Martinez v. Wolper Law Firm, P.A.Martinez v. Wolper Law Firm, P.A.
THIS MATTER is before the Court upon the Motion for Summary Judgment filed by the Plaintiffs on February 17, 2026 (the “Motion“). [Doc. No. 10]. The Court held a hearing on the Motion on March 26, 2026, at which Rashad Blossom appeared as counsel for the Plaintiffs and Michael L. Martinez and Benjamin D. Rhodes appeared as counsel for the Defendant (the “Hearing“). At the conclusion of the Hearing, the Court took the matter under advisement and now renders this order. For the reasons set forth below, the Court grants the Motion in part and denies it in part.
Before the above captioned bankruptcy filing (the “Base Case“), Jose and Nancy Martinez (the “Plaintiffs“) retained Wolper Law Firm, P.A. (the “Defendant” together with the Plaintiffs, the “Parties“) to represent them in a Financial Industry Regulatory Authority (“FINRA“) arbitration (the “FINRA Arbitration“) against their former financial advisor, Keith D‘Agostino, and his employer, AEGIS Capital Corp. (together the “Former Financial Advisor“). The FINRA Arbitration concerned approximately $730,000 in retirement funds that were allegedly mismanaged by the Plaintiffs’ Former Financial Advisor through a series of high-risk and unsuitable investments, resulting in a substantial diminution of the Plaintiffs’ retirement assets. The Defendant‘s representation of Plaintiffs was governed by a contingency fee agreement executed on March 25, 2024, pursuant to which the Defendant was entitled to one-third of any recovery obtained through the FINRA Arbitration, in addition to reimbursement of costs. Defendant initiated the FINRA Arbitration on April 5, 2024, by filing a Statement of Claim with FINRA.
The Plaintiffs, by separate bankruptcy counsel, Jack G. Lezman (“Lezman“), filed a voluntary petition under Chapter 7 of the Bankruptcy Code on September 30, 2024 (“Petition Date“). The Plaintiffs disclosed their interest in the FINRA Arbitration and representation by Defendant on Schedule A/B.1 [Base Case, Doc. No. 1]. On October 20, 2024, at the meeting of creditors held pursuant to
The Defendant subsequently received a settlement offer of $225,000 from the Former Financial Advisor, which the Plaintiffs instructed Defendant to accept. On February 24, 2025, the Plaintiffs executed a settlement agreement resolving the FINRA Arbitration in exchange for that amount. On March 26, 2025, the Defendant disbursed $148,640 to the Plaintiffs and retained the remaining $76,360, reflecting $74,935 in attorney‘s fees and $1,435 in costs. The following day, Plaintiff and Debtor Nancy Martinez signed a settlement statement approving the distribution of funds (the “Settlement Proceeds“).
On April 3, 2025, the Trustee contacted the Defendant for the first time to inquire about the status of the FINRA Arbitration. Upon learning that the settlement funds had been disbursed, the Trustee demanded that the Defendant turn over all settlement proceeds. The Trustee filed a Notice of Possible Dividends on April 3, 2025, and the Court entered its notice of the same the next day.2 [Base Case, Doc. No. 13]. On April 7, 2025, the Trustee filed a Motion for Turnover seeking an order directing the Plaintiffs to remit the settlement proceeds to the Court, which the Court granted by order entered on April 21, 2025. [Base Case, Doc. No. 15, 28].
Thereafter, the Defendant filed a proof of claim in the Base Case in the amount of $76,360. See [Base Case, Claim No. 5-1]. Defendant‘s proof of claim asserts alternative priority levels, including administrative expense priority, secured status, and, in the alternative, allowance as a general unsecured claim. See id.
The Plaintiffs filed the complaint initiating this adversary proceeding on August 29, 2025 (the “Complaint“). [Doc. No. 1]. Among other things, the Complaint objects to the Defendant‘s claim pursuant to
The Defendant opposes the Motion primarily on three grounds. First, the Defendant contends that, although its employment was not properly sought or approved by the Court, extraordinary circumstances exist that warrant compensation as an administrative expense. Alternatively, the Defendant asserts that its claim is secured by virtue of a charging lien pursuant to Florida law. Finally, the Defendant argues that, even if its claim is neither entitled to administrative expense priority nor secured status, it should be allowed as a general unsecured claim.
a. Summary Judgment Standard
In considering a motion for summary judgment, the court construes “all facts and reasonable inferences therefrom in the light most favorable to the nonmoving party.” United States v. 8.929 Acres of Land in Arlington Cnty., 36 F.4th 240, 252 (4th Cir. 2022) (quoting Carter v. Fleming, 879 F.3d 132, 139 (4th Cir. 2018)). Further, “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment,” while factual disputes over irrelevant or unnecessary facts are not considered. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In sum, summary judgment is appropriate when the evidence “is so one-sided that one party must prevail as a matter of law.” 8.929 Acres of Land, 36 F.4th at 252 (quoting Anderson, 477 U.S. 242 at 252).
b. Defendant is Not Entitled to Administrative Expense Priority
Whether the Defendant is entitled to an administrative expense claim turns on the Bankruptcy Code‘s framework governing a Chapter 7 trustee‘s retention of professionals and compensation from the estate.
The prior-approval requirement is a strict, non-waivable condition to compensation from the estate. Courts have enforced this rule regardless of outcome, and ignorance of the requirement is not an excuse. In re Se. Materials, Inc., No. 09-52606, 2010 Bankr. LEXIS 423, at *2 (Bankr. M.D.N.C. Feb. 12, 2010) (“‘Generally, courts should try to hold parties to strict compliance with section 327, especially in the case of attorneys who may be properly charged with knowledge of the law‘” (citation omitted)); In re Carolina Sales Corp., 45 B.R. 750, 754–55 (Bankr. E.D.N.C. 1985); In re Rennie Petroleum Corp., 384 B.R. 412, 415, n. 2 (Bankr. E.D. Va. 2008); In re Johnson, 21 B.R. 217, 218 (Bankr. D.D.C. 1982). Services rendered without authorization are not compensable even if the work benefited the estate or was agreed to by the parties, and the professional is treated as a volunteer even if they acted in good faith. EBW Laser, 333 B.R. at 356;
The material facts are not in dispute. Defendant was retained by Plaintiffs prepetition pursuant to a contingency fee agreement and continued to prosecute the FINRA Arbitration after the Petition Date. Upon the Petition Date, the FINRA Arbitration became property of the estate pursuant to
Defendant contends that, notwithstanding the failure of the Trustee to seek court approval of Defendant‘s employment, extraordinary circumstances warrant after-the-fact court approval of its fees. Some courts have permitted retroactive approval where the professional makes a showing of extraordinary circumstances by (1) satisfactorily explaining the failure to obtain prior approval and (2) otherwise meeting the substantive requirements of
The Fourth Circuit recently issued binding precedent on this issue in David v. King, 109 F.4th 653 (4th Cir. 2024), delineating the limited scope of the court‘s equitable discretion under
The narrow circumstances in which equitable relief remains available following David is illustrated by the recent decision in Schultz v. Martin L. Grp., P.C., No. 1:25-cv-1598 (LMB/IDD), 2026 LX 110921, at *17 (E.D. Va. Apr. 21, 2026). Unlike here, the professional in Schultz had
Even under Tidewater Mem‘l Hosp.‘s two-part extraordinary circumstance test, retroactive approval requires as a threshold matter that the retention would have been approved had it been timely filed, meaning all substantive requirements of
The Court acknowledges that this result is a harsh one. Defendant provided valuable services that generated the full recovery for the estate, and the Trustee had at least two opportunities to address the deficiency, by seeking approval of Defendant‘s employment when it became apparent that the FINRA Arbitration was being actively prosecuted on behalf of the estate, or by seeking nunc pro tunc approval following the settlement. The Trustee did neither. However, that inaction does not vest this Court with authority to grant compensation that the statute does not permit. The requirements of
The Defendant asserts that it holds a charging lien under Florida law,4 which it contends gives rise to a secured claim in the settlement proceeds. Under Florida law, a charging lien is “an equitable right to have costs and fees due an attorney for services in the suit secured to him in the judgment or recovery in that particular suit.” Sinclair, Louis, Siegel, Heath, Nussbaum & Zavertnik, P.A. v. Baucom, 428 So. 2d 1383, 1384 (Fla. 1983). A properly perfected charging lien may therefore operate as a secured interest in litigation or settlement proceeds.
However, a charging lien is not self-executing; it must be properly perfected before it can be enforced. Baker & Hostetler, LLP v. Swearingen, 998 So. 2d 1158, 1161 (Fla. 5th DCA 2008). To establish an enforceable charging lien, a claimant must demonstrate: (1) an express or implied contract between attorney and client; (2) an express or implied understanding that payment would be either dependent upon or paid from recovery; (3) either avoidance of payment or a dispute as to fees; and (4) timely notice. See Daniel Mones, P.A. v. Smith, 486 So. 2d 559, 561 (Fla. 1986) (citing Sinclair, 428 So. 2d at 1385).
Timely notice is essential. To satisfy this requirement, an attorney must either file a notice of lien or otherwise assert the lien in the underlying proceeding before its conclusion. Id. at 561. Generally, a charging lien must be asserted before the action has been reduced to judgment or terminated by settlement. Id.; Baker & Hostetler,
Here, the underlying proceeding was the FINRA Arbitration, which concluded by settlement on February 24, 2025. The undisputed record contains no evidence that the Defendant filed a notice of charging lien or otherwise provided timely notice of its intent to assert such a lien prior to the conclusion of the arbitration. In the arbitration context, the attorney must provide notice of the lien before the proceeding ends. See, e.g., Feldman v. Davis, 53 So. 3d 1132, 1134 (Fla. 4th DCA 2011) (in which the law firm asserted a charging lien in a FINRA arbitration prior to its conclusion). That did not occur here.
At the Hearing, counsel acknowledged that timely notice was not given but argued the sequence of events made such notice practically impossible, contending that because Defendant controlled and disbursed the settlement funds before the Trustee demanded turnover, there was no opportunity to assert the lien. That argument confirms that an essential element of a charging lien was not met. Defendant controlled the FINRA Arbitration, was aware of the impending settlement, and was in the best position to provide notice before funds were disbursed. Florida courts have held that failure to provide timely notice before a proceeding concludes results in forfeiture of the right to assert the lien. Weiland v. Weiland, 814 So. 2d 1252, 1253 (Fla. 4th DCA 2002). The charging lien is an equitable device designed to protect an attorney‘s interest in a recovery before funds are disbursed, not after. Baker & Hostetler, 998 So. 2d at 1161–62. By arguing that disbursement made notice impossible, counsel confirmed rather than excused the absence of the required element.
Because timely notice is a required element for perfection, the failure to provide such notice is fatal to the lien claim. The lien was therefore never perfected, no equitable charging lien attached
d. Defendant Holds a Prepetition Unsecured Claim
Although the Defendant is not entitled to administrative expense priority or secured status, the Court considers whether any portion of its claim may be allowable as a general unsecured claim. The Defendant argues that even if its administrative expense and secured claims fail, it is nonetheless entitled to a general unsecured claim, and notes that this is a surplus case in which unsecured creditors are expected to be paid in full.
While an enforceable contract allocating attorney‘s fees “is allowable in bankruptcy except where the Bankruptcy Code provides otherwise,” the Code does provide otherwise here. Travelers Casualty & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 448 (2007). As discussed above, sections 327 and 330 establish an exclusive mechanism for compensating estate professionals for services rendered on behalf of the estate, and that mechanism conditions any right to compensation on prior court approval. The Supreme Court has made clear that a professional who is not employed under
The analysis is different for services rendered prior to the Petition Date. Prepetition claims arise independently of
Under Florida principles of quantum meruit, an attorney retained under a contingency fee agreement who is discharged without cause prior to the occurrence of the contingency may recover, upon the successful occurrence of the contingency, the reasonable value of services rendered, subject to the contractual fee cap. Rosenberg v. Levin, 409 So. 2d 1016, 1020 (Fla. 1982). In determining reasonable value, courts consider the totality of the circumstances, including the time expended, the recovery sought, the skill required, the results obtained, and the terms of the underlying agreement. Id. at 1022.
It is clear from the record that the Defendant performed legal services under the contingency agreement from March 25, 2024 through the September 30, 2024 Petition Date. Defendant is entitled to assert a prepetition claim in quantum meruit for the reasonable value of those services, subject to the cap imposed by the contingency fee agreement and contingent upon the occurrence of the recovery, which did ultimately occur. See EBW Laser, 333 B.R. at 356–57 (recognizing quantum meruit claim for discharged attorney‘s prepetition services under contingency fee agreement where settlement proceeds constituted a successful occurrence of the contingency, entitling attorney to reasonable value of services rendered prior to termination of his involvement). The amount of such claim, including what portion of Defendant‘s total services were rendered prepetition and the reasonable value of those services, present factual issues that cannot be resolved on summary judgment. Accordingly, summary judgment is denied with respect to any general unsecured claim based on prepetition services under a quantum meruit theory.
Based on the foregoing, the Court ORDERS as follows:
- The Motion is GRANTED as to the Defendant‘s claim for administrative expense priority.
- The Motion is GRANTED as to the Defendant‘s assertion of a secured claim.
- The Motion is DENIED as to the Defendant‘s general unsecured claim for prepetition services, which remains for further proceedings within the parameters of this order.
IT IS SO ORDERED.
Ashley Austin Edwards
United States Bankruptcy Judge
This Order has been signed electronically. The Judge‘s signature and Court‘s seal appear at the top of this order.