Ceasar Cuevas Ricasata and Geraldyn Gaviola Ricasata

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 10-44101 T
Chapter 11
CEASAR CUEVAS RICASATA, GERALDYN
GAVIOLA RICASATA,
Debtors-in-Possession.
_________________________________/
In re 	No. 10-45356 T
Chapter 11
EUFRESINA DE LEON BOADO, ARTHUR
BASA BOADO, SR.,
Debtors-in Possession.
________________________________/
MEMORANDUM OF DECISION
The 	above-chapter 	11 	debtors-in-possession 	have 	applied 	for
permission to employ Kenneth R. Graham (“Graham”) as their bankruptcy
counsel 	in 	the 	above-captioned 	cases. 	The 	Office 	of 	the 	United
States Trustee (the “UST”) has objected to Graham’s employment. 	The
parties 	were 	given 	an 	opportunity 	to 	brief 	the 	issues. 	Having
considered the evidence and argument presented, the Court concludes
that 	the 	applications 	should 	be 	denied 	with 	prejudice. 	The
Signed: July 16, 2010
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
July 19, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 10-44101 Doc# 51 Filed: 07/16/10 Entered: 07/19/10 16:24:40 Page 1 of 7

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underlying 	facts 	and 	the 	reasons 	for 	the 	Court’s 	decision 	are 	set
forth below.
BACKGROUND
Graham 	filed 	a 	chapter 	11 	petition 	for 	the 	Ricasatas 	on 	April
12, 	2010. 	An 	application 	to 	employ 	Graham 	as 	counsel 	for 	the
Ricasatas was filed on May 3, 2010. 	An objection to the application
was 	filed 	on 	May 	6, 	2010. 	The 	parties 	appeared 	at 	hearings 	with
respect to the application and objection on May 17 and June 15, 2010.
At the conclusion of the June 15, 2010 hearing, the Court gave Graham
until June 22, 2010 to file a response to the UST’s objection and the
UST 	until 	June 	29, 	2010 	to 	file 	a 	reply. 	Graham 	failed 	to 	file 	a
response 	in 	this 	case. 	However, 	on 	June 	28, 	2010, 	the 	UST 	filed 	a
motion to extend the deadline for its reply. 	The motion was granted.
The UST filed a timely reply on July 13, 2010.
Graham 	filed 	a 	chapter 	11 	petition 	for 	the 	Boados 	on 	May 	10,
2010. 	An application to employ Graham as counsel for the Boados was
filed on June 2, 2010. 	An objection to the application was filed on
June 11, 2010. 	The parties appeared at a hearing with respect to the
application and objection on June 15, 2010. 	At the conclusion of the
June 15, 2010 hearing, the Court gave Graham until June 22, 2010 to
file 	a 	response 	to 	the 	UST’s 	objection 	and 	the 	UST 	until 	June 	29,
2010 to file a reply. 	Graham filed a response in this case on June
25, 	2010. 	On 	June 	28, 	2010, 	the 	UST 	filed 	a 	motion 	to 	extend 	the
deadline 	for 	its 	reply. 	The 	motion 	was 	granted. 	The 	UST 	filed 	a
timely reply on July 13, 2010.
Case: 10-44101 Doc# 51 Filed: 07/16/10 Entered: 07/19/10 16:24:40 Page 2 of 7

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The 	objection 	filed 	by 	the 	UST 	in 	the 	Ricasata 	case 	asserted
that, 	contrary 	to 	Cal. 	Civ. 	Code 	§ 	2944.7, 	Graham 	obtained 	$6,000
from the Ricasatas for performing future loan modification services.
It also noted that Graham had failed to serve a copy of the proposed
order 	approving 	his 	employment 	on 	the 	UST. 	Finally, 	the 	objection
noted 	that 	the 	retainer 	agreement 	attached 	to 	the 	application
indicated that Graham intended to charge the Ricasatas $200 for any
amendments to the petition. 	The UST contended that this charge was
excessive.
The objection in the Boado case asserted that the employment of
Graham by various debtors in the Northern District of California had
been the subject of numerous objections by the UST. 	In some of these
cases, 	his 	employment 	had 	been 	denied. 	In 	addition, 	various
bankruptcy courts in the Northern District had issued orders to show
cause 	based 	on 	complaints 	about 	his 	performance. 	Twelve 	cases 	are
listed and the details of the problems summarized.
The UST noted that all twelve of the cases were large cases in
which 	individual 	debtors 	owned 	multiple 	pieces 	of 	real 	estate. 	In
most of the cases, some of the real estate generated cash collateral.
In 	none 	of 	the 	cases 	were 	applications 	filed 	for 	permission 	to 	use
cash 	collateral. 	The 	UST 	further 	noted 	that 	Graham 	had 	permitted
another 	attorney 	to 	work 	on 	the 	Boado 	case 	without 	disclosing 	the
attorney’s name or connections. 	This problem had not been remedied
despite 	the 	UST 	having 	brought 	it 	to 	Graham’s 	attention. 	The 	UST
concluded 	by 	asking 	that 	Graham’s 	employment 	be 	denied 	unless 	and
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until 	he 	can 	demonstrate 	that 	he 	is 	sufficiently 	competent 	and
ethical to represent a chapter 11 debtor-in-possession.
The response filed by Graham in the Boado case asserted that his
office 	has 	now 	established 	a 	checklist 	to 	prevent 	the 	mistakes
previously made, as noted by the UST. 	He pointed out that, in some
of 	the 	twelve 	cases 	listed 	by 	the 	UST, 	the 	objections 	cited 	were
overruled without hearings. 	In one of the cases, no ruling had yet
been made on the objection. 	With respect to the attorney whose name
and 	connections 	were 	not 	disclosed, 	Graham 	contended 	that 	he 	was
simply 	an 	employee 	of 	Graham’s 	firm. 	He 	contended 	that 	nothing 	in
the rules or guidelines required a law firm applying for employment
to 	identify 	all 	of 	its 	attorneys 	by 	name. 	Based 	on 	this 	response,
Graham asked that the UST’s objection to his application be overruled
and his employment approved.
The UST’s filed a consolidated reply in the two cases. 	The UST
continued 	to 	assert 	Graham’s 	lack 	of 	competence 	and 	lack 	of 	candor
regarding the terms of his employment as grounds for denying approval
of his employment. 	The UST noted that the Court has a duty to deny
approval 	of 	the 	employment 	of 	counsel 	by 	chapter 	11 	debtors-in-
possession 	on 	grounds 	of 	incompetence, 	among 	other 	things. 	See 	In
re 	Nucorp 	Energy, 	inc., 	764 	F.2d 	655, 	658 	(9th 	Cir. 	1985); 	In 	re
Crayton, 192 B.R. 970, 976 (Bankr. 9th Cir. 1996); and In re Vettori,
217 B.R. 242 (Bankr. N.D. Ill. 1998).
The 	UST 	noted 	that 	Graham 	began 	filing 	chapter 	11 	cases 	for
debtors 	in 	March 	2009. 	Since 	that 	time 	he 	has 	filed 	19 	chapter 	11
cases. 	In virtually all of these cases, the debtors were individuals
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who owned multiple rental properties. 	In none of these 19 cases have
chapter 	11 	plans 	been 	confirmed. 	Two 	of 	the 	cases 	have 	been
dismissed, 	one 	case 	was 	converted 	to 	chapter 	7, 	and 	in 	one 	case
Graham’s 	employment 	was 	denied. 	In 	three 	others, 	his 	employment
applications remain pending.
Moreover, the UST contended, the history of Graham’s misconduct
demonstrates 	that 	he 	is 	unable 	or 	unwilling 	to 	learn 	from 	his
mistakes. 	His 	employment 	was 	denied 	in 	September 	2009 	in 	a 	San
Francisco bankruptcy case, based on his agreement to accept a post-
petition retainer without court approval. 	Nevertheless, Graham filed
employment 	applications 	containing 	provisions 	for 	post-petition
retainers 	in 	January 	and 	February 	2010. 	Similarly, 	Graham 	has
repeatedly failed to comply with state law regarding the receipt of
loan modification fees. 	Despite being advised in April 2010 of the
prohibition 	on 	flat 	fees 	for 	such 	services, 	he 	continued 	to 	file
employment applications thereafter providing for such fees.
The UST noted that, since the objections were filed in these two
cases, on July 1, 2010, Graham was sanctioned by another bankruptcy
judge in this district for failing to timely file documentation with
respect 	to 	the 	receipt 	of 	fees 	for 	loan 	modification 	services 	as
ordered by the court. 	The UST conceded that it is true that a law
firm 	need 	not 	disclose 	the 	name 	of 	every 	member 	or 	associate 	when
applying 	for 	employment. 	However, 	it 	noted 	that 	here, 	it 	appeared
that the undisclosed attorney was the only attorney the debtors ever
dealt with. 	Moreover, the attorney was a recent admittee to the Bar
who did not provide the debtors with adequate legal services.
Case: 10-44101 Doc# 51 Filed: 07/16/10 Entered: 07/19/10 16:24:40 Page 5 of 7

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Based 	on 	the 	foregoing, 	the 	Court 	concludes 	that 	Graham’s
employment 	should 	not 	be 	approved 	in 	either 	case. 	A 	chapter 	11
debtor-in-possession serves in the capacity of a trustee and thus is
a 	fiduciary 	with 	respect 	to 	estate 	property. 	For 	this 	reason, 	a
chapter 	11 	debtor 	must 	seek 	the 	Court’s 	approval 	before 	employing
counsel. 	The 	Court 	has 	an 	obligation 	under 	these 	circumstances 	to
permit a chapter 11 debtor-in-possession to employ counsel only when
his counsel of choice is competent in chapter 11 bankruptcy law and
has 	ethical 	standards 	sufficient 	to 	his 	role 	as 	counsel 	for 	a
fiduciary. 	The 	Court 	is 	unable 	to 	find 	that 	Graham 	meets 	these
requirements. 	Above 	all, 	Graham’s 	repeated 	noncompliance 	with 	the
law, after being advised of problems, forms the basis for the Court’s
conclusion. 	Graham’s 	employment 	application 	will 	be 	denied 	with
prejudice.
Counsel 	for 	the 	UST 	is 	directed 	to 	submit 	proposed 	forms 	of
orders in these two cases.
END OF DOCUMENT
Case: 10-44101 Doc# 51 Filed: 07/16/10 Entered: 07/19/10 16:24:40 Page 6 of 7

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COURT SERVICE LIST
Kenneth R. Graham
Law Offices of Kenneth R. Graham
1575 Treat Blvd #105
Walnut Creek, CA 94598
Arthur Basa Boado, Sr.
Eufresina de Leon Boado
4549 Oakdale St.
Union City, CA 94587
Ceasar Cuevas Ricasata
Geraldyn Gaviola Ricasata
1801 Vetta Drive
Livermore, CA 94550
Margaret H. McGee
Office of the U.S. Trustee
1301 Clay St. #690N
Oakland, CA 94612
Case: 10-44101 Doc# 51 Filed: 07/16/10 Entered: 07/19/10 16:24:40 Page 7 of 7