Ettinger & Associates, LLC v. Miller (In Re Miller)
730 F.3d 198
3rd Cir.2013Background
- Ettinger (attorney) represented Tammy and Gregory Miller in a landlord/tenant dispute, billing about $43,000; the Millers paid ~ $20,000 and later filed Chapter 7 bankruptcy after Ettinger sued them for the remainder.
- Ettinger (through counsel Tsarouhis) filed an adversary complaint in bankruptcy alleging the Millers’ debt for legal fees was nondischargeable as fraud; the Bankruptcy Court found for the Millers after trial.
- The Millers filed a Rule 9011 sanctions motion (Initial Motion) on Jan 31, 2011, withdrew it the next day, then refiled a substantively identical motion Feb 23, 2011; the Bankruptcy Court held the motion in abeyance until after the merits.
- After trial, the Millers filed an Amended Rule 9011 motion; the Bankruptcy Court found Ettinger and Tsarouhis sanctionable (relying on a key deposition) and imposed $20,000 in sanctions.
- The District Court vacated the sanctions for failure to comply with Rule 9011’s 21-day safe-harbor timing (including the three extra days for service by mail) and because some sanctionable conduct post-dated the safe-harbor; it declined to remand to consider alternative sanctioning authorities.
- The Third Circuit agreed Rule 9011 sanctions were procedurally defective but remanded so the Bankruptcy Court may consider other sanctioning mechanisms (inherent power, §105, §1927, or sua sponte Rule 9011) with appropriate notice and opportunity to respond.
Issues
| Issue | Plaintiff's Argument (Millers) | Defendant's Argument (Ettinger/Tsarouhis) | Held |
|---|---|---|---|
| Whether Rule 9011 safe-harbor was satisfied | Initial Motion (and its refiling) provided fair notice andstarted the 21-day safe-harbor | Millers failed strict timing; refiling was premature and procedural defect prevents sanctions | Court: strict compliance required; safe-harbor was not satisfied because refile occurred before the extended deadline (mail + holiday days) |
| Whether sanctions may be imposed for conduct occurring after service of the Initial Motion | Millers: safe-harbor and subsequent Amended Motion covered conduct and justified sanctions | Ettinger: lacking particularized notice of post-motion conduct; due process violated | Court: cannot sanction for conduct that post-dates and was not particularized in the sanctioned notice; due process requires particularized notice and chance to cure |
| Whether district court should remand for consideration of alternative sanctioning authorities | Millers: if Rule 9011 defective, other sanctioning tools still available and should be considered | District Court: declined remand because safe-harbor cure was impossible and Bankruptcy Court relied on Rule 9011 | Third Circuit: remand required so Bankruptcy Court can consider other sanctioning bases (inherent power, §105, §1927, sua sponte Rule 9011) with due process |
| Calculation of safe-harbor period (inclusion of additional days for mail and holidays) | Millers: electronic service and local rules mean additional 3 days shouldn’t apply | Ettinger: Bankruptcy Rules govern; mail service adds 3 days; holidays extend deadline | Court: Bankruptcy Rules control; added holiday and 3 mail days extended the safe-harbor — Millers’ refiling was premature |
Key Cases Cited
- Schaefer Salt Recovery, Inc. v. United States, 542 F.3d 90 (3d Cir.) (safe-harbor 21-day requirement is mandatory)
- In re Winstar Commc’ns, Inc., 554 F.3d 382 (3d Cir. 2009) (standards of appellate review for bankruptcy matters)
- Brickwood Contractors, Inc. v. Datanet Eng’g, Inc., 369 F.3d 385 (4th Cir. 2004) (procedural compliance with Rule 11/9011 is mandatory)
- Roth v. Green, 466 F.3d 1179 (10th Cir. 2006) (purpose of safe-harbor to allow correction and avoid chilling effects)
- In re Gioioso, 979 F.2d 956 (3d Cir. 1992) (Rule 11/9011 caselaw applicability and sanctioning standards)
- Ginsberg v. Evergreen Sec., Ltd. (In re Evergreen Sec., Ltd.), 570 F.3d 1257 (11th Cir. 2009) (sanctions valid under alternative mechanisms may survive safe-harbor defects)