Harger v. Jones (In re Jones)

Summarized by Michael Coury , Glankler Brown, PLLC
10 years 4 min ago

Citation:

Harger v Jones (In re Jones), 16 Fed App.0001P(6th Cir. March 3, 2016)

Tag(s):

Ruling:

The Sixth Circuit BAP held that the bankruptcy court erred as a matter of law in awarding attorneys' fees as sanctions under Rule 9011 on a sua sponte basis and abused its discretion in imposing sanctions. Rule 9011(c)(2) only allows a court to award attorneys' fees as a sanction when a motion is brought by opposing counsel and does not permit such an award upon a show cause order issued sua sponte by the court. The BAP did not consider the propriety of the sanctions under 28 U.S.C. 1927 or under a court's inherent authority to sanction since the court only specified Rule 9011 as the basis of its award. With respect to the non-monetary sanctions assessed by the court, the BAP found that the bankruptcy court abused its discretion since the exercise of discretion was predicated upon multiple findings of fact which were clearly erroneous. Accordingly, the BAP reversed and vacated the bankruptcy court's sanction order.

Procedural context:

The BAP's order arises out of an appeal from a final orders of the bankruptcy court awarding sanctions against counsel for the Debtor.

Facts:

Attorney for prepetition creditor filed a motion for stay relief to continue state court litigation filed against the debtor for infliction of emotional distress, civil conspiracy and malicious prosecution. Counsel also filed an adversary complaint seeking denial of discharge and to determine dischargeability of debt under Sections 727 and 523. The Debtor filed a counterclaim in the adversary proceeding alleging abuse of process. Following the creditor's voluntary dismissal of the stay motion and adversary proceeding, the bankruptcy entered a sua sponte Order to Show Cause why the Creditors and their counsel did not violate Rule 9011(b) by filing the motion for relief from stay and the adversary complaint. Following an initial hearing, the court issued a second show cause order to consider whether creditor's counsel did not further violate Rule 9011 in responding to the initial Show Cause order. After submission of affidavits and two days of trial, the court found that counsel had filed the stay relief motion and adversary complaint without specific evidence and that counsel had made knowing and intentional misrepresentations in his court filings. The court assessed $26,000 in sanctions and revoked counsel's CM/ECF bankruptcy filing privileges. The court also made a criminal referral of the attorney's conduct to the U.S. Attorney.

Judge(s):

Preston, Humphrey and Harrison

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