Agonafer Shiferaw

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 11-30696DM
AGONAFER SHIFERAW, 	)
)
Debtor. 	) Chapter 11
___________________________________)
MEMORANDUM DECISION ON APPLICATION FOR
INTERIM COMPENSATION BY FORMER ATTORNEY FOR DEBTOR
I. Introduction
Before the court is the Final Application For Interim
Compensation by Attorney for Debtor (“Application”) filed by
Debtor’s former counsel, Kayla M. Grant, Esq. (“Grant”). 	Grant
seeks allowance of fees for her services in the sum of $16,900.00,
together with expenses of $1,289.97. 	Grant seeks to apply a
credit in the amount of $6,139 previously paid to her and seeks
interim allowance and payment of the balance of $12,050.97. 	Since
Grant’s services have been terminated by Debtor, the court treats
the Application as a final application (see 11 U.S.C. § 330)
despite its title.
Debtor, through present counsel, has objected to the
Application, requesting that the court defer ruling until the case
has been concluded when the court can best determine the net value
of Grant’s services to the estate.
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Signed and Filed: January 20, 2012
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
Entered on Docket
January 23, 2012
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 11-30696 Doc# 119 Filed: 01/20/12 Entered: 01/23/12 14:18:00 Page 1 of
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Unfortunately, the court is faced with a series of incomplete
or inaccurate representations by an inexperienced attorney,
incomplete time keeping, unauthorized disbursements, and, most
importantly, a blatant misrepresentation of her client’s position
in connection with a prior application. 	While the court will
accede to Debtor’s request to defer consideration of the fees, it
will do so only by imposing on Grant some requirements to improve
her fundamental skills and to provide some assurance that her
ethical lapses will not be repeated in the future.
II. 	Facts 1
As the facts below demonstrate, at the outset of Grant’s
representation of Debtor she overstated her experience and
competence to the court and to the Debtor, while knowing that she
was not up to the task of taking on representation of a debtor who
was operating a substantial business.
Debtor filed this case under chapter 13 on February 24, 2011,
represented by other counsel. 	Approximately three weeks later,
Grant filed a notice of substitution of counsel. 	Thereafter, on
March 24, 2011, she filed an Amended Application To Employ Kayla
M. Grant, Esq. signed by Debtor, but obviously drafted by Grant.
The application states that Debtor selected Grant “for the reason
that she has considerable experience in chapter 11
reorganizations.” 	The application also recites that Grant was the
attorney assigned to four other chapter 11 clients while she was
an employee of another attorney. 	Two of those chapter 11 cases
were before this court, McKae (Docket No. 09-33611) and Le Club,
1 The following discussion constitutes the court's findings
of fact and conclusions of law. 	Fed. R. Bankr. P. 7052(a).
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LLC (Docket No. 09-33681); the other two cases were Creative Tile
& Marble, Inc. (Docket No. 09-71180) and 504 Broadway LLC (Docket
No. 09-32638).
The application further indicates that “based on [Grant’s]
experience ... Applicant believes [she] is well qualified to
represent its [sic] as debtor in possession in this proceeding.”
In the next paragraph, the application states that Grant will
render services such as “preparing on behalf of [Debtor] as debtor
in possession a disclosure statement, a plan of reorganization,
and representing [Debtor] at any hearing to approve the disclosure
statement and to confirm the plan of reorganization.” 	Debtor
states that he needs to employ Grant “because the [Debtor] is not
sufficiently familiar with the rights and duties of debtor in
possession as to be able to plan and conduct proceedings without
the aid of competent counsel.”
Sadly Grant dramatically overstated both her experience and
her competence and ability to perform the enumerated services.
First, while the court is unaware of how much time Grant herself
worked in the McKae and Le Club cases, the clients in both cases
expressed dissatisfaction with their counsel and the Le Club case
was converted to chapter 7 prior to confirmation. 	The debtors in
McKae, through new counsel, were able to have their chapter 11
case dismissed.
A review of the dockets of the other two cases shows that 504
Broadway, LLC, was converted to chapter 7 without a plan being
confirmed; only Creative Tile, LLC confirmed a plan. 	The court
cannot determine how much Grant herself was involved in the
representation of that debtor, but her implication that these four
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cases equipped her with adequate chapter 11 experience to handle
this case is a serious misrepresentation to the Debtor and the
court.
In responding to the Debtor’s objection to her fees, Grant
essentially concedes that the recital of her “considerable”
experience in chapter 11 reorganizations was inaccurate. 	Instead,
she admits that her “experience with chapter 11's is limited” and
that she “never held [herself] out to Debtor as being capable of
handling his entire case on [her] own and from the very beginning
urged him to seek more experienced counsel to assist him with the
problems he was having with Sequoia Mortgage and Trust Deed
Investment.” 	See Applicant’s Response Debtor’s Objection (Docket
No. 112, p. 2:6-10).
Grant also suggests that she accepted a low retainer because
Debtor indicated that he only needed individual chapter 11
protection when in fact he was doing business as Rasselas.
Regardless of what Debtor originally told Grant, by March 30,
2011, when she prepared and filed his Schedules and his chapter 11
statement of current monthly income, Grant included the assets and
monthly revenues of Rasselas. 	Grant’s statement that she believed
Rasselas to be a separate corporate entity is thus inconsistent
with documents that she prepared and filed.
In the amended application to employ her, Grant recited that
Debtor paid her a retainer of $4,235 “prior to the filing of this
Chapter 11 petition in bankruptcy.” 	This also appears to be a
misstatement. 	While the invoices supporting the Application
reflect a retainer being paid on March 10, 2011, the payment was
made after the commencement of the chapter 13 case but admittedly
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before conversion to chapter 11. 	The retainer is reflected in the
invoices as $6,139, an amount that is consistent with the
statement pursuant to Rule 2016(b) filed on March 30, 2011 (Docket
No. 30): “Retainer $5,374 + $765 filing fee = $6,139.” 	Thus, the
amount actually paid to Grant as a retainer exceeds the amount
shown in her amended employment application by nearly $2,000.
Finally, Grant initially filed an application for
compensation on August 8, 2011, and set it for hearing on August
31, 2011. 	Trust Deed Investments, Inc. and Sequoia Mortgage
Capital, Inc. opposed that application on August 26, 2011 (Docket
Nos. 86 and 87) based upon their unwillingness to have cash
collateral expended for Grant’s fees. 	Grant then amended her
application on September 12 (Docket No. 95) and included an
electronically signed Declaration Of [Debtor] In Support Of
Amended Interim Application For Compensation And Reimbursement Of
Expenses. 2 	That declaration recites that Debtor reviewed the
amended application and had no objection to it.
Subsequently, when Debtor (through new counsel) denied having
signed the original of that declaration, Grant was given an
opportunity to produce the blue ink original. 	She did not produce
it. 	She was also given an opportunity to examine Debtor about
whether or not he indeed had signed the original in her office, or
had indeed indicated the lack of objection to that application.
Grant chose none of those options, leading the court to find that
Grant had filed a false declaration containing a false signature.
Whether the misleading electronic declaration was provided
2The signature block on the declaration contains a typeset
“/s/Agonafer Shiferaw.”
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intentionally, or negligently, the court is appalled by such
behavior by an officer of the court who held herself out to be
experienced in chapter 11 matters.
Her conduct was also a direct violation of the court’s
Electronic Court Filing Procedures that require:
8. Signature and Verified Pleadings: A Registered Participant
who electronically files a document with the Court shall be
deemed to have certified under penalty of perjury that he or
she has personally reviewed the document,
* 	* 	*
Each electronically filed document shall bear the typed name
of the person purporting to have signed the document.
* 	* 	*
A Registered Participant filing a Verified Pleading
electronically shall insure that the electronic version
conforms to the original, signed pleading/document. Each
signature on the original, signed pleading/document shall be
indicated on the electronically filed Verified Pleading with
the typed name of the person purported to have signed the
pleading/document. The electronic filing of a Verified
Pleading constitutes a representation by the Registered
Participant who files it that the Registered Participant has
in his or her possession at the time of filing the fully
executed original, signed pleading/document. (Emphasis
added.)
9. Retention Requirements: All originally executed
pleadings/documents signed by someone other than the
Registered Participant (e.g., Verified Pleadings), which are
subsequently electronically filed with the Court, must be
retained by the Registered Participant for five years after
the case or adversary proceeding has been closed. The CM/ECF
system provides notice of all case closings to Registered
Participants. Upon request of the Court, the Registered
Participant filer must provide to the Court the original,
signed pleadings/documents for review.
On August 12, Grant withdrew her amended application and
later filed the Application, which came on for hearing on December
21, 2011. 	Grant attempted to minimize the significance of the
misrepresentation of her former client’s support for the earlier
application because that application had been withdrawn. 	In a
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statement that is remarkable for its boldness and audacity, Grant
writes “it perplexes [Grant] as to why a declaration filed in
support of a previously withdrawn pleading is being scrutinized at
this time.” 	Applicant’s Response to Debtor’s Objection to Final
Application for Compensation and to Judge Docket Order (Docket No.
112), p. 3:21-22. 	It perplexes the court that Grant is so naive.
Grant also has disclosed that during the time she was
representing Debtor, she billed her client and paid herself from
funds held in her trust account on the 25th day of March, April,
May, June, July, August and September. 	Each of these payments was
a transfer from Grant’s trust account to Grant of property of the
estate without prior court authorization of payment of interim
compensation under 11 U.S.C. § 331.
III. 	Discussion
From the foregoing it is obvious that Grant was not qualified
to take on this case and made serious misrepresentations of fact
at the outset of her engagement and subsequently when she led the
court to believe that her then client had approved of her previous
fee application. 	Grant also lacks sufficient training, knowledge
or experience to know when and how she is entitled to be paid for
services to be rendered. 	Notwithstanding that criticism, some of
her work has been of value to the Debtor although a large portion
of it has not, as recognized by Grant in her Application wherein
she has voluntarily eliminated charges for portions of her work in
connection with the aborted efforts to promulgate a plan and
disclosure statement.
Rather than deny her all compensation and order return of the
improperly disbursed funds, the court will give Grant an
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opportunity to educate herself about what is expected of a
bankruptcy specialist, and what her ethical responsibilities are.
But it will not do so at the present expense of the Debtor.
Accordingly, the court will deny all fees sought in the
Application other than the amounts impermissibly paid by Grant to
herself from her trust account on an interim basis; that denial
will be without prejudice to Grant reapplying after she has
complied with the court’s requirements set forth below. 	The court
will take no action at the present time on Grant’s impermissible
payments to herself from the trust account and it will defer to a
later day whether to allow those payments and to allow any other
amounts to be awarded to Grant under 11 U.S.C. § 330.
In the meantime, Grant is required, no later than June 30,
2012, to attend a recognized Continuing Legal Education program or
programs on bankruptcy practice or some other aspect of
substantive bankruptcy law consisting of at least sixteen hours of
education, and also attend at least two hours of CLE pertaining to
ethics and/or professionalism. 	Grant should file and provide
chamber’s copy of the CLE certifications of attendance at such
programs no later than July 13, 2012.
If Grant fails to comply (or obtain an order extending the
deadline), counsel for Debtor may file a declaration confirming
such failure and upload an order denying the net amount of
$12,050.97, and may move for an order for Grant to disgorge the
amounts improperly transferred from her trust account.
This Memorandum Decision is being issued too late for Grant
to be able to attend Judge Jaroslovsky’s presentation on January
23, 2012, at 4:00 P.M., in the Santa Rosa Bankruptcy Court
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entitled “Avoiding Fatal Mistakes In Individual Chapter 11 Cases.”
If she is able to obtain and watch a DVD of that presentation, the
court will accept her certification that she has done so as
completion of two hours of the order CLE on bankruptcy matters.
IV. Conclusion
The court is concurrently issuing an order consistent with
this Memorandum Decision.
**END OF MEMORANDUM DECISION**
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COURT SERVICE LIST
Kayla Grant, Esq.
Law Office of Kayla Grant
214 Duboce Ave.
San Francisco, CA 94103
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