United States: The Reach Of Bankruptcy Courts

In the beginning of the opinion he wrote for Stern v. Marshall, Chief Justice Roberts referenced Charles Dickens' Bleak House, in which Dickens gives a grim description of a lawsuit litigated in a foggy courtroom.¹ In resolving the tumultuous Stern dispute, the Supreme Court created a new fogginess in bankruptcy courtrooms as to the exact contours and scope of a bankruptcy courts' authority. As our readers are aware, the Supreme Court and the various Circuit Courts have issued a number of opinions in the wake of Stern to clarify the exact parameters of a bankruptcy court powers and the recent opinion by the Fourth Circuit in In re Lewis addressing the specific power of a bankruptcy court to discipline attorneys further helps clear the proverbial fog surrounding the bankruptcy courts' powers.²

In In re Lewis, Mr. Lewis was the attorney to a debtor in bankruptcy.³ The Bankruptcy Administrator observed several discrepancies in Mr. Lewis' representation, prompting the Bankruptcy Court to sanction and temporarily suspend Mr. Lewis from further proceedings.⁴ On appeal, Mr. Lewis contended that the court did not have the authority, as an Article I tribunal, to suspend his bar privileges or to sanction him.⁵ Relying on Stern, he argued that the court did not possess the authority to rule on disciplinary matters against him.⁶ The Fourth Circuit disagreed.⁷

The Court of Appeals explained that the Bankruptcy Court appropriately exercised its authority to sanction Lewis for his misconduct.⁸ Bankruptcy courts have inherent power, "'incidental to all courts' to 'discipline attorneys who appear before it,'"⁹ including "issu[ing] any order, process, or judgment that is necessary or appropriate to carry out the provisions of [Title 11] or to prevent an abuse of power"¹⁰ and suspending or disbarring attorneys from their court.¹¹ So, despite any Constitutional restrictions prescribed upon Article I courts, all courts may admonish and discipline those who appear before them.

Footnotes

^{1Stern v. Marshall, 131 S. Ct. 2594 (2011)}

^{2 In re Lewis, 2015 WL 3561277 (E.D. N.C. June 9, 2015).}

^{3 In re Lewis, 2015 WL 3561277 at *1.}

^{4 Id.}

^{5 Id. at *2.}

^{6 Id.}

^{7 Id.}

^{8 Id.}

^{9 Id. (quoting Chambers v. NASCO, Inc., 501 US 32, 43 (1991).}

^{10 Id. (quoting 11 USC § 105(a)).}

^{11 Id. (citing In re Snyder, 472 U.S. 634, 643 (1985)).}

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