Opinion

ROBERTO CENTENO PAGAN

Court: United States Bankruptcy Court, D. Puerto Rico
Filed: Jan 30, 2017
Cited by: 0 cases
Authority: More cited than 41.2%

The opinion

IN THE UNITED STATES BANKRUPTCY COURT

2 FOR THE DISTRICT OF PUERTO RICO

3 IN RE: CASE NO. 14-08824 (ESL)

4 ROBERTO CENTENO PAGAN CHAPTER 7

Debtor

OPINION AND ORDER

This case is before the court upon the Debtor’s Motion for Rule 9011 Sanctions (Docket

No. 67). The Debtor seeks sanctions against unsecured creditor Amada Medina Ramos and her

legal counsel for the filing of Medina Ramos’ Supplemented §707(a) &/or §707(b)(3)(A) &

§349 Motion to Dismiss (Docket No. 40). The Debtor alleges that the Motion to Dismiss was

frivolous, malicious, and caused the Debtor to incur in unwarranted expenses and delay in the

closing of his bankruptcy case. Consequently, Debtor prays for sanctions in the form of

attorney’s fees and costs. Also before the court is the Opposition to Debtor’s Motion for Rule

9011 Sanctions filed by Medina Ramos’ legal counsel (Docket No. 69), the Order to Show

Cause (Docket No. 75) entered by this court on June 16, 2016, and attorney Morales Vidal’s

responses thereto (Docket Nos. 77, 81, 82 and 83). 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 under 28 U.S.C. §1927.

Procedural Background

The Debtor filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code on

October 28, 2014 (Docket No. 1). On October 29, 2014, the Notice of Chapter 7 Bankruptcy

Case, Meeting of Creditors & Deadline (the “Notice”) was docketed in the instant case (Docket

No. 6). The Notice disclosed that the deadline to object to the Debtor’s discharge or to challenge

the dischargeability of certain debt was January 25, 2015. On January 11, 2015, Amada Medina

Ramos (hereinafter referred to as “Medina Ramos”) filed a motion requesting an extension of

ninety (90) days to file a motion to dismiss for bad faith under Section 707 and/or a complaint

1 to deny Debtor’s discharge or to challenge the dischargeability of Debtor’s debt to Medina

2 Ramos pursuant to Section 523 (Docket No. 17), and the same was granted On January 15,

3 2015, (Docket No. 18). On January 15, 2015, the Debtor filed his Response to Amada Medina

4 Ramos’ Motion for Extension of Time in which he argued, among other things, that the request

5 for extension of time was frivolous and that the ninety (90) day request was unreasonable

6 (Docket No.19).

7 On February 11, 2015, Medina Ramos filed motion titled Amada Medina Ramos

8 Verified Request to Initiate Discovery Before Motion to Dismiss Under §707(a) &/or §707(b)

9 &/or §523/§727 Complaint is Filed (the “Motion to Initiate Discovery”, Docket No. 21)

10 requesting that the court enter an order authorizing discovery alleging that there was a need for

11 discovery to ascertain the viability of her potential actions against the Debtor. On that same

12 date, Medina Ramos filed a supplement to the motion requesting discovery, adding Medina

13 Ramos’ declaration that the information contained therein was correct (the “Supplement to

14 Motion to Initiate Discovery”, Docket No. 22). On February 12, 2015, the Debtor filed his

15 Response to Motion to Initiate Discovery (Docket No. 23) in which he argued, among other

16 things, that the request for discovery was unnecessary since based on Medina Ramos’

17 allegations she must have possession or control of any documents or evidence that would

18 substantiate her potential claims against the Debtor. In addition, the Debtor alleged that Medina

19 Ramos has no evidence of bad faith or abuse and that she has access to the public documents

20 related to the pre-petition probate and state court litigation related to Medina Ramos’ claim

21 against the Debtor. On February 13, 2015, the Debtor filed a Supplement in Opposition to

22 Motion to Initiate Discovery (Docket No. 24) in which he informed the Court that on that same

23 date his legal counsel forwarded to Medina Ramos’ legal counsel all documents in Debtor’s

24 possession related to Medina Ramos’ claim. In addition, the Debtor reiterated his opposition to

25 discovery. On February 18, 2015, the court entered an Order denying Medina Ramos’ Motion to

26 Initiate Discovery (Docket No. 25). On that same date, the court also entered an order denying

27 Medina Ramos’ Supplement to Motion to Initiate Discovery (Docket No. 26).

1 Thereafter, on April 22, 2015, Medina Ramos filed Medina Ramos’ §707(a) &/or

2 §707(b)(3)(A) & §349 Motion to Dismiss (Docket No. 35), which was denied without prejudice

3 for failure to comply with LBR 9013-1(3) and LBR 9013-1(c) (Docket No. 36). Subsequently,

4 on May 1, 2015, Medina Ramos filed Movant Request for Reconsideration of Order Denying

5 Motion to Dismiss re docs #35 & #36 & Request Leave To Supplement & Notice Creditors Not

6 Otherwise Noticed (Docket No. 38) in which she sought leave to supplement Docket No. 35 in

7 order to comply with the notice requirements of LBR 9013-1(c)1. On that same date, Medina

8 Ramos proceeded to file Medina Ramos’ Supplemented §707(a) &/or §707(b)(3)(A) & §349

9 Motion to Dismiss2 (the “Motion to Dismiss”, Docket No. 40) in which she argued that the

10 Debtor’s bankruptcy case should be dismissed because it was filed in bad faith and with the

11 intent to avoid payment of Debtor’s $25,000.00 debt with Medina Ramos “through conduct akin

12 to fraud, misconduct, or gross negligence” (Docket No. 40, p.7). Medina Ramos alleged that the

13 Debtor: (i) “had no reason or cause to file for “protection” from his creditors, other than to

14 thwart and gain undue advantage and avoid payment to Movant” (Docket No. p. 5); (ii)

15 “continually manipulated Movant to obtain the conveyance of her property rights in the

16 Barceloneta property and later free himself from this single debt by repeatedly promising

17 payment in exchange for conveyance”; and (iii) “has no real need to shield himself from

18 collection or pressure from his other creditors since debtor’s only source of income in that of

19 Social Security benefits is protected under 42 U.S.C. §407 from collection or garnishment. His

20 only asset, titled to him by misleading and manipulating Movant to sign a donation, is now

21 exempted from the reach of creditors under the Puerto Rico Homestead Law 195” (Docket No.

22 40, p.6). Accordingly, Medina Ramos contends the “debtor’s utilization of the protections of

23 Bankruptcy Code and law, as well as his utilization of the Puerto Rico exemption law has been

25 1 Medina Ramos also asserted that the First Motion to Dismiss complied with 9013-1(3) since the Debtor had

previously certified that he is not active in the military service at Docket No.2. In the alternative, Medina Ramos

26 requested leave to file the corresponding certification (Docket No. 38, ¶4).

2 On that same date, Medina Ramos filed an incomplete version of the motion to dismiss (Docket No. 39). Medina

27 Ramos later clarified that the Debtor should respond to the Motion to Dismiss filed at Docket No. 40. See Docket

Nos. 43, 44.

1 in conscious detriment of the Movant and establishes “cause” to dismiss with case with

2 prejudice for bad faith and abuse of process” (Docket No. 40, p. 10). In addition, Medina

3 Ramos argued that a majority of courts have held that dismissal under Section 707(a) for bad

4 faith is appropriate even though there is no controlling precedent from the First Circuit Court of

5 Appeals. Moreover, she alleged that seven of the twelve factors considered by the court in In re

6 Lombardo, 370 B.R. 506, 512 (Bankr. E.D.N.Y. 2007) to determine there was cause to dismiss

7 pursuant to Section 707(a) are present in this case. Medina Ramos also sustained that the case

8 could be dismissed under Sections 707(b)(1) and 707(b)(3)(A).

9 On May 8, 2015, the Debtor filed a Notice of Intent to Pursue Rule 9011 Sanctions

10 (Docket No. 42) informing the court that on that same date a copy of a motion requesting

11 sanctions was sent to Medina Ramos and her legal counsel in compliance with Fed. R. Bank. P.

12 9011(c). On May 26, 2015, Medina Ramos filed Movant [sic] Response to Debtor’s Motion of

13 Intent to Pursue Rule 9011 Sanction (Docket No. 45) in which she declared that “[t]he motion

14 to dismiss which debtor purports violates Rule 9011 was drafted and filed after carefully

15 reviewing the facts [without the opportunity of discovery prior to its filing as requested at doc

16 #22 and opposed by debtor and denied by the court] and researching the law” (Docket No. 45,

17 pp.1-2, ¶5). In addition, Medina Ramos, through her legal counsel, reaffirmed her request that

18 the Debtor’s bankruptcy case be dismissed for bad faith and declared that “[a]lthough Movant’s

19 health is very delicate at this time and has turned for the worse very recently, it is in the opinion

20 and evaluation by the undersigned, that there is no reason to withdraw the motion to dismiss at

21 this time” (Docket No. 45, p.3, ¶12).

22 Subsequently, on June 1, 2015, the Debtor filed a Motion for Order (Docket No. 46) in

23 which he requested that the court enter an order setting a hearing to consider the Motion to

24 Dismiss or ordering the Debtor to file a response within thirty (30) days from the entry of the

25 order. On June 12, 2015, the Court entered an Order and Notice scheduling a preliminary

26 pretrial and scheduling conference under Fed. R. Bank. P. 7016(b) on October 16, 2015 (Docket

27 No. 49).

1 On October 5, 2015, the Debtor and Medina Ramos filed a Joint Motion to Convert Pre-

2 Trial Hearing to Status Conference (Docket No. 51). In addition, the parties informed the court

3 that they were engaged in communications regarding the exchange of documents and papers

4 necessary to litigate the contested matter as well as a possible settlement. On October 14, 2015,

5 the court entered an Order granting the Joint Motion to Convert Pre-Trial Hearing to Status

6 Conference (Docket No. 52).

7 On October 16, 2015, the court held a Status Conference in which Medina Ramos’s

8 legal counsel, Lyssette Morales Vidal, for the first time informed the court and Debtor’s counsel

9 that Medina Ramos had passed away a month before the hearing. See Docket Nos. 54 (Audio

10 File) and 55 (Minute Entry). In addition, attorney Morales Vidal informed the court that she

11 would be filing a motion to substitute pursuant to Fed. R. Civ. P. 253. Debtor’s counsel declared

12 that this was the first time he was being notified of the Movant’s death despite several attempts

13 to communicate with attorney Morales Vidal with regards to the Status Conference and a

14 possible settlement prior to the hearing. The court noted in the Minute Entry that “[m]ovant has

15 passed one month ago. Movant’s counsel had failed to inform debtor’s counsel4” (Docket No.

16 55). In addition, the court granted the Debtor sixty (60) days to file an answer to the Motion to

17 Dismiss.

18 On November 20, 2015, the Debtor filed a Response to the Motion to Dismiss (Docket

19 No. 57) and Debtor’s Memorandum in Opposition to Dismissal (Docket No. 58) in which he

20 argued, without conceding that Section 707(a) is a proper basis for dismissal, that: (i) the

21 Debtor’s bankruptcy filing was filed in good faith due to his financial situation; (ii) the Debtor

22 did not induce Medina Ramos to sign any of the documents pertaining to the donation of the

23 Barceloneta property; (iii) during the state court proceedings Medina Ramos was represented by

24 an attorney; (iv) the Debtor had other debts when he filed for bankruptcy as evidenced by

25 Schedule F; and (v) the Debtor had a legal right to file for homestead protection. In addition, the

27 3 The court notes that the motion to substitute pursuant to Fed. R. Civ. P. was never filed.

4 The court also questioned whether Ms. Medina Ramos’ daughter had standing to pursue the action.

1 Debtor stressed that despite Medina Ramos’ death, “even without a client or a substitute,

2 Amada’s counsel continued to prosecute this action has if nothing had changed” (Docket No.

3 58, p.12). Accordingly, the Debtor declared that “[s]uch lack of candor toward the Court and

4 consideration for her adversaries deserves scrutiny from the court and a relevant sanction

5 against Movant’s counsel to deter similar wasteful and spurious litigation in the future.” Id.

6 On December 4, 2015, the court entered an Order directing attorney Morales Vidal to

7 show cause why the Motion to Dismiss should not be denied for the reasons stated by the

8 Debtor (Docket No. 59). After several procedural events5, on January 4, 2016, attorney Morales

9 Vidal filed a Response to Order at doc#62 & Motion to Withdraw doc#40 with Prejudice due to

10 Death of Movant in which she requested that the Motion to Dismiss be withdrawn since she no

11 longer had a client or witness because the Movant’s heir was not interested in pursuing the

12 contested matter (Docket No. 64). In addition, attorney Morales Vidal declared that “[a]lthough

13 the totality of circumstances surrounding the pre-petition dealings with movant were in the

14 Movant’s opinion, in bad faith and in abuse of the bankruptcy process, it is a determination that

15 is ultimately only made by the Court after weighing the credible testimony of the parties,

16 testimony and evidence not possible under the circumstances of Movant’s death” (Docket No.

17 64, p.3, ¶14).

18 Subsequently, on January 5, 2016, the Debtor filed a Motion for Leave to File Motion

19 for Rule 9011 Sanctions6 (Docket No. 65) and the same was granted on January 12, 2016

20 (Docket No. 66). On January 14, 2016, the Debtor filed Debtor’s Motion for Rule 9011

5 See Docket Nos. 61 and 62.

6 The Debtor argued that:

“The Movant passed away apparently well before the hearing scheduled for and held on October

16, 2015. (Dkt. 55)(the “Hearing”). Undeterred, counsel for Movant continued to press this matter

as if nothing had happened. Prior to the Hearing and without disclosing Movant’s death to

Debtor’s attorney, Movant’s counsel brazenly attempted to entice Debtor’s counsel into reaching a

24 settlement whereby the Debtor would re-affirm this unsecured and dischargeable debt. Also, at the

Hearing, Movant’s counsel was asked to enter the statement of death and inform the Court how

25 she could substitute the dead Movant’s heir under Rule 25 in a matter where no claim was filed

and did not involve a dischargeability contest. (Dkt. 54-55). Movant’s counsel failed to do either.

26 Instead, knowing all along that the allegations were unsupportable and false, she caused Debtor to

have to answer the [Motion to Dismiss], only to “withdraw” it at this time after being unable to

27 comply even with the most minimum requirements set forth by the Court. Dkt. 57-62).”

Docket No. 65, pp. 1-2.

1 Sanctions7 seeking sanctions against attorney Morales Vidal pursuant to Fed. R. Bank. P. 9011

2 arguing that: (i) “the motion to dismiss frivolous and malicious”; (ii) “the multiple claims for

3 relief in the motion are inappropriate for a motion to dismiss and are not warranted or supported

4 by existing law or a good faith argument to modify or extend existing law; and (iii) “the claims,

5 false statements and allegations in the motion are clearly meant to aggravate and harass the

6 debtor and cause in to incur in unwarranted expenses and delay in finishing his case and

7 obtaining a discharge” (Docket No. 67, p. 5, ¶8). In addition, the Debtor requested that the court

8 take notice what he alleges constitutes sanctionable conduct by attorney Morales Vidal,

9 including: (i) “opposing counsel’s conduct leading up to the October 16, 2015 hearing”; (ii) “the

10 ambiguous manner in which she has handled the death of her client and her antics in notifying

11 the fact”; (iii) “her unsupportable statements, legal arguments and allegation made for the

12 record during that hearing concerning the viability of the action, the availability of material

13 witnesses and the certain inclusion of Amada’s sole heir”; (iv) “her failure to address the

14 Court’s inquiry regarding [the] Rule 25 addition of Amada’s heir and her failure to file a formal

15 statement of death in the record”; (v) “her continuation of this matter despite not having a

16 client”; (vi) “her attempt to entice Debtor and his counsel into reaffirming a dischargeable debt

17 all the while knowing-and not disclosing-that her client was dead”; and (vii) “the unjustifiable

18 manner in which she caused the additional waste and expense of time and resources by the

19 Debtor, his attorneys and the judicial system by causing the continuation of this matter through

20 her silence and gimmicks thus causing a formal, extensive and expensive response to the

21 [Motion to Dismiss], only to withdraw it at the eleventh hour, and only after by confronted by

22 an order of Court for her to finally to support her cause, or else” (Docket No. 67, pp.2-3).

23 Accordingly, the Debtor requests sanctions in the form of attorney fees and costs in having to

24 defend himself against the Motion to Dismiss.

7 The Debtor declared that “[t]his Rule 9011 motion is in all material respects identical to the notice of motion

27 served on the Movants dated May 8, 2015 and of which Movants acknowledge notice, a copy of which was attached

to Debtor’s motion for leave to seek Rule 9011 sanctions” (Docket No. 67, p.1).

1 On January 25, 2016, attorney Morales Vidal filed an Opposition to Debtor’s Motion for

2 Rule 9011 Sanctions (Docket No. 69) reiterating the arguments contained in Docket Nos. 45 and

3 64. In addition, attorney Morales Vidal argues that: (i) “there is an absence of even a prima facie

4 case to warrant sanctions; (ii) the “Debtor has not shown, nor can he produce a showing of

5 evidence of objectively unreasonable conduct on the part of the undersigned attorney, or a

6 subjective determination of an improper purpose in the motion to dismiss”; and (iii) “[t]he

7 purpose of the motion to dismiss was proper and warranted by law upon and evidentiary hearing

8 or on summary judgment further on in the proceedings had it not been for the demise of the

9 Movant.” Moreover, attorney Morales Vidal also submits that she has been a responsible

10 advocate during her more than forty (40) litigating before this court (Docket No. 69, p.4, ¶13).

11 On June 16, 2016, the court entered an Order to Show Cause ordering attorney Morales

12 Vidal “to show cause within fourteen (14) days as to why she should not be sanctioned pursuant

13 to 28 U.S.C. §1927” (Docket No. 75). The Order to Show Cause specifically makes reference to

14 the “statements and allegations made by attorney Morales Vidal during the hearing held on

15 October 16, 2015, (Docket No. 54 Audio File, Docket No. 55 Minute Entry).”

16 On July 5, 2016, attorney Morales Vidal filed a Request for Extension of Time to

17 Respond to Order to Show Cause at doc. #75 (Docket No. 77) requesting an additional thirty

18 (30) days to file her answer to the Order to Show Cause. On that same date the Debtor filed a

19 response informing the court that he had not objection to the request (Docket No. 78). On July

20 6, 2016, the court granted the Request for Extension of Time to Respond to Order to Show

21 Cause at doc. #75 (Docket No. 79).

22 On August 4, 2016, attorney Morales Vidal filed her Attorney Response to Order at doc

23 #75 to Show Cause (Docket No. 81). In her response attorney Morales Vidal sustains that the

24 Motion to Dismiss was not filed “unreasonably and vexatiously to multiply litigation” and that it

25 was not filed “without a basis in law fact and law” (Docket No. 81, p. 1, ¶¶4-5). In addition, she

26 declares that “[h]er pleadings and conduct in this and all of her cases has been responsible,

27 reasonable and with the upmost integrity and good faith in the drafting of her pleadings on

1 behalf of her now deceased client…” (Docket No. 81, p. 2, ¶9). Attorney Morales Vidal also

2 challenges the Debtor’s allegations as to the Motion to Dismiss and reiterates that the evidence

3 could have led this court to determine that the Debtor had filed the bankruptcy petition in bad

4 faith had her client not passed away. Finally, she also argues that due process requires that the

5 court “identify with specificity what litigation misconduct by the undersigned or her now

6 deceased client, Movant in the Motion to Dismiss, or throughout these proceedings satisfy the

7 triggering mechanism for §1927 that shows misconduct [vigorously denied by the undersigned]

8 that has multiplied the proceedings both vexatiously and unreasonably” (Docket No. 81, p. 8,

9 ¶45).

10 On August 5, 5016, attorney Morales Vidal filed a motion titled Exhibits to Attorney

11 Response to Order at doc #75 to Show Cause (Docket No. 82) supplementing her response by

12 attaching the documentary evidence which she sustains supported the allegations contained

13 Motion to Dismiss. On August 7, 2016, attorney Morales Vidal filed a motion titled Attorney’s

14 Motion to Inform Impossibility of Opening Audio at doc #54 & as Such Show Cause Filed at

15 doc #81 Does Not Address Audio (Docket No. 83) stating that she has not been able to open the

16 Audio File at Docket No. 54 and prays for an extension to visit the Clerk’s office for assistance.

17 In the alternative, she submits her answer as is if the court does not grant her extension of time.

18 On September 1, 2016, the Debtor filed Debtor’s Position to Response to Show Cause,

19 Dkt. 81-83 (Docket No. 84). He argues that the Order to Show Cause “is well-grounded and

20 meritorious in light of counsel Morales Vidal’s actions during and subsequent to the October

21 hearing” (Docket No. 84, p. 2). However, the Debtor also informs the court that “so far as we

22 are concerned, we want nothing from sister counsel, Lyssette Morales Vidal” and declares that

23 “[b]y entry of the mere order to show cause, we deem ourselves satisfied and the dignity of our

24 practice vindicated from the affront caused by sister counsel’s litigation tactics.” Id. The Debtor

25 also sustains that although it no longer seeks an award of monetary sanctions against attorney

26 Morales Vidal, that the court may impose other remedies such as a public reprimand, apology or

27 bill of costs to the court. Finally, the Debtor requests that the matter be deemed submitted.

1 Jurisdiction

2 The court has jurisdiction pursuant to 28 U.S.C. §§ 157(b)(1) and 1334(b). Venue of

3 this proceeding is proper under 28 U.S.C. §§1408 and 1409. The power to sanction will be

4 further discussed below.

5 Applicable Law and Analysis

6 (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:

10 “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

11 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

12 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 ¶

14 9011.01 (16th ed.2015).”

15 Id. Specifically, Fed. R. Bank. P. 9011(b) provides:

16 (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

18 unrepresented party is certifying that to the best of the person's knowledge,

information, and belief, formed after an inquiry reasonable under the

19 circumstances,

(1) it is not being presented for any improper purpose, such as to harass or to

20 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

22 reversal of existing law or the establishment of new law;

(3) the allegations and other factual contentions have evidentiary support or, if

23 specifically so identified, are likely to have evidentiary support after a reasonable

opportunity for further investigation or discovery; and

24 (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.

2 The four subdivisions in Fed. R. Bank. P. 9011(b) “may be further divided in two

3 categories; namely, the frivolousness clauses and the improper purpose clause.” In re Terron

4 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[7][a] (16th ed. 2015).“Courts

may infer the purpose of a filing from the consequences of a motion, such as delaying the

10 proceedings or creating ‘a persistent pattern of clearly abusive litigation.” In re Terron

11 Hernandez, 513 B.R. 172 at 180, quoting In re CK Liquidation Corp., 321 B.R. 355, 365 (B.A.P.

12 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

18 and delay in closing his bankruptcy case and obtaining his discharge. In addition, the Debtor

19 sustains that the factual allegations contained in the Motion to Dismiss are false. Finally, the

20 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).

25 This court finds that sanctions pursuant to Fed. R. Bank. P. 9011(b) are not warranted.

26 Firstly, the court finds that the Motion to Dismiss was not filed for an improper purpose.

27 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

2 maliciously prevent or delay the entry of the Debtor’s discharge. In addition, this court finds that

3 although several of the remedies requested in the prayer for relief in the Motion to Dismiss were

4 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

10 determine whether the factual allegations contained in the Motion to Dismiss had evidentiary

11 support since Medina Ramos has passed away and is no longer able to testify in support of those

12 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:

18 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

19 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.

22 “Sanctions under Section 1927 can only be imposed against attorneys, not parties.” In re MJS

23 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

2 Section 1927. See MJS Las Croabas Properties, Inc., 545 B.R. at 418.

3 “The purpose of sanctions under § 1927 is to deter dilatory litigation practices and to

4 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

10 has explained that “[l]itigation conduct qualifies as “vexatious” if it is “harassing or annoying,

11 regardless of whether it is intended to be so.” Lamboy-Ortiz v. Ortiz-Velez, 630 F.3d 228, 245

12 (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

18 required and courts are to apply an objective standard in assessing an attorney’s conduct. Cruz v.

19 Savage, 896 F.2d 626, 632 (1st Cir. 1990) (“Finally, in assessing whether an attorney acted

20 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

25 inform this court or the Debtor’s counsel of her client’s passing prior to the hearing held on

26 October 16, 2015, despite the fact that the Minutes reflect her client passed away a month before

said hearing8. Also, attorney Morales continued settlement negotiations with the Debtor prior to

2 the hearing despite the fact that the Movant had passed away. As a result, not only was the

3 hearing held on October 16, 2015, but the Debtor had to file a reply and memorandum of law in

4 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

10 avoided had attorney Morales Vidal promptly informed this court and Debtor’s counsel of her

11 client’s passing, instead of continuing to litigate the matter without confirmation of whether

12 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.

18 Conclusion

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

26 8 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

27 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.

1 Dismiss within fourteen (14) days. Attorney Morales Vidal may file a response fourteen (14)

2 days thereafter.

3 SO ORDERED.

4 In San Juan, Puerto Rico, this 30th day of January, 2017.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.