RENE ORTIZ RIVERA

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO
IN RE: : CASE NO. 10-01470
:
RENE ORTIZ RIVERA : CHAPTER 13
:
Debtor :
:
____________________________________:
OPINION AND ORDER
This case is before the court upon debtor’s motion for sanctions, attorney’s fees, ans costs
pursuant to Rule 9011 of the Fed. R. Bankr. P and 11 U.S.C.A. 105(a) against Integration
Technologies Corp. (hereinafter “Intech”), and Intech’s opposition thereto. Debtor alleges that Intech
had no chance of success in motions filed before the court, advanced no reasonable argument for its
position, the arguments were meritless, the arguments were aimed at misleading the court, and the
arguments were presented for an improper purpose. Debtor prays for sanctions in the amount of
$5,000, and attorney’s fees and costs in the amount of $10,425 as per attached itemized detail. Intech
opposes alleging that its arguments were presented in good faith, not for the purpose of delaying
litigation, and based on the doctrine of judicial estoppel as the debtor had failed to include all
prepetition causes of action, particularly the one against Intech. For the reasons stated below,
Debtor’s motion is hereby denied.
Factual Background
1. Debtor filed a voluntary Chapter 13 petition on February 26, 2010. On the same date the
debtor filed a Chapter 13 plan, which was confirmed on April 29, 2010 (Docket Nos. 2 & 10).
2. On November 23, 2010 the debtor filed amended schedules B and C, to include and request
an exemption over the state court of action which was valued at $1.00 (Docket No.22). Copy of the
complaint attached to Intech’s motion opposing the voluntary dismissal show that the action which
was filed requested $1,000,000 (Docket No. 29, Exhibit D).
2. On February 9, 2011 the debtor filed an application to employ special counsel to prosecute
an action against Intech (Docket No. 23). Intech opposed the application (Docket No. 24). The
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contested matter was scheduled for a hearing on May 25, 2011 (Docket No. 25). The special counsel
would represent the debtor in an action filed in state court against Intech for intentional interception
of telephonic communications, harassment, sexual orientation discrimination, retaliation, and
damages. The state court action was filed on September 13, 2010. However, the debtor had made
an extrajudicial claim against Intech on November 9, 2009 for acts which occurred in October 2009,
that is, prepetition.
3. On March 9, 2011 the debtor filed a motion for voluntary dismissal (Docket No. 28).
Debtor alleges in his motion that considering his actual condition he has opted to pay his creditors
outside the bankruptcy court. Intech opposed the motion for voluntary dismissal (Docket No. 29).
The contested matter was also scheduled for a hearing on May 25, 2011, and subsequently continued
to June 21, 2011 (Docket Nos. 30 & 35).
3. At the June 21, 2011 hearing the court entered an order in open court granting the motion
to dismiss finding that there were no exigent circumstances for the court to deny the request (Docket
No. 40). The court also found that Intech had no standing to oppose the request as it was not a
creditor and did hold any pecuniary interest in debtor’s estate. The court granted debtor 14 days to
move the court, in writing, for sanctions and attorney’s fees. See transcript of hearing, Docket No.
51.
Argument
The basic purpose of Rule 9011 sanctions is to deter abusive litigation tactics and to
streamline the litigation process by lessening the frequency of frivolous claims. In re Kristan, 395
B.R. 500 (1 . Cir BAP 2008). Sanctions are meant to serve the dual purposes of deterrence andst
compensation. In re Withrow, 405 B.R. 505, 514 (1 . Cir BAP 2009). Amongst the factors to weighst
are: if the party’s conduct was willful or negligent, whether it was a pattern of activity or an isolated
event, whether it infected the entire pleading, whether there is a basis in law. In re Kristan, supra.
Intech’s motion were both predicated on the fact that the debtor had failed to disclose a
prepetition cause of action, and that the debtor should not benefit from such an omission. The
argument was based on the Supreme Court’s decision in Marrama vs. Citizens Bank of
Massachusetts, 549 U.S. 365 (2007), and In re Acosta-Rivera, 557 F3d 8 (1 Cir 2009), which heldst
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that the bankruptcy court has discretion not to dismiss a case. Although not directly on point, these
two decisions do give Intech a plausible ground to object, irrespective of its standing, as was later
found by the court.
If the Debtor would have disclosed the prepetition cause of action it would have the “clean
hands” to pursue the request for sanctions under Rule 9011. However, he did not. Such an omission
weighs heavily against this court awarding sanctions.
Conclusion
In view of the foregoing, debtor’s request for sanctions is hereby denied.
SO ORDERED.
Dated this 12th day of September, 2011 in San Juan, Puerto Rico.
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