Porto filed his Chapter 7 bankruptcy proceeding on March 16, 2007. One of the debts he sought to discharge was a personal injury judgment debt he had owed DeLauro since 1985. DeLauro filed a complaint objecting to the discharge of Porto’s debt to him on the ground that Porto had fraudulently avoided satisfying that debt since the judgment underlying it was entered 22 years before. Although DeLauro’s complaint contained multiple factual allegations of fraud, the only legal remedy it sought was the denial of Porto’s discharge pursuant to Bankruptcy Code Section 727(a)(5), which forbids discharge where “the debtor has failed to explain satisfactorily . . . any loss of assets or deficiency of assets to meet the debtor’s liabilities.”
The bankruptcy court entered judgment in favor of Porto, denying the relief that DeLauro sought under 11 U.S.C. § 727(a)(5), and it awarded attorney’s fees to Porto as a sanction for DeLauro’s meritless complaint. DeLauro appealed both orders to the district court. In an order dated May 26, 2009, the district court affirmed the bankruptcy court’s judgment on the merits of DeLauro’s claims, but it requested further briefing on the issue of whether the bankruptcy court properly granted Porto’s motion to sanction DeLauro. In the meantime, Porto filed motions in the district court for additional sanctions and to tax costs against DeLauro for pursuing a frivolous appeal from the bankruptcy court. After further briefing, the district court in an order dated September 15, 2009 affirmed the bankruptcy court’s judgment awarding attorney’s fees to Porto, but it later denied Porto’s renewed request for additional sanctions against DeLauro for appealing the bankruptcy court orders because it concluded that those appeals were colorable.
DeLauro filed two separate notices of appeal to this Court on October 15, 2009. One of them appealed the district court’s order affirming the bankruptcy court’s order overruling his objections and discharging Porto’s debt to him. The other one appealed the district court’s order affirming the bankruptcy court’s award of attorney’s fees to Porto as a sanction against DeLauro for filing the objections.
Porto cross-appealed the district court’s order denying his motion for sanctions and costs against DeLauro for having filed what Porto characterized as frivolous appeals to the district court.
DeLauro’s appeal from the district court’s judgment affirming the bankruptcy court’s judgment on the merits is DISMISSED for lack of jurisdiction. The judgment of the district court on the issue of attorney’s fees is VACATED and the case is REMANDED for proceedings consistent with this opinion. The district court’s judgment denying sanctions for the appeal to it is AFFIRMED.
(The bankruptcy court’s decision rested in part on DeLauro’s referring to the wrong bankruptcy code section in arguing that Porto’s debt should not be discharged. The appeals court questions why DeLauro’s attorney was not sanctioned for poor lawyering, yet another reminder of the importance of doing your homework.)