New York Court Sanctions Attorney and Lender Client where client relied on its attorney's advise but Court said it was unreasonable to rely on such advice. Courts are reluctant to impose sanctions on attorneys or litigants. In fact, Fed.R.Civ.P. 11 and its bankruptcy equivalent, Fed.R.Bankr.P. 9011, are designed to allow attorneys and parties a chance to avoid sanctions by correcting any potentially sanctionable pleadings or actions. The Bankruptcy Court for the Northern District of New York recently imposed sanctions on both an attorney and his client, a credit union, after finding that they filed an adversary proceeding knowing it was only, to paraphrase the attorney, a "shot in the dark." [Northern Federal Credit Union v. Eliopoulos (In re Eliopoulos), Adv. Pro. No 04-90063, May 5, 2005.] In this case, the individual Chapter 7 debtor lived with his girlfriend. In part, the credit union sought to require the debtor to list his girlfriend's income on his schedules. The credit union theorized that the debtor's girlfriend paid some of the expenses he had listed on his schedules and that, as a result, the expenses listed on his schedules were inflated. The credit union also theorized that the debtor was diverting some of his income to his girlfriend in a way that, when combined with the supposedly inflated expenses, constituted fraud warranting denial of the debtor's discharge. The problem was that the credit union had no proof to support either of its theories. Even after conducting a Rule 2004 exam, and by their own admission, the credit union had insufficient information with which to make a determination about the debtor's intent. However, the credit union opted to file suit anyway. The Court noted that in addition to a lack of evidence to support a fraud claim, the attorney was unable to point the court toward any case law that adequately supported the credit union's contention that the girlfriend's income should be listed on the schedules. As such, the Court determined that the case was filed in bad faith. In the end, the Court required the attorney and the credit union to pay the debtor's attorneys fees and costs for having to defend the suit. Although the credit union had relied on the attorney's advice, the Court found that it was "not objectively reasonable" for the credit union to rely on that advice. In part, the Court found that a key individual responsible for making the decision on behalf of the credit union was familiar with the bankruptcy process and had worked closely with the attorney. Mac McMahan