A sanction was imposed on an attorney by the United States Bankruptcy Court for the Eastern District of North Carolina Wilmington Division.
The Bankruptcy Administrator seeks heavy sanctions against debtor’s counsel including disgorgement of fees, fines, and suspension from practice.
The story
The debtor has filed chapter 13 bankruptcy five times in the last eight years. Debtor’s current counsel, William T. Batchelor, represented him in the two most recent filings. The first was filed on December 22, 2008 and was dismissed by the court on August 14, 2009 for failure to comply with the terms of the chapter 13 plan. It provided that should the debtor file another petition within one year, the automatic stay may be limited to thirty days or may not go into effect absent a motion and order imposing the stay. The debtor, represented by Mr. Batchelor, filed again on June 17, 2010 and did not ask the court to extend the automatic stay. On August 11, 2010 a hearing was held on a motion for relief from stay field by the Charles Miller Trust, which held a secured claim on 26.1 acres in Duplin County, owned by the debtor. The court entered an order lifting the stay with regard to the property. However, the creditor was not to hold a foreclosure sale for 60 days to allow the parties to negotiate a settlement. Six days after the order was entered, the debtor sought voluntary dismissal of the case, which was granted by the court on August 26, 2010.
This motion was filed with respect to the fees received by Mr. Batchelor in relation to the instant filing. Mr. Batchelor was previously sanctioned by the court on March 12, 2010 for violations of the Bankruptcy Code and Local Bankruptcy Rules regarding compensation and disclosure requirements. In re Daniels, 2010 Bankr. LEXIS 785 (Bankr. E.D.N.C. Mar. 12, 2010). The court found Mr. Batchelor had irregular billing practices and procedures. He often led clients to believe they would be charged the standard base fee and later informed them that additional monies were required for services rendered. Mr. Batchelor failed to disclose these additional amounts to the court or seek permission to obtain them. The order required disgorgement of fees and a suspension of filing new petitions in the Eastern District until April 15, 2010. Since that time, Mr. Batchelor has revamped his standard fee agreement, cooperated with the Bankruptcy Administrator’s requests for information, and promptly refunded monies to clients. Based on this behavior, on April 1, 2010 the Bankruptcy Administrator recommended no further sanctions against Mr. Batchelor, stating he “appears to be making a genuine effort to reform his practice to be in line with both the word and spirit of the Bankruptcy Code/Rules and the NC Code of Professional Conduct for Attorneys.”
The Bankruptcy Administrator filed this motion on September 13, 2010 based on information provided by the debtor that Mr. Batchelor received fees related to the debtor’s case beyond the $3,000.00 base fee and standard court fees and had not disclosed these payments. At issue are payments totaling $2,075.00, as the parties concede the $3,300.00 paid for the debtor’s case and court fees were disclosed and legitimate.
The source of misunderstanding over the $2,075.00 stems from the fact that Mr. Batchelor also agreed to represent the debtor’s son, Mohammed Amra, in a bankruptcy filing and various negotiations related to pending foreclosures. The debtor paid his son’s legal fees and often spoke with Mr. Batchelor about his and his son’s legal issues in a single meeting. The debtor wrote Mr. Batchelor several bad checks for his son’s legal fees beginning in March 2010. Mr. Batchelor’s demands for proper payment on these checks often coincided with hearing dates scheduled in the debtor’s own bankruptcy case.