Lawyer Who Filed Petition Without Authority Is Barred From Local Bankruptcy Practice
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals’s Bankruptcy Appellate Panel has affirmed the determination that a Woodland Hills attorney committed a fraud on the court by filing a bankruptcy petition on behalf of a hospice when he had no authority to act on its behalf.
A panel—comprised of Chief Judge Robert J. Faris and Judges William J. Lafferty III and Frederick P. Corbit—on Friday upheld the decision of Bankruptcy Judge Ernest M. Robles of the Central District of California referring attorney Michael Eugene Reznick, who practices in Los Angeles, Chicago and New York, to a disciplinary panel. That panel subsequently barred Reznick from practicing before the Bankruptcy Court for three years, and the District Court entered a reciprocal order.
Robles cited Rule 9011 of the Federal Rules of Bankruptcy Procedure. That rule sets forth that “[b]y presenting to the court (whether by signing, filing, submitting, or later advocating) a petition…an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances” that the filing is not for an improper purpose and the allegations are supportable.
The judge concluded that “[b]y signing the petition on behalf of the Hospice, Reznick was representing to the Court that he had authority to cause the Hospice to seek bankruptcy protection,” finding that the “representation constituted a fraud on the court” and ran afoul of Rule 9011.
The Bankruptcy Appellate Panel declared:
“Mr. Reznick completely ignores the bankruptcy court’s finding that he knew that he did not have authority to file the bankruptcy petition.”
He claimed that he thought the person giving him the go-ahead had the authority and was unaware that Ailene Rivera—with whom he had been in an adversarial relationship—made claim to ownership of 50 percent of DA & AR Hospice Care. In an April 4, 2022 email, he admitted he could not could not disprove Rivera’s claim of half ownership.
The opinion says: “Mr. Reznick primarily argues that the bankruptcy court erred in finding that Ms. Rivera owned fifty percent of the Hospice. He contends that a physical therapist such as Ms. Rivera cannot lawfully own shares in a California professional medical corporation.
“As far as we can tell, there is no dispute that Ms. Rivera is a physical therapist who cannot own a majority ownership interest in a California professional corporation. There is no evidence, however, that the Hospice was formed as a professional corporation, as opposed to a simple corporation. Further, Mr. Reznick offers no authority for the proposition that only a “professional medical corporation” can conduct the business of the Hospice.
“But we need not definitively answer these questions, because Ms. Rivera’s purported ownership of the Hospice is irrelevant for the purposes of appeal. We need only decide whether Mr. Reznick had authority to file the bankruptcy petition on behalf of the Hospice. Even if Ms. Rivera could not or did not own the Hospice, it does not necessarily follow that Mr. Reznick had authority to file the bankruptcy petition.”
No Reasonable Inquiry
The panel said:
“Mr. Reznick signed the Hospice’s petition, thus certifying that he had undertaken a reasonable inquiry that the petition was not filed for an improper purpose and that the allegations therein had evidentiary support. Yet…, Mr. Reznick later admitted that he did not perform due diligence to verify that he had authority to sign the petition, did not know who owned or controlled the Hospice…and knew that the information he had been given was ‘bullsh*t’ that did not ‘pass the smell test.’ His signature on the petition and continued advocacy for the viability of the petition thus violated Rule 9011.”
The case is In re DA & AR Hospice Care, Inc., CC-22-1128.
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