In re Sekema
523 B.R. 651
Bankr. N.D. Ind.2015Background
- Debtors filed Chapter 13 on March 24, 2014 in Indiana; claims filed by Jefferson Capital (Fingerhut) and Resurgent/LVNV (Sears National Bank) were challenged as time-barred under Indiana law (six-year limit).
- Jefferson Capital’s claim was charged off May 11, 2001; Resurgent/LVNV’s claim was charged off December 27, 1998, both well beyond six years before filing.
- Debtors objected to both proofs of claim; creditors did not respond, and objections were sustained with claims denied as unenforceable.
- Court issued orders to show cause for potential Rule 9011(b)(2) sanctions due to lack of reasonable pre-filing inquiry; claimants again did not respond or appear.
- Court held that proofs of claim are subject to Rule 9011; the duty to investigate applies to the asserted position and obvious defenses, not every possible defense.
- Court concluded that the filings violated Rule 9011(b)(2) and that sanctions should be imposed in the form of a monetary penalty to deter future misconduct; damages to debtors were not awarded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether filing time-barred claims violated Rule 9011(b)(2). | Debtors contend the defenses were obvious and the claims were time-barred. | Not argued; defendants did not respond to show-cause orders. | Yes; claims violated Rule 9011(b)(2). |
| Appropriate sanction under Rule 9011(c) for filing time-barred claims. | Sanctions should deter misconduct and reflect system-wide burdens. | Not argued; no response provided. | Monetary sanction of $1,000 to the court to deter future misconduct. |
Key Cases Cited
- Frantz v. United States Powerlifting Federation, 836 F.2d 1063 (7th Cir.1987) (duty to investigate and prevent frivolous positions under Rule 9011)
- Fred A. Smith Lumber Co. v. Edidin, 845 F.2d 750 (7th Cir.1988) (purpose and scope of Rule 9011 duties)
- McGhee v. Sanilac County, 934 F.2d 89 (6th Cir.1991) (reasonableness of pre-filing investigation standard)
- Excello Press, Inc., 967 F.2d 1109 (7th Cir.1992) (obvious defenses and duty to investigate)
- Leeds Building Products, Inc., 181 B.R. 1006 (Bankr.N.D.Ga.1995) (defense obviousness and need for inquiry before filing)
- In re Rimsat, Ltd., 229 B.R. 914 (Bankr.N.D.Ind.1998) (deterrence considerations in sanctions under Rule 9011)