CourtAlert - Tip of the Week
Decision of Interest (Sanctions)
May 8, 2008
Subject:
Decision of Interest (Sanctions)
It is not our practice to
advise the CourtAlert community about decisions of interest
pending in state courts outside of New York. However, the end
result in the case mentioned below deals with bankruptcy court
and we thought you would find this of interest when a party
decides to file for bankruptcy on the eve of trial. The
Circuit Court of the City of Norwalk set the case of Rey v.
Simonz down for trial on November 15, 2006. The night before
the trail defendant advised his attorney about his financial
situation and came to the conclusion to file for bankruptcy.
The attorney switched from being the defendants trial counsel
to being his attorney in bankruptcy court with just a few
clicks on the courts electronic filing system.
The next morning defendants
counsel appeared in the Circuit Court for the trial to
announce his client had filed for bankruptcy the night before.
Plaintiffs counsel immediately asked the court to assess costs
and attorneys
fees against defendants counsel and issue a bench warrant
against defendant for unspecified criminal charges. The court
questioned defendants counsel about the circumstances related
to his client’s decision to file for bankruptcy. Defendants
counsel informed the court that his client had a legal right
to file for bankruptcy at any time, including pretrial, during
the trial, or upon the conclusion of trial.
The court did not rule on
plaintiffs oral motion for sanctions against defense counsel,
but entered an order that dismissed the plaintiffs action
without prejudice because defendant was entitled to an
automatic stay of legal proceedings by operation of law
pursuant to 11 U.S.C. 362. The following month and without a
hearing, the circuit court entered an order that the conduct
of defense counsel in filing pleadings indicating an intent to
try the case while in fact knowing the bankruptcy was to be
filed was not in good faith and was for an improper purpose
including to needlessly increase the cost of litigation to the
Plaintiffs. The court ordered defense counsel to personally
pay the legal fees incurred by Plaintiffs in the amount of
$14,090. Defendants moved for reconsideration which was denied
and then took an appeal to the Virginia Supreme Court. The
court concluded that an attorney representing a litigant
contemplating filing a petition for bankruptcy, does not have
an obligation to inform opposing counsel or the court that the
attorney’s client is considering filing for bankruptcy. The
lower court order was reversed. If
you would like to see a copy of the Virginia Supreme Court
decision
Please Click Here
.
We would like to point out
some items of interest or thoughts on this matter:
We checked the
bankruptcy docket and we noticed the petition was not
originally signed by the Debtor. What if the Debtor never
signed the actual petition? An attorney in the same district
was sanctioned a few years ago for one year because he failed
to have the Debtor sign the original petition. What effect
would there be on the automatic stay if he never signed the
petition?
We found the web
sites for the Circuit Court and the Virginia Supreme Court
very user friendly. If you have a chance please take a look at
them.
http://wasdmz2.courts.state.va.us/CJISWeb/CaseDetail.do
http://www.courts.state.va.us/scv/home.html
The defendant was fortunate to have an attorney
that had an ECF password to electronically file his bankruptcy
papers after the court had closed. This might serve as a good
reminder to make sure the attorneys in your firm are
registered for a password in all local courts. We would also
like to remind our case management users that ECF passwords
and attorney admission information can be recorded in a
special secured database.
We are committed to remain the best!
Thank You,
Izzy
Schiller , President
CourtAlert
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