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Attorney Certification and Sanctions

Attorneys, who represent debtors whose debts are primarily consumer debts in Chapter 7 bankruptcy cases, are subject to certain certification standards.  These standards are prescribed under Section 707 of the Bankruptcy Code.

The signature of an attorney on a petition, pleading, or written motion constitutes a certification that the attorney has:

  1. performed a reasonable investigation into the circumstances that gave rise to the petition, pleading, or written motion; and
  2. determined that the petition, pleading, or written motion is well grounded in fact; and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law and does not constitute an abuse.

The signature of an attorney on a petition constitutes a certification that the attorney has no knowledge, after an inquiry, that the information in the schedules filed with such petition is incorrect.

Rule 9011 of the Federal Rules of Bankruptcy Procedure provides that by presenting to the Court (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that:

  1. it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;
  2. the claims, defenses, and other legal contentions are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
  3. the allegations and other factual contentions have evidentiary support or likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and
  4. the denials of factual contentions are warranted on the evidence or based on a lack of information or belief.

Courts may impose appropriate sanction upon attorneys, law firms, or parties that have violated statutory requirements, after notice and a reasonable opportunity to respond.  The aggrieved party may file a motion for sanctions under Rule 9011, describing the alleged conduct of violation of the Rule.  Courts may, if warranted, award to the party prevailing on the motion the reasonable expenses and attorney’s fees incurred in presenting or opposing the motion.  A law firm is held jointly responsible for violations committed by its partners, associates, and employees, unless there are some exceptional circumstances.  In addition to this, the Court may also, on its own initiative, enter an order describing the violative conduct and direct the attorney, law firm or party to show cause of their violation.

A sanction imposed for violation of this rule is limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated.

Monetary sanctions are not awarded:

  1. against a represented party for a violation of not certifying that the claims, defenses, and other legal contentions are warranted by existing law, and
  2. on the Court’s initiative unless the Court issues its order to show cause before a voluntary dismissal or settlement of the claims made by or against the party to be sanctioned.

A sanction may include:

  1. directives of a non-monetary nature,
  2. an order to pay a penalty into court, or
  3. an order directing payment of reasonable attorneys’ fees and other expenses incurred as a direct result of the violation, to the movant, if imposed on motion and warranted for effective deterrence.

When imposing sanctions, the Court is required to describe the conduct constituting the violation and explain the basis for the sanction imposed.  The objective of Rule 9011 is to require an attorney to make reasonable inquiry before signing any pleading, paper, or motion.  When a Court finds that Rule 9011 has been violated, imposition of sanction becomes mandatory.  However, courts have discretion to determine what sanctions are appropriate.

Inside Attorney Certification and Sanctions