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WDVA: Bankruptcy firm's revoked practice privileges affirmed.

Byline: Rebecca M. Lightle

After an initial stay pending appeal, the district court reinstated the revocation of privileges for UpRight Law LLC and related entities to practice before the bankruptcy court. Revocation was based on the defendants' unethical business practices that preyed on bankruptcy filers, and the district court found no justification to halt the revocation order.

Background

In February 2018, the bankruptcy court revoked the privileges of the Petitioners in this case two individuals and two related business entities to practice before the court for five years. The Petitioners appealed to this court and moved to stay the privilege revocation pending appeal.

Authority to revoke privileges

Contrary to the Petitioners' arguments, the privilege revocation is not an injunction. It does not require the Petitioners to act in any particular way. Instead, it revokes the Petitioners' practice privileges in this district. The bankruptcy court has the inherent authority to regulate who may practice before it, but this authority does not equate to enjoining itself a nonsensical proposition.

The bankruptcy court's authority to regulate and discipline attorneys who appear before it extends to nonmembers of the bar who engage in unauthorized activities affecting the court, and also to law firms that oversee such conduct.

Likelihood of success

The record belies any suggestion that due process was not satisfied when the bankruptcy court revoked the Petitioners' appearance privileges. The revocation followed a four-day trial and extensive post-trial briefing by the parties. And the evidence at trial led the bankruptcy court to conclude that the Petitioners engaged in unethical sales tactics to coerce potential clients into retaining them, including preying on clients' religious beliefs and ignoring spousal input. The Petitioners' argument also ignores their litigation misconduct that gave rise to the revocation trial.

Thus, this court cannot conclude that the privilege revocation was unfounded. Given the available facts, it is not apparent that the Petitioners have any likelihood of success on the merits.

No irreparable harm

The Petitioners claim two distinct irreparable harms: (1) they must refund and forego attorneys' fees from existing clients; and (2) they will suffer incalculable loss of business due to reputational harm. Neither meets the standard.

While the Petitioners allege that they will be forced to repay up to $450,000 in fees, there is no suggestion that their business will collapse because of repayment associated with this district. Instead, they will merely lose out on business during the pendency of the privilege revocation. That is not irreparable harm.

As to reputation, if this court ultimately affirms the bankruptcy court, any reputation harm is an injury of the Petitioners' own making and cannot justify a finding of irreparable harm. If the court reverses the bankruptcy court, then any reputation harm will be cured.

The Petitioners disingenuously urge this court to follow what it claims was its ruling in their separate, but related, proceeding regarding privilege revocation. Contrary to their characterization, the court did not hold that monetary harm and temporary suspension from filing cases constituted irreparable injury. Rather, the court recognized that while the company "is likely to suffer some irreparable harm," that factor did not weigh heavily in the Petitioners' favor.

Motion to stay denied.

Allen v. Fitzgerald, Case No. 7:18cv134, Aug. 1, 2018. WDVA at Roanoke (Urbanski). VLW No. 018-3-334, 16 pp.

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Title Annotation:US Western District Court of Virginia, UpRight Law LLC
Author:Lightle, Rebecca M.
Publication:Virginia Lawyers Weekly
Date:Aug 17, 2018
Words:555
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