Derrick v. National Health Finance DM LLC et al

Filing 51

ORDER that the Order Disqualifying Counsel for Debtor (Bankr. Doc. 196) is reversed. The Clerk shall enter judgment accordingly and shall terminate this case in this court. Signed by Judge Neil V Wake on 1/15/2014. (KMG)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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In Re
Gayle Ann Derrick

BK. 10-BK-36666-SSC
Debtor,

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ADV. No. N/A
Gayle Ann Derrick,

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No. CV-13-01706-PHX-NVW

Appellant,

ORDER

v.
National Health Finance DM, LLC; and
Williams & Halladay,
Appellees.

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Appellant-Debtor Gayle Ann Derrick appeals the Bankruptcy Court’s August 1,

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2013 Order Disqualifying Counsel for Debtor (Doc. 45-1 at 2; Bankr. Doc. 196). Her

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appeal is fully briefed, and the Court heard extended oral argument on January 6, 2014.

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The Bankruptcy Court disqualified Isidore Yetnikoff as counsel for Derrick for violating

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11 U.S.C. § 329(a) by not disclosing that Larry A. Zier, her attorney in her state court

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personal injury action, was also representing her in this bankruptcy proceeding.

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The order of the Bankruptcy Court will be reversed.

Zier’s attorney–client

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relationship and obligations included advising Derrick to retain a bankruptcy lawyer and

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conferring with her and that lawyer about facts and bankruptcy strategy. But Zier was

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not an “attorney representing a debtor in a case under this title” and there was no
“compensation paid or agreed to be paid.” 11 U.S.C. § 329(a). Therefore, § 329 did not
obligate him to file a statement of such compensation. Any different view of the facts
would be clearly erroneous.

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Moreover, 28 U.S.C. § 329 deals with judicial supervision of debtors’ attorney
fees. In light of this reversal, this Court need not decide whether, if this were a noncompliance with § 329, it would warrant the extreme remedy of depriving the debtor of
her lawyer, rather than depriving the lawyer of his compensation.

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I.

BACKGROUND
A.

The state court and bankruptcy court proceedings

Derrick suffered injuries in a car accident in January 2006. Two months later, she
obtained financed medical treatment from Defendant National Health Finance DM, LLC
(“NHF”), and NHF recorded a statutory lien against any personal injury recovery. In
April 2009, Derrick hired Zier to represent her regarding the accident. NHF subsequently
claimed $5430 for the treatment, and Zier filed an action in state court to adjudicate a
dispute over the validity of the lien and the amount NHF claimed (the “state court
action”). NHF answered and counterclaimed against Derrick, Zier, and his law firm.
In November 2010, Derrick filed a bankruptcy petition. She received a discharge
in April 2011. Despite the discharge, NHF maintained its counterclaims against Derrick.
In May 2012, Derrick retained Yetnikoff to remedy the discharge violation in bankruptcy
court. A month later, the Bankruptcy Court concluded that NHF violated the discharge
injunction and ordered that Derrick be dismissed as a counter-defendant in the state court
action. The Bankruptcy Court also set an evidentiary hearing to prove damages. That
hearing was continued and has not occurred.
The state court action has continued without Derrick. Zier remains a counterdefendant, and in July 2012, Yetnikoff substituted in as his counsel. Yetnikoff and NHF
exchanged discovery regarding the bankruptcy case, and both listed Zier as a potential
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witness to the violation of the discharge injunction. Activity in the state action appears to
have stopped at least in part because the Bankruptcy Court ordered that NHF depose
Derrick in the bankruptcy case before deposing her in the state court action, in which she
is a witness.

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In June 2013, NHF moved in the Bankruptcy Court to disqualify Yetnikoff and
Zier based on a conflict of interest between Derrick and Zier. Doc. 42 at 26–41. After a
hearing on the motion on July 23, the Bankruptcy Court disqualified both Yetnikoff and
Zier for a different reason not argued—disclosure violation—and instructed NHF to
submit a form of order. See Doc. 12-1 at 189–90. On August 1, 2013, the Bankruptcy
Court issued the Order Disqualifying Counsel for Debtor. Doc. 43 at 1. That same day,
Zier filed on his own behalf a “Motion to Stay Order; and Motion to Set Hearing”
seeking a hearing to challenge the Bankruptcy Court’s finding. See id. at 2. The
Bankruptcy Court held a hearing on Zier’s motion on November 14, 2013. In both the
order setting the hearing and the hearing itself, the Bankruptcy Court expounded its
rationale for disqualifying Yetnikoff and Zier. See generally Doc. 45-1 at 24–30; Doc.
48-1.
Derrick filed a notice of appeal in Bankruptcy Court on August 12, 2013. See
Doc. 1 at 1. On September 3, 2013, she filed in the Bankruptcy Court her own motion to
stay pending the appeal. See Doc. 45 at 1. She subsequently filed two emergency
motions in this Court to stay the bankruptcy proceedings pending her appeal. This Court
denied the first motion as premature (Doc. 26) and granted the second on January 7, 2014
(Doc. 50).

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B.

Zier’s involvement in the bankruptcy case

Derrick initially filed her bankruptcy petition without a lawyer. When she later
sought representation, Zier referred her to Yetnikoff. On May 2, 2012, Derrick and Zier
informed Yetnikoff of the discharge violation in the state proceedings, and Derrick
retained Yetnikoff. Both Yetnikoff and Derrick signed a retainer agreement, which
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literally defines both Zier and Yetnikoff as “Attorney” and which covers representation
“in connection with a claim/action for damages (or other appropriate relief) against or
brought by [NHF] in both the Federal Bankruptcy Court, Case No. 2:10-BK-36666-SSC
and/or the Maricopa County Superior Court, Case No. CV 2010-007848. (This does not
cover any representation in connection with Client’s underlying Bankruptcy itself, which
has been discharged[.])” Doc. 41 at 4. It appears to say literally that both lawyers are
counsel in both cases. As counsel acknowledged, however, the references to Zier and the
state court matter were erroneous. Zier’s paralegal prepared the document for Yetnikoff,
working off the retainer agreement Zier and Derrick had executed in the state court
action. But she mistakenly left in reference to Zier and the state court action in this
retainer agreement, which was supposed to be for Yetnikoff and the bankruptcy
enforcement proceeding. Zier never signed it or saw it, and Yetnikoff admitted that he
signed it without reading it. The agreement does not contain any other references to Zier
or co-counsel; for example, it does not discuss how any contingent fee would be divided
between Yetnikoff and Zier.
On July 18, 2013, a month after NHF filed its motion to disqualify, Derrick signed
an amended retainer agreement clarifying that Zier was not representing and never had
represented Derrick in the bankruptcy case. See Bankr. Doc. 184-1 at 2–3. On June 23,
2013, she also executed a conflict waiver, after receiving independent legal advice, in
which she acknowledged that Yetnikoff represents Zier in state court, that Zier represents
Derrick in state court, and that “Zier does not represent Gayle Derrick in Bankruptcy
Court.” Doc. 42 at 174.
After Derrick retained Yetnikoff, he and Zier discussed the bankruptcy case.
Yetnikoff’s billing records reflect that between May 2 and June 13, 2012, he met with
Zier or discussed Derrick’s case with him for 2.1 hours out of the 46.2 total hours he
invested in the case. See Doc. 41 at 18–20.
Zier did not file an appearance on behalf of Derrick in any of the bankruptcy
proceedings. At the June 13, 2012 hearing establishing the discharge violation, Yetnikoff
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announced for the record his appearance for Derrick and introduced Zier, who sat in the
audience, see Bankr. Doc. 214 at 5, as “Debtor’s counsel in the state action.” Doc. 12-1
at 5. Similarly, Yetnikoff disclosed Zier’s status as Derrick’s state court counsel in
bankruptcy court filings on May 25, May 31, and October 24, 2012. See Doc. 12 at 8.
Zier did not sign any bankruptcy filings or accept or apply for any attorney fees.
Derrick filed an affidavit on October 24, 2012, in support of her request for the
Bankruptcy Court to find the discharge violations. Doc. 41 at 8–13. She asserted that
when Zier suggested she seek relief in bankruptcy court, he advised her to retain a
bankruptcy lawyer because he did not practice bankruptcy law.

See id. at 11–12.

Because the affidavit, like the original retainer agreement, was fundamental to the
Bankruptcy Court’s disqualification decision, the pertinent language follows:
11.
On or about April 14, 2009, I hired the Law Office of Larry
A. Zier, P.C (the “Zier Law Firm”), to represent me in my dispute with
NHF.
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37.
Larry Zier explained that the Bankruptcy Court could help
me, but that he did not practice bankruptcy law and suggested to me that I
hire a bankruptcy lawyer to seek intervention of the Bankruptcy Court, and
to enforce my bankruptcy discharge.
38.
I inquired if Larry Zier knew a bankruptcy lawyer, and Larry
Zier suggested that I hire Isidore Yetnikoff, of Yetnikoff Law Offices,
PLLC, since Larry Zier had previously worked with Isidore Yetnikoff on
other matters.
39.
Since time was of the essence, I requested that Larry Zier
immediately hire Isidore Yetnikoff, on my behalf, to enforce my
bankruptcy discharge against NHF, and to seek all available remedies in
Bankruptcy Court.
40.
On or about May 2, 2012, Isidore Yetnikoff agreed to
represent me in Bankruptcy Court to enforce the bankruptcy discharge
against NHF.
41.
Thereafter, I communicated with Isidore Yetnikoff directly or
indirectly through Larry Zier[] about the progress of my efforts to enforce
the bankruptcy discharge against NHF.
42.
I also instructed Larry Zier to communicate with Isidore
Yetnikoff as necessary on my behalf, since Larry Zier is a lawyer, and this
matter caused me great distress.

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43.
At all times, Isidore Yetnikoff performed work to enforce my
bankruptcy discharge exclusively on my behalf and upon my instructions.
44.
I executed a formal engagement agreement with Isidore
Yetnikoff.

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Id. at 9, 11–12. This affidavit describes what a referring lawyer normally and properly

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does with a referred lawyer concerning a matter within the referring lawyer’s knowledge.

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C.

Bankruptcy Court findings

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NHF’s motion to disqualify Yetnikoff and Zier argued that Yetnikoff “has a

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conflict of interest because of his concurrent representation of [Zier] in the State Court

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matter and his client in this matter, Gayle Derrick,” that Zier “has a direct conflict of

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interest with his client, Gayle Derrick, in this [bankruptcy] matter and a lawsuit in State

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Court between Creditor NHF and Zier,” and that both conflicts are apparent and

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incurable. Doc. 42 at 26. NHF asserted that these manifest conflicts violated Arizona

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Rule of Professional Conduct 1.7. Id. at 34–40.

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At the first hearing on the disqualification, NHF presented the alleged conflict to

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the Bankruptcy Court, which concluded that NHF had raised potential disclosure

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problems but not necessarily demonstrated a conflict of interest. See Doc. 12-1 at 185 (“I

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have other issues, but not necessarily focusing on what you’re focusing on.”).

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Indeed, in its colloquy with Yetnikoff on behalf of Derrick, the Bankruptcy Court

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expressed concern that Zier was listed in the original retainer agreement but was not

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disclosed as required by federal statute and the bankruptcy rules. See id. at 186 (“I’m

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looking at the retainer agreement; I’m looking at when it was executed. You specifically

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refer to the bankruptcy case; it refers to co-counsel, and that’s not disclosed to me. . . .

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That’s a [11 U.S.C.] § 329 problem, and it’s also Bankruptcy Rule 2014–2016

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problem.”).

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Concluding that Yetnikoff had not complied with Arizona ethical rules, the

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bankruptcy code’s disclosure requirements, or his duty of candor to the tribunal, the

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Bankruptcy Court orally granted the motion and disqualified Yetnikoff and Zier because

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there was “no way to cure this problem; it’s a lack of fundamental disclosure to this
Court.” Id. at 190. This was not the basis of NHF’s motion for disqualification of
counsel.
Subsequently, the Bankruptcy Court issued a one-page order disqualifying
Yetnikoff and Zier. The order concluded that Yetnikoff and Zier “did not properly
disclose their representation of the Debtor . . . , pursuant to 11 U.S.C. § 329, Bankruptcy
Rules 2017 and 2016(b) and In re Crimson Investments, 109 B.R. 397 (Bankr. D. Ariz.
1989).” Bankr. Doc. 196 at 1. The Bankruptcy Court similarly concluded that Yetnikoff
and Zier “were not candid with the Court concerning their representation of the Debtor,
as required under Ethical Rule[] 3.7 . . . .” Id.
The Bankruptcy Court clarified its reasoning in later proceedings. In the October
11, 2013 order setting for hearing Zier’s motion to stay the disqualification, the
Bankruptcy Court noted that the retainer agreement was “[c]ritical to the Creditor’s
argument, but not determinative for this Court.” Doc. 45-1 at 27. The Bankruptcy Court
relied on Derrick’s affidavit in concluding that “an attorney–client relationship was
created between Mr. Zier and the Debtor with regards to the bankruptcy.” Id. at 28 (“The
Debtor, in her Affidavit, specifically states that she communicated with Mr. Yetnikoff
through Mr. Zier about the progress of her efforts to enforce the bankruptcy discharge
against the Creditor.”). Finally, the Bankruptcy Court expressed skepticism regarding the
conflict waiver. To clarify the information Derrick possessed in executing the conflict
waiver—and the time at which she possessed it—and also to clarify the perceived
discrepancy between Derrick’s affidavit and Zier’s assertions, the Bankruptcy Court set a
hearing on the issue. Id. at 28–29.
At the November 14, 2013 hearing, the Bankruptcy Court concluded that Zier had
not provided sufficient evidence to warrant reconsideration of the disqualification order.
See Doc. 48-1 at 28. The Bankruptcy Court allowed Zier to elect an evidentiary hearing
to carry his burden of proof. See id. at 32. He subsequently elected not to request such a
hearing, standing on the evidentiary record already made. As in the previous order, the
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Bankruptcy Court interpreted the retainer agreement and affidavit, taken together, to
establish that Zier served as bankruptcy co-counsel.

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Indeed, the

Bankruptcy Court suggested that the affidavit could be sufficient to establish an attorney–
client relationship in the bankruptcy proceedings without the retainer agreement. See id.
at 12.

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See id. at 10.

The record thus shows that, although the Bankruptcy Court expressed a number of
concerns, the disqualification order rested on finding Zier’s role required a disclosure
under 11 U.S.C. § 329 (requiring “[a]ny attorney representing a debtor in a case under
this title” to file “a statement of the compensation paid or agreed to be paid”), Rule
2016(b) (requiring “[e]very attorney for a debtor” to file “the statement required by
§ 329”), Rule 2017 (obligating bankruptcy courts to review debtors’ attorney fees for
excessiveness), and Ethical Rule 3.7 (generally precluding a necessary witness from also
acting as counsel in that trial). The order also necessarily assumes that such a violation
warrants depriving the debtor of her lawyer rather than depriving the lawyer of his
compensation. Derrick appeals that order.

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II.

APPELLATE JURISDICTION AND STANDARD OF REVIEW
This Court has jurisdiction pursuant to 28 U.S.C. §§ 158(a)(1) and (c)(1)(A).

Section 158(a)(1) gives jurisdiction for appeals from “final judgments, orders, and
decrees” of the bankruptcy court. NHF does not challenge that basis for jurisdiction, and
in any event the Court would exercise its discretion to hear the appeal pursuant to
§ 158(a)(3) (discretionary appeal “from other interlocutory orders and decrees”).
A bankruptcy court order disqualifying counsel is reviewed for abuse of discretion
to the extent it is discretionary. See In re Maximus Computers, Inc., 278 B.R. 189, 194
(B.A.P. 9th Cir. 2002). “A bankruptcy court necessarily abuses its discretion if it bases
its decision on an erroneous view of the law or clearly erroneous factual findings.” In re
Hansen, 368 B.R. 868, 875 (B.A.P. 9th Cir. 2007); see also Fed. R. Bankr. P. 8013
(“Findings of fact, whether based on oral or documentary evidence, shall not be set aside
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unless clearly erroneous, and due regard shall be given to the opportunity of the
bankruptcy court to judge the credibility of the witnesses.”). “A finding is ‘clearly
erroneous’ when, although there is evidence to support it, the reviewing court on the
entire evidence is left with the definite and firm conviction that a mistake has been
committed.” Hansen, 368 B.R. at 874 (quoting United States v. U.S. Gypsum Co., 333
U.S. 364, 395 (1948)).

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The unfortunately oversimplified statement that disqualification is reviewed for
abuse of discretion obscures the reality that disqualification has constituent steps that
have distinct standards of review. As in anything else, embedded conclusions of law are
reviewed de novo, findings of fact are reviewed for clear error, and exercises of discretion
are reviewed for abuse of discretion. Whether facts as found and not clearly erroneous
are sufficient to require or authorize disqualification is itself a question of law reviewed
de novo.

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III.

ANALYSIS
Although the parties variously state the issues on appeal, the comprehensive

questions are whether the Bankruptcy Court erred in disqualifying Yetnikoff and in
concluding that Zier’s involvement in the bankruptcy proceedings triggered disclosure
requirements pursuant to 11 U.S.C. § 329(a).

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A.

Conflict of interest

The disqualification of counsel was not based on conflict of interest, the stated
basis for NHF’s motion. Moreover, conflict of interest could not justify disqualification
for multiple reasons.
At the threshold, NHF has no right to challenge opposing counsel for a conflict of
interest between opposing counsel’s own clients. Derrick did not complain of a conflict,
and Zier and Yetnikoff both denied any conflict. NHF’s counsel claimed standing to
seek disqualification based on her “ethical obligation” to apprise the Bankruptcy Court of
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a violation. Doc. 12-1 at 172. But NHF has not made any showing that it was harmed by
a conflict. In the absence of prejudice, it is improper for NHF to seek disqualification of
opposing counsel. Arizona’s conflict rules are not a tool for strategic elimination of
opposing counsel. See Cottonwood Estates, Inc. v. Paradise Builders, Inc., 128 Ariz. 99,
105, 624 P.2d 296, 302 (1981) (“To call for the disqualification of opposing counsel for
delay or other tactical reasons, in the absence of prejudice to either side, is a practice
which will not be tolerated.”). It is the responsibility of lawyers and the state bar to
ensure fidelity to the ethics rules—not opposing counsel. Cf. Alexander v. Superior
Court In & For Maricopa Cnty., 141 Ariz. 157, 161, 685 P.2d 1309, 1313 (1984) (“Only
in extreme circumstances should a party to a lawsuit be allowed to interfere with the
attorney–client relationship of his opponent . . . .”). If NHF’s counsel had a duty to report
an ethical violation of another lawyer, it authorized her to report the conduct to State Bar
Association disciplinary authorities. She has made no such referral.
Second, the Bankruptcy Court did not disqualify Yetnikoff for conflict of interest.
The July 23 minute order and the August 1 order asserted only nondisclosure for
disqualification. Although the August 1 order also cites Ethical Rule 3.7, the supporting
finding concerned the lawyers’ lack of candor regarding the bankruptcy representation.
Both the July 23 hearing and the November 14 colloquy with Zier and Derrick confirm
that disqualification turned on nondisclosure and not on conflict of interest.
Third, there was no conflict of interest.

NHF complained that Yetnikoff

represented both Derrick in the bankruptcy enforcement and Zier in the state court action
and that Zier was to serve as both witness and advocate in the bankruptcy proceeding,
violating Rule 3.7. See Doc. 39 at 14, 17. Yetnikoff’s concurrent representation of
Derrick in the bankruptcy case and Zier in the state case raises no conflict because the
two had mutual interests.

See Alexander, 141 Ariz. at 163, 685 P.2d at 1315

(“Concurrent representation does not become a problem unless the interests of the clients
are adverse or become adverse during the trial.”). When pressed at oral argument, NHF
could not articulate any actual conflict or posit any testimony Yetnikoff might elicit from
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Zier in the bankruptcy case that could be harmful to Derrick, or vice versa.

That

Yetnikoff had two clients who would testify on matters involving the other is not a
conflict of interest; it is an everyday occurrence.

Preliminary discussions between

counsel about possible compromise are not improper, as no such compromise can be
made without informed consent of the clients.

Lawyers commonly test opposing

counsel’s receptiveness to settlement ideas before presenting them to their own clients,
which is permissible unless the client has forbidden it.
Ethical Rule 3.7’s prohibition of being attorney and witness in the same case could
not apply here for two reasons. First, Zier never did act and never proposed to act as
counsel for Derrick in any bankruptcy evidentiary proceeding, much less one in which he
would testify. That is all ER 3.7 forbids. That Zier and Derrick had an attorney–client
relationship even as to this subject matter even while he is testifying raises no ethical
concern. Lawyers often testify on matters concerning clients in which they are not
counsel for the hearing. Second, if Zier did propose to appear as co-counsel at the
hearing in which he testifies, ER 3.7 would be satisfied by disqualifying him as counsel.
It could not justify disqualifying Yetnikoff.
Fourth and finally, even if there were a technical conflict, Derrick promptly
obtained an independent legal opinion and executed a written waiver after NHF tried to
deprive her of her lawyer. See Doc. 42 at 174. The Arizona ethics rules allow clients to
waive concurrent conflicts of interest if the lawyer reasonably believes he can
competently and diligently represent both clients, see Ethical Rule 1.7(b), and there is no
basis for a court or opposing counsel to interrogate the adequacy of the waiver here.

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B.

Nondisclosure and violation of 11 U.S.C. § 329

As discussed above, the Bankruptcy Court disqualified counsel based on a
violation of 11 U.S.C. § 329(a) and ancillary rules.

The Bankruptcy Court was

disadvantaged in reaching this conclusion sua sponte without adversarial exposition and
based on a written document that said that. But the full evidence that later came out
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shows that the document was a clerical error, never signed by or known to Zier, and that
Derrick and both the lawyers agreed in fact that only Yetnikoff was to be counsel “in”
this bankruptcy “case” and to share in any contingent fee. The lawyers’ actual course of
conduct was exactly that, and not what the erroneous document recited.
From the colloquies below, the Bankruptcy Court may also have misapprehended
the reach of § 329(a). Section 329 states the following:
(a) Any attorney representing a debtor in a case under this title, or in
connection with such a case, whether or not such attorney applies for
compensation under this title, shall file with the court a statement of the
compensation paid or agreed to be paid, if such payment or agreement was
made after one year before the date of the filing of the petition, for services
rendered or to be rendered in contemplation of or in connection with the
case by such attorney, and the source of such compensation.
(b) If such compensation exceeds the reasonable value of any such services,
the court may cancel any such agreement, or order the return of any such
payment, to the extent excessive, to-(1) the estate, if the property transferred-(A) would have been property of the estate; or
(B) was to be paid by or on behalf of the debtor under a plan
under chapter 11, 12, or 13 of this title; or
(2) the entity that made such payment.
11 U.S.C.A. § 329.
The statute addresses court supervision of debtors’ attorney fee payments. It
applies only to an “attorney representing a debtor in a case under this title,” and it
requires disclosure of “compensation paid or agreed to be paid.” Id. The Bankruptcy
Court may have thought the mere existence of an attorney–client relationship concerning
bankruptcy brings the disclosure obligation of the statute into force.

Zier had an

attorney–client relationship concerning the personal injury action and the related medical
lien litigation in state court. That relationship included advising his client to investigate
bankruptcy protection against the lien litigation and consulting with the bankruptcy
lawyer to which he referred her. Their attorney–client relationship included that subject
and communications, giving Derrick the full protection of Zier’s professional obligations.

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However, the inclusion of communications about bankruptcy within the
preexisting attorney–client relationship does not suffice to bring § 329 into play. The
scope of an admitted attorney–client relationship extends to anything about which
attorney and client communicate that is pertinent to the existing representation. That
broad scope of the relationship, for the protection of clients’ reasonable expectations of
confidentiality and loyalty, does not supplant the statutory language for the scope of
§ 329.
Nonetheless, the Bankruptcy Court concluded Zier was bankruptcy co-counsel in
fact because his name was on the retainer agreement Derrick executed with Yetnikoff and
because of language in Derrick’s affidavit. As noted above, the reference to Zier in the
original agreement is fully explained as a clerical error. Zier’s paralegal prepared it
mistakenly, Zier never saw it or signed it, and Yetnikoff did not read it when he signed
it—or at least he did not read it carefully and did not notice that it referenced both
lawyers as representing Derrick in both cases and not each lawyer in his respective case.
It referred to both the bankruptcy and the state court actions, and Yetnikoff
explained to the Bankruptcy Court that Derrick simply believed she was authorizing Zier
to provide Yetnikoff with facts from the state court action. See Doc. 12-1 at 187, 189.
Once NHF asserted that Zier was co-counsel in the bankruptcy case based on the retainer
agreement, Derrick promptly signed an amended agreement clarifying that Zier did not
represent her in the bankruptcy case. The original retainer agreement simply did not
reflect the intent of the parties to it; nor did it reflect the actual conduct of counsel.
Further, Derrick’s affidavit does not say that Zier did anything beyond what
referring counsel routinely do with bankruptcy counsel without themselves becoming
counsel “in” the bankruptcy “case.”

In the relevant paragraphs, Derrick states she

“communicated with Isidore Yetnikoff directly or indirectly through Larry Zier[] about
the progress of [her] efforts to enforce the bankruptcy discharge” and “instructed Larry
Zier to communicate with Isidore Yetnikoff as necessary on my behalf, since Larry Zier
is a lawyer.” Doc. 41 at 12. This is consistent with Zier referring his client to Yetnikoff
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and communicating with him on matters that related to their respective representations of
Derrick. It followed from Zier’s responsibilities in the state court action. But it was not
sufficient to bring him within the obligations of § 329.
In light of the undisputed evidence and the actual course of conduct, it was clear
error to conclude from the retainer agreement or the Derrick affidavit that Zier
represented Derrick “in” the bankruptcy “case” or that he agreed to be paid any
compensation for it.
IT IS THEREFORE ORDERED that the Order Disqualifying Counsel for Debtor
(Bankr. Doc. 196) is reversed. The Clerk shall enter judgment accordingly and shall
terminate this case in this court.
Dated this 15th day of January, 2014.

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