MEMORANDUM OPINION
MARTIN V.B. BOSTETTER, Jr., Chief Judge.
We decide the above-captioned cases together, all of which include strikingly similar factual situations. Each case involves the operations of the Debt Clinic, Inc., as well as Alan Dubow and Margo Bly Owen, Esq.
These proceedings were initiated on the United States trustee’s motions to examine debtors’ transactions with their attorney in four separate bankruptcy filings. The trustee asks this Court to require debtors’ attorney, debtors’ financial counselor and the Debt Clinic, Inc. to disgorge monies received for services rendered in each of these cases. After hearing arguments of counsel, the Court took these matters under advisement. For the following reasons, we conclude debtors’ attorney and debtors’ financial counselor have violated certain professional and ethical mandates. Accordingly, we order the disgorgement of all fees received in each case.
The Court possesses jurisdiction over the parties and subject matter of this core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (b)(2)(0) and 1334(b). Venue is proper pursuant to 28 U.S.C. § 1409(a).
The Debt Relief Centers, Inc. along with the Debt Relief Law Firm, P.C. provided financial counseling and legal representation to debtors in Maryland and the District of Columbia. Alan Dubow (“Dubow”) served as president of the Debt Relief Centers, Inc. and secretary of the Debt Relief Law Firm, P.C. Margo Bly Owen, Esq. (“Owen”), debtors’ counsel in each of the four cases at bar, joined Dubow on the board of directors of the Debt Relief Centers, Inc. and was a shareholder of the Debt Relief Law Firm, P.C.
On February 5, 1998, Dubow entered into a consent agreement in the District of Columbia Bankruptcy Court, which required the disgorgement of fees received in six bankruptcy cases. The Court also enjoined the Debt Relief Centers, Inc. and the Debt Relief Law Firm, P.C. from practicing law before it. As a result of the District of Columbia proceedings, the court suspended Dubow’s license to practice law in the District.
During the District of Columbia proceedings in December of 1997, Dubow established the Debt Relief Centers, Inc. of Virginia, now called the Debt Clinic, Inc. (“Clinic”).
Du-bow acted as president and as a director of the Clinic, and Owen served as vice president. Like its predecessors, the Clinic offered financial counseling and legal representation for a standard fee. As an unlicensed attorney, Dubow contracted with Owen to perform legal services on behalf of the Clinic’s clients.
Dubow and Owen followed the same procedure in handling Soulisak’s, Finegold’s, Bennett’s and Smith’s (collectively “debtors”) bankruptcy petitions. Each debtor first met with Dubow, who reviewed debtors’ financial information and provided forms for debtors to complete. After this initial consultation, debtors met again with Dubow, who then presented them with their bankruptcy petition to sign. Debtors did not meet with
Owen, their attorney, until their respective section 341 creditors’ meeting. The United States trustee filed motions to examine debtors’ transactions with debtors’ attorney on the grounds that this procedure constituted the unauthorized practice of law.
Attorneys who practice before a bankruptcy court must not only concern themselves with the obligations set forth in the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, but also with the application of state ethical rules.
1 Collier on Bankruptcy ¶ 8.02[4], p. 8-9 (Lawrence P. King et al. eds., 15th ed. rev.1997). Dubow, Owen and the Clime’s operations have run afoul of all three.
The Virginia Code of Professional Responsibility outlines the mandatory minimum level of acceptable conduct for attorneys. 1 Collier on Bankruptcy ¶ 8.02[2], p. 8-12 (Lawrence P. King et al. eds., 15th ed. rev. 1997). Disciplinary Rules 3-101 and 3-104 of the Virginia Code prohibit the unauthorized practice of law and an attorney’s assistance in another’s unauthorized practice of law.
Va. Sup.Ct. R. pt. 6 § 1 (1997); Virginia Code of Professional Responsibility DR 3-101 & DR 3-104 (1997). A nonlawyer giving assistance to the general public in the completion of forms, such as wills, leases, powér-of-attorney, bills of sales, or rendering legal advice concerning the completion of these forms constitutes the unauthorized practice of law. Virginia Comm, on Legal Ethics and the Unauthorized Practice of Law, Comm. Op. 73 (1996); Virginia Comm, on Legal Ethics and the Unauthorized Practice of Law, Comm. Op. 1600 (1996). We see no reason not to apply this same rule to the preparation of debtors’ bankruptcy petitions.
The unauthorized practice of law stems from the direct and personal relationship between attorney and client. It has been defined as the furnishing of advice under circumstances, which imply the use of legal skill and knowledge. Va. Sup.Ct. R. pt. 6 § 1 (1997). The gravity of the consequences resulting from abuses of this relationship requires this Court to scrutinize the procedures such as those employed by Dubow, Owen and the Clinic.
Dubow discussed the differences between bankruptcy chapters with debtors,
went over the procedure for filing bankruptcy, reviewed debtors’ applications,
helped in the valuation of items for debtors’ schedules,
counseled on exemptions,
advised debtors on the treatment of student loans,
and discussed the effect of reaffirmation of debts.
At every critical juncture in these bankruptcy cases, Dubow was the only person advising debtors.
Dubow testified that the Clinic used a computer program to generate debtors’ petitions based on information provided by debtors and Owen. He also claimed to have served only as a liaison between debtors and Owen when relaying answers to substantive legal questions.
These actions within themselves fall within the purview of acceptable nonlawyer behavior.
See, e.g.,
Virginia Comm, on Legal Ethics and the Unauthorized Practice of Law, Comm. Op. 73 (1996).
However, the role Dubow played in counseling debtors, regardless of where he received his information, crosses the line drawn by the rule of law.
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MEMORANDUM OPINION
MARTIN V.B. BOSTETTER, Jr., Chief Judge.
We decide the above-captioned cases together, all of which include strikingly similar factual situations. Each case involves the operations of the Debt Clinic, Inc., as well as Alan Dubow and Margo Bly Owen, Esq.
These proceedings were initiated on the United States trustee’s motions to examine debtors’ transactions with their attorney in four separate bankruptcy filings. The trustee asks this Court to require debtors’ attorney, debtors’ financial counselor and the Debt Clinic, Inc. to disgorge monies received for services rendered in each of these cases. After hearing arguments of counsel, the Court took these matters under advisement. For the following reasons, we conclude debtors’ attorney and debtors’ financial counselor have violated certain professional and ethical mandates. Accordingly, we order the disgorgement of all fees received in each case.
The Court possesses jurisdiction over the parties and subject matter of this core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (b)(2)(0) and 1334(b). Venue is proper pursuant to 28 U.S.C. § 1409(a).
The Debt Relief Centers, Inc. along with the Debt Relief Law Firm, P.C. provided financial counseling and legal representation to debtors in Maryland and the District of Columbia. Alan Dubow (“Dubow”) served as president of the Debt Relief Centers, Inc. and secretary of the Debt Relief Law Firm, P.C. Margo Bly Owen, Esq. (“Owen”), debtors’ counsel in each of the four cases at bar, joined Dubow on the board of directors of the Debt Relief Centers, Inc. and was a shareholder of the Debt Relief Law Firm, P.C.
On February 5, 1998, Dubow entered into a consent agreement in the District of Columbia Bankruptcy Court, which required the disgorgement of fees received in six bankruptcy cases. The Court also enjoined the Debt Relief Centers, Inc. and the Debt Relief Law Firm, P.C. from practicing law before it. As a result of the District of Columbia proceedings, the court suspended Dubow’s license to practice law in the District.
During the District of Columbia proceedings in December of 1997, Dubow established the Debt Relief Centers, Inc. of Virginia, now called the Debt Clinic, Inc. (“Clinic”).
Du-bow acted as president and as a director of the Clinic, and Owen served as vice president. Like its predecessors, the Clinic offered financial counseling and legal representation for a standard fee. As an unlicensed attorney, Dubow contracted with Owen to perform legal services on behalf of the Clinic’s clients.
Dubow and Owen followed the same procedure in handling Soulisak’s, Finegold’s, Bennett’s and Smith’s (collectively “debtors”) bankruptcy petitions. Each debtor first met with Dubow, who reviewed debtors’ financial information and provided forms for debtors to complete. After this initial consultation, debtors met again with Dubow, who then presented them with their bankruptcy petition to sign. Debtors did not meet with
Owen, their attorney, until their respective section 341 creditors’ meeting. The United States trustee filed motions to examine debtors’ transactions with debtors’ attorney on the grounds that this procedure constituted the unauthorized practice of law.
Attorneys who practice before a bankruptcy court must not only concern themselves with the obligations set forth in the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, but also with the application of state ethical rules.
1 Collier on Bankruptcy ¶ 8.02[4], p. 8-9 (Lawrence P. King et al. eds., 15th ed. rev.1997). Dubow, Owen and the Clime’s operations have run afoul of all three.
The Virginia Code of Professional Responsibility outlines the mandatory minimum level of acceptable conduct for attorneys. 1 Collier on Bankruptcy ¶ 8.02[2], p. 8-12 (Lawrence P. King et al. eds., 15th ed. rev. 1997). Disciplinary Rules 3-101 and 3-104 of the Virginia Code prohibit the unauthorized practice of law and an attorney’s assistance in another’s unauthorized practice of law.
Va. Sup.Ct. R. pt. 6 § 1 (1997); Virginia Code of Professional Responsibility DR 3-101 & DR 3-104 (1997). A nonlawyer giving assistance to the general public in the completion of forms, such as wills, leases, powér-of-attorney, bills of sales, or rendering legal advice concerning the completion of these forms constitutes the unauthorized practice of law. Virginia Comm, on Legal Ethics and the Unauthorized Practice of Law, Comm. Op. 73 (1996); Virginia Comm, on Legal Ethics and the Unauthorized Practice of Law, Comm. Op. 1600 (1996). We see no reason not to apply this same rule to the preparation of debtors’ bankruptcy petitions.
The unauthorized practice of law stems from the direct and personal relationship between attorney and client. It has been defined as the furnishing of advice under circumstances, which imply the use of legal skill and knowledge. Va. Sup.Ct. R. pt. 6 § 1 (1997). The gravity of the consequences resulting from abuses of this relationship requires this Court to scrutinize the procedures such as those employed by Dubow, Owen and the Clinic.
Dubow discussed the differences between bankruptcy chapters with debtors,
went over the procedure for filing bankruptcy, reviewed debtors’ applications,
helped in the valuation of items for debtors’ schedules,
counseled on exemptions,
advised debtors on the treatment of student loans,
and discussed the effect of reaffirmation of debts.
At every critical juncture in these bankruptcy cases, Dubow was the only person advising debtors.
Dubow testified that the Clinic used a computer program to generate debtors’ petitions based on information provided by debtors and Owen. He also claimed to have served only as a liaison between debtors and Owen when relaying answers to substantive legal questions.
These actions within themselves fall within the purview of acceptable nonlawyer behavior.
See, e.g.,
Virginia Comm, on Legal Ethics and the Unauthorized Practice of Law, Comm. Op. 73 (1996).
However, the role Dubow played in counseling debtors, regardless of where he received his information, crosses the line drawn by the rule of law. Dubow placed himself in the improper position of having to determine what constituted legal and administrative information when meeting with prospective clients.
See, e.g., State Unauthorized Practice of Law Committee v. Paul Mason & Assoc., Inc.,
46 F.3d 469, 471 (5th Cir.1995). A court should not permit such acts, nor should it encourage the appearance of such impropriety. Dubow, a formerly licensed attorney, and Owen as an attorney, are charged with this knowledge.
Additionally, an attorney shall not practice law in association with a nonlawyer or otherwise share legal fees. Virginia Code of Professional Responsibility DR 3-102 (1997); Ethical Consideration 3-8, VA Sup. Ct. R. pt. 6 § 2 (1997);
see also
11 U.S.C. § 504. In light of Dubow’s track record, Owen should have taken steps to ensure that he was not meeting alone with debtors and not advising them on legal issues.
As a Virginia licensed attorney, Owen bore the
burden of protecting the integrity of the judicial system.
Dubow and Owen’s “professional agreement” on the division of fees constitutes improper fee sharing prohibited by the Virginia and Bankruptcy Codes.
See
11 U.S.C. § 504; Virginia Code of Professional Responsibility DR 3-102 (1997). Their practice of not strictly monitoring the payment of fees and periodically “settling up” further blurs the lines between attorney and financial counselor.
Absent compliance with the law, no professional has an absolute right to their fees.
Anderson v. Anderson (In re Anderson),
936 F.2d 199, 204 (5th Cir.1991). A bankruptcy court is given wide latitude in fashioning an appropriate sanction for unethical behavior, including the disgorgement of fees.
Arens v. Boughton (In re Prudhomme),
43 F.3d 1000, 1004 (5th Cir.1995);
In re Chapel Gate Apartments, Ltd.,
64 B.R. 569, 574 (Bankr.N.D.Tex.1986). Courts have ordered the disgorgement of fees to deny the one engaged in unethical behavior the fruits of illegal and improper actions.
In re Kaitangian,
218 B.R. 102, 115 (Bankr.S.D.Cal.1998);
In re Gavin,
181 B.R. 814, 821 (Bankr.E.D.Pa.1995). Specifically, ’ courts have ordered disgorgement in conjunction with the unauthorized practice of law.
In re Bright,
171 B.R. 799, 806 (Bankr.E.D.Mich.1994);
United States Trustee v. Kasuba (In re Harris),
152 B.R. 440, 447 (Bankr.W.D.Pa.1993);
In re Martin,
40 B.R. 695, 700 (Bankr.N.D.Ga.1984);
In re Anderson,
79 B.R. 482, 486 (Bankr.S.D.Cal.1987).
In addition to state law sanctions, Bankruptcy Code § 329 permits unethical conduct to serve as a factor considered in analyzing the reasonableness of legal fees paid by a debtor.
In re Devers,
12 B.R. 140 (D.D.C.1981); 3 Collier on Bankruptcy § 329.04[l][b], p. 329-17;
In re McNar,
116 B.R. 746 (Bankr.S.D.Cal.1990),
aff'd in part,
133 B.R. 561 (9th Cir. BAP 1991). This
section applies to all legal services to a debtor in a bankruptcy case or in connection with such a case.
In re Evans,
No. 93-10237-AT, 1995 WL 506839, *2 (Bankr.E.D.Va.) (Tice, J.). In the cases at bar, we find the unethical conduct of Dubow and Owen to be so egregious as to make any collection of fees unreasonable. persons who render
For the foregoing reasons, we order Alan Dubow, Margo Bly Owen, Esq. and the Debt Clinic, Inc. to disgorge all fees received in connection with the above four cases pursuant to § 329.