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The question here is whether a cost award in favor of the California State Bar is dischargeable in bankruptcy. California attorney John Findley gets disciplined and spanked with a mandatory $14,000 award of costs in favor of the Bar. But he goes bankrupt. Now, the Ninth Circuit held in 2001 -- in a ruling identical to the holding of every other court to consider the issue -- that state bar cost awards were dischargeable. So that would seem to answer the question about whether Findley has to pay the costs.

But in response to that 2001 ruling, the State Bar of California amended the rule. Did it change the cost award? Nope. Did it change the amount? Nah. Instead, it simply changed the verbiage. The Bar got the Legislature to add a paragraph to the relevant statutory provision that essentially says: "The award of these costs are penalties, for a public purpose."

Does that really work?! It's still a cost award, and still calculated on the same basis. It's not actually a fine, since it's a set amount, and (unlike a fine) doesn't at all vary depending on what the person did. So the question is simply whether an express award of "costs" isn't actually an award of costs as long as you declare that they're instead penalties.

And the Ninth Circuit unanimously concludes: Yep. Now the cost award isn't dischargeable.

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