In re Learson
| Decision Date | 18 February 2022 |
| Docket Number | CASE NO. 19-13035 |
| Citation | 638 B.R. 341 |
| Parties | IN RE: Brandin G. LEARSON, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Louisiana |
Kevin K. Gipson, Kevin K. Gipson, Ltd., Aplc, New Orleans, LA, for Debtor.
Amanda Burnette George, Office of the U.S. Trustee, New Orleans, LA, for U.S. Trustee.
This Court held an evidentiary hearing (the "Hearing") to consider the Debtor's Motion for Order Compelling Disgorgement of Fees (the "Motion To Disgorge Fees"), [ECF Doc. 130], filed by Brandin Learson ("Learson" or, post-petition, the "Debtor"), and the Opposition to the Motion To Disgorge Fees filed by Sandler Michaud, LLC (the "Firm"), [ECF Doc. 183]. The Debtor, now represented by different counsel, alleges that the Firm failed to perform promised legal services which resulted in this Court issuing an Order converting the Debtor's case from chapter 13 to one under chapter 7. The Debtor seeks disgorgement of fees paid to the Firm because "no legal services of substance were provided." Motion To Disgorge Fees, ¶ 12.
At the Hearing, the Court heard testimony from the Debtor, Natausha Gaudin, Sharry Sandler, and Marc Michaud. The Court admitted into evidence the following exhibits: Debtor Exhibits A–L and Firm Exhibits A–B. At the conclusion of the Hearing, the Court took the matter under advisement.
After considering the evidence presented, the arguments of the parties, the record as a whole, and the applicable legal authority, the Court GRANTS the Motion To Disgorge Fees and orders disgorgement of attorneys’ fees in the amount of $9,000.
This Court has jurisdiction to grant the relief provided for herein pursuant to 28 U.S.C. § 1334. The matter presently before the Court constitutes a core proceeding that this Court may hear and determine on a final basis under 28 U.S.C. § 157(b)(2)(A). The venue of the Debtor's chapter 13 case is proper under 28 U.S.C. § 1408.
Learson owns and operates a variety of small businesses, including fitness and construction businesses, through various limited liability companies of which he is the member-manager. See Hr'g at Min. 9:03–:06; 10:55; Debtor Ex. D. Natausha Gaudin ("Gaudin"), who has power of attorney to make decisions about Learson's property and finances, assists him in operating the businesses. See Hr'g at Min. 9:03–:06; 10:55; Debtor Exs. B–D.
The Firm is owned and operated by two attorneys: Sharry Sandler ("Sandler") focuses her practice on consumer bankruptcy and Marc Michaud ("Michaud") practices general litigation. See Hr'g at Min. 9:02–:05; 10:05–:39.
On October 31, 2019, Learson retained Michaud to defend one of Learson's companies, Bellus Development Group, LLC ("Bellus"), against a pending foreclosure suit (the "Foreclosure Action") and executed a retention agreement by which Learson paid a flat fee of $2,500 and promised to pay 33% of any amount recovered under a theory of unfair or wrongful debt collection practices. See Hr'g at Min. 9:03:45; 9:04:22; Debtor Ex. L.
Earlier that year, in January 2019, a lawsuit was filed in state court against Learson, Gaudin and Bellus, asserting fraud claims related to ownership of assets transferred to Bellus (the "Fraud Case"). [Adv. No. 20-1011, Ex. 1]. In December 2019, counsel representing those defendants withdrew and, in January 2020, Michaud substituted as counsel for all of the defendants. See Hr'g at Min. 10:05:20–:09:50. Michaud testified that he worked primarily with Gaudin on the defense of the Fraud Case and filed motions for extensions of time in that case. See id . No written retention agreement was executed for this representation, but on January 22, 2020, Michaud accepted a $4,000 fee, of which he testified that $2,000 would be used to defend the Fraud Case and $2,000 would be used to assess and file adversary proceedings in Learson's personal bankruptcy case to tee up the claims alleged in the Fraud Case in that forum. See id. ; Debtor Ex. G.1 Michaud filed no adversary proceedings in the bankruptcy case, and on March 19, 2020, the Firm refunded $2,000 to the Debtor. See Debtor Ex. I; Hr'g at Min. 10:06:23; 10:14:00–:15:40.2
On January 17, 2020, Learson retained Michaud on behalf of another of his affiliated companies, Innovative Fitness LLC, to defend an eviction action filed by Hyde Park Plaza, L.L.C. (the "Eviction Action"). See Hr'g at Min. 10:07–:09:16; 10:33:31–:47; Debtor Ex. K. A $1,000 fee was paid from Innovative Fitness's account, see Debtor Ex. K, but Michaud testified that he accepted an additional $1,000 cash payment for the representation as well, see Hr'g at Min. 10:05:20–:09:50. No written agreement was executed by the parties for this representation. See Hr'g at Min. 10:09:59–:10:18
Michaud testified that he has represented Learson, Gaudin, and/or Learson's affiliates in six separate matters, but executed retention agreements in only two of them. See Hr'g at Min. 10:05:20–:16:05. Michaud also testified that the Firm treated Learson, Gaudin, and Learson's closely held companies as "effectively one unit" and the problems facing that group as "interchangeable," explaining that the Firm aimed to save the entire enterprise. See Hr'g at Min. 10:05:20–:13:03. Michaud further testified that he was unaware prior to the Hearing of the provisions for retention of estate professionals under the Bankruptcy Code and Bankruptcy Rules, see Hr'g at Min. 10:08:20–:08:26, and that he "[hadn't] kept a time sheet since 2009," see Hr'g at Min. 10:11:53–:12:00.
A week after the Firm was retained to represent Bellus, Learson retained Sandler on November 6, 2019, to file an individual chapter 13 bankruptcy petition for him personally. See Debtor Ex. A. The parties executed a written retention agreement, which outlines the terms of the engagement between Learson and Sandler (the "Fee Agreement"). See id. Per the Fee Agreement, Learson paid Sandler a flat fee of $2,500 for legal services to file and manage his chapter 13 bankruptcy case. See id. ; see also Hr'g at Min. 9:27–:29. The agreement specified the services that Sandler would provide:
Debtor Ex. A, at 1. The Fee Agreement also identified services that would not be included in the base fee of $2,500, but would cost additional legal fees, such as filing motions to sell property, defense against a motion by a creditor to terminate the automatic stay on property, or filing a motion to convert the case to one under chapter 7 of the Bankruptcy Code. See Debtor Ex. A, at 2. Sandler failed to file within fourteen days of the Order for Relief a disclosure of compensation into the record as required by 11 U.S.C. § 329, Bankruptcy Rule 2016(b), and this Court's governing presumptive-fee Order.
On the same day that Learson signed the Fee Agreement, Sandler worked with Gaudin to sort through the Debtor's financial documents. See Hr'g at Min. 9:03–:06. At that time, Sandler possessed the Debtor's name, address, social security number, information on the Debtor's businesses and the properties owned by those businesses (including Bellus), and a list of creditors—all obtained through Michaud's defense of Bellus in the pending Foreclosure Action. Id.
On November 7, 2019, Sandler filed a chapter 13 voluntary petition on Learson's behalf. [ECF Doc. 1]. The Petition reflected the Debtor's residential address, but designated his "mailing address" as: Bellus Development Group, 201 St. Charles Avenue, Suite 114-159, New Orleans, LA 70170. [ECF Doc. 1]; Hr'g at Min. 9:17–:18. That designation resulted in the inclusion of "Bellus Development Group" on the automatically generated Notice of Bankruptcy Case Filing . [ECF Docs. 5 & 10]. Immediately upon the filing of the Petition, creditor Six C Investment, LLC ("Six C"), a secured lender holding a mortgage on property belonging to Bellus, filed a Motion To Determine Applicability of Stay because the scheduled foreclosure sale on that property had been interrupted by the filing of the Debtor's bankruptcy petition. [ECF Doc. 3]. In that motion, Six C attached documentation from the Louisiana Secretary of State's Web site showing the Debtor to be Bellus's member-manager and quitclaim deeds demonstrating Bellus's ownership of the property at issue. Six C alleged that "[c]ounsel for Brandin Gregory Learson has contacted the Sheriff for the Parish of Orleans in an attempt to have the sale for the property owned by Bellus Development Group, LLC cancelled as a result of the filing of the bankruptcy of Brandin Gregory Learson." [ECF Doc. 3, ¶ VI; ECF Doc. 25]. After notice and hearing, the Court issued an Order confirming that the provisions of 11 U.S.C. § 362(a) did not apply to...
To continue reading
Request your trial