Judge Jacqueline P. Cox recently found that three Illinois attorneys violated their ethical obligations by failing to return their client’s phone calls. She thus ordered the attorneys to return half of their already-court-approved, and paid, flat fee.
In In re: Dennis Molnar, 19-bk-09525, 2024 WL 190919 (Jan. 17, 2024 N.D, Ill.), the debtor filed a petition seeking relief under chapter 13. Originally, three attorneys from the same firm represented the debtor. The attorneys appeared pursuant to a “no look,” flat-fee program for chapter 13 debtors’ attorneys.
These flat fees are sometimes called “no look” fees because they are awarded without the kind of detailed application and itemization of services that Rule 2016(a) would otherwise demand. The flat fee represents a kind of agreement not only with the debtor but with the court: in exchange for the attorney’s commitment to perform specified legal services for the debtor, the court awards a flat fee and dispenses with the usual application.
Id. at *1. Pursuant to the flat-fee arrangement, the court awarded $3,968.47 (of the $4,000 requested) to the debtor’s firm with its approval of the proposed chapter 13 plan in June 2023.
A few months later, in November 2023, a new attorney from a different firm filed a motion to substitute counsel. The new attorney informed the court that “the attorneys[] of record were not returning the [d]ebtor’s phone calls, causing him to secure other counsel.” Id. The court issued an order to show cause why the original attorneys should not be held to have violated the flat fee agreement.
The debtor’s original attorneys testified that while the debtor had called the firm, he did not explain why he did not receive the services expected, as the flat fee (by then paid in full) only required that the debtor be represented until the case closed. The attorneys further argued that the debtor simply desired to change lawyers.
The court found the original attorneys’ argument “totally unbelievable. The [d]ebtor had to be in distress to go out and hire an attorney when he was entitled to continuing legal services under the no look program.” Id. at 2.
The court analyzed Illinois Professional Rule of Conduct 1.3 and section 329 of the Bankruptcy Code. It found that the attorneys’ failure to return their client’s calls violated their obligation to act with reasonable diligence, and that pursuant to section 329, roughly half the fees should be returned to the debtor. The court thus awarded the debtor $2,000 and found his former attorneys jointly and severely liable.
The case provides an object lesson to practitioners: promptly respond to your clients, even if you are unsure what they are requesting, and even if you have already been paid under a flat-fee arrangement.
