In re Mighell

564 B.R. 34, 2017 Bankr. LEXIS 361
CourtUnited States Bankruptcy Court, C.D. California
DecidedFebruary 7, 2017
DocketCase No.: 6:09-14033 MH
StatusPublished
Cited by2 cases

This text of 564 B.R. 34 (In re Mighell) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, C.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Mighell, 564 B.R. 34, 2017 Bankr. LEXIS 361 (Cal. 2017).

Opinion

MEMORANDUM DECISION AND ORDER: (1) HOLDING DANIEL G. BROWN IN CONTEMPT; (2) ESTABLISHING BRIEFING SCHEDULE; AND (3) SETTING HEARING

Mark Houle, United States Bankruptcy Judge

I. PROCEDURAL BACKGROUND

On March 4, 2009, Matthew and Diana Mighell (“Debtors”) filed a Chapter 11 voluntary petition. On September 18, 2009, the case was converted to Chapter 7. On August 26, 2010, Debtors received a standard discharge.

On January 19, 2016, Debtors filed a Motion for Contempt against Daniel Brown (“Brown”). On January 27, 2016, Brown filed his opposition. Debtors filed their reply on March 14, 2016. On April 4, 2016, an order to show cause why Brown [39]*39should not be held in civil contempt was entered by the Court.

On May 20, 2016, Debtors filed a brief in support of their motion. On June 21, 2016, Brown filed his opposition brief. After a continuance on July 20, 2016, Debtors filed them reply brief on August 10, 2016. On September 14, 2016, Brown filed a motion to continue hearings, which was opposed by Debtors on September 21, 2016. On October 4, 2016, an amended order was entered continuing the hearing until December 7,2016.

On November 13, 2016, Brown filed another opposition. On November 17, 2016, Debtors filed another reply. By document filed on November 29, 2016, Brown corrected certain technical flaws in his opposition. On November 30, an order was entered continuing the hearing until December 20. At the hearing on December 20, 2016, the Court took the matter under submission.

II. FACTUAL BACKGROUND

In December 2008, Debtors and Brown began discussions regarding representation of Debtors in a state court proceeding,1 in addition to a bankruptcy proceeding. The representation was discussed over the ensuing weeks, resulting in two agreements: (1) a contingency fee arrangement 2; and (2) a bankruptcy fee arrangement. The former governed representation in the state court proceeding and provided for a forty percent contingency fee. The latter governed representation in the bankruptcy proceeding, and provided for a flat fee of $6,000 for limited scope representation. The contingency fee arrangement was disclosed to the Court.

On September 9, 2010, Brown filed a fee application requesting $25,420 for services provided outside the scope outlined in the bankruptcy retainer. Brown’s application made clear that these fees were accrued while Debtors were in a Chapter 11, prior to the conversion date. On September 15, 2010, Trustee objected on the basis that Brown failed to seek employment authorization from the court and failed to disclose any subsequent fee arrangement. On January 5, 2011, an order was entered denying the fee application.

On March 30, 2010, the underlying state court proceeding resulted in a jury verdict in favor of two of Debtors’ companies in the amount of $1,066,000. Debtors appear to have then fired Brown immediately after the issuance of the state court verdict. The verdict was subsequently overturned on appeal.

On March 21, 2012, Brown filed a complaint against the Debtors in state court for breach of contract, breach of implied covenants, quantum meruit, unfair business practices, and fraud. The complaint requested damages in relation to both representation in the state court proceeding and in the bankruptcy proceeding. The complaint was amended on July 1, 2013, to drop all causes of action except quantum meruit. On October 21, 2013, Debtors filed a cross-complaint against Brown for negligence. On February 2, 2014, Debtors amended their cross-complaint to add causes of action for breach of fiduciary duty and deceit.

[40]*40III. DISCUSSION

Debtors make the following arguments in support of their contention that Brown has violated the discharge injunction: (1) Brown’s filing of the state court complaint violated the discharge injunction because the underlying services were provided pre-petition; (2) to the extent Brown is seeking repayment of fees associated with bankruptcy, those fees can only be paid pursuant to Bankruptcy Court order, but Brown’s application has already been denied by the Court; (3) Brown has engaged in various dishonest billing practices; (4) Brown has harassed debtor-wife’s mother and committed other unprofessional acts; and (5) Brown has violated attorney-client privilege. Only the first argument has merit. It is not clear how (2) through (5) are related to the discharge injunction.

Brown argues in response that all fees arose post-petition and are therefore not subject to the discharge injunction. Brown additionally contends that if the claims were discharged, he did not “willfully” violate the discharge injunction, because he subjectively believed the claims were not discharged at the time he filed the state court complaint.

There are two preliminary matters which allow quick disposition. First, to the extent that Brown is attempting to collect on a disputed claim for fees for bankruptcy services rendered post-petition and pre-conversion, that action is a violation of the discharge injunction. 11 U.S.C. § 348(b) (2010) provides:

(b) Unless the court for cause orders otherwise, in sections 701(a), 727(a)(10), 727(b), 1102(a), 1110(a)(1), 1121(b), 1121(c), 1141(d)(4), 1201(a), 1221, 1228(a), 1301(a), and 1305(a) of this title, “the order for relief under this chapter” in a chapter to which a case has been converted under section 706, 1112, 1208, or 1307 of this title means the conversion of such case to such chapter.

Furthermore, the second page of the discharge issued by this court states: “If this case was begun under a different chapter of the Bankruptcy Code and converted to chapter 7, the. discharge applies to debts owed when the bankruptcy case was converted.” Therefore, while the bankruptcy services provided by Brown were provided post-petition, they were provided pre-con-version, and, therefore, were discharged. Second,' there is extensive discussion and confusion regarding the actual merits and details of any claim Brown does or does not possess.3 In order to determine whether the discharge injunction was violated, this Court need not analyze the merits of Brown’s.claim; it is not this Court’s duty to determine whether Brown has a valid claim, or the form of that claim. As further explained below, the discharge injunction prevents attempts to collect on discharged debt. The state court complaint initiated by Brown represents the action Debtors contend violated the discharge injunction. Therefore, the debt that Brown is attempting to collect on is the debt that is outlined in his state court action. It is not appropriate for this Court or Debtors or any other entity to redefine the claim upon which Brown is attempting to collect. To the extent the debt described by Brown is different from what this Court might have determined should be the claim asserted by Brown, it is the claim asserted in the state court complaint that controls.-

/. Standard for Contempt-Violation of Discharge

11 U.S.C. § 524(a)(2)(2010) states:

[41]*41(a) A discharge in a case under this title—

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Cite This Page — Counsel Stack

Bluebook (online)
564 B.R. 34, 2017 Bankr. LEXIS 361, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-mighell-cacb-2017.