Daryl Withrow

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United States Bankruptcy Court

District of Massachusetts
)
In re: ) Chapter 7
) Case No. 07-41243-H] B
DARYL WITHROW, )
)
Debtor. )
)
MEMDRANDUMOF DECISION

Before the Courtis its Order, dated September 6, 2007, requiring Attomey Francis
J. Lafayette (“Attomey Lafayette”), counsel to Daryl Withrow (the “Debtor’), to show cause
why Attomey Lafayette should not, pursuant to Fed. R. Bankr. P. 9011(c)(1)(B) (“Rule
9011"), be sanctioned on account of alleged misrepresentations, omissions and errors in
the Debtor's bankruptcy schedules, Statement of Financial Affairs and Rebuttal of

Presumption of Abuse (the “Show Cause Order’).

L FACTS AND TRAVEL OF THE CASE

The relevant facts are either: (1) not matenally disputed, having been drawn from
the docket, pleadings and testimony provided by Attomey Lafayette as described below;
or (2) found, pursuant to Fed. R. Bankr. P. 7052, after evidentiary hearing.

On Apnil 9, 2007, Attomey Lafayette filed the instant Chapter 13 bankruptcy case.

At the outset, Attomey Lafayette filed only the petition and the matnx of creditors. On the

1 Outstanding documents included the Attorney Disclosure Statement, Schedules A-J, Statement of
Financial Affairs, Summary of Schedules, Statement of Post-Petition Creditors, Statement of Current Monthly
Income, Means Test Form B22A and the Statistical Summary of Certain Liabilities. The Statement of Intent,
however, was separately due on May 23, 2007 and no extension was sought for the filing of that document.
It was filed, but a day late, on May 24th.
2
following day, the Court ordered the Debtor to file the remaining documents no later than
April 25th. On April 20th, however, the Debtor moved to convert his case from Chapter 13
to Chapter 7, alleging that, after consulting his attorney, he now believed that conversion
of the case to Chapter 7 was in his best interest. On that same date, the Court converted
the case to Chapter 7. A new Order to Update was subsequently issued, requiring that the
outstanding documents be filed by May 8th. 1 On May 9th, a day late, Attorney Lafayette
filed a “Motion to Extend Time: Expedited Determination Requested,” requesting that the
May 8th deadline be extended to May 25th, because the Debtor had allegedly failed to
appear for appointments with his attorney. 	The motion failed to explain why Attorney
Lafayette filed the motion after the expiration of the court-ordered deadline. Nonetheless,
the motion was allowed.
On May 24, 2007, Attorney Lafayette filed, in addition to the remaining outstanding
documents, a “Rebuttal of Presumption of Undue Hardship” (the “Rebuttal”). Presumably,
the Rebuttal was filed in order to counteract the presumption of abuse otherwise suggested
by the calculations in the Debtor’s Official Form B22A. In the Rebuttal, the Debtor stated
that consideration of “special circumstances” was required in order to properly evaluate the
Debtor’s income and expenses; and that the resulting changes justified the preservation
of a Chapter 7 discharge. First, the Debtor noted that while Official Form B22A, Item 10
set forth his average monthly income as $5,333.33, that amount was attributable to
overtime pay and he “no longer ha[d] substantial over-time pay” as of the date of the filing
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of the Rebuttal. The Debtor maintained that his actual average monthly income was now
in the amount of $4,000.00. Second, the Debtor now anticipated a need to provide support
to his mother in the monthly amount of $100.00 on account of a stroke she suffered after
the filing of the Debtor’s Chapter 13 case.
On June 4, 2007, the Chapter 7 Trustee, Joseph B. Collins, Jr. 	(the “Chapter 7
Trustee”), filed a response to the Rebuttal (the “Rebuttal Response”), asserting that the
Rebuttal was “false and misleading” for several reasons, including:
1. the $5,333.33 average monthly income reported in the Rebuttal nowhere
appeared on the Debtor’s Form B22A, Item 10; the Debtor’s Form B22A,
Item 12 set forth an average monthly income in the amount of $4,834.22, not
$5,333.33;
2. despite the Debtor’s allegations to the contrary, recent pay stubs for
postpetition work revealed that he continued to receive overtime income;
3. 	the 	Debtor’s 	mother 	suffered 	her 	stroke 	prior 	to 	and 	not 	after
commencement of 	the case; and
4. the veracity of the Debtor with respect to his financial support of his mother
was 	undermined by his inability at the Section 341 meeting to remember
her current address.
The Court conducted a hearing on the Rebuttal on June 13, 2007, but then decided
that the propriety of the Debtor obtaining a Chapter 7 discharge was not ripe for
determination because the United States trustee (the “UST”) had not yet taken a position
on whether a Chapter 7 discharge in this case would be abusive. See 11 U.S.C. § 704(b).
On July 17, 2007, Attorney Lafayette filed his “First Interim Application for
Compensation” (the “Fee Application”), requesting Court approval of $1,195.00 in
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2 Attorney Lafayette is required to file fee applications in all cases in which he represents debtors in
this District. See In re LaFrance, et al., 311 B.R. 1, 25 (Bankr. D. Mass. 2004).
3 On the Debtor’s original Schedule B, only one bank account was disclosed: a checking account with
Banknorth in the amount of $5.00. In his affidavit filed August 3, 2007, however, the Debtor reported that his
current account was at United Bank and that he had four other open bank accounts with the following
balances: Banknorth ($0.25), RBC Centura ($4.87), Citizen’s Bank ($0.00) and Sovereign Bank ($2.00).
Further, the Debtor stated that accounts with the Navy Credit Union and Bank of America were closed prior
to the filing of the Debtor’s bankruptcy case. The originally filed Statement of Financial Affairs, however,
reported that the Debtor had not closed any financial accounts in the year prior to filing.
4
professional fees. 2 The Chapter 7 Trustee responded with an objection. After repeating
the concerns set forth in his Rebuttal Response, the Chapter 7 Trustee noted also that the
Debtor had testified at the Section 341 meeting to having accounts at seven different
banks, but had reported only one on Schedule B. 	Because the Debtor testified at the
Section 341 meeting that he had “fully and truthfully” informed counsel of the facts and
circumstances related to the schedules, Statement of Financial Affairs and the Rebuttal,
the Chapter 7 Trustee concluded that any misrepresentations, omissions or errors were the
fault of Attorney Lafayette. The UST also objected to Attorney Lafayette’s Fee Application,
adopting the reasons proffered by the Chapter 7 Trustee.
On August 3, 2007, the Debtor filed an affidavit in response to the Chapter 7
Trustee’s objection to Attorney Lafayette’s Fee Application. The affidavit sought to clarify
the discrepancies between the schedules, the Statement of Financial Affairs, the testimony
at the Section 341 meeting and the Rebuttal. The Debtor simply stated that his omission
of current and recently closed bank accounts was a matter of personal forgetfulness. 3 He
further admitted to being mistaken about the precise date of his mother’s stroke but
emphasized that he was caring for her both before and after the date of the bankruptcy
case filing. The Debtor did not deny having been unaware of the physical address of his
mother’s residence, but maintained that he does assist his mother financially by giving her
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at least $50.00 twice a month and providing her with transportation. 	Again, the Debtor
stated that he “fully and truthfully” informed his counsel of the facts and circumstances
surrounding the schedules, Statement of Financial Affairs and the Rebuttal. He disputed
the Chapter 7 Trustee’s conclusion that he had provided “misrepresentations, omissions
and errors” to the Court.
The Court held a hearing on the Fee Application on September 5, 2007. There, the
Chapter 7 Trustee reported to the Court a “settlement” with Attorney Lafayette, pursuant
to which the Fee Application would be allowed, less $1,000.00 to be paid directly to the
Chapter 7 Trustee to compensate him for services rendered in the case. The UST had no
objection to the proposed settlement. This Court, however, was not comfortable approving
a settlement wherein Attorney Lafayette would pay money to the Chapter 7 Trustee to
resolve the Chapter 7 Trustee’s concern that Attorney Lafayette failed to do due diligence
in investigating the Debtor’s prepetition financial affairs. 	If the Chapter 7 Trustee’s
allegations were correct, the Court noted, it preferred to rule that Attorney Lafayette’s
$1,000.00 payment to the Chapter 7 Trustee was in the nature of a Rule 9011 sanction.
Attorney Lafayette objected to that characterization and requested that the Court hold an
evidentiary hearing on the Rule 9011 issues. 	Accordingly, the Court issued an order
continuing the Fee Application generally, and scheduled the instant Show Cause Order for
an evidentiary hearing on November 7, 2007.
On October 18, 2007, the Chapter 7 Trustee filed an affidavit with this Court citing
additional concerns with the Debtor’s schedules. First, he noted that Schedule C provided
no exemption for the equity either in the Debtor’s residence listed in Schedule A
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4 The Debtor’s original Schedules A and D represent that the Debtor owns real estate in Springfield,
Massachusetts valued at $170,718.00 with secured mortgages in the aggregate amount of $156,693.00.
Original Schedule B indicates that the Debtor owns a 1990 Chevy Lumina with a current value of $4,200.00.
Schedule D did not show any liens or encumbrances on this vehicle.
5 On November 6, 2007, the Debtor’s amendments to Schedules A, B, C and Statement of Financial
Affairs were filed, but the filing was deficient, as it did not include a motion to approve the amendments nor
did it include a certificate of service. Following court notification of these deficiencies, they were remedied.
6 The Chapter 7 Trustee reported in his affidavit that at the Section 341 meeting the Debtor testified
that he owned the following accounts at the date of the petition: Navy Federal Credit Union ($10.00), United
Bank ($200.00 overdrawn), Sovereign Bank ($0.00), RBC Centura Bank ($15.00 to $25.00) and Citizens
Online Bank ($1.00). An account with Bank of America had been closed in December of 2006.
6
(approximately $14,000) or automobile listed in Schedule B (approximately $4,200.00). 4
According to the Chapter 7 Trustee, he informed Attorney Lafayette of those omissions at
the Section 341 meeting held on June 4, 2007. 	Attorney Lafayette responded that he
would amend Schedule C, but he did not do so until November 6, 2007 (approximately five
(5) months later and, not so coincidentally, on the day prior to the evidentiary hearing on
the Show Cause Order). 5 Second, the Chapter 7 Trustee more specifically outlined the
bank accounts that the Debtor testified at the Section 341 meeting were open or closed
prior to filing his bankruptcy case, and the amounts contained in each account. 6 Based on
the discrepancies in the Debtor’s schedules, Statement of Financial Affairs and the Debtor’s
testimony at the Section 341 meeting, the Chapter 7 Trustee repeated his conclusion that
the schedules and Statement of Financial Affairs were “materially false and misleading”.
And the Chapter 7 Trustee reiterated his concerns, first raised in the Rebuttal Response,
regarding errors in the Debtor’s identification of overtime pay, average monthly income and
the additional expenses relating to caring for the Debtor’s mother. The Chapter 7 Trustee
urged the Court to reach the conclusion that the Rebuttal was drafted to conceal and
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7 The Debtor stated in paragraph 6 of this counter-affidavit that his Schedule A was amended to show
a current real estate value of $179,900.00 in his residence. In the very next paragraph, however, the Debtor
stated that he had concluded that the value of the residence was $177,000.00, based on discussions between
himself and his banker and through a comparison of real estate values in the vicinity.
8 Flora Withrow, mother of the Debtor, stated that she suffered the stroke prior to the date of her son’s
bankruptcy case filing, and that the Debtor provided care for her prior to the date of the case filing. She stated
that he provides at least $50.00 each pay period and has out-of-pocket expenses when providing her
transportation. Further, she stated that the Debtor has had a memory problem regarding the address of her
residence.
7
misstate facts relevant to the Court’s consideration of a presumption of abuse under §
707(b)(2).
The Debtor responded to the Chapter 7 Trustee’s affidavit on November 4, 2007 with
a counter-affidavit. There, the Debtor reported that his schedules had now been amended
to accurately reflect the true value of his residence and vehicle. 7 The Debtor stated that
the original listing of only one open bank account was due to a misunderstanding on his
part and that the values provided at the Section 341 meeting regarding the amounts in
open bank accounts were also estimates. The Debtor denied testifying that he closed an
account with Bank of America prior to filing for bankruptcy. 	He also took issue with the
Chapter 7 Trustee’s assessment of the circumstances surrounding his overtime pay. The
Debtor stated that he was told by his employer that he was not going to receive overtime
pay, though the employer did provide four (4) hours of overtime per pay period for a certain
period of time. He averred that there was currently no overtime available. The Debtor also
provided an affidavit from his mother regarding his involvement in her life. 8 Lastly, the
Debtor introduced a new explanation for discrepancies between his testimony at the
Section 341 meeting and the documents filed in this case. The Debtor stated that he had
been taking two medications for hypertension and blood pressure which caused him to
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become drowsy and dizzy, and to “not have it all there” when answering questions at the
Section 341 meeting. 	Regardless, the Debtor stated that at no time did he intend to
provide materially false or misleading information at the Section 341 meeting or in his
bankruptcy petition.
The evidentiary hearing on this Court’s Show Cause Order was held on November
7, 2007. Attorney Lafayette’s testimony, answering questions from both the UST and the
Chapter 7 Trustee, is best summarized as follows:
1. 	Attorney Lafayette conceded that the Debtor’s original schedules claimed no
exemption either for the Debtor’s residence or his vehicle, despite the equity
in each. He testified that he told the Chapter 7 Trustee at the Section 341
meeting on June 4, 2007 that it was his intention to amend the Debtor’s
Schedule C to include exemptions in the Debtor’s real estate and vehicle (but
until November 6, 2007, none had been filed). He further admitted to helping
the Debtor prepare the November 4, 2007 affidavit which stated that
amendments to the Debtor’s schedules had been filed, despite the fact that
the amendments were not filed with the Court until after the filing of the
Debtor’s affidavit.
2. 	Attorney Lafayette contended that the omission of the open or recently
closed bank accounts on the schedules and Statement of Financial Affairs
was due to the Debtor’s forgetfulness, which Attorney Lafayette attempted
to justify by noting that all of the accounts were in negligible amounts.
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3. 	The UST inquired about the discrepancy between (a) the Rebuttal which
provided that the Debtor’s average current monthly income was $5,333.33,
supposedly referencing Form B22A, Line 3; and (b) the Debtor’s actual Form
B22A, Line 3, which set forth current monthly income at $4,834.22 and not
$5,333.33. The UST also inquired with respect to the discrepancy between
(a) the Debtor’s Rebuttal which listed his actual current income without
overtime pay at $4,000.00; and (b) Schedule I which listed the same income
without overtime pay at $3,309.73. Attorney Lafayette responded to the first
discrepancy by conceding that the amount of $5,333.33 in the Rebuttal was
a mistake on his part. But in response to the Court’s inquiry as to the latter
discrepancy - actual income in the amount of $700.00 - Attorney Lafayette
seemed confused by the line of questioning, and finally, the Court just gave
up. Indeed, throughout Mr. Lafayette’s testimony, he appeared completely
unprepared for the evidentiary hearing which he himself had requested.
4. 	Finally, the UST questioned Attorney Lafayette regarding the discrepancy
between (a) Debtor’s Schedule J, Line 17, which provided that the Debtor did
not reasonably anticipate a significant increase or decrease in expenses in
the upcoming year; and (b) the Rebuttal, which provided that the Debtor
anticipated that he would have to assist his mother for an indefinite period of
time because of her stroke suffered after the filing of the bankruptcy case.
Attorney Lafayette testified that the omission of financial support from
Schedule J was due to the Debtor’s not having provided monetary support
at the time of filing the petition but anticipating the expense at the time of
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9 Attorney Lafayette introduced a package of documents to validate his claim of infirmity. Because
of their personal nature, the Court will impound them. But this is hardly the first time that Attorney Lafayette
has relied on ailments as an excuse for shoddy representation of consumer debtor clients. 	See In re
LaFrance, et al., 311 B.R. at 24-25; In re LaClair, et al., 360 B.R. 388, 397 (Bankr. D. Mass. 2006). The
Court’s responses in LaFrance and in LaClair are adopted here by reference.
10
filing the Rebuttal. (But note that the Debtor provided his own affidavit and
that of his mother stating that he had been providing direct or indirect
financial support for his mother.) Attorney Lafayette explained further that he
and the Debtor generated the Rebuttal late at night and the Debtor may have
confused the date of their first meeting, November 30, 2006, with the actual
date of filing. He explained that the Debtor had a memory problem and that
he simply typed the information contained in the Rebuttal as it was presented
to him by his client. Attorney Lafayette testified that it was around the time
of filing the Rebuttal that Attorney Lafayette became ill and was hospitalized,
impacting his handling of the case. 9
II. 	POSITIONS OF THE PARTIES
The Debtor states or is cited as saying that he “fully and truthfully” disclosed the
information of his financial affairs to his counsel, Attorney Lafayette, in multiple filings with
the Court. Thus, the UST and the Chapter 7 Trustee contend that Attorney Lafayette is
responsible for the misrepresentations, omissions and errors found within the documents
filed in the Debtor’s bankruptcy case. 	They believe that Attorney Lafayette’s failure to
provide due diligence on the Debtor’s behalf is amply demonstrated by his failure to claim
exemptions to which the Debtor was entitled, his (at best) insufficient inquiry from the
Debtor about bank accounts which were open or recently closed at the time of filing the
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10 It is immaterial that a document is submitted electronically. Massachusetts Local Bankruptcy Rules,
Appendix 8, Rule 8 provides in relevant part:
(a) 	The user log-on and password required to submit documents to the ECF System
serve as the Registered User’s signature on all electronic documents filed with the
Court. They also serve as a signature for purposes of of Fed. R. Bankr. P. 9011,
the Federal Rules of Bankruptcy Procedure, the local rules of this Court, and any
other purpose for a which a signature is required.
11
petition and by misstatements concerning the existence and amount of the Debtor’s
income, as well as the circumstances surrounding his mother’s condition and the
assistance provided to her by the Debtor.
Attorney Lafayette disagrees. He asserts that neither he nor the Debtor intended
to mislead the Chapter 7 Trustee. 	While he admits errors with the filed documents,
Attorney Lafayette attributes them to varying income statements, accidental omissions by
the Debtor and medical conditions suffered both by him and the Debtor.
III. 	DISCUSSION
Federal Rule of Bankruptcy Procedure 9011 provides in relevant part:
(b) Representations to the Court.
By presenting to the court (whether by signing, filing, submitting, or
later advocating) 10 a petition, pleading, written motion, or other paper,
an attorney or unrepresented party is certifying that to the best of the
person's knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances,—
(1) it is not being presented for any improper purpose, such as
to harass or to cause unnecessary delay or needless increase
in the cost of litigation;
(2) the claims, defenses, and other legal contentions therein
are warranted by existing law or by a nonfrivolous argument for
the extension, modification, or reversal of existing law or the
establishment of new law;
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(3) 	the 	allegations 	and 	other 	factual 	contentions 	have
evidentiary support or, if specifically so identified, are likely to
have evidentiary support after a reasonable opportunity for
further investigation or discovery; and
(4) the denials of factual contentions are warranted on the
evidence or, if specifically so identified, are reasonably based
on a lack of information or belief.
(c) Sanctions.
If, after notice and a reasonable opportunity to respond, the court
determines that subdivision (b) has been violated, the court may,
subject to the conditions stated below, impose an appropriate sanction
upon the attorneys, law firms, or parties that have violated subdivision
(b) or are responsible for the violation.
(1) How Initiated.
. . .
(B) On Court's Initiative. On its own initiative, the
court may enter an order describing the specific
conduct that appears to violate subdivision (b)
and directing an attorney, law firm, or party to
show cause why it has not violated subdivision
(b) with respect thereto.
(2) Nature of Sanction; Limitations.
A sanction imposed for violation of this rule shall be limited to
what is sufficient to deter repetition of such conduct or
comparable conduct by others similarly situated. Subject to the
limitations in subparagraphs (A) and (B), the sanction may
consist of, or include, directives of a nonmonetary nature, an
order to pay a penalty into court, or, if imposed on motion and
warranted for effective deterrence, an order directing payment
to the movant of some or all of the reasonable attorneys' fees
and other expenses incurred as a direct result of the violation.
This Court has long believed that debtors’ counsel have Rule 9011 obligations, even
with respect to a debtor’s schedules, statement of affairs and other documents disclosing
assets, which debtors - but not counsel - are required to sign. Rule 9011(b) is not limited
to statements below which appear an attorney’s signature. 	Rule 9011(b) provides that
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filing, submitting or even advocating with respect to a document filed with a court has the
same effect as signing the document. It can not be otherwise. An attorney for a debtor can
not shield him or herself with respect to a document, such as bankruptcy schedules or the
statement of affairs, containing knowingly false information, by arguing that, despite the
attorney’s knowledge of the falsity of the information or the client’s reckless disregard for
its truth, Rule 9011 does not apply because the attorney did not sign the document.
But regardless of whether that view was well supported prior to October 17, 2005,
any controversy as to its correctness has been mooted by amendments to § 707(b) of the
Bankruptcy Code adopted by the Bankruptcy Abuse Prevention and Consumer Protection
Act of 2005 (“BAPCPA”). The revised § 707 provides in relevant part:
(b)
. . . .
(4)
. . . .
(C) 	The signature of an attorney on a petition, pleading, or
written motion shall constitute a certification that the attorney
has—
(i) 	performed 	a 	reasonable 	investigation 	into 	the
circumstances that 	gave rise to the petition, pleading,
or written motion; and
(ii) determined that the petition, pleading, or written
motion—
(I) is well grounded in fact; and
(II) is warranted by existing law or a good faith
argument for the extension, modification, or
reversal of existing law and does not constitute
an abuse under paragraph (1).
(D) The signature of an attorney on the petition shall constitute
a certification that the attorney has no knowledge after an
inquiry that the information in the schedules filed with such
petition is incorrect.
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And, completing the loop, Official Form 1 (Voluntary Petition) requires a signature
by the debtor’s attorney, if any, and now notes with reference to that signature:
“In a case in which § 707(b)(4)(D) applies, this signature also constitutes a
certification that the attorney has no knowledge after an inquiry that the
information in the schedules is incorrect.”
Three problems (and probably more) remain. 	First, what is a certification? 	It is
nowhere defined in the Bankruptcy Code. 	It conotes more than a statement, yet it is
obviously less than a verification under oath. This Court believes that a certification is an
unsworn verification, that is, a representation to the Court that - while not under oath to
which criminal penalties would attach for intentional breach - is rather a specific assurance
that the statement has not been made lightly and that it is the product of an investigation
insofar as practical under the circumstances, within the attorney’s control, and designed
to discover the truth.
Second, how extensive must this investigation be? The language of § 707(b)(4)(C)
and (D) and the history of Rule 9011 clarifies that the investigation need only be a
“reasonable” one. 	In re D.C. Sullivan Co., Inc., 843 F.2d 546, 598-99 (1st Cir. 1988)
(“Subjective good faith is not the issue; generally, Rule 9011 demands that counsel's actions
comport with an objective standard of lawyerly performance.”). Indeed, courts must be very,
very, very careful not to impose on debtors’ counsel burdens which are impractical under
the circumstances of their representation. 	Bankruptcy judges should appreciate their
vulnerability to falling down the infamous “slippery slope” and bear in mind that an attorney
for a debtor is not a guarantor of the accuracy of any information contained in bankruptcy
documents prepared by the attorney with information provided by that debtor. 	Some
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debtors are simply not capable of producing all of the documentation that an attorney might
prefer. Such a debtor should not be turned away from legal representation or asked for a
fee which is more consistent with an audit than with the preparation of bankruptcy
schedules. Nor should an attorney fear to represent such a debtor. Judges can be relied
upon, in most instances, to recall the difficulties of private practice.
Inasmuch as Rule 9011 and the § 707(b)(4)(C) standard is to be a reasonable one,
it must be tested objectively. Id. Accordingly, it seems to this Court that the answers to at
least the following questions are germane to a Rule 9011 and § 707(b)(4)(C) analysis: (1)
did the attorney impress upon the debtor the critical importance of accuracy in the
preparation of documents to be presented to the Court; (2) did the attorney seek from the
debtor, and then review, whatever documents were within the debtor’s possession, custody
or control in order to verify the information provided by the debtor; (3) did the attorney
employ such external verification tools as were available and not time or cost prohibitive
(e.g., on-line real estate title compilations, on-line lien search, tax “scripts”); (4) was any of
the information provided by the debtor and then set forth in the debtor’s court filings
internally inconsistent - that is, was there anything which should have obviously alerted the
attorney that the information provided by the debtor could not be accurate; and (5) did the
attorney act promptly to correct any information presented to the Court which turned out,
notwithstanding the attorney’s best efforts, to be inaccurate. These questions can be further
simplified and reduced to one question, their common denominator: Did the attorney do his
or her level best to get it right? More can not, and should not, be asked of any attorney.
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11 As the Court in In re Robertson cogently explained:
Under new § 707(b)(4)(C), attorneys are subject to a statutory “automatic certification of
meritoriousness” as to any “petition, pleading, or written motion” signed by them. This
certification is analogous to that long imposed by Fed. R. Bankr.P. 9011(b), though the
statute uses part of the language from an earlier version of that rule. Another automatic
certification is imposed by new § 707(b)(4)(D). It is triggered by counsel's signature on the
client's bankruptcy petition, which activates a deemed representation that “the attorney has
no knowledge after an inquiry that the information in the schedules filed with such petition is
incorrect.” Though this new verbiage has no directly-associated enforcement mechanism, §
707(b) now contains a basis in statute for the bankruptcy court to impose sanctions. These
can take the form of “all reasonable costs” incurred by a successful movant under § 707(b),
where “the action of the attorney for the debtor in filing a case under [the Bankruptcy Code]
violated rule 9011 of the Federal Rules of Bankruptcy Procedure.” 11 U.S.C. §
707(b)(4)(A)(i)-(ii). It also provides for “the assessment of an appropriate civil penalty against
the attorney for the debtor,” § 707(b)(4)(B)(i), payable to the trustee or the UST, §
707(b)(4)(B)(ii), if “the attorney for the debtor violated rule 9011 of the Federal Rules of
Bankruptcy Procedure,” 11 U.S.C. § 707(b)(4 ) (prefatory language). These provisions are
worded in a cumbersome fashion and they are clumsily organized. With them being
references to readily-amendable rules of court procedure that were not legislatively adopted,
their mere placement in a statute is somewhat counterintuitive. It is not clear exactly how they
are to be applied, and they may not be as baleful as they first may seem. See David Gray
Carlson, Means Testing: The Failed Bankruptcy Revolution of 2005, 15 Am. Bankr.Instit.
L.Rev. 223, 294-295 (2007); Henry J. Sommer, Making Sense Out of Nonsense:
Representing Consumers Under the “Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005,” 79 Am. Bankr.L.J. 191, 204-206 (2005). But, their general drift is
clear: debtors' counsel are to exercise significant care as to the completeness and accuracy
of all recitations on their clients' schedules, after they have made a factual investigation and
legal evaluation that conforms to the standards applicable to any attorney filing a pleading,
motion, or other document in a federal court. The content of a debtor's petition and schedules
is relied on, and should have the quality to merit that reliance. (Critic Sommer, 79 Am.
Bankr.L.J. at 206, questioned whether the new verbiage worked any change from preexisting
law. He had a point, though an academic one only.)
370 B.R. 804, 809 fn.8 (Bankr. D. Minn. 2007).
16
And when an attorney appears to have provided less, an inquiry under Rule 9011 and §
707(b)(4)(C) is proper. 11
On the facts here, this Court can not find that Attorney Lafayette has met his Rule
9011 and § 707(b)(4)(C) obligations. After all of the argument and testimony, the Court still
is not sure what the Debtor earned in the six months prior to the filing of the petition or what
the Debtor earns now. Nor is the Court sure whether the Debtor intended to mislead the
Court with respect to the information provided in his bankruptcy papers or his Section 341
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meeting testimony. But the Court is sure of this - that Attorney Lafayette, at the very least,
failed to (1) properly review information provided by the Debtor with respect to his prepetition
income; (2) identify contradictions and inconsistencies in the schedules, Statement of
Financial Affairs, Rebuttal and affidavits submitted on behalf of the Debtor before the filing
of those documents; (3) promptly correct those contradictions and inconsistencies, even
when identified by the Chapter 7 Trustee, on anything close to a timely basis; and (4) to
place himself in a position of being able to explain the reasons for those contradictions and
inconsistencies to the Court even in the context of an evidentiary hearing of which he had
more than adequate notice. Certainly, there is no bright line that surrounds § 707(b)(4)(C)
and (D) and Rule 9011. But wherever that line lies, this Court agrees with the Chapter 7
Trustee and the UST that Attorney Lafayette has crossed it. 	What remains is the
final question; that is, what form of sanction is appropriate. The determination of the amount
of any sanction ought to take into account a number of factors, including the egregiousness
of the conduct complained of, the extent of the harm caused, the deterrence to others of
repeating the conduct and whether the conduct is repetitive of conduct for which the actor
has been previously criticized.
In the LaFrance case, this Court described Attorney Lafayette’s practices as “sloppy,
careless and unprofessional.” 	Id. at 25. 	In response, fees were disallowed and ordered
disgorged, Attorney Lafayette was ordered to thereafter deposit all client compensation in
his client trust account and not to withdraw funds absent allowance of a fee application, to
be filed in each case. The Court contemplated the duration of that procedure to be a year,
at most. Nothing changed, however, and, since the issuance of the LaFrance decision, this
Court has denied countless fee applications by Attorney Lafayette on account of the same
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or similar poor quality services. See, e.g., In re LaClair, 230 B.R. 388. The only reasonable
conclusion that the Court can draw is that the sanctions were not sufficient to meet their
intended goal.
Accordingly, this Court will sanction Attorney Lafayette in the sum of $3,585.00, being
three (3) times the amount which he intended to charge his client for the services which
Attorney Lafayette undertook. That sanction shall be payable, within thirty (30) days to the
bankruptcy estate care of the Chapter 7 Trustee, who can satisfy his compensation from
estate funds in the ordinary course. Further, that sanction will not include any disgorgement
to the Debtor which the Court may order based on Attorney Lafayette’s Fee Application.
IV. 	CONCLUSION
This Court finds that Attorney Lafayette has, in his preparation of the schedules,
Statement of Financial Affairs and the Rebuttal, violated the terms of § 707(b)(4)(C) and (D)
and Rule 9011, and will order Attorney Lafayette to pay to the Chapter 7 Trustee the sum
of $3,585.00 within thirty (30) days hereof. 	An order in support of this Memorandum of
Decision will be entered simultaneously hereto.
DATED: 	July 3, 2008 	By the Court,
Henry J. Boroff
United States Bankruptcy Judge
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