- Case Type:
- Case Status:
- 20-8002 (6th Circuit, Nov 23,2020) Not Published
- A panel of the Bankruptcy Appellate Panel for the Sixth Circuit (BAP or Panel) affirmed, "solely" on procedural grounds, the decision of the United States Bankruptcy Court for the Western District of Tennessee (BC) to sanction William H. Thomas Jr. (Thomas or Debtor) for the filing of a motion that had requested the imposition of sanctions on Tennessee's attorney general's office and the deputy who represented it (Motion) on the basis of the Federal Rules of Bankruptcy Procedure (collectively, Bankruptcy Rules, and, individually, Bankruptcy Rule ), and doing so without conducting a hearing.
- Procedural context:
- In this case, the Debtor filed his notice of appeal on March 3, 2020. This was six days after entry of the BC’s Order Denying “Motion for Sanctions Pursuant to Rule 9011 of the Federal Rules of Bankruptcy Civil Procedure Against the Office of the Tennessee Attorney General Including Michael Willey,” which issued on February 26, 2020 (Order Denying Motion for Sanctions). The Notice preceded the entry of a supplemental Order Granting Award of Attorney Fees to Tennessee Attorney General’s Office, which was not docketed until May 29, 2020 (Order Awarding Fees) (collectively, Orders). Though technically premature, the BAP deemed the Notice to be valid pursuant to Bankruptcy Rule 8002(a). Because this provision treats notices of appeal filed after announcement of a decision or order but before entry of the order as having been filed “on the date of and after the entry,” a premature notice of appeal, like the Debtor’s, is considered “suspended” until entry of the final order and “ripened” upon such entry.” Thus, the BAP obtained jurisdiction over the Order upon the promulgation of the Order Awarding Fees on May 29, 2020. Additionally, since the Debtor timely appealed the Order Denying Motion for Sanctions but did not appeal any issue particular to the Order Awarding Fees, and as the latter neither altered or amended the former, the BAP was able to consider all issues relating to the award of sanctions against the Debtor and in favor of the Office of the Tennessee Attorney General (Office), as well as the senior assistant attorney general who represented it, Michael B. Willey (Willey) (collectively, Appellee or AG Office), in the Debtor's Chapter 11 case (Case). On appeal, the Debtor cited more than a handful of issues even as he strangely ignored a pivotal one. Specifically, Thomas raised six issues on appeal, including, among others, whether the BC erred in concluding that (1) he lacked standing due to the appointment of a Chapter 11 trustee and (2) the Motion, filed pursuant to Bankruptcy Rule 9011, which incorporates Federal Rule of Civil Procedure 11 (Rule 11), lacked merit. The Debtor further questioned whether the BC properly awarded sanctions to the Office and properly awarded such sanctions without conducting a hearing. Notably, however, the Debtor did not appeal the BC's denial of the Motion for failure to comply fully with the procedural requirements of Rule 9011. Reviewing the Orders for abuse of discretion, any findings of fact for clear error, and any conclusions of law de novo, the BAP found procedural grounds to be "both threshold and dispositive in this case." Its opinion addressed only whether the BC abused its discretion in (1) denying the Motion for sanctions for failure to comply with Bankruptcy Rule 9011's procedural requirements, (2) awarding sanctions against the Debtor, and (3) doing so without conducting a hearing. Particularly, the BAP found the following: that (1) the Motion was not properly served as set forth in Bankruptcy Rule 7004 and was neither served 21 days before filing as nor provide the specificity required by Bankruptcy Rule 9011; (2) the BC's award of sanctions for the Debtor's "patently procedurally deficient" Motion was consistent with Bankruptcy Rule 9011; and (3) no legal authority required the holding of a hearing. The BAP declined to review the BC's decisions as to the standing of the Debtor and the merits of his arguments.
- The Debtor commenced the Case in 2016, and in late 2018 a creditor moved for the appointment of Chapter 11 trustee. The Tennessee Department of Transportation (TDOT), represented by the AG Office, filed a notice of joinder, as did another creditor. The BC granted the motion in January 2019 and promptly approved the appointment of Michael Collins as Chapter 11 Trustee. The Debtor appealed the BC’s order and filed a motion to stay the order pending appeal. The BC denied the latter. One year later, the Debtor filed the Motion. This document “largely consist[ed] of his reference to and description of four attachments”: (1) a December 9, 2019, letter from the Debtor to Willey in which the Debtor states that he intended the letter to comply with Bankruptcy Rule 9011’s notice requirements before the Debtor proceeded with filing the Motion; (2) a December 20, 2019, response letter from Willey; (3) a pleading filed by Willey for the Office on behalf of TDOT on January 9, 2020 (AG Pleading); and (4) a January 17, 202, letter from the Debtor to Willey that neglects to mention Bankruptcy Rule 9011. Aside from these attachments (and the Debtor’s synopses), Thomas advanced two conclusory statements in the Motion. First, he contended that Willey had “file[d] pleadings, motions and other papers that were improper and submitted in order to harass and cause delay and increase the cost of litigation without necessary support required by 9011(b)(2)(3) and (4).” Second, he damned the AG Pleading for “contain[ing] numerous other erroneous conclusions of law and statements of fact which have been outlined by Debtor in a letter dated January 17, 2020.” In the Motion, the Debtor quoted two paragraphs from the AG Pleading for the initial allegedly erroneous conclusion of law or statement of fact but did not explain the error. Rather than including facts or argument in the Motion itself to support his conclusions, the Debtor relied entirely on letter attachments both for the substance of his arguments and for compliance with the notice requirement of Rule 9011. He requested a hearing to determine the appropriate “corrective actions,” signing the Motion as a “Pro se Attorney” and providing his Tennessee attorney license number. The AG Office responded with the Objection to the Debtor’s Motion (Objection). Therein, it argued that the Debtor lacked standing because a Chapter 11 trustee had been appointed and the trustee had not authorized, joined or indicated support for the Motion. The AG Office further objected that the Debtor had not served the Motion in advance; rather, the Debtor had relied on a “letter threatening a motion for sanctions” and had not served the Motion in accordance with Bankruptcy Rule 7004. In addition, the AG Office objected to the Debtor seeking sanctions under Bankruptcy Rule 9011 related to, among other things, discovery matters expressly excluded from its explicit scope. Lastly, though it provided a summary of what it believed the Debtor’s arguments to be, the AG Office complained about the lack of specificity to these contentions. The BC entered the Order Denying Motion for Sanctions without conducting a hearing. The BC agreed with the AG Office that the Debtor lacked standing to bring the Motion. The BC further noted that, having given notice of his intent to file a motion for sanctions via his December 9, 2019, letter, the Debtor had not served the Motion as required by Bankruptcy Rules 9011 and 7004, and faulted the Debtor for the lack of specificity required by the former provision. Notwithstanding these procedural deficiencies, the BC addressed “each of the Debtor’s concerns identified by the Attorney General,” finding none to be worthy of being classified as sanctionable conduct. Ultimately, the BC denied the Motion for three reasons: (1) the Debtor lacked standing to bring it; (2) the Motion failed to state cause to impose sanctions; and (3) the Motion had not been served in the manner specified in Bankruptcy Rules 9011 and 7004. Later, the BC entered the Order Awarding Fees. In support, the BC noted that the AG Office had requested the fee award and that Bankruptcy Rule 9011 specifically provides for such an award to a prevailing party. As it explained, the “Debtor’s motion was wholly without merit,” even though the “Debtor is a licensed attorney who should be fully aware of the consequences of filing motions unsupported ‘by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.’” The quoted language came, it emphasized, from the plain text of Bankruptcy Rule 9011.
- Beth A. Buchanan; Randall S. Mashburn; Jessica E. Price Smith
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