Restructuring

JUDGE MARKELL’S SPICKELMIER!

Spickelmier fans, raise your impeccable bracket in the air for all the naysayers to see!  In the championship round, Spickelmier cruised into the number one spot with 60% of the votes.  Judge Markell’s witty reference to contemporary vernacular combined with his detailed account of counsel Mondejar’s “lowest moment in attorney representation the court has ever witnessed” was simply dynamite.  Now that Spickelmier is done jumping through hoops and has been rightfully crowned the 2014 Champion, the moment has come to satisfy your curiosity.  We know you are on the edge of your seat eagerly awaiting the finale to Mr. Mondejar’s three-part saga.  Did Mr. Mondejar violate any other sections of Rule 9011?  Did Mr. Mondejar have to disgorge his fees?  Was Mr. Mondejar sanctioned?  If so, how?
Don’t fret Spickelmier fans!  The answers are mere scrolls away.  Read on for “Part III: The Mr. Mondejar Saga Continues and then, Unfortunately, Ends.”  (If you were one of the Grydzuk fans and simply don’t remember the Spickelmier saga, catch up by reading “Part I: The Saga” and “Part II: The Saga Continues”.)
PART III: THE SAGA CONTINUES AND THEN, UNFORTUNATELY, ENDS
Rule 9011(b)(3)
Where were we?  Ah, yes.  Mr. Mondejar violated Rule 9011(b)(2).  But, did he violate any other sections of Rule 9011?  Judge Markell answered in the affirmative.  Subsection 3 of Rule 9011(b) requires that “the allegations and other factual contentions” contained within a filing “have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.”  Moreover, by signing, filing, submitting, or later advocating a motion, an attorney certifies that the motion complies with subsection 3 to the best of his or her “knowledge, information, and belief, formed after an inquiry reasonable under the circumstances.”  Again, as with Rule 9011(b)(2), the standard is one of objective reasonableness.
Remember that affidavit Mr. Mondejar submitted with the motion to shorten time for the second motion to vacate?  (Flashback: The first motion to vacate was denied when Mr. Mondejar did not show up at the hearing to consider the motion.)  The affidavit was signed by another attorney, Mr. Levinson.  It stated, in part, “If the hearing is heard in the ordinary course the Debtors will be liable for being garnished, creditors, and risk of foreclosure on property.”  Judge Markell found that if a reasonably competent attorney had submitted such an affidavit, the attorney would have supported such allegations with “some kind of proof.”  A reasonably competent attorney would have, even after discovering, post-filing, that the affidavit and related motion lacked evidentiary support, moved to withdraw the motion.  In the alternative, rather than withdraw the motion, a reasonably competent attorney would have amended the filed papers to the extent a portion of such filings lacked evidentiary support.  And, if after going through all of these steps, a reasonably competent attorney was confronted with an order to show cause that requested specific examples of the prejudice referred to in the affidavit, such reasonably competent attorney would have, at a minimum, showed up at the order to show cause hearing prepared to address the court’s concerns.
Unfortunately for Mr. Mondejar, when viewed against this backdrop of reasonable conduct, his actions, and those of Mr. Levinson, fell far short.  At the hearing, Mr. Mondejar was prompted by the court and asked for admissible evidence to support the prejudice alleged in the supporting affidavit.  Aside from a foreclosure notice, which was sent to the Spickelmiers after the court’s order to show cause had been filed, Mr. Mondejar had no other proof.  Accordingly, Judge Markell found that “[t]his showing, or non-showing, for lack of a better word, convinces the court that Mr. Levinson signed the Levinson Affidavit without any appropriate evidentiary support.  He apparently believed that he would receive a ‘pass’ for making up events.  He does not.”  Mr. Levinson violated Rule 9011(b)(3) when he filed the motion to shorten and accompanying affidavit, and Mr. Mondejar violated Rule 9011(b)(3) when he advocated on behalf of such motion.
Disgorgement of Fees Under Section 329
Section 329 provides that a court may “examine the reasonableness of a debtor’s attorney fees and, if such compensation exceeds the reasonable value of any such services, the court may cancel any such agreement, or order the return of any such payment, to the extent excessive.”  The reasonable value of services rendered by a debtor’s attorney is a question of fact.  Such attorney fees may be reduced if the court determines that the work done was either excessive or of poor quality.
Where did Mr. Mondejar’s work fall on this spectrum?  The court found that “[t]he work counsel performed for the Debtors in this case reflects a lack of competence and diligence that does not deserve to be compensated.”  In sum:

• Mr. Mondejar assisted the Spickelmiers in filing for chapter 13 relief, relief to which they were not entitled to because their debts were approximately $200,000 over the debt limit to qualify for chapter 13 relief;
• Mr. Levinson’s office then negotiated a stipulation for dismissal of the case with the chapter 13 trustee and failed to comply with it, resulting in the dismissal of the Spickelmiers’ case;
• After moving to have the dismissal reconsidered, counsel did not show up at the hearing on his motion;
• Counsel then moved for an order shortening time on a motion identical to the one the court previously denied without any legal authority that supported the motion; and
• When the court held the hearing on the order to show cause, counsel failed to provide any support for his actions.

The court found that the reasonable value of such services was $0.00 and ordered that Mr. Levinson’s office disgorge all monies paid by the Spickelmiers in their chapter 13 case.
Sanctions
Under Rule 9011, sanctions “shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated.”  Although the court found that the violations in this case were egregious, extensive sanctions were not warranted.  Accordingly, the court sanctioned Mr. Levinson’s office as follows:

• Public reprimand of Mr. Levinson, Mr. Mondejar and the law offices of Mr. Levinson;
• Disgorgement of all fees paid by the debtors in their chapter 13 case;
• Requirement that, for the following three years, each new chapter 11 petition filed by Mr. Levinson’s office would have to be accompanied by proof of compliance with the court’s orders requiring completion of CLE courses in the form of an affidavit or declaration by the attorney signing the petition;
• Requirement that Mr. Mondejar or Mr. Levinson provide, within 48 hours, a copy of Judge Markell’s opinion to court and counsel if during those three years any litigant or court filed a motion or action questioning the propriety or competency of the actions of Mr. Levinson or Mr. Mondejar; and
• Reference of this matter to the State Bar of Nevada so that it may determine whether the case warranted further disciplinary proceedings.

While the Spickelmiers’ saga must, unfortunately for us, and fortunately for the Spickelmiers, end, Judge Markell’s witty use of “epic fail” to describe Mr. Mondejar’s performance will live on in the halls of Weil’s March Madness champions.  May it inspire future March-Madness-worthy opinions.  May it awaken an appreciation in us all for the contemporary vernacular that does not make the proverbial cut.
We cannot wait to see what 2015 has in store.
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A special thanks to our readers for their suggestions for this tournament.  For those of you who were among the first 50 readers to submit suggestions, the Weil March Madness basketballs are on their way to our offices and will be shipped out soon.  We also will be sending a special “bankruptcy memento” to Jonathan Petts, the reader who submitted the winning quote!