In this action, plaintiff Ellenoff Grossman & Schole, LLP (EGS), a law firm, seeks a money judgment against its former clients, defendants Jason Konior and Phoenix Capital Worldwide LP (Phoenix), a company purportedly owned by Konior as its sole shareholder. Plaintiff's action was commenced by filing on November 8, 2006. The verified complaint was served upon the defendants on November 10, 2006, and it seeks compensation for legal services rendered and disbursement incurred, in the sum of $26,795.91. Because the defendants did not respond, on June 8, 2007, EGS served a notice of additional mailing of summons and complaint upon them. After the defendants again failed to respond, plaintiff filed the instant motion, pursuant to CPLR 3215, seeking a default judgment against the defendants. Defendants have not opposed this motion.

The complaint alleges that EGS was retained by the defendants, pursuant to an agreement, to perform various legal services on their behalf (the Retention Agreement). The services were commenced in July 2006 and continued through September 2006. The complaint alleges that EGS issued invoices to the defendants, which totaled $26,650.00 for legal services rendered and $145.91 for disbursements incurred, for an aggregate amount of $26,795.91. When the invoices were unpaid, plaintiff commenced the instant action. The complaint asserts three causes of action against the defendants: breach of contract, account stated, and quantum meruit.

In its motion seeking entry of a default judgment against the defendants, EGS asserts that, [*2]on or about November 17, 2006, it received a Notice Extending Time To File Objections To Discharge And Dischargeability For Creditors Added To Schedules (the Bankruptcy Notice) in a Chapter 7 bankruptcy proceeding concerning Jason J. Konior, commenced on March 6, 2006 in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). Attached to the Bankruptcy Notice was an Amended Schedule F, which added certain creditors, including EGS, as unsecured creditors of Konior in his chapter 7 bankruptcy case. EGS asserts that it did not learn of Konior's bankruptcy filing, until it received the Bankruptcy Notice. EGS also asserts that "Konior attempted to trick EGS into believing that the Bankruptcy was filed on behalf of himself and Phoenix Capital by including both Defendants on ... Schedule F, in an attempt to discourage and dishonestly disuade [sic] EGS from pursuing its debt against both Defendants." Summers Affirm. ¶ 16. In other words, EGS asserts that the bankruptcy petition was only filed by Konior, and Phoenix has never sought bankruptcy relief.

EGS further asserts that because its "right to payment" against the defendants, including Konior, arose more than four months after Konior filed for bankruptcy relief, its postpetition claim against Konior is not subject to the automatic stay under section 362, title 11 of the United States Code (the Bankruptcy Code). Thus, EGS argues that it is "well within its rights to continue to pursue this action against Konior." Summers Affirm. ¶ 14.

CPLR 3215 (f) provides that "[o]n any application for judgment by default, the applicant shall file proof of service of the summons and the complaint," and "[w]here a verified complaint has been served, it may be used as the affidavit of the facts constituting the claim and the amount due; in such case, an affidavit as to the default shall be made by the party ... ."

The complaint filed in this action is a verified complaint. Based on other filed documents, including the affidavits of service and the notice of additional mailing of the summons and complaint pursuant to CPLR 3215 (g), EGS has complied with the procedural requirements with respect to its application for a default judgment.

With respect to defendant Phoenix, because it has never sought bankruptcy relief, EGS's claim against it is not subject to any constraint or requirement of the Bankruptcy Code. As EGS has fully complied with the CPLR requirements in respect of its application for a default judgment, the Motion is granted in favor of EGS against Phoenix, in the amount of $26,795.91.

However, with respect to defendant Konior, who is a chapter 7 debtor, EGS's claim and its quest for a default judgment against Konior, requires an analysis of the applicable provisions of the Bankruptcy Code, to determine whether a default judgment may be granted, under the facts and circumstances as stated in the Motion and the verified complaint.

The first issue is whether EGS's claim, arising from its role as an attorney for Konior, is subject to the provisions of the Bankruptcy Code. With respect to debtor's attorneys, section 327 (a) of the Bankruptcy Code provides that "the trustee, with the court's approval, may employ one or more attorneys ... to represent or assist the trustee in carrying out the trustee's duties under this title." 11 USC § 327 (a). In turn, section 330 of the Code provides that a professional person, including an attorney, employed pursuant to section 327 is entitled to "reasonable compensation for actual and necessary services rendered" by such person. 11 USC. § 330 (a). Prior to 2004, many appellate courts had held that attorneys who rendered services to chapter 7 debtors were eligible to be compensated for postpetition services that were necessary to the administration of the debtor's estate, [*3]even though section 330 stated that compensation would be granted if the attorneys were retained by the trustee, with the approval of the bankruptcy court. See e.g. In re Eggleston Works Loudspeaker Co., 253 BR 519, 524 (6th Cir BAP 2000)(bankruptcy appellate panel opined that "Congress did not intend to deny compensation to chapter 7 debtors' attorneys for services necessary to the administration of the estate"); In re Top Grade Sausage, Inc., 227 F3d 123 (3rd Cir 2000)(same). In 2004, the United States Supreme Court held that, under the plain language of section 330, even though the language is "awkward" and "ungrammatical," debtors' attorneys were not entitled to be compensated from estate funds unless they were employed by the trustee with court approval. Lamie v United States Trustee, 540 US 526, 534 (2004).

In this case, the Retention Agreement between EGS and the defendants is not attached to the complaint or the Motion, and the pleadings do not contain a description of the nature of services rendered by EGS.^[FN1] Thus, it is impossible to determine whether the postpetition services rendered by EGS, as Konior's attorney, benefitted Konior and/or his bankruptcy estate.^[FN2] In its Motion, EGS has not informed this Court whether it seeks recovery from Konior's estate funds. In light of Lamie, however, it is assumed that EGS does not intend to do so, and that EGS seeks to hold Konior personally liable for the debt.

EGS contends that the automatic stay of section 362 of the Bankruptcy Code is inapplicable, because its services were postpetition and its right to payment arose postpetition, and therefore it can continue to pursue this action against Konior.^[FN3] Although the pursuit of a postpetition claim or action is generally not stayed by the automatic stay provision of section 362, a discharge of the debtor under the Bankruptcy Code can serve, among other things, as an injunction against the pursuit of an action that seeks to recover a debt as a personal liability of the debtor, as discussed below.

As noted above, EGS received the Bankruptcy Notice from Konior on or about November 17, 2006. The Bankruptcy Notice provided, among other things, that any creditor whose name was listed in the attached Schedule F^[FN4] would have 60 days from the date of service of the Notice to file [*4]a complaint (1) objecting to the discharge of the debtor pursuant to 11 USC § 727; or (2) requesting a court determination of the dischargeability of any debt pursuant to 11 USC § 523.^[FN5] The 60 day period is consistent with Bankruptcy Rule 4004, which provides that "on expiration of the time fixed for filing a complaint objecting to discharge", the bankruptcy court "shall forthwith grant the discharge" unless "a complaint objecting to the discharge has been filed" or "a motion to extend the time for filing a complaint objecting to discharge is pending." Bankruptcy Rule 4004 (c) (1) (emphasis added). In other words, promptly after expiration of the 60 day period, an order discharging the debtor will likely be granted, unless an objection to such discharge, or a motion seeking an extension to file such an objection, has been timely filed.

EGS, whose claim is listed in Schedule F, has not informed this Court whether it timely filed any objection to Konior's discharge, or if an objection was not timely filed, whether it requested the Bankruptcy Court to grant an extension of time to file such an objection.^[FN6]

If the Bankruptcy Court granted a discharge of Konior, the effect of such discharge is significant. Among other things, section 524 of the Bankruptcy Code states that a discharge "voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727" and "operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor." 11 USC § 524 (a) (1) and (2).

EGS has not informed this Court as to the status of Konior's bankruptcy or whether the Bankruptcy Court granted or denied any discharge with respect to EGS's claim against Konior. As such, this Court cannot determine whether a default judgment should be granted in favor of EGS against Konior at this time. In light of the foregoing, the motion is denied as to Konior without prejudice.

Accordingly, it is hereby

ORDERED that plaintiff's motion for a default judgment against Phoenix Capital Worldwide LP is granted, the complaint is severed as against this defendant, and the Clerk of the Court is directed to enter judgment in favor of plaintiff in the amount of $26,795.91 against Phoenix Capital Worldwide LP; and it is further

ORDERED that plaintiff's motion for a default judgment against Jason Konior is denied, without prejudice.

[*5]Dated: 10/1/07

New York, New YorkENTER:

s/

J.S.C.