JEFFREY P. NORMAN, Bankruptcy Judge.
The Court held a hearing on the Acting United States Trustee's Motion to Disgorge Fees and for Other Appropriate Relief (ECF No. 16) in the above captioned bankruptcy proceeding on January 9, 2018. This opinion constitutes this Court's findings of fact and conclusions of law. To the extent any of the findings of fact are considered conclusions of law, they are adopted as such. To the extent any of the conclusions of law are considered findings of fact, they are adopted as such.
The United States District Court for the Western District of Louisiana has issued a General Order of Reference of Bankruptcy Cases and Proceedings dated June 1, 2012. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1334. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A). This United States Bankruptcy Court has the authority to issue final orders pursuant to 28 U.S.C. § 157(b). The Court also has inherent authority to "to discipline attorneys who appear before it." Chambers v. NASCO Inc., 501 U.S. 32, 43 (1991). The Court's inherent authority is further bolstered by 11 U.S.C. § 105.
This case is an unfortunate tale of attorney delay, promises to a client made by counsel but not kept, deception, and professional negligence. On December 29, 2015, the debtor, Lillie Mae Banks (hereinafter "Banks"), contacted UpRight Law LLC (hereinafter "UpRight") by telephone. After a series of calls this opinion discusses later, Banks ultimately retained UpRight on February 16, 2016, to file a Chapter 7 bankruptcy case. After unnecessary delay and several errors, UpRight finally filed a Chapter 7 for Banks on June 10, 2016, some four months later. This first bankruptcy case was dismissed on June 13, 2016, three days after it was filed, when UpRight failed to file Bank's credit counseling certificate. UpRight committed additional errors in attempting to reinstate
By stipulation, the parties introduced 38 exhibits into evidence. Some of these exhibits consist of telephone transcripts, emails, and text messages. These exhibits, together with witness testimony, give a clear picture of the interactions between UpRight and Banks. The Court will provide a chronological review of the events in this case.
On December 29, 2015, after discovering UpRight on the internet, Banks called UpRight for the first time. First, Banks spoke to an employee named David, who placed notes from their conversation into UpRight's computer system. David ultimately routed her to Brian, who is described as a "senior consultant" and is not an attorney. Banks disclosed she had between $15,000 and $18,000 in debt that she could not pay. She told Brian her problems stemmed from a broken $10,000 heating and air conditioning system that Sears refused to fix. She indicated that, given her fixed income, she could not afford to pay Sears. The Court considers Brian a salesperson, as it is obvious he was following a sales script. He made the following promises in this initial conversation, nearly all of which turned out to be false:
Banks received another telephone call from UpRight the same day (December 29, 2015). This time she spoke to an individual named Josh Laker, who identified himself as an attorney with UpRight. Mr. Laker is an attorney admitted to the Illinois State Bar on November 5, 2015, and who lists his registered business address at UpRight Law at 79 W. Monroe St., Chicago, IL 60603-4901. Mr. Laker is based in Chicago, and is not licensed to practice law in Louisiana. He advised Banks that she would be getting a retainer agreement via email. He also stated the following:
Cynthia Tannert electronically signed Banks' Attorney Client Base Retainer Agreement for Chapter 7 Bankruptcy Related Services (hereinafter the "retainer agreement") the next day. Ms. Tannert is located in Greenville, Tennessee and is licensed to practice law in Tennessee and Georgia. She has never been licensed to practice law in Louisiana. Ms. Tannert never contacted Banks. Further, Banks never received a retainer agreement signed by an attorney licensed in Louisiana. Josh finished the call by giving Banks a number for creditor referrals and confirmed Banks' payment arrangement for her Chapter 7 bankruptcy.
Banks signed the retainer agreement for Chapter 7 Bankruptcy on December 30, 2015. Banks signed electronically using DocuSign. Cynthia Tannert's signature is affixed to the document using the /s/ notation, but she did not physically sign the retainer agreement or even see it. Tannert, a partner attorney with UpRight, has signed a contract giving UpRight permission to sign her name to these contracts without notice. The retainer agreement specifically provides that "[t]he undersigned Partner of Firm has authorized Firm to affix Partner's digital signature upon this Agreement."
The Court finds the retainer agreement problematic. Some of its terms violate the Louisiana Code of Professional Responsibility, specifically Rule 1.5. However, as Banks never received a signed copy of the agreement signed by an attorney licensed to practice law in Louisiana, the agreement is not binding. Still further, the retainer agreement contains terms that are contrary to the oral representations made by UpRight and contains "unbundling" provisions this Court has not and will not allow.
Such language is confusing. It also contradicts to the oral representations UpRight made to Banks that all legal services are included in her quoted fee. Any future retainer agreements between UpRight and its clients in the Western District of Louisiana must specifically include all services integral to a Chapter 7 filing. It also must conform to the Louisiana Rules of Professional Conduct.
On January 5, 2016, Brian returned Banks' telephone call. She had called UpRight earlier and left a message. She was worried about UpRight's legal representation. Brian replied as follows:
Banks was worried as she had been approached by one of her creditors. Brian responded as follows:
Banks was stalling because he was aware there really was no action taking place on Banks' case. UpRight was not going to file her case until she had paid the retainer. To his partial credit, he did effectively communicate to Banks that her case would not be filed until she finished what he called "a great payment plan." However, the Court is troubled by this conversation because it completely contradicted his prior promise that relief would be immediate.
No later than January 18, 2016, UpRight's partner attorney Andrea Augustus
Banks was one of the nine clients she had not contacted. Augustus responded two days later, on January 20, 2018. She apologized and stated that she would be emailing those nine clients, including Banks, later that day.
On February 1, 2016, some 12 days later, Banks calls UpRight. She was concerned that her local lawyer had not contacted her. Banks was apparently aware that Augusts was her local attorney, but the record is unclear about how she knew this. Banks spoke with an individual at UpRight named Sola, who was not an attorney. Banks indicated she was worried because Augustus lives in New Orleans and she wanted to get a Chapter 7 hearing date. She was advised that her Court date would be about three weeks after she filed her bankruptcy case. Sola also stated that Banks' case had not been filed yet due to her not having paid her retainer. Banks was worried she would have to go to court in New Orleans, but Sola advised her that she would go to court in her county.
On February 10, 2016, Augustus emailed Banks. This email was brief and merely contained documents Augustus was requesting Banks complete. Respondent Ex. 4. Before this email, it had been 43 days since Banks initially contacted UpRight. This email was the first time she had been contacted by a lawyer licensed to practice law in Louisiana and admitted to practice in the Western District of Louisiana federal courts. Any legal advice given to Banks from December 29, 2015, to February 10, 2016, had been given by staff of UpRight or by an UpRight lawyer not licensed in Louisiana. This Court has concerns about the unauthorized practice of law during this substantial period of time.
On February 16, 2016, Banks called UpRight. She indicated she had been unable to get in touch with Augustus. She was confused and believed that Augustus was a paralegal. She stated:
By this point, Banks had received certified letters from a creditor. She had yet to speak to Augustus or any attorney licensed in Louisiana, and had only received a brief email from Augustus. UpRight advised Banks again to give creditors UpRight's contact information. UpRight further advised Banks to complete her documents so that she could file bankruptcy.
UpRight attempted to call Augustus on another line, but they only reached Augustus's voice mail. UpRight left the following message on Augustus's voicemail:
Banks was still worried about Augustus's location. UpRight attempted to allay Banks' fears. UpRight stated the following:
It is clear UpRight had little or no knowledge that its partner attorney (Augustus) and the client (Banks) are 350 miles apart, which would be a 12 hour round trip by car. Given the distance between them, Banks never personally met with Augustus, nor anyone from UpRight. Banks expressed concern that her Chapter 7 payment plan would not end until April, but she wanted to pay it off early and get her case filed. In response, UpRight stated the following:
That same day Banks finished her bankruptcy payment plan earlier than scheduled. UpRight then provided Augustus a paid in full summary via email showing Banks' legal fees had been fully paid.
Later that same day, February 16, 2016, Banks again called UpRight. She spoke to Josh, who confirmed she had paid her case in full. He stated the following: "[w]hat I'm going to do for you today is start prepping your petition which is what gets filed with the bankruptcy court." UST Ex. 8, pg. 2. This is contrary to Augustus's testimony. She testified she alone was responsible for the typing and filing of Banks' petition. Banks had yet to speak to Augustus or any other lawyer licensed in Louisiana and had borrowed money from a family member to pay the bankruptcy legal fees in full. Josh promised Banks "[s]o you're going to be filed relatively soon here." However, the case would be unnecessarily delayed, and would not be filed for nearly another four months.
On February 19, 2016, Banks spoke to Augustus for the first time. This was the first time she had spoken to a lawyer licensed in Louisiana. Any legal services provided by UpRight to this date had come from UpRight's staff. The attorneys she had spoken to were located in Chicago, and those attorneys were not licensed to practice law in Louisiana. That same day, Augustus emailed Banks a bankruptcy document request letter. On March 4, 2016, Banks completed her credit counseling and forwarded the certificate to Augustus. Augustus's negligent failure to timely file this document caused the dismissal of Banks' first bankruptcy case.
On March 17, 2016, Banks called UpRight to indicate she was still having difficulty reaching Augusts. The following day, she called UpRight once again. In that call, she stated the following:
The UpRight representative then promised to get managers involved and assured Banks that Augustus or someone else would get in touch with her soon. The representative ended the conversation by saying the following:
Despite UpRight's continued promises, there was an amazing lack of oversight of August by UpRight. Scott Hogan, who holds the title of Client Advocate with UpRight, sent an internal email to a Joe Liange that same day (March 18, 2019) stating the following:
Joe Liange forwarded the email to Augustus and asked her to "[p]lease reach out to the below referenced claim before the end of the day." Augustus responded by stating the following:
Her response was forwarded to Scott Hogan, who took no further action.
Irrespective of Augustus's assurances, Banks called six days later UpRight on March 24, 2016. She had been served a civil citation and was very upset. She did not feel like anything was being done on her case. She stated the following:
UpRight responded that they needed more documents from Banks. She responded that she could not reach her attorney. She stated the following:
That same day, Banks emailed Augustus and stated in all caps "DID YOU RECEIVE MY E-MAIL? PLEASE CALL ME AT YOUR EARLIEST." Augustus did not call Banks, but instead emailed a reply of "[n]o ma'am I haven't seen an email from you. I'll contact you as soon as I am able." UST Ex. 13. In response, Banks emailed Augustus from an email address not associated with her and carbon copied herself. This email contained a copy of the civil citation the sheriff's department had issued that morning. Banks also gave Augustus two phone numbers to reach her.
Four days later, on March 28, 2016, Augustus emailed Banks with a request for updated documents. One day later, she provided a fax number so that Banks could forward the documents. Apparently, the notice of a civil citation had still not caused Augustus to take more immediate action and it would still be over two months before she would file Banks' first Chapter 7 case.
On April 10, 2017, Banks again emailed Augustus in all caps. That email stated the following:
The next day, April 11, 2016, Augustus sent Banks an updated list of items required to be submitted before the case could be filed. The following day, Banks faxed over 64 pages of documents to Augustus. One day later, on April 13, 2016, a judgment is taken against Banks by Republic Finance for $2,133.71 plus interest accruing at the rate of 18%, together with attorney fees at 25%.
On April 15, 2016, Banks sent a text message to Augustus asking if she had received the 64 pages faxed to her. Augustus did not respond. That same day, she called UpRight yet again. She was angry about the judgment. She stated that "she has done what they asked me" and "today I was — I have been issued a judgment against one of my creditors that I have because there was no response." She continues:
At this point, UpRight cut Banks off and told her she needed to provide more documents to Augustus. In response, Ms. Banks stated the following:
The conversation continues:
The UpRight representative responded that "I'll call her and see what's going on, and then I'll have her to give you a call back, because we need to get your case filed." Id. at pgs. 8-9. It would still be another twenty days before any further action is taken on Banks' case.
On May 4, 2016, August emailed Banks a draft copy of her bankruptcy petition. Banks reviewed this petition, made corrections, and returned it to Augustus. Two weeks later, on May 18, 2016, Augustus forwarded a second draft of the petition, which Banks then corrected and returned. Thirteen days later, August sent Banks a tracking number for the package containing the bankruptcy petition that must be signed. Banks signed the petition and schedules and returned them to Augustus. Finally, Augustus filed Banks' first Chapter 7 bankruptcy (Case No. 16-10979). The case was filed 164 days after Banks originally contacted UpRight. The case was then dismissed three days later.
The docket in that first case reflects that the case was dismissed due to Banks' failure to comply with 11 U.S.C. § 109(h), which contains the credit counseling requirement. Augustus failed to file the credit counseling certificate Banks obtained on March 4, 2016, and that she had previously received. In response to the dismissal order, which Augustus received electronically, Augustus emailed Banks requesting another copy of the credit counseling certificate. Her email stated the following:
She did not inform Banks that her case had been dismissed. Banks complied and emailed the credit counseling certificate. On June 22, 2016, Augustus filed the credit counseling certificate. She also filed the Declaration of Electronic Filing and an Ex-Parte Motion to Reconsider Dismissal. The PDF attached to the Ex-Parte Motion to Reconsider was incomplete and the clerk's office instructed Augustus to refile it. However, Augustus did not refile the document. Augustus took no further action in the case, so the case remained dismissed and was subsequent closed in February of 2017.
Augustus was negligent in allowing Banks' case to be dismissed and remain dismissed. Augusts could have easily vacated the dismissal order had she properly served all parties and set the motion to vacate for hearing. She negligently failed to take these actions. UpRight is also negligent in failing to appropriately supervise Augustus. UpRight's failure to supervise Augustus continued over the entire course of UpRight's representation of Banks.
On June 20, 2016, Banks called UpRight and spoke to an individual named Teeter. Banks explained she had received a letter notifying her that her bankruptcy case had been dismissed. The conversation proceeded as follows:
Teeter promised that Banks would get a call from someone named Orlando, who is a lawyer at UpRight.
That same day an individual named Matthew, not Orlando, called Banks. Matthew explained that he was an "enhanced service manager." The record is unclear whether Matthew is a lawyer. He was calling her because of her earlier telephone call and because her first Chapter 7 case had been dismissed. He did not know why the case has been dismissed, even though this information could easily be obtained from the Court's electronic docket. Banks, who was confused by the terminology, advised him the case was dismissed because a "cash (sic) certificate and debt repayment plan wasn't provided." She stated that she had taken the class but could take the second financial management class until her case was filed. She stated the following:
Banks complained that she did not understand why it had taken six months for her case to be filed and that "it shouldn't take that long to file bankruptcy." She wanted to know why her creditors were still calling her. Matthew advised her to give them her case number. Banks explained that she had not given her creditors her case number because her case had been dismissed. Banks was clearly frustrated, as was Matthew. The conversation continued:
Matthew clearly was not taking into consideration the fact that Banks' case was dismissed. Due to the dismissal of the case, the automatic stay
The Court again stresses that Banks' bankruptcy case had been dismissed for seven days. Matthew had no basis for stating that "anybody calling you cannot call you so — as long as you provide them this case number." This representation was false as there was no automatic stay in effect. The conversation continued:
Given Banks' repeated difficulty communicating with Augustus, Matthew's advice was problematic. Further, by stating that everything on their end had been completed, Matthew confirms this Court's suspicion that UpRight is merely a referral service. Banks responded as follows:
Banks was clearly frustrated. She later asked if this was the first case Augustus had handled. Matthew responded as follows:
As previously stated, Banks' case was dismissed due to Augustus's failure to file the credit counseling certificate that Banks had previously provided. Banks is not at fault for the dismissal; however, Matthew ignorantly attempted to blame her for not providing documents. He then attempted to intimidate her regarding a refund of the fees she had paid. He stated:
First, the Court must comment on the ignorance of Matthew's comments. Banks' bankruptcy case had been dismissed—the work was far from complete. In fact, Banks' case is still not complete to date. Second, the retainer agreement signed by UpRight specifically provides a guaranteed refund policy, so Matthew's comments are totally without justification. The retainer agreement states the following:
UpRight had repeatedly promised Banks that it would take specific actions, and that she was protected from her creditors. UpRight had also enticed her with the full refund policy. UpRight had promised that Banks' case would be competently handled until discharge. As the Court will discuss, these misstatements and broken promises are not isolated incidents, and UpRight's negligent representation actually continued.
Matthew later agreed to step in and help Banks. He stated "I'll step in and help with that, I really will because I know you're going through a lot." Id. Unfortunately, there is no evidence that Matthew followed up on any of his promises. Banks' case remains dismissed, and it would take nine more months for her second case to be filed.
On the morning of June 20,
On July 12, 2016, Augustus emailed Banks. She stated the following:
Augustus had not been in contact with the law clerk of this Court. This Court's Courtroom Procedures, which are available on the Court's website, specifically states that "[c]ontact with Judge Norman and his law clerks, other than by pleadings, is strictly prohibited. Letters and telephone calls to chambers are prohibited." Augustus intentionally misled her client.
On July 25, 2016, an individual named Julian at UpRight contacted Banks to advise her that there was a court date the following day that Augustus should be attending to reconsider the dismissal of her case. This statement was false as there was no hearing scheduled.
On August 18, 2016, Banks called UpRight once again. She wanted more information regarding the next step in her case. She assumed the dismissal of her case had been vacated. However, she was still having difficulty communicating with Augustus. She stated the following:
UpRight never followed up on this call, and Augustus never contacted Banks. Banks' bankruptcy case remained dismissed and no discharge would be forthcoming. Again, UpRight misrepresented the facts of Banks' case to her.
On October 4, 2016, Banks again called UpRight. She complained that she had filed bankruptcy, that her case was not yet closed, and that she was getting creditor correspondence. She was not aware that her case remained dismissed. Banks again complained that Augustus was unresponsive. UpRight promised to escalate her case to a manager. Banks replied that this had been promised before and that nothing had happened. UpRight promised the following:
On October 7, 2016, Banks again called UpRight. UpRight indicated that Augustus would call Banks that day. Banks was frustrated as she knew her case had been dismissed. UpRight advised that the matter had been escalated to partner relations and promised they would reach out to her with an update soon. However, as usual, UpRight never followed up. Again, the Court stresses the repeated broken promises made by UpRight to Banks and UpRight's continued failure to monitor and oversee its partner attorney Augustus.
On October 12, 2016, Banks again called UpRight. August had not called her, and no one from partner relations had called her. Banks expressed her frustration with the fact that no one would ever follow up with her. UpRight simply had no answer. A representative merely promised to get in touch with partner relations. In this conversation, Banks stated the following:
On October 13, 2016, Banks received an email from Augustus. UST Ex. 31. This was the first time in three months Augustus had followed up with Banks. Augustus indicated that she was preparing to file Banks' second bankruptcy case. However, Banks' credit counseling certificate had expired.
On October 19, 2016, August once again emailed Banks. Respondents Ex. 24. She states that she will print Banks' first bankruptcy petition to determine if there are any changes that need to be made, after which Banks would need to sign it. On October 25, 2016, Augustus emailed Banks promising that the bankruptcy case would filed the second week of November. However, the second case would not be filed until some four months later, on March 28, 2017.
On November 8, 2016, Banks called UpRight yet again to complain. The UpRight representative stated the following:
The Court again notes that, at that time, Banks did not have an active bankruptcy case. UpRight promised to email Augustus and have her contact Banks. The UpRight representative stated that the dismissal of the first case was because "there were some issues with not being able to sign electronic filing in a timely manner." As usual, this was a gross misrepresentation of why Banks' first case was dismissed.
On January 3, 2017, Banks again called UpRight. She continues to complain to UpRight. The UpRight representative assured Banks that the case had been filed:
Given what had already occurred, UpRight's ignorance here is astonishing. Banks attempted to explain that the first case had been dismissed and a new case had not been filed. The representative stated "[w]ell, she did refile it, ma'am." The representative later retracted this assertion. Again, UpRight promised to email Augustus and "include a manager from our partner relations department." Not surprisingly, the phone call generated no response from UpRight.
On January 13, 2017, Banks sent a text message to Augustus stating "[p]lease call me ASP (sic), need to know where you are with my case." Augustus failed to respond. On January 24, 2017, Banks again called UpRight and spoke to an individual named Karen. Banks again complains about the status of her case and the fact that Augustus did not respond to her text message. Karen indicated she could see reports of Banks' previous calls to UpRight. Karen stated the following:
Based on the information in the record, the Court can only conclude that the "partner relations" department does very little, and is negligent at the very least. There are multiple instances when UpRight representatives have promised to involve "partner relations." However, there were never any results.
On March 6, 2017, Denise Alcauther (hereinafter "Alcauther") at UpRight emailed Augustus about Banks. That email stated the following:
The record does not show that August responded to this email. There are no documented conversations or emails between Banks and Augustus from the date of the Alcauther email until Banks' second case was filed.
Banks' second bankruptcy case (the instant case) was filed on March 28, 2017. However, the Court notes that the petition in this case is identical to the first petition. Banks did not review it or sign it. The petition falsely represents that it has been signed by Banks. It is clear Augustus filed the exact same case without determining whether there were any changed circumstances. By filing the petition and schedules without Banks' actual "wet" signatures, Augustus violated the rules for the electronic filing of documents and pleadings in this district pursuant to the Administrative Procedures for the U.S. Bankruptcy Court for the Western District of Louisiana ("Administrative Procedures"), last amended March 18, 2014. Augustus falsely indicated Banks had signed the documents by indicating a signature with a "/s/" before Banks' name. This representation was false.
On April 3, 2017, Banks completed her personal financial management course required for a discharge. She forwarded the certificate to Augustus, who never filed it. On May 5, 2017, Banks appeared for her first § 341 meeting of creditors. Augustus failed to attend that meeting.
The CM/ECF docket for this case at the time of the hearing in this matter showed Andrea Augustus as the attorney of record. UpRight was not listed on the docket. Augustus's physical address at all times pertinent to this matter was her residence. Augustus testified that she did not meet with clients in her home, instead meeting with them in offices she maintained. However, she could not provide the Court with the address of any office she claimed to maintain during time when Banks' bankruptcy cases were pending. The Court finds that she did not maintain an office during this time, and UpRight misrepresented this fact to Banks. Even if Augustus had maintained an office, her location in New Orleans made it all but impossible for Banks to meet with her.
These facts lead the Court to conclude that Augustus never had any intention of attending Banks' meeting of creditors. Augustus was clearly aware of the meeting date and time as she had sent an email to UpRight confirming it. On May 5, 2017, Augustus emailed UpRight and Banks at 2:57 p.m. that she was unable to attend the first meeting of creditors, even though that meeting had already taken place at 10:00 a.m. She stated that a "proper motion requesting an extension arising from extenuating circumstance will be filed before end by end (sic) of day Monday." Respondents Ex. 31. No such motion was filed. The Court finds that Augustus never intended to attend the meeting given her distance from Shreveport and the travel time that would have been required.
The Partnership Agreement between Augustus and UpRight set the rate of compensation for Banks' Chapter 7 case. Augustus was to receive 20% of all earned fees, assuming she performed certain work, plus 13% for attending the first meeting of creditors. Banks paid UpRight $1350, so Augustus could have earned $175.50 for traveling from New Orleans to Shreveport for the meeting of creditors. Assuming she performed certain work and attended the meeting of creditors, Augustus could have earned a total of $445.50 for representing Banks. The round trip drive time between New Orleans and Shreveport is at least 10 hours. Further, there are no direct flights between the cities. Augustus's excuse that she was ill and could not attend the first meeting of creditors is not credible. The Court finds that she did not plan to attend the meeting given the low rate of compensation compared with the time and cost it would have taken to attend.
On May 11, 2017, Banks' second Chapter 7 case was dismissed for failure to comply with 11 U.S.C. § 521. Augustus had failed to file required employee income records, a declaration of electronic filing, a picture ID card, and Banks' Social Security card.
Upright Law, LLC is not a typical law firm. It consists of Chicago based Law Solutions Chicago, LLC, (hereinafter "Law Solutions"), an Illinois limited liability company licensed to do business in Louisiana as UpRight Law LLC. The firm engages "partner" attorneys located throughout the country. The nature of UpRight's consumer bankruptcy practice was outside the scope of the hearing in this matter. However, the evidence shows UpRight refers to itself as a national law firm. UpRight does not maintain an office in the Western District of Louisiana. Instead, it engages "partners" licensed to practice law in the jurisdiction and then solicits consumer bankruptcy business over the internet.
UpRight appears to be nothing more than a referral service. It solicits clients and then refers them to local attorneys. The local attorneys, who UpRight calls "partners," file consumer bankruptcy cases for those clients after they are referred. In many instances, these "partner" attorneys maintain their own independent practices in which they often engage in consumer bankruptcy work. It appears "partners" are not full time UpRight employees.
Augustus, who "partnered" with UpRight to handle Banks' consumer bankruptcy, entered into her Partnership Agreement with Law Solutions on December 17, 2015. However, as the Court has already discussed, this partnership appears to be for the purpose of client referral only. This agreement allows Law Solutions to collect a referral fee for signing up bankruptcy clients and then referring them to so called "partner" attorneys such as Augustus.
The scope of the professional negligence on the part of Augustus and UpRight in the handling of Banks' Chapter 7 case is substantial. Over a period of more than two years, they have continuously violated the Louisiana Rules of Professional Conduct. These violations are noted below:
Rule 1.1 Competence:
Augustus and UpRight have failed to competently represent Banks in her Chapter 7 case. Banks' case should have been simple; in fact, UpRight has admitted as much. However, in the two years Banks has interacted with Augustus and UpRight, all she has achieved is two dismissed bankruptcy cases. Due to lack of legal knowledge, skill, thoroughness, preparation, and general negligence on the part of Augustus and UpRight, Banks has still not received a discharge.
Rule 1.3 Diligence:
A lawyer shall act with reasonable diligence and promptness in representing a client. Banks' Chapter 7 case should have taken no more than five months. However, over two years later, her case remains unresolved. This is due entirely to UpRight and Augustus. The Court has never seen such a lack of diligence in any Chapter 7 proceeding. Phone calls were constantly not returned. There was unnecessary delay. There were false promises. All fairly describe Upright's and Augustus's representation of Banks.
Rule 1.4 Communication:
UpRight and Augustus never kept Banks appropriately informed of the status of her case. Augustus repeatedly failed to communicate with Banks in violation of the Louisiana Rules of Professional Conduct. Banks was often unaware of what was happening in her bankruptcy cases. Further, UpRight representative had an appalling lack of knowledge regarding what was occurring in these two bankruptcy cases. While Banks was always able to communicate with representatives in Chicago, those representatives either negligently or intentionally gave her the wrong information about her cases consistently. Still further, UpRight's failure to take corrective action as promised, including returning Banks' phone calls, as well as giving her false information, leads the Court to conclude that they failed to reasonably consult with their client.
Rule 1.5 Fees:
Banks often came close to requesting UpRight provide a refund of her fixed fee; however, the Court notes Banks never explicitly requested a refund. She did frequently reference the fees she had paid. If Banks had overtly requested a refund, then the Louisiana Rules of Professional Conduct would have required UpRight to immediately refund the unearned portion of such fee. Regardless, the Court finds that UpRight did violate this rule. An UpRight representative said the following to Banks: "on our end — on our end as far as, you know, refunds go, which is what I think you're about to (incomprehensible), the work's completed, like the case is filed, the attorney fees are done, credit counseling all that so we couldn't offer a refund." The representative was clearly attempting to avoid a refund request. Rule 1.5 would have required UpRight to immediately refund Banks the unearned portion of the fixed fee if a fee dispute had arisen. The UpRight representative was obviously misrepresenting UpRight's obligations under the Louisiana Rules of Professional Conduct. UpRight misrepresented its professional obligation to provide a refund. The Court holds that any future fixed fee agreement between UpRight and any Louisiana client must include a disclosure of its requirement to provide a refund under the Rules of Professional Conduct. Further, UpRight may not make statements that lead clients or potential clients to believe that that have no right to a refund.
RULE 5.1. Responsibilities of Partners
UpRight's supervision of Augustus was totally inadequate. UpRight has various supervisory lawyers who were expected to ensure client satisfaction. On multiple occasions, UpRight representatives promised Banks that her complaints would be escalated. The supervisory lawyers were either unable or unwilling to address the issues in Banks' case. By their lack of action, the managing attorneys in the Chicago office ratified Augustus's conduct. Still further, with regard to Augustus, the managing partners had supervisory authority over her practice. Many of the errors and negligence in this case could have been avoided if they had taken action.
11 U.S.C. § 528 requires bankruptcy attorneys execute a written contract and to provide such contract to their clients. This Court has already noted that Banks' retainer agreement with UpRight was signed by a lawyer not licensed in Louisiana. In fact, the lawyer did not even see it or physically sign it. Cynthia Tannert's electronic signature is affixed to the retainer agreement by the notation of a /s/Cynthia Tannert. Tannert a "partner" with UpRight, has given permission for UpRight to sign her name to these contracts without notice. This does not comply with the requirements of the Bankruptcy Code. Banks never had a written contract with UpRight executed by a Louisiana licensed lawyer.
Pursuant to 11 U.S.C. § 329 and Fed. R. Bankr. P. Rule 2017, disgorgement in this case is appropriate. Section 329(b)(2) of the Bankruptcy Code provides that a court may order disgorgement of fees if attorney compensation exceeds the reasonable value of the services provided. Further, Bankruptcy Rule 2017 provides the following: "[o]n motion by any party in interest or on the court's own initiative, the court after notice and a hearing may determine whether any payment of money or any transfer of property by the debtor, made directly or indirectly and in contemplation of the filing of a petition under the Code ... to an attorney for services rendered or to be rendered is excessive." The Court finds no value in the services UpRight provided to Banks. To the contrary, UpRight's actions harmed Banks by causing her to file two bankruptcies instead of one, and allowing a judgment to be entered against Banks when such judgment could have been avoided. In both bankruptcy cases, Augustus failed to submit basic required documents t, despite Banks having provided her those same documents. When the proceedings were dismissed, Augustus and UpRight failed to correct the mistakes in either proceeding and failed to communicate with Banks for months at a time. In this case, Augustus filed identical schedules and statements to those filed in the first case, with no updated financial information and without Banks having reviewed or signed them.
While Augustus bears responsibility for her failures, UpRight took no effective action to aid Banks. UpRight took no action even though Banks had apprised them constantly of the issues in her case. The contract UpRight provided Banks stated that "[c]lient retains Firm, (and not any specific attorney/staff member) to represent Client for Chapter 7 Bankruptcy Services." This contract indicates that UpRight should have been responsible for proper representation.
Disgorgement is appropriate under 11 U.S.C. § 526(c)(1). That section provides that "any contract for bankruptcy assistance between a debt relief agency and an assisted person that does not comply with the material requirements of [11 U.S.C. §§ 526, 527, or 528] shall be void and may not be enforced ... other than [by] such assisted person." Under 11 U.S.C. § 528, a debt relief agency must "execute a written contract" with a client not less than five days after first providing bankruptcy assistance services and provide the assisted person with a copy of the fully executed and completed contract. Here, Banks' contract bears the electronic signature of Cynthia Tannert. Ms. Tannert is a Tennessee attorney who is not licensed to practice in Louisiana and and has never had any contact with Banks and never physically signed any contract with her. Thus, the signature on the Banks contract is false, and the contract is fraudulent. Even assuming Ms. Tannert had actually signed the contract, she is not licensed to practice law in Louisiana and had no ability to ensure UpRight followed through on its agreement to serve Banks. Moreover, UpRight and Augustus never executed a contract with Banks, despite Augustus having filed her two bankruptcy cases. As a result, no one from UpRight ever executed a contract with Banks. UpRight failed to provide Banks a properly executed copy of a written contract between them. This is in violation of 11 U.S.C. §§ 528(a)(1) and (2), so the contract is void and UpRight must disgorge all fees collected as provided by 11 U.S.C. § 526(c)(1).
Relief pursuant to 11 U.S.C. §§ 526(c)(5) and 105 is also appropriate. Section 526(c)(5) provides that upon a finding that "a person intentionally violated this section, or engaged in a clear and consistent pattern or practice of violating this section, the court may ... enjoin the violation of such section; ... or ... impose an appropriate civil penalty against such person." Section 526(a)(1) provides the following:
In this case, UpRight promised to provide Banks an array of bankruptcy services. UpRight has repeatedly failed to provide those services or misrepresented those services. UpRight's continued failure to provide Banks with bankruptcy services after numerous requests for help amounts to an intentional violation of 11 U.S.C. § 526(a)(1). UpRight's apparent disregard seems to reflect a business model in which this Chicago based corporation is primarily a marketer of legal services, not a provider of them. UpRight has never provided Banks any real service, beyond the detrimental step of referring her to Augustus. Violations of 11 U.S.C. § 526(a) are actionable under 11 U.S.C. § 526(c)(5), which provides that the Court may enjoin the violation of such section or impose an appropriate civil penalty.
The UST and UpRight have agreed to the following sanctions for UpRight:
The Court approves the sanctions agreement between the UST and UpRight. The Court finds that UpRight has previously disgorged to Banks all fees that she paid. However, the Court will also impose the following sanctions and requirements.
