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Counsel Forfeits Fee for False Statement

A Lynchburg U.S. Bankruptcy Court denies debtor’s counsel additional requested compensation of $2,000 for reaching a settlement regarding a complaint to determine dischargeability of debt filed on behalf of the Social Security Administration in this adversary proceeding alleging overpayment of social security benefits; however, the court will grant counsel an additional $250.

SSA counsel informed the court that a settlement offer had been made to debtors and was pending. It was acknowledged by debtor’s counsel that the consent order was submitted with the assistant U.S. attorney’s signature without her having seen the order, but that she had otherwise consented to the relief requested.

The Bankruptcy Code authorizes a bankruptcy court to determine the reasonableness of compensation to debtor’s counsel to be paid under a chapter 13 plan. However, a bankruptcy court may consider the behavior of the party seeking approval of compensation in making such a determination. In particular, a court may impose a sanction on debtor’s counsel for violation of the rules of professional conduct and noncompliance with applicable code provisions, rules and court orders.

Attorneys admitted to practice before this court must abide by the Virginia Rules of Professional Conduct. Rule 3.3, Candor Toward the Tribunal, requires that a lawyer shall not knowingly make a false statement of fact or law to the tribunal. Local Rule 9072-1(C) of this court states that “Counsel’s tender of an order containing the typed signatures of other counsel shall constitute proponent counsel’s representation that each counsel has reviewed the identical version of the order being tendered and consented thereto, or has objected thereto, in which case the fact of such counsel’s objection shall be noted immediately above such counsel’s typed name.” Local Rule 5005-4 provides that electronic signatures constitute the representation by the electronic filer that the original was duly signed.

By submitting an order to the court with the signature of the assistant U.S. attorney’s electronic signature, debtor’s counsel was representing to the court that she had in fact reviewed the identical version of the order being tendered and consented to. This was false; therefore, counsel violated Professional Conduct Rule 3.3 concerning candor toward the tribunal. The court finds it appropriate to impose sanctions in this case for counsel’s noncompliance with the Rules of Professional Conduct. The court, however, does find that some fee is appropriate for the work performed in the uncontested adversary proceeding.

The application for compensation is denied to the extent of $2,250 and allowed to the extent of $250. The trustee is authorized to disburse attorney’s fees to counsel for debtor for services in connection with the adversary proceeding in the amount of $250.

In Re William Thomas Budd (Connelly) No. 14-61192, July 24, 2015; USBC at Lynchburg, Va. VLW 015-4-021, 5 pp.

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