Findley v. State Bar of California (In re Findley) (07-1187)

Attorney discipline cost awards are compensatory in nature and thus not excepted from discharge.

John Findley III is admitted to practice law in California. The State Bar of California (State Bar) prosecuted Findley for violations of the Rules of Professional Conduct based on a complaint made by his client. The State Bar Court Review Dept. held that Findley should be suspended from practice for one year and placed on probation for two. Before the Review Dept. could act on the recommendation, Findley filed for Chapter 7 bankruptcy. Meanwhile, the State Bar issued a Certificate of Costs ordering Findley to pay the costs of the disciplinary action. Findley motioned to have his bankruptcy discharge excuse payment owed to the State Bar. The State Bar moved to have the debt excepted from discharge. The court concluded that Business and Professions Code Section 6068.10(e) amended the rule in Taggart v. State Bar. Accordingly, the debt was not discharged. Reversed. The Taggart decision established that attorney discipline cost awards are compensatory in nature, and thus not excepted from discharge under 11 U.S.C. Section 523(a)(7) as penalties that are not compensation for actual pecuniary loss. The 2003 amendment of Section 6068.10 designated attorney discipline cost awards as "penalties." Here, the court construed the 2003 amendment as superseding Taggart. This was incorrect due to recent case law. The court should have honored Taggart "until such time as the Ninth Circuit decides that 'Taggart' lacks vitality." Thus, the judgment is reversed and Findley's discipline cost should have been discharged.

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Reference Info:Decision | Federal, 9th Circuit, California | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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