Shalaby v. Mansdorf (In re Nakhuda) (B.A.P. 9th Cir. 2016)
Debtor’s attorney sanctioned by Bankruptcy Court, sua sponte (sua sponte means on the Court’s own motion, instead by a party bringing a Motion for sanctions) for multiple errors, including that debtor attorney did not have debtor client’s original signature on the bankruptcy petition, schedules, other required bankruptcy documents, which is required if the debtor’s attorney efiles the bankruptcy case with “/s/” signatures for debtor, instead of with ink signed signature. In addition, bankruptcy court sanctioned debtor attorney for: “(1) making arguments not warranted by existing law or non-frivolous arguments for its extension, modification or reversal; (2) failing to ensure that allegations and factual contentions had evidentiary support; (3) his inability or unwillingness to obtain the most basic knowledge of bankruptcy law or engage in the legal analysis necessary to competently represent debtor; (4) harming the estate by forcing Trustee to use limited estate assets to respond to the frivolous arguments and positions;…” Sanctions included bankruptcy court suspended attorney’s ability to file electronically or appear in court in the Northern District of California, ordered debtor attorney to disgorge attorneys fees paid to him by client, and required attorney to take an ECF course. The 9th Circuit BAP affirmed some of the sanctions, but did not affirm others of the sanctions that the Bankruptcy Court had imposed, due to a difference in the standards of proof depending on the motion being made by another party, and a motion initiated sua sponte by the court, stating: “When assessing sanctions sua sponte under Rule 9011(c)(1)(B) and under the law of this Circuit, the bankruptcy court is required to issue an order to show cause to provide notice and an opportunity to be heard and to apply a higher standard “akin to contempt” than in the case of party-initiated sanctions. The reason behind the heightened standard is because, unlike party-initiated motions, court-initiated sanctions under Rule 9011(c)(1)(B) do not involve the 21-day safe harbor provision for the offending party to correct or withdraw the challenged submission. “Accordingly, at bottom, the “akin to contempt” standard seems to require conduct that is particularly egregious and similar to conduct that would be sanctionable under the standards for contempt.”