Opinion
Case No. 97-11811-SSM
February 23, 1998
Jack Frankel, Alexandria, VA, for the United States Trustee
Richard C. Deering, Gaithersburg, MD, for the debtors
David Ross Rosenfeld, Alexandria, VA, of Counsel for James A. Bielec
MEMORANDUM OPINION AND ORDER
This matter is before the court on the motion filed by the United States Trustee on February 24, 1998, for reconsideration of this court's prior memorandum opinion and order of February 11, 1998, which denied the United States Trustee's motions to vacate the order of April 21, 1997, dismissing this case and to enter an order requiring the debtors' former attorney, Richard Deering, to disgorge the fee he was paid to file their case. The motion to reconsider apparently does not seek reconsideration of the court's ruling with respect to not vacating the order of dismissal, but does urge, in light of a recent unpublished order from another judge of this court, that the court nevertheless has jurisdiction to order the debtors' former attorney to disgorge the fees he was paid pre-petition. No response has been filed to the motion for reconsideration.
As discussed in the prior memorandum opinion, this case was dismissed on April 21, 1997, after the debtors — apparently as a result of misinformation from their attorney — failed to appear at the meeting of creditors. They then obtained new counsel, filed a new bankruptcy petition, and were granted a discharge. The United States Trustee's motion under § 329, Bankruptcy Code, to examine the transactions between the debtors and their attorneys was filed on October 10, 1997, some five and a half months after the present case was dismissed.
A second attorney, James Bielec, was listed on the petition as local counsel. The court is not advised as to whether Mr. Bielec received any portion of the $375.00 fee the debtors reportedly paid Mr. Deering. In any event, the United States Trustee is no longer seeking disgorgement from Mr. Bielec.
The position of the United States Trustee, as set forth in the motion for reconsideration, is that "[a] bankruptcy court retains jurisdiction to determine the allowance of fees even after a case has been dismissed and/or closed." In re Signal Hill — Liberia Avenue L.P., No. 92-10843-AT, Order at 1 (Bankr. E.D. Va., Feb. 2, 1998) (Tice, J.). In Signal Hill, counsel to a chapter 11 trustee filed a $41,513.27 fee application approximately one year after the case was converted to chapter 7, and approximately 10 months after the case was closed. There were no assets in the bankruptcy estate to pay the fee, but counsel had received a $4,000.00 retainer that had never been drawn down and wanted a "comfort order" that would permit him to apply the retainer. The United States Trustee objected on the ground that the court did not have jurisdiction to award fees in a closed case. Judge Tice disagreed, and approved the requested fees as an administrative expense and allowed counsel to apply the retainer against the approved fees.
Signal Hill involved a case that had been closed, not one that was dismissed. However, it cites to several cases involving post-dismissal consideration of fee applications. See, e.g., In re Harshbarger, 205 B.R. 109 (Bankr. S.D. Ohio, 1996) (disallowing counsel fees for futile appeal of order dismissing chapter 13 case). At least one of the cases cited, however, does not squarely support the proposition that such jurisdiction exists. In re Quaker Distributors, Inc., 207 B.R. 82 (E.D. Pa. 1997) (after dismissal of the case, bankruptcy court, although it had jurisdiction to determine allowance of fees, did not have jurisdiction to decide competing claims to a prepetition retainer held by counsel). Whatever the correctness of the ruling in Signal Hill, I am unwilling to extend it to a situation in which a case was dismissed rather than closed, and where the issue sought to be litigated post-dismissal was not at least in some sense pending at the time of dismissal. An order of disgorgement, moreover, differs fundamentally from an order merely approving fees in the abstract, as occurred in Signal Hill, and allowing a portion of those fees to be paid from a fund as to which there were no rival claimants. Put another way, the "comfort order" in Signal Hill presented no issues as to enforcement, while the order sought by the United States Trustee could embroil this court in difficult and protracted enforcement proceedings.
As discussed in the prior memorandum opinion, the debtors may well have an right of action against Mr. Deering to recover the fees they paid him to file their case. That action, however, will have to be brought in some other forum.
ORDER
For the foregoing reasons, it is
ORDERED:
1. The motion for reconsideration is denied.
2. The clerk will mail a copy of this memorandum opinion and order to the parties listed below.