In re Royal Manor Management, Inc., 525 B.R. 338

Gordons filed a $2,142,000 unsecured proof of claim in jointly administered Chapter 11s; claim was disallowed by the bankruptcy court and affirmed on appeal.
Bankruptcy court sanctioned attorney Grossman $207,004 under 28 U.S.C. § 1927 and 11 U.S.C. § 105 for fees related to Gordon Claim litigation; the sanctions were affirmed on appeal.
Grossman appealed the sanctions order and a recusal denial (First Appeal) and separately challenged post-judgment collection efforts and special counsel retention (Second Appeal).
The district court and Sixth Circuit upheld the sanctions and related collection/recusal rulings, and later proceedings addressed post-judgment discovery and collection.
The sanctions were premised on vexatious conduct and frivolous theories to delay distribution to creditors and force settlement; the court found bad faith or recklessness under § 105 and § 1927.
Post-judgment matters included authorizing special counsel to collect the judgment and compelling Grossman to respond to discovery and appear for debtor’s examination.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 1927 supports Grossman’s sanctions	Grossman argues lack of support or improper use of § 1927	Court found § 1927 abuse, amounting to excessive costs caused by vexatious conduct	Sanctions affirmed under § 1927
Whether the court properly exercised its inherent § 105 authority	Grossman contends no bad faith justification under § 105	Bad-faith, vexatious litigation supported § 105 sanctions	Sanctions affirmed under § 105
Whether the denial of Grossman’s recusal motion was proper	Grossman argues bias; seeks recusal	Record showed no disqualifying bias; insufficient basis for recusal	Recusal denial affirmed; no abuse of discretion
Whether post-judgment discovery and special-counsel retention were proper	Trustee may collect; discovery necessary to enforce judgment	Special counsel appropriate; discovery within bankruptcy jurisdiction	Post-judgment discovery and special-counsel retention affirmed
Whether the Gordon Claim theories were frivolous warranting sanctions	Claims had some non-frivolous bases	Overall theories frivolous and pursued vexatiously to burden estate	Sanctions upheld; Gordon Claim theories deemed frivolous and vexatious

Chambers v. NASCO, Inc., 501 U.S. 32 (U.S. 1991) (inherent power to sanction with restraint)
Rentz v. Dynasty Apparel Indus., Inc., 556 F.3d 389 (6th Cir. 2009) (§ 1927 sanctions require excess costs from conduct)
AutoStyle Plastics, Inc. (In re AutoStyle Plastics, Inc.), 269 F.3d 726 (6th Cir. 2001) (11-factor test for re-characterizing debt vs. equity)
Midland Asphalt Corp. v. United States, 489 U.S. 794 (U.S. 1989) (finality standard for bankruptcy appeals)
Jones v. Continental Corp., 789 F.2d 1225 (6th Cir. 1986) (framework for § 1927 abuse of discretion)
Salkil v. Mount Sterling Tp. Police Dept., 458 F.3d 520 (6th Cir. 2006) (sanctions standards and bad-faith considerations)