479 B.R. 133
Bankr. M.D. Fla.2012Background
- This miscellaneous proceeding concerns whether William G. Whitcomb violated the No-Look and First Day Orders by seeking/receiving post-petition fees and expenses from Chapter 13 debtors.
- The United States Trustee moved for examination and disgorgement of fees; the Attorney represented Chapter 7 and 13 debtors for about 26 years and handled roughly 600 Chapter 13 cases in Jan 2007–Mar 2012.
- Disclosures in Fraser and other cases showed the Attorney sought post-petition fees for amendments, conversions, and related services, sometimes without timely or complete disclosures.
- The court held that post-petition collections and undisclosed payments violate the No-Look and First Day Orders and the disclosure requirements of § 329 and Rule 2016.
- The Court determined two disclosure categories: (a) post-petition fees for amendments/conversions; (b) post-petition fees or expenses collected directly from debtors, including filing fees.
- The court ordered disgorgement of $13,955 and detailed distribution to the UST, a pro bono organization, a Fraser debtor, and trustee compensation, with judgment entered and potential for closeout of the proceeding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether post-petition fees were improperly sought from debtors | Whitcomb sought post-petition fees without proper disclosure. | Whitcomb contends disclosures and procedures complied with applicable rules. | Whitcomb violated No-Look and First Day Orders; improper post-petition fees undisclosed. |
| Whether undisclosed post-petition fee disclosures breached § 329 and Rule 2016(b) | Disclosures failed to reveal all post-petition payments and agreements. | Disclosures were sufficient or not required in certain instances. | Non-disclosures violated § 329(a) and Fed. R. Bankr.P. 2016(b). |
| Whether attorney withholding services for nonpayment violated court orders | Withholding legal services pending nonpayment violated No-Look and First Day Orders. | No explicit intent to violate orders; practices arose from professional norms. | Withholding services violated No-Look and First Day Orders; sanctionable conduct. |
| Whether disgorgement and civil penalties are appropriate | Disgorgement is warranted to deter non-compliance and protect the estate. | Sanctions should be measured and not punitive given circumstances. | Disgorgement of $13,955 approved and sanctions imposed to deter future non-compliance. |
Key Cases Cited
- In re Saturley, 131 B.R. 509 (Bankr.D.Me.1991) (full and complete disclosure required; coy disclosures unacceptable)
- Neben & Starrett, Inc. v. Chartwell Fin. Corp. (In re Park-Helena Corp.), 63 F.3d 877 (9th Cir.1995) (disclosures must be precise and complete)
- In re Smitty’s Truck Stop, Inc. (Jensen v. U.S. Trustee), 210 B.R. 844 (10th Cir. BAP 1997) (requirement to disclose compensation payments to debtors' counsel)
- In re McTyeire, 357 B.R. 898 (Bankr.M.D.Ga.2006) (failure to disclose justifies denial of all compensation)
- In re Fraser, 9:10-bk-26493-BSS (Bankr.M.D.Fla.2010) (First Day Order context and amendment procedures in Chapter 13)
- Jove Engineering, Inc. v. IRS, 92 F.3d 1539 (11th Cir.1996) (civil contempt standard: knowledge of the order and violation regardless of intent)