652 F. App'x 330
6th Cir.2016Background
- Royal Manor, Darlington, and Dani (related entities) filed Chapter 11; cases were jointly administered and a Liquidation Trustee was appointed.
- Gertrude Gordon filed a pro se proof of claim (on behalf of her children) based on a July 27, 2000 agreement; Trustee and Committee objected and the claim was disallowed; Grossman later appeared pro hac vice for the Gordons and pursued multiple pleadings and appeals.
- District court and Sixth Circuit affirmed dismissal of the claim on the merits; certiorari was denied by the Supreme Court.
- Trustee sought sanctions against Grossman and Gertrude Gordon under 28 U.S.C. § 1927 and the bankruptcy court’s inherent authority (§ 105), alleging vexatious multiplication of proceedings that delayed distributions and increased estate costs.
- Bankruptcy court held hearings, found Grossman’s repetitive filings unreasonable and vexatious, and awarded $207,004 in sanctions; it also granted post-judgment discovery (interrogatories, document requests, debtor’s exam) and employment of special counsel to collect.
- BAP affirmed; Grossman appealed to the Sixth Circuit, which reviewed for abuse of discretion and affirmed the sanctions, denial of recusal, and post-judgment discovery orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to sanction under 28 U.S.C. § 1927 and § 105 | Trustee: §1927 and §105 authorize sanctions for Grossman’s unreasonable, vexatious multiplication of proceedings and attendant fees | Grossman: bankruptcy court lacked authority/§1927 doesn’t apply to bankruptcy courts; §105 inappropriate when other rules exist | Court: Bankruptcy court may impose §1927 sanctions (Sixth Circuit precedent persuasive) and use §105; affirmed sanctions |
| Adequacy of notice / due process | Trustee: renewed motion and attachments gave fair notice and opportunity to be heard | Grossman: insufficient notice; deprived of due process | Court: Grossman had adequate notice, participated in hearings; due process satisfied |
| Specificity of sanctionable filings | Grossman: court erred by not identifying particular frivolous filings and lumping pleadings together | Trustee: pervasive, repetitive conduct over years justified aggregate treatment | Court: sanction based on ongoing pattern over four+ years; no requirement to parse each filing individually; affirmed |
| Timeliness / filing-one-day-late objection | Grossman: renewed sanction motion was late and should be denied | Trustee: court has discretion to extend court-imposed deadlines; motion reactivated pending sanctions | Court: extension was within court’s docket-management discretion; timely enough; affirmed |
| Recusal claim | Grossman: judge was biased and should have been disqualified | Trustee: no extrajudicial source of bias; record does not show extreme behavior | Court: no abuse of discretion in denying recusal; impartiality not reasonably questioned |
| Post-judgment discovery and collection | Trustee: allowed to pursue discovery and hire special counsel to collect judgment | Grossman: objects to debtor exam and contingent counsel employment | Court: bankruptcy court acted within discretion; debtor’s exam and collection steps authorized and affirmed |
Key Cases Cited
- Jordan v. Cleveland, 464 F.3d 584 (6th Cir.) (sanctions review standard: abuse of discretion)
- In re Rembert, 141 F.3d 277 (6th Cir.) (standard of review for bankruptcy factual findings and legal conclusions)
- Ridder v. City of Springfield, 109 F.3d 288 (6th Cir.) (§1927 sanctions may reach back to when unreasonable conduct began)
- Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (courts’ inherent authority to impose sanctions independent of statutes)
- Ruben v. Warren City Schs., 825 F.2d 977 (6th Cir.) (sanctions procedure and limits; notice requirement)
- Wilson-Simmons v. Lake County Sheriff’s Dept., 207 F.3d 818 (6th Cir.) (§1927 standard: attorney falls short of obligations to the court and causes expenses)