In Re: Foreign Economic Industrial Bank Limited, "Vneshprombank" Ltd.

Background

Victor A. Worms represented debtors in two related Chapter 15 bankruptcy proceedings. The bankruptcy court authorized discovery by the foreign representative in one proceeding. After Worms repeatedly refused to comply with a subpoena and court orders, the bankruptcy court held him in contempt and imposed monetary sanctions, including $34,000 for past noncompliance and $1,000 per day going forward. It later awarded attorneys’ fees connected to the sanctions motion.

On an earlier appeal, another district court affirmed the bankruptcy court’s authority to impose civil-contempt sanctions but vacated the $34,000 lump-sum sanction as an improper criminal penalty. It sent the matter back for the bankruptcy court to determine the proper amount of daily sanctions and to clarify the legal basis for the fee award.

Around the time of that remand, Worms moved to withdraw as counsel in the two bankruptcy proceedings. He identified nonpayment of fees as the reason. The bankruptcy court stated that it would not allow him to withdraw until it resolved the sanctions issues sent back by the district court. The court denied the motions without prejudice, meaning the motions could be renewed later, and also noted that Worms remained counsel of record in another pending appeal concerning a turnover order.

Issues and jurisdiction

The district court reviewed the bankruptcy court’s order under the rule allowing immediate review of certain orders that conclusively resolve an important issue separate from the main case and would be difficult to review later. The Second Circuit had previously held that an order denying an attorney’s request to withdraw falls within this category. The district court therefore concluded that it had mandatory jurisdiction to hear the appeals, even though the bankruptcy court had denied the motions without prejudice.

Thirteenth Amendment claim

Worms argued that requiring him to continue representing the debtors while the bankruptcy court considered sanctions against him amounted to involuntary servitude under the Thirteenth Amendment. The district court rejected the argument. It explained that the Amendment prohibits slavery and involuntary servitude, but that denying an attorney permission to abruptly end a representation the attorney voluntarily undertook is not comparable to slavery.

The court reasoned that attorneys who appear before a court accept professional obligations, including the requirement to obtain court permission before withdrawing. It also rejected Worms’s focus on unpaid fees, explaining that the withdrawal rules govern professional conduct regardless of whether the attorney seeks payment.

Abuse-of-discretion claim

The district court also held that the bankruptcy court did not abuse its discretion. Under the applicable local rule, an attorney seeking to withdraw must show satisfactory reasons in light of the case’s posture. Nonpayment may sometimes support withdrawal, but courts may deny withdrawal when it would delay or disrupt the proceedings.

The court found that Worms’s submissions identified only nonpayment and a resulting deterioration in the attorney-client relationship. They did not show that the clients deliberately disregarded their financial obligations. More importantly, the court concluded that withdrawal at that point would disrupt proceedings focused on the contempt sanctions and fee issues arising from Worms’s own conduct. The record supported the bankruptcy court’s conclusion that Worms’s continued involvement was necessary while those matters remained pending.

Disposition

The district court affirmed the bankruptcy court’s order denying Worms’s motions to withdraw without prejudice. It directed the Clerk of Court to close the case.