Opinion
Memorandum Re Sanctions for Rules Violations
ALAN JAROSLOVSKY, Bankruptcy Judge
On February 25, 2011, attorney Bram Bevis Dresden filed a Chapter 7 petition on behalf of debtor Lydia Wilson, who had been planning a bankruptcy filing with Dresden for several months. Wilson owned and operated a jewelry store, which she had fully disclosed to Dresden.
On February 26, Dresden filed a Chapter 7 petition, schedules and a statement of affairs, all allegedly signed by Wilson. He sent Wilson an email stating, "Your bankruptcy has been filed. The Case # is 11-10683." The email went on to instruct Wilson where and when to appear for her meeting of creditors.
On February 28, Wilson sent an email to Dresden beginning, "Thanks for letting me know." Her email went on to ask several questions regarding the bankruptcy, the hearing and the address of the bankruptcy court. She also asked about the balance of her fees due to Dresden, who responded that she had a balance due of $1, 000.00, which "can be paid at any time before the Hearing on April 6th."
On March 18, 2011, the Chapter 7 Trustee made an unannounced visit to Wilson's jewelry store. Wilson became agitated that her business was involved in her bankruptcy, even though she operated it as a sole proprietorship, as Dresden had evidently told her otherwise. Dresden then sent her to a new attorney, who filed a motion to dismiss the case on the ground that she never signed the bankruptcy petition. Dresden testified that notwithstanding BLR Local Rule 5005-2(c), which provides that the electronic filing of a document "purportedly signed by someone other than the Registered Participant, including but not limited to the petition, statement of financial affairs, and schedules of assets and liabilities, shall be deemed a certification by the Registered Participant that he or she has the document in question, bearing the person's original signature, in his or her physical possession, " Dresden filed the petition and schedules without ever obtaining Wilson's signature on them.
Dresden testified that he is a simple practitioner and that he became confused and pushed the wrong key on his computer and filed Wilson's bankruptcy by mistake. The court does not believe a word of this testimony, and believes it was concocted in order to undo what appears to be gross malpractice. Dresden made no attempt to contact the court to undo his mistake, as all attorneys are instructed to do in the training Dresden admits he received. He sent an email to Wilson right after the filing telling her the case number. He even asked Wilson for the balance of his fees. His conduct and the documentary evidence completely belie his assertion that the filing was a mistake. The court denied Wilson's motion to dismiss on grounds that she had ratified her filing by her conduct. The court then ordered Dresden to show cause why he should not be sanctioned pursuant to Rule 9011 and the court's inherent power to sanction attorneys for unprofessional conduct. That matter is now before the court.
Dresden's lack of bankruptcy knowledge and cavalier attitude towards the schedules and statement of affairs are appalling. He evidently told Wilson that her business assets were not part of her bankruptcy. He prepared and filed schedules and a statement of affairs which omitted the store inventory and answered "none" as to jewelry and business fixtures and supplies, even though he knew she had a jewelry store. They also stated that Wilson did not hold property for any other person, even though Dresden admits that he asked her about having consigned goods and she told him that she did. In other words, not only were the schedules and statement of affairs filed without Wilson's signature, they were filled with lies.
There are no mitigating circumstances in Dresden's favor. He pleads lack of knowledge of bankruptcy law, which is in itself no excuse, but it does not take any kind of legal education to know what the word "none" means. His only other attempt at mitigation is a shameless reference to all illness he had nine years ago which bears not the slightest on his actions in this case.
When an attorney electronically files a document on behalf of a client, the attorney is certifying to the court that he or she has the original in his physical possession bearing the original signature of the client. If the certification is false, the attorney is subject to sanctions pursuant to Rule 9011. In re Tran, 427 B.R. 805, 808 (Bankr.N.D.Cal.2010 ), aff'd sub nom. In re Nguyen, 447 B.R. 268, (9th Cir. BAP 2011); In re Brown, 328 B.R. 556, 559 (Bkrtcy.N.D.Cal 2005). In this case, not only did Dresden file unsigned documents, but they were filled with falsehoods. A severe fine is required for this offense.
Dresden has admitted to the court that he was not competent to handle Wilson's case. He completely ignores the fact that he knew the information in the schedules was false. The court elects to treat this matter as a simple violation of Rule 3-110 of the California State Bar Rules of Professional Conduct for failure to act competently, but will refer this matter to the Standing Committee on Professional Conduct for a determination as to whether the falsehoods contained in the schedules and statement of affairs evidence active dishonesty rather than mere incompetence. If the Committee agrees with this court's assessment that Dresden's conduct is something more than mere incompetence, the court recommends a significantly longer suspension than the court will now impose, or disbarment.
To summarize, the court finds that Dresden has violated Rule 9011 of the Federal Rules of Bankruptcy Procedure by filing unsigned petition, schedules and statement of affairs. The court finds that Dresden has failed to act competently in this case. The court suspects, but leaves a finding to the Standing Committee on Professional Conduct, that Dresden has acted in a knowingly dishonest manner by filing materially false schedules and statement of affairs.
The court will accordingly assess the following sanctions:
1. Dresden may not commence any new bankruptcy cases, nor substitute into any cases, for the next 90 days or until he has fulfilled the other terms to be ordered, whichever is longer.
2. Dresden shall pay a fine of $7, 500.00 to the Clerk of the Court for violation of Rule 9011. Provided, however, that all but $2, 500.00 will be stayed so long as this amount is paid within 90 days and Dresden never again files any document which falsely indicates that a client or other person has signed it and so long as he always produces the signed copy of any document upon request of the court.
3. Dresden shall complete at least eight hours of continuing education in elementary bankruptcy law, procedure and ethics.
The court does not care where Dresden obtains this education, but notes that videos meeting this requirement, eligible for full MCLE credit, are available free of charge at this court at any time. The court will therefore brook no delay based on availability of courses. The court stresses that the training must be elementary in nature, designed for attorneys new to bankruptcy practice.
4. Dresden shall re-take and pass the court's Electronic Case Filing training course.
5. This matter shall be referred to the Standing Committee on Professional Conduct for such other and further discipline as it deems appropriate.
An appropriate order will be entered.