In re: Shaver Lakewoods Development Inc.

Opinion

FILED 1 NOT FOR PUBLICATION NOV 29 2016 2 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL 3 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

4 OF THE NINTH CIRCUIT 5 6 In re: ) BAP No. EC-15-1311-JuKuMa ) 7 SHAVER LAKEWOODS DEVELOPMENT ) Bk. No. 11-62509 INC., ) 8 ) Adv. No. 14-01005 Debtor. ) 9 ______________________________) HENRY DORAME NUNEZ, ) 10 ) Appellant, ) 11 ) v. ) M E M O R A N D U M* 12 ) RANDELL PARKER, Chapter 7 ) 13 Trustee, ) Appellee. ) 14 ______________________________) 15 Argued and Submitted on October 20, 2016 at Sacramento, California 16 Filed - November 29, 2016 17 Appeal from the United States Bankruptcy Court 18 Eastern District of California, Sacramento 19 Honorable Fredrick E. Clement, Bankruptcy Judge, Presiding __________________________________ 20 Appearances: Appellant Henry Nunez argued pro se; Lisa Anne 21 Holder of Klein Denatale Goldner Cooper Rosenlieb & Kimball, LLP argued for appellee Randell 22 Parker, Chapter 7 Trustee __________________________________ 23 24 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1.

-1- 1 Before: JURY, KURTZ, and MARTIN,** Bankruptcy Judges. 2 Appellant Henry Nunez (“Nunez”) appeals from the bankruptcy 3 court’s judgment in favor of the chapter 71 trustee Randell 4 Parker (“Trustee”) determining (1) Nunez’s attorney’s lien, 5 which was purportedly secured by real property, was invalid 6 under Rule 3-300 of the California Rules of Professional 7 Conduct, (2) Nunez does not hold an equitable lien on the real 8 property, and (3) Nunez’s allowable attorney fees and costs are 9 limited to pre-petition services that benefitted the debtor’s 10 bankruptcy estate. 11 For the reasons stated below, we AFFIRM. 12 I. FACTS 13 Shaver Lakewoods Development, Inc. (“Shaver” or “Debtor”) 14 was formed to develop a residential subdivision. Gordon Loo and 15 Angela Rodriguez each held a 50 percent ownership interest. 16 Loo, Angela,2 and Robert Rodriguez, the husband of Angela, 17 served as members of the board of directors. Loo was the 18 president, Angela was involved in the daily operations, and 19 Robert brought extensive experience in development. 20 In early 2000, Shaver purchased land in Shaver Lake, 21 California, which was subdivided into twenty lots, fifteen of 22 ** 23 Hon. Brenda Martin, United States Bankruptcy Judge for the District of Arizona, sitting in designation. 24 1 Unless otherwise indicated, all chapter and section 25 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 26 “Rule” references are to the Federal Bankruptcy Procedure. 2 27 For ease of reference, we identify the members of the Rodriguez family by their first names. No disrespect is 28 intended.

-2- 1 which were fully developed, and five of which remained partially

2 developed (the “Real Property”). Sierra Pines at Shaver Lake

3 Homeowners Association (“Sierra Pines”) was created for

4 marketing, managing, and selling the lots.

5 On June 8, 2009, Sierra Pines and various individual

6 homeowners (the “plaintiffs”) brought a·construction defect

7 lawsuit against Shaver·and Robert for breach of implied

8 warranty, strict liability, and negligence in the Fresno County

9 Superior Court (the “State Court Action”).

10 On October 2, 2009, in satisfaction of preexisting debt,

11 Shaver deeded the Real Property to Angela and Loo (the

12 “Transferred Lots”).3 On August 19, 2010, the plaintiffs in the

13 State Court Action filed an amended complaint which, in relevant

14 part, added Loo and Angela as defendants and added causes of

15 action for actual fraudulent transfer, constructive fraudulent

16 transfer, and constructive trust. On August 27, 2010, the

17 plaintiffs recorded a lis pendens against the Transferred Lots.

18 Nunez Fee Agreement Meetings

19 As a result of the State Court Action, Shaver, Loo, Robert,

20 and Angela retained Nunez, a Fresno based attorney. The parties

21 and Nunez met on two occasions, in June 2010 and January 2011,

22 to discuss their retention of Nunez.

23 24 25 3 The bankruptcy court judge found that on November 7, 2002, 26 Loo loaned Shaver $250,000 and in return received a promissory note and a security agreement, but not a deed of trust. 27 Likewise, the bankruptcy judge found that on October 18, 2005, Angela loaned Shaver $282,000 and in return received a promissory 28 note and a security agreement, but not a deed of trust.

-3- 1 The June 2010 Meeting

2 In June 2010, Loo and Robert, without Angela, met with

3 Nunez (the “June 2010 Meeting”). They discussed the dispute,

4 the possibility of defenses, and the type of fee arrangement.

5 Specifically, the record indicates that Nunez presented Loo and

6 Robert with a standard pre-printed retainer agreement. The

7 agreement had blank spaces that could be completed in a

8 handwritten fashion with information pertinent to identifying

9 and describing the clients, the dispute, estimated fees,

10 retainers, and dates and signatures of the parties. Nunez

11 filled in the first few lines on the blank portions of this

12 agreement, which included: the client names of Loo, Robert, and

13 Angela; the client addresses; a description of the Shaver case

14 name and number; authority for Nunez to act; and an indication

15 that the fees were unknown but a retainer of $2,500.00 was

16 required. The judge later found this meeting did not result in

17 an agreement for payment of fees.4 Nunez agreed to work on the

18 case on an interim basis, solely based on his long-standing

19 professional association with Robert Rodriguez, a former client.

20 The January 2011 Meeting

21 Six months later, on January 14, 2011, Angela, Loo, and

22 Robert met with Nunez (the “January 2011 Meeting”). The record

23 indicates that on that date Nunez on his own behalf and Loo,

24 Robert, and Angela, both individually and on behalf of Shaver,

25 4 26 The trial judge based this finding on (1) Angela was not present, (2) the retainer agreement was not signed, and (3) the 27 parties did not agree on the details of the retention of Nunez, as Nunez repeatedly resisted the demands by Loo and Robert to 28 proceed on a contingency fee basis.

-4- 1 executed a signed retainer agreement. Although the first few 2 lines from the agreement as marked up at the June 2010 Meeting 3 remained, the parities added several additional terms. Most 4 significantly, the new terms included a purported lien in favor 5 of Nunez which was to be secured by the Transferred Lots. The 6 agreement, in relevant part, provided: 7 The parties agree that the fee shall not exceed 1/3 of the value of lots owned by clients and attorney shall 8 have the option to accept 1/3 of value of lots recovered. The lien shall apply to these lots. 9 ... 10 Clients hereby grants [the Nunez Firm] a lien on any/and all claims or causes of action that are the 11 subject of [] representation under this Agreement. The lien will attach to any recovery you may obtain 12 whether by Arbitration award, judgment, settlement, or otherwise and on the real property lots release of lis 13 pendens and recovery of lots for clients. ... 14 The undersigned waive any conflict of interest which 15 may exist as a result of representation of all parties. 16 17 Of the species of fee agreements recognized in California, 18 the trial judge later found that the agreement was a “hybrid,” 19 where there was an hourly component to the agreement that was 20 capped and the clients held an option to provide Nunez with 21 one-third of the value of the lots. Said another way, Nunez was 22 entitled to an hourly fee without regard to whether he was 23 successful in resolving the dispute with Sierra Pines, and the 24 hourly fees and one-third valuation were mere measuring devices 25 for how much Nunez would be paid. 26 On January 20, 2011, and on March 18, 2011, Nunez made two 27 attempts in the Fresno County Superior Court to expunge the lis 28 pendens. Each attempt was unsuccessful.

-5- 1 The Bankruptcy Proceedings 2 On November 17, 2011, Shaver filed a petition under 3 Chapter 7 of the Bankruptcy Code (the “Petition Date”).5 In 4 addition to representing Shaver, Loo, Angela, and Robert in the 5 State Court Action, Nunez represented them in their respective 6 bankruptcy proceedings as well. 7 In Amended Schedule B, Debtor listed a contingent claim for 8 fraudulent transfer of the Transferred Lots valued at 9 $15,000.00. After negotiations by Trustee, on April 26, 2012, 10 the bankruptcy court approved a settlement agreement under 11 Section 9019(a) of the Bankruptcy Code between Trustee, Angela, 12 Loo, and Nunez (the “Compromise Agreement”). The Compromise 13 Agreement provided, in relevant part, that Loo and Angela would 14 reconvey the Transferred Lots to Debtor’s bankruptcy estate and 15 that Nunez could file a proof of claim for the purported lien 16 secured by the Transferred Lots. On April 20, 2012, Nunez filed 17 a proof of claim asserting a secured claim for unpaid fees and 18 costs in the amount of $88,501.81. 19 On October 26, 2012, Trustee negotiated with Sierra Pines 20 to release the lis pendens against the Transferred Lots which 21 Trustee had obtained. On November 26, 2012, the bankruptcy 22 court entered an order authorizing the sale of the Transferred 23 Lots free and clear of the liens of Nunez, Angela, and Loo. 24 Under the terms of the order, the liens were to attach to the 25 proceeds with the same validity, priority, and amount as they 26 5 27 Loo and Robert also filed for bankruptcy. In total, there were five bankruptcy filings by parties related to the State 28 Court Action.

-6- 1 attached to the Transferred Lots. The net proceeds from the 2 sale were $210,540.17. 3 On January 6, 2014, Trustee filed an adversary proceeding 4 seeking declaratory relief from the bankruptcy court that 5 Nunez’s lien was not secured against the Transferred Lots and 6 requesting the court to determine the amount of Nunez’s claim. 7 On February 6, 2014, Nunez filed an answer and counterclaim for 8 quiet title based on his lien, specific performance, and 9 declaratory relief. 10 The bankruptcy court held a three day trial. On August 26, 11 2015, the court issued its oral ruling. After stating detailed 12 findings of fact and conclusions of law, the bankruptcy court 13 concluded that Nunez did not have a secured claim against the 14 Transferred Lots because Nunez did not comply with Rule 3-300 of 15 the California Rules of Professional Conduct (“Rule 3-300”). 16 The court found based on the words of the retainer agreement and 17 the testimony at trial that the fee agreement was a “hybrid” and 18 therefore, under relevant case law, Nunez’s lien was invalid and 19 unsecured. Adopting the Trustee’s methodology, the bankruptcy 20 court then determined that Nunez was allowed an unsecured claim 21 for fees and costs based on his pre-petition representation of 22 the Debtor in the amount of $8,535.38, which was to be paid by 23 the estate. Nunez timely appealed to this court. 24 II. JURISDICTION 25 The bankruptcy court had jurisdiction over this proceeding 26 under 28 U.S.C. §§ 1334 and 157(b)(2). We have jurisdiction 27 under 28 U.S.C. § 158. 28

-7- 1 III. ISSUES 2 A. Whether the bankruptcy court erred by concluding that 3 Nunez did not hold an enforceable lien on the Transferred Lots 4 under Rule 3-300 of the California Rules of Professional 5 Conduct. 6 B. Whether the bankruptcy court erred by concluding that 7 Nunez did not hold any equitable liens on the Transferred Lots. 8 C. Whether the bankruptcy court abused its discretion in 9 calculating Nunez’s allowed attorney’s fees and costs in the 10 amount of $8,535.38. 11 IV. STANDARDS OF REVIEW 12 In reviewing decisions of the bankruptcy court, the Panel 13 reviews legal conclusions de novo, factual findings for clear 14 error, and mixed questions of law and fact de novo. Murray v. 15 Bammer (In re Bammer), 131 F.3d 788 (9th Cir. 1997); 16 In re Jorgensen, 66 B.R. 104, 109 (9th Cir. BAP 1986). A 17 finding of fact is clearly erroneous when, after reviewing the 18 evidence, we are left with the definite and firm conviction that 19 a mistake has been committed. In re Contractors Equip. Supply 20 Co., 861 F.2d 241, 243 (9th Cir. 1988). 21 We review a bankruptcy court’s decision to award attorney’s 22 fees and cost for abuse of discretion. See, e.g. Cal. Emp. Dev. 23 Dep’t v. Taxel (In re Del Mission Ltd.), 98 F.3d 1147 (9th Cir. 24 1996). Under the abuse of discretion standard of review, we 25 first “determine de novo whether the [bankruptcy] court 26 identified the correct legal rule to apply to the relief 27 requested.” United States v. Hinkson, 585 F.3d 1247, 1262 (9th 28 Cir. 2009) (en banc). If the bankruptcy court identified the

-8- 1 correct legal rule, we then determine under the clearly 2 erroneous standard whether its factual findings and its 3 application of the facts to the relevant law were: 4 “(1) illogical, (2) implausible, or (3) without support in 5 inferences that may be drawn from the facts in the record.” Id. 6 (internal quotation marks omitted). 7 V. DISCUSSION 8 A. Motion to Strike 9 During the pendency of this appeal, Trustee filed a motion 10 to strike portions of Nunez’s opening brief and excerpts of 11 record. Nunez included in the excerpts declarations from 12 summary judgment motions, judicially noticed documents, and 13 findings of facts and conclusions of law, all that relate to 14 prior filings with the bankruptcy court, which were not 15 presented at trial or admitted in the trial record. Nunez 16 argues that the evidence only needed to be presented at some 17 point to the trial court to be considered part of the excerpts 18 of record. Thus, because they were on the court’s docket, they 19 were presented to the trial court. 20 In making this argument, Nunez essentially seeks to 21 introduce new evidence on appeal. The summary judgment motion 22 and other documents were not introduced into the evidentiary 23 record at trial. Accordingly, because the material Nunez 24 included in the excepts was not admitted into the trial record, 25 it would be improper for this Panel to consider the material 26 outside the record. See Heath v. Helmick, 173 F.2d 156 (9th 27 Cir. 1949). Therefore, the challenged exhibits are stricken. 28 We likewise accept Trustee’s redacted brief, which eliminated

-9- 1 any reference to the material not in the trial record in Nunez’s 2 opening brief filed with the Panel. 3 B. Secured claims against the estate 4 Nunez argues that his retainer agreement created a secured 5 claim against the Shaver bankruptcy estate. The bankruptcy 6 court denied that security for reasons stated above. We address 7 those reasons in turn. 8 1. Attorney’s Lien 9 Nunez argues that he has a secured attorney’s charging lien 10 based on the January 2011 retainer agreement which need not 11 comply with the ethical obligations in Rule 3-300. The record 12 indicates that in making its determination, the bankruptcy court 13 found that there are four species of retainer agreements: 14 hourly, fixed, contingent, and true retainer. After eliminating 15 each type of agreement, the court characterized the January 2011 16 retainer agreement as a “hybrid.”6 On appeal, Nunez does not 17 dispute this characterization, leaving only the issue of whether 18 Nunez’s fee agreement required compliance with Rule 3-300 before 19 the Panel. 20 State law governs the nature, extent, and validity of a 21 lien in a bankruptcy proceeding. Diamant v. Kasparian (In re S. 22 Cal. Plastics, Inc.), 165 F.3d 1243, 1248 (9th Cir. 1999). The 23 parties do not dispute that California law governs the retainer 24 agreement because undisputably it was entered into in 25 California. 26 6 27 The bankruptcy court based its determination on there being an hourly component with an option to pay Nunez one-third 28 of the value of the Transferred Lots.

-10- 1 Under California law, there are two types of attorneys’ 2 liens: specific charging liens and general possessory liens. 3 Evans v. Stockton & Hing (In re Sw. Restaurant Sys., Inc.), 4 607 F.2d 1243, 1246 (9th Cir. 1979). “A charging lien attaches 5 to the particular fund or other property created or secured 6 through the attorney's efforts,” whereas, a possessory lien 7 “enables the attorney to retain a client’s records or other 8 property until the client pays for all of the legal fees owing 9 to the attorney.”7 Id. A charging lien may be used to secure 10 either hourly fee or a contingency fee. Cetenko v. United Cal. 11 Bank, 30 Cal.3d 528 (1982). 12 In most jurisdictions, a charging lien may be created 13 either by contract or by operation of law. Fletcher v. Davis, 14 33 Cal.4th 61, 62 (2010). Unlike most other jurisdictions, 15 under California law an attorney’s charging lien to secure 16 payment for legal services can only be created by contract of 17 the parties. Carroll v. Interstate Brands Corp., 99 Cal. App. 18 4th 1168, 1172 (2002). 19 For most charging liens, California attorneys must satisfy 20 the ethical obligations found in Rule 3-300 or the lien will be 21 invalid. See Fletcher, 33 Cal.4th 61. Rule 3-300, an ethics 22 rule entitled “Avoiding Interests Adverse to a Client,” 23 provides: 24 A member shall not enter into a business transaction with a client; or knowingly acquire an ownership, possessory, 25 security, or other pecuniary interest adverse to a client, unless each of the following requirements has been 26 27 7 Nunez does not argue and the facts do not suggest that the 28 lien he had was a possessory lien.

-11- 1 satisfied: 2 (A) The transaction or acquisition and its terms are fair and reasonable to the client and are fully disclosed and 3 transmitted in writing to the client in a manner which should reasonably have been understood by the client; and 4 (B) The client is advised in writing that the client may 5 seek the advice of an independent lawyer of the client's choice and is given a reasonable opportunity to seek that 6 advice; and 7 (C) The client thereafter consents in writing to the terms of the transaction or the terms of the acquisition. 8 9 Cal. R. Prof. Conduct 3-300. 10 It is well-established that an attorney who secures payment 11 of fees by taking a lien on the property of a client creates an 12 “adverse interest” and must comply with the ethical obligations 13 in Rule 3-300. See Hawk v. State Bar, 45 Cal.3d 589 (1988) 14 (holding that an attorney who had secured payment of fees with a 15 note secured by a deed of trust on a client’s property had to 16 comply with then-current Rule 5-101 (now Rule 3-300); see also 17 Brokway v. State Bar, 53 Cal.3d 51 (1991); Fletcher, 33 Cal.4th 18 at 64; Comments to Rule 3-300. In this case, Nunez billed at an 19 hourly rate and took a security interest in the Transferred 20 Lots, which prior to the filing of bankruptcy, belonged to one 21 of his clients, either Shaver or Loo and Angela. Nunez’s 22 attorney’s fees were therefore to be secured by property of his 23 clients, an acquisition that creates an adverse interest under 24 California law. Id. 25 Nunez argues that Plummer v. Day/Eisenberg, 184 Cal.App. 26 4th 38, 41 (2010) applies to his hybrid fee agreement and 27 therefore he need not comply with Rule 3-300. We disagree. In 28 Plummer, the retainer agreement was a pure contingency fee

-12- 1 agreement, which provided the attorney with a lien on the 2 client’s prospective recovery in the same proceeding. Id. at 3 38. The court, adopting the reasoning of the California State 4 Bar, concluded that a pure contingency fee agreement does not 5 create an adverse interest to the client within the meaning of 6 Rule 3–300. Id.; Cal. Eth. Op. 2006–170 at *6. Plummer is 7 easily distinguishable because Nunez’s fee agreement was not 8 contingent upon the outcome of resolving the State Court Action, 9 which he plainly concedes.8 Moreover, his fees were not 10 contingent at all, instead billed at an hourly rate whether or 11 not he won for his clients. Therefore, Plummer cannot apply on 12 these facts to exempt Nunez’s compliance with the ethical 13 obligations in Rule 3-300. 14 Although we need not make such determination to reach a 15 decision in this case, we doubt that Nunez held a “charging 16 lien” at all. A charging lien attaches to a particular 17 “recovery” or “fund.” Fletcher, 33 Cal.4th at 61; In re Sw. 18 Restaurant Sys., Inc., 607 F.2d at 1246; Cetenko v. United Cal. 19 Bank, 30 Cal.3d at 528. Nunez’s lien secured hourly fees but 20 the fees were not contingent on obtaining a judgment. 21 Therefore, his lien could not attach to any conceivable 22 “recovery” or “fund” and was unperfected, as it was never 23 recorded. In any case, because the lien was not a pure 24 continency charging lien, compliance with Rule 3-300 was 25 8 26 Even if Plummer applied to this retainer agreement, Nunez still did not “recover” the Transferred Lots. Nunez was 27 unsuccessful in his attempts to expunge the lis pendens. It was Trustee who avoided the lis pendens and recovered the Transferred 28 Lots in the Compromise Agreement.

-13- 1 required. See Plummer, 184 Cal.App. 4th at 38. The bankruptcy 2 court did not err in determining that Rule 3-300 compliance was 3 mandatory. 4 2. Compliance with Rule 3-300 5 After three days of trial, the bankruptcy court made 6 factual findings that Nunez did not comply with Rule 3-300. We 7 can only disturb these findings if they were clearly erroneous. 8 See Joseph F. Sanson Inv. Co. V. 268 Limited (In re 268 9 Limited), 789 F.2d 674 (9th Cir. 1986). 10 Under the first requirement of Rule 3-300, in which the 11 terms must be “fair and “reasonable” and “fully disclosed” to 12 the client, the bankruptcy court found that the terms were not 13 fair or reasonable. The court noted three problems. First, the 14 costs of litigation and sale of the recovered lots are not 15 described in the fee agreement. Second, Nunez did not discuss 16 how his lien might impact settlement discussions if a 17 disagreement resulted between Nunez on the one hand and Loo, 18 Robert, Angela, or Shaver on the other. Last, and most 19 significant, was the actual conflict of interest in representing 20 both the transferor and transferee in the defense of a 21 fraudulent transfer action. Clients Loo and Angela agreed to 22 place liens on the Transferred Lots that were titled in their 23 names in exchange for Nunez’s representation of themselves and 24 Shaver, the entity which made the transfer. Shaver did not have 25 the same interest in the State Court Action as Loo and Angela. 26 Under the second requirement, which requires there must be 27 both a written notification of the right to seek advice by 28 outside counsel and a reasonable opportunity to obtain such

-14- 1 advice, the bankruptcy court found that neither was present. 2 The court first found that the agreement was not reviewed by an 3 independent lawyer who was not affiliated with Nunez. The court 4 commented that the rule makes no exception for sophisticated 5 clients, as Nunez argued. The bankruptcy court then found that 6 because the agreement that was ultimately signed in January 2011 7 was materially different than the June 2010 agreement, a·new 8 period of review was required, which was not given. Because the 9 clients signed the agreement on that very day, there was no 10 reasonable opportunity for independent review. 11 Under the last requirement, which requires consent by the 12 client, the bankruptcy court found that although consent was 13 given for the January 2011 Agreement, because a reasonable 14 opportunity for advice must precede consent, which was not 15 present, Nunez did not comply with the ethical rule. 16 We have reviewed the retainer agreement and the bankruptcy 17 court’s findings. The bankruptcy court did not commit clear 18 error in making the determination that the Rule 3-300 warnings 19 were not provided by Nunez to all the signers of the January 20 2011 retainer agreement. Among other things, the actual 21 conflict of interest in representing both the transferor and the 22 transferee is blatant. The terms could have never been fair and 23 reasonable to all of Nunez’s clients and on this basis alone 24 Nunez did not comply with the Rule 3-300 warnings. Therefore, 25 the bankruptcy court properly determined that Nunez’s lien was 26 27 28

-15- 1 invalid under Rule 3-300.9 Fletcher, 33 Cal.4th at 66. 2 3. Equitable Lien 3 Nunez also argues that the bankruptcy court erred in not 4 imposing an equitable lien on the Transferred Lots to protect 5 his claim for attorney’s fees. 6 We disagree. This equitable remedy must be considered 7 under California law. See Wilkins v. Oken, 321 P.2d 876, 879 8 (Cal. Ct. App. 1958). The imposition of an equitable lien is an 9 extraordinary remedy to establish justice in a given situation. 10 See Farmers Ins. Exchange v. Smith, 71 Cal. App. 4th App. 660, 11 667 (1999); see also City. of Los Angeles v. Constr. Laborers 12 Trust Funds for S. Cal., 137 Cal. App. 410, 415 (2006); 13 53 C.J.S. Liens, § 5, pp. 462–463, fns. omitted. An equitable 14 lien is topically based on the doctrines of estoppel, unjust 15 enrichment, or the equitable maxim that equity will deem as done 16 that which ought to be done. See Farmers Ins. Exchange v. 17 Zerin, 53 Cal. App. 4th 445, 453 (1997); Constr. Laborers Trust 18 Funds For S. Cal., 137 Cal. App. at 416. 19 Although we question whether an equitable lien is available 20 as a remedy to an attorney whose retainer agreement did not 21 create a valid charging lien, see Wilkins v. Oken, 157 Cal. App. 22 2d, 603 (1958), we acknowledge that there is no California case 23 that establishes such a bright line rule. However, we need not 24 establish such a rule in this case. Consistent with the policy 25 9 26 Although the lien is invalid for non-compliance with Rule 3-300, it does not follow that the underlying contractual 27 provisions of the retainer agreement are also invalid. See Shopoff & Cavallo v. Lyon LLP, 167 Cal. App. 4th 1489, 1523 28 (2000).

-16- 1 of Rule 3-300, we find that under these facts Nunez is not 2 entitled to an equitable lien. The basis of Nunez’s 3 representation and its adverse impact on his clients required 4 him to comply with the ethical provisions of Rule 3-300, which 5 he did not do. Nunez’s non-compliance with Rule 3-300 rendered 6 him unsecured. Nunez cannot now argue under an equitable theory 7 that he is entitled to different treatment. Because the 8 imposition of an equitable lien is based upon providing justice 9 in a given situation, imposing an equitable lien in favor of an 10 attorney who has failed to comply with the Code of Professional 11 Conduct would be improper. See Farmers Ins. Exchange v. Smith, 12 71 Cal. App. 4th App. at 667. 13 We affirm the bankruptcy court’s decision that Nunez has no 14 right to an equitable lien. 15 4. Attorney’s Fee Award 16 After properly determining that Nunez’s claim was 17 unsecured, the bankruptcy court adjudicated the amount of 18 Nunez’s unsecured claim for attorney’s fees. In doing so, the 19 record indicates that the court adopted the Trustee’s 20 methodology in calculating the fees. The bankruptcy court did 21 not abuse its discretion in determining the reasonableness of 22 Nunez’s fees. 23 Section 502(b)(4) provides that a prepetition claim for 24 services performed by an attorney or insider of the debtor shall 25 be disallowed to the extent the claim exceeds the reasonable 26 value of the services provided. Thus, “the excess amount of the 27 claim beyond such reasonable value fixed by the court is simply 28 disallowed and may not, therefore, share in the distribution of

-17- 1 the debtor's assets.” 4 Collier on Bankruptcy ¶ 502.03[5][c] 2 (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2009). The 3 reasonableness of attorney's fees under section 502(b)(4) is a 4 question of federal law. Schoenmann v. Bach Constr., Inc. 5 (In re Segovia), 387 B.R. 773, 779 (Bankr. N.D. Cal. 2008), 6 aff'd, 2008 WL 8462967, at *6 (9th Cir. BAP Oct.22, 2008); 7 In re W. Real Estate Fund, 922 F.2d at 597. As such, Nunez’s 8 claim for attorney's fees and costs may be allowed only to the 9 extent it is reasonable as determined under federal law. 10 Landsing Diversified Props.-II v. First Nat’l Bank & Trust Co. 11 of Tulsa (In re W. Real Estate Fund, Inc.), 922 F.2d 592, 597 12 (10th Cir. 1991). The bankruptcy court correctly applied this 13 law. 14 Nunez’s total claim for attorney fees and costs was in the 15 amount of $88,501.81. The bankruptcy court first properly 16 disallowed all fees after the Petition Date in the amount of 17 $30,824.27. The record indicates that Nunez was not employed by 18 the estate. Because an attorney can only be paid by the estate 19 for post-petition services if employed by the trustee with court 20 approval, §§ 327-330; Lamie v. United States Tr., 540 U.S. 526 21 (2004), the bankruptcy court properly determined that Nunez was 22 not entitled to post-petition fees. 23 The bankruptcy court then deducted $15,000 for the work 24 previously done for Robert because there was no benefit to the 25 Debtor. It was not clear error for the bankruptcy court to 26 deduct fees that were unrelated to the representation of the 27 debtor. Finally, since Debtor was one of five represented 28 clients, with all of the clients’ fees and expenses included in

-18- 1 the claim, the court assigned 20 percent (1/5) of the remaining 2 balance of the claim to the Debtor, leaving $8,535.38 as a 3 general unsecured claim. We conclude this factual finding was 4 not clearly erroneous. 5 VI. CONCLUSION 6 For the reasons stated above, we AFFIRM. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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