Albert-Sheridan v. State Bar of Cal. (In re Albert-Sheridan)

Decision Date10 June 2020
Docket NumberNo. 19-60023,19-60023
Parties IN RE Lenore L. ALBERT-SHERIDAN, Debtor, Lenore L. Albert-Sheridan, DBA Law Offices of Lenore Albert, Appellant, v. State Bar of California; Maricruz Farfan; Brandon Tady; Alex Hackert; Yvette Roland; Paul Bernardino, Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Lenore L. Albert, Westminster, California, pro se Appellant.

Vanessa L. Holton, Robert G. Retana, and Suzanne C. Grandt, Office of General Counsel, State Bar of California, San Francisco, California, for Appellees.

Before: Richard A. Paez, Consuelo M. Callahan, and Patrick J. Bumatay, Circuit Judges.


BUMATAY, Circuit Judge:

The State Bar of California suspended one of its members for misconduct. It conditioned her reinstatement on the payment of court-ordered discovery sanctions and costs associated with its disciplinary proceedings. Rather than pay the two fees, the suspended attorney sought to discharge them in bankruptcy.

We consider whether the Bankruptcy Code permits this. The bankruptcy court and the Ninth Circuit Bankruptcy Appellate Panel ("BAP") held that the two fees were non-dischargeable debts. We disagree. While our precedent holds that the costs of the disciplinary proceedings may not be discharged, the plain text of the Code requires a contrary result for the discovery sanctions. For this reason, we affirm in part and reverse in part.

A. Discovery Sanctions and State Bar Proceedings

Until her suspension, Lenore Albert-Sheridan had practiced as an attorney in California since December 2000 with no disciplinary record. She served as a consumer-advocate attorney, often representing homeowners in residential housing and mortgage disputes. By her own account, Albert stopped over 1,000 foreclosure sales in one case alone.

Beginning in May 2012, Albert represented Norman and Helen Koshak in an unlawful detainer matter in California Superior Court. In that case, plaintiffs 10675 S. Orange Park Boulevard, LLC, Francis Lantieri, and Gary Schneider ("Orange Park Boulevard") commenced an action to evict the Koshaks from their property. In August 2012, Orange Park Boulevard filed three motions to compel Helen Koshak's response to several discovery requests. In each motion, Orange Park Boulevard also sought costs and fees against Koshak and Albert for misuse of the discovery process under California Code of Civil Procedure § 2023.030.

After a hearing, a California Superior Court commissioner granted the discovery motions and imposed sanctions against Helen Koshak and her "counsel-of-record, Lenore Albert" in three separate orders. The commissioner ordered that they pay "monetary sanctions" of $2,675.50, $1,242.50, and $1,820.00 (totaling $5,738) to "Plaintiff 10675 S Orange Park Boulevard, LLC," jointly and severally within 30 days. To date, these discovery sanctions have not been paid.

In early 2015, the State Bar received a complaint against Albert and initiated an investigation. By July 2015, the State Bar requested documents and written responses from Albert. Albert failed to comply with the inquiry and instead requested an extension to the "eternity of time" while accusing the State Bar of wrongdoing.

The following year, the State Bar began disciplinary proceedings and charged Albert with, as relevant here, failing to cooperate with its investigation and disobeying the court orders to pay Orange Park Boulevard the discovery sanctions. After a State Bar trial, the hearing officer found Albert culpable on both counts. The hearing officer recommended a 30-day suspension of Albert's law license with reinstatement conditioned on her payment of the discovery sanctions. The hearing officer also awarded $18,714 to the State Bar in "reasonable costs" for the disciplinary proceedings under California Business and Professions Code § 6086.10(b)(3). The costs included a pre-set base charge of $16,758 plus $1,956 for investigations. California law requires the payment of disciplinary costs as a prerequisite for Bar reinstatement. Cal. Bus. & Prof. Code § 6140.7.

On appeal, the State Bar Review Department affirmed Albert's culpability on the two charges, her suspension, and the imposition of the disciplinary proceedings’ costs.

In December 2017, the California Supreme Court entered a final order of discipline. The supreme court ordered Albert suspended for 30 days, to be continued until:

She pays the following sanctions (or reimburses the Client Security Fund, to the extent of any payment from the Fund to the payees ...), and furnishes proof to the State Bar ... the $2,675.50, $1,242.50, and $1,820 sanctions awards issued on August 31, 2012, by the Superior Court of Orange County ... plus 10 percent interest per year from August 31, 2012.

In re Albert on Discipline , No. S243927, 2017 Cal. LEXIS 9745 at *1 (Cal. Dec. 13, 2017). It also awarded the costs of the disciplinary proceedings to the State Bar. Id. at *3. The supreme court later denied Albert's petition for rehearing. To date, Albert has not paid the disciplinary proceeding costs.

B. Bankruptcy Proceedings

In February 2018, Albert filed for Chapter 13 bankruptcy. The bankruptcy court later converted Albert's case to Chapter 7 based on her inability to fund a confirmable Chapter 13 plan.

In April 2018, Albert filed an adversarial complaint in bankruptcy court against the State Bar and several of its employees. In her complaint, Albert alleged (1) the dischargeability of debts under 11 U.S.C. § 523(a)(7) ; (2) the violation of 11 U.S.C. § 525(a) ’s anti-discrimination provision; (3) the violation of her rights under 42 U.S.C. § 1983 ; (4) the violation of California's Rosenthal Fair Debt Collection Practices Act and the federal Fair Debt Collection Practices Act; and (5) the claim that California Business and Professions Code §§ 6103, 6086.10, and 6140.7 are unconstitutional.1

Four months later, the bankruptcy court granted the State Bar's motion to dismiss the complaint. The bankruptcy court held that both the discovery sanctions and disciplinary costs were non-dischargeable based on In re Findley , 593 F.3d 1048 (9th Cir. 2010). The bankruptcy court also dismissed the § 525(a) claim because the State Bar could predicate Albert's reinstatement on the payment of non-dischargeable debts. Albert filed a timely notice of appeal to the BAP, which affirmed on largely the same grounds. In re Albert-Sheridan , No. 8:18-AP-01065-SC, 2019 WL 1594012 (B.A.P. 9th Cir. Apr. 11, 2019).

Before us is Albert's appeal from the BAP's decision. We have jurisdiction under 28 U.S.C. § 158(d)(1) and review de novo the BAP's decision and the bankruptcy court's dismissal of Albert's complaint for failure to state a claim. In re Turner , 859 F.3d 1145, 1148 (9th Cir. 2017).


A Chapter 7 discharge "releases the debtor from personal liability for her pre-bankruptcy debts." In re Ybarra , 424 F.3d 1018, 1022 (9th Cir. 2005). A debtor is entitled to a discharge of all pre-petition debts except for nineteen categories of debts set forth in the Code. 11 U.S.C. §§ 727(b), 523(a). One of the exceptions makes non-dischargeable a debt "for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss." 11 U.S.C. § 523(a)(7).

In this case, Albert seeks the discharge of two debts: (1) the $18,714 assessed against her for the costs of the State Bar's disciplinary proceedings, and (2) the $5,738 in discovery sanctions ordered by a California superior court. We consider § 523(a)(7) ’s application to each debt in turn.


Our court has already addressed whether a debtor may discharge the costs of the State Bar's attorney disciplinary proceedings imposed under California Business and Professions Code § 6086.10. The clear answer is no.

In Findley , we held that the costs of State Bar attorney disciplinary proceedings are non-dischargeable based on their punitive and rehabilitative nature. 593 F.3d at 1049, 1052–54. Like here, the attorney in that case was assessed a standard, preset charge and the actual costs of the proceedings. Id. at 1049. California law classifies these costs as "penalties, payable to and for the benefit of the State Bar of California, a public corporation created pursuant to Article VI of the California Constitution, to promote rehabilitation and to protect the public." Cal. Bus. & Prof. Code § 6086.10(e).

The Findley court concluded that California's classification of the costs was sufficient to render them non-dischargeable under § 523(a)(7). 593 F.3d at 1054. We determined that the § 6086.10 costs were not compensatory to the State Bar but rather "disciplinary costs" imposed only for "misconduct that merits public reproval, suspension or disbarment." Id . We thus agreed that the costs were "not compensation for actual pecuniary loss" under § 523(a)(7). Id .

Findley stands on all fours with this case. Because Findley ruled that attorney disciplinary costs under § 6086.10 are excepted from discharge, Albert's $18,714 debt to the State Bar is non-dischargeable.

Albert argues that Findley was wrongly decided given that disciplinary proceeding costs are based on the amount of time the State Bar expends, not on the attorney's underlying conduct—which fits more with compensation rather than punishment. Albert asks us to overrule Findley for this reason. This is a non-starter. Findley is binding precedent on this question, and we must follow it. See Koerner v. Grigas , 328 F.3d 1039, 1050 (9th Cir. 2003) ("[I]n the absence of intervening Supreme Court precedent, one panel cannot overturn another panel, regardless of how wrong the earlier panel decision may seem to be.") (quoting Hart v. Massanari , 266 F.3d 1155, 1171–72 (9th Cir. 2001).)2


Unlike attorney disciplinary proceeding costs, the dischargeability of discovery sanctions under California Code of Civil Procedure § 2023.030 is a matter of first impression in this court. As is...

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