MEMORANDUM OPINION

PAUL M. BLACK, Bankruptcy Judge.

This matter comes before the Court on Complaints filed by the United States Trustee for Region Four ("UST") against Darren T. Delafield, John C. Morgan, Jr., Upright Law, LLC ("Upright"), Law Solutions Chicago, LLC, Jason Royce Allen, Kevin W. Chern, Edmund Scanlan, and Sperro, LLC on May 31, 2016 and June 30, 2016. Separate adversary proceedings were filed in the bankruptcy cases of Timothy and Andrian Williams, filed by Darren Delafield ("Delafield") as an Upright partner, and of Jessica D. Scott, filed by John Morgan ("Morgan") as an Upright partner. The two cases were consolidated for trial. Sperro, LLC did not file a response, nor has it appeared in this action. Default was entered against it on July 15, 2016 and August 17, 2016. The remaining defendants are collectively referred to as the "Upright Defendants." Extensive discovery took place and numerous motions were heard prior to trial. A four day trial was conducted September 25-28, 2017, during which multiple witnesses testified and thousands of pages of exhibits were submitted. All parties submitted post-trial briefing once the transcripts were prepared, which briefing was completed in late December 2017. This matter is now ripe for resolution.

FACTUAL BACKGROUND

This case involves yet another collision between traditional methods of providing — and policing — legal services to consumers for bankruptcy matters and attempts by attorneys and creative online marketers to tap into that market on a high-volume, multi-jurisdictional basis. On November 15, 2015, this Court issued an opinion in which it stated:

Little has changed.

The UST attempts to paint Upright and by association its local "partners" as money hungry "bankruptcy boiler room" operators that have stepped over — and will continue to step over — legal and ethical lines without hesitation in their inexorable quest for the next dollar. The Upright Defendants, in turn, attempt to portray themselves as cutting-edge advocates for the financially distressed consumer. They contend they have identified a void in the legal market for consumers that they are uniquely able to fill by using technology and the internet to match underserved areas of clients with attorneys who have the capacity and ability to fill their needs on a national basis, all while staying within the bounds of the law.

This case was aggressively litigated on both sides. The Court's findings of fact and conclusions of law follow below.1

FINDINGS OF FACT

I. Overview of the Genesis and Structure of "Upright Law"

Upright Law, LLC is a d/b/a for Law Solutions Chicago, LLC ("LSC"), an Illinois limited liability company. LSC also operates under various other assumed names, including Jason Allen Law, LLC, Allen Chern Law, Allen Chern LLC, and Allen & Associates, LLC among others. In at least one instance, Upright Law is referred to as "a service of Allen Chern Law LLC." UST Ex. 3-7. According to Kevin Chern ("Chern"), the members of LSC are Chern, Jason Royce Allen ("Allen"), and David Leibowitz ("Leibowitz"), all members of the Illinois bar.2 Tr. 60-61, Day 3.3 The mangers of LSC are Chern and Allen. Chern is the managing partner of LSC, Allen is its chief operating officer, and Leibowitz is its chief legal officer.

Chern has a past business history with an individual named Edmund Scanlan ("Scanlan"), whose expertise is internet marketing, among other things. Scanlan is not an attorney. He holds the title of executive director of LSC, although he holds no actual ownership interest in LSC. Scanlan is paid a base salary of $200,000.00 by LSC for which he receives an IRS Form 1099, presumably as an independent contractor. LSC has very few actual employees — the ones it does have are in-house Chicago attorneys — instead leasing most of its employees from Mighty Legal, LLC.4 Mighty Legal, LLC in turn is owned by Justiva, LLC, which is owned by Chern, Scanlan, Allen and some others not parties to this litigation. Justiva, LLC also owns Royce Marketing, LLC, which provides marketing services to LSC.5 Scanlan does not share in the profits or losses of LSC. However, for all practical purposes, LSC is the only client of both Mighty Legal and Royce Marketing, and the arrangements with Mighty Legal, Royce Marketing — and ultimately Justiva — allow for significant funds generated by LSC to flow to Scanlan, Chern, and others.6

Chern testified that, while working with Scanlan to provide online marketing services to small law firms, he identified "that there was an enormous gap between the number of consumers who are actually reaching out and saying that they need legal assistance and the number of attorneys that are interested in proliferating information about their availability to provide services to those consumers." Tr. 55, Day 3. In 2013, Chern approached Allen, who at the time ran LSC, and discussed joining with him to attempt to match up on a multi-jurisdictional basis attorneys who were looking for work with consumers who needed bankruptcy assistance, but, for a variety of factors, were unable to obtain counsel. According to their research, clients overwhelmingly preferred not coming into "brick and mortar locations," instead they preferred receiving legal services without the burdens of travel. This led to the establishment of a "remote onboard process for clients," with LSC centralizing its operations in Chicago and abandoning the traditional client office-visit arrangement. Tr. 58-59, Day 3. Unless otherwise described in this Opinion, "Upright Law," "Upright" and "LSC" are generally referred to as one in the same.

A. The "Onboarding" Process

The trial evidence reflected that when a prospective client searches the internet for a bankruptcy attorney and comes across Upright Law, the client generally reaches out one of two ways: they either call Upright Law or request information through an online request form. This reach out, in turn, prompts a call back from a "client consultant." In 2015, Upright had a bifurcated client intake process involving non-attorney personnel in Chicago called "client consultants" and "senior client consultants." Client consultants were junior employees whose job it was to gather basic information and probe whether the prospect was really interested in filing for bankruptcy, whether they had the ability to pay for services, and whether they were the decision maker for the family.7 Chern, Tr. 88, Day 3. If those qualifications were met, the prospect was passed on to a senior client consultant.

Senior client consultants were usually former client consultants who had been promoted after a period of time. According to Chern, their job was to identify the consumer's motivations and desires, what goals they were trying to achieve, and whether there was a precipitating event that was driving them to file. Id. at 88-89. These individuals are not attorneys and are paid a base salary plus commission. Sales employees were also trained in a boot-camp type arrangement. They were provided with a "Playbook," which taught them a variety of methods to "close" the sale of bankruptcy services to individuals seeking relief.

For example, UST Exhibit 37 is an Upright Law "Sales Play Book," which provides at Chapter I "Sales Rules & Theory — Close or be Closed." It includes topics such as the "Pitch Outline," the "Pitch Script," "Moving to the Close," and "Objection Handling." It is replete with high pressure sales tactics, some of which recommended to "close" the sale are unsettling to the Court.8 Under objection handling, senior client consultants are taught to respond as follows if a prospect says "I need to pray about it":

UST Ex. 37, p. 12. Moreover, if a prospect said, "I need to talk to my Wife/Husband," senior client consultants were advised to respond with responses including: "I agree, and you should, but if your husband/wife is anything like mine, he/she never tells me no when I really need or love something, and I never tell him/her no." Id. Or, "[b]etter to ask for forgiveness than ask for permission, so let's get you going right away[.]" Id. Under the Playbook's "Now or Never" pitch, Upright sales people were advised to state as follows:

UST Ex. 37, p. 7. If a prospect is already represented by counsel, sales personnel are directed to "[t]ell the client to fire their local attorney, they can send an email, then they can hire us." Upright Ex. J7, p. 11.9

One of the senior client consultants, Brandon Fox ("Fox"), testified by deposition that he was paid a base pay of $40,000, plus a commission tied to how may "closes" he obtained. Tr. 289, Day 1. Another senior client consultant, Angelo Walsh ("Walsh"), testified by deposition that each client consultant had a minimum requirement to meet or no bonus would be paid, and each "salesman has a specific number or amount of fees collected they need to hit in order to remain employed." Tr. 304, Day 1. The sales numbers were tallied on a 45 day basis, and changed frequently. Tr. 289, 304-05, Day 1. Fox testified that he understood he was hired to "sell[] bankruptcy to people."10 Tr. 287, Day 1.

The non-attorneys were instructed they could not provide legal advice. Chern, Tr. 169, Day 3. Fox and Walsh confirmed that instruction. However, in several instances in the matters before the Court, those instructions were not followed by Upright non-attorney personnel.11 The conversations with the debtors involved in this action were recorded by Upright Law, and those transcripts were introduced into evidence by the UST. UST Exs. 3-1, 4-1. Among other things, prospects were told that they were a "perfect candidate for filing for bankruptcy," and their filing chapter was pre-selected before they ever spoke to an attorney. UST Ex. 3-1, Tr. pp. 11-12, 43-45. A prospect was examined by a non-attorney to "see if you qualify to file," conceded by Allen to be unauthorized. UST Ex. 3-1, Tr. p. 4; UST Ex. 26, Tr. pp. 84-85. In addition, one client was advised, after asking about whether certain debts would be included in her case, that it would be up to the trustee to make that determination. UST Ex. 3-1, Tr. p. 21. In at least one instance in this case, a debtor was told she could leave a debt off her bankruptcy schedules to protect an ex-spouse.12 UST Ex. 4-1, Tr. pp. 30-31. One prospect was given the advice to hide a vehicle from the lender, despite Allen's testimony that such a suggestion was "off-script." Chern confirmed such advice was outside the employee's authority. UST Ex. 3-1, Tr. pp. 75-77; Chern Tr. 252, Day 3; UST Ex. 26, Allen Dep. Tr. p. 219.13 All of these discussions took place before a prospective client ever spoke with an attorney, either in Chicago or locally.

The sales personnel were supervised by a non-attorney sales director, and that sales director, in turn, reported to Allen. "Onboarding attorneys" in Chicago are supposed to confirm that the non-lawyers did not provide the client with any legal advice,14 but as seen, this check appears less than effective based on the evidence at trial. Once a client was "closed" or sold on bankruptcy, and money was received or payment scheduled, an "oral retention" agreement was entered into and the client was then transferred to an attorney. No conflict check was run before a client was presented with the oral retention agreement.15 Among other things, the oral retention agreement used in 2015 provided if the client is seeking to file bankruptcy under a certain chapter of the Bankruptcy Code, that the "firm does not represent you until you talk to you [sic] local attorney and they accept you as a client," and that until fees are paid in full, the firm will not take action to file the case. The oral retention agreement further advises that the client acknowledges that the firm will be performing work on the client's behalf, such as by fielding creditor calls, answering client questions, and preparing the petition. In addition, "[p]ayments made are direct compensation for that work on your case and are generally non-refundable as they are earned." UST Ex. 58. The oral retention agreement provides that an electronic retainer agreement will follow which the client is obligated to sign and return. Id. In the Western District of Virginia, forty-eight percent (48%) of all clients paying over time never complete their payment plans, and the cases are not filed. UST Ex. 1, p. 5. In general, the fees that are not refunded are not shared with the "local partners."

B. The Local Partners

In furtherance of its national marketing and business plan, Upright brings on local attorneys around the country as "partners," "local partners," or "limited partners." These attorneys generally have their own practices and have limited signage and advertising indicating they are affiliated with Upright. The attorneys get a different CM/ECF case filing password for their own practices, and a separate one for cases filed as an Upright partner. The local attorneys sign a limited partnership agreement that provides they have no rights in the management of the firm and only a marginal, non-voting interest in it. The attorneys are licensed in their home state.

Prior to September 2015, the senior client consultant would set up a recurring payment plan for a client to start paying his or her fee, and an engagement agreement would be generated and sent to the client. At that point, the local attorney or "limited partner" would get an email inviting the attorney to contact the client. The attorney would have forty-eight (48) hours to contact the client and do the initial welcome call.16 Chern, Tr. 190-192, Day 3. Assuming the partner approved of the representation and did not have any modifications to the representation, whether in terms of fees or the relief sought by the client, they confirmed the representation back to Upright. Id. at 191.17 At that point, Upright would take calls at the main office in Chicago. If they had a matter that required local participation, the client would be transferred or an email sent to the partner to contact the client. Id. at 191-92. Once the client paid in full, Upright had a team of "document collectors" who would "interface with the client and collect all of the documents remotely." Id. at 192. An associate attorney on staff in Chicago would prepare an initial draft of the petition and do an initial Skype interview with the client. A second interview and petition review would be scheduled with the local attorney, who would go over final changes to the petition, make any changes or corrections, and then file the petition. These meetings were by Skype or in person. The local attorney would attend the initial meeting of creditors. Id. After September 2015, the process was the same until the client paid in full. At that point, Chern testified Upright decided to pay the local partners more, but also shift to them the responsibility of collecting information and preparing the petitions. Id. at 192-93. That system prevails today.18 Upright, however, has at all times prepared in Chicago the Rule 2016 disclosures for the local partners and continues to do so. Chern, Tr. 197-98, Day 3.

In early 2014, LSC/Upright was advertising on the internet that it had local offices "nationwide." However, at that time, it only had local partners in fourteen (14) states. Chern, with assistance of another attorney, took the lead on recruiting local partners, targeting attorneys with approximately 20 years of experience or more in consumer bankruptcy.19 Today, Upright has approximately 400 partners. Chern, Tr. 135-36, Day 3. Upright used to advertise that it had "local offices nationwide," but advertises now that it has "attorneys in offices nationwide," presumably to squelch any concerns that it does not have any office space actually leased anywhere but Chicago. The local partners are conducting Upright business locally out of their individual offices, according to Chern. Chern, Tr. 155-56, Day 3. Chern testified that Upright's website currently states that it has "attorneys in all 50 states across the nation." Chern, Tr. 156, Day 3. Upright holds the partners out to the public with the title, style, and attribute of "partner," which appears on the firm's website, letterhead, business cards, and in some cases, office signage. Chern, Tr. 187-88, Day 3. The local partners are to take reasonable steps to apprise potential clients of their affiliation with Upright. Id.

In 2014, LSC/Upright was not authorized or qualified to do business in Virginia. An affidavit from the Virginia State Bar indicates Law Solutions Chicago, LLC is not registered with the State Bar. However, Upright Law, LLC, a Virginia limited liability company, was formed January 9, 2015, and Allen sent a document to the Virginia State Bar to qualify it with the Bar that same date. However, the bar qualification document was not signed by a member of the Virginia State Bar, as required. That deficiency was ultimately corrected, and Upright was qualified with the Virginia State Bar effective August 12, 2015. UST Ex. 57. The Virginia State Bar has taken no action against Upright for its tardy registration, despite beginning the provision of legal services in Virginia sometime after January 23, 2014 when it confirmed its arrangement with Morgan to provide services out of his office in Warrenton, Virginia. UST Ex. 41.20 Upright began generating revenue from Virginia clients in late January or early February 2014.

1. The Partnership Agreements and "Partnership"

The UST contends that the LSC local partnership structure is nothing more than a "bankruptcy boiler room" and "telemarketing referral business," with the Chicago office as a "referral hub," and the partnership agreements just another way "to secure another person to attend 341 meetings and whitewash LSC's unauthorized practice of law, while [the local partner's] purpose was to receive additional revenue with minimum input." UST Initial Closing Argument ("UST Brief") at 3, 8, 15. The testimony and exhibits were voluminous on this point, both in terms of the UST's case and Upright's response, and the Court will attempt to summarize and condense them. Each local partner is required to sign a partnership agreement, which is revised and updated periodically. Pursuant to these agreements, local partners are entitled to a share of the revenue generated from that local partner's clients and a bonus pool formed from revenue generated in the local jurisdiction. These local partners receive Schedule K-1s to report their Upright-related income, as opposed to a Form 1099 or a W-2. Upright provides the local partners with access to its SalesForce software system, its case management system, so that they can log in and work on a client's file with Chicago personnel. They also have access to Upright's Best Case bankruptcy software system and an Upright credit card for the payment of filing fees. Upright also provides the local partners with malpractice insurance. Chern, Tr. 182-88, Day 3.21

The partnership agreements outline the allocation of certain rights and responsibilities between Chicago and the local partner, including the financial compensation, and Section 24 of the partnership agreement states that limited partners have "no right to participate in the management of the Firm." See e.g., UST Ex. 43, Upright Ex. D8, Morgan Agreement, ¶ 24. From 2014 to March 2016, Virginia residents were given fee agreements which provided that money paid to LSC was earned on receipt. Chern contended, however, such language was not intended to restrict or curtail the limited partners in performance of the ethical duties or abilities to provide input into the firm's operations. During that same time frame, attorney's fees were placed directly into either LSC's Illinois general operating account or LSC's Virginia operating account.

Limited/local partners are invited to attend bi-monthly "partner's meetings" by teleconference during which Chern solicits feedback about firm operations. In addition, during months when there is no partnership conference, Chern convenes a telephone conference of the Virginia limited partners so they have direct access to him. Chern, Tr. 183-85, Day 3. There is also an annual partnership meeting in Chicago that limited partners are invited to attend, as well as a partner newsletter that goes out periodically.

2. Local Partner John C. Morgan, Jr.

Morgan is a member of the Virginia State Bar, with his office in Warrenton, Virginia. He is admitted to practice in the United States Bankruptcy Courts for the Eastern and Western Districts of Virginia. He has been disciplined twice by the Virginia State Bar, once for contacting the represented client of another attorney in a criminal matter, and the second time for the commission of a felony. He was suspended by the Bar for three years for the second matter. UST Ex. 24, Tr. pp. 126-27.22 Morgan obtained electronic filing privileges in this Court in 2005 and has engaged primarily in consumer bankruptcy cases in this Court since then.

In early to mid-January 2014, Chern approached Morgan about joining Upright and establishing a Virginia presence. Prior to Morgan joining Upright, Upright had no presence in Virginia. Morgan took notes of his initial conversation with Chern. The notes reflect that "Kevin Chern and Ed Scanlon [sic] have started a new national law firm." UST Ex. 72. Among other things, the duties of the local partner were to do a 10-15 minute compliance call within 24-48 hours, the firm would take client calls and creditor calls, presumably at "headquarters" in Chicago. The firm would prepare the petition. Morgan would be required to obtain a separate ECF login for these cases and handle the petition signing and the Section 341 meeting of creditors. Chapter 7 cases are said to have a "25% margin" and Chapter 13 cases have a "40% margin."23 Id. Morgan subsequently applied for and obtained a new ECF filing login for "UpRight Law LLC" on October 9, 2014. UST Ex. 50. He filed his first case in this Court for Upright on October 29, 2014.24 Overall, at least nine (9) cases have been filed under Morgan's Upright ECF password — mainly Chapter 7 cases with one under Chapter 13. Stip. ¶ 17. Morgan's 2016 K-1 from LSC reflected $18,620.00 in self-employment earnings from LSC. Upright Ex. P5, pp. 85-86.25

3. Local Partner Darren T. Delafield

Delafield has long appeared before this Court, and the Court is well familiar that his practice consists primarily of representing consumer debtors in Chapter 7 and Chapter 13 cases. Delafield first obtained ECF filing privileges in this Court in October 2004. As mentioned above, he has received prior admonition from this Court with instructions as to the future handling of cases, as well as a private reprimand from the Virginia State Bar. UST Ex. 63.

In early December 2014, Chern solicited Delafield to become a local partner of Upright. On December 3, 2014, Chern sent Delafield a pitch email, which provided, in part, as follows:

UST Ex. 45.26 Delafield signed a partnership agreement with LSC/Upright shortly thereafter. UST Ex. 46.

Delafield applied for an ECF login for "UpRight Law LLC" by application dated January 9, 2015, which was promptly issued. He filed his first Upright case in this Court on January 10, 2015. In total, more than thirty (30) cases have been filed by Upright in this Court though Delafield's login, with seven (7) cases having been filed before Upright was properly registered with the Virginia State Bar. Stip. ¶ 19.27 Delafield's 2016 K-1 from LSC reflected $21,741.00 in self-employment earnings from LSC. Upright Ex. P5, pp. 189-90.

C. The "New Car Custody Program" or "Sperro Program"

Chern testified he met an individual named Brian Fenner ("Fenner") as a result of both having attended the National Association of Consumer Bankruptcy Attorneys annual conference in Chicago in 2015. Fenner was a sponsor and exhibitor, and he obtained Chern's name off a list of attendees. Prior to 2015, Fenner had long experience in the repossession industry. Fenner owned and ran multiple companies, including Collateral Services of Indiana, LLC, Sperro, LLC, and Fenner & Associates, LLC.

Chern testified that Fenner described a service he provided called the "New Car Custody Program" or the "Sperro Program." As described by Chern, Fenner pitched this program as a service to consumer debtors who wanted to surrender their car in bankruptcy. Fenner explained that his service facilitated the return of collateral to the auto finance company by having the debtor turn the car over to Fenner, and Fenner would in turn notify the finance company that he has the car, and if desired, he would return the car to the finance company. Chern contends that Fenner advised him that Fenner would give the finance company the option of using Fenner's auction services, or they could pick the car up from Fenner.

Chern testified Fenner's program interested him because Fenner offered to pay the legal fees for consumers who were interested in participating in it.28 As is the case in many bankruptcy cases, clients struggle to come up with the fees to pay their attorneys, as well as filing fees. One of the benefits of the program gleaned from Chern's testimony was that this would enable a consumer debtor who wanted to surrender his or her vehicle to have the attorney's fees paid by a third party such that the debtor did not have to go out of pocket, and it would eliminate the delay in filing precipitated by an installment payment plan that a debtor may or may not complete.

In May 2015, Chern told Fenner he would ask Leibowitz to contact Fenner and investigate the "risks/rewards" of participating in Fenner's program. Leibowitz did that, although he testified he only reviewed the "risks," and Chern advised Fenner that they would be moving forward. On May 11, 2015, Fenner emailed Chern, after being told he passed the "smell test," stating as follows:

UST Ex. 35-10 (emphasis added).

This was the beginning of a scam.

Fenner sent another email to Chern on May 12, 2015, advising of their hookup fees, towing rates, and impound fees. Fenner advised Chern as follows:

UST Ex. 35-18.

On May 18, 2015, Chern asked Fenner for a copy of any correspondence that other attorneys in his program used to notify lenders that the collateral was in Sperro's possession, along with a copy of a petition to show how the compensation was disclosed to the bankruptcy court. UST Ex. 35-30. Fenner replied that no other attorneys sent such correspondence to creditors and advised that the entity paying the fees should be disclosed as Fenner & Associates. Id. Fenner also asked that letters not go out to creditors until at least five days passed from pick up, in order to give the collateral time to reach his storage facility in Indiana. Id.

On June 18, 2015, Chern sent an email to all Upright partners advising "New Car Custody Program at UpRight Law — Read Carefully." UST Ex. 35-53. Fenner was blind copied on the email. In that email, Chern advised his limited partners that Upright's senior client consultants had started offering a new program to clients to surrender a vehicle to a towing and storage facility and have the cost of their bankruptcy case fully subsidized. In order to qualify, Chern advised that the following conditions needed to be met: (i) the client wanted to file Chapter 7, (ii) the client has a vehicle he or she is willing to surrender, (iii) there is no equity in the vehicle, and (iv) the vehicle is worth greater than $5,000.00. Id. The client is advised to contact Fenner's company "Sperro," and to arrange for Sperro to take custody of the vehicle. At the time of surrender to Sperro, the client signs a towing, storage and custody agreement with Sperro whereby the client contracts with Sperro to load the vehicle, tow it to a facility, store and maintain it until such time as the finance company picks up the vehicle. Id. Chern advised his colleagues that Sperro charges "customary and reasonable fees for these services (e.g. $75 loading fee, $1.50 per mile towing, $45/day storage, etc.)." Id. Chern advised that Upright — not Fenner — notices the finance company by certified mail "within a couple of days that Sperro has custody of the vehicle, the location of the storage facility, contact information for Sperro and instructions that they should recover the vehicle as soon as possible to avoid excessive storage fees." Id.

The benefits to the clients were also described. Chern told his local partners that the client can immediately cancel the insurance. The client no longer has to maintain it or worry about the expense or inconvenience of plating or storing a vehicle. The client does not have to worry about the repossession agent showing up at home or at work. The creditor can be referred to Sperro as to the status of the vehicle. The client does not have to worry about finance companies who refuse to pick up a vehicle, and "[i]mmediately upon placing the vehicle in Sperro's custody, Sperro will remit the entire legal fee plus filing fee to UpRight Law on client's behalf." Id.29

An Upright limited partner named Mark Steinberg in Miami, Florida immediately questioned the program after it was rolled out, and on June 18, 2015, Chern told Steinberg as follows: "[t]hey hold the car in one of three states that allow for mechanic's liens that trump the 1st lien. 60% of the time, they pick up the car and satisfy the charges. 40% of the time they just abandon the vehicle. Sperro really makes its money when the finance company abandons and Sperro auctions it off." UST Ex. 35-55.30 So, at least as early as June 18, 2015, Upright senior management knew that Fenner and his companies were towing cars out of states like Florida (and as will ultimately be seen, Virginia) to Fenner-related storage lots in Nevada, Mississippi, or Indiana for the purpose of trying to prime secured lenders, or hold their collateral hostage, with excessive hookup, towing and storage fees that were completely unnecessary. But, Fenner and Sperro were willing to pay Upright's clients' attorney's fees and filing fees in order to get the referral from Upright to do it. Also significant to the Court is that all of this was offered to prospective clients by Upright using "senior client consultants" without the clients ever having spoken to their local attorney before being placed into the program,31 and Chern was negotiating with Fenner for Sperro "to pay our marketing company $150 for each deal we generate from partners. . . ." UST Ex. 35-54, a June 18, 2015 email from Chern to Fenner.32 As will be seen below, Chern further authorized the dissemination of letters to finance companies over the names of Upright's local partners from the Chicago office, and listing the local attorney's addresses as Chicago, without the knowledge of some of those attorneys.

Chern testified that he decided to terminate Upright's participation in the New Car Custody Program on or about November 19, 2015 due to a variety of factors, one of which was Chern learning from one of his limited partners that a lawsuit was filed by Ally Financial against Sperro and others alleging that the defendants in that case were complicit in converting its collateral. At that point, after reviewing the allegations in Ally's complaint, Chern decided that Upright should not refer any more clients to Sperro until the court ruled in that litigation. Chern, Tr. 86, 104-05, Day 3. In October, Chern was also getting concerned with Fenner and Sperro becoming increasingly tardy with the payment of Upright's attorney's fees, even though they had picked up client vehicles. Id. at 105-06. Finance companies also started complaining to Upright about Sperro's excessive towing and storage fees. Id. at 107-08.

D. Debtors Timothy and Andrian Williams

Timothy and Andrian Williams are "assisted persons" who filed a Chapter 7 bankruptcy petition in this Court on December 22, 2015.33 Stip. ¶ 28. They are husband and wife, residing in Smyth County, Virginia.34 In August 2015, the Williamses were experiencing financial trouble, and Ms. Williams began searching the internet for bankruptcy options. In a search, Upright Law came up, and she filled out an online information request form. Her husband was contacted by an Upright representative by telephone later the same day. The calls between Upright and their prospective clients were recorded, including the calls with the Williamses. The Williamses spoke to Upright, in part, because other attorneys they had spoken to in the past would not assist them unless they had money to pay their fees. Williams, Tr. 97-98, Day 1.

The Williamses advised Upright they were being called by various creditors, in particular, GCB Acceptance Corp. ("GCB"), the secured lender on their Ford Taurus. Ms. Williams was becoming stressed about the calls. Mr. Williams spoke with Upright's client consultants and he was informed Delafield would be his local attorney. The total attorney's fees and filing fee quoted were $1,985.00. The Williamses wanted to return the Ford Taurus to GCB, but GCB only offered refinancing even though they were seriously delinquent. After going through their financial situation with a client consultant named Alexis Ball, Mr. Williams was told "you seem like the perfect candidate for filing for bankruptcy. We definitely want to help you get your financial independence back. . . . And I think filing bankruptcy would help you do that." Stip. ¶ 29, UST Ex. 3-1, Tr. p. 11-12.

Mr. Williams had inquired about continuing to pay on several payday loans, and Upright's non-attorney consultant advised him "it's going to be up to the trustee whether or not they're going to include those into the bankruptcy. . . ." UST Ex. 3-1, Tr. p. 21. Later, when told by a senior client consultant that his credit score would go up by 85 to 135 points after he filed bankruptcy, Mr. Williams apparently decided to include the payday credit loans, stating that "I mean, now that I know that . . . filing bankruptcy is going to help my credit, yeah." Id. at 35, 40. The senior client consultant then advised "it just makes sense to just get rid of everything . . . if you continue to hold on to that and you miss a payment, it's going to ruin your credit while we're trying to build it for you. . . ." Id. at 40.

Once the Williamses mentioned their issues with the Taurus, one of Upright's senior client consultants brought up the Sperro Program as a way to get GCB dealt with and to have their attorney's fees and filing fee paid at the same time. The Williamses, before they ever had a chance to consult with their local attorney, were asked to call Sperro directly and talk to them about surrendering their car and having their attorney's fees and filing fee paid. Once Sperro sold the car, and their fees were paid, the Williamses would be refunded any fees they had paid toward Upright in the interim.35 In one conversation with senior client consultant Angelo Walsh at Upright, Mr. Williams advised he was being contacted by GCB about the car and indicated that GCB advised they would pick it up if a payment was not made. Walsh, in turn, reminded Mr. Williams that Sperro would be contacting him to pick up the car, and that if he turned it over to GCB he would likely get nothing for it. Walsh advised Mr. Williams, that although it was up to him, "in this situation, if I were you, I would keep it hidden and we come get it, and at least pay off some of your bankruptcy. . . ." UST Ex. 3-1, Tr. pp. 75-76.

Mr. Williams questioned the legality of the Sperro Program with a non-Virginia licensed Upright attorney named Ryan Galloway. Mr. Galloway told Mr. Williams the Sperro Program was legal. Stip. ¶ 32. Mr. Williams later spoke with an Upright onboarding attorney named Jacob Brown, and Brown explained the Sperro program was like parking a car in a fire lane. The car gets towed to a lot, then the finance company has to pay the towing company and lot owner to get it back. "And so that's like where Sperro makes all their money," Brown told Mr. Williams. UST Ex. 3-1, Tr. pp. 87-88. "So, it's totally fine . . .," Brown said. Id. At no time in the recorded call transcripts does it appear that any Upright personnel told the Williamses the cars were being towed out of state.

Sperro sent the Williamses a transportation and storage agreement, and the Williamses signed an agreement with Sperro. Sperro had the vehicle picked up and transported it from the Williamses' residence in Smyth County, Virginia to Sperro's facility in Indianapolis, Indiana. The security agreement between the Williamses and GCB provided that the Williamses agreed, among other things, "not to sell, encumber or abandon the Collateral," and "not to remove or attempt to remove said collateral from the county and state given above as my address without notifying you in writing. . . ." Stip. ¶ 37.

Upright then emailed Delafield to approve the representation. On September 1, 2015, Delafield spoke with the Williamses and confirmed his representation to them as an Upright partner for their Chapter 7 bankruptcy case. However, on September 4, 2015, without ever having spoken to Delafield, Sperro picked up the Ford Taurus and towed it away. Sperro sold the car at auction on or about October 9, 2015. Stip. ¶ z. On September 8, 2015, someone at Upright mailed a letter to "General Acceptance Corporation" in Greenville, North Carolina, supposedly the lender for the Taurus, when the actual lender was GCB in Johnson City, Tennessee. UST Exs. 3-7, 3-9.36 The letter advised the lender, albeit the wrong one, that, after identifying the Williamses, the collateral, and VIN on the Taurus,

UST Ex. 3-7. A telephone number was provided. The letter was closed by the signature line Darren Delafield, 79 W Monroe, 5th Floor, Chicago, IL 60603. Delafield neither saw nor authorized this letter before it went out.37

On September 21, 2015, LSC deposited a $1,650.00 check from Fenner & Associates into LSC's operating account and deposited a $335.00 check from Fenner & Associates into an IOLTA account. Stip. ¶ 38. The October 16, 2015 engagement agreement with Upright described the fees charged to the Williamses as "Attorney's fees: $1600.00; Court Filing Fees: $335.00; and Report Fees: $50.00. Total Fees, $1985.00." Stip. ¶ 39. The Rule 2016 disclosure reflected the attorney's fees were paid by "Sperro." UST Ex. 3-15, p. 92. The Williamses met with Delafield several times by Skype and their petition was ultimately filed on December 22, 2015.

The Sperro Program came to light at the Williamses' 341 meeting, and Delafield denied knowing why Sperro paid the Williamses' fees in connection with their case. Stip. ¶ 40. However, Delafield admitted at trial he knew as early as December 2015, as the Williamses had told him, that the car had been used to pay their fees. Delafield, Tr. 143-44, Day 2. Delafield also admitted in his Answer to the Complaint that he received the June 18, 2015 email about the New Car Custody Program from Chern. UST Ex. 3-33; Delafield, Tr. 142-43, Day 2. At the 341 meeting, Delafield attempted to deflect any questions regarding Sperro by the Trustee and GCB's counsel to an unidentified "senior attorney" at Upright for further explanation, professing ignorance as to the relationship between Sperro and Upright. UST Ex. 3-2. The Chapter 7 Trustee referred the matter to the UST, and a motion for a Rule 2004 examination was filed and granted by Order on March 15, 2016.38 Treating joint debtors as a single client, not less than 219 clients of LSC participated in the Sperro Program, of which 7 resided in the Western District of Virginia. UST Ex. 62; Stip. ¶ 27. Nationally, Upright generated not less than $333,545.00 in fees from the Sperro Program, exclusive of filing fees, before it was terminated. Tr. 340-44, Day 2.

E. Debtor Jessica Dawn Scott

Jessica Dawn Scott ("Scott") is an "assisted person" who filed a Chapter 7 petition with this Court on February 24, 2016. Stip. ¶ 41. Scott first learned of Upright through an internet search and understood it to be a law firm based in Chicago with partnerships throughout the United States. Scott searched the internet, and Upright came up early in her search. Like the Williamses, Scott told Upright that she was interested in surrendering a car, and Upright told her about the Sperro Program. Scott spoke with Brandon Fox, an Upright senior client consultant, on October 14, 2015. When asked if she knew what Chapter she wanted to file, Scott said "Whichever wipes out everything." Fox replied: "Okay. So Chapter 7 definitely." UST Ex. 4-1, Tr. p. 13. Scott had a 2005 Pontiac Sunfire she wanted to surrender financed with Credit Acceptance Corporation. Regarding the Sperro Program, Fox explained,

UST Ex. 4-1, Tr. pp. 13-14. Later, on October 19, 2015, Scott spoke to Fox again and inquired about a debt she had co-signed with her ex-spouse. The exchange went as follows:

UST Ex. 4-1, Tr. pp. 30-31.

On October 20, 2015, Scott executed an engagement agreement with Upright. Scott's fee agreement stated that the total fee for her bankruptcy, including filing fees, was $1,835.00. Scott made a $100.00 payment to LSC as a partial payment toward its attorney's fees. On or about October 24, 2015, Scott spoke to Morgan over the telephone for an initial consultation and he approved her as a client. The first time Morgan ever met with Scott in person was when she was deposed in this case, although he did talk to her over the telephone. Scott met with Morgan's wife, Rhonda, who is his assistant in his law practice.39 She is not an attorney. Morgan did not review Scott's petition or schedules with Scott, and Morgan did not witness Scott sign them either. This was delegated entirely to Rhonda Morgan.40 The filings with the Court were replete with errors, including (1) the Rule 2016 disclosure failed to reflect the proper amount of fees paid to Upright, (2) the Rule 2016 disclosure failed to reflect that the fees were paid by Sperro and/or Fenner & Associates, (3) the Statement of Financial Affairs indicated that the 2005 Pontiac Sunfire was "attached, seized, or levied," and (4) the Statement of Financial Affairs indicated that she transferred no property to anyone within the two years of filing bankruptcy. UST Ex. 4-10.

A former associate in Morgan's firm named James McMinn, who had no relationship to Upright other than working for Morgan in his separate private practice, attended the 341 meeting, and as in the Williamses' case, the Sperro Program came to light when questions were raised about what happened to the Sunfire and who paid the attorney's fees. Morgan said he had Scott's permission to have someone else appear on his behalf, but he has no confirmation of that fact. His own time records reflect he attended the 341 meeting, when clearly he did not. UST Exs. 4-3, 24, Tr. p. 95.

Scott's security agreement with Credit Acceptance on the Sunfire provided in part as follows:

Stip. ¶ 45. Sperro towed the Sunfire from Virginia to Indiana, and by letter dated November 9, 2015, Sperro appears to have advised "Lien Holder" that Scott's car was towed to Indiana, and that "reasonable fees [are] still due and owing at this time in the amount of $3,258.80 for the towing, storage and related service expenses for the Vehicle. . . ." UST Ex. 4-2, p. 7. The lien holder was advised that if the foregoing charges were not paid in 15 days, the vehicle would be sold at public auction in Indiana on November 28, 2015 in furtherance of its mechanic's lien under Indiana law. Id.41 On November 17, 2015, Fenner & Associates paid Upright $1,650.00 for Scott's attorney's fees plus $335.00 for the filing fee. Morgan's initial Rule 2016 disclosure filed with the Court reflected that Scott paid Upright $1,500.00 plus $335.00 for the filing fee. UST Ex. 4-10, p. 50. There was no reference to Sperro having paid any fees in that document.

McMinn discussed Scott's meeting of creditors, held on March 23, 2016, with Morgan when he returned to the office. More than two months passed before Morgan attempted to correct Scott's schedules, statements, and other papers filed in connection with the case. Stip. ¶ 53. On June 7, 2016, Morgan filed an amended Rule 2016 disclosure, and he also filed an amended Statement of Financial Affairs ("SOFA"), which purports to bear Scott's signature under oath. Scott did not sign it and she did not know about it until she was deposed. In that SOFA, Morgan inserted that Sperro, LLC paid Upright Law LLC an attorney's fee of $1,650.00 and the filing fee of $335.00. Stip. ¶ 55, UST Ex. 4-11, 4-12. The amended SOFA does not disclose any of the funds LSC drafted from Scott's checking account, nor does it reflect that Sperro picked up the Sunfire. Id. Scott ultimately received a Chapter 7 discharge on July 1, 2016.

F. Assertion of the Attorney Client Privilege in Discovery

The Williamses and Scott are not parties to this litigation. There is no assertion by the UST that they did anything wrong, and there never has been. The Court finds both the Williamses and Ms. Scott to be caught up in this dispute through no fault of their own. None of the Debtors appears to have done anything more than seek out help due to severe financial distress, and rely on whoever was advising them what to do, be it an Upright sales person in Chicago or their local attorney. They did not know where else to turn, and it is truly unfortunate they have been drawn into this maelstrom.

As part of the preparation for trial, subpoenas were served on the Williamses and on Scott by the UST. Discovery had previously been served on one or more of the Upright Defendants earlier in the case in which the attorney-client privilege was raised — not between Upright and its litigation counsel, but between the Upright Defendants and their bankruptcy clients. May 9, 2017 Transcript at pp. 4-5 (docket no. 76). According to counsel for the UST at a hearing on May 9, 2017, counsel for the litigants in this case agreed that since the Upright Defendants' counsel was not comfortable about asking the bankruptcy clients if they wanted to waive the attorney-client privilege, it was agreed that the UST would send Rule 45 subpoenas to the bankruptcy clients, and if those clients wanted to assert the attorney-client privilege, they could do so in response to those subpoenas. Id. Counsel for the Upright Defendants did not dispute this agreement.

Scott was served with the subpoena on April 10, 2017, and she produced documents to the UST on April 26, 2017. However, on April 27, 2017, with counsel for the Upright Defendants having represented they were uncomfortable discussing the attorney-client privilege with the bankruptcy clients, objections to the Scott subpoena asserting the attorney-client privilege were served on the UST by Morgan. This objection, however, was prepared behind the scenes by an attorney named David Menditto ("Menditto"), Upright's in-house litigation counsel.42 Menditto apparently "mistakenly" put Morgan's name on the subpoena objection.

In addition, despite his own employer's actions being at issue, Upright, through Menditto, used heavy handed tactics, including text messages, to try and get the Williamses to sign conflict waivers, even though the UST informed the Court that Mr. Williams called the UST on April 27, 2017 and advised he did not want to sign one. UST Ex. 3-20; May 9, 2017 Tr. at 17. Menditto sent the Williamses a conflict waiver letter dated April 20, 2017, which suggested, among other things, that the Williamses' discharge might be at issue, despite telling them later by text message there was no allegation they did wrong. Compare UST Ex. 3-19 with UST Ex. 3-20, p. 11. While there is a suggestion that they could receive advice from other counsel, the proposed conflict letter was heavily tilted toward having the Williamses waive any conflicts and let Upright continue to represent them. Upright had to know, as a practical matter, the Williamses had limited resources to hire separate counsel.

Mr. Williams emailed Menditto on April 26, 2017, stating that:

UST Ex. 3-20, pp. 3-4 (emphasis added). Nevertheless, Menditto continued to persist in trying to get Mr. Williams to talk to him, clearly to lobby him to sign the conflict waiver so he could assert the attorney-client privilege on their behalf and attempt to shield their files and Upright's from discovery. Id.

CONCLUSIONS OF LAW

I. Jurisdiction and Venue

This Court has jurisdiction of this matter by virtue of the provisions of 28 U.S.C. §§ 1334(a) and 157(a) and (b) and the delegation made to this Court by Order from the District Court on December 6, 1994, and Rule 3 of the Local Rules of the United States District Court for the Western District of Virginia. This Court further concludes that these matters are "core" bankruptcy proceedings within the meaning of 28 U.S.C. § 157(b)(2)(A). See In the Matter of Kenneth W. Paciocco, Misc. Pro. No. 15-00302-KRH, 2015 WL 5178036 (Bankr. E.D. Va. Sept. 3, 2015). A request for sanctions arising out of an attorney's conduct in a core proceeding is itself a core proceeding. See, e.g., In re French Bourekas, Inc., 183 B.R. 695, 696 (Bankr. S.D. N.Y. 1995).

II. The UST's Requests for Relief

The UST has asserted six counts against the Upright Defendants and Sperro. Count I of the Complaints each asks the Court to order Delafield, Morgan, LSC, and Upright to disgorge fees under Section 329(a) and Section 105(a) of the Bankruptcy Code. Count II of the Complaints seek disgorgement of fees under 11 U.S.C. § 329(b) against Delafield, Upright, Morgan, and LSC. Count III of the Williams Complaint requests voiding of the fee agreement and disgorgement under 11 U.S.C. §§ 526(c)(1) and 105(a) against Delafield, Upright and LSC. Count III of the Scott Complaint and Count IV of the Williams Complaint seek an injunction against Delafield, Morgan, Upright and LSC, enjoining them from violating 11 U.S.C. § 526. Count V of Williams Complaint and Count IV of the Scott Complaint seek civil penalties under 11 U.S.C. § 526(c)(5)(B) against Delafield, Morgan, Upright Law LLC, and LSC, and Count VI of the Williams Complaint and Count V of the Scott Complaint seek sanctions against all Defendants under the Court's inherent powers. This last Count asks the Court to prohibit Delafield, Morgan, LSC, Upright Law, LLC, Allen, Chern, and Scanlan from practicing before this Court whether directly or indirectly through any companies in which they have ownership interests or management authority. The UST contends that cause also exists to sanction them monetarily. The Court is also asked to require Sperro and its affiliates to disgorge all funds received as a result of the Sperro Program, and to enjoin Sperro and its affiliates from remitting or providing any funds to LSC or Upright Law, LLC or to an affiliate, member, or agent of either of those entities. In both Complaints, the UST further requests that the Court "take such action as the court deems necessary to deter such misconduct and similar schemes in the future."

III. Williams and Scott Counts I and II and Williams Count III: 11 U.S.C. §§ 329(a), 329(b), 526(c)(1) and 105(a)

Section 329 of the Bankruptcy Code provides as follows:

11 U.S.C. § 329. As stated in In re Levin, Case No. 97-15574DWS, 1998 WL 732878 (Bankr. E.D. Pa. Oct. 15, 1998), "[o]ne of the surest means for the bankruptcy system to come under public disrepute is for the perception to take hold that it allows attorneys to milk the last cent out of debtors while leaving creditors nothing. Also disturbing is the prospect that attorneys may be able to extract a premium from debtors who are desperate to file in order to save an asset that is on the brink of being lost. These concerns, among others, have led Congress and the Courts to enact and enforce strict regulations on the payment of attorney's fees in bankruptcy. One of the cornerstones of the regulatory structure is the necessity for attorneys to fully and honestly disclose their transactions with clients." Levin, 1998 WL 732878, at *2.

Section 329 reflects the Congressional concern that a debtor's payments to his attorney present a "serious potential for evasion of creditor protection provisions of the bankruptcy laws." H.R.Rep. No. 95-595, at 329 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6285.

In re Jackson, 401 B.R. 333, 339-40 (Bankr. N.D. Ill. 2009).

Because disclosure under Section 329(a) and Rule 2016(b) is "central to the integrity of the bankruptcy process," failure to disclose is sanctionable. In re Andreas, 373 B.R. 864, 872 (Bankr. N.D. Ill. 2007). The sanctions can include partial or total denial of compensation as well as partial or total disgorgement of fees paid. Id. "Many courts, perhaps the majority, punish defective disclosure by denying all compensation." Id.; see, e.g., Mapother & Mapother, P.S.C. v. Cooper (In re Downs), 103 F.3d 472, 477-78 (6th Cir. 1996). However, other courts consider the egregiousness of the conduct and the facts of a given case. See Charity v. NC Financial Solutions of Utah, LLC (In re Charity), No. 16-31974-KLP, 2017 WL 3580173, at *26 (Bankr. E.D. Va. Aug. 15, 2017).44

A. Mootness

The Upright Defendants contend the UST's claims against them in Counts I, II, and III of the Williams Complaint, and Count I and II of the Scott Complaint are moot, because, prior to trial, they refunded to the Williamses and Scott all of the fees paid to LSC/Upright on both the Williamses' and Scott's behalf.45 In Scott's case, Fenner & Associates sent extra funds on Scott's behalf, and the Upright Defendants advise they are prepared to deliver those additional funds, $100.00, to whomever the Court directs. Because they have already surrendered the funds to the Debtors, the Upright Defendants contend that any relief for disgorgement is moot. See e.g., In re Bradley, 495 B.R. 747, 792 (Bankr. S.D. Tex. 2013). The Upright Defendants, in effect, assert there is no case or controversy left for the Court to resolve as to the above referenced Counts, and there is no need to cancel any contracts, because the contracts are fully performed and the debtors have received their discharges. In essence, the Upright Defendants assert there is nothing left for Upright, Delafield, or Morgan to perform in their cases, and cancelling a fully performed contract is basically a useless act.

As stated in Simmons v. United Mortg. & Loan Inv., LLC, 634 F.3d 754 (4th Cir. 2011):

Id. at 763. The UST contends that the forgoing Counts are not moot, and that there is a live case or controversy.

First, as to Count I of each Complaint, brought under Section 329(a) and 105(a), the UST contends that the Upright Defendants failed to "disclose completely and accurately the compensation paid in this case, in particular both the ultimate source of the compensation and the sharing of compensation between the various entities involved." Williams Complaint, ¶ 84; Scott Complaint, ¶ 83. In both Complaints, the UST asks the Court to use its authority under Section 105(a) to require to LSC, Upright, Delafield and Morgan "to disgorge all fees."46 This request is made in the body of Count I, whereas the requests for relief at the conclusion of all counts are much broader.

Part of what the UST is targeting in Count I of the Complaints is the allegation that LSC is not a law firm, and that the Rule 2016(b) disclosures are inaccurate and misleading under Section 329(a) and Rule 2016(b). Rule 2016(b) provides, in part, that "[t]he statement shall include the particulars of any such sharing or agreement to share by the attorney, but the details of any agreement for the sharing of the compensation with a member or regular associate of the attorney's law firm shall not be required." Fed. R. Bankr. P. 2016(b). Count I of the Complaints asserts that the "precise nature of the fee arrangement must be disclosed, not merely the identity of the ultimate owner of the funds," and the Upright Defendants had an obligation to ensure the filing of an accurate statement under Section 329(a) and Rule 2016(b). "Despite this, they failed to disclose completely and accurately the compensation paid in this case, in particular both the ultimate source of the compensation and the sharing of compensation between the various entities involved." Complaints, Count I. Here, after this litigation commenced, the Upright Defendants contend that they paid the Williamses $1,650.00 and Ms. Scott the sum of $1,835.00. Thus, since the UST asks for disgorgement of those funds, the Upright Defendants assert there would be no point in the Court ordering them to do what they have already done, and there is no need to delve into the Rule 2016(b) disclosures.

The Court disagrees. There are approximately 15 additional cases pending in this Court in which the UST has questioned the issue of fee sharing under LSC's business model and the adequacy and manner in which its Rule 2016(b) disclosures are prepared and filed with the Court.47 In several of those cases, the UST alleges that her Office "has filed several other motions against[, among others,] LSC and Upright Law and alleged a pattern and practice of misrepresentations to the Court regarding the details concerning fees and fee sharing.". See, e.g., Motion to Review Debtor's Transactions with Debt Relief Agencies and Order Disgorgement of Attorney Fees Paid, In re Holtz, No. 16-50742 (docket no. 11). In Knox v. Service Emps. Int'l Union, Local 1000, 567 U.S. 298, 132 S.Ct. 2277 (2012), the Supreme Court held that "[a] case becomes moot only when it is impossible for a court to grant . . . any effectual relief whatever to the prevailing party. . . . [A]s long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot." (citations omitted). Id. at 2287. Moreover,

Porter v. Clarke, 852 F.3d 358, 363-64 (4th Cir. 2017).

The Upright Defendants continue to file cases in this Court under the existing business model, and the manner in which the Rule 2016(b) disclosures are prepared and filed is a recurring issue. To say that the Court cannot review their practices because in the two instances currently before the Court they paid the attorney's fees back to the debtors before the Court had a chance to rule on the adequacy of their disclosures would gut the "voluntary cessation" rule as described above. Moreover, in line with Knox above, the UST has asked the Court in each Complaint to take such other action as the Court deems necessary to deter such misconduct and similar schemes in the future," and the Court has that discretion under Section 105(a). There remains a "concrete interest . . . in the outcome of this litigation," and the Court finds Counts I and II of both Complaints, and Count III of the Williams Complaint, are not moot.48

B. LSC as a law firm and the status of Delafield and Morgan as partners

The UST contends that cancellation of the retention agreements and disgorgement of attorney's fees are appropriate in this case against Delafield, Morgan, Upright, and LSC because they each failed to satisfy their disclosure obligations under the Bankruptcy Code and Rules. UST Brief at 39. The UST contends that the Rule 2016 certifications in these cases are inaccurate and misleading.49 The UST asserts that Rule 2016(b) requires the disclosure of the sharing of compensation between entities while not requiring the disclosure of sharing within a firm. Here, the UST argues that LSC does not fit the definition of a law firm and neither Morgan nor Delafield qualify as a bona fide partner of LSC for purposes of Rule 2016(b). Therefore, LSC's undisclosed sharing of fees with Morgan and Delafield is improper. Id. at 41. Bluntly stated, the UST characterizes the collective Upright entities, with Chern, Scanlan, and Allen at LSC's helm, as nothing more than a "boiler room and mere forwarder of legal business," and a "call center employing sales people and hard sell tactics to collect money" from, among others, Virginia residents. Id. at 42. The UST argues (1) that LSC is not properly registered with the Virginia State Bar, (2) that it is not organized to deliver legal services to Virginia residents, (3) that it encourages the unauthorized practice of law, (4) that there is an inability to perform meaningful conflicts checks, and (5) that a real law firm would have reasonable oversight procedures. Id. at 42-43. Further, the UST contends that Scanlan is a secret owner of the firm, disqualifying it as a law firm.

The UST then argues that even if LSC could be considered a law firm, Morgan, Delafield and Upright Law, LLC, the Virginia entity, are not bona fide partners in LSC. Even though Morgan and Delafield testified that they thought they were "partners" in LSC, the UST contends the evidence shows they were not. As examples of this lack of bona fides, Morgan and Delafield have no legal access to partnership documents that the law permits them to have, and the partnership agreements expressly provide that they have no right to participate in the management of the firm. The local partners are generally prohibited from collecting money from clients and the agreements attempt to prohibit local partners from soliciting clients upon disassociation from the firm. That the local partners receive no portion of the fees from files that were closed without a case being filed is another factor the UST relies upon. Id. at 44.

LSC, in turn, contends that LSC and Upright, with Delafield and Morgan as local partners, are very much a true law firm, both in form and substance. LSC contends that it is sufficient for an attorney to simply be a "member," "partner," or "regular associate," which are all terms Section 101 of the Bankruptcy Code leaves undefined. 11 U.S.C. § 101. Thus, LSC contends courts apply this section in a practical manner, recognizing that different law firms have varying types of structures and varying relationships with their attorneys. LSC contends that Delafield and Morgan have a true partnership relationship with Upright. It enters into partnership agreements with its local partners. They are provided with malpractice insurance. The local partners, albeit while maintaining their separate law practices, hold themselves out to the general public with the title, style and attribute of a "partner," and the partners are supposed to take reasonable steps to advise their clients of their affiliation with Upright. Moreover, Morgan and Delafield share in the firm's revenues and receive a Schedule K-1 to report their Upright-related income, not a W-2 nor a Form 1099.50 Chern also testified that the local partners participate in partnership meetings with him, and they are invited to an annual partnership meeting in Chicago. They also receive regular newsletters and have direct communication with him to share concerns and to discuss issues with the firm and clients.

In Futreal, this Court observed — addressing Prince Law's ill-fated foray into Virginia — that these multi-jurisdictional local partner arrangements "are often nothing more than disguised independent contractor arrangements designed to increase revenue streams by attempting to evade the fee splitting prohibitions in the Bankruptcy Code and Bankruptcy Rules." Futreal, 2016 Bankr. Lexis 3974, at *42.51 Further, in Banner, addressing the Volks Anwalt firm and its managing partner Jessica McClean, Judge Beyer observed:

While the Upright/LSC firm bears many similarities with that of Prince Law and Volks Anwalt, including the observations of Judge Beyer quoted above, it is a much more sophisticated and structured operation, perhaps because it is formed and operated by individuals, albeit self-described, experienced in law firm operations and internet marketing. Without limitation, efforts have been made to register the Virginia entity with the Virginia State Bar, as well as to qualify it to do business in Virginia and elsewhere.52 The firm shares client information with its local partners through its Sales Force case management software system, such that Chicago and the local offices can work on files together, and the local partners are given significant involvement in the preparation, filing and management of the clients' cases, more so now than when Upright first started. LSC/Upright has a conflicts check system whereby it can run conflicts against its local partners' Upright clients, although it cannot run conflicts checks against those local partners' clients in their separate law practices. For example, neither LSC/Upright nor Morgan can check their client database against Delafield's non-Upright client database. The local partners can check their non-Upright client databases against the larger Upright client database, and based on Chern's testimony, this has not presented a problem in day-to-day operations, since the local partners rarely represent creditors. The Court is deeply disturbed by the lack of effective oversight of its sales people and methods used by LSC/Upright to sell its product, which will be addressed in more detail to follow, as well as the way it provides services and utilizes Virginia lawyers to do so in this District. However, it cannot say LSC is not a law firm.53

Under the Virginia Rules of Professional Conduct, "firm," or "law firm" "denotes a professional entity, public or private, organized to deliver legal services, or a legal department of a corporation or other organization." Va. R. Prof'l Conduct, Preamble, Terminology. A comment to Rule 1.10 provides as follows:

Va. R. Prof'l Conduct, 1.10 Cmt. [1] (emphasis added).

The Court recognizes that compliance with both Section 329 and Rule 2016(b) are questions of federal, not state, law. But, the comment above is not inconsistent with Federal Rules of Bankruptcy Procedure 9001(6) and (10). Those provisions find that for the purposes of the Bankruptcy Rules, "Firm" includes "a partnership or professional corporation of attorneys or accountants", and "Regular associate" means "any attorney regularly employed by, associated with, or counsel to an individual or firm." Fed. R. Bankr. P. 9001(6), (10). Although raised in a somewhat different context, the Court appreciates Judge Chapman's observation in In re GSC Grp., Inc., 502 B.R. 673 (Bankr. S.D. N.Y. 2013), that:

Id. at 735, n.227.54

Mindful of the above, the Court turns to Delafield's and Morgan's relationship with LSC/Upright. Although styled as "limited partners" with no rights to management of the firm, the Court takes a more holistic approach. Looking to substance over form with regard to the partnership agreements and the record in this case, including the method and manner of Delafield's and Morgan's interactions with LSC in Chicago, the Court is satisfied that both Morgan and Delafield are "regularly associated with" or "counsel to" the "firm," of which the local Virginia LLC in which Delafield and Morgan are limited partners is a component part. Thus, the Rule 2016(b) disclosures are not deficient on the basis that LSC/Upright is not a law firm and that Delafield's and Morgan's relationships with it are impermissible. The Court finds that the statements in the Rule 2016(b) disclosures by Delafield and Morgan that "I have not agreed to share the above-disclosed compensation with any other persons unless they are members and associates of my law firm" are not actionable in these cases. Disgorgement and cancellation of the retention agreements between LSC/Upright, the Williamses, and Scott will not be ordered on that basis.

C. Additional Rule 2016(b) and engagement deficiencies

Chern testified that the Rule 2016(b) disclosures were and still are prepared in Chicago. Chern, Tr. 197, Day 3.55 The UST argues that from May 12, 2015, when Fenner sent Chern the email outlining the operation of the "New Car Custody Program," LSC knew that Fenner & Associates would be the source of payments for those clients participating in the Sperro Program. Even though Fenner & Associates was controlled by the same person as Sperro, Fenner & Associates actually wrote the checks to LSC/Upright. Nevertheless, when the Rule 2016(b) disclosures were filed for the Williamses and Scott, they failed to disclose that Fenner & Associates paid the fee instead of Sperro. To date, the UST points out no amended Rule 2016(b) disclosure has been filed in either case correcting the actual remitter of the fees.

The UST also complains that the engagement agreements between Upright and the Williamses and Scott contained misrepresentations and were also unclear or inaccurate.56 Among the UST's contentions are that the engagement agreements misrepresented the local attorneys' true hourly rates. The Williamses' and Scott's retainer agreements appear to be form agreements used in the Western District of Virginia and elsewhere, and the hourly rate substantially exceeds the market rate for such services in this District. It appears the agreements specified rates of $395.00 per hour regardless of the fees the attorney actually charged, although Morgan's time records did specify $395.00 an hour in Scott's case.57 Further, in violation of Virginia ethics rules, the engagement agreements contained provisions that funds paid were earned when paid.58 The UST further contends that in Scott's case, the Rule 2016(b) disclosure reflects that Morgan and Upright agreed to accept $1,500.00 for legal services initially, but were paid $1,650.00 and the disclosure did not reflect the $100.00 that Scott paid.

As to the Williamses, the UST contends that a "debt relief agency" is required to give an assisted person an executed written contract within 5 business days of first offering bankruptcy assistance to the assisted person. 11 U.S.C. § 528(a)(1). The written contract is required to explain "clearly and conspicuously — (A) the services such agency will provide to such assisted person; and (B) the fees or charges for such services, and the terms of payment." Id. The debt relief agency is also required to give the assisted person a "copy of the fully executed and completed contract." 11 U.S.C. § 528(a)(2). "Any contract for bankruptcy assistance between a debt relief agency and an assisted person that does not comply with the material requirements of this section, section 527, or section 528 shall be void. . . ." 11 U.S.C. § 526(c)(1).59

LSC, Upright, Delafield and Morgan stipulated they are "debt relief agencies." Stip. ¶ 10. The Williamses and Scott are "assisted persons" as defined in the Code. LSC/Upright clearly provided "bankruptcy assistance" to the Williamses well before they received the written contract from Upright.60 In fact, and without limitation in terms of bankruptcy assistance, it appears their car was picked up on Upright's Sperro referral long before they ever saw a written contract that fell within the scope of Section 528(a).61 Without addressing each and every UST alleged violation of Section 528(a) as to the Williamses, it is clear from the record that Upright violated Section 528(a) as to the Williamses based on the timing of the delivery of the written agreement. The contract between Upright and the Williamses is declared void pursuant to Count III of the Williams Complaint.

Further placing the Williamses and Ms. Scott into the Sperro Program is a sufficient basis to declare Upright's fee to be unreasonable in both the Williams and Scott cases under Section 329(b). What these individuals have had to endure as a result of the actions of LSC, Chern, Upright, Delafield and Morgan is unconscionable. Section 329(b) provides that the court "may cancel any such agreement, or order the return of any such payment to the extent excessive, to— (1) the estate, if the property transferred — (A) would have been property of the estate; or (B) was to be paid by or on behalf of the debtor under chapter 11, 12, or 13 of this title; or (2) the entity that made such payment." 11 U.S.C. § 329(b) (emphasis added). Here, the Court sees little point in cancelling the agreements between Upright, the Williamses, and Scott. The Williamses' agreement has already been declared void under Section 526(c)(2) for violating Section 528(a). Scott and the Williamses have received their discharges and moved on with their lives. The pendency of these adversary proceedings is what is keeping their cases from being closed.

The Court acknowledges that after this litigation ensued, Upright on its own paid the Williamses and Scott funds received on their behalf — for the most part. Upright is still holding approximately $100.00 in excess funds on Scott's behalf.62 However, the Court believes that all funds received by Upright in these cases should be remitted back to the debtors' estates. The money Fenner & Associates paid to Upright on behalf of the Williamses and Scott in connection with the Sperro Program would not necessarily have been estate property, because it does not appear that the funds paid were traceable to proceeds of the sale of the debtors' vehicles. The funds were paid to Upright well before the vehicles were sold. Nevertheless, the legal fees were paid to Upright as a quid pro quo for the surrender of what would have been estate property, albeit property subject to a lien that the trustee would likely have abandoned (assuming perfection of the lender's security documents). This nexus to what would have been estate property is sufficient for the Court to conclude that the Chapter 7 trustees ought to have the opportunity to consider the disposition of the funds returned by Upright, as small as the dollar amounts may be, and who may be entitled to those funds. That Upright jumped the gun and paid funds to the Williamses and Scott voluntarily after litigation commenced is a loss Upright will have to bear. The Court will grant the UST's requests in both Counts I and II of the Scott and Williams Complaints that the fees received by Upright be delivered to the estates in those cases. The UST's request that fee agreements be cancelled is denied.

IV. Williams Count IV and Scott Count III — Injunction under 11 U.S.C. § 526(c)(5)(A)

In the above referenced Counts, the UST seeks injunctions against LSC, Upright, Delafield, and Morgan to enjoin them "from violating 11 U.S.C. § 526." Williams, Complaint ¶ 100; Scott, Complaint, ¶ 96. The Court has already found that LSC is a law firm and that the Rule 2016(b) disclosures are not deficient on that basis alone.

The Court is aware of another recent decision, In re Bishop, involving Upright and the UST, where some, but not all, of the same issues in this case were raised.63 See In re Bishop, 578 B.R. 158 (Bankr. W.D. N.Y. 2017). In that case, as here, the UST alleged the individual local attorney and the Upright Defendants "have engaged in a clear and consistent pattern of filing false and misleading disclosures of compensation in other Upright Cases." Id. at 166. The UST also sought to have the Court enjoin the defendants "from violating 11 U.S.C. § 526." Id.

The Bishop court observed that, while the injunction request tracked the language of 11 U.S.C. § 526(c)(5)(A), "`when Congress authorizes injunctive relief, it implicitly requires that the traditional requirements for an injunction be met in addition to any elements explicitly specified in the statute.'" Id. at 166 (citing Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1098 (11th Cir. 2004)). The Court went on to observe that an order granting an injunction must meet the specific requirements of Federal Rule of Civil Procedure 65, and as the Second Circuit has noted, "`an injunction must be more specific than a simple command that the defendant obey the law.'" Bishop, 578 B.R. at 199 (citing Peregrine Myanmar v. Segal, 89 F.3d 41, 51 (2d Cir. 1996)).64 As stated in Bishop, an injunction simply to order the defendants to obey the law and not violate Section 526 would be difficult to police and run afoul of Rule 65. Accordingly, Williams Count IV and Scott Count III will be dismissed.65

V. Williams Count VI and Scott Count V — Section 105(a) and the Court's Inherent Authority

"A federal court has an inherent power `to control admission to its bar and to discipline attorneys who appear before it.'" Paciocco, 2015 WL 5178036 (citing In re Parker, No. 3:14cv241, 2014 WL 4809844, at *5 (E.D. Va. Sept. 26, 2014) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991))). "This inherent power extends to bankruptcy courts and `includes the power to suspend or disbar attorneys from practicing before the court.'" Paciocco, at *1 (citing Williams v. Lynch (In re Lewis), No. 141881, 2015 WL 3561277, at *2 (4th Cir. Jun. 9, 2015) (citing In re Snyder, 472 U.S. 634, 643, 105 S.Ct. 2874 (1985))). Further, Section 105(a) authorizes a bankruptcy court to "issue any order, process, or judgment that is necessary to carry out the provisions of [the Bankruptcy Code]." 11 U.S.C. § 105(a); In re Circle T Pipeline, No. 11-70556, 2011 WL 9688240, at *12 (Bankr. W.D. Va. April 27, 2011). Two years ago, discussing the "national law firm" business model and the use of local, limited partners, this Court made the following observation:

Futreal, 2016 Bankr. LEXIS 3974, at *41. As this case further demonstrates, the issues are complex, recurring, and multi-jurisdictional. It may well be that the federal courts in which the practices most often arise may be the most able and efficient places to draw lines. As stated in In re Burton, 442 B.R. 421, 467 (Bankr. W.D. N.C. 2009), "[a] court exercises the authority to sanction attorneys with due restraint. When disciplining an attorney, the court must fashion an appropriate sanction without overreaching." (citing Byrd v. Hopson, 108 Fed.Appx. 749, 756 (4th Cir. 2004)). Further, Burton held that "[c]ourts should impose the minimum sanction necessary to both protect the public and deter future misconduct. . . . To this effect, courts are inclined to discipline a first offense with a lesser sanction and increase the severity of the discipline for any subsequent infractions, while taking into account previous failed attempts to discipline the attorney." Burton, at 467. In this case, the Sperro/New Car Custody Program was a scam from the start. Despite Chern's protestations to the contrary, the Court believes he was well aware that cars were being towed out of state as early as June 18, 2015, or even earlier. UST Ex. 35-55; UST Ex. 35-37. The only purpose for doing so was to prime the secured lender's lien under more favorable state law towing and garagemen's liens, while running up exorbitant fees, and it benefitted Upright by getting their attorney's fees paid faster. As can be seen by a multitude of exhibits, including the Sales Playbook and scripts, the leadership of Upright constantly had its concerns on cash flow.66 The fact that this Program was offered or suggested to debtors before they even had the chance to speak to an attorney makes it all the more egregious. Chern testified as follows:

Chern, Tr. 106, Day 3. Making this proposal to cash-strapped debtors was essentially offering them a Hobson's choice — one the debtors had to make without legal advice — all while Upright was offering its services under the guise of helping them make the proper decisions to reach their "financial independence." Upright preyed upon some of the most vulnerable in our society — as the Williamses demonstrated — while they were under great stress. The Williamses were only 20 and 21 years old, with two children, when the Sperro New Car Custody Program was proposed to them. UST Ex. 3-20, pp. 3-4; UST Ex. 3-15, p. 72. Many of the debtors have had to take time off from work to either appear in Court or be deposed in this case, and the anxiety placed upon them permeates both the testimony and written communications. The debtors were left to question if they did anything wrong, as well as the consequences they might face, without proper guidance and assurance.

Of no lesser import is the impact upon an untold number of vehicle creditors.67 The record reflects that 217 Upright clients participated in the New Car Custody Program nationally, but how many different creditors lost their collateral after being caught up in it is not readily clear, nor is the dollar value of collateral converted or the amount of funds Sperro and/or Fenner & Associates ultimately pocketed. The Court does know that Upright received an amount of not less than $333,545.00 in fees from Fenner/Sperro in payment of legal fees. This is exclusive of filing fees. As shown by the language of the security agreements with the Williamses' and Scott's lenders, hiding and intentionally removing their collateral from Virginia and facilitating the imposition of state law liens against it was contrary to the debtors' contractual obligations to their lenders.68 There is no credible evidence that Chern or anybody at Upright gave serious thought or concern to this.

Chern's testimony about being intrigued about Fenner's pitch that the New Car Custody Program could be a benefit to Upright's customers, taking the burdens of maintaining and surrendering the collateral off their shoulders, was not credible, nor was his belief that he was really trying to help his clients. Chern, Tr. 278, Day 3. On May 21, 2015, Chern even inquired if there was a way for a consumer to waive the 30-day hold requirement of Indiana law to see if the mechanic's lien could attach sooner. UST Ex. 35-37. Moreover, Chern was also angling for a separate $150.00 fee for his separate "marketing company." UST Ex. 35-54. As the legal fees and filing fees were running on average between $1,800 to $2,000, Chern, clearly a financially astute businessman, had to know that Fenner and Sperro had to charge more than that to make a profit. Fenner's initial pitch email stated as much.69 Two former Upright clients, Russell McGuire and Regina White, testified that their cars were sold with Sperro having incurred charges of between $4,500 and $5,000. McGuire, White Tr. 236, 249, Day 1. It was also not credible that Chern could have believed that the New Car Custody Program was some kind of a loss-leader for Fenner, or that Fenner could somehow make his auction services attractive to the vehicle lenders after Fenner towed their collateral hundreds of miles to states where their financing liens could be primed in violation of contractual covenants with their borrowers.70 Despite red flags of being a "scam," including one local partner questioning it as such on June 18, 2015,71 Chern went forward with the rollout on June 18, 2015.72

Considering (1) the hard sell tactics encouraged on its sales people, (2) the transcripts of the actual recordings of the calls with clients, (3) the lack of supervision and control over its salespeople in connection with the unauthorized practice of law, due in no small part to the commission and sales structure imposed upon them, (4) the focus on cash flow over professional responsibility, and (5) the participation in the Sperro Program and the record as a whole, including Upright's efforts to get the Williamses and Scott to assert the attorney-client privilege in a thinly-veiled attempt to cover its own tracks, this Court believes that the Upright Defendants have acted in bad faith and the privileges of LSC, Upright Law, Chern, and Allen to file or conduct cases, directly or indirectly, in the Western District of Virginia shall be revoked for a period of five (5) years.73 This includes any firm that that LSC, Upright Law, Allen, or Chern, directly or indirectly, have an ownership interest in or control over. Further, LSC, Upright, Chern, Allen, Scanlan and Sperro shall be fined collectively the sum of $250,000.00.74 Chern shall be separately and personally fined the sum of $50,000.00 for his participation in and leadership of the Sperro scheme. Given LSC's financial resources and revenues in particular, as reflected by its tax returns and evidence of receipts from residents of the Western District of Virginia, these sums are appropriate in an effort to deter future misconduct. A lesser sanction would not be more appropriate.75 These fines are to be paid to the Office of the United States Trustee within thirty (30) days of the Court's Order becoming final and unappealable.

Delafield and Morgan bear responsibility for their actions as well. Delafield did do some things correctly: He met with his clients, he witnessed their signatures on the petition and schedules, and he went over the petition and schedules with them and explained things as an attorney should.76 However, he also did some things incorrectly, like not acting appropriately when it appeared he had a conflict of interest when the Sperro Program came to light, and also filing amendments to the petition without obtaining a wet signature, much less getting the clients' permission. Although not under oath, Delafield was an officer of the Court and less than forthcoming at the Williamses' 341 meeting.

At the 341 meeting, Delafield professed ignorance as to why Sperro paid the attorney's fees for the Williamses in their case. Clearly backpedaling, he said, "I don't know" and a "senior attorney at Upright can fill you in on the details. I can't." UST Ex. 3-2. He knew full well what the Sperro Program was and how it worked.77 Delafield knew as early as December 2015, as the Williamses had told him, that the car had been used to pay their fees. He also admitted in his Answer to the Complaint that he received the June 18, 2015 email about the New Car Custody Program from Chern.

Delafield fumbled even more fundamental responsibilities. A lawyer with primary responsibility for a client's legal matter is under a duty to know how his client's file is being handled and cannot simply claim ignorance of another's misconduct. Cf. Banner v. Cohen, Estis and Assoc., LLP (In re Balco Equities, Ltd., Inc.), 345 B.R. 87 (Bankr. S.D. N.Y. 2006) (discussing New York Rules of Professional Responsibility). This was Delafield's case, and he was the responsible attorney before this Court. The actions leading up to its filing, the filing itself, and the conduct of the case fall to him. Moreover, Virginia Rule of Professional Conduct 5.1(c), applicable to attorneys practicing in this Court, provides as follows:

Pt. 6, § II, Rule 5.1, Rules of Supreme Ct. of Va.

Here, Delafield ratified participation in the Sperro Program when he took the case and filed it. He was also a partner with knowledge of the conduct in question.78 He knew about the Sperro Program before he met with the Williamses, and Chern testified that Upright in Chicago prepared the Rule 2016(b) disclosures, which it still does, and sent them to the local partners. The Williamses' Rule 2016(b) disclosure came with the reference to Sperro already on it. Once Delafield saw that, he could have declined to take the case or to file it once the Sperro Program was disclosed to him. Instead, he decided to move forward. That it turned out to be a scam is laid equally at his feet. In addition, Rule 5.3 provides as follows:

Pt. 6, § II, Rule 5.3, Rules of Supreme Ct. of Va.

Delafield, a partner in the firm, also bears equal responsibility for the actions of the Upright sales staff touting and pushing the Sperro Program, as well as their unauthorized practice of law.79 These are not trifling matters just requiring more sales staff education or training.80 The "senior client consultants," as outlined above in Part I(A), engaged in numerous instances of providing impermissible legal advice to potential clients, albeit alleged violations of Upright's policies, and some of it was just outright wrong, such as advising clients to hide collateral or leave certain debts off their schedules. Coupled with the pressure to hit sales and commission targets, the fact that sales people engaged in overreaching conduct is not surprising. Chern testified that these are isolated instances and not illustrative of Upright's usual practices. However, that the instances of sales personnel exceeding their ethical boundaries just happen to be in the cases before this Court is a coincidence that cannot be ignored.81 Delafield professed ignorance about much of what the sales people did and how the cases were handled in Chicago. He knew few in firm leadership other than Chern or their roles at Upright. He knew little about how his Upright clients' funds were handled in Chicago.82 He should have known more about all of these matters. Delafield also has a past disciplinary history with this Court, specifically designed to correct past practice deficiencies in this Court. The Court believes lesser discipline would not be effective. Delafield's privileges to practice in this Court shall be revoked for a period of one (1) year, and Delafield will be sanctioned $5,000.00 to be paid to the Williamses, both to take effect within thirty (30) days of the Court's Order becoming final and unappealable.

Morgan is another matter altogether. Morgan, more so than Delafield, was defiant in his testimony, taking little responsibility for anything. That he relied on his partners or his staff was a frequent Morgan refrain. He, too, bears responsibility for filing a case before this Court in which his client was put into the Sperro Program. He received Chern's Sperro rollout memo and knew Scott was in the program from the start. Morgan, Tr. 47-48, Day 4. Moreover, his actions in trying to advance the attorney-client privilege to shield his actions and that of Upright's were self-serving and in conflict with Scott's interests. The responsibility for Upright actions attributable to the salespeople are as equally applicable to Morgan as to Delafield.

However, one of Morgan's practices, which he had no qualms about, is that he often does not meet with his clients in person, much less meet with them to go over and witness schedules being signed. He often leaves that to his wife, a non-attorney, who he testified has "a superior knowledge of the law" in that area. In this case, the first time he laid eyes on Jessica Scott was at her deposition on June 2, 2017, nearly a year and a half after her case was filed.83 As Judge Phillips stated in In re Smith, "[b]ankruptcy clients rely on their attorneys to explain an unfamiliar and complicated process so that they can make informed, appropriate decisions. In re Alvarado, 363 B.R. 484, 487 (Bankr. E.D. Va. 2007). An attorney has an affirmative duty to meet with and counsel his clients, answer any questions the client may have and explain the legal significance of their actions." In re Smith, No. 13-31565-KLP, 2014 WL 128385, at *6 (Bankr. E.D. Va. Jan. 14, 2014). Judge Kenney in the Eastern District of Virginia echoed the same sentiment, advising that "despite these advances in technology that allow parties to communicate remotely and to file papers electronically with the Court, there is still a fundamental duty to meet with the client and to obtain the client's original signature on the petition. The filing of a bankruptcy petition is an important, life-altering decision. The client must consider the risks (the damage to one's credit, the transactional fees, and the possibility of a failed Chapter 13 plan after paying into the plan for some period of time) with the potential rewards (the automatic stay, a discharge and the possibility of a strip-off of wholly unsecured liens)." In re Tran, No. 14-11837-BFK, 2014 WL 5421575, at *7 (Bankr. E.D. Va. Oct. 17, 2014). Leaving it to a lay person to meet with the client, go over the petition and schedules, verify their accuracy, explain the ramifications, answer questions, and obtain the signature is beyond the pale in this Court.84

This is unacceptable practice, and this practice shall stop. The Court also notes Morgan has a past disciplinary record with the Virginia State Bar more severe than that of Delafield, and it believes that lesser discipline would not be effective. Morgan's privileges to appear before this Court, directly or indirectly, including through his PLLC, shall be revoked for eighteen (18) months, and Morgan will be sanctioned $5,000.00 to be paid to Jessica Scott, both to take effect within thirty (30) days of the Court's Order becoming final and unappealable.85

Sperro, LLC is in default. Sperro is directed to disgorge immediately all funds received from (1) the sale or disposition of any property for which it remitted funds to LSC/Upright in connection with a case filed in this Court, and (2) any funds paid to it by or on behalf of a lender to recover that lender's collateral in connection with a case before this Court. Sperro shall provide full documentation to the UST of all such transactions. All such funds shall be paid to the Clerk of this Court, to be held in the Clerk's registry pending further order of this Court. Sperro shall also, to the extent it has not already done so, provide to the Office of the United States Trustee a list of all clients referred to it from LSC/Upright nationally, as well as details pertaining to the recovery, sale, disposition and/or secured creditor redemption of any collateral in connection with the so-called New Car Custody Program.86

CONCLUSION

Bankruptcy courts have long recognized that Congress sought to enact certain provisions of the Bankruptcy Code so that lawyers would preserve the integrity of the bankruptcy process and not treat bankruptcy matters as "matters of traffic." See In re Worldwide Direct, 316 B.R. at 646 and cases cited therein (addressing Section 504 of the Bankruptcy Code). The Bankruptcy Code provisions and Rules in play here are part of a larger structure, all of which operate in their own way to support those same goals. The integrity of the bankruptcy process was a distant thought in these cases. The pursuit of the next dollar of compensation was the primary consideration here, by Sperro, LSC/Upright, its organizers, and its local partners.

Local attorneys joining multi-jurisdictional law firms as local or limited partners cannot be both tall and short. An attorney cannot claim to be a partner in the firm and file cases with the Court as lead counsel, but yet claim no responsibility for what happens in the main office on the files the attorney decides to take. Attorneys considering joining firms with this business model should understand that, in this Court, while an injury might be initiated elsewhere — there is a real possibility the pain is going to be felt at home.87 An appropriate Order shall issue.

Nature of Suit: 14 — Recovery of money/property - other, 72 — Injunctive relief - other.