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Jared C. Walters, Trustee v. Jeanne A. Gallegos, et al.

Summarizing by David Treacy

Goldberg v. Goodman (In re Goodman)

BAP Nos. 12-1643 and 13-1049 (9th Cir. BAP 2013)
BAP affirmed bankruptcy court imposition of sanctions against debtor's former counsel, including award of attorney fees to debtor's new counsel of approximately $45,000; suspension from filing new bankruptcy cases for 6 months; and referrals to United States Attorney, Nevada Secretary of State, Nevada Attorney General, Nevada State Bar, and United States Trustee
Procedural context:
Debtor filed Motion for Sanctions against prior bankruptcy attorney alleging malpractice, unprofessionalism and forgery. Bankruptcy Court conducted 4 separate evidentiary hearings, and entered two sanction orders, one suspending attorney and second awarding Debtor's new counsel attorney fees. Prior counsel appealed to the BAP which affirmed.
Debtor retained counsel for a chapter 7 proceeding. During course of representation, counsel prepared and filed multiple documents on which counsel forged debtor's signature; counsel filed a pre-filing counseling certificate that stated that debtor took required pre-petition course which debtor never took but instead was taken by a staff member at counsel's office impersonating the debtor; forged debtor's signature on tax returns filed with the IRS as well as an IRS Form 2848 Power of Attorney; failed to appear at the Section 341 meeting and instead sent non-attorney paralegal to appear on behalf of debtor; had staff members notarize documents without witnissing the signatures, which themselves were forged; and failed to act with dilligence in prosecution of debtor's Chapter 13 case or in connection with debtor's attempt to obtain a loan modification (whcih debtor ultimately obtained directly with the lender as counsel was not taking steps to accomplish). Counsel knowingly filed false and fraudulent documents with court and IRS, and not only violated court rules, but continued to violate multiple criminal statutes including those relating to the filing of tax returns and documents. Court has authority under Rul 9011 to sanction attorney for conduct that was detrimental to own client. Court also has inherent authroity and authority under Section 105 to impose sanctions to address conduct that frustrates or impedes the proper administration of the estate, as long as court affords notice to offending party of nature of conduct at issue and that sanctions may be awarded, and provides opportunity for a hearing. Nature and extent of sanctions are within Court's discretion. Sanctions including suspension and criminal referrals were within scope of reasonableness and were not too severe where record indicated that counsel had previously been sanctioned multiple times for the same or similar conduct including forging signatures on credit counseling certificates and filing those with the court, where prior disciplinary steps had not stemmed the unprofessional and possibly criminal conduct. Counsel also acknowledged 15-20 grievances filed against him by former clients for similar conduct. Sanctions shoud be progressive and where prior sanctions proved ineffective to deter further wrongful conduct, the elevation of sanctions to include suspension and criminal referral was warranted. Sanctions also properly included attorney fees by debtor's new attorney for time spent in connection with sanctions process.
Krischer, Collins & Dunn

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