In re Linda J. Lane
COUNSEL
ON BRIEF: Neil C. Bordy, SEILLER WATERMAN, LLC, Louisville, Kentucky, for Appellee. Kevin Dean, Sarah Dean, Mount Washington, Kentucky, pro se.
SCOTT W. DALES, Bankruptcy Appellate Panel Judge. The appellants in this case, Sarah and Kevin Dean (the “Deans” or the “Appellants“), by two separate appeals challenge the orders of the Bankruptcy Court for the Western District of Kentucky (“Bankruptcy Court“) finding them in contempt and issuing sanctions, as well as orders denying motions for reconsideration. The current appeal is just the latest in a series of appeals emanating from the chapter 13 bankruptcy case of Linda J. Lane (the “Debtor” or “Appellee“), which has turned out to be an especially vexing proceeding for the parties and the courts.
STATEMENT OF ISSUES
In their Appellants’ Designations of Record and Statements of Issues to be Presented on Appeal, the Deans list numerous issues on appeal. Many of the issues they did not address in their briefing; other issues are not fully developed on appeal or are unrelated to the orders that are currently before the Panel. As to these unbriefed or underdeveloped issues, the Panel will not address them because “[i]t is well-established that issues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived.” Church Joint Venture, L.P. v. Bedwell (In re Blasingame), 598 B.R. 864, 874 (B.A.P. 6th Cir. 2019) (quoting Dillery v. City of Sandusky, 398 F.3d 562, 569 (6th Cir. 2005) (internal quotation marks and citations omitted)). In each appeal, the Panel has fully considered
JURISDICTION AND STANDARD OF REVIEW
The Bankruptcy Appellate Panel of the Sixth Circuit (“BAP” or the “Panel“) has jurisdiction to decide this appeal. The United States District Court for the Western District of Kentucky has authorized appeals to the Panel, and the parties did not elect to have this appeal heard by the district court.
The Panel reviews a bankruptcy court‘s imposition of sanctions for abuse of discretion. Wingerter, 594 F.3d at 936. Likewise, “[t]he denial of a motion for reconsideration is reviewed for abuse of discretion.” In re Burrage, 464 B.R. 61(table), 2011 WL 6155716, at *1 (B.A.P. 6th Cir. Nov. 18, 2011). The Panel will find an abuse of discretion when, after careful review, it has a “definite and firm conviction that the [court below] committed a clear error of judgment.” Mayor and City Council of Baltimore, Md. v. W. Va. (In re Eagle-Picher Indus., Inc.), 285 F.3d 522, 529 (6th Cir. 2002) (internal quotation marks and citation omitted).
The Panel has elaborated on this standard of review in the sanctions context as follows:
Sanctions based upon an erroneous view of the law or an erroneous assessment of the evidence are necessarily an abuse of discretion. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S. Ct. 2447, 2461, 110 L. Ed.2d 359 (1990); Salkil v. Mount Sterling Tp. Police Dept., 458 F.3d 520, 527-28 (6th Cir. 2006). See also Parrott v. Corley, 266 F. App‘x. 412, 415 n.1 (6th Cir. 2008) (arguments concerning an error in statutory interpretation or due process related to sanctions are reviewed de novo).
Montedonico v. Blasingame (In re Blasingame), 559 B.R. 676, 679 (B.A.P. 6th Cir. 2016), aff‘d, 709 F. App‘x 363 (6th Cir. 2018) (quoting In re Royal Manor Mgmt., Inc., 525 B.R. 338, 346 (B.A.P. 6th Cir. 2015), aff‘d sub nom. Grossman v. Wehrle (In re Royal Manor Mgmt., Inc.), 652 F. App‘x 330 (6th Cir. 2016)). Nevertheless, “[t]he abuse of discretion must be more than harmless error to provide cause for reversal. Tompkin v. Philip Morris USA, Inc., 362 F.3d 882, 897 (6th Cir. 2004) (citations omitted).” Id. at 679.
With this recent guidance in mind, the Panel turns to the merits of the current appeals.
FACTS
In June 2014, the Debtor sold her home to the Deans. After the closing, the Deans discovered mold in the basement. The parties agreed to arbitration, and ultimately the arbitrator awarded the Deans $28,172.99, plus attorney fees of $98,722.58. The Bullitt County Circuit Court confirmed the arbitration award and entered a
On July 14, 2017, the Debtor filed a chapter 13 bankruptcy petition in the Western District of Kentucky. She listed the Deans on Schedule D of her petition as secured creditors and the Deans filed Proof of Claim No. 2.
The Deans, through counsel, initially objected to the Debtor‘s proposed chapter 13 plan. At the hearing on the objection, however, the parties agreed that the only unresolved issue was the interest rate on the Deans’ claim. Following the hearing, the Bankruptcy Court issued an order setting the rate at 4.25%. The Bankruptcy Court confirmed the Debtor‘s chapter 13 plan (the “Plan“), and the Debtor is paying the Deans’ claim in full, with interest, over the term of the Plan.
On October 13, 2017, the Deans filed a complaint against the Debtor, commencing Adversary Proceeding No. 17-03062. In that adversary proceeding, the Deans claimed damages of $300,000 for Sarah Dean‘s respiratory problems allegedly attributable to mold contamination. The Deans requested a finding that the damages be declared non-dischargeable. The Bankruptcy Court later dismissed the Adversary Proceeding, and the Deans did not appeal from the dismissal order.
Meanwhile, on November 2, 2017, shortly after the entry of the order confirming the Debtor‘s Plan, the Deans filed a motion to dismiss the Debtor‘s bankruptcy case. The Debtor objected, and on February 5, 2018, the Bankruptcy Court entered a Memorandum Opinion denying the motion to dismiss. The Deans timely filed a notice of appeal from that order, but the BAP dismissed that appeal for lack of jurisdiction, concluding that the order declining to dismiss the Debtor‘s bankruptcy case was not a final order. Dean v. Lane (In re Lane), 598 B.R. 595 (B.A.P. 6th Cir. 2019) (“BAP Case 18-8005“).
On March 2, 2018, while the appeal in BAP Case 18-8005 was still pending, the Debtor sent the Deans a letter offering a proposed payout of her claim (“Settlement Letter“). The Settlement Letter explained that it was not admissible as evidence pursuant to
On April 13, 2018, the Debtor filed a motion for sanctions against the Deans, her first such motion (Mot. for Sanctions, Case No. 17-32237 ECF No. 62 (the “First Sanctions Motion“)).1 The First Sanctions Motion asserted the Deans had violated
On August 3, 2018, the Bankruptcy Court entered an opinion and order granting the Debtor‘s motions. (ECF No. 97 (the “First Sanctions Opinion“).) The Bankruptcy Court ordered the Settlement Letter stricken from the record, sanctioned
While the controversy surrounding their filing of the Settlement Letter was simmering, the Deans filed another complaint against the Debtor, commencing Adversary Proceeding No. 18-03022, through which they sought revocation of the order confirming the Plan pursuant to
On September 4, 2018, the Bankruptcy Court entered a memorandum opinion on the Second Sanctions Motion but did not set the amount of sanctions. (ECF No. 110 (the “Second Sanctions Opinion“).) On September 14, 2018, the Deans filed a motion for reconsideration of the second set of sanctions. The Bankruptcy Court denied the reconsideration motion on September 18, 2018. Nine days later, the Bankruptcy Court entered an order requiring the Deans to pay the Debtor $2,641 in attorney‘s fees for their filing of the frivolous adversary proceeding. The Deans timely filed a notice of appeal from this second sanctions order on October 9, 2018. The Panel docketed the appeal as BAP Case 18-8040.
DISCUSSION
I. BAP Case No. 18-8038
Finding that the Deans filed the Settlement Letter for an improper purpose, the Bankruptcy Court granted the Debtor‘s First Sanctions Motion pursuant to Rule 9011.
(b) Representations to the Court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person‘s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,--
(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation[.]
A. Procedural Arguments
1. Safe Harbor Provision
Rule 9011 provides a “safe harbor” in that a motion for sanctions “may not be filed with or presented to the court unless, within 21 days after service of the motion [in accordance with
Under
In the present case, the Debtor provided a proof of service showing that the unfiled First Sanctions Motion, accompanied by a safe harbor letter, was properly addressed, stamped and mailed. The Deans admitted to receipt of the package. The Bankruptcy Court did not err in determining that the Debtor had complied with Rule 9011‘s safe harbor provision by mailing the First Sanctions Motion to the Deans before filing it.
2. Separate Motion Requirement
Rule 9011 requires a “separate motion” so that “a request for sanctions [is not] buried at the end of a motion for summary judgment or a motion to dismiss, but rather [is] highlighted as a separate event.” Walton v. Roberts (In re Kiamsha Cmty. Dev. Corp. Inc.), No. 10-72520-WLH, 2010 WL 4881524, at *3 (Bankr. N.D. Ga. Sept. 9, 2010), citing Ridder v. City of Springfield, 109 F.3d 288, 294 n. 7 (6th Cir. 1997). The Deans assert the Debtor violated the “separate motion” requirement by requesting the Settlement Letter be stricken from the docket in the prayer for relief in her First Sanctions Motion. Again, the Deans’ argument fails.
This provision is intended as a shield not a sword. The Debtor‘s request for sanctions is not buried in some other type of motion. She filed a motion for sanctions, properly titled as such, which requested sanctions for the Deans’ improper conduct regarding the Settlement Letter. Additionally, the Debtor separately filed the Motion to Strike. The Panel finds that both motions were procedurally proper, and the Bankruptcy Court did not err in considering them.
3. Signature Requirement
The Deans assert they cannot be punished under Rule 9011 for filing the
Under Rule 9011(b), by filing the Settlement Letter in the record, the Deans certified it was not filed for an improper purpose. “Rule 9011(b) broadly defines the manner by which a party may present “a petition, pleading, written motion, or other paper” to the court to include “signing, filing, submitting, or later advocating.” In re Blasingame, 559 B.R. at 685. Rule 9011(b) does not require a party to have signed a document to be sanctioned if the filing otherwise violates the rule. Behavior that is sanctionable under Rule 9011(b) includes filing or submitting a pleading or other paper for an improper purpose, such as to harass or to cause unnecessary delay or needlessly increase in the cost of litigation.
The Deans cite In re Ruben, 825 F.2d 977, 981 (6th Cir. 1987), for the proposition that they cannot be sanctioned under Rule 9011 because they did not sign the Settlement Letter, but their argument is not persuasive. In Ruben, the Sixth Circuit reversed Rule 9011 sanctions imposed against an attorney when the trial court failed to delineate the legal grounds for the sanctions, the attorney only appeared in the matter as “additional counsel” and the attorney was not the one who signed the pleadings filed. Id. at 980-81, 984. Accordingly, Ruben is distinguishable on the facts and does not stand for the rule of law the Deans advocate. The Deans may not have signed the Settlement Letter, but they alone were responsible for filing it on the docket and making it part of the record. Accordingly, they may be sanctioned for filing it, even without a signature.
4. Failure to Issue an Order to Show Cause
In their Reply Brief, the Deans raise an argument not listed in their issues on appeal, and not addressed by the Debtor in her brief. The Deans assert the Bankruptcy Court was required to issue an order to show cause to provide them with notice and an opportunity to be heard prior to issuing the $5,000 sanction. The Deans cite Rule 9011(c)(1)(B) and use the phrase “sua sponte” in their brief, but they evidently misapprehend its meaning. (Appellants’ Reply Br. at 11, BAP Case 18-8038 ECF No. 15.) But, the Bankruptcy Court did not raise a Rule 9011 violation on its own initiative as that Rule contemplates. Rather, the sanctions were imposed after the Debtor filed the First Sanctions Motion and the Bankruptcy Court held a hearing. Rule 9011(c) is simply not applicable.
B. Arguments on the Merits
1. Motion to Strike
The Deans assert “[i]t was an abuse of discretion to Strike the [Settlement Letter] because the Debtor showed no prejudice or substantial right affected by its presence, and the Deans’ [sic] were prejudiced by the Bankruptcy Court striking it to cover up the Debtor and Neil Bordy‘s improper, ill intended actions.” (Appellants’ Br. at 10, BAP Case 18-8038 ECF No. 13.) The Deans also assert the length of time the Settlement Letter remained on the docket after it was filed, five months, indicates the Bankruptcy Court‘s order striking the document was in retaliation for the Deans’ objection to the interim fee application filed by Debtor‘s counsel. (Appellants’ Br. at 11.) Neither of these arguments is developed or supported and therefore the Panel will not address them.
In their Reply Brief, the Deans argue the offer reflected in the Settlement Letter improperly uses property of the bankruptcy estate, and the Debtor “intentionally fail[ed] to inform and involve the United States Trustee” and such was “further proof of their ongoing deceptive acts.” (Appellants’ Reply Br. at 8.) The Deans did not raise this argument in their response to the First Sanctions Motion, nor did they raise it during the hearings, nor in their motions for reconsideration. “It is well-settled that this court will not consider arguments raised for the first time on appeal unless our failure to consider the issue will result in a plain miscarriage of justice.” U.S. Bank N.A. v. Barbee (In re Barbee), 461 B.R. 711, 718 (B.A.P. 6th Cir. 2011) (quoting Bailey v. Floyd Cnty. Bd. of Educ., 106 F.3d 135, 143 (6th Cir. 1997)).3
The Panel perceives no miscarriage of justice, plain or otherwise.
3. Sanctions Warranted
In granting the First Sanctions Motion, the Bankruptcy Court determined the Deans had not “presented evidence of or otherwise persuaded the Court of any permissible use of this letter.” (First Sanctions Opinion at 4.) Moreover, the Bankruptcy Court concluded that “filing the letter was to foster all of the prohibited uses listed in Rule 408.” (Id. (emphasis in original).) The Bankruptcy Court noted that the Deans had filed the Settlement Letter on the docket, then immediately added it to their designation of record on appeal. The Bankruptcy Court then held “[t]he Deans’ actions with respect to their filing of the [Settlement Letter] are impermissible, serve no evidentiary value and amount to frivolous litigation tactics. These actions constitute the latest in a series of harassing, baseless and inflammatory litigation tactics by the Deans.” (Id. at 6.)
Rule 408 addresses the use of Compromise Offers and Negotiations. It provides, in part:
(a) Prohibited Uses. Evidence of the following is not admissible--on behalf of any party--either to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction:
(1) furnishing, promising, or offering--or accepting, promising to accept, or offering to accept--a valuable consideration in compromising or attempting to compromise the claim; and
(2) conduct or a statement made during compromise negotiations about the claim--except when offered in a criminal case and when the negotiations related to a claim by a public office in the exercise of its regulatory, investigative, or enforcement authority.
The Deans filed the Settlement Letter on the docket in the bankruptcy case without any explanation. It was not filed as an attachment to a motion, objection, or other request for relief, nor was it offered as evidence for a hearing. Still, the Deans argue they had a legitimate purpose in filing it on the docket. They argue the Settlement Letter is admissible to show the Debtor acknowledges a personal injury claim. The Bankruptcy Court rejected this argument, holding: “Any personal injury claim the Deans may have, however, is not part of this chapter 13 proceeding.” (First
The Deans’ own statements regarding their intended use defeat their argument. Rule 408 clearly states a compromise offer cannot be used to prove or disprove the validity of a disputed claim or to contradict a prior statement. Accordingly, the Settlement Letter cannot be offered to show that the Debtor acknowledges a personal injury claim outside the chapter 13 proceeding.
On appeal, the Deans argue their intended use of the Settlement Letter falls within the exceptions stated in Rule 408. This argument also fails. The rule provides:
(b) Exceptions. The court may admit this evidence for another purpose, such as proving a witness‘s bias or prejudice, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.
Because the Deans filed the Settlement Letter on the docket without any context, the Bankruptcy Court had to ascertain their motivation from their actions. The Bankruptcy Court noted that immediately following the filing, the Deans designated the Settlement Letter as part of the record on appeal. Accordingly, the Bankruptcy Court found the Deans’ intention was to use the Settlement Letter to support their arguments on appeal that the chapter 13 bankruptcy case should be dismissed due to fraud, in part based on the Debtor‘s failure to address the Deans’ other claims. As Rule 408 prohibits this use, the Bankruptcy Court did not abuse its discretion in holding the filing of the Settlement Letter on the docket did not have a proper purpose.
Incorrectly citing the standard governing motions to dismiss under
4. Ability to Pay
Rule 9011 mandates that sanctions be limited to the amount required to deter future conduct.
After a bankruptcy court determines that Rule 9011 has been violated by a party, it has wide discretion in selecting the appropriate sanction. Jackson v. The Law Firm of O‘Hara, Ruberg, Osborne, & Taylor, 875 F.2d 1224, 1229 (6th Cir. 1989). The two goals of the rule are deterrence and compensation, with deterrence being the primary goal. Orlett v. Cincinnati Microwave, Inc., 954 F.2d 414, 419 (6th Cir. 1992). As such, the “court should impose the least severe sanction that is likely to deter.” Jackson, 875 F.2d at 1229; Orlett, 954 F.2d at 419; see also [Heavrin v. Schilling (In re Triple S Restaurants, Inc.), 342 B.R. 508, 513 (Bankr. W.D. Ky. 2006] (sanction imposed is limited to “what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated.“). One type of sanction which may be imposed is “reasonable attorney fees.” Orlett, 954 F.2d at 419. Reasonable attorney fees do not necessarily mean actual legal expenses incurred. In determining the amount of attorney fees to impose as a sanction, the court must consider the party‘s ability to pay. Jackson, 875 F.2d at 1230.
Byrd v. Arvest Bank (In re Lamar Crossing Apartments, L.P.), 464 B.R. 61 (table), 2011 WL 6155716, at *8 (B.A.P. 6th Cir. Sept. 20, 2011). The BAP has explained “[w]hile failure of the court to inquire into a sanctioned party‘s ability to pay is an abuse of discretion, . . . ‘the burden of proof is on the sanctioned party to provide evidence of financial status.’ ” Id. *10 (quoting Legair v. Circuit City Stores, Inc., 213 F. App‘x 436, 440 (6th Cir. 2007)). Accordingly, “[a]n unsupported claim regarding financial status is clearly insufficient [and] [e]ven in the case of a proven total inability to pay, a court may still impose modest sanctions, because the purpose is to deter future misconduct in litigation.” Id. (internal citations omitted); see also White v. General Motors Corp., Inc., 908 F.2d 675, 685 (10th Cir.1990) (“We also hold that even if plaintiffs prove that they are totally impecunious the court may impose modest sanctions to deter future baseless filings.“).
In the First Sanctions Opinion, the Bankruptcy Court acknowledged the duty to limit sanctions “to what is sufficient to deter the repetition of such conduct[.]” (First Sanctions Opinion at 6.) The Bankruptcy Court also noted “the Deans refused to cash any of the disbursement checks sent to them by the chapter 13 Trustee as payment on their claim from the Debtor.” (Id. at 5-6.) In imposing the $5,000 sanction for filing the Settlement Letter on the docket, the Bankruptcy Court stated that it was imposing an amount sufficient to deter the Deans’ conduct. The Bankruptcy Court also indicated the cumulative nature of the abuse of process was a factor in determining the amount.
The Panel finds that the Bankruptcy Court properly considered the financial information presented regarding the Deans’ ability to pay and limited the sanctions awarded to an amount designed to deter future harassing litigious behavior. While the Deans claimed that they could not afford an attorney because they did not have the financial resources, their refusal to cash disbursement checks undermined their argument, as the Bankruptcy Court observed.
For the reasons stated, the Panel finds that the Bankruptcy Court did not abuse its discretion by imposing sanctions against the Deans for filing the Settlement Letter on the docket. The Bankruptcy Court‘s orders appealed in BAP Case No. 18-8038 are AFFIRMED.
II. BAP Case No. 18-8040
In the second appeal, the Deans argue the Bankruptcy Court erred in granting
A. Procedural Arguments
1. Timing of the Motion for Reconsideration
The Deans assert the Bankruptcy Court granted the Second Sanctions Motion before ruling on the Deans’ pending motion to vacate or reconsider the order dismissing the Deans’ complaint under
2. Lack of Objections
The Deans assert “no other creditors, nor did the Trustee(s), object to the Bankruptcy Court Vacating or Reconsidering any of the Orders. Neil Bordy did not even file an Objection to the Deans’ September 14, 2018, Motion to Vacate or Reconsider second Order for Sanctions on the Dismissal of the Deans’ fraud Complaint.” (Appellants’ Br. at 25.) The Deans’ argument that a bankruptcy court must grant a motion to vacate if no one objects is plainly wrong.
A court may reconsider a previous judgment: (1) to accommodate an intervening change in controlling law; (2) to account for newly discovered evidence; (3) to correct a clear error of law; or (4) to prevent manifest injustice. See GenCorp, Inc. v. American Int‘l Underwriters, 178 F.3d 804, 834 (6th Cir. 1999). “A motion under
Rule 59(e) is not intended to provide the parties an opportunity to relitigate previously-decided matters or present the case under new theories. Rather, such motions are intended to allow for the correction of manifest errors of fact or law, or for the presentation of newly-discovered evidence.” In re Nosker, 267 B.R. 555, 564 (Bankr. S.D. Ohio 2001). “The burden of demonstrating the existence of a manifest error of fact or law rests with the party seeking reconsideration.” Id. at 565.
In re J & M Salupo Dev. Co., 388 B.R. 795, 800-01 (B.A.P. 6th Cir. 2008). Moreover, “[t]he granting of a
The Deans did not carry their burden of demonstrating the existence of a manifest error of fact or law in the Bankruptcy Court. They did not present an intervening change in law or any newly discovered evidence. Rather, at its root, their argument was that sanctions were not warranted because all their behavior was justified. In making that assertion to the Bankruptcy Court, which they now reiterate to this Panel, the Deans repeated the same arguments they have presented at every stage of this litigation.
The Panel finds that the Bankruptcy Court did not abuse its discretion by considering the motion to vacate in the absence
B. Substantive Arguments
1. Ability to Pay
In the Second Sanctions Opinion, the Bankruptcy Court noted that the “Court previously sanctioned the Deans in an amount it believed would deter this type of conduct.” (Second Sanctions Opinion at 7.) The Bankruptcy Court held that “the filing of the second adversary proceeding based on issues that had already been fully litigated, appealed or otherwise waived, amounted to frivolous and/or vexatious litigation tactics on the part of the Deans that could only have an improper purpose and amounted to an abuse of the bankruptcy process.” (Id.) Then, in the subsequent order setting the amount of sanctions, the Bankruptcy Court limited the amount of attorney fees that it awarded to only those incurred with the prosecution and filing of the motion for sanctions related to the dismissal of the second adversary proceeding, reducing the amount from the $7,075.50 requested to $2,641.
In their motion for reconsideration of the Second Sanctions Opinion, the Deans asserted the Bankruptcy Court erred when it failed to take into account the Deans’ ability to pay the sanctions. The Deans, however, did not file any proof of their financial status with that motion or in response to the Second Sanctions Motion. In the Bankruptcy Court, the Deans only offered anecdotal comments regarding their inability to afford a lawyer, not evidence, to support their contention that they could not afford to pay sanctions. (See June 27, 2018 Hr‘g Tr. 15:10-20 (ECF No. 120).) Moreover, their failure to cash the chapter 13 trustee‘s dividend disbursement checks undermined any assertion that the Deans were unable to pay. Finally, it is telling that the sanctions have apparently not deterred the Deans from continuing to file frivolous documents, adversary proceedings, and appeals, suggesting, perhaps, that the award was too low. Accordingly, the Panel finds that the Deans’ inability to pay argument was without merit. The Bankruptcy Court was not obligated to provide an in-depth analysis of the Deans’ ability to pay when they had not offered any substantial evidence of their financial hardship.6
2. Reduction of plan payments
The Deans assert that the Bankruptcy Court erred by allowing the Trustee to pay the sanctions from estate funds and reduce the amount distributed to the Deans. The Bankruptcy Court did not grant such a request. Specifically, the Bankruptcy Court denied the Debtor‘s request to proceed in this manner, stating: “The Court declines this request due to the form in which it is made. Debtor‘s counsel may pursue funds held by the chapter 13 Trustee on behalf of the Deans upon proper request under Bankruptcy Rule 7000, et seq.” (Second Sanctions Opinion at 7.) Likewise, the Bankruptcy Court noted that “counsel for the Debtor may pursue a direct claim for reimbursement against the Deans for such fees through appropriate means.” (Id.) Therefore, this argument is
For the reasons stated, the Panel finds that the Bankruptcy Court did not err by imposing sanctions against the Deans for filing a frivolous adversary proceeding. The Bankruptcy Court‘s orders appealed in BAP Case No. 18-8040 are AFFIRMED.
CONCLUSION
Sometimes the bankruptcy process can be confusing and counter-intuitive. Before bankruptcy, creditors may seem to have all the cards but after bankruptcy, leverage shifts, and the playing field changes, given important federal policies woven into the Bankruptcy Code. The chapter 13 process can be especially bewildering to the untrained eye, unfamiliar with the rules and without legal guidance. It is obvious the Deans do not understand the system. They do not understand the effect of a confirmation order. They do not understand the purpose or legitimacy of plan modification. As creditors whose claims will be paid in full through the chapter 13 case, yet who have obstreperously objected throughout the case, they evidently do not understand the purpose of chapter 13, which appears in this case to be working as Congress intended (except for the multiplication of litigation at the behest of the Deans). And perhaps most importantly, they do not understand that the Debtor‘s lawful exercise of the privileges accorded by a bankruptcy filing does not amount to fraud. Due to these misunderstandings, the Deans have ignored the Bankruptcy Court‘s admonitions to stop filing pleadings that unnecessarily increase litigation expenses and harass the Debtor. By ignoring these warnings, the Deans are only increasing expenses and delaying payment of their own claim. And now, due to their own actions, they are decreasing their 100% dividend by the amount of sanctions the Bankruptcy Court ordered them to pay. In other words, they are only hurting themselves. It is their choice to continue down this same road by continuing to file objections, refusing to cash their dividend checks, and increasing the Debtor‘s litigation expenses, but in the end, the Deans may see the favorable terms of the Debtor‘s chapter 13 plan reduced either by a decrease in the Debtor‘s resources or by an increase in their own liability to the Debtor or her bankruptcy estate.
Whether or not specifically addressed in this opinion, the Panel has considered all the arguments raised in the Deans’ briefs and finds them without merit. For the reasons stated, the Bankruptcy Court‘s orders are AFFIRMED.