496 B.R. 144
Bankr. S.D.N.Y.2013Background
- Alfred and Maritza Ortiz filed a Chapter 7 petition through the Law Offices of David S. Waltzer, PC, which disclosed a $1,494 flat prepetition fee on the Rule 2016(b) form.
- The firm’s Rule 2016(b) statement listed core filing and §341 meeting representation as included, but expressly excluded: more than one §341 appearance (unless caused by attorney), over one hour of post-§341 work, amendments due to client error, reaffirmations, redemptions, adversary proceedings, litigation/negotiation with trustee or third parties, and credit repair.
- The statement also said the firm ‘‘may hire appearance counsel’’ for the first §341 meeting and would pay appearance counsel $75–$150; no separate Rule 2016(b) statement from appearance counsel was attached.
- The court convened a hearing to examine the scope of representation and the adequacy/consistency of the Rule 2016(b) disclosure under 11 U.S.C. §329 and Fed. R. Bankr. P. 2016(b).
- The court found that certain routine bankruptcy services are mandatory components of representation and that the exclusions in the firm’s disclosure (notably excluding multiple §341 appearances and routine post-filing tasks) were impermissible or unreasonable under New York ethical rules.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of Rule 2016(b) disclosure | Waltzer: flat fee disclosed; exclusions agreed with client; appearance counsel paid by firm and fee not passed to debtors | Court/UST: disclosure must be complete; shared/related compensation and appearance counsel compensation implicate §329 and Rule 2016(b) | Court: Disclosure was inconsistent; appearance counsel who appears must file their own Rule 2016(b) statement and compensation must be disclosed |
| Exclusion of more than one §341 appearance from flat fee | Waltzer: may limit scope and exclude additional §341 appearances | Court: §341 meeting attendance is a core, fundamental duty; excluding >1 appearance unreasonable under NY RPC 1.2(c) | Court: Excluding more than one §341 appearance is unreasonable; attorney must provide representation at the §341 meeting as part of competent representation |
| Use of appearance counsel without separate disclosure | Waltzer: appearance counsel paid by firm; fee not passed to debtor | Court: Any attorney who appears in connection with the case and receives compensation must file §329/R.2016(b) disclosure regardless of passthrough | Court: Appearance counsel must file their own Rule 2016(b) statement disclosing compensation |
| Exclusion of routine post-petition services (amendments, reaffirmations, redemptions, limited post-§341 work) | Waltzer: these services were excluded from flat fee by agreement | Court: Some routine services are part of ‘‘normal, ordinary, and fundamental’’ representation; limitations must be reasonable and supported by informed consent | Court: Such exclusions may be improper absent reasonable limitation and informed consent; firm directed to represent debtors consistent with decision |
Key Cases Cited
- Castoreña v. 270 B.R. 504 (Bankr. D. Idaho) (representation must include ordinary and fundamental bankruptcy tasks)
- Seare v. 493 B.R. 158 (Bankr. D. Nev.) (scope-limiting/unbundling must comply with ethics; attendance at §341 is core)
- Smith v. 331 B.R. 622 (Bankr. M.D. Pa.) (court has independent duty to review fee applications)
- Busy Beaver Bldg. Ctrs., Inc. v. 19 F.3d 833 (3d Cir.) (broad discretion for court review of fees)
- Johnson v. 291 B.R. 462 (Bankr. D. Minn.) (attendance at §341 is a basic element of a debtor’s retainer)