461 B.R. 22
Bankr. E.D. Mich.2011Background
- Moohaven Dairy LLC filed Chapter 11 on October 21, 2010.
- Bank of America sought relief from the automatic stay as to non-debtor individuals, granted December 10, 2010.
- Sanilac County Circuit Court entered judgments against various individuals; no further action against the Debtor since the stay relief order.
- Cubitt sought employment as counsel for the debtor-in-possession; application denied January 11, 2011; Chapter 11 Trustee appointed January 12, 2011.
- Cubitt purported to represent the Debtor in Sanilac County proceedings after February 2011, despite lack of authority.
- Court limited Cubitt’s involvement and later held Cubitt improperly represented Moohaven Dairy LLC, ordering sanctions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Cubitt violated the January 11, 2011 order denying employment. | Moohaven’s creditor contends Cubitt acted without authority. | Cubitt maintained he was acting on behalf of the debtor-in-possession. | Yes; Cubitt violated the order. |
| Whether Bank of America is entitled to fees caused by Cubitt's improper actions. | Bank seeks damages for its counsel's time and efforts. | Cubitt’s actions caused fees that are not properly chargeable to Moohaven. | Yes; $5,602 in fees attributable to Cubitt's improper representation. |
| Whether civil contempt sanctions are appropriate and the amount. | Bank seeks sanctions to coerce compliance and compensate damages. | Contempt should be limited given procedural posture and notice issues. | Sanctions awarded as civil contempt in the amount stated; payment required. |
| Whether all other Bank of America fees should be offset against post-February 2011 actions. | Some fees would have been incurred regardless of Cubitt’s involvement. | Fees directly tied to Cubitt’s actions should be separated from other services. | Only the $5,602.00 tied to Cubitt’s improper actions were awarded; remaining fees not attributable to Cubitt were not awarded. |
| Whether the Sanilac County hearing notice issues affect fee awards. | Notice defects warranted fee recovery against the appropriate party. | Sanilac County proceedings are governed by state rules; Court cannot decide those fee issues. | Fees and costs related to notice issues left to Sanilac County Circuit Court; this Court did not award additional fees. |
Key Cases Cited
- In re Joint Eastern and Southern Districts Asbestos Litigation, 830 F. Supp. 1153 (C.D. Ill. 1993) (civil contempt framework and remedial nature)
- Gnesys, Inc. v. Greene, 437 F.3d 482 (6th Cir. 2005) (prompt compliance with court orders; contempt standards)
- Int'l Union, United Mine Workers of America v. Bagwell, 512 U.S. 821 (U.S. 1994) (willfulness not required for civil contempt; coercive sanctions)
- United States v. Bayshore Assoc., Inc., 934 F.2d 1391 (6th Cir. 1991) (monetary fines and coercive sanctions in civil contempt)
- Rolex Watch, U.S.A., Inc. v. Crowley, 74 F.3d 716 (6th Cir. 1996) (elements of contempt; intentionality not required for civil contempt)
- Walker v., 257 B.R. 493 (Bankr. N.D. Ohio 2001) (contempt standards and willfulness considerations)
- Rylander, 460 U.S. 752 (U.S. 1983) (party must show inability to comply; shifting burden)