528 B.R. 297
S.D. Tex.2015Background
- SkyPort (now TrustComm) confirmed a Chapter 11 plan in Aug. 2009 that merged SkyComm into SkyPort and included injunctions barring certain derivative claims; 49 investors (the "Schermerhorn Parties") later filed a 111-page state-court petition alleging fraud, fiduciary breaches, and seeking remedies including appointment of a receiver.
- Defendants removed the state action to the bankruptcy court and moved to dismiss as a collateral attack on the confirmation order; SkyPort separately sought injunctive and declaratory relief and consolidation of adversaries.
- The bankruptcy court (1) exercised jurisdiction, (2) entered a preliminary injunction preventing plaintiffs from pursuing claims or contacting vendors/employees pending further order, and (3) ruled that many claims were derivative and barred by the confirmation order while remanding certain direct claims.
- The bankruptcy court found multiple violations of the preliminary injunction (unauthorized vendor/employee contacts, filings intended to pursue claims) and imposed sanctions (attorneys’ fees, costs, modest additional sanctions) and contempt findings against individual attorneys and a non-party acting in concert.
- Plaintiffs appealed fifteen bankruptcy orders (dismissal/service rulings, remand, multiple contempt and sanctions orders, and awards of fees); the district court reviewed the record and affirmed all challenged orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction / removal: whether the state petition was a collateral attack on the confirmation order | Schermerhorn: petition asserted direct claims not barred; bankruptcy lacked jurisdiction over direct state claims | Defendants/SkyPort: petition sought relief (receiver, control) that attacked the confirmed plan and findings, giving bankruptcy jurisdiction | Held: bankruptcy court had jurisdiction; many claims were derivative or attacked confirmation and were dismissed as barred; some direct claims remanded |
| Preliminary injunction scope and violations | Schermerhorn/Goldman: communications and filings were due diligence/requests for permission, not pursuing claims; accountants are "learned professionals," not "vendors" | SkyPort: injunction forbade pursuing claims or contacting vendors/employees; plaintiffs’ contacts and filings sought to advance claims and thus violated injunction | Held: injunction valid and binding; contacts and filings violated it; contempt and remedial sanctions affirmed |
| Contempt: civil vs criminal and appropriate sanctions | Goldman/Craig: proceedings were criminal in substance; injunction vague and unenforceable; fees awarded unreasonable | SkyPort: proceeding was remedial civil contempt to compensate for fees/costs caused by violations | Held: proceeding was civil remedial contempt; award to compensate SkyPort for reasonable fees/expenses was appropriate and not an abuse of discretion |
| Sanctions: legal basis, bad faith, reasonableness of fee awards | Schermerhorn: no bad faith finding, lack of legal basis, excessive awards, inadequate hearings | Defs/SkyPort: sanctions grounded in court's inherent authority and §105; bad-faith findings supported by factual record and prior unappealed findings; lodestar/Jonson factors applied to limit awards | Held: bankruptcy court properly relied on inherent power/§105; bad-faith/supporting findings were effectively unappealed; fee awards reduced and calculated by lodestar adjusted under Johnson factors — affirmed |
| Service on foreign defendant (Wilson Vukelich) | Schermerhorn: service complied with Hague Convention; needed reasonable/120 days per Nuovo Pignone; Ontario law allows service on receptionist or saves service | Wilson Vukelich: service did not comply with local Ontario rules (must serve partner/manager); certificate insufficient; service ineffective | Held: plaintiffs had reasonable time but failed to prove proper service under Ontario rules; arguments about Ontario decisions and savings clause were not raised below and waived; dismissal without prejudice affirmed |
Key Cases Cited
- Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (recognizes courts’ inherent power to sanction for bad-faith litigation conduct)
- Nuovo Pignone, SpA v. STORMAN ASIA M/V, 310 F.3d 374 (5th Cir. 2002) (forum courts must allow a reasonable time to effect service on foreign defendants)
- In re Bradley, 588 F.3d 254 (5th Cir. 2009) (standard for reviewing contempt and distinguishing civil/criminal contempt; remedial contempt may compensate opposing party)
- Crowe v. Smith, 151 F.3d 217 (5th Cir. 1998) (inherent-power sanctions threshold and bad-faith requirement)
- Gonzalez v. Trinity Marine Group, Inc., 117 F.3d 894 (5th Cir. 1997) (due-process requirements when imposing inherent-power sanctions)
- In re Cahill, 428 F.3d 536 (5th Cir. 2005) (approving lodestar method for fee awards in bankruptcy context)
- Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974) (fee-award factors used to adjust lodestar)