By Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys, Andy@BLSforAttorneys.com
In re Brooks-Hamilton
Ninth Circuit Bankruptcy Appellate Panel No. NC-08-1233-DJuMk
January 21, 2009
A couple of weeks ago the Ninth Circuit addressed the bankruptcy court's inherent authority to suspend an attorney from practicing before it, in Price v. Lehtinen (In re Lehtinen). (See last week's Litigation Report on that opinion.) A few months earlier the Ninth Circuit BAP had addressed the very same issue, in a published opinion authored by Judge Randall Dunn, the In re Brooks-Hamilton opinion addressed in this Bulletin. The question is whether this published BAP opinion, or any part of it, is still good law in the Circuit after Lehtinen? This may be of particular importance to attorneys who practice in Judge Dunn's courtroom in Oregon.
A Touch of Background
This case has an extended history, certainly for the attorney fighting for six years, so far unsuccessfully, to avoid a six-month suspension. It involved a prior dance up the appellate staircase, resulting in an earlier BAP published opinion, the Ninth Circuit sending the case back to the bankruptcy court on remand, and now the attorney again appealing to the BAP. After a lessening of the monetary sanction, the appeal is now limited to the bankruptcy court's reimposed six-month suspension sanction.
The Brooks-Hamilton Holding
The BAP, through Judge Dunn, held that bankruptcy courts derive their authority to suspend attorneys from practicing law in that district's bankruptcy courts from three sources: through an "inherent authority" to discipline attorneys before it, through § 105(a) of the Bankruptcy Code, and through Rule 9011 of the Federal Rules of Bankruptcy Procedure. Having established that the court has the authority to suspend, this left the question whether this sanction was appropriate here, particularly whether the bankruptcy court had considered the factors established in a 1996 9th Circuit BAP opinion, Peugeot v. United States Trustee (In re Crayton), 192 B.R. 970 (and followed in the 2005 Ninth Circuit BAP Lehtinen opinion from which last month's Ninth Circuit Lehtinen opinion referred to above was appealed).
In applying the Crayton factors, the BAP determined in Brooks-Hamilton that the disciplinary proceeding was fair in that the attorney received adequate notice and opportunity to be heard, and the evidence supported the bankruptcy court's findings. But the BAP also held that in determining the reasonableness of the sanction, the court abused its discretion in not expressly considering the American Bar Association standards for sanctioning attorneys, and so remanded to the bankruptcy court for further findings on the application of those ABA standards to the case.
The Ninth Circuit Silent in Lehtinen on Brooks-Hamilton
This analysis of Brooks-Hamilton as compared to the Ninth Circuit's Lehtinen leads to some quixotic and ironic observations. The first curiosity is that even though Judge Dunn's BAP opinion of January 21, 2009 and the April 28, 2009 Lehtinen opinion addressed identical issues, the Ninth Circuit opinion made no mention of the Brooks-Hamilton opinion. Given the Brooks-Hamilton case's prior appellate history, it seems like the Ninth Circuit judges and clerks should have had some familiarity with it. And the BAP case could not have been TOO new to fly under their radar--it was published, on an expedited basis, in January of this year while the Ninth Circuit case was not submitted to the Court of Appeals for decision until mid-February (there was no oral argument) and its opinion was filed in late April, 2009, seemingly with plenty of time to notice this BAP opinion published back in January. And although the higher court was under no obligation to name prior BAP cases on point in its opinion, it apparently intended to do so here: it said that "[t]he BAP has "held that the bankruptcy court has the power to disbar or suspend an attorney under its inherent authority power"--the key holding in the Brooks-Hamilton of January 2009--but cited instead to the 1996 Crayton BAP opinion cited above. Are the Ninth Circuit's judges or their law clerks not on top of recent case law? Must be--makes no sense that the opinion's author would purposely avoid referring to the most recent BAP opinion squarely on point.
The Appropriate Role of the ABA Standards in Attorney Sanctioning
A second curiosity is that the Ninth Circuit in Lehtinen managed to avoid addressing the dispositive holding in all three of the BAP opinions in play--Crayton from 1996, this Brooks-Hamilton one, and the BAP Lehtinen opinion below: the mandatory reference by the bankruptcy court to the ABA Standards to determine the reasonableness of the sanction. On this, Judge Dunn stated in Brooks-Hamiliton that "[t]he Panel has adopted ABA standards as the means for determining reasonable sanctions," and he quoted the BAP's Crayton opinion that the “[f]ailure to consider such factors constitutes an abuse of discretion" by the bankruptcy court. This quote was subsequently repeated and relied upon by the BAP judges in their Lehtinen opinion. And yet when that case came before the Ninth Circuit, after making passing mention of the BAP's reference to the ABA Standards in the introduction, its opinion never refers to the ABA Standards again, neither to embrace nor to reject them.
But while the Ninth Circuit in Lehtinen did not expressly reject reliance on the ABA Standards, it surely did so by clear implication. In its conventional recitation of the Standard of [Appellate] Review, the Court quoted its own precedents that "[t]his court independently reviews the bankruptcy court's ruling on appeal from the BAP," and "reviews an award of sanctions for an abuse of discretion." In its independent review, the Court could have affirmed the BAP ruling below that the failure to consider the ABA Standards "constitutes an abuse of discretion." Instead the Court addressed whether the bankruptcy court's procedures met the due process standards of notice and opportunity to be heard, and determined that it had met them. The Court "conclude[d] that because [the attorney] was accorded due process, the bankruptcy court possessed the inherent power to suspend him." The Court never felt a need to ask, as did all three BAP panels, whether the suspension sanction was reasonable in the circumstances. Clearly, the Ninth Circuit ruling is that a bankruptcy court has the power to suspend an attorney as long as she is afforded procedural due process, without any obligation to consult the ABA Standards as to the fairness of the suspension.
The "Tempest in a Teapot" of Brooks-Hamilton
One irony in this is that this now discredited reference to the ABA Standards was the entire focus of a multi-page repartee in Brooks-Hamilton between Judge Dunn's majority opinion and Judge Bruce Markell's very reluctant concurrence. Judge Markell, a former law professor, railed in his concurrence against the appropriateness of the ABA Standards in this context, and then against the Ninth Circuit BAP's "rigid view that we cannot change or alter our prior precedent, even if we think it dead wrong." "[B]lindly applying Lehtinen and Crayton to the facts of this case leads, I believe, to a result that should offend those who care about how courts operate, or who wish courts to operate rationally." He cites as authority for not "blindly applying" precedent sources as diverse as Aristotle, the economist John Maynard Keynes, and the British House of Lords of the 19th Century. The Keynesian quote was a particularly nice flourish: against over reliance on precedents: "When the facts change, I change my mind. What do you do, sir?"
Nevertheless Judge Markell concurs in Judge Dunn's holding on the mandatory use of the ABA Standards, perhaps mollified by this footnote in the Court's opinion:
The "Standing Committee" Recommendation
Judge Dunn ended the Brooks-Hamilton opinion with a somewhat odd twist: a nonbinding "strong recommendation" to the bankruptcy court below. After instructing the bankruptcy court to determine the appropriate sanction under the ABA standards, he stated: "Although the Panel’s prior decisions do not require that the bankruptcy court refer the matter to the Standing Committee [on Professional Conduct of the Northern District of California], we strongly urge the bankruptcy court to do so, to spare itself from having to rehash this stale and exhausting matter." (Emphasis in original; citations omitted.) However, lest there be any doubt, the very last words of his opinion was this final footnote: "Despite that strong recommendation, we reiterate that the bankruptcy court has the authority, as discussed supra, to impose a district-wide disbarment or suspension sanction on an attorney for misconduct and/or incompetence in appropriate circumstances."
The Ninth Circuit in Lehtinen would definitely have agreed (had it taken to opportunity to acknowledge Judge Dunn's opinion): in the face of an argument by the sanctioned attorney that the bankruptcy case should have referred the matter to the court's Standing Committee on Professional Conduct pursuant to the bankruptcy court's rules, the Court pointed to the bankruptcy court's unfettered discretion within the same rules to "[i]mpose other appropriate sanctions" as an open-ended authority to suspend. Under this bankruptcy court's rules, whether or not it should refer the matter to the court's Standing Committee was completely discretionary, and thus it was free to impose the suspension instead.
The Bottom Line
Without referring by name to the BAP's Brooks-Hamilton opinion, the Ninth Circuit's Lehtinen opinion discarded 1) any reliance on the ABA's Standards for determining whether an attorney sanction is reasonable, and 2) any emphasis on referring attorney discipline issues to the court's Standing Committee on Professional Conduct. But the Court of Appeals followed all three BAP opinions--Brooks-Hamilton, Clayton, and Lehtinen--in approving, for the first time in this Circuit, the inherent authority of bankruptcy courts to suspend attorneys from all of its district's bankruptcy courts, as long as general procedural due process principles of notice and opportunity are followed. Each bankruptcy court must look to its own, and its district's court rules because each "are free to define the rules to be followed and the grounds for punishment.”
(Oregon attorneys should review, perhaps among others, LBR 9011-3: Sanctions, Remedies, & Suspension/Disbarment.)
A Touch of Background
This case has an extended history, certainly for the attorney fighting for six years, so far unsuccessfully, to avoid a six-month suspension. It involved a prior dance up the appellate staircase, resulting in an earlier BAP published opinion, the Ninth Circuit sending the case back to the bankruptcy court on remand, and now the attorney again appealing to the BAP. After a lessening of the monetary sanction, the appeal is now limited to the bankruptcy court's reimposed six-month suspension sanction.
The Brooks-Hamilton Holding
The BAP, through Judge Dunn, held that bankruptcy courts derive their authority to suspend attorneys from practicing law in that district's bankruptcy courts from three sources: through an "inherent authority" to discipline attorneys before it, through § 105(a) of the Bankruptcy Code, and through Rule 9011 of the Federal Rules of Bankruptcy Procedure. Having established that the court has the authority to suspend, this left the question whether this sanction was appropriate here, particularly whether the bankruptcy court had considered the factors established in a 1996 9th Circuit BAP opinion, Peugeot v. United States Trustee (In re Crayton), 192 B.R. 970 (and followed in the 2005 Ninth Circuit BAP Lehtinen opinion from which last month's Ninth Circuit Lehtinen opinion referred to above was appealed).
In applying the Crayton factors, the BAP determined in Brooks-Hamilton that the disciplinary proceeding was fair in that the attorney received adequate notice and opportunity to be heard, and the evidence supported the bankruptcy court's findings. But the BAP also held that in determining the reasonableness of the sanction, the court abused its discretion in not expressly considering the American Bar Association standards for sanctioning attorneys, and so remanded to the bankruptcy court for further findings on the application of those ABA standards to the case.
The Ninth Circuit Silent in Lehtinen on Brooks-Hamilton
This analysis of Brooks-Hamilton as compared to the Ninth Circuit's Lehtinen leads to some quixotic and ironic observations. The first curiosity is that even though Judge Dunn's BAP opinion of January 21, 2009 and the April 28, 2009 Lehtinen opinion addressed identical issues, the Ninth Circuit opinion made no mention of the Brooks-Hamilton opinion. Given the Brooks-Hamilton case's prior appellate history, it seems like the Ninth Circuit judges and clerks should have had some familiarity with it. And the BAP case could not have been TOO new to fly under their radar--it was published, on an expedited basis, in January of this year while the Ninth Circuit case was not submitted to the Court of Appeals for decision until mid-February (there was no oral argument) and its opinion was filed in late April, 2009, seemingly with plenty of time to notice this BAP opinion published back in January. And although the higher court was under no obligation to name prior BAP cases on point in its opinion, it apparently intended to do so here: it said that "[t]he BAP has "held that the bankruptcy court has the power to disbar or suspend an attorney under its inherent authority power"--the key holding in the Brooks-Hamilton of January 2009--but cited instead to the 1996 Crayton BAP opinion cited above. Are the Ninth Circuit's judges or their law clerks not on top of recent case law? Must be--makes no sense that the opinion's author would purposely avoid referring to the most recent BAP opinion squarely on point.
The Appropriate Role of the ABA Standards in Attorney Sanctioning
A second curiosity is that the Ninth Circuit in Lehtinen managed to avoid addressing the dispositive holding in all three of the BAP opinions in play--Crayton from 1996, this Brooks-Hamilton one, and the BAP Lehtinen opinion below: the mandatory reference by the bankruptcy court to the ABA Standards to determine the reasonableness of the sanction. On this, Judge Dunn stated in Brooks-Hamiliton that "[t]he Panel has adopted ABA standards as the means for determining reasonable sanctions," and he quoted the BAP's Crayton opinion that the “[f]ailure to consider such factors constitutes an abuse of discretion" by the bankruptcy court. This quote was subsequently repeated and relied upon by the BAP judges in their Lehtinen opinion. And yet when that case came before the Ninth Circuit, after making passing mention of the BAP's reference to the ABA Standards in the introduction, its opinion never refers to the ABA Standards again, neither to embrace nor to reject them.
But while the Ninth Circuit in Lehtinen did not expressly reject reliance on the ABA Standards, it surely did so by clear implication. In its conventional recitation of the Standard of [Appellate] Review, the Court quoted its own precedents that "[t]his court independently reviews the bankruptcy court's ruling on appeal from the BAP," and "reviews an award of sanctions for an abuse of discretion." In its independent review, the Court could have affirmed the BAP ruling below that the failure to consider the ABA Standards "constitutes an abuse of discretion." Instead the Court addressed whether the bankruptcy court's procedures met the due process standards of notice and opportunity to be heard, and determined that it had met them. The Court "conclude[d] that because [the attorney] was accorded due process, the bankruptcy court possessed the inherent power to suspend him." The Court never felt a need to ask, as did all three BAP panels, whether the suspension sanction was reasonable in the circumstances. Clearly, the Ninth Circuit ruling is that a bankruptcy court has the power to suspend an attorney as long as she is afforded procedural due process, without any obligation to consult the ABA Standards as to the fairness of the suspension.
The "Tempest in a Teapot" of Brooks-Hamilton
One irony in this is that this now discredited reference to the ABA Standards was the entire focus of a multi-page repartee in Brooks-Hamilton between Judge Dunn's majority opinion and Judge Bruce Markell's very reluctant concurrence. Judge Markell, a former law professor, railed in his concurrence against the appropriateness of the ABA Standards in this context, and then against the Ninth Circuit BAP's "rigid view that we cannot change or alter our prior precedent, even if we think it dead wrong." "[B]lindly applying Lehtinen and Crayton to the facts of this case leads, I believe, to a result that should offend those who care about how courts operate, or who wish courts to operate rationally." He cites as authority for not "blindly applying" precedent sources as diverse as Aristotle, the economist John Maynard Keynes, and the British House of Lords of the 19th Century. The Keynesian quote was a particularly nice flourish: against over reliance on precedents: "When the facts change, I change my mind. What do you do, sir?"
Nevertheless Judge Markell concurs in Judge Dunn's holding on the mandatory use of the ABA Standards, perhaps mollified by this footnote in the Court's opinion:
For the reasons stated by Judge Markell in his concurrence, we all have serious questions as to the appropriateness of requiring explicit consideration of the ABA standards in determining the reasonableness of the suspension sanction imposed by the bankruptcy court. However, as further discussed herein, this Panel stated its reasons for requiring consideration of the ABA standards in Crayton and Lehtinen, and this Panel is bound by its prior decisions.Perhaps to the relief of both judges, just three months later the Ninth Circuit Lehtinen opinion disregarded the ABA Standards, by its silence dispensing with the need for a bankruptcy court to make "explicit consideration of the ABA standards."
The "Standing Committee" Recommendation
Judge Dunn ended the Brooks-Hamilton opinion with a somewhat odd twist: a nonbinding "strong recommendation" to the bankruptcy court below. After instructing the bankruptcy court to determine the appropriate sanction under the ABA standards, he stated: "Although the Panel’s prior decisions do not require that the bankruptcy court refer the matter to the Standing Committee [on Professional Conduct of the Northern District of California], we strongly urge the bankruptcy court to do so, to spare itself from having to rehash this stale and exhausting matter." (Emphasis in original; citations omitted.) However, lest there be any doubt, the very last words of his opinion was this final footnote: "Despite that strong recommendation, we reiterate that the bankruptcy court has the authority, as discussed supra, to impose a district-wide disbarment or suspension sanction on an attorney for misconduct and/or incompetence in appropriate circumstances."
The Ninth Circuit in Lehtinen would definitely have agreed (had it taken to opportunity to acknowledge Judge Dunn's opinion): in the face of an argument by the sanctioned attorney that the bankruptcy case should have referred the matter to the court's Standing Committee on Professional Conduct pursuant to the bankruptcy court's rules, the Court pointed to the bankruptcy court's unfettered discretion within the same rules to "[i]mpose other appropriate sanctions" as an open-ended authority to suspend. Under this bankruptcy court's rules, whether or not it should refer the matter to the court's Standing Committee was completely discretionary, and thus it was free to impose the suspension instead.
The Bottom Line
Without referring by name to the BAP's Brooks-Hamilton opinion, the Ninth Circuit's Lehtinen opinion discarded 1) any reliance on the ABA's Standards for determining whether an attorney sanction is reasonable, and 2) any emphasis on referring attorney discipline issues to the court's Standing Committee on Professional Conduct. But the Court of Appeals followed all three BAP opinions--Brooks-Hamilton, Clayton, and Lehtinen--in approving, for the first time in this Circuit, the inherent authority of bankruptcy courts to suspend attorneys from all of its district's bankruptcy courts, as long as general procedural due process principles of notice and opportunity are followed. Each bankruptcy court must look to its own, and its district's court rules because each "are free to define the rules to be followed and the grounds for punishment.”
(Oregon attorneys should review, perhaps among others, LBR 9011-3: Sanctions, Remedies, & Suspension/Disbarment.)
New Bulletins on this website will provide summaries of other opinions within the Ninth Circuit shortly after they are published. PLEASE EMAIL ME at Andy@BLSforAttorneys.com IF YOU WOULD LIKE TO BE EMAILED A LINK TO SUCH FUTURE REPORTS.
by Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys
Andy@BLSforAttorneys.com
PLEASE NOTE that the writer is not licensed to practice law in any state. This means that he is not legally permitted to give any legal advice or perform any legal services. Any non-attorney reading this must consult an attorney about ANYTHING contained here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.
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