EAST ST. LOUIS – Chicago bankruptcy firm UpRight Law seeks a court order to stop an investigation of fees that Belleville lawyer Ronald Buch collected.
UpRight filed 20 suits at U.S. district court on Sept. 30, challenging the authority of bankruptcy trustee Nancy Gargula to examine Buch’s fees in 20 cases.
UpRight counsel Mark Lavery of Niles filed 12 more suits challenging her authority over James Ford of Benton in 12 cases.
Lavery claims Bankruptcy Judge Laura Grandy refused to close cases when she lacked jurisdiction to keep them open.
He wrote that estates were fully administered without objection and discharges of debts were entered.
Buch places his name on dockets twice, once from the firm of William Mueller on West Main Street and once for UpRight.
Grandy granted Gargula authority to examine Buch and certain debtors in April.
She held a hearing on her own motion in June, and directed UpRight counsel Charles Armgardt to itemize fees and costs for each case.
UpRight vice president Ryan Galloway complied in July, and Buch and Ford moved to close their cases.
Gargula’s trial attorney Mark Skaggs of Peoria objected to the closing and moved to examine Ford and clients.
He wrote that it was relevant whether a lawyer explained to debtors the difference between Chapter 7 and Chapter 13.
He wrote that Gargula wished to examine debtors about the decision process, interaction with attorneys, document preparation, and timing of tasks.
He wrote that she wanted to examine them about length of time between the date of final payment of UpRight fees and filing of the case.
He asked whether debtors needed to file a bankruptcy case in the first instance.
Ford responded that, “Rule 2004 examinations are not an appropriate device to conduct an investigation of the law firm that represented the debtor.”
He wrote that no law regulates when, how often, or for how long a debtor may choose to meet face to face with an attorney.
Grandy granted examinations on Sept. 14.
She found debtors paid fees higher than those the attorneys charged when filing cases under their own names. She also found the additional fees raised a question of what additional services the affiliation with UpRight provided to debtors.
At a hearing on Sept. 16, UpRight counsel Armgardt told Grandy that keeping cases open caused harm to the fresh start of debtors.
“They don’t have any physical ability to seek to resolve any of this. There’s no one to settle with,” Armgardt said.
He called the investigation limitless and rudderless, saying UpRight and partner attorneys were in purgatory with no allegations articulated against them.
He said it appeared Gargula targeted Buch and Ford.
“I’m not sure, personal animosity perhaps,” Armgardt said.
Trial attorney Skaggs focused on a 33rd case involving UpRight lawyer Eric Homa of Peoria and debtor Chelsea Potter of Dietrich.
Skaggs said Potter retained UpRight in 42 minutes after service of a claim against her in state court.
He said she spoke with a finance consultant and paid $50 towards a fee.
Grandy asked how she paid so quickly and Skaggs said she paid by debit card.
Grandy repeated the words and he said, “UpRight Law’s practice is to get a debit card during that first phone call and that’s what happened in this case.”
Skaggs said Potter went to court, signed off on a judgment, and entered into a payment agreement of $125.
He said she paid UpRight in full in December 2018, but didn’t speak with Homa until February 2019, and the case wasn’t filed until June 2019.
“She paid them over $2,000 with the court filing fee, this single mother who gets zero assistance from the father of her child,” Skaggs said.
He said Potter met Homa just before the meeting of creditors and was shocked to learn his fee in another case was less than $600.
Grandy said higher fees had come to her attention, “and lots of gaps and periods of time when the debtor seemed to languish without a lot of legal assistance other than maybe an intake person at UpRight.”
“It’s just baffling to me that we have certain cases where there’s a refund due from UpRight,” Grandy said.
“I want to find out why it is that these refunds were due before filing, and were they paid back?”
She covered each case, with neither Armgardt nor Skaggs adding much.
In one case she found foreclosure of a home took place. In another she found a debtor’s wages were garnished to the tune of $737.36.
“Why did this case linger so long in the hallows of UpRight law firm when their client is suffering from a wage garnishment?” Grandy said.
She found a debtor paid three unsecured creditors $3,725.37 within 90 days prior to filing bankruptcy.
She found lenders repossessed a debtor’s property valued at $2,343.32, a debtor’s Chevy Avalanche, and a debtor’s mobile home valued at $28,000.
She sustained the trustee’s objections and said she would issue an order.
She didn’t get the chance.
Lavery, in asserting district court jurisdiction, argued that there were no conflicting claims brought before the bankruptcy court.
He wrote that neither Gargula nor anyone else brought forward any contested matters, adversary proceedings, or other dispute against UpRight.
He wrote that Grandy’s directive for Gargula to investigate UpRight was inconsistent with her obligation to serve as a neutral arbiter.
He wrote that Grandy acted more in the nature of a party advocate and drew conclusions without a fair process.
“Among other things, due process is violated because the firm has not received adequate notice of any claims asserted against it,” Lavery wrote.
District Judge Staci Yandle will preside over all 33 suits.