ERIC L. FRANK, CHIEF U.S. BANKRUPTCY JUDGE.
Joseph G. Mirarchi Legal Services, P.C., a law firm in which Joseph G. Mirarchi ("Mr. Mirarchi") is the sole practitioner,
Mirarchi seeks the $113,400.00 fund based on a contingent fee legal services agreement entered into during the pendency of this chapter 12 bankruptcy case. The Debtor and Mr. Thorpe (collectively, "the Thorpes") object to the payment of any professional compensation to Mirarchi. The chapter 12 trustee ("the Trustee") also objects to the payment requested by Mirarchi.
As explained below, I have concluded that this is a non-core matter as to which the bankruptcy court lacks authority to enter a final judgment.
Based on the proposed findings of fact and conclusions of law, I recommend that the district court enter an order denying the Mirarchi Motion in its entirety.
The procedural history of this case was set out in great detail in the district court's reported opinion,
On June 13, 2013, the Debtor filed a chapter 12 bankruptcy petition in this court. The bankruptcy filing stayed a sheriff's sale of the Debtor's farm property, 371 Stoney Brook Road, Newtown, PA ("the Farm") scheduled by Lititz Properties, Inc. ("Lititz"). At that time, Lititz held a mortgage on the Farm, as well as a mortgage on a second (residential) property owned by the Thorpes.
On January 13, 2014, this court confirmed the Debtor's Fourth Amended Plan ("the Initial Confirmed Plan"). The Initial Confirmed Plan provided for the modification and payment of Lititz's allowed secured claim.
Ultimately, neither the Debtor nor the Trustee succeeded in selling the Farm parcel by the deadline set in the Initial Confirmed Plan. As a result, Lititz pressed for dismissal of the bankruptcy case.
After extensive negotiations among the parties and with their consent, on November 13, 2014, the court approved a post-confirmation modified plan, the Debtor's Fifth Amended Plan, as Amended ("the Modified Confirmed Plan"). Under the Modified Confirmed Plan, the Debtor was given a short period to market the parcel and, if no buyer were found, the Trustee would market the parcel for a fixed period of time. If the Trustee could not sell the parcel within the allotted time, an auction of the entire Farm would be held. Lititz
Again, neither the Trustee nor the Debtor was able to sell the parcel. Nor was the Debtor able to raise the $1 million necessary to forestall the auction. As a result, the entire Farm was sold to a third party at an auction held on September 16, 2015. Prior to the auction, Lititz's proof of claim, to which the Debtor had filed an objection, was temporarily allowed for purposes of credit bidding in the amount of $2,358,354.32. (Doc. # 463).
At the auction, Lititz did not invoke its credit bid to make the highest bid. Instead, the winning bid, made by a third party, was $1.75 million.
This court confirmed the auction sale by order dated September 18, 2015. (Doc. # 476).
The Debtor appealed the order confirming the sale. The district court affirmed the order by opinion and order dated October 9, 2015.
The Farm having been auctioned, this court held a status hearing in the case on November 24, 2015.
At the status hearing, the Debtor and Lititz discussed certain issues that remained unresolved. Lititz's claim was secured not only by the Farm, but also by the Debtor's second (residential) property. With the loss of the Farm, the Debtor expressed her intent to move with her family into that second property in the near future. From Lititz's perspective, the auction price for the Farm ($1.75 million) was significantly less than the outstanding debt (in excess of $2.3 million), leaving Lititz with a substantial deficiency claim, secured by that second property. The Debtor asserted that her then-pending objection to Lititz's claim would either eliminate or greatly reduce Lititz's deficiency claim, allowing her to propose a second, post-confirmation modified plan. Lititz disputed the validity of the Debtor's claim objection and did not concede that the Debtor had any further right to modify her chapter 12 plan.
Rather than resume litigation of the claim objection and commence litigation regarding the merits of another post-confirmation modification to the Debtor's plan, the Thorpes and Lititz agreed to mediation. Following the status hearing on November 24, 2015, Judge Ashely M. Chan of this court agreed to serve as mediator and was so appointed.
Judge Chan successfully mediated the disputes between the Thorpes and Lititz. However, the mediation also brought to light the dispute that is now before the court.
At the same time as the unsuccessful marketing process of the Farm parcel that eventually led to the auction of the Farm
Three (3) salient events occurred in connection with this insurance litigation:
The Nationwide insurance matter figured prominently in the mediated settlement ("the Lititz Settlement") between the Debtor and Lititz, as the availability of the settlement proceeds was material in inducing Lititz to compromise its claim against the Thorpes. The question that came up was whether the full $324,000.00 was available to fund the settlement or whether that fund would be diminished by the Mirarchi 35% contingent fee.
By the conclusion of the mediation, the Thorpes and Lititz reached an agreement, but no global settlement was reached that would resolve the Mirarchi fee dispute. As a result, the essential terms of the Lititz Settlement were:
On April 19, 2016, Lititz filed a motion to approve the Lititz Settlement ("the Lititz Settlement Motion"). (Doc. # 547). Mirarchi, the Trustee and the Thorpes all filed responses to the Lititz Settlement Motion. (Doc. #'s 550, 553, 559).
Mirarchi's primary concern was to ensure that approval of the Lititz Settlement would not prejudice his claim for his contingent fee. (
By order dated May 25, 2016, the court overruled all of the objections, granted the Lititz Settlement Motion and approved the
On June 22, 2016, Mirarchi filed the Mirarchi Motion. (Doc. # 581). In the Motion, Mirarchi requested that the court enforce its contingent fee agreement and direct the Clerk of the Bankruptcy Court to pay him the $113,400.00 held by the Clerk (hereafter, "the Disputed Funds").
The Thorpes filed a lengthy response to the Mirarchi Motion on July 11, 2016, asserting that due to various types of attorney misconduct, Mirarchi had no entitlement to any fee for services provided in connection with the Nationwide litigation. (
The hearing on the Mirarchi Motion was held over three (3) days, August 3, 2016, August 8, 2016 and August 19, 2016. Mirarchi and the Thorpes filed post-hearing memoranda in support of their positions, the last of which was filed on December 2, 2016. The Trustee elected to stand on his written objection to the Motion and did not attend the evidentiary hearing or file a post-hearing memorandum.
Set forth below are my proposed findings of fact. In making these proposed findings, I have considered the credibility and demeanor of the trial witnesses, the plausibility of their testimony, the existence of corroborating circumstantial, testimonial or documentary evidence and the totality of the evidentiary record. Where it would provide context, I have set forth in footnotes additional observations and analysis of the evidence presented.
1. The Debtor and Mr. Thorpe are husband and wife and the owners of the Farm.
2. Mirarchi is a law firm in which Mr. Mirarchi is president and the sole practitioner. (8/3/16 N.T. at 10, 87).
3. Mr. Mirarchi began practicing law in December 2001. (
4. Between 2010 and 2012, the Farm was damaged by two (2) separate storms, as well as by a fire. (8/8/16 N.T. at 149; 8/19/16 N.T. at 54).
5. On March 21, 2013, the Thorpes commenced a lawsuit ("the C.P. Action" or "the Insurance Litigation") against their property insurer ("Nationwide")
6. When they commenced the C.P. Action, the Thorpes were represented by Brem Moldovsky ("Mr. Moldovsky"). (
7. On July 23, 2013, the Debtor filed a motion requesting that the court award $51,025.54 in compensation to Mr. Moldovsky ("the Moldovsky Fee Motion"). The request was based on Mr. Moldovsky's negotiation of a partial settlement of the Thorpes' claim in the amount of $155,270.70 and Mr. Moldovsky's contingent fee agreement with the Thorpes. (
8. Lititz filed an objection to the Moldovsky Fee Motion, but later withdrew it. As a result, the court granted the uncontested Moldovsky Fee Motion by order dated October 16, 2013. (
9. At no time did the Debtor seek Mr. Moldovsky's appointment as special counsel.
10. Approximately one (1) year after commencing the C.P. Action, the Thorpes retained new counsel, Herbert McDuffy, Jr. ("Mr. McDuffy"), who entered his appearance on the Thorpes' behalf in the C.P. Court on February 14, 2014. (Ex. M-2).
11. On October 23, 2014, Nationwide filed a Petition for a Rule to File a Complaint in the C.P. Action. (Ex. M-2).
12. On November 7, 2014, McDuffy filed a complaint on the Thorpes' behalf in the C.P. Action. (
13. On November 26, 2014 Nationwide filed preliminary objections to the complaint. (
14. At no time between February 2014 and February 2015 did the Debtor seek Mr. McDuffy's appointment as special counsel.
15. In late November 2014, a mutual acquaintance of the Thorpes and Mr. Mirarchi contacted Mr. Mirarchi regarding the possibility of Mirarchi substituting in for Mr. McDuffy as counsel for the Thorpes in the C.P. Action. (8/3/16 N.T. at 15-16, 125-27; 8/8/16 N.T. at 92-93, 135).
16. At that time, Mr. Mirarchi was an attorney licensed to practice law in Pennsylvania. (8/3/16 N.T. at 13).
18. Mr. McDuffy also met with Mr. Mirarchi and then recommended that the Thorpes retain Mr. Mirarchi to replace him as their attorney in the C.P. Action. (8/19/16 N.T. at 13-14).
19. On December 15, 2014, Mr. McDuffy hand delivered his file on the C.P. Action to Mirarchi. (8/3/16 N.T. at 50).
20. The Thorpes' response to the preliminary objections was due on December 23, 2014. (
21. Through a series of text messages exchanged by Mr. Thorpe and Mr. Mirarchi, the Thorpes engaged Mirarchi to represent them in the C.P. Action. (Ex. M-6 at 3).
22. Prior to receiving a signed fee agreement, but considering himself "retained," (8/3/16 N.T. at 131;
23. Due to what he considered the exigency of the filing deadline, Mr. Mirarchi did not have the Thorpes review and verify the Amended Complaint, but instead filed it by attaching a signed verification that was included in the file he received from Mr. McDuffy. (
24. On February 13, 2014, also prior to receiving a signed fee agreement, Mirarchi filed a response to Nationwide's preliminary objections. (Ex. M-2).
25. In late February 2014, Mr. Mirarchi contacted Mr. Thorpe by email to request that Mr. Thorpe and the Debtor sign and return a contingent fee agreement ("the Mirarchi Fee Agreement") to retain Mirarchi to represent them in the Nationwide insurance litigation. (Ex. M-12).
26. On March 4, 2015, the Thorpes signed the Mirarchi Fee Agreement. (Ex. M-13; 8/3/16 N.T. at 18-19).
28. The Mirarchi Fee Agreement authorized Mirarchi to prosecute the C.P. Action and to settle or compromise the claim with the Thorpes' consent. (
29. On or about February 23, 2015, Nationwide's attorney communicated to Mr. Mirarchi its agreement that the filing of the Amended Complaint mooted Nationwide's preliminary objections. (8/3/16 N.T. at 131).
30. On April 2, 2015, Mr. Mirarchi advised Mr. Thorpe that he had granted Nationwide an extension of time to file an Answer to the Amended Complaint and that, thereafter, he would conduct discovery, including interrogatories and depositions. (Ex. M-14).
31. On April 29, 2015, Nationwide filed an Answer to the Amended Complaint in the C.P. Action. (Ex. M-2).
32. Neither side in the C.P. Action conducted any discovery between April 2015 and August 25, 2015. (8/3/16 N.T. at 131-32).
33. By order dated July 15, 2015, the Supreme Court of Pennsylvania placed Mr. Mirarchi on administrative suspension ("the Suspension Order") pursuant to Pa. R.C.L.E. 111(b) due to his failure to comply with his continuing legal education ("CLE") obligations. (Exs. M-38, M-42).
34. The July 15, 2015 Suspension Order took effect thirty (30) days later,
35. Mr. Mirarchi learned of the suspension of his license on August 13 or 14, 2015, after receiving an e-mail from the Pennsylvania Disciplinary Board. (8/3/16 N.T. at 110-11, 113).
36. Once Mirarchi learned of his administrative suspension, he promptly (within
37. On August 28, 2015, the Pennsylvania CLE Board sent Mr. Mirarchi a letter that:
(Ex. M-16) (emphasis added).
38. Mirarchi was not reinstated to active status as an attorney until September 16, 2015. (
39. At no time during his administrative suspension did Mr. Mirarchi inform the Thorpes of the suspension. (8/3/16 N.T. at 113).
40. On August 25, 2015, while his law license was suspended, Mirarchi engaged in a telephonic settlement negotiation with Nationwide's counsel. (8/3/16 N.T. at 23-24, 132).
41. The August 25, 2015 negotiation was the first settlement discussion after Nationwide filed its Answer to the Amended Complaint. (
42. In that negotiation, which involved an initial offer by Nationwide and a counteroffer by Mr. Mirarchi, Nationwide made a settlement offer of $324,729.30 ("the Nationwide Settlement Offer"). (
43. Mr. Mirarchi communicated the Nationwide Settlement Offer to Mr. Thorpe by text and e-mail. (8/3/16 N.T. at 24-25; 8/8/16 N.T. at 94; Ex. M-6, at 13-14).
44. At that time, Mr. Mirarchi was aware that a mortgage holder (
45. In response, Mr. Thorpe advised Mr. Mirarchi that the Nationwide Settlement Offer would have to be discussed with the Debtor's bankruptcy counsel. (8/8/16 N.T. at 95).
46. As a result, over the next few weeks, Mr. Mirarchi communicated with Mr. Thorpe and the Debtor's bankruptcy counsel's office by numerous e-mails and texts seeking:
47. On September 4, 2015, following a telephone conversation with the Debtor's bankruptcy counsel, Roger Ashodian ("Mr. Ashodian") and Mr. Ashodian's non-lawyer assistant, Brian Gerstel ("Gerstel"), Mr. Mirarchi sent Mr. Ashodian a copy of the Mirarchi Fee Agreement and his curriculum vitae in preparation for the filing of a motion for approval of the Nationwide settlement, for Mirarchi's appointment as counsel and for allowance of Mirarchi's contingent fee as compensation. (Ex. M-17;
48. By e-mail dated September 9, 2015, Gerstel advised Mr. Mirarchi that Mr. Ashodian had "decided for strategic reasons not to file the application as of yet, but he would like everything in place to file it soon." (Ex. M-19).
49. At no time did the Debtor file an application to appoint Mirarchi as counsel.
50. Starting in mid-September 2015, both Mr. Thorpe and the Debtor's bankruptcy counsel requested further details regarding administrative suspension, including the specific dates of the suspension. (Exs. M-21, M-22, M-23).
51. In response, on October 2, 2015, Mr. Mirarchi sent the Thorpes a four (4) page letter which
(Ex. M-24).
52. By mid-October, the tone of Mr. Mirarchi's
53. In the course of an eighteen (18) day period between October 15, 2015 and November 2, 2015, Mr. Mirarchi sent the Thorpes four (4) letters regarding the settlement. These letters, which were sent after the auction of the Farm, suggested that the strength of the Thorpes' case against Nationwide was uncertain and included criticism of the Debtors bankruptcy counsel:
54. By e-mail dated November 23, 2015, Mr. Thorpe advised Mr. Mirarchi that the Thorpes were terminating Mirarchi as their attorney in the C.P. Action. (
55. In response to the November 23, 2015 e-mail, Mr. Mirarchi advised the Thorpes by letter that, in addition to the e-mail from Mr. Thorpe, he required a signed termination notification from the Debtor. (Ex. M-32;
56. On December 31, 2015, Mr. Mirarchi received a signed copy of the e-mail terminating him as counsel. (
57. The Thorpes' discharge of Mr. Mirarchi as counsel was based, in significant part, on his administrative suspension, his failure to advise them of the suspension and what they considered to be his inadequate responses to their inquiries regarding the suspension. (8/8/16 N.T. at 155, 180-81).
59. On or about January 4, 2016, the Thorpes again engaged Mr. McDuffy to represent them in the C.P. Action. (Ex. D-2).
60. Mr. McDuffy re-entered his appearance in the C.P. Action on January 27, 2016. (Ex. M-2).
61. At no time before or after Mr. McDuffy's reentry of his appearance in the C.P. Action did the Debtor seek Mr. McDuffy's appointment as special counsel.
62. Without any further negotiation regarding the amount of the settlement, Mr. McDuffy accepted the Nationwide Settlement Offer on the Thorpes' behalf. (8/19/16 N.T. at 26, 43-44).
63. Although they considered the settlement offer to be too low, the Thorpes nevertheless accepted it in order to reach a settlement with Lititz that would protect their residential property. (
64. On June 23, 2016, by praecipe, the C.P. Action was marked "settled, discontinued and ended." (Ex. M-2).
1. The bankruptcy court has subject matter jurisdiction in this matter.
2. The bankruptcy court may exercise only non-core jurisdiction pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(c)(1) and therefore, may not enter a final order.
3. The Thorpes' termination of Mirarchi's representation prior to their acceptance of the Nationwide Settlement Offer terminated the Mirarchi Fee Agreement and Mirarchi's right to recover legal fees as a matter of contract.
4. In the absence of a right of recovery by contract, Mirarchi retained a potential right to recover under the doctrine of
5. Mr. Mirarchi violated the Pennsylvania Rules of Professional Conduct by failing to advise the Thorpes of his administrative suspension and by continuing to practice law during the period of his administrative suspension.
6. The Thorpes' termination of Mirarchi's representation prior to their acceptance of the Nationwide Settlement Offer was based on Mirarchi's wrongful conduct and, under applicable nonbankruptcy law, precludes any recovery in
This matter involves a dispute arising in a post-confirmation contract between a
As explained below, I conclude that the court has subject matter jurisdiction and that this is a non-core matter. One of the parties to the dispute, Mirarchi, has not consented to the entry of a final order by the bankruptcy court. (Mirarchi Pretrial Statement) (Doc. # 597). Therefore, this court will submit proposed findings of fact and conclusions of law to the district court.
In 2015, I summarized the jurisdictional framework in bankruptcy cases as follows:
The core/non-core distinction is significant because it determines the bankruptcy court's level of decision making authority.
Only after a bankruptcy court is satisfied that it has subject matter jurisdiction is it necessary to determine whether its jurisdiction is core or non-core and whether it has the authority to enter a final order or only proposed findings of fact and conclusions of law.
Aside from its main function of establishing whether the bankruptcy court may enter a final order, the core/non-core distinction also provides some guidance in analyzing the preliminary question of the existence of subject matter jurisdiction itself.
The concept of a core proceeding is "anchored in" two (2) of the jurisdictional grounds stated in 28 U.S.C. § 1334(b): those "that `arise under' and those that `arise in' the bankruptcy case."
By comparison, the iconic test for determining whether a matter is merely "related to" the bankruptcy case sets a lower standard:
Under
Comparison of the two (2) types of proceedings, core and non-core, suggests that one can conceptualize core matters as a subset of those matters that are "related to" a bankruptcy case:
The "relatedness" of the Mirarchi Motion and the manner in which its outcome may affect the administration of this bankruptcy case are not difficult to discern.
The Lititz Settlement, which resolved an objection to Lititz's proof of claim, provides that if the Mirarchi Motion is denied and some or all of the Disputed Funds are not payable to Mirarchi, Lititz will be entitled to receive an additional distribution of $9,400.00 on account of its allowed secured claim.
Having determined that the bankruptcy court has subject matter jurisdiction, I must now decide whether this matter is core or non-core.
The Court of Appeals has provided guidance for determining whether a matter over which a bankruptcy court may exercise jurisdiction is core or non-core:
The Mirarchi Motion is a non-core matter.
To understand why, it is helpful to begin by examining the underlying insurance claim against Nationwide. That claim was derived from prepetition fire and storm damage to the Farm. As such, the claim was property of the bankruptcy estate upon the commencement of the case,
The dispute between the Thorpes and Mirarchi arises from a contract they entered into in which Mirarchi agreed to provide legal services to assist the Thorpes
Thus, when viewed from the proper perspective, Mirarchi was retained by the Debtor and Mr. Thorpe, post-confirmation, to assist them in collecting a non-estate asset. This renders the connection between the Insurance Litigation and the post-confirmation administration of the bankruptcy case tenuous, especially because no provision in the confirmed plan imposed any obligation on the Debtor to use any of the proceeds of the Nationwide claim to pay any of the claims allowed in the bankruptcy case. Indeed, absent the Debtor's objection to Lititz's proof of claim, that resulted in the Lititz Settlement and the potential for the Disputed Funds to augment the distribution on account of Lititz's allowed claim, it is hard to see how the Nationwide insurance proceed would have had any effect on the bankruptcy case. Without the Lititz settlement, bankruptcy jurisdiction might not even exist, much less core jurisdiction.
All of these considerations dictate the conclusion that this contested matter regarding the competing claims of Mirarchi, the Thorpes (and Lititz, by virtue of the Lititz Settlement) to the Disputed Funds is a non-core proceeding.
In concluding that this is a non-core matter, I have considered the Trustee's Objection to the Mirarchi Motion, (Doc. # 590), in which the Trustee asserts that the Insurance Litigation remained property of the bankruptcy estate after confirmation of the Debtor's chapter 12 plan. However, I am unpersuaded by the Trustee's contention.
11 U.S.C. § 1227(b) provides:
The Trustee asserts that the Debtor's confirmed plan "otherwise provided," overriding the automatic vesting of the Debtor's interest in the insurance proceeds and therefore, the Debtor's interest in the Nationwide insurance proceeds remained
The Trustee bases his position on Paragraph 3.A.i. of the Modified Confirmed Plan, (Doc. # 286), which was approved postconfirmation November 14, 2014, (Doc. # 290). Paragraph 3.A.i. of the Modified Confirmed Plan provides:
If the Trustee is correct, and the Disputed Funds are property of the bankruptcy estate, this contested matter could be conceptualized as a bankruptcy court resolution of competing claims against estate property in the custody of the court, with the competing claimants being the Debtor, Mirarchi and various administrative expense claimants (the Trustee, the Trustee's counsel, and the Debtor's counsel). As such, this matter arguably would be a core matter under 28 U.S.C. § 157(b)(2)(B) or (O).
I do not interpret Paragraph 3.A.i of the Modified Confirmed Plan as a revesting provision that overrides the operation of 11 U.S.C. § 1227(b). Paragraph 3.A.i is a procedural mechanism for addressing the tension that continuously existed between the Debtor and Lititz during the case over the use of insurance proceeds. The Debtor hoped to use those proceeds for repairs and operations at the Farm, while Lititz preferred to received the proceeds to pay down the outstanding debt.
Any doubt regarding the question is laid to rest by Paragraph 8 of the Initial Confirmed Plan, as well as by Paragraph 8 of the Modified Confirmed Plan, both of which state unequivocally that all property of the estate "will vest in the Debtor upon confirmation." In other words, under the
The vesting provision of the confirmed plans defeats the argument that this proceeding is a core matter because the Nationwide insurance claim is estate property. Therefore, the litigation over the Disputed Funds is not a core matter and the bankruptcy court may only issue proposed findings of fact and conclusions of law.
As discussed in more detail in Parts VII and VIII,
The starting points in the Thorpes' argument are the legal propositions that (1) the bankruptcy court must approve the employment of a professional to provide services on behalf of the bankruptcy estate and (2) the payment of an employed professional with estate assets also requires court approval.
Assuming
As discussed in Part V,
It is true that, later, the situation changed. In the Lititz Settlement, the Debtor agreed to obligate a portion of her potential recovery to partially pay Lititz's an allowed claim. In functional terms, the approval of the Lititz Settlement modified the confirmed plan (which, as explained earlier, is why this court has jurisdiction of the dispute between the Thorpes and Mirarchi). But, the nexus between the insurance proceeds and the administration of this case was created after Mirarchi had already been both retained and discharged by the Thorpes. It would be absurd and inequitable to hold that the Bankruptcy Code requires court approval of a professional's retention based on circumstances arising after the conclusion of the professional's contractual relationship with the debtor.
For these reasons, I reject the Thorpes' argument that the Bankruptcy Code precludes Mirarchi from asserting a claim against the Disputed Funds.
Mirarchi's lead argument is that he has a contractual right to enforce the contingent fee provision of the Mirarchi Fee Agreement. This argument is without merit because it fails to take into account the Thorpes' discharge of Mirarchi as counsel before the Insurance Litigation concluded by way of settlement or court judgment.
Certain principles regarding the attorney-client relationship in Pennsylvania are well established and do not require an extended discussion:
In this matter, it is undisputed that the Thorpes never authorized Mirarchi to accept the Nationwide Settlement Offer.
As the
In the absence of a right to recover under the Fee Agreement, Mirarchi's sole remaining claim sounds in
The Thorpes contest Mr. Mirarchi's
Based on its authority under the Pennsylvania Constitution, the Pennsylvania Supreme Court has adopted the Pennsylvania Rules of Disciplinary Enforcement.
Several provisions of the Pa. R.D.E. are relevant in this contested matter.
Pa. R.D.E. 102(a) defines the term "administrative suspension" as including the
Pa. R.D.E. 102(a) defines the term "formerly admitted attorney" as including an "administratively suspended" attorney.
Several subdivisions of Pa. R.D.E. 217 describe the duties of a formerly admitted attorneys (including those under administrative suspension). These duties include:
At trial, Mr. Mirarchi asserted that:
Mr. Mirarchi also introduced a letter from the Pennsylvania Supreme Court Continuing Legal Education Board ("the
Mr. Mirarchi took these positions in his testimony, even though, earlier in the trial he stipulated that the date of his reinstatement to practice law was September 14, 2015 (with the proviso that the record would remain open for a brief period of time to permit him to submit any documentation demonstrating that the actual reinstatement date was different than that in the stipulation). (8/8/16 N.T. at 10). Later in the hearing, Mr. Mirarchi finally seemed to concede that the CLE Board letter of August 28, 2015 did not effect his reinstatement, only to revert to his initial contentions just a few minutes later. (
Mr. Mirarchi's contentions, prior to the hearing as well as at different points during the hearing in this matter — that either the completion of his delinquent CLE credits or the subsequent August 28, 2015 CLE Board letter constituted his "reinstatement" — are indisputably, legally incorrect.
On some level, Mr. Mirarchi's desire to ignore his suspended status is understandable. He was placed under administrative suspension for the relatively innocuous failure to maintain his CLE obligations, (relatively innocuous, compared to other types of more serious and culpable conduct that may result in suspension or disbarment, such as mishandling client's property or failing to represent clients competently). He then addressed the CLE problem immediately, by taking the required CLE courses. From a subjective standpoint, I presume that Mr. Mirarchi's
The considerations described above may have caused Mr. Mirarchi to convince himself that a "technicality" should not interfere with his professional life and that he should be able to continue with "business as usual" in his law practice once he completed his CLE obligations. All of this is understandable on a human, emotional level. But that is not what the law required and, as an attorney, Mr. Mirarchi should have had an enhanced sensitivity to his professional obligations. His likely subjective experience of the administrative suspension provides no excuse for his failure to fulfill his professional obligations to comply with the express requirements of the Pa. R.D.E.
The question, then, is not whether Mr. Mirarchi committed professional misconduct, but rather, the effect of that misconduct on his right to recover a portion of the Disputed Funds under the
The doctrine of
There is a small body of case law that addresses the right of an attorney to recover in
As stated in Part VII,
In
The next question is whether a suspension of an attorney's law license, which precludes the attorney from rendering service under the attorney-client contract, constitutes a material breach for
The first line of cases equates the attorney's suspension or disbarment to a material breach of the attorney-client contract. Recovery in
The second line of cases permits
In
Thus, the material issue here is whether the Thorpes' active, express termination of the attorney-client relationship was based on Mirarchi's wrongful conduct or whether it was merely the exercise of the implied contractual right to discharge an attorney for any reason (or no reason). If the former, under
I conclude that the Thorpes' termination of Mr. Mirarchi in November or December 2015 was based on his wrongful conduct. By that time, the Thorpes had discovered that Mr. Mirarchi had been administratively suspended, that he had not timely notified them of the suspension and that he had continued to practice law and represent them while suspended. Also, he had been uncooperative in his responses to the Thorpes' request for specific details regarding the duration of the suspension. Indeed, he provided them with information regarding his professional status that was misleading, if not an outright misrepresentation.
In the end, this is an equity case. Mirarchi has no contract rights against the Thorpes He seeks equitable relief because denial of all compensation for the services he rendered to the Thorpes while he was duly licensed to practice law undoubtedly results in a windfall to the Thorpes. Hence, he invokes the doctrine of
For these reasons, I recommend that the district court enter an order denying the Mirarchi Motion.
It is therefore
To decide the Motion, it is not necessary to resolve this fact issue. It is not material because it is indisputable that the Thorpes retained Mirarchi to represent them in the C.P. Action. (
I do not credit the Debtor's testimony on this point. I believe Mr. Mirarchi's testimony that, in their initial meeting, Mr. Thorpe represented that he had the authority to retain him on the Debtor's behalf. (8/3/16 N.T. at 17). I find both that the representation was made and that it was accurate. My observation of the Thorpes' conduct throughout this bankruptcy case convinces me that the Debtor routinely authorized Mr. Thorpe to act on their collective behalf with respect to matters that affected the Farm. Mirarchi's retention was just one example of that grant of authority. In any event, the Debtor signed the Mirarchi Fee Agreement on March 4, 2015 and there is no credible argument that the signature on the document is not hers.
(Ex. M-24).
To the extent that the Thorpes contend that Mr. Mirarchi's representation in general was sub-par, they did not prove this point at trial. Their evidence on the issue was little more than a conclusory expression of lay opinion.
Whatever the strength of the Thorpes' case may have been on this point, their feelings about the lack of quality representation undoubtedly were a factor in the decision to discharge Mr. Mirarchi. However, based on my consideration of all of the evidence, I am satisfied that Mr. Mirarchi's conduct in dealing with the Thorpes regarding his administrative suspension also was a material factor in their decision to discharge him as counsel.
In
The effect of the entry of the confirmation order in a chapter 11 case differs significantly from that in a chapter 12 case.
Conceptually, upon confirmation, a chapter 11 debtor has, to some extent, "exited" bankruptcy, having become the "reorganized debtor." In
By comparison, in chapter 12 and chapter 13 cases, the debtor remains "the debtor" through the end of the case. Further, while property of the estate vests in the debtor upon confirmation,
In chapter 12, the continued existence of a bankruptcy case trustee whose duties include ensuring that the debtor makes the payments required by the confirmed plan and filing a final accounting of the administration of the estate,
All of the differences described above have a jurisdictional consequence, making it appropriate to apply the traditional
I note that the text and structure of the Code support a counter-argument. In chapter 12, like chapter 13 (a chapter in which a debtor is clothed with certain trustee powers and in which it is indisputable that a debtor need not employ counsel), a separate trustee is appointed in every case. Thus, every chapter 12 case already has an estate fiduciary. One might infer from this structure that the chapter 12 debtor's counsel, like the chapter 13 debtor's counsel, is representing the debtor and not the bankruptcy estate, even though the chapter 12 debtor may employ various trustee powers. This distinction finds expression in 11 U.S.C. § 330(a)(4)(B), which authorizes counsel to the debtor in a chapter 12 case to be compensated by the estate for representing "the interests of the debtor," rather than the interests of the estate.
In this case, it is not necessary to decide the issue whether the court must appoint a chapter 12 debtor's professionals.
The Pennsylvania Supreme Court granted a petition for allowance of appeal in
His suspension exceeded thirty (30) days. That cannot fairly be characterized as having been resolved "near immediately."
Assume that Mr. Mirarchi notified the Thorpes of his administrative suspension and had otherwise complied with his obligations under the Pa. R.D.E. Assume further, however, that upon his reinstatement, the Thorpes ratified or re-entered the Mirarchi Fee Agreement, after which Mr. Mirarchi, able to practice law again, negotiated the settlement terms with Nationwide's counsel. Finally, assume that only after the negotiation of the terms of the eventual settlement did the Thorpes discharge Mr. Mirarchi's as counsel, for reasons other than wrongful conduct. In this scenario, arguably Mirarchi's right to recover in
Of course, these facts differ from the real facts in this case in that there was no
In