response stated that Simms-Wilson was terminated for violating a firm policy and because of the “irreconcilable ethical issue” associated with Simms-Wilson's representation of Fort Bend and Lamar.

On June 6, 2009, Simms-Wilson filed an adversary proceeding against Linebarger, Sutton and Nelson (collectively, the “Defendants”) alleging violations of 11 U.S.C. §§ 362(a)(3), 362(a)(6) and 525(b)(3). With regard to § 362, Simms-Wilson alleges that Defendants attempted to collect the delinquent taxes in violation of the automatic stay when Sutton informed Simms-Wilson that she was being terminated on May 1, 2009. Simms-Wilson alleges that Defendants violated § 525(b)(3) because she was terminated “solely” because she owed delinquent taxes.

Defendants claim that they never attempted to collect the delinquent taxes and did not violate the automatic stay. Further, Defendants claim that Simms-Wilson was not terminated “solely” due to her delinquent taxes but also because Simms-Wilson's representation of Fort Bend and Lamar created an impermissible conflict of interest.

The case went to trial on March 4, 2010. After trial, the Court ordered briefing on the question of whether-since the delinquent 2008 taxes were a post-petition obligation-Simms-Wilson's 2008 taxes constitute a “debt that is dischargeable” under § 525(b)(3).

The Court ordered additional briefing of two issues on April 12, 2010. (Doc. No. 42). First, the Court ordered the parties to submit a brief regarding the sufficiency of the evidence of damages presented at the March 4, 2010 trial. ⁷ Second, the Court ordered briefing on the burden of proof regarding damages and mitigation.

Issues

1. Whether Simms-Wilson was terminated solely because she owed a debt dischargeable in bankruptcy in violation of 11 U.S.C. § 525(b)(3)?

2. If Defendants did violate § 525(b)(3), what remedy should Simms-Wilson receive?

3. Whether Defendants' conduct when terminating Simms-Wilson amounted to an attempt to collect the delinquent taxes in violation of §§ 362(a)(3) and (a)(6)?

Jurisdiction

The Court has subject...