Louie Joseph Aquilino and Robin Aquilino v., 135 F.4th 119

Robin and Louie Aquilino filed for Chapter 7 bankruptcy and hired the law firm Spector Gadon Rosen & Vinci P.C. for an upfront flat fee.
The initial bankruptcy filing disclosed a $3,500 flat fee agreement for legal representation, but later a new, much larger payment arrangement (the “Letter Agreement”) for additional post-petition work was made and not disclosed to the bankruptcy court.
Spector Gadon billed the Aquilinos for approximately $151,000 in additional services, later reducing the amount to $113,000 in a settlement paid from post-bankruptcy assets.
The Bankruptcy Court sanctioned Spector Gadon for failing to supplement its fee disclosures as required by 11 U.S.C. § 329(a) and Bankruptcy Rule 2016(b), ordering disgorgement of all collected fees and cancelling the unpaid fee arrangement.
The District Court reversed, finding that Spector Gadon had a Seventh Amendment right to a jury trial on their collection action regarding the additional fees.
On appeal, the Third Circuit held that the fee dispute and sanctions were within the Bankruptcy Court's core equitable powers and did not implicate a jury trial right, reversing the District Court.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Did the Bankruptcy Court have jurisdiction over the fee-sanctions dispute?	Debtors: Court had core jurisdiction under § 329(a).	Spector Gadon: Court lacked jurisdiction for post-petition fees.	Court had core jurisdiction.
Did Spector Gadon violate fee disclosure requirements?	Debtors: Non-disclosure of the Letter Agreement breached § 329(a), Rule 2016(b).	Spector Gadon: Not required to disclose post-petition/non-estate fees.	Failure to disclose was a violation.
Was Spector Gadon entitled to a jury trial under the Seventh Amendment?	Debtors: § 329(a) proceeding is equitable, no jury right.	Spector Gadon: Right to jury for collection/breach of contract claims.	No jury right for equitable claim.
Was the sanction of total disgorgement and cancellation appropriate?	Debtors: Proper sanction for willful, undisclosed fee arrangement.	Spector Gadon: Overly harsh; court should consider debtor misconduct.	Sanction was not an abuse of discretion.

Lamie v. U.S. Tr., 540 U.S. 526 (Supreme Court clarified that Chapter 7 debtor's attorneys generally are not paid from estate assets)
Stern v. Marshall, 564 U.S. 462 (defining scope of "core" bankruptcy proceedings and role of bankruptcy courts)
Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (distinguishing legal from equitable claims for Seventh Amendment jury analysis)
Liu v. SEC, 591 U.S. 71 (explaining equitable remedies include disgorgement to restore status quo)
Chambers v. NASCO, Inc., 501 U.S. 32 (recognizing courts' inherent authority to sanction attorneys)
In re Gilbert, 120 F.4th 114 (clarifying representation and authority in Chapter 7 cases)
In re Stewart, 970 F.3d 1255 (attorney fee disclosure in bankruptcy is a continuing duty)
In re Park-Helena Corp., 63 F.3d 877 (disgorgement for nondisclosure of attorney fees in bankruptcy)