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Bankruptcy Court Sanctions Attorney For Repeated, Meritless Motions to Amend Adversary Complaint

The Bankruptcy Court of the District of Rhode Island has held that it will sanction an attorney for filing repeated, meritless motions to amend an adversary complaint.

The attorney represented a creditor that had filed an adversary complaint objecting to the discharge of the debtor. The court had granted a motion to amend the complaint ("the second amended complaint") and then granted the debtor's motion to dismiss the complaint. The creditor appealed that decision to the district court. While the appeal was pending the creditor moved to file a third amended complaint. The debtor objected that the motion was frivolous in light of the prior dismissal and the pending appeal and requested sanctions. The Court denied the motion to amend without prejudice as it lacked jurisdiction during the appeal. The district court affirmed the dismissal of the second amended complaint. The creditor re-filed its motion to assert the third amended complaint. The debtor renewed its sanctions motion. The bankruptcy court denied the renewed motion to amend and then denied a motion for reconsideration of that denial.

The bankruptcy court held it was clear under First Circuit law that once judgment had entered dismissing the second amended complaint it lack jurisdiction to grant a motion to amend unless post-judgment relief was granted. The creditor did not seek post-judgment relief; instead, it pursued its unsuccessful appeal. Once the district court affirmed the dismissal there was no complaint to amend. The creditor cites to a First Circuit decision that is almost identical on the facts but holds contrary to the creditor. This should have put the creditor on notice that its renewed motion to amend was frivolous.

The court held that to sanction an attorney it must find the attorney was "culpably careless" when violating the bankruptcy rules. It found the creditor's attorney was culpably careless in filing the renewed motion to amend the second amended complaint and in failing to withdraw it when debtor pointed out its flaws. The motion was not "warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law..." The court determined that creditor's counsel should pay a reasonable attorney's fee.

M2Multihill, LLC v. Jock West, Showtime, LLC, A.P. No-11-01021, 2013 WL 5923078 (Bankr.D.R.I. Oct. 30, 2013)

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