In re Kolle
| Decision Date | 10 December 2021 |
| Docket Number | Case No. 17-41701-CAN, Case No. 17-42125-DRD, Case No. 17-42465-BTF, Case No. 17-43023-BTF, Case No. 17-43313-BTF, Case No. 18-40087-CAN, Case No. 18-40723-DRD, Case No. 18-41222-DRD, Case No. 17-43094-CAN, Case No. 18-40264-CAN |
| Citation | 641 B.R. 621 |
| Parties | IN RE: Amanda June KOLLE, Debtor. In re: DeAnn Michelle Gould, Debtor. In re: Justin Mantez MacKey, Debtor. In re: Melissa Maxine Long, Debtor. In re: Ernestine Richetta Franklin, Debtor. In re: Leona Tenelle Harvey, Debtor. In re: Angel Marie Demeturis Anderson, Debtor. In re: Kenneth Darwin Cook, Debtor. In re: Lateisha Jenee Robinson, Debtor. In re: Nechol Mutesa Washington, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Missouri |
Jason C. Amerine, Castle Law, Kansas City, MO, for Debtors.
Almost four years ago, the United States Trustee ("UST") filed four adversary complaints against attorney Jason Amerine and his law firm, Castle Law Office of Kansas City, P.C. The UST sought sanctions, disgorgement, and discipline, arising out of Mr. Amerine's and his law firm's practice of failing to disclose they had "factored" fees owed to them by some of their chapter 7 debtor clients.1 After a court-ordered mediation, the parties reached a settlement requiring Castle Law to disgorge fees and to pay a civil penalty.2 Once the motion seeking the court's approval for the settlement was filed, however, it came to light that the factoring and nondisclosure had occurred – not just in the four cases – but in an additional 100 cases or more.3
The court approved the settlement but issued an order to Mr. Amerine to show cause why additional sanctions should not be imposed in connection with the additional cases.4 After nearly a thousand pages of briefs and exhibits filed and numerous hearings held over the course of almost a year, new and previously undisclosed facts about the extent of the nondisclosures are still coming to light. Because, the court believes, it should not take almost four years and hundreds of pages for a debtor's attorney to completely and accurately disclose how much he charged and was paid for filing chapter 7 bankruptcy cases, the court is compelled to impose additional sanctions in the form of a disciplinary referral.
Mr. Amerine is a consumer bankruptcy attorney representing debtors in chapter 7 and 13 bankruptcy cases in the Western District of Missouri and the adjacent District of Kansas since 2001.5 He was the managing attorney at Castle Law from 2002 to 2014, when he became the sole owner.6 By his own calculation, he has filed thousands of cases for consumer debtors over the course of his legal career.7 Although other attorneys work at Castle Law,8 every bankruptcy case Castle Law files is filed under Mr. Amerine's name.9
The issues in this case were first brought to the court's attention when, on March 12, 2018, the UST filed the first of four adversary complaints against Mr. Amerine and Castle Law in In re James .10 The initial complaint, as well as the three that followed, alleged what on their face were disturbing facts: that the four debtors had retained Mr. Amerine and his law firm to file chapter 7 bankruptcy cases for flat fees; that, after the debtors each paid some funds, Mr. Amerine and his law firm pressured the debtors to accept a new fee contract, under which $0 would be allocated to the prepetition services; and that, after filing for bankruptcy, the debtors were then presented with a second fee contract for a higher amount than the originally quoted flat fee and told that if they did not accept it, Mr. Amerine would withdraw.
The complaints further alleged that after filing the cases, Castle Law sold or "factored" the second fee contracts at a discount to a third-party funder, known as BK Billing, who then collected the fees directly from the debtors in apparent violation of the automatic stay and the discharge injunction. The UST alleged that the debtors, whose payments included in the price of their fees a 25% factoring fee, were charged an unreasonable fee and that none of these details, including the amounts Castle Law had been paid by BK Billing, had been disclosed to the court.
The UST alleged that "bifurcating" the fees in this manner into pre- and postpetition amounts was not only unreasonable and unethical, but in direct violation of this court's local rule, L.R. 2016-1.D.11 This rule excuses debtors’ attorneys from filing motions to approve their fees if two conditions are met: (1) the attorneys certify they have executed the court's Rights and Responsibilities Agreement ("RRA") for one flat fee for pre- and postpetition legal services; and (2) that fee does not exceed the "no look" amount of (then) $3,000.12 In the event attorneys elect not to execute the RRA, the fees exceed the no look, or the fee agreement terms are otherwise nonstandard, the local rule requires attorneys to hold the fees in trust pending the prompt filing of a motion and court approval.
By failing to seek court approval under L.R. 2016-1.D and by failing to disclose the bifurcation and factoring of his fees, Mr. Amerine had, according to the UST, actively attempted to conceal the details of his fee arrangements from the UST and the court, particularly because Mr. Amerine had certified he had executed the RRA in all four cases.
The UST's five-count complaints alleged violations of 11 U.S.C. §§ 526 – 528, the so-called "debt relief agency" provisions of the Bankruptcy Code; of 11 U.S.C. § 329, Fed. R. Bankr. Proc. 2016(b) and L.R. 2016-1.D regarding the failure to disclose and the reasonableness of the fees; as well as violations of various rules of the Missouri Rules of Professional Conduct ("MRPC").13 Specifically, the UST alleged that Mr. Amerine's fees were subject to the requirements of reasonableness and disclosure as set out in § 329 and Rule 2016(b), and that Mr. Amerine had made materially false and misleading statements in his Rule 2016(b) disclosures and that the fees were unreasonable.14 The UST sought imposition of civil penalties, disgorgement, injunctive relief, sanctions, and a disciplinary referral.
Mr. Amerine and Castle Law, through experienced insurance defense counsel,15 vigorously defended, not only denying most of the allegations, but contesting the bankruptcy court's jurisdiction and authority to hear and determine the complaints by filing a motion in each adversary to withdraw the reference.16 Mr. Amerine and Castle Law did not object to this court's lengthy report, which methodically laid out why the bankruptcy court did, indeed, have both jurisdiction and authority to hear and determine whether Mr. Amerine and Castle Law should be sanctioned, or to the recommendation that the motions to withdraw reference be denied.17
The U.S. District Court18 adopted this court's report and recommendation in each case the day after the deadline to object expired and denied the motions to withdraw reference.19 The District Court stated: "This Court, having reviewed the motion to withdraw reference and the report and recommendation, and given the lack of objection by Defendants, is convinced that the recommendation of the [then] Chief Bankruptcy Judge is correct and should be adopted."20 In the meantime, however, resolution of the four adversary complaints was delayed for several months while the parties briefed the motions and the court heard oral arguments and drafted its report and recommendation.
While the motions to withdraw reference in the four adversaries were pending, Mr. Amerine filed another chapter 7 case, In re Arlando & Angela Hughes.21 Mr. Amerine filed the Hugheses’ bankruptcy case as an incomplete – otherwise known as a "skeletal" filing – with just the petition, creditor matrix, and Rule 2016(b) Disclosure of Compensation of Attorney For Debtor(s). The court would come to learn that Mr. Amerine refers to this type of skeletal filing as a "shell." The Rule 2016(b) Disclosure (Form B2030) in Hughes certified that Mr. Amerine had agreed to accept $0 for his legal services; had received no money prior to the filing of the statement; and that no balance was due.
In Part 4 of the Disclosure, regarding the source of the compensation "to be paid to me," Mr. Amerine certified: 22 Part 6.b of the Disclosure, stating what legal services Mr. Amerine had agreed to render, stated: "Post-filing debtor [sic] and Castle Law intend to discuss alternate options to address further work that needs to be performed including hiring other counsel, continuing pro se, or continuing further engagement with Castle Law under a new contract all subject to local rules and the rights and responsibilities agreement."23 Notwithstanding the statement that any new fee agreement would be subject to the RRA, Mr. Amerine also certified with the filing of the petition that he had not executed the RRA and had declined the no look fee in L.R. 2016-1.D, and would be submitting "motions for compensation based on time records."24
The court issued its standard order to show cause ("OSC") why the Hughes case should not be dismissed for the failure to file all required schedules, statements, and related documents within 14 days.25 Ten days later, in connection with filing all the rest of the required documents, Mr. Amerine filed an amended Rule 2016(b) Disclosure.26 The Amended Disclosure in Hughes certified that Mr. Amerine had agreed to accept $2,000 for his legal services; had received no payments "prior to the filing of this statement"; that $2,000 was the balance due; and debtors were the source of the...
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