In re Disciplinary Proceedings

• Decision Date: 16 August 2002
• Docket Number: Adversary No. 00-1140-JMD.,BAP No. NH 01-076.,BAP No. NH 02-005.
• Citation: 282 B.R. 79
• Parties: In re DISCIPLINARY PROCEEDINGS. William C. Sheridan, Defendant/Appellant, v. Nancy H. Michels, Plaintiff/Appellee.
• Court: U.S. Bankruptcy Appellate Panel, First Circuit

Page 79

282 B.R. 79

In re DISCIPLINARY PROCEEDINGS.

William C. Sheridan, Defendant/Appellant, v. Nancy H. Michels, Plaintiff/Appellee.

BAP No. NH 01-076.

BAP No. NH 02-005.

Adversary No. 00-1140-JMD.

United States Bankruptcy Appellate Panel, First Circuit.

August 16, 2002.

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William C. Sheridan, Londonderry, NH, pro se.

Nancy H. Michels, Carole A. Mansur, Londonderry, NH, on brief for appellee.

Before HAINES, ROSENTHAL, & KORNREICH, U.S. Bankruptcy Appellate Panel Judges.

OPINION

PER CURIAM.

INTRODUCTION

This matter comes before us on consolidated appeals from two orders of the United States Bankruptcy Court for the District of New Hampshire (the "Bankruptcy Court"). The first (the "Suspension Order") suspended the Appellant, William C. Sheridan ("Sheridan"), from practicing law before the Bankruptcy Court for a period of one (1) year. The second (the "Fee Order") awarded fees and costs incurred by special counsel, Nancy H. Michels ("Special Counsel"), in investigating and prosecuting the disciplinary action. The Bankruptcy Court entered the Suspension Order after trial, having found that Sheridan had committed at least eighty-eight (88) violations of New Hampshire Rules of Professional Conduct ("NHRPC") 1.1 and 1.15 while serving as counsel for various debtors in bankruptcy cases. Sheridan argues, among other things, that the Bankruptcy Court did not have jurisdiction to commence a disciplinary investigation against him or to suspend him from practice. As to the Fee Order, Sheridan argues that Special Counsel's fees and expenses were unreasonable, that the Bankruptcy Court lacked authority to make the award, and that it could not properly condition his reinstatement on payment (or, more accurately, reimbursement) of the award.

For the reasons set forth below, we affirm.

BACKGROUND

On June 21, 2000, the Bankruptcy Court, through Chief Judge Vaughn, appointed Special Counsel to investigate Sheridan's possible violation of NHRPC Rules 1.1 and 1.15. As a result of her investigation, on September 20, 2000, she submitted a report to Judge Vaughn recommending that a disciplinary proceeding be initiated. Judge Vaughn granted Special Counsel leave to institute the proceeding. On October 30, 2000, she filed an adversary proceeding complaint requesting that Sheridan be disciplined. Prior to trial, the parties entered into a stipulation in which Sheridan admitted many of the complaint's factual allegations.

A. The Suspension Order.

On October 12, 2001, several months following trial, the Bankruptcy Court issued its order suspending Sheridan from practicing before the Bankruptcy Court for a period of one (1) year. The Bankruptcy Court found that during a twenty (20) month period between January 13, 1999 and September 29, 2000, Sheridan committed at least eighty-eight (88) violations of NHRPC. 1.1 and 1.15.¹ See Michels v. Sheridan, 2001 WL 1757058, *23, 2001 Bankr.LEXIS 1383, *69 (Bankr.D.N.H.2001). The violations included (i) failure to file certificates of service for Chapter 13 plans, (ii) failure to file answers to motions to dismiss or convert, (iii) failure to timely file documents, (iv) failure to properly review and advise a client regarding a reaffirmation agreement, (v) failure to pay proper attention to details, (vi) failure to segregate clients' property from his own, (vii) failure to keep proper records, and (viii) failure to notify the client and deliver to the client property that the client was entitled to receive. These violations involved thirty (30) clients in thirty-three (33) separate cases, plus at least five (5) additional infractions committed during the course of the disciplinary proceeding.² The Bankruptcy Court found that Sheridan had demonstrated a continuing unwillingness or inability to competently provide services to his clients and meet his professional obligations. Id. at *23. The Bankruptcy Court also noted Sheridan had admitted allegations which "at best show a repeated pattern of conduct involving inattention to and neglect in handling client matters." Id. at *23. Accordingly, the Bankruptcy Court determined it was necessary to impose sanctions.

In fixing the appropriate sanctions, the Bankruptcy Court concluded that, due to Sheridan's pattern of repeated violations of his obligation to handle client matters competently as required by NHRPC 1.1, he had demonstrated that he was not currently fit to practice law in the Bankruptcy Court, and that he was not immediately capable of improving his conduct. Id. Accordingly, in order to protect the public and the administration of justice, the Bankruptcy Court suspended Sheridan from practicing law before it for a period of one (1) year.³

The Bankruptcy Court also ordered that prior to Sheridan's reinstatement, application for which could not be made any sooner than after six (6) months, Sheridan would be required to establish that (i) he is a member in good standing of the bar of the United States District Court for the District of New Hampshire (the "District Court"), (ii) he will be able to competently represent the interests of his clients before the Bankruptcy Court, and (iii) he has reimbursed the government for the cost of the proceedings by paying to the Clerk of the District Court the amount of fees and expenses awarded to Special Counsel. Id. at *24. The Bankruptcy Court authorized Special Counsel to submit an application seeking payment of fees and expenses earned and incurred in the course of her service.

Subsequently, Sheridan filed three separate motions for reconsideration, primarily arguing that the Bankruptcy Court did not have jurisdiction to hear the matter and that the Suspension Order violated the Rehabilitation Act and the Americans with Disabilities Act because the Bankruptcy Court premised its finding of professional misconduct on conduct arising out of Sheridan's alleged disability. The Bankruptcy Court denied each of the three motions.

B. Fee Order.

Consistent with the Bankruptcy Court's directions, Special Counsel filed her Final Application For Approval Of Fees Pursuant To Court Order (the "Fee Application"), seeking $30,377.50 in fees and expenses for work performed by her and others in her firm in connection with the disciplinary proceeding. Appended was a detailed statement setting forth the services rendered and the hours spent on the case. On November 29, 2001, the day of the hearing on the Fee Application, Sheridan filed a late objection,⁴ arguing, among other things, that the Bankruptcy Court lacked jurisdiction to enter a fee award and that Special Counsel's fees were unreasonable.

On December 27, 2001, the Bankruptcy Court entered the Fee Order. It rejected Sheridan's jurisdictional argument, noting that Sheridan was rehashing the same arguments as he had previously raised in opposition to the Suspension Order. It concluded that Special Counsel's fees were reasonable, awarding her fees and expenses totaling $30,377.50.⁵

On January 8, 2002, the Bankruptcy Court entered a supplemental order directing the Clerk to pay the approved fees to Special Counsel as follows: two payments in the amount of $10,125.83 each, payable on or before March 1, 2002 and June 1, 2002 and a final payment in the amount of $10,125.84 payable on or before September 1, 2002.

Subsequently, Sheridan moved for reconsideration of the Fee Order, arguing that the Bankruptcy Court did not have the power to compensate Special Counsel out of court funds. The Bankruptcy Court denied the motion, concluding that Sheridan had presented no authority for the proposition that the Bankruptcy Court could not award such fees and order their payment, nor had he demonstrated that the Bankruptcy Court had made a manifest error of law in connection with the fee issues.

ISSUES ON APPEAL

Sheridan asserts, among other things, that the Bankruptcy Court was without jurisdiction to commence a disciplinary investigation or to suspend him from practicing before it as a result of that investigation. In addition, he argues that the fees and expenses awarded to Special Counsel in connection with the disciplinary proceeding were unreasonable, that the Bankruptcy Court did not have authority to award Special Counsel her fees and expenses, and that the Bankruptcy Court could not properly condition Sheridan's reinstatement upon payment of the fees and expenses awarded to Special Counsel.

APPELLATE JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel has appellate jurisdiction over final bankruptcy court orders pursuant to 28 U.S.C. § 158. The clearly erroneous standard applies to review of factual findings; de novo review to conclusions of law. See, e.g., Prebor v. Collins (In re I Don't Trust), 143 F.3d 1, 3 (1st Cir.1998); Brandt v. Repco Printers & Lithographics, Inc. (In re Healthco Int'l, Inc.), 132 F.3d 104, 107 (1st Cir.1997); TI Fed. Credit Union v. DelBonis, 72 F.3d 921, 928 (1st Cir.1995). Subject matter jurisdiction is a legal issue and, thus, is reviewed de novo. See Sunshine Dev., Inc. v. FDIC, 33 F.3d 106, 110 (1st Cir.1994) (question of lower court's jurisdiction presents pure question of law subject to de novo review); Balzotti v. RAD Investments, 273 B.R. 327 (D.N.H.2002) (de novo review of bankruptcy court's jurisdictional rulings).

Orders imposing sanctions are reviewed for abuse of discretion. Peugeot v. United States Trustee (In re Crayton), 192 B.R. 970 (9th Cir. BAP 1996). Appellate courts accord substantial respect to the trial court's informed discretion on fee issues and will disturb such a fee award only for mistake of law or abuse of discretion. Coutin v. Young & Rubicam Puerto Rico, Inc., 124 F.3d 331 (1st Cir.1997). An abuse of discretion occurs "when a material factor deserving significant weight is ignored, when an improper factor is relied upon, or when all proper and no improper factors are assessed, but the court makes a serious mistake in...