Antonio Delane Storey

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
ANTONIO DELANE STOREY,
Debtor.
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Case No. 08-00198
(Chapter 11)
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION RE MOTION OF
THE UNITED STATES TRUSTEE FOR SANCTIONS AGAINST DEBTOR’S COUNSEL
By his Motion for an Order to Show Cause (Docket Entry
(“DE”) No. 95), the United States Trustee has sought the
imposition of sanctions against the debtor’s counsel for failing
to disclose a postpetition receipt of $2,032 from the debtor for
services rendered in connection with a state court landlord-
tenant action. 	This Memorandum Decision supplements the court’s
earlier oral decision.
I
The debtor filed his petition commencing this case on March
25, 2008. 	The debtor’s attorneys are Andrew P. Barber and Barber
& Associates PC, and for ease of discussion, I will refer to them
as Barber as though only Mr. Barber were the debtor’s attorney.
Barber received $3,600 on March 20, 2008 in connection with
The document below is hereby signed.
Signed: May 19, 2009.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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services rendered or to be rendered in connection with this
bankruptcy case, and duly disclosed that payment under Rule
2016(b) of the Federal Rules of Bankruptcy Procedure. 	During
the month of June 2008, Barber received an additional payment of
$2,032 from the debtor. 	Barber later filed the debtor’s monthly
operating report for June 2008 disclosing that payment, but he
did not file an amended 2016(b) statement. 	When Martha Davis,
counsel for the United States Trustee, asked Barber about that
payment, Barber disclosed that the $2,032 payment was for
services rendered in connection with a state court landlord-
tenant action. 	Davis advised Barber that he needed to file an
amended Rule 2016(b) disclosure statement disclosing the receipt
of this additional $2,032 payment, that he needed either to
return the funds to the debtor or move the funds into escrow, and
that he needed to make application for payment of such
compensation. 	Davis also advised Barber about the court’s
decision in In re Williams, Case No. 08-00116, 2008 WL 2890933
(Bankr. D.D.C. July 21, 2008). 	Despite repeatedly being urged to
file the amended Rule 2016(b) statement and to take the other
suggested steps, Barber failed to do so, thus prompting the
filing of the United States Trustee’s motion.
On September 9, 2008, before the United States Trustee filed
his motion, Barber filed on behalf of the debtor an Application
for Order under 11 U.S.C. §§ 327(a) and 329 Authorizing the
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Employment and Retention of Barber & Associates, PC as Attorneys
for the Debtor (DE No. 93). 	That Application failed to disclose
the landlord-tenant work that Barber had performed for the
debtor. 	It was later stricken on October 10, 2008 (DE No. 112)
for lack of a signature, and no subsequent application has been
filed for an order authorizing the employment of Barber as
counsel for the debtor in possession.
On September 10, 2008, the United States Trustee filed his
motion seeking sanctions. 	Barber filed an opposition on October
8, 2008 (DE No. 111) and on October 22, 2008, the court held a
hearing on the motion.
II
Barber contends that Rule 2016(b) does not apply to the
$2,032 payment. 	Rule 2016(b) implements 11 U.S.C. § 329(a),
which provides in relevant part that:
Any attorney representing a debtor in a case under this
title, or in connection with such a case . . . shall
file with the court a statement of the compensation
paid . . . for services rendered or to be rendered . .
. in connection with the case by such attorney . . . .
[Emphasis added.] Barber contends that although he is working as
the attorney for the debtor in possession in the case, his
services with respect to the landlord-tenant matter, albeit as an
attorney for the debtor in possession, were not “in connection
with the case” as required for § 329 to apply because this was
litigation in the ordinary course of the debtor’s business,
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citing In re D’Lites of America, Inc., 108 B.R. 352 (N.D. Ga.
1989), and In re Johns-Manville Corp., 60 B.R. 612 (S.D.N.Y.
1986). 	Accordingly, Barber contends that § 329 did not require
him to file a statement disclosing the compensation paid in
connection with such services.
I will assume, without deciding, that if the debtor in
possession had employed someone other than Barber to represent it
only in the landlord-tenant case, compensation for representing
the debtor in possession in such ordinary course of business
litigation would not require disclosure under § 329(a). 	Barber,
however, is representing the debtor in possession with respect to
the conduct of the case in general and in carrying out the debtor
in possession’s duties in the case, and that distinguishes this
case from the cases relied upon by Barber, In re D’Lites of
America, Inc. and In re Johns-Manville Corp., in which the
individuals were employed only with respect to matters that were
in the ordinary course of the debtor’s business, and not with
respect to the bankruptcy aspects of the case. 	See In re D’Lites
of America, Inc., 108 B.R. 352 (N.D. Ga. 1989) (unnecessary to
obtain court approval for the hiring of employees to replace the
debtor in possession’s departed employees because the replacement
employees were hired to perform everyday functions of the
business rather than to assist in the handling of the bankruptcy
proceedings); In re Johns-Manville Corp., 60 B.R. 612 (S.D.N.Y.
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1986) (court approval unnecessary for the hiring of non-attorney
lobbyists who performed services in the ordinary course of the
debtor’s business, a function that was found to be “completely
external to the reorganization process . . . .”).
Barber is serving as the debtor in possession’s counsel “to
represent and assist the [debtor in possession] in carrying out
the [debtor in possession’s] duties under [the Bankruptcy Code]”
within the meaning of 11 U.S.C. § 327(a), and in general has been
engaged “to represent the [debtor in possession] in conducting
the case” within the meaning of 11 U.S.C. § 327(e). 	One of the
debtor in possession’s powers is that of a trustee to sue and be
sued. 	11 U.S.C. §§ 323(b) and 1107(a). 	Moreover, under 11
U.S.C. § 330(a)(1) an attorney employed under § 327 as counsel
for the debtor in possession may seek authorization for
reasonable compensation for services rendered, with the
determination of reasonableness to include a consideration under
11 U.S.C. § 330(a)(3)(C) of “whether the services were necessary
to the administration of, or beneficial at the time at which the
service was rendered toward the completion of, [the]
case . . . .”
When an attorney represents a trustee or a debtor in
possession with respect to the conduct of the case in general and
in carrying out the trustee’s or debtor in possession’s duties,
representation on matters that in isolation might not be
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considered a representation of the debtor in connection with the
case (because the representation is in the ordinary course of the
debtor’s business) nevertheless become part of that general
representation of the debtor in connection with the case. 	Barber
has an obligation as the debtor in possession’s attorney in the
case to assure that ordinary course of business litigation
conducted on behalf of the debtor in possession is conducted in a
cost-effective manner. 	When, with respect to ordinary course of
business litigation, a debtor in possession elects to employ a
different attorney than the counsel generally representing the
debtor in the conduct of the case, the debtor in possession’s
general counsel in the case can act as a watchdog, or at least a
source of advice, to assure that the services are billed at a
reasonable rate. 	When, however, the debtor in possession employs
the attorney representing it in the conduct of the case to also
conduct ordinary course of business litigation, there is an
obvious danger of a conflict of interest if the compensation for
services relating to ordinary course of business litigation is
treated as not subject to approval by the court under § 330.
When a trustee’s or a debtor in possession’s attorney is
providing representation in general with respect to the conduct
of the case and in carrying out the trustee’s or debtor in
possession’s duties, that attorney’s representation of the
trustee or debtor in possession with respect to postpetition
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ordinary course of business litigation is necessarily
representation in connection with the case. 	Because of the
attorney’s fiduciary role in the case, the hat the attorney wears
as the attorney providing general representation of the debtor in
possession in the conduct of the case covers all services
rendered by that attorney to the debtor postpetition. 	The
attorney cannot operate under the unrealistic fiction that he can
be treated as wearing two different hats, one as the debtor in
possession’s representative in the conduct of the case and the
other as the debtor in possession’s attorney in ordinary course
of business litigation deemed not to be in connection with the
case. 	Such an attorney’s compensation for all services rendered
for the benefit of the estate ought to be subject to disclosure
under § 327 and approval by the court as to the reasonableness of
the fees under § 330.
III
In any event, Barber has already received $3,600.00 for
representing the debtor in connection with this case, but has
failed to file an application in proper form under 11 U.S.C.
§ 327 and Fed. R. Bankr. P. 2014(a) to authorize his
representation of the debtor. 	The defective application Barber
did file failed to disclose the representation in the landlord-
tenant action as a connection to the debtor. 	If Barber were
correct that his representation of the debtor in possession in
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1 	The court does not address whether Barber should be
denied all compensation for services rendered to the debtor in
possession prior to his eventually filing a Rule 2014(a)
application and obtaining authorization to represent the debtor
in possession.
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the landlord-tenant action was not in connection with the case
under § 329, that representation would nevertheless be a
connection with the debtor (beyond Barber’s being employed as the
debtor in possession’s counsel under § 327(a)) that would be
required to be disclosed under Rule 2014(a). 	Barber should have
filed an application early on in this case disclosing the
representation of the debtor in possession in the landlord-tenant
action if such representation were to be treated as employment
not covered by § 327. 	His failure to comply with Rule 2014(a)
and to disclose the work on the landlord-tenant matter as a
connection with the debtor would in itself provide a basis for
requiring Barber to disgorge part of his compensation as a
sanction for failing to comply with the rules applicable to
professionals employed by a debtor in possession in the case. 1
IV
An order follows requiring Barber to disgorge $500.00 to the
debtor as a sanction, and requiring him to place the $1,532.00
balance of the $2,032.00 in escrow pending a ruling on an
application to be filed under 11 U.S.C. § 330 seeking approval of
of the $1,532.00 as compensation for services rendered in
connection with the landlord-tenant action (or as compensation
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9	O:\TEEL\Judge Temp Docs\Storey (Antonio Delane) Mem Decsn re UST Mtn for Sanctions for Non-Disclosure of Atty Fees_v2.wpd
for other services rendered in connection with the case).
[Signed and dated above.]
Copies to: Debtor; Debtor’s attorney; Office of United States
Trustee.
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