In re Lehtinen
| Decision Date | 28 April 2009 |
| Docket Number | No. 05-17421.,05-17421. |
| Citation | 564 F.3d 1052 |
| Parties | In the Matter of Patricia Ann LEHTINEN, Debtor, Jim G. Price, Appellant, v. Patricia Ann Lehtinen; Martha Bronitsky, Chapter 13 Standing Trustee; United States Trustee, Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Jim G. Price, Appellant,
v.
Patricia Ann Lehtinen; Martha Bronitsky, Chapter 13 Standing Trustee; United States Trustee, Appellees.
[564 F.3d 1055]
Jim Price, Brentwood, CA, for the appellant.
Appeal from the Ninth Circuit Bankruptcy Appellate Panel Brandt, Marlar, and Smith, Bankruptcy Judges, Presiding. BAP No. NC-04-01534-BMaS.
Before: D.W. NELSON, Senior District Judge, W. FLETCHER and RICHARD C. TALLMAN, Circuit Judges.
D.W. NELSON, Senior District Judge:
Appellant Jim Price appeals the Bankruptcy Appellate Panel's ("BAP") decision affirming the bankruptcy court's order suspending him. We affirm.
In October or November 2003, debtor Patricia Lehtinen ("debtor") retained Jim
Price to represent her in a chapter 13 proceeding. Debtor was primarily concerned with selling her house to repay certain debts.
Debtor's petition was filed before the U.S. Bankruptcy Court, Northern District of California. On February 19, 2004, debtor attended the 11 U.S.C. § 341 meeting of the creditors. Price did not attend this meeting and sent a contract attorney instead. Debtor alleges that Price failed to inform her that he would not attend.
Price also referred debtor to Rene Boisvert of Boulevard Equity Group so that debtor could obtain a loan to fix up her house. Boisvert told debtor that Boulevard would lend her the funds and pay off the first deed of trust on her house, and that Boulevard would be repaid from the proceeds of the sale, but only if debtor retained Price as a broker for the sale. Debtor never completed the loan documents, and sold her house through another realtor without informing Price.
The trustee served notice of a June 3, 2004, confirmation hearing on Price and debtor. Debtor called the trustee's office in April 2004, and was advised that she had until the confirmation hearing to either sell her home, refinance her home, or amend her plan. She was also advised that she was required to attend the hearing. According to debtor, this was the first time she had heard of the confirmation hearing because Price had failed to notify her.
Price did not appear at the June 3, 2004, confirmation hearing. At the request of another client, he had agreed to appear in another court even though he knew it conflicted with the confirmation hearing. He did not request a continuance of either hearing. Debtor attended the confirmation hearing alone, and informed the court that her house was pending sale. The court confirmed the plan with a 100% payout to unsecured creditors.
Without checking the outcome of the confirmation hearing, Price sent a letter to debtor on June 4, 2004, stating that her case had been dismissed, that he could refile another case for her or help her to sell the house, and that the bank could proceed with the foreclosure on her house. Price admits that sending the letter was a "mistake." He assumed the case had been dismissed because he missed the hearing and because debtor was behind on her payments to the trustee. Price testified that he sent the letter "to urge ... [debtor] to do something."
On June 10, 2004, the bankruptcy court issued an order to show cause why Price should not disgorge all or part of his $1,500 fee for failure to appear at the meeting of the creditors and the confirmation hearing (hereinafter "First OSC"). On July 7, 2004, the bankruptcy court held a hearing on these issues. On July 8, 2004, it entered an order resolving both absences by ordering Price to disgorge $300 of the $1,500 fee.
After the hearing, but before the issuance of the order, debtor sent a letter to the bankruptcy court stating: (1) that Price never informed her of the confirmation hearing date; (2) that she learned of the hearing date from the trustee; (3) that Price was a real estate broker and pressured debtor to list her house with his brokerage firm; and (4) that Price referred debtor to his friend for a home improvement loan, who had conditioned the loan on her engaging Price as her broker. Debtor also attached the June 4, 2004, letter from Price.
Based on debtor's letter, the bankruptcy court issued a second order to show cause "why ... [Price] should not be sanctioned pursuant to this court's inherent sanction power ... for bad faith conduct," and
"why he should not be suspended or disbarred from practice in this court" (hereinafter "Second OSC"). The Second OSC identified four instances of alleged misconduct: (1) Price's failure to attend and to inform debtor of her confirmation hearing; (2) the pressuring of debtor to list her house for sale with his brokerage firm; (3) the lender's condition of retaining Price as the broker for the loan transaction; and (4) his letter to debtor falsely informing her that her bankruptcy case had been dismissed and that a foreclosure sale was imminent. The Second OSC also stated that "the facts point to a clear conflict of interest between Mr. Price acting as the debtor's lawyer, soliciting the debtor to use his services as a real estate broker, and serving as a loan broker." Moreover, it described the evidence required regarding the sanctionable conduct. The Second OSC, however, did not identify applicable rules or sections.
The bankruptcy court held the Second OSC hearing on July 26, 2004. On October 22, 2004, it ordered Price to disgorge the balance of the $1,500 fee and suspended him from practicing before the bankruptcy court of the Northern District of California for three months. It concluded that Price violated several parts of the California Rules of Professional Conduct and the California Business & Professions Code.
On October 29, 2004, Price filed an appeal and obtained a stay of the suspension with the BAP. On October 11, 2005, the BAP concluded that the bankruptcy court "was within its authority in sanctioning Price, and afforded him due process," but vacated the suspension and remanded to the bankruptcy court for consideration of the American Bar Association Standards in disciplining Price. Price v. Lehtinen (In re Lehtinen), 332 B.R. 404, 417 (9th Cir. BAP 2005).
On November 10, 2005, Price appealed to this court. No answering brief was filed.
We have jurisdiction over "final decisions" of the BAP under 28 U.S.C. § 158(d). Although there is some question as to the finality of the BAP's decision because the BAP vacated the portion of the bankruptcy court's order suspending Price and remanded for further proceedings, see Foothill Capital Corp. v. Clare's Food Mkt., Inc. (In re Coupon Clearing Serv., Inc.), 113 F.3d 1091, 1098 (9th Cir. 1997), we have jurisdiction over a non-final order in a bankruptcy case where "the appeal concerns primarily a question of law," DeMarah v. United States (In re DeMarah), 62 F.3d 1248, 1250(9th Cir. 1995); accord Bonner Mall P'ship v. U.S. Bancorp Mortgage Co. (In re Bonner Mall P'ship), 2 F.3d 899, 904(9th Cir.1993), cert. granted, 510 U.S. 1039, 114 S.Ct. 681, 126 L.Ed.2d 648 (1994), dismissed as moot, 513 U.S. 18, 29, 115 S.Ct. 386, 130 L.Ed.2d 233 (1994). This case concerns the bankruptcy court's power to sanction. Because this is a purely legal question, we have jurisdiction. See Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1187 (9th Cir.2003).
Although Price argues that the proceeding is non-core, the acts and events upon which his suspension was predicated occurred in the course of his representation of debtor in matters central to the administration of her case. As such, the disciplinary hearing fits well within the ambit of a core proceeding. 28 U.S.C. § 157(b)(2)(A).1
"This court independently reviews the bankruptcy court's rulings on appeal from the BAP." Miller v. Cardinale (In re DeVille), 361 F.3d 539, 547 (9th Cir.2004). "This court reviews an award of sanctions for an abuse of discretion." Id. Due process challenges are reviewed de novo. Willamette Waterfront, Ltd. v. Victoria Station Inc. (In re Victoria Station Inc.), 875 F.2d 1380, 1382 (9th Cir. 1989). A court's interpretation and application of a local rule is reviewed for abuse of discretion. United States v. Heller, 551 F.3d 1108, 1111(9th Cir.2009).
Price argues the BAP's decision should be reversed because: (1) the bankruptcy court lacked the power to suspend him; (2) he was not accorded due process; and (3) the bankruptcy court abused its discretion by failing to follow N.D. Cal. Civ. R. 11-6. We address each argument in turn.
I. The Bankruptcy Court's Inherent Power to Suspend Attorneys
Bankruptcy courts generally have the power to sanction attorneys pursuant to (1) their civil contempt authority under 11 U.S.C. § 105(a); and (2) their inherent sanction authority. Dyer, 322 F.3d at 1192-93, 1196. The bankruptcy court sanctioned Price under its "inherent sanction powers."
In Chambers v. NASCO, Inc., the Supreme Court held that the inherent power of a federal court permits it, inter alia, "to control admission to its bar and to discipline attorneys who appear before it." 501 U.S. 32, 43, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991). In Caldwell v. Unified Capital Corp. (In re Rainbow Magazine, Inc.), this court held that bankruptcy courts also "have the inherent power to sanction that Chambers recognized exists within Article III courts." 77 F.3d 278, 284 (9th Cir.1996). Although a simple reading of both Chambers and Caldwell suggests that the bankruptcy court has the power to suspend attorneys, this court's subsequent cases have limited the scope of the bankruptcy court's inherent power, see, e.g., Dyer, 322 F.3d at 1197, warranting further analysis.
A bankruptcy court's inherent power allows it to sanction "bad faith" or "willful misconduct," even in the absence of express statutory authority to do so. Id. at 1196. It also...
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