Strickland v. U.S. Trustee (In re Wojcik), 560 B.R. 763 (9th Cir. BAP 2016)
In Strickland v. U.S. Trustee (In re Wojcik), 560 B.R. 763 (9th Cir. BAP 2016), the U.S. Bankruptcy Appellate Panel for the Ninth Circuit (the “BAP”) affirmed the lower court’s ruling that a paralegal’s use of the word “legal” in her business name and advertisements violated the strict liability provisions of 11 U.S.C. section 110(f). In doing so, the BAP upheld an order requiring the disgorgement of fees plus the payment of penalties.
The BAP ruled that Strickland’s use of the business name “Low Cost Paralegal Services,” and her use of the word “paralegal” and “legal” throughout her website violated section 110(f). It further ruled that section 110’s penalty of $2,000 in damages was mandatory, though the bankruptcy court’s additional order for the disgorgement of Strickland’s $150 fee and the imposition of a $500 fine were discretionary under the statute. Nevertheless, the BAP further ruled that the bankruptcy court did not abuse its discretion in ordering those additional penalties.
BAP decision is notable for holding that section 110(f) is a strict liability statute that requires the imposition of a fine even if a debtor suffers no harm. There is no indication in the decision that the Debtor had complained about the services she received from the BPP or the amount she was charged. The BAP’s ruling promotes the legislative purpose of section 110 – that is, the protection of debtors from a BPP who lacks legal training and ethical regulations. Consequently, a BPP must understand and strictly comply with the requirements of section 110 to avoid the imposition of mandatory damages and potential disgorgement of fees and fines that may substantially exceed any compensation that a BPP may receive for his or her services.