In re Crowe
| Decision Date | 03 December 1999 |
| Docket Number | BAP No. NV-98-1728-RMaMe. Bankruptcy No. 98-20151-RCJ. Adversary No. 98-2129-RCJ. |
| Parties | In re Cheryl A. CROWE, Debtor. Jack Ferm, Appellant, v. United States Trustee, Appellee. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Ninth Circuit |
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Jack Ferm, Las Vegas, NV, Pro se Appellant.
Barry H. Jenkins, Office of the United States Trustee, Las Vegas, NV, for the U.S. Trustee, Appellees.
Before: RUSSELL, MARLAR, and MEYERS, Bankruptcy Judges.
The United States Trustee filed an adversary proceeding against the appellant, a bankruptcy petition preparer, after he failed to comply with orders requiring him to disgorge fees and pay fines. The Trustee's complaint sought injunctive relief pursuant to 11 U.S.C. § 110,1 which authorizes penalties for persons who negligently or fraudulently prepare bankruptcy petitions. Appellant did not file an answer and the Trustee moved for default judgment. The bankruptcy court entered judgment against appellant, enjoining him from acting as a bankruptcy petition preparer. This appeal followed. We AFFIRM.
The appellant, Jack Ferm, is a bankruptcy petition preparer in Las Vegas. Early in 1998, the debtor, Cheryl A. Crowe, engaged Ferm to handle her bankruptcy case, paying him $320 for his services. Crowe's chapter 13 petition and schedules were filed on January 8, 1998.
On February 26, 1998, the United States Trustee filed a motion for an order directing the disgorgement of fees paid to Ferm that exceeded the value of services rendered. The motion also requested an order directing Ferm to comply with the guidelines for petition preparers in the District of Nevada. While these guidelines, which became effective June 1, 1997, do not set fees, they prohibit a petition preparer from charging more than $150 for a chapter 7 case or $200 for a chapter 11, 12, or 13 case.
Ferm filed no response to the motion and failed to appear at the March 31, 1998 hearing. On April 13, 1998, Judge Robert Clive Jones entered an order (the "Crowe order") that directed Ferm to return to the debtor, within thirty days, the sum of $320, the entire fee charged by Ferm. The order also fined Ferm in the amount of $1,500, also due within thirty days. The court assessed $500 for failing to provide a copy of the repayment plan to the debtor, as required by § 110(d)(1). Additionally, Ferm's collection of the filing fee violated § 110(g)(1)'s ban on such conduct and drew a fine of $500. Finally, because a person other than the debtor signed her "Amendment to Bankruptcy Petition," the court levied a $500 penalty for violation of § 110(e)(1), which prohibits a petition preparer from executing a document on a debtor's behalf.
The hearing also resulted in orders requiring disgorgement and imposing fines on Ferm in connection with two other bankruptcy cases he had handled. Ferm neither appealed these orders nor the Crowe order. After he failed to comply with all three mandates, the U.S. Trustee filed a complaint (at issue in this appeal) for injunctive relief, pursuant to § 110(j).2 The May 27, 1998 complaint sought to permanently enjoin Ferm from acting as a bankruptcy petition preparer in the District of Nevada. It also sought to require Ferm to comply with the aforementioned orders. Among the complaint's allegations was that Ferm had violated various provisions of § 110 in other cases.
Ferm neither filed an answer nor appeared at the scheduling conference held on June 29, 1998. He did, however, file a motion for recusal and disqualification of judges. In this motion, Ferm sought the disqualification of all California and Nevada Bankruptcy Judges, alleging that they were "known by all and are a part of an interstate conspiracy by and between California and Nevada." Ferm also filed a Special Appearance to Object to the Jurisdiction of the Bankruptcy Court. He did not attend the hearing on either of these matters. The recusal motion was denied and the objection to jurisdiction was overruled.
The U.S. Trustee moved for default judgment on July 23, 1998, and later moved for summary judgment as an alternative. Ferm opposed both motions, alleging, inter alia, that bankruptcy judges and attorneys were attempting to monopolize the Bankruptcy Court solely for attorneys and to maintain their excessive fees. He made no appearance at the August 25, 1998, hearing and the court granted the trustee's motion for default judgment. On September 30, 1998, the court entered judgment permanently enjoining Ferm from serving as a petition preparer. Ferm timely appealed.
A. Whether the Crowe order was final and valid.
B. Whether the bankruptcy court had personal and subject matter jurisdiction in the U.S. Trustee's adversary proceeding.
C. Whether the bankruptcy court's order permanently enjoining Ferm from acting as a bankruptcy petition preparer violated his constitutional rights.
D. Whether the bankruptcy court abused its discretion by entering default judgment in favor of the U.S. Trustee.
We review de novo the bankruptcy court's acceptance of jurisdiction. See In re ACI-HDT Supply Co., 205 B.R. 231, 234 (9th Cir. BAP 1997) (citing In re Harris Pine Mills, 44 F.3d 1431, 1434 (9th Cir.1995); In re Castlerock Properties, 781 F.2d 159, 161 (9th Cir.1986)). We will uphold the granting of a default judgment unless there was an abuse of discretion. See In re Black, 222 B.R. 896 (9th Cir. BAP 1998) (citing Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1391-92 (9th Cir.1988), cert. denied, 493 U.S. 858, 110 S.Ct. 168, 107 L.Ed.2d 124 (1989)). Under the abuse of discretion standard, the Panel "must have a `definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached,' before reversal is proper." In re Tong Seae (U.S.A.), Inc., 81 B.R. 593, 597 (9th Cir. BAP 1988) (quoting Mission Indians v. American Management, 824 F.2d 710, 724 (9th Cir.1987)).
A. Validity of the Crowe Order
It is first necessary to briefly address the validity of the Crowe order, entered on April 13, 1998. Ferm attacks this order as invalid. We disagree.
On March 31, 1998, the bankruptcy court held a hearing on the U.S. Trustee's motion for an order directing the disgorgement of fees charged by Ferm for his services in Crowe's bankruptcy case. The resulting order required Ferm to return his entire fee of $320 to Crowe and pay $1,500 in fines for various violations of § 110. By his own admission, Ferm chose to ignore the order. His brief states: Appellant's Opening Brief, p. 4.
The validity of the order can hardly be questioned. Section 110 permits a bankruptcy court to do exactly what the court did-require disgorgement and levy fines of not more than $500 per violation for failing to provide a copy of the repayment plan to the debtor, for collecting a filing fee from a debtor, and for executing a document on a debtor's behalf.
Ferm's pleadings show disrespect for the court.3 Treating a final and valid order as a "nullity" is frivolous. He had ample opportunity to challenge its factual basis, but failed to do so. His ill-fated attempt to reopen the matter must be rejected.
B. Jurisdiction of the Bankruptcy Court
Ferm argues that the court lacked the power to impose sanctions in the U.S. Trustee's adversary proceeding. He also contends that the court was without personal jurisdiction. We disagree.
The United States District Court for the District of Nevada has issued Special Order 100,4 which states in part that "when a non-lawyer petition preparer is alleged to be in violation of 11 U.S.C. § 110(b) through (g), the Bankruptcy Court shall find the facts and impose the fines set forth in those provisions." Special Order No. 100, United States District Court, District of Nevada ("Special Order No. 100"), § (a)(1). The order further provides that "an action seeking an injunction under 11 U.S.C. § 110(j) shall be commenced in the Bankruptcy Court" and that "the Bankruptcy Court shall find the facts and order an injunction." Special Order No. 100, §§ (b)(1) and (b)(2). The U.S. Trustee's complaint alleged violations of § 110 and sought injunctive relief under § 110.
Ferm challenges the court's power to impose sanctions on the ground that the court used § 110(j) as a vehicle to circumvent the holding in Sequoia Auto Brokers, Ltd., Inc. v. Idell, 827 F.2d 1281 (9th Cir. 1987). In Sequoia, the court addressed the question whether a bankruptcy judge has jurisdiction to issue a civil contempt order. Sequoia Auto Brokers, 827 F.2d at 1283. It held that a bankruptcy judge lacks contempt jurisdiction because no inherent or statutory authority granted it. Id. at 1290-91.
Ferm's analogy to Sequoia is ill-advised because, as was recognized by the court in In re Rainbow Magazine, Inc., 77 F.3d 278 (9th Cir.1996), two significant changes have occurred since the decision in Sequoia. First, in 1987, Congress reformed Bankruptcy Rule 9020 to read:
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