FILING CHAPTER 13
The Debtors filed a Petition for relief under Chapter 13 of the Bankruptcy Code on May 14, 2009. Chad R. Oldham, an attorney with the Oldham Law Firm (Oldham), Jonesboro, Arkansas, was hired to prepare, file and represent Debtors in the bankruptcy case on March 25, 2009 after they learned that their house had been placed in foreclosure. At the hearing on January 6, 2011, Mrs. Burnett advised the Court that they had fallen behind on their mortgage payments as a result of the transfer of the mortgage from Regions Bank to Everhome Mortgage Company. A failure of notification of the transfer compounded by additional fees and costs resulted in the Debtors missing several payments. However, they were in the process of trying to make repayment arrangements when they received the foreclosure notice dated March 9, 2009, which also indicated that the property was about to be sold.
When they arrived for the March 25 consultation at Oldham, the Burnetts were directed to speak with Ms. Julie Gray, a paralegal at the firm. During the meeting, Debtors explained to Ms. Gray about the foreclosure and provided her with a copy of the March 9 foreclosure notice which stated on the front page in bold type:
“The Property is scheduled to be sold at a foreclosure sale. Please review the enclosed statutory Notice of Default and Intention to Sell and familiarize yourself with the details of the sale.”
On the reverse of the letter was a notice explaining that the sale of the property was to take place at 11:00 a.m. on April 30, 2009, and offered the bold, capitalized warning that read:
“YOU MAY LOSE YOUR PROPERTY IF YOU DO NOT TAKE IMMEDIATE ACTION.”
Mrs. Burnett stated that she specifically pointed the sale date out to Ms. Gray. However, Mrs. Burnett testified that during the meeting, Ms. Gray advised them that the only way to save their home was by filing a Chapter 13 bankruptcy.
ADVISED TO STOP MAKING PAYMENTS
At the time of their meeting with Ms. Gray, the only other secured debt owed by Debtors was on a 2002 Nissan Maxima. Even though they were current on those payments, Ms. Gray, the paralegal for Mr. Oldham, advised them to stop making payments and to allow the loan to fall into arrears. Mrs. Burnett also testified that they were holding a $6,000 tax refund in their bank account which they intended to use to repay the mortgage arrears. She further stated that if someone from Everhome would have negotiated with them, they would have used all of their funds for the arrears and would not have filed bankruptcy. Mrs. Burnett further testified that they were advised by Ms. Gray to remove the $6,000 from their bank account and not to use it to pay the arrears on their mortgage. The Debtors paid $200 to retain Oldham on the day of the initial consultation. They paid the remaining $600 the following day for a total fee of $800. Within one week, they had also provided all of the requested documentation. They removed the $6,000 from their bank account. Mrs. Burnett made an appointment for an office consultation in April 2009 after a lack of response to phone calls to Oldham. At that appointment, she met with Amy Forbes, another Oldham paralegal. Ms. Forbes informed her that the case had not been filed because they had not turned in the necessary paperwork. Mrs. Burnett pointed out to Ms. Forbes that she was not looking at the Debtors’ file. Upon locating and reviewing the correct file, Ms. Forbes informed Mrs. Burnett that everything was fine. In early May 2009, Debtors received notice that the foreclosure sale had taken place and they were about to be evicted from their home and had to move out in 3 days. Mrs. Burnett went to Oldham’s office where she was directed to the paralegal’s office by Mr. Oldham.
On May 14, 2009, Oldham filed the Burnett’s bankruptcy petition. The next contact that the Debtors had from Oldham was on June 18, 2009. They were called and asked to come in for their first meeting with Mr. Oldham. Mrs. Burnett testified that it appeared to be the first time that Mr. Oldham had reviewed their file. He ended the meeting by telling them that the file needed work. Approximately one week later, Debtors were called in for another meeting with the paralegal, Ms. Gray. During that meeting, Ms. Gray informed the Burnetts that they would not be able to keep their house and that they would be out of the mortgage, could cancel the bankruptcy, and everything would be okay. Debtors decided to seek new counsel to help them try to save their home. On July 3, 2009, after making an appointment with the law firm of Crawley and DeLoache (Crawley), Mrs. Burnett attempted to obtain a copy of their file from Oldham. She was told by the paralegal, Ms. Forbes, that she could not get a copy of the file at that time because the office was closing early for the holiday weekend. Ms. Forbes further instructed Mrs. Burnett to not return for the file until after business hours the following Monday, July 6. Upon review of the file, Mrs. Burnett realized that the letters concerning the foreclosure and sale were missing.
EVICTED FROM THE HOME
The Burnetts were eventually evicted from their home. Everhome filed a Motion for Relief from Stay on June 9, 2009, along with an Objection to Confirmation of Plan. The Court’s docket reflects that notice of the filings was sent to various email addresses for Oldham. The pleadings stated that Debtors’ property had been sold on April 30, 2009 (which date was prior to the filing of the Debtors’ bankruptcy petition); that the Debtors’ interest in the property was terminated with the sale, therefore it was not part of the bankruptcy estate, and requested relief to enforce the right to possession of the property. One day prior to the June 25, 2009 hearing date on the Motion, the attorney for Everhome informed the Court that the parties had settled the Motion for Relief and instructed the Court to remove the matter from the docket. On June 25, a Proposed Order on the Settlement was sent to Mr. Oldham for signature. He was also notified that in accordance with Local Rule 9019-1 he had 10 days (until July 6, 2009), to object to the Proposed Order on the basis that it did not comply with their agreement, or otherwise, Everhome would submit the Proposed Order to the Court. On July 8, 2009, after the 10-day objection period had expired, a paralegal from Oldham sent an email to the Courtroom Deputy stating that they had the Order in their file and were not sure if the original had been sent back for proper filing. The email also stated that they had issues with the creditor, Everhome, and asked the Court to not proceed with the filing of the Order and to set it for hearing on the August 27, 2009 docket, while apologizing for any inconvenience. The Court responded in a return email that a Motion would need to be filed by Oldham requesting that the matter be reset for hearing with an explanation of why the settlement was no longer valid. The Court received no further filings or communications on this matter from Oldham.
On July 13, 2009, the law firm of Crawley was substituted as counsel for the Debtors. On July 22, 2009, Crawley filed a Response to the Motion for Relief stating that the foreclosure sale was unenforceable and void. On July 28, Everhome filed a Motion to Strike Response and Amended Response Filed by Debtors, or in the alternative, Motion for Summary Judgment. This asserted that the Response filed by Crawley could not be heard because a Settlement had already been reached, that the settlement agreement had been properly submitted to Oldham for approval, and that due to the failure of Oldham to object, approval of the Settlement was inferred. The Court agreed with Everhome and entered an Order Granting Motion to Strike Response and Amended Response and Directing Entry of Order Granting Motion for Relief From Stay Nunc Pro Tunc on July 31, 2009. On August 10, 2009, the Court entered an Order Granting Motion for Relief From Stay. Within the Order Striking Response, the Court noted its concerns about Mr. Oldham’s professional obligation to his clients and the Court due to the use of the email from the paralegal to communicate substantive issues.
RESPONSIBLE LEGAL COUNSEL
Mr. Oldham testified in Court that the facts presented by Mrs. Burnett were indisputable. He took responsibility for failure to provide Debtors with adequate representation. He offered explanations of staff member issues, bankruptcy attorneys being overwhelmed, and lack of support in the office. He further informed the Court that Ms. Gray was no longer employed in that position. The Court found that Mr. Oldham caused the Debtors to lose their home. He did not meet with them personally, instead relying on his paralegals to meet with them. The Court also agreed that Mr. Oldham failed to provide his clients with legal advice. Mr. Oldham positioned and enabled his paralegals to practice law without a license by “failing to review the Debtors’ case before legal determinations were made as to how to proceed. Mr. Oldham placed his paralegals in a position to take such actions by allowing the paralegals to conduct the consultation without ever so much as meeting the clients himself, and by continuously referring the Debtors to his paralegals in situations that begged for the attention of an attorney.” The Court also found that systemic deficiencies in Mr. Oldham’s practice harmed his clients and that he never accepted the responsibility of protecting his clients. He continually left the management and resolution of issues to his paralegals, acted affirmatively to conceal his errors, and failed to provide any evidence in defense of his actions. The Court concluded that if the Debtors had received the proper representation at the onset of the representation by Oldham, they could have avoided the loss of their home. Mr. Oldham was found solely responsible. The fees paid by the Burnetts to Oldham were returned less the filing and credit counseling fees. Mr. Oldham was suspended from appearing before or filing pleadings and other documents in the United States Bankruptcy Courts until such time as the Arkansas Supreme Court Committee on Professional Conduct reviews and makes a determination of sanctions.