Castellanos Grp. Law Firm, L.L.C. v. Fed. Deposit Ins. Corp. (In re MJS Las Croabas Props., Inc.)
| Decision Date | 17 February 2016 |
| Docket Number | Bankruptcy Case No. 12–05710–ESL,BAP NO. PR 15–036 |
| Citation | 545 B.R. 401 |
| Parties | MJS Las Croabas Properties, Inc., a/k/a Ocean Club at Seven Seas, Debtor. Castellanos Group Law Firm, L.L.C., Appellant, v. Federal Deposit Insurance Corporation, as Receiver for Westernbank Puerto Rico, and Wilfredo Segarra Miranda, Chapter 7 Trustee, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, First Circuit |
Alfredo A. Castellanos Bayouth, Esq., on brief for Appellant.
Jeffrey A. Sandell, Esq., Manuel Fernández–Bared, Esq., and Brian M. Dick–Biascoechea, Esq., on brief for Appellee, Federal Deposit Insurance Corporation, as Receiver for Westernbank Puerto Rico.1
Before Feeney, Deasy, and Cary, United States Bankruptcy Appellate Panel Judges.
Castellanos Group Law Firm, L.L.C. (the "Castellanos Firm") appeals from the following bankruptcy court orders: (1) the March 13, 2015 order imposing sanctions against the firm (the "March 2015 Order");2 and (2) the May 27, 2015 order quantifying the amount of the sanctions (the "May 2015 Order") (collectively, "the Orders"). For the reasons discussed below, we AFFIRM the Orders.
MJS Las Croabas Properties, Inc. (the "Debtor")3 filed a voluntary chapter 11 petition on July 19, 2012. Thereafter, Quiñones–Rodriguez filed duplicate notices of appearance in the main case and an adversary proceeding on behalf of a creditor, indicating she was a lawyer "from the law firm of Castellanos & Gierbolini."4 On September 12, 2013, the bankruptcy court converted the case to chapter 7; several days later, the Trustee was appointed.
On August 14, 2014, Quiñones–Rodriguez filed a motion for relief from stay pursuant to § 3625 (the "Relief Motion") on behalf of a different creditor, the Homeowners Association of the Development (the "HOA"),6 seeking authorization "to present a complaint before the Department of Consumer Affairs against the [D]ebtor for [ ] construction defects" relating to the Development. Her signature on the Relief Motion indicated that Quiñones–Rodriguez was a lawyer with the Castellanos Firm. On August 15, 2014, the bankruptcy court issued a summons, scheduling the Relief Motion for a hearing at 9:00 A.M. on September 9, 2014 (the "September 2014 Hearing").
Thereafter, on August 19, 20, and 21, 2014, Manuel Fernández–Bared ("Fernández–Bared"), a lawyer from the firm of Toro, Colón, Mullet, Rivera & Sifre, P.S.C. ("Toro Colón") serving as local counsel for the FDIC, telephoned Quiñones–Rodriguez to resolve the FDIC's concerns regarding the Relief Motion prior to the September 2014 Hearing.7 In each instance, the person who answered the phone informed Fernández–Bared that Quiñones–Rodriguez was unavailable; each time, Fernández–Bared left a message, asking Quiñones–Rodriguez to return his call. His phone calls went unreturned and unacknowledged. In addition, the Trustee and Trigild telephoned Quiñones–Rodriguez several times, without success.
Unable to reach Quiñones–Rodriguez by email or telephone, the FDIC filed a motion for extension of time on August 27, 2014, seeking seven additional days to communicate with the HOA and/or to respond to the Relief Motion. On August 28, 2014, Trigild also filed a motion for extension of time, similarly requesting a seven-day extension in order to make a final effort to speak with the HOA's counsel or, if necessary, to file a response to the Relief Motion. The following day, the Trustee likewise filed a motion, seeking nine additional days to file an opposition to the Relief Motion. In the absence of any objection or response from the HOA, the bankruptcy court granted the three motions, directing the FDIC and Trigild to respond to the Relief Motion by September 4, 2014, and the Trustee to respond by September 8, 2014.
On August 29, 2014, the FDIC, through another of its local attorneys, Brian M. Dick–Biascoechea ("Dick–Biascoechea"), attempted to communicate with Quiñones–Rodriguez via telephone, in yet another effort to discuss the Relief Motion prior to the September 2014 Hearing. Quiñones–Rodriguez was "unavailable" to take the call. Dick–Biascoechea immediately followed up the call with an email to Quiñones–Rodriquez, stating:
Dick–Biascoechea did not receive any form of response to his email.
Subsequently, on September 3, 2014, Trigild's attorney emailed Quiñones–Rodriguez, stating:
We are writing on behalf of Trigild, Inc. We have tried to reach you at your office several times, however we have not received any response. Trigild has some concerns with the HOA's Motion for Relief from Automatic Stay that we would like to discuss without having to object to the HOA's motion. Trigild has until tomorrow to file its opposition to HOA's motion, therefore we hope to receive a response from you before then.
That email produced no response.
Unable to resolve its concerns regarding the Relief Motion by telephone, the FDIC filed a twelve-page opposition to the Relief Motion (the "FDIC's Opposition") by the September 4, 2014 deadline, five days before the September 2014 Hearing.8 It argued:
Over the past three weeks, the FDIC–R has repeatedly called and e-mailed the HOA's counsel in a genuine, honest, and good faith effort to resolve various defects inflicting [sic] the HOA's Motion for Relief. The HOA's counsel, however, has refused to respond to a single message or otherwise speak with undersigned counsel. Accordingly, in order to protect its interests, which arise, in part, from its timely-filed proofs of claim totaling more than $54 million, the FDIC–R has no choice but to file this objection and point out that the Motion for Relief is improper, fatally flawed for numerous independent reasons, and must be denied.
(footnote omitted). Trigild immediately joined the FDIC's Opposition, stating, in relevant part:
Trigild has tried to contact HOA's counsel several times, has left several messages, additionally we sent an email to HOA's counsel informing her that we wanted to discuss some of Trigild's concerns. However we haven't received any response.
Several days passed, and the HOA's counsel continued to ignore the communications from the FDIC, the Trustee, and Trigild. However, on September 8, 2014, at 4:51 P.M., while Sandell was traveling by plane from Dallas, Texas to San Juan, Puerto Rico to attend the September 2014 Hearing, Quiñones–Rodriguez unexpectedly filed a terse motion to withdraw the Relief Motion and "vacate" [sic] the hearing (the "Withdrawal Motion"), offering no explanation for this change of course.
Accordingly, at 6:52 A.M. on the morning of the September 2014 Hearing, the FDIC filed a response to the Withdrawal Motion (the "FDIC's Response to the Withdrawal Motion"), wherein it: (1) requested the entry of an order pursuant to the bankruptcy court's inherent authority, directing both the HOA and the [Castellanos Firm] to pay the FDIC's expenses and costs incurred in connection with the filing of the FDIC's Opposition and travelling to the hearing (the "FDIC's Sanctions Request"); (2) urged the court to proceed with the hearing; and (3) requested five additional days to prepare a bill of costs, itemizing the expenses and costs it incurred as a result of "the misconduct of [the] HOA and [the Castellanos Firm]." The FDIC maintained that Sandell "had no choice but to prepare and file [an] extensive response ... and fly from Dallas, Texas to San Juan, Puerto Rico" to attend the September 2014 Hearing because the [Castellanos Firm] "categorically refused to respond to any communications concerning the [Relief Motion]."
At the hearing which ensued shortly thereafter, the HOA, the Trustee, and the FDIC appeared by counsel.9 At the outset of the hearing, the court acknowledged the withdrawal of the Relief Motion, observed that there would have been grounds to deny the motion, and ruled that the FDIC's request to proceed with the hearing was moot. Then, in support of the FDIC's Sanctions Request, Sandell argued that the HOA refused to respond to "dozens of voice messages" and "several e-mails" from Trigild and the FDIC. On behalf of the HOA, Quiñones–Rodriguez countered:
The court explicitly granted both the Castellanos Firm and Quiñones–Rodriguez additional time to respond to the FDIC's Sanctions Request and indicated it was inclined to view the allegations of the FDIC and Trigild favorably:
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