UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

In re:

William McNeir Richmond

Debtor

________________________________

New Hampshire Supreme Court

Committee on Professional

Conduct,

Appellee

v. Civil No.06-cv-426-SM

Opinion No. 2007 DNH 121

William McNeir Richmond,

Appellant

O R D E R

William McNeir Richmond (“Richmond”), a Chapter 7 debtor,

appeals the bankruptcy court’s (Deasy, J.) determination that the

costs assessed against him by the New Hampshire Supreme Court

Committee on Professional Conduct (“PCC”) at the conclusion of

each of two disciplinary proceedings are not dischargeable. The

PCC found Richmond guilty of misconduct in each case. He was

suspended from the practice of law initially and, after the

second proceeding, was disbarred. For the reasons given below,

the decision of the bankruptcy court is affirmed.

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Standard of Review

A bankruptcy court’s findings of fact are not set aside

unless clearly erroneous. Palmacci v. Umpierrez, 121 F.3d 781,

785 (1st Cir. 1997) (citing FED. R. BANKR. P. 8013; Commerce Bank &

Trust Co. v. Burgess (In re Burgess), 955 F.2d 134, 137 (1st Cir.

1992); FED. R. CIV. P. 52(c), advisory committee’s note to 1991

Amendment). However, a “bankruptcy court’s legal conclusions,

drawn from the facts so found, are reviewed de novo.” Palmacci,

121 F.3d at 785 (citing Martin v. Bajgar (In re Bajgar), 104 F.3d

495, 497 (1st Cir. 1997)) “On an appeal the district court . . .

may affirm, modify, or reverse a bankruptcy judge’s judgment,

order, or decree or remand with instructions for further

proceedings.” FED. R. BANKR. P. 8013.

Background

Richmond has been the subject of two PCC disciplinary

proceedings. See Richmond’s Case (Richmond I), 152 N.H. 155

(2005); Richmond’s Case (Richmond II), 153 N.H. 729 (2006). In

Richmond I, the New Hampshire Supreme Court suspended Richmond

from the practice of law for six months and, among other things,

adopted the referee’s recommendation that Richmond be ordered to

“reimburse the committee for the costs of investigating and

prosecuting this matter.” 152 N.H. at 162. In Richmond II, the

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New Hampshire Supreme Court disbarred Richmond and, among other

things, ordered him to “reimburse the committee for all of its

expenses, including legal fees, incurred in investigating and

prosecuting this matter.” 153 N.H. at 746.

While his disciplinary proceedings were under way, Richmond

sought protection from creditors under Chapter 7 of the United

States Bankruptcy Code. The PCC “filed a complaint pursuant to

11 U.S.C. § 523(a)(7) seeking to except from [Richmond’s]

discharge his obligations to the [PCC] arising out of [his] two

attorney disciplinary proceedings.” N.H. Sup. Ct. Prof’l Conduct

Comm. v. Richmond (In re Richmond), 351 B.R. 6, 7-8 (Bankr.

D.N.H. 2006). The bankruptcy court “conclude[d] that

[Richmond’s] obligation to pay the Disciplinary Costs to the

[PCC] falls within the provisions of § 523(a)(7) as it is a debt

‘for a fine, penalty or forfeiture payable to and for the benefit

of a governmental unit, and is not compensation for actual

pecuniary loss.’” Id. at 14. This appeal followed.

Discussion

Under the Bankruptcy Code, “a discharge . . . does not

discharge an individual debtor from any debt . . . to the extent

such debt is for a fine, penalty, or forfeiture payable to and

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for the benefit of a governmental unit, and is not compensation

for actual pecuniary loss.” 11 U.S.C. § 523(a)(7). Here, the

parties agree that the disputed PCC assessments are “payable to

and for the benefit of a governmental unit.” The two points of

dispute are whether a PCC assessment qualifies as “a fine,

penalty, or forfeiture” and whether such an assessment is

“compensation for actual pecuniary loss.” According to Richmond,

the bankruptcy court erroneously ruled against him on both

points.

To support his argument that the costs assessed against him

do not qualify as a “fine, penalty, or forfeiture,” Richmond

relies upon various dictionary definitions, points out that the

provision pertaining to PCC cost assessments, New Hampshire

Supreme Court Rule 37(16), is not found in that section of the

rules titled “Types of Discipline and Other Possible Actions,”

N.H. SUP. CT. R. 37A(1)(e), and opines that the possible

imposition of costs upon attorneys subject to PCC discipline is

generally treated as an afterthought by the PCC and the New

Hampshire Supreme Court, and, in any event, has little or no

deterrent effect. Moreover, Richmond argues, or at least argued

before the bankruptcy court, that the costs assessed against him

were not fines or penalties because “the New Hampshire attorney

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disciplinary system is not penal in nature.” In re Richmond, 351

B.R. at 11.

At the time of the disciplinary proceedings against

Richmond, costs were assessed pursuant to Supreme Court Rule

37(16), which provided that “[a]ll expenses incurred by the

committee and by bar counsel in the investigation and enforcement

of discipline shall be paid by the New Hampshire Bar Association

in the first instance but may, in whole or in part, be assessed

to a disciplined attorney to the extent appropriate.” The fact

that only a “disciplined attorney” is subject to an assessment of

expenses suggests that the assessment is in the nature of a fine

or penalty. Even more persuasive, however, is the following

observation by the New Hampshire Supreme Court:

We retain the ultimate authority to determine the

appropriate sanction for a violation of the rules

governing attorney conduct. Wood’s Case, 137 N.H. 698,

701 (1993). In exercising our authority, we are

mindful that discipline is not intended as a mode of

inflicting punishment for an offense. Silverstein’s

Case, 108 N.H. 400, 401 (1967). Rather, “[t]he purpose

of the court’s disciplinary power is to protect the

public, maintain public confidence in the bar, preserve

the integrity of the legal profession, and prevent

similar conduct in the future.” Budnitz’ Case, 139

N.H. 489, 492 (1995) (quotation and ellipsis omitted).

The sanction we impose must be sufficient to satisfy

these goals, and must take into account the severity of

the misconduct and any mitigating circumstances

disclosed by the record. Welts’ Case, 136 N.H. 588,

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592 (1993). . . . Every case is judged on its own

facts and circumstances. Id.

The respondent committed serious infractions of

the rules that regulate the handling of client funds by

attorneys. . . . We conclude, however, that because of

mitigating factors, a conditionally delayed two-year

suspension, coupled with an obligation to pay costs,

will protect the public, maintain public confidence in

the bar, preserve the integrity of the legal

profession, and prevent similar conduct in the future.

Morgan’s Case, 143 N.H. 475, 476-77 (1999) (parallel citations

omitted, emphasis added). 

It may well be that “the New Hampshire attorney discipline

system is not penal in nature.” In re Richmond, 351 B.R. at 11. 

But that system, penal or not, does impose sanctions, and in

Morgan’s Case, the New Hampshire Supreme Court placed suspension

and the payment of costs on the same footing, as sanctions, that

“protect the public, maintain public confidence in the bar,

preserve the integrity of the legal profession, and prevent

similar conduct in the future.” 143 N.H. at 477. Suspension

from the practice of law is a serious penalty, and, because

suspension and the payment of costs were imposed in Morgan’s Case

in conjunction, and in furtherance of the same goals, it is

difficult to argue that the Supreme Court viewed only the

suspension as a penalty and considered the assessment of costs to

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be something other than a penalty or fine. Finally, while not

dispositive, it is worth noting that a decided majority of courts

that have considered this issue have also held that when attorney

discipline includes an assessment of costs, those costs are in

the nature of a fine or penalty for purposes of 11 U.S.C. §

523(a)(7). See In re Richmond, 351 B.R. at 13 (collecting

cases). The costs assessed against Richmond as part of the

discipline imposed by the PCC are in the nature of a fine or

penalty for the purposes of 11 U.S.C. § 523(a)(7), and the

bankruptcy court did not err in so concluding.

Richmond also argues that the costs assessed against him by

the PCC were dischargeable because they constituted “compensation

for actual pecuniary loss.” 11 U.S.C. § 523(a)(7). He bases his

argument upon the fact that PCC assessments are not imposed at a

flat rate, but are based upon actual costs incurred by the PCC,

which vary from case to case. He also relies upon the New

Hampshire Supreme Court’s consistent reference to the cost

assessment as “reimbursement.” The bankruptcy court did not err

in ruling against Richmond on this issue. 

The discussion of this issue in Attorney Grievance

Commission of Maryland v. Smith (In re Smith), 317 B.R. 302

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(Bankr. D. Md. 2004), a case upon which the bankruptcy court

relied, is persuasive. There, the court first explained that

“[t]he mere fact that a penal sanction is calculated by reference

to actual costs does not, in and of itself, transform the penalty

into compensation for pecuniary loss.” Id. at 312. The court

further explained that as a governmental entity that “will carry

out its disciplinary functions regardless of whether it recovers

costs awarded to it,” id., and that “fulfill[s] a public function

of government in bringing attorney disciplinary proceedings,”

id., an attorney disciplinary committee is incapable of incurring

an “actual pecuniary loss” for purposes of 11 U.S.C. § 523(a)(7). 

The bankruptcy court’s reliance upon In re Smith was not

misplaced, and the court did not err in determining that

Richmond’s PCC assessments were not reimbursements for actual

pecuniary losses.

Conclusion

Because the bankruptcy court did not err in concluding that

the costs assessed against Richmond were in the nature of a fine

or penalty and were not compensation for actual pecuniary loss,

its decision to deem Richmond’s disciplinary assessment

nondischargeable is affirmed.

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SO ORDERED.

____________________________

Steven J. McAuliffe

Chief Judge

September 27, 2007

cc: Joseph A. Foster, Esq.

Cheryl C. Deshaies, Esq.

Bruce A. Harwood, Esq.

Michael S. Askenaizer, Esq.

Geraldine L. Karonis, Esq.

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