In re Carter

533 B.R. 632, 2015 WL 4116676
CourtUnited States Bankruptcy Court, S.D. Ohio
DecidedJuly 8, 2015
DocketCase No. 10-59509
StatusPublished
Cited by1 cases

This text of 533 B.R. 632 (In re Carter) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Carter, 533 B.R. 632, 2015 WL 4116676 (Ohio 2015).

Opinion

MEMORANDUM OPINION AND ORDER ON APPLICATION FOR EMPLOYMENT OF SPECIAL COUNSEL TO REPRESENT DEBTOR IN PERSONAL INJURY MATTER

C. Kathryn Preston, United States Bankruptcy Judge

This cause came on for hearing on March 6, 2015 to consider the Application for Employment of Special Counsel to Represent Debtor in Personal Injury Matter (Doc. # 73) (the “Application”) filed by the Debtor. The Application seeks to employ Philip C. Lauer and his law'firm Scott Schiff & Associates Co., LPA (the “Firm”). Present at the hearing were Mr. Bardwell representing, the Debtor, Georgia Carter, Philip C. Lauer (“Special Counsel”), and Don Mains representing the Chapter 13 Trustee, Frank M. Pees (the “Trustee”). The Debtor requests authority to employ Special Counsel to prosecute certain claims the Debtor has against Progressive Insurance Company (“Progressive”)1 for injuries the Debtor sustained in an automobile accident involving the Debtor and a person who was not insured.

I. JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and General Order 05-02 entered by the United States District Court for the Southern District of Ohio, referring all bankruptcy matters to this Court. This is a core matter pursuant to 28 U.S.C. § 157(b)(2)(A).

II. FACTS

On August 8, 2010, the Debtor, Georgia L. Carter, filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code. In due course, the Debtor’s proposed Chapter 13 Plan was confirmed. On August 6, 2013, the Debtor was involved in a car accident in which she sustained certain injuries. Two days later, on August 8, 2013, the Debtor engaged the Firm to represent her with respect to the automobile accident. The Debtor engaged the [635]*635Firm on a contingency fee basis whereby the Firm and Special Counsel would receive 25% of any funds recovered on behalf of the Debtor. Special Counsel did not begin working on the Debtor’s file until August or September 2014 almost a year after the Firm had been engaged.2 Thereafter, Special Counsel was able to negotiate a settlement with Progressive and other interested parties. On September 23, 2014, Special Counsel discovered for the first time that the Debtor had filed bankruptcy. Special Counsel could neither confirm nor deny whether any other attorneys that worked for the Firm were ever aware that the Debtor was involved in a pending bankruptcy case. After learning about the Debtor’s pending bankruptcy case, Special Counsel emailed the Debtor’s bankruptcy attorney on October 17, 2014 to advise him of the settlement with Progressive.

On November 10, 2014, the Debtor filed the Motion of Debtor for an Order Approving a Compromise of the Claim of the Debtor Against Progressive Insurance Company and Authorizing Disbursement of Settlement Proceeds (Doc. # 70) (the “Motion to Compromise”). In the Motion to Compromise, the Debtor requested authority to settle her claims against Progressive for an amount of $15,901.00, of which the Debtor proposed to pay Special Counsel and the Firm $3,300.00 for their fees and expenses. The amount to be paid to the Firm and Special Counsel (i.e., $3,300) is actually only 20.75% of the settlement recovery. The Trustee filed Trustee’s Objection to Debtor’s Motion to Approve Compromise (Doc. # 71) (the “Objection”) indicating that he did not object to the settlement amount that was offered, but he did object to the Firm and Special Counsel being paid from the settlement proceeds because their employment had never been approved by this Court. Thereafter, the Debtor filed the Application requesting authority to employ Special Counsel and the Firm to prosecute her claims against Progressive for injuries the Debtor sustained in the automobile accident.

III. DISCUSSION

A. Employment of Professional Persons under 11 U.S.C. § 327

“A trustee or debtor-in-possession may not employ an attorney, accountant, or other professional person without the court’s express approval.” Farinash v. Vergos (In re Aultman Enters.), 264 B.R. 485, 489 (E.D.Tenn.2001) (citing 11 U.S.C. § 327(a)). “Section 327 ... of the Bankruptcy Code and Rule 2014(a) of the Federal Rules of Bankruptcy Procedure require professionals including attorneys, to obtain court approval prior to being employed on behalf of the estate.” In re WDS, Inc., 336 B.R. 301 (Bankr.W.D.Ky. 2006). Section 327(a) states as follows:

(a) Except as otherwise provided in this section, the trustee, with the court’s approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest advérse to the estate, and that are disinterested persons, to represent or assist ■the trustee in carrying out the trustee’s duties under this title.

11 U.S.C. § 327(a).

The purpose of 11 U.S.C. § 327 of the Bankruptcy Code is to provide notice to all creditors and parties in interest that the trustee is hiring a professional and is proposing to pay the professional [636]*636from estate funds. Section 327 also gives the Court the ability to perform a screening process, verify the necessity of employment, ensure the neutrality of the person employed, and control and limit estate expenses, thereby promoting efficient administration of the bankruptcy estate.

In re McKenzie, 449 B.R. 306, 318 (Bankr. E.D.Tenn.2011).

The procedure for obtaining approval of employment of a professional is governed by Fed. R. Bankr.P.20143 and requires, among other things, that the trustee or committee file an application requesting Court approval of the employment. Rule 2014 also requires the application set forth certain facts regarding the need for and the terms of the employment, and establish that the applicant is disinterested. “The purpose of the rule requiring prior court authorization of a professional’s employment is to prevent volunteerism and to assist the court in controlling administrative expenses.” In re McDaniels, 86 B.R. 128, 129 (Bankr.S.D.Ohio 1988) (citation omitted).

A professional failing to comply with the requirements of the Code or Bankruptcy Rules may forfeit the right to compensation.... The services for which compensation is requested should be performed pursuant to appropriate authority under the Code and in accordance with an order of the court. Otherwise, the person rendering such services may be considered an officious intermeddler or a gratuitous volunteer.

Collier on Bankruptcy P 327.03[2][c] (Alan N. Resnick & Henry J.

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Cite This Page — Counsel Stack

Bluebook (online)
533 B.R. 632, 2015 WL 4116676, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-carter-ohsb-2015.