In re Thorpe

602 B.R. 906

IN RE: Renee M. THORPE, Debtor

Bky. No. 13-15267 ELF

United States Bankruptcy Court, E.D. Pennsylvania.

Signed June 28, 2019

Roger V. Ashodian, William H. Hall, IV, Jennifer Song, Regional Bankruptcy Center of SE PA, Havertown, PA, for Debtor.

Michael B. Joseph, Chapter 12 Trustee, Wilmington, DE, for Trustee.

MEMORANDUM

ERIC L. FRANK, U.S. BANKRUPTCY JUDGE

I. INTRODUCTION

On June 22, 2016, Joseph Q. Mirarchi Legal Services, P.C. ("MLS"), a law firm in which Joseph Q. Mirarchi ("Mirarchi") was the sole practitioner, filed a motion ("the Motion") ("Doc. 581") seeking payment of $113,400.00 that has been placed in the bankruptcy court clerk's registry ("the Escrowed Funds"). The Escrowed Funds constitute thirty-five percent (35%) of the settlement proceeds of a state court lawsuit ("the C.P. Action") that the chapter 12 debtor, Renee M. Thorpe ("the Debtor"), and her non-debtor husband, Dale Thorpe (collectively, "the Thorpes"), filed against Nationwide Mutual Insurance Company ("Nationwide").

Presently, the Motion is before the bankruptcy court on remand from the Court of Appeals and the district court. The district court instructed this court to make a recommendation concerning the proper amount of a quantum meruit award to MLS. (See Doc. # 695).

For the reasons set forth below, I recommend that the district court enter an order determining that MLS is entitled to $25,200.00 and that the Thorpes are entitled to the $88,200.00 balance of the Escrowed Funds.

II. PROCEDURAL HISTORY

A. Prior to the District Court Remand

The initial procedural history of this matter is set forth in detail in this court's Memorandum dated February 17, 2017. See In re Thorpe, 563 B.R. 576, 580-83 (Bankr. E.D. Pa. 2017) (" Thorpe I"), recommendation adopted sub nom., U.S. Trustee v. Thorpe, 2017 WL 3084388 (E.D. Pa. July 20, 2017) (" Thorpe II"); aff'd in part, rev'd in part sub nom., In re Thorpe, 755 F. App'x 177 (3d Cir. 2018) (nonprecedential) (" Thorpe III"). So, I will limit the discussion to a brief description of my initial Memorandum and the procedural events that followed.

In Thorpe I, after determining that the dispute was a non-core matter, see 563 B.R. at 594–97, I issued proposed findings of fact, proposed conclusions of law and a recommendation that the district court deny the Motion in its entirety. I concluded that MLS lacked any right to the Escrowed Funds based on the contingency fee contract between MLS and the Thorpes. I further concluded that Mirarchi's professional misconduct precluded any recovery in quantum meruit.

By Memorandum and Order entered on July 20, 2017, the district court adopted this court's recommendation and denied the Motion. Thorpe II.

On November 20, 2018, the Court of Appeals affirmed the district court's order in part, reversed it in part, and remanded the matter to the district court.

The Court of Appeals affirmed the district court's determination that MLS lacked a contractual right to the Escrowed Funds based on the contingency fee agreement. Thorpe III, 755 F. App'x at 180. The Court of Appeals reversed the district court's determination that, due to wrongful conduct, MLS was precluded from a recovery in quantum meruit, reasoning:

[W]e hold that the doctrine of unclean hands does not bar the quantum meruit claim of Mirarchi. We acknowledge that he was placed on administrative suspension due to his own failure, although seemingly negligent, to obtain the requisite CLE credits to continue practicing law in Pennsylvania. We also acknowledge that Mirarchi's failure to disclose his administrative suspension violated the Pennsylvania Rules of Disciplinary Enforcement, see Pa. R.D.E. 217(b), and that his work on behalf of the Thorpes during his one-month administrative suspension constituted the unauthorized practice of law, see 42 Pa. C.S.A. § 2524 ; Pa. R.D.E. 217(j). We do not applaud the manner in which Mirarchi handled his representation of the Thorpes once he was placed on administrative suspension. Nonetheless, we do not believe his conduct shocks the conscience such that he should be completely denied recovery based on the doctrine of unclean hands.

Id. at 182.

The Court of Appeals remanded the matter "to the Bankruptcy Court and the District Court to determine in the first instance the proper amount of Mirarchi's recovery in quantum meruit." Id. at 183 (footnote omitted).¹

Following the remand to the district court, by order entered December 17, 2018, the district court "referred" the matter to this court "to determine the proper amount of [the] quantum meruit award." See (Doc. # 695).

B. After the District Court Remand

1. overview

On December 20, 2018, this court entered an order requiring:

on or before January 4, 2019, each party shall file a statement stating whether this court may comply with the requirements of the remand order based on the existing evidentiary record or whether it is necessary and/or appropriate for this court to take further evidence on the issue. If a party asserts that further evidence is necessary and/or appropriate, the party [must] state with specificity the reasons for its position.

(Doc. # 696) (emphasis in original).

No party in interest filed a timely request for the opportunity to supplement the existing evidentiary record.

On March 18, 2019, after determining that additional briefing "would be of assistance to the court," I entered another order, this time directing that each party submit a memorandum on or before April 9, 2019. (Doc. # 706).

The March 18, 2019 order was specific in describing the issues to be addressed in the requested memoranda:

(a) the appropriate legal standards to be applied in determining a quantum meruit award in a case in which an attorney's services have been terminated before the right to a contingent fee has vested; and

(b) the proper determination of the quantum meruit award based on the facts of this case, with citations to the record (or to the prior findings [of] fact of the district court or the proposed findings of fact of the bankruptcy court) for any facts employed in the analysis.

(Id. ).

As the March 18, 2019 Order indicated on its face, I directed the filing of additional submissions from the parties to flesh out their positions regarding the applicable legal standards and to have them point to the relevant facts in the existing record (with citations to the record) that should be considered in determining MLS's quantum meruit entitlement.

Unfortunately, the March 18, 2019 Order triggered a flurry of filings from the parties that went well beyond the scope of the submissions ordered by the court – a veritable free-for-all of unsolicited, sometimes untimely, filings and responses. I address those matters below.

2. the Thorpe's Judicial Notice Motion

a.

On April 9, 2019, the Thorpes filed a motion, ("the Judicial Notice Motion") (Doc. # 708), requesting that this court take judicial notice of the Pennsylvania Supreme Court's March 18, 2019 Order ("the Supreme Court Order"). The Supreme Court Order disbarred Mirarchi based on an accompanying Report and Recommendations of the Disciplinary Board of the Supreme Court of Pennsylvania. The Thorpes also attached to the Judicial Notice Motion a copy of the seventy-three (73) page report of the Disciplinary Board. ("the Report").

The Thorpes contend that Mirarchi's disbarment is relevant evidence that was not available before the expiration of the January 4, 2019 deadline set by this court for requesting the opportunity to supplement the existing record.

MLS objects to the court's consideration of this additional evidence on the ground that the Thorpes are requesting that the court take judicial notice of facts that are in dispute (without explaining why the facts of the disbarment and the findings in the Report are in dispute). (Doc. # 718).

I will deny the Judicial Notice Motion, but for reasons other than those offered by MLS. I conclude that the Supreme Court Order and the Report provide evidence that is either merely cumulative or irrelevant.

b.

The Report describes numerous instances of professional misconduct by Mirarchi involving, inter alia: (a) the handling and misappropriation of client trust fund monies and (b) the unauthorized practice of law while under administrative suspension. The Report makes no specific reference to any conduct involving Mirarchi's representation of the Thorpes.

The Report does reference the July 15, 2015 Pennsylvania Supreme Court order (effective on August 14, 2015) that administratively suspended Mirarchi for failing to comply with his continuing education requirements, as well as his reinstatement effective September 16, 2015. (Report ¶¶ 161-62, 185). The Report then states the Disciplinary Board's finding that between August 14, 2015 and September 15, 2015, Mirarchi "continued to maintain an office for the practice of law and to hold himself out as eligible to practice law" and "falsely testified at the disciplinary hearing that while he was administratively suspended, he ‘did not work on any cases.’ " (Id. ¶¶ 180, 186).

With the possible exception of the Report's reference to the unauthorized practice of law, none of the other, numerous instances of misconduct recited in the Report relate to Mirarchi's representation of the Thorpes. It is not possible to tell from the Report whether the Thorpes' case was one of the cases the Disciplinary Board was referring to when it found that Mirarchi worked on cases while under administrative suspension in 2015. But, ultimately, that is of no consequence. The fact that Mirarchi practiced law by representing the Thorpes while under administrative suspension in 2015 is not "news" to this court. That fact was established during the initial hearing in this court and is no longer in dispute. See Thorpe I, 563 B.R. at 586-88, 601-02 ; see also Thorpe III, 755 F. App'x at 179 ("While suspended, Mirarchi negotiated on behalf of the Thorpes a settlement with Nationwide for $324,000").

As for the Pennsylvania Supreme...