A solo bankruptcy practitioner in Florida was suspended from practice for two years and referred to the state and federal grievance committees with a recommendation that she be disbarred, for filing schedules and statements in dozens of cases where the debtors had neither seen, signed nor verified the papers under oath.
In his 37-page opinion on June 25, Bankruptcy Judge John K. Olson of Fort Lauderdale, Fla. called the lawyer “grossly incompetent” to practice in the bankruptcy court or anywhere else. Given that her actions had “serious criminal implications,” Judge Olson declined to invoke the “empty head but pure heart” defense.
After reading Judge Olson’s opinion, Prof. Nancy Rapoport told ABI, “In addition to being educated about a phrase I’ve misused all of my life (“Pandora’s Jar,” not “Pandora’s Box”) and loving the way Judge Olson writes, I think the main take-away is that those of us responsible for keeping the system of justice honest (in other words, all lawyers) must be vigilant in terms of reporting abuse, once we discover it, and I’m especially grateful to the lawyer who took the case pro bono.”
Prof. Rapoport is the Garman Turner Gordon Professor of Law at the Univ. of Nevada at Las Vegas William S. Boyd School of Law, where she is an expert on legal ethics and fee allowances in bankruptcy cases.
The Slow Motion Train Wreck
The scandal unfolded by happenstance. A chapter 7 trustee filed a complaint to revoke a debtor’s discharge because the trustee obtained information suggesting that the schedules and statement of affairs were not accurate. The revocation action, according to Judge Olson, opened “Pandora’s Jar,” later making him “aware of a multitude of extremely serious violations.”
The lawyer who filed the petition and schedules — and soon found herself in hot water — was granted authority to withdraw as the debtor’s counsel.
In discussions with the debtor who was then represented by pro bono counsel, the chapter 7 trustee learned that the debtor had neither seen nor signed the filed version of the debtor’s schedules and statement of affairs. So, the trustee filed a motion for sanctions against the debtor’s former counsel.
At the conclusion of the ensuing hearing, Judge Olson entered an order directing the lawyer to produce all of her files for every bankruptcy the lawyer had filed in the previous two years. To his “shock and dismay,” he said the lawyer did not produce a “single document.” Instead, counsel for the lawyer filed a response saying that the documents filed with the court “in many instances” may have had “slight variations” from versions that the debtors had signed.
Counsel for the lawyer said his client had “made significant changes to her practice in order to avoid this problem in the future.”
Judge Olson was not satisfied. He said the response was “in fact a last-ditch effort to keep the lid on Pandora’s Jar, a farcical attempt to avoid accountability.” So, he ordered the lawyer again to produce every document from her files for the 123 cases she had filed in the prior two years. He also directed her to show cause why she should not be suspended from practice.
By the required date, the lawyer produced a banker’s box of documents which, it turned out, did not include 17 cases filed during the relevant time period. Judge Olson surmised that the records in those 17 cases may have reflected “especially poorly upon her, above and beyond the horrors produced in the banker’s box.”
What he found in the produced documents sent Judge Olson into earth orbit.
The lawyer had not produced all documents in 70% of the cases. On average, the lawyer filed the petitions 53 days after the debtors had signed drafts of the petitions and schedules. The filed petitions and schedules were not the ones the debtors had signed.
Judge Olson examined 10 cases in depth. In one, the schedules signed by the debtor omitted more than $1 million in debt appearing in the filed schedules. In another, the signed schedules omitted some $160,000 in income appearing in the filed schedules.
Like “the oncologist conducting exploratory surgery who finds metastatic cancer,” Judge Olson said he “peaked and shrieked.” From the documents and the attorney’s testimony in court, he found, as a fact, that the debtors “have never seen, sworn to, or verified the accuracy of the documents” that the attorney filed.
On top of identifying violations of Bankruptcy Rule 9011(b), Judge Olson found that that the “method of production manifests a bad faith attempt to avoid detection of [the attorney’s] shockingly inadequate and possible criminal standard operating procedure.”
The Sanctions
“Accordingly and extremely regrettably,” Judge Olson said he had “no other choice but to suspend [the lawyer] for a considerable period of time and to recommend that other entities act to disbar [her] from the practice of law entirely.” He was convinced that “[n]o amount of continuing legal education could possibly fill the gaps of incompetence demonstrated here.”
Judge Olson therefore suspended the lawyer from practice in the bankruptcy court for the Southern District of Florida for two years. He referred her to the state and federal grievance committees with a recommendation of disbarment. Finally, he referred the matter to the U.S. Trustee and the U.S. Attorney for such investigations as they “see fit.”
Observation: Having lost her livelihood, the lawyer will presumably appeal. Will an appellate court grant a stay pending appeal? Will a softhearted appellate court give the lawyer a second chance and lift the suspension? How many hours of CLE would be enough? Should reinstatement depend on the lawyer’s serving as an intern in a law office that abides by the rules?
A Possible Remedy: How should the courts respond if it appears that the Florida lawyer is not alone in filing petitions that debtors have not verified and signed? The Bankruptcy Rules could be amended or judges could adopt local rules requiring counsel to file optically scanned petitions and schedules showing the debtors’ “wet” signatures with the debtors’ “wet” initials on every page.
A solo bankruptcy practitioner in Florida was suspended from practice for two years and referred to the state and federal grievance committees with a recommendation that she be disbarred, for filing schedules and statements in dozens of cases where the debtors had neither seen, signed nor verified the papers under oath.
In his 37-page opinion on June 25, Bankruptcy Judge John K. Olson of Fort Lauderdale, Fla. called the lawyer “grossly incompetent” to practice in the bankruptcy court or anywhere else. Given that her actions had “serious criminal implications,” Judge Olson declined to invoke the “empty head but pure heart” defense.
After reading Judge Olson’s opinion, Prof. Nancy Rapoport told ABI, “In addition to being educated about a phrase I’ve misused all of my life (“Pandora’s Jar,” not “Pandora’s Box”) and loving the way Judge Olson writes, I think the main take-away is that those of us responsible for keeping the system of justice honest (in other words, all lawyers) must be vigilant in terms of reporting abuse, once we discover it, and I’m especially grateful to the lawyer who took the case pro bono.”