U.S. Bankruptcy Judge Jacqueline P. Cox recently found that three Illinois attorneys violated their ethical obligations by failing to return their client's phone calls. She ordered the attorneys to return roughly half of their already-court-approved, and paid, flat fee. In In re: Molnar in the U.S. Bankruptcy Court for the Northern District of Illinois in February, the debtor filed a petition under Chapter 13. Originally, three different attorneys from the same firm represented the debtor, one of which left for a different firm part of the way through the representation. The attorneys appeared pursuant to a "no-look, flat-fee program for Chapter 13 debtors' attorneys."

Bankruptcy courts around the country have approved such fee programs wherein the debtor and their attorney "enter into a Court Approved Retention Agreement in which the attorney promises to represent the debtor in the matter through case closing for a flat fee." These flat fees are sometimes called no-look fees because they are awarded without the kind of detailed application and itemization of services that Rule 2016(a) of the Federal Rules of Bankruptcy Procedure would otherwise demand. The flat fee represents a kind of agreement not only with the debtor but with the court: In exchange for the attorney's commitment to perform specified legal services for the debtor, the court awards a flat fee and dispenses with the usual application.

To continue reading Daniel Lowenthal's and Maxwell Weiss's article in Law360, please click here.