In re Cooper

659 B.R. 473

IN RE: Samuel Frank COOPER, Debtor(s).

C/A No. 21-02110-HB

United States Bankruptcy Court, D. South Carolina

Signed May 15, 2024

Jason T. Moss, Moss & Associates, Attorneys, P.A., Columbia, SC, for Debtor.

Joshua J. Hudson, Smith Hudson Law, LLC, Greenville, SC, for Trustee.

ORDER ON FEE DISPUTE MOTION AND SANCTIONS MOTION

Helen E. Burris, Chief United States Bankruptcy Judge

Before the Court for consideration is the Fee Dispute Motion filed by Debtor Samuel Frank Cooper¹ and the Motion for Sanctions against Cooper pursuant to Fed. R. Bankr. P. 9011(c)(1)(A) ("Sanctions Motion")² filed by his attorneys of record in the above-captioned case, Moss & Associates, Attorneys, P.A. (the "Firm"). Cooper appeared at the hearing representing himself and Jason T. Moss appeared on behalf of the Firm. The parties did not present testimony or documentary evidence as exhibits, and instead elected to call the Court's attention to documents and information in their pleadings and events and documents on the case docket.

BACKGROUND AND FACTS

The relationship between Cooper and the Firm began at least by March 2018, when the Firm represented Cooper in an earlier bankruptcy proceeding.³ The creditor matrix filed with Cooper's petition in that case listed creditors SunTrust Bank and SunTrust Mortgage, Cooper's Schedule D listed SunTrust Mortgage as holding two mortgages secured by Cooper's real property, and Cooper's confirmed plan provided he was not in default on his mortgages with SunTrust Mortgage and would maintain regular payments. On August 9, 2021, Cooper received a Chapter 13 discharge, and the case was concluded and closed.

Two (2) days after that case was closed, on August 11, 2021, J. Ronald Jones, Jr. ("Jones") filed a motion in that case on behalf of The Reliable Automatic Sprinkler Co., Inc. ("Reliable") requesting an order declaring (1) Reliable's claims against Cooper arising from its complaint filed against Cooper and two others in the Supreme Court of the State of New York, County of Westchester (Index No. 53514/2021) (the "Reliable Suit") were not discharged in the bankruptcy case; (2) Reliable is not stayed from prosecuting its claims against Cooper; and (3) Reliable may collect upon any judgment obtained against Cooper.⁴ Reliable attached the complaint in the Reliable Suit to its motion, which alleged Cooper and two others conspired to overcharge Reliable for information technology products, services, and support, and requested a judgment against the defendants—jointly and severally—in an amount to be determined at trial but no less than $931,000.00.⁵ Jones filed a certificate of service attesting to service of the motion on August 11, 2021, on Cooper by mail and on the Firm by electronic mail.⁶ The docket also reflects that the Firm received a Notice of Electronic Filing of the motion. The Court later entered an Order striking the motion filed in that closed case and no further action was taken therein.⁷

On August 15, 2021, four (4) days after Reliable's motion was filed and served, Cooper filed this Chapter 13 case, again represented by the Firm. Gretchen D. Holland was appointed as Chapter 13 Trustee ("13 Trustee"). At the time of filing, "[o]nly an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $419,275 and noncontingent, liquidated, secured debts of less than $1,257,850," was eligible to be a Chapter 13 debtor. 11 U.S.C. § 109(e) (as it read on August 15, 2021). Above the attorney signature on the petition certain duties are explained as follows:

I, the attorney for the debtor(s) named in this petition, declare that I have informed the debtor(s) about eligibility to proceed under Chapter 7, 11, 12, or 13 of title 11, United States Code, and have explained the relief available under each chapter for which the person is eligible. I also certify that I have delivered to the debtor(s) the notice required by 11 U.S.C. § 342(b) and, in a case in which § 707(b)(4)(D) applies, certify that I have no knowledge after an inquiry that the information in the schedules filed with the petition is incorrect.

The referenced § 342(b) notice includes, among other things, warnings to a debtor of the debt limit requirements for Chapter 13, warnings regarding the consequences of omitting required information, and warnings regarding bankruptcy crimes.

The initial filing in this case was a "minimal filing" and listed only one creditor name with an address: Colonial Savings and Loan Mortgage. Included with the minimal filing was the Disclosure of Compensation of Attorney for Debtor(s) (Form B2030) (the "Disclosure of Compensation") that indicates Cooper would pay the Firm $4,000.00 (of which $1,286.00 had already been paid, and the $313.00 filing fee paid), and in exchange, the Firm "agreed to render legal service for all aspects of the bankruptcy case, including . . . [a]nalysis of the debtor's financial situation, and rendering advice to the debtor in determining whether to file a petition in bankruptcy" and "[p]reparation and filing of any petition, schedules, statement of affairs and plan which may be required[.]" The Disclosure of Compensation also outlined which services were not included in the $4,000.00 fee, including representing Cooper in any dischargeability actions, relief from the automatic stay actions, and adversary proceedings. The Disclosure of Compensation does not indicate whether converting a case to another chapter is included in the $4,000.00 fee. A copy of the signed retainer agreement between Cooper and the Firm was not attached to the Disclosure of Compensation, does not appear to have been filed anywhere else on the docket, and was not submitted into evidence at the hearing. On August 30, 2021, Cooper, through the Firm, requested additional time to file schedules and statements and an extension was granted.

Only weeks after the case was filed—on September 10, 2021—Jones, on behalf of Reliable, filed a motion for relief from stay pursuant to 11 U.S.C. § 362, and filed a certificate indicating service on Cooper and the Firm.⁸ Jones self-scheduled the hearing for October 5, 2021. The notice scheduling the hearing indicated that if no objection was filed within fourteen (14) days from September 10, 2021, "you may be denied the opportunity to appear and be heard on this proceeding before the Court." The motion requests relief from stay to continue with the Reliable Suit against Debtor. The motion argued that even if any portion of its suit was a claim involved in the prior bankruptcy, it was not a claim of the type that was discharged. The causes of action listed in the attached amended complaint leveled at Cooper and the other defendants, apparently under New York law, included fraud, fraud in the inducement, "faithless servant", conspiracy, and aiding and abetting fraud.⁹ The amended complaint requested a judgment against the defendants—jointly and severally—in an amount to be determined at trial but no less than $1,700,000.00.

On September 13, 2021, schedules and statements were filed in the bankruptcy case.¹⁰ They did not include any mention of Reliable or its pending lawsuit as a disputed debt or otherwise; however, two other pending lawsuits are listed. Child support and spousal support are listed in the schedules, and secured debt of approximately $340,000.00. Truist Bank is listed on Schedule D as having a second mortgage on property located at 1048 Emerald Place, Evans, GA 30809 (the "Evans Property"). No unsecured debt is scheduled. The documents are signed by Cooper under penalty of perjury. The certificate of service accompanying the schedules indicates service of notice of the bankruptcy case on a number of creditors and parties in interest, but neither Reliable nor Jones was included.¹¹

The initial Chapter 13 Plan filed on September 13, 2021 provided Cooper was current on one mortgage and would make payments directly to the creditor, and for another mortgage, he proposed to engage in loss mitigation. The Plan acknowledges that payments are due under a domestic support obligation and provides Cooper will pay those claims. The Plan estimated payment of less than 100% of any unsecured claims. A certificate of service for the Plan includes Jones, who had filed a pleading in this Court and at that point appeared on the Court's creditor matrix.¹²

The Statement of Financial Affairs discloses fees paid for the first case in the amount of $4,132.00 from August 2018 through December 2020. There was no challenge to fees during the prior case. The statement also indicates that Cooper paid the Firm $1,599.00 ($1,286.00 in attorney fees plus the $313.00 filing fee) for this case in April 2021 (while the prior case was pending).¹³ On September 14, 2021, the Firm filed a Certificate of Credit Counseling on behalf of Cooper, indicating he had taken the course while the prior case was pending on April 12, 2021.¹⁴

On September 27, 2021, Jones certified to the Court that no timely responses to Reliable's motion had been received and asked the Court to enter an order lifting the automatic stay by default without a hearing. On the same day, three (3) days after the objection deadline but before entry of any order, the Firm filed a response to the motion, asserting an objection but stating the Firm had been unable to contact Cooper. The response triggered the self-scheduled hearing noticed by Reliable for October 15, 2021. The following day, September 28, 2021, Reliable filed a proof of claim asserting a non-priority unsecured claim against Cooper in the amount of $1.7 million.

On October 4, 2021, the Firm filed a text entry on the docket stating that the response to Reliable's motion was withdrawn because it was filed in error¹⁵ and asking that the hearing not be held. Therefore, Jones again filed a notice with the Court that no objection was pending and submitted a proposed order for relief. The order was signed...