Metropolitan News-Enterprise


Tuesday, February 2, 2010


Page 5


Ninth Circuit Rules Attorney Discipline Costs Not Dischargeable


By SHERRI M. OKAMOTO, Staff Writer


A suspended Ventura attorney’s Chapter 7 bankruptcy did not discharge his $14,000 debt to the State Bar for the costs of his 2005 disciplinary proceedings, the Ninth U.S. Circuit Court of Appeals ruled yesterday.

The court held that amendments to Business and Professions Code Sec.6086.10 in 2003 sufficiently rendered attorney discipline costs imposed by the California State Bar Court exempt from forgiveness in bankruptcy, reversing a ruling by the circuit’s Bankruptcy Appellate Panel.

John William Findley III, who joined the State Bar in 1991, was disciplined in 2005 for failing to perform legal services competently, communicate with clients or obey court orders, and placed on probation for two years with an actual suspension of 30 days.

The State Bar assessed a fee of $13,463 to cover the cost of his disciplinary proceedings, plus $406.80 for the cost of certifying court documents, $128.25 for the cost of transcripts, and $56.89 for witness fees.

Sec. 6086.10(a) mandates such an assessment, absent proof of hardship, when an attorney has been disciplined, and Sec. 6140.7 requires payment as a prerequisite to reinstatement.

Findlay filed for Chapter 7 bankruptcy and received a discharge of his debts while his discipline case was pending before the State Bar Court’s Review Department. He then argued that his bankruptcy discharge excused payment of the disciplinary cost award and sought reinstatement.

The State Bar, however, contended in proceedings before the bankruptcy court that 11 U.S.C. § 523(a)(7) excepted the award from discharge. The statute excepts a debt from discharge “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.”

The bankruptcy court ruled that the award was non-dischargeable and granted summary judgment for the State Bar, but the BAP reversed, relying on the Ninth Circuit’s 2001 ruling in State Bar of California v. Taggart 249 F.3d 987.

There, the Ninth Circuit held that attorney disciplinary costs imposed under a previous version of Sec. 6086.10 were eligible for discharge since the Legislature did not intend cost awards as punishment, and enacted the statute in order to create the possibility of fines in the context of attorney disciplinary proceedings

In response to Taggart, the Legislature amended the California Business and Professions Code in 2003 to add subsection (e), which specifies that “costs imposed pursuant to this section are penalties, payable to and for the benefit of the State Bar of California…to promote rehabilitation and to protect the public.”

Writing for the Ninth Circuit, Judge David R. Thompson explained that the plain language of the 2003 amendment “strongly suggests that the California legislature disagreed with the Taggart court’s inferences about its intent in enacting Sec. 6086.10.”

The jurist reasoned that the amendment “undermines the result in Taggart” insofar as it clarified the Legislature’s intent in imposing attorney disciplinary costs in the prior version of the statute, and expressly stated that lawmakers enacted attorney disciplinary costs to serve penal and rehabilitative ends.

Judge Sidney R. Thomas and Senior U.S. District Judge Ann Aldrich of the Northern District of Ohio, sitting by appointment, joined Thomas in his decision.

Findlay was disciplined again in 2008, placed on another two years of probation with 90 days of actual suspension and suspended until he paid sanctions. He remains ineligible to practice law, according to the State Bar website.

The case is In re Findlay, 08-60024.


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