Debtor Attorney’s Failure to Itemize Fees Warranted Disgorgement Where his Errors Caused Debtor to Lose Home

Debtor Attorney’s Failure to Itemize Fees Warranted Disgorgement Where his Errors Caused Debtor to Lose Home

By Order dated September 12, 2017, the court directed Attorney Gantz to appear and show cause why it should not require him to disgorge fees he received from the Debtor in connection with the above-captioned case. The Debtor and Mr. Gantz each appeared at the adjourned hearing pro se; the United States Trustee appeared through counsel.

The court had jurisdiction over the Debtor’s chapter 13 case under 28 U.S.C. §§ 157(a) and 1334(a), pursuant to the reference from the United States District Court under a Local Rule, and retained jurisdiction under the Show Cause Order, despite dismissing the case, to fulfill its statutory obligations under 11 U.S.C. § 329 and Fed. R. Bankr. 2017(a).

The Show Cause Order, which Mr. Gantz admitted he failed to read until the night before the original return date, instructed him to appear and explain why the court should not (1) require him to disgorge any fees he received from the Debtor, and (2) cancel his retainer agreement with the Debtor. At the return hearing, with the consent of Mr. Gantz, the court took testimony from the Debtor, and accepted Mr. Gantz’s own testimonial proffer. The court admitted no exhibits, but considered the specific docket entries that the parties identified during the hearing, as well as the docket in this case more generally.

Significantly, Mr. Gantz did not provide an itemization of the time he spent in preparing and prosecuting the Debtor’s case to its unsuccessful conclusion, though mid-way through the hearing he requested an opportunity to (i) supplement the record with an itemization, and (ii) adjourn the hearing for this purpose. Having adjourned the hearing once for his convenience, and given the United States Trustee’s opposition to any further adjournment, the court denied the request. In refusing to adjourn further, the court was also mindful of the amount in controversy, and the fact that the Debtor had already appeared twice in connection with the Show Cause Order, once at the originally scheduled return hearing and again at the November 7 hearing.

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