Critique Services, LLC v. LaToya L. Steward
828 F.3d 672
| 8th Cir. | 2016Background
- Debtor LaToya Steward filed Chapter 7 (June 2011); was represented by James Robinson (d/b/a Critique Services). She reaffirmed a Ford debt and later sought to rescind; alleged Robinson abandoned her and missed deadlines.
- Steward (pro se) reopened the case and filed an adversary complaint; the bankruptcy court recharacterized it as a motion to disgorge attorney’s fees for inadequate representation.
- Robinson and counsel Elbert Walton repeatedly failed to comply with discovery orders; court imposed discovery sanctions, daily fines, and later contempt and monetary sanctions (including joint liability for $30,000 and $19,720 in attorney fees).
- Bankruptcy court suspended Robinson and Walton from practice before that court and referred misconduct for further disciplinary investigation.
- The district court affirmed the bankruptcy court’s rulings in all respects; Robinson, Walton, and Critique Services appealed to the Eighth Circuit, which affirmed.
Issues
| Issue | Plaintiff's Argument (Steward) | Defendant's Argument (Robinson/ Walton/ Critique) | Held |
|---|---|---|---|
| Standing to bring disgorgement | Trustee abandoned estate claims; Steward can pursue disgorgement | Claim was estate property and only trustee could pursue it | Trustee’s certifications and conduct supported abandonment; Steward had standing to bring the claim |
| Recusal of bankruptcy judge | Judge Rendlen’s prior role as U.S. Trustee and alleged knowledge of Critique Services created reasonable question of impartiality | Motions untimely and no record evidence of bias; judge’s knowledge arose from court proceedings | Motions untimely and appellants failed to meet heavy burden; denial of recusal affirmed |
| Docketing pro se complaint as motion to disgorge | Recharacterization was improper under Rule 9005 | Pro se filings may be liberally construed to match their substance | Bankruptcy court properly recharacterized the pro se pleading as a motion to disgorge |
| Sanctions, contempt, and suspensions | Sanctions excessive; contempt was criminal without purge; suspension improper | Sanctions were civil, coercive, and proportionate to repeated bad-faith discovery noncompliance; court has inherent and local-rule authority to suspend | Bankruptcy court did not abuse discretion: sanctions upheld as civil and purgable; suspension authorized under inherent power and local rules |
Key Cases Cited
- United States ex rel. Gebert v. Transp. Admin. Servs., 260 F.3d 909 (8th Cir. 2001) (defining scope of bankruptcy estate interests)
- Vreugdenhil v. Hoekstra, 773 F.2d 213 (8th Cir. 1985) (trustee abandonment permits debtor to pursue estate claims)
- In re Reynolds, 425 F.3d 526 (8th Cir. 2005) (standard of review for factual findings regarding abandonment)
- Liteky v. United States, 510 U.S. 540 (1994) (recusal requires strong proof; judicial remarks in litigation often not disqualifying)
- Fletcher v. Conoco Pipe Line Co., 323 F.3d 661 (8th Cir. 2003) (timeliness doctrine for recusal under § 455)
- Castro v. United States, 540 U.S. 375 (2003) (courts may recharacterize pro se filings to reflect substance)
- Chafin v. Chafin, 133 S. Ct. 1017 (2013) (mootness requires the parties retain a concrete interest in the outcome)