589 B.R. 267
Bankr. W.D. Pa.2018Background
- Quicken Loans filed Rule 3002.1(c) Notices in three Chapter 13 cases seeking postpetition attorney fees without contemporaneous time records and mostly as flat fees.
- The Chapter 13 Trustee objected in each case, arguing the fees were unexplained, administrative in nature, unreasonable, and flat-rate.
- Extensive litigation followed (discovery orders, motion for summary judgment, motion to compel, trial scheduling). Quicken ultimately filed unilateral Withdrawals of the Notices.
- At hearing Quicken conceded Pennsylvania's Act 6 barred recovery of the claimed attorney fees because no foreclosure had been commenced prepetition.
- The court treated the Withdrawals as motions under Fed. R. Civ. P. 41(a)(2), granted voluntary dismissal with prejudice, and imposed conditions: Quicken must (a) certify loan histories corrected to remove the fees, (b) provide complete loan histories to Trustee and debtors, and (c) not seek litigation costs from debtors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Quicken could unilaterally withdraw Rule 3002.1 Notices after Trustee filed objections | Quicken treated Notices as withdrawable via filed Withdrawal notices | Trustee treated her Objections as active litigation; Rule 41 governs contested matters and unilateral withdrawal is disallowed once opposing party appears | Withdrawals are treated as motions under Rule 41(a)(2); unilateral dismissal without court approval is not permitted |
| Whether voluntary dismissal should be granted | Quicken sought dismissal after concluding Act 6 barred fees; argued lack of prejudice to Trustee | Trustee sought corrective relief (loan-history correction) and protection from shifting litigation costs | Court granted dismissal with prejudice but conditioned on corrective actions protecting Trustee/debtors |
| Whether dismissal should be with or without prejudice and whether sanctions/attorney fees are warranted | Quicken implicitly conceded fees were not legally recoverable — argued dismissal appropriate | Trustee requested corrective measures; court considered whether Rule 9011 sanctions or fee awards were appropriate | Dismissal ordered with prejudice; court reserved right to pursue Rule 9011 against Quicken's attorneys but declined to award Trustee attorney fees as part of the Rule 41 order |
| Whether postpetition attorney fees were recoverable under Pennsylvania Act 6 | Quicken relied on lender guidelines and flat-fee arrangements | Trustee argued Act 6 forbids attorney fees for residential mortgages incurred prior to initiation of foreclosure; thus fees not recoverable postpetition if no prepetition foreclosure | Court accepted Act 6 bar as dispositive here and noted proponent bears burden of proving reasonableness under Rule 3002.1(d) |
Key Cases Cited
- In re Graboyes, [citation="223 F. App'x 112"] (3d Cir.) (Act 6 prevents recovery of postpetition attorney fees when no prepetition foreclosure)
- In re DeTone, 262 B.R. 359 (Bankr. W.D. Pa. 2001) (Act 6 bars certain mortgage-related attorney fees in bankruptcy when foreclosure not commenced)
- In re Enron Corp., 298 B.R. 513 (Bankr. S.D.N.Y. 2003) (analogy applying Rule 41 principles to contested matters in bankruptcy)
- In re Wellbutrin XL, 268 F.R.D. 539 (E.D. Pa. 2010) (standards for granting voluntary dismissal under Rule 41(a)(2))