Lawyer wins sanctions appeal, urges colleagues to fight too

Score a big win for Las Vegas attorney Scott Chapman. It took him five years, but he won his battle to vacate a scathing sanction he and his former law firm received in 2006 from U.S. Bankruptcy Judge Bruce Markell.

The 9th U.S. Circuit Court of Appeals memo overturned Markell with harsh words for the judge, who has been a frequent critic of attorneys practicing in his courtroom.

This marks the third recent reversal of sanctions by Markell.

Attorney Neil Beller also appealed his sanction, and it was overturned by U.S. District Judge Clive Jones.

Jones also overturned Markell’s sanction of attorney Keith Galliher in July, a third strike, so to speak. (Then-federal Judge Brian Sandoval upheld Markell but was reversed by the appeals court.)

Chapman estimated it cost his firm $100,000 in wasted time to win the appeal. But he said it was worth it and encouraged other lawyers to appeal unwarranted sanctions.

“I believe my reputation is valuable, that my word is my bond and that false statements are lies. We wanted to clear my name.”

The case involved a bankruptcy in which the sole asset was a Porsche. Markell was brutal, saying the firm and Chapman “who had no background or training in Chapter 11, agreed to represent a client who had no business being in bankruptcy.”

The appellate court found some of Chapman’s actions were “negligent.” But the negligence didn’t rise to the level of bad faith. They didn’t deserve the sanctions Markell ordered, including banning Chapman and his entire law firm — at that time the firm of Harris, Merritt & Chapman — from practicing in bankruptcy court without filing a statement that they had taken eight hours of continuing legal education in bankruptcy and jumped through other hoops.

Markell’s finding of bad faith was based on “several clearly erroneous factual findings and unsubstantiated interpretations of Chapman’s action,” the appellate memo stated.

Chapman shouldn’t have filed a bankruptcy when only one asset was involved. Markell said he did it knowingly; the appeal judges said that wasn’t the case.

Markell also “skewed other facts” against Chapman and abused his discretion in imposing the sanctions and trying to punish the attorney, the memo stated.

But there may have been a reason. The appellate memo noted Markell may have written his own harshly worded opinion in response to the law firm’s “intemperate brief, written in anger.”

Chapman said bankruptcy court was “a much more collegial place” before Markell came on the bench. Markell was a bankruptcy attorney for 10 years before moving into the academic world. He then was appointed judge in 2004.

The attorney chastised me for writing several columns praising Markell for raising the bar by sanctioning attorneys he deemed inexperienced or unethical. I saw that as protecting the public, my only reason for caring about fussing and feuding between lawyers and judges with vocabularies big enough to match their egos.

Columns comparing Markell to “a modern-day Robin Hood does not serve the image of the law, especially when such a characterization is not accurate,” Chapman wrote.

He suggested Las Vegas would be better served “if you did not paint attorneys as cowering buffoons and judges with a paddle awaiting a misstep.”

Nancy Rapoport, a former bankruptcy attorney and now a professor at the Boyd Law School, gave her opinion that in all three cases when Markell was overturned, the bankruptcy judge was right and the higher court judges were wrong because “they don’t understand bankruptcy law.”

Rapoport believes district judges “may have a hard time believing how awful some lawyers appearing in bankruptcy courts can be.”

We’ll see whether Markell turns reticent to sanction attorneys since the reversals.

Wouldn’t count on it.

Jane Ann Morrison’s column appears Monday, Thursday and Saturday. E-mail her at Jane@reviewjournal.com or call (702) 383-0275. She also blogs at lvrj.com/blogs/morrison.

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