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6500 Cherrywood Ln - Greenbelt, MD 20770 - Main Tel: 301-344-8018 map
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101 W Lombard St Room 8530 - Baltimore, MD 21201 - Main Tel: 410-962-2688
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Case Numbersort ascending Opinion Summary ( date sorted)
Robert A. Gordon
12-19863
Robert Anthony Griffin
Mar 18, 2013

Debtor and his co-heir, non-debtor sister, inherited his principal residence from their mother who had encumbered the residence with a reverse mortgage. Upon the mother’s death, the reverse mortgage accelerated and was due in full prior to the petition date. The Debtor, relying upon 11 U.S.C. § 1322(c)(2) which provides that a Chapter 13 plan may modify a claim secured by a debtor’s principal residence when “the last payment on the original payment schedule… is due before the date on which the final payment under the plan is due,” sought to repay the reverse mortgage in full over the life of his Chapter 13 plan. The mortgagee, Federal National Mortgage Association (FNMA), objected to confirmation of the plan and asserted that (1) Section 1322(b)(2) forbids modification of a claim secured by a debtor’s principal residence and therefore the reverse mortgage could not be decelerated and paid over time under the plan and (2) the modification could not be accomplished without the presence of the Debtor’s sister in the case. At issue was whether the acceleration of the reverse mortgage makes it a claim for which the last payment is due before the date on which the final payment under the plan is due and whether a co-owner need be a party in order for a mortgage’s payment terms to be modified. The Court held that (1) the provisions of Section 1322(c)(2) apply to the mortgage’s payment terms and it could be paid over time under the plan and (2) the Debtor’s sister is not a necessary party to the modification of the payment terms. FNMA’s objection to confirmation was overruled.

Robert A. Gordon
11-27484
Leonard Paul Raskin
Feb 12, 2014

Leonard Paul Raskin, a married man, filed for bankruptcy individually and sought to use 11 U.S.C. §522(f) and the recently enacted Maryland homestead exemption to avoid a joint lien on real property owned with his wife as tenants by the entirety. The lienholder objected and argued that since only the Debtor’s interest in the real property was before the Court, the Court could neither avoid the lien in part nor entirely as this would allow the Debtor to unilaterally destroy the unity of interest that is the hallmark of the tenancy by the entireties estate. The Court held that the Maryland homestead exemption and Section 522(f) act in concert to create an exception to the common law prohibition against the unilateral alteration of rights in the entireties estate such that the Debtor could have the lien avoided. However, the Court agreed that the homestead exemption does not extend to the avoidance of the lien as to the wife’s interest in the property and the result was limited to allowing only the Debtor to avoid the lien to the extent it impaired his exemption as to his interest.

Robert A. Gordon
10-23222
Monica D. Harenberg
Apr 08, 2013

In re: Monica D. Harenberg, Debtor, Case No. 10-23223-RAG
In re: D&M Realty, LLC, Debtor, Case No. 10-23222-RAG
Jointly Administered Under Case No. 10-23223-RAG

Following the decision to convert jointly administered Chapter 11 cases to Chapter 7 in lieu of the approval of the proffered disclosure statement, and the corollary denial of confirmation of the plan, the Debtors, an individual and a shell entity, appealed the decision and filed a motion for stay pending appeal. The Court found that its decision to withhold approval of the disclosure statement and deny confirmation of the plan, and therefore convert, was appropriate in light of the plan’s failure to conform to applicable law, the individual Debtor’s repeated acts of bad faith, the plan’s violation of the liquidation test and its proposed unfair discrimination in favor of the individual Debtor’s mother, all in violation of the confirmation requirements of Section 1129(a). Conversion was deemed appropriate as the individual Debtor’s schedules and disclosure statement reflected substantial equity in both her real and personal property. In light of these factors, the individual Debtor could not establish that (1) there was a likelihood of success on the merits on appeal, (2) she would suffer irreparable injury if the stay is denied, (3) other parties will not be substantially harmed by the stay, and (4) the public interest will be served by granting the stay. The requested stay pending appeal was denied.

Robert A. Gordon
10-00091
Carol Todd
May 17, 2012

In re Carol Todd/09-32262
Todd v. Access Group, Inc. et al./10-00091

Debtor, a sixty-three year old woman suffering from an autism spectrum disorder (Autism) and various physical ailments, filed a complaint pursuant to 11 U.S.C. §523(a)(8) to have her student loans included within her discharge. Debtor argued that she was unable to obtain gainful employment due to her Autism and other permanent shortcomings and that to have her student loan debt excepted from her discharge would be an undue hardship. Three of her student loan creditors, who were collectively owed nearly $340,000, objected. The Court applied the Brunner test to determine the dischargeability of the student loans and found that, 1) Debtor’s monthly finances would not allow her to sustain a minimal standard of living if she was forced to re-pay her student loans; 2) Debtor’s Autism and other ailments amounted to sufficient additional circumstances to establish a certainty of hopelessness as regards the Debtor’s ability to ever obtain regular employment sufficient to re-pay her student loan debts; and 3) Debtor had acted in good faith in attempting to obtain employment and steady income to repay her loans but Autism and other circumstances beyond her control prevented her from realizing the same. Finding that all requirements of the Brunner test had been met, the Court discharged all of the student loans.

Robert A. Gordon
08-16398
PRIS-MM, LLC.
Jul 31, 2009

The state court appointed Receiver of the Debtor (Receiver) and his Counsel filed separate motions seeking allowance of compensation and expenses incurred as administrative expense claims pursuant to 11 U.S.C. §§ 543(c)(2), 503(b)(3)(E) and 503(b)(4). The Receiver served in this capacity for the ten-day pre-petition period and was superseded by the commencement of the bankruptcy case pursuant to 11 U.S.C. § 543(a). The Receiver did not seek authority to continue in this capacity for the post-petition period yet continued to play an active role in the case primarily by seeking its dismissal. The Receiver and Counsel sought compensation and expenses for both the pre and post-petition periods. The Receiver and Counsel argued that it was not necessary that their actions contributed a substantial benefit to the estate for an award of fees but instead that the Court should rule in their favor because their activities could reasonably have been thought to be beneficial to the estate when they were performed. The Court, in concluding pursuant to well established law that a genuine benefit to the estate must be established, found that: (1) conclusory and bald averments that the Receiver and Counsel’s work tended toward the preservation and benefit of the estate was not sufficient; (2) reduced compensation for the Receiver would be awarded only for the ten-day pre-petition period; (3) Counsel was not entitled to any compensation, as his time records did not provide any evidence that his work tended toward the preservation or benefit of the estate.

Robert A. Gordon
07-13714
In re: Donna Hill Flohr, Debtor/David L. Flohr, Pl
Dec 12, 2008

Plaintiff filed a two-count complaint for nondischargeability of debt under 11 U.S.C. §§ 523(a)(5) and 523(a)(15). Plaintiff received a judgment from the Circuit Court for Howard County retroactively reducing the amount of alimony owed to Debtor-Defendant, which a Washington State Court had compelled Plaintiff to pay pursuant to the terms of a divorce separation agreement. Plaintiff alleged this overpaid alimony should be excepted from the Debtor’s discharge. The parties agreed, and the Court found, that the material and relevant facts in this case were not subject to dispute. In granting the Plaintiff’s Motion for Summary Judgment as to Count II, the Court held 1) Debtor owed a judgment debt to the Plaintiff who is an ex-spouse of the Debtor, 2) the overpayment of alimony in this case did not constitute a domestic support obligation under 523(a)(5), because the Debtor is the beneficiary of the obligation, not the designated payor per the separation agreement and the fact that the Maryland Judgment is premised on the overpayment of alimony does not transform it into an offsetting right in favor of Plaintiff to receive alimony, and 3) the debt was incurred in connection with a separation agreement or divorce decree. Accordingly, the debt fell within the confines of Section 523(a)(15) and is excepted from the Debtor’s discharge.

Robert A. Gordon
07-00839
In re: James Paul Quillen, Jr., Debtor, Case No. 07-00839
Feb 17, 2010

Plaintiff filed a two-count complaint for nondischargeability of debt pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (B). The Debtor, an experienced real estate developer, sought to refinance an existing loan secured by a first lien on the real property at issue. Plaintiff was to receive a first lien on the real property when the loan was settled. Prior to the settlement with the Plaintiff and unbeknownst to it, Debtor granted an indemnity deed of trust in favor of non-party private investors, securing it with the same real property that was to be pledged to the Plaintiff. This resulted in a loss of the lien priority bargained for by the Plaintiff. The Court found that Plaintiff’s Section 523(a)(2)(A) claim failed because the Debtor’s omission or active misrepresentation regarding the Plaintiff’s lien status was a statement regarding the Debtor or an insider’s financial condition and outside that section’s scope. However, the Court concluded that the Debtor had made materially false written statements regarding an insider’s financial condition with the intent to deceive which were reasonably relied upon by the Plaintiff, thus satisfying all elements of Section 523(a)(2)(B) and requiring that the underlying debt be excepted from the Debtor’s discharge.

Robert A. Gordon
07-00839
Baltimore County Savings Bank, FSB v. James Paul Q
Jul 14, 2008

Debtor/Defendant moved to dismiss nondischargeability adversary proceeding for untimeliness under Fed. R. Bankr. P. 4007(c), specifically asserting that following conversion from Chapter 11 to Chapter 7 there is no Section 341(a) meeting of creditors and that therefore Plaintiff's complaint under Section 523(a)(2) had to be filed no later than sixty (60) days following the date of conversion to be timely, despite Rule 4007(c)'s explicit command that the deadline expires sixty (60) days after the "first date set for the meeting of creditors under Section 341(a)".
The Court held that, upon conversion, Section 348(a) operates to spawn a new "order for relief" (notwithstanding the statutory caveat that the "date of" the order for relief does not change from the date of the original order for relief) and that this in turn generates a second, independent Section 341(a) meeting of creditors, by operation of the plain meaning of Sections 301, 341(a), 342(a), 343 and 348(a).

These provisions, taken in conjunction with Rule 1019(2), which mandates the resetting of Rule 4007(c)'s deadline
following conversion from a case under Chapter 11 to a case under Chapter 7, require that a Section 341(a) meeting be convened post-conversion and that nondischargeability complaints must be filed within the time period stated in Rule 4007(c)'s plain language i.e. within sixty (60) days after the first date set for the meeting of creditors in the converted case. As the Plaintiff's complaint was timely filed, Debtor's motion to dismiss was denied.

Robert A. Gordon
06-17365
QC Ridgley, LLC
Mar 18, 2004

Counsel for Debtor filed an amended application for compensation, in which Counsel reduced the amount of compensation sought by approximately $7,000 from the original application for compensation. The voluntary reduction was not explained by Counsel. Hence, the Court concluded that it arose from an error in calculation and was not an exercise of either billing judgment or Counsel's largesse. Because the section of the amended application devoted to "billing judgment" did not provide a sufficient analysis of why a voluntary reduction of actual fees would be inappropriate in this instance, but instead recited factors common to any Chapter 11 case, the Court, finding that the exercise of "billing judgment" is a requirement of all attorney fee applications, further reduced Counsel's fees by $745.

Robert A. Gordon
06-16535
In re: Patrica A. Robinson-Wolf and Edward Wolf
Oct 10, 2007

Order awarding compensation for Chapter 7 Trustee after conversion to Chapter 13 (dkt. 69).
Chapter 7 Trustee filed an application for compensation, with the consent of the Debtors, seeking $1,400 for a mixture of trustee duties and attorney services performed by Chapter 7 Trustee before the Debtors converted the case to Chapter 13. In arriving at amount requested, Chapter 7 Trustee multiplied his total hours of work by his normal hourly billing rate for legal services. The Court held that 1) generally Sections 326(a), 328(b), and 330(a) provide for the bifurcation of the calculation and award of
compensation to a Chapter 7 trustee (as comission) and counsel for the Chapter 7 trustee (at an hourly rate), and 2) that the proper methodology in setting the Chapter 7 trustee's compensation in a converted case is to calculate the maximum commission that the Chapter 7 trustee could have earned for his pre-conversion efforts based on the sums to be distributed under the Chapter 13 plan, discounted by a reasonable amount as determined by the circumstances of the case and the actual services performed. When applying the discount rate and setting the ultimate compensation the trustee's hourly rate and number of hours of work are relevant factors. The Court found that the Chapter 7 Trustee had made such calculation and awarded compensation in the amount of $1,400.

Robert A. Gordon
06-15939
Baltimore County Savings Bank, FSB v. James Paul Q
Jul 14, 2008

Debtor/Defendant moved to dismiss nondischargeability adversary proceeding for untimeliness under Fed. R. Bankr. P. 4007(c), specifically asserting that following conversion from Chapter 11 to Chapter 7 there is no Section 341(a) meeting of creditors and that therefore Plaintiff's complaint under Section 523(a)(2) had to be filed no later than sixty (60) days following the date of conversion to be timely, despite Rule 4007(c)'s explicit command that the deadline expires sixty (60) days after the "first date set for the meeting of creditors under Section 341(a)".
The Court held that, upon conversion, Section 348(a) operates to spawn a new "order for relief" (notwithstanding the statutory caveat that the "date of" the order for relief does not change from the date of the original order for relief) and that this in turn generates a second, independent Section 341(a) meeting of creditors, by operation of the plain meaning of Sections 301, 341(a), 342(a), 343 and 348(a).

These provisions, taken in conjunction with Rule 1019(2), which mandates the resetting of Rule 4007(c)'s deadline
following conversion from a case under Chapter 11 to a case under Chapter 7, require that a Section 341(a) meeting be convened post-conversion and that nondischargeability complaints must be filed within the time period stated in Rule 4007(c)'s plain language i.e. within sixty (60) days after the first date set for the meeting of creditors in the converted case. As the Plaintiff's complaint was timely filed, Debtor's motion to dismiss was denied.

Robert A. Gordon
06-15938
In re: James Paul Quillen, Jr., Debtor
Jul 09, 2009

Debtor filed an amended list of exemptions on the eve of a consensual conversion from Chapter 11 to Chapter 7. The Chapter 7 trustee filed a timely objection to a portion of the newly exempted property and an amended objection within thirty days of the conclusion of the post-conversion 11 U.S.C. § 341(a) meeting, objecting to the remaining exemptions taken. The fundamental issue raised is whether the deadlines for objecting to exemptions set forth in Federal Rule of Bankruptcy Procedure 4003(b) automatically re-set following conversion so that the trustee and creditors are granted two thirty day periods to object to amended exemptions previously listed by a debtor; thirty days following the amendment and an additional thirty days following the conclusion of the 11 U.S.C § 341(a) meeting of creditors held in the converted case. The Debtor argued that there is no second meeting of creditors held pursuant to 341(a) upon conversion and thus the deadlines do not reset. Debtor likewise argued that because the deadlines do not reset, the trustee’s amended objection was untimely and any exemptions not objected to were therefore conclusively established resulting in the severance from the estate of the exempt property and its re-vesting in him. Debtor also argued that: (a) property exempted as tenants by the entirety was completely severed from the estate and was not subject to the claims of any creditors, (b) he was entitled to take exemptions allowed by the state of Florida, and (c) his exemptions of non-marital estate property were not limited by the exemption values that he assigned to such property. The Court concluded that a second 341(a) meeting of creditors is a statutory imperative in a converted case but the thirty day deadline for filing objections after the conclusion of the 11 U.S.C. § 341(a) meeting prescribed by Rule 4003(b)(1) does not apply to exempt property that had already re-vested in the Debtor; the Chapter 7 trustee’s amended objection to the Debtor’s amended list of exemptions was consequently untimely; that nevertheless, the long settled law in this Circuit provides that property held as tenants by the entirety may be administered by the trustee for the benefit of joint creditors whether a party files a timely objection or not; the Debtor, a Maryland resident for the relevant statutory period, may only utilize those exemptions provided by Maryland law; and the value of the Debtor’s permissible exemptions shall be limited by the dollar amount ceilings that he assigned to his claimed exemptions.

Robert A. Gordon
06-15732
Timothy James Burek, Sr., Debtor/Timothy James Bur
Dec 14, 2006

Debtor filed a motion to redeem his automobile, secured by a lien in favor of Respondent, pursuant to Sections 722 and 506(a) by paying the value of the collateral in a lump sum within 30 days. The Court concluded that in order to redeem the automobile, Debtor must pay the fair-market, retail value of the collateral, as adjusted for age and condition. The Court further held that under Section 506(a)(2), added by BAPCPA, the valuation of the collateral should be made as of the date of filing of the petition, and thus post-petition depreciation should not be taken into account.

Robert A. Gordon
06-15285
Darcy Alana Herron
Jan 23, 2008

Chapter 13 debtor objected to a general unsecured claim for a credit card debt filed by Jefferson Capital Systems, LLC, assignee of the originating creditor, asserting that the collection of such debt was barred by the statute of limitations. The creditor did not file a response. The Court held a hearing and overruled the objection since Debtor did not present evidence in support of the objection, instead relying solely upon the inconclusive information included in the claim and attached account
summary. Thereafter, the Debtor filed a motion to reconsider the order overruling the objection to claim. The Court denied that motion to reconsider, holding that: 1) Section 502(b) provides the exclusive bases for objecting to claims and noncompliance with the Bankruptcy Rules is not one of the enumerated grounds, 2) creditor's claim, which included a comprehensive account summary, was executed in accordance with Federal Bankruptcy Rule 3001 and therefore was entitled to prima facie validity,
and 3) although the creditor retained the ultimate burden of proof on the claim under state law, Debtor failed to rebut the claim's prima facie validity by presenting countervailing evidence that showed that the creditor had forfeited its right to collect on the debt.

Robert A. Gordon
06-15054
In re Michelle D. Tubman
Mar 26, 2007

Debtor, who had a Chapter 13 case dismissed within the preceding 1-year period, filed a motion to extend the automatic stay in her current Chapter 13 case pursuant to 11 U.S.C. 362(c)(3)(B) after the expiration of the 30-day post-petition period. The Court conducted an initial hearing and Debtor subsequently filed a motion for declaratory judgment as to the extent of the termination of the stay under Section 362(c)(3)(A) and additionally sought the imposition of a stay under Section 105(a). A secured creditor, holder of a deed of trust on Debtor’s residence, objected to both motions, arguing, in an attempt to proceed with foreclosure, that the automatic stay under Section 362(a) had expired in toto by operation of law. The Bankruptcy Court, J. Gordon, held that: (1) the automatic stay terminated by operation of law on the 30th day post-petition under Section 362(c)(3)(A), (2) an untimely filed motion cannot serve to reimpose the automatic stay under Section 362(c)(3)(B), (3) the termination of the stay under Section 362(c)(3)(A) was limited in scope and the stay, while terminating as to the Debtor, did not terminate as to property of the estate, and (4) the alternative relief requested by Debtor under Section 105(a) appeared unnecessary in light of the Court’s ruling.

Robert A. Gordon
06-12724
Mintec Corporation v. Francois Miton
Dec 11, 2007

This case addresses the following issue: whether a Maryland corporation whose charter has been forfeited can pursue an action for denial of discharge under Section 727 and determination of nondischargeability of a debt under Section 523. The Bankruptcy Court, J. Gordon, held that: (1) under Maryland law, a corporation whose charter is forfeit is a legal non-entity and therefore the original adversary proceeding filed by the forfeit corporation was a nullity, (2) while a director-trustee of the void entity could have brought the suit as a part of the winding up of the corporation’s affairs, that did not occur in this instance, and (3) the subsequent revival of the corporate charter did not serve to resurrect the adversary proceeding since the limitations periods in Bankruptcy Rules 4004(a) and 4007(c) expired while the charter was forfeited thus divesting the corporation of the cause of action. As there was no action to prosecute and the refiling of the action was barred by the Bankruptcy Rules, the Court granted Debtor’s motion to dismiss.

Robert A. Gordon
05-39583
In re: Harry E. Lindsley, Debtor/Frank and Cathlee
Apr 22, 2008

Debtor, an experienced mortgage broker and real estate professional who engineered and caused the establishment of a conservation easement and environmental mitigation credit bank as to certain valuable real estate which he owned, acted with the requisite fraudulent intent under 11 U.S.C. § 523(a)(2)(A) when he conveyed and transfered the same real estate in fee simple to good faith purchasers for value but continued to sell those mitigation credits to third parties, such that the resulting judgment entered by the state court should be excepted from his discharge. Fraudulent intent, for purposes of Section 523(a)(2)(A), requires that the debtor subjectively intended to deceive the creditor, based on the totality of the circumstances. Such intent may be inferred from the circumstances, including when the debtor knowingly or recklessly made false representations. In this case, Debtor argued that he was simply and innocently mistaken as to his right to continue selling the credits after conveying the underlying real property and that he did not intend to defraud the Plaintiffs. The Court found the existence of fraudulent intent based on a confluence of factors: 1) Debtor misrepresented to Plaintiffs at closing that all of the credits had been sold and at no time disclosed his intention to continue selling the credits post-settlement, 2) no documents either severed the interest in the credits from the interest in the land or disclosed the existence of the credits, 3) no documents supported Debtor's argument that he honestly believed he retained the right to continue to sell the credits, despite the fact that Debtor engineered the creation of the property rights at issue, 4) any ongoing maintenance duties as to the conservation easement, if Debtor had any, did not entitle Debtor to exercise control over the credits, and 5) Debtor sold the credits in at least 15 separate transactions post-settlement utilizing a form contract that erroneously continued to identify his wholly-owned entity as the owner of the real estate.

Robert A. Gordon
05-25591
Brooklyn Harlee a/k/a Brooklyn Harlee, Jr., Debtor
May 01, 2008

In a Chapter 7 case, secured lender filed a motion for relief from stay under 11 U.S.C. Section 362 to enforce its rights under a Deed of Trust as to certain real property owned by the Debtor. No response was filed by either the Debtor or the Chapter 7 Trustee. The Court denied the motion without prejudice for the failure to comply with Local Rule 4001-1(b)(1) by filing a detailed statement of the debt owed. Secured lender then filed a motion to reconsider, in which it both challenged its noncompliance and attached the requisite account statement. The Court granted the motion to reconsider, but was compelled to address the issue of Movant's initial noncompliance. The Court held that under its interpretation of Local Rule 4001-1(b), creditors seeking to prosecute motions for relief from stay must document in detail the indebtedness due and be prepared to support the motion with evidentiary materials, in most instances by attaching copies of account summaries or some other relevant business records.

Robert A. Gordon
05-01255
Kamran Miremadi and Holy Julie Miremadi a/k/a Holl
Jan 08, 2008

Plaintiff filed a complaint for nondischargeability under Section 523(a)(2)(A) for a mortgage debt incurred by Debtors years before, asserting that Debtors misrepresented their ownership of the real property that secured the loan. The results of Plaintiff's pre-filing investigation established Debtors did in fact own the real property at the time the debt was incurred. Debtors' filed a motion to dismiss and Plaintiff responded with its own motion to dismiss the Adversary Proceeding. After Debtors received their discharge, they filed a motion for award of attorney's fees under Section 523(d), contending that Plaintiff’s position in bringing the Adversary Proceeding was not substantially justified. Finding that Plaintiff knew or should have known the complaint lacked substantial justification before it was filed and that despite Plaintiff’s subsequent dismissal, the case therefore should never have been filed, the Court granted summary judgment for Debtors and awarded attorney’s fees.

Robert A. Gordon
04-31689
In re: Scott Adam Lockwood, Debtor/Belmont Condominium
May 23, 2008

Condominium association moved for relief from the stay to enforce its lien rights as to Debtor's real estate due to Debtor's failure to pay post-petition assessments. Movant and Debtor, pro se, submitted a proposed consent order that the Court found lacking in several respects. In this Order Denying Consent Order Modifying Stay Without Prejudice, the Court articulates its general requirements for consent orders, including (1) that the debtor is given an opportunity to cure a subsequent default thereunder and (2) that the movant cannot proceed to collect from other property of the estate, such as by obtaining a lien against any other real or personal property or garnishing Debtor’s wages, without first obtaining further authorization from this Court.

Robert A. Gordon
04-21689
In re: Scott Adam Lockwood, Debtor/Belmont Condomi
May 23, 2008

Condominium association moved for relief from the stay to enforce its lien rights as to Debtor's real estate due to Debtor's failure to pay post-petition assessments. Movant and Debtor, pro se, submitted a proposed consent order that the Court found lacking in several respects. In this Order Denying Consent Order Modifying Stay Without Prejudice, the Court articulates its general requirements for consent orders, including (1) that the debtor is given an opportunity to cure a subsequent default thereunder and (2) that the movant cannot proceed to collect from other property of the estate, such as by obtaining a lien against any other real or personal property or garnishing Debtor’s wages, without first obtaining further authorization from this Court.

Robert A. Gordon
04-18625
In re: OR Partners, Inc./In re: OR Ramblewood, LLC
Sep 15, 2006

Chapter 11 Trustee filed an application for allowance of both trustee’s commission and compensation for counsel to the trustee. As to the trustee’s commission element, instead of seeking compensation based upon the commission schedule in Section 326, Trustee decided to seek compensation as if he were an attorney for all work performed, based upon the hourly rate he would normally charge for legal services. Trustee noted that the amount requested was substantially less than what his commission would have been if calculated under Section 326. Court held that 1) under Section 328, Trustee’s commission calculation must be performed separately and distinctly from an analysis of an award of attorney’s fees, 2) betterapproach would have been for Trustee to present an application for commission in an amount voluntarily reduced to the amount sought, without injecting calculation of his attorney’s fees for such work, and 3) as Trustee was not attempting to use hourly rate calculation to gain greater compensation than he would be entitled to under Section 326, the commission was reasonable and would be approved.

Robert A. Gordon
02-56825
In re: James L. Gay, Jr.
Jun 27, 2008

Counsel for Debtor filed his first fee application five years into the case seeking approval of compensation of approximately $80,000. In the fee application, Counsel disclosed for the first time that, three years prior, he had received approximately $40,000 directly from a third party non-debtor business entity in which the Debtor held an ownership interest. This compensation arrangement was not outlined in the disclosure of compensation filed with the petition and at no time thereafter did Counsel submit an amended disclosure pursuant to Section 329 and Fed. R. Bankr. P. 2016(b). In response to the Court's concerns, Counsel argued that approval of the undisclosed payments was not required because the funds were not property of the estate. Counsel also argued that the exercise of billing judgment is generally not mandatory and was not warranted in this case save for a de minimis write-off. The Court held that 1) income derived by the Debtor from his passive ownership interest in business entities was in the nature of dividends or profits and not wages for post-petition services rendered, was not excepted from property of the estate under Section 541(a)(6), and should not have been used to pay Counsel without court approval, 2) fee applicants must conduct a searching and thorough analysis to determine whether the exercise of billing judgment is necessary, 3) the exercise of billing judgment was required in this case because certain services were of marginal value or were necessitated by Counsel's own failure to meet deadlines, 4) Section 329 and Fed. R. Bankr. P. 2016(b) provide an inflexible rule requiring counsel to disclose the precise nature of the fee arrangement with the debtor and the source of compensation to be paid, regardless of whether counsel will seek approval of compensation from the estate, 5) Severe sanctions are rightly imposed for violating the duty to disclose and may require denial of all fees, and 6) Counsel did violate his duty by not disclosing the payment of $40,000 until three years after he received the funds, but since the confirmed plan provided for the payment of all claims in full and there was no apparent harm to the estate, the appropriate sanction in this instance was reduction of compensation by $10,000.

Robert A. Gordon
02-56825
In re: James L. Gay, Jr.
Jun 27, 2008

Counsel for Debtor filed his first fee application five years into the case seeking approval of compensation of approximately $80,000. In the fee application, Counsel disclosed for the first time that, three years prior, he had received approximately $40,000 directly from a third party non-debtor business entity in which the Debtor held an ownership interest. This compensation arrangement was not outlined in the disclosure of compensation filed with the petition and at no time thereafter did Counsel submit an amended disclosure pursuant to Section 329 and Fed. R. Bankr. P. 2016(b). In response to the Court's concerns, Counsel argued that approval of the undisclosed payments was not required because the funds were not property of the estate. Counsel also argued that the exercise of billing judgment is generally not mandatory and was not warranted in this case save for a de minimis write-off. The Court held that 1) income derived by the Debtor from his passive ownership interest in business entities was in the nature of dividends or profits and not wages for post-petition services rendered, was not excepted from property of the estate under Section 541(a)(6), and should not have been used to pay Counsel without court approval, 2) fee applicants must conduct a searching and thorough analysis to determine whether the exercise of billing judgment is necessary, 3) the exercise of billing judgment was required in this case because certain services were of marginal value or were necessitated by Counsel's own failure to meet deadlines, 4) Section 329 and Fed. R. Bankr. P. 2016(b) provide an inflexible rule requiring counsel to disclose the precise nature of the fee arrangement with the debtor and the source of compensation to be paid, regardless of whether counsel will seek approval of compensation from the estate, 5) Severe sanctions are rightly imposed for violating the duty to disclose and may require denial of all fees, and 6) Counsel did violate his duty by not disclosing the payment of $40,000 until three years after he received the funds, but since the confirmed plan provided for the payment of all claims in full and there was no apparent harm to the estate, the appropriate sanction in this instance was reduction of compensation by $10,000.