Wednesday, April 29, 2009
Court Upholds Disgorgement Sanctions, Suspension of Brentwood Attorney
By SHERRI M. OKAMOTO, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday upheld a bankruptcy court order requiring Brentwood attorney Jim G. Price to disgorge fees paid to him and temporarily suspending him from practicing before the bankruptcy court of the Northern District of California.
Although the Bankruptcy Appellate Panel vacated the suspension, the Ninth Circuit concluded it had jurisdiction over Price’s appeal and that the bankruptcy court had acted within its inherent sanction powers in ordering the attorney suspended.
Price, who could not be reached for comment, was retained by Patricia Lehtinen to represent her in a chapter 13 proceeding in which she sought to sell her home in order to repay certain debts.
Price filed her petition with the U.S. Bankruptcy Court of the Northern District of California, but subsequently failed to attend a creditors meeting, sending a contract attorney in his stead. Lehtinen claimed that Price had not informed her that he would not personally attend the meeting.
She also claimed that Price had referred her to Rene Boisvert of the Boulevard Equity Group to obtain a loan in order to make repairs to the house. Lehtinen said that Price told her that Boulevard would make the loan, pay off the first deed of trust on her house, and be repaid from the proceeds of the sale if she retained him as the broker for the sale.
Lehtinen never completed the loan documents, and sold her house through another realtor without informing Price.
In April 2004, Lehtinen said she called the bankruptcy trustee and learned for the first time that she was required to attend a confirmation hearing scheduled for June 3.
Price did not attend the June 3 hearing, and the bankruptcy court issued an order to show cause why the attorney should not disgorge all or part of his $1,500 fee for failing to appear at the creditor meeting and confirmation hearing. The bankruptcy court subsequently ordered Price to disgorge $300 of his fee.
Letter to Court
After the hearing, but before the issuance of the order, Lehtinen sent a letter to the bankruptcy court stating that Price had never informed her of the confirmation hearing date, and accusing the attorney of pressuring her to list her home for sale with his brokerage firm.
She also attached a copy of a letter from Price, dated June 4, which informed her that her case had been dismissed at the confirmation hearing and foreclosure was imminent. In the letter, Price offered to re-file her case or assist her in selling her home.
Based on Lehtinen’s letter, the bankruptcy court issued a second order to show cause to show why Price should not be sanctioned “pursuant to this court’s inherent sanction power…for bad faith conduct.”
Price admitted that sending the letter was a “mistake,” based on his assumption that the case had been dismissed because he had missed the hearing and Lehtinen was behind on her payments to the trustee.
The bankruptcy court subsequently found that Price violated several parts of the California Rules of Professional Conduct and the California Business and Professions Code, ordered Price to disgorge the balance of his $1,500 fee, and suspended him from practicing before the bankruptcy court of the Northern District of California for three months.
Price filed an appeal with the BAP, which held that the bankruptcy court was within its authority in sanctioning Price, but vacated the suspension and remanded to the bankruptcy court for consideration of the American Bar Association Standards in disciplining Price.
Even though the BAP vacated his suspension, Price appealed the decision, challenging the bankruptcy court’s authority to suspend him and contending he was not afforded due process.
Writing for the appellate court, Senior Judge Dorothy W. Nelson explained that the federal appellate courts only have jurisdiction over “final decisions” of the BAP.
Although she acknowledged “some question as to the finality of the BAP’s decision,” Nelson noted that the appellate court also has jurisdiction over non-final orders in bankruptcy cases where the appeal “concerns primarily a question of law.” As the bankruptcy court’s power to sanction is a purely legal question, Nelson reasoned that the appellate court had jurisdiction.
Bankruptcy Court’s Power
Citing Chambers v. NASCO, Inc., (1991) 501 U.S. 32—which held that the inherent power of a federal court permits it “to control admission to its bar and to discipline attorneys who appear before it”—and Caldwell v. Unified Capital Corp. (In re Rainbow Magazine, Inc.), (1996) 77 F.3d 278—which held that the power to sanction recognized in Chambers also applied to Article III courts—Nelson explained that the bankruptcy court has the power to suspend attorneys.
While an attorney subject to such discipline is entitled to procedural due process, Nelson concluded that Price had been afforded notice and a right to be heard in the second order to show cause and hearing.
Judges William A. Fletcher and Richard C. Tallman joined Nelson in her decision.
The attorney, a graduate of UC Berkeley and the UC Hastings School of Law, already has a record of discipline with the State Bar.
After being admitted in 1985, Price received a public reproval in June 2007 for accepting compensation from the buyer in a real estate transaction for his work assisting the seller with a quiet title action in order to finalize the sale without obtaining the seller’s informed written consent to the payment arrangement.
The case is In the Matter of Lehtinen, 05-17421.
Copyright 2009, Metropolitan News Company