In re Reeves

648 B.R. 289

IN RE: Rebecca B. REEVES, Debtor.

Case No. 20-00631-dd

United States Bankruptcy Court, D. South Carolina.

Signed February 7, 2023

Linda Barr, Office of United States Trustee, Columbia, SC, for U.S. Trustee.

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

ORDER DENYING SUPPLEMENTAL FEE REQUEST

David R. Duncan, United States Bankruptcy Judge

This matter came before the Court on the Statement of Supplemental Fees in the amount of $1,289.00 filed by Moss & Associates, Attorneys, P.A. ("Attorney") on November 7, 2022 (Dkt. No. 32; the "Supplemental Fee Request"), to which both the Chapter 13 trustee and the Acting United States Trustee for Region Four (the "UST") filed Objections (Dkt. Nos. 33 & 35; the "Objections"). On January 5, 2023, a hearing was held on the Supplemental Fee Request (the "Hearing"). Based on the evidence presented and the arguments of counsel, the Court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

In the Supplemental Fee Request, Attorney seeks an award of $1,289.00 in fees and costs (the "Supplemental Fees") for filing a motion for a moratorium (Dkt. No. 27; the "Motion for Moratorium") in payments under the confirmed Chapter 13 plan (Dkt. No. 16; the "Plan") and filing a notice of change in address (Dkt. No. 26; the "Change of Address") on behalf of Debtor Rebecca B. Reeves ("Debtor"). The Supplemental Fees requested are in addition to the $3,700.00 Attorney received under the Expedited Fee Approval Procedure under SC LBR 2016-1(b).¹ In the Objections, the UST and Chapter 13 trustee argue that: (a) the Supplemental Fees are not permissible under 11 U.S.C. §§ 329(b) & 330, SC LBR 2016-1(b), and Fed. R. Bankr. P. 2016 & 2017 ; (b) the Supplemental Fees are not reasonable under 11 U.S.C. §§ 329(b) & 330(a)(3) & (4) and Fed. R. Bankr. P. 2017(b) ; (c) Attorney did not provide adequate disclosures and notice of the Supplemental Fees under 11 U.S.C. § 329(a), SC LBR 2016-1(b)(2), and Fed. R. Bankr. P.2016(a); and (d) Attorney did not provide adequate disclosure and notice to Debtor of the Supplemental Fees under SC LBR 2016-1(b)(2) and 11 U.S.C. § 528.²

Debtor Rebecca Reeves filed a petition for relief under Chapter 13 of the Bankruptcy Code on February 5, 2020. Included in the petition is a Disclosure of Compensation of Attorney for Debtor(s) pursuant to § 329(a) and Fed. R. Bankr. P. 2016(b) (the "Disclosure of Compensation"),³ which states that Attorney agreed to accept $3,700.00, of which $489.00 had been paid prior to the filing, "to render legal service for all aspects of the bankruptcy case" except for:

Representation of the debtors in any dischargeability actions, judicial lien avoidances, relief from stay actions, motions to incur debt, motions to sell property, moratoriums, motions to reconsider, plan modifications after confirmation, motions to reopen, motions to redeem, or any other adversary proceeding.

Based upon the Disclosure of Compensation, Attorney and Debtor agreed to the Expedited Fee Approval Procedure under SC LBR 2016-1(b)(1).

On September 11, 2022, Attorney filed the Change of Address on behalf of Debtor by submitting a text event in CM/ECF indicating that Debtor's mailing address had changed.⁴

On September 12, 2022, Attorney filed on behalf of Debtor a one-page Motion for Moratorium and proposed order seeking a three-month suspension in Plan payments.⁵ The Motion for Moratorium was not contested. The Trustee prepared and submitted a proposed Order Granting the Motion for Moratorium, which the Court entered on October 11, 2022.

On November 4, 2022, Attorney filed its Bankruptcy Retainer Agreement with Debtor, which is not dated, and a Disclosure of Additional Attorney's Fees dated October 25, 2022. (Dkt. No. 31; the "Retainer Agreement" and "Disclosure of Additional Attorney's Fees").⁶ The undated Retainer Agreement provides in relevant part:

[Attorney] agrees that, in exchange for payment of [$3,700.00], [Attorney] shall perform all services associated with the bankruptcy matter except for those specifically listed on Schedule A, attached hereto. If additional fees are incurred as specified in Schedule A, Client shall be responsible for such fees. However, Client acknowledges that [Attorney] may be able to file a supplemental claim with the bankruptcy, court which would allow payment out of the assets of the estate or Chapter 13 plan payments. By signing this agreement, Client agrees to allow [Attorney] to file such claims with the court without further written agreement, if such work is completed by [Attorney]. The parties further agree that all fees paid under this agreement are non-refundable and earned immediately by [Attorney] ....

There is no Schedule A attached to the filed Retainer Agreement, however, based on a review of other retainer agreements filed by Attorney in other cases, Schedule A likely includes language providing that "generally, Attorney shall not be required to perform services [excluded services], unless the fees are paid by the client."⁷

The Disclosure of Additional Attorney's Fees lists services that Attorney may provide to Debtor for fees ranging from $285.00 to $1,700.00.⁸ Included in the list of services are fees of $885.00 for "Motion for Moratorium" and $385.00 for "Address change in estate." The Disclosure of Additional Attorney's Fees was signed by Debtor and dated October 25, 2022, which is more than two and half years after Debtor's case was filed, and more than forty days after Attorney performed the services which are the basis of the Supplemental Fee Request. At the bottom of the Disclosure of Additional Attorney's Fees, the following language is included:

These fees are in addition to expedited attorney fees as referenced in the signed attorney client agreement. The fees referenced herein may increase and/or decrease at the discretion of the attorney. The fees will be paid through the Chapter 13 Plan at zero (0%) percent interest. If you have an issue that requires legal work greater than the above-referenced amounts, a request for approval of additional fees will be submitted to the Bankruptcy Trustee and Bankruptcy Court. If any additional work is needed, the Attorney rate is $500/per hour. If paid through a Contingency Agreement, Attorney will be paid at 40%. Any service for a creditor is an additional $2.00 or more per creditor.

On November 7, 2022, Attorney filed the Supplemental Fee Request, which seeks approval of a disbursement of $1,289.00 through the confirmed Plan for $885.00 for filing the Motion for Moratorium and $19.00 for related postage charges, and $385.00 for the filing of the Notice of Change of Address text event for Debtor.⁹

The Supplemental Fee Request, if approved, would bring the total compensation to be paid to Attorney by Debtor to $4,989.00 for services provided in this case.

At the Hearing, the Chapter 13 trustee represented that Debtor's Plan payment is insufficient to pay the Supplemental Fee Request and a payment increase stipulation or a modified plan would be required if the fees are allowed. The Chapter 13 trustee also represented that she had reviewed reports created from the data of her internal recordkeeping software that reflect that all of the supplemental fee requests filed in cases assigned to her office from June 1, 2022 through December 27, 2022 (the "Reports"). The Reports showed that Attorney was the only attorney to request a fee for filing notices of change of address for debtors, and that Attorney continued to file requests for supplemental fees in the reduced amount of $285.00 for filing notices of change address for debtors even after the Objections were filed to the Supplemental Fee Request in this case.¹⁰

The Chapter 13 trustee also represented that the Reports reflected that Attorney was the only attorney that requested a fee of more than $500.00 for services related to the filing of motions for moratorium. The Chapter 13 trustee presented that the Reports showed that Attorney reduced the amount of supplemental fees requested for services related to a motion for moratorium (ranging from $400.00 to $685.00) after the filing of the Objections to the Supplemental Fee Request in this case.¹¹

Attorney did not dispute the facts presented by the UST and Chapter 13 trustee at the Hearing and in the Objections.

CONCLUSIONS OF LAW

The Court has jurisdiction over this matter under 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b), and venue is proper under 28 U.S.C. §§ 1408 and 1409. The Chapter 13 trustee and the UST argue that the Supplemental Fee Request should be denied due to (1) the inadequate disclosures and notice of the supplemental fees under § 329(a), SC LBR 2016-1(b)(2), Fed. R. Bankr. P.2016(a), and § 528 ; and (2) the Supplemental Fees are not permissible and reasonable under §§ 329(b) & 330, SC LBR 2016-1(b), and Fed. R. Bankr. P. 2016 & 2017(b). The Court addresses each of these arguments below.

I. Attorney's Duty to Disclose Compensation

Attorneys representing debtors in bankruptcy cases have an affirmative duty to fully and completely disclose all fee arrangements and all payments. Specifically, § 329(a) provides that:

Any attorney representing a debtor in a case under this title, or in connection with such a case, whether or not such attorney applies for compensation under this title, shall file with the court a statement of the compensation paid or agreed to be paid, if such payment or agreement was made after one year before the date of the filing of the petition, for services rendered or to be rendered in contemplation of or in connection with the case by such attorney, and the source of such compensation.

Further, Fed. R. Bankr. P. 2016(b) provides that:

Every attorney for a debtor, whether or not the attorney applies for compensation, shall file and transmit to the United States trustee within 14 days after the order for relief, or at another time as the court may direct, the

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