Hoffman v. Tishgart et al

OCR transcription for search; preserved printed pages are authoritative

Entered on Docket
March 06, 2012

GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

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7 UNITED STATES BANKRUPTCY COURT
8 NORTHERN DISTRICT OF CALIFORNIA
91 Inre

10 || KENNETH and LORI TISHGART, No. 09-13400 |
| | Debtor(s), .

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TIMOTHY W. HOFEMAN, Trustee,
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14 Plaintiff(s),

15 v. A.P. No, 10-1087

16 || KENNETH and LORI TISHGART,

17 Defendant(s).
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19 | . Memorandum After Trial
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Debtor and defendant Kenneth Tishgart has been an attorney since 1980. At the time he filed
1 his Chapter 7 petition on October 15, 2009, he was a solo practitioner with a personal injury practice.
2 He had numerous contingent fee cases pending at the time, many of which later settled. In this
°° adversary proceeding, plaintiff and Chapter 7 trustee Timothy Hoffman seeks to recover a portion of
i the fees Tishgart collected on these cases.
' Factually, there are no real disputes. Since his bankruptcy filing, Tishgart has received

INFORMATION

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$148,875.80 in fees on account of personal injury cases which were pending on the date of bankruptcy.
Tishgart has admitted that in each of these cases he provided little or no services after the bankruptcy.!
However, in each case except two the final settlement was reached after bankruptcy so that no fees
were due to him on the date of filing except for $3,600.00 in the Ferrer matter (already the subject of
summary adjudication) and $14,800.00 in the Brown matter.

The principal point of dispute in this case is over the law. Pursuant to § 541(a)(1) of the
Bankruptcy Code, all of a debtor’s legal and equitable rights as of the day of filing belong to the
bankruptcy estate. Bankruptcy courts look to state law to determine the extent of those rights. In re
Harrell, 73 F.3d 218, 219 (9" Cir. 1996). Both sides agree that in the case of an attorney the amount
which belongs to the estate is that which Tishgart would have been entitled to receive if his
employment had been terminated by the client on the date of bankruptcy. However, they disagree as to
the amount of that entitlement under state law.

The dispute can be best explained by a hypothetical case in which an attorney worked for ten
hours on a case and was then terminated without cause. A second attorney then worked for ten hours
and achieved a $100,000.00 settlement. Tishgart argues that the first attorney is entitled to ten hours
compensation at his regular hourly rate, so the total compensation if the hourly rate is $200 would be
$2,000.00. Hoffman argues that the first attorney did half the work and is therefore entitled to half the
fee. For the reasons stated below, the court finds that neither is totally correct but that Hoffman is far
more correct than Tishgart.

The leading case on this issue is Jn re Jess, 169 F.3d 1204 (9" Cir.1999). In that case, the court
held that because 78% of the work on the contingent-fee case was done before bankruptcy, the
bankruptcy estate was entitled to 78% of the ultimate recovery. While this case clearly establishes that

division of the fees is based on what is fair and reasonable and undercuts Tishgart’s hourly rate

'Tishgart is deemed to have admitted this by virtue of his failure to deny Hoffman’s requests
for admission in a timely manner in discovery. The court denied Tishgart’s request for relief from the
effect of his failure.

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argument, it does not fully support Hoffman’s percentage allocation argument. The court in Jess
specifically noted that while the attorney there made no attempt to place a greater value on post-
petition hours, such a result was possible. 169 F.3d at 1208n4. Because the court in Jess left this issue
unanswered, the court returns to state law,

The leading California case is Fracasse v. Brent, 6 Cal.3d 784 (1972). In that case, the court
established the right of a discharged attorney to a fair share of a contingent fee based on principles of
fairness, which might well be the entire fee if the first attorney was discharged “on the courthouse
steps.” 6 Cal.3d at 791. Subsequent California cases make it clear that allocation of contingent fees
between attorneys is a matter within the discretion of the court and depending on the circumstances of
each case. Padilla vy. McClellan, 93 Cal.App.4th 1100, 1107 (2001). Such an allocation might be
made on the basis of time multiplies by an hourly rate, but it could also be a fair percentage share
(70/30 in Padilla) or something entirely different (e.g. hourly rate plus a bonus in Patrick v. Dovidio,
2007 WL 593558 (2007)).

The hourly fee argument urged by Tishgart was specifically rejected in Cazares v. Saenz, 208
Cal.App.3d 279, 286-7 (1989). The court there held:

Because the hourly fee is the prevailing price structure in the legal profession, it is

sometimes assumed that the quantum meruit standard applied to legal services

includes nothing more than a reasonable hourly rate multiplied by the amount of

time spent on the case... . [H]owever, this is an overly natrow view of the quantum

meruit standard applied in the context of a contingent fee agreement which, through

no fault of either party, could not be performed.

In this case, Tishgart is deemed to have admitted that he provided little or no services in the
cases at issue after bankruptcy. He has given the court scant basis for differentiating between his
prepetition and postpetition work on the cases, which is the only possible basis for avoiding the
preclusive effect of Jess, The court would be justified in awarding almost all of the fees in question to
Hoffman. However, in the spirit of fairness the court will not be quite so harsh.

The court has previously summarily awarded Hoffman the entire $3,600.00 fee in the Ferrer

matter. To that, the court will add the entire $14,800.00 fee in the Brown matter, which was

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substantially concluded right about the time of the bankruptcy. As to the remaining $130,475.80, the
court will award half to Hoffman and half to Tishgart.? Hoffman shall therefore have judgment against
Tishgart and his wife for $83,637.90, plus interest at the federal legal rate from the filing of the
complaint and costs of suit.

This memorandum constitutes the court’s findings and conclusions pursuant to FRCP 52(a) and

FRBP 7052. Counsel for Hoffman shall submit an appropriate form of judgment forthwith.

Dated: March 6, 2012

*In cases commenced well before the bankruptcy, most of the work was prepetition. In cases
commenced nearer to the bankruptcy, most of the work was postpetition notwithstanding Tishgart’s
deemed admissions to the contrary. They pretty much offset each other, so a 50 - 50 split seems fair.
The court notes that Tishgart did not keep time records, thereby making it difficult to divine a fair split
more precisely.

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1
2 | CERTIFICATE OF MAILING
3
4 The undersigned deputy clerk of the United States Bankruptcy Court for the
5 | Northern District of California hereby certifies that a copy of the attached
6 | document was mailed to all parties listed below as required by the Bankruptcy
7 || Code and Rules of Bankruptcy Procedure.
8
9 | Dated: March 6, 2012 Wendy Karnes
Deputy Court Clerk
° Kenneth Bruce Tishgart
nee mee
12 | Ross, CA 94957
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