Rosslyn2016, LLC and Texas Esencia 2019 LLC
This Court addresses a matter of profound concern regarding the integrity of the bankruptcy process, the professional responsibility of counsel, and the proper administration of justice. The facts are troubling and warrant the Court‘s careful attention. Three entities, Kitchen Central, LLC, CirCir, LLC, and Adil Property, Inc. (collectively, the “Petitioning Creditors“), filed involuntary petitions against the three debtors in this case (the “Debtors“), represented by attorney Gregory W. Mitchell (“Mitchell“). The claims underlying these involuntary petitions were riddled with inconsistencies that alerted Allison D. Byman, the Chapter 7 Trustee, (“Trustee“) to potential fraud on the court. In response, the Trustee served
This Court denied the frivolous motions to quash on April 30, 2026, and ordered production of documents within seven days. The Petitioning Creditors and Mitchell failed to comply. No documents were produced by the May 7, 2026, deadline. When the Trustee filed a motion for
For the reasons stated herein, the Trustee‘s Motion to Enforce at ECF No. 254 and Supplemental Motion at ECF No. 263 are GRANTED. The Court finds that Mitchell violated
The Court finds that (i) the Petitioning Creditors and Mitchell violated the Court‘s April 30, 2026, Order at ECF No. 241 denying the Motions to Quash by failing to produce documents responsive to the Trustee‘s
An order consistent with this Memorandum Opinion will be entered on the docket simultaneously herewith.
This Court makes the following findings of fact and conclusions of law pursuant to
A. Background
1. The involuntary petitions and inconsistent claims
On August 4, 2025, the Petitioning Creditors filed involuntary petitions against the three Debtors in this case: Rosslyn2016 LLC (Case No. 25-34507), Texas Esencia 2019 LLC (Case No. 25-34508), and Timbers2020 LLC (Case No. 25-34510). ECF. No. 1. These three bankruptcy cases are jointly administered under the instant bankruptcy Case No. 25-34507. ECF No. 10. These involuntary petitions were filed shortly after this Court dismissed the Debtors’ prior voluntary chapter 11 cases with prejudice to refiling. See e.g., Case No. 25-31816, ECF No. 84. The Petitioning Creditors filed proofs of claim on January 6, 2026 totaling approximately $2.5 million (the “Proofs of Claim“). Claims Register, Claims No. 6-8. As explained infra, the record reveals significant and troubling inconsistencies between the involuntary petitions, the Debtors’ schedules, and the Proofs of Claim filed by the Petitioning Creditors.
2. The Trustee‘s Bankruptcy Rule 2004 Discovery Requests
Due to the significant inconsistencies and lack of supporting documents in connection with the Petitioning Creditors’ Proofs of Claim, the Trustee served document requests pursuant to
3. The Petitioning Creditors’ Responses and Motions to Quash
On April 15, 2026, Mitchell and each of the Petitioning Creditors served written discovery responses to the Trustee and filed motions to quash (the “Motions to Quash“). ECF. Nos. 218-221. In response to the Trustee‘s document requests, the Petitioning Creditors each responded that there were no responsive documents to the critical requests. Specifically, they claimed that no documents existed showing the transfer of funds alleged in the promissory notes, the source of funds transferred to the Debtors, payment history or records of payments, documents concerning the drafting or execution of the notes, or any demand letters, notices of default, or similar communications. ECF No. 284, Exs. 1-3. Rather than immediately withdrawing their claims in light of the absence of supporting documentation, the Petitioning Creditors and Mitchell filed the Motions to Quash. ECF. Nos. 218-221. The central legal argument in these motions was based on
4. The Fabricated Citations and Invented Legal Authority
The Motions to Quash contained multiple fabricated quotations presented as direct authority for the proposition that
On April 30, 2026, this Court held a hearing on the Motions to Quash and determined that they should be denied. The Court entered its order denying the Motions to Quash, which ordered Mitchell to respond to all requests for production in the Trustee‘s
6. Non-Compliance with the Turnover Order
Despite the clear deadline established by the Turnover Order, the Petitioning Creditors and Mitchell failed to produce any documents by May 7, 2026. On May 10, 2026, three days after the deadline, Mitchell and the Petitioning Creditors filed a Notice of Withdrawal of Documents attempting to withdraw the Motions to Quash even though the Court had already ruled on and denied them on April 30, 2026. ECF No. 253.
7. The Trustee‘s Motion to Enforce and Late Document Production
On May 12, 2026, the “Trustee filed the Motion to Enforce Order Denying Petitioning Creditors’ and Their Counsel‘s Motions to Quash and for Civil Contempt,” (the “Motion to Enforce“) seeking to enforce the Turnover Order and to hold the Petitioning Creditors and Mitchell in contempt for failing to produce documents by the May 7, 2026 deadline. ECF No. 254. Shortly after the Trustee filed the Motion to Enforce on May 12, 2026, Mitchell produced documents on behalf of the Petitioning Creditors and himself. The documents produced included screenshots of payment confirmations for payments made from Texas Excel Property Management to the Petitioning Creditors, check images for payments from Texas Excel Property Management to the Petitioning Creditors, payment report spreadsheets summarizing the screenshots and checks, promissory notes already filed with the Court as attachments to the Proofs of Claim, lien documents filed against the Debtors’ properties on November 8, 2024, proofs of claim already
However, the documents produced were woefully deficient. Critically, the Petitioning Creditors did not produce any documents confirming that they had transferred the principal amounts reflected in their respective promissory notes to the Debtors. The documents that were produced only showed payments to the Petitioning Creditors, but did not evidence that the Petitioning Creditors had advanced funds to the Debtors.
8. Withdrawal of the Proofs of Claim
On May 17, 2026, the Petitioning Creditors filed their Original and Amended Notices of Withdrawal of Proofs of Claim, ECF. Nos. 258, 261, withdrawing each of the Proofs of Claim filed in these cases. The Petitioning Creditors asserted in their notices of claim withdrawal that the claims were withdrawn for economic reasons not based on the merits. ECF No. 258.
9. Mitchell‘s Explanations and Objections
In response to the Motion to Enforce, Mitchell provided explanations for the late document production. He claimed that responsive documents were received from the Petitioning Creditors beginning on or about May 2, 2026, but he had technical issues downloading the documents. ECF No. 257. On or about May 4, 2026, after returning from traveling, Mitchell began compiling documents responsive to requests directed at him. Id. Responsive documents had largely been compiled by May 7, 2026, but technical issues continued through May 8, 2026. Id. Mitchell left town on May 8, 2026 on a long-planned trip to the wedding of a close family friend. Id. Technical issues were resolved by the end of the day on Monday, May 11, 2026. A Dropbox link to 200 plus pages of responsive documents was sent to the Trustee‘s counsel on May 12, 2026, shortly after the Motion to Enforce was filed. Id.
10. The Trustee‘s Supplemental Motion and Request for Sanctions
On May 19, 2026, the Trustee filed its supplement to the Motion to Enforce (the “Supplemental Motion“). ECF No. 263. The Supplemental Motion documents the withdrawal of all Proofs of Claim and requests that the Court enter an order requiring the Petitioning Creditors and Mitchell to reimburse the estates for all fees incurred in connection with the discovery, the frivolous Motions to Quash, and the Motion to Enforce. ECF No. 263.
11. The June 10, 2026 Show Cause Hearing
On June 10, 2026, the Court held a hearing where it considered the Motion to Enforce and required Mitchell to show cause as to why he should not be sanctioned for his apparent use of generative AI without proper verification. At the hearing, Mitchell testified that the inaccurate legal citations in his Motions to Quash resulted from his use of a prior template. June 10, 2026 H‘rg (Mitchell testifying). He could not recall or identify the template‘s origin and acknowledged that he did not verify any of the citations in the Motions to Quash, admitting that some were “clearly” not accurate. Id. Notably, Mitchell is a sole practitioner who received no assistance from any other lawyer or legal professional in drafting the Motions to Quash. Id. Mitchell testified that
II. CONCLUSIONS OF LAW
A. Jurisdiction and Venue
This Court holds jurisdiction pursuant to
This Court may only hear a case in which venue is proper.
B. Constitutional Authority to Enter a Final Order
While bankruptcy judges can issue final orders and judgments for core proceedings, absent consent, they can only issue reports and recommendations on non-core matters. See
III. ANALYSIS
A. The Trustee‘s Bankruptcy Rule 2004 Requests
The Court will first discuss why the Trustee‘s
1. The Trustee is not barred from using Bankruptcy Rule 2004 to evaluate whether to file an objection to a proof of claim
The Petitioning Creditors’ primary defense rests on a mischaracterization of the scope of
Petitioning Creditors and Mitchell argue that because adversarial litigation was “contemplated” or “anticipated,” the Trustee‘s
In this case, the Trustee had not filed any objections to the Petitioning Creditors’ claims at the time the
2. The Trustee had substantial grounds to investigate claim validity
Mitchell did not appear for the Petitioning Creditors prior to the voluntary bankruptcy case‘s dismissal with prejudice. The Proofs of Claim also did not attach sufficient documents to support the basis for the claims or explain the inconsistencies between the Proofs of Claim, the schedules and the Involuntary Petition. See Claims Register, Claims 6-1, 7-1 and 8-1. Moreover, when the Trustee requested supporting documentation such as bank records, wire transfer confirmations, source documentation, payment histories, and demand letters, the Petitioning Creditors and Mitchell responded that these key categories of documents did not exist. ECF No. 284, Exs. 1-3.
The inconsistencies among the Involuntary Petition, schedules, and Proofs of Claim, the Petitioning Creditors’ inability to reconcile those inconsistencies, and the Petitioning Creditors’
B. The Petitioning Creditors and Mitchell are in civil contempt of the April 30, 2026 Order
1. The Trustee has met her prima facie burden for civil contempt
To establish civil contempt, the moving party must show, by clear and convincing evidence, that a court order was in effect, the order required certain conduct by the respondent, and the respondent failed to comply with the court‘s order. FDIC v. LeGrand, 43 F.3d 163, 170 (5th Cir. 1995). Civil contempt is remedial in nature and is designed to compel compliance with a court order or to compensate a party for losses resulting from noncompliance. Carter v. Loc. 556, Transp. Workers Union of Am., 156 F.4th 459, 503 (5th Cir. 2025). The absence of willfulness does not relieve one from civil contempt. Id. at 502 n.15 (citing Am. Airlines, Inc. v. Allied Pilots Ass‘n, 228 F.3d 574, 581 (5th Cir. 2000)); McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949) (“The absence of willfulness does not relieve from civil contempt.“). Since the purpose is remedial, a party‘s failure to comply with a clear court order constitutes civil contempt even absent a showing of deliberate defiance or bad faith intent. See Carter, 156 F.4th at 503; McComb, 336 U.S. at 191. The focus is on the objective fact of noncompliance, not on the subjective mental state of the respondent. See Carter, 156 F.4th at 503; McComb, 336 U.S. at 191.
The Trustee has met her prima facie burden of each element of civil contempt. First, the Court entered its Turnover Order requiring Petitioning Creditors and Mitchell to respond to all requests for production. ECF No. 241. Second, the Turnover Order explicitly required respondents
2. Mitchell and Petitioning Creditors have not rebutted the finding of civil contempt
“After the movant has shown a prima facie case, the respondent can defend against it by showing a present inability to comply with the subpoena or order.” Petroleos Mexicanos v. Crawford Enters., Inc., 826 F.2+d 392, 401 (5th Cir. 1987). “The respondent may avoid a contempt finding by establishing that it has substantially complied with the order or has made reasonable efforts to comply.” In re Brown, 511 B.R. 843, 849 (Bankr. S.D. Tex. 2014). “The court also considers good faith, or lack thereof.” M.D. v. Abbott, 119 F.4th 373, 384 (5th Cir. 2024) (citing Whitfield v. Pennington, 832 F.2d 909, 914-15 (5th Cir. 1987)).
Mitchell claims that technical issues prevented timely document production: technical issues downloading documents from the Petitioning Creditors (May 2-4, 2026), technical issues compiling his own documents (May 4-8, 2026), and travel to a wedding (May 8-11, 2026). ECF No. 257. These assertions do not excuse non-compliance with a clear court order for several reasons. First, Mitchell did not inform the Trustee‘s counsel of the technical issues before the compliance deadline. Nor did Mitchell provide a reasonable explanation of why he chose not to reach out to either the Court or the Trustee to communicate his alleged inability to comply with the Turnover Order before the compliance deadline.
Second, the technical issues he describes (downloading documents, compiling documents) are routine matters of a modern law practice that should have been redressed well before the deadline. And Mitchell had from April 30 to May 7 (seven days) to remedy the technical issues.
Finally, the fact that Mitchell eventually produced documents does not cure the contempt. The Court‘s Turnover Order required production by May 7, and Mitchell and Petitioning Creditors did not produce documents until May 12, after the Motion to Enforce was filed. See ECF No. 241; ECF No. 257, at 2, ¶¶ 2-5; ECF No. 286-1. In any event, the document production did not produce all the documents required by the Turnover Order. See ECF No. 241; ECF No. 286-5. For example, the Turnover Order required Mitchell, on behalf of the Petitioning Creditors, to produce all documents requested in the
In sum, Mitchell‘s explanation suggests a lack of diligence and good faith in complying with the Court‘s Turnover Order. He did not begin compiling documents until May 4, did not resolve technical issues until May 11, and did not produce documents until May 12, after the Motion to Enforce was filed. This unreasonable lack of diligence does not rebut the Trustee‘s prima facie showing of contempt. Furthermore, Mitchell and the Petitioning Creditors’ attempted withdrawal of the Motions to Quash is ineffective. ECF No. 253. The Court had already ruled on and denied the Motions to Quash on April 30, 2026. ECF No. 241. A motion cannot be withdrawn after it has already been ruled on.
Because the Trustee showed that each element of civil contempt is met and Mitchell and Petitioning Creditors did not demonstrate a valid defense for their failure to comply with the Turnover Order, the Court finds that the Petitioning Creditors and Mitchell are in contempt of the Turnover Order. Mitchell and Petitioning Creditors shall therefore be liable for the reasonable attorney fee‘s incurred by the Trustee in attempting to enforce compliance with the Turnover Order, including fees incurred in connection with the Motion to Enforce and the Trustee‘s supplement to the Motion to Enforce.
C. Mitchell violated Rule 11(b) by submitting motions containing fabricated authority
1. Rule 11(b) requirements and standards
Additionally, and as expressly laid out in S.D. Tex. General Order 2025-04:
Rule 11 of the Federal Rules of Civil Procedure requires that an attorney or self-represented litigant certifies their claims, defenses, and other legal contentions are warranted by existing law and the factual contentions have evidentiary support. Attorneys and self-represented litigants are cautioned against submitting to the Court any pleading, written motion, or other paper drafted using generative artificial intelligence (e.g., ChatGPT, Harvey.AI, generative AI services) without checking the submission for accuracy as certain technologies may produce factually or legally inaccurate content and should never replace the lawyer‘s independent legal judgment.
S.D. Tex. General Order 2025-04 also clarifies that an attorney may “be held responsible for the contents of that filing under Rule 11, regardless of whether generative artificial intelligence drafted any portion of that filing.” S.D. Tex. Gen. Order 2025-04 (citing
2. Mitchell submitted fabricated citations and quotations
The Court finds that Mitchell submitted the Motions to Quash containing multiple fabricated quotations, citations to non-existent authority, and misleading descriptions of authority. These false citations and quotations were not incidental errors but were central to Mitchell‘s
TABLE I
| Document | Citation and/or Quotation | Actual Finding |
|---|---|---|
| Petitioning Creditors Motion to Quash at ¶ 6 | Courts routinely quash or narrow Rule 2004 requests that amount to a “premature and unauthorized substitute for formal discovery,” In re Dinnubilo, 177 B.R. 932, 939-40 (E.D. Cal. 1993). | Non-existent Quotation The direct quotation does not appear in Dinnubilo. Trustee‘s counsel has not been able to locate this quotation in another published opinion. Setting aside the nonexistent quotation, the case is distinguishable and does not support the hallucinated proposition for which it is cited, nor is it an appropriate paraphrase of any portion of the case text. |
| Petitioning Creditors Motion to Quash at ¶ 6 | or that impose disproportionate burdens on non-debtor third parties. See In re Table Talk, Inc. 51 B.R. 143, 146 (Bankr. D. Mass 1985). | Misrepresentation of Authority There is no discussion of this topic in Table Talk. Neither the word “burden” nor “disproportionate” appear in the opinion, nor is this an appropriate paraphrase of any portion of the case text. In fact, Table Talk rejects the exact argument being made by the Petitioning Creditors. In that case, the party objected “to the use of a Rule 2004 examination as a ‘pre-litigation discovery device’ which would give the Trustee ‘an unwarranted tactical advantage.‘” Table Talk, 51 B.R. at 145. At the pinpoint cite in the Petitioning Creditors’ Motion to Quash, the Court rejects this argument. Id. at 146. |
| Petitioning Creditors Motion to Quash at ¶ 8 | Rule 2004 cannot be weaponized to extract full blown litigation discovery | Non-existent Quotation The direct quotation does not appear |
| TABLE I | ||
|---|---|---|
| Document | Citation and/or Quotation | Actual Finding |
| outside those procedural protections. See In re Symington, 209 B.R. 678, 683 (Bankr. D. Md. 1997) (“[W]hen a specific dispute has matured to the point where it could be adjudicated through a contested matter or adversary proceeding, Rule 2004 examination is not an appropriate substitute for formal discovery.“). | in Symington. Trustee‘s counsel has not been able to locate this quotation in another published opinion. Setting aside the nonexistent quotation, the case is distinguishable and does not support the hallucinated proposition for which it is cited, nor is it an appropriate paraphrase of any portion of the case text. | |
| Mitchell Motion to Quash at ¶ 8 | Courts consistently hold that the Rule “may not be used as a device for discovery in anticipated litigation” once the parties’ relationship has ripened into an adversarial dispute. In re Wilcher, 56 B.R. 428, 433 (Bankr. N.D. Ill. 1985); see also In re Bennett Funding Grp., Inc., 203 B.R. 24, 28 (Bankr. N.D.N.Y. 1996). |
Non-existent Quotation The direct quotation does not appear in either the Wilcher or the Bennett Funding Group cases cited. The pinpoint citation in Wilcher includes the inverse proposition—the often-used phrase that Rule 2004 “can legitimately be in the nature of a ‘fishing expedition.‘” Wilcher, 56 B.R. at 433 (citing In re Vantage Petroleum Corp., 34 B.R. 650, 651 (Bankr. E.D.N.Y 1983)). The pinpoint cite in Bennett Funding Group cites Wilcher for the “fishing expedition” language. Bennett Funding Grp. Inc., 203 B.R. at 28. “It is clear that Rule 2004 may not be used as a device to launch into a wholesale investigation of a non-debtor‘s private business affairs.” Id. at 434. This is the only place in the case text in which the word “device” appears. The case does not include the phrase “anticipated litigation.” Bennett Funding Group discusses the uses of Rule 2004 after an adversary proceeding has been filed, but there is |
| Mitchell Motion to Quash at ¶ 10 | A court may for good cause issue a protective order to protect a party from “annoyance, embarrassment, oppression, or undue burden or expense.” |
Misrepresentation of Authority Mitchell cites Shields for the proposition that a party may move for a protective order before there is a motion to compel filed. Shields does not discuss this legal question. The holding in Shields is that
There is a passing reference to the fact that production of the work product was compelled in the prior litigation pursuant to a protective order. Id. at 381-82. However, in the Shields case itself, the appeal was from a motion in limine. Id. at 381. There is no discussion about a protective order. |
| Mitchell Motion to Quash at ¶ 14 | The attorney-client privilege protects confidential communications between an attorney and client made for the purpose of seeking or providing legal advice. In re Grand Jury Subpoena, 870 F.2d 343, 346 (5th Cir. 1989). |
Non-Existent Case This reporter citation is for a case in a different circuit, with a different name, on a different topic. The proper citation is: Grubbs v. Norris, 870 F.2d 343 (6th Cir. 1989) Misrepresentation of Authority |
| Mitchell Motion to Quash at ¶ 14 | This privilege is absolute unless waived by the client, not the attorney. United States v. Zolin, 491 U.S. 554, 562 (1989). |
Misrepresentation of Authority Zolin is about the crime-fraud exception to the attorney-client privilege. Therefore, it is an example of why the privilege is not absolute. There is a passing reference to the lower courts’ factual finding that privilege had not been waived through an inadvertent disclosure, but the Supreme Court states “these findings are not at issue here.” Zolin, 491 U.S. at 563. The pinpoint cite in Mitchell‘s Motion discusses the crime-fraud exception and reads as follows:
|
| Mitchell Motion to Quash at ¶ 16 | The Trustee bears the burden of demonstrating that privilege does not apply before any production can be ordered. United States v. Zolin, 491 U.S. at 572. |
The cited authority discusses the boundaries of in camera review of privileged materials by the court, not the production of such materials to the requesting party. The in camera review is appropriate when the facts support a “good faith belief…that in camera review of the materials may reveal evidence to establish the claim that the crime-fraud exception applies.” Id. at 572. The pinpoint cite in Mitchell‘s Motion reads as follows:
|
3. Mitchell‘s Explanations Do Not Excuse the Violation
As justification, Mitchell asserts that he “has the ‘Precision’ version of Westlaw, which, upon information and believe [sic], does incorporate AI capabilities.” ECF No. 272, at 2, ¶ 6. Mitchell further claims that he “has never encountered issues with Westlaw‘s AI feature in the
Mitchell‘s suggestion that the “Precision” version of Westlaw, which is a generative AI tool offered by Westlaw, should be given different treatment from non-legal AI tools demonstrates Mitchell‘s disregard for the General Orders of the Southern District of Texas. S.D. Tex. General Order 2025-04 expressly cautions lawyers against using generative AI services without checking accuracy, and does not differentiate between legal AI services and general AI services. S.D. Tex. Gen. Order 2025-04. In fact, S.D. Tex. General Order 2025-04 mentions Harvey.AI, a legal specific AI service, as an example of an AI tool that should be used with caution. Id.
Mitchell also explained that the legal citations in his Motions to Quash resulted from his use of a prior template but admitted that they were misleading and inaccurate. June 10, 2026 H‘rg (Mitchell testifying). S.D. Tex. General Order 2025-04 provides that “[a]ny attorney or self-represented litigant who signs a pleading, written motion, or other paper submitted to the Court will be held responsible for the contents of that filing under Rule 11, regardless of whether generative artificial intelligence drafted any portion of that filing.” S.D. Tex. Gen. Order 2025-04 (emphasis added). Thus, whether the citations were generated by artificial intelligence, copied from prior filings without verification, or typed manually, the fundamental problem remains: Mitchell submitted citations and quotations that he had not verified and that do not support his legal contentions. This is the precise conduct prohibited by
As such, the Court finds that Mitchell violated
4. The Safe Harbor Does Not Apply
However, sanctions under
Nonetheless, the Court retains its inherent authority to award reasonable attorney‘s fees as a sanction if it finds that an attorney or party engaged in bad faith. Elliott v. Tilton, 64 F.3d 213, 217 (5th Cir. 1995). Furthermore, the Court can sanction conduct under its inherent power even if that same conduct would fall within the scope of
D. Sanctions Are Appropriate Under The Court‘s Inherent Power And Section 105(a)
The Supreme Court in Chambers v. NASCO held that federal courts have inherent power to sanction parties and their attorneys. Chambers v. NASCO, Inc., 501 U.S. at 53. A federal court‘s inherent power to impose attorney‘s fees as a sanction is limited “to cases in which a litigant has engaged in bad-faith conduct or willful disobedience of a court‘s orders.” Id. at 47. A court may also order sanctions pursuant to applicable procedural rules but such rules do “not repeal or modify existing authority of federal courts to deal with abuses . . . under the court‘s inherent power.” Id. at 48. Indeed, the “inherent power of a court can be invoked even if procedural rules exist which sanction the same conduct.” Id. A court ordinarily should rely on relevant rules and statues, rather than the inherent power, but “if in the informed discretion of the court, neither the statute nor the rules are up to the task, the court may safely rely on its inherent power.” Id. at 53.
The principles in Chambers regarding a court‘s inherent power to award attorney fees as sanctions are “equally applicable to the bankruptcy court.” Matter of Case, 937 F.2d 1014, 1023 (5th Cir. 1991). Specifically,
For a bankruptcy court to sanction an attorney pursuant to its inherent power under § 105, it must make a specific finding that the party being sanctioned acted in bad faith. In re Crocheter, 382 B.R. 311, 326 (S.D. Tex. 2007) (citing Crowe v. Smith, 261 F.3d 558, 563 (5th Cir. 2001)), rev‘d on other grounds 297 F. App‘x 382 (5th Cir. 2008). “A court may assess attorney‘s fees under its inherent powers when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons, or has defiled the ‘very temple of justice.‘” Matta v. May, 118 F.3d 410, 416 (5th Cir. 1997). A bankruptcy court can use its inherent authority to sanction both a party and its attorney. Carroll v. Abide (In re Carroll), 850 F.3d 811, 815 (5th Cir. 2017) (“Federal courts have inherent powers which include the authority to sanction a party or attorney when necessary to achieve the orderly and expeditious disposition of their dockets.“).
E. Sanctions Against The Petitioning Creditors And Mitchell Are Appropriate
The Petitioning Creditors and Mitchell engaged in a pattern of conduct throughout this proceeding that demonstrates a bad faith abuse of the bankruptcy process. The Petitioning Creditors, through Mitchell, filed involuntary petitions asserting proofs of claim totaling to approximately $2.5 million. See Claims Register, Claims 6-1, 7-1 and 8-1. The involuntary petitions were filed shortly after the Debtors’ previous chapter 11 case was dismissed with prejudice. As explained supra, there were significant and troubling inconsistencies between the involuntary petitions, the Debtors’ schedules, and the Proofs of Claim filed by the Petitioning Creditors which prompted the Trustee to issue Bankruptcy Rule 2004 requests to investigate the legitimacy of the Proofs of Claim. Instead of complying with the Bankruptcy Rule 2004 requests,
After the Court denied the Motions to Quash and ordered the Petitioning Creditors and Mitchell to turnover all the requested information, they failed to do so. ECF No. 241. Not only was the Petitioning Creditors’ and Mitchell‘s turnover of documents untimely, but it was wholly deficient because they did not produce evidence of transfer of funds from the Petitioning Creditors to Debtors as requested in the Bankruptcy Rule 2004 requests. ECF No. 286, Ex. 5. And in a last-ditch effort to avoid contempt of the Court‘s Turnover Order and responsibility for their meritless Motions to Quash, the Petitioning Creditors withdrew their Proofs of Claim and Mitchell, on behalf of himself and the Petitioning Creditors, attempted to withdraw the Motions to Quash. ECF No. 253.
The Trustee explicitly stated in her Omnibus Response to the Petitioning Creditors’ and their Counsel‘s Motion to Quash that “[t]he purpose of the Rule 2004 requests for production is to determine if the Trustee has a basis to object to the Petitioning Creditors’ claims and to investigate potential fraud on the Court in their filing the involuntary petitions.” ECF No. 229, at 1–2, ¶ 1. The Trustee concluded that the Petitioning Creditors “do not hold valid claims and have no standing in these cases.” ECF No. 229, at 3, ¶ 4. Thus, the Petitioning Creditors and Mitchell were on notice of the allegations against them and had the opportunity to rebut them by producing documents responsive to the Bankruptcy Rule 2004 requests to show that the Proofs of Claims were legitimate. See ECF No. 229. But the Petitioning Creditors did not do that. Instead, the Petitioning Creditors, through Mitchell, withdrew their Proofs of Claim without ever producing sufficient evidence that they ever had valid claims. ECF No. 258. The Petitioning Creditors’ assertion that the withdrawal of the Proofs of Claim totaling approximately $2.5 million was for
The withdrawal, in light of the Trustee‘s allegations and Bankruptcy Rule 2004 requests, effectively serves as an admission that the Proofs of Claim lacked evidentiary support and that the Petitioning Creditors are not creditors of the Debtors. The Petitioning Creditors lacked standing to file involuntary petitions because they did not have valid claims and were not creditors of the Debtors. See
In sum, the Petitioning Creditors filed the Proofs of Claim without evidentiary support, filed frivolous Motions to Quash the Bankruptcy Rule 2004 requests, failed to comply with the Court‘s Turnover Order, and ultimately withdrew the Proofs of Claim without ever providing supporting evidence. This pattern of conduct demonstrates that the Proofs of Claim were filed as part of a scheme to manufacture standing in this bankruptcy case that the Petitioning Creditors would not otherwise have possessed. As such, the Court finds that the Petitioning Creditors acted in bad faith and abused the bankruptcy process.
The Court further finds that Mitchell acted in bad faith and abused the bankruptcy process by facilitating the Petitioning Creditors’ scheme. Mitchell filed the Proofs of Claims and Motions to Quash on behalf of the Petitioning Creditors and, as an experienced bankruptcy attorney, understood that the baseless Proofs of Claim conferred standing that the Petitioning Creditors would not otherwise possess. When confronted with the potential impropriety, Mitchell filed a frivolous Motion to Quash, failed to comply with the Court‘s Turnover Order, and withdrew the Proofs of Claim without ever producing adequate evidentiary support.
F. The Trustee‘s Attorney‘s Fees Are Reasonable And Directly Resulted From The Petitioning Creditors’ And Mitchell‘s Misconduct
The Trustee‘s counsel submitted a time entry reflecting 44.6 hours of attorney and paralegal time, totaling $29,877.00 in fees. ECF No. 284-18. These fees were incurred in connection with the following matters: (1) reviewing the Petitioning Creditors’ Proofs of Claim (3.40 hours, $2,593.00); (2) filing objections to the motion for continuance of a Bankruptcy Rule 9019 hearing filed by Mitchell and the Petitioning Creditors (2.90 hours, $2,100.50); (3) preparing Bankruptcy Rule 2004 discovery requests (9.30 hours, $4,721.50); (4) reviewing, analyzing, and responding to the Motions to Quash (20.20 hours, $13,466.00); (5) preparing the Motion to Enforce (3.00 hours, $2,385.00); and (6) preparing the Trustee‘s Omnibus Reply in support of sanctions (5.80 hours, $4,611.00). Id.
The Petitioning Creditors’ frivolous Proofs of Claim, filed through Mitchell, necessitated the Trustee‘s counsel‘s review of those claims and the subsequent Bankruptcy Rule 2004 discovery. The frivolous Motions to Quash required the Trustee‘s counsel to expend time responding to and objecting to those motions. The Petitioning Creditors’ and Mitchell‘s failure to comply with the Turnover Order compelled the Trustee to file her Motion to Enforce and to request sanctions. Moreover, absent the Petitioning Creditors’ frivolous Proofs of Claim, they would not have had standing to participate in this proceeding or to be heard on any motion brought related to Bankruptcy Rule 9019. Moreover, the Court finds that the total amount of fees requested, $29,877.00, is reasonable in light of the various motions filed by Mitchell and the Petitioning
As such, the Court finds that the Trustee incurred $29,877.00 of reasonable legal fees as result of Mitchell and the Petitioning Creditors’ bad faith conduct.
IV. CONCLUSION
For the reasons stated herein, the Trustee‘s Motion to Enforce at ECF No. 254 and Supplemental Motion at ECF No. 263 are GRANTED. The Court finds that Mitchell violated
An order consistent with this Memorandum Opinion will be entered on the docket simultaneously herewith.
SIGNED Tuesday, July 14, 2026
Eduardo V. Rodriguez
Chief United States Bankruptcy Judge