Debtor’s Counsel Fee Request Reduced by Court Where Adversary Proceeding was Not Required and Lawyer and Paralegal Both Billed at Same Hourly Rate

Debtor’s Counsel Fee Request Reduced by Court Where Adversary Proceeding was Not Required and Lawyer and Paralegal Both Billed at Same Hourly Rate

The Debtors, by counsel, filed a voluntary Chapter 7 petition on May 18, 2017 at which time the automatic stay of 11 U.S.C. §362(a) went into effect. A motion to quash garnishment was filed the next day, on May 19, 2017, against Wellmont, which apparently had a judgment against the Plaintiff. An order to quash the garnishment was entered by this Court on May 22, 2017.  That order was sent to Wellmont and to the Plaintiff’s employer, GMS. A total of $1,399.65 was withheld from the Plaintiff’s wages by GMS. The funds were claimed as exempt on the Plaintiff’s Schedule C and his homestead deed, which was timely recorded in the Circuit Court.

The Plaintiff and his wife received their discharge on September 5, 2017 and the case was closed the same day. However, based on the evidence at the hearing convened on sanctions, Plaintiff’s counsel knew that the funds withheld from the Plaintiff’s wages had not been returned either to the male Debtor, Debtors’ counsel or to the Chapter 7 Trustee in violation of the Court’s order quashing the garnishment. In fact, the legal assistant for Plaintiff’s counsel spoke to GMS on August 29, 2017, inquiring as to the return of the funds, just prior to the case being closed. She previously spoke to them on May 25, 2017; July 13, 2017; July 27, 2017; and August 10, 2017.  At no point prior to discharge or closure of the case did Plaintiff’s counsel take any action before the Court to recover the funds or prevent closure of the bankruptcy case. Instead, counsel filed a motion to reopen the case on October 23, 2017, paying a reopening fee of $260.00 for which he seeks reimbursement in this case.

Thereafter, on November 21, 2017, counsel filed the instant adversary proceeding against GMS to recover the $1,399.65 withheld from the Plaintiff’s wages, paying a separate $350.00 filing fee on behalf of the Plaintiff for which he also seeks reimbursement in this case. The Bankruptcy Court Miscellaneous Fee Schedule, issued in accord with 28 U.S.C. § 1930, provides that the filing fee for an adversary complaint is $350.00, except that “[t]his fee must not be charged if the debtor is the plaintiff . . . .”(emphasis added). On February 14, 2018, counsel for the Plaintiff subsequently filed a second lawsuit against Wellmont in connection with the same $1,399.65, this time not for recovery of the funds, but for sanctions and attorney’s fees. The garnished funds were paid to the Plaintiff’s counsel by Wellmont in December 2017, roughly two months prior to the second lawsuit being filed. Despite the plain language of the Miscellaneous Fee Schedule, another $350.00 filing fee was paid to the Court by counsel on behalf of the same Debtor/Plaintiff as in that case.

In the present case, GMS is in default, and counsel seeks $4,975.00 in attorney’s fees and costs as a sanction against GMS.


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