In the Matter of James Glen WHITLEY, doing business as Whitley Properties, doing business as Edna Housing, doing business as Whitley Ranch Seed Company, Debtor.
Trustee Lowell T. Cage, Appellee. Reese W. Baker; Baker & Associates, Appellants
[Copyrighted Material Omitted]
H. Gray Burks, IV, Esq., Shapiro Schwartz, L.L.P., Houston, TX, Reese Walker Baker, Esq., Baker & Associates, Houston, TX, for Appellants.
Timothy L. Wentworth, Cage, Hill & Niehaus, L.L.P., Houston, TX, for Appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before HIGGINBOTHAM, OWEN, and HIGGINSON, Circuit Judges.
HIGGINSON, Circuit Judge.
A bankruptcy judge may regulate attorney compensation by ordering debtor's counsel to return to the estate excessive compensation. 11 U.S.C. § 329(b). Separately, a bankruptcy judge has authority to discipline attorneys who violate the disclosure requirements of the Bankruptcy Code and Rules. Arens v. Boughton (In re Prudhomme), 43 F.3d 1000, 1003 (5th Cir.1995). Because a bankruptcy judge's reach under the plain language of § 329(b) is limited to attorney compensation, however, we REVERSE and REMAND the bankruptcy court order before us.
FACTS AND PROCEEDINGS
In 2008 and again in 2009, James Whitley made failed endeavors to reorganize
his debts under Chapter 13 of the Bankruptcy Code. Appellants Reese Baker and Baker & Associates (" Baker" ) served as Whitley's counsel in both proceedings. On March 4, 2009, the bankruptcy court dismissed Whitley's 2008 petition without prejudice and on July 20, 2009, the bankruptcy court dismissed Whitley's 2009 petition with prejudice. On October 8, 2009, the bankruptcy court vacated its order dismissing Whitley's 2009 petition and converted Whitley's case to Chapter 7.
Between July 20, 2009, when the bankruptcy court dismissed Whitley's 2009 case with prejudice, and October 8, 2009, when the bankruptcy court vacated its order and converted Whitley's case to Chapter 7, Whitley and Baker engaged in the transactions giving rise to this appeal. Whitley was convicted of sexual assault of a minor and on August 27, 2009 he was sentenced to life in prison. Also on August 27, 2009, Whitley transferred two properties— the Church Street property and the Highway 111 property— to Baker's wholly owned entity BK/HSH, LLC. William and Miriam Ackley held liens on the two properties, and after Whitley transferred them to Baker, the Ackleys foreclosed. The Ackleys noticed the properties for foreclosure sales on September 1, 2009. Baker attended and won both foreclosure sales, bidding $60,040 for the Highway 111 property and $38,735 for the Church Street property. Baker never disclosed these transactions to the bankruptcy court.
On June 4, 2010, Appellee-Trustee Lowell T. Cage (" Trustee" ) filed an adversary proceeding against Baker claiming that Whitley's various transfers to Baker, including Whitley's transfer of the two properties, were voidable under 11 U.S.C. §§ 548, 549, and 550. The Trustee's complaint alleges that " [a]lthough the case had been dismissed at [the time of the transfers]," the transfers were without court authority, were for less than reasonably equivalent value, and were executed in breach of Baker's fiduciary relationship with Whitley.
The bankruptcy judge, Judge Steen, denied the Trustee's motion for summary judgment on these claims, reasoning that " although some very limited issues might be appropriate for summary judgment, the best procedure is to decide, first, under Bankruptcy Code § 329 whether Baker must disgorge compensation. There are material issues of fact with respect to that question. Determination of that question may make other issues moot." Specifically, the court noted that § 329 may be the most efficient way to recover the money Baker had already ...