In re D'Arata

587 B.R. 819
CourtUnited States Bankruptcy Court, S.D. New York
DecidedAugust 3, 2018
DocketCase No. 18-10524-shl
StatusPublished
Cited by6 cases

This text of 587 B.R. 819 (In re D'Arata) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re D'Arata, 587 B.R. 819 (N.Y. 2018).

Opinion

SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the Order to Show Cause, dated April 19, 2018 [ECF No. 21], issued to Raymond Ragues, Esq. as counsel for Vincent D'Arata, the debtor in the above-captioned Chapter 7 case (the "Debtor" or "Mr. D'Arata"). The Court issued the Order to Show Cause based on two letters from the Debtor that complained about the conduct of his counsel. See Letter of Vincent D'Arata, dated April 2, 2018 [ECF No. 13]; Letter of Vincent D'Arata, dated April 4, 2018 [ECF No. 19]; Statement of United States Trustee in Support of Order to Show Cause re: Attorney Raymond Ragues ¶¶ 10, 18, 20 ("UST Statement") [ECF No. 25]; Chapter 7 Trustee's Statement in Connection with the Court's April 19, 2018 Order to Show Cause ¶ 9 ("Chapter 7 Trustee Statement") [ECF. No. 26]. In his letters, Mr. D'Arata complained that, among other things, his counsel had filed incorrect documents on his behalf, notwithstanding Mr. D'Arata's repeated attempts to correct the errors. See ECF Nos. 13, 19. Based on the allegations in the letters, the Court issued the Order to Show Cause whether Mr. Ragues should be required to return the fee that he charged the Debtor for the filing of the bankruptcy case. As it turns out, the incorrect filings were only part of a much more pervasive problem that included the use of so-called appearance counsel that effectively left the Debtor without representation *821at his meeting of creditors under Section 341 of the Bankruptcy Code. Given all the problems caused by Debtor's counsel here-as further set forth below-counsel must return the fee that he charged the Debtor. The Court writes this opinion to remind attorneys practicing in this jurisdiction of their ethical obligations to their debtor clients and to avoid the use of appearance counsel as a way of passing the buck on those obligations.1

BACKGROUND

There is nothing about this Chapter 7 case that suggests it would be unusually difficult. In late February 2018, the Debtor filed a voluntary petition (the "Petition") for relief under Chapter 7 of the Bankruptcy Code, along with, among other things, his initial set of Schedules of Assets and Liabilities (the "Schedules"), Statement of Financial Affairs and Creditor Matrix [ECF No. 1]. The purpose of the Schedules in a bankruptcy case is to list the types of assets that a debtor has in its possession or would like to claim as exempt. Consistent with the practice in Chapter 7 cases, a Chapter 7 trustee was appointed to administer the Debtor's case; the trustee appointed here was Albert Togut, Esq. (the "Chapter 7 Trustee").

Raymond Ragues, Esq. of Raymond Ragues PLLC is the attorney who filed the case for the Debtor. See Petition at 7. Prior to the filing, Mr. D'Arata paid Mr. Ragues a fee of $900 for his legal services in the case. See Disclosure of Compensation of Attorney for Debtor [ECF No. 1]. The Debtor never met Mr. Ragues in his office, but instead communicated with him online and over the telephone. See UST Statement ¶ 5.

Mr. D'Arata lives on a monthly income of $1,435.00, with his monthly expenses exceeding his income by $20. See Schedules I and J [ECF No. 1]. Mr. D'Arata spends 65% of his monthly income ($953) on rent, food, and basic supplies alone. See id.2 Given his financial circumstances, it took Mr. D'Arata a year to save the money to pay Mr. Ragues' fee. See UST Statement ¶ 16. Mr. D'Arata paid the $900 legal fee in installments over eight months, with the last installment paid in November 2017, some three months before the bankruptcy case was filed. See Letter of Vincent D'Arata, dated April 2, 2018.

As is customary in Chapter 7 cases, the Debtor was scheduled to appear at a meeting of creditors and be questioned under oath by the Chapter 7 Trustee about his case, including with regard to the Debtor's assets and liabilities and the consequences of seeking a discharge. See 11 U.S.C. § 341 (providing for an oral examination of the debtor at a meeting of creditors). These so-called 341 meetings are not presided over-or even attended-by the Court, but rather are run by the Chapter 7 trustee appointed in the case. See 11 U.S.C. § 341(c) (noting that a court may not preside at or attend a 341 meeting).3

*822As a Chapter 7 case is often administered without the need for the Debtor to appear before the Court, a 341 meeting may be the most significant event in such a case for an individual debtor, particularly in a no-asset case such as this one. See Chapter 7 Trustee's Report of No Distribution, docket entry dated June 7, 2018.4 No-asset cases are usually more streamlined because the liquidation of a debtor's estate produces no assets from which creditors can recover value, or there is such low value recovered that only administrative costs-generally attorneys' and trustees' fees-can be paid. See Report of the Commission on the Bankruptcy Laws of the United States, H.R. Rep. No. 137, pt.1, at 3-4 (July 1973), reprinted in B Collier on Bankruptcy App. Pt. 4(c).

But notwithstanding the straightforward nature of Mr. D'Arata's case, difficulties arose almost immediately. The 341 meeting in this case was first convened on March 28, 2018 (the "First Meeting"), but Mr. Ragues did not appear to represent the Debtor. See UST Statement ¶ 14. Instead, an appearance was made on behalf of the Debtor by an attorney named Kenneth Zweig, Esq. See id. But Mr. Zweig was not hired by Mr. D'Arata. Rather, he came to the First Meeting as so-called "appearance counsel"-meaning that he appeared as counsel on behalf of Mr. Ragues and his firm even though Mr. Zweig was not employed at Mr. Ragues' firm.5 See Tr. of March 28, 2018 Meeting of Creditors at 1, attached as Exhibit A to the Chapter 7 Trustee Statement [ECF No. 26].6 While the Debtor knew that an attorney would represent him at the First Meeting, he did not know that it would be Mr. Zweig. See id. at 3.

During this First Meeting, the Debtor testified that the information in the original *823set of Schedules filed by Mr.

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Cite This Page — Counsel Stack

Bluebook (online)
587 B.R. 819, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-darata-nysb-2018.