United States District Court, E.D. Pennsylvania
U.S. TRUSTEE and CHIEF ERIC L. FRANK, Defendants,
RENEE MARIE THORPE, Debtor-in-Possession, FREDERICK L. REIGLE, Trustee. Bankruptcy No. 13-15267
case concerns a dispute over the disbursement of bankruptcy
settlement funds in the wake of Debtor Renee Thorpe's
Chapter 12 bankruptcy proceeding, which previously resulted
in the sale at auction of the Thorpe family farm to satisfy
debts to mortgage holder Lititz Properties, Inc. See In
re Thorpe, 540 B.R. 552 (E.D. Pa. 2015). Joseph Q.
Mirarchi Legal Services, P.C. (“MLS”), a solo law
practice maintained by Joseph Q. Mirarchi, is now attempting
to recover $113, 400 from the bankruptcy settlement as
compensation for its representation of Renee Thorpe and her
husband, Dale Thorpe, in a suit against their property
insurer, Nationwide Mutual Insurance Company. MLS claims both
a contractual and an equitable right to recover for services
rendered prior to its dismissal as the Thorpes' attorney.
The Thorpes maintain that the circumstances of Mirarchi's
termination bar recovery, and that Lititz is instead entitled
to a portion of the funds in satisfaction of the mortgage
disputed funds are currently in escrow, pursuant to an order
of the Bankruptcy Court. MLS filed a motion with the
Bankruptcy Court seeking to claim the funds (the “MLS
motion”). The Bankruptcy Court, after finding that the
MLS motion presented a non-core matter over which it could
not issue final judgment, issued proposed findings of fact
and legal conclusions recommending denial of the motion. MLS
has objected to that recommendation. After a de novo
review of the record, the Bankruptcy Court's
recommendation shall be adopted in all material respects and
the MLS motion shall be denied.
2010 and 2012, the Thorpes' farm sustained significant
property damage from three separate events: two storms and
one fire. 8/8/16 N.T. at 149. In response to this damage, the
Thorpes retained Brem Moldovsky in early 2013 to represent
them against Nationwide, their property insurer. Ex. M-2.
Moldovsky soon obtained a partial settlement, and in June of
2013 Ms. Thorpe filed a motion with the Bankruptcy Court to
award Moldovsky his $51, 025.54 contingency fee. Ex. M-35.
The Thorpes subsequently retained Herbert McDuffy to continue
their suit against Nationwide. Ex. M-2. On November 7, 2014,
McDuffy filed a complaint against Nationwide on the
Thorpes' behalf. Ex. M-2.
was unable to continue his representation of the Thorpes for
personal reasons, and the Thorpes retained Mirarchi, a solo
practitioner specializing in first-party insurance
litigation, to continue the suit. 8/3/16 N.T. at 15-16, 19,
125-27. On December 23, 2014, prior to receiving a signed
contingency agreement from the Thorpes, Mirarchi filed an
amended complaint on their behalf. 8/3/16 N.T. at 131;
see also Ex. M-6 at 3. Faced with what he believed
to be a firm filing deadline, Mirarchi did not have the
Thorpes review and verify the complaint. 8/8/16 N.T. at
141-42. Rather, he obtained Dale Thorpe's verbal consent
to attach signed verifications obtained from the original
complaint filed by McDuffy. 8/19/16 N.T. at 19. The amended
complaint successfully mooted Nationwide's preliminary
objections. 8/3/16 N.T. at 131.
Thorpes sent Mirarchi a signed copy of the contingency fee
agreement (“MLS Fee Agreement”) on March 4, 2015.
Ex. M-13. The agreement provides, in pertinent part, that
MLS's compensation “shall be determined as follows:
Thirty-Five (35%) of the funds derived by suit or amicable
settlement.” Ex. M-13. Further, the agreement
authorizes MLS “to bring suit or to settle and
compromise” the claim, with the Thorpes' consent.
Ex. M-13. Nationwide filed its Answer to the amended
complaint on April 29, 2015, and though MLS was at this point
formally retained, no discovery was conducted by either party
between April and August of 2015. Ex. M-2; see also
8/3/16 N.T. at 131-32.
15, 2015, Mirarchi was administratively suspended from
practicing law in Pennsylvania effective August 14, 2015, due
to a failure to fulfill his Continuing Legal Education
(“CLE”) requirements under Pennsylvania Rule for
Continuing Legal Education 111(b). Exs. M-38, M-42. Mirarchi
soon obtained the necessary CLE hours, and the Pennsylvania
CLE Board sent Mirarchi a letter on August 28, 2015
acknowledging Mirarchi's completion of his CLE
obligations for 2014 and 2015. Ex. M-16. The letter also
noted that the administrative suspension would not be lifted
until certain “form(s) and fee(s)” were sent to
the Disciplinary Board. Ex. M-16. Mirarchi was not reinstated
to active status as an attorney until September 16, 2015, the
same day that the Thorpes' farm was sold at auction. Ex.
point did Mirarchi inform the Thorpes of his suspension, and
he continued to act as their attorney while suspended from
the bar. On August 25, eleven days after his suspension took
effect, Mirarchi engaged in settlement negotiations with
Nationwide's counsel on the Thorpes' behalf. 8/3/16
N.T. at 23-24. Nationwide offered a figure of $324, 729.30.
Mirarchi texted this offer to Dale Thorpe, who after some
prodding suggested that he could not assent without first
discussing the matter with Ms. Thorpe's bankruptcy
counsel. 8/8/16 N.T. at 95; see also Ex. M-6 at
15-17. Mirarchi nevertheless forged ahead: He sent Ms.
Thorpe's counsel a copy of the MLS Fee Agreement in
preparation for the filing of a motion for: (1) approval of
the Nationwide settlement, (2) Mirarchi's appointment as
special counsel, and (3) approval of MLS's contingent
fee. Ex. M-17.
mid-September 2015, Dale Thorpe and Rene Thorpes'
bankruptcy counsel began to request details concerning
Mirarchi's administrative suspension. Exs. M-22, M-23. On
October 2, Mirarchi sent the Thorpes a letter addressing the
issue, claiming that the suspension “in now [sic] way
effected [sic] my representation of you.” Ex. M-24 at
3. He further maintained that “[a]t all material times,
I was a Member of the Bar of our Commonwealth's Supreme
Court.” Ex. M-24 at 3. At no point did Mirarchi inform
the Thorpes of either the nature of the suspension or its
length. Ex. M-24 at 3. In the following weeks, Mirarchi
continued urging the Thorpes to accept Nationwide's
offer, at times disparaging the effectiveness of Debtor's
bankruptcy counsel and suggesting that the Thorpes' case
against Nationwide was “very weak.” Exs. M-26,
M-27, M-28, M-30.
Thorpes terminated Mirarchi by e-mail on November 23, 2015,
without having accepted the Nationwide settlement. Ex. M-34.
The email cited both Mirarchi's failure to notify the
Thorpes of his administrative suspension as well as his
inadequate responses to their inquiries concerning the
suspension. 8/8/16 N.T. at 155, 180-81. The Thorpes rehired
McDuffy, who accepted the Nationwide offer on the
Thorpes' behalf without any further
negotiation. 8/19/16 N.T. at 43.
following day, the Bankruptcy Court held a status hearing in
the Chapter 12 case. The funds received from the farm's
auction sale ($1.75 million) failed to satisfy the extent of
Lititz's claim (in excess of $2.3 million), a claim still
secured by the Thorpes' second residential property.
Rather than continue the litigation, both parties agreed to
undergo mediation with the Honorable Ashely M. Chan. During
the mediation conferences, the issue of MLS's legal fees
was discussed but not resolved; the parties were nevertheless
able to agree upon a proposed settlement. The settlement
required the Thorpes to accept the Nationwide settlement
offer and immediately pay Lititz $210, 600 from the proceeds.
The remaining funds ($113, 400) would remain undistributed
until the matter of MLS's fees could be resolved. If MLS
received less than the entire sum, Lititz would be entitled
to an additional payment, up to a maximum of $9, 400. Lititz
would then accept these payments in full satisfaction of its
claim against Ms. Thorpe.
April 19, 2016, Lititz filed a motion to approve the
settlement. ECF No. 547. In an order dated May 25, 2016, the
Bankruptcy Court approved the proposed settlement, authorized
the payment of $210, 600 to Lititz, and directed that the
remaining funds be held by the Clerk of the Bankruptcy Court
until the question of MLS's legal fees could be resolved.
ECF No. 572.
filed the MLS motion with the Bankruptcy Court on June 22,
2016, seeking payment of the disputed funds based on the MLS
Fee Agreement. ECF No. 581. The Thorpes filed a response on
July 11, alleging that Mirarchi's attorney misconduct
barred MLS from recovering for his services. ECF No. 586. The
Bankruptcy Court, after a three-day hearing, found: (1) that
the matter was a non-core proceeding, (2) that MLS had no
contractual right to recover its legal fees, and (3) that
Mirarchi's wrongful conduct during the Nationwide suit
barred MLS from recovering in equity. The Bankruptcy Court
issued its proposed finding of facts and legal conclusions
recommending dismissal of all of MLS's claims and denial
of the Mirarchi motion on February 17, 2017. ECF No. 644.
That recommendation was transmitted to this Court for review
on February 22, 2017. ECF ...