In re: Wayne A. Seare and Marinette Tedoco
515 B.R. 599
| 9th Cir. BAP | 2014Background
- DeLuca was Debtors Seare and Tedoco’s bankruptcy attorney; Debtors sought to stop wage garnishment tied to a district court Judgment arising from Seare’s fraud in an earlier St. Rose lawsuit.
- St. Rose obtained a Judgment for attorney’s fees ($67,430.58) after sanctions for fraud on the court; garnishment followed against Seare.
- Debtors filed Chapter 7 with DeLuca in Feb 2012; St. Rose later filed an adversary proceeding under 523(a)(4)/(a)(6); Debtors received a discharge in May 2012.
- DeLuca informed Debtors on June 6, 2012 that he would not represent them in the adversary; the OSC was issued Aug 3, 2012; evidentiary hearing occurred Oct 23, 2012.
- Bankruptcy court issued Sanctions Opinion on Apr 9, 2013 sanctioning DeLuca for NRPC and Code violations, including disgorgement of fees and publication; DeLuca timely appealed.
- St. Rose filed a Confession of Judgment for nondischargeable debt on Jan 2, 2013; sanctions order included ongoing disclosure requirements for future adversary clients.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the sanctioning order was an abuse of discretion | DeLuca argues the sanctions were excessive and failed proper process | Seare contends sanctions were justified due to unbundling ethics violations | No abuse; sanctions upheld with proportional measures |
| Whether unbundling adversary representation violated NRPC 1.1/1.2 and related rules | DeLuca asserts unbundling limited scope was reasonable and consented | Bankruptcy court found unbundling unreasonable and not adequately consented | Unbundling violated NRPC 1.1/1.2 and consent requirements; affirmed |
| Whether DeLuca failed to obtain informed consent and adequately communicate risks (NRPC 1.4/1.5) | DeLuca relied on boilerplate Retainer Agreement; consent sufficient | Retainer lacked clear connection between risks and limited scope | VIOLATED NRPC 1.4 and 1.5; sanctions affirmed |
| Whether DeLuca violated 707(b)(4)(C), 526(a), and 528(a) | Debtors relied on DeLuca’s failure to investigate and disclose risks | DeLuca claimed reasonable investigation given client limitations | Violations established; sanctions affirmed |
| Whether publication of the Sanctions Opinion was proper | Publication deters misconduct | Publication excessive | Publication upheld as appropriate deterrent measure |
Key Cases Cited
- In re Nguyen, 447 B.R. 268 (9th Cir. BAP 2011) (authority on sanctions and inherent powers; en banc considerations)
- In re Kayne, 453 B.R. 372 (9th Cir. BAP 2011) (bankruptcy sanctions standard; abuse of discretion)
- In re Lehtinen, 564 F.3d 1052 (9th Cir. 2009) (abuse of discretion; standards for sanctions)
- In re DeVille, 361 F.3d 539 (9th Cir. 2004) (due process and notice in disciplinary sanctions)