- BAP No. NC-13-1285-DJuKi
- The The Ninth Circuit BAP affirmed the Bankruptcy Court. However, the BAP affirmed the bankruptcy court's order imposing sanctions on the Appellant based on another ground. The BAP ruled that the Appellant did not violate an order of the bankruptcy court, act in bad faith, or engage in willful misconduct. However, based on the Appellant's failure to comply with the local rules, the BAP held that the bankruptcy court has the inherent authority to impose sanctions in these circumstances.
- Procedural context:
- The bankruptcy court levied sanctions against Appellant for failing to obtain or retain the debtor's original "wet" signatures pursuant to 11 U.S.C. Sec. 105 and Local Rules for the bankruptcy Court of the Northern District of California. However, the bankruptcy court further held that the Appellant did not do anything to perpetrate a fraud upon the court; rather, "it was just poor judgment or a lapse of judgment." The bankruptcy court did award the Debtor reasonable attorney fees and suspended the Appellant's ECF privileges until took the ECF training course. Appellant timely appealed the ruling imposing sanctions.
- The Appellant was retained by a consumer Debtor to prepare and file a Chapter 13 Bankruptcy. The Debtor paid Appellant $2,100 as a retainer. The Debtor was going to be working out-of-town; therefore, the Debtor authorized his parents to "oversee his Chapter 13 Bankruptcy". Appellant filed the Petition, Schedules, Statement of Financial Affairs, and Chapter 13 Plan. All of the pleadings affixed the Debtor's electronic signature. Appellant did not appear at the Debtor's 11 U.S.C. Sec. 341(a) Meeting of Creditor; instead the Appellant had Special Counsel appear. Appellant files an application to approve his fees in the amount of $7,500. The Debtor, with new counsel, opposed the Appellant's request and further requested that the Appellant be required to disgorge the amount of the pre-Petition retainer. The bankruptcy court entered an order instructing Appellant to disgorge the pre-Petition retainer and further ordered no further fees were to be paid to Appellant. The Appellant did not comply with the order; rather, he filed a Motion for Reconsideration. Debtor's new counsel filed a motion for order to show cause and request for entry of sanctions based on the Appellant not obtaining the "wet" signatures of the Debtor and willfully and knowingly abusing the bankruptcy process by filing pleadings on behalf of the Debtor without the Debtor having reviewed the same. The Debtor's new counsel previously worked for the Appellant; thus the bankruptcy court detailed various assertions made by the Parties regarding who was overseeing and/or ensuring that the Debtor or Debtor's parents were informed of the pleadings filed on behalf of the Debtor. Ultimately, the bankruptcy court requested that the Appellant provide the pleadings filed on behalf of the Debtor with the "wet" signatures. The Appellant could not produce this documents; moreover, neither the Appellant nor the Appellant's paralegal could recall having actual knowledge of the Debtor or the Debtor's parents signing the pleadings that were filed.
- Dunn, Jury, and Kirscher
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