Commonwealth of VA ex rel. Va. State Bar v. Francis (In re Francis)
| Decision Date | 01 December 2022 |
| Docket Number | 22-11929-BFK,Adversary Proceeding 22-01008-BFK |
| Parties | In re: ERNEST PAUL FRANCIS, Debtor. v. ERNEST PAUL FRANCIS, Defendant. COMMONWEALTH OF VA, ex rel., VIRGINIA STATE BAR, Plaintiff, |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Eastern District of Virginia |
Commonwealth of Virginia ex rel. Virginia State Bar Plaintiff.
Robert B. McEntee, Jr., Esq. Counsel for Plaintiff.
Ernest Paul Francis Pro se Defendant.
This Opinion addresses whether costs assessed by the Virginia State Bar ("the State Bar") in a disciplinary proceeding against the Debtor, a former attorney, are excepted from the Debtor's discharge under Bankruptcy Code Section 523(a)(7). The Court finds that, with the exception of the State Bar's Administrative Fee, the costs are dischargeable. Accordingly, the Court will grant the Debtor partial summary judgment on Count I of the State Bar's Complaint, and will grant the State Bar partial summary judgment on Count I as to its Administrative Fee.
The Court finds that the following facts are not genuinely contested.
1. The Plaintiff is the Virginia State Bar.
2. The Defendant, Ernest Paul Francis ("the Defendant," or "the Debtor"), was a member of the Virginia State Bar.
3. On January 12, 2021, the Defendant consented to a revocation of his license to practice law in the Commonwealth of Virginia, effective March 23, 2021. Complaint at Ex. A, 1, Docket No. 1; Answer at 1, Docket No. 18.
4. On January 14, 2021, the Clerk of the State Bar assessed costs against the Defendant pursuant to Part 6, Sec. IV, Rule 13-9(E) in connection with the disciplinary proceedings. Complaint at Ex. B; Answer at 2.
6. In February 2021, the State Bar agreed to a payment plan with the Defendant. Complaint at Ex. C; Answer at 1.
7. Pursuant to the terms of the payment plan, the Defendant made two payments, totaling $1,664.00. The balance of the costs now stands at $3,297.98. Complaint at 3; Answer at 1.
8. The Defendant filed a Voluntary Petition under Chapter 7 with this Court on November 24, 2021. Case No. 21-11929.
9. The Debtor received a discharge in his case on September 7, 2022, subject to any applicable exceptions. Docket No. 83.
10. The State Bar timely filed a Complaint commencing this adversary proceeding on February 25, 2022. Docket No. 1.
The Court has jurisdiction over this matter pursuant to 28 U.S.C § 1334 and the Order of Reference entered by the U.S. District Court for this District on August 15, 1984. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) (determinations as the dischargeability of particular debts).[1]
Summary judgment is appropriate where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Bankr.P. 7056 (incorporating Fed. R. Civ. Pro. 56(a)). The moving party has the initial burden of showing that there are no material facts in dispute, and that it is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986). When the moving party has met its initial burden, the burden then shifts to the nonmoving party to present specific facts demonstrating that there is a genuine issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-84 (1986). Whether a fact is material or not depends on the substantive law at issue in the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Id.
Summary judgment "is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed 'to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp., 477 U.S. at 327, quoting Fed.R.Civ.P. 1.
Section 523(a)(7) provides an exception to the debtor's discharge for debts "to the extent such debt is 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). The State Bar is an administrative agency of the Virginia Supreme Court. Va. Code § 54.1-2910. The Debtor does not contest that the State Bar is a governmental unit. The Court, therefore, will address the other two elements of: (a) whether the debt is a "fine, penalty or forfeiture;" and (b) whether the debt is "compensation for actual pecuniary loss." 11 U.S.C. § 523 (a)(7).
The State Bar's Complaint contains two Counts. Complaint, Docket No. 1. Count I is a claim for a declaration of non-dischargeability as to the State Bar's costs. Id. at 2. Count II is a claim for a declaration of non-dischargeability for funds paid to one of the Debtor's former clients under the Client Protection Fund. Id. at 3-4. At the hearing on November 15, 2022, counsel for the State Bar advised the Court that the State Bar could not locate the former client and, therefore, had not paid anything to the former client. Counsel for the State Bar advised the Court that the State Bar would be seeking a dismissal of Count II under Bankruptcy Rule 7041. Accordingly, this Opinion addresses only the costs assessed by the State Bar in connection with the Debtor's disciplinary proceedings. The Court does not address the dischargeability of funds paid by the State Bar pursuant to the Client Protection Fund, a subject about which there is some disagreement in the case law. Compare Kassas v. State Bar of California (In re Kassas), 49 F.4th 1158 (9th Cir. 2022) (), with In re Young, 577 B.R. 227 (Bankr. W.D. Va. 2017) ().
The Court will address the remaining two elements of non-dischargeability under § 523(a)(7), below.
The Court will first address whether the costs assessed are a fine, penalty, or forfeiture. In Virginia, the Clerk is required to assess costs against attorneys against whom discipline is imposed or who consent to a revocation. Virginia State Bar Professional Guidelines, 13-9 Clerk of the Disciplinary System (2019), https://www.vsb.org/pro-guidelines/index.php/bar-govt/procedure-for-disciplining-suspending-and-disbarring-attorneys/13-9/. The term "costs" is defined as follows:
"Costs" means reasonable costs paid by the Bar to outside experts, consultants, or guardians ad litem in a proceeding conducted pursuant to subparagraph 13-22; reasonable travel and out-of-pocket expenses for witnesses; Court Reporter and transcript fees; electronic and telephone conferencing and recording costs, if such procedures are requested by Respondent; copying, mailing, and required publication costs; translator fees; and an administrative charge determined by Council.
Virginia State Bar Professional Guidelines, 13-1 Definitions (2021), https://www.vsb.org/pro-guidelines/index.php/bar-govt/procedure-for-disciplining-suspending-and-disbarring-attorneys/13-1.
In Kelly v. Robinson, the Supreme Court held that restitution obligations imposed as a part of a criminal sentence constitute fines, penalties, or forfeitures, and are not dischargeable under § 523(a)(7). 479 U.S. 36 (1986). The Court was primarily concerned with non-interference by bankruptcy courts in State criminal proceedings. See id. at 361 () The Court found that the restitution obligation at issue in Kelly was designed for the protection of society as a whole, and that it served the twin goals of punishment and rehabilitation of the offender. Id. at 52.
Most other courts have found costs imposed by state bar associations in connection with disciplinary proceedings to be fines, penalties, or forfeitures within the meaning of § 523(a)(7). In re Kassas, 49 F.4th at 1166; and see Osicka v. Off. of Law. Regul., 25 F.4th 501, 506 (7th Cir. 2022) (); In re Feingold, 730 F.3d 1268, 1274-75 (11th Cir. 2013); see In re Findley, 593 F.3d 1048 (9th Cir. 2009); Richmond v. N.H. Sup. Ct. Comm. on Pro. Conduct, 542 F.3d 913 (1st Cir. 2008); In re Smith, 317 B.R. 302 (Bankr. D. Md. 2004).
The Debtor relies heavily on the case of Gonzalez v Sessions. 894 F.3d 131 (4th Cir. 2018). Gonzalez did not involve § 523(a)(7). Rather, the case addressed whether $100 in court costs assessed against an individual in State court for a marijuana possession conviction constituted a "conviction" for purposes of the Immigration and Naturalization Act ("the Act"). Id. at 134. The term conviction is defined in the Act as "some form of punishment, penalty or restraint on the alien's liberty." Id. at 136, quoting 8 U.S.C. § 1101(a)(48)(A). The Fourth Circuit held that a monetary assessment is a punishment or a penalty "if it is primarily intended to serve a punitive purpose - that is, if a judge orders the monetary assessment to advance a punitive goal tethered to the...
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