Elias v. Lisowski Law Firm, Chtd. (In Re Elias)

court, characterized the state assump- mortgage obligation

tion of the and the agreement to hold Dee harmless from support. related debt was intended as Therefore, consideration of the fore- factors, going Elay’s the court concludes that obligation pay Security Bank of He- mortgage bron and hold Dee harmless from unsatisfied balance intended to be support. and is the nature of Section 523(a)(15) alternative, argued in the will not applies only be addressed as it to debts not otherwise sup- found to be in the nature of port or maintenance. foregoing

Based on the IT IS ORDERED mortgage repre- unsatisfied balance sented the supplemental money judgment Plaintiff, Kubik, in favor of the Dee Devonna against Defendant/Debtor, Klayton Kubik, principal $29,591.76 amount of together judgment with interest at the rate July interest from and after

nondisehargeable pursuant section 523(a)(5).

JUDGMENT MAY BE ENTERED AC- CORDINGLY. Shelly ELIAS, Debtor.

Shelly ELIAS, Appellant,

v. FIRM, CHTD.; LISOWSKI LAW United Trustee, Appellees. States BAP No. NV-95-2258-RMaMe. Bankruptcy No. 94-20662-LBR. United States Appellate Panel of the Ninth Circuit. Argued and Submitted Feb.

Decided Oct. MARLAR,1 RUSSELL, and

Before: MEYERS, Bankruptcy Judges.

OPINION

MARLAR, Bankruptcy Judge: chapter 112 After the debtor’s case was dismissed, bankruptcy attorney her filed a $10,000.00 against state-court lawsuit her for unpaid chapter attorneys’ fees. The summary judgment debtor filed a motion for action, arguing that in the state-court her attorney any former was not entitled to employment in because he had secured his bankruptcy fraudulently by failing prior to disclose his connection with the debt- or, bankruptcy the fee he received for the retainer, receipt potential or his of a $3,000.00 preference from the debtor on the filing. eve of ruling summary Prior to on the motion for judgment, requested the state court viability court rule lien, attorney’s the status of the attor- ney’s employment preference against whether a claim ability attorney could affect his to collect a fee. request,

Pursuant to the state court’s filed a motion authorizing coun- seeking to vacate the order hen, employment, sel’s cancel counsel was not entitled and determine that any discretion, Exercising its motion. The bank- court denied the debtor’s juris- ruptcy court also found that had concerning to enter further orders diction disputed appealed. fees. The debtor We AFFIRM. 7.FACTS Nerseian, Nerseian, Clark, A. &

Robert NV, Vegas, Appellant. Las Debtor”) (“the Shelly Elias filed a volun- February tary chapter proceeding Stephens, Lisowski Law Elizabeth A. Firm, CHTD, NV, attorney, James F. Lisowski of Vegas, 1994. Her Las Firm, Chtd., applied for Firm, Lisowski Law Law Chtd. indicated, Marlar, chapter, Bankruptcy section otherwise Honorable James M. Unless Code, Arizona, Bankruptcy rule are to the desig- references Judge sitting by for the District of seq. § 101 et and to the Federal Rules 11 U.S.C. nation. Procedure. February retention as her days more than made within $600.00 1994. The stated that the Debtor to commencement of the case. The Debtor retainer, and, further, paid nothing as a $3,000.00 pre-petition never disclosed the firm that neither nor Ms “have payment LisowsM to the LisowsM firm writing, Debtor, connection with the her creditors or authority the U.S. Trustee had no to waive party in other interest ... and question. the answer to that rio interest adverse to Estate in the proceeded through stages The case various upon [they matters to be re- are] year. 1994, for almost a In December application supported by tained.” The Debtor, counsel, through filed a motion to affidavit, repeated wherein he LisowsM’s Thereafter, dismiss her case. the Debtor represent statement that he did not or hold apparently falling had a out with the Lisow- An appointing adverse interest. order sM firm and filed the actual order of dismiss- signed by bankruptcy the firm was herself, al consulting attorneys. without her 8,1994. on March 11,1995. The case January was dismissed on fact, bankrupt- for some time before the firm, up The LisowsM through to and dis- cy, represented LisowsM and his firm had missal, counsel, never moved to withdraw as the Debtor in connection with her cocktail and now maintains that the dismissing order lounge. prior Just bankruptcy filing, to the the case was entered attorneys before its $8,000.00. the Debtor owed the LisowsM firm entry knew of the dismissing order Knowing that he could not case. in chapter proceeding Debtor her while that, parties All agree during the course of creditor, his firm was a LisowsM and the chapter 11 proceeding and to the current agreed Debtor pay date, for, applied LisowsM never nor was he $8,000.00 $8,000.00 outstanding toward the awarded, by bankruptcy court. bill, $5,000.00 legal and the balance would be 14,1995, April On LisowsM sued the Debt- forgiven. paid The Debtor then an addition- or in state court for pro- Ms fees. In that $4,200.00 fee, bankruptcy al together ceeding, judge the state-court declined to to cover the filing $800.00 cost of parties rule unless and until the obtained a chapter record, 11. It is unclear from the . ruling court, bankruptcy from the in the opinion, and immaterial to this whether the 11, chapter dismissed concerning propri- paid Debtor also an additional $500.00. ety and amount of fees. Specifically, the (or $4,200.00 payment $4,700.00) The of a requested state court parties refer attorneys’ fee was inconsistent with Lisow- the matter to the court “for con- “- representation sM’s paid that the firm was following sideration of the issues in order to 0—” for its services conflicting avoid results: 22, 1994, On March the Debtor executed her viability 1. The lien held noted, Statement of Financial Affairs and Firm, LisowsM Law Chtd. 9, question that LisowsM had indeed been 2. The status of Mr. LisowsM as an em- $4,200.00 paid 17,1994. February ployee client, Elias, Shelly of Ms meeting of creditors was held Bankruptcy action. 1994, $3,000.00 on March prefer- preference against Could claim Mr. payment ential was raised and discussed ability LisowsM affect Ms to collect his attorney. the U.S. According Trustee’s attorney’s fees?” LisowsM, the U.S. Trustee’s indicat- by a ed “shake of the Thereafter, head” that it was new motions were filed in the unnecessary for the court, Debtor to amend the seeking disqualify Statement of Affairs and note that item in LisowsM firm and rescind the order of em- writing. The existence of this ployment. head nod is On November the trial unsupported by record, and counsel’s court exercised its discretion and refused to suspicious reference to and, addition, because the act on request, found Affairs, question Statement of requires juris- court was without payments” disclosure of “all aggregating diction to resolve the state court’s concerns. entered to dismissal under parties ders returned then case, juris lying that it does not retain court, “fully capable but noting it was state grant new relief a case that diction to requested adjusting the fees based (In Taylor dismissed. and extent of services rendered.” the nature Tsafaroff v. Cir.1989); Taylor), bankruptcy court’s Or- appeal of the This (In re Deeds v. Franklin Trust Beneficial Franklin), der followed. (9th Cir.1986). F.2d observed, that, Taylor,. Ninth Circuit REVIEW OF II. STANDARD interpreting orders entered addition regarding court’s decision A underlying prior to bank dismissal profes of a for the power bankruptcy court has ruptcy for abuse of sional discretion. is reviewed appli dispose ancillary matters such as an v. In Bank Nevada CIC First Interstate attorneys’ fees for cation for an award (In Corp. re CIC Investment vestment in with the un services rendered connection 1994). (9th BAP B.R. 52 53 Cir. Corp.), 175 (citing derlying action. 884 F.2d at 481 decision as to Similarly, bankruptcy court’s (Matter Corp. Danning v. Motel U.S.A. attorneys’ to be amount of fees proper (9th Corp.), Motel 521 F.2d 117 U.S.A. Cir. an abuse of discre is reviewed for awarded 1975)). Thus, that, possible while it is under Starrett, Inc. v. Chartwell tion. & Neben facts, bankruptcy right set of court (In Corp.), Corp. re Park-Helena Financial compensation power inherent to determine — Cir.1995) (9th 877, cert. den. presented even after the case has questions -, 133 L.Ed.2d 116 S.Ct. U.S. dismissed, power does not extend (1996). bankruptcy court’s deci Finally, “[a] In of “new relief.” this granting jurisdiction over to exercise sion to decline correctly the trial court determined following dismissal of the proceedings related requested by the Debtor would have relief only underlying bankruptcy case is set aside was, therefore, relief’ and constituted “new Davis v. Cour discretion.” C.G. abuse of jurisdiction. beyond bankruptcy court’s Davis), (In 910-11 ington Here, position that the the Debtor’s bank- 1995) (citation omitted). BAP Cir. invalidate her contract ruptcy court should argu- is based not with LisowsM III. DISCUSSION did not earn A. Jurisdiction' case, but, rather, bankruptcy during her appeal, is issue on whether first unethically acted upon the assertion deciding court was correct in bankruptcy bankruptcy representation. The court in the jurisdiction resolve it was without ensuring in that attor- have an interest does post-dismissal disputes regarding the Debt- it conduct neys before themselves appearing attorneys’ bankruptcy or’s that, can properly, and interest vindicated be dismissed, disciplinary proceed- through the initiation a case has been Once conduct and ings concerning estate3 re-vests property of the debtor’s practice before the court. Howev- debtor, and, fitness to unless the court orders oth certain, er, not extend so far as erwise, does types interest of transfers bankruptcy jurisdiction to court bankruptcy grant might been avoided have dispute by itself in a state-court bankruptcy if had inter involve as reinstated 349(b). at- independent inquiry into an launching an § also 11 U.S.C. vened. (1977) (“The during a 95-595, torney’s now-dismissed conduct No. at 338 H.R.Rep. 349(b) bankruptcy inquiry would Such § is to undo the case. purpose basic presented to the issues ease, any In practicable.”) bankruptcy as far bankruptcy, would not affect: jurisdiction, the trial finding that it had no creditor, would not rights any serve deci supported court is Ninth Circuit also bankrupt- underlying the purposes that a trial court retains sions which hold short, bankruptcy cy In jurisdiction interpret or code. subject-matter 541(a). U.S.C. case. is created the commencement 3. An "estate” Cir.1990). granting be essence, would Debtor new relief that because the issues purpose serve no in advancing upon which the requested state court guid- dismissed case.4 ance are immaterial matter in the ease, dismissed an order of the

Furthermore, subsequent to the Ninth Cir- merely court would be advice to rulings Taylor Franklin, cuit’s reason, also, the state court. For this Supreme United States Court has deter- bankruptcy court was correct in refusing to scope mined that of a federal court’s issue further orders this matter. jurisdiction residual in a dismissed case is quite limited. v. Kokkonen Guardian America, Insurance Co. the court Life C. Discretion held that is to be presumed “[i]t that a cause Even court had lies outside juris- [a federal court’s] limited jurisdiction motions, to consider the new diction.” 511 U.S. 114 S.Ct. properly exercised its discretion not to do (1994) (citation 128 L.Ed.2d 391 omit- 350(b) so. Section Code ted). presumption operates This deny provides that ease reopened “[a] federal even to enforce a the court in which such case was ... closed court-approved agreement whereby a case in debtor, accord relief to the or for other settled, that same court was unless the order cause.” The reopen court’s decision to approving the agreement adopts settlement entirely discretion, within its sound based agreement’s terms, expressly the court upon the circumstances of each case. Rosin jurisdiction maintains over agreement, (In Boyd Rosinski), v. ski 539, re 759 F.2d independent “there is some basis for federal (6th Cir.1985); 540-41 Citizens Bank &

jurisdiction.” 381-82, Id. at 114 S.Ct. at (Matter Case), Trust Co. v. Case 937 F.2d case, this independent there is no (5th 1014, Cir.1991); Rediker, 1018 25 statutory constitutional or basis for the bank- 71, (Bankr.M.D.Tenn.1982). B.R. 73 Proce ruptcy court to pre- decide the ethical issues requires dure filed, that a motion be some matter, sented in this impact or the of those thing lacking that was in the instant case. upon issues the validity of employment 5010, Rule Federal Bankruptcy Rules of Pro contract between the Debtor and Lisowski. cedure. One circuit has Moreover, held that a bank that matter currently pending is ruptcy may court reopen a sponte in case sua if jurisdiction state court with full to re- prima evidence discloses that an estate solve contract issues before it. facie has not fully. been administered See Mul Thus, even if the bankruptcy court were to (In lendore v. Mullendore), United re States have set aside the employment, order of it (10th 306, Cir.1984). 741 F.2d 308-09 How had no to order the additional ever, exception narrow, this and is not requested. relief Accordingly, the bankrupt- present here. cy court was jurisdictionally unable to decide questions posed by state court. Thus, one must look to the known facts of case, B. this Opinion Advisory by the disclosed record chosen parties, to consider whether the bank- jurisdictional addition to the ruptcy court its abused discretion in refusing grounds above, stated federal courts also are reopen the ease questions and answer the prohibited rendering from advisory opinions. posed by the judge. state-court trial As this States, Muskrat v. United 219 U.S. (In court in noted v. Kashani Fulton re S.Ct. (1911); 55 L.Ed. 246 v. Flast Co Kashani), hen, U.S. 88 S.Ct. 20 L.Ed.2d (1968); American Bank State v. standard, [u]nder Marks the abuse of discretion (In MacNeil), (9th re clearly Ninth Circuit has stated that Moreover, bankruptcy court is not the best be should noted signed, that the Debtor herself oath, complain profes- forum which to about the under very Statement of Affairs which attorney sional conduct of an fraudulent, outside context she now contends was erroneous and case; any pending courts, she, bankruptcy also, presumably the state because wanted to ensure association, appropriate and the state bar are that appointed her her Also, better able to deal bankruptcy. III(C), with issues. it Part infra. that showing its discretion exercise trial court’s refusing abused its discretion is “‘a there unless not be disturbed will reopen dismissed order review that the firm conviction definite concerning disput- issues judgment state-court pending error of a clear below committed attorneys’ fees. therefore AFFIRM upon weigh- We it ed reached in the conclusion ” court. decision the relevant factors.’ ing of 1995) (9th (citing Cir. BAP B.R. 875 RUSSELL, dissenting: Judge, (In Eisen), 31 F.3d Moneymaker v. Cohen (internal Cir.1994) citations respectfully I dissent. omitted)). REMAND REVERSE and Here, supported the numerous factors bankruptcy court enter that the instructions to consider bankruptcy court’s decision vacating the order of order that They included further. the fee issues deny request eight for over been dismissed the case had majority’s excerpts from the following months; assets to admin- there were no that opinion does share demonstrate that ister; re-vested property had that all impact of my regarding the serious concern Debtor; preferences had any potential integrity of upon actions dismissal; by the reinstated been' bankruptcy system: oath, the signed, under herself Debtor Here, position that the Debtor’s she contend- of Affairs very which Statement her fraudulent; bankruptcy court invalidate should erroneous ed was is based not contract with Lisowski adjusting “fully capable of court was state that Lisowski did not earn argument nature upon the requested based the fees but, during her rendered;” his fees of services and extent rather, upon the acted assertion what sanc- may “the state court determine representation. unethically in the determining the total appropriate tions (cid:127) have an interest in court does fees, any, paid.” attorneys appearing before it ensuring that effect, state the if we determine In that in- and conduct themselves properly, the bank- requires request for advice court’s through the initi- can be vindicated terest act, opening the door we ruptcy court to proceedings concern- disciplinary ation by parties who any requests for number of attorney’s and fitness to ing conduct an long after the fighting still find themselves However, that practice before the court. to rest. Be- bankruptcy case has been laid grant so far as to does not extend interest bankruptcy longer exists cause there no jurisdiction to bankruptcy involve the ease, a retro- purpose is served no federal dispute by launching itself in a state-court active, of-a state-court post-dismissal review attorney’s an independent inquiry into an dispute. this matter attorney-fee Had bankrupt- during a now-dismissed conduct attention bankruptcy court’s brought to the inquiry an would cy case. Such case, during pendency the the presented in to issues any connection the decided, proper at the have been it could rights the bankruptcy, not affect would context, in that forum. proper and time creditor, and would not serve however, pend- Now, properly is the matter underlying purposes issues court which decide ing another short, . code. fully jurisdic- clearly within its and that are relief the. new granting Debtor wit, an tion, amount of propriety to purpose advancing serve no that would attorney’s fee, attorney’s extent case.4 the dismissed lien. IV. CONCLUSION independent con- case, there is this for the bank- statutory basis stitutional that the bank- are not satisfied either We ethical issues ruptcy court decide grant jurisdiction ruptcy court had matter, impact of or the Debtor, presented in this or that there requested by the relief those validity issues of the em- blame for egregious conduct of her attor- ployment contract between the ney Debtor is at best unfortunate. Moreover, Lisowski. that matter current- Finally, majority’s holding that the mo- ly pending in a state court with full tion vacate the order autho- jurisdiction to resolve the contract issues rizing employment Lisowski’s and to deter- before it. mine that he was not entitled to further added). (Emphasis asking fees was for “advisory majority merely concludes that we are opinion” is surprising. The requested relief dealing “ethical issues” which have no by motion, far from asking for a mere impact bankruptcy system on the or this opinion bankruptcy court, asking However, case. nothing could be further very specific relief on presently matters from the truth. go issue which integrity heart of the bankruptcy system. Although egregious conduct of the attorney issues, debtor’s does involve ethical impacted adversely conduct on integ- I. STATEMENT OF FACTS rity of bankruptcy system. As will be debtor, Elias, Shelly chapter filed below, discussed in more detail the disclosure petition February 1994. She hired requirements Code and Lisowski, James F. Sr. of the Lisowski Law Rules are operation crucial the proper of Firm, (“Lisowski”) Chtd. to represent her in bankruptcy system go to the heart of the bankruptcy case. Lisowski ap- filed an ' its integrity. plication for an order authorizing the debtor In footnote the majority adds insult to employ him. The order authorizing his injury by implying that the debtor was a was entered on March willing accomplice in egregious days Within 90 course of conduct: paid $8,000. Moreover, court is not the $5,500 That sum consisted of representa- complain best forum pro- in which to about the attorney fessional conduct of an outside the con- tion in the chapter 11 case and case; any pending bankruptcy text of the state account of an antecedent debt owed to Li- courts, appropriate and the state bar associa- sowski ..prior representation for his tion, are better able to deal with such issues. Also, it should be noted that the Debtor herself debtor in the acquisition and licensing of a oath, signed, very under Statement of Affairs saloon. which she now contends was erroneous and fraudulent, she, also, presumably because want- The employment application and Lisow- ed to appointed ensure that her ski’s related affidavit failed to disclose that bankruptcy. her in the See Part any prior had connection with the debtor. 111(c),infra. The also stated that Lisowski had added). (Emphasis paid not been general monies as a retain- Is the majority in serious suggesting that er for the bankruptcy representation.

the debtor was aware of the full ramifications $5,500 Lisowski failed disclose to the of the and various omissions and false statements $2,500 payments in the applica- attorney? her hope To sug- not. even tion, schedules, the debtor’s gest and the state- that the debtor a preference knew what ment of was, financial affairs. Lisowski’s state- understood the intricacies and ramifi- 2016(b) pursuant ment to Rule regarding cations of what constitutes a “disinterested compensation stated that he person,” had received the is unrealistic. To suggest further $4,200 sum of from the debtor legal that ser- paid the debtor the same attention to vices rendered in connection the with the bank- accuracy her attorney’s representa- ruptcy case paid and had $800 tions to the court equally unrealistic. the fee. short, although the . was debtor aware of past present 341(a) regarding facts § her At the meeting of creditors held relationship with her attorney, sug- 23,' to even on March the United States Trustee gest that (“UST”) she in way some is partially to reviewed the debtor’s statement of bankruptcy case com- employment in the Lisow- and Lisowski. debtor affairs bankruptcy court. upon the $2,500 mitting payment fraud UST that ski advised that the fraud specifically contended to Debtor offered amend listed and was not failure to of Lisowski’s disclose payment. Lisowski consisted to reflect schedules payment on the prepetition schedules indicated alleged that the UST subsequently potential as a of affairs it would not and the statement by shaking his head representation incorrect preference, state- his the schedules and necessary to amend supporting employment application Li- payment. to include the of affairs paid Lisow- or state- affidavit that the debtor had the schedules not amend did sowski retainer, rep- and his incorrect during general the course a any time ski ment of affairs 2016(b) the Rule disclosure resentation in bankruptcy ease. of the which the of the amounts debtor statement 341(a) § at the asked Lisowski The UST paid to him. might consti- payment meeting whether responded 1, 1995, argu- Lisowski preference. following oral tute On November payment was stating summary negative, ruling to ment but substantially motion, received in the state court issued judgment owed, and that amount than the actual less that the matter be referred requesting order at the time was solvent court for its consideration 341(a) (1) concluded payment. viability The UST following issues: inquiry regard- (2) completing lien, his meeting the attor- attorney’s after the status of con- case, ing the remainder information ney’s employment affairs. (3) in the debtor’s preference tained claim against whether a ability affect his collect could of the debtor representation Lisowski’s explained attorney’s order Eventually, on Novem- the case continued. to avoid so in order the state court did 21, 1994, on the filed a Lisowski motion ber conflicting results. In the the case. dismiss debtor’s behalf motion, specifically stated a motion in subsequently filed The debtor arrange- or had made current debtor was requested §§ and 507 pay administra- ments vacate, “dissolve,” i.e., bankruptcy court chapter 11 expenses incurred tive employ- authorizing Lisowski’s the order bank- including to the UST. The fees owed lien, ment, attorney’s strike his to cancel and granted the motion to dismiss ruptcy court that Lisowski was and for determination 21,1994. on December (the va- “motion to fees not entitled to cate”). 11,1995, January an order of dismissal

On per- propria by the debtor submitted hearing bankruptcy court conducted order of not submit the did sona. Lisowski the debtor’s motion at which considered re- apparently because dismissal vacate, opposition, and written to Lisow- pay further fused representations argument oral heard order The court entered debtor’s ski. including the UST. parties, from all January chapter 11 case on dismissing submission, taking the under After matter 12,1995. applications were ever filed No fee an bankruptcy court entered order the in the ease. 16, the in which denied 1995 November dismissed, bankruptcy case was After the court found to The motion vacate. debtor’s for against lien filed a Lisowski comply failure to -with that during attorney’s incurred unpaid fees violation, a'sanctionable rules was disclosure in complaint He also filed chapter 11 case. court could deter- the state but stated that to collect those fees. state sanctions, appro- any, might be mine what held bankruptcy court further The 1995, priate. in a motion debtor filed May On jurisdiction to order summary it did not judgment, action the state court namely, cancel to remaining requested, relief to Lisowski was not contending that entitled to determine attorney’s lien and the' any because he had secured collect fees, any not entitled to The seek represent to debtors and who seek to appealed. recover fees are intended to ensure that representation counsel’s inis inter best Parky-Helena ests of the estate. In re Corp., II. ISSUES (9th Cir.1995), cert. denied A. Whether the court abused Starrett, sub. nom Neben & Inc. v. Chartwell its in discretion denying debtor’s motion —Corp. U.S.-, Fin. 116 S.Ct. to authorizing vacate order employ- (1996). L.Ed.2d 667 obligations The imposed ment of the debtor’s counsel. upon counsel the disclosure rules are in B. Whether im- dependent of all requirements. other Id. properly declined to exercise 2014(a)1 Rule requires that an over the debtor’s to request cancel the attor- application for employment “all disclose ney’s hen and to disallow counsel’s fees. debtor, [counsel’s] connections with the credi- tors, any or other party in interest....” III. DISCUSSION The requirement is intended to assist A. Whether The Bankruptcy Court Abused court in its determination that the attorney Its Denying Discretion In The Debtor’s interest, has no conflicts of as required by To Motion The Vacate Order Authoriz- 327(a),2 § and that the attorney is “disinter- ing The Employment Debtor’s Coun- 101(14)3 ested” § in defined Of sel Employment of an who is not The requirements disclosure imposed by disinterested has been held to be void ab Code and the attorneys Rules EWC, who Inc., initio. provides pertinent Rule part: tants, in auctioneers, appraisers, profes- or other Employment Rule 2014. persons, Professional Per- sional represent do not hold or sons. estate, an interest adverse to the (a) Application Employ- for and Order persons, disinterested or assist the approving ment. An order attorneys, carrying trustee in out the trustee’s duties tra- accountants, appraisers, auction- der this title. eers, agents, professionals pursuant or other § §or 1114 of the Code shall be provides pertinent 3.Section part: only application made of the trustee or § 101. Definitions and, application committee. The shall be filed In this title— unless the case municipality is a copy application be shall trans- (14) applicant person” mitted "disinterested person to the United States means (bat- application specific trustee. shall state the ía) showing creditor, necessity facts employ- equity for the not a security an hold- ment, er, person insider; the name employed, be or selection, professional (B) reasons for the is not and was investment banker rendered, any proposed services be arrange- any debtor; outstanding security of the and, compensation, ment for (C) the best of the been, years within three before applicant's knowledge, person’s all of the con- filing date of the petition, an invest- debtor, creditors, any nections with the other debtor, security banker for a or an interest, party respective attorneys their attorney for such an investment banker in con- accountants, the any United States trustee or offer, sale, nection with the or issuance of a person employed office United debtor; security of the trustee. States shall be ac- (D) not, is not and years within two companied by a per- verified before the date of the petition, employed son setting person’s forth the director, officer, employee or of the debtor or debtor, creditors, with the or specified of an investment subpara- banker interest, party other respective their attor- (B) (C) graph paragraph; or of this neys accountants,- the United States trust- (E) does not have materially an interest ad- ee, any person employed in the office of the verse to the interest of the estate or of class United States trustee. holders, equity security creditors or by rea- provides 2. pertinent Section 327 in part: any to, son of direct relationship or indirect with, § in, Employment professional persons 327. of or interest the debtor or (a) Except provided as specified otherwise subpara- in this sec- investment banker in tion, trustee, (B) the (C) approval, graph with the paragraph, court’s or of any this for or may employ attorneys, one more or accoun- other reason.

609 consequences for Further, 285. counsel’s (Bankr.W.D.Okla.1992). similarly in- fees regarding non-disclosure to be con are considered disclosure duties requested, fees Park-Hel- of all clude denial ongoing result tinuing and disgorgement of at or Corp., 63 F.3d persons ena disqualify court to the of EWC, Inc., received, 138 B.R. at already (citing Id. fees interest. of a conflict

with (Bankr.N.D.Ala.1986); 158, 161 285. Estes, 57 B.R. (D.Utah Roberts, B.R. In re Corp., 121 B.R. 1987); Amdura In re prior con- to disclose 1. Counsel’s failure (Bankr.D.Colo.1990)). the with the violated nections 2016(b)5 require and Rule Section 3294 requirements Code the disclosure of must file attorney for a debtor every Rules and compensation paid disclosing the statement autho- for an order Lisowski’s or not attorney, whether promised or employ attor- possession rizing debtor compensation applies for attorney ever the general retainer denied neys under the case. any prior connection firm Lisowski or had comply the with attorney’s failure to An with the debtor: and of the Code requirements disclosure violation, even knowledge, applicant’s sanctionable of Rxiles To the best have shown LAW disclosure proper of the LISOWSKI the members any actually violated Code attorney not have,any connection with do not FIRM Corp., any party Rule. Debtor, any or Park-Helena other provision or her creditors Intern., 880; attorneys Ventures or interest, respective at Film 63 F.3d their or 1987). Inc., BAP accountants, Cir. ad- 75 B.R. no interest literally de applied rules are in the matters The disclosure to the Estate verse may harsh results spite sometimes is to be retained. which it omissions occur, or negligent inadvertent of Likewise, support affidavit for disclosure. the need do obviate stated: employment application at 881. Corp., 63 F.3d Park-Helena I, LAW LISOWSKI Neither attorney’s violation consequences of an there- FIRM, any or associate nor ap- member regarding requirements the disclosure of ascertain, of, I have able as insofar may include the plications for to that of any adverse interest represents aside, the order autho- vacating, of setting or Debtor, estate, Debtor, Inc., or employment, EWC. rizing counsel’s party any other or fees, creditors Debtor’s Park-Helena a denial B.R. at law upon which said in the matters interest disgorgement at or Corp., engaged. Inc., firm is to be received, already EWC Compensation or (b) Paid part: Disclosure pertinent provides in 4. Section 329 Every attor- Attorney for Debtor. Promised attorneys with § transactions 329. Debtor’s debtor, attorney not the ney or whether for (a) in a attorney representing a debtor Any trans- compensation, shall file and applies for title, with in connection this or case under days within trustee the United States mit to not such whether or such a relief, time or at another order for after the title, compensation this shall applies under direct, by required statement compen- court a statement tile with including attor- the Code whether 329 of pay- paid, if such paid agreed to be or sation compen- agreed to ney or share shared year after one agreement was made ment or entity. The statement with other sation petition, for filing of the date of the before the particulars such shar- include the shall in contem- or to be rendered rendered services attorney, but agreement ing to share or with plation in connection of or sharing of any agreement the details compen- attorney, of such source regular or compensation a member sation. attorney's not be law firm shall associate part: pertinent provides in supplemental 5. Rule 2016 shall required. A trust- United States and transmitted to tiled Ren- Compensation for Services Rule 2016. agree- any payment days after ee within Expenses. dered Reimbursement previously disclosed. on Based the foregoing, I believe the MR. LISOWSKI: Honestly, Honor, Your I LISOWSKI LAW FIRM is a “disinter- just think it was mistake our part to person” ested within the meaning of Sec- not put it in. IAnd didn’t realize it until I 101(13), tions 327 of petition reviewed the for the which is Code. my practice. standard I realized it wasn’t petition. Despite assertions, these it is uncontro- THE talking COURT: I’m about appli- verted that Lisowski was the debtor’s attor- cation employ. ney and dating advisor back to at least 1992 in connection with acquisition her and licen- MR. LISOWSKI: As far application as the sure of a saloon in Nevada known as the to employ goes, Your Honor? Hyde Lounge. Park Lisowski does not dis- THE COURT: Yeah. pute that represented re- MR. LISOWSKI: Listing that she had peatedly prior to filing.' He paid three thousand? also does dispute not that the debtor had THE Well, COURT: you said had no outstanding balance approximately connection— him, owed to and amounts owed to other firms, at the time of the MR. bankruptcy filing.' not, LISOWSKI: I did Your Honor. At the time we petition filed the she didn’t Lisowski nonetheless asserts that he had owe anyme money. prior connection with the debtor. At the THE No, no, no, COURT: no, no. You hearing on the vacate, motion to the follow- say in your application ing colloquy between the court and Lisowski concerning prior MR. connections with LISOWSKI: Mm-hmm.

debtor occurred: THE you COURT: —that have no connec- tion

THE with the Now, COURT: Mr. Lisowski. debtor. I take “no connection” to you’d mean that rep- never MR. honor, LISOWSKI: Your I think the resented her. Court has look totality of what MR. true, LISOWSKI: really That’s not happened in Your this case. Honor; I had represented her repeatedly. Ms. Elias first contacted me in May of THE COURT: I understand that’s what 1993 about petition due really happened. to the fact that she bills; couldn’t pay her this included numerous MR. fees to LISOWSKI: Yeah. my firm Finally, other firms. Your THE is, COURT: point My why didn’t the Honor, just prior to February 18th it on— say that. was determined that she needed to file a MR. LISOWSKI: know, I don’t Your Hon- Chapter 11 because she was about to have or; I represented had her repeatedly an increase in payments Hyde Park time, to this and there was no secret about Liquor, Inc., her secured creditor. At that that. And I mean I represented her I time informed Ms. Elias that I could not in the acquisition bar, of this repre- I had her any she had type of out- sented her in getting her license. It was— standing my balance to firm because we THE COURT: Your application says, “to would not [be] party. disinterested the best of their knowledge, the members Through discussions with her it sug- do connection with the debt- gested that the bill discounted, or that a or”— percentage of the paid. fee be And she MR. see, LISOWSKI: Honor, You Your I did in fact pay three thousand dollars take “connection with the debtor” to mean bill; that’s what we’re talking about. insider, I’m not an I am not in business her, with I do not own a ‘percentage her THE COURT: Now why your bar, appli- split her; don’t and that’s ” why your did application not cor- Iwhat take [as] cation — “connection. And I had rectly reflect— no with her in way, shape above, and described bankruptcy matters Honor; just was she Your form, or $5,500 was a retainer for payment that client. representation.6 added). (Emphasis his understand- of explanation Lisowski’s the debtor acknowledges that Lisowski is connection” of “no the definition ing of $8,000 the time at approximately him owed employ- In the astounding. of nothing short filed, and that he case was that represented Lisowski application, ment $2,500 in full payment accept to agreed and “experience firm have law his he and outstanding debt. insol- bankruptcy, of field knowledge in the 2014(a) required under Rule was Lisowski rights” and and creditors’ vency debtors’ and $5,500 employ- in his retainer them disclose the believed to consequently debtor that the application, in the application. her to ment qualified be “well no retainer: in- however, is that he received case.” It states reorganization Chapter experi- knowledgeable, conceivable that the essential necessary and It 5. is have such attorney could enced attorney[s] under employ these Debtor understanding of of lack fundamental and stan- on time based general retainer equally It is connection.” of “no definition general retainer charges. A dard billable bankrupt- experienced inconceivable legal of the extensive necessary because is explana- provide such attorney would cy gener- A for this estate. required services well he knew full if in fact the court tion to by Debtor paid has been al retainer con- term “no meaning of the plain that the -0-. amount of $ that, i.e., con- precisely means nection” including representation 3(a) whatsoever of affairs nection statement of the Item no. “just a client.” on payments list the debtor requires that or ser- loans, purchases goods installment prior significant indisputably had Lisowski debts, more vices, aggregating other and and failed the debtor with connections creditor, within 90 made $600 than his those connections disclose commence- immediately preceding the days whether It immaterial application. payments Neither of the case. of the ment of Lisowski’s the result was non-disclosure on statement are listed Lisowski received an inten- Law or ignorance innocent 3(a). item no. response to affairs disingenuous. part to be on his effort tional Un- F.3d at 881. Corp., 63 Park-Helena failed deny that he does Lisowski pri- scenario, non-disclosure der either contends, howev- He payments. disclose the a clear the debtor with omissions issue er, raised the that he 327(a) § requirements violation 341(a) meeting “uni- § the UST 2014(b). Rule and offered sponte” laterally” “sua of af- and statement the schedules amend prepeti- to disclose 2. Counsel’s failure by a “shake” contends He further fairs. also the debtor payments tion from head, him that told UST or a “nod” requirements disclosure violated the schedules need to amend did not Rules the Code and payments. reflect the of affairs statement paid reflects record The 341(a) re- meeting (four transcript of the The $2,500 February on meticulously questioned UST $5,500 vealed that on bankruptcy) days before the informa- about and Lisowski February and state- schedules in the contained tion The debtor February on was filed basis. by item item on an of affairs account $2,500 paid on contends did that Lisowski transcript reflects to Lisowski owed debt antecedent until payments omission his non- mention of her representation was in debt antecedent paid for the the amount proceedings be- during the asserted 6. Lisowski $3,000. $2,500 and not account of on fact was received low that appeal that Lisowski admits debt. antecedent inquiry 3(a) UST’s regarding item no. MR. JENKINS: Referring Yes. to Item was imminent: 10 of the statement of financial affairs .... point [at

MR. Okay, JENKINS: UST began questioning financial affairs Item 1 debtor regarding for item you no. entitled show a “Other negative $18,000, income Transfers.”] but on your returns, tax you show a negative in- added). (Emphasis $66,000. come of A close reading of transcript does not MR. time, LISOWSKI: At the we were support Lisowski’s contentions UST, estimating. We filed the schedule. She verbally either nonverbally by a “shake of just, actually, received the return back as head,” advised Lisowski that he did not mentioned, she today. need to amend the schedules and statement Okay. MR. JENKINS: of affairs to reflect the payments. The UST MR. LISOWSKI: We can you amend. I— stated that it would not be necessary to know, we—the accountant had given that amend the debtor’s response to item 1no. on figure to me is what he could tell from the the statement of affairs. The UST said noth- cash flow. ing whatsoever concerning amendment of the MR. Okay. JENKINS: No. That won’t be response 3(a). to item no. Lisowski did not necessary. just I’m curious. amend the schedules or statement of affairs MR. LISOWSKI: That’s what her state- during time the course case. It year-end show. Her appears statement for that Lisowski acknowledged pay- the bar showed that. only ments when he realized the UST was about to MR. ask questions detailed Okay. JENKINS: Item 2 of about item 3(a). no. $11,000 of financial affairs shows income in 1993 other than from the Hyde I agree with the debtor that it is not Park Lounge. What was that in? possible to into read the exchange quoted MS. my ELIAS: That was rental. From above kind of head motion the UST to, August know, you the— which would indicate that an amendment of MR. Okay. JENKINS: the documents would not be necessary. In any case, MR. Jenkins, LISOWSKI: Mr. the obligation to can I disclose pay- point out No, ments on cannot omission 3? waived the UST. It is an obligation owed to the JENKINS; Yes, MR. creditors and particu- larly to the court. MR. LISOWSKI: No. 3 the creditors for 3(a). Okay? My received office Lisowski’s claim that his failure to disclose will amend the schedules to this. payments reflect was an unintentional mistake My received Elias, $3.0007 Ms. office from and was “inadvertent” questionable. is highly approximately, a week filing this were, Even if before it a bankruptcy deny compromised bill. I will amend to do all fees where the attorney debtor’s uninten that. It was intention —not intentional- tionally fails to potential disclose preference ly unintentionally omitted on the sched- payments — received from the debtor. Park- ules. Corp., Helena 881; 63 F.3d at see also MR. JENKINS: Is that going to create a Ass’n, American & Loan Thrift problem as 381, 389 far as any preference? (Bankr.S.D.Cal.1992). MR. LISOWSKI: I don’t believe so. First Loan, American & the bankrupt- Thrift all, it’s an 11. cy court held that attorney’s fees should be MR. JENKINS: Yes. denied where had failed to dis- MR. LISOWSKI: Secondly, it was sub- application close for employment that stantially less than what the value was. he or she had potential received preference And the thing third as we’ve repeated payments from the debtor. Id. at 390. The along, she’s not insolvent. bankruptcy court explained further supra 7. note 6. or should who could of the debtor em- tor have denied preferential of a recovery pursued fully disclosed attorney had if the ployment motion to denying the In its order Id. at transfer. debtor. with the all connections vacate, court stated: on whether emphasis 3. Counsel’s at the creditor not a Mr. Lisowski preferences were in payments fact hence he petition, time of misplaced on those per disqualified se was. pro- concerning the arguments LisowsM’s omitted]. grounds. [Citation focused non-disclosure of his priety avoidable, preference receipt consti- payment of whether issue have discretion void, and debtors not re- He 547.8 preference under a tuted preferences. pursue not to pursue or it could peatedly contended not.. Moreover, apparent it is not § 547. U.S.C. by the UST questioned when Specifically, than he more received Lisowski that Mr. could consti- payment receipt of the whether liquidation. in a have received it explained that preference, a tute Lisowski. consti- receipt of funds or not Whether exist cannot preference a not because could “materially ad- is interest tutes an preference aof resolution full until after case is after the not relevant is verse” possession by the debtor brought action provides § 349 dismissed, as U.S.C. He adversary proceeding. of an the context after reinstated preferences recovered not: could payment explained that further dismissal. was a it preference because abe mark. missed the analysis this I believe the actual than substantially less ease, was potentially is whether analysis The correct solvent.9 was owed, value and whether payment occurred preferential arguments that these based appears It receipt of of his disclosure made Lisowski full disclose stating did not he is Lisowski was led .the believe payment. was disclosure he believed because payment concerning arguments astray by Lisowski’s non- warranted, than because rather not payment was of whether significance Further, no- inadvertent.10 was disclosure to whether opposed preference, in fact a explain attempted to has Lisowski where had oc- payment preferential potentially or state- schedules amend the why he did not payment of that full disclosure curred and his notify court of of affairs ment made. had been pay- preferential potentially receipt of the UST contention

ment, other than item no. be noted it should Finally, of “shake by a nonverbal him does advised affairs 3(a)' of not do so. need payments preferential head” all list of require Rather, bankruptcy. days of within made analy- arguments, of result these aAs payments of disclosure requests simply focused below proceedings sis failing to period. time made within a credi- in fact was whether Lisowski of issue was transfer of such the time creditor part: pertinent provides in 8.Section insider; and § 547. Preferences to receive (5)that creditor such enables if— would receive creditor than such more (c) this of provided in subsection (b) Except as chapter 7 of (A) under a case were the case section, transfer avoid the trustee title; this property debtor in made; interest —. (B) had not the transfer creditor; (1) benefit or such payment of (C) received creditor such debt (2) antecedent of an on account by provisions provided the extent debt to transfer debtor before owed made; title. this solvency insolvent; only the issue arguments, these (3) debtor was 9. Of while the made analysis. preference ato possibly relevant (4) is made— days the date (A) before within 90 on or elsewhere his statements contradicts This petition; or filing the inadver- non-disclosure the record that year before (B) ninety days one between tent. petition, if such filing of the date of disclose the prepetition payment fees would be denied because the disclo- the statement of affairs the employ- sures were not forthcoming or the attorney application, prevented was not disinterested. In the case at bar having from highly relevant informa- we have both Judge, we have an attorney tion before it. who was not disinterested and was abso- lutely statutorily barred and we have an 4. Lack actual harm caused attorney who failed to make appropri- disclose failure determinative ate disclosures the Court. A disclosure violation may result in sanc Counsel’s repeated non-disclosures under- regardless tions of the actual harm to the mined the integrity of the judicial process. estate. Corp., Park-Helena 63 F.3d at 881 facts, On these the bankruptcy court’s denial (citing 14K, Ltd., re Maui of the motion to vacate the order authorizing (Bankr.D.Haw.1991)). A lack of harm to counsel’s constituted an abuse of the estate does not obviate the fact of non discretion. I believe that its decision must disclosure and does not alter the resulting be reversed and the matter remanded with consequences disqualification or denial of instructions that the bankruptcy court enter compensation. EWC, Inc., 138 B.R. at 284. an order vacating the order of employment. In explaining its exercise of discretion to deny the vacate, to motion the court stated: B. Whether The Bankruptcy Court Improp- [T]he court notes that no fees are being erly Declined To Exercise Jurisdiction sought or were sought estate, from the Over The Request Debtor’s To Cancel creditor being is harmed, there is no evi- The Attorney’s Lien And To Disallow dence that the failure to disclose or the Counsel’s Fees alleged conflict of interest way Because the and, harmed the court finally, erred fail- dismissal ing to sought vacate at the the order, instance of the debtor the debtor’s counsel creditor. was never properly em- ployed by the debtor and is not entitled to The bankruptcy court’s analysis again any fees for representation of the debtor point. missed the The debtor’s counsel stat- in this case. There accordingly is no basis ed the issue correctly at the hearing on the upon which the state court could decide that vacate, motion to as follows: he is entitled to payment of fees as the question [T]he is not the harm to the debt- debtor’s counsel.11 In Weibel, See re 176 or; it’s not even the harm to the estate. It (9th B.R. 209, 211-12 1994) (hold- Cir. BAP is the harm to process of authorizing ing that compensation professionals acting -attorneys to representation undertake on behalf of an estate must be based on proscribed is proscribed, statute and provisions of Code, which pro- does not the disciplinary rules attorneys all vide for fee awards based on state law theo- work under. That —it’s pretty clear, in ries such quantum meruit). fact repeatedly in the cases cited to this Court the cases state that there was a In of above, view the there is no need to benefit to estate, detriment, address whether the bankruptcy court had benefit; and even with that benefit jurisdiction to order the remaining relief re- issue, 11. On this I note that counsel entitled to collect from the debtor on precluded by the judicial doctrine of estoppel unpaid account of attorney's 11 asserting from state position court action a believe, based on egregious counsel's conduct which is inconsistent position with his earlier in throughout case, posi inconsistent court case. his In motion type tions reflect the "cynical of gamesmanship” dismiss the bankruptcy counsel stated: judicial the doctrine of estoppel is intend 7. The Debtor is current or has made ar- prevent. ed to Teledyne Industries, Inc. v. rangements pay 11 U.S.C. S 503 and N.L.R.B., (6th 911 F.2d Cir.1990); 1218 expenses 507 including fees owed to the United Forty-Eight Insulations, Inc. v. Aetna Cas. & Sur. States Trustee. Co., (N.D.Ill. 162 1993). B.R. 147 This in direct conflict with his contention in the state court action that he is

615 scrutiny judicial of appropriateness for and ex- significant However, given quested. his a debtor and arrangements between addressed majority has to which tent against ... protect attorney pro- compelled I feel jurisdiction, issue court of the by an officer' overreaching discus- their response to following vide Wood, U.S. 210 ’”) from (quoting . . sion. 624-25, .52 L.Ed. 246, 253, 28 S.Ct. jurisdiction court had Lowe, 97 B.R. (1908)); Matter also see disallow attorney’s lien or cancel awards, by reason (“Attorney’s fees 548 n. 328(e)13govern fees. Sections court being attorneys’ officers profes- propriety determination pow- disciplinary the court’s subject to of a the course during arising sionals’ fees legis even in custodia ers, to be continue retain courts bankruptcy case. they in which of a ease the termination after the award of over jurisdiction subject matter collected.”) been awarded the dismissal after even has exclusive Indeed, bankruptcy court Corp., Brickell Inv. re In underlying case. debt- the determination jurisdiction over (“Fees (S.D.Fla.1994) 149, 156 B.R. “The determination fees: or’s item to an essential is a core estate agent of fees of can, jurisdiction core court’s jurisdiction exclusive proceeding within same, after dismiss- even must, consider Edgewater re Bankruptcy Court.” Fricker, case.”); al of (N.D.Fla.1995), Inc., B.R. Spot, Sun (bankruptcy (Bankr.E.D.Pa.1991) 937-38 v. Pen Sun Edgewater nom sub. aff 'd pro- to determine “has Haben, Cir. & nington by Coun- received compensation priety of the Edgewater Sun nom 1996), sub. cert denied dis- — though this even A., sel Haben, P. & Pennington v. Inc. Spot, _ Lowe, B.R. 97 ”); Matter missed 220 of 136 L.Ed.2d -, S.Ct. 117 U.S. (“The has court (Bankr.W.D.Mo.1987) 548 Moreover, Circuit (1996). the Ninth the rea- duty to determine inescapable has exclusive bankruptcy court ruled that the ... fees of awards on the sonableness of misconduct claims jurisdiction over after the even performed be duty must Balboa In re attorneys. This In of debtors’ part (9th Post v. case.”); see also Cir. Ltd., of 966 dismissal 99 B.R. Improvements, 1989) (S.D.Ohio 566, 568-69 B.R. Ewing, 1989), that: 119 BAP held BAP (a which had dismissed court misconduct claim of over a Jurisdiction jurisdiction retained properly 11 administration attorney in the debtor’s fee to return counsel analogized to order dismissal b'e may after an estate debtors). claims similar over jurisdiction exclusive or debt- trustee court-appointed against possession Attorneys for debtors settled It is well or-in-possession. their fairness court. The officers in state sued fiduciary cannot such court. integrity upon the reflects leave without court exer- must that, court can It follows capacity official in his done acts for awards, after even fee over jurisdiction cise authority an officer as his within In bankruptcy. underlying dismissal court. (9th BAP Cir. 945 B.R. Shirley, 134 re Id. at 970. cover- 1992) (“The and Rules sections Code situation, present and the dealings between ing the fees, such to disallow were the need ‘premised on attorney are debtor’s or 327 employed under section person sional note 2. supra if, during such any time title of this '1103 part: pertinent provides in Section sec- employment under person's professional profes- compensation of on title, 328. Limitation sional professional 1103.of this 327 or tion persons repre- person, or person disinterested inter- adverse an interest or holds sents 327(c), section (c) Except provided in respect to the matter estate est title, 1107(b) the court 327(e), of this or employed. person is professional which 'such compensation services for deny allowance profes- expenses aof and reimbursement disallowance would act as a sanction jurisdiction for his existed over the independent Thus, misconduct. for the court to decide claim, state law the Ninth Circuit found that whether Lisowski is entitled fees, to his the bankruptcy court subject lacked matter must consider exactly those “acts done in jurisdiction. Id. attorney’s] [the official capacity and within The Ninth Circuit relied Kokkonen in his authority as an officer of the court.” order to reach its decision in Hunter. Nonetheless, Lisowski argues, and the ma- Kokkonen, the United States Supreme Court jority agrees, that the bankruptcy court has held that a federal court could not exercise jurisdiction issue, over the whereas the subject jurisdiction matter over a state law state court does. The reverse is true: breach of contract claim which arose from a jurisdiction court has which su- ease that had been previously pur- dismissed persedes that of the state court. suant ato agreement, settlement absent an- Furthermore, the United Supreme States cillary an independent basis jurisdic- for Court has ruled that a district court retains Kokkonen, tion. at 381-82, U.S. jurisdiction to issue Rule 11 sanctions even S.Ct. at 1677. after the dismissal of the case. Cooter & Hunter, Kokkonen and however, solely Gell v. Corp., Hartman U.S. concerned the issue of a federal court’s sub- S.Ct. 2462-63, 110 L.Ed.2d 359 ject jurisdiction matter over (1990). state law claims reasoning same applies, and has which were ancillary to the underlying law- applied, to the bankruptcy court. “The suits. The case, issue this by contrast, voluntary dismissal” of chapter 11 proceed concerns the propriety of legal fees incurred ing, “unquestionably a core proceeding, by a debtor’s counsel during the of a course not strip [does] [the court] chapter 11 case in the federal bankruptcy impose sanctions conduct during the court. Hunter and Kokkonen are inapplica- course of the case.” In re Bourekas, French ble to this and the reliance of Inc., both the 696 (Bankr.S.D.N.Y.1995), bankruptcy court and the majority upon aff'd, 195 B.R. (S.D.N.Y.1996). Because these authorities misplaced. the disallowance of Lisowski’s fees would act as a sanction misconduct, the The majority relies the Ninth Circuit dismissal of the underlying bankruptcy eases does of In Taylor, 884 F.2d 478 not strip the bankruptcy court jurisdiction. Cir.1989), and Franklin, 802 F.2d 324 (9th Cir.1986), in holding In that us, bankruptcy matter before the bankruptcy court does jurisdiction not have court held that to if even disallow to were vacate the Lisowski’s fees. It maintains order authorizing these Lisowski’s employment, it cases stand for the proposition had jurisdiction no trial to cancel his attorney’s courts retain subject jurisdiction lien or matter disallow his to fees. The bankruptcy interpret prior orders, but that they court found the state cannot court “fully to be capa- grant “new relief.” The ble of adjusting majority concludes requested fees based on that the bankruptcy court has jurisdiction nature and extent of the services ren- in the instant case because the dered.” The debtor re- bankruptcy court relied on In quests “new Hunter, relief.” This (9th reasoning 66 is F.3d mis- 1002 Cir.1995), and guided. Kokkonen v. Guardian Ins. Co. Life of America, 511 U.S. S.Ct. Taylor, In the Ninth Circuit held that (1994), L.Ed.2d 391 in support of its position. after an entry anof order dismissing a Chap- Hunter, petition ter 13 the Ninth based on Circuit held the debtor’s failure to bankruptcy file a plan, feasible could a not bankruptcy hear an indepen- court no longer dent jurisdiction state law had fraud grant claim to after a request dismissal for of relief underlying stay from arising case unless there was “some prior statutory Chapter or petition: constitutional juris- basis for its Hunter, diction.” 66 F.3d at 1005. Since the [T]he bankruptcy court subject retains parties in that case lacked diversity, and no jurisdiction matter to interpret en- orders constitutional or statutory authorization for prior tered to dismissal of the underlying non-disclo- for the explanation and to Counsel’s omitted] bankruptcy [citations to disclose failed Counsel sure defied belief. as an such ancillary matters dispose of with prior connection significant, extensive attorney’s a of an award application pri- of the and the non-disclosure with in connection rendered for services of a clear violation connection constituted omitted]. action underlying [citations Code and of the juris- requirements have the disclosure not court does however, relief inde- Rules. grant new diction, to the under- rulings once prior of its pendent receipt to disclose also failed Counsel has been dismissed. lying action general retainer of a from the debtor Taylor, at 481. debt of antecedent payment on account Franklin, held Circuit the Ninth Counsel’s legal non-bankruptcy services. jurisdiction de- bankruptcy court legal- the non-disclosure justification for filing of effect termine bankruptcy court misled ly irrelevant and Franklin, a foreclosure. bankruptcy on the case. Coun- inquiry in the relevant from must re- (“[B]ankruptey courts at 326 F.2d pay- prepetition sel’s non-disclosure own orders their construe jurisdiction to tain similarly constituted from the debtor ments monitoring capable they are to be requirements of the disclosure clear violation ultimately executed are orders those whether and Rules. Code manner.”). Although Lisow- in the intended extraordinary of this case The facts for an award never filed ski egregious. Under is and counsel’s conduct to fees fees, his entitlement circumstances, i.e., order, totality of the based vacate debtor’s motion attor- court’s denial A debtor’s employment. order of of discre- was an abuse employment an or- counsel’s fees without ney cannot receive the fees Thus, is entitled employment counsel tion. approval “Court der: qua is sine court action. sought in the state possession for a debtor counsel Shirley, paid.” getting

non counsel relied, as bankruptcy court Finally, 1992). A BAP Cir. B.R. legal au- inappropriate majority, does attorney his deny trial court’s decision jurisdiction declining to exercise thorities to revoke to a decision fees is tantamount counsel’s of disallowance the issue over to re- The decision employment. order bankruptcy court has nothing voke the order considered and should the issue over en- of an order interpretation than an more Its on the merits. decision the matter present situa- dismissal. The prior to tered discretion. do so was abuse the ambit of within squarely thus falls tion Frank- by Taylor jurisdiction as defined and REMAND I would REVERSE lin. court enter instructions employment vacating the order therefore an order bankruptcy court believe attorney’s fees. request deny the jurisdiction, indeed exclusive jurisdiction, had of Lisowski’s the disallowance over CONCLUSION

V. affirmatively stated counsel The debtor’s and the application in his support affidavit the debtor. with had however, reflects, that counsel record years several represented the debtor for owed and was bankruptcy filing prior to the bankrupt- at the time of significant sum in con- legal services rendered cy filing for matters. non-bankruptcy related nection

Case Details

Case Name: Elias v. Lisowski Law Firm, Chtd. (In Re Elias)

Court Name: United States Bankruptcy Appellate Panel for the Ninth Circuit

Date Published: Oct 27, 1997

Citation: 215 B.R. 600

Docket Number: BAP No. NV-95-2258-RMaMe, Bankruptcy No. 94-20662-LBR

Court Abbreviation: 9th Cir. BAP