Dead Men Tell No Tales … nor can their attorney’s continue to pursue an action without telling anyone their client died!
As a bankruptcy attorney in Mount Vernon, IL for over 20 years, I read through and analyze court rulings throughout the country, and pay particular attention to cases that affect an attorney’s practice and standing with the court.
Here is a case from Puerto Rico that shows how important it is to be a good officer of the court – to show respect not only to the court but opposing counsel.
The Creditor and Debtor obviously had a long litigious relationship. In the middle of a motion to dismiss a case based on bad faith, the creditor died. Creditor’s attorney, however, did not inform the curt or opposing counsel and continued prosecuting/negotiating the case.
The first half of the opinion can be read here.
The death of the creditor might not have been the end of the case. Were there enough discoverable evidence gathered at the time of the creditor’s death the court might have considered proceeding with the case – although the odds of the creditor’s success diminished substantially. Had the creditor’s attorney been more candid about the creditor’s death he (gender neutral) may have avoided these sanctions. He would have faced an immediate summary judgment motion, but were there enough facts and evidence available the complaint might have been able to withstand even that (perhaps not enough to prevail at the end …) but the death of a creditor is not the death of a case. The creditor’s heirs and assigns, if the bankruptcy case WAS dismissed due to bad faith, could continue to collect against the Debtor for the decedent’s estate.
I suspect this case depended too much on the creditor and her testimony as opposed to hard evidence. The attorney’s actions and lack of candor likely point to the fact that when the creditor died, so did her case against the Debtor.
This is an excellent opinion and a good morality tale for attorneys.
IN RE: ROBERTO CENTENO PAGAN Debtor
CASE NO. 14-08824 (ESL)
UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO
January 30, 2017
OPINION AND ORDER
The court has jurisdiction pursuant to 28 U.S.C. §§ 157(b)(1) and 1334(b). Venue of this proceeding is proper under 28 U.S.C. §§1408 and 1409. The power to sanction will be further discussed below.
Applicable Law and Analysis
(A) Sanctions under Fed. R. Bank. P. 9011 and Fed. R Civ. P. 11
“Fed. R. Bankr. P. 9011 is derived from Fed. R. Civ. P. 11.” In re Figueroa Alonso, 546 B.R. 1, 7 (Bankr. D.P.R. 2016). Moreover, as this court has previously explained:
“The central purpose of Rule 11 is to deter baseless filings. See CQ Int’l Co. v. Rochem Int’l, Inc., USA, 659 F.3d 53, 62 (1st Cir.2011). Likewise, “the purpose of Federal Rule of Bankruptcy 9011 is to deter baseless filings in bankruptcy court and thus avoid unnecessary judicial effort, the goal being to make proceedings in the court more expeditious and less expensive. The rule imposes sanctions on persons violating the rule and, it is hoped, will act to deter future conduct of the same nature.” Alan N. Resnick & Henry J. Sommer, 10 Collier on Bankruptcy ¶ 9011.01 (16th ed.2015).”
Id. Specifically, Fed. R. Bank. P. 9011(b) provides:
(b) Representations to the court
By presenting to the court (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,
(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.
Fed. R. Bank. P. 9011.
The four subdivisions in Fed. R. Bank. P. 9011(b) “may be further divided in two categories; namely, the frivolousness clauses and the improper purpose clause.” In re Terron Hernandez, 513 B.R. 172, 180 (Bankr. D.P.R. 2014). Fed. R. Bank. P. 9011(b)(1) “prohibits presentation of a document for an improper purpose” and “lists harassment, delay or needless increase in litigation as examples of improper purposes, but the list is not exhaustive.” Alan N. Resnick & Henry J. Sommer, 10 Collier on Bankruptcy ¶ 9011.04[a] (16th ed. 2015).”Courts may infer the purpose of a filing from the consequences of a motion, such as delaying the proceedings or creating ‘a persistent pattern of clearly abusive litigation.” In re Terron Hernandez, 513 B.R. 172 at 180, quoting In re CK Liquidation Corp., 321 B.R. 355, 365 (B.A.P. 1st Cir. 2005) . “Fed. R. Bankr.P. 9011(b)(2)-(4), “require[ ] that a party’s attorney must perform a reasonable preliminary investigation of the facts and the applicable law before filing a paper in federal court. Id., quoting In re Am. Telecom Corp., 319 B.R. 857, 867 (Bankr.N.D.Ill.2004).
In the instant case, the Debtor alleges that the allegations contained in the Motion to Dismiss were meant to aggravate the Debtor and to cause him to incur in unwarranted expenses and delay in closing his bankruptcy case and obtaining his discharge. In addition, the Debtor sustains that the factual allegations contained in the Motion to Dismiss are false. Finally, the Debtor argues that several of the prayers for relief included in the Motion to Dismiss have no basis in law. Therefore, the court must determine if the filing of the Motion to Dismiss violated Fed. R. Bank. P. 9011 (b)(1) and whether the allegations and arguments contained therein violated Fed. R. Bank. P. 9011 (b)(2) and (b)(3).
This court finds that sanctions pursuant to Fed. R. Bank. P. 9011(b) are not warranted. Firstly, the court finds that the Motion to Dismiss was not filed for an improper purpose. Although, the litigation that ensued from the filing of the Motion to Dismiss certainly prolonged the Debtor’s bankruptcy case, this court finds that it was not filed to harass the Debtor or to maliciously prevent or delay the entry of the Debtor’s discharge. In addition, this court finds that although several of the remedies requested in the prayer for relief in the Motion to Dismiss were not proper, it is clear from the motion that the main relief requested was that the Debtor’s bankruptcy case be dismissed pursuant to Section 707(a) and/or Section 707(b)(3)(A) as Medina Ramos alleged that it was filed in bad faith. Moreover, the Motion to Dismiss contained a thorough discussion of the legal theories and case law in support of the request for dismissal pursuant to Section 707(a) and/or Section 707(b)(3)(A). Finally, at this juncture the court cannot determine whether the factual allegations contained in the Motion to Dismiss had evidentiary support since Medina Ramos has passed away and is no longer able to testify in support of those allegations. Accordingly, this court denies the Debtor’s request for sanctions pursuant to Fed. R. P. Bank. 9011(b).
(B) Sanctions under 28 U.S.C. §1927
Section 28 U.S.C. §1927 provides:
Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct. 28 U.S.C. § 1927.
“Sanctions under Section 1927 can only be imposed against attorneys, not parties.” In re MJS Las Croabas Properties, Inc., 530 B.R. 25, 40 (Bankr. D.P.R. 2015), aff’d sub nom. MJS Las Croabas Properties, Inc., 545 B.R. 401 (B.A.P. 1st Cir. 2016). Moreover, although courts are split as to whether bankruptcy courts may impose sanctions under Section 1927, the Bankruptcy Appellate Panel for the First Circuit has affirmed a bankruptcy court’s award of sanctions under Section 1927. See MJS Las Croabas Properties, Inc., 545 B.R. at 418.
“The purpose of sanctions under § 1927 is to deter dilatory litigation practices and to punish aggressive tactics that far exceed zealous advocacy.” Id. at 419, quoting In re Royal Manor Mgmt., Inc., 525 B.R. 338, 365 (BAP 6th Cir. 2015). Furthermore, the focus of Section 1927 is on a course of conduct. Id. (“Unlike Rule 11 sanctions which focus on particular papers, the inquiry under § 1927 is on a course of conduct.”), quoting Bowler v. U.S. Immigration and Naturalization Serv., 901 F.Supp. 597, 605 (S.D.N.Y.1995)). The First Circuit Court of Appeals has explained that “[l]itigation conduct qualifies as “vexatious” if it is “harassing or annoying, regardless of whether it is intended to be so.” Lamboy-Ortiz v. Ortiz-Velez, 630 F.3d 228, 245 (1st Cir. 2010) (citation omitted). Moreover, “section 1927 does not apply to “[g]arden-variety carelessness or even incompetence,” but instead requires that the “attorney’s actions … evince a studied disregard of the need for an orderly judicial process, or add up to a reckless breach of the lawyer’s obligations as an officer of the court.” Id. at 245-46, citing Jensen v. Phillips Screw Co., 546 F.3d 59, 64 (1st Cir.2008). Finally, in this Circuit a finding of subjective bad faith is not required and courts are to apply an objective standard in assessing an attorney’s conduct. Cruz v. Savage, 896 F.2d 626, 632 (1st Cir. 1990) (“Finally, in assessing whether an attorney acted unreasonably and vexatiously in multiplying proceedings, the district courts in this circuit should apply an objective standard.”).
In the instant case, the court finds that attorney Morales Vidal’s actions add up to a reckless breach of her obligations as an officer of the court. Attorney Morales Vidal failed to inform this court or the Debtor’s counsel of her client’s passing prior to the hearing held on October 16, 2015, despite the fact that the Minutes reflect her client passed away a month before said hearing. Also, attorney Morales continued settlement negotiations with the Debtor prior to the hearing despite the fact that the Movant had passed away. As a result, not only was the hearing held on October 16, 2015, but the Debtor had to file a reply and memorandum of law in opposition to the Motion to Dismiss, only for attorney Morales Vidal to end up eventually withdrawing the Motion to Dismiss. However, the motion withdrawing the Motion to Dismiss (Docket No. 64) was not filed until January 4, 2016 (almost five months after her client had allegedly passed away) and was filed in response to the Order entered by this court on December 4, 2015 (Docket No. 59). The unnecessary prolongation of this contested matter could have been avoided had attorney Morales Vidal promptly informed this court and Debtor’s counsel of her client’s passing, instead of continuing to litigate the matter without confirmation of whether Medina Ramos’ daughter was interested or had standing to pursue the same. Accordingly, attorney Morales Vidal’s cumulative behavior in continuing to litigate this matter despite the fact that her client had passed away, and the manner in which she prosecuted the same, including but not limited to failing to inform Debtor or the court of her client’s death, is sanctionable under 28 U.S.C. §1927.
For the reasons stated herein, Debtor’s Motion for Rule 9011 Sanctions (Docket No. 67) is denied. However, the court hereby sanctions attorney Morales Vidal pursuant to 28 U.S.C. §1927 to pay to the Debtor the excess costs, expenses, and attorneys’ fees incurred after September 15, 2015. The Debtor is further ordered to file an itemized description of his fees, excess costs and expenses related to his counsel’s work in defending against the Motion to Dismiss within fourteen (14) days. Attorney Morales Vidal may file a response fourteen (14) days thereafter.
In San Juan, Puerto Rico, this 30th day of January, 2017.
Michael Curry of Curry Law Office in Mount Vernon, Illinois (http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.
He is also the author of books on finance and bankruptcy available on Kindle through Amazon!
Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!
You can also access my website at http://www.mtvernonbankruptcylawyer.com
 The court notes that during the hearing attorney Morales Vidal stated that she did not know that her client had passed away a month ago, but that she had recently been informed. Nevertheless, it is clear she had knowledge of her client’s passing prior to the hearing and failed to inform the court or Debtor’s counsel. See Audio File (Docket No 54) at 10:19-10:20 AM.