Now Updating
In re Jesslyn Anderson

Summarizing by Bradley Pearce

Olson v. Anderson (In re Anderson)

9th Cir. BAP No. WW-14-1262-JuKiF (Oct. 7, 2015) (unpublished)
The 9th Cir. BAP held that special counsel to Chapter 7 trustee was required to disgorge fees and to pay attorneys fees under Rule 11 for settling the Debtor's personal injury lawsuit, and then paying his fees and sending the balance to the Debtor without notice to the Trustee. The attorney's alleged misunderstanding of the law and the alleged reasonableness of the settlement was not a defense.
Procedural context:
Trustee filed a motion seeking turnover of settlement proceeds, followed by a separate motion for sanctions against his special counsel attorney under Rule 9011 and 28 U.S.C. § 1927. After a hearing, the bankruptcy court entered an order granting Trustee’s motions for turnover and for sanctions, but deferred deciding the amount of the sanctions until Trustee’s attorneys filed their fee application. The order regarding the sanctions became final when the court subsequently entered an order fixing the amount of the sanctions (approximately $14,000). The attorney appealed from the Sanctions Order, and the 9th Cir. BAP affirmed.
Although the attorney thought he no longer needed to comply with the bankruptcy employment provisions because the Debtor had received a discharge years ago, the BAP found that the attorney's refusal to turn over property of the estate was squarely foreclosed by the case law and the Bankruptcy Code and Rules. Further, the attorney had been employed by the bankruptcy estate and “was aware of the rules regarding compensation of professionals employed in a bankruptcy case.” The bankruptcy court also awarded actions under U.S.C. § 1927, which provides that “[a]ny attorney or other person admitted to conduct cases in any court of the United States . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” The 9th Cir. BAP held, however, that this sanction is only available to "courts of the United States" (e.g., district courts) and was not available to bankruptcy courts. Thus, the sanctions were affirmed under Rule 11, which was an alternative ground used by the bankruptcy court.

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