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Plaintiff filed a complaint containing three claims for relief: (1) violation of the discharge injunction, (2) violation of the automatic stay, and (3) violation of Bankruptcy Rule 3002.1(c). Defendant CitiMortgage Inc., a former holder/servicer of Plaintiff’s mortgage, requested dismissal of the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted on all three causes of action. The Plaintiff alleged that the Defendant violated the § 524(i) discharge injunction with misapplication of payments and an inflated account payoff balance. Following In re Williams, 612 B.R. 682 (Bankr. M.D.N.C. 2020), the Court determined that the Plaintiff’s allegations that CitiMortgage transferred Plaintiff’s mortgage account with an inflated balance due to misapplied payments is sufficient to constitute an act to collect for the purposes of withstanding a motion to dismiss under Rule 12(b)(6). The Court also found that the Plaintiff plausibly pled the elements required for violation of the automatic stay under § 362(k) and for violation of Bankruptcy Rule 3002.1(c).

Dismissal, Published No

Memorandum Opinion explaining Court’s decision to grant Debtor’s motion to convert from chapter 13 to chapter 11, determining chapter 11 is not necessarily futile due to failure to meet deadlines to conduct a status conference under § 1188 or to file a plan under § 1189, and explaining Court’s decision to deny Debtor’s motion to extend the deadlines under §§ 1188 and 1189.

Conversion, Published No

         The Debtor filed an amended application seeking approval of compensation for its special counsel McGuireWoods LLP, including fees and expenses incurred prior to the special counsel’s effective date of employment. The Debtor filed an application to employ special counsel on March 4, 2020, which served as the effective date of employment, but special counsel had already performed the bulk of its compensable services prior to that date.
          The Court first found that, given the Supreme Court’s decision in Roman Catholic Archdiocese of San Juan v. Acevedo Feliciano, 140 S. Ct. 696 (2020), the use of nunc pro tunc employment orders to backdate a professional’s effective employment date under 11 U.S.C. § 327 no longer appears to be a permissible exercise of a bankruptcy court’s inherent powers or authority under 11 U.S.C. § 105(a).  While Acevedo may have eliminated nunc pro tunc employment orders, courts are not, however, prohibited from compensating professionals under 11 U.S.C. § 330 for work performed prior to an effective date of employment.
           As part of determining whether a professional’s compensation is reasonable, the Court will consider, as an additional factor under 11 U.S.C. § 330(a)(3), whether all or some of the fees and expenses sought are for work performed prior to a professional’s effective date of employment and, if so, whether the professional has provided a reasonable justification for why services were performed prior to the employment effective date. In determining whether a reasonable justification exists, the Court will consider, inter alia, factors such as the reason for the delay in filing an application to employ, whether the applicant was under pressure to begin service without approval, and the extent to which compensation to the applicant will prejudice third parties. The Court will view with skepticism any explanation that amounts to negligence or inadvertence.
          Applying this standard to the context of this application, the Court found that special counsel’s pre-employment services were of an unexpected and emergency nature. The Court also found that there would be no prejudice to creditors by awarding pre-employment compensation in this case. While the Court found cause to award pre-employment compensation to special counsel, the Court reduced that compensation by 10 percent due to the Debtor’s failure, on at least two occasions, to notify the Court and all interested parties that special counsel had provided extensive services prior to filing an application to employ and would seek fees for those services.

Fees/Compensation, Published No

Creditor Ford Motor Credit Company LLC and the pro se Debtor filed a reaffirmation agreement seeking to reaffirm the Debtor’s lease of a vehicle. Given the uncertain status of the Debtor’s current expenditures (both in her original schedules and the revised, but unsupported, figures within the reaffirmation agreement), the lack of any cushion in the Debtor’s budget for unexpected expenses, and the additional fees and charges within the lease agreement beyond the monthly payments, the Court was unable to make a finding that the proposed reaffirmation agreement would not impose an undue hardship and was in the best interest of the Debtor. Moreover, the Debtor and the Creditor used the wrong procedural mechanism to continue the lease agreement. The parties would have been better served by assuming the lease through the separate procedures of 11 U.S.C. § 365(p) rather than seeking to reaffirm through 11 U.S.C. § 524(c). For those reasons, the Court disapproved the reaffirmation agreement. 

Reaffirmation, Published No

Plaintiff brought a complaint alleging seven causes of action against the Defendants: (1) Recovery of Amount Due on the UD Note; (2) Successor Liability; (3) Tortious Interference with Contract; (4) Civil Conspiracy; (5) Negligent Misrepresentation; (6) Fraud; and (7) Violation of N.C. Gen. Stat. §75-1.1 Unfair and Deceptive Acts and Practices. Defendants filed a motion to dismiss complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted on all seven causes of action. The Court denied the motion to dismiss as to counts I and II, but found that cause existed to dismiss counts III- VII of Plaintiff's complaint.

Dismissal, Published No
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