McKinstry v. Richard Holmes Enterprises, LLC (In re Black Diamond Mining Company, LLC)

(E.D. Ky. June 16, 2016)

The district court affirms the bankruptcy court’s order dismissing the reopened bankruptcy case. The creditor consented to the unsecured creditors trusts’ settlement of a claim, which was followed by a distribution to creditors and closure of the case. The creditor then moved to reopen the case, and the bankruptcy court granted the motion on condition that the creditor deposit its distribution amount in escrow. The creditor failed to do so, and the case was then dismissed. The bankruptcy court did not err in placing a condition on reopening the case. Because the creditor waited to challenge the settlement and bring claims against the trusts’ attorneys after distribution, there were no fund to indemnify the trust. Thus, the requirement to deposit funds in escrow was appropriate. Opinion below.

Judge: Thapar

Attorneys for Creditor: The Getty Law Group, PLLC, C. Thomas Ezzell, Richard A. Getty, Ware Jackson Lee O’Neill Smith & Barrow, LLP, Paul Smith, Timothy F. Lee

Attorneys for Trust and Its Attorneys: Foley & Lardner, LLP, David B. Goroff, Geoffrey S. Goodman, Dinsmore & Shoal LLP, David James Treacy, Hoover Hull Turner LLP, Michael R. Limrick, Patrick A. Ziepolt, Wayne C. Turner

2016-06-16 – in re black diamond mining company

Grossman v. Wehrle (In re Royal Manor Management, Inc.)

(6th Cir. June 15, 2016)

The Sixth Circuit affirms the decision finding sanctions were appropriate against the attorney because he unreasonably and vexatiously multiplied the proceedings with repeated filings. The bankruptcy court did not abuse its discretion in entering the sanctions order. Opinion below.

Judge: White

Appellant: Dennis Allan Grossman

Attorney for Appellee: Louise M. Mazur, Marc Bryan Merklin, Brouse McDowell, Caroline Louisa Marks

2016-06-15 – in re royal manor management

Author: Matt Lindblom

In re Jones

(6th Cir. B.A.P. Mar. 3, 2016)

The Sixth Circuit B.A.P. reverses the bankruptcy court’s sanctioning of a lawyer under Bankruptcy Rule 9011. The bankruptcy court sua sponte entered a show cause order to address whether the bankruptcy court should find the attorney in violation of Rule 9011. Following a hearing, the court entered an order holding the attorney liable for $26,000 in attorney fees and revoking his ECF privileges. The B.A.P. reviews the record and finds that the bankruptcy court relied on clearly erroneous factual findings to support the sanctions order and that attorney fees could not be awarded because the show cause order was issued sua sponte. Opinion below.

2016-03-03 – in re jones

Author: Matt Lindblom

In re Payan

(Bankr. S.D. Ind. Feb. 16, 2016)

The bankruptcy court grants the debtor’s motion for sanctions for stay violations. The creditor alleged that it had coded the debtor’s account to reflect the bankruptcy when the creditor received notice of the bankruptcy. However, the creditor’s computer system had recently been updated, and the coding failed to stop the automatic loan payments from being deducted from the debtor’s checking account. Post-petition, the debtor’s wife notified the company three separate times to fix the problem, but the automatic payments continued. The court finds that sanctions were appropriate due to the willful stay violation. Opinion below.

2016-02-16 – in re payan

Author: Matt Lindblom

In re Taylor

(7th Cir. July 20, 2015)

The Seventh Circuit holds that the bankruptcy court abused its discretion in issuing a contempt order and awarding damages to the debtor for the creditor’s alleged violation of the discharge injunction. The creditor’s adversary proceeding had been dismissed for failure to establish the creditor had standing to enforce a state court judgment. The judgment was then discharged. The creditor then went back to state court and obtained an order that stated a prior assignment of the judgment to the creditor had always been valid. The bankruptcy court held this violated the injunction. This court holds that obtaining the state court order was not an act to collect a discharged debt and it was not a collateral attack on the bankruptcy court’s orders. Opinion below.

2015-07-20 – in re taylor

Author: Matt Lindblom

Boone County Utilities, LLC v The Branham Corporation (In re Boone County Utilities, LLC)

(Bankr. S.D. Ind. May 8, 2015)

In this declaratory judgment action, the bankruptcy court grants partial summary judgment in favor of the Chapter 11 debtor. The debtor’s plan had been confirmed ten years prior to this action and the plaintiff brought the action to attack certain provisions of that plan. The bankruptcy court interprets its prior orders in the bankruptcy case and ultimately rules in favor of the debtor, as well as finds sanctions against the plaintiff are appropriate. Opinion below.

2015-05-08 – boone county utilities v the branham corporation

Author: Matt Lindblom

Rinaldi v. HSBC Bank USA, N.A. (In re Rinaldi)

(7th Cir. Feb. 11, 2015)

The Seventh Circuit affirms the bankruptcy court’s dismissal of the debtors’ adversary claims against the mortgage holder and the bankruptcy court’s order sanctioning the debtor’s attorney for frivolous court filings. The debtors asserted fraud, breach of contract, tortious interference, and related claims against the mortgage holder, all of which were dismissed by the bankruptcy court. The debtors appealed, and the district court affirmed. The debtors appealed to the circuit court and then dismissed their bankruptcy case, stating they intended to now bring the dismissed claims in state court. The attorney filed numerous motions that the district court held were frivolous, rambling, and not compliant with court rules. The court entered an order holding that any further frivolous filings would result in an award of sanctions. The attorney then filed a motion to withdraw as counsel and intervene as a party in the case. The court allowed the withdraw but held she had no standing to intervene, and then entered the sanctions order. The Seventh Circuit holds that it will not dismiss the appeal for mootness but instead affirms the orders below, including the award of sanctions. Opinion below.

2015-02-11 – in re rinaldi

A second opinion was issued on the same day, sanctioning the same attorney for behavior in a foreclosure case. That opinion can be found here:

2015-02-11 – in re nora

Author: Matt Lindblom

In re Royal Manor Management, Inc.

(6th Cir B.A.P. Feb. 5, 2015)

The Sixth Circuit B.A.P. affirms the bankruptcy court’s orders sanctioning an attorney and denying that attorney’s motion seeking recusal of the bankruptcy judge. The bankruptcy court ordered the attorney to pay over $200,000 in fees and costs incurred by the trustee in disallowing the attorney’s client’s claim, because the attorney presented arguments without merit. In this sixty-page opinion, the court addresses the bankruptcy court’s authority to enter the sanctions order and determines that the arguments presented in support of the claim were frivolous. The bankruptcy court did not err in denying the recusal motion. Opinion below.

2015-02-05 – in re royal manor management

Author: Matt Lindblom

In re Sekema

(Bankr. N.D. Ind. Jan. 7, 2015)

The bankruptcy court finds sanctions are appropriate and enters an order fining the creditors $1,000 for submitting proofs of claim in violation of Bankruptcy Rule 9011. The debts were clearly barred by Indiana’s six-year limitations period. The debtor objected to the proof of claim, the creditors did not respond, and the claims were denied. The court then issued show cause orders, to which the creditors also did not respond. The creditors had not conducted the reasonable investigation required by Rule 9011 before submitting the claims. Opinion below.

2015-01-07 – in re sekema

Author: Matt Lindblom

In re McGee

(Bankr. E.D. Ky. Oct. 29, 2014)

The bankruptcy court enters orders sanctioning attorneys Brady and Porter for multiple violations of their professional duties and responsibilities. The attorneys failed to adequately represent clients prior to and after filing bankruptcy petitions, took thousands of dollars from clients and failed to account for funds or timely file petitions, and allowed non-attorney staff to counsel clients and file court documents without appropriate supervision. The court determines that the chapter 13 bankruptcy of one of the attorneys did not prevent the entry of the order for sanctions. The orders require reimbursement of client funds, monetary sanctions, and permanent prohibition of practice in this bankruptcy court. Opinion below.

2014-10-29 – in re mcgee