UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
LEXINGTON DIVISION
IN RE:
JAMES LEE BYRD JR.
LESLEY
ANN BYRD CASE
NO. 98-52882
DEBTORS
OPINION AND
ORDER
This matter is before the court upon the Motion of
Hughes and Coleman, PLC for Attorney Fee filed on August 20, 2001 and the
Application for Compensation for Honorable John Simms, attorney for trustee,
filed by the trustee herein on August 30, 2001.
Prior to the filing of this bankruptcy case, one of the
debtors, James Byrd, had hired Hughes and Coleman, attorneys, to represent him
with respect to a personal injury case.
In the Hughes and Coleman motion herein, (Doc. #42), it reflects that
services began on or about May 7, 1997, and based upon that document, it
appears that a lawsuit was filed on January 12, 2001. This bankruptcy proceeding was filed November 13, 1998 and it is
clear to the court that the bulk of the work done by Hughes and Coleman was
done after the bankruptcy proceeding was filed.
Upon the filing of the bankruptcy proceeding, the
motions and responses of the parties reflect that the trustee and Hughes and
Coleman were unable to agree as to the representation on the claim, which was
now estate property pursuant to 11 U.S.C. '541. The trustee hired attorney John Simms to
represent the estate in the matter, and Mr. Simms proceeded to reach a
settlement, which has been approved by this court, in the amount of $85,000. Mr. Simms states that Hughes and Coleman was
unresponsive to his request for the records and that much of his work
duplicated that of Hughes and Coleman since they would not make available to
him the information which they had.
Hughes and Coleman responds that the case could have and should have
been settled for a larger sum. The
trustee points out that the insurer, Reliance Insurance, is in a Chapter 11
proceeding thereby making collection on the claim more dubious and indicates
this was one of the substantial reasons for settlement in the case.
Pursuant to 11 U.S.C. '541, the estate is comprised of all legal and equitable interests of
the debtor in property as of the commencement of the case. Clearly, the cause of action being
prosecuted by Hughes and Coleman at the time of the filing of the case was such
property. The prosecution of the
lawsuit was then the province of the trustee as the party responsible for
administering the estate. The funds
received from the lawsuit would be estate property, subject only to any exempt
portion properly claimed by the debtor in the bankruptcy case. The trustee was not, of course, bound by
debtor=s selection of counsel and after initial attempts to
reach agreement failed, selected her own counsel.
Actions taken by Hughes and Coleman from and after the
filing of the bankruptcy proceeding were without the authority of the owner of
the cause of action, the estate. While
it is not clear when Hughes and Coleman became aware that Mr. Byrd had filed
his bankruptcy proceeding, it is clear that they were aware of the pending
bankruptcy on or before October 27, 2000, in that their statement of services
reflects ADraft correspondence to bankruptcy attorney and client@. (Doc.
#42). Hughes and Coleman have stated
that they keep no time records with regard to contingency fee cases and have
reconstructed their statement of services from their records. Clearly, they rendered services regarding
the cause of action prior to the filing of the bankruptcy case and have a lien
for the services pursuant to KRS 376.460.
In reviewing the matter, it appears to the court that
Hughes and Coleman proceeded with the prosecution of the case after becoming
aware of the filing of the bankruptcy.
As attorneys, they should be charged with knowledge of the fact that the
filing of a bankruptcy creates an estate and that the cause of action which
they were prosecuting was the property of that estate and that the estate was
administered by the trustee. 11 U.S.C. ' 541. They
should not profit from their neglect of, or indifference toward, the pending
bankruptcy proceeding. Additionally, in
arguments of counsel, they did not deny that they refused to turn over records
and cooperate with the trustee=s prosecution
of the case. The court considers this
also an important factor in deciding upon the allocation of attorney=s fees herein.
With respect to the attorney=s fees herein, it appears that the trustee applied to
appoint the attorney in accordance with the attorney=s declaration and that declaration reflects a
contingency fee of one-third of any recovery plus expenses incurred by the
attorney. An order was entered by the
estate on March 19, 2001 allowing the employment of the attorney on that
basis.
Upon a review of the entire file, it appears that the
court should allow one attorney fee in the total amount of one-third of
$85,000.00, or $28,333.33. Based upon
the hearing in the matter, the record and the recitations above, it appears that
that sum should be divided one-third to Hughes and Coleman and two-thirds to
John Simms, attorney for trustee.
Additionally, it appears that expenses in the amount of $151.61 should
be allowed to the attorney for the trustee.
IT IS THEREFORE ORDERED AS FOLLOWS:
1)
The trustee shall pay to
Hughes and Coleman, PLC, the sum of $9,444.44; and
2)
The trustee shall pay to
John Simms, attorney for trustee, the sum of $18,888.89 as attorney=s fees, and $151.61 for expenses.
3)
The trustee is directed
to forthwith make the aforesaid payments from funds of the estate.
Dated this day of November,
2001.
BY
THE COURT
JUDGE
COPIES TO:
John M. Simms, Esq.
Anna C. Johnson, Esq.
Brent Travelsted, Esq.