FLINT BANKRUTCY LAWYER (810) 235-1970, SHARES RECENT BANKRUPTCY JUDGE OPINION ON ATTORNEY FEES.

You might ask.IN MY BAY CITY, LAPEER, SAGINAW, OWOSSO OR FLINT BANKRUTPCY CAN I CHANGE ATTORNEYS. ANSWER : YES. FOR MORE BANKRUPTCY INFORMATION CALL (810) 235-1970

I.

The debtor filed for chapter 7 relief on July 24, 2008. He was represented by Edward J.

Gudeman of Weik and Assoc., P.C. On December 2, 2010, the debtor filed a motion to remove

Gudeman as his attorney. The motion was granted by order dated January 31, 2011.

On March 22, 2011, the debtor, through his new attorney, Jay Kalish, filed a motion,

pursuant to § 329 and Rule 2017, for a determination of the propriety of his fee agreement with

Gudeman and for disgorgement of fees. The debtor also filed a motion seeking to remove a state

court action that Gudeman had filed against the debtor for collection of fees for the bankruptcy case.

The Court conducted a hearing on the motions on April 11, 2011. The Court denied the

debtor’s motion for removal as untimely and requested briefs from the parties on the issue of

whether the Court’s jurisdiction under § 329 is exclusive.

II.

Federal district courts, and their bankruptcy courts by delegation, have exclusive jurisdiction

“of all cases under title 11.” 28 U.S.C. § 1334(a). Pursuant to § 1334(e), the district courts also

have exclusive jurisdiction over property of the debtor, property of the estate, and all claims and

causes of action relating to § 327. In all other cases “arising under title 11, or arising in or related

to cases under title 11,” the district courts “shall have original but not exclusive jurisdiction[.]” 28See 11 U.S.C. § 523(c); Dollar Corp. v. Zebedee (In re.), 25 F.3d 1320, 1325 (6th Cir. 1994) (“Congress intended ‘to take the determinationsSpilman v. Harley, 656 F.2d 224, 226 (6th Cir.1981)).court determines such debt to be excepted fromMoncur v. Agricredit Acceptance Co. In re Moncur), 328 B.R. 183, 189 (B.A.P. 9th Cir. 2005).the court may cancel any such agreement, or order the return of any such payment, to theIn re Campbell, debtors’ attorneys, providing protection to debtors and creditors and preventing overreaching byJensen v. United States Trustee (In re Smitty’s Truck Stop, Inc.), 210 B.R. 844, 848See also In re Busy Beaver Bldg. Ctrs., Inc., 19 F.3d 833, 844 (3rd Cir.In re Williams, 2003 WL 22722841 (Bankr. D. Vt. 2003), explained:

Id.

Given the plain language of § 329 and the important role of the bankruptcy court in

monitoring the relationship between debtors and professionals, the Court concludes that it is within the sole province of the bankruptcy court to determine the propriety of a debtor’s fee agreement with his or her attorney.

Further support for this conclusion is found in

188 F.3d 1160, 1165 (9th Cir. 1999), wherein the court explained:

[B]ankruptcy courts have recognized that fee issues, and control of

the parties and their representatives, can be central to the proper

conduct of bankruptcy proceedings. We expressed a similar view in

a different context when we pointed out that regulation of the

at *3.Elias v. United States Trustee (In re Elias),

activities of parties before the bankruptcy court should be in theSee MSR Exploration, Ltd. v. Meridian(9th Cir.1996). Bankruptcy courts surely at 1165. See also In re Williams, 2003 WL 22722841, *2 (Bankr. D. Vt. 2003) (“BankruptcyEdgewater Sun Spot, Inc. v. Pennington & Haben(In re Edgewater Sun Spot, Inc.), 183 B.R. 938, 943 (N.D. Fla.1995), aff'd, 84 F.3d 438 (11th

Signed on April 22, 2011

Id.  courts, through the United States district courts, have exclusive jurisdiction over the matter of

attorney's fees in a bankruptcy proceeding.” citing

P.A.  Cir.1996)).

Accordingly, the Court concludes that it has exclusive jurisdiction over the debtor’s claim

under 11 U.S.C. § 329, and that therefore the state court matter of Gudeman & Associates, P.C. vs.

Axxxxx, Oakland County Circuit Court Case No. 2010-110550-CK, shall be stayed

pending this Court’s resolution of that claim.

For Publication

.

hands of that court alone.

Oil, Inc., 74 F.3d 910, 915

have the most expertise and interest in controlling their own

proceedings and in regulating the behavior of professionals who seek

to appear before them or work on cases under their tutelage. It is

those courts that help prevent distressed debtors, and their creditors,

from becoming cheerless carrion for voracious vultures, who would

pick the estate clean. In my opinion, there is a need for exclusivity

and I would require it . . . .

( Likewise, § 329 contains the same restrictive language. That section provides, in pertinent

part, that an attorney representing a debtor must file with the court a statement of compensation paid or agreed to be paid and that “if such compensation exceeds the reasonable value of any such

services,  extent excessive[.]” 11 U.S.C. § 329(b) (emphasis added).

Section 329 “was enacted because ‘payments to a debtor’s attorney provide serious potential

for evasion of creditor protection provisions of the bankruptcy laws, and serious potential for

overreaching by the debtor’s attorney, and should be subject to careful scrutiny.’”

259 B.R. 615, 625 (Bankr. N.D. Ohio 2001) (quoting H.R .Rep. No. 95–595, at 329 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6285). It enables courts to carefully scrutinize compensation paid to

attorneys.  (B.A.P. 10th Cir. 1997).

1994) (“Disagreeable as the chore may be, the bankruptcy court must protect the estate, lest

overreaching attorneys or other professionals drain it of wealth which by right should inure to the

benefit of unsecured creditors.”).

The court in  Ensuring that the relationship between a debtor and his or her

attorney is fair is one of the primary duties the bankruptcy courts

must perform in their capacity as guardians of the integrity of the

bankruptcy system. Clients seeking bankruptcy advice are frequently

in particularly vulnerable situations, where they have both a desperate

need for immediate financial relief and very little understanding of

the complexities of bankruptcy law. Therefore, court review of

transactions between debtors and their attorneys require sensitivity to

these vulnerability factors, acknowledgment of the very different

bargaining position of each party in the professional relationship, and

a heightened level of scrutiny.

U.S.C. § 1334(b).

An exception to the general rule of concurrent jurisdiction is found in § 523(c)(1), which

grants bankruptcy courts exclusive jurisdiction to determine the dischargeability of debts described in § 523(a)(2), (4) and (6) of the Code.

Dollar Corp governed by 11 U.S.C. § 523(c) away from state courts and grant exclusive jurisdiction in thebankruptcy courts.’”) (quoting

“[T]he operative language ‘unless the discharge,’ which was carried forward from a 1970 amendment to the prior Bankruptcy Act, is understood to deprive nonbankruptcy courts of jurisdiction.”

United States Bankruptcy Court

Eastern District of Michigan

Southern Division

In re:

Axxxxx x . Pxxxxx, Case No. 08-57865-R

Debtor. Chapter 7

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Opinion and Order Granting Stay