Berliner v. Kusek (In re Kusek)
Berliner v. Kusek (In re Kusek)
Opinion of the Court
Before us is Lisa Kusek’s appeal from the bankruptcy court’s order denying her motion for sanctions against Thomas Ku-sek’s attorney, L. Jed Berliner. Attorney Berliner, in turn, asks us to sanction Lisa for prosecuting a frivolous appeal.
We conclude that the bankruptcy court acted within its discretion in denying Lisa’s motion for sanctions. We do not accept her protest that the court’s refusal to hear the motion and to enter findings makes remand essential. We also conclude that Attorney Berliner’s motion for sanctions is denied.
BACKGROUND
Thomas filed a petition for relief under Chapter 13 of the Bankruptcy Code.
Thomas asserted that his obligation to Lisa was not a DSO. Thus, he objected to her claim and filed an adversary proceeding to establish its true character and
About six months into the litigation, Thomas sought leave to amend his complaint
Subsequently, Lisa (again) asked the court to sanction Attorney Berliner under Rule 9011,
Shortly thereafter, the dispute went to trial. Providing oral findings of fact and conclusions of law, the court entered judgment for Thomas. Lisa timely appealed. She does not impugn the final judgment, but takes issue only with the court’s denial of her second sanctions motion. And now Attorney Berliner, apparently learning by example, insists that we sanction Lisa for prosecuting a frivolous appeal.
JURISDICTION
We are duty-bound to determine our jurisdiction before we examine the merits, whether or not the parties raise
STANDARD OF REVIEW
Trial court decisions awarding or denying sanctions are reviewed for abuse of discretion. CQ Int’l Co., Inc. v. Rochem Int’l, Inc., USA No. 10-1838, 2011 WL 4537177, at *4 (1st Cir. Oct. 3, 2011). Abuse of discretion exists when a relevant factor deserving of significant weight is overlooked, or when an improper factor is accorded significant weight, or when the court considers the appropriate mix of factors, but commits a palpable error of judgment in calibrating the decisional scales. Ameriquest Mortgage Co. v. Nosek (In re Nosek), 609 F.3d 6, 9 n. 4 (1st Cir. 2010) (citing United States v. Roberts, 978 F.2d 17, 21 (1st Cir. 1992)).
DISCUSSION
Although Lisa asserts that sanctions were in order (and articulates her arguments in favor of their imposition), she maintains that, at minimum, we must remand the matter. She argues that the bankruptcy judge’s failure to articulate the basis for denying her motion deprives us of the opportunity to effect meaningful review of his decision. Attorney Berliner replies that the record is sufficient and, on the merits, the ruling must be sustained. In the end, we side with Attorney Berliner.
I. Rulé 9011 and Its Application
“[T]he bankruptcy courts have discretion to impose sanctions against attorneys or pro se parties who violate [Rule] 9011(b).” Kristan v. Turner (In re Kristan), 395 B.R. 500, 509 (1st Cir. BAP 2008).
“Because Rule 9011 is derived from Fed.R.Civ.P. 11, the First Circuit has explained that Rule 11 jurisprudence is largely transferable to Rule 9011 cases.” White v. Burdick (In re CK Liquidation Corp.), 321 B.R. 355, 362 (1st Cir. BAP 2005) (internal quotations and citation omitted). Both rules “should be used to deter baseless filings.” Featherston v. Goldman (In re D.C. Sullivan Co., Inc.), 843 F.2d 596, 599 (1st Cir. 1988). Rule 9011, like Fed.R.Civ.P. 11, “emphasizes responsible behavior on the part of litigators.” Id. at 598. “Subjective good faith is not the issue; generally, Rule 9011 demands that counsel’s actions comport with an objective standard of lawyerly performance.” Id. at 598-99.
“[T]he trier has broad discretion in deciding whether counsel acted responsibly under the circumstances.” Id. at 599. “[A] court’s determination is accorded ‘extraordinary deference’ when it has decided to deny sanctions.” Lichtenstein v. Consolidated Servs. Group, Inc., 173 F.3d 17, 22 (1st Cir. 1999) (citing Salois v. Dime Sav. Bank of New York, FSB, 128
Although neither the Rule nor case law enumerates an exhaustive list of factors a court should consider in deciding whether to impose sanctions or what type of sanctions to impose, the following is a list of factors that may in a particular case be proper considerations:
whether the improper conduct was willful, or negligent; whether it was part of a pattern of activity, or an isolated event; whether it infected the entire pleading, or only one particular count or defense; whether the person has engaged in similar conduct in other litigation; whether it was intended to injure; what effect it had on the litigation process in time or expense; whether the responsible person is trained in the law; what amount, given the financial resources of the responsible person, is needed to deter that person from repetition in the same case; what amount is needed to deter similar activity by other litigants.
In re CK Liquidation Corp., 321 B.R. at 362 (internal quotations and citations omitted) (emphasis added).
With the pertinent standards in hand, we can examine the decision below to determine whether the order can be sustained or whether the record’s paucity deprives us of the ability to review it. The First Circuit has repeatedly rejected the notion that a judge is duty-bound to make specific findings when it denies a request for sanctions. In re D.C. Sullivan Co., 843 F.2d at 599-600.
[W]e must not lose sight of the fact that [Rule 9011] was intended as a tool to hold lawyers in check and to assist judges in overseeing the proper functioning of the judicial process. This tool, and the sanctions which can be imposed under its authority, are an adjunct to the business of litigation, not the main event. We will not invite full-blown satellite litigation over such issues, nor will we require trial courts to conjure up a welter of paperwork every time a sanctions motion is filed.
Id. “We have never required more than that the court’s rationale be apparent from the face of the record and supported by the facts.” CQ Int’l Co., Inc., 659 F.3d at 63 (citing Lichtenstein, 173 F.3d at 24; Anderson, 105 F.3d at 769).
Here, the record before us, sparse as it is, provides sufficient rodder lor review. When he denied the motion, the judge had before him Thomas’s complaint and motion to amend his complaint; Lisa’s pleadings and her two motions for sanctions; and his recollection and record of the hearing addressing the motion to amend. That was not all, however. The judge had been aboard for the entire travel of the case, including the parties’ earlier crossing of swords.
We echo the court of appeals’ observation in a recent case: “If anything emerges clearly from this querulous record, it is that the caterwauling was roughly equal on both sides of the fence.” In re D.C. Sullivan Co., Inc., 843 F.2d at 600. Here, the bankruptcy court exercised its discretion after observing the parties, their demean- or, conduct, and filings over an approximate seven-month period. The naked record reveals a clear basis for denying a request for sanctions. In such circumstances, we expect and require no more.
II. The Frivolous Appeal Motion
Rule 8020 “permits a district court to award just damages and single or double costs to the appellee if it determines that an appeal from a Bankruptcy Court decision is frivolous.”
Like Rule 9011, Rule 8020 is far from a strict liability model. More than just a losing argument is necessary to support a conclusion that an appeal is frivolous. 20 C.J.S. Costs § 214 (2011). Sanctions may be imposed where the argument on appeal is “patently meritless under First Circuit law.” Great Road Serv. Ctr., 304 B.R. at 552; see also Pettey v. Belanger, 232 B.R. at 548 (“no legitimate basis”); Seraphin v. Morris Publ’g Group, LLC (In re Morris Publ’g Group, LLC), Nos. 10-10134, CV 110-056, 2011 WL 1167180,
Lisa’s most substantial complaint on appeal centers on the bankruptcy court’s failure to set out findings and conclusions anent its denial of her sanctions motion. We conclude that her appeal, though unsuccessful, focused on what could have been, and in some cases has been declared to be, a shortcoming that would lead, if nothing else, to remand. See, e.g., Anderson, supra. This leads us to conclude that Lisa’s appeal, though insubstantial, was not patently meritless. Thus, Attorney Berliner’s motion for sanctions on appeal is denied.
CONCLUSION
Enough is enough. The bankruptcy court’s denial of Lisa’s Rule 9011 motion is AFFIRMED. Attorney Berliner’s motion for sanctions on appeal is DENIED.
. All references to the "Code” or the "Bankruptcy Code” are to the Bankruptcy Code of 1978, as amended, 11 U.S.C. § 101, et seq. Unless otherwise indicated, all references to statutory sections are to sections of the Code. Unless expressly stated otherwise, all references to "Rule” or "Bankruptcy Rule” shall be to the Federal Rules of Bankruptcy Procedure.
. The term "domestic support obligation” means a debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable non-bankruptcy law notwithstanding any other provision of this title, that is—
(A) owed to or recoverable by—
(i) a spouse, former spouse, or child of the debtor or such child's parent, legal guardian, or responsible relative; or
(ii) a governmental unit;
(B) in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child's parent, without regard to whether such debt is expressly so designated;
(C) established or subject to establishment before, on, or after the date of the order for relief in a case under this title, by reason of applicable provisions of—
(i) a separation agreement, divorce decree, or property settlement agreement;
(ii) an order of a court of record; or
(iii) a determination made in accordance with applicable nonbankruptcy law by a governmental unit; and
(D)not assigned to a nongovernmental entity, unless that obligation is assigned voluntarily by the spouse, former spouse, child of the debtor, or such child’s parent, legal guardian, or responsible relative for the purpose of collecting the debt.
11 U.S.C. § 101(14A).
.A DSO is entitled to first priority in the hierarchy of unsecured claims. § 507(a)(1). DSO claims must be provided for without discount in a Chapter 13 plan, § 1322(a), and the plan will not be confirmed unless the debtor demonstrates that he or she is current on all DSO payments that have come due since bankruptcy was filed. In addition, a debtor will not receive a Chapter 13 discharge — of any debts — without certification that all DSO obligations, those treated in the plan as well as those that have come due since confirmation, have been fully paid. § 1328(a). Moreover, the Chapter 13 discharge does not relieve the debtor of liability for a DSO. §§ 523(a)(5), 1328(a)(2).
. Fed. R. Bankr.P. 7015; Fed.R.Civ.P. 15(a).
. Lisa’s opposition to the motion stated myriad grounds, ranging from estoppel and non-justiciability to the assertion that Thomas’s proposed contractually-based counterclaim was, in the bankruptcy context, without support in the law. The court agreed with the last point, finding the proposed count “not legally cognizable.” Appendix at 6.
. Pursuant to Rule 9011, pleadings presented to the court represent a certification that, after reasonable inquiry "to the best of the person’s knowledge, information, and belief”:
(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;
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have eviden-tiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.
Rule 9011(b).
. Appendix at 79, 81.
. See Fed. R. Bankr.P. 9011, supra n. 6.
. The documents evidencing the case history are not part of the formal record on appeal, but we may take judicial notice of the trial court's docket. Aja v. Fitzgerald (In re Aja), 441 B.R. 173, 179 n. 6 (1st Cir. BAP 2011).
. "[T]he bankruptcy judge is in the best position to gauge the interplay of factors and make delicate judgment anent fee awards.” Hermosilla v. Hermosilla, 447 B.R. 661, 671 n. 9 (D.Mass. 2011) (citing Great Road Serv.
. Rule 8020 became effective April 11, 1997, and is materially identical to Fed. R.App. P. 38. Pettey v. Belanger, 232 B.R. 543, 548 n. 6 (Bankr.D.Mass. 1999). Courts therefore turn to case law relating to Rule 38 for guidance. Id.
Reference
- Full Case Name
- Thomas Eugene KUSEK, a/k/a Tom Kusek, a/k/a Thomas E. Kusek, Debtor. L. Jed Berliner, Esq. v. Lisa A. Kusek
- Cited By
- 4 cases
- Status
- Published