Opinion
Bankruptcy Case Nos. 03-50956, 02-54849, Civil Action No. SA-03-CA-0472-XR, Consolidated with 03-CA-0481-XR.
July 19, 2004
ORDER
On this date, the Court considered Appellant John T. Fleming's appeal from the Order Regarding Court's Order to Show Cause and Suspending Counsel, John T. Fleming, from Practice in the U.S. Bankruptcy Courts for the Western District of Texas. In that Order, signed on May 12, 2003, United States Bankruptcy Judge Leif M. Clark, barred Appellant from practicing before the Bankruptcy Courts of the Western District of Texas and ordered him to disgorge fees paid to him in this case, as well as others. The Order also commanded the U.S. Chapter 13 Trustees to withhold any fees previously earned in Chapter 13 bankruptcies. Because Bankruptcy Judge Clark does not have the authority to unilaterally disbar an attorney in a disciplinary hearing from practicing before the Bankruptcy Courts of the Western District of Texas, the May 12, 2003, Order by Judge Clark is VACATED and REMANDED for further proceedings in accordance with this order.
Because the Court outlines the proper procedure to be followed for disbarring an attorney in the Western District of Texas, the Court does not address Bankruptcy Judge Clark's findings of fact or conclusions of law. Those determinations will be properly addressed by the committee of this division in the attorney's review and investigation.
"It has long been understood that certain implied powers must necessarily result to our Courts of justice from the nature of their institution, powers which cannot be dispensed with in a Court because they are necessary to the exercise of all others." Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991) (citations omitted). These powers are understood to emanate from the Court's authority to control it's own proceedings and must be wielded with great care. Thus, any court, including a bankruptcy court, has the power to discipline attorneys who appear before it. In re Johnson, 921 F.2d 585, 586 (5th Cir. 1991); In re Sheridan, 2004 WL 603524, at *9 (1st Cir. March 29, 2004); see also 11 U.S.C. § 105(a) (A bankruptcy court "may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.").
But "disbarment and suspension plainly are among the most grievous sanctions which can be imposed." In re Sheridan, 2004 WL 603524 at *9. Because of this, disbarment is considered quasi-criminal in nature when used as a sanction in a disciplinary proceeding. See In the Matter of Sealed Appellant, 194 F.3d 666, 670 (5th Cir. 1999); Crowe v. Smith, 151 F.3d 217, 229-30 (5th Cir. 1998). However, quasi-criminal means "less than criminal" so that the full protections of due process will not apply. Crowe, 151 F.3d at 229-30. Thus, while district courts "must make a specific finding that an attorney's conduct constituted or was tantamount to bad faith," the finding of bad faith must only be based on clear and convincing evidence. In the Matter of Sealed Appellant, 194 F.3d at 671 (citation omitted); In re Medrano, 956 F.2d 101, 102 (5th Cir. 1992).
"[T]he profession of an attorney is of great importance to an individual [and] the prosperity of his whole life may depend on its exercise. The right to exercise it ought not to be lightly or capriciously taken from him. [However,] it is extremely desirable that the respectability of the bar should be maintained, and that its harmony with the bench should be preserved." Ex Parte Burr, 22 U.S. 529 (1824) (Marshall, C.J.).
But if bad faith is patent from the record, a specific finding is unnecessary. In re Matter of Sealed Appellant, 194 F.3d at 671.
Because the Bankruptcy Court functions as a derivative unit of the District Court of the Western District of Texas, it too must conform to these requirements implicating due process. Although it may adopt local rules under the authority of the United States District Court for the Western District of Texas, it may not admit an attorney to practice before it or to practice before the Western District of Texas. W.D. TEX. LOC. R. AT-1(g)(2). Likewise, the Bankruptcy Court may not disbar an attorney from practicing before it or the Western District of Texas. The power of the Bankruptcy Court of the Western District of Texas to admit or disbar an attorney only extends as far as the United States District Court for the Western District of Texas allows.
This power is separate from the power of an individual judge to sanction an attorney who appears directly before him or her. Bankruptcy Judge Clark could chose to recuse himself from each and every case this attorney appeared in, however, all judges should exercise such discretion carefully so as to avoid any undue burden on his or her fellow judges.
Because the extreme sanction of disbarment must carefully conform with some aspects of procedural due process, the United States District Court for the Western District of Texas has adopted a local rule laying out a procedure which affords attorneys an opportunity to be heard and to challenge their disbarment. Under Western District of Texas Local Rule AT-1, Admission and Discipline of Attorneys, section (i) reads in part, as follows:
In In re Medrano, the Fifth Circuit urged this Court to consider formally adopting a disciplinary rule or some procedural format. In re Medrano, 956 F.2d at 102, n. 2.
Any attorney admitted to practice in this Court will be referred to the committee of the division wherein the attorney practices for appropriate review, investigation, and recommendation if said attorney:
(4) represents a client in such a fashion as to raise a serious question concerning the need to improve the quality of the attorney's professional performance; or
(5) presents an impediment to the orderly administration of justice and/or integrity of the Court.
Promptly after receipt of such reference, the chairperson of the committee will advise the attorney that the referral has been made. An initial screening subcommittee, consisting of one or more members of the full committee, chosen by the chairperson, will be formed. The subcommittee may request the attorney meet with it informally to explain the circumstances which gave rise to the reference, and may conduct such preliminary inquiry as it deems advisable. If after the inquiry the subcommittee determines further attention is not needed, it will so notify the referring judge and the committee's responsibility will end. The referring judge may then take such action, if any, as appropriate.
If the initial screening subcommittee determines that the matter warrants further action, it will notify and furnish the attorney with a copy of the subject matters which the subcommittee intends to refer to the full committee. In addition, it will advise the chairperson who will then initiate a review by the full committee or a quorum, as defined in this rule. Ten days after notice to the attorney, the committee may pursue such inquiries it deems appropriate including scheduling a hearing with the attorney present and shall thereafter make its recommendation in writing. The attorney will be advised of the recommendation, in writing, and will be given the opportunity to respond, to seek revision or revocation, and/or to suggest alternatives to the recommendation. The committee, after receiving the response, may modify, amend, revoke or adhere to its original recommendation and will thereafter notify the attorney and the referring judge of its final recommendation. The referring judge may then take such action, if any, that is appropriate.
It will be the obligation of any attorney who is a member of the bar of this district to cooperate with the committee so that it may effectively comply with its responsibilities under this rule. If an attorney refuses to meet with the committee, refuses to furnish it with an explanation of the circumstances which gave rise to any referral, or otherwise refuses to cooperate with the committee, the committee will advise the presiding judge(s) of the division wherein the attorney practices and the Chief Judge of this Court. Thereafter, the Chief Judge may take such action, if any, as appropriate or refer the matter to the presiding judge of the division in which the lawyer practices.
Any attorney of the bar of this Court who is subject to a reference under this rule or who is asked by the committee to furnish it with relevant information concerning any requirement of this rule will regard it to be an obligation as an officer of the court to cooperate fully with the committee. In addition, any attorney who is convicted of a felony offense in any state or federal court; has his or her license to practice law suspended, revoked, or otherwise limited by any appropriate disciplinary authority; or resigns his or her license to practice law in any state or federal bar specified in the lawyer's application to be a member of the bar of this Court must notify the Clerk of this Court of such action immediately and the Clerk shall, in turn, notify the presiding judge(s) of the divisions wherein the attorney practices.
The rules go on to mark the records from such proceedings as confidential and to command any judge receiving any recommendation from the committee to forward such information to the state bar.
(j) All records of the committee pertinent to the implementation and administration of this rule will be kept confidential to ensure the flow of information to the committee, frankness in reporting, and preventing recriminations against sources of information, unless the Court orders otherwise. If the attorney in question files a written request with the committee to make the matter one of public record, then the entire record will be presented to the Chief Judge of the district of the division for an appropriate determination.
(k) When any judge of this district receives a recommendation from the committee regarding any member of the bar of the Western District of Texas and the circumstances warrant, the judge shall forward a copy of the committee's records and the Court's action regarding any attorney to the appropriate disciplinary authority of any bar that authorizes the attorney to practice
W.D. TEX. LOC. R. AT-1(j) and (k).
W.D. TEX. LOC. R. AT-1. While this procedure is not necessary when the court wields its inherent power to sanction an attorney or hold an attorney in contempt of court, it is absolutely necessary when a judge considers disbarring an attorney from practicing in the district. Thus, bankruptcy courts, like the district courts, must comply with this local rule.
The Bankruptcy Court does not have the authority to limit the application of the Local Rules of the United States District Court of the Western District of Texas. See W.D. TEX. BANK. LOC. R. 1001(e).
When a judge refers an attorney for disbarment, the judge must first put the attorney on notice that his referral is imminent. Specifically, the court must give an attorney "particularized notice of: (a) the improper conduct; (b) the disciplinary rules he is charged with having violated; and (c) the potential sanctions he faces." In re Alvarado, 2003 WL 22097092, at *6 (W.D. Tex. July 29, 2003). Although Appellant received this requisite notice before his show cause hearing, Bankruptcy Judge Clark issued the order to disbar Appellant from practicing before the Bankruptcy Courts of the Western District of Texas, rather than referring this action to the division's committee. Accordingly, Bankruptcy Judge Clark's order must be VACATED and REMANDED in order to comply with the local rules, as well as this order.
The Court does not reach the issue of whether disbarment should be considered a "core" or "non-core" proceeding. The Court notes however, that Judge Clark's order attempted to reserve the right to order further disgorgement of fees in connection with other cases. This type of "omnibus disciplinary proceeding . . . relat[ing] to multiple bankruptcy cases extending over a considerable period of time," has been considered non-core by the First Circuit. In re Sheridan, 2004 WL 603524, at *9.
It is FURTHER ORDERED that Appellant's Motion to Stay Order of Disbarment pending resolution of appeal is DENIED as moot (docket no. 14). Because Judge Clark's Order is VACATED, Appellant may resume his practice during the course of any committee investigation. Appellant's Motions for Default and to Strike the U.S. Trustee's brief are DENIED as moot (docket nos. 9 and 10). Likewise, the U.S. Trustee's Motion to Strike Appellant's affidavits is DENIED as moot (docket no. 8).
Bankruptcy Judge Clark also Ordered Chapter 13 Trustees for the Western District of Texas to withhold funds earned by Appellant in Chapter 13 cases where he represented the debtors. Because his Order is VACATED and REMANDED, the Chapter 13 Trustees for the Western District of Texas shall be authorized to distribute or disburse funds to John T. Fleming in cases where he represented debtors before the Bankruptcy Court of the Western District of Texas prior to May 6, 2003.