Judge has harsh words for attorneys operating ‘bankruptcy mills’

Las Vegas bankruptcy attorney Anthony DeLuca is the latest to receive a sanction and a sharp set-down from U.S. Bankruptcy Judge Bruce Markell, who has been aggressive about trying to inform the public about attorneys operating “bankruptcy mills.”

Markell tore into DeLuca for violating the U.S. Bankruptcy Code as well as the Nevada Rules of Professional Conduct in a 91-page opinion that reads like the academic he once was and will become again when he leaves the bench this summer to teach at Florida State University.

“DeLuca’s conduct has eroded the public trust by serving as an example of one more lawyer that values efficiency and what is best for him over the client’s needs,” Markell wrote in his April 9 opinion. “The profession suffers, albeit intangibly, where the overall level of consumer bankruptcy practice is dragged down by unethical behavior.”

Markell also has harsh words for the debtors for their deception in two courts.

In 2010, Wayne Seare sued St. Rose Dominican Health Foundation. A lab assistant who worked at all three St. Rose campuses, Seare sued the foundation for employment discrimination and sexual harassment. In 2011, the court threw the case out and ordered Seare to pay St. Rose $67,430 for attorneys fees.

The reason? Fraud upon the court by Seare.

In February 2012, Seare and his wife, Marinette Tedoco, turned to DeLuca, who advertises his law firm as a full-service firm.

Seare’s monthly income was $2,808, and the garnishment was $329.

With five dependents, he lives paycheck to payment. He wanted DeLuca to help him with a bankruptcy and to fight St. Rose, which was garnisheeing his wages. St. Rose was seeking the attorneys fees in bankruptcy court in an adversary proceeding.

Debts incurred through fraud, as Seare’s was, are not dischargeable in a bankruptcy proceeding. However, hospital bills can be discharged through bankruptcy.

In the one and only time the couple met with DeLuca, they showed him documents including a Wage Garnishment and Wage Sanction. DeLuca glanced at the paperwork and apparently assumed it was an action for hospital bills. He told the couple that hospital bills are dischargeable.

DeLuca said he wouldn’t have taken the case if he had understood he would have to handle an adversary proceeding in bankruptcy court.

His refusal to handle the adversary proceeding left the couple without an attorney during a complex proceeding. Seare has since settled the garnishee issue with St. Rose.
Markell said it was DeLuca’s duty to find out the couple’s objectives. Instead, DeLuca filed a routine bankruptcy that protected the couple from creditors owed $137,000, debts that were discharged during the bankruptcy.

Markell called the attorney negligent and noted DeLuca refused to admit his own mistakes and tried to blame everything on the couple, who Markell described as “hardly the models of credibility.”

Markell explained that limiting the scope of a practice is called “unbundling.”

“While unbundling is permissible, it must be done consistent with the rules of ethics and professional responsibility binding on all attorneys,” the judge wrote, adding, DeLuca didn’t meet those standards.

The sanctions against DeLuca include:

■ Returning the couple’s $2,000 fee.

■ A public reprimand by publishing the decision.

■ Ten hours of continuing education regarding ethical responsibilities and five hours regarding collection and enforcement of judgments.

DeLuca said Tuesday he will appeal Markell’s decision. “He’s got the law and the facts wrong. I’ve already filed a motion to stay the publication, and he granted that,” the lawyer said.

An attorney for 17 years, DeLuca said he can’t remember all the tens of thousands of cases, but said he’s never even had a disciplinary case opened against him by the State Bar of Nevada.

In 2012, there were 14,000 bankruptcy cases filed in Las Vegas, and not all the attorneys understood the complexities involved, as Markell’s prior sanctions have shown.

Repeatedly, Markell has sanctioned bankruptcy attorneys and entire law firms, trying to drum home his message: “The practice of law is a professional service, not a pre-packaged, one-size-fits-all product.”

I’ve done my part to warn the public by writing about sanctions. If DeLuca wins his appeal, I’ll write about that, too.
I do wonder, however, if I will receive calls and emails about DeLuca hurting rather than helping a client. That’s become routine after sanction columns.

Just once I’d like to hear from people who read a sanction column and researched and found a solid bankruptcy attorney instead of being duped by slick advertising. Just once.

Jane Ann Morrison’s column appears Monday, Thursday and Saturday. Email her at Jane@reviewjournal.com or call her at (702) 383-0275.