UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In re: VIVIAN J. HARDEE,

Debtor.

BARBARA L. WHITE,

Plaintiff-Appellant, No. 96-1968

v.

RICHARD M. MITCHELL, Trustee for

Vivian J. Hardee,

Defendant-Appellee.

Appeal from the United States District Court

for the Western District of North Carolina, at Charlotte.

Robert D. Potter, Senior District Judge.

(CA-95-504-3-P, BK-95-31282)

Argued: April 10, 1998

Decided: October 20, 1998

Before MURNAGHAN, HAMILTON, and MICHAEL,

Circuit Judges.

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Reversed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Barbara Leslie White, Charlotte, North Carolina, for

Appellant. Richard M. Mitchell, MITCHELL, RALLINGS, SINGER,
MCGIRT & TISSUE, P.L.L.C., Charlotte, North Carolina, for Appellee.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Barbara White appeals monetary sanctions imposed upon her under

Bankruptcy Rule 9011 for conduct arising from her representation of

Vivian Hardee in Hardee's personal bankruptcy case. The trustee for

the bankruptcy estate moved for sanctions after he suspected that

White had purposely misrepresented the nature of a pension asset in

a statement and schedules filed with the debtor's petition. The bankruptcy court imposed sanctions on White in 1995 after determining

that she had violated Rule 9011, which relates to the signing of court

papers. The district court affirmed. Because the papers in question did

not have to be signed by an attorney, Rule 9011 (as it existed in 1995)

did not authorize sanctions. Moreover, we believe that White's conduct did not warrant a sanction under any other authority. We therefore reverse.

I.

This dispute centers around a single asset. In 1991 Hardee acquired

a beneficial interest in an ERISA-qualified pension plan following the

death of her cousin, James Swink. Swink had worked as a teacher on

Long Island and had named Hardee as the beneficiary of his pension

plan benefits in the event of his death. After Swink's death the plan

manager, Teachers Insurance and Annuity Association of AmericaCollege Retirement Equities Fund (TIAA-CREF), gave Hardee the

option of taking a lump-sum payment from the plan or drawing an

annuity that would be paid monthly over approximately eighteen

years. Hardee chose the annuity.

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Hardee filed a Chapter 7 bankruptcy petition on August 31, 1995.

The TIAA-CREF annuity was listed in four separate places on forms

filed with the petition. First, it was listed on Schedule B as personal

property. Second, it was shown on Schedule C as property claimed as

exempt, with the notation that the exemption was provided under

ERISA. Third, the monthly income from the annuity was listed on

Schedule I as "other monthly income." Finally, in the statement of

financial affairs, the income was listed as "income other than from

employment or operation of business."

A trustee was appointed for Hardee's bankruptcy estate on September 1, 1995. At a meeting of creditors held pursuant to 11 U.S.C.

§ 341(a) (1994), the trustee asked if there were any amendments to

Hardee's petition. Hardee answered that there were not. The trustee

then asked Hardee to explain the "Teachers and Insurance Annuities"

listed on the schedules. Hardee said that this was an annuity she had

inherited from her cousin. White, Hardee's attorney, added that she

may need to amend the schedules to reflect this information. The

trustee then abruptly closed the meeting, saying that he had already

asked for amendments and had been told there were none. The trustee

apparently believed that White had deliberately mischaracterized the

pension asset on the schedules.1

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1 Qualified pension benefits may be excluded from a bankruptcy estate,

thereby placing them beyond the reach of creditors. See Patterson v.

Shumate, 504 U.S. 753, 755 (1992). This result is brought about by

§ 541(c)(2) of the Bankruptcy Code, which excludes from the bankruptcy estate any interest in a trust that is subject to transfer restrictions

under applicable non-bankruptcy law. Shumate, 504 U.S. at 758. This

necessarily excludes from the bankruptcy estate all interests in pension

plans that are qualified under the Employee Retirement Income Security

Act of 1974 (ERISA), which requires that all pension plans include a

prohibition on assignment and alienation. See 29 U.S.C. § 1056(d)(1)

(1994).

Here, the trustee claimed that by failing to indicate that the debtor

(Hardee) was a beneficiary of someone else's pension plan, White (the

debtor's attorney) had improperly created the impression that the pension

benefits could be excluded or exempted from the bankruptcy estate. In

fact, the bankruptcy court found that the pension should be excluded

from the estate, even though Hardee was only a beneficiary of the pension and not the original participant in the pension plan. See In re

Hardee, No. 95-31282 at 3-4 (Bankr. W.D.N.C. Nov. 22, 1995) (order

sustaining objection to exemption).

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The trustee subsequently moved for sanctions against White. The

bankruptcy court granted the motion and ordered White to forfeit her

fees in the case, pay attorney's fees of $500 to the trustee, and pay

a penalty of $2,500 into court. White appealed to the district court,

which affirmed. She has taken a further appeal to us.

II.

The sanctions here were imposed under Bankruptcy Rule 9011. In

reviewing an award of sanctions under Rule 9011, we may follow the

standards applicable under Federal Rule of Civil Procedure 11, a corresponding sanctions provision. In re Weiss, 111 F.3d 1159, 1170 (4th

Cir. 1997). We review an award of sanctions under Rule 11 using an

abuse of discretion standard. Cooter & Gell v. Hartmarx Corp., 496

U.S. 384, 405 (1990). A court abuses its discretion if it bases its order

for sanctions on "an erroneous view of the law or on a clearly erroneous assessment of the evidence." Id. We adopt the same standard of

review for sanctions imposed under Bankruptcy Rule 9011. See In re

Weiss, 111 F.3d at 1170.

III.

The sanctions against White were imposed in 1995. Our first question, then, is whether Bankruptcy Rule 9011, as it existed prior to its

amendment in 1997, authorized sanctions against an attorney for

defects in bankruptcy schedules and statements. 2

Before the 1997 amendment Rule 9011(a) stated:

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2 Rule 9011 was amended in 1997 to conform to the 1993 changes to

Federal Rule of Civil Procedure 11. See Fed. R. Bankr. P. 9011 advisory

committee's notes. This amendment broadened the scope of attorneys'

obligations to the court, but placed additional constraints on the imposition of sanctions. See Fed. R. Civ. P. 11 advisory committee's notes. The

amendment to Rule 9011 also gave courts discretion to impose sanctions;

previously, sanctions for violations were mandatory. See Fed. R. Bankr.

P. 9011 advisory committee's notes.

Our discussion as to the scope of Rule 9011 is limited to the rule as

it existed prior to the 1997 amendment.

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(a) Signature

 Every petition, pleading, motion and other paper served

or filed in a case under the Code on behalf of a party represented by an attorney, except a list, schedule, or statement,

or amendments thereto, shall be signed by at least one attorney of record in the attorney's individual name, whose

office address and telephone number shall be stated. A party

who is not represented by an attorney shall sign all papers

and state the party's address and telephone number. The signature of an attorney or a party constitutes a certificate that

the attorney or party has read the document; that to the best

of the attorney's or party's knowledge, information, and

belief formed after reasonable inquiry it is well grounded in

fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing

law; and that it is not interposed for any improper purpose,

such as to harass or to cause unnecessary delay or needless

increase in the cost of litigation or administration of the

case. If a document is not signed, it shall be stricken unless

it is signed promptly after the omission is called to the attention of the person whose signature is required. If a document

is signed in violation of this rule, the court on motion or on

its own initiative, shall impose on the person who signed it,

the represented party, or both, an appropriate sanction,

which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because

of the filing of the document, including a reasonable attorney's fee.

This rule, like Rule 11 of the Federal Rules of Civil Procedure, is

aimed at curbing abuses of the judicial system. Both Rule 11 and

Bankruptcy Rule 9011 operate by way of a certification requirement.

However, the certification scheme of Rule 9011 does not extend to

bankruptcy schedules and statements. Attorneys need not sign (and

thereby certify) every document in a bankruptcy case. The provision

of Rule 9011(a) that actually authorizes sanctions begins "[i]f a

document is signed in violation of this rule . .. ." (emphasis added).

The Advisory Committee's Notes define "document" as "all papers

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which the attorney or party is required to sign."3 Fed. R. Bankr. P.

9011, advisory committee's notes. However, Rule 9011(a) exempts "a

list, schedule, or statement, or amendments thereto" from the signature requirement. Since the schedules and statements need not be

signed by an attorney, they are not "documents" for the purposes of

Rule 9011 and therefore cannot trigger the imposition of sanctions

under the rule. See In re Palumbo Family Ltd. Partnership, 182 B.R.

447, 475-76 (Bankr. E.D. Va. 1995); In re Eatman , 182 B.R. 386, 396

(Bankr. S.D.N.Y. 1995); In re Remington Dev. Group, 168 B.R. 11,

15 (Bankr. D.R.I. 1994); In re Ostas, 158 B.R. 312, 319 (Bankr.

N.D.N.Y. 1993); In re Alderson, 114 B.R. 672, 677 (Bankr. D.S.D.

1990); but see In re Weiss, 111 F.3d at 1170. In sum, the plain meaning of Rule 9011 does not allow the imposition of sanctions on White

for defects in the schedules and statement at issue in this case. The

district court therefore erred in affirming the sanctions.4

IV.

Although Rule 9011, as it existed in 1995, did not authorize sanctions against an attorney for defects in bankruptcy schedules and

statements, we recognize that bankruptcy courts have other avenues

for sanctioning improper conduct by parties and attorneys. For example, bankruptcy courts may punish criminal contempt, Fed. R. Bankr.

P. 9020, and civil contempt, see In re Walters , 868 F.2d 665, 670 (4th

Cir. 1989). They may impose sanctions for abuses in the discovery

process. See Fed. R. Bankr. P. 7037 (incorporating Fed. R. Civ. P. 37

into Bankruptcy Rules). Bankruptcy courts also possess the inherent

power to regulate litigants' behavior and to sanction wrongdoing by

litigants. See In re Weiss, 111 F.3d at 1171; A.H. Robins Co. v.

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3 Ordinarily, pleadings and papers must be signed by an attorney. See

Fed. R. Bankr. P. 9011(a). If a party is not represented by counsel, that

party must sign the documents in place of an attorney. See id.

4 We note that some bankruptcy courts have narrowed the exemption

in Rule 9011 to the "lists," "schedules," and "statements" required to be

filed under Federal Rule of Bankruptcy Procedure 1007. See, e.g., In re

Palumbo Family Ltd. Partnership, 182 B.R. at 475-76; In re Ostas, 158

B.R. at 319. This case fits within this narrow exemption, since the schedules and statement here were filed under Bankruptcy Rule 1007. See Fed.

R. Bankr. P. 1007(b).

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Piccinin, 788 F.2d 994, 1003 (4th Cir. 1986). This inherent power

may be used in combination with, or instead of, the bankruptcy

courts' other powers to sanction. See In re Weiss, 111 F.3d at 1171.

In different circumstances, we might have remanded for the consideration of sanctions under authority other than pre-amendment Rule

9011. Here, however, we have all of the facts before us, and we conclude that White should not be sanctioned under any available

ground. We say this because the schedules and statement in this case

were well grounded in fact and were not filed for any improper purpose. Our explanation follows.

A.

The first consideration is whether the schedules and statement of

financial affairs were well grounded in fact. This is measured by an

objective standard of reasonableness under the circumstances. See

Business Guides, Inc. v. Chromatic Comm. Enter., 498 U.S. 533, 551

(1991); In re Kunstler, 914 F.2d 505, 514 (4th Cir. 1990). This standard was met.

White listed the interest in the pension annuity on the correct line

on Schedule B. She also referred to the annuity in three other places

-- on Schedule C, claiming the asset as exempt; on Schedule I, listing

Hardee's current income from the annuity; and on the statement of

financial affairs, listing Hardee's income from the annuity. The trustee's own expert conceded that White had listed this interest in the correct place on Schedule B, stating only that White should have added

a note clarifying the nature of the interest. Unartful disclosure, however, such as a conclusory listing, is "irrelevant" to the factual inquiry

under Rule 9011. See Brubaker v. City of Richmond, 943 F.2d 1363,

1373 (4th Cir. 1991); Simpson v. Welch, 900 F.2d 33, 36 (4th Cir.

1990). Furthermore, sanctions are inappropriate for"isolated factual

errors, committed in good faith, so long as [the document] as a whole

remains `well grounded in fact.'" Forrest Creek Assocs. v. McLean

Savings & Loan Assn., 831 F.2d 1238, 1245 (4th Cir. 1987).

The level of disclosure here was reasonable in light of the nature

and purpose of the bankruptcy schedules and forms. The 1991 Advisory Committee Notes to the Form 6 Schedules (Schedules A-J)

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explain that "[t]he schedules require a complete listing of assets and

liabilities but leave many of the details to investigation by the

trustee." 11 U.S.C.A. Official Bankr. Form 6, advisory committee's

notes (West pamph. 1998) (emphasis added). Indeed, the schedules

were intended to be summaries that could serve as a quick and easy

list of relevant information. The Notes state that Schedule C, for

example, was simplified in 1991 by "eliminat[ing the] duplication of

information provided" on other schedules. See id. Similarly, a former

requirement in Schedule C that the debtor state the present use of

property was "eliminated as best left to inquiry by the trustee." See

id. The requirements for listing personal property in Schedule B also

reflect the basic purpose of the schedules. The Notes state that this

schedule requires that debtors declare whether they have "any property in each category on the schedule." Id. They add that the trustee

"can request copies of any documents concerning the debtor's property necessary to the administration of the estate." Id. The Advisory

Committee Notes elaborate that "Section 521(3) of the Code requires

the debtor to cooperate with the trustee, who can administer the estate

more effectively by requesting any documents from the debtor rather

than relying on descriptions in the schedules which may prove to be

inaccurate." (emphasis added).

Of course, false and deceptive schedules and statements will not be

tolerated and are subject to sanctions. However, there was no falsehood or deception here. White's disclosure of the pension on the

schedules and statement was accurate, and the trustee could have

investigated further. We recognize that bankruptcy trustees are under

pressure to perform their duties in an expeditious fashion. Still, the

trustee here was made aware of the pension asset, and he could have

taken a couple of minutes to inquire into the source of the asset rather

than close the creditors' meeting and move for sanctions.

We conclude that the schedules and statement were well grounded

in fact.

B.

The second consideration is whether the schedules and statement

of affairs were filed for an improper purpose. The attorney's conduct

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must be evaluated according to an objective standard of reasonableness. See In re Weiss, 111 F.3d at 1171.

There is ample objective evidence that White did not have an

improper purpose in filing the schedules and statement. She disclosed

the pension asset in four separate places in the papers. The trustee's

witnesses said that the substance of this disclosure would have led

them to assume that the debtor was a teacher or retired teacher. However, it was disclosed on Schedule I that Hardee (the debtor) was

working as a secretary. This suggests that there was no intent to mislead the trustee as to the nature of Hardee's interest in the pension.

The listing of the pension interest as exempt property under ERISA

does not appear to have been made for an improper purpose but rather

seems to have been made as part of a good faith argument under the

Supreme Court's decision in Patterson v. Shumate , 504 U.S. 753

(1992). In that case the Court held that the non-alienation provisions

of ERISA would exclude qualified pension benefits from the bankruptcy estate under 11 U.S.C. § 541(c)(2) (1994). Indeed, the bankruptcy court in this case relied on Patterson v. Shumate to hold that

Hardee's pension interest was not property of the bankruptcy estate.

In re Hardee, No. 95-31282 at 3-4 (Bankr. W.D.N.C. Nov. 22, 1995)

(order sustaining objection to exemption). Of course, White's disclosure of the pension as exempt was not strictly accurate under

Patterson v. Shumate because it was excluded entirely from the bankruptcy estate. However, the disclosure of the asset as exempt had two

significant advantages. It openly disclosed the existence of the asset

to the trustee, avoiding the danger of a subsequent charge that it was

improperly omitted in the event it was ultimately determined to be a

part of the estate. Disclosure in this manner also gave White an alternative argument, that is, the pension was not property of the estate,

but even if it was, it was exempt property.

We conclude that the schedules and statement were not filed for an

improper purpose.

V.

Bankruptcy Rule 9011, as it appeared on the books prior to the

1997 amendment, did not provide a basis for sanctioning White in this

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case. In addition, we conclude that White's conduct did not warrant

sanctions under any other authority. The judgment of the district court

is therefore reversed.

REVERSED

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