Seattle Bankruptcy Attorneys is not immune to the possibility of being sanctioned by bankruptcy courts. One reason why hiring Seattle bankruptcy attorneys can be far better then filing yourself is that seattle bankruptcy attorneys are held to a very high standard in how they deal with clients and care for them. The 9th circuit in particular (where Washington resides) is particularly careful with how ot both punishes and protects attorneys who knowingly dismiss the need to file clients with care and consistency.
Bankruptcy judges have broad equitable power under Bankruptcy Code Section 105(a)
which states in part that “The court may issue any order, process, or judgment that is necessary or appropriate to cary out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.” Essentially this means that the court has absolute authority to control the actions of any and all persons interacting with the court. This includes Seattle Bankruptcy attorneys but also includes anyone filing individually.
The Bankruptcy Court also has broad authority to impose sanctions under Rule 9011(c). Under §9011(c)(1)(A) sanctions under this section would typically be brought by motion. Under §9011(c)(2), the Rule provides guidance on the limitations of sanctions to directives of non-monetary nature, monetary sanctions to be paid to the court if warranted for effective deterrence, or reasonable fees to an opposing party. Bankruptcy rule 9011(c)(1)(A) requires a 21 day notice before a motion for sanctions may be filed.
The 9th Circuit has provides quite a bit of guidance in imposing sanctions throughout the years. Other courts also provide instances of when and how sanctions should be levied. In addition, when sanctions are imposed, the degree of sanctions is also carefully and strictly construed where appropriate, and expansive where appropriate. In Crayton, the BAP determined that “reasonable sanctions” are those sanctions which apply the ABA Standards (ABA = American Bar Association). The ABA Standards dictate consideration of four different criteria: (1) whether the duty violated was to a client, the public, the legal system, or the profession, (2) whether the attorney acted intentionally, knowingly or negligently, (3) the seriousness of the actual or potential injury caused by the attorney’s misconduct, and (4) the existence of aggravating and mitigating factors. In re Crayton 192 B.R. at 980 (9th Cir. BAP 1996).
Seattle bankruptcy attorneys need to take the time to make sure filings are correct.
Aggravating facts in each instance can warrant an increase in the degree of discipline imposed include considerations of any prior disciplinary offenses, multitudes of offenses, an ongoing pattern of misconduct, and/or a refusal to acknowledge the wrongful nature of the conduct. In re Crayton 192 B.R. at 981. On the other side of the coin, mitigating circumstances justifying a reduction in the degree of discipline include the absence of a prior disciplinary record, personal or emotional problems, inexperience in the practice of law, or a timely good faith effort to make restitution or to rectify the consequences of the misconduct.
Three sources of authority make available the ability to admonish bad faith. “Bad faith” is a formless and elusive concept, and its definition can vary from jurisdiction to jurisdiction. It has been generally defined as “knowingly or recklessly raising a frivolous argument making a claim for an improper purpose, “delaying or disrupting the litigation”, hampering enforcement of a court order, improper motive, giving “no meaningful thought” to the purposes of bankruptcy, and more. In re Walker, 532 F.3d at 1309 (11th Cir. 2008); In re Yorkshire, LLC 2008 WL 3306680 at 2 (5th Cir. Aug 8, 2008).
In Hale v Trustee, a bankruptcy attorney refused to sign a bankruptcy petition he had prepared, arguing that the client had only hired him to draft the petition, and to not file the petition or do any post petition work. The Court ordered teh bankruptcy attorney to sign the petition. The attorney refused again. The court sanctioned counsel for failing to sign a pleading under B.R. 9011(a) but noted at lengthy ongoing and consistent pattern of counsel in eluding, failing to recognize poor conduct, and continually violating direct orders; the punishment was a $250 disgorgement and $2,000 along with an encouragement to change his conduct. Hale v. U.S. Trustee, 509 F.3d 1139, 1148 (9th Cir. 2007). The attorney had previously been required in the past to disgorge fees in several cases such as In re Castorena, 270 B.R. 504 at 532 (Bankr. D. Idaho 2001). The Court was relatively lenient in this matter considering the ongoing conduct of the attorney.
In re Nguyen, 447 B.R. 268 (9th Cir. BAP 2001) the attorney for the Debtor Margolis showed a distain for his own action. Margolis’ testimony revealed his generally lax and hands-off approach when attempting to ascertain the accuracy of bankruptcy schedules and statements of financial affairs. Margolis would not meet with clients, failed to counsel clients (letting his paralegal do all the work), and would file schedules not signed by the clients. The bankruptcy court was proper to be worried about potential harm to the public resulting from these practices and refusal to accept his/her own wrongdoing. Therefore, the court enjoined Margolis from filing schedules unless a Seattle bankruptcy attorney conducted the initial client interview and spent at least one hour with the debtor to make sure that assets and debts would be discovered and properly scheduled. Consistent with the bankruptcy court’s findings, this penalty was tailored to coerce Margolis into spending time and exerting effor with clients to determine a full view of their financial history, assure the clients’ understanding of the importance of correctly completing bankruptcy documents, and to assure that Margolis has a proper understanding of his clients’ requirements.
Other stories exist, and I may do another blog or two reviewing some of the cases which have resulted in Seattle bankruptcy attorneys
being sanctioned or punished (or avoiding punishment) in the weeks to come. I find them interesting and a great warning to other Seattle bankruptcy attorneys when trying to figure out what is expected of them.