Wright v. United States (In Re Placid Oil Co.)

158 B.R. 404, 1993 U.S. Dist. LEXIS 13838, 1993 WL 376997
CourtDistrict Court, N.D. Texas
DecidedSeptember 22, 1993
Docket1:93-cr-00017
StatusPublished
Cited by24 cases

This text of 158 B.R. 404 (Wright v. United States (In Re Placid Oil Co.)) is published on Counsel Stack Legal Research, covering District Court, N.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wright v. United States (In Re Placid Oil Co.), 158 B.R. 404, 1993 U.S. Dist. LEXIS 13838, 1993 WL 376997 (N.D. Tex. 1993).

Opinion

FITZWATER, District Judge:

An attorney appeals a bankruptcy court order requiring him to disgorge attorney’s fees and permanently disbarring him from practicing in the bankruptcy court. The court affirms the disgorgement directive and vacates and remands the • disbarment sanction.

I

Appellant William D. Wright, Esq. (“Wright”) appeals a bankruptcy court order directing that he disgorge the sum of $132,223.93 in legal fees and be permanently stricken from the list of attorneys admitted to practice law before the Bankruptcy Court for the Northern District of Texas. The court entered the order in connection with the bankruptcy of Placid Oil Company (“Placid”), a chapter 11 debtor which filed bankruptcy on August 29, 1986 and operated as a debtor-in-possession until plan confirmation on September 30, 1988.

The court derives its recitation of the relevant background facts and procedural history from undisputed facts and from the factual findings of the bankruptcy court that are not clearly erroneous. 1 Appellee Internal Revenue Service (“IRS”) 2 filed an administrative expense claim against Placid for postpetition taxes. Placid requested pursuant to 11 U.S.C. § 505(b) that the IRS conduct an expedited examination of its tax liability for the 1986 and 1987 tax years. Placid and the IRS resolved all but two of the issues raised by the examination. The unresolved questions concerned the deduc-tibility of certain professional fees and the alleged loss of oil and gas licenses by Placid’s British subsidiary (Placid Oil Company-United Kingdom) in the North Sea. The IRS and Placid litigated the two unresolved issues in the bankruptcy court. 3

Appellant Wright’s law firm — Shank, Irwin, Conant, Lipshy & Casterline (“Shank, Irwin”) — had represented Placid for many years prior to Placid’s chapter 11 filing. Initially as a Shank, Irwin associate, and later as a partner, Wright represented Placid on transactional and tax matters. Wright was a partner of the firm when it dissolved in 1990.

The law firm of Simon, Anisman, Doby, Wilson & Skillern (“Simon, Anisman”) served as Placid’s counsel in the chapter 11 proceeding, taking the place of a firm that had represented Placid initially. The bankruptcy court approved Simon, Anisman’s employment. The firm of Vinson & Elkins served with court approval as Placid’s special tax counsel until 1988. Because of potential conflicts, Shank, Irwin did not act either as bankruptcy counsel or as special tax counsel to Placid. After Vinson & El-kins withdrew, 4 Simon, Anisman undertook Placid’s representation concerning the IRS’s postpetition tax liability claim.

On July 26, 1989 the IRS wrote a letter expressing its concern to Khent H. Row- *408 ton, Esq. (“Rowton”), an attorney with Simon, Anisman, that appellant Wright would be providing legal advice to Placid. The IRS informed Rowton that if Wright planned to participate in the case, he needed court approval for employment. Row-ton responded in an August 8, 1989 letter, acknowledging that Wright would be participating, but only as a fact witness, not as a professional. Rowton indicated there was no need for the bankruptcy court to approve Wright’s employment.

Later, at a September 18, 1989 status conference concerning Placid’s objection to the IRS claim, the IRS complained of Placid’s apparently inconsistent statements about Wright’s role. The IRS based its concern on interrogatory answers that indicated Placid intended to call Wright as an expert witness at trial. The IRS believed Wright's only expertise was as a tax lawyer and that participation in this capacity would require court approval. The bankruptcy court responded by directing William L. White, Esq. (“White”), another lawyer with the Simon, Anisman firm, to inform Rowton not to hire as a consultant, without a court order, any lawyers to whom Placid would pay attorney’s fees. The bankruptcy judge instructed White that he did not want any consultant or professional witnesses that were not subject to his order. He also expressed concern over the participation of any attorneys from the Shank, Irwin law firm without an application and court order because, inter alia, of the firm’s representation of Placid prior to bankruptcy. Rowton later acknowledged at an October 25, 1989 status conference that he had received and understood the instructions given to White for conveyance to him.

In a March 1990 deposition and at the April 1990 trial of the North Sea tax issue, the IRS examined Wright concerning his role in the litigation. Wright stated at the deposition that he was receiving compensation for his services. At trial he testified that his role was that of a fact witness, yet cross-examination reflected at least 38 occasions prior to trial where he had been contacted by the Simon, Anisman firm. These contacts resulted in Simon, Anis-man’s charging fees to Placid in the amount of $22,357.50. Wright admitted he had redrafted pleadings that were filed by Simon, Anisman and had conferred with Rowton concerning the IRS’s brief. Wright testified that he was called as a fact witness at trial because of his extensive knowledge concerning the North Sea matter. He admitted, however, that he had given Placid advice concerning the other tax issue, which related to deductibility of professional fees. An internal memorandum revealed that Wright had participated on a regular basis in the development of Placid’s legal strategy.

Simon, Anisman’s fee applications for April and May 1990 revealed an additional 21 contacts with Wright. Some of these occurred after the April 1990 trial and concerned legal concepts. Rowton billed for a conference with Placid executives and Wright, which he described as a “discussion of the IRS matter and strategy.”

The IRS submitted an objection to Simon, Anisman’s fee application for May 1990. On June 26, 1990 the IRS filed a “motion to determine the role of William D. Wright.” At a July 11, 1990 hearing on the motion and objection, the bankruptcy judge warned that he would order that the fees paid to Wright be disgorged if he found that Wright had acted as an attorney in the case and was paid attorney’s fees. The court directed that Wright determine how much money he had received since January 1989 and inform the court by letter.

In August 1990 Wright joined the Simon, Anisman firm. Simon, Anisman included in its billings charges for Wright’s work with regard to litigation of the postpetition tax claim. The IRS filed an objection to Simon, Anisman’s fee application for September 1990 because of charges for Wright’s work as an attorney. On December 31, 1990 Wright and Rowton left Simon, Anisman to establish their own law firm. The bankruptcy judge considered the IRS’s objection at a February 5, 1991 hearing. The judge stated he would order Wright to disgorge all his attorney’s fees since the day Placid decided to use him as a witness, and would *409 disqualify Wright from taking part in the appeal to the district court of the decision on the North Sea tax claim, and being counsel of record.

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Cite This Page — Counsel Stack

Bluebook (online)
158 B.R. 404, 1993 U.S. Dist. LEXIS 13838, 1993 WL 376997, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wright-v-united-states-in-re-placid-oil-co-txnd-1993.