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In re Brady-Zell

United States Bankruptcy Appellate Panel of the First Circuit

October 24, 2013

Karen A. BRADY-ZELL, Debtor.
v.
Karen A. Brady-Zell, Defendant-Appellee. Danielle E. deBenedictis, Plaintiff-Appellant, Bankruptcy No. 10-10922-FJB. Adversary No. 10-01119-FJB.

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[Copyrighted Material Omitted]

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Danielle E. deBenedictis, Esq., Pro Se, on brief for Appellant.

Logan A. Weinkauf, Esq., on brief for Appellee.

Before LAMOUTTE, HAINES, and DEASY, United States Bankruptcy Appellate Panel Judges.

LAMOUTTE, Bankruptcy Judge.

Attorney Danielle E. deBenedictis (" deBenedictis" ) appeals the bankruptcy court's judgment in favor of Karen A. Brady-Zell (" Brady-Zell" ) on her complaint seeking to except from discharge a debt for legal fees incurred during her representation of Brady-Zell in a pre-petition divorce proceeding. After a trial on the merits, the bankruptcy court determined that deBenedictis had not met her burden of proving Brady-Zell's fraudulent intent, and, therefore, that the debt was not excepted from discharge under § 523(a)(2)(A).[1] As deBenedictis has not shown the bankruptcy court's decision to be a result of clear error, we AFFIRM the judgment.

BACKGROUND [2]

deBenedictis is a practicing attorney specializing in domestic relations law and custody matters. In October 2007, Brady-Zell contacted deBenedictis seeking her representation as replacement counsel in a divorce proceeding. At that time, Brady-Zell's husband was challenging the validity of their marriage, asserting that Brady-Zell had not been properly divorced from her first husband in the Dominican Republic. If true, Brady-Zell's second marriage would be void, and she would not be entitled to alimony or distribution of her husband's considerable assets. In light of these allegations, the probate court entered an order affording Brady-Zell an opportunity to engage counsel to refute

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these claims, and ordered her husband to pay $25,000.00 to her attorney for legal representation.

deBenedictis agreed to represent Brady-Zell and, as a retainer, accepted and received the $25,000.00 that Brady-Zell's husband was required to advance on her behalf. Brady-Zell and deBenedictis had no written retention agreement, but in a letter dated October 10, 2007, deBenedictis memorialized the terms on which they agreed as follows:

This will also confirm that I have agreed to represent you in the above entitled matter [the then-pending divorce action] and to do all that is possible to avoid your Husband from establishing that your marriage to him is not legally valid. I will accept the $25,000 which Judge Smoot ordered advanced to you by your Husband as a retainer and will bill you at $400 per hour against this retainer. As we discussed I will wait to be paid for the remainder of my services until the matter has been concluded as you have represented that you will not have any further funds until that time.

Although Brady-Zell later denied receiving this letter and claimed that she understood the $25,000.00 payment to be a flat fee or cap, the bankruptcy court found Brady-Zell's testimony to be incredible and that the parties agreed that deBenedictis would work and be paid at the rate of $400.00 per hour, that the first $25,000.00 of her fees and expenses would be covered by the retainer, and that she would wait to be paid for the remainder of her services until the divorce action was concluded.

deBenedictis performed legal services on Brady-Zell's behalf from October 2007 through January 2008. It is undisputed that the scope of deBenedictis' representation far exceeded what either of them had expected at the time deBenedictis was hired. deBenedictis testified that the divorce case presented novel and difficult issues of divorce, criminal, and immigration law. Although the case became " paramount and all consuming" for two months, Brady-Zell and her husband reconciled in December 2007, and the divorce action was dismissed in January 2008.

On January 23, 2008, deBenedictis sent Brady-Zell a bill for legal services in the amount of $87,432.54, against which she credited the $25,000.00 retainer, leaving a balance of $62,432.54. In the bill, deBenedictis accounted in detail for her time, and billed $80,040.00 for 200.1 hours of time, plus $5,000.00 for monies she advanced to counsel in the Dominican Republic, and $2,392.54 for other fees and expenses. Prior to this bill, deBenedictis had not sent Brady-Zell any billing statements documenting her hours and fees as they accrued.

Although Brady-Zell praised deBenedictis for the work performed and made repeated assurances that she was trying to make arrangements to pay the sizeable bill, she never paid any of the balance. Eventually, in March 2009, deBenedictis sued Brady-Zell in state court to collect the fee. In Brady-Zell's response to deBenedictis' motion for a real estate attachment, Brady-Zell, for the first time, argued that the legal fees were excessive and not fully earned, and that they had agreed on a flat fee payment of $25,000.00.

In January 2010, Brady-Zell filed a chapter 7 petition, which stayed the state court action. Thereafter, deBenedictis filed an adversary complaint asserting, among other things, that the outstanding debt for legal fees was nondischargeable under § 523(a)(2)(A) as a debt arising from a false representation and false pretenses. deBenedictis contended that Brady-Zell made a promise to pay any fees and expenses incurred in excess of the $25,000.00 retainer, and that she made this promise

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without intending to honor it. She also argued that Brady-Zell later made repeated assurances of payment, thereby inducing deBenedictis to work long hours on the divorce proceeding and accrue significant legal fees. Brady-Zell denied making any such promise at all, contending that they agreed on a flat fee of $25,000.00. She also argued that because she did not receive periodic billing statements, she did not know that the $25,000.00 retainer had been exhausted or how large ...


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