Sheridan v. Michels (In Re Sheridan) , 362 F.3d 96 ( 2004 )

United States Court of Appeals
For the First Circuit
No. 02-9007 Volume I of II
IN RE WILLIAM C. SHERIDAN,
WILLIAM C. SHERIDAN,
Defendant, Appellant,
v.
NANCY MICHELS,
Plaintiff, Appellee.
APPEAL FROM THE BANKRUPTCY APPELLATE PANEL
OF THE FIRST CIRCUIT
Before
Selya, Circuit Judge,
Cyr, Senior Circuit Judge,
and Lynch, Circuit Judge.
William C. Sheridan, pro se.
Nancy H. Michels, with whom the Law Offices of Michels &
Michels and Carole A. Mansur were on the brief for appellee.
March 29, 2004
CYR, Senior Circuit Judge. William C. Sheridan, Esquire,
appeals from a bankruptcy court order which suspended him from the
practice of law before the United States Bankruptcy Court for the
District of New Hampshire and directed him to remit the fees due
the special counsel appointed to investigate the various violations
of the District of New Hampshire Rules of Professional Conduct for
which Sheridan allegedly is responsible. We now vacate the
bankruptcy court order, and remand for further proceedings.
I.
BACKGROUND
In June 2000, the bankruptcy judge appointed Attorney
Nancy Michels as Special Counsel to investigate the ethical
violations alleged against Sheridan, an attorney and member of the
bankruptcy court bar. Following an extensive investigation into
Sheridan’s representation of various clients between 1999 and 2000,
Special Counsel lodged a complaint charging Sheridan with rendering
incompetent representation in violation of N.H. Rule of
Professional Conduct 1.1(a).
Although Sheridan, acting pro se, eventually stipulated
to most of the allegations in the complaint, he contended that his
conduct had been due either to a dopamine deficiency resulting in
severe attention deficit disorder or to the uncooperativeness and
obstinacy of the affected clients. Following a disciplinary
hearing in June 2001, the bankruptcy court determined that Sheridan
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had committed eighty-eight ethical violations, most involving the
failure to comply with such basic requirements as the timely filing
of chapter 13 plans and motions for continuance.
In due course, Sheridan was suspended from practice
before the bankruptcy court for one year; readmission contingent
upon satisfactory proof that he was competent to represent clients
before the bankruptcy court. Subsequently, the bankruptcy court
approved an application for a $30,377.50 attorney fee to Special
Counsel, then directed that Sheridan – as a precondition to his
readmission to the bankruptcy bar – reimburse the bankruptcy court
in that amount. Sheridan then appealed to the Bankruptcy Appellate
Panel ("BAP"), which affirmed. Sheridan v. Michels (In re
Disciplinary Proceedings), 282 B.R. 79 (B.A.P. 1st Cir. 2002).
II.
DISCUSSION
Sheridan contends that (i) the bankruptcy court, unlike
Article III courts, lacks either the inherent or statutory power to
suspend or discipline counsel who practice before it, see Northern
Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 86-87
(1982); (ii) moreover, even assuming the bankruptcy court possesses
such disciplinary power, it cannot exercise it absent an explicit
local court rule, but see U.S. Dist. Ct. Local Rule (D.N.H.) 83.5,
and then only if the bankruptcy court were to determine that
counsel acted in “bad faith,” see Chambers v. NASCO, Inc., 501 U.S.
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32, 45 (1991); (iii) Bankruptcy Code § 105 applies exclusively to
such disciplinary proceedings against an attorney as arise in a
particular, ongoing bankruptcy case, not to the instant type of
omnibus investigation into alleged attorney misconduct spanning
multiple bankruptcy cases no longer pending before the court;1 (iv)
Administrative Order 2090-2, issued by the bankruptcy court below,
explicitly authorizing such disciplinary hearings, is invalid due
to the fact that it was promulgated without either advance notice
or an opportunity for public comment, notwithstanding the rule-
making provisions enunciated in Federal Rule of Civil Procedure 83,
cf. U.S. Dist. Ct. Local Rule (D.N.H.) 77.4(b) (“Pursuant to [Fed.
R. Bankr. P] 9029, the bankruptcy judges of this district are
authorized to make such rules of practice and procedure as they may
deem appropriate, subject to the requirements of Fed. R. Civ. P.
83.”); (v) in all events, Administrative Order 2090-2, which was
not in effect at the time the bankruptcy court initiated the
Sheridan investigation, cannot be applied retroactively; and (vi)
the disciplinary power wielded by the bankruptcy court in the
instant case offends the doctrine of separation of powers, in that
the bankruptcy court itself thereby assumes the inherently
conflicting roles of accuser, investigator, prosecutor, and judge.
1
Bankruptcy Code § 105(a) provides, in pertinent part: “The
court may issue any order, process, or judgment that is necessary
or appropriate to carry out the provisions of this title.” 11
U.S.C. § 105(a).
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In the particular circumstances of the instant case, due
to the fact that the BAP lacked appellate jurisdiction to address
Sheridan’s claims on the merits, the case must be remanded to the
bankruptcy court for further proceedings. We explain.
The BAPs are authorized to review only the “final
judgments, orders and decrees” issued by the bankruptcy courts. 28
U.S.C. § 158(b)(1), (a)(1). Consequently, in the instant context
the dispositive jurisdictional issue is whether the disciplinary
orders issued by the bankruptcy court against Sheridan were
“final.” See Stanley v. S.S. Retail Shoes Corp. (In re S.S. Retail
Shoes Corp.), 162 F.3d 1230, 1232 (9th Cir. 1998) (“In making the
[jurisdictional] determination, we must focus on the nature of the
bankruptcy court's order. If that decision was not a final order,
then the BAP's order also lacks finality.”).
The finality of a bankruptcy court order depends, inter
alia, upon whether the proceeding in which it was entered
constitutes a “core” or “non-core” proceeding. Although the
district court, as a tribunal established under Article III of the
United States Constitution, possesses broad jurisdiction to
adjudicate all proceedings which even tangentially “aris[e] under,”
or are “related to,” a bankruptcy case [hereinafter: “related to”
proceedings], the district court may opt to refer such cases or
proceedings to the bankruptcy courts for hearing or adjudication.
See 28 U.S.C. § 157(a). Of course, unlike the district court, the
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bankruptcy court is established pursuant to Article I, rather than
Article III, and its jurisdiction is delimited accordingly.
Although the bankruptcy court may hear all “related-to” proceedings
which have been referred to it, whether core or non-core, it may
enter a final appealable judgment only if (i) the proceeding itself
is core, viz., closely intertwined with and integral to the
bankruptcy court’s mandate to administer a bankruptcy case; or (ii)
the case or proceeding is non-core, but the litigants nonetheless
have consented to the entry of a final disposition by the
bankruptcy court, rather than by the district court. See Northern
Pipeline, 458 U.S. at 86-87.
If the proceeding is core, the bankruptcy court’s final
judgment is immediately appealable either to the district court or,
with the consent of the parties, to the BAP. 28 U.S.C. §
158(b)(1); § 157(b)(1). In either instance, the appellate tribunal
applies a deferential standard of review to the bankruptcy court’s
findings of fact, and will upset those findings only if clearly
erroneous. See In re Spadoni, 316 F.3d 56, 58 (1st Cir. 2003).
In a non-core proceeding, however, the bankruptcy court
is not empowered to enter final, appealable orders without the
parties’ consent. Instead, after it has conducted the required
proceedings, it must submit its proposed findings of fact and
conclusions of law for consideration by the district court. See 28
U.S.C. § 157(c)(1); Cong. Credit Corp. v. AJC Int’l, Inc., 42 F.3d
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686, 690 (1st Cir. 1994). The role of the district court in turn
is to conduct de novo review of the findings of fact and the
conclusions of law submitted by the bankruptcy court. In so doing,
the district court may receive further evidence, modify the
findings proposed by the bankruptcy court, and/or remand to the
bankruptcy court with instructions. See Fed. R. Bankr. P. 9033(d).
At that stage, any appeal from the “final” district court order may
be taken only to the court of appeals, which applies a deferential
standard of review. Id. § 158(d).
In the instant case, the BAP did not address the
core/non-core distinction in its decision, Sheridan, 282 B.R. at
86-89, perhaps because Sheridan’s reference to it – included
amongst other objections, in his appellate briefs, to the
bankruptcy court’s authority to impose sanctions – simply was not
prominently advanced or distinguished. Unlike the issue of subject
matter jurisdiction, which may neither be waived nor forfeited by
the parties, see Quinn v. City of Boston, 325 F.3d 18, 26 (1st Cir.
2003), and into which the courts are duty-bound to inquire, sua
sponte, even absent objection by any party, see Hicks, Muse & Co.
v. Brandt (In re Healthco Int'l, Inc.), 136 F.3d 45, 50 n.4 (1st
Cir. 1998), the protections afforded by the Northern Pipeline
core/non-core distinction may be waived or forfeited, either by (i)
consenting to the bankruptcy court's treatment of an otherwise non-
core proceeding as core, or (ii) failing to raise or pursue the
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issue adequately on appeal. See Commodity Futures Trading Comm’n
v. Schor, 478 U.S. 833, 848-49 (1986).
Although normally the proper designation of a proceeding
as either core or non-core presents a pure question of law, subject
to plenary review on appeal, see In re V & M Mgmt., Inc., 321 F.3d
6, 7 (1st Cir. 2003); In re Graves, 279 B.R. 266, 270 (B.A.P. 9th
Cir. 2002), if Sheridan failed to preserve his contention before
the bankruptcy court or on appeal, we would review for plain error
only, see Rivera-Torres v. Ortiz Velez, 341 F.3d 86, 102 (1st Cir.
2003) ("[C]laims ‘forfeit[ed] through ignorance or neglect’ are
subject to plain error review.”) (citation omitted). We now turn
to these threshold issues.
A. Consent
Before the bankruptcy court, Sheridan did not expressly
consent, either orally or in writing, to the treatment of his
omnibus disciplinary proceeding as core.2 In In re G.S.F. Corp.,
2
The advisory committee note to Federal Rule of Bankruptcy
Procedure 7008, which implements the statutory core/non-core
dichotomy, provides:
Proceedings before a bankruptcy judge are either core or
non-core. 28 U.S.C. § 157. A bankruptcy judge may enter
a final order or judgment in a core proceeding. In a
non-core proceeding, absent consent of the parties, the
bankruptcy judge may not enter a final order or judgment
but may only submit proposed findings of fact and
conclusions of law to the district judge who will enter
the final order or judgment. 28 U.S.C. § 157(c)(1). The
amendment to subdivision (a) of this rule requires an
allegation as to whether a proceeding is core or
non-core. A party who alleges that the proceeding is
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938 F.2d 1467 (1st Cir. 1991), we decided that in certain
circumstances, at least where the parties’ actions appear to speak
as clearly as words, consent may be implied. The actions deemed to
have evidenced “implied consent” in G.S.F. consisted of (i) the
filing of stipulations and releases by the parties “for entry as a
final judgment” in the bankruptcy court, which stipulations and
releases subsequently were incorporated into the final order
whereby the bankruptcy court dismissed the proceeding, and (ii) the
decision by the parties not to appeal from that “final” order. Id.
at 1477. Thus, it was their affirmative and unambiguous conduct
before the bankruptcy court – rather than their mere failure to
request prior to judgment that the proceeding be declared non-core
– which constituted the functional equivalent of the parties'
express consent. See infra note 5.
In contrast, Sheridan’s conduct did not unambiguously
connote consent, either to the bankruptcy court’s characterization
of the proceeding as core or to its final adjudication of the
non-core shall state whether the party does or does not
consent to the entry of a final order or judgment by the
bankruptcy judge. Failure to include the statement of
consent does not constitute consent. Only express
consent in the pleadings or otherwise is effective to
authorize entry of a final order or judgment by the
bankruptcy judge in a non-core proceeding. Amendments to
Rule 7012 require that the defendant admit or deny the
allegation as to whether the proceeding is core or
non-core.
Fed. R. Bankr. P. 7008 advisory committee’s note (1987) (emphasis
added).
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proceeding as non-core. It is true that Sheridan did not suggest
that the proceeding was non-core until he submitted the post-
judgment motion for reconsideration, cf. Santiago v. Canon U.S.A.,
Inc., 138 F.3d 1, 4 (1st Cir. 1998) (noting that party normally may
not raise new issues in post-judgment motion for reconsideration),
but the entry of the judgment was the first procedural juncture in
the bankruptcy proceeding in relation to which the core/none-core
issue was broached. Until then, it remained unclear how the
bankruptcy court viewed its own jurisdiction.
To be sure, Sheridan could have elected to place the
issue in contention sooner, but the failure to do so can bear no
inference of consent. When the district court refers a “related
to” proceeding to the bankruptcy court, no presumption attaches
that the proceeding is core. Indeed, the Rules of Bankruptcy
Procedure, which serve to implement the statute itself, mandate
that the complaint contain a statement or allegation regarding
whether the proceeding is core or non-core, and if the latter,
whether the plaintiff consents to the entry of a final judgment by
the bankruptcy court. See Fed. R. Bankr. P. 7008(a). The
complaint filed by Special Counsel failed to place the issue in
contention by alleging that the proceeding was core. In cases
where the plaintiff (e.g., Special Counsel Michels) has the burden
to plead the core/non-core issue, and has chosen the bankruptcy
court as her forum, her silence might connote consent. See, e.g.,
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Horwitz v. Alloy Auto. Co., 992 F.2d 100, 103 (7th Cir. 1993)
(“Silence does not imply consent, but affirmatively invoking the
bankruptcy court’s jurisdiction most assuredly supplies whatever
consent is necessary.”) (citations omitted). As Michels is not the
appellant, and appellant Sheridan did not initiate the disciplinary
proceeding, we need not address this issue.3
Similarly, Bankruptcy Rule 7012(b) prescribes that the
defendant’s answer “shall admit or deny an allegation that the
proceeding is core or non-core,” and that “[i]n non-core
proceedings[,] final orders and judgments shall not be entered on
the bankruptcy judge’s order except with the express consent of the
parties.” By implication, therefore, there was no need for the
Sheridan answer to challenge the core nature of the proceedings
3
The dissent relies upon various cases, some cited with
approval in In re G.S.F., in which the specific issue involved
consent by a party – unlike Sheridan – who had invoked the
bankruptcy court’s jurisdiction. See Canal Corp. v. Finnman (In re
Johnson), 960 F.2d 396, 398 (4th Cir. 1992) (noting that appellant
was plaintiff in adversary proceeding); Mann v. Alexander Dawson,
Inc. (In re Mann), 907 F.2d 923, 925-26 (9th Cir. 1990) (same);
Daniels-Head & Assocs. v. William M. Mercer, Inc. (In re Daniels-
Head & Assocs.), 819 F.2d 914, 919 (9th Cir. 1987) (same); Pisgah
Contractors, Inc. v. Rosen (In re Pisgah Contractors, Inc.), 215
B.R. 679, 682 (W.D.N.C. 1995) (“[B]y asserting a counterclaim
against the debtor in the adversary proceeding, the Rosens
subjected themselves to the equitable power of the Bankruptcy
Court.”); Jefferson Nat’l Bank v. I.A. Durbin, Inc. (In re I.A.
Durbin, Inc.), 62 B.R. 139, 143 (S.D. Fla. 1986) (finding implied
consent where counterclaimant-appellant had joined in a third
party’s counterclaim, knowing that her co-complainant already had
admitted that her counterclaim involved a core proceeding); cf.,
e.g., Marshall v. Mich. Dep’t of Agric. (In re Marshall), 118 B.R.
954, 960 (W.D. Mich. 1990) (refusing to find implied consent where
appellant’s counterclaim was compulsory).
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due to the fact that the complaint made no such allegation.4
Moreover, absent the parties’ allegations, the bankruptcy
court is required in all cases to make a sua sponte determination
as to whether or not a proceeding is core, 28 U.S.C. § 157(b)(3)
(“The bankruptcy judge shall determine, on the judge’s own motion
or on timely motion of a party, whether a proceeding is a core
proceeding.”) (emphasis added), and it seems quite clear that this
provision would have been phrased very differently were the
Congress to have intended that all “related to” proceedings
referred to the bankruptcy court were to be deemed presumptively
core.
Of course, whether the Sheridan proceeding was core or
non-core, the bankruptcy court was empowered to hear the case and
receive evidence. See 28 U.S.C. § 157(c)(1) (“A bankruptcy judge
may hear a proceeding that is not a core proceeding but that is
otherwise related to a case under title 11.”). Thus, the core/non-
core distinction would have significance primarily at the time of
judgment, when it would become necessary to characterize the
bankruptcy court order either as a final judgment (viz., enabling
4
Again, the dissent relies upon inapposite case law and
authorities wherein the defendant-appellant’s answer had failed to
deny an express allegation of core jurisdiction. See Pisgah
Contractors, 215 B.R. at 682; Aero-Fastener, Inc. v. Sierracin (In
re Aero-Fastener, Inc.), 177 B.R. 120, 132 (Bankr. D. Mass. 1994);
1 Lawrence P. King, Collier on Bankruptcy § 3.02[6][b] (“The effect
of failure to interpose an objection at the pleading stage should
be consent to the final order being entered by the bankruptcy
judge.”) (emphasis added).
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an immediate appeal either to the district court or the BAP), or as
a recommended decision (viz., necessitating its referral back to
the district court for entry of a final, appealable judgment).5
Thus, in the instant case, until the bankruptcy court
entered its “final” judgment characterizing the disciplinary
proceeding as core, Sheridan was not placed on notice, either by
the bankruptcy court or Special Counsel, that the hearing would be
so characterized. Finally, Sheridan objected at the earliest
available opportunity by submitting a timely postjudgment motion
for reconsideration.6 Accordingly, in these circumstances we
5
In contrast to our limited holding in G.S.F., other courts
have split on the issue as to whether Bankruptcy Code § 157(c)
consent may be implied merely from the party’s failure to object,
in a timely manner, to the hearing of the proceeding by the
bankruptcy court. Compare, e.g., In re Hatfield, 117 B.R. 387, 388
n.1 (Bankr. C.D. Ill. 1990) (drawing such inference), with Cont’l
Airlines, Inc. v. First Sec. Bank of Utah, N.A. (In re Cont’l
Airlines, Inc.), 146 B.R. 534, 536 (Bankr. D. Del. 1992) (“Implied
consent is not sufficient to waive constitutional [core/non-core]
jurisdiction.”). The rationale for those former cases, propounding
the broad rule now embraced by our dissenting colleague, is not
consonant with either the provisions in or the commentary to
Federal Rule of Bankruptcy Procedure 7008, which plainly require
“express consent.” See supra note 2. Moreover, that rationale
ignores the important reality that the bankruptcy court is
empowered to conduct hearings in both core and non-core
proceedings. See 28 U.S.C. § 157(c)(1). Thus, a party which
acquiesces in the bankruptcy court’s decision to hear the case
would not necessarily presume that the court intended its post-
hearing decision to be final, as distinguished from recommendatory.
6
The primary authority the dissent cites for its expansive
interpretation of consent involved proceedings in which the courts
determined that the appellants (unlike Sheridan) failed to object
even after the bankruptcy court had entered a “final” judgment.
See McFarland v. Leyh (In re Tex. Gen. Petroleum Corp.), 52 F.3d
1330, 1337 (5th Cir. 1995) (finding an implied waiver because
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conclude that the actions taken by Sheridan did not sufficiently
connote consent to the final adjudication of the omnibus
disciplinary proceeding by the bankruptcy court.
B. Waiver/Forfeiture
In light of the BAP’s failure to address the core/non-
core issue, however, see Sheridan, 282 B.R. at 86-89, we now must
determine whether Sheridan’s argumentation on the core/non-core
issue, as set forth both in his postjudgment motion for
reconsideration and his appellate briefs before the BAP and this
court, is sufficiently clear and developed to focus appellate
defendant-appellant “fail[ed] to object in the bankruptcy court,”
appealed to the district court instead of seeking de novo review,
and “his objection to jurisdiction at this stage [viz., on appeal
to the court of appeals] ‘more closely resembles an afterthought’”)
(citation omitted); Abramowitz v. Palmer, 999 F.2d 1274, 1276 (8th
Cir. 1983) (implied consent found where defendant-appellant did not
raise her non-core argument before the bankruptcy court, she
appealed the bankruptcy court’s dischargeability decision to the
district court, rather than seeking its de novo review, and she
raised her non-core argument “for the first time” before the court
of appeals); Canal Corp. v. Finnman (In re Johnson), 960 F.2d 396,
403 (4th Cir. 1992) (implied consent found because plaintiff-
appellants were “apparently content” when bankruptcy court entered
its “final” judgment to distribute monies to appellants, and
objected only after the bankruptcy court had modified its judgment
so as to reallocate the monies among various members of the
plaintiff class); Men’s Sportswear, Inc. v. Sasson Jeans, Inc. (In
re Men’s Sportswear, Inc.), 834 F.2d 1134, 1138 (2d Cir. 1987)
(noting that appellant failed to raise non-core issue even after
bankruptcy court issued its judgment explicitly declaring the
proceeding core, and even on appellant's appeal to the district
court); DuVoisin v. Foster (In re S. Indus. Banking Corp.), 809
F.2d 329, 331 (6th Cir. 1987) (finding implied consent where
defendant-appellant's answer (i) stated without qualification that
bankruptcy court had “jurisdiction,” (ii) raised no jurisdictional
challenge before judgment, and (iii) marked the bankruptcy court
order as “agreed for entry”).
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attention upon the merits of the core/non-core issue. See
Mulvihill v. Top-Flite Golf Co., 335 F.3d 15, 27 (1st Cir. 2003)
(noting that issues raised in perfunctory manner on appeal are
deemed waived). Our review reveals that Sheridan lumped together
a host of jurisdictional and non-jurisdictional challenges
predicated upon the central premise that the bankruptcy court
lacked any “authority” whatsoever to impose monetary sanctions as
a condition precedent to his reinstatement to the bar. Given this
circumstance, therefore, we understand how the issue may have
eluded the BAP's attention.
Although it may be that Sheridan, had he been represented
by counsel,7 would have advanced his argument more prominently and
distinctly than was done in his pro se submissions, we cannot
fairly conclude that Sheridan failed either to raise the argument,
or to discuss the criteria most pertinent to the core/non-core
analysis. For instance, in his motion for reconsideration Sheridan
plainly contended: “As such the Bankruptcy [C]ourt does not share
all the powers of the district court. Thus in [Northern Pipeline],
the United States Supreme Court held that it was unconstitutional
for the Bankruptcy Courts to exercise the ‘essential attributes of
7
By way of bolstering its inference that Sheridan consented,
the dissenting opinion adverts to Sheridan as “an experienced
bankruptcy attorney,” while failing to acknowledge that these
disciplinary proceedings arose, at least in part, from Sheridan’s
numerous physical ailments and mental impairments. The district
court has yet to be accorded the opportunity to make the requisite
findings of fact on this issue.
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the judicial power of the Article III district court,’ and that the
bankruptcy court’s power was limited to ‘core proceedings’ of the
administration of the bankruptcy estate under the bankruptcy code,
28 U.S.C. § 157(b)(1).” (Emphasis added; citations omitted.)
Not only is Northern Pipeline the seminal case on the
constitutional limitations which undergird the pivotal core/non-
core distinction, but the utter absence of a close nexus between
the Sheridan disciplinary proceeding and the administration of any
particular pending bankruptcy proceeding is a crucial consideration
in resolving the core/non-core issue. See 28 U.S.C. § 157(b)(2)(A)
(noting that core proceedings involve, inter alia, “matters
concerning the administration of the estate”) (emphasis added);
infra Section II.C. Moreover, Sheridan reiterated the same
argument verbatim, both before the BAP and in the instant appeal,
by relying upon the same citation to, and paraphrase of, the
Northern Pipeline holding, then adding: “The disciplinary order in
each of the cases cited by the [BAP] arose out of and during the
administration of a single bankruptcy estate.” (Emphasis added.)
Thus, though Sheridan might have asserted the issue with somewhat
more prominence and clarity, we are hard-pressed to find, on these
submissions, that the argument was conclusively forfeited. “[A]
court should not lightly infer from a litigant's conduct consent to
have private state-created rights adjudicated by a non-Article III
bankruptcy judge. Indeed, to do so would violate the spirit of
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[Northern Pipeline].” In re Men's Sportswear, Inc., 834 F.2d 1134,
1138 (2d Cir. 1987).8
No less importantly, even in the event we were to
conclude that Sheridan forfeited the instant issue below, see
8
Nor can the Sheridan decision to appeal to the BAP, rather
than the district court, be deemed implied consent. Normally, a
bankruptcy court decision in a non-core proceeding is not
appealable to the BAP, but must be taken to the district court.
Here, however, the bankruptcy court purportedly entered a decision
on the merits in what it termed a core proceeding, thereby
rendering its judgment (unless vacated on appeal) final and
appealable. See In re M.A. Baheth Constr. Co., 118 F.3d 1082, 1084
(5th Cir. 1997) (“Until and unless the determination of bankruptcy
court jurisdiction is overturned, Baheth was bound to comply with
the court's judgment – and the procedural consequences thereof.”).
Appeals from such a judgment lie either with the BAP or the
district court, sitting in its appellate capacity. See 28 U.S.C.
§ 158(c)(1). Thus, either the BAP or the district court would have
jurisdiction to determine whether the bankruptcy court’s
designation of the proceeding as core constituted reversible error.
We find equally enigmatic the related suggestion in the
dissenting opinion that Sheridan expressly abandoned his objection
to the bankruptcy court’s core treatment of the proceeding. In his
15-page supplemental brief Sheridan vehemently disputes that he
ever consented, asserting instead that he promptly raised the
core/non-core issue in his motion for reconsideration before the
bankruptcy court. Michels, the party whose burden it was to allege
that the proceeding was core, declined our invitation to submit
supplemental briefing. Sheridan did note that he would “take[] no
position” on the non-core issue, but not because he conceded that
it lacked merit, nor that it was not in his interest to pursue it.
Instead, he noted that it was supported by “ample authority.” He
believed (albeit incorrectly) that the jurisdictional issue became
relevant only if we were to find that the bankruptcy court had
issued the sanction under Administrative Order 2090-2 only, and not
pursuant to Bankruptcy Code § 105. This is a far cry from
abandonment. Assuming that further evidence that Sheridan had not
abandoned this claim was needed, however, his supplemental brief,
in its final citation, points to In re BNI Telecommuns., 246 B.R.
845, 849 (B.A.P. 6th Cir. 2000), a case in which the Sixth Circuit
reversed a bankruptcy court for improperly entering a final
judgment in a non-core proceeding without appellant’s consent.
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Mulvihill, 335 F.3d at 27, it is within our discretion to address
an issue de novo, in those rare instances where the issue poses
“purely a question of law; where addressing the merits promotes
judicial economy as the same issue will likely be raised in other
cases; and the claim raises an issue of constitutional magnitude,
which if meritorious, could substantially affect the rights of
creditors and debtors in this and future bankruptcy proceedings.”
In re Weinstein, 164 F.3d 677, 685 (1st Cir.) (reaching unpreserved
Fifth Amendment Takings Clause issue), cert. denied, 527 U.S. 1036(1999); United States v. La Guardia, 902 F.2d 1010, 1013 (1st Cir.
1990) (reaching unpreserved due process challenge to sentencing
guidelines).
The core/non-core argument advanced by Sheridan suits the
bill on all three criteria. The question as to whether the
proceeding is core or non-core poses a pure question of law,
subject to plenary appellate review. See In re Graves, 279 B.R. at
270. As the extended procedural travel of this case amply
demonstrates, the proper characterization, ab initio, of this type
of omnibus disciplinary proceeding – as either core or non-core –
is likely to minimize substantially the waste of judicial resources
in future cases. For example, had this proceeding been considered
non-core from the outset, the Sheridan appeals to the BAP and to
this court could not have occurred, the case would have proceeded
directly to the district court to decide whether to adopt or reject
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the recommended findings of fact and legal conclusions made by the
bankruptcy court, and Sheridan may well have averted almost two
years of suspension from his professional livelihood.9
Finally, the core/non-core distinction advanced in
Northern Pipeline unquestionably is one of constitutional import,
in that it concerns the authority of an Article I court to enter a
final judgment in a non-core proceeding absent the consent of the
parties. Thus, even assuming we were to conclude that Sheridan’s
presentation of the core/non-core contention before the bankruptcy
court and the BAP was inadequate, we would consider this case an
appropriate one in which to conduct de novo review, rather than
plain error review.10
9
The consequences of the core/non-core determination cannot
fairly be understated. Thus, if the bankruptcy court decision were
not a final judgment, but merely a recommendation for entry of
judgment, the Sheridan suspension from law practice would be
premature, and could never have taken effect unless and until the
district court adopted the recommended decision entered by the
bankruptcy court. Similarly, had the district court adopted the
bankruptcy court recommendation, the issues upon which Sheridan
might base his appeal would be drastically altered. That is to
say, in that event the question would not be whether the bankruptcy
court rules or administrative orders authorized this type of
sanction, but whether the district court’s rules and orders
authorized such a sanction. See U.S. Dist. Ct. Local Rule (D.N.H.)
83.5.
10
With respect, we must note that our dissenting colleague's
disapproval of our recourse to the La Guardia exception flows from
several faulty premises. The dissent insists that Sheridan did not
raise the core/non-core issue on appeal or if he did, inexplicably
abandoned it after devoting several pages of supplemental briefing
to a denial that he consented to core treatment. See supra note 8.
The dissent further states that the non-core issue is not one of
constitutional dimension. To the contrary, even the authorities
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C. Core vs. Non-core
Notwithstanding the jurisdictional issues raised by
Sheridan, see supra, the bankruptcy court failed to elaborate upon
its rationale for ruling that the instant omnibus disciplinary
action constitutes a core proceeding. See 28 U.S.C. § 157(b)(3).
Generally speaking, a proceeding which “arises under” the
bankruptcy laws is considered core. See 28 U.S.C. § 157(b)(1);
cited by the dissent acknowledge that Northern Pipeline, which §
157 purports to implement, involved a litigant’s constitutional
right to have his case heard by an Article III court. See, e.g.,
In re Tex. Gen. Petroleum Corp., 52 F.3d at 1336 (“[Appellant’s
core/non-core] argument, however, is a constitutional one based on
Article III. We must undertake the constitutional analysis.”).
The dissent then mischaracterizes our delineation of the factors
which render this particular type of omnibus disciplinary
proceeding non-core as involving a factual determination, whereas
it is a purely legal determination as to what essential attributes
of this proceeding satisfy the legal criteria set forth in §
157(b)(2). See, e.g., In re Graves, 279 B.R. at 270 (noting that
the core/noncore determination is a question of law). The dissent
further contends that the legal argument for characterizing the
Sheridan disciplinary proceeding as non-core is not compelling,
even though the dissent cites no contrary authority directly on
point, and the Sheridan disciplinary proceeding meets none of the
criteria set forth in Bankruptcy Code § 157(b)(2). See infra
Section II.C.; Eleccion v. Sogge (In re Hessinger & Assocs.), 192
B.R. 211, 219-20 (N.D. Cal. 1996) (holding that omnibus
disciplinary proceedings are non-core). Finally, despite its
admission that these types of omnibus proceedings have occurred in
the past, the dissent rejects our resort to the La Guardia
exception based on its surmise that the bankruptcy courts are not
likely to resort to such omnibus disciplinary proceedings in the
future. One readily can envision, however, that an Article I court
– once reassured that it is exercising its core authority – would
be hard put to resist the streamlined disciplinary procedures and
finality afforded by these proceedings.
-20-
Boroff v. Tully (In re Tully), 818 F.2d 106, 108 (1st Cir. 1987).11
This statutory provision prescribes a non-exhaustive exemplar of
core proceedings, 28 U.S.C. § 157(b)(2)(A)-(O), including the
allowance and disallowance of proofs of claim, orders to turn over
property to the estate, proceedings to avoid preferences or
fraudulent conveyances, motions to lift automatic stays, and the
adjudication of objections to discharge. Importantly, each of the
enumerated matters relates to a function essential to the
administration of the bankruptcy case.
In addition to these more particular functions, there are
two broadly phrased categories which relate more generally to other
11
The dissent advances but two arguments premised upon
authority which predates the enactment of § 157(b). First, it
proposes the following syllogism: (1) all non-core proceedings
involve state contract claims, see Thomas v. Union Carbide Agric.
Prods. Co., 473 U.S. 584 (1985); (2) the Sheridan disciplinary
proceeding involved no such claim; and (3) consequently, the
Sheridan disciplinary proceeding is not a non-core proceeding. The
initial premise is flawed, however. Thomas simply describes its
Northern Pipeline holding, but does not announce that the Court
would forbear in future cases from extending the Northern Pipeline
rationale to other types of analogous claims. Second, the dissent
cites our decision in In re Arnold Print Works, Inc., 815 F.2d 165(1st Cir. 1987), for the proposition that attorney disciplinary
actions against attorneys do not involve private contract-based
rights, but “public rights” which non-Article III courts have
always been permitted to adjudicate. However, Arnold addresses the
somewhat arcane public rights doctrine, which describes a very
narrow category of claims of a sort which Article III courts are
institutionally capable of adjudicating, but which historically
were resolved instead by legislative or administrative courts. See
Northern Pipeline, 458 U.S. at 67-68. Obviously, attorney
disciplinary actions, long within the province of the federal
courts, do not comport with this specialized “public rights”
definition.
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“matters concerning the administration of the estate,” id. §
157(b)(2)(A), and “other proceedings affecting the liquidation of
the assets of the estate or the adjustment of the debtor-creditor
or the equity security holder relationship, except personal injury
tort or wrongful death claims,” id. § 157(b)(2)(O). It is
important to note that the matters adumbrated in Bankruptcy Code §
157(b)(2)(A) and (O) likewise typically arise within the context of
a particular bankruptcy case, and are essential to the efficient
administration of the bankruptcy case.12 Thus, to the extent that
attorney misconduct may have thwarted the efforts of the bankruptcy
court to bring a particular bankruptcy proceeding efficiently to
conclusion, it is at least arguable that attorney disciplinary
proceedings occurring during such a case can be classified as core.
On the other hand, the omnibus disciplinary proceeding
initiated against Sheridan is essentially different, in that the
ethical violations in which Sheridan allegedly engaged, for the
12
The dissenting opinion suggests, incorrectly, that we rely
upon the expressio unius principle to interpret § 157(b), thereby
ignoring the explicit nonexclusivity of the § 157(b)(2) listing.
See Lohnes v. Level 3 Communications, Inc., 272 F.3d 49, 61 (1st
Cir. 2001) (“[T]he maxim expressio unius est exclusio alterius
instructs that, ‘when parties list specific items in a document,
any item not so listed is typically thought to be excluded.’”)
(citation omitted). On the contrary, any attempted extrapolation
of the § 157(b)(2) listing must be guided by reference to those
essential characteristics which the listed proceedings share in
common, see Aceros Prefabricados, S.A. v. TradeArbed, Inc., 282
F.3d 92, 101-02 (2d Cir. 2002); Collier v. Gray, 167 F.3d 977, 981
(6th Cir. 1999), and unlike the Sheridan omnibus disciplinary
proceeding, all of the proceedings in the § 157(b) listing arise as
part of the ongoing administration of “the” bankruptcy estate.
-22-
most part, occurred during the course of numerous bankruptcy cases
previously closed, rather than in a pending bankruptcy proceeding,
thus cannot be said to have involved the sort of routine case
“administration” described in § 157(b)(2). Unlike disciplinary
actions brought against counsel in the course of an ongoing
bankruptcy case,13 the Sheridan disciplinary proceedings did not
purport to adjust the legal relationships among the parties in
these closed bankruptcy cases, but consisted largely of the
bankruptcy court’s exercise of its supervisory responsibility to
oversee and regulate its bar so as to safeguard public confidence
in the integrity and functionality of the bankruptcy court. See,
e.g., Eleccion v. Sogge (In re Hessinger & Assocs.), 192 B.R. 211,
219-20 (N.D. Cal. 1996) (noting that disciplinary action conducted
outside particular bankruptcy proceeding is non-core, “concerned
solely with the issue of the [law] firm’s professional misconduct
[as defined by the California Rules of Professional Conduct] and
addressed neither the assets of any bankruptcy estate nor the
adjustment of debtor-creditor relations”).14 Indeed, no present or
13
All the cases the dissent cites in support of the so-called
“core comes from core” principle involved discipline imposed for
attorney misconduct in a single, ongoing bankruptcy case. See,
e.g., In re Mem’l Estates, Inc., 950 F.2d 1364, 1370 (7th Cir.
1991) (finding that sanction “affect[ed] the liquidation of the
assets of the estate”).
14
In advancing its contention that this court cites no
authority for the proposition that the § 157(b) listing restricts
core proceedings to those which arise as part of the administration
of a single bankruptcy case, the dissent fails to acknowledge
-23-
former client ever lodged a complaint against Sheridan.
Although a determination that Sheridan breached ethical
canons could conceivably enable these closed cases to be reopened,
possibly with a view to recovering attorney fees paid to him by the
respective estates, cf., e.g., id. at 220 (distinguishing non-core
omnibus disciplinary action from two other cases under review where
attorney sanctions were “pursued in the course of processing a
bankruptcy petition,” and where “finding that a law firm violated
the Rules [of Professional Conduct] could lead to that firm
forfeiting its fees . . . and such forfeiture would ‘affect the
liquidation of the assets of the estate’”),15 the disciplinary
action against Sheridan had no such purpose or effect, since its
remedial goal focused exclusively upon Sheridan’s fitness to
represent clients in future bankruptcy cases, rather than upon any
Hessinger, the one and only extant case directly on point. In
response, the dissent cites a string of cases involving omnibus
disciplinary proceedings, while conceding that the parties in all
those cases (unlike in Hessinger) never raised the core/non-core
issue for resolution by those courts. See, e.g., Household Credit
Servs., Inc. v. Dragoo (In re Dragoo), 219 B.R. 460 (Bankr. N.D.
Tex. 1998).
15
Similarly, some courts have held that the bankruptcy court
may issue “final” contempt orders in an ongoing case to discipline
counsel for noncompliance with court orders, since noncompliance
obviously hampers the efficacy of liquidation and reorganization
proceedings. See In re Woodward, 229 B.R. 468, 477 (Bankr. N.D.
Okla. 1999); cf. Volpert v. Volpert (In re Volpert), 186 B.R. 240,
245 (N.D. Ill. 1995) (noting that sanctions imposed under Fed. R.
Bankr. P. 9001 for dilatory conduct by counsel in an ongoing
bankruptcy case are core matters), aff’d, 110 F.3d 494 (7th Cir.
1997).
-24-
recoupment of estate funds attributable to Sheridan’s misconduct.
Thus, no matter what the outcome of the disciplinary proceeding
against Sheridan, no pending or closed bankruptcy case would be
affected unless further independent proceedings were instituted in
the future. At the present juncture, however, any prediction of
such an eventuality would be pure speculative. See, e.g., Warren
v. Calania Corp., 178 B.R. 279, 281 (M.D. Fla. 1995) (holding that
attorney disciplinary proceedings were not core, since “[t]he fact
that potential proceeds of the action may be distributed by the
[bankruptcy] court if an award is received is not enough”).
Omnibus disciplinary proceedings predicated upon alleged
violations of ethical rules are further distinguishable in that the
rights protected thereby do not derive from the Bankruptcy Code,
but from state law, viz., in this instance, the New Hampshire Rules
of Professional Conduct. See In re G.S.F. Corp., 938 F.2d at 1475(noting that core proceedings normally involve rights derived from
bankruptcy law, and “depend on the Bankruptcy [Code] for their
existence”); Bethlahmy v. Kuhlman (In re ACI-HDT Supply Co.), 205
B.R. 231, 236 (B.A.P. 9th Cir. 1997) ("[A] proceeding ‘will not be
considered a core matter, even if it falls within the literal
language of § 157(b)(2)(A) or 157(b)(2)(O), if it is a state law
claim that could exist outside of bankruptcy and is not
inextricably bound to the claims allowance process or a right
created by the Bankruptcy Code.’”) (citation omitted); Jackson v.
-25-
Wessel (In re Jackson), 90 B.R. 126, 129 (Bankr. E.D. Pa. 1988)
(“‘[C]ontroversies that do not depend on the bankruptcy laws for
their existence – suits that could proceed in another court even in
the absence of bankruptcy – are not core proceedings.’”) (citation
omitted), aff’d, 118 B.R. 243 (E.D. Pa. 1990). Indeed, the
standards for admission to the bar of the United States District
Court for the District of New Hampshire essentially “piggyback”
upon the state’s rules of professional conduct (albeit that state
law is expressly adopted by the federal court in the particular
jurisdiction). See U.S. Dist. Ct. Local Rule (D.N.H.) 83.1(a)
(“Any member in good standing of the bar of the Supreme Court of
New Hampshire is eligible for admission.”). Although the
predominance of state-law issues, standing alone, cannot be
determinative, see 28 U.S.C. § 157(b)(3) (“A determination that a
proceeding is not a core proceeding shall not be made solely on the
basis that its resolution may be affected by state law.”) (emphasis
added), undoubtedly it is one relevant factor in the core/non-core
inquiry.16
16
The dissent contends that rules regulating attorney conduct
in federal court are strictly a matter of federal law, not state
law. We do not disagree. Our point is simply that the source of
the rules governing Sheridan’s case is the state rules, which in
this instance were adopted wholesale as the federal district
court's own rules. Cf. In re Snyder, 472 U.S. 634, 645 n.6 (1985)
(noting that state rules were not applicable in federal court
because “[t]he state code of professional responsibility [did] not
by its terms apply to sanctions in federal court”). Nor does our
case involve the wholly distinct question as to whether to apply a
federal rule or a state rule which proscribes the identical
-26-
Moving beyond the explicit constraints in the statute
itself, sound policy concerns likewise compel such distinctions.
Where, as here, the attorney misconduct occurred neither in the
context of an ongoing bankruptcy case, nor in the presence of the
bankruptcy court, the bankruptcy court may have no better vantage
from which to make final findings of fact than would the district
court. See Fed. R. Bankr. P. 9033(d) (empowering district court to
receive further evidence before deciding whether to adopt
bankruptcy court’s recommended decision). Consequently, this sort
of omnibus disciplinary proceeding is far different from the
johnny-on-the-spot disciplinary proceedings relating to errant
attorney conduct occurring during an ongoing bankruptcy case, which
may be essential to the fair and efficient administration of the
conduct. See In re Larry’s Apartment, L.L.C., 249 F.3d 832, 838-39
(9th Cir. 2001) (undertaking analysis under Eerie doctrine, and
holding that a state law imposing sanctions for an attorney’s
filing of a lawsuit for an improper purpose was inapplicable in
federal court, given the existence of federal rules – viz., Federal
Civil Rule of Procedure 11 or 28 U.S.C. § 1927 – proscribing the
same misconduct). In attempting to demonstrate that our reference
to the state ethical rules is wholly “beside the point,” the
dissent quotes Arnold Print Works, 815 F.2d at 169, where we
stated that “[i]t is the nature of the proceeding – its relation to
a basic function of the bankruptcy court – not the federal or state
basis for the claim, that makes the difference here.” (Emphasis
added.) The quoted statement plainly does not support the
dissent’s contention that the primacy of state law can never be
weighed as a factor in the core/non-core analysis; and were there
to be any doubt, we further observed that “the fact that a
bankruptcy matter raises issues of state, rather than federal, law
does not by itself determine that it is non-core, rather than
core.” Id. (emphasis added).
-27-
bankrupt estate.17
In this type of omnibus disciplinary proceeding, which
relates to multiple bankruptcy cases extending over a considerable
17
The dissent further suggests that our holding will undermine
the bankruptcy courts’ ability to administer cases with efficiency
and dispatch. Although we need not resolve the issue today, a
strong argument could be made that § 157(b) contemplates that
attorney discipline imposed in the midst of an ongoing case
administration would be a core proceeding, even if the attorney’s
conduct itself occurred during a non-core proceeding, precisely
because the discipline concerns the administration of the estate
and the prospects that the bankruptcy court will be able to bring
the case to successful conclusion. In those circumstances,
immediate discipline serves the purpose of expedition, rather than
thwarting it.
Throughout, the dissent inexplicably describes our non-core
treatment of an omnibus disciplinary proceeding as a “penalty,”
which the bankruptcy courts will scurry to avoid at all costs, even
if it means the tedious reopening of each constituent case, or the
manipulation of the form of a disciplinary proceeding in a single
bankruptcy case so as to introduce in evidence attorney misconduct
arising in the other unrelated cases. In re Ludwick, 185 B.R. 238(Bankr. S.D. Mich. 1995), however, clearly was not an attempt to
manipulate the form of a disciplinary proceeding to avoid a non-
core designation. The bankruptcy attorney was accused of forging
one client’s (i.e., Ludwick’s) signature. During disciplinary
hearings, a second client of the attorney in an unrelated
bankruptcy case testified that the attorney had also forged his
signature. The court sanctioned the attorney only to compensate
Ludwick for the Ludwick forgery, not the other forgery. Id. at 244(noting that court used evidence of second forgery only on the
issue of the attorney’s credibility in denying the Ludwick
forgery).
We can perceive no sound basis for the curious conclusion that
the bankruptcy courts would be unreasonably covetous of the power
to issue a final disciplinary order, rather than a recommendatory
decision subject to de novo review by the district court. The
mutual goal of the bankruptcy courts and the district courts alike
is the deterrence of attorney misconduct. Thus, omnibus
proceedings are – and will remain – an efficient means to
investigate attorney conduct spanning dozens of bankruptcy cases,
as well as a viable option for the bankruptcy courts following our
decision.
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period of time, the alleged misconduct may have occurred either
before multiple bankruptcy judges in a multi-judge district, or
entirely or partially outside the presence of the bankruptcy judge
who hears the disciplinary case. Here, for instance, the
bankruptcy court appointed Michels to investigate Sheridan’s
conduct, much of which allegedly occurred outside the courtroom. In
such cases, the bankruptcy judge would seem to have no greater
expertise as a factfinder than the district court.
We do not question that the case law overwhelmingly
suggests that the bankruptcy court possesses the requisite
authority, either inherent or statutory, to regulate its bar as
necessary and appropriate. See supra note 1. Nor do we hold
otherwise. In the instant case, however, the bankruptcy court
exercised its authority to take disciplinary action against
Sheridan, and we simply hold that — in these particular
circumstances — the bankruptcy court was not empowered to arrive at
a final resolution of the disciplinary matter absent further
district court participation and oversight.
The requirement that the district court arrive at a
final, plenary disciplinary disposition further recognizes that
disbarment and suspension plainly are among the more grievous
sanctions which can be imposed. Thus, the imposition of a
$30,377.50 fine, as a condition precedent to readmission to the
bar, is onerous indeed; the more so in the present circumstances
-29-
where numerous ethical violations spanning numerous bankruptcy
cases were conglomerated into a single disciplinary proceeding
after the fact. Cf., e.g., Bone v. Judah (In re Josey), 195 B.R.
511, 516 (Bankr. N.D. Ga. 1996) (noting that imposition of sanction
of suspension pursuant to bankruptcy court’s inherent powers is
“very serious,” and under local district court rule is to be
referred for investigation to standing district court disciplinary
committee). The consolidated nature of this type of omnibus
disciplinary proceeding threatens to expose attorneys to much
steeper sanctions than might otherwise have been incurred as a
result of piece-meal disciplinary proceedings conducted at the time
the misconduct arose in each constituent bankruptcy case. Thus,
the de novo review conducted by the district court accords counsel
additional procedural protections when confronting potentially
harsh penalties. See Cunningham v. Ayers (In re Johnson), 921 F.2d
585, 586 (5th Cir. 1991) (noting that district court undertook de
novo review).18
Finally, these disciplinary proceedings inevitably place
the bankruptcy court itself in an extremely awkward posture,
18
As suspensions and disbarments are “extreme” sanctions, the
courts frequently require heightened procedural protections, such
as a showing of “bad faith” and “clear and convincing” evidence.
See, e.g., Fellheimer, Eichen & Braverman, P.C., 57 F.3d at 1224;
In re Cowboy Roofing, Inc., 193 B.R. at 446. In that vein,
Sheridan argues on appeal that the bankruptcy court imposed a
sanction unsupported by any evidence of bad faith on his part. We
do not evaluate this argument, as it is more appropriately
presented to the district court following remand.
-30-
vulnerable to the public perception (if not charge) that the
bankruptcy court is inappropriately acting as accuser,
investigator, prosecutor, and judge. See Peugeot v. U.S. Tr. (In
re Crayton), 192 B.R. 970, 978 (B.A.P. 9th Cir. 1996). Any such
perception can be further allayed through recourse to the de novo
review conducted before the district court. After all, attorneys
are admitted to practice before the district court, which admission
accords counsel the derivative right to practice before the
bankruptcy court within the district, by virtue of the fact that
the bankruptcy courts function as organizational units of the
district court.
We close with a final admonition: our opinion is not to
be construed as holding that all attorney disciplinary proceedings
before the bankruptcy court are to be presumptively considered non-
core. Thus, had the Sheridan ethical violations occurred either
during the course of a bankruptcy case or within the immediate
presence of the bankruptcy judge, or otherwise directly affected
the administration, liquidation, or reorganization efforts, a
stronger demonstration might be made for characterizing the
disciplinary proceeding as a core matter. See, e.g., In re
Hessinger, 192 B.R. at 220 (noting that within an individual
bankruptcy case a suspension or disbarment of counsel may more
readily be regarded as “affecting” asset liquidation, inasmuch as
disqualification of counsel normally affects entitlement to
-31-
attorney fees recoverable from the bankrupt estate, or requires
reimbursement of attorney fees previously received, hence
increasing the assets available for distribution). As the instant
case implicates no such considerations, however, we reserve that
matter for another day.
In summary, the case at bar is distinguishable due
principally to the following factors: (i) the omnibus nature of
the disciplinary proceeding; (ii) the case did not arise in the
context of an ongoing bankruptcy case, cf. In re Desilets, 247 B.R.
660, 663 (Bankr. W.D. Mich. 2000) (holding that such an attorney
suspension constitutes core proceeding), aff’d, 255 B.R. 294 (W.D.
Mich. 2000), rev’d on other grounds, 291 F.3d 925 (6th Cir. 2002);
(iii) these disciplinary charges were predicated upon alleged
ethical-rule violations proscribed by state law, rather than by the
Bankruptcy Code; and (iv) any potential effect the bankruptcy court
order may have had upon a closed bankruptcy case is both remote and
overly speculative, see Warren, 178 B.R. at 281.
As the BAP lacked subject matter jurisdiction in the
instant case, it is unnecessary to reach the merits of the Sheridan
contentions that the sanction imposed by the bankruptcy court was
unwarranted in law or fact. Accordingly, the case must be remanded
to the bankruptcy court for entry of its recommended findings of
fact and conclusions of law, pursuant to 28 U.S.C. § 157(c)(1).
The instant dismissal is not to be interpreted as reflecting our
-32-
views on the underlying merits of the Sheridan appeal or the
authority of the district court, vel non, to impose monetary
sanctions as a condition precedent to Sheridan's readmission to the
bar following the type of omnibus disciplinary proceeding conducted
here.
Accordingly, pending the entry of a final judgment by the
district court, based upon the recommended findings of fact and
conclusions of law entered by the bankruptcy court, Sheridan is
reinstated to the bankruptcy court bar immediately. See supra note
9. Our decision shall be without prejudice to the right of a party
to appeal from any district court order that finally disposes of
the recommended findings of fact and conclusions of law entered by
the bankruptcy court.
The BAP decision and the bankruptcy court decision are
hereby vacated for want of jurisdiction. Sheridan is hereby
reinstated to the bankruptcy court bar, and the case is remanded to
the bankruptcy court for further proceedings consistent with this
opinion. The parties are to bear their own costs. SO ORDERED.
- Concurring Opinion Follows -
-33-
SELYA, Circuit Judge (concurring in the judgment). I
recognize that the appellant did not make his jurisdictional
argument with crystalline clarity, either to the BAP or in this
court. There are, however, extenuating circumstances, and in my
view the LaGuardia/Weinstein exception is available here. I am
comfortable in joining in the affirmative exercise of discretion
needed to invoke that exception, and, thus, reaching the important
issue of classification (core versus non-core) that permeates this
proceeding. While that issue is not free from doubt, my resolution
of it tracks Judge Cyr's: this omnibus disciplinary proceeding,
which did not arise out of any matter(s) directly affecting the
bankruptcy court's ability to administer one or more ongoing cases,
is a non-core proceeding. Consequently, the bankruptcy court
lacked the authority to enter a final judgment.
I therefore concur in the vacation of the improvidently
entered judgment and the concomitant remand. If the appellant's
conduct is deserving of discipline beyond the period of enforced
suspension that he already has experienced — a matter on which I
take no view — it is the district court which, in the circumstances
of this proceeding, must impose it.
- Dissenting Opinion Follows -
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