In re: Wayne A. Seare and Marinette Tedoco
515 B.R. 599
9th Cir. BAP2014Background
- DeLuca was Debtors Seare and Tedoco’s bankruptcy attorney for a chapter 7 filing.
- The district court sanctioned Seare for fraud upon the court in a St. Rose dispute, awarding about $67,431 in attorney’s fees and issuing a wage garnishment.
- Debtors hired DeLuca on February 13, 2012; the 19-page Retainer Agreement and FAQs set out basic vs. additional fees and included a fraud nondischargeability disclaimer.
- Debtors’ chapter 7 petition was filed February 29, 2012; St. Rose later filed an adversary proceeding to except the debt from discharge; Debtors received a discharge May 30, 2012.
- The bankruptcy court issued an Order to Show Cause in August 2012 for possible NRPC violations; it held an evidentiary hearing in October 2012 and issued a Sanctions Opinion on April 9, 2013 sanctioning DeLuca and ordering disgorgement of $1,999 plus other nonmonetary sanctions including publishing the opinion and records-related requirements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the bankruptcy court err in sanctioning DeLuca for unbundling? | DeLuca contends unbundling was permissible and ethically allowed under NRPC 1.2(c) and related rules. | Seare argues unbundling violated ethical rules and severely harmed debtors. | No; unbundling failed to meet ethical standards and the court properly sanctioned. |
| Did DeLuca violate NRPC 1.1 and 1.2(c) by unbundling and not adequately advising Debtors? | DeLuca asserts limited scope complied with consent and goals were identified. | Seare contends lack of proper goals, investigation, and consent. | Yes; found violations of NRPC 1.1 and 1.2(c). |
| Did DeLuca violate NRPC 1.4 and 1.5 by failing to communicate risks and scope of services? | DeLuca argues disclosures and consent were adequate. | Debtors lacked clear understanding of scope and risks. | Yes; findings support violations of NRPC 1.4 and 1.5. |
| Did DeLuca violate 707(b)(4)(C), 526(a), and 528(a) by failing to investigate and misrepresent services? | DeLuca claims reasonable investigation and consent. | Debtors depended on representations about scope and nondischargeability. | Yes; violations established; sanctions affirmed. |
| Were the sanctions imposed by the bankruptcy court appropriate and properly limited by due process? | DeLuca argues sanctions exceeded OSC scope and violated due process. | Seare asserts sanctions were within court’s discretion and properly tailored to deter misconduct. | Yes; sanctions affirmed as reasonable and within magistrate’s discretion. |
Key Cases Cited
- In re Nguyen, 447 B.R. 268 (9th Cir. BAP 2011) (bankruptcy courts may sanction attorneys; deference to factual findings)
- In re Lehtinen, 564 F.3d 1052 (9th Cir. BAP 2009) (discretion in sanctions; standard of review)
- In re Kayne, 453 B.R. 372 (9th Cir. BAP 2011) (broad discretion in sanctions determinations)
- TrafficSchool.com v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011) (sanctions standards; appellate review)
- In re DeVille, 361 F.3d 539 (9th Cir. BAP 2004) (due process and notice in disciplinary proceedings)
- Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (inherent authority to sanction attorneys before courts)