Wisconsin Attorney Owes Disciplinary Sanction Despite Bankruptcy

An attorney’s unpaid sanction of disciplinary costs isn’t dischargeable in bankruptcy because it’s a “penalty” paid to the state, the Seventh Circuit said Monday upholding his obligation to pay about $12,000 before he can be reinstated to the Wisconsin state bar.

The appeals court, addressing the issue for the first time, joined other federal appeals courts that have considered the issue, it said.

The Wisconsin Supreme Court reprimanded attorney Tim Osicka for failing to respond to clients who were unhappy with his work and for failing to cooperate with a state bar investigation, according to the U.S. Court of Appeals for the Seventh Circuit. The top court also ordered $150 in restitution to a client and payment of $12,500 for the costs of his disciplinary proceedings.

Osicka closed his practice and sought bankruptcy protection, listing the Wisconsin Office of Legal Regulation as an unsecured creditor. He received a general discharge of debts. But when he sought reinstatement, the OLR said he still had to pay the cost sanction.

A general discharge of debts under the Bankruptcy Code excepts government fines, penalties, and forfeitures, Judge Michael Y. Scudder Jr. said for the Seventh Circuit. Osicka’s sanction was a penalty, he said.

First, the Wisconsin rule authorizing cost orders “unambiguously singles out attorney discipline as a penal endeavor,” Scudder said.

And second, Osicka’s sanction wasn’t compensation for actual pecuniary loss because the OLR “simply expended money that it had already allocated” to further its public responsibilities, he said.

“Bankruptcy courts in our circuit likewise have found no contradiction between punishing attorney misconduct and measuring that punishment based on the government’s expenses,” a way of tailoring the remedy to the case, he said.

Judges Michael B. Brennan and Candace Jackson-Akiwumi also served on the panel.

Law Firm of Conway, Olejniczak & Jerry SC represented Osicka. The office of the Wisconsin attorney general represented the OLR.

The case is Osicka v. Office of Lawyer Regulation, 7th Cir., No. 21-1566, 2/7/22.