Sheridan v. Michels

362 F.3d 96

• Court: Court of Appeals for the First Circuit
• Decided: March 30, 2004
• Docket: 02-9007
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 02-9007 Volume II 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 LYNCH, Circuit Judge (dissenting). With regret, I

dissent. The majority decides this case on an argument that

Sheridan never raised in the bankruptcy court, in the BAP, or on

appeal, and that Sheridan expressly refused to adopt when this

court raised it sua sponte and asked for his view. The majority

then decides that issue the wrong way. The result is to relegate

Sheridan to a new round of litigation in the courts below, more

than two years after the bankruptcy court suspended him from

practice. For Sheridan, this is a pyrrhic victory, and one that he

asked us not to give him.19

The principal opinion by Judge Cyr and the opinion by

Judge Selya concurring in the judgment agree on two points that I

believe are not only mistaken but also certain to have consequences

beyond the narrow realm of attorney discipline in bankruptcy cases:

(1) that this is an appropriate case for invoking the

LaGuardia/Weinstein doctrine to justify this court in addressing an

issue that Sheridan elected not to raise; and (2) that the

disciplinary proceeding against Sheridan was not a "core

proceeding" under § 157. I also dissent from the principal

opinion's conclusion that Sheridan neither consented nor waived his

objections to entry of a final order in the bankruptcy court.

19 It is true that, after the court's decision, the order suspending Sheridan will no longer be final. But the district court may simply reinstate the remedy chosen by the bankruptcy court.

-35- I.

The principal opinion reaches the "core proceeding"

question in this case only by holding that while Sheridan perhaps

forfeited the issue, he never consented to the entry of a final

judgment or otherwise waived the requirements of § 157. I cannot

join that conclusion: (i) it requires a restrictive interpretation

of § 157(c) that conflicts with the views of at least five circuits

and the leading commentator on bankruptcy law; and (ii) it

undermines this court's jurisprudence of waiver and consent to say,

on this record, that Sheridan ever disputed the finality of the

bankruptcy court's order.

A. Section 157 and Finality

A bankruptcy judge's power to enter final orders is not

limited to core proceedings. Rather, a bankruptcy court has the

authority to enter a dispositive order in any proceeding,

irrespective of core/non-core status, if the parties consent. See

§ 157(c)(2); see also In re S. Indus. Banking Corp., 809 F.2d 329,

331 (6th Cir. 1987) ("A related proceeding with the consent of all

parties functionally has the same effect as a core proceeding . .

. ."). This court held unequivocally in In re G.S.F. Corp., 938

F.2d 1467 (1st Cir. 1991), that such consent can be implied from a

party's litigation conduct. See id. at 1477 ("[I]mplied consent

will suffice."). We upheld appellate jurisdiction in that case

because the parties had, by their conduct before the bankruptcy

-36- court, "acquiesce[d]" in the treatment of the proceeding as core.

Id. If, by his conduct, Sheridan likewise indicated his knowing

acquiescence in the bankruptcy court's treatment of his case as

core, then the sanctions order was final, the BAP had appellate

jurisdiction, and the core/non-core status of the disciplinary

hearing is irrelevant.20

The principal opinion seems to interpret In re G.S.F. to

require some "affirmative" expression of consent before a party

will be held to have waived the procedures required by § 157(c).

Op. at 8-10. That decision does not announce such a restrictive

and formalistic rule; it did not require any particular conduct,

but merely examined the record for "indication[s] of acquiescence."

938 F.2d at 1477. Further, in concluding that "implied consent

20 In a non-bankruptcy case, this issue would normally be characterized as "waiver." In bankruptcy cases, the more common rubric is that of "implied consent." The difference in terminology is not important; notions of waiver and consent are closely intertwined in the context of a litigant's asserted right to an Article III tribunal, as the Supreme Court has made clear. See, e.g., Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 849 (1986) ("[T]he relevance of concepts of waiver to Article III challenges is demonstrated by our decision in Northern Pipeline, in which the absence of consent to an initial adjudication before a non-Article III tribunal was relied on as a significant factor in determining that Article III forbade such adjudication."). Indeed, several courts of appeals have used both terms to describe the inquiry under § 157(c)(2). See, e.g., In re Johnson, 960 F.2d 396, 403-04 (4th Cir. 1992); Home Ins. Co. v. Cooper & Cooper, Ltd., 889 F.2d 746, 749 (7th Cir. 1989); see also In re Nell, 71 B.R. 305, 310 n.4 (D. Utah 1987). The terms are used interchangeably in this opinion, as the substantive standard is the same: because Sheridan knew of his right to seek de novo review in the district court and chose not to do so, the sanctions order should have been deemed final and the entire core/non-core problem avoided.

-37- will suffice" under § 157(c)(2), this court cited cases like In re

Daniels-Head & Assocs., 819 F.2d 914 (9th Cir. 1987), In re S.

Indus. Banking Corp., supra, and In re Hatfield, 117 B.R. 387

(Bankr. C.D. Ill. 1990), each of which held that the absence of a

timely objection to the bankruptcy court's jurisdiction is enough

to establish consent. See 819 F.2d at 919; 809 F.2d at 331; 117

B.R. at 389 n.1.

The principal opinion contends that such cases must have

been wrongly decided in light of the 1987 advisory committee notes

to Fed. R. Bankr. P. 7008, which emphasize "express" consent. See

Op. at 8 n.2. That argument, however, is undercut by the Supreme

Court's recent decision in Roell v. Withrow, 123 S. Ct. 1696

(2003), in which the Court held that consent to proceedings before

a federal magistrate judge can be implied from a party's litigation

conduct. Id. at 1703. In Roell, as in this case, a federal rule

interpreting the underlying statute required advance, written

consent from both parties. Id. at 1701. As in this case, that

rule was not satisfied. Nevertheless, the Roell Court held that

under the terms of the statute itself, implied consent was all that

was required. Id. at 1703. The same logic applies under § 157(c),

which requires only "consent," not "express consent." Moreover,

Congress knew how to require express consent when it wanted that

result -- it did so in § 157 only a few paragraphs later. See 28

U.S.C. § 157(e) ("express consent" is required from all parties

-38- before the bankruptcy court may hold a jury trial). In light of

Roell and Congress's calculated choice of words in § 157, the

principal opinion's restrictive interpretation of the consent

requirement in § 157(c) is unjustified.

Under the view adopted by the principal opinion today, a

party's complete failure to object to core treatment is not

sufficient to show consent. That position, if adopted by this

court, would place this circuit directly in conflict with the views

of at least five of our sister circuits. See In re Tex. Gen.

Petroleum Corp., 52 F.3d 1330, 1337 (5th Cir. 1995) ("A party who

fails to object to a bankruptcy court's assumption of core

jurisdiction consents to that court's entry of final judgment.");

Abramowitz v. Palmer, 999 F.2d 1274, 1280 (8th Cir. 1993) (finding

implied consent where "[n]either party object[ed] to the bankruptcy

court's entering a final judgment"); In re Johnson, 960 F.2d 396,

403-04 (4th Cir. 1992) (finding implied consent because the parties

"failed to object to the bankruptcy court's determination" of the

matters in dispute); In re Daniels-Head, 819 F.2d at 919 (failure

to raise a timely objection to core treatment constitutes implied

consent); In re Men's Sportswear, Inc., 834 F.2d 1134, 1137-38 (2d

Cir. 1987) (party's failure to object to bankruptcy court's

exercise of core jurisdiction despite multiple opportunities to

lodge such an objection "can only be construed as implied

-39- consent").21 The leading treatise on bankruptcy law likewise

concludes that the failure to object to core treatment should be

enough to show consent. See 1 Collier on Bankruptcy § 3.02[6][b]

(rev. 15th ed. 2003) ("It is unstated, but probably implied in

section 157(b)(3), and it has been held, that failure to make

timely objection to the characterization of the proceeding as a

core proceeding will be deemed a consent to the jurisdiction of the

bankruptcy court to enter dispositive orders and judgments in like

manner as section 157(c)(2)."); id. § 3.03[4] ("The effect of

failure to interpose an objection [to core treatment] at the

pleading stage should be consent to the final order being entered

by the bankruptcy judge.").

B. Waiver in the Bankruptcy Court

If the principal opinion's restrictive view of consent

under § 157(c)(2) is wrong, it collapses. That is because under

the test adopted by other circuits and (in my view) endorsed by

this court itself in In re G.S.F., Sheridan waived any right he may

have had to de novo review in the district court.

Sheridan utterly failed even to identify the core/non-

core issue in the bankruptcy court, let alone raise a coherent

objection to the core status of the proceeding, despite multiple

opportunities to do so. Neither in his responsive pleadings nor in

21 But see Home Ins. Co., 889 F.2d at 749-50 (express consent required).

-40- his various motions to the bankruptcy court did Sheridan -- an

experienced bankruptcy attorney22 –- argue that the proceedings were

non-core, that the bankruptcy court could not enter a final

judgment against him, that he was entitled to de novo review of the

facts and the law in the district court, or anything else that

could be interpreted as a reference to § 157(c).

Nor did Sheridan identify this issue at the bench trial.

The bankruptcy court entered a pretrial scheduling order on January

16, 2001 that required the parties to identify all disputed issues

of law and applicable defenses. Sheridan, in response, raised

various legal objections, not one of which addressed the core/non-

core status of the proceeding or the bankruptcy court's power to

22 The bankruptcy court expressly found that Sheridan "is an experienced attorney who has practiced [bankruptcy law] for a significant period of time." 2001 WL 1757058, at *24. The court further found that in light of that extensive experience, Sheridan "was aware" of the applicable rules and practices in bankruptcy court. Id. Nevertheless, the principal opinion says that Sheridan's extensive experience as a bankruptcy attorney does not support the inference that he knowingly acquiesced in core treatment because "these disciplinary proceedings arose, at least in part, from Sheridan's numerous physical ailments and mental impairments." Op. at 15 n.7. That is a non-sequitur: whether Sheridan's misconduct was related to his alleged disabilities has nothing to do with whether Sheridan knew, based on his years of practicing bankruptcy law, that he was obliged to alert the bankruptcy judge if he objected to the treatment of his disciplinary proceeding as core. The principal opinion does not suggest that a disability actually prevented Sheridan from objecting to core treatment. In any event, the principal opinion's willingness to attribute Sheridan's professional misconduct to his disabilities is puzzling, given that (1) the bankruptcy court made no finding of any disability, and (2) the BAP held that Sheridan utterly failed to support his claim of disability. See 282 B.R. at 92 & n.15.

-41- enter a final judgment against him.23 Even during the bench trial,

Sheridan made no argument that the court was obliged to enter its

findings as "proposed findings of fact" under § 157(c)(1). On

October 12, 2001, the bankruptcy court entered a final opinion and

order suspending Sheridan from practice. Michels v. Sheridan, No.

00-1140-JMD, 2001 WL 1757058 (Bankr. D.N.H. Oct. 12, 2001).

The principal opinion explains all of this by saying that

Sheridan could not have raised the core/non-core issue prior to

judgment because he had no idea that the bankruptcy court intended

to enter a binding sanctions order. Op. at 13. That is simply not

so. Sheridan has never claimed, and could not claim, that he was

unaware that the bankruptcy court intended to sanction him

directly. The bankruptcy court's January 16, 2001 pretrial

scheduling order stated that the complaint against Sheridan had

been commenced under Administrative Order 2090-2 of the New

Hampshire bankruptcy courts. That order expressly allows the

bankruptcy court to issue binding orders sanctioning and disbarring

attorneys by deeming attorneys who practice before the bankruptcy

court to have consented to disciplinary jurisdiction.24 Sheridan

23 Sheridan's reply stated only that the complaint failed to allege violations of the applicable rules of ethics and that, in the alternative, his conduct should be excused because of his disabilities. 24 AO 2090-2 provides, in relevant part, that "[a]ny attorney admitted or permitted to practice before [the bankruptcy] court shall be deemed to have conferred disciplinary jurisdiction upon th[e] court for any alleged attorney misconduct arising during the

-42- was clearly on notice that the bankruptcy court intended to hold

such a proceeding, yet he did not dispute that it was a core

proceeding or that any resulting order would be final.25

Even in his multiple motions for reconsideration after

the bench trial, Sheridan failed to raise the core/non-core issue.

In his October 22, 2001 motion, Sheridan responded to the

bankruptcy judge's statement that bankruptcy courts have the

substantive power to discipline attorneys under the "inherent

power" doctrine of Ex parte Burr, 22 U.S. 529 (1824). See

Sheridan, 2001 WL 1757058, at *1. Because the principal opinion

relies heavily on Sheridan's response to conclude that he raised

and pressed the core/non-core argument, I quote it here:

First, Ex parte Burr, supra (U.S. 1824) concerns broad powers inherent in the exercise of the judicial power under Article III of the United States Constitution. However, although the United States Bankruptcy Court is a "unit of the [Federal] district court," it is well established that the powers of Bankruptcy judges are limited to those "conferred under" the United States Bankruptcy Code. 28 U.S.C. Section 151. As such the Bankruptcy court does not share all of the powers of the district court. Thus, in Northern Pipeline Co. vs. Marathon Pipeline Co., 458 U.S. 50 (1982) the United States Supreme Court held that it was

course of a case pending before th[e] court in which that attorney has participated in any way." 25 Sheridan argued in his opening brief that AO 2090-2 was not promulgated until February 2001, after the disciplinary complaint against him was filed. That is not true: the administrative order was adopted in October 2000, and Sheridan is fairly charged with knowledge of its contents. An amended version of AO 2090-2 became effective in February 2001, but the amendments did not affect any portion of the order relevant to Sheridan's case.

-43- unconstitutional for the Bankruptcy Courts to exercise the "essential attributes of 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. section 157(b)(1). It is axiomatic that since the bankruptcy court does not share in the "essential" powers of Article III judges, it follows that the bankruptcy court does not share in the "inherent authority" derived from the exercise of Article III judicial power.26

This was Sheridan's sole reference to "core proceedings" or § 157

in the bankruptcy court.

As the context makes clear, Sheridan was not objecting in

these paragraphs to the finality of the bankruptcy court's order

against him. Nor did the bankruptcy court understand him to be

making such an argument. Rather, Sheridan was contending only that

bankruptcy courts do not enjoy the "inherent power" described in Ex

parte Burr to discipline attorneys. This is simply an attack on

one of the bankruptcy court's asserted sources of disciplinary

authority. It is distinct from the contention that the principal

opinion attributes to Sheridan: namely, that the bankruptcy court,

while empowered to conduct disciplinary proceedings, was not

permitted to enter a final order against Sheridan under

§ 157(c)(1). Sheridan, an experienced bankruptcy lawyer, knows the

difference. Indeed, the principal opinion itself recognizes that

the question whether a bankruptcy court has the power to discipline

26 This passage is quoted exactly from Sheridan's October 22 motion; any mistakes or grammatical errors are his.

-44- attorneys is a question independent of whether it has the power to

enter a final order.27 Yet the principal opinion contends that by

raising the former argument, Sheridan somehow also raised the

latter.28 This is unfair to bankruptcy judges, who should not be

asked to read tea leaves to discern a litigant's argument.

27 For example, the principal opinion concedes that bankruptcy courts have substantive disciplinary authority, but it holds that the exercise of that power in this particular case was not a "core proceeding." See Op. at 28-29. Sheridan essentially argued the opposite: he challenged the substantive power of bankruptcy courts to discipline attorneys, but did not contest that the invocation of that power, if valid, would be a core proceeding. 28 The principal opinion emphasizes Sheridan's citation to Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982), which it describes as "the seminal case regarding the constitutional limitations which undergird the pivotal core/non- core distinction." Op. at 16 (emphasis in original). There is no doubt that the "core proceeding" concept reflects some of the Article III issues discussed in the plurality opinion in Northern Pipeline. But it is more than a stretch to say that Sheridan's reference to that case amounts to an argument that the proceeding below was non-core under § 157. Congress did not create the core/non-core distinction until after Northern Pipeline, so the citation alone hardly suffices to raise the issue. More fundamentally, Northern Pipeline discussed at least five ways in which the Bankruptcy Act of 1978 unconstitutionally vested the "essential attributes" of judicial power in Article I bankruptcy judges, only one of which was the fact that bankruptcy judges were empowered to issue final orders that were binding and enforceable. See 458 U.S. at 85-86. Significantly, another of the "essential attributes" cited by the Northern Pipeline Court was the power of bankruptcy judges to exercise "all ordinary powers of district courts," including issuing extraordinary writs and orders. Id. at 85. This -- and not the core/non-core distinction -- was the proposition for which Sheridan cited Northern Pipeline. Sheridan has consistently argued that under Northern Pipeline, bankruptcy courts lack the "inherent power" that district courts enjoy to discipline attorneys in the absence of statutory authorization. As noted above, this is logically distinct from the argument that bankruptcy courts can discipline attorneys but cannot enter final orders.

-45- All of this, in my view, requires the conclusion that the

bankruptcy court's order was final and appealable. Sheridan was

plainly aware of the core/non-core distinction. He simply elected

not to assert the issue, perhaps for strategic reasons. Perhaps he

gambled that the bankruptcy judge's factual findings would be

favorable to him, hoping to benefit from a more favorable standard

of review on appeal. Perhaps he preferred to retain the option of

appealing to the Bankruptcy Appellate Panel, as he ultimately did.

Whatever his reasons, Sheridan abandoned any right he may have had

to de novo review in the district court by choosing not to object

to core treatment. See In re G.S.F., 938 F.2d at 1477; accord In

re Tex. Gen. Petroleum Corp., 52 F.3d at 1337; Abramowitz, 999 F.2d

at 1280; In re Johnson, 960 F.2d at 403-04; In re Daniels-Head, 819

F.2d at 919; In re Men's Sportswear, 834 F.2d at 1137-38. By

refusing to infer consent from Sheridan's conduct, the majority

simply encourages future bankruptcy litigants to game the system by

waiting until an adverse judgment before objecting to core

treatment. "Inferring consent in these circumstances . . . checks

the risk of gamesmanship by depriving parties of the luxury of

waiting for the outcome before denying the [bankruptcy judge's]

authority. Judicial efficiency is served; the Article III right is

substantially honored." Roell, 123 S. Ct. at 1703.

C. Waiver on Appeal

Sheridan's conduct on appeal, both in the BAP and before

-46- this court, provides further assurance that he consented to core

treatment. First, Sheridan elected to bring his appeal in the

Bankruptcy Appellate Panel rather than in the district court,

despite the fact that the BAP has no authority to review proposed

findings of fact or conclusions of law under § 157(c)(1). The

principal opinion dismisses this point, stating that Sheridan's

appeal was proper because the bankruptcy judge ostensibly entered

a final order. Op. at 16 n.8. That is true, but it does not

negate the inference of consent: although Sheridan had an absolute

statutory right to bring his appeal in the district court

irrespective of the core/non-core issue, see 28 U.S.C. § 158(c)(1),

and although the BAP notified Sheridan of that right in writing,

Sheridan nevertheless pursued his appeal in the BAP. If, as the

principal opinion contends, Sheridan had believed he was entitled

to de novo review in the district court, the obvious choice would

have been to invoke his right to appeal to the district court and

then to demand de novo review. His decision to appeal to the BAP

instead is strong evidence of his consent to core treatment. Cf.

Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 849-50

(1986) (plaintiff's election to forgo review in federal court and

seek relief instead in an Article I proceeding "constituted an

effective waiver" of Article III objections because the party had

the option of Article III adjudication but "chose to avail himself

of the quicker and less expensive procedure Congress had provided

-47- him").

Sheridan never argued to the BAP that the proceeding in

the bankruptcy court was non-core. He merely repeated his argument

about "inherent power" under Ex parte Burr. The BAP opinion makes

clear that the finality of the bankruptcy court's order was never

in dispute. See, e.g., In re Disciplinary Proceedings, 282 B.R.

79, 85 (B.A.P. 1st Cir. 2002) (referring to "final bankruptcy court

orders" and indicating that the bankruptcy court's factual findings

would be reviewed for clear error).

The final and most telling indication of Sheridan's

consent to core treatment came before this court. Invited by the

court to file a supplemental brief on the core/non-core question,

Sheridan expressly declined to argue that the disciplinary hearing

was non-core. His supplemental brief acknowledged the core/non-

core issue and even cited § 157(c)(1), the provision barring

bankruptcy judges from entering final orders in non-core

proceedings absent the consent of the parties. Nevertheless,

Sheridan refused to assert that the disciplinary proceeding was

non-core –- he stated simply that he "takes no position" on whether

the bankruptcy court order was final, and he urged this court to

provide prompt and clear guidance on the merits of his appeal

because his case had already been pending too long.29

29 The principal opinion emphasizes that before Sheridan stated he "takes no position" on the core/non-core issue, he successfully briefed the argument that the proceeding below was non-core. Op.

-48- II.

The second reason I cannot join the judgment is the

majority's extension of the LaGuardia/Weinstein exception to our

rules of waiver and forfeiture. See Op. at 17-19. The LaGuardia

exception is inapplicable on these facts, and by invoking it here,

the majority approves a novel and extremely unwise expansion of

that doctrine.

Under LaGuardia and its progeny, the court of appeals may

review de novo an argument that is raised for the first time on

appeal only if: (1) the argument involves a purely legal question

of constitutional import that can be resolved with certitude on the

existing record; (2) addressing the argument will promote judicial

economy because the same issue will arise in nearly identical terms

in other cases; and (3) the argument, if meritorious, would almost

certainly entitle the appellant to prevail, so that failing to

address it would result in a miscarriage of justice. See United

States v. LaGuardia, 902 F.2d 1010, 1013 (1st Cir. 1990); see also

Castillo v. Matesanz, 348 F.3d 1, 12 (1st Cir. 2003); In re

Weinstein, 164 F.3d 677, 685 (1st Cir. 1999); Sammartano v. Palmas

del Mar Props., Inc., 161 F.3d 96, 98-99 (1st Cir. 1998). Until

at 16 n.8. Of course he did –- the whole point of the supplemental briefing was to address that argument, and Sheridan duly traced its contours. Yet despite demonstrating that he knew how to make the argument if he were so inclined, Sheridan expressly stated that he "takes no position" on the matter. The principal opinion attributes the argument to him anyway.

-49- today, LaGuardia provided a narrow exception to the raise-or-waive

rule, which this court ordinarily applies "with a near-religious

fervor." Nat'l Ass'n of Soc. Workers v. Harwood, 69 F.3d 622, 627

(1st Cir. 1995). Cases qualifying for the exception, we have said,

are "few and far between." Id.

The majority's resort to LaGuardia on facts like these is

unprecedented in multiple respects. First, this court has never

invoked the LaGuardia exception when the party on whose behalf the

court would intervene has not actually raised the issue on appeal.

Here, not only did Sheridan fail to raise the core/non-core issue

on appeal, but he also explicitly declined to advocate the position

when asked.

In addition, the usual predicate conditions for invoking

LaGuardia are absent here. The core/non-core distinction is not a

matter of constitutional law or import, no more than any other

question of statutory interpretation under the Bankruptcy Code.30

30 The principal opinion insists that the core/non-core question is a question of "constitutional import," presumably because Congress created the core/non-core distinction in response to a Supreme Court case predicated on Article III. Op. at 19 & n.10. That argument is misplaced for two reasons. First, the fact that a statutory scheme reflects considerations of constitutional law does not elevate the statute itself to constitutional stature. We do not say, for example, that service of process under Fed. R. Civ. P. 4 is a question of constitutional dimensions, even though that Rule was plainly written to comport with constitutional due process concerns. Indeed, if the core/non-core issue is a matter of constitutional law, so too is the rest of the Bankruptcy Code insofar as it reflects Congress's judgment about how best to implement its powers under the Bankruptcy Clause, U.S. Const. Art. I, § 8, cl. 4.

-50- Nor is the core/non-core determination "strictly a question of

law." LaGuardia, 902 F.2d at 1013. The principal opinion itself

recognizes that the core/non-core question in this case is not a

purely legal one -- the court does not hold that attorney

disciplinary proceedings are always non-core, but rather that the

proceeding was non-core "[i]n the particular circumstances of the

instant case." Op. at 5. And the core/non-core status of an

omnibus attorney disciplinary proceeding initiated by a bankruptcy

court is hardly a question that is "almost certain to be presented

in identical terms in other cases." LaGuardia, 902 F.2d at 1013.

Similarly, the merits of the core/non-core issue in this

case are neither "highly persuasive," Harwood, 69 F.3d at 628, nor

"so compelling as virtually to insure [the appellant's] success,"

Second, the core/non-core distinction is nothing like the problems of constitutional law or import that have previously served as a predicate for this court's resort to LaGuardia. See, e.g., Castillo v. Matesanz, 348 F.3d 1, 11-16 (1st Cir. 2003) (ineffective assistance of counsel under the Sixth Amendment); In re Weinstein, 164 F.3d 677, 684-85 (1st Cir. 1999) (takings claim under the Fifth Amendment); Nat'l Ass'n of Soc. Workers v. Harwood, 69 F.3d 622, 629 (1st Cir. 1995) (immunity of state legislature from First Amendment claim under federal common law, by analogy to the Speech and Debate Clause); United States v. Mercedes-Amparo, 980 F.3d 17, 19 (1st Cir. 1992) (due process concerns in prosecutorial breach of plea bargain agreement). In the few cases in which this court has invoked LaGuardia in the absence of a claim based directly in constitutional law, we have done so to vindicate a strong governmental interest of a kind not present here. See, e.g., Chestnut v. City of Lowell, 305 F.3d 18, 21 (1st Cir. 2002) (per curiam) (en banc) (relieving a city of punitive damages award under City of Newport); In re 604 Columbus Ave Realty Trust, 968 F.3d 1332, 1343-44 (1st Cir. 1992) (permitting the FDIC to raise special governmental defenses based on federal common law).

-51- Sammartano, 161 F.3d at 98-99; United States v. Slade, 980 F.2d 27,

31 (1st Cir. 1992). Sheridan has not advanced the core/non-core

argument at all, let alone advanced it in a "highly persuasive"

manner, and the principal opinion's reasoning is not "so

compelling" that the outcome is essentially predetermined. See

Correa v. Hosp. San Francisco, 69 F.3d 1184, 1196 (1st Cir. 1995)

(declining to invoke LaGuardia where the forfeited argument merely

advanced one of two possible constructions of a statute).

Lastly, this case does not meet the final criterion for

invoking LaGuardia: that if the issue were meritorious, failing to

reach it would constitute a "miscarriage of justice." 902 F.2d at

1013. It could hardly be a miscarriage of justice to reach the

merits of Sheridan's appeal given that both parties have urged us

to do so. If there is any miscarriage of justice in this case, it

is the disservice done to both sides in remanding this case for

another round of litigation below.

If LaGuardia can apply here, it can apply in any case in

which an appellate judge wishes to raise and decide an issue sua

sponte, no matter how compelling the evidence of waiver or

forfeiture and regardless of whether a party advocates that

position. I will not be surprised if this aspect of the court's

decision today is regretted by this court and the bar for years to

come.

-52- III.

Finally, I disagree with the majority's conclusion that

the proceeding against Sheridan was non-core. In my view, the only

interpretation of § 157 that is consistent with the purposes of the

federal bankruptcy laws and Congress's intent in the 1984

bankruptcy amendments is that the disciplinary proceeding against

Sheridan, which arose out of misconduct occurring in indisputably

core proceedings, constituted a core proceeding.

A. Interpretation of 28 U.S.C. § 157

1. Plain text of § 157

Whether the disciplinary proceeding against Sheridan was

a "core proceeding" under 28 U.S.C. § 157 is a matter of statutory

construction. The plain text of § 157 makes no explicit reference

to attorney discipline, sanctions, contempt, or anything similar,

just as it fails to describe other proceedings that courts have

recognized as core.31 Nor is the statutory term "core proceeding"

self-defining.

Nevertheless, the principal opinion purports to find

support in the text of § 157. It discusses the various categories

of core proceedings in § 157(b)(2), emphasizing that "each of the

enumerated matters relates to a function essential to the

31 See generally 1 Collier on Bankruptcy § 3.02[3] (rev. 15th ed. 2003) (listing examples of proceedings recognized as "core" even though they do not fall within the express terms of § 157(b)).

-53- administration of the bankruptcy case." Op. at 21. The proceeding

against Sheridan, the principal opinion contends, was different:

it did not arise in any single bankruptcy case, so there was no

relevant "case" to administer. Accordingly, it must have been non-

core. This is an expressio unius rationale: Congress provided a

list of core proceeding categories in § 157(b); that list does not

include omnibus attorney disciplinary hearings or similar

proceedings spanning multiple bankruptcy cases; therefore Congress

meant to exclude such proceedings from "core" treatment.

This is flawed logic. As the Supreme Court reiterated

last Term, the expressio unius canon applies only when the

statutory list in question "justif[ies] the inference that items

not mentioned were excluded by deliberate choice." Barnhart v.

Peabody Coal Co., 537 U.S. 149, 168 (2003). No such inference is

possible here. It is true that Congress, in drafting the

categories of core proceedings in § 157(b)(2), referred to "the

estate" (i.e., in the singular), but that choice of words merely

reflects the reality that the vast majority of bankruptcy

proceedings pertain to a single debtor. Nothing in the statute

says a proceeding is non-core if it involves more than one estate,

and Congress knew how to exclude matters from § 157(b) when it

wished to do so. See, e.g., § 157(b)(2)(O) (excluding personal

injury and wrongful death claims from core treatment). The

clincher is that Congress specifically provided that the list of

-54- examples in § 157(b)(2) is not exhaustive. See 28 U.S.C.

§ 157(b)(2) (core proceedings "are not limited to" the listed

categories); see also 1 Collier on Bankruptcy, supra, § 3.02[3]

("It should be emphasized at the outset that section 157(b)(2) is

not limiting . . . .").

This brings us back to where we started. The underlying

question on the merits of the core/non-core issue is this:

whether, in light of the structure and purpose of the core/non-core

distinction and the Bankruptcy Code as a whole, § 157(b)(2) should

be interpreted to embrace disciplinary proceedings like Sheridan's.

See In re Hart, 328 F.3d 45, 48 (1st Cir. 2003). The principal

opinion undertakes no such analysis.

2. Background to the 1984 Bankruptcy Amendments

In fact, there is every reason to believe that Congress

wanted and expected bankruptcy judges to enforce the professional

responsibilities of bankruptcy attorneys through final and binding

orders where the misconduct in question occurred in a core

bankruptcy proceeding or proceedings.32 In 1984, when Congress

32 Long before Northern Pipeline and Congress's 1984 enactment of § 157, the Supreme Court recognized that a court's power to regulate the conduct of the bar, including the power to suspend and disbar attorneys, is essential to the administration of justice and the protection of the public. See, e.g., Roadway Express, Inc. v. Piper, 447 U.S. 752, 764-67 (1980); Theard v. United States, 354 U.S. 278, 281 (1957); Ex parte Bradley, 74 U.S. 364, 374 (1868); Ex parte Garland, 71 U.S. (4 Wall.) 333, 378-79 (1867); Ex parte Burr, 22 U.S. (9 Wheat.) 529, 531 (1824); see also In re Snyder, 472 U.S. 634, 643-45 (1985) ("Courts have long recognized an inherent authority to suspend or disbar lawyers.").

-55- amended the Bankruptcy Code to create the core/non-core

distinction, the case law available to Congress provided no reason

to think that bankruptcy courts' status as Article I tribunals

would bar them from entering final disciplinary orders. In 1926,

the Supreme Court itself held in Goldsmith v. U.S. Bd. of Tax

Appeals, 270 U.S. 117 (1926), that the U.S. Board of Tax Appeals,

an Article I tribunal, possessed the authority not only to

promulgate ethical rules for admitting attorneys to practice, but

also to disbar attorneys who failed to meet those standards. See

id. at 121-22 (emphasizing, in holding that the Board possessed

this power, "the character of the work to be done by the board, the

quasi judicial nature of its duties, [and] the magnitude of the

interests to be affected by its decisions"). The Court explicitly

rejected the contention that such a tribunal cannot disbar or

discipline lawyers absent express statutory authority, observing

that the power of the Board to do so is "so necessary . . . and so

usual" that the statute creating it would be interpreted to include

that power. Id. at 122.

Furthermore, Congress knew that federal courts before

1984 had upheld the power of other Article I tribunals to issue

binding disciplinary orders against counsel appearing before them.

See, e.g., Kivitz v. SEC, 475 F.2d 956, 962 (D.C. Cir. 1973) (power

of SEC to disbar attorney for ethical misconduct); Herman v.

Dulles, 205 F.2d 715, 715-16 (D.C. Cir. 1953) (similar,

-56- International Claims Commission); Francis v. Virgin Islands, 11

F.2d 860, 864 (3d Cir. 1926) (upholding the contempt powers of the

U.S. District Court for the Virgin Islands); Fleming v. United

States, 279 F. 613, 616 (9th Cir. 1922) (similar, United States

Court for China). Consistent with this line of cases, some courts

had by 1984 already upheld the authority of bankruptcy courts to

discipline attorneys for unethical conduct in bankruptcy cases. As

early as 1979, for example, the Second Circuit described as

"nothing novel" the proposition that a debtor's counsel could be

sanctioned for breaching his ethical responsibilities to the

bankruptcy court. See In re Arlan's Dep't Stores, Inc., 615 F.2d

925, 943-44 (2d Cir. 1979).

Congress enacted the 1984 bankruptcy amendments against

this background. Nothing in the 1984 Act or its legislative

history suggests that Congress intended to deny bankruptcy judges

the authority to regulate the bankruptcy bar. On the contrary,

this court has held that Congress's purpose in the 1984 amendments

was to press the jurisdiction of the bankruptcy courts "to its

constitutional bounds" in the wake of Northern Pipeline. See In re

Arnold Print Works, Inc., 815 F.2d 165, 168 (1st Cir. 1987)

(Breyer, J.). The congressional sponsors of the 1984 amendments

described non-core proceedings as "Marathon-type" cases, referring

to the Northern Pipeline decision, and they understood that

category to be "very limited." Id. Accordingly, this court

-57- concluded that "Congress intended that 'core proceedings' would be

interpreted broadly, close to or congruent with constitutional

limits." Id.

3. Article III and attorney discipline

Congress had no reason to think that Article III is

offended when a bankruptcy court enters a binding order against a

bankruptcy attorney for professional misconduct in a core

bankruptcy proceeding. Even the principal opinion does not so

contend. Indeed, less than a year after its decision in Northern

Pipeline, the Supreme Court emphasized the limits of its holding:

"The Court's holding in that case establishes only that Congress

may not vest in a non-Article III court the power to adjudicate,

render final judgment, and issue binding orders in a traditional

contract action arising under state law, without consent of the

litigants, and subject only to ordinary appellate review." Thomas

v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 584 (1985)

(emphasis added).33

The proceeding at issue in Sheridan's case is

fundamentally different from a traditional common-law cause of

33 The Supreme Court endorsed this narrow reading of Northern Pipeline again the following year, repeatedly citing that case for the proposition that Congress's power to assign matters to non- Article III tribunals is constrained "where private, common law rights are at stake." Schor, 478 U.S. at 854; see also id. (noting that "private, common law rights were historically the types of matters subject to resolution by Article III courts," citing Northern Pipeline).

-58- action. The privilege to practice law, including the privilege to

practice before a federal tribunal, is a matter of public license.

See In re Snyder, 472 U.S. 634, 644 (1985). It is well-settled

that courts have the authority to revoke that license where

necessary to protect the public. See id.; In re Ruffalo, 390 U.S.

544, 550 (1968); Theard v. United States, 354 U.S. 278, 281 (1957);

Ex parte Wall, 107 U.S. 265, 288-89 (1882). Further, a

disciplinary proceeding is a matter between the court and the

attorney only; no right to a jury trial attaches. See Ex parte

Wall, 107 U.S. at 288. It is akin to the enforcement of a "public

right," and as then-Judge Breyer noted for this court in Arnold

Print Works, the Supreme Court in Northern Pipeline found nothing

unconstitutional in a bankruptcy judge issuing dispositive orders

in such cases. See 815 F.2d at 170.

4. Purposes of the Bankruptcy Code

Nor is there any reason to infer from the overarching

purposes of the Bankruptcy Code that Congress wanted to limit

bankruptcy judges' power to issue final and binding orders

disbarring, suspending, or otherwise disciplining attorneys who act

unethically in core proceedings. On the contrary, the need to

maintain attorney discipline and enforce the rules of professional

responsibility is, if anything, stronger in the bankruptcy context,

where considerations of speed and cost-effectiveness are paramount:

A sine qua non in restructuring the debtor-creditor relationship is the court's ability to police the

-59- fiduciaries . . . who are responsible for managing the debtor's estate in the best interest of creditors. The bankruptcy court must be able to assure itself and the creditors who rely on the process that court-approved managers of the debtor's estate are performing their work, conscientiously and cost-effectively.

In re Southmark Corp., 163 F.3d 925, 931 (5th Cir. 1999) (holding

that a professional malpractice claim by a Chapter 11 debtor

against a court-appointed accountant was a core proceeding).

Bankruptcy courts are charged with the rehabilitation of

financially distressed debtors and the reorganization or

liquidation of their assets, often under the press of time because

of the threat of financial loss. In re McLean Indus., 68 B.R. 690,

695 (Bankr. S.D.N.Y. 1986); see also United States v. Mourad, 289

F.3d 174, 179 (1st Cir. 2002) (observing that the power to regulate

attorney behavior is necessary "if the bankruptcy courts are to

carry out efficiently and effectively the duties assigned to them

by Congress" (quoting In re Volpert, 110 F.3d 494, 500 (7th Cir.

1997))). Involving the district court in such disciplinary matters

would "unduly burden the already complex and congested calendars of

the district courts, and undermine the reasons for the district

court's reference of Code cases to the bankruptcy courts." In re

McLean Indus., 68 B.R. at 696; see also In re Mem'l Estates, Inc.,

116 B.R. 108, 112 (N.D. Ill. 1990) (imposition of sanctions must be

a core proceeding because "any other interpretation would seriously

hamper the bankruptcy court in its administration of the estate and

-60- would provide additional methods of multiplying litigation for

those seeking to hinder and delay the proceedings in the bankruptcy

court").

Congress, moreover, must have been aware that problems of

attorney discipline are particularly acute in the consumer

bankruptcy area, see In re Bruzzese, 214 B.R. 444, 450-51 (Bankr.

E.D.N.Y. 1997), such as the Chapter 13 proceedings in which

Sheridan specialized. Consumer debtors, like those whom Sheridan

represented, rarely have the resources or sophistication to bring

tort claims for legal malpractice. Indeed, because of the high

volume of consumer bankruptcy filings and the speed at which

bankruptcy courts must process such petitions, many consumer

debtors "never discover that their attorneys have committed

malpractice." Id. at 450. Direct discipline by the bankruptcy

court may be the only feasible means in many cases of protecting

debtors and ensuring the ethical conduct of the consumer bankruptcy

bar in core proceedings. For this reason, "[b]ankruptcy judges are

expected by Congress, the public, the appointing courts of appeals,

and the leadership of the bar to maintain high standards of

performance by all lawyers appearing before them. This is 'part of

the job description.'" Id. at 450-51.

5. "Core comes from core"

I do not contend that Congress intended all attorney

disciplinary proceedings in the bankruptcy courts to be core

-61- proceedings, regardless of how they arise. There are situations in

which the justifications for permitting bankruptcy judges to issue

binding disciplinary orders are less compelling –- for example,

when an attorney acts unethically in a non-core proceeding in which

the parties have refused to consent to the entry of a final order

on the merits. In such cases, the bankruptcy court must recommend

findings of fact and conclusions of law to the district court in

any event; there is little reason to treat the disciplinary issues

alone as within the bankruptcy court's core powers.

As to unethical conduct in core proceedings, however,

Congress's purposes in the Bankruptcy Code are much better served

by a rule that permits bankruptcy judges to issue final and binding

disciplinary orders directly, without resort to the district court

but with normal rights to appeal. In fact, there is a widely

accepted rule in attorney discipline cases that "core comes from

core" -- that is, disciplinary hearings arising out of core

proceedings are themselves core proceedings. See, e.g., Memorial

Estates, 950 F.2d at 1370; In re O'Connor, 2001 WL 1335883, at *1

(N.D. Tex. 2001); In re French Bourekas, Inc., 183 B.R. 695, 696

(Bankr. S.D.N.Y. 1995) ("[T]he power to sanction parties for

conduct in a core matter is itself core."), aff'd, 195 B.R. 19

(S.D.N.Y. 1996); In re VIII S. Mich. Assocs., No. 94C 5593, 1994 WL

698489, at *5 (N.D. Ill. 1994); Fed. Sav. & Loan Ins. Corp. v.

Sutherlin, 109 B.R. 700, 703 (E.D. La. 1989); In re Usoskin, 61

-62- B.R. 869, 872 (Bankr. E.D.N.Y. 1986); In re Emergency Beacon Corp.,

52 B.R. 979, 987 (Bankr. S.D.N.Y. 1985), aff'd, 790 F.2d 285 (2d

Cir. 1986); see also In re Monarch Capital Corp., 173 B.R. 31, 35-

39 (D. Mass. 1994) (contempt proceeding against debtor's attorneys

was core because the contempt occurred in a core proceeding).

The "core comes from core" rule also makes practical

sense. One chief functional difference between a core proceeding

and a non-core proceeding is the deference accorded to the

bankruptcy court's findings of fact. Compare Fed. R. Bankr. P.

8013 (review of core proceedings), with Fed. R. Bankr. P. 9033(d)

(review of non-core proceedings); see generally In re Delta

Petroleum (P.R.), Ltd., 193 B.R. 99, 106 (D.P.R. 1996). In a core

proceeding, the bankruptcy judge is empowered to make factual

findings on the merits and to have those findings reviewed only for

clear error. No useful purpose is served by denying the bankruptcy

court the power to make equally authoritative findings of fact

about the conduct of the very attorneys who appear before it. "If

the bankruptcy courts are to administer 'the restructuring of

debtor-creditor relations, which is at the core of the federal

bankruptcy power,' they must also have the power to sanction

parties that interfere with such administration." In re Emergency

Beacon Corp., 52 B.R. at 987.

Under the "core comes from core" principle, the

proceeding against Sheridan was plainly a core proceeding. The

-63- overwhelming majority of the ethical violations of which Sheridan

was accused occurred in core proceedings. The bankruptcy court

found that Sheridan committed at least 83 ethical violations over

33 separate bankruptcy cases.34 It is clear from the record that

at least 80 of those 83 violations, accounting for fully 31 of the

33 cases, occurred in core proceedings (specifically, proceedings

to propose, file, modify, and confirm Chapter 13 plans).35 Further,

there has been no showing that the remaining three instances of

misconduct occurred in non-core proceedings; rather, it is simply

impossible to tell from the record whether those proceedings were

also core. As a result, the only impediment to applying the "core

comes from core" rule in this case is a set of 3 ethical violations

in proceedings whose core/non-core status is unknown. Even

assuming that those violations (which accounted for less than

1/20th of the charges against Sheridan) occurred in non-core

proceedings, there is no reason to think that they materially

34 In addition, the court determined that Sheridan committed five violations in the disciplinary proceeding itself, bringing the total to 88 violations in 34 cases. 35 The vast majority of Sheridan's infractions involved failing to file certificates of service for his clients' Chapter 13 plans (17 times in 16 cases); failing to file documents or motions related to his clients' Chapter 13 petitions in a timely manner (39 times in 28 cases); and failing to appear or appearing late at court hearings (8 occasions) and § 341 meetings (3 occasions) related to Chapter 13 petitions. Matters concerning the confirmation of a debtor's plan for reorganization, including Chapter 13 plans, are core proceedings. See 28 U.S.C. § 157(b)(2)(L).

-64- affected the bankruptcy court's choice of sanction. Cf. Sheridan,

2001 WL 1757058, at *23 (declaring that the evidence at trial

"clearly establishes" that Sheridan is not professionally

competent).

6. Summary

The court's constrained reading of § 157 contradicts

Congress's intent in the 1984 amendments, which was not to shrink

the powers of the bankruptcy courts but to extend them to their

jurisdictional limits in the wake of Northern Pipeline. In light

of the open-ended statutory text of § 157; the clear congressional

intent that courts should interpret the term "core proceeding"

broadly; the binding precedent in our own circuit commanding that

we do so; the absence of relevant constitutional constraints; the

legitimate functional need for bankruptcy courts to have "core"

jurisdiction over attorney misconduct arising in core proceedings;

and the broadly accepted rule that "core comes from core," I think

we would be obliged to hold, were the issue properly presented,

that the disciplinary proceeding against Sheridan was a "core

proceeding" under § 157.

B. The Principal Opinion's Four Distinguishing Factors

The principal opinion reserves the question of whether

attorney disciplinary proceedings may ever enjoy core status,

holding instead that Sheridan's case is distinguishable on four

grounds: (1) the disciplinary proceeding against Sheridan did not

-65- take place in the context of an ongoing bankruptcy case, but rather

was an "omnibus" proceeding spanning multiple cases; (2) the rule

of decision in Sheridan's disciplinary proceeding came from state-

law ethics rules, rather than federal law; (3) any potential effect

on a closed bankruptcy case is remote and speculative; and (4) the

bankruptcy court's disciplinary order was "extreme" relative to

Sheridan's misconduct. See Op. at 31-32. Not one of these grounds

is valid basis for distinguishing this case.

1. Omnibus vs. individual disciplinary proceedings

The principal opinion first argues that Sheridan's case

merits different treatment because it was an "omnibus" disciplinary

investigation -- that is, because the bankruptcy court consolidated

the ethical issues arising in multiple, independent bankruptcy

cases into a single disciplinary hearing.

This objection is without merit. Nothing in § 157

restricts core proceedings to proceedings that concern a single

bankruptcy case, and the principal opinion cites no authority for

its suggestion that § 157(b) should be interpreted so narrowly.

Compare Arnold Print Works, 815 F.2d at 168. There is no

functional reason to discourage bankruptcy courts from combining

disciplinary issues spanning multiple bankruptcy cases into a

single proceeding for expeditious administration. Normally this

court encourages and respects the efforts of lower courts to manage

their dockets efficiently. In re Atlantic Pipe Corp., 304 F.3d

-66- 135, 143-45 (1st Cir. 2002); A.M. Capen's Co., Inc. v. Am. Trading

& Prod. Corp., 202 F.3d 469, 472 n.4 (1st Cir. 2000); Rosario-Diaz

v. Gonzalez, 140 F.3d 312, 315 (1st Cir. 1998). Moreover, attorney

discipline in the federal courts outside of the bankruptcy context

is frequently imposed in "omnibus" proceedings. See, e.g., United

States v. Johnson, 327 F.3d 554, 558, 561-62 (7th Cir. 2003); In re

Smith, 76 F.3d 335, 336 (10th Cir. 1996) (per curiam). Surely

Congress would not have wanted the bankruptcy judge to hold 30

separate disciplinary hearings before entering a binding sanctions

order against Sheridan.

The case law confirms that "omnibus" disciplinary

hearings in the bankruptcy courts are generally treated as core

proceedings. For example, the Fifth Circuit in 1999 affirmed a

four-year suspension imposed by a bankruptcy court in a proceeding

that involved evidence of misconduct in three separate bankruptcy

cases. See In re Dragoo, 219 B.R. 460, 465-68 (Bankr. N.D. Tex.

1998), aff'd, 186 F.3d 614 (5th Cir. 1999). The court of appeals

did not take issue with the bankruptcy court's express entry of a

final order under Fed. R. Bankr. P. 7052.36 See 219 B.R. at 468

n.2. See also In re Melendez, 235 B.R. 173, 181-82, 201-04 (Bankr.

D. Mass. 1999) (imposing sanctions in an omnibus disciplinary

36 Bankruptcy Rule 7052 makes Fed. R. Civ. P. 52 applicable to bankruptcy proceedings. An order entered under Rule 7052 is a final judgment. See Fed. R. Civ. P. 52(a); see also In re Werthen, 329 F.3d 269, 272 (1st Cir. 2003) (findings of fact under Bankruptcy Rule 7052 are reviewed for clear error).

-67- hearing initiated sua sponte by the bankruptcy court against

several debtors' attorneys for inadequate representation of their

respective clients, and expressly entering its findings under

Bankruptcy Rule 7052); In re Nesom, 76 B.R. 101, 102 & n.1 (Bankr.

N.D. Tex. 1987) (suspending an attorney for misconduct in two

bankruptcy cases after a sua sponte disciplinary hearing by the

court, and expressly terming the proceeding core).

The principal opinion's objection to consolidated

disciplinary proceedings also makes little sense in light of the

rules of evidence. By the principal opinion's reasoning, the

bankruptcy court in Sheridan's case could simply have framed its

hearing as an investigation into Sheridan's misconduct in a single

bankruptcy case, then admitted evidence of Sheridan's misconduct in

other cases under Fed. R. Evid. 404(b) and entered a final order on

that basis. See In re Ludwick, 185 B.R. 238, 242-47 (Bankr. W.D.

Mich. 1995) (en banc) (following this approach in suspending a

bankruptcy attorney from practice for two years); see also id. at

239 (determining that the hearing was a core proceeding). It

elevates form over substance to hold that the functionally

equivalent approach selected by the bankruptcy court in this case

rendered the proceeding non-core.37

37 For similar reasons, there is no justification for the principal opinion's suggestion that the power of a bankruptcy judge to enter binding disciplinary orders should depend on whether the bankruptcy judge personally witnesses the attorney's misconduct.

-68- 2. Source of law

The principal opinion next argues that the proceeding

against Sheridan should be characterized as non-core because the

underlying substantive ethics rules "derive . . . from state law."

Op. at 24-25. That is flatly wrong. The rules of attorney conduct

in federal court are federal law, not state law. The Supreme Court

so held in In re Snyder, in which the court of appeals had asserted

that an attorney's ethical obligations in federal court are defined

by state law. The Supreme Court disagreed: "The state code of

professional responsibility does not by its own terms apply to

sanctions in the federal courts. Federal courts admit and suspend

attorneys as an exercise of their inherent power; the standards

imposed are a matter of federal law." 472 U.S. at 645 n.6

(emphasis added); see also In re Larry's Apartment, L.L.C., 249

F.3d 832, 837-38 (9th Cir. 2001) (federal law, not state law,

governs the imposition of sanctions in federal bankruptcy cases).

This case did not involve a "state law claim that could exist

outside of bankruptcy." In re ACI-HDT Supply Co., 205 B.R. 231,

236 (B.A.P. 9th Cir. 1997). Rather, it involved a federal

bankruptcy judge's enforcement of federal standards of conduct

against an attorney who practiced in the federal bankruptcy courts.

In any event, the focus on the source of the applicable

law is beside the point. As this court held in Arnold Print Works,

"[i]t is the nature of the proceeding –- its relation to the basic

-69- function of the bankruptcy court –- not the state or federal basis

for the claim, that makes the difference here." 815 F.2d at 169

(emphasis added).

3. Closed cases

The principal opinion also attempts to distinguish the

proceeding against Sheridan on the grounds that much of the charged

misconduct occurred in now-closed bankruptcy cases,38 so that any

remedy ordered by the bankruptcy court is unlikely to concern the

administration of those clients' estates. Therefore, the principal

opinion argues, the proceeding cannot be core because it neither

"concern[s] the administration of [an] estate," § 157(b)(2)(A), nor

"affect[s] the liquidation of the assets of [an] estate,"

§ 157(b)(2)(O).

This, too, is unpersuasive. The bankruptcy court's

imposition of sanctions on Sheridan did in fact "concern[] the

administration of the estate" in each of the underlying bankruptcy

cases within the meaning of § 157(b)(2)(A). That section

conspicuously does not require that the proceeding in question

contemporaneously affect the ongoing administration of the estate;

38 Neither the principal opinion nor the concurring opinion acknowledges that several of the underlying bankruptcy cases were still pending at the time the disciplinary proceeding against Sheridan was instituted in October 2000. Indeed, several of the instances of misconduct proven during the bench trial occurred as late as November 2000, after the disciplinary proceedings had begun. At least in these cases, the disciplinary action against Sheridan was literally a "matter[] concerning the administration of the estate." § 157(b)(2)(A).

-70- the matter must simply "concern[]" the administration of the

estate. Compare § 157(b)(2)(O) (core proceedings include "other

proceedings affecting . . . the debtor-creditor . . . relationship"

(emphasis added)). And the imposition of sanctions against the

debtor's attorney necessarily "concern[s]" the administration of

the debtor's estate because, in a Chapter 13 case, the debtor's

attorney is paid with funds from the estate in an amount "based on

a consideration of the benefit . . . of [the attorney's] services

to the debtor." 11 U.S.C. § 330(a)(4)(B); see also id.

§ 503(b)(2) (authorizing payments to attorneys under § 330(a) as

"administrative expenses" of the estate); cf. Delta Petroleum, 193

B.R. at 106 (disputes over the appointment and compensation of

attorneys are core proceedings because they concern the

administration of the estate).

The majority's rule would require a bankruptcy court even

in a single core proceeding to interrupt its adjudication of the

debtor's petition to decide, then and there, an attorney

disciplinary matter. It would preclude the court, on penalty of

converting the proceeding from core to non-core, from waiting to

deal with the attorney until after it had dealt with debtor's and

creditors' arguments. That priority is backwards.

Moreover, even in the majority's terms, the order

sanctioning Sheridan "concern[ed]" the administration of the

underlying estates because it provided a clear basis for re-opening

-71- those cases, which the bankruptcy court may do whenever it finds

"cause." See 11 U.S.C. § 350(b) ("A case may be reopened . . . to

administer assets, to accord relief to the debtor, or for other

cause."). The principal opinion characterizes the possibility of

reopening the underlying cases as "remote and overly speculative."

Op. at 31. But at least one bankruptcy court has reopened a case

"for cause" due to evidence of ineffective representation by the

debtor's counsel. See Bruzzese, 214 B.R. at 449-50. Moreover,

there is no warrant in § 157(b)(2) for insisting on proof that a

proceeding will alter the administration of the estate; the statute

requires only that the proceeding "concern[]" its administration.

The narrower reading is contrary to this court's conclusion in

Arnold Print Works that Congress intended the term "core

proceeding" to be interpreted expansively.

Lastly, there is no independent problem with imposing

sanctions on an attorney for misconduct that occurred in a since-

closed case. Disciplinary proceedings against attorneys do not

depend on the continued pendency of the underlying action and can

be imposed long after a judgment on the merits. See Chambers v.

NASCO, Inc., 501 U.S. 32, 56 (1991); Cooter & Gell v. Hartmarx

Corp., 496 U.S. 384, 396 (1990). This has been the rule in

bankruptcy cases as well. See In re Hasan, 287 B.R. 308, 311-12

(Bankr. D. Conn. 2002) (collecting cases); see also In re Rambo,

209 B.R. 527, 528-29 (B.A.P. 10th Cir. 1997) (dismissal of

-72- underlying Chapter 13 case did not affect BAP's jurisdiction to

decide appeal of sanctions order); In re Balboa Improvements, Ltd.,

99 B.R. 966 (B.A.P. 9th Cir. 1989) (similar).

4. "Extreme" nature of the sanction

Finally, the principal opinion cites the "extreme" nature

of the sanction imposed on Sheridan as a justification for holding

that the proceeding against him was not core. Op. at 31-32. This

conflates the core/non-core question with the merits of Sheridan's

appeal. Whether the bankruptcy court's chosen sanction was

"extreme" has nothing to do with whether it had the statutory

authority to enter a binding order embodying that sanction.

Suspensions and disbarments are severe sanctions that merit close

review. But that review should have been done here.

IV.

For the foregoing reasons, I respectfully dissent.

-73-