In re Monteagudo

Case No. 13-20044 (unpublished slip opinion)
Houston Bankruptcy Judge Marvin Isgur's order sanctioning a Seattle-based attorney for the attorney's pattern of ignoring Judge Isgur's prior rulings was AFFIRMED. The attorney represented a credit card company that became notorious for filing section 523(a)(2)(A) complaints, alleging that the chapter 7 debtors fraudulently incurred credit card debts and, thus, should not receive a discharge of those debts. In a published opinion from 2012, Judge Isgur held that Rule 9(b) applies to such complaints, and that the complaints must allege specific facts to support the allegations of fraud, as required by the rule. See In re Fuentes, 474 B.R. 497 (Bankr. S.D. Tex. 2012). The sanctions here required the attorney to follow that ruling and attach a copy of the sanctions order to all future complaints for one year. The district court affirmed, and the Fifth Circuit agreed that the bankruptcy court's inherent sanctioning powers were justified based on the attorney's bad faith, which was patently evident from the record. The Fifth Circuit also agreed that the attorney failed to acknowledge the bankruptcy court's prior ruling and abide by it. Finally, the Fifth Circuit held that the attorney was given fair notice of the possible sanctions, and that the sanctions neither prevented the attorney from practicing nor did they inconvenience the attorney unnecessarily. Accordingly, the sanctions were upheld on appeal.
Procedural context:
Appeal from the district court, which affirmed sanctions issued by the bankruptcy court.
This Seattle-based attorney became well-known to Judge Isgur, and not in a good way. In a 22-month span, the same attorney filed 68 dischargeability complaints in the Southern District of Texas, alleging that the debtors' pre-bankruptcy credit card charges were fraudulent and, thus, not dischargeable under 11 U.S.C. 523(a)(2)(A). In 2012, Judge Isgur ruled that, because such complaints were based on common-law fraud, Rule 9(b) required the complaints to state particular facts beyond the dates and amounts of the charges to demonstrate why they amounted to fraud. See In re Fuentes, 474 B.R. 497 (Bankr. S.D. Tex. 2012). When the attorney did not immediately amend his complaint in this adversary proceeding, Judge Isgur issued a show cause order. Following the hearing on the show cause order, Judge Isgur remained unconvinced that the attorney acknowledged his Fuentes ruling and intended to abide by it (the attorney maintained that it was the defendant's burden to raise Rule 9(b) concerns, an argument previously rejected in Isgur's 2012 decision). Judge Isgur, thus, issued an order sanctionioning the attorney by requiring him to: (1) comply with his Fuentes ruling; and (2) attach the sanction order to all future 523(a) complaints for one year. The attorney appealed.
REAVLEY, JOLLY, and DAVIS (per curiam)

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