In re Davis, 2014 Bankr. LEXIS 2985 (Bankr. N.D. Ala.,July 11, 2014)
The issues addressed in this Opinion do not pertain so much to the debtor's assets, debts or financial matters, or the circumstances that led him into bankruptcy. Rather the Court must examine the surreptitious scheme the debtor's chapter 7 attorney concocted to collect his fees from the debtor on a postpetition basis. This was not a one-off occurrence; similar postpetition-fee arrangements were employed by the same attorney in at least 200 additional chapter 7 cases. And what is most disturbing is his payment scheme was structured to avoid detection; indeed, it went undetected for more than two years.
For at least the last two years, Cobb followed the same modus operandi for collecting his fees and expenses charged in virtually all chapter 7 cases he and his firm filed on behalf of their clients. When a prospective chapter 7 debtor first contacted Cobb — usually by phone — he was told to bring his checkbook to Cobb's office for the initial attorney-client meeting. At that meeting, the prospective debtor was instructed to write 15 postdated checks for $100.00 each, payable to Cobb. This routine became so commonplace that Cobb had stamps prepared so he could quickly stamp the checks with the monthly payment amount (i.e., $100) and his name, "L A Cobb," as payee. The checks were dated for 15 consecutive months, with the first dated approximately one month after the initial meeting. The checks were then sealed in an envelope addressed to Cobb, with postage affixed. The envelope containing the checks was given to the prospective debtor with instructions to mail it back to Cobb after Cobb's office called and told the debtor his case had been filed. Cobb did not dispute that virtually all debtors followed his instructions and returned the envelope. The following month, and for 14 months thereafter, one of the checks was deposited by Cobb into his operating account, not a trust account maintained for clients' funds. The checks dated for the first three months, and in some cases a small portion of the fourth, were used by Cobb to pay filing fees associated with the case, and the remainder were applied to his fees and expenses.
For the bankruptcy process to function as intended by Congress, disclosures by debtors and their attorneys must be accurate and complete. There can be no secrets, half-truths, coy responses, or limited and inadequate disclosures that require cross-examination to get the full story. "Neither the trustee nor the creditors should be required to engage in a laborious tug-ofwar to drag the simple truth into the glare of daylight." Boroff v. Tully (In re Tully), 818 F.2d 106, 110 (1st Cir. 1987) (citing Matter of Mascolo, 505 F.2d 274, 278 (1st Cir. 1974), and In re Tabibian, 289 F.2d 793, 797 (2d Cir. 1961)). It all starts with the attorneys; they are charged with knowing the Code, Rules, and ethical cannons. When attorneys resort to trickery to skirt disclosure requirements, their clients recognize that something unsavory is afoot. Cobb's clients may not have known the exact purpose of the postdated-checks-and-return-envelope routine, but they were shrewd enough to know Cobb was up to something he wanted kept under the table, and that something lacked the bona fides you would expect from a lawyer who was guided by ethical principles rather than his pocketbook. Indeed, Cobb's conflict of interest was glaring: There was no incentive for him to impress upon his clients the importance of disclosing all their income and assets; after all, anything that was left undisclosed would not go to creditors, but potentially would be available to pay the checks Cobb would soon be depositing after the dust settled. The more that went undisclosed, the better chance those checks would be paid when deposited.
The Court needs to hear more from Cobb and the BA before deciding the consequences for Cobb's misconduct in Davis's chapter 7 case and other cases that involved the same undisclosed fee-collection scheme. Accordingly, by separate order, Cobb will be required to furnish the  Court and BA with detailed information regarding his fees and the expenses charged in all chapter 7 cases filed by Cobb, his firm and any lawyer with his firm, from January 1, 2012 through the date of the order. After receipt of this information, the Court will determine whether disgorgement of fees and expenses, and imposition of sanctions are appropriate, and if the Court finds disgorgement or sanctions, or both, appear justified, it will order Cobb, his firm and other lawyer with the firm, to show cause why the same should not be ordered and imposed. The BA will be expected to advocate his position at any show-cause hearing.