It is further ORDERED and the Court finds that Richard Thomson is not in contempt of this Court but has acted diligently in assisting the Court in finding the facts underlying the need for the Court's initial order and in finding substitute counsel for Clark & Washington's Western District of Tennessee clients. Mr. Thomson is likewise commended.
(Amended Final Order at 3, Case No. 25-08010, ECF No. 30.)
On December 1, 2025, the firm filed a timely notice of appeal.
DISCUSSION
1. Did the Bankruptcy Court abuse its discretion by sua sponte suspending Appellant and its staff attorneys from representing debtors in bankruptcy cases filed in the Western District of Tennessee solely because Appellant lacks a physical office in that district and its staff attorneys are not physically present there?
The Bankruptcy Court entered a Final Order suspending Clark & Washington and all its individual attorneys from practicing before TNWB. The Final Order permitted the firm to seek relief from the suspension by filing "a motion to be relieved from this order and demonstrat[ing] that it has adopted policies consistent with the local rules of this court and the proper representation of consumer bankruptcy clients." (Final Order at 3.) Appellant asks the Panel to find that the Court abused its discretion by imposing the suspension solely based on Appellant's lack of a physical office in TNWB.
In the OSC, the Court cited § 105 as the authority for its actions regarding Clark & Washington. Section 105 empowers bankruptcy courts to "sua sponte, tak[e] any action or mak[e] any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process." 11 U.S.C. § 105(a). Courts have held that § 105 includes the
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power to impose sanctions for misconduct. Grossman v. Wehrle (In re Royal Manor Mgt., Inc.),
652 F. App'x 330, 342 (6th Cir. 2016) (affirming sanctions imposed under § 105); John Richards Homes Bldg. Co., L.L.C. v. Adell (In re John Richards Homes Bldg. Co., L.L.C.), 404 B.R. 220, 227 (E.D. Mich. 2009); Forson v. Nationstar Mortg. LLC (In re Forson), 583 B.R. 704, 712 (Bankr. S.D. Ohio 2018); In re Ludwick, 185 B.R. 238, 245 (Bankr. W.D. Mich. 1995). The Bankruptcy Court also cited its inherent power to manage its own affairs. The inherent power of bankruptcy courts as federal courts includes the authority to impose sanctions for improper conduct. Knowles v. Zinni (In re Zinni), 261 B.R. 196, 203 (B.A.P. 6th Cir. 2001); In re Hake, 464 B.R. 61, 61 (Table), 2006 WL 2621116 at *9 (B.A.P. 6th Cir. Sept. 14, 2006); In re Gorges, 590 B.R. 771, 791 (Bankr. E.D. Mich. 2018). This authority to sanction, in turn, includes the power to "suspend or disbar lawyers." In re Snyder, 472 U.S. 634, 643, 105 S. Ct. 2874, 2880 (1985) (citations omitted). The Sixth Circuit recognizes a significant check on this authority, specifically that the invocation of a court's inherent powers to impose sanctions
"requires a finding of bad faith or of conduct tantamount to bad faith." BDT Products, Inc. v. Lexmark Int'l., Inc., 602 F.3d 742, 752 (6th Cir. 2010); Youn v. Track, Inc., 324 F.3d 409, 420 (6th Cir. 2003) (quoting First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501, 517 (6th Cir. 2002)). See also Roadway Express, Inc. v. Piper, 447 U.S. 752, 777, 100 S. Ct. 2455, 2465 (1980) ("any sanction under the court's inherent powers" should first include a finding that "counsel's conduct constituted or was tantamount to bad faith[.]"). The Panel has previously highlighted the importance of the evidence justifying sanctions when evaluating their legitimacy; it is an abuse of discretion to impose sanctions based upon an erroneous assessment of the evidence. Lane, 604 B.R. at 27 (citing Montedonico v. Blasingame (In re Blasingame), 559 B.R. 676, 679 (B.A.P. 6th Cir. 2016), aff'd, 709 F. App'x 363 (6th Cir. 2018). This is because the sanction must be "commensurate with the egregiousness of the conduct." Mapother & Mapother P.S.C. v. Cooper (In re Downs), 103 F.3d 472, 478 (6th Cir. 1996); accord In re Fordu, 201 F.3d 693, 711 (6th Cir. 1999).
For example, in Mills the bankruptcy court explained that while the discretion to select sanctions is broad, the court must "exercise great care" and "impose the minimum sanction necessary to both protect the public and deter future misconduct." In re Mills, No. 15-11766,
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2018 WL 10323376, at *19 (Bankr. W.D. Tenn. July 24, 2018) (citing Cavender v. U.S. Xpress Enters., Inc., 191 F. Supp. 2d 962, 965 (E.D. Tenn. 2002); In re Burton, 442 B.R. 421, 467 (Bankr. W.D.N.C. 2009)). In Cavender, the court noted:
. . . motions to disqualify counsel in a lawsuit are very sensitive and require the Court to exercise judgment with an eye toward upholding the highest ethical standards of the profession, protecting the interest of the litigants in being represented by the attorney of their choosing, protecting the loyalty and confidences a prior client may have placed in a law firm or an attorney, and the overriding societal interests in the integrity of the judicial process. Cavender, 191 F. Supp. 2d at 965.
In the instant case, it appears that the Bankruptcy Court imposed an indefinite suspension without making specific findings.2The Bankruptcy Court also failed to identify what, if any, local rules or state rules of professional responsibility ultimately formed the basis for the suspension of Clark & Washington. Significantly, while the OSC warned of particular alleged misconduct and the Court's powers to sanction, the Final Order imposing the suspension does not state with specificity which rules the firm violated, if any, nor does it cite under what specific authority it imposes the suspension, or explain why the sanction is appropriately tailored to the alleged misconduct.
It appears that Ms. Pritchett may have violated TNWB Local Bankruptcy Rule 1001- 3(b) by appearing for a hearing prior to her admission to practice. And further that Mr. Brown and the firm's supervisory attorneys may not have complied with the Tennessee Supreme Court Rules and the Tennessee Rules of Professional Conduct. But the Bankruptcy Court's Final Order does not find a violation of those specific rules. The Court made no specific findings about any of the conduct, or any deficiencies in oversight and supervision that may have led to the substitutions of Mr. Brown or the appearance of Ms. Pritchett.
The OSC further suggested that actions may have been taken on behalf of clients without their consent. However, the Bankruptcy Court's Final Order does not elaborate on the issue or
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give any specific examples of clients who failed to consent to any particular substitution of one attorney for another. Moreover, the Final Order does not provide any factual finding as to whether the clients hired Clark & Washington to represent them, or whether they engaged an individual attorney.3Additionally, the filing of entries of appearance under Mr. Brown's credentials without his knowledge or express authorization would likely violate, at least, the Western District of Tennessee's Electronic Case Filing Guidelines providing that "No Filing User or other person may knowingly permit or cause to permit a Filing User's ECF account to be used by anyone other than an agent of the Filing User authorized to use such ECF account."4 But the Bankruptcy Court made no explicit finding of such a violation. Even given the lack of specific alternate findings, Appellant has not demonstrated that the sole basis for Appellant's suspension was the representation of consumer debtors without an in- district office. Instead, the Court considered and discussed a number of potential violations not related to office location. Those concerns included concerns encompassing client representation:
They get to choose who their attorney is. That is so important in all of this . . . This was—they were just treated like widgets. I mean, I can't tell you how offended I am at the thought that a person can have an attorney one day and the next day a different one and no indication that the clients were consulted. That's offensive to me.
(Tr. Oct. 2, 2025 H'rg at 20:1-9.) In summary, the Court's consideration of the special vulnerability of debtors does not mean that the suspension order rested solely5on Appellant's office location, particularly when the Bankruptcy Court weighed other potentially sanctionable conduct unrelated to office location.
Nevertheless, the Panel has explained the reasons why it must remain "mindful of the different adjudicative roles of a trial court and appellate court":
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A trial court makes findings of fact and states its conclusions of law based on the evidence presented and arguments made, while the appellate court merely reviews the decision of the trial court by applying the appropriate standard of review. Fed. R. Bankr. P. 7052 (incorporating Fed. R. Civ. P. 52(a)(1)); Taglieri v. Monasky,
907 F.3d 404, 408-09 (6th Cir. 2018). Because the bankruptcy court failed to state with specificity its factual findings as to the evidence at trial and did not explain its legal conclusions, we are unable to meaningfully review the trial court's decision and remand for further proceedings[.]
Woods v. Landingham (In re Landingham), No. 23-8018, 2026 WL 751643, at *9 (B.A.P. 6th Cir. Mar. 17, 2026).
Here, the Bankruptcy Court's failure to state factual findings and set forth its conclusions of law contravenes those roles and warrants remand.
2. Did the Bankruptcy Court violate Appellant's right to due process when it determined that it is permissible for creditors to be represented by out-of- district law firms, but consumer debtors may not be represented by similarly situated debtors' firms?
Appellant additionally challenges the Bankruptcy Court's sanctions on the basis of procedural due process and substantive due process. First, because "prior to suspension, Appellant had no notice that it was subject to suspension for not maintaining an office for the practice of law in TNWD." (Appellant's Br. at 17, BAP Case No. 25-8020, ECF No. 8.) And second, because the Bankruptcy Court "de facto adopted a new local rule, sua sponte" that "bans out-of-district debtors' firms but admits out-of-district creditors' firms." (Id. at 17, 38) Appellant's substantive due process challenge largely relies on the reasoning set forth in Frazier
v. Heebe, 482 U.S. 641, 107 S. Ct. 2607 (1987). Because the due process challenge is closely related to the issues related to the failure to state factual findings and apply them to conclusions of law, the Panel need not reach a dispositive conclusion on the due process issues. The finding of an abuse of discretion warrants remand on its own accord. However, the Panel will briefly address Appellant's due process concerns.
The Sixth Circuit has recognized that "attorney disciplinary proceedings are quasi- criminal . . . [and] entitle attorneys facing disbarment to procedural due process." In re Justice, No. 20-5479, 2021 WL 3808965, at *3 (6th Cir. Aug. 26, 2021). This entitlement includes fair notice and an opportunity to show cause why the practitioner should not be suspended or
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disbarred. In re Cook, 551 F.3d 542, 549 (6th Cir. 2009) (citing In re Ruffalo, 390 U.S. 544, 550-51, 88 S. Ct. 1222, 1225-26 (1968); Theard v. United States, 354 U.S. 278, 282, 77 S. Ct. 1274, 1276 (1957). Due process is required both for sanctions levied for violations of local and ethical rules and those authorized under a court's inherent powers. In re Mills, 2018 WL 10323376, at *19.
The Sixth Circuit has held that "due process is satisfied by issuance of an order to show cause why sanctions should not be imposed and by providing an opportunity to respond." Cook
v. Am. S.S. Co., 134 F.3d 771, 775 (6th Cir. 1998) (quoting Julien v. Zeringue, 864 F.2d 1572, 1575 (Fed. Cir. 1989)). See also NPF Franchising, LLC v. SY Dawgs, LLC, 37 F.4th 369, 377 (6th Cir. 2022) ("a court must give notice to the party facing sanctions and an opportunity to be heard."). Here, the attorneys were given both the opportunity to show cause and respond to the OSC, which included an express threat of suspension. The opportunity to respond included two separate full hearings. Thus, to the extent that Appellant argues it did not receive notice as to the possibility of suspension, the argument must fail. Compare, In re Rose, 314 B.R. 663, 690 (Bankr. E.D. Tenn. 2004) (denying due process challenge where bankruptcy court warned of possible sanctions and provided an opportunity to show why it should not be imposed), with Gray v. U.S., No. 23-3723, 2025 WL 40818, at *2 (6th Cir. Jan. 3, 2025) (vacating sanction because the appellant was not warned of potential sanctions).
Here, the Appellant's due process challenge does not arise from a lack of notice regarding the purpose and extent of the hearings, but rather the fact that there was no notice that a debtor law firm was required to maintain a local office. The absence of prior notice of a local office requirement was not clearly addressed in the Court's limited findings regarding the wide range of potential misconduct outlined in the OSC. Courts have variously held that when imposing sanctions, particularly those as severe as suspension or disbarment, the sanctioning court must be specific in explaining the nexus between its authority and the alleged misconduct so as to provide fair notice of the particular conduct and rationale. In re Moncier, 569 F. Supp. 2d 725, 728 (E.D. Tenn. 2008) ("It is axiomatic that the suspension is personal and specific to the attorney disciplined."). E.g., Roberson v. Comm. on Grievances for the U.S. Dist. of Columbia (In re Robertson), No. 19-5215, 2022 WL 683404, at *3 (D.C. Cir. Feb. 11, 2022).
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As previously discussed, while the OSC contemplated, and thus warned Appellants of, specific rules violations and improper conduct, the Court made no specific findings related to those rules or conduct before imposing the suspension. The OSC clearly forewarned Appellant of the specific possibility of suspension, both in the title and the body of the order. The initial hearing revealed a troubling narrative underlying the filing of substitutions and consent issues, which elicited justifiable concern from the Court about adequate representation of local consumer debtors. The Court also questioned whether there was a potential abuse of remote appearance privileges. Further, the record suggests that Mr. Brown may never have had any personal contact with the numerous debtors for which he was substituted as counsel. While the Court expressed concern for proper representation of local consumer debtors, and developed the view that the firm was perhaps exploiting their permission to appear remotely, it does not appear that the Court extemporaneously adopted a new local rule manifesting discrimination against out-of-district consumer debtors' firms, as alleged by the Appellant. First, an individual bankruptcy judge cannot create a "local rule". See Fed. R. Bankr. P. 9029(a) (local rules generally must be approved by the District Court, which may delegate such power to "the district's bankruptcy judges". There is no evidence that there has been any such delegation in TNWB, much less that such delegation was to any individual judge.)
Appellant's argument that the Court de facto created a new local rule does not squarely present a question of law warranting de novo review as to the validity of a local rule under 28 U.S.C. § 2072 or otherwise, nor does it squarely warrant an abuse of discretion analysis as to the application of a local rule.6See 10A Collier on Bankruptcy ¶ 9029.01[1] (16th ed. 2026)
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(discussing the standards of review applicable to local rules). Because of the array of potential misconduct considered, the Court alluded to local and ethical rules on multiple occasions. But the record does not reflect any clear statement that the Bankruptcy Court was creating a new local rule requiring consumer debtors to be represented by in-district counsel. Nor did the Court attempt to apply an already existing local rule with a similar requirement, as no such rule existed.7
Even if the actions taken here were to warrant a review of a local rule's validity or application, Appellant's Supreme Court authority would only be somewhat supportive of its position. In Frazier, the Supreme Court invalidated a formally adopted local rule requiring residence and physical office presence within a particular state in order to practice within a particular federal district of that state. Frazier, 482 U.S. 641. The Eastern District of Louisiana's local rule requiring "continuous and uninterrupted Louisiana residence or maintenance of a Louisiana law office for continuing eligibility in that bar" was struck down for discrimination against out-of-state attorneys without sufficient justification. Id. at 643. It was described by the Court as "unnecessary and irrational." Id. at 649. The Court explained the rule lacked justification because it perceived "no link between residency within a State and proximity to a courthouse." Id. at 642. It is conceivable that an in-state office could be twice as far from the courthouse as an out-of-state office just across the border. Id. at n.9. The Supreme Court then suggested that a rule requiring counsel to maintain an office in the district would be more compelling. Id. at 650-51.
Noteworthy too is that the Court left the petitioner's due process challenge unaddressed despite the rule having passed muster under the lower appellate court's rational basis review and
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the district court's heightened scrutiny review. Instead, the Court acted under its inherent supervisory power. Id. at 645-46.
By comparison, a dissent of three justices explicitly concluded that the rule did not violate the Fifth Amendment Due Process Clause. Id. at 655 (citing Supreme Court cases in support of the "nearly exclusive authority" of federal courts over bar membership decisions). Even if it may be true that Frazier displays a disfavor for local rules of this kind, it does not directly stand for the proposition that such a rule runs afoul of Appellant's substantive due process rights.
While the use of Frazier to invalidate a local bankruptcy rule requiring a local office would not be automatic, the language of the Supreme Court's decision certainly supports the idea that such a requirement is disfavored. Thus, the use of the absence of a local office as a factor in attorney discipline would require, at a minimum, a strong body of evidence and factual findings that are not part of the record or the Final Order.
Nothing in this opinion should be read to limit the bankruptcy court's authority to impose or withhold a sanction on remand, provided that the Court's justification is stated with sufficient particularity. On remand the Bankruptcy Court may show specific ways that the conduct of Clark & Washington negatively impacted debtors in specific cases, warranting suspension of the firm. However, the Panel finds that the Amended Final Order does not sufficiently establish those grounds.
CONCLUSION
The Amended Final Order suspending Clark & Washington is hereby vacated and the case is remanded for further factual findings consistent with this Opinion.
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