Court Opinion

ID: 3174100
Source: CourtListenerOpinion
Date Created: 2016-02-05 08:32:28.806426+00
Date Added: 2024-06-11T07:38:51.128237
License: Public Domain

FILED
                                                               FEB 04 2016
 1
                                                           SUSAN M. SPRAUL, CLERK
 2                            ORDERED PUBLISHED              U.S. BKCY. APP. PANEL
                                                             OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.      NC-15-1149-JuKuW
                                   )
 6   FAROUK E. NAKHUDA,            )      Bk. No.      14-41156-RLE
                                   )
 7                  Debtor.        )
     ______________________________)
 8                                 )
                                   )
 9   ANDREW W. SHALABY,            )
                                   )
10                  Appellant,     )
                                   )
11   v.                            )      O P I N I O N
                                   )
12   PAUL J. MANSDORF, Trustee,    )
                                   )
13                  Appellee.      )
     ______________________________)
14
15                  Argued and Submitted on January 21, 2016
                          at San Francisco, California
16
                            Filed - February 4, 2016
17
               Appeal from the United States Bankruptcy Court
18                 for the Northern District of California
19       Honorable Roger L. Efremsky, Bankruptcy Judge, Presiding
                         _________________________
20
21   Appearances:     Andrew W. Shalaby argued pro se; Dennis D. Davis
                      of Goldberg, Stinnett, Davis & Linchey, argued
22                    for appellee Paul J. Mansdorf, chapter 7 trustee.
23                         _________________________
24
25
26   Before:   JURY, KURTZ, and WANSLEE,* Bankruptcy Judges.
27
28        *
             Hon. Madeleine C. Wanslee, United States Bankruptcy Judge
     for the District of Arizona, sitting by designation.
 1   JURY, Bankruptcy Judge:
 2
 3            The bankruptcy court issued an Order to Show Cause (OSC)
 4   directing Andrew W. Shalaby (Shalaby), the attorney for chapter
 5   71 debtor Farouk E. Nakhuda, to show cause why he should not be
 6   required to disgorge fees he had been paid and sanctioned for
 7   violations of Rule 9011.      After a hearing, the bankruptcy court
 8   issued a Memorandum Decision finding that Shalaby asserted
 9   numerous positions in filed documents without an adequate basis
10   in law or fact.      As a result, the court imposed sanctions
11   consisting of: (1) non-compensatory monetary sanction for $8,000
12   payable to the bankruptcy court for violations of Rule 9011(b);
13   (2) disgorgement of $4,000 that was paid to Shalaby by debtor
14   under § 329; (3) suspension from the practice of law in the
15   bankruptcy courts for the Northern District of California until
16   he had completed 24 hours of continuing legal education in
17   bankruptcy law and 3 hours of continuing legal education in
18   ethics (except for those cases which he had already appeared);
19   and (4) suspension of his electronic case filing (ECF)
20   privileges until he had completed the ECF training provided by
21   the clerk’s office.2     The bankruptcy court entered an Order On
22   Memorandum Decision Re Order To Show Cause (Sanctions Order).
23
          1
             Unless otherwise indicated, all chapter and section
24
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
25   “Rule” references are to the Federal Rules of Bankruptcy
     Procedure and “Civil Rule” references are to the Federal Rules of
26   Civil Procedure.
27        2
             Subsequent to the filing of this appeal, Shalaby paid the
     sanctions, was reinstated to practice before the bankruptcy court
28
     in the Northern District, and had his e-filing privileges
     restored.

                                       -2-
 1   Thereafter, Shalaby moved to amend the Sanctions Order which the
 2   bankruptcy court denied (Amendment Order).         Shalaby appeals from
 3   the Sanctions Order and the Amendment Order.
 4            We AFFIRM in part and REVERSE in part.     We AFFIRM the
 5   court’s decision as to disgorgement under § 329 and suspension
 6   of Shalaby’s ECF filing privileges.          We REVERSE the bankruptcy
 7   court’s decision finding that Shalaby’s conduct violated 9011(b)
 8   and imposing sanctions of $8,000 payable to the clerk of the
 9   bankruptcy court.      When the court initiates sanctions under Rule
10   9011(c)(1)(B), the party ordered to show cause is afforded no
11   “safe harbor” opportunity to correct his or her conduct.
12   Because there is no “safe harbor,” the Ninth Circuit has
13   instructed courts to apply a higher “akin to contempt” standard
14   than in the case of party-initiated sanctions when applying Rule
15   9011(b).      United Nat’l Ins. Co. v. R & D Latex Corp., 242 F.3d
16   1102, 1116 (9th Cir. 2001).      Here, the bankruptcy court applied
17   a “reasonableness” standard to Shalaby’s conduct, which is the
18   appropriate standard for party-initiated sanctions, but not for
19   court-initiated sanctions.      Moreover, the court’s factual
20   findings do not support the heightened “akin to contempt”
21   standard.
22                                  I.   FACTS3
23            On March 16, 2014, Shalaby filed a skeletal chapter 7 case
24   for debtor.      Paul Mansdorf was appointed the chapter 7 trustee
25   (Trustee).
26            At the time of his filing, debtor was operating five
27
          3
             The facts leading up the OSC are comprehensively set
28
     forth in the bankruptcy court’s Memorandum Decision dated April
     27, 2015.

                                         -3-
 1   laundromats in the San Francisco and Vallejo area, either as
 2   sole proprietorships or as partnerships.     The petition listed no
 3   trade names for debtor and indicated the debts were primarily
 4   consumer debts rather than business debts.     The Schedules listed
 5   no executory leases, no interests in partnerships and no
 6   payments to landlords.
 7           On March 31, 2014, Shalaby filed the first version of the
 8   Schedules and Statement of Financial Affairs (SOFA).     Schedule A
 9   listed a house valued at $433,000 and encumbered with secured
10   debt of approximately $380,000.     Schedule B listed personal
11   property consisting of $600 in debtor’s wallet, $4,000 in a
12   checking account, and $211 in a Fidelity Investments account
13   (Fidelity Account).     Schedule B did not list any accounts
14   receivable or interests in partnerships, but did list certain
15   office equipment valued at $900 and inventory of detergents and
16   sodas valued at $300.     Schedule C claimed a homestead exemption
17   and an exemption in office equipment and inventory under
18   California Code of Civil Procedure (Cal. Civ. Proc.) § 704.760
19   (tools of the trade).     Schedule I stated debtor was married with
20   two adult children and was self-employed with $4,359 monthly net
21   income from operating a business.
22           Question no. 18 in the SOFA listed five laundromat
23   businesses in San Francisco and Vallejo.     Question no. 21
24   identified two of the laundromats as partnerships in which
25   debtor owned a 50% interest and two as sole proprietorships.4
26           On April 10, 2014, Shalaby filed the first amendments to
27   the Schedules.     Schedule B listed the same cash and bank
28
         4
              The fifth laundromat was evidently closed.

                                      -4-
 1   accounts and now listed a $15,000 account receivable.    Amended
 2   Schedule B also listed debtor as the 50% owner of the
 3   partnership laundromats valued at $45,000 and added laundry
 4   machines valued at $437,485, but did not list the sole
 5   proprietorship laundromats.    Schedule C listed the same
 6   homestead exemption and the same exemptions in the office
 7   equipment and inventory and added an exemption valued at $0 for
 8   the partnership laundromats (erroneously referring to Cal. Civ.
 9   Proc. § 704.010, the exemption for motor vehicles).    Schedule D
10   added a secured creditor owed $437,485 with a lien on the
11   laundry machines.
12        Before the meeting of creditors took place, Shalaby and
13   Trustee exchanged emails.    The April 7, 2014 email from Trustee
14   to Shalaby asked about the laundromats’ entity status and
15   requested Shalaby to confirm that any sole proprietorship
16   businesses were not operating and that no estate property was
17   being used.    Shalaby replied that the sole proprietorship
18   laundromats were still in business.    In response, Trustee
19   informed Shalaby that debtor could not operate a sole
20   proprietorship business while he was in chapter 7.
21        Despite this prior communication, when debtor appeared with
22   Shalaby at the § 341 meeting of creditors on April 16, 2014
23   (§ 341 meeting), he testified that he was still operating the
24   laundromats.    Trustee’s counsel advised   debtor that he could
25   not continue to use business income to pay rent to the landlords
26   and could not operate the businesses.    Shalaby responded:   “I am
27   not sure you are right about that . . . it is not so black and
28   white.”   Shalaby requested Trustee to provide him with authority

                                     -5-
 1   for this position and give him an opportunity to respond.
 2   A.   The Turnover Order
 3        On April 17, 2014, Trustee filed an Ex Parte Application to
 4   Cease Debtor’s Operations and Turnover Non–Exempt Funds and
 5   Records.    Attached to the application was the supporting
 6   declaration of Trustee’s counsel describing debtor’s
 7   post-petition use of estate assets and continued operation of
 8   the sole proprietorship laundromats.
 9        On the same date, the bankruptcy court signed an order
10   granting the application, which required debtor to (1) turnover
11   all of his bank account proceeds; (2) shut down the sole
12   proprietorship laundromats and give the keys to Trustee;
13   (3) stop using estate assets for the operation of any business;
14   and (4) provide Trustee with bank records for all post-petition
15   activity.
16        Instead of advising debtor to comply with the Turnover
17   Order, on April 17, 2014, Shalaby filed an Ex Parte Application
18   for Briefing and Hearing Schedule for Motion to Remove Trustee
19   and Motion to Set Aside Turn–Over Order or Direct Turn–Over to
20   New Trustee.    The application sought to remove Trustee because
21   of the way he had conducted the § 341 meeting.    Shalaby also
22   asserted that the Turnover Order suffered from a “due process
23   problem” as it had been granted without debtor being given an
24   opportunity to respond.    Shalaby further argued:   “The
25   [T]rustee’s proposal is simply to wipe out those businesses and
26   shut them down immediately, which will cause irreparable harm to
27   debtor as well as to potential creditors.”    The bankruptcy court
28   denied the application on April 18, 2014.

                                     -6-
 1        On April 21, 2014, Shalaby filed an Ex Parte Application to
 2   Set Aside Turnover Order for Failure to Notice Hearing.      The
 3   application argued that the Turnover Order was issued in
 4   violation of the Fifth and Fourteenth Amendments.   Shalaby
 5   further asserted that the “laundry machines that are not
 6   exempted as tools of the trade are secured by liens and there is
 7   no equity” and the “two businesses themselves are upside-down
 8   with secured liens.   It appears they are exempted.”   This
 9   application did not cite the Bankruptcy Code or any relevant
10   case law (although it did cite the Fourteenth Amendment and case
11   law regarding due process).
12        On April 22, 2014, Shalaby filed an amended application.
13   The amended application repeated his previous arguments and
14   proposed that the bankruptcy court amend its Bankruptcy Local
15   Rule (BLR) 9014–1 to provide for hearings on ex parte matters.
16   In Shalaby’s own words:
17        Even if laws do in fact exist that mandate the closure
          of a business upon filing of a Chapter 7, there is a
18        fundamental due process violation insofar as there is
          no notice given to the debtor of any such law in
19        existence. Even to the extent that if such a law
          should exist, ignorance of the law is no excuse, the
20        debtor would still be entitled to challenge any such
          law under the 5th Amendment or otherwise if he
21        believes it to be unconstitutional. The point is,
          however, that the debtor has been entirely deprived of
22        any and all opportunity to respond to the [T]rustee’s
          application.
23
24        In connection with this amended application, Shalaby filed
25   a Notice of Ex Parte Motion and Motion to Set Aside Turnover
26   Order for Failure to Notice Hearing which purported to give
27   notice that a hearing would be held two days later.    The
28   bankruptcy court denied this application on April 22, 2014.

                                    -7-
 1        On May 6, 2014, Shalaby filed a Motion for Return of
 2   Exempted Property and Removal of Trustee which was set for
 3   hearing on June 4, 2014.   In the motion, Shalaby   sought the
 4   return of the sole proprietorship laundromats and the “working
 5   capital and other exempted funds” held by Trustee.    He also
 6   sought removal of Trustee on the grounds “exempted property does
 7   not belong to the Trustee.”   Shalaby asserted that Trustee had
 8   “taken control of two exempted assets, laundromats, and has
 9   terminated and destroyed those businesses without any benefit to
10   the estate, maliciously, and in retaliation.”   Trustee opposed
11   and, in an accompanying declaration, Trustee’s counsel detailed
12   numerous examples of Shalaby’s ignorance of fundamental chapter
13   7 practice and incompetent representation of debtor.    He also
14   declared that “to date,” debtor has never turned over any funds
15   to Trustee despite the bankruptcy court’s order.
16        Shalaby responded by withdrawing as “moot” the part of the
17   motion requesting a return of the cash in the checking account
18   and the sole-proprietorship laundromats.   However, Shalaby
19   withdrew this reply two days later and then filed another
20   document entitled Withdrawal of Moot Portions of Motion and
21   Reply to Opposition to Motion to Remove Trustee.    Shalaby
22   withdrew this motion in its entirety one day before the June 4th
23   hearing “on grounds of obsolescence.”
24   B.   Turnover Order Appeal
25        On April 24, 2014, Shalaby filed a Notice of Appeal to this
26   Panel, purporting to appeal the Turnover Order, the order
27   denying his request to stay the Turnover Order, and the order
28   denying his request to set aside the Turnover Order.    On the

                                    -8-
 1   same day that Shalaby filed his designation of the record on
 2   appeal, he filed another document in the bankruptcy court
 3   captioned Objection to Turnover Motion.   This objection repeated
 4   his prior arguments and again requested the bankruptcy court to
 5   hold a hearing on the turnover issue.
 6        On May 1, 2014, Shalaby filed a motion to have the appeal
 7   decided by the Ninth Circuit on the basis that the question of
 8   law presented (i.e., whether the bankruptcy court can issue a
 9   turnover order on an ex parte basis) was “of national importance
10   with no other authority in existence in any jurisdiction.”
11        Following briefing, the Panel heard oral argument on
12   February 19, 2015.   The day after oral argument, Shalaby filed a
13   motion to dismiss the Turnover Order appeal.
14        On March 3, 2015, the Panel issued its Memorandum and
15   Judgment affirming the Turnover Order and denying the late
16   motion to dismiss the appeal.   In its decision, the Panel
17   confirmed the applicable provisions of the Bankruptcy Code which
18   provide that a chapter 7 debtor is required to cease operation
19   of a business upon filing for bankruptcy and which required
20   debtor to surrender the business assets to Trustee.
21        On March 9, 2015, Shalaby filed Debtor’s motion for
22   rehearing of the BAP ruling affirming the Turnover Order, which
23   the Panel denied on March 19, 2015.   Shalaby then filed a notice
24   of appeal of the BAP ruling to the Ninth Circuit.   That appeal
25   was subsequently dismissed on debtor’s request due to a
26   settlement with Trustee.
27   C.   Contested Exemptions
28        Between April 10 and April 25, 2014, Shalaby filed several

                                     -9-
 1   amendments to the Schedules.   On May 6, 2014, Shalaby filed
 2   fourth amended Schedules B and C.     This version of Schedule B
 3   listed the same cash, bank accounts, account receivable, and the
 4   partnership laundromats.   This Schedule C claimed the same
 5   exemptions in the office equipment and inventory, added an
 6   exemption for $3,719 in the business checking account under Cal.
 7   Civ. Proc. § 704.060 (tools of the trade), and also claimed the
 8   partnership laundromats exempt, valuing the exemption at $0
 9   under Cal. Civ. Proc. § 704.010 (motor vehicles).    It did not
10   exempt the $15,000 account receivable or the $600 cash in
11   debtor’s wallet.
12        On May 7, 2014, Trustee filed an objection to this version
13   of Schedule C on the grounds that (1) money in a checking
14   account does not qualify as a tool of the trade under Cal. Civ.
15   Proc. § 704.060; (2) the $0 exemption in the partnership
16   laundromats appeared to be an admission that there was no claim
17   of exemption in these; and (3) the entire Schedule C was
18   objectionable because it had not been signed by debtor.
19   Trustee also stated that his investigation concerning these
20   matters was continuing and that these objections would be set
21   for hearing when that investigation concluded.
22        On June 2, 2014, Shalaby filed fifth amended Schedules B
23   and C.   This version of Schedule B listed the same cash,
24   checking account, and account receivable.    It added the sole
25   proprietorship laundromats with an “unknown” value.    This
26   Schedule C again exempted as tools of the trade (Cal. Civ. Proc.
27   § 704.060) the office equipment, inventory, the $3,719 in the
28   checking account, and — for the first time — the $600 cash in

                                    -10-
 1   debtor’s wallet.   It also added an exemption based on Cal. Civ.
 2   Proc. § 706.050 (exempt earnings) for the   account receivable,
 3   now characterizing it as “income not yet paid.”    The values in
 4   this version of Schedule B and C were cut in half under the
 5   theory that not all community property was property of the
 6   estate.   Thus, for example, the checking account balance became
 7   $1,971 and the account receivable became $7,350.
 8         On June 3, 2014, Trustee filed an Amended Objection to
 9   Debtor’s Claim of Exemptions, incorporating his prior objection
10   to exemptions and objecting to the exemption in alleged earnings
11   due to debtor from a company named Borismetrics because they
12   were the same account receivable previously listed in Schedule
13   B.   Trustee also objected to the 50% valuations of community
14   property assets as violating § 541(a)(2).
15         On June 12, 2014, Shalaby filed yet another version of
16   Schedules B and C, which increased the amount claimed in
17   connection with the account receivable from $7,350 to $8,930.56
18   as exemptible earnings.
19         On July 10, 2014, Trustee filed an Amended and Supplemental
20   Objections to Exemptions.   It incorporated the prior objections
21   and said:
22         Debtor continues to claim a portion of his bank
           account proceeds exempt under California Code of Civil
23         Procedure § 704.060 [sic] but has increased the amount
           of exemption from $7,350 to $8,930.56. The Trustee
24         objects to said amended claim of exemption on the
           ground that it has no factual or legal basis as a
25         claim of exemption in debtor’s bank account proceeds.
26   D.   Exemption Disputes and Turnover Compliance
27         On July 22, 2014, the Trustee filed Memorandum of Points
28   and Authorities in Support of Notice of Status Conference

                                    -11-
 1   Regarding Objections to Claims of Exemption and Request for
 2   Turnover of Assets (July Motion), along with a Notice setting a
 3   hearing for September 3, 2014.    There was no motion accompanying
 4   the pleadings.   In the points and authorities, Trustee sought
 5   turnover of cash which debtor had, on advice of Shalaby, refused
 6   to turn over to Trustee (i.e., $600 cash, $3.12 in savings
 7   account, $3,719 in checking account, $2,471 accounts receivable
 8   collected post-petition, and $211 in the Fidelity Account, for a
 9   total of $7,274.41).   It also restated Trustee’s objections to
10   the claimed exemptions in the account receivable recharacterized
11   as exempt wages and the exemptions claimed in bank accounts as
12   tools of the trade.    The July Motion was supported by Trustee’s
13   counsel’s declaration attaching excerpts from debtor’s
14   deposition at which debtor testified that he was not an employee
15   of Borismetrics, the entity owing the accounts receivable.
16        The day before the hearing on the July Motion, Shalaby
17   filed an Opposition and Objection to Procedurally Defective
18   Motion.   This opposition described the July Motion as
19   procedurally defective because it was “not a status conference,”
20   but “facially a motion on a contested matter that is up on
21   appeal, fully briefed, and awaiting a ruling.”   Shalaby further
22   contended that the “motion” was contested and thus it should be
23   denied for failure to comply with BLR 9013 or 9014.      Because
24   the bankruptcy court wanted to afford the parties an opportunity
25   to address whether the pending appeal of the Turnover Order
26   precluded a ruling on all or part of the July Motion, the court
27   continued the hearing from September 3, 2014, to October 1,
28   2014, and set a briefing schedule regarding whether the pending

                                      -12-
 1   appeal affected the court’s jurisdiction.    The bankruptcy court
 2   also allowed Shalaby an opportunity to file a brief regarding
 3   the validity of his claimed exemptions.
 4        On September 10, 2014, Shalaby filed his brief on the
 5   merits of the exemption issues, supported by the declarations of
 6   debtor and Shalaby.   Shalaby claimed that Trustee’s objections
 7   to the exemption in the wages paid by Borismetrics to debtor and
 8   in the bank accounts was untimely.    With respect to the bank
 9   account exemption, Shalaby argued that Trustee failed to
10   identify any assets in dispute.   He further asserted that it was
11   correct to cut the amount of the Borismetrics receivable to
12   $8,930 to reflect debtor’s non-filing spouse’s community
13   property share, citing Cal. Family Code § 760, but failed to
14   explain why § 541(a)(2) did not control.    Shalaby also
15   maintained that the Borismetrics payment of $8,930 was exempt as
16   wages, but he failed to address debtor’s prior deposition
17   testimony that he was not an employee of Borismetrics.
18        In addition, Shalaby raised a new issue regarding debtor’s
19   unchallenged $100,000 homestead exemption.    The bankruptcy court
20   had previously entered an order approving the estate’s
21   compromise with debtor through which debtor had paid $30,000 to
22   purchase the non-exempt equity in his house from the estate
23   (Sale Order).   Shalaby now argued that the Sale Order should be
24   vacated “in the interest of justice” because — months after the
25   fact — he had obtained an appraisal from which he had concluded
26   that the house was worth less than Trustee’s broker had said it
27   was worth.   He asked the bankruptcy court to enter an order
28   directing Trustee to return this $30,000 (plus a $600 appraisal

                                    -13-
 1   fee) to debtor.
 2        Trustee filed a supplemental brief on the merits of the
 3   exemptions.   Trustee largely repeated his prior arguments and
 4   pointed out that debtor had agreed to the compromise embodied in
 5   the Sale Order and this belated attack on it was procedurally
 6   and substantively inappropriate.   Trustee also maintained that
 7   debtor had amended his Schedules a number of times and, each
 8   time, Trustee filed a new set of objections to debtor’s claims
 9   of exemption within thirty days of the amendments.
10        At the hearing on October 1, 2014, the bankruptcy court
11   sustained Trustee’s objections to the claimed exemptions and
12   denied debtor’s belated attack on the Sale Order.    The court
13   also indicated it intended to issue an OSC directed at Shalaby
14   for the positions he had taken during the case.     The court then
15   issued an order sustaining Trustee’s objection to the
16   exemptions, denying debtor’s request for return of the $30,000
17   in connection with the Sale Order, and ordering debtor to turn
18   over (1) $600 in cash; (2) $2,741 account receivable collected
19   post-petition; and (3) $211.29 from the Fidelity Account to
20   Trustee within ten days of the order (October 2 Order).
21        The day after this hearing, Shalaby filed a request that
22   the court order a settlement conference.   In the request,
23   Shalaby stated: “Unfortunately, I must agree with the court,
24   largely, that with a bit more effort and legal research, many of
25   the problems and matters disputed could have and would have been
26   avoided.”   He then quoted Rule 9011(b) and said:
27        [W]hile a matter may explain the reason I admittedly
          failed to diligently research some of my legal
28        contentions and presented incorrect interpretations of

                                    -14-
 1            applicable law (e.g. community property interest being
              irrelevant to exemptions, misapplication of 11 U.S.C.
 2            § 542(a), and other matters), that matter is quite
              personal and difficult to disclose on the record
 3            and/or in pleadings on an OSC hearing.
 4   It went on to state “I do in fact recognize my mistakes, and
 5   appreciate the court’s frustration.”      Shalaby suggested that the
 6   “practical thing” to do was to try to “settle the OSC/sanction
 7   by negotiating a reasonable payment to the trustee.”      The
 8   bankruptcy court declined to order a settlement conference.
 9   E.       The OSC
10            On November 4, 2014, the bankruptcy court issued the OSC.5
11   The OSC describes seven specific factual and legal positions
12   taken by Shalaby in connection with the issues that culminated
13   in the October 1 hearing: (1) he argued that Trustee’s
14   objections to exemptions were not timely when they were; (2) he
15   argued that the value of assets was reduced by 50% as non-estate
16   property ignoring § 541(a)(2); (3) he reclassified the
17   Borismetrics account receivable as exemptible wages without
18   factual or legal support (ignoring debtor’s deposition testimony
19
20        5
             Creditor Mercy Commercial California (MCC) also responded
21   to the OSC. MCC received relief from stay on May 29, 2014, to
     enforce the lease and recover the premises at 1305 Polk Street,
22   San Francisco, California and that order was final. Relying on
     the order, counsel for MCC served a non-default notice of
23   termination of the occupancy on debtor and then filed and served
24   an unlawful detainer action in the San Francisco Superior Court.
     MCC alleged that debtor, through Shalaby’s office, filed a Notice
25   of Stay of Proceedings, which blocked the state court action from
     proceeding. This conduct, MCC asserted, was a misuse of the
26   bankruptcy process and falsely stated to the state court that
     there was a stay when the opposite was true. As a result of this
27
     tactic, MCC incurred additional legal fees and expenses and
28   delay. MCC urged the bankruptcy court to examine this particular
     act of debtor and counsel.

                                       -15-
 1   that he was not an employee); (4) he argued that Trustee’s
 2   objections had not identified any assets in dispute; (5) he
 3   argued that a bank account was exempt as a tool of the trade
 4   with no supporting legal authority; (6) he attacked the Sale
 5   Order which was a final order; and (7) he argued debtor had no
 6   obligation to turn over assets based on his assertion that the
 7   scheduled values were inconsequential.
 8        The OSC directed Shalaby to appear and show cause why he
 9   should not be required to disgorge the fees he had been paid or
10   should not be otherwise sanctioned for his conduct in the case.
11   Based on the seven illustrative factual and legal positions that
12   Shalaby had taken, the specific violations described in the OSC
13   were:   (1) making arguments not warranted by existing law or
14   non-frivolous arguments for its extension, modification or
15   reversal; (2) failing to ensure that allegations and factual
16   contentions had evidentiary support; (3) his inability or
17   unwillingness to obtain the most basic knowledge of bankruptcy
18   law or engage in the legal analysis necessary to competently
19   represent debtor; (4) harming the estate by forcing Trustee to
20   use limited estate assets to respond to the frivolous arguments
21   and positions; and (5) failing to obtain original signatures on
22   documents filed with the court.   The court identified its
23   authority for issuance of the OSC and possible sanctions as the
24   court’s inherent powers and § 105, § 329(b), Rule 9011(b) and
25   (c), and paragraphs 8 and 9 of the ECF Procedures for the
26
27
28
                                    -16-
 1   bankruptcy court.6
 2            Immediately after the OSC was issued, Shalaby filed an Ex
 3   Parte Application to advance the December 4, 2014 hearing date
 4   to November 20, 2014, due to a scheduling conflict.        Shalaby
 5   proposed that the OSC response deadline be advanced to November
 6   14, 2014.      The bankruptcy court granted his request and reset
 7   the OSC hearing date and response deadline.
 8            On November 6, 2014, Shalaby filed an Ex Parte Application
 9   for Order Directing Disgorgement in Discharge of the OSC.
10   There, Shalaby moved the court for an order directing him to
11   disgorge $4,000 in discharge of the OSC.        Shalaby further said:
12   “This counsel is very sorry that the bankruptcy has gone so
13   awry, and hopes that his offer of voluntarily disgorgement of
14   the fees will be to the Court’s satisfaction.”        Trustee filed an
15   objection to the application asserting that the damages to the
16   estate were in excess of $30,000.        The bankruptcy court
17   subsequently denied the application.
18            Shalaby then responded to the OSC on the merits supported
19   by his and debtor’s declarations.        Shalaby asserted that
20   sanctions should not be imposed in the case because there was a
21   good faith disagreement as to the interpretation of law and that
22   imposing sanctions would chill his First Amendment rights.        He
23   further argued that (1) there was improper notice of a hearing
24   for the July Motion; (2) Trustee’s exemption objections should
25
26        6
             These paragraphs contain the requirements for signatures
27   on electronically filed documents and retention requirements.
     Under BLR 5005-2(d), a debtor’s counsel must obtain and retain
28   wet signatures of debtor for ECF.

                                       -17-
 1   have been overruled; (3) § 541(a)(2) did not prevent him from
 2   taking the position that the non-filing spouse’s community
 3   property share of non-exempt assets was not property of the
 4   estate and that the bankruptcy court should have held a trial on
 5   that issue; (4) the court should hold a trial on whether the
 6   Borismetrics payment was exemptible wages; (5) Trustee had not
 7   identified specific assets in dispute; (6) funds in a bankruptcy
 8   account could be exempted as tools of the trade; (7) the Sale
 9   Order could be challenged after the fact because a trustee
10   should not be allowed to collect money or property from a debtor
11   based on an artificially high valuation; and (8) his advice to
12   debtor that he did not need to turn over assets to Trustee was
13   justified because:
14        [A]s a matter of logic, a property that has very low
          value, or a ‘negative’ value, is not an asset of the
15        estate due to the lack of a value. This belief is
          based on an understanding of the trustee’s statutory
16        [duty] as specified in 11 U.S.C. § 704. Generally,
          the trustee’s duty is to collect only assets of value
17        that exceed the exemptions and to distribute those
          assets to the creditors.
18
19        Trustee responded to Shalaby with the declaration of his
20   counsel which attached multiple exhibits evidencing alleged
21   frivolous positions asserted by Shalaby.   Shalaby objected to
22   the declaration arguing that every matter therein was a
23   privileged First Amendment communication pursuant to Cal. Civ.
24   Code § 47, and that the declaration was the “equivalent of a
25   SLAPP suit.”   Shalaby also argued that the declaration was an
26   “undisguised attempt to circumvent the safe harbor provisions”
27   of Rule 9011(c)(1)(A).
28        On November 20, 2014, the bankruptcy court held a hearing

                                    -18-
 1   on the OSC.   At the conclusion of the hearing, the court
 2   requested a supplemental declaration from Trustee’s counsel
 3   regarding attorney’s fees incurred for the matters identified in
 4   the OSC.   Trustee’s counsel subsequently filed a declaration
 5   showing total fees and expenses of $58,679.89 through December
 6   8, 2014, of which $14,231 were attributable to dealing with the
 7   issues outlined in the OSC.
 8        Shortly after, Shalaby filed a motion to recuse Judge
 9   Efremsky based on alleged impartiality due to the fact Shalaby
10   indicated an intent to file a lawsuit against Trustee.    In the
11   motion, Shalaby discussed numerous incidents where, in his
12   opinion, the bankruptcy judge showed bias and prejudice against
13   debtor and his counsel.   In reaching his opinion, Shalaby
14   stated:
15        [H]e has now spoken with several attorneys and non-
          attorneys after they had listened to the audio of the
16        OSC hearing and that every one expressed an
          unequivocal belief and conclusion that Judge Efremsky
17        appears very biased and prejudiced in favor of the
          trustee and against the debtor and his counsel.
18
19   The bankruptcy court denied the recusal motion.
20        On April 27, 2015, the bankruptcy court issued its
21   Memorandum Decision finding that Shalaby asserted numerous
22   positions during debtor’s case without an adequate basis in law
23   or fact in violation of Rule 9011.    Accordingly, the court
24   imposed sanctions consisting of: (1) non-compensatory monetary
25   sanction for $8,000 payable to the bankruptcy court;
26   (2) disgorgement of $4,000 that was paid to him by debtor;
27   (3) suspension from the practice of law in the bankruptcy courts
28   for the Northern District of California until he had completed

                                    -19-
 1   24 hours of continuing legal education in bankruptcy law and 3
 2   hours of continuing legal education in ethics (except for those
 3   cases which he had already appeared); and (4) suspension of his
 4   e-filing privileges until he had completed the ECF training
 5   provided by the clerk’s office.      On the same day, the court
 6   entered the Sanctions Order.
 7           On April 30, 2015, Shalaby filed an application to amend
 8   the Memorandum Decision and Sanctions Order.      The bankruptcy
 9   court denied that application.
10           Shalaby filed a timely appeal from the Sanctions Order and
11   Amendment Order.7
12                             II.    JURISDICTION
13           The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
14   §§ 1334 and 157(b)(2)(A).       See In re Nguyen, 447 B.R. 268, 275
15   (9th Cir. BAP 2011)(en banc) (citing In re Brooks–Hamilton, 400
16   B.R. 238, 244 (9th Cir. BAP 2009) (acts leading to suspension
17   occurred in matter central to administration of bankruptcy
18   case).      We have jurisdiction under 28 U.S.C. § 158.
19
20
21
22       7
             Shalaby’s notice of appeal (NOA) states that he also
     appeals from the Memorandum Decision. The Memorandum Decision
23
     does not contain a judgment, order or decree. See Rule 8001(a).
24   The NOA also does not mention the bankruptcy court’s order
     denying Shalaby’s motion for recusal. As a result, the recusal
25   order is not before us in this appeal. In addition, as Shalaby
     has not asserted any arguments on appeal that relate to the
26   bankruptcy court’s denial of his application to amend, those
     arguments are waived. Smith v. Marsh, 194 F.3d 1045, 1052 (9th
27
     Cir. 1999).
28
                                        -20-
 1                                 III.    ISSUES8
 2            Did the bankruptcy court abuse its discretion in imposing
 3   sanctions against Shalaby under Rule 9011?
 4            Did the bankruptcy court abuse its discretion in ordering
 5   disgorgement under § 329 of all fees and costs paid by debtor to
 6   Shalaby?
 7            Did the bankruptcy court abuse its discretion by suspending
 8   Shalaby’s e-filing privileges until he participated in the
 9   training provided by the clerk’s office?
10                           IV.   STANDARDS OF REVIEW
11            All aspects of an award of sanctions are reviewed for an
12   abuse of discretion.      Orion v. Haffman (In re Kayne), 453 B.R.
13   372, 380 (9th Cir. BAP 2011); In re Nguyen, 447 B.R. at 276.
14            We review the bankruptcy court’s decision regarding the
15   proper amount of legal fees to be awarded to the debtor’s
16   attorney for an abuse of discretion.        Hale v. U.S. Trustee, 509
17   F.3d 1139, 1146 (9th Cir. 2007).
18            We also review the bankruptcy court’s interpretation and
19   application of a local rule for an abuse of discretion.       Price
20   v. Lehtinen (In re Lehtinen), 564 F.3d 1052, 1058 (9th Cir.
21   2009).
22            Review for abuse of discretion has two parts.   First, we
23   “determine de novo whether the bankruptcy court identified the
24   correct legal rule to apply to the relief requested.”       U.S. v.
25
26
          8
             Shalaby has framed the issues differently and asserts
27   that all the issues he has raised on appeal are questions of law
     subject to de novo review. We disagree with this contention.
28
     Upon our review of his brief and the record, we reorganized and
     rephrased the issues.

                                          -21-
 1   Hinkson, 585 F.3d 1247, 1261–62 (9th Cir. 2009) (en banc).      If
 2   so, we then determine under the clearly erroneous standard
 3   whether the bankruptcy court’s factual findings and its
 4   application of the facts to the relevant law were
 5   “(1) ‘illogical,’ (2) ‘implausible,’ or (3) ‘without support in
 6   inferences that may be drawn from the facts in the record.’”
 7   Id. at 1262.   Findings of fact are given great deference in this
 8   context.    DeLuca v. Seare (In re Seare), 515 B.R. 599, 614 (9th
 9   Cir. BAP 2014).
10        We may affirm on any ground supported by the record.
11   Shanks v. Dressel, 540 F.3d 1082, 1086 (9th Cir. 2008).
12                               V.   DISCUSSION
13   A.   The Bankruptcy Court’s Authority To Issue Sanctions
14        A bankruptcy court has the inherent authority to regulate
15   the practice of attorneys who appear before them.    Chambers v.
16   NASCO, Inc., 501 U.S. 32, 43 (1991); Caldwell v. Unified Capital
17   Corp. (In re Rainbow Magazine, Inc.), 77 F.3d 278, 284-85 (9th
18   Cir. 1996).    “Inherent powers are the exception, not the rule,”
19   and, therefore, “must be exercised with great caut2/4/16ion.”
20   Chambers, 501 U.S. at 64.    “A specific finding of bad faith
21   . . . must ‘precede any sanction under the court’s inherent
22   powers.’”   United States v. Stoneberger, 805 F.2d 1391, 1393
23   (9th Cir. 1986).   The bankruptcy court also has express power to
24   impose sanctions pursuant to Rule 9011 and its local rules.      See
25   In re Nguyen, 447 B.R. 380-81.     A bankruptcy court may suspend
26   an attorney from the practice of law for violations of Rule
27   9011.   In re Brooks-Hamilton, 400 B.R. at 249.
28
                                       -22-
 1   B.   Rule 9011
 2        The initial basis for imposing sanctions on Shalaby is Rule
 3   9011, the bankruptcy counterpart to Civil Rule 11.      Case law
 4   interpreting Rule 11 is applicable to Rule 9011.      Marsch v.
 5   Marsch (In re Marsch), 36 F.3d 825, 829 (9th Cir. 1994).
 6        Rule 9011(b) requires parties and their attorneys to ensure
 7   papers filed before a bankruptcy court are “warranted by
 8   existing law or by a nonfrivolous argument for the extension,
 9   modification, or reversal of existing law or the establishment
10   of new law” and that “allegations and other factual contentions
11   have evidentiary support . . . .”      Rule 9011(b)(2) and (3).
12   Rule 9011(b) incorporates a reasonableness standard which
13   focuses on whether a competent attorney admitted to practice
14   before the involved court could believe in like circumstances
15   that his actions were legally and factually justified.      See
16   Zaldivar v. City of Los Angeles, 780 F.2d 823, 830-31 (9th Cir.
17   1986).
18        When assessing sanctions sua sponte under Rule
19   9011(c)(1)(B) and under the law of this Circuit, the bankruptcy
20   court is required to issue an order to show cause to provide
21   notice and an opportunity to be heard and to apply a higher
22   standard “akin to contempt” than in the case of party-initiated
23   sanctions.    R&D Latex Corp., 242 F.3d at 1115-16.    The reason
24   behind the heightened standard is because, unlike party-
25   initiated motions, court-initiated sanctions under Rule
26   9011(c)(1)(B) do not involve the 21-day safe harbor provision
27   for the offending party to correct or withdraw the challenged
28   submission.    Id. at 1116 (citing Barber v. Miller, 146 F.3d 707,

                                     -23-
 1   711 (9th Cir. 1998)).
 2         In Barber v. Miller, the Ninth Circuit emphasized the
 3   distinctions between a party-initiated motion for sanctions
 4   under Civil Rule 11 and sanctions imposed upon the court’s own
 5   initiative, finding they were not the equivalent.   There, the
 6   district court granted the defendant’s motion to dismiss the
 7   plaintiff’s complaint with prejudice.   The order granting the
 8   motion indicated that the district court would retain
 9   jurisdiction to consider sanctions.   After dismissal, the
10   defendant notified the attorney for the plaintiff by letter that
11   it would be seeking sanctions and then it filed the motion.    The
12   district court granted the motion, awarding the defendant $2,500
13   in sanctions against the attorney.    The attorney appealed and
14   the defendant cross-appealed on the amount.   The Ninth Circuit
15   reversed the award of sanctions because the motion for sanctions
16   did not comply with the safe harbor provision under Civil Rule
17   11.
18         The court then considered whether the district court’s
19   retention of jurisdiction for purposes of a sanctions motion
20   could be equated to an election by the court to impose sanctions
21   on its own motion.   The Ninth Circuit concluded that it was not
22   the equivalent, noting the distinction between a party-initiated
23   motion for sanctions and sanctions awarded on the court’s own
24   initiative.   The Ninth Circuit observed that the district court
25   awarded sanctions to a party under circumstances which did not
26   meet the standard for court-initiated sanctions.    The court also
27   noted that “the fact the district court exercised its discretion
28   to award sanctions on motion of a party does not necessarily

                                    -24-
 1   mean that the court would exercise its discretion to impose
 2   sanctions on its own motion for the same conduct” since show
 3   cause orders “will ordinarily be issued only in situations that
 4   are akin to a contempt of court. . . .”     146 F.3d at 711 (citing
 5   Civil Rule 11, Adv. Comm. Notes to 1993 Amend.).9
 6            Here, the bankruptcy court expressly applied the objective
 7   reasonableness standard to Shalaby’s numerous violations of Rule
 8   9011.      The court dismissed Shalaby’s contentions that his “good
 9   faith belief” or “opinion” supported his positions on the basis
10   that his subjective intent was irrelevant since his conduct is
11   measured against a reasonableness standard which consists of a
12   competent attorney admitted to practice law before the court.
13   With respect to each violation of Rule 9011(b) set forth in the
14   OSC, the bankruptcy court expressly applied this standard to
15   each of its factual findings.
16            The evidence in the record supports the bankruptcy court’s
17
18        9
              Civil Rule 11, Adv. Comm. Notes to 1993 Amend., states
19   in relevant part:

20        The power of the court to act on its own initiative is
          retained, but with the condition that this be done
21        through a show cause order. . . . Since show cause
          orders will ordinarily be issued only in situations
22
          that are akin to a contempt of court, the rule does not
23        provide a ‘safe harbor’ to a litigant for withdrawing a
          claim, defense, etc., after a show cause order has been
24        issued on the court’s own initiative.
25   Rule 9011, Adv. Comm. Notes to 1997 Amend. states:
26
          This rule is amended to conform to the 1993 changes to
27        [Civil Rule] 11. For an explanation of these
          amendments, see the advisory committee note to the 1993
28        amendments to [Civil Rule] 11.

                                       -25-
 1   ruling; it certainly shows that Shalaby’s legal positions and
 2   arguments were objectively frivolous under the reasonableness
 3   standard.   In fact, Shalaby admitted as much when he requested
 4   the court to order a settlement conference.    There, he
 5   acknowledged that with a bit more effort and legal research,
 6   many of the problems and matters disputed could have and would
 7   have been avoided.     He further stated that there was a “personal
 8   matter” which may explain why he admittedly failed to diligently
 9   research some of his legal contentions and presented incorrect
10   interpretations of applicable law (e.g. community property
11   interest being irrelevant to exemptions, misapplication of
12   § 542(a), and other matters), but the record does not show what
13   that “personal matter” was or whether it was a legitimate excuse
14   for Shalaby’s admitted digressions.     Finally, Shalaby went on to
15   say that he recognized his mistakes, and appreciated the
16   “court’s frustration.”    Therefore, at least then, Shalaby seemed
17   to acknowledge that he had a duty to conduct a reasonable
18   inquiry into the law and underlying facts before filing the
19   documents, and that had he done so, many of the problems could
20   have been avoided.10
21        But even if Shalaby’s positions were frivolous under the
22   reasonableness standard, the standard for court-initiated
23   sanctions in the Ninth Circuit is “akin to contempt.”      Although
24   we considered remand so that the bankruptcy court could apply
25
         10
26           In his brief, Shalaby has not directed us to any clearly
     erroneous facts which would warrant disturbing the bankruptcy
27   court’s decision based on its application of the reasonableness
     standard. Instead, he continues to assert that his positions
28   were correct under the guise of zealously representing his
     client.

                                      -26-
 1   the proper legal standard, we ultimately conclude that certain
 2   factual findings made by the bankruptcy court foreclose that
 3   consideration.
 4        Admittedly, the “akin to contempt” standard is neither
 5   well-developed nor consistently applied.   However, case law
 6   makes it clear the alleged transgressions must exceed those for
 7   party-initiated sanctions.   In United National Insurance Company
 8   v. R & D Latex Corporation, 242 F.3d 1102, the Ninth Circuit
 9   reversed the district court’s imposition of sua sponte sanctions
10   after examining the sanctioned attorneys’ statements made in a
11   Notice of Related Cases (Notice) they filed in connection with a
12   removed action.   Looking at all the circumstances, the court
13   found the attorneys’ actions “not so egregious as to merit sua
14   sponte sanctions,” and concluded that the “Notice was in neither
15   purpose nor substance ‘akin to contempt.’”   Id. at 1116, 1118.
16        Accordingly, at bottom, the “akin to contempt” standard
17   seems to require conduct that is particularly egregious and
18   similar to conduct that would be sanctionable under the
19   standards for contempt.   See MyMedicalRecords, Inc. v. Jardogs,
20   LLC, 2015 WL 5445987, at *2 (C.D. Cal. 2015) (finding that bad
21   faith analysis applied to court-initiated sanctions under Civil
22   Rule 11); Brown v. Royal Power Mgt., Inc., 2012 WL 298315, at *4
23   (N.D. Cal. Feb. 1, 2012) (finding that assertion of a position
24   knowing that it is baseless “constituted bad faith and lacked
25   forthrightness with the court” and thus was “akin to
26   contempt.”); Stone v. Wolff Properties LLC, 135 Fed.Appx. 56,
27   2005 WL 1389893, at *2 (9th Cir. June 13, 2005) (reversing
28   district court’s imposition of sua sponte sanctions, finding

                                    -27-
 1   that appellant’s “conduct, though perhaps not laudable, was not
 2   so ‘egregious’ as to be considered ‘beyond the pale.’”) (citing
 3   R & D Latex Corp., 242 F.3d at 1116-18); Sanai v. Sanai, 408
 4   Fed.Appx. 1, 2010 WL 2782636, at *3 (9th Cir. July 12, 2010)
 5   (affirming sua sponte sanction award by district court which
 6   issued OSC, gave appellants an opportunity to be heard, and
 7   expressly found they acted in bad faith); Lynch v. Cal. Ct. of
 8   Appeal, Third Dist., 2008 WL 2811197, at *7 (July 14, 2008)
 9   (noting that prior to a sua sponte imposition of sanctions under
10   Civil Rule 11, the court must find that counsel’s conduct was
11   particularly egregious, i.e., “akin to a contempt of court”);
12   compare Darulis v. Iaria, 2008 WL 5101932, at *4 (S.D. Cal. Dec.
13   1, 2008) (finding conduct was not of the nature of a violation
14   of a court order and therefore could not be punished sua sponte
15   under Civil Rule 11).
16        Here, the bankruptcy court’s findings do not support the
17   heightened standard.    First, the court found that nothing in the
18   record suggested that Shalaby had an improper purpose under Rule
19   9011(b)(1).   Next, in considering the sanctions to impose, the
20   bankruptcy court cited the ABA standards which include an
21   inquiry into whether the attorney acted intentionally, knowingly
22   or negligently.   The bankruptcy court did not find Shalaby acted
23   knowingly or intentionally, but that at a minimum, his conduct
24   was negligent.    The heightened standard of “akin to contempt”
25   requires more than ignorance or negligence on the part of
26   Shalaby.   See Barber, 146 F.3d at 711 (noting that bad faith in
27   an analogous context requires more than mere negligence).   While
28   we do not condone Shalaby’s conduct, these factual findings

                                     -28-
 1   demonstrate that his conduct was neither in purpose nor
 2   substance “akin to contempt.”
 3        In sum, the bankruptcy court erred in sanctioning Shalaby
 4   for his conduct under Rule 9011 because it applied the wrong
 5   legal standard for sua sponte sanctions and its factual findings
 6   do not support — and in fact foreclose — the heightened standard
 7   of “akin to contempt.”   Accordingly, the court abused its
 8   discretion in issuing sanctions under Rule 9011.
 9   C.   Section 329
10        Section 329(a) requires an attorney representing a debtor
11   in a bankruptcy case to file a statement regarding the
12   compensation agreed to be paid for services in the case and the
13   source of the compensation.   Section 329(b) provides in relevant
14   part:   “If such compensation exceeds the reasonable value of any
15   such service, the court may cancel any such agreement, or order
16   the return of any such payment. . . . .”   (Emphasis added.)
17   Bankruptcy Code § 329 is implemented by Rules 2016 and 2017.
18   Rule 2016(b) provides that every attorney for a debtor, whether
19   or not the attorney applies for compensation, shall file the
20   statement required by § 329 of the Code.   Rule 2017(a) provides
21   that on the court’s own initiative, the court may determine
22   whether any payment by the debtor, made directly or indirectly
23   and in contemplation of the filing of a petition, to an attorney
24   for services rendered or to be rendered, is excessive.
25        The standard applied under § 329(b) to determine the
26   reasonable value of fees is set forth in § 330.    Hale v. U.S.
27   Trustee (In re Basham), 208 B.R. 926, 931 (9th Cir. BAP 1997).
28   “The burden is upon the applicant to demonstrate that the fees

                                     -29-
 1   are reasonable.”   Id. at 931-32.   Section 330(a)(3) states that
 2   in determining the amount of reasonable compensation, the court
 3   should consider the nature, extent, and value of the services
 4   rendered, taking into account all relevant factors, including
 5   (A) the time spent on the services; (B) the rates charged for
 6   the services; (C) whether the services were necessary or
 7   beneficial at the time the services were rendered; (D) whether
 8   the services were performed within a reasonable amount of time
 9   commensurate with the complexity, importance, and nature of the
10   problem, issue, or task addressed; (E) whether the person
11   demonstrated skill and experience in the bankruptcy field;
12   (F) whether the compensation is reasonable based on the
13   customary compensation charged by comparably skilled
14   practitioners in cases other than bankruptcy cases.
15        The reasonable value of services rendered by a debtor’s
16   attorney “is a question of fact to be determined by the
17   particular circumstances of each case.    The requested
18   compensation may be reduced if the court finds that the work
19   done was excessive or of poor quality.”    In re Spickelmier, 469
20   B.R. 903, 914 (Bankr. D. Nev. 2012); see also In re Basham, 208
21   B.R. at 933 (disgorgement upheld for incomplete and inaccurate
22   schedules, improperly claimed exemptions, improperly noticed
23   plan confirmation hearing).
24        The bankruptcy court’s OSC put Shalaby on notice of a
25   potential disgorgement under this section.    On appeal, Shalaby
26   contends § 329 “could not, as a matter of law, apply in this
27   case.”   Shalaby does not fully explain his position on this
28   point, but presumably he contends that § 329 does not apply

                                    -30-
 1   since $4,000 was disproportionate to the services rendered.
 2   Shalaby is mistaken.    As noted by the bankruptcy court, the
 3   question is not how much time Shalaby spent on the case and what
 4   he believes his theoretical unpaid bill might be.    Rather, the
 5   question is whether the $4,000 he was paid was excessive for
 6   what he accomplished for debtor in this case.
 7        The bankruptcy court properly considered the value of
 8   Shalaby’s services under § 330(a)(3).    Specifically, the court
 9   found factors (C) whether the services were necessary or
10   beneficial and (E) skill and experience in the bankruptcy field
11   “particularly important here.”    Applying those factors, the
12   court found:
13        First, as the issues listed in the OSC and the above
          discussion show, his services were not necessary or
14        beneficial to the debtor and they were costly and
          detrimental for the estate. Second, it is apparent
15        that Mr. Shalaby lacked skill and experience in this
          field; he lacked competence in the relevant
16        substantive and procedural areas required to handle
          this case.
17
          His handling of this case showed he did not understand
18        the implications of filing a chapter 7 case and did
          not understand the basic concepts, including the
19        debtor’s duties, the Trustee’s duties, the nature of a
          bankruptcy estate, the duty to turn over assets, the
20        rules regarding abandonment, the concept of rejection
          of an executory lease, or the importance of
21        administrative rent. If he were competent, multiple
          amendments to the schedules would not have been
22        necessary and he would have known he had to have the
          debtor sign them, as the applicable ECF rules require.
23
24   The record supports these findings and thus they are not clearly
25   erroneous.
26        Shalaby also complains that of the $4,000, $306 was for the
27   filing fee.    According to Shalaby, § 329 cannot be used to
28   direct a debtor’s counsel to “disgorge” filing fees as this

                                      -31-
 1   would be a Fifth Amendment takings violation.    Shalaby provides
 2   no analysis to support his conclusory statement nor does he
 3   bother to provide authority.    The takings clause provides that
 4   “private property [shall not] be taken for public use without
 5   just compensation.”    U.S. CONST. amend. V.   Suffice to say that
 6   a debtor’s attorney does not have a property interest in his or
 7   her compensation that is protected under the Takings Clause of
 8   the Fifth Amendment.
 9        In sum, the bankruptcy court applied the correct legal rule
10   and its finding that the $4,000 paid to Shalaby by debtor
11   exceeded the reasonable value of his services was not illogical,
12   implausible, or without support in the record.    Therefore, the
13   bankruptcy court did not abuse its discretion when it ordered
14   disgorgement of all fees, including the filing fee within the
15   total amount to be disgorged.    See DeLuca v. Seare (In re
16   Seare), 515 B.R. 599, 621 (9th Cir. BAP 2014) (finding court did
17   not abuse its discretion in including filing and credit report
18   fees within the total amount to be disgorged).
19   D.   Suspension of ECF filing privileges
20        The bankruptcy court stated in the OSC that it was
21   considering sanctions based on Shalaby’s admitted failure to
22   obtain debtor’s signature on documents filed with the court
23   through ECF.   The court further observed that Shalaby had
24   admitted that it was his practice to not have his debtor clients
25   sign any of the papers filed on their behalf.    In response to
26   the OSC, Shalaby maintained that he could not locate the ECF
27   procedures on the bankruptcy court’s website.    The bankruptcy
28   court noted that the procedures were readily available on the

                                     -32-
 1   website and that Shalaby was required to know the rules and
 2   abide by them if he was going to practice in that bankruptcy
 3   court.   Accordingly, the bankruptcy court determined that the
 4   remedy for Shalaby’s “flagrant violation” was to suspend his e-
 5   filing privileges until he participated in the training provided
 6   by the clerk’s office.
 7        On appeal, Shalaby acknowledges his oversight regarding the
 8   requirements for wet signatures.   He asserts, however, that such
 9   oversight is not sanctionable under any provision of Rule 9011
10   nor § 105, especially since he rectified the error before the
11   OSC hearing.   He further argues that the bankruptcy court erred
12   by not considering nonmonetary measures.   We are not persuaded.
13        As noted by the bankruptcy court, Shalaby was a registered
14   user of the bankruptcy court’s CM/ECF system and thus bound by
15   the procedures and rules governing electronic filings.    The
16   court’s ECF Administrative Procedures ¶¶ 8 and 9 state in
17   relevant part:
18        A Registered Participant who electronically files a
          document . . . shall be deemed to have certified under
19        penalty of perjury that he or she has personally
          reviewed the document.
20
          Pleadings . . . that are required to be verified . . .
21        and all affidavits or other pleadings in which a person
          verifies, certifies, affirms or swears under oath or
22        penalty of perjury concerning the truth of matters set
          forth in that pleading or document (‘Verified
23        Pleading’) may be filed electronically . . . .
          The electronic filing of a Verified Pleading
24        constitutes a representation by the Registered
          Participant . . . that the Registered Participant has
25        in his or her possession at the time of filing the
          fully executed original, signed pleading/document.
26
          BLR 5005-2(d) provides:
27        In the case of a Signatory who is not a Registered
          Participant, as in the case of documents requiring
28
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 1        multiple signatures or documents signed by a third
          party such as a debtor, the filing of the document
 2        constitutes the filer’s attestation that the filer has
          possession of (i) an original ink signature, (ii) a
 3        copy of the original ink signature that has been
          electronically scanned, or (iii) a copy of the
 4        original ink signature transmitted by facsimile. The
          filer shall maintain records to support this
 5        attestation for subsequent production to the Court, if
          so ordered, or for inspection upon request by a party,
 6        until five years after the case or adversary
          proceeding in which the document was filed is closed.
 7
 8        Shalaby violated the ECF Administrative Procedures and BLR
 9   5005-2(d) — he admitted he did not have debtor’s original
10   signatures on the documents he filed.
11        The bankruptcy court possesses the inherent authority to
12   manage attorney practices before it and to impose sanctions for
13   violation of its local rules.   See Singh v. Singh (In re Singh),
14   2014 WL 842102, at *8 (9th Cir. BAP March 4, 2011).   BLR 9011-1
15   states:
16        Any petition, schedule, statement, declaration, claim
          or other document filed and signed or subscribed under
17        any method (digital, electronic, scanned) adopted
          under the rules of this Court shall be treated for all
18        purposes (both civil and criminal, including penalties
          for perjury) in the same manner as though manually
19        signed or subscribed.
20        Failure of counsel or of a party to comply with any
          provision of these rules or the Bankruptcy Rules shall
21        be grounds for imposition by the Court of appropriate
          sanctions.
22
23        We can affirm the bankruptcy court’s imposition of
24   sanctions against Shalaby under this rule.
25        BLR 9011-1 authorized the bankruptcy court to use its
26   authority to suspend Shalaby’s e-filing privileges until he took
27   further training.   Moreover, contrary to Shalaby’s contention,
28   this remedy for the violation was a nonmonetary remedy and

                                     -34-
 1   Shalaby has already complied.11     Finally, unlike the court in In
 2   re Singh, nowhere did the bankruptcy court purport to rely on
 3   § 105 for its sanctioning power in connection with Shalaby’s
 4   violations of the ECF procedures.        Thus, the issue of Shalaby’s
 5   “bad faith” was irrelevant.   In sum, the bankruptcy court did
 6   not abuse its discretion when it sanctioned Shalaby by
 7   suspending his e-filing privileges until he participated in the
 8   training session offered by the clerk’s office.
 9   E.    Request for Judicial Notice
10         On August 30, 2015, Shalaby filed a request for judicial
11   notice of the several documents pursuant to Fed. R. Evid. 201:
12         A cover email from Attorney Dennis Davis, received by
           Appellant on August 19, 2015, advising that the
13         Chapter 7 trustee collected $76,176.73 in funds in
           this bankruptcy case. Attached to the email is Mr.
14         Davis’ “First and Final Application” for compensation,
           document number 285, which sets forth the amount of
15         fees he has claimed at $62,627.50, and costs of
           $2,983.00.
16
           Judge Efremsky’s order awarding fees of $62,627.50 and
17         costs of $2,983.99 to Attorney Dennis Davis.
18         A letter dated December 12, 2014 acknowledging receipt
           of Appellant’s complaint of judicial misconduct no.
19         14-90182 pertaining to Judge Roger L. Efremsky.
20         These documents are not relevant to the disposition of this
21
22        11
            Shalaby suggests that since he complied with the
     Sanctions Order by taking the ECF class, this portion of his
23   appeal may be moot. We do not think Shalaby’s compliance with
24   the Sanctions Order renders this portion of his appeal moot as we
     have jurisdiction to consider the legal question of whether
25   Shalaby’s conduct was sanctionable. See Fleming & Assocs. v.
     Newby & Tittle, 529 F.3d 631, 640 (5th Cir. 2008) (“Any
26   non-monetary portion of the sanctions not rendered moot by
     settlement is appealable for its residual reputational effects on
27
     the attorney.”); Dailey v. Vought Aircraft Co., 141 F.3d 224, 226
28   (5th Cir. 1998) (“This appeal is not moot because the [temporary]
     disbarment on the attorney’s record may affect her status as a
     member of the bar and have other collateral consequences.”).

                                       -35-
 1   appeal.   As judicial notice is inappropriate where the facts to
 2   be noticed are irrelevant, see Ruiz v. City of Santa Maria, 160
 3   F.3d 543, 548 n. 13 (9th Cir. 1998), we deny the request for
 4   judicial notice.
 5                            VI.   CONCLUSION
 6        For the reasons stated, we AFFIRM in part and REVERSE in
 7   part.
 8
 9
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12
13
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