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Walton, Jr. v. Steward (In re Steward)

Walton, Jr. v. Steward (In re Steward), 2016 WL 3629028 (8th Cir. July 7, 2016)
Discovery sanction and order directing disgorgement of fees paid to debtor's counsel was affirmed.
Procedural context:
Appeal from U.S. District Court from the Eastern District of Missouri - St. Louis, which had affirmed ruling by bankruptcy court that imposed a discovery sanction of $49,720, disgorgement of fees, and suspension from practice before the bankruptcy court against attorney who had previously represented debtor. The Eighth Circuit Court of Appeals affirmed in all respects.
Debtor filed bankruptcy and reaffirmed an obligation to Ford Motor Credit. She subsequently sought to rescind the reaffirmation agreement, but alleged that her attorney abandoned the representation and failed to assist her in doing so. She subsequently filed a pro se motion to reopen the bankruptcy case to discharge the debt, and then amended her complaint to assert claims against her former attorney. The former attorney retained his own counsel, and proceeded to repeatedly refuse to comply with discovery requests. After numerous failures to comply with discovery orders, several motions to recuse the judge, and other similar proceedings, the bankruptcy judge ordered a discovery sanction of $30,000 plus an additional $19,720 in attorney fees, plus disgorgement of the fees paid to the attorney for representing the debtor, and suspended both the former attorney and his counsel from practice before the bankruptcy court. On appeal, the 8th Circuit found the debtor had standing to pursue disgorgement of the fees, that the issues were not moot, the attorneys could not assert the doctrine of unclean hands, and they had an opportunity to purge themselves of contempt which they did not take. Affirmed.
Loken, Gruender, and Kelly

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