456 B.R. 361
N.D. Ill.2011Background
- Garcia, a debtor, appeals a bankruptcy court ruling that Miller is not subject to §329 of the Bankruptcy Code.
- Garcia hired Miller for pre-petition services in contemplation of bankruptcy and paid or was to pay $24,000; dispute over actual amount.
- Miller assisted before Garcia filed for Chapter 11 (Sept. 17, 2009) and later engaged Potts for filing.
- Bankruptcy court initially ruled Garcia prevailed but later vacated and found Miller not subject to §329.
- Second-order litigation centers on whether Miller’s services were rendered in contemplation of bankruptcy, not on whether she was Garcia’s bankruptcy counsel.
- Court remanded to apply the correct standard and determine the reasonableness of fees if §329 applies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Miller’s services were rendered in contemplation of bankruptcy | Garcia argues services were for debt restructuring in contemplation of bankruptcy | Miller contends services were testing the sale/defense work, not necessarily in contemplation | Remanded for proper §329 analysis |
| What standard determines if services are in contemplation of bankruptcy | Subjective state of mind of Garcia and purpose of retaining Miller | Services tied to pre-petition work may be outside §329 if not for the bankruptcy | Remanded to apply proper subjective standard ( debtor’s state of mind and purpose) |
| Proper scope of §329 when a non-bankruptcy attorney assists a debtor pre-petition | Courts may subject any pre-petition services connected to bankruptcy to §329 | Only services by the debtor’s designated bankruptcy counsel fall under §329 | Remand to determine applicability of §329 based on contemplation standard, not attorney status |
Key Cases Cited
- In re Zepecki, 277 F.3d 1041 (8th Cir. 2002) (whether pre-petition services can be subject to §329 when aimed at avoiding bankruptcy)
- In re Dixon, 143 B.R. 671 (Bankr.N.D.Tex. 1992) (test for contemplation: debtor influenced by possibility of bankruptcy)
- In re Gage, 394 B.R. 184 (Bankr.N.D.Ill. 2008) (whether underlying professional services were rendered while contemplating bankruptcy)
- In re Prudhomme, 43 F.3d 1000 (5th Cir. 1995) (services for dispute avoidance may fall within §329)
- In re Perrine, 369 B.R. 571 (Bankr.C.D.Cal. 2007) (fees for related pre-bankruptcy work may be subject to §329)
- In re Swartout, 20 B.R. 102 (Bankr.S.D.Ohio 1982) (non-bankruptcy services must bear more than a casual relationship to bankruptcy)
- In re Bressman, 327 F.3d 229 (3d Cir. 2003) (fees for criminal-defense arising from bankruptcy collapse not in connection with bankruptcy)
- In re GIC Gov't Securities, Inc., 92 B.R. 525 (Bankr.M.D.Fla. 1988) (fees for resolving bankruptcy-related disputes may be contemplated services)
- In re Willett, 544 F.3d 787 (7th Cir. 2008) (standard of review for questions of law in bankruptcy)
- In re Berman, 629 F.3d 761 (7th Cir. 2011) (standard of review; interpretation of bankruptcy code)