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Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 4, 2010 Decided March 26, 2010 

No. 09-7045 

JOHN DOUGLAS BURNS, 

APPELLANT

V. 

GEORGE BASILIKAS TRUST, 

APPELLEE

Consolidated with 09-7078 

Appeals from the United States District Court 

for the District of Columbia 

(No. 1:07-bk-00235) 

John D. Burns, appearing pro se, argued the cause and 

filed the briefs for appellant. 

Before: ROGERS and TATEL, Circuit Judges, and 

WILLIAMS, Senior Circuit Judge. 

Opinion for the Court filed by Senior Circuit Judge

WILLIAMS. 

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WILLIAMS, Senior Circuit Judge: The bankruptcy court 

imposed sanctions on John Burns, counsel for a debtor, for 

violation of Rule 9011(b)(2) of the Federal Rules of 

Bankruptcy Procedure, and the district court affirmed. Burns 

appeals. Because the sanctions were based on an erroneous 

reading of law, we reverse. 

Filing a voluntary Chapter 13 petition, Frances Haylock 

invoked 11 U.S.C. § 109(h)(3) as the basis for exemption 

from § 109(h)(1)’s credit counseling requirement. Section 

109(h)(1) provides that: 

Subject to paragraphs (2) and (3) . . . an individual may 

not be a debtor under this title unless such individual has, 

during the 180-day period preceding the date of filing of 

the petition by such individual, received from an 

approved nonprofit budget and credit counseling agency 

described in section 111(a) . . . [a] briefing (including a 

briefing conducted by telephone or on the Internet) that 

outlined the opportunities for available credit counseling 

and assisted such individual in performing a related 

budget analysis. 

Id.

1

 Section 109(h)(3) allows a debtor to delay receiving 

counseling until after the petition so long as “the debtor 

submits to the court a certification” that: 

 

 1 11 U.S.C. § 111 requires the U.S. trustee (or bankruptcy 

administrator) to maintain a publicly available list of agencies 

providing one or more of the services described in § 109(h) 

“currently approved by the United States trustee (or the 

bankruptcy administrator, if any),” and specifies the process 

and criteria used to revise the list. 

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(i) describes exigent circumstances that merit a waiver of 

the requirements of [§ 109(h)(1)]; 

(ii) states that the debtor requested credit counseling 

services from an approved nonprofit budget and credit 

counseling agency, but was unable to obtain the services 

referred to in [§ 109(h)(1)] during the 5-day period 

beginning on the date on which the debtor made that 

request; and 

(iii) is satisfactory to the court. 

11 U.S.C. § 109(h)(3). 

Haylock had contacted Burns’s law firm on the morning 

of a scheduled foreclosure. She was elderly, unsophisticated, 

and apparently without a place to stay in the event of 

foreclosure. Burns interviewed Haylock and assisted in the 

bankruptcy filing, which was made in time to stay foreclosure. 

During the pre-filing interview, she explained that she had 

attempted to receive credit counseling at her church and 

online. But Burns did not establish whether any agency that 

Haylock reached had been approved. 

Exhibit D of the form bankruptcy petition that the federal 

courts make available to prospective filers,2

 the “Individual 

Debtor’s Statement of Compliance with Credit Counseling 

Requirement,” contains various preprinted statements. The 

first two deal with a debtor who has received the sort of 

counseling required by § 109(h)(1). The third, which Haylock 

checked, is for debtors relying on § 109(h)(3)’s provision for 

waiver; it provides:

 

 2 See Official Bankruptcy Form B1D (Oct. 06) available at http:// 

www.uscourts.gov/rules/BK_Forms_1207/B_001D_1006f.pdf. 

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I certify that I requested credit counseling services from 

an approved agency but was unable to obtain the services 

during the five days from the time I made my request, and 

the following exigent circumstances merit a temporary 

waiver of the credit counseling requirement so I can file 

my bankruptcy case now. 

Next to this preprinted statement is a request that the debtor 

“summarize [the] exigent circumstances.” In the space 

provided, Haylock’s petition said: “Debtor was unable to 

obtain credit counseling prior to scheduled foreclosure.” 

 Twelve days after the filing, the Chapter 13 trustee 

moved to dismiss the case for failure to qualify under 

§ 109(h); George Basilikas Trust, a secured creditor with a 

lien on Haylock’s home, joined the motion. The next day 

Haylock filed a response saying she would not oppose the 

trustee’s motion, possibly because refinancing had become 

available in the form of a reverse mortgage. Attached to her 

response was an affidavit saying that she was “not able to 

provide proof of my efforts to obtain credit counseling prior to 

the foreclosure date.” The Trust then filed a motion seeking 

sanctions against Haylock and her counsel for violation of 

Rule 9011(b), which provides in relevant part: 

By presenting to the court . . . a petition, pleading, written 

motion, or other paper, an attorney . . . is certifying that to 

the best of the person's knowledge, information, and 

belief, formed after an inquiry reasonable under the 

circumstances,— . . . 

(2) the claims, defenses, and other legal contentions 

therein are warranted by existing law or by a 

nonfrivolous argument for the extension, 

modification, or reversal of existing law or the 

establishment of new law . . . . 

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Id. 

The bankruptcy court dismissed Haylock’s petition but 

retained jurisdiction to resolve the motion for sanctions. At 

the sanctions hearing, the court found that Burns violated Rule 

9011(b)(2) by having made “a legal determination that the 

petition can be filed,” even though there was “no evidence 

that [Haylock] actually came within [the] exception” provided 

by § 109(h)(3). It was uncontested that Burns obtained only 

Haylock’s assurance that she had sought credit counseling, not 

that she had communicated with “an approved agency.” 

Burns maintained that “the case law is divergent” as to 

whether satisfying § 109(h)(3) requires a debtor to seek credit 

counseling from an approved agency before petitioning and 

that “[s]ome cases have said . . . that some attempt to get 

credit counseling within the time parameters is sufficient.” 

The bankruptcy court dismissed the motion as against the 

debtor, but granted it as against Burns. 

After the Trust filed a statement computing fees and 

expenses allegedly incurred by reason of the bankruptcy 

filing, Burns filed a response, renewing his argument that 

sanctions under Rule 9011(b)(2) were improper. He pointed 

to In re Meza, No. 2:06-cv-1307, 2007 U.S. Dist. LEXIS 

48430 (E.D. Cal. June 25, 2007) (unreported), as authority for 

the proposition that credit counseling requested from a nonaccredited agency could satisfy the requirements of § 109(h). 

He argued: 

The question of whether the credit counseling agency 

must be a compliant agency or a non-compliant agency 

. . . is the subject of varied opinions. In the case of In re 

Meza . . . a debtor who visited a . . . non-accredited 

agency[] well in excess of 180 days prior to her petition 

date was found to have been in compliance with her 

credit counseling obligations under Section 109(h) 

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because of her ‘substantial compliance’ with the 

requirements of 11 U.S.C. Section 109(h), permitting the 

underlying bankruptcy court to forego analysis of any 

waiver request. In short, visiting some private company 

and attempting some measure of debt counseling was 

found to meet the call of a debtor’s obligations. 

As we shall see, this is a correct summation of In re Meza. 

After a hearing to consider the Trust’s calculation of 

sanctions and Burns’s response, the court issued an Interim 

Memorandum Decision rejecting Burns’s renewed challenge. 

It said that a request to a non-accredited agency could never 

satisfy § 109(h)(3) and that arguments to the contrary were 

legally frivolous: 

The debtor’s counsel’s obligation was to advise the 

debtor that, because she had made no request for 

prepetition credit counseling from an approved agency, 

she was ineligible to file a petition and to decline to file a 

petition on her behalf unless and until she could satisfy 

§ 109(h). 

The bankruptcy court said that Meza was “open to possible 

criticism, but even if . . . correctly decided . . . only hold[s] 

that when some error regarding compliance with § 109(h)(3) 

has occurred due to negligence, the court has discretion to 

permit the case to remain pending.” 

After Burns and the Trust agreed that an appropriate 

figure for sanctions would be $2000, the court issued a Final 

Memorandum Decision expunging a finding of bad faith that 

it had made in the Interim Memorandum Decision, fixing the 

amounts of sanctions at the agreed sum, and further 

explaining the basis of its ruling:

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[Counsel’s] good faith . . . does not alter the correctness 

of the conclusion in the Interim Memorandum Decision 

that the petition was not well-founded as a matter of law 

because of the debtor’s ineligibility under § 109(h) and 

that the creditor was thus entitled to Rule 9011 sanctions. 

Burns appealed to the district court, which tersely affirmed; he 

then appealed. The Trust did not oppose Burns in the district 

court and does not do so here. 

 Sanctions for violation of Federal Rule of Civil Procedure 

11(b) are reviewable for abuse of discretion. Cooter & Gell v. 

Hartmarx Corp., 496 U.S. 384, 405 (1990). Such an abuse 

occurs if a court relies “on a materially incorrect view of the 

relevant law in determining that” an attorney’s position was 

legally frivolous. Id. at 402. See also Lucas v Duncan, 574 

F.3d 772, 775 (D.C. Cir. 2009). Rule 11(b) of the Federal 

Rules of Civil Procedure and Rule 9011(b) are identical in all 

material respects, and at least on this issue nothing in the 

context suggests any reason to treat sanctions differently as 

between the two. 

 In awarding sanctions, the bankruptcy court relied on the 

proposition that “§ 109(h)(3)(A), when read in the context of 

§ 109(h) as a whole, cannot in any fashion be read to support” 

an interpretation that a petition may be filed without the filer’s 

having made a request from an approved credit counseling 

agency. That is one interpretation of the statute; certainly it 

appears literally correct, and perhaps it will prove ultimately 

“correct” in the sense of receiving the Supreme Court’s 

blessing or emerging as the unanimous opinion of the circuits. 

But counsel’s reliance on a contrary view would be frivolous 

for purposes of Rule 11 sanctions only if “it can be said that a 

reasonable attorney in like circumstances could not have 

believed his actions to be legally justified.” In re Sargent, 136 

F.3d 349, 352 (4th Cir. 1998) (brackets and ellipses deleted). 

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The Advisory Committee Notes on the most recent 

amendments of Rule 11 caution that “the extent to which a 

litigant has researched the issues and found some support for 

its theories even in minority opinions, in law review articles, 

or through consultation with other attorneys should certainly 

be taken into account in determining whether [11(b)(2)] has 

been violated.” Fed. R. Civ. Pro. 11, Advisory Committee’s 

Note (1993 Amendments) (emphasis added). Here we need 

not face when or how aggressively counsel can “swim 

upstream against the current of stare decisis,” Gurary v. 

Winehouse, 235 F.3d 792, 799 (2nd Cir. 2000), asserting 

theories rejected by the circuit or the Supreme Court. Burns 

faced no such preclusive authority, and his position had 

support in the Meza case, which he brought to the judge’s 

attention. 

 In Meza, the debtor filed for Chapter 7 relief after having 

received credit counseling from a non-approved agency. In re 

Meza, 2007 U.S. Dist. LEXIS 48430 at *1. The United States 

Trustee “moved to dismiss the filing due to Meza’s failure to 

obtain pre-petition credit counseling and properly file a 

certificate regarding the same, as required by § 109(h).” Id. 

The bankruptcy court dismissed the motion, finding that the 

debtor had “substantially complied” with the requirements of 

§ 109(h). Id. at *2. On appeal, the district court affirmed. It 

acknowledged that “the counseling was provided by an unapproved service and was received more than 180 days prior 

to filing,” but it looked to the substance of the counseling. 

Finding that the counseling had “resulted in the type of debt 

repayment contemplated by Congress” and that the 

bankruptcy court had been satisfied with the petition “in 

general” and with Meza’s continued counseling post-petition, 

it held that it could not “determine, as it must to warrant 

reversal on appeal, that the bankruptcy court’s finding of 

substantial compliance with eligibility requirements 

constituted clear error.” Id. at *4. 

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Contrary to the bankruptcy court’s description, Meza does 

not “hold that when some error regarding compliance with 

§ 109(h)(3) has occurred due to negligence, the court has 

discretion to permit the case to remain pending.” Nothing in 

Meza turned on negligence. Instead, Meza held that 

§ 109(h)(1) could be satisfied through substantial compliance 

even though the debtor never sought credit counseling from an 

approved agency. By holding that counseling with an 

unapproved agency can satisfy § 109(h)(1), Meza supports 

Burns’s position that requesting counseling from such an 

agency can satisfy § 109(h)(3). The bankruptcy court’s view 

of the law—in the sense of the array of interpretations 

accepted by courts—was therefore mistaken, and its award of 

sanctions an abuse of discretion. 

Conclusion 

 We reverse the district court’s affirmance of sanctions 

and remand for proceedings consistent with this opinion. 

So ordered. 

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