In re Contreras

In re: Mark Contreras Debtor

In re: James L. Curry Debtor

In re: David Campbell Heather Campbell Debtors

In re: Wanda Hubbard Debtor

Case No. 18-30995

Case No. 16-34693

Case No. 16-35750

Case No. 18-33054

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

April 25, 2019

Chapter 13

MEMORANDUM OPINION

Before the Court are applications for compensation filed by attorney Reese W. Baker (hereinafter "Baker"), a volume Chapter 13 practitioner in this division.¹ These applications raised similar issues, which is why this Court issues this opinion addressing them together. These issues include (a) the reasonableness of requested fees necessary for the work performed; (b) the diminution of returns to unsecured creditors for excessive fees; (c) duplication of effort; (d) billing for secretarial tasks; (e) billing for deficient filings; (f) the Court's standard for board-certified attorneys; and (g) the potentiality of attorney disqualification due to a conflict of interest. The Chapter 13 Trustee has objected to all the pending fee applications.

HISTORICAL BACKGROUND OF THE CASES

Mark Contreras (Case No. 18-30995)

Baker filed this Chapter 13 case on behalf of debtor Mark Contreras on March 5, 2018. Baker also represented Mr. Contreras in his original bankruptcy case (Case No. 17-32841), filed on May 2, 2017. That case was dismissed on November 21, 2017. The Statement of Financial Affairs filed on March 16, 2018 (ECF No. 10), indicates that Mr. Contreras paid Baker's law firm $400.00 on May 2, 2017, $650.00 on March 2, 2018, and $3,435.00² via the Chapter 13 Trustee on various dates within the one year prior to the filing of the bankruptcy petition. On March 24, 2018, Baker filed his Rule 2016(b) disclosure (ECF No. 24), in which he disclosed that he received $650.00 pre-petition for representation in the second case and "$400.00 on or about May 2, 2017 from the Debtor for outstanding fees for the prior case." This disclosure is mostly consistent with the Statement of Financial Affairs; however, it states the May 2, 2017, payment of $400 was for "[l]egal fees [p]aid in [p]rior," apparently omitting the word "case." However, Baker has been overpaid in the first filed case by $400.00.³ At the hearing held on March 27,2019, Baker testified upon cross-examination that he had, in fact, received payment for unpaid attorney fees related to the first case after dismissal of that case and prior to the filing of the second case. This testimony was inconsistent with the 2016(b) Statement and the Statement of Financial Affairs filed in the second case. That testimony was not true, and while Baker has regularly received payment for unpaid attorney fees related to prior case filings with other debtors after dismissal but prior to filing of successive cases, it did not occur in this case. Baker's testimony acknowledges this fact; however, he was misinformed as to his actions in the Contreras case, where it did not occur.

Mr. Contreras refiled bankruptcy to save a property he inherited, which is located at 809 Sunset Drive, Baytown, Texas 77520. Baker testified that Mr. Contreras informed him this property had been paid off through his father's life insurance. To support his claim, Mr. Contreras presented a document to Mr. Baker that appeared to be printed from a computer. Based on this evidence, Baker testified that he filed an adversary proceeding (Case No. 18-3255) against Rushmore Loan Management Services LLC and nine other financial institutions, on August 20, 2018, to contest their interest in the property and to contest how the alleged life insurance funds had been applied to the mortgage loan. During the adversary proceeding, Baker testified that the defendants were able to present proof that the life insurance policy in question had not in fact paid off the loan. This Court signed an agreed order dismissing the adversary proceeding on November 28, 2018 (Case No. 18-3255, ECF No. 26).

The Chapter 13 Trustee has argued that Baker should have known the adversary proceeding would be of little or no benefit because most of the claims were barred by the Texas statute of limitations. On cross examination, it became clear that Baker had not performed sufficient due diligence to determine the veracity of the claims before initiating the adversaryproceeding. Baker testified that the reason he filed the adversary proceeding because "the debtor wanted us to do this." (ECF No. 79, pg. 15, line 9.) Instead, Baker filed the adversary proceeding based solely on his client's representations and a computer printout. That computer printout, which was not introduced into evidence, only showed that an insurance premium was being paid when the mortgage loan was executed in 2001; it did not show whether insurance was actually in place when the debtor's father died. Baker made no mention of any investigation he performed to determine whether any of the claims had any merit. If Baker had performed minimal investigation, he likely would have easily discovered that there had been no life insurance policy in place when the debtor's father died, and therefore no life insurance funds were disbursed to be applied to the mortgage loan. In addition to this, it is arguable that some or most of the claims, including the breach of contract claim, in the adversary proceeding were barred by the Texas statute of limitations. This adversary proceeding provided no benefit to the debtor or the bankruptcy estate. Further, Baker did not perform sufficient due diligence to determine whether the adversary proceeding reasonably could have benefited the debtor or the estate.

In the 2017 case, Baker filed a Fixed Fee Agreement in the amount of $3,825.00. (Case No. 17-32841, ECF No. 31). Baker also attempted to file a Fixed Fee Agreement in the present case, but his application was denied as untimely. (ECF No. 40). As a result, Baker billed this case on an hourly fee basis. In this refiled case, from February 23, 2018, through February 26, 2019, Baker's fees total $13,097.00, which includes the fees in the main case ($4,681.00) and the fees from the adversary proceeding ($8,416.00). (ECF No. 71-4). The adversary proceeding was dismissed as was the debtor's main case before confirmation. He seeks a total of $12,943.58after deduction of the debtor's March 2, 2018, payment of $650.00.⁴ Baker's fee application does not account for the overpayment in the debtor's prior case of $400.00.

The Court notes three important facts. First, over two unsuccessful bankruptcy cases and one unsuccessful adversary proceeding, Baker has sought fees totaling $16,522.00 and has been paid $4,475.00. Second, irrespective of the time Baker and his law firm have billed, neither the debtor nor the bankruptcy estate have received much benefit from the work Baker has performed. Third, twelve different people, including Baker, billed on this case. Baker does not employ secretarial staff, so paralegals bill for secretarial tasks. No task is billed below a $100 rate. (ECF No. 71). This raises issues concerning duplication of effort and billing for clerical tasks. As this case was dismissed before confirmation, no plan was confirmed and no distributions to unsecured creditors will occur.

James Curry (Case No. 16-34693)

Baker filed this Chapter 13 bankruptcy petition on behalf of debtor James Curry on September 21, 2016. The Court confirmed Mr. Curry's plan on May 16, 2017 (ECF No. 63). A modification of the confirmed plan was approved (ECF No. 111) on June 14, 2018. The confirmed plan, as modified, provided for a total of $5,835.00 in attorney fees to Baker & Associates, of which $3,735.00 had been previously disbursed pursuant to a fixed fee agreement (ECF No. 99). It also estimated approximately $3,548.87 available for general unsecured claims.

On March 11, 2019, Baker filed a Chapter 13 Fee Application (ECF No. 115) in the total amount of $3,808.88. He has requested that 100% of these fees and expenses be paid to him through the Chapter 13 plan. To date, Baker has been paid $3,735.00 in fees through the Chapter 13 plan pursuant to a fixed fee agreement. Seven different people, including Baker, billed onthis case. Further, because Baker does not employ secretarial staff, paralegals billed for secretarial tasks.⁵ All paralegal tasks were billed at a $105 rate. (ECF No. 115.) These facts raise issues of duplication of effort and billing for clerical tasks.

David and Heather Campbell (Case No. 16-35750)

Baker filed this Chapter 13 bankruptcy petition on behalf of debtors David and Heather Campbell on November 18, 2016. The Court confirmed debtors' Chapter 13 plan on April 18, 2017 (ECF No. 51). A modification of the confirmed plan was approved on March 9, 2018 (ECF No. 73). The Court approved another modification of the plan on August 22, 2018 (ECF No. 88). The confirmed plan, as modified, provides for a total of $7,235.00 in attorney fees to Baker & Associates, of which $3,544.00 had been previously disbursed pursuant to a fixed fee agreement. It also estimated approximately $6,444.40 available for general unsecured claims. On February 6, 2019, Baker filed a Chapter 13 Fee Application (ECF No. 93) for post-confirmation fees in the total amount of $2,790.73. On March 4, 2019, this Court entered an order (ECF No. 97) denying the Chapter 13 Fee Application. On March 6, 2019, Baker filed a Second Chapter 13 Fee Application (ECF No. 98) for post-confirmation fees in the total amount of $2,097.46. Nine different people, including Baker billed on this case. Baker does not employsecretarial staff, so paralegals billed for secretarial tasks.⁶ Most paralegal tasks were billed at a $105 rate. (ECF No. 115). This raises issues of duplication of effort and billing for clerical tasks.

Wanda Hubbard (Case No. 18-33054)

Baker filed this Chapter 13 bankruptcy petition on behalf of debtor Wanda Hubbard on June 4, 2018. The Court confirmed debtors' Chapter 13 plan (ECF No. 43) on December 7, 2018. The confirmed...