In Re Nguyen, 447 B.R. 268

Margolis is a sole practitioner in California, representing consumer debtors, many from Northern California's South Bay Vietnamese community; his wife aids as office manager and interpreter but is not an attorney.
Debtors Nguyen answered Margolis's advertisement for bankruptcy services; they signed incomplete February Schedules and later corrected them, which were not reflected in filed documents.
On March 2, 2009 Margolis filed a chapter 7 petition with unsigned/incomplete Bankruptcy Schedules and without reflecting the Debtors' corrections.
The chapter 7 Trustee uncovered undisclosed assets (a $24,000 bank account, a 2008 Mercedes, a condominium, and a storage unit with Debtors' business furniture) and alleged concealment and poor record-keeping in a complaint under §727(a)(2),(a)(3),(a)(4).
A trial was held January 20, 2010; Margolis testified with limited recollection, admitting that non-attorney staff prepared schedules and that he spent little time with Debtors.
Bankruptcy court denied the Debtors' discharge on February 4, 2010 and issued an OSC on February 8, 2010 seeking sanctions against Margolis for filing unsigned schedules and for gross negligence in supervising non-attorney staff; sanctions included fee disgorgement, a $7,500 monetary sanction, and a permanent injunctions/suspensions related to filing and client interviews.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Crayton's ABA Standards must be applied to sanctions.	Crayton requires ABA Standard criteria to guide sanctions.	Bankruptcy court may rely on inherent authority and local rules; strict ABA criteria need not be applied.	Not required to apply every ABA criterion; sanctions were still fair and reasonable.
Whether the Sanctions Order was fair and supported by the record.	Court correctly found recurring unprofessional conduct and protected the public.	Sanctions were overbroad or unsupported by evidence of recurring misconduct.	Sanctions were fair, supported by evidence, and within court's authority.
Whether the sanctions, including an injunction on filing and mandatory attorney conduct, were reasonable.	Inherent authority allows tailored sanctions to prevent future harm and ensure proper client interviews.	Sanctions impose undue burdens and extend beyond duties of a lawyer.	Sanctions were reasonable and tailored to address Margolis' misconduct.

In re Crayton, 192 B.R. 970 (9th Cir. BAP 1996) (ABA Standards inform reasonableness of attorney sanctions)
In re Brooks-Hamilton, 400 B.R. 238 (9th Cir. BAP 2009) (limits of requiring ABA Standards explicit address)
In re Lehtinen, 564 F.3d 1052 (9th Cir. 2009) (bankruptcy court may sanction attorneys under inherent powers and Local Rule 1001-2)
In re DeVille, 280 B.R. 483 (9th Cir. BAP 2002) (sanctions within court's inherent authority; sanctions may be coercive or compensatory)
In re Ruffalo, 390 U.S. 544 (1968) (due process requires notice and opportunity to respond in disciplinary context)
Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (inherent powers of federal courts to manage proceedings)
In re Lehtinen, 564 F.3d 1052 (9th Cir. 2009) (standards for abuse of discretion and sanctions in bankruptcy context)