Elam v. Bank of N.Y. Mellon
589 B.R. 431
S.D. Fla.2018Background
- Debtor Kim Crawford filed Chapter 11; counsel Brett A. Elam received a $34,400 check from the debtor in March 2017 that was deposited into Elam's trust account but later withdrawn in part.
- Bank of New York Mellon (creditor) questioned whether the debtor-in-possession (DIP) funds remained in Elam's trust account and sought proof; Elam provided redacted statements showing the deposit but did not initially show continuous retention.
- The bankruptcy court ordered Elam to produce full trust-account records (March–May 2017); Elam failed to comply fully, prompting motions to compel, an order to show cause, and an evidentiary hearing.
- At the hearing Elam admitted withdrawing trust funds for personal/emergency reasons, could not recall specific expenditures, and acknowledged misleading the court about the funds. Complete trust-account records later showed multiple withdrawals totaling significant sums between March 2 and May 11, 2017.
- The bankruptcy court found willful violations, misrepresentations, and misconduct; it ordered sanctions: suspension from bankruptcy practice, payment of $8,557.50 to the creditor, return of $34,400 to the debtor, referral to Florida Bar, and other remedies. Final judgment entered October 24, 2017; motion for reconsideration denied November 17, 2017.
- Elam appealed to the district court; the district court affirmed the sanctions, found many of Elam’s appellate arguments waived or frivolous, and denied the intervenor/ debtor’s fee request without prejudice.
Issues
| Issue | Elam's Argument | Bank/Movant's Argument | Held |
|---|---|---|---|
| Jurisdiction to sanction after dismissal | Bankruptcy court lost subject-matter jurisdiction after case dismissal | Bankruptcy courts retain power to adjudicate collateral matters including sanctions after dismissal | Court: Elam failed to brief authority; jurisdiction upheld (bankruptcy court may sanction post‑dismissal) |
| Whether sanctions required bad faith (inherent power) | Elam denied bad faith; argued withdrawals were permissible or earned | Bank argued willful disobedience, misrepresentations, and concealment justified sanctions under §105 and Local Rule | Court: Elam abandoned some arguments; sanctions under §105 and Local Rule stand; bad faith findings sufficient for inherent‑power sanction |
| Whether Elam legitimately "earned" the fees/was entitled to withdraw | Elam claimed contractual right/fees earned (and relied on Florida ethics opinion) | Bank and court: fees in Chapter 11 governed by §330; funds must remain until court approval; private contract cannot override federal law | Court: Argument waived (not raised below) and meritless; withdrawals improper; sanctions affirmed |
| Appellate fees for debtor/intervenor | Elam contends appeal merits review; implicitly opposes fee award | Debtor (intervenor) sought fees under Fed. R. Bankr. P. 8020 as appeal frivolous | Court: Appeal frivolous on multiple grounds; denied intervenor’s fee motion without prejudice because authority to award to intervenor unclear; permitted renewed motion addressing concerns |
Key Cases Cited
- Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (Sup. Ct.) (courts may impose sanctions or contempt after the underlying action terminates)
- In re Neiman, 257 B.R. 105 (Bankr. S.D. Fla.) (bankruptcy courts retain power to sanction post‑dismissal)
- In re Hardy, 97 F.3d 1384 (11th Cir.) (§105(a) permits sanctions for willful violation of court orders)
- Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678 (11th Cir.) (appellant must challenge every independent ground for judgment or abandon that ground)
- Walker v. Walker (In re Walker), 532 F.3d 1304 (11th Cir.) (sanctions reviewed for abuse of discretion)
- In re Ocean Warrior, Inc., 835 F.3d 1310 (11th Cir.) (standard for reviewing sanctions and abuse of discretion)