Attorney Fees

Special counsel representing a bankruptcy debtor in a separate tort action must comply with bankruptcy statutes and rules relating to disclosure of their employment arrangements, including any fee-sharing agreements. Wright v. Csabi (In re Wright), No. 13-10472, Adv. Proc. No. 16-1004 (Bankr. S.D. Tex. Dec. 2017).

During her bankruptcy, chapter 13 debtor, Vicky Wright, presented to the court an agreement she had entered into with James Grissom to represent her in a contingency-fee tort claim. The court approved the agreement. Unbeknownst to the court, Mr. Grissom had separately entered into fee-sharing agreements with Francisco Rodriguez and William Csabi. After the tort case settled for $650,000, the court ordered that Mr. Grissom be paid $90,000 pursuant to the prior-approved agreement, and that the rest of the settlement proceeds go to the chapter 13 estate for distribution to creditors. Notwithstanding this order, Mr. Grissom distributed $73,330 each to Mr. Rodriguez and Mr. Csabi pursuant to the fee-sharing agreements. Ms. Wright’s bankruptcy counsel, Abe Limon, sent demand letters to Messrs. Rodriguez and Csabi notifying them that the transferred funds were property of the bankruptcy estate and demanding turnover. Mr. Csabi turned the funds over several months later and Mr. Rodriquez did not turn over the funds. Ms. Wright filed an adversary complaint seeking disgorgement and turnover. [Read more…] about Special Counsel Violates Code and Rules by Failure to Disclose Fee Agreements

Where the debtors’ attorneys filed a fee application as an administrative claim after the debtors completed their chapter 13 plan, the court properly denied the administrative claim and treated the debt as discharged. Cripps v. Foley, No. 16-744 (W.D. Mich. March 31, 2017).

After the debtors, Lon and Deborah Cripps, completed their chapter 13 bankruptcy and the trustee had filed the notice of completion, their bankruptcy attorneys, Dietrich Law Firm, filed a fee application for $642.60 as an administrative claim. (During the course of the bankruptcy, Dietrich Law had filed fee applications amounting to over $13,000 which had been approved and paid through the plan). The trustee objected to the fees as untimely and, while the issue was pending, the Cripps’ were granted discharge. While the court approved the fee application under section 330(a), it found that the fees could not be paid as an administrative claim under section 503. [Read more…] about Attorney Fee Application Filed Too Late

An adversary proceeding alleging fraudulent transfer was not an “action on a contract” for purposes of application of the contract’s fee agreement. Jones v. Cheplick (In re Jones), No. 15-2148 (E.D. Cal. Sept. 22, 2016).

David Jones was President and majority shareholder of Telecomm Engineering which was a party to a lease agreement with Wally Cheplick. When Telecomm defaulted on its lease obligations, Mr. Cheplick obtained a judgment against it for $55,656.00. Telecomm failed to pay the judgment and forfeited the property. Mr. Jones filed for chapter 7 bankruptcy, and Mr. Cheplick filed an adversary proceeding, under sections 523 and 747, seeking to recover the Telecomm judgment on the grounds that Mr. Jones had fraudulently transferred Telecomm’s assets to avoid paying creditors. The bankruptcy court held a hearing in which it found insufficient evidence of fraud to support nondischargeability. The court, however, denied Mr. Jones’s motion for attorney’s fees. [Read more…] about Action for Fraudulent Transfer Not “On a Contract”

A California statute requiring reciprocal fee-shifting when a contract provides for fee-shifting for the benefit of only one party, does not apply when the action is for relief from stay in bankruptcy. Green Tree Servicing, Co. v. Giusto, No. 15-2105 (N.D. Cal. June 20, 2016).

Jacqueline Giusto inherited real property encumbered by a note and deed of trust. When she filed for bankruptcy she stopped making payments on the note. Green Tree Servicing, as servicer for Bank of America, filed a motion for relief from stay to allow it to initiate foreclosure proceedings. Ms. Giusto filed a brief in opposition arguing that Green Tree did not have standing to bring the motion. The bankruptcy court agreed. Ms. Giusto then sought to recover costs and attorney’s fees incurred by reason of the motion arguing that the note’s provision entitling Bank of America to recoup fees and costs incurred in the effort to collect on a debt was made reciprocal by operation of California Civil Code § 1717.  That statute provides: “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” [Read more…] about Relief from Stay Motion Not “Action on a Contract” for Fee-Shifting Purposes