Critique Services, LLC v. Steward, No. 15-1857 (8th Cir. 2016)
Annotate this CaseAttorney James Robinson, Attorney Elbert Walton, and Critique Services, LLC appealed the district court's affirmance of the bankruptcy court's judgment on debtor's motion to disgorge attorney's fees. The court concluded that the district court did not clearly err in determining that, assuming that debtor's claim was property of her Chapter 7 bankruptcy estate, the Trustee abandoned the property. The court also concluded that Appellant's motion to recuse was untimely pursuant to 28 U.S.C. 455(a); even if the motions to recuse were timely, Appellants have not demonstrated that Judge Rendlen’s impartiality might reasonably be questioned; the bankruptcy court did not err in docketing debtor's pro se complaint as a motion to disgorge attorney's fees; Critique Services had been properly served and discovery requests were properly directed to it; debtor's claim is not moot; because settlement in this case was never completed, the bankruptcy court retained authority to order debtor to accept discovery and to sanction Appellants for failing to comply with the court’s orders; and Appellants were not entitled to benefit from the doctrine of unclean hands. Finally, the court concluded that the bankruptcy court did not abuse its discretion by imposing significant sanctions on Appellants, including civil penalties and suspension. Accordingly, the court affirmed the judgment.
Court Description: Kelly, Author, with Loken and Gruender, Circuit Judges] Civil case - Bankruptcy. The Chapter 7 trustee effectively abandoned the claim for disgorgement of attorneys' fees based on ineffective assistance of counsel, and debtor had standing to bring the claim; Critique's motions to recuse the bankruptcy judge were untimely under 28 U.S.C. Sec. 455(a), and, in any event, they failed to demonstrate that the judge's impartiality might reasonably be questioned; no error in docketing debtor's pro se motion as a motion to disgorge; Critique was properly served and debtor's discovery requests were properly directed to it; Critique's alleged attempt to tender a portion of the fees debtor had paid did not moot this action; the matter never settled and the court did not err in denying, without prejudice, a motion to approve a settlement; unclean hands doctrine had no applicability to the case; sanctions imposed on Critique and its counsel, while substantial, were proportionate to their bad faith conduct in this matter; no error in imposing civil contempt penalties against counsel or in suspending them from practice before the bankruptcy court.
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