Walton v. LaBarge
| Decision Date | 14 April 2000 |
| Docket Number | No. 99-3395,99-3395 |
| Citation | 223 F.3d 859 |
| Parties | (8th Cir. 2000) IN RE: CLARA CLARK; MICHAEL KARSCH; LENA FALLS; MARY CARR; HATTIE M. MCCLINTON; LEON J. HERRON, DEBTORS. ELBERT A. WALTON, APPELLANT, v. JOHN V. LABARGE, JR., TRUSTEE/APPELLEE. Submitted: |
| Court | U.S. Court of Appeals — Eighth Circuit |
Appeal from the United States District Court for the Eastern District of Missouri. [Copyrighted Material Omitted] Before Wollman, Chief Judge, Beam, Circuit Judge, and Frank, 1 District Judge.
Elbert A. Walton, Jr. appeals from the district court's 2 order affirming the bankruptcy court's 3 opinion that denied Walton attorney fees, required him to disgorge fees he had previously received, and ordered him to pay costs to the United States Trustee 4 who investigated his conduct in six Chapter 13 bankruptcy cases. We affirm.
The facts below are from the bankruptcy court's December 21, 1998, amended memorandum opinion (Bankruptcy Opinion). Generally, debtors represented by attorney Walton became his clients after meeting with his paralegal, MacArthur Jackson, who worked from the same office space both as an employee of Walton's practice, Metropolitan St. Louis Legal Services Corporation, P.C., and as an independent financial consultant. The debtors, considering Jackson to be Walton's "right hand person," paid approximately $350 to Jackson for services and filing fees related to their Chapter 13 cases, which included advice and the preparation of necessary filings such as the bankruptcy petition and Chapter 13 plan. Jackson would then explain that although he was preparing the documents, in court they would need to be represented by a lawyer. He then would refer them to Walton or simply indicate that Walton would represent them. In most of these cases, the debtors first met Walton in court. Walton is "one of the more frequent bankruptcy petition filers" in the district.
Local rules and practice in the bankruptcy courts of the Eastern District of Missouri provide that a Chapter 13 debtor's attorney may choose to receive compensation through one of two methods. The method at issue here is the election of a flat fee of $1250.00, which Walton requested for his representation in the six cases underlying this appeal. During the debtors' July 1998 plan confirmation hearings, the bankruptcy court took up the matter of inconsistencies in reported payments of attorney fees and incorrect or incomplete fee disclosures, which were the basis for the Trustee's objections to the plans' confirmation. Walton had filed multiple documents in an attempt to overcome the Trustee's objections, but the court, evidently not reassured by Walton's actions, scheduled further hearings.
At least nine persons were subpoenaed for the subsequent hearings held on September 8, October 2, and October 21 of 1998: Walton, Jackson, a former associate of Walton, and the six debtors. Four of the debtors, Walton, and Jackson appeared, and Walton cross-examined at least one of his clients about payments made to Jackson. On October 13, 1998, the Trustee submitted to the bankruptcy court and served on Walton documents entitled "Summary of Trustee's Position" concerning the five cases that were heard on September 8 and October 2. (The hearing in debtor Leon Herron's case was scheduled for October 21, 1998.) These documents summarized inaccuracies in the filed documents and testimony that was given at the September 8 and October 2 hearings and at earlier bankruptcy proceedings, and concluded with a request that Walton be denied attorney fees and that the Trustee be awarded costs and expenses as a sanction. Walton did not respond to these documents or submit any of his own. He attended the October 21 hearing in debtor Herron's case.
The Bankruptcy Opinion gives the following overview of the September/October hearings: Bankruptcy Opinion at 4, 5. The bankruptcy court also rendered findings of fact specific to each debtor's case, reciting a litany of problems that included: inconsistencies in Walton's filings about payments and in response to the Trustee's objections; execution of blank forms; unauthorized or forged signatures of both Walton and debtors; and Walton's ignorance of the cases for which he was responsible. The court concluded that Walton had failed to properly represent the debtors or perform the legal services contemplated by the fee, and that he had done so in bad faith. The court ordered that attorney fees Walton sought in these cases be denied, that fees already paid be disgorged, and that costs and expenses be awarded to the Trustee as a sanction against Walton. The court then referred the six cases to the district court for disciplinary investigation.
Walton appeals from the decisions of the courts below, arguing that the bankruptcy court's factual findings are clearly erroneous, that the court erroneously applied the law regarding fees and sanctions, and that he did not receive adequate notice and a hearing about the possibility of such a fee denial and sanctions.
As the second reviewing court, we apply the same standards of review that the district court applied. See Snyder v. Dewoskin (In re Mahendra), 131 F.3d 750, 754 (8th Cir. 1997). We review the bankruptcy court's factual findings for clear error and its conclusions of law de novo, see Ross v. Dakota Rail, Inc. (In re Dakota Rail, Inc.), 946 F.2d 82, 84 (8th Cir. 1991), and a decision regarding attorney fees for an abuse of discretion, see Grunewalt v. Mutual Life Ins. Co. (In re Coones Ranch, Inc.), 7 F.3d 740, 744 (8th Cir. 1993).
We briefly address Walton's primary arguments of factual error. First, Walton alleges that the court erred by failing to find that he was the victim of an errant employee, but he provides no evidence, much less clear evidence, to contradict the court's finding that Walton was well aware that Jackson provided legal bankruptcy assistance and collected payments. Walton admitted that Jackson functioned at least partially as an employee when he provided bankruptcy services to these debtors, and Walton himself filed pleadings with the bankruptcy court acknowledging receipt of some of the payments Jackson had collected.
Second, Walton contends that the hearings concerned only the amount that remained due for legal fees, not the propriety of attorney fees in general, and thus he had no notice that fees could be fully denied. We note that Walton has provided us with no transcript or other record of the September/October hearings that might support his contention that fee disgorgement was not discussed. To the contrary, the bankruptcy court's opinion makes repeated references to the testimony offered during these hearings, which included testimony about the documents previously filed with the court. The hearings, set by the court to disentangle the problems with attorney fees, resulted in the production of wide array of evidence, including testimony from the four debtors and from Jackson and Walton concerning the office's operations, services performed and by whom, and signatures on the various filed documents. Thus, the matters in issue at the hearings involved more than simply a discussion of the amounts of money that had been received by Walton or Jackson for bankruptcy services. The bankruptcy court noted in its opinion that Walton attempted to shift the blame for the inaccuracies and fee collection practices, which indicates Walton was given ample opportunity to be heard.
Third, Walton argues that because what constitutes "local practice" is nebulous and undefined, he may not be denied fees for violating it. We disagree. The explanation of services that Walton signed and filed in each case disclosing the fees paid and listing the services to be rendered is in large part patterned on the court's local practice standards. Walton does not dispute that he failed to perform many of the listed services, such as advising his clients. Additionally, when Walton applied for the flat fee under the court's local practice, he implicitly agreed to provide the services the court required. Moreover, the court did not rest its conclusion solely on violations of local practice.
Walton contends that the because the debtors' bankruptcy plans were confirmed, he should receive a fee without inquiry into its reasonableness.
We find neither an abuse of discretion nor an improper application of legal standards or procedure in the court's denial of fees and its order requiring disgorgement of those fees already paid. The bankruptcy court has the broad power and discretion to award or deny attorney fees, and, indeed, a duty to examine them for reasonableness. See 11 U.S.C. 329, 330 (1993 & Supp. 2000); Bankr. Rule 2017, 11 U.S.C. (1984 & Supp. 2000); Chamberlain v. Kula (In re Kula), 213 B.R. 729, 735 (B.A.P. 8th Cir. 1997) () (internal quotation marks and citation omitted). The burden is on the attorney to prove that the agreed compensation is reasonable. See In re Mahendra, 131 F.3d at 757. As the Fifth Circuit has stated, "[i]t is well established law that, absent compliance with the Bankruptcy Code and Rules, an attorney has no absolute right to an award of compensation." Anderson v. Anderson (In re Anderson), 936 F.2d 199, 204 (5th Cir. 1991).
The bankruptcy court found that by seeking the flat fee for services Walton knew had been performed by his non-attorney employee,...
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