Church Joint Venture, L.P. v. Grusin (In re Blasingame)

Case Type:
Case Status:
16-6776 (6th Circuit, Jan 04,2018) Not Published
The Sixth Circuit reverses the imposition of sanctions by the bankruptcy court under Rule 9011 and 28 USC Sec. 1927 (but affirms the BAP), holding that Grusin did not file the debtors petition, that movant failed to comply with Rule 9011 safe harbor provisions, and that conduct which is negligent or incompetent does not merit sanctions under Section 1927.
Procedural context:
The bankruptcy court imposed sanctions against Grusin, a non-bankruptcy attorney assisting the debtors. Grusin appealed to the Sixth Circuit BAP, which reversed. The creditor which was awarded the sanctions appealed to the full Sixth Circuit, which also reversed the bankruptcy court, consistent with the BAP's decision.
Grusin was a non-bankruptcy attorney who advised the debtors (incorrectly) about the treatment of trust funds in bankruptcy proceedings. The debtors retained bankruptcy counsel and filed schedules which omitted several trusts they had created. After prevailing in an action to deny the debtors a discharge, a creditor and the trustee sought sanctions under Rule 9011, 28 USC Sec. 1927 and a disgorgement of fees. After a hearing, the bankruptcy court ordered Grusin to disgorge fees, pay $20,000 to the trustee and attend 15 hours of CLE under Rule 9011, and awarded an additional $75,000 to the creditor and trustee under Section 1927.
Keith, McKeague and Stranch; opinion by Keith

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