[00:00:02] Speaker 02:
Inray Shear, Marilyn Shear, appellant, appearing pro se, Suzanne Grant, appearing for appellee.

[00:00:12] Speaker 05:
This year, please.

[00:00:13] Speaker 05:
Please go ahead.

[00:00:15] Speaker 05:
Would you like to reserve some time?

[00:00:17] Speaker 02:
Yes, Your Honor.

[00:00:18] Speaker 05:
OK, how much would you like?

[00:00:19] Speaker 02:
Five minutes.

[00:00:20] Speaker 05:
Very good.

[00:00:20] Speaker 05:
Please go ahead.

[00:00:22] Speaker 02:
May it please the court?

[00:00:25] Speaker 02:
The bankruptcy court committed error.

[00:00:27] Speaker 02:
and the order dismissing my complaint should be reversed because the state violated the discharge injunction of Section 524A2 by imposing mandatory payment conditions on my law license requiring that I pay discharged third-party debt and the costs associated with obtaining such unlawful relief before I could recover my law license.

[00:00:51] Speaker 05:
So are you saying the costs were discharged also?

[00:00:55] Speaker 02:
The costs were not discharged.

[00:00:57] Speaker 02:
Encouraging them, they were void ab initio because they were incurred in obtaining relief that was not authorized, that could not be authorized because it was void.

[00:01:10] Speaker 04:
But isn't that contrary to the existing Ninth Circuit precedent that we're bound by in Ray Finley?

[00:01:16] Speaker 02:
Finley analyzed the cost under Section 523A7 and referred to a state law that said costs were disciplinary.

[00:01:26] Speaker 02:
That is not the analysis that I'm referring to here.

[00:01:29] Speaker 02:
I'm referring to Section 524A2, which makes

[00:01:33] Speaker 02:
trying to obtain such relief void ab initio incurring costs in obtaining relief which violated the discharge injunction.

[00:01:41] Speaker 04:
I hear you but in in Sheridan Albert Sheridan she raised the same argument and the court specifically running back to Finley said the question was were they discharged and the answer was no.

[00:01:55] Speaker 02:
Albert Sheridan was a different case because there the discharge injunction was not involved because the order from the Supreme Court came down before she filed bankruptcy.

[00:02:10] Speaker 02:
In my case, the order came down

[00:02:13] Speaker 02:
after my discharge.

[00:02:15] Speaker 02:
524A2 was not at issue in Elbert Sheridan.

[00:02:19] Speaker 04:
But you got the benefit in the subsequent proceedings that were conducted in 2013 and 2015 by the state bar.

[00:02:29] Speaker 04:
You got the benefit of the discharge of the restitution orders that were issued through those proceedings.

[00:02:35] Speaker 04:
And yet you say somehow they're continuing the proceedings to incur costs

[00:02:42] Speaker 04:
were at void ab initio.

[00:02:44] Speaker 04:
You have the advantage of saying restitution that was related to pre-petition conduct is discharged, but costs that are related to pre-petition enforcement of that actions are somehow dischargeable.

[00:02:58] Speaker 04:
When the Ninth Circuit has said costs are not dischargeable, they're part of the penalty that imposed under state law to reinstate your license, and that's absolutely required under California law.

[00:03:10] Speaker 02:
Your Honor, I am not saying that costs are dischargeable.

[00:03:14] Speaker 02:
I am not saying that.

[00:03:16] Speaker 02:
That is not my argument.

[00:03:18] Speaker 02:
I tried to make that clear in my brief.

[00:03:20] Speaker 02:
What I'm saying is that the incurring of those costs, the incurring of them, were void

[00:03:28] Speaker 02:
ab initio because they were related to actions taken to enforce a lien against my law license.

[00:03:36] Speaker 02:
Those costs could not be recovered.

[00:03:39] Speaker 02:
They were void ab initio.

[00:03:41] Speaker 02:
They should not have been incurred.

[00:03:43] Speaker 05:
Are you saying they were void ab initio because the costs weren't adjudicated before you got their discharge?

[00:03:49] Speaker 05:
They were only adjudicated after?

[00:03:51] Speaker 05:
Suppose these same costs had been awarded before you got your discharge.

[00:03:56] Speaker 05:
They would not be dischargeable, correct?

[00:03:58] Speaker 02:
It's not about discharge.

[00:04:00] Speaker 02:
It's about whether they were void ab initio.

[00:04:02] Speaker 05:
I think the two things are related.

[00:04:03] Speaker 05:
But focus on my question, please.

[00:04:05] Speaker 05:
If those costs had been adjudicated by the California Supreme Court before you got your discharge, they would not be discharged, correct?

[00:04:13] Speaker 05:
Under Albert Sheridan.

[00:04:16] Speaker 02:
Albert Sheridan, Your Honor, with all due respect, has no impact on this case because the cost in her case

[00:04:26] Speaker 02:
were incurred before the bankruptcy was filed.

[00:04:31] Speaker 02:
There could not have been a violation of either the automatic stay or the discharge injunction when those costs were awarded because the bankruptcy had not been filed yet.

[00:04:44] Speaker 05:
And in my case... Let me go on to another question.

[00:04:47] Speaker 05:
OK.

[00:04:47] Speaker 02:
This is very important.

[00:04:48] Speaker 02:
And I know, I understand that the courts have a problem with it.

[00:04:52] Speaker 02:
But I tried to explain this because not only was the state bar in violation of the discharge injunction, they were also in violation of the automatic stay.

[00:05:04] Speaker 05:
You haven't made that claim, correct?

[00:05:06] Speaker 05:
Yet.

[00:05:08] Speaker 02:
Well, I'm saying if you want to go back, they were also in violation of the automatic stay because... We're not going to go back because you haven't made that claim yet.

[00:05:18] Speaker 05:
Let me try and approach this a little bit differently.

[00:05:22] Speaker 05:
The discharge, 544A says that a judgment is void to the extent that it adjudicates the debtor's personal liability for a discharge debt.

[00:05:35] Speaker 05:
You seem to be saying that because this debt was partly discharged, at least the restitution part was dischargeable, the rest of it also must be discharged as well.

[00:05:46] Speaker 05:
How do you reconcile that with the language of the statute which says to the extent that?

[00:05:51] Speaker 02:
I'm not arguing necessarily 524A1.

[00:05:54] Speaker 02:
I'm arguing 524A2, the discharge injunction, the statutory injunction that says that any effort to enforce discharge debt is void ab initio, is void at the time.

[00:06:11] Speaker 02:
And the state bar likes to make the argument that they are proceeding under 362B4,

[00:06:17] Speaker 05:
I think what I'm trying to focus on is the statute, and I'm working from memory here, says that the judgment is void to the extent it adjudicates a discharge debt.

[00:06:27] Speaker 05:
It doesn't say all of it, including any non-dischargeable part.

[00:06:32] Speaker 05:
How do you reconcile your argument with that to the extent language?

[00:06:37] Speaker 02:
That's Section 524A1.

[00:06:39] Speaker 02:
I'm talking about 524A2, the discharge injunction.

[00:06:45] Speaker 02:
And the Ninth Circuit law says that any judicial proceeding or acts to enforce personal liability for a discharge debt

[00:06:54] Speaker 04:
The costs have not been discharged.

[00:06:57] Speaker 04:
Their actions to enforce the costs are not actions to hold you personally liable for discharge debt.

[00:07:04] Speaker 04:
You only have a discharge of the restitution order.

[00:07:07] Speaker 04:
You don't have a discharge of anything else.

[00:07:10] Speaker 02:
The costs were incurred in trying to enforce.

[00:07:15] Speaker 04:
It doesn't matter.

[00:07:16] Speaker 04:
They're separate from restitution by statute in California.

[00:07:20] Speaker 04:
They have to be imposed separately.

[00:07:23] Speaker 04:
And it's a condition of reinstatement by state law.

[00:07:27] Speaker 02:
Under the Supremacy Clause 524A2,

[00:07:31] Speaker 02:
takes priority over a state statute.

[00:07:35] Speaker 02:
I am not analyzing this under 523A7, which is where Finley gets the provision.

[00:07:42] Speaker 02:
Finley had to look to state law to determine that costs were disciplinary.

[00:07:48] Speaker 02:
I am not making that argument.

[00:07:50] Speaker 02:
These costs were associated with trying to enforce

[00:07:56] Speaker 02:
You're trying to enforce a lien, which was not allowed.

[00:08:01] Speaker 02:
So any attempt to enforce the costs associated with that.

[00:08:05] Speaker 05:
I have the language in front of me now, 524A2.

[00:08:09] Speaker 05:
And it's not quite what I said before, but there's another word that's important.

[00:08:13] Speaker 05:
It says that the discharge operates as an injunction, et cetera.

[00:08:17] Speaker 05:
to collect, recover, or offset any such debt, any such debt.

[00:08:23] Speaker 05:
And the such, I think, has to refer back to A1, which states the debts that are discharged.

[00:08:31] Speaker 05:
It's limited to debtors, the debts that are discharged.

[00:08:34] Speaker 02:
Okay.

[00:08:35] Speaker 02:
But, Your Honor, they were trying to obtain a lien.

[00:08:39] Speaker 02:
That was part of the cost.

[00:08:40] Speaker 02:
You can't piecemeal those costs.

[00:08:42] Speaker 02:
Why not?

[00:08:43] Speaker 05:
The numbers are separable.

[00:08:44] Speaker 05:
They're stated separately.

[00:08:46] Speaker 02:
No, but part of the costs they incurred were to enforce that lien.

[00:08:51] Speaker 02:
That was part and parcel of their effort.

[00:08:54] Speaker 02:
Part of the relief they sought and the costs they incurred were to enforce that lien against my law license, which they could not do.

[00:09:03] Speaker 02:
So the costs associated with enforcing that lien, which I'm saying can't be piecemealed from the whole, but the costs were incurred.

[00:09:11] Speaker 02:
from the very beginning, from the very beginning, and they were not operating under the police power of any kind, because 362B4, regardless of what they say, does not cover enforcement by a lien.

[00:09:25] Speaker 02:
And that's what they were doing here.

[00:09:27] Speaker 02:
So they incurred costs to take unlawful action.

[00:09:31] Speaker 02:
And those costs, under Girolo 2, the cost, if they take

[00:09:37] Speaker 02:
Unlawful action, action in violation of the stay, those costs incurred.

[00:09:42] Speaker 02:
It's not like they were separate.

[00:09:43] Speaker 02:
This is all part and parcel of their effort to try and obtain a lien against my law license, which was the primary portion of the Supreme Court's orders.

[00:09:53] Speaker 05:
In Albert Sheridan, the Ninth Circuit didn't regard them as part and parcel, as inseparable.

[00:10:00] Speaker 05:
They said that the restitutionary obligation was discharged, the costs were not.

[00:10:04] Speaker 05:
I think you have to be arguing that they become inseparable because this all happened post-discharge.

[00:10:10] Speaker 05:
Is that right?

[00:10:11] Speaker 02:
Yes, Your Honor.

[00:10:12] Speaker 02:
Albert Sheridan does not reach the issue because the costs there were incurred before she even filed her bankruptcy.

[00:10:20] Speaker 02:
Those weren't true pre-petition, pre-petition debts.

[00:10:26] Speaker 04:
There are portions of the costs that are in this case that were incurred before you filed bankruptcy.

[00:10:34] Speaker 04:
They had already taken action.

[00:10:35] Speaker 04:
The Supreme Court had already affirmed.

[00:10:38] Speaker 04:
You then asked them to reduce the amount of the cost.

[00:10:41] Speaker 04:
They agreed to reduce the cost to $20,000.

[00:10:44] Speaker 04:
You filed bankruptcy after they issued their ruling.

[00:10:50] Speaker 02:
No, Your Honor.

[00:10:52] Speaker 04:
You filed bankruptcy in July of 2013, didn't you?

[00:10:55] Speaker 02:
The first Supreme Court order came down on July 16, 2014.

[00:10:59] Speaker 02:
That's incorrect.

[00:11:03] Speaker 02:
It is true the state bar filed proceedings in

[00:11:07] Speaker 02:
2012.

[00:11:08] Speaker 02:
But the review department didn't even get the case until after my bankruptcy.

[00:11:14] Speaker 02:
So no, the Supreme Court order came down on July 16, 2014.

[00:11:18] Speaker 04:
So let me just clarify.

[00:11:22] Speaker 04:
Your position is that if a lawyer is committed a violation, alleged violation, of state law and or unauthorized practice of law,

[00:11:34] Speaker 04:
consumer violations.

[00:11:36] Speaker 04:
That's what was asserted in your case.

[00:11:39] Speaker 04:
The lawyer can go file bankruptcy.

[00:11:41] Speaker 04:
And effectively, if they get a discharge, they can stop the state from proceeding to take any action to collect restitution costs.

[00:11:51] Speaker 04:
And they can take no further action to stop reinstatement.

[00:11:54] Speaker 04:
They can't impose any conditions upon the lawyer to take ethics training or do anything else.

[00:12:02] Speaker 04:
In essence, the discharge that you obtained is a get-out-of-jail-free card with respect to anything that occurred pre-petition and they can't do anything post-petition to enforce it against you.

[00:12:14] Speaker 02:
No, Your Honor, not at all.

[00:12:17] Speaker 02:
That's a misconception and an argument that the state bar likes to make for strict liability.

[00:12:22] Speaker 02:
Not at all.

[00:12:23] Speaker 02:
But the state courts under the Supremacy Clause and under Kelp are bound by federal law.

[00:12:31] Speaker 02:
They are bound by the bankruptcy code.

[00:12:34] Speaker 02:
And they cannot violate it.

[00:12:36] Speaker 02:
They cannot place mandatory payment conditions, liens on my law license.

[00:12:42] Speaker 02:
Now, they could oppose a fine.

[00:12:45] Speaker 02:
They could oppose other types of relief.

[00:12:47] Speaker 04:
So how is that different than a lien?

[00:12:50] Speaker 04:
How has it become a lien in this case?

[00:12:54] Speaker 02:
They imposed a mandatory payment condition on my law license because the payments were to be made to third parties.

[00:13:04] Speaker 03:
The state bar is the third party?

[00:13:07] Speaker 05:
Costs weren't payable to third parties.

[00:13:09] Speaker 02:
No, but the costs were incurred as part of their effort to obtain the lien.

[00:13:14] Speaker 02:
The costs were associated with obtaining a lien, so they're inextricably... How would they get a lien?

[00:13:21] Speaker 04:
Can they foreclose the law license?

[00:13:24] Speaker 02:
They make it a charge against my law license so that I can't... Can they sell the lien to somebody else?

[00:13:31] Speaker 02:
That's not the requirement for a lien.

[00:13:33] Speaker 03:
A lien under California law is typical.

[00:13:36] Speaker 02:
No.

[00:13:36] Speaker 02:
The definition of lien under Section 101-37 of the Bankruptcy Code defines lien, a charge against or interest in property to secure payment of a debt or performance of an obligation.

[00:13:49] Speaker 02:
That is coercion, and that means that I cannot get my license back unless I satisfy that lien.

[00:13:57] Speaker 02:
That's the very definition of a lien, Your Honor.

[00:14:00] Speaker 01:
Counsel, in this case.

[00:14:02] Speaker 01:
We're using the word cost here, but isn't this really a penalty?

[00:14:10] Speaker 02:
Well, the state bar calls them costs.

[00:14:11] Speaker 01:
They're supposed to be the costs associated with, but regardless of whether- Often costs in a civil action are reimbursing someone for their filing fee or actual amounts incurred.

[00:14:24] Speaker 01:
Here, it's different, isn't it?

[00:14:28] Speaker 02:
Well, the state bar filed the cost to recover if it was a penalty.

[00:14:34] Speaker 02:
If it was a true penalty, it shouldn't have been imposed in connection with trying to obtain a lien.

[00:14:41] Speaker 02:
That's my whole argument.

[00:14:43] Speaker 02:
And it was imposed after my discharge so that it was an obligation that did not arise until it was awarded by the court.

[00:14:58] Speaker 02:
which occurred after my discharge.

[00:15:01] Speaker 02:
And I'm saying that those costs were incurred to enforce a lien, a lien which was proscribed by 362A and 524A2.

[00:15:15] Speaker 02:
You cannot enforce discharge debt.

[00:15:20] Speaker 02:
And that's why they sought the mandatory payment condition, to force me to pay third parties, not the government,

[00:15:27] Speaker 02:
pay third parties, and it's very clear from the Supreme Court's orders that those payments were supposed to go to third parties, that debt was discharged.

[00:15:36] Speaker 02:
You cannot enforce discharge debt.

[00:15:39] Speaker 02:
There's no exception to 524A2.

[00:15:41] Speaker 02:
OK.

[00:15:41] Speaker 05:
We've talked you through your reserve time.

[00:15:44] Speaker 05:
I'm going to give you two extra minutes after your opposing counsel finishes.

[00:15:50] Speaker 02:
OK.

[00:15:50] Speaker 02:
OK.

[00:15:50] Speaker 02:
Thank you, Your Honor.

[00:15:51] Speaker 05:
OK.

[00:15:54] Speaker 05:
Ms.

[00:15:54] Speaker 00:
Grant.

[00:15:56] Speaker 00:
Good morning.

[00:15:59] Speaker 03:
Ready?

[00:16:01] Speaker 00:
Go ahead.

[00:16:01] Speaker 00:
May it please the court.

[00:16:02] Speaker 00:
My name is Suzanne Grant, and I represent defendant Epalee of the State Bar of California.

[00:16:08] Speaker 00:
Ms.

[00:16:08] Speaker 00:
Shear's appeal boils down to one key issue, whether State Bar disciplinary proceedings are debt collection mechanisms.

[00:16:15] Speaker 00:
This is because the only actions in Ms.

[00:16:17] Speaker 00:
Shear's complaint that are alleged to violate the discharge injunction were the State Bar's 2012 through 2016 proceedings prosecuting Shear for ethical violations.

[00:16:28] Speaker 00:
As such, Mr.'s position is that her filing for bankruptcy immunized her at any attorney from the California Supreme Court and the State Board's power to regulate attorneys' ethical conduct.

[00:16:39] Speaker 05:
Well, it did immunize them from the requirement to pay money to the third parties, correct?

[00:16:44] Speaker 00:
Yes, and we concede that that money is dischargable for the restitution and the client security fund payments under CASAS just recently.

[00:16:54] Speaker 00:
However, the position that the Ninth Circuit has made clear that the proceedings themselves, the actual prosecution, are part of the enforcement of the state bar's regulatory authority over the practice of law.

[00:17:05] Speaker 00:
They're not debt collection, even when an attorney is ordered money to pay, in order to pay money to a third party.

[00:17:11] Speaker 00:
Well, yes, that money to a third party is not enforceable,

[00:17:13] Speaker 00:
The proceedings themselves, which may include seeking restitution are still part of the public protection mechanism disciplinary proceedings are designed to protect the public from lawyers who commit unauthorized practice of law.

[00:17:24] Speaker 00:
engage in illegal fee collection practices and violate California law.

[00:17:29] Speaker 00:
Those were the reasons Ms.

[00:17:30] Speaker 00:
Shear was disciplined.

[00:17:31] Speaker 00:
Notably, if Shear had paid back every single cent of the money that she had unlawfully gained from her clients, her conduct still would have resulted in discipline.

[00:17:41] Speaker 00:
And her current suspension now continues for reasons that are unrelated

[00:17:45] Speaker 00:
to the restitution.

[00:17:47] Speaker 00:
And those are, as recognized by Your Honor, the non-dischargeable discipline cost, as well as she has to show proof of compliance to the State Bar Court of restitution, I'm sorry, not restitution, of rehabilitation fitness to practice law with State Bar Court.

[00:18:01] Speaker 00:
Those disciplinary costs are penalties.

[00:18:02] Speaker 00:
They were imposed under Business and Professions Code 608.6.1.

[00:18:05] Speaker 03:
Are they called costs?

[00:18:07] Speaker 00:
They are called costs, but under Business and Profession Code 686.10, the legislature specifically recognized that these are penalties imposed for the benefit of the state of California, and it was under- Can I just call them a penalty?

[00:18:18] Speaker 00:
I didn't name them.

[00:18:20] Speaker 00:
I think they were just termed cost.

[00:18:21] Speaker 00:
They are indeed cost of the... They are cost of the prosecution, but the legislature made clear that they were a penalty.

[00:18:28] Speaker 05:
And... Sort of subsidized the bar court and so on, but they don't necessarily... They aren't necessarily tied to the specific cost of a particular proceeding.

[00:18:36] Speaker 05:
Would that be right?

[00:18:36] Speaker 00:
That is correct.

[00:18:37] Speaker 00:
They're based on... Always based on a formula.

[00:18:39] Speaker 00:
They're not tied to exact cost.

[00:18:41] Speaker 00:
And the court in Finley, which, you know, this court is bound by... Bound by Anne and Albert Sheridan and Anne and Cassius has consistently recognized

[00:18:47] Speaker 00:
that those costs are non-dischargeable under 523A7 because they are considered fines, penalties, or forfeitures under 523A7.

[00:18:54] Speaker 00:
And Ms.

[00:18:56] Speaker 00:
Shear has recognized that those costs are non-dischargeable for that reason.

[00:19:00] Speaker 00:
Ms.

[00:19:00] Speaker 00:
Shear has classified these costs as costs associated with a lien on her license, costs associated with pursuing discharge debt.

[00:19:07] Speaker 00:
And again, that miscomprehends the nature of the attorney discipline system.

[00:19:11] Speaker 00:
They were not incurred in pursuing discharge debt.

[00:19:13] Speaker 00:
They were incurred in prosecuting Ms.

[00:19:14] Speaker 00:
Shear

[00:19:15] Speaker 00:
for her ethical misconduct.

[00:19:17] Speaker 05:
So because the state bar did not- One of the ironies of the case is that if the bar court just disbarred a lawyer, bankruptcy would have nothing to do with that.

[00:19:26] Speaker 05:
There'd be nothing to be done in a bankruptcy case without that.

[00:19:29] Speaker 05:
This comes up because the bar has opted to give lawyers an ability to get back into the bar's good graces, so to speak.

[00:19:37] Speaker 05:
Well, so if somebody- Incentivize even harsher punishment.

[00:19:41] Speaker 00:
Well, if someone is disbarred, there is a requirement that they pay all client security fund payments back before they're reinstated, so those would be discharged.

[00:19:50] Speaker 05:
There's always a way to get reinstated, at least theoretically.

[00:19:53] Speaker 00:
Theoretically, of course, obviously, it's not all monetary.

[00:19:55] Speaker 00:
You have to apply for reinstatement and have to show various reasons for your reinstatement.

[00:20:00] Speaker 00:
But I think if you still owed client security fund payments, that is a condition of any reinstatement, and those would be discharged.

[00:20:09] Speaker 00:
Answer their question council on a different point.

[00:20:12] Speaker 01:
There's this discussion about a lien You know we deal with liens all the time and liens require they attach to a property interest How can there be a lien here does is there a property interest that the debtor has in in her license or?

[00:20:30] Speaker 00:
So a debtor does have a property interest in a law license the same way, you know, a public servant might have an interest in their employment.

[00:20:37] Speaker 00:
And that means, you know, you can't take away that right without due process because of that property interest.

[00:20:41] Speaker 01:
So that's why, for instance, state bar proceedings.

[00:20:45] Speaker 01:
a third or another party the right to take that property.

[00:20:51] Speaker 01:
And so I don't see that here is that state California doesn't get a license to practice law by enforcing a lien.

[00:20:58] Speaker 01:
It's not like repossessing a car or a house where you can take a piece of property and give ownership to another party.

[00:21:06] Speaker 01:
I don't see how this license can be transferred.

[00:21:09] Speaker 01:
As a result, I'm troubled by the argument that there is actually a lien

[00:21:14] Speaker 00:
Right.

[00:21:15] Speaker 00:
We agree with that.

[00:21:16] Speaker 00:
There is no lien on Mr's law license for that reason.

[00:21:20] Speaker 00:
Law license is not transferable property.

[00:21:22] Speaker 00:
You can't buy it.

[00:21:23] Speaker 00:
You can't transfer it.

[00:21:24] Speaker 00:
You can't sell it.

[00:21:25] Speaker 00:
You are licensed to practice law with the California Supreme Court.

[00:21:29] Speaker 00:
So there's no such thing as a law license somebody can give you.

[00:21:32] Speaker 00:
So Francis Misher is still a licensee of the bar.

[00:21:36] Speaker 00:
She's just unable to practice law.

[00:21:37] Speaker 00:
So there is no conceivable way you could place a lien on something such as a law license.

[00:21:45] Speaker 00:
So we agree with that argument.

[00:21:47] Speaker 00:
So because the state bar did not violate the discharge injunction when in disciplining shear, the disciplinary orders are not void.

[00:21:55] Speaker 00:
They are not void simply because they contain unenforceable payment conditions.

[00:21:59] Speaker 00:
The state bar, as I said before, agrees that the discharge payment conditions are unenforceable.

[00:22:05] Speaker 00:
If there was a money judgment filed by the state bar for the CSF or if an aggrieved client filed a money judgment,

[00:22:10] Speaker 00:
For the restitution, that would be void, and that would be unenforceable.

[00:22:14] Speaker 00:
But the Supreme Court order finding Ms.

[00:22:15] Speaker 00:
Shear liable for her unethical misconduct is not void.

[00:22:19] Speaker 00:
There are no allegations that the state bar has ever sought to enforce the discharge payment condition, such as by withholding her license solely for failure to pay discharge debt.

[00:22:31] Speaker 00:
Rather, Ms.

[00:22:32] Speaker 00:
Shear herself concedes that she remains suspended for non-payment of the non-dischargeable discipline costs

[00:22:37] Speaker 00:
and failure to meet the other non-monetary requirements of the Supreme Court's disciplinary orders.

[00:22:43] Speaker 00:
As recognized by this panel a few minutes ago, the Ninth Circuit and the Albert Sheridan case has already determined that the state bar can properly enforce the non-discharge conditions of a disciplinary order, despite the fact the order also contains discharge debt.

[00:22:57] Speaker 00:
The voiding of the order would also impose a hindsight strict liability standard of the state bar, which contradicts the United States Supreme Court's decision in Taggart v. Lorenzen.

[00:23:06] Speaker 00:
So in this case, that case established that a creditor may be held in contempt for discharge injunction violation only if there is a fair ground of doubt as to whether the discharge barred the creditor's conduct.

[00:23:18] Speaker 00:
The state bar took these proceedings in 2012 to 2016.

[00:23:20] Speaker 00:
This was many years before Cassis was decided, before Albert Sheridan was decided.

[00:23:26] Speaker 00:
As recognized by the bankruptcy court and many courts, there was considerable confusion over what was dischargeable.

[00:23:31] Speaker 00:
Kelly has been interpreted very inconsistently between criminal courts.

[00:23:36] Speaker 00:
not on criminal courts, the state bar reasonably relied on the law at the time when it sought Ms.

[00:23:40] Speaker 00:
Scheer's discipline.

[00:23:41] Speaker 00:
And now, simply once that it has been made clear by the Ninth Circuit what the law is on the dischargeability, the state bar properly informed Ms.

[00:23:49] Speaker 00:
Scheer they would not be enforcing the discharge payment conditions.

[00:23:53] Speaker 00:
Ms.

[00:23:53] Speaker 00:
Scheer herself does not dispute that the state bar had a right to her law at the time.

[00:23:57] Speaker 00:
She claims she is not seeking damages.

[00:23:59] Speaker 00:
for any actions that were taken pre-cases.

[00:24:02] Speaker 05:
So now it's... And the contempt analysis, the knowledge analysis, that would only be relevant to a damages claim, correct?

[00:24:10] Speaker 00:
Correct, right.

[00:24:11] Speaker 00:
So first there would have to be a discharge injunction violation, and then whether the creditor can be held in contempt for such a violation.

[00:24:18] Speaker 00:
Now, of course, the state bar does not, as I just argued, our argument is that we did not violate the discharge injunction at all.

[00:24:25] Speaker 00:
But to the extent this court does believe the disciplinary proceedings were debt collection mechanisms, our argument would be that the court should not find the state bar in contempt due to the fair ground of doubt based on when

[00:24:38] Speaker 00:
the debt was part of the order.

[00:24:42] Speaker 00:
So essentially, almost a decade later, after these proceedings took place, Ms.

[00:24:46] Speaker 00:
Scheer wants to invalidate her entire discipline, which is based on her ethical misconduct.

[00:24:51] Speaker 00:
And again, the discipline was not because she owed money to someone, it was because she had violated ethical rules.

[00:24:58] Speaker 00:
So in conclusion, unless you have other questions, the bankruptcy court properly analyzed the law.

[00:25:03] Speaker 00:
The court determined that Mishir failed to state a claim for violation of the bankruptcy discharge at injunction or the anti-discrimination provision.

[00:25:10] Speaker 00:
So we ask that the bankruptcy court's order and judgment be affirmed.

[00:25:13] Speaker 04:
So let me just ask you, Ms.

[00:25:17] Speaker 04:
Scheer makes the argument that all of the restitution and the costs and the discipline ultimately that the Supreme Court entered its final order on occurred after she filed her bankruptcy case.

[00:25:32] Speaker 04:
But if it was post-petition debt, in other words, if it wasn't incurred until a time after she filed her bankruptcy, at a time the Supreme Court entered its order, she wouldn't have the ability to argue that she had relief for the restitution.

[00:25:49] Speaker 04:
It would have to be a pre-petition obligation in order for the discharge injunction to apply.

[00:25:55] Speaker 04:
because if it was incurred after her bankruptcy, then it would be a post-petition obligation, and post-petition obligations aren't discharged by a prior order, right?

[00:26:05] Speaker 00:
That's correct.

[00:26:07] Speaker 04:
Doesn't the same analysis work with regard to the costs?

[00:26:11] Speaker 04:
If she got the relief that flowed after her bankruptcy was filed, because the conduct all occurred pre-petition, where the costs and related to proceedings were all involved in actions that she conducted before she filed bankruptcy, then the costs would follow the same analysis that the restitution did.

[00:26:31] Speaker 04:
And it would all be a pre-petition obligation.

[00:26:34] Speaker 00:
Right.

[00:26:34] Speaker 00:
I think here, I think as Mr. clarified, her bankruptcy

[00:26:41] Speaker 00:
was before the final discipline.

[00:26:44] Speaker 00:
So the costs were imposed post-petition, but the restitution, I believe, would still be considered pre-petition because the debt was owed to the client prior to the bankruptcy.

[00:26:54] Speaker 04:
The clients and the conduct that related to that all occurred before she filed?

[00:27:00] Speaker 04:
Correct.

[00:27:01] Speaker 01:
All right.

[00:27:02] Speaker 01:
So are you saying that the costs were all in connection with the police powers?

[00:27:06] Speaker 00:
That, yes, and that is consistent, I believe, with Finley as well, that these costs were penalties associated with the prosecuting, Ms.

[00:27:14] Speaker 00:
Scheer's misconduct, and the Supreme Court ordered those costs as part of the discipline, and that's one of the reasons that it's a condition of her reinstatement, because the Supreme Court ordered that as part of the discipline.

[00:27:26] Speaker 04:
And that's part of what the state law says.

[00:27:28] Speaker 04:
You have to impose costs and you have to require repayment of the cost before the license can be reinstated under state law.

[00:27:36] Speaker 00:
Right, that's under business number of actions code section 6086.10.

[00:27:40] Speaker 01:
If the state, if the bar had gone for disciplinary actions that did not include the restitution, would the cost amount have still been the same?

[00:27:49] Speaker 00:
Yes.

[00:27:50] Speaker 01:
Okay.

[00:27:50] Speaker 01:
So, you know, you can't say that part portion of the cost was attributable to the restitution and therefore would be void ab initio because the cost would be the same even if you didn't pursue the restitution.

[00:28:02] Speaker 00:
That's correct.

[00:28:03] Speaker 00:
And again, the restitution was ordered also as part of the discipline.

[00:28:07] Speaker 00:
She wasn't disciplined because she didn't pay back money.

[00:28:10] Speaker 00:
So that's exactly right.

[00:28:11] Speaker 00:
Yes.

[00:28:13] Speaker 04:
I think what Judge Corda was trying to get at is the costs are not a percentage.

[00:28:17] Speaker 00:
Oh, yes.

[00:28:17] Speaker 00:
That's correct.

[00:28:18] Speaker 04:
They're not related in that way.

[00:28:19] Speaker 04:
It's totally whatever you decide the time element is and the expense to the state is, and it's a penalty.

[00:28:28] Speaker 00:
Right, it's part of a formula based on how long the proceeding was, the trial, and things like that.

[00:28:33] Speaker 00:
So yes, it would have been the same no matter what.

[00:28:37] Speaker 00:
Any other questions?

[00:28:38] Speaker 05:
Any other questions?

[00:28:38] Speaker 00:
Thank you very much.

[00:28:39] Speaker 05:
Thank you very much.

[00:28:42] Speaker 05:
OK, Ms.

[00:28:42] Speaker 05:
Scheer, two minutes.

[00:28:45] Speaker 02:
Your Honor, these costs could not have been deemed discharged.

[00:28:50] Speaker 02:
I respectfully disagree with the court.

[00:28:53] Speaker 02:
523A7 has no role in this analysis.

[00:28:58] Speaker 02:
The applicable statute is Section 524A2.

[00:29:04] Speaker 02:
these costs were incurred in attempting to enforce a charge.

[00:29:11] Speaker 02:
You may not like the term lien, but it certainly was a charge against my law license.

[00:29:16] Speaker 02:
And under Section 101 of the 37 of the Bankruptcy Code, lien means a charge against or interest in property to secure payment of a debt or performance of an obligation.

[00:29:29] Speaker 02:
It was meant to coerce

[00:29:32] Speaker 02:
That is a violation of the discharge injunction.

[00:29:37] Speaker 02:
That's exactly why the Supreme Court imposed mandatory payment condition, which I say equates to a lien.

[00:29:46] Speaker 02:
There's no requirement that the property interests be able to be transferred.

[00:29:52] Speaker 02:
And a person's law license is a valuable property right under California law, according to Conway v. State Bar, which I've cited in my brief.

[00:30:01] Speaker 05:
You know, one problem I have with your argument is that there's this dogma that liens right through Chapter 7 bankruptcy cases because 524A1 says that it only invalidates the, or only voids judgments to the extent that they determine the personal liability of the debtor.

[00:30:20] Speaker 02:
But this lien was not obtained pre-petition.

[00:30:24] Speaker 02:
It was obtained post-petition.

[00:30:27] Speaker 02:
That is the problem.

[00:30:28] Speaker 05:
On a debt that's not dischargeable.

[00:30:30] Speaker 05:
on the, in part, on the costs, which are not dischargeable under Oliver Sheridan.

[00:30:36] Speaker 02:
The costs were not incurred.

[00:30:38] Speaker 02:
They were not awarded pre-petition.

[00:30:41] Speaker 02:
523A7 only relates to pre-petition debt.

[00:30:45] Speaker 02:
The costs were incurred post-petition to enforce

[00:30:51] Speaker 02:
and to enforce this, which I will call a lien or a charge against my law license.

[00:30:56] Speaker 02:
And there's a formula.

[00:30:57] Speaker 02:
They have to fill out a bill of costs.

[00:31:00] Speaker 02:
And all of that is related.

[00:31:02] Speaker 02:
It's not just a blanket

[00:31:06] Speaker 02:
fee for this amount of cost they have to submit a bill of cost which is also attached to my complaint and because those costs were in incurred in trying to enforce thank you very much okay trying all right I don't have any more time yes that's true okay thank you your honor