Frances E. Haylock

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
FRANCES E. HAYLOCK,
Debtor.
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Case No. 07-00235
(Chapter 13)
Not for Publication in
West’s Bankruptcy Reporter
INTERIM MEMORANDUM DECISION REGARDING ATTORNEY’S FEES SOUGHT
PURSUANT TO THE MOTION OF THE GEORGE BASILIKA TRUST FOR SANCTIONS
The Motion for Sanctions (Docket Entry No. 20) filed by the
George Basilika Trust led to an Interim Order Re Motion for
Sanctions (Docket Entry No. 37) signed on June 20, 2007, which
recited in full:
On this date, the court heard the Motion for
Sanctions (Docket Entry No. 20) filed by the George
Basilika Trust, and rendered an oral decision
concluding that the Trust is entitled to recover from
the debtor’s counsel as sanctions under F.R. Bankr. P.
9011(b) the fees and expenses it has incurred as a
result of the improper filing of this case when there
was no reasonable basis for believing that the debtor
was eligible under 11 U.S.C. § 109(h) to file a
bankruptcy case. 	To some extent the fees and expenses
may relate to enforcement of the Trust’s rights under
its deed of trust and promissory note and be
recoverable from the debtor directly, but the court
concluded that none of the fees and expenses ought to
be recovered from the debtor under Rule 9011.
The fees and expenses should be recoverable from
the debtor’s counsel under F.R. Bankr. P. 9011 without
The decision below is signed as a decision of
the court.
Signed: November 05, 2007.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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awaiting the outcome of efforts to collect the amounts
from the debt or to the extent she is contractually
obligated to pay such amounts. To the extent that the
fees and expenses are paid by the debtor prior to being
paid by her counsel, the Trust is not entitled to a
double recovery. 	But there is no assurance of a
recovery from the debtor, and the Trust is entitled to
be made whole without any delay that attempting to
collect from the debtor might entail.
Moreover, some of the fees and expenses incurred
by reason of the filing of the improper case would
appear to be recoverable solely from the debtor’s
counsel, namely, the fees and expenses that relate to
prosecution of the Motion for Sanctions (under Rule
9011) and of a Motion to Examine Debtor’s Transactions
With Counsel (under 11 U.S.C. § 329(b)). 	The purpose
of a Rule 9011 motion is to deter improper filings and
the Rule 9011 relief is being awarded only against the
debtor’s counsel. 	The purpose of relief under § 329(b)
is to limit the fees charged to a debtor to a
reasonable amount and is directed against only the
debtor’s counsel. 	Accordingly, the part of the fees
and expenses incurred in the pursuit of relief under
Rule 9011 and § 329(b), including preparation of the
statement of fees and expenses to be recovered under
Rule 9011, probably is not recoverable contractually
from the debtor.
In light of the foregoing, it is
ORDERED that the Motion for Sanctions (Docket
Entry No. 20) is GRANTED IN PART AND DENIED IN PART as
follows:
1. 	The Motion for Sanctions is denied with
respect to the request to impose sanctions on the
debtor.
2. 	The Motion for Sanctions is granted with
respect to the debtor’s counsel.
3. By July 20, 2007, the George Basilika Trust
shall file a statement of fees and expenses incurred by
reason of the improper filing, together with a proposed
order to recover from the debtor’s counsel the specific
dollar amount of such fees and expenses, and within 11
days after service of the same, the debtor’s attorney
may file any objection he has to the reasonableness of
the fees and expenses claimed.
On June 27, 2007, the George Basilika Trust filed a Statement of
Legal Fees Regarding Motion for Sanctions, reciting the hours
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spent on the matter. 	A total of 10.2 hours was spent and at the
Trust’s attorney’s usual hourly rate of $325.00, the amount of
fees set forth in this Statement totals $3,315.00. 	On July 9,
2007, the debtor’s counsel filed a reply (the “Reply”).
I
The Reply in effect seeks reconsideration of the court’s
ruling that the debtor’s counsel violated Rule 9011. 	In that
regard, it raises three separate arguments.
It argues, first, that “a debtor who undertakes efforts at
credit counseling, even at a non-approved agency, for some period
of time which this debtor said . . . was over some odd two weeks
meets the standard of 11 U.S.C. § [109(h)(3)(A)(ii)].” 	Reply at
13. 	However, § 109(h)(3)(A)(ii) requires that the unsuccessful
request for credit counseling services have been sought “from an
approved nonprofit budget and credit counseling agency.” 	The
debtor plainly had not complied with this requirement and thus
was ineligible to be a debtor, and her counsel could not file the
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1 	The Reply explains at further length that:
The Debtor had relayed to counsel that she had
attempted to seek credit counseling and bankruptcy or
foreclosure protection from her church. The Debtor
further stated that she had a relative who had
attempted to assist her briefly with internet and
finding credit counseling without success. When asked
over what period these efforts had taken place, the
Debtor communicated that it had been over approximately
two weeks some time recently.
Reply at 2. 	There is no suggestion that the debtor represented
that she had made a request of an approved agency. 	Her counsel
appears to have filed the petition in the belief that the
imminence of a foreclosure sale, leaving no time to seek credit
counseling, is an extraordinary circumstance justifying his
disregarding the requirements of § 109(h).
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petition without violating Rule 9011. 1
The Reply then makes a meritless argument regarding the
requirement in § 109(h)(3)(A)(ii) that after the required request
for credit counseling was made, the debtor “was unable to obtain
the services referred to in paragraph (1) during the 5-day period
beginning on the date on which the debtor made that request.”
The Reply argues that the 5-day period following the making of
the required request need not have been a 5-day prepetition
period, citing In re DiPinto, 336 B.R. 693, 699-700 (Bankr. E.D.
Pa. 2006), which stands for the proposition that the 5-day period
may straddle the petition date. 	Even if that proposition is
correct, it is irrelevant here because the debtor never made the
required request of an approved agency.
To the extent that the debtor’s counsel’s argument is that
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2 	Relying on Arbaugh v. Y & H Corp., 546 U.S. 500 (2006)
(Title VII’s 15-employee threshold is an ingredient of a claim
for relief, rather than a jurisdictional element), the court in
Meza, 2007 WL 1821416 at *2, concluded that § 109(h) is not
jurisdictional and, instead, constitutes a factual element of a
claim to relief under the Bankruptcy Code. 	This court has
reached a different conclusion, reasoning that debtor eligibility
is a prerequisite to this court's jurisdiction under a plain
reading of 28 U.S.C. §§ 1334 and 157 and 11 U.S.C. § 301(a). 	In
re Hawkins, 340 B.R. 642, 643-46 (Bankr. D.D.C. 2006). 	I note,
however, that no party in Hawkins cited Arbaugh v. Y & H Corp. ,
and that nothing precluded the court’s raising the eligibility
issue sua sponte even if it were only an element of the debtor’s
claim to bankruptcy relief.
5
the request under § 109(h)(3)(A) to an approved agency for credit
counseling can be made postpetition, § 109(h)(3)(A), when read in
the context of § 109(h) as a whole, cannot in any fashion be read
to support such an interpretation. 	Accordingly, the argument is
not one “warranted by existing law or by a nonfrivolous argument
for the extension, modification, or reversal of existing law or
the establishment of new law” as required by Rule 9011(b)(2).
The Reply finally cites decisions, including the seminal
decision in In re Hess, 347 B.R. 489 (Bankr. D. Vt. 2006), in
which courts have treated § 109(h) as a non-jurisdictional
requirement and declined to dismiss bankruptcy cases despite a
failure to comply with 11 U.S.C. § 109(h). 	See also In re Enloe,
373 B.R. 123 (Bankr. D. Colo. 2007); In re Nichols, 362 B.R. 88
(Bankr. S.D.N.Y. 2007); In re Manalad, 360 B.R. 288 (Bankr. C.D.
Cal. 2007); In re Kernan, 358 B.R. 537 (Bankr. D. Conn. 2007); In
re Meza, 2007 WL 1821416 (E.D. Cal. June 25, 2007). 2 	Those
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3 	If a debtor cannot satisfy § 109(h) as an element of his
claim to bankruptcy relief (see n.2, supra), and the issue has
not been waived, then denying the debtor bankruptcy relief would
arguably be the only course available (and dismissal would be the
procedure utilized to deny such relief). 	If the debtor is not
eligible for bankruptcy relief, and the issue has not been
waived, how can the case remain pending?
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decisions are open to possible criticism, 3 but even if those
decisions were correctly decided, they only hold that when some
error regarding compliance with § 109(h)(3) has occurred due to
negligence, the court has discretion to permit the case to remain
pending. 	They do not stand for the proposition that an attorney,
knowing that the debtor cannot satisfy the requirements of §
109(h) or having failed to make adequate inquiry in that regard,
satisfies the requirements of Rule 9011 when he proceeds to sign
and file a petition on the debtor’s behalf. 	Indeed, in Enloe,
373 B.R. at 134-35, the court, although declining to dismiss the
case, imposed sanctions against the debtor’s counsel for having
filed a petition when he negligently believed that the debtor
satisfied the credit counseling requirement of § 109(h).
The court recognizes that the debtor’s counsel, faced with
tight time constraints, acted on the impulse of assisting a
debtor who was in need of immediate bankruptcy relief. 	However,
the non-compliance with § 109(h) was plain, and thus made the
debtor plainly ineligible for bankruptcy relief. 	The debtor’s
counsel’s filing of a petition notwithstanding his knowledge that
the debtor was ineligible for bankruptcy relief warrants
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sanctions. 	The debtor’s counsel’s obligation was to advise the
debtor that, because she had made no request for prepetition
credit counseling from an approved agency, she was ineligible to
file a petition and to decline to file a petition on her behalf
unless and until she could satisfy § 109(h). 	The debtor plainly
was ineligible to file a petition even though the debtor was
elderly and unsophisticated, had not appreciated the necessity of
obtaining prepetition credit counseling, and faced an imminent
foreclosure sale.
On occasion, § 109(h) produces harsh results, but it is the
law of the land. 	If an attorney knows that a debtor is
ineligible for bankruptcy relief based on § 109(h), as occurred
here, that attorney cannot file a bankruptcy petition on behalf
of the debtor without violating Rule 9011.
II
The debtor’s counsel next argues that in imposing sanctions,
the court should impose only such sanctions as are necessary to
deter violations of Rule 9011. 	However, the court must take into
account that the Rule 9011 violation here might not have been
addressed, and have served its deterrent purpose, had the Trust
not raised and litigated the issue. 	The impact of awarding
reasonable compensation to such a party is an appropriate
consideration in determining what is necessary to serve as a
deterrent (because without such compensation, the fees might be a
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disincentive to the pursuit of the motion).
III
The debtor’s counsel also questions the appropriateness of
the Trust’s counsel’s time entries given the relatively short
duration of the hearing and the relative simplicity of the issues
and of the papers filed by the Trust’s counsel. 	The challenges
to the reasonableness of the time entries raise factual issues
requiring an evidentiary hearing at which the Trust can respond
to the challenges raised by the Reply. 	The court, however, will
direct the parties to confer before the hearing regarding what is
an appropriate award in an effort to avoid another hearing.
Although an evidentiary hearing may be necessary, I make
some observations in advance of the hearing. 	The court’s
recording of the June 20, 2007, hearing reflects that the
hearing, which was scheduled to begin at 9:30 a.m., began at
10:02:57 a.m. and concluded at 10:59:20 a.m., and travel time
(even if compensated or compensated at a reduced rate) should be
kept at a bare minimum. 	The Trust’s counsel’s time entries for
the amount of time spent attending the hearing may thus be
excessive. 	In determining the amount of reasonable fees, the
court may temper that determination (for example, by imposing a
high standard of proof with respect to the reasonable fee to be
imposed) because the award should only be in an amount necessary
to serve the deterrent purposes of Rule 9011, and because the
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9	O:\Judge Temp Docs\Haylock Decision re Fees Sought as Sanction under Rule 9011
obvious violation of Rule 9011 ought to have permitted the
Trust’s counsel to keep time spent on the matter at a modest
level.
An order follows.
[Signed and dated above.]
Copies to: Debtor; Debtor’s attorney; Chapter 13 Trustee; Jeffrey
Sherman, Esq.; Office of U.S. Trustee.
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