In re Revels , 147 B.R. 128 ( 1992 )

ORDER DENYING EMPLOYMENT OF SPECIFIC COUNSEL

HAL J. BONNEY, Jr., Bankruptcy Judge.

This Chapter 11 ease was filed on September 22, 1992 on behalf of Ruth A. Revels, debtor. On the same day Harry W. Jernigan, P.C. (“the firm”) filed an application for the debtor to employ the firm as counsel.

The Court directed that the application be set for a hearing and it was scheduled for October 8. On October 5 an amended application to employ was filed.

A comparison of the two applications is essential. What concerned the Court to cause the original to be set was

(1) a provision for employment of a secretary, and

(2) more attorneys than the firm currently has.

Obviously and admittedly triggered by the Court’s setting of the matter, the amended application was filed. It

(1) omits the secretary, but

(2) discloses for the first time that a third party will pay the attorneys’ fees.

At the hearing the Court inquired if knowledge of the third party was known when the case was filed. The answer was “yes.”

Since this was the case, it was required to be disclosed on the Attorney’s Disclosure Statement pursuant to Rule 2016(b). It was not nor has the statement been amended.

At the hearing counsel (1) agreed the secretary should not have been included, (2) admitted to “overlooking” the third party and (3) argued the firm might employ in the future an Associate Junior Attorney to bill at $80.00 an hour. Presently, it is

Harry W. Jernigan, III $150.00/hr.

John C. Cancelleri, Associate Attorney, $100/hr.

Associate Junior Attorney, $80.00/hr.

Paralegal/Para-Professional, $45.00/hr.

The U.S. Trustee did not object to either application including the one providing for the employment of a secretary at $35.00/ hr. Indeed, the U.S. Trustee endorsed the proposed order for this with “no objection.”

There are three areas of concern that require action upon the matter.

(1) The duty of the Court to see that there is not even the .appearance of impropriety.

(2) The high duty imposed upon an attorney by Canons of Ethics 1 and 9.

(3) The increasing concern over attorneys’ charges in the Congress.

Had there been but one problem area here, we might give little pause; however, there are three.

The Court must conclude that an approved charge for a secretary was deliberately sought in the hope it would slip through. While a final application for fees would come before the Court for review, getting a secretary “preapproved” is a start. Too, it must be noted that this Revels case is not the only one where employment of a secretary was sought. On the docket on the same day was the case of Harriet Rosen, 92-24791, and the case of Irving Rosen, 92-24792. Since there was but one flaw there, inclusion of a secretary, the Court approved employment only upon striking secretary.

As for an Associate Junior Attorney, while the position exists in the firm, it is not now filled and this should have been disclosed.

The major concern is the failure to disclose in two places — the Disclosure Statement and the application — -the presence of a third party to pay the fees. I hope no one begs to know the reasoning, the absolute necessity of disclosing this in every case. The legislative history mandates “careful scrutiny.” H.R. 31, 94th Cong., 1st Sess. § 4-311(b)(1975); House Report No. 95-595, 95th Cong., 1st Sess. 329 (1977); Senate Report 95-989, 95th Cong., 2d Sess. 39-40 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787.

More especially, the law mandates full disclosure. 11 U.S.C. 329(a). The Rules, 2014(a), require an affidavit. The one originally filed here is false. Only after the Court moved did the attorney move to correct this.

The applicant law firm, in this case, does not come with the forthrightness and “clean hands” necessary. It is a matter of the discretion of the Court. 11 U.S.C. 327(a).

The application to employ the firm of Harry W. Jernigan, P.C., is denied. The message the Court must send is clear: Play It Straight.

IT IS SO ORDERED.