MEMORANDUM

ERIC L. FRANK, U.S. BANKRUPTCY JUDGE.

I. INTRODUCTION

On June 22, 2016, Joseph Q. Mirarchi Legal Services, P.C. ("MLS"), a law firm in which Joseph Q. Mirarchi ("Mirarchi") was the sole practitioner, filed a motion ("the Motion") ("Doc. 581") seeking payment of $113,400.00 that has been placed in the bankruptcy court clerk's registry ("the Escrowed Funds"). The Escrowed Funds constitute thirty-five percent (35%) of the settlement proceeds of a state court lawsuit ("the C.P. Action") that the chapter 12 debtor, Renee M. Thorpe ("the Debtor"), and her non-debtor husband, Dale Thorpe (collectively, "the Thorpes"), filed against Nationwide Mutual Insurance Company ("Nationwide").

Presently, the Motion is before the bankruptcy court on remand from the Court of Appeals and the district court. The district court instructed this court to make a recommendation concerning the proper amount of a quantum meruit award to MLS. (See Doc. # 695).

For the reasons set forth below, I recommend that the district court enter an order determining that MLS is entitled to $25,200.00 and that the Thorpes are entitled to the $88,200.00 balance of the Escrowed Funds.

II. PROCEDURAL HISTORY

A. Prior to the District Court Remand

The initial procedural history of this matter is set forth in detail in this court's Memorandum dated February 17, 2017. See In re Thorpe, 563 B.R. 576, 580-83 (Bankr. E.D. Pa. 2017) ("Thorpe I"), recommendation adopted sub nom., U.S. Trustee v. Thorpe, 2017 WL 3084388 (E.D. Pa. July 20, 2017) ("Thorpe II"); aff'd in part, rev'd in part sub nom., In re Thorpe, 755 F. App'x 177 (3d Cir. 2018) (nonprecedential) ("Thorpe III"). So, I will limit the discussion to a brief description of my initial Memorandum and the procedural events that followed.

In Thorpe I, after determining that the dispute was a non-core matter, see 563 B.R. at 594-97, I issued proposed findings of fact, proposed conclusions of law and a recommendation that the district court deny the Motion in its entirety. I concluded that MLS lacked any right to the Escrowed Funds based on the contingency fee contract between MLS and the Thorpes. I further concluded that Mirarchi's professional misconduct precluded any recovery in quantum meruit.

By Memorandum and Order entered on July 20, 2017, the district court adopted this court's recommendation and denied the Motion. Thorpe II.

On November 20, 2018, the Court of Appeals affirmed the district court's order in part, reversed it in part, and remanded the matter to the district court.

The Court of Appeals affirmed the district court's determination that MLS lacked a contractual right to the Escrowed Funds based on the contingency fee agreement. Thorpe III, 755 F. App'x at 180. The Court of Appeals reversed the district court's determination that, due to wrongful conduct, MLS was precluded from a recovery in quantum meruit, reasoning:

Id. at 182.

The Court of Appeals remanded the matter "to the Bankruptcy Court and the District Court to determine in the first instance the proper amount of Mirarchi's recovery in quantum meruit." Id. at 183 (footnote omitted).1

Following the remand to the district court, by order entered December 17, 2018, the district court "referred" the matter to this court "to determine the proper amount of [the] quantum meruit award." See (Doc. # 695).

B. After the District Court Remand

1. overview

On December 20, 2018, this court entered an order requiring:

(Doc. # 696) (emphasis in original).

No party in interest filed a timely request for the opportunity to supplement the existing evidentiary record.

On March 18, 2019, after determining that additional briefing "would be of assistance to the court," I entered another order, this time directing that each party submit a memorandum on or before April 9, 2019. (Doc. # 706).

The March 18, 2019 order was specific in describing the issues to be addressed in the requested memoranda:

(Id.).

As the March 18, 2019 Order indicated on its face, I directed the filing of additional submissions from the parties to flesh out their positions regarding the applicable legal standards and to have them point to the relevant facts in the existing record (with citations to the record) that should be considered in determining MLS's quantum meruit entitlement.

Unfortunately, the March 18, 2019 Order triggered a flurry of filings from the parties that went well beyond the scope of the submissions ordered by the court — a veritable free-for-all of unsolicited, sometimes untimely, filings and responses. I address those matters below.

2. the Thorpe's Judicial Notice Motion

a.

On April 9, 2019, the Thorpes filed a motion, ("the Judicial Notice Motion") (Doc. # 708), requesting that this court take judicial notice of the Pennsylvania Supreme Court's March 18, 2019 Order ("the Supreme Court Order"). The Supreme Court Order disbarred Mirarchi based on an accompanying Report and Recommendations of the Disciplinary Board of the Supreme Court of Pennsylvania. The Thorpes also attached to the Judicial Notice Motion a copy of the seventy-three (73) page report of the Disciplinary Board. ("the Report").

The Thorpes contend that Mirarchi's disbarment is relevant evidence that was not available before the expiration of the January 4, 2019 deadline set by this court for requesting the opportunity to supplement the existing record.

MLS objects to the court's consideration of this additional evidence on the ground that the Thorpes are requesting that the court take judicial notice of facts that are in dispute (without explaining why the facts of the disbarment and the findings in the Report are in dispute). (Doc. # 718).

I will deny the Judicial Notice Motion, but for reasons other than those offered by MLS. I conclude that the Supreme Court Order and the Report provide evidence that is either merely cumulative or irrelevant.

b.

The Report describes numerous instances of professional misconduct by Mirarchi involving, inter alia: (a) the handling and misappropriation of client trust fund monies and (b) the unauthorized practice of law while under administrative suspension. The Report makes no specific reference to any conduct involving Mirarchi's representation of the Thorpes.

The Report does reference the July 15, 2015 Pennsylvania Supreme Court order (effective on August 14, 2015) that administratively suspended Mirarchi for failing to comply with his continuing education requirements, as well as his reinstatement effective September 16, 2015. (Report ¶¶ 161-62, 185). The Report then states the Disciplinary Board's finding that between August 14, 2015 and September 15, 2015, Mirarchi "continued to maintain an office for the practice of law and to hold himself out as eligible to practice law" and "falsely testified at the disciplinary hearing that while he was administratively suspended, he `did not work on any cases.'" (Id. ¶¶ 180, 186).

With the possible exception of the Report's reference to the unauthorized practice of law, none of the other, numerous instances of misconduct recited in the Report relate to Mirarchi's representation of the Thorpes. It is not possible to tell from the Report whether the Thorpes' case was one of the cases the Disciplinary Board was referring to when it found that Mirarchi worked on cases while under administrative suspension in 2015. But, ultimately, that is of no consequence. The fact that Mirarchi practiced law by representing the Thorpes while under administrative suspension in 2015 is not "news" to this court. That fact was established during the initial hearing in this court and is no longer in dispute. See Thorpe I, 563 B.R. at 586-88, 601-02; see also Thorpe III, 755 F. App'x at 179 ("While suspended, Mirarchi negotiated on behalf of the Thorpes a settlement with Nationwide for $324,000").

As for the Pennsylvania Supreme Court Order, it merely constitutes an administrative action taken by the Court in 2019, years after the events giving rise to the dispute. It is irrelevant.

Consideration of the additional evidence requested by the Thorpes will not affect the quantum meruit determination. Therefore, I will deny the Judicial Notice Motion.

3. the Mirarchi time records and other evidentiary matter

a.

On April 9, 2019, MLS also filed its submission in response to the court's March 19, 2019 Order, which it styled as "Memorandum of Law of Movant Mirarchi Legal Services, P.C. Serving to Supplement the Record in Connection with the Third Circuit Court of Appeals Mandate and Remand of the Motion for Payment of Certain Funds Held in Escrow." (Doc. # 713) (emphasis added).

As suggested by its title, MLS attached to the memorandum various documents that contain evidentiary matter not in the present evidentiary record:

In the File Activity Log, MLS asserts that Mirarchi spent 326.30 hours in connection with this matter, for a total legal fee of $97,890.00 on a lodestar basis. In addition, MLS lists expenses incurred of $505.00 for filing in the Court of Appeals, $16,916.92 in appellate printing costs and $57,669.19 in legal fees owed to Fox Rothschild.3 The File Activity Log concludes by stating that the "Grand Total Quantum Meruit Claim" is $172,981.11, an amount that far exceeds the $113,400.00 in Escrowed Funds.4

b.

The Thorpes object to the court's consideration of the additional evidence. I agree that this evidence should not be considered in fixing the amount of MLS's quantum meruit entitlement.

There are two (2) threshold problems with consideration of the documents attached to MLS's memorandum: (1) the evidence is unverified and (2) their submission as an attachment to the memorandum deprives the Thorpes of the opportunity to cross examine Mirarchi on the content of the documents — in particular, the File Activity Log.

But most importantly, and decisively, MLS' submission is untimely in light of the January 4, 2019 deadline set by the court's December 20, 2018 order.

By failing to respond to the December 20, 2018 order, the parties bound themselves to the record established during the course of Thorpe I. The March 18, 2019 order (the second post-remand order entered by this court) did not alter the December 20, 2018 order. It merely requested and authorized the filing of memoranda on specified issues; it did not reopen the evidentiary record or authorize MLS to submit additional evidence by attaching documents to its memorandum.

If MLS wished, belatedly, to supplement the record, the only proper course would have been to file a motion to extend the January 4, 2019 deadline and for leave to supplement the evidentiary record. Had such a motion been filed, and granted, MLS could have offered its additional evidence at a hearing, subject to the Thorpes' cross-examination and potential rebuttal evidence.

Instead, MLS simply ignored the January 4, 2019 deadline set by the court and, more than two (2) months after the deadline expired, submitted additional evidence — without offering any explanation or excuse for its delay. This was improper because evidence may not be submitted to the court by attaching material to a post-hearing brief5 and because the submission was untimely.6

In these circumstances, it is appropriate to enforce the January 4, 2019 deadline set by the December 20, 2018 order and disregard the exhibits attached to MLS's memorandum. See U.S. v. Locke, 471 U.S. 84, 101, 105 S.Ct. 1785, 85 L.Ed.2d 64 (1985) ("if the concept of a filing deadline is to have any content, the deadline must be enforced"); accord Silivanch v. Celebrity Cruises, Inc., 333 F.3d 355, 368 (2d Cir. 2003) ("the legal system would groan under the weight of a regimen of uncertainty in which time limitations were not rigorously enforced — where every missed deadline was the occasion for the embarkation on extensive trial and appellate litigation to determine the equities of enforcing the bar"); Rockwell Automation, Inc. v. U.S., 7 F.Supp.3d 1278, 1303 (Ct. Int'l Trade 2014) (deadlines in court orders "must mean something" and "must be respected and honored by the parties and they must be enforced by the court, unless, of course, they are extended pursuant to a timely-filed motion").

Therefore, my recommendation regarding MLS's quantum meruit entitlement will be based entirely on the record made at the hearings held in the course of Thorpe I.

III. PROPOSED FINDINGS OF FACT

I incorporate by reference all of the Proposed Findings of Fact set forth in my prior Memorandum,7 with the exception of Proposed Finding of Fact No. 57.8 See Thorpe I, 563 B.R. 576, 583-90.

I supplement the prior Proposed Findings of Fact with the Following Supplemental Proposed Findings of Fact:

During the course of the hearing preceding Thorpe I, MLS's primary legal theory was that it was entitled to recover the Escrowed Funds as a matter of contract based on its contingent fee agreement with the Thorpes. Truly, quantum meruit was an afterthought. Consequently, there is very little in the record regarding the amount of time MLS expended in representing the Thorpes in the C.P. Action.

Initially, Mirarchi stated that he did not keep time records while he represented the Thorpes. (8/3/16 N.T. at 74).10 When pressed further on the amount of time MLS spent in representing the Thorpes, the most concrete testimony on the subject occurred in the following exchange between Mirarchi and the Thorpes' attorney:

(8/3/16 N.T. at 78).

There is nothing else in the record quantifying the amount of time MLS spent in representing the Thorpes between November 20, 2014 and August 14, 2015 and from September 16, 2015 to November 23, 2015.11

The pleading referenced in the above-quoted exchange between Mirarchi and the Thorpes' attorney is the Nunc Pro Tunc Application to Employ Joseph Q. Mirarchi Legal Services, P.C. as Special Litigation Counsel ("the Application to Employ") (Doc. # 545).12 In the Application to Employ, MLS represented that in the weeks following its retention (accomplished by an exchange of text messages between Dale Thorpe and Mirarchi on December 22, 2014), MLS thereafter "worked on the matter for approximately thirteen (13) hours." (Application to Employ ¶¶ 24, 28). The Application to Employ also stated that, in the weeks following February 17, 2015, MLS expended "at least eight (8) hours revising certain pleadings in the State Court Action. (Id. ¶ 36).

The record supports a finding that MLS spent twenty-one (21) hours representing the Thorpes.13 In their remand memorandum, the Thorpes rounded that number up to twenty-two (22) hours. (Thorpes' Memorandum at 11-12) (unpaginated). I accept the Thorpes' calculation.

IV. DISCUSSION

A. Applicable Legal Principles

In Thorpe III, the Court of Appeals determined that MLS "has a viable quantum meruit claim of at least some amount." 755 F. App'x at 183. That is the starting point in my analysis.14

An action in quantum meruit "sounds in quasi-contract or contract implied in law and seeks the equitable remedy of restitution where one person has been unjustly enriched by the services of another." Thorpe III, 755 F. App'x at 181 (quoting Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman, P.C., 635 Pa. 427,137 A.3d 1247, 1250 n.4 (2016)).15

At its core, quantum meruit is equitable in nature. See, e.g., Knox v. Herman Gerel, LLP, 2014 WL 2880277, at *20 (E.D. Pa. June 24, 2014); Bednar v. Marino, 435 Pa.Super. 417, 646 A.2d 573, 578 (1994); see also Kelly v. Vennare, 2016 WL 1062819, at *10 (Pa. Super. Ct. Mar. 16, 2016) (nonprecedential). The determination of the proper amount of a quantum meruit award is left to the sound discretion of the trial court. See Mager v. Bultena, 797 A.2d 948, 961 (Pa. Super. Ct. 2002); Robbins v. Weinstein, 143 Pa.Super. 307, 17 A.2d 629, 633 (1941).

The measure of damages in a quantum meruit action is "limited to the reasonable value of the services performed." Meyer, Darragh, 137 A.3d at 1251 n.6.

These principles are well-settled. Perhaps somewhat less clear is the precise methodology for measuring the reasonable value of the services performed by an attorney retained on a contingency whose services are terminated prior to the occurrence of the contingency. See Mulholland v. Kerns, 822 F.Supp. 1161, 1169 (E.D. Pa. 1993) ("Pennsylvania does not have a specific method for determining attorneys' fees quantum meruit").

A well-established methodology for determining the reasonable amount of an attorney's fee is the lodestar approach: multiplying the reasonable number of hours expended by a reasonable hourly rate. See, e.g., Jones v. Muir, 511 Pa. 535, 515 A.2d 855, 864 (1986); see also Lindy Bros. Builders, Inc. of Phila. v. Am. Radiator & Standard Sanitary Corp., 487 F.2d 161, 167-68 (3d Cir. 1973).

Pennsylvania courts have employed the lodestar approach as a means of measuring quantum meruit attorney's fee awards. See Mager, 797 A.2d at 956; Hiscott & Robinson v. King, 426 Pa.Super. 338, 626 A.2d 1235, 1237-38 (1993); Biersdorf & Assocs., P.C. v. Horner, 33 Pa. D. & C.5th 85, 93 (C.P. 2013).

A passage in Mager suggests that the lodestar approach is the sole method for determining a quantum meruit attorney's fee award:

Mager, 797 A.2d at 957 (emphasis in original).

Other judicial opinions, however, suggest that a court may have more flexibility in fashioning a quantum meruit attorney's fee award.

In Mager itself, the concurring opinion stated:

Mager, 797 A.2d at 962 (Joyce, J., concurring).

Recently, a panel of the Pennsylvania Superior Court read the Mager majority opinion narrowly and found the Mager concurrence persuasive. In Angino & Rovner v. Jeffrey R. Lessin & Assocs., 131 A.3d 502, 511 (Pa. Super. Ct. 2016), the court stated:

This statement was not mere dictum. The Angino & Rovner, court further held that "[t]he facts of this case represent a compelling reason to award Angino more than an hours and expenses quantum meruit recovery." Id.16

In the absence of controlling state court precedent, a federal court must try to predict how the Pennsylvania Supreme Court would resolve an issue by examining the relevant decisional law of both Pennsylvania intermediate courts and federal courts. See, e.g., Klein v. Weidner, 729 F.3d 280, 283 (3d Cir. 2013) (citing Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1373 n. 15 (3d Cir. 1996)).

In my view, Angino & Rovner, the most recent intermediate Pennsylvania appellate decision on the issue before this court, as well as the consistent federal court decisions from this district, are the best barometers of Pennsylvania law on the subject. Therefore, the foundation of my quantum meruit analysis will be the lodestar approach, but that calculation will be subject to modification based on other factual and equitable considerations that may be relevant.

B. Determination of the Recommended Quantum Meruit Award

1.

The first step in the two-step quantum meruit determination, the calculation of the lodestar, is not difficult in this case.

Based upon the twenty-two (22) hours of time that Mirarchi expended in this matter before his administrative suspension, (as he himself stated in documents filed with the court and adopted, if somewhat grudgingly, in his testimony at trial) and his requested $300.00 hourly rate, Mirarchi is presumptively entitled to a quantum meruit award of $6,600.00.

The second step in the determination — the factual and equitable adjustment of the lodestar — has more moving parts. As explained below, I recommend that the lodestar be adjusted upward based on a qualitative evaluation of the value of the services that MLS provided to the Thorpes. However, I also recommend a second, downward adjustment of the award based on other equitable considerations, specifically, Mirarchi's unprofessional conduct during the relevant time period.

2.

In LaRocca, the Pennsylvania Supreme Court stated that among the factors to be considered in determining the reasonable value of an attorney's services are the results the attorney obtained and the amount of money in question. 246 A.2d at 339.

In this case, the Thorpes obtained a settlement of $324,729.30, a substantial sum. The question is: what was the value of MLS's services that contributed to this outcome?

Based on the facts presented here, the mechanical lodestar methodology (which would yield an award of only $6,600.00) is too narrow an approach. Rather, equity warrants the consideration of more qualitative, holistic considerations in measuring the value of MLS's services in the C.P. Action.

When the Thorpes retained MLS, their lawsuit against Nationwide was floundering. Preliminary Objections to the complaint McDuffy filed on their behalf were pending and could have resulted in the dismissal of their lawsuit. McDuffy felt he lacked the expertise to overcome this obstacle and to generally navigate the litigation to a successful conclusion. The Thorpes then retained MLS. Working under some considerable time constraints, MLS responded to the Preliminary Objections and prevented dismissal of the C.P. Action. Eventually, Mirarchi persuaded Nationwide not to press its Preliminary Objections. Instead, Nationwide filed an answer to the amended complaint that MLS filed on the Thorpes' behalf.17

When MLS took on the representation, the Thorpes were in a vulnerable position in the C.P. Action. Its neutralization of Nationwide's dispositive motion, which permitted the litigation to proceed to the discovery phase, was a significant contribution to the eventual successful outcome of the litigation and should be considered in placing a value on MLS's services.

Of course, there is no objective formula for measuring value in the context presented here. That said, I suggest that the following constitutes a fair valuation method in this case.

At the risk of oversimplification, litigation that does not settle can be categorized as having three (3) phases: (1) pleadings; (2) discovery; and (3) trial. Throughout all three (3) phases, representation may also involve settlement negotiations which may terminate the litigation at any point.

Here, MLS made a substantial contribution in only one (1) of the three (3) litigation phases, i.e., the pleading phase. MLS's contribution was limited to this one (1) phase of the litigation. MLS did no discovery. And, as a matter of public policy, should MLS should not receive any favorable consideration based on the settlement negotiations conducted while Mirarchi was under administrative suspension and engaged in the unauthorized practice of law.

While one may consider it a form of "rough justice" that may or may not be appropriate in other factual settings, I consider it equitable in this setting to measure the value of MLS's services as constituting one-third of what otherwise would have been the contractual measurement of the value of the legal services. In other words, on the particular facts presented here, I propose that the district adopt the finding that, as an initial matter, the presumptive value of the services provided is one-third (1/3) of the contractual contingent fee, i.e., one-third of $113,400.00, or $37,800.00.18

3.

There is an additional equitable consideration that must be evaluated in fashioning a quantum meruit award that leads me to recommend a further adjustment — this time downward.

MLS (acting through Mirarchi) acted inequitably in a variety of ways during the course of its relationship with the Thorpes. Mirarchi engaged in the unauthorized practice of law in negotiating a settlement of the C.P. Action. He failed to timely notify the Thorpes of his administrative suspension, as required by Pennsylvania law. He was uncooperative in his responses to the Thorpes' request for specific details regarding the duration of the suspension. And worse, in response to their inquiries, Mirarchi provided the Thorpes with information regarding the status of his professional license that was misleading, if not an outright misrepresentation. See Thorpe I, 563 B.R. at 604.

I am fully cognizant that the Court of Appeals panel held that Mirarchi's professional misconduct was insufficient to preclude MLS from obtaining a quantum meruit award. But I read the panel's decision as holding only that, as a threshold matter, Mirarchi's misconduct was insufficient to warrant a complete forfeiture of his equitable quantum meruit rights. In its decision, the panel evaluated Mirarchi's misconduct under an enhanced standard — i.e., whether his conduct "shock[ed] the conscience"19 The panel's employment of such a rigorous standard is consistent with the equitable maxim that "equity abhors a forfeiture," See, e.g., Accurso v. Infra-Red Servs., Inc., 169 F.Supp.3d 612, 621 (E.D. Pa. 2016); In re Wolfe, 378 B.R. 96, 105 (Bankr. W.D. Pa. 2007).

But now we are beyond the threshold determination whether MLS may invoke equity and the court's function is to do equity. In making the equitable, quantum meruit determination itself, Mirarchi' professional misconduct is a relevant consideration. Professional misconduct, by its very nature detracts from the value of the services rendered by an attorney. Furthermore, in light of the overall equitable nature of the quantum meruit inquiry, consideration of an attorney's professional misconduct is appropriate in the fulfilling the court's function of balancing the competing interests of the parties and attempting to achieve an overall sense of fairness and justice:

30A C.J.S. Equity § 103 (West 2019) (footnotes omitted) (citing cases).

Thus, I conclude that it is permissible, appropriate and necessary for a court of equity to consider the professional misconduct of any attorney in determining the amount of a quantum meruit award.

This principle was applied in United States v. 36.06 Acres of Land, 70 F.Supp.2d 1272 (D.N.M. 1999) to reduce a presumptive quantum meruit award due to attorney misconduct. The court explained:

Id. at 1277; accord Exact Software v. Infocon Sys., Inc., 2011 WL 2490594, at *6-7 (N.D. Ohio June 22, 2011) (in quantum meruit action, a lawyer's unethical conduct "may reduce the value of such services").20

In the circumstances presented here, I conclude that the appropriate equitable remedy is a reduction of the presumptive $37,800.00 quantum meruit award by one-third, i.e., by $12,600.00 and I make that recommendation to the district court.

V. CONCLUSION

For the reasons stated above, I recommend that the district court enter an order determining that the Escrowed Funds should be distributed as follows: $25,200.00 to MLS and $88,200.00 to the Thorpes.