A Sonoma lawyer is in hot water for his handling of a bankruptcy case.
Gregory Orton was hit with a $20,000 sanction after a U.S. Trustee turned up a Chapter 7 debtor's undisclosed asset of $61,250.
Oopsie.
San Francisco U.S. Bankruptcy Chief Judge Alan Jaroslovsky had some stern words for Orton. If everything the Trustee alleged is true, Jaroslovsky said when the matter was before him, "Orton's conduct was criminal."
The U.S. Bankruptcy Appellate Panel for the Ninth Circuit U.S. Court of Appeals this week released an opinion upholding the sanction. Orton failed to exercise due diligence, the panel concluded.
The undisclosed asset stemmed from the client's settlement in Sonoma Superior Court. Orton was aware that the debtor had received payments in 2009, but he didn't mention that in the bankruptcy papers, the Trustee discovered.
Orton argued there was no conspiracy to conceal the asset because he listed the lawsuit in the Schedules and Statement of Financial Affairs. But in a meeting of creditors, Orton conceded he didn't disclose the suit because he was under the impression the money was "essentially uncollectible."
Orton says his client wasn't forthcoming. She was inconsistent in statements and her employment history was "sketchy," he said. Orton conceded, the opinion notes, that he shouldn't have filed the bankruptcy petition for her, or should have amended the petition when he thought he had been lied to, or later should have withdrawn from representation.
On appeal, he argued he won't be able to pay the fine. The appeals court didn't have any sympathy, saying Orton presented no information to back that up. Plus, he didn't raise it in the lower court.
His client's filings were, "by omission of critical information, rendered patently false, something Orton knew at the time the schedules were filed," the appeals court panel said.
As deplorable as the debtor's attorney's alleged conduct was, the sanctions demonstrate that the system usually works. BARF (a/k/a BAPCPA) was enacted in order to burden debtors (and trustees) with extensive documentation which is unnecessary and serves little if any purpose in the vast majority of cases.
Posted by: Don Petersen | August 05, 2011 at 03:46 PM