In re Spitko, Bankruptcy No. 04-18836bif (Bankr. E.D. Pa. 6/11/2007)
| Decision Date | 11 June 2007 |
| Docket Number | Adversary No. 05-0258.,Bankruptcy No. 04-18836bif. |
| Parties | In re CARL SPITKO and ELIZABETH GOETZ SPITKO, Chapter 7 Debtors HOWARD T. GLASSMAN, trustee Plaintiff v. HEIMBACH, SPITKO & HECKMAN Defendant |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
The plaintiff trustee, Howard T. Glassman, filed an adversary proceeding against the defendant law firm, Heimbach, Spitko & Heckman (hereinafter "HSH"), asserting three causes of action. Count I seeks to avoid prepetition transfers to HSH as preferential under 11 U.S.C. § 547, totaling $ 68,500. Count II asserts a fraudulent conveyance claim based upon those same prepetition transfers under federal law, 11 U.S.C. § 548(a)(1)(A), in the amount of $68,500. Count III also raises a fraudulent conveyance claim but under state law, Pennsylvania's Uniform Fraudulent Transfer Act ("PUFTA"), 12 Pa. C.S.A. §§ 5150 et seq., via 11 U.S.C. § 544, in the amount of $93,500.1
HSH filed an answer opposing any relief and now has filed an amended motion for partial summary judgment. Included with that motion are various affidavits and exhibits. HSH seeks to dismiss the preference count and count II, as well as strike a portion of the state law fraudulent conveyance count. (The defendant concedes that, for a component of the constructive fraudulent conveyance claim in count III, there are material facts in dispute rendering summary judgment inappropriate.)
The trustee opposes any summary judgment and believes himself entitled to trial on all three claims. He contends that there are material facts in dispute as to all counts, and offers his own affidavit in support thereof.
Upon my review of the admissions in the pleadings, the undisputed facts identified in the parties' pretrial statement, as well as the affidavits and exhibits submitted by HSH, along with the trustee's affidavit, I conclude that the following material facts are not disputed.
The chapter 7 debtors are Carl Spitko and Elizabeth Goetz Spitko, husband and wife. They filed a joint chapter 7 bankruptcy petition on June 29, 2004. At the time of their bankruptcy filing, Carl Spitko was the sole shareholder and president of Maintech, Inc., a subchapter S corporation. Carl and Elizabeth Spitko also were, at the time of filing, the sole shareholders of Sentek, LLC, with Carl serving as its president.
David Spitko is Carl's brother. David Spitko earned a law degree in 1985, worked for a Philadelphia law firm as an associate attorney, and then was one of the founding partners in 1992 of HSH, located in Allentown, Pennsylvania. HSH specialized in labor and employment law on behalf of employers. On June 29, 2004, when the Spitkos' bankruptcy case was filed, the law firm had four partners.
From its inception, HSH represented Maintech in employment matters. In 2002, Maintech engaged HSH to represent it in various commercial disputes, as the corporation was experiencing financial difficulties involving claims against it by Wachovia Bank. Indeed, in May 2003, Wachovia confessed judgments against Maintech and the debtors, as Carl and Elizabeth Spitko were guarantors of Maintech's loans held by Wachovia. Carl Spitko was also a guarantor of Maintech's obligations to a creditor known as De Lage Landen, which purportedly was also pressing Maintech for payment.
In May 2003, the debtors engaged Albert Ciardi, III, Esquire, to represent them as "workout" counsel. Mr. Ciardi avers that he recommended to the debtors that they use HSH for certain legal matters related to Mr. Ciardi's representation, because HSH's hourly rate was "substantially" lower than his. He also swears that he recommended to the debtors that they establish escrow retainers with HSH to pay for such services.
Sometime during the spring of 2003, the debtors received an income tax refund on Maintech's behalf (since it was a subchapter S corporation) in the amount of $379,456 for tax year 2002. Beginning on June 5, 2003, the debtors commenced a series of payments to HSH that are the subject of the instant adversary proceeding. These payments, which are undisputed, were made as follows:
Date of Payment Amount Paid to HSH
6/5/2003 $25,000
8/5/2003 $15,000
9/1/2003 $20,000
1/28/2004 $15,000
3/22/2004 $18,500
See Joint Pretrial Statement, Uncontested Facts ## 6-10.
Attached as an exhibit to HSH's motion for summary judgment is a hand-written account of HSH's "IOLTA Trust Account for payments made by Carl & Lisa Spitko (`Debtors') to the Trust Account." See Exhibit `A' to Defendant's Amended Motion for Partial Summary Judgment. In addition, HSH billed either Maintech or Sentek for legal services rendered, and attached redacted copies of those billings records as exhibits to the affidavit submitted by David Spitko. Those bills were paid by the debtors through the transfers just listed. The defendant provides the following accounting for those payments:
See Defendant's Reply to Trustee's Response to Summary Judgment Motion at 7-8.
Finally, I note that in opposing partial summary judgment, the trustee offered his own affidavit in support. In it, Mr. Glassman contends that he cannot evaluate the reasonableness of the fees charged by HSH due to the redacted nature of certain exhibits: HSH's billing records.2 And, to the extent the redaction is based upon the assertion of attorney-client privilege, he (Mr. Glassman) waives that privilege. He also believes that the debtors previously agreed to permit him to see unredacted billing information.
Federal Rule of Bankruptcy Procedure 7056 incorporates Fed. R. Civ. P. 56, the summary judgment rule, into bankruptcy adversary proceedings. Summary judgment avoids the expense and delay of an unnecessary trial when no material facts are in dispute and one of the parties is entitled to prevail on the merits. See, e.g., Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038 (1977). The standard for determining the applicability of summary judgment under Rule 56 is well...
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