Quiat v. Berger (In Re Vann)

136 B.R. 863, 1992 U.S. Dist. LEXIS 1276, 1992 WL 20775
CourtDistrict Court, D. Colorado
DecidedFebruary 5, 1992
DocketCiv. A. No. 91-K-1060, Bankruptcy No. 88 B 11859 J
StatusPublished
Cited by19 cases

This text of 136 B.R. 863 (Quiat v. Berger (In Re Vann)) is published on Counsel Stack Legal Research, covering District Court, D. Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Quiat v. Berger (In Re Vann), 136 B.R. 863, 1992 U.S. Dist. LEXIS 1276, 1992 WL 20775 (D. Colo. 1992).

Opinion

MEMORANDUM OPINION AND ORDER

KANE, Senior District Judge.

In this bankruptcy appeal, Andrew L. Quiat and the Law Offices of Andrew L. Quiat (collectively, Quiat) contest the bankruptcy court’s June 4, 1991 order requiring Quiat to disgorge approximately $125,000 of attorney fees paid by the debtor, John Allen Vann. Quiat argues that the bankruptcy court erred in ruling: (1) under § 329 of the Bankruptcy Code Quiat must forfeit all compensation because of potential and actual conflicts of interest, (2) the debtor and the debtor’s wife’s purported waivers of conflicts of interest were not effective, (3) Quiat’s compensation exceeded the reasonable value of his services, (4) Quiat’s disclosure statement as to compensation was inadequate under Bankr.R. 2016(b), (5) the inadequacy of the disclosure statement made determination of the reasonableness of Quiat’s fees impossible, and (6) Quiat was required to make reimbursement of the fees to the bankruptcy trustee, and not the debtor.

In addition, Quiat has also filed a combined motion to withdraw the reference and motion for new trial. He argues that withdrawal of the reference is appropriate because the bankruptcy court indicated its lack of impartiality when recusing from ruling on Quiat’s motion for stay pending appeal. He contends that a new trial is warranted because of newly available evidence, due to the debtor’s waiver of the attorney-client privilege by filing a malpractice action against Quiat.

I. Facts.

On September 2, 1988, debtor John Allen Vann filed for Chapter 7 bankruptcy protection. Vann was first represented by attorney Nancy Miller, who assisted him in filing his initial schedules of assets. Vann did not disclose to Miller his interests in the Mid Continent Management Group, the Sta-po Company and a limited partnership known as Executive Hangars l. 1 This led the trustee, Andrea S. Berger (Trustee), and several creditors to initiate adversary litigation against Vann in early 1989 objecting to his discharge. On March 10, 1989, when Vann finally disclosed these assets to Ms. Miller, she amended his schedules to reflect them.

Although Quiat did not formally enter his appearance on behalf of Vann until 1989, his relationship with Mr. and Mrs. Vann was longstanding. Vann, Quiat, and a third party were general partners in the Stapo Company, which in turn was the general partner of the Mid Continent Management Group. Quiat was also a limited partner in Mid Continent. In 1987, Quiat had assisted Vann in his attempt to transfer Vann’s interest in Mid Continent to his children. Quiat also represented Mrs. Vann in the Vann’s dissolution action, filed one day before Vann’s petition in bankruptcy. (The Vann’s later reconciled in October, 1988.)

Quiat’s first appearance came on June 5, 1989, when he filed a motion to dismiss an adversary proceeding brought by the Trustee on behalf of Vann. On June 14, 1989, he appeared as counsel of record for Mr. and Mrs. Vann at a hearing on the Trustee and creditors’ objections to certain exemptions claimed by Vann. On June 16, 1989, Quiat filed an “Application for Employment of Counsel and Disclosure of Compensation.” On July 26, 1989, after the Trustee objected to Quiat’s application, Quiat filed a second “Disclosure of Corn- *867 pensation.” Quiat withdrew his application for appointment as Vann’s attorney on July 25,1989 on the grounds that court approval of his employment was unnecessary under § 329. Quiat’s June 16 and subsequent July 26 disclosures revealed Quiat’s relationship to Vann through Mid Continent, his representation of Mrs. Vann, and his agreement with Vann to be paid from Vann’s deferred compensation funds and from the proceeds from the sale of Vann’s interest in Executive Hangars 1.

On June 24, 1989, after several months of negotiations between Vann, the Trustee and creditors, Vann proposed a detailed agreement in settlement of the adversary litigation. The agreement provided, among other things, that Vann would pay five percent of the estate’s administrative expenses, all of the Trustee’s adversary litigation would be dismissed without compensation to the Trustee, and Vann’s debts would be held nondischargeable, but without monetary judgment against him. According to the testimony of Ms. Miller, the Trustee and the creditors were willing to accept the settlement “except for some concerns of the Trustee about [its] tax consequences.” The proposed agreement fell through, however, when Vann withdrew settlement authority from Ms. Miller in August 1989. Miller eventually withdrew from representing Vann.

The adversary litigation against Vann continued through the fall of 1989. During that time, Quiat represented Vann in the bankruptcy court and also assisted Vann in selling his limited partnership interest in Executive Hangars No. 1. Quiat retained a majority of the sales proceeds in partial payment of his fees. In March 1990, Quiat was listed as a substantive witness in an adversary proceeding involving Mid Continent. As a result, on April 20, 1990, Quiat moved for leave to withdraw. The bankruptcy court granted the motion on April 23, 1990 and further ordered Quiat to file a statement of compensation in accordance with § 329.

On April 27, 1990, Vann, his creditors and the Trustee entered into a global settlement agreement approved by the bankruptcy court. The terms of this agreement were different than those proposed in the settlement contemplated in June 1989. Vann was required to pay all of the Trustee’s administrative expenses, he was assessed $250,000 to be paid into a settlement fund in consideration of the dismissal of the adversary proceedings, all of his debts were held nondischargeable and a one million dollar judgment was entered against him. Further, Vann was required to maintain a life insurance policy designating the Trustee as beneficiary for one million dollars. There was also an assignment of Vann’s wages, and time limits were placed on his debt repayment plan.

On May 23, 1990, in compliance with the bankruptcy court’s April 23 order, Quiat filed a Disclosure and Statement of Compensation, detailing the services rendered on behalf of Vann, his wife, and their children since 1989 and the source and amount of Vann’s payments. Several creditors and the Trustee objected to Quiat’s disclosure. Hearings on this issue were held in October and December of 1990 and in March and April of 1991. On June 4, 1991, the bankruptcy court issued its memorandum opinion and order, requiring Quiat to pay over to the Trustee approximately $125,000 in ■ fees received by Quiat over the past two years. See In re Vann, 128 B.R. 285 (Bankr.D.Colo.1991).

II. Issues.

A. Merits of Bankruptcy Court’s June 4 Disgorgement Order.

Quiat first takes issue with the bankruptcy court’s statement that “at least insofar as where a conflict of interest is shown when an attorney’s fees are questioned under § 329, this court adopts a per se rule that a debtor’s attorney must forfeit all fees.” Id. at 287. Quiat argues that this interpretation is an unfounded extension of the statutory language of § 329 and the procedural rules implementing it.

Section 329 of the Bankruptcy Code provides:

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Cite This Page — Counsel Stack

Bluebook (online)
136 B.R. 863, 1992 U.S. Dist. LEXIS 1276, 1992 WL 20775, Counsel Stack Legal Research, https://law.counselstack.com/opinion/quiat-v-berger-in-re-vann-cod-1992.