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In re Miller Automotive Group Inc.

United States Bankruptcy Appellate Panel of the Eighth Circuit

August 12, 2015

In re: Miller Automotive Group Inc., doing business as Miller Chrysler Dodge, doing business as Miller Chrysler Dodge Jeep Inc., Debtor; William L. Needler, Movant - Appellant
v.
Daniel J. Casamatta, U.S. Trustee - Appellee

Submitted July 22, 2015.

Page 829

Appeal from United States Bankruptcy Court for the Western District of Missouri - Jefferson City.

William L. Needler, Movant - Appellant, Pro se, Ogallala, NE.

For Daniel J. Casamatta, U.S. Trustee - Appellee: Adam Eric Miller, U.S. TRUSTEE'S OFFICE, Region 13 Western District of Missouri, Kansas City, MO.

Before SCHERMER, SALADINO and SHODEEN, Bankruptcy Judges.

OPINION

Page 830

SALADINO, Bankruptcy Judge.

William L. Needler and William L. Needler and Associates, Ltd. (collectively " Needler" ) appeal from an order of the bankruptcy court[1] imposing sanctions against Needler and a subsequent order denying Needler's motion to reconsider. We have jurisdiction over this appeal from entry of the bankruptcy court's final order pursuant to 28 U.S.C. § 158(b). For the reasons set forth below, we affirm.

FACTUAL BACKGROUND

On January 11, 2013, Needler electronically filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Western District of Missouri on behalf of " Miller Chrysler Dodge Inc." Because Needler is not admitted to practice in the Western District of Missouri, he also filed a motion to appear pro hac vice and an application to be employed as debtor's attorney. Over the objection of the United States Trustee, the bankruptcy court approved Needler's application with the admonition that his fees and activities would be closely scrutinized.

The United States Trustee soon discovered that the entity " Miller Chrysler Dodge Inc." did not legally exist and, when the error was not timely corrected, filed a motion to dismiss the Chapter 11 case. The motion noted that a similarly named entity, " Miller Chrysler Dodge Jeep, Inc.," did exist at one time, but in 2011 was merged into the entity " Miller Automotive Group, Inc." On February 3, 2013, Needler filed an amended voluntary petition under the proper name of the debtor -- Miller Automotive Group, Inc.

During the course of the Chapter 11 case, Needler received several orders from the clerk of the court to show cause for failure to comply with local filing requirements. Needler was unsuccessful in obtaining authority for the debtor to use cash

Page 831

collateral and to retain a broker to attempt to sell the business. He was also unsuccessful in his attempt to get the United States District Court for the Western District of Missouri to withdraw the reference of the bankruptcy case from the bankruptcy court. Relief from the automatic bankruptcy stay was sought and obtained by the two primary creditors, Ally Financial, Inc., and Chrysler Group, LLC. Ultimately, on April 24, 2013, the bankruptcy case was dismissed on the debtor's motion. The court closed the case file on May 29, 2013. During the pendency of the Chapter 11 case, Needler never sought nor obtained approval of any attorney fees and expenses.

Approximately six months later, the United States Trustee filed a motion to reopen the Chapter 11 proceeding to accord relief to the debtor and for cause pursuant to 11 U.S.C. § 350(b). Specifically, the United States Trustee asserted that she had received a written complaint from the debtor and debtor's principals concerning the conduct of Needler and his co-counsel[2] in the representation of the debtor. As part of the motion to reopen, the United States Trustee also asserted that Needler failed to communicate accurate information about the case to the debtor, that Needler made potentially false and misleading representations to the debtor and its officers concerning the case, and that Needler may have filed documents and taken actions in the bankruptcy case which were not authorized and resulted in unnecessary litigation and expense. The United States Trustee further noted that Needler had filed a state court action against the debtor and the debtor's principals for attorney fees in excess of $49,000.00. After consideration, the bankruptcy court granted the motion to reopen without a hearing. After the case was reopened, Needler attempted to object to the motion to reopen, which objection was denied as moot since the court had already granted the motion.

Thereafter, the United States Trustee filed a motion to compel Needler to disgorge all fees previously paid and to determine the reasonableness of any fees Needler asserted against the debtor. Subsequently, at a preliminary hearing on the United States Trustee's motion, Needler was ordered to file a final fee application. He did so, seeking more than $63,000.00 in fees and $3,600.00 in expenses. The United States Trustee objected to the fee application, as did David and Gloria Miller, the principals of the debtor. On May 13, 2014, the United States Trustee then filed the amended motion that is the subject of this appeal. In the amended motion, the United States Trustee requested the disgorgement of all fees paid to Needler, along with the imposition of additional sanctions " pursuant to [the] Court's inherent authority, 11 U.S.C. § 105(a) and Fed. R. Bankr. P. 9011." Sanctions were requested because:

Mr. Needler committed numerous serious acts of misconduct which violated the Federal Rules of Bankruptcy Procedure and the local rules of practice before this Court, and Mr. Needler's conduct evidences a pattern of such misconduct in cases filed in this court as pro hac vice counsel to Chapter 11 debtors.

In addition to disgorgement, the amended motion requested a declaration that Needler is entitled to no compensation for services rendered in the Chapter 11 case, denial of permission to appear pro ...


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