Vizconde v. McCandless (In re Carrera)

In re Carrera, No. NC-15-1383-KiTaJu (9th Cir. B.A.P. Aug. 16, 2016). Not for publication.
A chapter 13 debtors’ lawyer’s involvement in two bad-faith chapter 13 filings warranted FRBP 9011 monetary sanctions on the bankruptcy court’s own motion.
Procedural context:
In two chapter 13 cases in which the same lawyer represented the debtors, the court issued its sua sponte orders requiring the lawyer to show cause why the lawyer should not be sanctioned for filing the petitions in bad faith. The court ordered the lawyer to pay the court $2,000 in sanctions in each case. On appeal, the BAP affirmed.
Although the bankruptcy court did not cite the legal authority for its imposition of sanctions, the sanctions were warranted under FRBP 9011. Before 9011 sanctions may be awarded against a person, the person is entitled to notice and a hearing, but not the procedures required for a criminal-contempt proceeding. Where the court initiates the award of 9011 sanctions by a show-cause order, monetary sanctions are limited to the award of a penalty payable to the court. A penalty may not exceed an amount sufficient to deter repetition of the conduct or comparable conduct by others similarly situated, and it may not be a serious penalty in the nature of criminal contempt. Here, the $2,000 deterrence penalty in each case was appropriate and not a serious penalty.
Ralph B. Kirscher, Laura S. Taylor, and Meredith A. Jury, Bankruptcy Appellate Panel Judges.

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