In re Steward, 070716 FED8, 15-1857

Docket Nº:15-1857, 15-1988
Opinion Judge:KELLY, Circuit Judge.
Party Name:In re: LaToya L. Steward Debtor v. LaToya L. Steward, Debtor Appellee James C. Robinson Critique Services, LLC Appellant Elbert A. Walton, Jr.; Debra Lynne Wilson E. Rebecca Case U.S. Trustee In re: LaToya L. Steward Debtor James C. Robinson Appellant Critique Services, LLC Elbert A. Walton, Jr. Appellant Debra Lynne Wilson v. LaToya L. Steward...
Judge Panel:Before LOKEN, GRUENDER, and KELLY, Circuit Judges.
Case Date:July 07, 2016
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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In re: LaToya L. Steward Debtor

James C. Robinson Critique Services, LLC Appellant

Elbert A. Walton, Jr.; Debra Lynne Wilson

v.

LaToya L. Steward, Debtor Appellee

E. Rebecca Case U.S. Trustee

In re: LaToya L. Steward Debtor

James C. Robinson Appellant

Critique Services, LLC Elbert A. Walton, Jr. Appellant

Debra Lynne Wilson

v.

LaToya L. Steward, Debtor Appellee

E. Rebecca Case U.S. Trustee

Nos. 15-1857, 15-1988

United States Court of Appeals, Eighth Circuit

July 7, 2016

Submitted: January 12, 2016

Appeals from United States District Court for the Eastern District of Missouri - St. Louis

Before LOKEN, GRUENDER, and KELLY, Circuit Judges.

KELLY, Circuit Judge.

Attorney James Robinson, Attorney Elbert Walton, and Critique Services, LLC, appeal from the judgment of the district court1 affirming the judgment of the bankruptcy court2 on LaToya Steward's motion to disgorge attorney's fees. Upon careful review of all issues raised, we affirm.

I. Background

The issues in this case arose out of an extensive and chaotic procedural history, recounted here in the necessary detail. LaToya Steward filed a petition for Chapter 7 bankruptcy on June 17, 2011. She was represented by James C. Robinson, d/b/a Critique Services, LLC. Steward received a discharge on November 21, 2011, but before the discharge she reaffirmed a debt of $10, 966.60 to Ford Motor Credit Company. Steward sought to rescind the reaffirmation agreement, but Robinson apparently abandoned his representation and did not assist her in doing so. On November 16, 2012, Steward filed a pro se motion to reopen her bankruptcy proceedings in order to discharge her debt to Ford. On December 4, 2012, Steward filed an adversary complaint against Ford, in which she asserted that Robinson's poor representation had caused her to miss the deadline to rescind the reaffirmation agreement. At a hearing on this complaint, the bankruptcy court advised Steward that she should amend her complaint, and on April 5, 2013, Steward filed an amended complaint against Robinson and Critique Services. On April 8, 2013, the bankruptcy court entered an order deeming Steward's complaint to be a motion to disgorge attorney's fees based on Robinson's inadequate representation, and set a hearing for May 8, 2013. On May 7, 2013, Elbert Walton entered his appearance on behalf of Robinson, d/b/a Critique Services, 3 and filed an untimely response to Steward's motion.

The hearing was eventually reset as a status conference for September 18, 2013. As the case progressed in advance of the September 18 hearing, the parties-Steward now represented by counsel-had extensive discovery disputes. Robinson moved to quash Steward's requests for discovery, and the bankruptcy court denied the motion as frivolous. Status conferences on the discovery issues were held on August 14, September 4, and September 11. Steward was eventually forced to file a motion to compel. After the September 18 status conference, the bankruptcy court noted Robinson's "willful noncompliance" with his discovery obligations, 4 granted Steward's motion to compel, ordered Robinson to pay the attorney's fees incurred in litigating the motion to compel, and warned both Robinson and Walton that further obfuscation would be met with sanctions. The court also ordered Robinson to provide information about his affiliation with Critique Services (i.e., whether Critique Services had a corporate identity independent of Robinson or whether it was simply Robinson's corporate alter ego).

In the days following the September 18 status conference, Robinson filed multiple motions, including a motion to recuse the bankruptcy judge, a motion for judgment on the pleadings, a motion to set aside the order granting Steward's motion to compel, a motion for a protective order, and a motion to dismiss for lack of subject matter jurisdiction. The bankruptcy court denied all of Robinson's motions. At a status conference on October 1, 2013, the court determined that Robinson had not complied with the order compelling discovery and that he had no intention of doing so. On October 2, the bankruptcy court entered an order imposing sanctions on Robinson, which began to accrue on October 9, 2013. Consistent with the court's advisory to the parties at the September 18 status conference, the court sanctioned Robinson $1000 for each subsequent day of non-compliance with his discovery obligations.

On November 13, 2013, the bankruptcy court entered a second order on sanctions. The court ended the accrual of the daily monetary sanction, ordered payment of the accrued sanctions, and found Robinson in contempt of court pursuant to Fed.R.Civ.P. 37(b)(2)(A)(vii). Robinson attempted to appeal, characterizing the bankruptcy court's order as a final order for criminal sanctions, so the bankruptcy court entered a clarifying notice on December 2, 2013. The court stated that Robinson could purge the sanctions by complying with the order compelling discovery and participating appropriately in the discovery process.

Early in 2014, the parties engaged in settlement negotiations. However, on March 22, 2014, Steward notified the court that attempts to settle the case had failed. On April 3, the bankruptcy court entered a notice advising Robinson that the discovery deadline was April 11, 2014, and that if Robinson did not meet his discovery obligations by that date the court would impose further sanctions. The court also advised Walton that it was considering imposing sanctions against him, for facilitating Robinson's obstreperous behavior and participating in such behavior himself, and set a deadline for him to file a brief on the matter. On April 10, Walton filed a motion to withdraw and Robinson filed a notice of dismissal of counsel. The bankruptcy court did not allow Walton to end his representation of Robinson, believing this to be an attempt to delay the case and avoid consequences for their joint ongoing refusal to comply with the court's orders.

Also on April 10, 2014, Steward filed a motion for approval of a settlement agreement. Steward also filed a notice stating that she believed she could no longer accept discovery from Robinson, given their settlement. On April 11, the bankruptcy court ordered Steward to accept discovery should Robinson attempt to provide it, on the basis that providing such discovery would allow Robinson to purge the sanctions he had accrued. That same day, Robinson filed a second motion to recuse the bankruptcy judge. Walton also filed a motion to substitute counsel based on an alleged conflict of interest with Critique Services. The bankruptcy court denied both motions on April 14, 2014.

Walton then sued the bankruptcy judge in his personal capacity, raising various claims of tortious interference. The suit was dismissed. On April 21, 2014, the bankruptcy court entered a notice directed to both Robinson and Walton, advising them that the court intended to impose sanctions based on false statements made over the course of the litigation and giving them an opportunity to respond. On April 22, Walton filed a third motion to recuse the bankruptcy judge on behalf of both Robinson and himself. The bankruptcy court denied that motion on April 23. Finally, on April 28, 2014, the bankruptcy court denied Steward's motion for approval of the settlement without prejudice, based on the fact that such a motion must be filed by the Chapter 7 Trustee rather than by the debtor. The Trustee did not refile the motion for settlement approval.

On June 10, 2014, the bankruptcy court entered judgment in favor of Steward. The court found Robinson in contempt, struck Robinson's claims and defenses, made final $30, 000 in accrued monetary sanctions, ordered that Walton be jointly and severally liable for the $30, 000 in sanctions, and imposed additional sanctions on Robinson and Walton in the amount of $19, 720 for attorney's fees incurred by Steward's counsel in litigating discovery. The court also sanctioned Robinson and Walton for making false statements to the court by suspending them from practice before the United States Bankruptcy Court for the Eastern District of Missouri, and ordered that Robinson and Walton's actions be referred to the U.S. District Court for the Eastern District of Missouri, the Office of the U.S. Trustee, and the Office of Chief Disciplinary Counsel of the Missouri Supreme Court for any appropriate investigation and disciplinary action. Finally, the court awarded Steward a refund of the $495 in fees she paid to Robinson, but denied relief as to damages related to the reaffirmation of Steward's debt to Ford.

Robinson, Walton, and Critique Services (now...

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