Hale v. U.S. Trustee

• Decision Date: 10 December 2007
• Docket Number: No. 06-35349.,06-35349.
• Citation: 509 F.3d 1139
• Parties: Tom HALE, Appellant, v. U.S. TRUSTEE, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

509 F.3d 1139

Tom HALE, Appellant, v. U.S. TRUSTEE, Appellee.

No. 06-35349.

United States Court of Appeals, Ninth Circuit.

Submitted November 8, 2007.^*

Filed December 10, 2007.

Tom Hale, Shelly, ID, appellant in propria persona.

Gary L. McClendon, United States Department of Justice, Boise, ID, for the appellee.

Appeal from the United States District Court for the District of Idaho; Edward J. Lodge, District Judge, Presiding. D.C. No. CV-04-00289-EJL.

Before: WILLIAM C. CANBY, JR., SUSAN P. GRABER, and RONALD M. GOULD, Circuit Judges.

GRABER, Circuit Judge:

Appellant Tom Hale assisted Debtors Eric and Selina Jones in filing a bankruptcy petition. The bankruptcy court found that, in doing so, Hale failed to honor his legal and ethical obligations as their lawyer. The bankruptcy court denied Hale's motion requesting judicial recusal, denied his request for a jury trial on the reasonableness of his attorney fees, disgorged him of his attorney fees, and sanctioned him. The district court affirmed those rulings, and Hale timely appealed. On appeal, he raises only the attorney fees and sanction issues. We affirm.

FACTUAL AND PROCEDURAL HISTORY

Hale provided "PRE-FILING legal services" to Debtors pursuant to a signed disclosure agreement. For a $250 fee, he agreed to analyze Debtors' financial situation and prepare their bankruptcy petition and required exhibits, but disclaimed representing them at the meeting of creditors required under 11 U.S.C. § 341. In addition, the agreement specified that Hale's representation "d[id] not include the following services: Adversary proceedings, appeals, and/or conversions, non-dischargeability proceedings, or any other representation." Hale refers to this practice as providing "unbundled" legal services to "pro se" debtors.

In 2001, Debtors filed for bankruptcy pro se. Hale did not sign the petition. The bankruptcy petition listed the $250 fee paid to Hale and explained that the fee covered "preparation, assistance, pro se advice and counsel, pre-filing, to obtain discharge order, or confirmation of plan."

Shortly after Debtors filed their petition, the bankruptcy court ordered sua sponte that Hale account for the $250 fee. The order stated that "there is inadequate information in the record to allow the Court to determine whether amount received by Counsel is reasonable under the circumstances." The court requested an itemization of all services that Hale had rendered to Debtors, including "a detailed and specific description of each individual item of service rendered; the name of the individual who rendered each such service; the date such service was rendered; and the time expended in rendering such service."

A few days later, the United States Trustee issued a notice of intent to seek sanctions against Hale for his failure to sign the petition. The notice alleged that this omission violated Federal Rule of Bankruptcy Procedure 9011(a).

Hale submitted an itemization, but the bankruptcy court ruled that the itemization was "incomplete and not fully in compliance" with its order. The court explained that the itemization "use[d] a generic description of services with no detail." The court ordered that Hale supplement his itemization within 15 days.

About three weeks after the expiration of that 15-day period, Hale submitted a 15-page supplemental itemization. For most of the 15 pages, he took issue with the bankruptcy court's inquiry into his fee. For example:

This is not the first time that I have attempted to protect the debtors and myself from the judicial tyranny that flows from the chambers of a biased Judge.

. . . .

Judge Terry L. Myers has continued the tradition of Judge Pappas by ordering an accounting of more cases to determine subjectively if my legal services were worth $250.00 to the debtors. To provide the "necessary" legal services to debtors, needed to file a no asset Chapter 7 bankruptcy, an attorney must spend hours of his time, at an hourly rate of $125.00.

Hale then described each of the services rendered, but he did not provide "the name of the individual who rendered each such service."

The bankruptcy court ruled that Hale's supplemental itemization still was incomplete: "The Supplemental Itemization contains, at pp. 9-11, fifteen separate descriptions of services rendered, which are segregated by date and time. Counsel shall identify whether he personally performed each and every such service or whether some were performed by his staff and/or interns." The court required that Hale further supplement his itemization within 10 days.

Hale did not submit any additional itemizations. Instead, he filed a 28-page "Motion to Recuse, Vacate, and Amended [sic] Jury Trial Demand," wherein he accused Bankruptcy Judges Jim D. Pappas and Terry Myers of harboring bias against him and of casting the legal system into disrepute. He moved for recusal of Judge Myers and requested a jury trial on the issue of his $250 fee.

The bankruptcy court scheduled a hearing to examine Hale's compliance with its itemization orders. Hale then filed an 11-page "Motion to Recuse, Vacate Hearing, and Jury Trial Demand." The motion included six pages of unattributed hearsay accusations, in the form of stories and narratives, leveled at Judge Myers. Hale repeated his motion for Judge Myers to recuse himself, renewed his request for a jury trial on the issue of his $250 fee, and asked that the scheduled hearing be vacated. With regard to the latter, he argued that he was unable to attend the hearing because he was working as a professor and because Judge Myers should recuse himself.

The hearing remained on the docket as scheduled. Hale did not attend, and the bankruptcy court continued the matter for further briefing. The court gave the U.S. Trustee three weeks to respond to Hale's motions and gave Hale 10 days to respond to the U.S. Trustee's brief once filed. The U.S. Trustee filed a brief, but Hale did not file a reply.

Thereafter, the bankruptcy court published a Memorandum of Decision. In re Jones, No. 01-02853, 2002 WL 818275 (Bankr.D.Idaho Apr. 4, 2002). In it, the court denied Hale's motion for judicial recusal. Id. at *5. The court ruled that Hale had tendered only rumors, innuendos, and unsupported allegations in support of his motion, which are insufficient to warrant recusal under 28 U.S.C. § 455(a). Jones, 2002 WL 818275, at *4-5. The court also denied Hale's request for a jury trial, citing In re Rheuban, 121 B.R. 368 (Bankr. C.D.Cal.1990), and In re Rheuban, 128 B.R. 551 (Bankr.C.D.Cal.1991). Jones, 2002 WL 818275, at *6.

The bankruptcy court then scheduled a status conference to set a briefing schedule on the reasonableness of Hale's fee. On the morning the conference was to take place, Hale faxed the bankruptcy court a note: "Please accept my apology for not being able to attend the Status Conference scheduled for 3:00 p.m., today. I left class feeling extremely disoriented and I was forced to seek medical assistance." The bankruptcy court vacated the hearing and rescheduled the status conference for a date nearly three months later.¹ All parties attended the rescheduled conference, at which the court established a discovery time line and scheduled a hearing on Hale's fee.

The U.S. Trustee filed an amended motion for sanctions against Hale, stemming from his representation of Debtors. In its motion, the U.S. Trustee alleged that Hale failed to sign Debtors' bankruptcy petition in violation of Federal Rule of Bankruptcy Procedure 9011(a); failed to provide Debtors with legal representation covering the normal, ordinary, and fundamental aspects of their case; failed to obtain Debtors' informed consent to limit his representation of them; and failed to create accurate and complete documents for filing in Debtors' case. The U.S. Trustee asked that the bankruptcy court disgorge all attorney fees Debtors had paid to Hale, that Hale reimburse Debtors for all costs and expenses incurred in connection with their bankruptcy case, and that the court order Hale to sign all bankruptcy petitions of future debtor-clients and represent them in all normal, ordinary, and fundamental aspects of their cases, including attendance at the 11 U.S.C. § 341 meeting of creditors. The motion argued that sanctions were authorized under 11 U.S.C. §§ 105(a), 307, and 329; Federal Rules of Bankruptcy Procedure 2016(b) and 9011; Idaho Rules of Professional Conduct 1.2(c) and 1.4(b); "and the inherent authority of the court to sanction bad faith conduct." The bankruptcy court scheduled the hearing on the motion for sanctions concurrent with the attorney fees hearing.

Next, the U.S. Trustee filed a notice of intent to call witnesses at the upcoming hearing. Two days before the hearing, Hale filed a "Motion to Dismiss, Response to Amended Motions, Request for Sanctions, Offer of Proof, and Renewed Request for a Jury Trial." In his motion, Hale wrote a four-page notice to Debtors in which he accused the bankruptcy court of impropriety and the Debtors' current counsel of incompetent and unethical behavior. He then renewed his motion for a jury trial and stated: "I will be in Salt Lake City, Utah on the day of this hearing and I intend to rest on the pleadings. My presence is not mandated or necessary to the adjudication of the issues, in my opinion."

The bankruptcy court held the hearing, as scheduled, on Hale's attorney fees in Debtors' bankruptcy case. Hale did not attend.

The bankruptcy court subsequently issued a second Memorandum of Decision. The court summarized that, at the hearing, Debtor Selina Jones testified that Hale never informed her or her husband about the § 341 meeting of creditors or his intention not to appear at the meeting. When Hale sent Debtors the disclosure agreement, he told them to read over the papers but did not mention the section of the disclosure that states that he would not appear at the meeting. She further

testified that she did not and does...