Page 10 - John Hundley 2013

and SOFA with the client and passes that responsibility off to a legal assistant.

“[L]egal assistants are not attorneys,” the court emphasized. “Legal assistants may not counsel,
warn, or ensure the Debtor's compliance with bankruptcy law; rather, they are charged with mere
transposition of the debtor's information onto the Schedules and SOFA.”

The court made those rulings in an exhaustive decision in an egregious case – but the court's
laying down of clear black lines on such points invites application in less egregious cases.
Technically, the opinion constitutes just the rulings of a single bankruptcy judge and is not binding
precedent – but Chief Judge Jeff Bohm's thoroughness and language leave little doubt that the
decision is offered as a seminal clarion call to other judges faced with sloppy and unethical
bankruptcy practice, and a warning to practitioners tempted to cut corners.

The court imposed fines totaling $4,000 payable to the clerk of court, and
ordered the offending lawyer also to pay attorneys' fees and costs incurred by a
critical creditor, the United States Trustee, and successor counsel for the client
at issue. It further ordered him to pay expenses that the creditor had incurred in
attending hearings on the matter.

Lawyers seeking to thwart the spread of the Stomberg rulings will point to its egregious
background: the law firm was working under an indisputable conflict of interest as it simultaneously
represented both the client and his ex-wife who was a significant creditor of
the estate, without disclosing the conflict in required bankruptcy court papers.
Moreover, to the end the offending lawyer showed no remorse but maintained
an attitude that he was being victimized. And the case involved a lawyer with
a long history of run-ins before Judge Bohm, a record showing that
admonitions and lesser sanctions had not improved the offender's practice,
and several instances of what Bohm found to be perjury in the offender's defense in the case.

But according to the decision, those factors are not critical to the holding requiring actual
signatures to the exact form of papers being filed as a precondition to electronic filing, or to the ruling
that failing to have such signatures necessarily constitutes forgery and bad faith warranting sanctions,
or to the statements limiting the proper role of legal assistants.

The decision constitutes a continuation of a perceptible trend of bank-
ruptcy courts enforcing Bankruptcy Rule 9011. See Sharp Thinking No. 55 (Dec.
2011); No. 71 (Sept. 2012); No. 81 (Jan. 2013). However, the opinion also relies
heavily on Bankruptcy Rule 1008, requiring that certain papers be verified; the rules
regarding electronic filing; local ethical rules, which future sanctions respondents
may argue are distinguishable; and the ability to apply § 105 and the inherent
authority doctrine where the bankruptcy rules are not directly on point. In these
respects also, the opinion is significant. The decision was plainly written with a
prospective appeal in mind, and an appeal has been filed. We'll keep our eye on
Stomberg and its progeny in future issues of Sharp Thinking.

John\SharpThinking\#86.doc

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