Lenore Albert-Sheridan v. State Bar of California, 960 F.3d 1188

Lenore Albert‑Sheridan, a California attorney, was ordered by an Orange County Superior Court to pay discovery sanctions totaling $5,738 to the plaintiff after sanctions for misuse of discovery; those sanctions remain unpaid.
The State Bar investigated Albert for failing to cooperate and for disobeying the discovery orders; a hearing officer found misconduct and recommended a 30‑day suspension conditioned on payment of the discovery sanctions and payment of disciplinary costs.
The State Bar assessed $18,714 in disciplinary‑proceeding costs under Cal. Bus. & Prof. Code § 6086.10; the California Supreme Court imposed suspension continued until the sanctions (and interest) and disciplinary costs were paid.
Albert filed Chapter 13 (converted to Chapter 7) bankruptcy and sued to discharge the two obligations and to enjoin the Bar from conditioning reinstatement on payment of any dischargeable debt.
The bankruptcy court and the BAP held both debts non‑dischargeable; the Ninth Circuit panel affirmed as to the disciplinary costs (following In re Findley) but reversed as to the discovery sanctions, holding those dischargeable under 11 U.S.C. § 523(a)(7).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are State Bar disciplinary costs under Cal. Bus. & Prof. Code § 6086.10 dischargeable?	Albert: costs track time and are compensatory, so dischargeable	State Bar: costs are punitive/rehabilitative and benefit the Bar; Findley controls	Non‑dischargeable — court follows In re Findley; affirmed
Are discovery sanctions under Cal. Civ. Proc. Code § 2023.030 dischargeable under § 523(a)(7)?	Albert: sanctions compensate a private party for expenses and are payable to that party, so dischargeable	BAP/State Bar: purpose (as conditioned by state discipline order) makes them nondischargeable (relying on Kelly)	Dischargeable — sanctions are payable to a private party and are compensatory; reversed
Did the State Bar violate 11 U.S.C. § 525(a) by conditioning reinstatement on unpaid (allegedly dischargeable) debts?	Albert: conditioning reinstatement on unpaid discovery sanctions violates § 525(a)	State Bar: may condition reinstatement on nondischargeable disciplinary debts	§ 525(a) claim fails because disciplinary costs are nondischargeable; dismissal affirmed

In re Findley, 593 F.3d 1048 (9th Cir. 2010) (held State Bar disciplinary costs under § 6086.10 are nondischargeable under § 523(a)(7))
Kelly v. Robinson, 479 U.S. 36 (1986) (criminal restitution held nondischargeable; Court emphasized protecting state criminal proceedings)
In re Scheer, 819 F.3d 1206 (9th Cir. 2016) (criticized broad, atextual application of Kelly and limited its reach)
In re Silverman, 616 F.3d 1001 (9th Cir. 2010) (declined to extend Kelly to other bankruptcy provisions)
Norwest Bank Worthington v. Ahlers, 485 U.S. 197 (1988) (bankruptcy courts’ equitable powers are bounded by the Code)
Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973 (2017) (courts must not alter the balance established by statute)