Case Title: Webber, Reis, Holler & Urso, LLP v. Miller, Faignant & Behrens

Citation: 175 Vt. 592, 2003 VT 65, 834 A.2d 6

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2003-07-15T00:00:00Z

Document:
Webber, Reis, Holler & Urso, LLP v. Miller, Faignant & Behrens (2002-395);
175 Vt. 592; 834 A.2d 6

2003 VT 65

[Filed 15-Jul-2003]

                                 ENTRY ORDER

                                 2003 VT 65

                      SUPREME COURT DOCKET NO. 2002-395

                              MARCH TERM, 2003

  Webber, Reis, Holler & Urso, LLP     }	APPEALED FROM:
                                       }
                                       }
       v.	                       }	Rutland Superior Court
                                       }	
  Miller, Faignant & Behrens and       }
  Lisa Chalidze	                       }
                                       }	DOCKET NO. 298-5-01 Rdcv

                                                Trial Judge: William D. Cohen  

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  This appeal of an order of the Rutland Superior Court
  granting summary judgment to defendants, Lisa Chalidze and Miller, Faignant
  & Behrens, PC, arises from plaintiff's attempt to recover a portion of the
  attorney's fees awarded to defendants in a bankruptcy case still pending in
  Bankruptcy Court.  Plaintiff Webber, Reis, Holler & Urso, LLP contends that
  it deserves this fee award due to its work in the bankruptcy case and also
  pursuant to an agreement between plaintiff and defendant Chalidze to share
  the fees.  Plaintiff argues on appeal that the superior court erred in
  concluding that it lacked subject matter jurisdiction because the
  Bankruptcy Court had exclusive jurisdiction.  Based on the facts of this
  case and the procedural posture of the underlying bankruptcy case, we find
  that the superior court lacked subject matter jurisdiction over this
  dispute, and therefore affirm. 

       ¶  2.  The following facts are undisputed.  From July 1992 through
  January 1997, defendant Chalidze was a partner at Hull, Webber & Reis
  (HWR), the predecessor firm of plaintiff.  Attorneys Robert Reis and Lisa
  Chalidze, both of HWR, filed an application for employment with the
  Bankruptcy Court as required by 11 U.S.C. § 327 and Fed. R. Bankr. P. 2014,
  in order to represent their clients, the Vescios, in bankruptcy proceedings
  involving Merchants Bank.  The Bankruptcy Court approved the application on
  July 26, 1996.          
   
       ¶  3.  On January 1, 1997, defendant Chalidze left Hull, Webber &
  Reis and became "of counsel" to defendant Miller, Faignant & Behrens, PC. 
  As a result of the change, attorneys Reis and Chalidze then filed an
  amended employment application with the Bankruptcy Court on January 3,
  1997.  Around that same time, attorney Christopher Reis joined HWR, and on
  January 16, 1997, Merchants Bank filed a motion to disqualify HWR from
  representing the Vescios due to Christopher Reis's prior representation of
  Merchants Bank in a number of bankruptcy and foreclosure cases, which
  exposed him to confidential information related to the bankruptcy case
  involving the Vescios.  The Bankruptcy Court granted the Bank's motion to
  disqualify, and in an order filed on February 7, 1997, declared, "The Court
  holds that [Christopher] Reis is disqualified from representation because
  his involvement in the Vescios' case would violate the dictates of Canons
  4, 5 and 9 of the State of Vermont's Code of Professional Responsibility. 
  As a result, the firm of HWR is also disqualified from representation of
  the Vescios."

       ¶  4.  On May 2, 1997, defendant Lisa Chalidze filed another amended
  employment application, this time with attorney John Paul Faignant.  The
  Bankruptcy Court approved the application in an order amending the July 26,
  1996 employment application order to approve the employment of Chalidze,
  Faignant, and Miller & Faignant, PC, Faignant's firm at that time, "to
  serve as special co-counsel nun[c] pro tunc to July 26, 1996."  The
  presiding bankruptcy judge recused himself from the case in June 1999, and
  the case was referred to the United States District Court for the District
  of Vermont.  In December 1999, the Vescios waived the right to present
  further live testimony in exchange for $195,000 from Merchants Bank.  On
  April 27, 2001, the U. S. District Court approved the agreement, ordering
  the matter to be decided on the written record, with no further evidence
  taken, and disbursement of $202,165.25, paid by Merchants Bank, to the
  Vescios "free and clear of the claims of all creditors or other parties or
  entities, less one-third thereof payable to Lisa Chalidze, Esq. and Miller,
  Faignant & Behrens PC pursuant to the previously-approved contingency fee."

       ¶  5.  Plaintiff then filed this suit in Rutland Superior Court on
  May 17, 2001, alleging breach of contract, constructive trust and unjust
  enrichment.  Defendants filed motions for summary judgment arguing that the
  Bankruptcy Code prohibits the payment of fees to plaintiff because
  plaintiff was denied approval by the Bankruptcy Court.  The court granted
  summary judgment to defendants on June 24, 2002, "on the grounds that this
  court lacks jurisdiction to hear this matter," and on July 30, 2002, the
  court entered a final judgment in favor of defendants on all claims.  This
  appeal followed.  The underlying bankruptcy proceedings were still pending
  at the time of appeal. 

       ¶  6.  Bankruptcy courts, through the United States district courts,
  have exclusive jurisdiction over the matter of attorney's fees in a
  bankruptcy proceeding.  Edgewater Sun Spot, Inc. v. Pennington & Haben,
  P.A. (In re Edgewater Sun Spot, Inc.),