Opinion
Case No. 17-23817-B-13
12-05-2017
SUPPLEMENTAL MEMORANDUM AND ORDER SANCTIONING ATTORNEY LESLIE RICHARDS
INTRODUCTION
Attorney Leslie Richards(SBN 94672), former counsel for debtors Rafael A. Reyes and Villa Reyes in the above-captioned chapter 7 case, was sanctioned earlier this year in another bankruptcy case she filed in the Eastern District of California. Ms. Richards was ordered to not file any new bankruptcy case or proceeding in the Eastern District of California Bankruptcy Court after April 15, 2017, without first completing four hours of California State Bar approved participatory continuing legal education in ethics and certifying completion of that continuing legal education obligation with the clerk of the court. Ms. Richards did neither. And yet, between June and September of 2017 Ms. Richards filed three bankruptcy cases and one adversary proceeding in the Eastern District of California Bankruptcy Court.
Ms. Richards' conduct was discovered during proceedings in the above-captioned chapter 7 case, which is one of the cases that Ms. Richards filed in violation of the earlier sanctions order. Discovery of Ms. Richards' conduct prompted the court to issue an order on September 12, 2017, directing Ms. Richards to show cause why she should not be further sanctioned for violating the earlier sanction order. It is the September 12, 2017, order to show cause that is now before the court.
A hearing on the court's order to show cause was held on October 17, 2017. Ms. Richards appeared in person and on behalf of herself. There were no other appearances noted on the record.
This memorandum and order supplements the court's oral findings of fact and conclusions of law placed on the record in open court pursuant to Federal Rule of Civil Procedure 52(a) applicable by Federal Rules of Bankruptcy Procedure 7052 and 9014. If these written findings of fact and conclusions of law conflict with the court's oral findings of fact and conclusions of law, these written findings and conclusions control.
BACKGROUND
Although entered in the above-captioned chapter 7 case, the present order to show cause is based on a memorandum and order entered in In re Dynowski, No. 15-28574 (Bankr. E.D. Cal. 2015), in which Ms. Richards was also counsel of record for the debtor. The memorandum was filed on February 28, 2017. Id., dkt. 115. The related order on the memorandum was filed on March 1, 2017. Id., dkt. 114. The memorandum is appended to this order as Appx. 1. The related order is appended to this order as Appx. 2. Unless otherwise referred to individually, the memorandum and the order will be referred to collectively as the "Dynowski Decision."
The Dynowski case and the two Tyler cases below were re-assigned to the undersigned Judge by an October 5, 2017, order. A copy of that order is appended to this order as Appx. 3.
The Dynowski Decision is the second time Ms. Richards was sanctioned by a bankruptcy judge of this court. Ms. Richards was initially sanctioned $1,000.00 in the Dynowski case for conduct described in an August 11, 2016, memorandum filed in that case. See Dynowski, No. 15-28574, dkts. 96, 97.
After a hearing held in the Dynowski case on October 31, 2016, id., dkt. 112, the court issued the Dynowski Decision in which Ms. Richards was sanctioned for abusive, bad faith, and willful misconduct generally described as filing bankruptcy cases to acquire the automatic stay with no intent to prosecute those bankruptcy cases and more particularly described as follows:
[A] remarkably consistent pattern of abuse - failing to file fee disclosures, failing to file required documents, and failing to attend meetings of creditors. The court concludes from the record in the case now before it, as well as these prior cases, that Ms. Richards is aiding debtors in an abuse of the bankruptcy process that is calculated to hinder, delay, and defraud lenders in their efforts to foreclose and/or repossess their real property collateral.Dynowski, No. 15-28574, dkt. 115 at 3:18-25 & 16:21-27.
For that conduct, Ms. Richards was sanctioned as follows:
Attorney Leslie Richards, effective from April 15, 2017, shall not file new bankruptcy cases or proceedings in the Eastern District of California until she has completed at least four hours of continuing legal education in legal ethics that the State Bar of California approves as meeting standards for Minimum Continuing Legal Education, that is taught by a provider approved by the State Bar, and that is not self-study but a participatory activity for which the provider verifies attendance. Proof of attendance shall be provided to the clerk of this court when the four hours of education has been completed.Id., dkt. 114 at 1:18-27.
The memorandum similarly states as follows:
Rather than assess further monetary sanctions, the court will bar Ms. Richards, effective from April 15, 2017, filing new bankruptcy cases or proceedings in the Eastern District of California until she has completed at least four hours of continuing legal education in legal ethics that the State Bar of California approves as meeting standards for Minimum Continuing Legal Education, that is taught by a provider approved by the State Bar, and that is not self-study but a participatory activity for which the provider verifies attendance. Proof of attendance shall be provided to the clerk of this court when the four hours of education has been completed.
On March 3, 2017, the court, through the Bankruptcy Noticing Center, mailed the Dynowski Decision to Ms. Richards by first class mail addressed to the address that Ms. Richards provided in the petition she filed at the inception of the Dynowski case. Id., dkts. 1, 114, 115, 116, and 117. The court, through the Bankruptcy Noticing Center, also sent its September 12, 2017, order to show cause by first class mail to Ms. Richards at the same address. Compare Reyes, No. 17-23817, dkts. 45 & 49, with Dynowski, No. 15-28575, dkts. 114, 115, 116, and 117. Ms. Richards received the September 12, 2017, order to show cause. See Reyes, 17-23817, dkt. 60 at 2:17-18 ("[I] received the OSC on Rafael Reyes and Villa Reyes[.]"); see also Id., dkts. 51 & 52 at ¶ 2.
Without any regard to the sanction and restriction that the Dynowski Decision imposed on her, between June and September of 2017 Ms. Richards resumed filing bankruptcy cases and proceedings in the Eastern District of California Bankruptcy Court. During that three-month period, Ms. Richards filed three bankruptcy cases and one adversary proceeding identified as follows:
(1) In re Reyes, No. 17-23817, filed June 6, 2017, and dismissed July 26, 2017, for failure to timely file documents.
(2) Reyes v. Duke Partners II, LLC, Adv. No. 17-02127, removed from state court July 17, 2017, and remanded September 6, 2017.
(3) In re Tyler, No. 17-11558, filed April 23, 2017, assigned to Judge Clement, and dismissed May 12, 2017, for failure to timely file documents.
(4) In re Tyler, No. 17-13464, filed September 10, 2017, assigned to Judge Lastreto, and dismissed September 29, 2017, for failure to timely file documents.
As of September 12, 2017, when the order to show cause before the court was issued, the clerk of the court had no record of any certification by Ms. Richards that she completed four hours of California State Bar approved participatory continuing legal education in ethics.
Ms. Richards filed three responses to the court's September 12, 2017, order to show cause. The first response is a declaration dated September 26, 2017, filed on September 28, 2017. See Reyes, No. 17-23817, dkt. 51. The second response is a declaration dated October 2, 2017, filed on October 3, 2017. See Id., dkt. 52. And the third response was filed on October 5, 2017. See Id., dkt. 60. The first two declarations are nearly identical. The third response includes the September 26, 2017, declaration.
Ms. Richards does not dispute that between June and September of 2017, and thus after April 15, 2017, she filed the Reyes bankruptcy case, the Reyes adversary proceeding, and the two Tyler bankruptcy cases identified above. She also does not dispute that she filed those three bankruptcy cases and the one adversary proceeding without (i) taking four hours of state bar approved participatory continuing legal education in ethics and (ii) without certifying compliance with that continuing legal education obligation with the clerk of court. Thus, Ms. Richards does not dispute that she filed three bankruptcy cases and one adversary proceeding in violation of the Dynowski Decision.
Ms. Richards states in her declarations that she was unaware of the Dynowski Decision when she filed the Reyes bankruptcy case, the Reyes adversary proceeding, and the two Tyler bankruptcy cases. See Dynowski, No. 15-28574, dkt. 51 at ¶¶ 2, 5, & 9; dkt. 52 at ¶¶ 2, 5 & 10. However, Ms. Richards provides conflicting and inconsistent dates as to when she purportedly became aware of the Dynowski Decision. She first states that date was September 12, 2017. See Reyes, No. 17-23817, dkts. 51 & 52, ¶ 2. She then states that date was "the other day" as measured from either September 26, 2017, id., dkt. 51 at ¶ 5, or October 2, 2017. Id., dkt. 52 at ¶ 5.
Ms. Richards' declarations also suggest - but do not expressly state - that she was unaware of the Dynowski Decision because she did not receive it. Ms. Richards offers several explanations for the purported non-receipt of the Dynowski Decision: She was out of the office for a period of time because of surgery and physical therapy and her computer system (backup included) were rendered inoperable by a virus. See Reyes, No. 17-23817, dkts. 51, 52 at ¶¶ 3-4. She repeated these reasons on the record during the order to show cause hearing.
Ms. Richards did state on the record during the October 17, 2017, order to show cause hearing that she did not receive the Dynowski Decision. However, she offered nothing more to support that statement.
DISCUSSION
I. Legal Standard
A bankruptcy court has the power to sanction an attorney pursuant to its inherent authority. Price v. Lehtinen (In re Lehtinen), 564 F.3d 1052, 1058 (9th Cir. 2009), abrogated on other grounds, Gugliuzza v. FTC (In re Gugliuzza), 852 F.3d 884, 898 (9th Cir. 2017). The court's inherent authority to sanction is recognized in § 105(a). See 11 U.S.C. § 105(a); Chambers v. NASCO, Inc., 501 U.S. 32, 42-47 (1991); Caldwell v. Unified Capital Corp. (In re Rainbow Magazine, Inc.), 77 F.3d 278, 284 (9th Cir. 1996); Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1196-97 (9th Cir. 2003). Inherent authority sanctions are appropriate when an attorney engages in bad faith or willful misconduct. Lehtinen, 564 F.3d at 1058. Reckless conduct coupled with an improper purpose will also suffice. B.K.B. v. Maui Police Dept., 276 F.3d 1091, 1108 (9th Cir. 2002); Fink v. Gomez, 239 F.3d 989, 993 (9th Cir. 2001).
II. Ms. Richards' Conduct Was Willful and Tantamount to Bad Faith.
Ms. Richards violated the Dynowski Decision. That much is undisputed. She filed three bankruptcy cases and one adversary proceeding in the Eastern District of California Bankruptcy Court after April 15, 2017, without first taking four hours of California State Bar approved participatory continuing legal education in ethics and without certifying her compliance with that continuing legal obligation with the clerk of court. As discussed below, there is also clear and convincing evidence that Ms. Richards' violation of the Dynowski decision was willful.
On March 3, 2017, the court, through the Bankruptcy Noticing Center, sent the Dynowski Decision to Ms. Richards by first class mail addressed to her business address. That creates a presumption, albeit a rebuttable one, that Ms. Richards received the Dynowski Decision three days later. Dandino, Inc. v. U.S. Dept. of Trans., 729 F.3d 917, 921-22 (9th Cir. 2013); Payan v. Aramark Mgmt. Servs. Ltd. P'ship, 495 F.3d 1119, 1124 (9th Cir. 2007). Ms. Richards' has not rebutted that presumption.
Ms. Richards' declarations do not expressly state that she did not receive the Dynowski Decision. However, construing those declarations in a light favorable to Ms. Richards, the court can infer from Ms. Richards' statements in her declarations that she was unaware of the Dynowski Decision, as buttressed by her statement in open court, that it is her position that she did not receive the Dynowski Decision. But even so, because the Dynowski Decision was mailed by the court through the Bankruptcy Noticing Center, Ms. Richards' declarations (construed as declarations of non-receipt) and her statement to that effect in open court do not rebut the presumption that she received the Dynowski Decision sometime on or shortly after March 6, 2017. Moody v. Bucknum (In re Bucknum), 951 F.2d 204, 206-07 (9th Cir. 1991); see also Seminiano v. Xyris Enterprise, Inc., 512 Fed. Appx. 735, 2013 WL 1150781, *2 (9th Cir. 2013) (noting distinction between documents served by adverse party where a declaration of non-receipt may rebut presumption and a mailing by the court where declaration of non-receipt does not).
Even in those instances when a declaration or statement of non-receipt may be sufficient to rebut the presumption of receipt, the declaration or statement must still be credible. See Seminiano, 2013 WL 1150781, *2. Ms. Richards' declarations and her in-court statement are not credible. Ms. Richards declarations are not credible because they contain contradictory statements as to when she supposedly first became aware of the Dynowski Decision: Was it September 12, 2017, or was it "the other day" measured from September 26, 2017, or October 2, 2017? More to the point, the court does not believe that Ms. Richards' never received the Dynowski Decision and only became aware of it some six months after it was filed because the court's September 12, 2017, order to show cause was mailed to Ms. Richards in the same manner and to the same address as the Dynowski Decision and, as noted above, Ms. Richards admits that she received the September 12, 2017, order to show cause.
Ms. Richards' credibility was previously called into question. Dynowski, Case No. 15-28574, dkt. 115 at 16:24-26.
But even assuming the court found Ms. Richards' testimony and statements credible, her declarations would still be insufficient to rebut the presumption that she received the Dynowski Decision through the mail. The Ninth Circuit has held that a denial of receipt must be specific and factual. Nunley v. City of Los Angeles, 52 F.3d 792, 796 (9th Cir. 1995). Ms. Richards' declarations are neither. Ms. Richard's declarations do not state categorically that she did not receive the Dynowski Decision; rather, as noted above, the court has to infer that and draw that conclusion from the different dates that Ms. Richards states she first became aware of the memorandum and order. There are also no facts in Ms. Richards' declarations about any circumstances that would support or explain the purported non-receipt.
Ms. Richards does state that she was out of the office for a short period of time and her computer system was rendered inoperable by a virus. However, the former occurred well before the Dynowski Decision was filed and the latter has no bearing on receipt of the Dynowski Decision through the mail.
In sum, the court is clearly convinced that Ms. Richards willfully violated the Dynowski Decision because Ms. Richards knew of the Dynowski Decision, and the sanctions and restrictions imposed upon her, when she filed the Reyes bankruptcy case, the Reyes adversary proceeding, and the two Tyler bankruptcy cases. Further sanctions are therefore warranted.
II. Alternatively, Ms. Richards' conduct was reckless and conduct in which she engaged with and for an improper purpose.
At a minimum, Ms. Richards' conduct in filing the Reyes bankruptcy case and the two Tyler bankruptcy cases was reckless. The court advised Ms. Richards at the conclusion of the Dynowski sanctions hearing held on October 31, 2016, that it would issue a written decision. That means if Ms. Richards did not know of the Dynowski Decision until sometime in or after September 2017, then she did nothing to ascertain her status and determine if she had been sanctioned for nearly a year. As a member of the state bar and an officer of the court, Ms. Richards had an affirmative obligation to ascertain the extent to which she may have been (and in fact was) sanctioned so that she could timely comply with any sanction imposed. In other words, Ms. Richards should have regularly checked the court's docket or PACER for the court's decision following the sanctions hearing held in the Dynowski Case. Had she done that she would have found the Dynowski Decision at least three months before she first violated it, even assuming she never received it by mail.
The Reyes bankruptcy case and the two Tyler bankruptcy cases were also filed for an improper purpose. Ms. Richards' conduct in those three bankruptcy cases mirrored the conduct that the court found abusive (and for which Ms. Richards was sanctioned) in the Dynowski Decision. Ms. Richard's conduct in the Reyes and Tyler bankruptcy cases is explained in detail in the memorandum and order filed on September 12, 2017, denying Ms. Richards' motion to vacate the order dismissing this case. See Reyes, 17-23817, dkt. 43.
CONCLUSION
For all the foregoing reasons;
IT IS ORDERED that the order to show cause filed in this (Reyes) case on September 12, 2017, at dkt. 45, is SUSTAINED.
IT IS FURTHER ORDERED that Ms. Richards is sanctioned Two-Thousand Five Hundred and 00/100 dollars ($2,500.00), which shall be paid to the Clerk of the Bankruptcy Court for the Eastern District of California within ninety (90) days of the date on which this memorandum and order is entered. Ms. Richards shall also file a certification of payment within three (3) days after payment is made.
IT IS FURTHER ORDERED that Ms. Richards is barred from filing any bankruptcy case or adversary proceeding in the United States Bankruptcy Court for the Eastern District of California for a period of one (1) year from the entry of this memorandum and order.
Dated: December 5, 2017.
/s/_________
UNITED STATES BANKRUPTCY JUDGE
INSTRUCTIONS TO CLERK OF COURT
SERVICE LIST
The Clerk of Court is instructed to send the attached document, via the BNC, to the following parties: Leslie Richards
17337 Ventura Blvd Suite 211
Encino CA 91316 Antonia Darling
Office of the U.S. Trustee
Robert T Matsui United States Courthouse
501 I Street, Room 7-500
Sacramento CA 95814 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF CALIFORNIA SACRAMENTO DIVISION In re JOHN DYNOWSKI, Debtor. Case No. 15-28574-A-13J Date: October 31, 2016
Time: 1:30 p.m.
MEMORANDUM
Leslie Richards, the debtor's attorney, filed this case without being a member of the bar of the District Court of the Eastern District of California, and then failed to appear in its proper prosecution. Sanctions are warranted.
I
This matter originally came before the court as a motion by the chapter 13 trustee (Docket Control No. JPJ-1) seeking to compel attorney Leslie Richards to appear at the meeting of creditors. This request was made because Ms. Richards failed to appear on December 22, 2015 at the initial meeting. Although the debtor, John Dynowski, appeared at that meeting, Ms. Richards' absence required the trustee to continue the meeting to January 21, 2016.
In connection with the January 4 hearing on the trustee's motion, the court noted two additional problems: Ms. Richards filed this case even though she was not admitted to the bar of the Eastern District of California, and she had not filed the fee disclosure required by Fed. R. Bankr. P. 2016 and 11 U.S.C. § 329.
Despite continuing the hearing on the trustee's motion to January 19 to give Ms. Richards an opportunity to address these issues, Ms. Richards failed to appear.
While the court dismissed this bankruptcy case on January 19 at the request of the debtor, it reserved jurisdiction over the issues of Ms. Richards' compensation and the appropriateness of sanctions for her failure to represent her client and appear in the proper prosecution of this case. See Docket 30.
To that end, the court issued an Order to Show Cause on January 28, 2016 (see Docket 34) directing Ms. Richards to appear in person at a hearing on February 2 9 to determine whether she should be sanctioned for:
a. Failing to appear at the meeting of creditors on December 22, 2015;
b. Filing this case even though she was not admitted to the bar of the Eastern District of California; and
c. Failing to file the fee disclosure required by Fed. R. Bankr. P. 2016 and 11 U.S.C. § 329(a).
II
Ms. Richards responded to the Order to Show Cause by admitting she was not a member of the bar of the Eastern District of California when this case was filed. Her excuse is that she "did not realize [she] had to be admitted to the Eastern District nor was the issue previously brought up. . . ."
Ms. Richards also maintained she was unable to appear at the meeting of creditors because of recent knee surgery. Acknowledging she nonetheless had an obligation to represent the debtor at the meeting, Ms. Richards states that she failed to arrange for substitute counsel because her law clerk neglected to calendar the meeting.
Finally, Ms. Richards admitted that she did not file a fee disclosure in this case. However, she believes no disclosure was required because she charged no fee for Mr. Dynowski's representation.
III
In the course of considering Ms. Richards' response to the August 11 Order to Show Cause, the court determined from a search of its electronic case files that Ms. Richards was the attorney of record for debtors in fourteen cases in this district commenced over a 5-year period, from January 18, 2011 through January 21, 2016.
These cases show a remarkably consistent pattern of abuse - failing to file fee disclosures, failing to file required documents, and failing to attend meetings of creditors. The court concludes from the record in the case now before it, as well as these prior cases, that Ms. Richards is aiding debtors in an abuse of the bankruptcy process that is calculated to hinder, delay, and defraud lenders in their efforts to foreclose and/or repossess their real property collateral.
This table summarizes the cases filed by Ms. Richards.
Case No./Debtor | Chap. | 2016(b) filed/amount paid | Disposition | Foreclosure/Eviction? | First meetingattended? |
---|---|---|---|---|---|
16-10139Hyatt | 13 | yes - $2500 | filed 1/21/16dismissed 2/19/16before meeting | Dkt. #41. Case filed1 day before answerdue in unlawfuldetainer | NA |
15-14857Starr | 13 | yes - $750 | filed 12/20/15dismissed 4/8/16 | Dkt #52. Home inforeclosure | Counsel and debtorfailed to appear |
16-10088Starr | 7 | no | filed 11/19/15dismissed 3/3/16before meeting | Dkt #40. Debtorasks for dismissalbecause he has"discovered amortgagemodificationprogram" | NA |
16-20084Tracy | 7 | no | filed 11/18/15dismissed 2/23/16 | Dkt #17. Home inforeclosure | Counsel and debtorfailed to appear |
15-28574Dynowksi | 13 | no | filed 11/3/15voluntarilydismissed 6/20/16 | Dkt #47.Case filed 1day before hearingon summaryjudgment motion inunlawful detainer | Debtor appeared butcounsel did not |
15-22785Tracy | 7 | no | filed 4/6/15dismissed 4/24/15before meeting | See Case No 16-20084 | NA |
7 | yes - $1000 | filed 3/5/15discharge 7/20/15 | See Case Nos. 15-28574 & 14-31822 | Counsel and debtorappeared |
14-31822Dynowski | 7 | no | filed 12/4/15dismissed12/15/14 beforemeeting | Dkt #35. Case filed6 minutes beforehome foreclosure | NA |
13-31031Rodriguez | 7 | no | filed 8/22/13dismissed 9/3/13before meeting | NA | |
13-30462Manzo | 7 | no | filed 8/8/13dismissed 8/19/13before meeting | NA | |
13-15329Gutierrez | 11 | no + incompleteemploymentapplication | filed 8/5/13dismissed 10/3/13on UST motionbefore meeting | Dkt #24. Creditorattempting toforeclose on rentalproperties. | NA |
11-90725Pinheiro | 7 | yes - $1000 | filed 2/28/11discharge 6/6/11 | Dkt #19. Foreclosingcreditor attemptingto enforce writ ofpossession | Counsel and debtorappeared |
11-24004Ascencion | 13 | no | filed 2/27/11dismissed 3/8/11before meeting | See next case. | NA |
11-21249Ascencion | 7 | yes - $1200 | filed 1/18/11dismissed 2/8/11before meeting | Dkt #1. Scheduleslist under-securedhome mortgage. Noforeclosure oreviction noted ondocket. | NA |
A comparison of the three petitions filed by Debtor Dynowski shows his signature on two petitions, Case Nos. 14-31822 and 15-28574, is a "wet ink" signature, but the petition in Case No. 15-21755 is signed "/s/ John A Dynowski". This court's local rules permit either form of signature. See Local Bankruptcy Rule 9004-1(c)(1)(B). However, when the latter form is used, Local Bankruptcy Rule 9004-1(c)(1)(D), provides:
"When "/s/ Name" . . . is used in an electronically filed document to indicate the required signature(s) of persons other than that of the registered user, the registered user shall retain the originally signed document in paper form for no less than three (3) years following the closing of the case. On request of the Court, U.S. Trustee, U.S. Attorney, or other party, the registered user shall produce the originally signed document(s) for review. The failure to do so may result in the imposition of sanctions on the Court's own motion, or upon motion of the case trustee, U.S. Trustee, U.S. Attorney, or other party."At the hearing on the order to show cause both Ms. Richards and Mr. Dynowski admitted he never signed the petition in Case No. 15-21755. Ms. Richards does not have a copy of the petition with Mr. Dynowski's wet ink signature.
A review of the dockets of these cases shows the following:
• Over a 5-year period, Ms. Richards filed twelve bankruptcy cases in the Eastern District of California. Two more cases, Case Nos. 16-10088 and 16-20084, were filed in the Central District of California on November 18 and 19, 2015 and then transferred to the Eastern District at the debtors' requests. All fourteen cases were filed for individual consumer debtors. Nine of these cases were filed under chapter 7, four under chapter 13, and one under chapter 11.
• In only 2 of the 14 cases, both chapter 7 cases, did the debtor receive a discharge. One case was voluntarily dismissed. Eleven cases were dismissed because the debtors failed to file required statements, schedules, or a proposed plan, or failed to appear at the meeting of creditors.
• In none of the reorganization cases, whether under chapter 11 or 13, did the debtor confirm, much less complete, a plan.
• In 9 of the 14 cases, Ms. Richards failed to file the fee disclosure required by 11 U.S.C. § 329(a) and Fed. R. Bankr. P. 2016(b).
• In the five cases where disclosures were filed, Ms. Richards received fees of $2,500, $750, $1,000, $1,000 and $1,200 before the cases were filed. Two of these five cases were dismissed before the meeting of creditors, one was dismissed because Ms. Richards and her client failed to appear at the meeting of creditors, and in two cases the debtors received chapter 7 discharges.
• 11 of the 12 cases filed in the Eastern District (this excludes the two cases filed in the Central District and then transferred to the Eastern District) were filed by Ms. Richards even though she was not a member of the bar of the Eastern District of California. She became a member on January 14, 2016, after this court noted in a ruling on a motion in Case No. 15-28574 that Ms. Richards was not a member of its bar.
• 9 of the 14 cases were dismissed before the first meeting of creditors could be conducted. Of the 5 cases not dismissed prior to the meeting, Ms. Richards failed to appear at the meeting in 3 cases.
• 10 of the 14 cases were filed to delay a home foreclosure or a post-foreclosure unlawful
detainer action. This is evident from motions or objections filed by the foreclosing creditor as well as admissions in documents filed by the debtors. The dockets of the other four cases give no clue as to whether those debtors were attempting to delay foreclosures or unlawful detainer actions. Each of these four cases (Case Nos. 13-31031, 13-30462, 11-24004, and 11-21249) was dismissed soon after filing because the debtor failed to file required lists, statements, or schedules. Possibly because these cases were dismissed soon after filing, nothing was filed, either by the debtor, a creditor, or the trustee, indicating that the debtor's home had been foreclosed or was in foreclosure.
• Ms. Richards filed more than one bankruptcy case for four different debtors: she filed two cases for debtor Starr, two for debtor Tracy, three for debtor Dynowski, and two for debtor Ascencion.
But see footnote 3 below.
As discussed below, if cases filed in other districts are included, Ms. Richards has filed multiple cases for seven different debtors.
Not on the chart are three cases filed by Ms. Richards on behalf of Debtors Hyatt, Rodriquez, and Gutierrez in other districts.
Ms. Richards filed Case No. 13-14248, a chapter 7 petition, for Debtor Gutierrez in the Central District of California on June 25, 2013. The case was dismissed on July 26, 2013 because the debtor failed to file all mandatory lists, schedules and statements. This dismissal was followed by the filing of a second case, this time under chapter 11, in the Eastern District on August 5, 2013. The chapter 11 case was dismissed on October 3, 2013 on the motion of the United States Trustee. The debtor failed to schedule all real property assets, file monthly operating reports, provide proof of insurance, and provide copies of financial records to the United States Trustee.
Ms. Richards filed Case No. 15-13055 on behalf of Debtor Hyatt in the Central District of California on September 14, 2015. That case was dismissed just nine days later when the debtor failed to file a statement of social security number and a master address list. A second case, Case No. 16-10139, was filed for Debtor Hyatt in the Eastern District on January 21, 2016. It was dismissed on February 19 when the debtor failed to propose a chapter 13 plan.
Debtor Rodriguez filed a chapter 13 petition, Case No. 13-45399, on September 25, 2013 in the Northern District of California with the assistance of Ms. Richards. The case was dismissed due to the debtor's failure to file all lists, schedules, and statements. The Northern District case was filed less than three weeks after Case No. 13-31031 filed in the Eastern District was dismissed because the debtor had failed to file all lists, schedules, and statements.
Interestingly, document #14 on the docket of the Northern District case, a motion to vacate the dismissal, admits that the case was filed to halt a foreclosure of the debtor's home on September 26, 2013, the day after the case was filed. The chart above indicates that there is nothing on the docket of Eastern District Case No. 13-31031 indicating that the debtor was attempting to halt a foreclosure or eviction. With the admission made in the Northern District case, this means that 11 of the 14 cases in the Eastern District were filed to stop foreclosures or evictions.
It also is interesting that the motion to vacate the dismissal of the Northern District case indicates that documents were not filed timely because a paralegal in Ms. Richards' office had failed to calendar the filing deadline. This is reminiscent of the excuse offered in the case now before the court for the failure to appear at the meeting of creditors.
IV
Ms. Richards explanation of, and justifications for, her conduct in this case, particularly when evaluated in light of the other cases she filed in this district, do not hold water.
A. Admission to the Bar of the Eastern District
Ms. Richards maintains that she did not know she was required to be admitted to the bar of this court before practicing in it. Further, she maintains that no one told her she was required to be a member of the court's bar.
It is difficult to believe that any attorney is unaware of the necessity of being admitted to the bar of a court in which they intend to practice. Nor does the court believe that this requirement was never brought to Ms. Richards' attention.
Ms. Richards filed documents in this case electronically. In order to be authorized to file electronically, she had to register with the clerk of this court. The registration process is done over the Internet. Ms. Richards' registration form was received by the clerk on December 15, 2010. A copy of it is appended to Docket 97, the court's earlier August 11 Memorandum.
Section 1 of Ms. Richards' registration form advises that an attorney must be a member of the bar of this court in order to file documents electronically. And, in section 2, "Eligibility", Ms. Richards represented to the clerk that she was "an attorney admitted to the bar of the U.S. District Court for the Eastern District of California and currently [is] in good standing."
The registration form makes clear that in order to file documents electronically, an attorney must be a member of this court's bar, or admitted to it pro hac vice, or be exempt from admission. Hence, even if it somehow escaped Ms. Richards' notice over 35 years of practicing law that admission to the bar of a federal court was necessary before filing a case in it, the registration process clearly informed her of the requirement.
Ms. Richards misrepresented in 2010 that she was a member of this court's bar. This was untrue when this case was filed, and it was untrue when she filed twelve other cases over a five year period. Ms. Richards was not admitted to this court's bar until January 14, 2016.
B. Failure to Appear at the Meeting of Creditors
Ms. Richards does not deny that she failed to appear at the meeting of creditors. She claims she was medically unable to appear. But, if Ms. Richards' evidence is to be believed, this is not the reason for her nonappearance. She did not appear because her law clerk failed to calendar the meeting.
The court believes none of this. Neither Ms. Richards nor anyone in her stead ever intended to appear at the meeting because the debtor never intended to prosecute this case, his third in the space of eleven months. This case was intended only to delay and harass a lender who had foreclosed on the debtor's home. The debtor's first case was filed to stop the lender's nonjudicial foreclosure and his third case was filed to halt an adverse result in its unlawful detainer action.
The court previously authored a lengthy written ruling detailing the debtor's bad faith filing of cases in this court to hinder and delay Pennymac Holdings' nonjudicial foreclosure of his home and his later eviction. See Case No. 14-31822, Docket #57.
This is corroborated by the other cases filed by Ms. Richards in this court.
- Most were not prosecuted and most were filed on behalf of debtors hoping to derail foreclosures and/or evictions.
- Ten of fourteen cases were dismissed prior to the meeting of creditors because schedules, statements, lists and/or a plan were not filed.
- Two more of the fourteen cases were dismissed after the meeting because the debtor and counsel failed to appear at it.
- Ms. Richards or another attorney in her place appeared at the meeting of creditors in only two cases out of fourteen.
- Perhaps most telling is that the fact that no reorganization case filed by Ms. Richards in this court over the last five years has resulted in the confirmation of a
plan.
Of course, there is nothing wrong with filing a bankruptcy case that halts a foreclosure or an eviction. This rises to contumacious conduct when the case is used to hinder, delay, or defraud creditors and without any genuine intent and effort to obtain a discharge and/or reorganize debt.
That is exactly what the debtor was doing in his first and third cases filed with Ms. Richards' help. These cases were filed on the eve of a foreclosure or an eviction and then the debtor failed to properly prosecute the cases by filing required documents and appearing at the meeting of creditors. The debtor was hoping to delay his home lender as long as possible by acquiring the automatic stay of 11 U.S.C. § 362(a) without prosecuting the bankruptcy case.
And, as the chart above corroborates, Ms. Richards is all too familiar with this tactic.
C. Failure to Disclose Fees
Ms. Richards did not file the fee disclosure required by section 329(a) and Rule 2016(b) because she was paid nothing by the debtor for work in connection with this case. Assuming this is true, Ms. Richards nonetheless was required to file a disclosure indicating nothing was paid to her.
Section 329(a) and Rule 2016(b) require every debtor's attorney to file a statement of the compensation paid and to be paid for services rendered in connection with the bankruptcy case. This disclosure must be made with reference to compensation paid or agreed to be paid within the year prior to the filing of the bankruptcy case or after it is filed. Disclosure is mandatory and it must continue throughout the case. See Turner v. Davis, etc. (In re Investment Bankers, Inc.), 4 F.3d 1556 (10th Cir. 1993).
This disclosure permits the court to scrutinize compensation paid to a debtor's attorney even in the absence of an objection to it. The court is charged with insuring that compensation is reasonable. See 11 U.S.C. § 329(b).
If an attorney enters into an agreement to file a bankruptcy case for no compensation, such must be disclosed. The absence of a disclosure would only create an ambiguity - did counsel get paid but fail to make the disclosure, or was counsel representing the debtor without charge? There would be no way to determine what the attorney and the debtor had agreed to without issuing an order and requiring the parties to appear and explain themselves.
Ms. Richards is in business. She practices law as a business. She does not operate a pro bono legal clinic.
The court does not believe Ms. Richards was paid nothing for her services in this case. Ms. Richards represented the debtor in a state court unlawful detainer action. Before that action was filed, she represented him outside of the bankruptcy court in connection with a nonjudicial foreclosure. She was paid a fee for these services. In fact, the debtor and his partner gave Ms. Richards a debit card linked to one of their accounts so she could draw money for her fees.
In the effort to stop the foreclosure and the subsequent eviction, Ms. Richards filed three bankruptcy cases for the debtor, including the one now before the court. Given the failure to propose a plan, the failure to file schedules and statements, and the failure of an attorney to appear the meeting of creditors, it is a reasonable surmise that this case was filed just to acquire the automatic stay in order to prolong and delay the unlawful detainer action. Ms. Richards and her client never intended to prosecute this case to its conclusion.
This conclusion is buttressed by the chart above which shows Ms. Richards' repeated misuse of the automatic stay over the last five years. Whatever this debtor (and the other debtors) paid Ms. Richards, and however it was nominally accounted for by her, it was paid in contemplation of a bankruptcy petition filed to derail or delay a foreclosure and eviction. When paying Ms. Richards for her services, it was within the fair contemplation of the parties that a bankruptcy case could be filed. See e.g., In re Gage, 394 B.R. 184, 194 (Bankr. N.D. Ill. 2008). Therefore, full disclosure of that compensation should have been made to this court by Ms. Richards.
Finally, the fact that Ms. Richards ostensibly charged nothing for this bankruptcy case (and eight other cases filed over the last five years in this district) is corroboration for the lack of good faith in filing it. She had no intention of filing schedules, statements, or a plan, appearing at the meeting, or otherwise prosecuting the case. It was filed purely to harass the foreclosing creditor and to delay an eviction.
V
The $1,000 sanction assessed against Ms. Richards in the court's August 11 Order was for the conduct described in Part VI of this Memorandum. That order also directed Ms. Richards to show cause why she should not be sanctioned further for filing this case for the apparent improper purpose of harassing, delaying, and causing unnecessary expense to the debtor's foreclosing home lender. The Memorandum accompanying the August 11 order included all of the information summarized above concerning the other cases filed by Ms. Richards in this district over the last five years.
After considering her response to the August 11 order, and based on the findings summarized above, the court concludes that clear and convincing evidence establishes Ms. Richards' bad faith and willful misconduct as follows:
1. Ms. Richards filed this case, and eleven others, without being a member of the bar of this court. In addition, she appeared in two cases filed in other districts and then transferred them to this district. When this case was filed, Ms. Richards knew she was not a member of this court's bar and had misrepresented that she was a member of it.
2. Ms. Richards failed to file a fee disclosure as required by section 329(a) and Rule 2016(b).
3. This case (and others) was filed without any intention of prosecuting it to conclusion. It was filed solely to acquire the automatic stay in order to hinder and delay a foreclosure and an eviction. The court does not believe the assertion by Ms. Richards or the debtor that this case was filed with the genuine purpose of reorganizing the debtor's home loan or other finances.
Therefore, sanctions are appropriate. See Chambers v. NASCO, Inc., 501 U.S. 32, 42-47 (1991); Caldwell v. Unified Capital Corp. (In re Rainbow Magazine, Inc.), 77 F.3d 278, 284 (9th Cir. 1996); Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1196-1197 (9th Cir. 2003).
The court has already assessed $1,000 in sanctions against Ms. Richards pursuant to its Order to Show Cause of January 28, 2016. See Dockets 34 and 96. Ms. Richards paid the sanctions on September 1, 2016 and also filed a belated disclosure of compensation on September 15, 2016. The final issue is whether an additional sanction is appropriate given conclusion 3 immediately above.
Rather than assess further monetary sanctions, the court will bar Ms. Richards, effective from April 15, 2017, filing new bankruptcy cases or proceedings in the Eastern District of California until she has completed at least four hours of continuing legal education in legal ethics that the State Bar of California approves as meeting standards for Minimum Continuing Legal Education, that is taught by a provider approved by the State Bar, and that is not self-study but a participatory activity for which the provider verifies attendance. Proof of attendance shall be provided to the clerk of this court when the four hours of education has been completed.
A final order shall issue. Dated: February 28, 2017
By the Court
/s/_________
Michael S. McManus
United States Bankruptcy Judge
Instructions to Clerk of Court
Service List - Not Part of Order/Judgment
The Clerk of Court is instructed to send the Order/Judgment or other court generated document transmitted herewith to the parties below. The Clerk of Court will send the Order via the BNC.
John A Dynowski7445 Morningside WayCitrus Heights CA 95621 | Jan P. JohnsonPO Box 1708Sacramento CA 95812 | Office of the U.S. TrusteeRobert T Matsui United StatesCourthouse501 I Street, Room 7-500Sacramento CA 95814 |
PennyMac Corpc/o Aldridge Pite, LLP4375 Jutland Drive #200PO Box 17933San Diego CA 92177-0933 | Leslie Richards17337 Ventura Blvd Suite 211Encino CA 91316 | Mark A. Wolff8861 Williamson Dr #30Elk Grove CA 95624-7920 |
Time: 1:30 p.m.
ORDER
For the reasons given in the accompanying Memorandum, it is ORDERED:
Attorney Leslie Richards, effective from April 15, 2017, shall not file new bankruptcy cases or proceedings in the Eastern District of California until she has completed at least four hours of continuing legal education in legal ethics that the State Bar of California approves as meeting standards for Minimum Continuing Legal Education, that is taught by a provider approved by the State Bar, and that is not self-study but a participatory activity for which the provider verifies attendance. Proof of attendance shall be provided to the clerk of this court when the four hours of education has been completed. ///
To satisfy this order, Ms. Richards may complete the continuing legal education in ethics any time after the date of this order.
This order does not bar Ms. Richards from appearing in bankruptcy cases and proceedings filed prior to April 15, 2017. Dated: March 01, 2017
By the Court
/s/_________
Michael S. McManus
United States Bankruptcy Judge In re TOURE R. TYLER and ROLANDA C. TYLER, Debtors. RAFAEL A. REYES and VILLA REYES, Debtors. TOURE R. TYLER and ROLANDA C. TYLER, Debtors. JOHN A. DYNOWSKI, Debtor. DUKE PARTNERS II, LLC, Plaintiff, v. RAFAEL REYES and VILLA REYES, Defendants. Case Nos. 17-13464-B-13 17-23817-B-13 17-11558-A-13 15-28574-A-13 17-23817-B-13 Adv. 17-2127 ORDER ASSIGNING TO THE HON. CHRISTOPHER D. JAIME REVIEW OF LEGAL SERVICES PROVIDED BY LESLIE RICHARDS, ESQ. FOR CASES FILED IN THE U.S. BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF CALIFORNIA
Leslie Richards, Esq. ("Attorney Richards") is an attorney representing debtors in various cases filed in the Bankruptcy Court for the Eastern District of California. Issues concerning that representation have previously arisen in those cases which have been pending before different judges in this District. To provide for the uniform and. consistent addressing of these issues for Attorney Richards and the Court, the judges in this District have agreed for the review of those issues and the action to be taken by the Court, if any, shall be assigned to one judge for review and determination.
The undersigned, as Chief Bankruptcy Judge in this District, assigns to Bankruptcy Judge Christopher D. Jaime all issues relating to the conduct of Attorney Richards serving as an attorney for parties in this District, the corrective action (if any) to be taken, the documentation of compliance by Attorney Richards with orders of the court, and the possible referral of such conduct to the Chief Judge of the United States District Court for consideration with respect to an attorney's admission to practice in the Eastern District of California, in the following cases and proceedings:
A. In re Toure and Rolanda Tyler, Bankr. E.D. Cal. 17-13464
1. Filed........................................September 10, 2017
2. Dismissed........................................September 29, 2017
B. Duke Partners II, LLC v. Reyes et. al, Bankr. E.D. Cal. Adv. 17-02127
1. Removed to Federal Court......July 17, 2017
2. Remanded to State Court................September 6, 2017
C. In re Rafael and Villa Reyes, Bankr. E.D. Cal. 17-23817
1. Filed........................................June 6, 2017
2. Dismissed........................................July 26, 2017
D. In re Toure and Rolanda Tyler, Bankr. E.D. Cal. 17-11558
1. Filed........................................April 23, 2017
2. Dismissed.......................................May 12, 2017
E. In re John A. Dynowski, Bankr. E.D. Cal. 15-28574
1. Filed........................................November 3, 2015
2. Dismissed........................................June 20, 2016
In the Dynowski case, the Hon. Michael S. McManus, bankruptcy judge, entered an Order barring Attorney Richards from filing new bankruptcy cases or proceedings in the Eastern District of California Bankruptcy Court, effective April 15, 2017, until she completed further ethics education and documented such completion with the Clerk of the Court. 15-28547; Order, Dckt. 114.
In his Memorandum Opinion and Decision in Dynowski relating to the above Order, Judge McManus reviews the conduct of Attorney Richards in representing debtors in this court in the cases filed by her. Attached hereto as Addendum "A" is Judge McManus' Memorandum Opinion and Decision addressing such conduct, which includes his determination that:
These cases show a remarkably consistent pattern of abuse - failing to file fee disclosures, failing to file required documents, and failing to attend meetings of creditors. The court concludes from the record in the case now before it, as well as these prior cases, that Ms. Richards is aiding debtors in an abuse of the bankruptcy process that is calculated to hinder, delay, and defraud lenders in their efforts to foreclose and/or repossess their real property collateral.15-28574; Mem. Op. and Dec., p. 3: 18-25, Dckt. 115 (emphasis added).
In his Memorandum Opinion and Decision, Judge McManus surveys the representation provided by Attorney Richards in fourteen (14) cases filed in this District. Id. at 4-8. The court has identified three additional cases filed by Attorney Richards. These cases include (continuing the numbering from above):
F. In re Rafael and Villa Reyes, Bankr. E.D. Cal. 17-22413
1. Filed.......................................April 11, 2017
2. Dismissed..........................................May 1, 2017
G. In re Toure and Rolanda Tyler, Bankr. E.D. Cal. 17-10177
1. Filed.......................................January 20, 2017
2. Dismissed..........................................March 6, 2017
H. In re Raf[a]el and Villa Reyes, Bankr. E.D. Cal. 17-20282
1. Filed........................................January 17, 2017
2. Dismissed..........................................March 1, 2017
I. In re David Leigh Hyatt, Bankr. E.D. Cal. 16-10139
1. Filed.......................................January 21, 2016
2. Dismissed.........................................February 19, 2016
J. In re Ronald Leon Starr, Bankr. E.D. Cal. 15-14857
1. Filed........................................December 20, 2015
2. Dismissed.........................................April 8, 2016
K. In re Ronald Leon Starr, Bankr. E.D. Cal. 16-10088
1. Filed........................................November 19, 2015
2. Dismissed..........................................March 3, 2016
L. In re Mary Tracy, Bankr. E.D. Cal. 16-20084
1. Filed........................................November 18, 2015
2. Dismissed..........................................January 3, 2016
M. In re John A. Dynowski, Bankr. E.D. Cal. 15-28574
1. Filed.......................................November 3, 2015
2. Dismissed..........................................June 20, 2016
N. In re Mary Tracy, Bankr. E.D. Cal. 15-22785
1. Filed.......................................April 6, 2015
2. Dismissed..........................................April 24, 2015
O. In re John A. Dynowski, Bankr. E.D. Cal. 15-21755
1. Filed........................................March 5, 2015
2. Chapter 7 Discharge..........................July 20, 2015
P. In re John A. Dynowski, Bankr. E.D. Cal. 14-31822
1. Filed........................................December 4, 2014
2. Dismissed..........................................December 15, 2014
Q. In re Samuel Rodriguez, Bankr. E.D. Cal. 13-31031
1. Filed........................................August 22, 2013
2. Dismissed..........................................September 3, 2013
R. In re Ronald Manzo, Bankr. E.D. Cal. 13-30462
1. Filed........................................August 8, 2013
2. Dismissed..........................................August 19, 2013
S. In re Cecilio and Norma Gutierrez, Bankr. E.D. Cal. 13-15329
1. Filed........................................August 5, 2013
2. Dismissed..........................................October 3, 2013
T. In re Kelly Pinheiro, Bankr. E.D. Cal. 11-90725
1. Filed........................................February 28, 2011
2. Chapter 7 Discharge..........................June 6, 2011
U. In re Relucio Ascencion, Bankr. E.D. Cal. 11-24004
1. Filed........................................February 17, 2011
2. Dismissed..........................................March 8, 2011
V. In re Relucio and Roxanne Ascencion, Bankr. E.D. Cal. 11-21249
The above listed additional cases and those in which the court has assigned to Judge Jaime the issues relating to Attorney Richards' conduct, represent the entire universe of cases in which Attorney Richards has appeared in the Bankruptcy Court in this District. Judge McManus's Memorandum Opinion and Decision includes a discussion of cases filed for some of the above debtors by Attorney Richards in other districts.1. Filed........................................January 18, 2011
2. Dismissed..........................................February 8, 2011
After discussing the prior and possible monetary sanctions, Judge McManus concludes in the Memorandum Opinion and Decision:
Rather than assess further monetary sanctions, the court will bar Ms. Richards, effective from April 15, 2017, filing new bankruptcy cases or proceedings in the Eastern District of California until she has completed at least four hours of continuing legal education in legal ethics that the State Bar of California approves as meeting standards for Minimum Continuing Legal Education, that is taught by a provider approved by the State Bar, and that is not self-study but a participatory activity for which the provider verifies attendance. Proof of attendance shall be provided to the clerk of this court when the four hours of education has been completed.Id. at 17:11-21 (emphasis added).
There is no record of Attorney Richards having completed the required ethics continuing education or having provided the Clerk of the Court with proof of any such continuing education having been completed.
Therefore, the judges in this District have determined that further review and enforcement of the prior order requiring the continuing education and barring Attorney Richard filing cases or proceedings in this court is warranted.
For any of the above cases or proceedings which have been closed by the Clerk of the Court, an order reopening such cases for purposes of the Hon. Christopher D. Jaime conducting the review, determining action to be taken (if any), and the enforcement of such action will be issued.
Any hearings in the assigned matter shall be set by the Hon. Christopher D. Jaime in the Sacramento Division Courthouse, without regard to the Division in which the above cases have been filed.
The Clerk of the Court shall serve a copy of this Order on Leslie Richards, Esq. and the Office of the U.S. Trustee. The Clerk shall also deliver informational copies of this Order to the judges in the four bankruptcy cases and the one adversary proceeding for which the above matters concerning Attorney Richards are assigned to the Hon. Christopher D. Jaime. Dated: October 05, 2017
By the Court
/s/ _________
Ronald H. Sargis, Judge
United States Bankruptcy Court
ADDENDUM "A"
UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF CALIFORNIA SACRAMENTO DIVISION In re JOHN DYNOWSKI, Debtor. Case No. 15-28574-A-13J Date: October 31, 2016
Time: 1:30 p.m.
MEMORANDUM
Leslie Richards, the debtor's attorney, filed this case without being a member of the bar of the District Court of the Eastern District of California, and then failed to appear in its proper prosecution. Sanctions are warranted.
I
This matter originally came before the court as a motion by the chapter 13 trustee (Docket Control No. JPJ-1) seeking to compel attorney Leslie Richards to appear at the meeting of creditors. This request was made because Ms. Richards failed to appear on December 22, 2015 at the initial meeting. Although the debtor, John Dynowski, appeared at that meeting, Ms. Richards' absence required the trustee to continue the meeting to January 21, 2016.
In connection with the January 4 hearing on the trustee's motion, the court noted two additional problems: Ms. Richards filed this case even though she was not admitted to the bar of the Eastern District of California, and she had not filed the fee disclosure required by Fed. R. Bankr. P. 2016 and 11 U.S.C. § 329.
Despite continuing the hearing on the trustee's motion to January 19 to give Ms. Richards an opportunity to address these issues, Ms. Richards failed to appear.
While the court dismissed this bankruptcy case on January 19 at the request of the debtor, it reserved jurisdiction over the issues of Ms. Richards' compensation and the appropriateness of sanctions for her failure to represent her client and appear in the proper prosecution of this case. See Docket 30.
To that end, the court issued an Order to Show Cause on January 28, 2016 (see Docket 34) directing Ms. Richards to appear in person at a hearing on February 29 to determine whether she should be sanctioned for:
a. Failing to appear at the meeting of creditors on December 22, 2015;
b. Filing this case even though she was not admitted to the bar of the Eastern District of California; and
c. Failing to file the fee disclosure required by Fed. R. Bankr. P. 2016 and 11 U.S.C. § 329(a).
II
Ms. Richards responded to the Order to Show Cause by admitting she was not a member of the bar of the Eastern District of California when this case was filed. Her excuse is that she "did not realize [she] had to be admitted to the Eastern District nor was the issue previously brought up. . . ."
Ms. Richards also maintained she was unable to appear at the meeting of creditors because of recent knee surgery. Acknowledging she nonetheless had an obligation to represent the debtor at the meeting, Ms. Richards states that she failed to arrange for substitute counsel because her law clerk neglected to calendar the meeting.
Finally, Ms. Richards admitted that she did not file a fee disclosure in this case. However, she believes no disclosure was required because she charged no fee for Mr. Dynowski's representation.
III
In the course of considering Ms. Richards' response to the August 11 Order to Show Cause, the court determined from a search of its electronic case files that Ms. Richards was the attorney of record for debtors in fourteen cases in this district commenced over a 5-year period, from January 18, 2011 through January 21, 2016.
These cases show a remarkably consistent pattern of abuse - failing to file fee disclosures, failing to file required documents, and failing to attend meetings of creditors. The court concludes from the record in the case now before it, as well as these prior cases, that Ms. Richards is aiding debtors in an abuse of the bankruptcy process that is calculated to hinder, delay, and defraud lenders in their efforts to foreclose and/or repossess their real property collateral.
This table summarizes the cases filed by Ms. Richards.
Case No./Debtor | Chap. | 2016(b) filed/amount paid | Disposition | Foreclosure/Eviction? | First meetingattended? |
---|---|---|---|---|---|
16-10139Hyatt | 13 | yes - $2500 | filed 1/21/16dismissed 2/19/16before meeting | Dkt. #41. Case filed1 day before answerdue in unlawfuldetainer | NA |
15-14857Starr | 13 | yes - $750 | filed 12/20/15dismissed 4/8/16 | Dkt #52. Home inforeclosure | Counsel and debtorfailed to appear |
16-10088Starr | 7 | no | filed 11/19/15dismissed 3/3/16before meeting | Dkt #40. Debtorasks for dismissalbecause he has"discovered amortgagemodificationprogram" | NA |
16-20084Tracy | 7 | no | filed 11/18/15dismissed 2/23/16 | Dkt #17. Home inforeclosure | Counsel and debtorfailed to appear |
15-28574Dynowksi | 13 | no | filed 11/3/15voluntarilydismissed 6/20/16 | Dkt #47.Case filed 1day before hearingon summaryjudgment motion inunlawful detainer | Debtor appeared butcounsel did not |
15-22785Tracy | 7 | no | filed 4/6/15dismissed 4/24/15before meeting | See Case No 16-20084 | NA |
7 | yes - $1000 | filed 3/5/15discharge 7/20/15 | See Case Nos. 15-28574 & 14-31822 | Counsel and debtorappeared |
14-31822Dynowski | 7 | no | filed 12/4/15dismissed12/15/14 beforemeeting | Dkt #35. Case filed6 minutes beforehome foreclosure | NA |
13-31031Rodriguez | 7 | no | filed 8/22/13dismissed 9/3/13before meeting | NA | |
13-30462Manzo | 7 | no | filed 8/8/13dismissed 8/19/13before meeting | NA | |
13-15329Gutierrez | 11 | no + incompleteemploymentapplication | filed 8/5/13dismissed 10/3/13on UST motionbefore meeting | Dkt #24. Creditorattempting toforeclose on rentalproperties. | NA |
11-90725Pinheiro | 7 | yes - $1000 | filed 2/28/11discharge 6/6/11 | Dkt #19. Foreclosingcreditor attemptingto enforce writ ofpossession | Counsel and debtorappeared |
11-24004Ascencion | 13 | no | filed 2/27/11dismissed 3/8/11before meeting | See next case. | NA |
11-21249Ascencion | 7 | yes - $1200 | filed 1/18/11dismissed 2/8/11before meeting | Dkt #1. Scheduleslist under-securedhome mortgage. Noforeclosure oreviction noted ondocket. | NA |
A comparison of the three petitions filed by Debtor Dynowski shows his signature on two petitions, Case Nos. 14-31822 and 15-28574, is a "wet ink" signature, but the petition in Case No. 15-21755 is signed "/s/ John A Dynowski". This court's local rules permit either form of signature. See Local Bankruptcy Rule 9004-1(c)(1)(B). However, when the latter form is used, Local Bankruptcy Rule 9004-1(c)(1)(D), provides:
"When "/s/ Name" . . . is used in an electronically filed document to indicate the required signature(s) of persons other than that of the registered user, the registered user shall retain the originally signed document in paper form for no less than three (3) years following the closing of the case. On request of the Court, U.S. Trustee, U.S. Attorney, or other party, the registered user shall produce the originally signed document(s) for review. The failure to do so may result in the imposition of sanctions on the Court's own motion, or upon motion of the case trustee, U.S. Trustee, U.S. Attorney, or other party."At the hearing on the order to show cause both Ms. Richards and Mr. Dynowski admitted he never signed the petition in Case No. 15-21755. Ms. Richards does not have a copy of the petition with Mr. Dynowski's wet ink signature.
A review of the dockets of these cases shows the following:
• Over a 5-year period, Ms. Richards filed twelve bankruptcy cases in the Eastern District of California. Two more cases, Case Nos. 16-10088 and 16-20084, were filed in the Central District of California on November 18 and 19, 2015 and then transferred to the Eastern District at the debtors' requests. All fourteen cases were filed for individual consumer debtors. Nine of these cases were filed under chapter 7, four under chapter 13, and one under chapter 11.
• In only 2 of the 14 cases, both chapter 7 cases, did the debtor receive a discharge. One case was voluntarily dismissed. Eleven cases were dismissed because the debtors failed to file required statements, schedules, or a proposed plan, or failed to appear at the meeting of creditors.
• In none of the reorganization cases, whether under chapter 11 or 13, did the debtor confirm, much less complete, a plan.
• In 9 of the 14 cases, Ms. Richards failed to file the fee disclosure required by 11 U.S.C. § 329(a) and Fed. R. Bankr. P. 2016(b).
• In the five cases where disclosures were filed, Ms. Richards received fees of $2,500, $750, $1,000, $1,000 and $1,200 before the cases were filed. Two of these five cases were dismissed before the meeting of creditors, one was dismissed because Ms. Richards and her client failed to appear at the meeting of creditors, and in two cases the debtors received chapter 7 discharges.
• 11 of the 12 cases filed in the Eastern District (this excludes the two cases filed in the Central District and then transferred to the Eastern District) were filed by Ms. Richards even though she was not a member of the bar of the Eastern District of California. She became a member on January 14, 2016, after this court noted in a ruling on a motion in Case No. 15-28574 that Ms. Richards was not a member of its bar.
• 9 of the 14 cases were dismissed before the first meeting of Creditors could be conducted. Of the 5 cases not dismissed prior to the meeting, Ms. Richards failed to appear at the meeting in 3 cases.
• 10 of the 14 cases were filed to delay a home foreclosure or a post-foreclosure unlawful
detainer action. This is evident from motions or objections filed by the foreclosing creditor as well as admissions in documents filed by the debtors. The dockets of the other four cases give no clue as to whether those debtors were attempting to delay foreclosures or unlawful detainer actions. Each of these four cases (Case Nos. 13-31031, 13-30462, 11-24004, and 11-21249) was dismissed soon after filing because the debtor failed to file required lists, statements, or schedules. Possibly because these cases were dismissed soon after filing, nothing was filed, either by the debtor, a creditor, or the trustee, indicating that the debtor's home had been foreclosed or was in foreclosure.
• Ms. Richards filed more than one bankruptcy case for four different debtors: she filed two cases for debtor Starr, two for debtor Tracy, three for debtor Dynowski, and two for debtor Ascencion.
But see footnote 3 below.
As discussed below, if cases filed in other districts are included, Ms. Richards has filed multiple cases for seven different debtors.
Not on the chart are three cases filed by Ms. Richards on behalf of Debtors Hyatt, Rodriquez, and Gutierrez in other districts.
Ms. Richards filed Case No. 13-14248, a chapter 7 petition, for Debtor Gutierrez in the Central District of California on June 25, 2013. The case was dismissed on July 26, 2013 because the debtor failed to file all mandatory lists, schedules and statements. This dismissal was followed by the filing of a second case, this time under chapter 11, in the Eastern District on August 5, 2013. The chapter 11 case was dismissed on October 3, 2013 on the motion of the United States Trustee. The debtor failed to schedule all real property assets, file monthly operating reports, provide proof of insurance, and provide copies of financial records to the United States Trustee.
Ms. Richards filed Case No. 15-13055 on behalf of Debtor Hyatt in the Central District of California on September 14, 2015. That case was dismissed just nine days later when the debtor failed to file a statement of social security number and a master address list. A second case, Case No. 16-10139, was filed for Debtor Hyatt in the Eastern District on January 21, 2016. It was dismissed on February 19 when the debtor failed to propose a chapter 13 plan.
Debtor Rodriguez filed a chapter 13 petition, Case No. 13-45399, on September 25, 2013 in the Northern District of California with the assistance of Ms. Richards. The case was dismissed due to the debtor's failure to file all lists, schedules, and statements. The Northern District case was filed less than three weeks after Case No. 13-31031 filed in the Eastern District was dismissed because the debtor had failed to file all lists, schedules, and statements.
Interestingly, document #14 on the docket of the Northern District case, a motion to vacate the dismissal, admits that the case was filed to halt a foreclosure of the debtor's home on September 26, 2013, the day after the case was filed. The chart above indicates that there is nothing on the docket of Eastern District Case No. 13-31031 indicating that the debtor was attempting to halt a foreclosure or eviction. With the admission made in the Northern District case, this means that 11 of the 14 cases in the Eastern District were filed to stop foreclosures or evictions.
It also is interesting that the motion to vacate the dismissal of the Northern District case indicates that documents were not filed timely because a paralegal in Ms. Richards' office had failed to calendar the filing deadline. This is reminiscent of the excuse offered in the case now before the court for the failure to appear at the meeting of creditors.
IV
Ms. Richards explanation of, and justifications for, her conduct in this case, particularly when evaluated in light of the other cases she filed in this district, do not hold water.
A. Admission to the Bar of the Eastern District
Ms. Richards maintains that she did not know she was required to be admitted to the bar of this court before practicing in it. Further, she maintains that no one told her she was required to be a member of the court's bar.
It is difficult to believe that any attorney is unaware of the necessity of being admitted to the bar of a court in which they intend to practice. Nor does the court believe that this requirement was never brought to Ms. Richards' attention.
Ms. Richards filed documents in this case electronically. In order to be authorized to file electronically, she had to register with the clerk of this court. The registration process is done over the Internet. Ms. Richards' registration form was received by the clerk on December 15, 2010. A copy of it is appended to Docket 97, the court's earlier August 11 Memorandum.
Section 1 of Ms. Richards' registration form advises that an attorney must be a member of the bar of this court in order to file documents electronically. And, in section 2, "Eligibility", Ms. Richards represented to the clerk that she was "an attorney admitted to the bar of the U.S. District Court for the Eastern District of California and currently [is] in good standing."
The registration form makes clear that in order to file documents electronically, an attorney must be a member of this court's bar, or admitted to it pro hac vice, or be exempt from admission. Hence, even if it somehow escaped Ms. Richards' notice over 35 years of practicing law that admission to the bar of a federal court was necessary before filing a case in it, the registration process clearly informed her of the requirement.
Ms. Richards misrepresented in 2010 that she was a member of this court's bar. This was untrue when this case was filed, and it was untrue when she filed twelve other cases over a five year period. Ms. Richards was not admitted to this court's bar until January 14, 2016.
B. Failure to Appear at the Meeting of Creditors
Ms. Richards does not deny that she failed to appear at the meeting of creditors. She claims she was medically unable to appear. But, if Ms. Richards' evidence is to be believed, this is not the reason for her nonappearance. She did not appear because her law clerk failed to calendar the meeting.
The court believes none of this. Neither Ms. Richards nor anyone in her stead ever intended to appear at the meeting because the debtor never intended to prosecute this case, his third in the space of eleven months. This case was intended only to delay and harass a lender who had foreclosed on the debtor's home. The debtor's first case was filed to stop the lender's nonjudicial foreclosure and his third case was filed to halt an adverse result in its unlawful detainer action.
The court previously authored a lengthy written ruling detailing the debtor's bad faith filing of cases in this court to hinder and delay Pennymac Holdings' nonjudicial foreclosure of his home and his later eviction. See Case No. 14-31822, Docket #57. --------
This is corroborated by the other cases filed by Ms. Richards in this court.
- Most were not prosecuted and most were filed on behalf of debtors hoping to derail foreclosures and/or evictions.
- Ten of fourteen cases were dismissed prior to the meeting of creditors because schedules, statements, lists and/or a plan were not filed.
- Two more of the fourteen cases were dismissed after the meeting because the debtor and counsel failed to appear at it.
- Ms. Richards or another attorney in her place appeared at the meeting of creditors in only two cases out of fourteen.
- Perhaps most telling is that the fact that no reorganization case filed by Ms. Richards in this court over the last five years has resulted in the confirmation of a
plan.
Of course, there is nothing wrong with filing a bankruptcy case that halts a foreclosure or an eviction. This rises to contumacious conduct when the case is used to hinder, delay, or defraud creditors and without any genuine intent and effort to obtain a discharge and/or reorganize debt.
That is exactly what the debtor was doing in his first and third cases filed with Ms. Richards' help. These cases were filed on the eve of a foreclosure or an eviction and then the debtor failed to properly prosecute the cases by filing required documents and appearing at the meeting of creditors. The debtor was hoping to delay his home lender as long as possible by acquiring the automatic stay of 11 U.S.C. § 362(a) without prosecuting the bankruptcy case.
And, as the chart above corroborates, Ms. Richards is all too familiar with this tactic.
C. Failure to Disclose Fees
Ms. Richards did not file the fee disclosure required by section 329(a) and Rule 2016(b) because she was paid nothing by the debtor for work in connection with this case. Assuming this is true, Ms. Richards nonetheless was required to file a disclosure indicating nothing was paid to her.
Section 329(a) and Rule 2016(b) require every debtor's attorney to file a statement of the compensation paid and to be paid for services rendered in connection with the bankruptcy case. This disclosure must be made with reference to compensation paid or agreed to be paid within the year prior to the filing of the bankruptcy case or after it is filed. Disclosure is mandatory and it must continue throughout the case. See Turner v. Davis, etc. (In re Investment Bankers, Inc.), 4 F. 3d 1556 (10th Cir. 1993).
This disclosure permits the court to scrutinize compensation paid to a debtor's attorney even in the absence of an objection to it. The court is charged with insuring that compensation is reasonable. See 11 U.S.C. § 329(b).
If an attorney enters into an agreement to file a bankruptcy case for no compensation, such must be disclosed. The absence of a disclosure would only create an ambiguity - did counsel get paid but fail to make the disclosure, or was counsel representing the debtor without charge? There would be no way to determine what the attorney and the debtor had agreed to without issuing an order and requiring the parties to appear and explain themselves.
Ms. Richards is in business. She practices law as a business. She does not operate a pro bono legal clinic.
The court does not believe Ms. Richards was paid nothing for her services in this case. Ms. Richards represented the debtor in a state court unlawful detainer action. Before that action was filed, she represented him outside of the bankruptcy court in connection with a nonjudicial foreclosure. She was paid a fee for these services. In fact, the debtor and his partner gave Ms. Richards a debit card linked to one of their accounts so she could draw money for her fees.
In the effort to stop the foreclosure and the subsequent eviction, Ms. Richards filed three bankruptcy cases for the debtor, including the one now before the court. Given the failure to propose a plan, the failure to file schedules and statements, and the failure of an attorney to appear the meeting of creditors, it is a reasonable surmise that this case was filed just to acquire the automatic stay in order to prolong and delay the unlawful detainer action. Ms. Richards and her client never intended to prosecute this case to its conclusion.
This conclusion is buttressed by the chart above which shows Ms. Richards' repeated misuse of the automatic stay over the last five years. Whatever this debtor (and the other debtors) paid Ms. Richards, and however it was nominally accounted for by her, it was paid in contemplation of a bankruptcy petition filed to derail or delay a foreclosure and eviction. When paying Ms. Richards for her services, it was within the fair contemplation of the parties that a bankruptcy case could be filed. See e.g., In re Gage, 394 B.R. 184, 194 (Bankr. N.D. Ill. 2008). Therefore, full disclosure of that compensation should have been made to this court by Ms. Richards.
Finally, the fact that Ms. Richards ostensibly charged nothing for this bankruptcy case (and eight other cases filed over the last five years in this district) is corroboration for the lack of good faith in filing it. She had no intention of filing schedules, statements, or a plan, appearing at the meeting, or otherwise prosecuting the case. It was filed purely to harass the foreclosing creditor and to delay an eviction.
V
The $1,000 sanction assessed against Ms. Richards in the court's August 11 Order was for the conduct described in Part VI of this Memorandum. That order also directed Ms. Richards to show cause why she should not be sanctioned further for filing this case for the apparent improper purpose of harassing, delaying, and causing unnecessary expense to the debtor's foreclosing home lender. The Memorandum accompanying the August 11 order included all of the information summarized above concerning the other cases filed by Ms. Richards in this district over the last five years.
After considering her response to the August 11 order, and based on the findings summarized above, the court concludes that clear and convincing evidence establishes Ms. Richards' bad faith and willful misconduct as follows:
1. Ms. Richards filed this case, and eleven others, without being a member of the bar of this court. In addition, she appeared in two cases filed in other districts and then transferred them to this district. When this case was filed, Ms. Richards knew she was not a member of this court's bar and had misrepresented that she was a member of it.
2. Ms. Richards failed to file a fee disclosure as required by section 329(a) and Rule 2016(b).
3. This case (and others) was filed without any intention of prosecuting it to conclusion. It was filed solely to acquire the automatic stay in order to hinder and delay a foreclosure and an eviction. The court does not believe the assertion by Ms. Richards or the debtor that this case was filed with the genuine purpose of reorganizing the debtor's home loan or other finances.
Therefore, sanctions are appropriate. See Chambers v. NASCO, Inc., 501 U.S. 32, 42-47 (1991); Caldwell v. Unified Capital Corp. (In re Rainbow Magazine, Inc.), 77 F.3d 278, 284 (9th Cir. 1996); Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1196-1197 (9th Cir. 2003).
The court has already assessed $1,000 in sanctions against Ms. Richards pursuant to its Order to Show Cause of January 28, 2016. See Dockets 34 and 96. Ms. Richards paid the sanctions on September 1, 2016 and also filed a belated disclosure of compensation on September 15, 2016. The final issue is whether an additional sanction is appropriate given conclusion 3 immediately above.
Rather than assess further monetary sanctions, the court will bar Ms. Richards, effective from April 15, 2017, filing new bankruptcy cases or proceedings in the Eastern District of California until she has completed at least four hours of continuing legal education in legal ethics that the State Bar of California approves as meeting standards for Minimum Continuing Legal Education, that is taught by a provider approved by the State Bar, and that is not self-study but a participatory activity for which the provider verifies attendance. Proof of attendance shall be provided to the clerk of this court when the four hours of education has been completed.
A final order shall issue. Dated: February 28, 2017
By the Court
/s/_________
Michael S. McManus
United States Bankruptcy Judge
Instructions to Clerk of Court
Service List - Not Part of Order/Judgment
The Clerk of Court is instructed to send the Order/Judgment or other court generated document transmitted herewith to the parties below. The Clerk of Court will send the Order via the BNC.
John A Dynowski 7445 Morningside Way Citrus Heights CA 95621 Jan P. Johnson PO Box 1708 Sacramento CA 95812 Office of the U.S. Trustee Robert T Matsui United States Courthouse 501 I Street, Room 7-500 Sacramento CA 95814 PennyMac Corp c/o Aldridge Pite, LLP 4375 Jutland Drive #200 PO Box 17933 San Diego CA 92177-0933 Leslie Richards 17337 Ventura Blvd Suite 211 Encino CA 91316 Mark A. Wolff 8861 Williamson Dr #30 Elk Grove CA 95624-7920
Id., dkt. 115 at 17:11-21.