462 B.R. 857
Bankr. S.D. Florida2011Background
- The court held show-cause hearings in multiple Florida Chapter 13 cases to address Debtors' counsel's filing of numerous claim objections under Rule 9011(b).
- In each case, the debts were scheduled as noncontingent, liquidated, undisputed, yet Debtors' counsel objected to the claims on grounds of lack of documentation or disputed amounts, prompting sanctions concerns.
- The MacFarland, Hurtado, Garcia, Ahringer, Mullennix, Alvarez, Kirkland, Santana, Beckford, De Pena, and Lewis matters were consolidated for the sanction proceedings and related orders were issued or proposed against the respective counsel.
- The court found that the objections were filed in objective bad faith or with a lack of reasonable inquiry, violating Rule 9011(b), and ordered sanctions against the attorneys in the listed cases.
- The sanctions included suspensions from practice in the SD Fla for specified periods and overruling of numerous claim objections, with the court emphasizing deterrence of repeat or concerted misconduct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether filing claim objections without reasonable inquiry violated Rule 9011(b) | MacFarland (and others) argued objections were proper under 9011(b). | Debtors' counsel claimed no bad faith and that objections were legitimate responses to claims. | Yes; sanctions imposed for objective bad faith and lack of reasonable inquiry. |
| Whether lack of attached documentation warrants disallowance under 502(b) when debts are undisputed and scheduled | Debtors contended lack of documentation supported disallowance under 502(b). | Court held failure to attach writing is not a basis for disallowance where debts are undisputed and scheduled. | No; 502(b) disallowance requires enumerated grounds; documentation gaps do not alone justify disallowance. |
| Whether objecting to undisputed, scheduled debts in full, rather than addressing only disputed portions, constitutes bad faith | Debtors argued to strike entire claims based on insufficient documentation. | Counsel claimed objections were proportional to perceived issues with the claims. | Yes; striking entire undisputed portions when only part is disputed constitutes bad faith sanctions. |
| Whether sanctions should extend to the individual attorneys across multiple related cases as a pattern | Pattern of conduct suggested coordinated improper strategy to affect plans. | Counsel asserted remedial steps and good faith efforts to curb future issues. | Yes; sanctions issued for a pattern of conduct across cases to deter repeat or similar misconduct. |
| What is the appropriate sanction for the offending attorneys | Sanctions necessary to deter similar conduct and protect creditors. | Varied by case; some sanctions characterized as suspensions with particular duration. | Suspensions from practice for 31 days in several cases; consecutive suspensions where warranted; continued monitoring and related orders. |
Key Cases Cited
- In re Moreno, 341 B.R. 813 (Bankr.S.D.Fla. 2006) (undisputed scheduled debts require little documentation; do not object to undisputed amounts)
- In re Felipe, 319 B.R. 730 (Bankr.S.D.Fla. 2005) (address only the portion of a claim actually in dispute; not appropriate to strike undisputed amounts)
- In re Kincaid, 388 B.R. 610 (Bankr.E.D. Pa. 2008) (failure to attach documentation is not grounds for disallowance; burden on objector to rebut prima facie claim)