United States District Court, W.D. Louisiana, Shreveport Division
HORNSBY MAGISTRATE JUDGE.
ELIZABETH ERNY FOOTE UNITED STATES DISTRICT JUDGE.
the Court is an appeal from an order of the United States
Bankruptcy Court, Western District of Louisiana. Appellant,
Law Solutions Chicago, LLC, doing business as UpRight Law,
LLC ("UpRight"), appeals from the Bankruptcy
Court's Order [Bankr. Doc. 41] ("the Order") on
the United States Trustee's Motion to Disgorge Fees and
For Other Appropriate Relief in the underlying bankruptcy
matter, In re Lillie Mae Banks, No. 17-10456
("the Banks case"). For the reasons announced
herein, the Order of the Bankruptcy Court is
characterizes itself as a "national consumer bankruptcy
law firm, headquartered in Chicago, Illinois, with a practice
model that differs from some law firms." Record Document
32, p. 30. Specifically, its Chicago office addresses the
firm's administrative functions, advertising, and
provides assistance to the "local partners"- the
approximately 400 attorneys nationwide who "have a
relationship with the firm but also maintain a separate
practice." Id. The local partners do not have
any managerial authority in the firm, Id. at 31, but
receive a percentage of the fees that a client pays to
UpRight if the partner provides services for that client,
Bankr. Doc. 40, pp. 156-57. When a prospective client reaches
out to UpRight, the Chicago-based staff enters the
client's information into a system, a fee is generated,
and a partner attorney is assigned to the case. See
Id. at 190, 213-14; Record Document 32, pp. 33-34.
underlying bankruptcy case, the debtor, Lillie Mae Banks
("Banks"), discovered UpRight through the internet
and called UpRight at a number provided on its website.
Bankr. Doc. 40, pp. 10-11. Though initially assigned an
attorney not licensed to practice in the Western District of
Louisiana, Banks was eventually represented by Andrea
Augustus ("Augustus"), an attorney located in New
Orleans who was formerly a local partner at UpRight. After a
series of missteps by both UpRight and Augustus, the United
States Trustee ("UST") filed a Motion to Disgorge
Fees and For Other Appropriate Relief [Bankr. Doc. 16] in the
Banks case. Generally, the UST's motion gave an account
of the events that had taken place in the case, which all
parties agree was "horribly screwed up," Record
Documents 7, p. 19; 22-9, p. 199, and requested that the
court disgorge all fees collected, issue a $5, 000 civil
penalty, and issue certain injunctive relief to prevent
future abuse and neglect by UpRight. Bankr. Doc. 16. The
Bankruptcy Court held a hearing on the motion, at which it
heard testimony from Banks, attorney Augustus, and David
Menditto, the associate general counsel for litigation at
UpRight. See Bankr. Doc. 40. On February 6, 2018, the
Bankruptcy Court issued its Order [Bankr. Doc. 41], which
imposed a 90-day suspension and additional requirements on
UpRight, and is the subject of this appeal.
Bankruptcy Court's Order generally found that UpRight
failed to adequately represent Banks in what should have been
a simple bankruptcy case. For example, the court found that
UpRight: (1) initially assigned Banks an attorney located in
Tennessee and not licensed to practice in Louisiana; (2)
later assigned Banks to attorney Augustus, who was located
350 miles from Banks, despite promising that she would be
represented by a local attorney; (3) never sent Banks a
retainer agreement signed by an attorney licensed to practice
in Louisiana; (4) used a problematic retainer agreement with
terms that violate Louisiana Rule of Professional Conduct 1.5
concerning fees and fee disputes; (5) made oral
representations that contradicted the written retainer
agreement; (6) made multiple misstatements or
misrepresentations, and repeatedly broke promises made to
Banks; and (6) failed to properly supervise Augustus over the
entire course of UpRight's representation of Banks.
Bankr. Doc. 41, pp. 3-25. The court also found Augustus at
fault, as she: (1) consistently neglected to contact Banks;
(2) delayed filing Banks' first bankruptcy petition; (3)
negligently allowed the first bankruptcy case to be dismissed
and remain dismissed; (4) falsely indicated that Banks had
signed her second bankruptcy petition; and (5) allowed the
second bankruptcy to be dismissed by failing to file required
documentation. Id. at 9-28. The court found
professional negligence on the part of both Augustus and
UpRight, including multiple, continuous violations of the
Louisiana Rules of Professional Conduct. The court further
found that UpRight failed to comply with the Bankruptcy Code,
11 U.S.C. § 528, when Banks' retainer agreement was
electronically signed by an attorney not licensed to practice
in Louisiana and who never saw or physically signed the
agreement. Id. at 33.
court ruled that disgorgement was appropriate under 11 U.S.C.
§ 526(c)(1), specifically because UpRight failed to
provide Banks with a properly executed written contract
between them, in violation of 11 U.S.C. §§
528(a)(1) and (2). Id., at 34-35. In addition to
disgorgement, the court found relief under 11 U.S.C.
§§ 526(c)(5) and 105 appropriate. Section 526(c)(5)
provides that if a court finds an intentional violation of
section 526, or a clear and consistent pattern or practice of
violating section 526, it may enjoin the violation of that
section or impose a civil penalty. The court found that
"UpRight's continued failure to provide Banks with
bankruptcy services after numerous requests for help
amount[ed] to an intentional violation of 11 U.S.C. §
526(a)(1)," and also noted that while UpRight
"promised to provide Banks an array of bankruptcy
services," it "repeatedly failed to provide those
services or misrepresented those services." Id., at 35.
Accordingly, the court imposed the sanctions agreed upon by
the UST and UpRight: disgorgement of all fees paid by Banks,
refunding the $30 Banks paid for credit counseling, and
payment of a $5, 000 civil penalty to the United States
Treasury. Id. at 36. Additionally, the court
suspended Augustus from practicing in the United States
Bankruptcy Court for the Western District of Louisiana for 90
days and ordered that her electronic filing privileges be
suspended until she completes fifteen hours of bankruptcy
specific continuing legal education and petitions the court
for reinstatement of her privileges. Id. at 36-37.
UpRight does not appeal those sanctions or requirements. The
court imposed the following additional measures, which are
the subject of this appeal:
(1) UpRight was suspended from filing any bankruptcy cases in
the Western District of Louisiana for a period of 90 days.
The suspension included any of UpRight's partner
attorneys filing on UpRight's behalf. However, partner
attorneys who maintained separate legal practices could
continue to file bankruptcy cases for those clients not
contracted with or represented by UpRight, and were also
allowed to participate in any bankruptcy cases filed by
UpRight prior to entry of the Order. Id.,
(2) UpRight "may not accept any payment from any Western
District of Louisiana residents who have not had a thorough
and adequate consultation with an attorney that is licensed
to practice in this District and is able to represent
them." Id. at 37.
(3) UpRight's "contracts or retainer agreements must
conform to Louisiana Rule of Professional Conduct
1.5(f)(5)" and all contracts between UpRight and
residents of the Western District of Louisiana must contain a
specified paragraph of text taken from that rule.
Id., at 37-38.
(4) Attorneys acting on behalf of UpRight are prohibited from
filing any document that is electronically signed by a client
(i.e., using the notation). All documents filed by UpRight
and its partner attorneys in this district which contain a
client signature must contain a scanned original signature.
This applies to all bankruptcy cases filed by UpRight and its
affiliates in the Western District of Louisiana. Id.
(5) "[E]very employment contract for debt relief
services between UpRight Law LLC and its clients must contain
the original 'wet' signatures of both the client and
the UpRight Law LLC attorney licensed in the Western District
of Louisiana. The attorney who executes that contract shall
be designated as the attorney in charge of that case.
Further, UpRight Law LLC and its affiliates may not accept a
retainer from any client before an employment contract is
executed. This order applies with respect to UpRight Law LLC
and its affiliates and any of their prospective clients
residing in or anticipating filing bankruptcy in the Western
District of Louisiana." Id
(6) Every attorney affiliated with UpRight and its affiliates
who files a pleading within this district on behalf of
UpRight or its affiliates must contact the clerk of court and
update their CM/ECF account or create a duplicate account so
that the docket in each case accurately reflects the
attorney's firm name as UpRight Law LLC. IcL at 38-39.
additionally challenges the following statements made in the
Order: "Any future retainer agreements between UpRight
and its clients in the Western District of Louisiana must
specifically include all services integral to a Chapter 7
filing. It also must conform to the Louisiana Rules of
Professional Conduct." Id. at 8. Finally, to
the extent they are construed as findings of fact, UpRight
challenges the Bankruptcy Court's characterizations of it
as a "referral service" and a "marketer of
legal services." See Id. at 19, 29, 35.
Court has jurisdiction to consider this appeal under 28
U.S.C. § 158(a)(1), which grants district courts
jurisdiction to hear appeals from final judgments, orders,
and decrees of bankruptcy judges.
bankruptcy court's findings of fact are reviewed for
clear error, and issues of law are reviewed de novo.
Placid Refining Company v. Terrebonne Fuel and Lube, Inc.
(In re Terrebonne Fuel & Lube. Inc.). 108 F.3d 609,
613 (5th Or. 1997). In reviewing attorney discipline, whether
a particular disciplinary action was appropriate is reviewed
for abuse of discretion, while the determination of whether
an attorney's actions were misconduct is reviewed de
novo. Id.; In re Moity, 320 Fed.Appx. 244,
247 (5th Cir. 2009) (citing In re Sealed Appellant.
194 F.3d 666, 670 (5th Cir. 1999)). "A district court
abuses its discretion when its ruling is based on an
erroneous view of the law or a clearly erroneous assessment
of the evidence." In re Sealed Appellant, 194
F.3d at 670.
argues that the Bankruptcy Court erred or abused its
discretion in ordering the measures detailed above.
UpRight claims the 90-day suspension is an injunction subject
to the requirements of Federal Rule of Civil Procedure 65(d).
Record Document 32, pp. 47-48. The Court disagrees with this
characterization. "Courts enjoy broad discretion to
determine who may practice before them and to regulate the
conduct of those who do." United States v.
Nolen, 472 F.3d 362, 371 (5th Cir. 2006). A court does
not necessarily issue an "injunction" when it
restricts an attorney's ability to practice within its
district, or regulates that practice.
cites Newby v. Enron Corp., 302 F.3d 295 (5th Cir.
2002), and Federal Trade Commission v. Lanier Law,
LLC, 194 F.Supp.3d 1238 (M.D. Fla. 2016), in support of
its argument, but those cases are easily distinguishable. In
Newby, the court enjoined an attorney from filing
any new Enron-related actions in state court without leave of
the district court, 302 F.3d at 300-03, and in Lanier
Law, the injunction included a bar on the defendants
from practicing in a particular area of the law- the
"loan modification/foreclosure defense area," 194
F.Supp.3d at 1288. Unlike the case here, where a court
implements a limited suspension of a law firm practicing
before it, and only to the extent that law firm practices
before it, the Newby and Lanier Law cases
involved an exertion of authority over a party's ability
to practice in othercourts. The Court sees this as
an important distinction, and one noted by at least one other
court examining the same issue. See Alle ...