In re Johnson
| Decision Date | 20 July 1999 |
| Docket Number | No. Civ.A. 98-1188. Bankruptcy No. 97-1709.,Civ.A. 98-1188. Bankruptcy No. 97-1709. |
| Citation | 236 BR 510 |
| Parties | In re Ford T. JOHNSON, Debtor. Ford T. Johnson, Jr., Appellant, v. W. Clarkson McDow, Jr., et al., Appellees. |
| Court | U.S. District Court — District of Columbia |
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Ernest P. Francis, Arlington, VA, for plaintiff.
Wilma A. Lewis, United States Attorney, Washington, DC, Daria J. Zane, Assistant U.S. Attorney, Washington, DC, for defendant.
This Chapter 7 Bankruptcy matter comes before the court on Debtor Ford T. Johnson's appeal of an April 6, 1998 Order denying his Motion to Alter or Amend Order Denying Rule 9011 Sanctions ("Motion to Alter or Amend"). This is an appeal which now follows final judgment in a bankruptcy case, and this court has jurisdiction to entertain this appeal pursuant to 28 U.S.C. § 158(a).
The question before this court on appeal is whether the Bankruptcy Court abused its discretion in denying Debtor's Motion to Alter or Amend. Because the evidence in the record shows that the Debtor's Motion for Sanctions was, on its face, plainly frivolous and counterproductive, the Bankruptcy Court did not abuse its discretion. Furthermore, the independent finding that this particular Motion to Alter or Amend is frivolous can only be bolstered by a review of the entire appeal record. The record of this case makes only too clear that Debtor's counsel was willing to spend his own resources as well as the Trustee's resources and the court's resources litigating the minutia of allegations that were, are, and will always be irrelevant.
Ford T. Johnson ("Debtor") filed a petition under Chapter 11 of the United States Bankruptcy Code on February 6, 1996. The petition was filed in the United States Bankruptcy Court for the District of Maryland. For months following the filing of the case, the debtor failed to file a proposed disclosure statement or plan. Due to the inactivity in the case, the attorney responsible for the case in the Office of the United States Trustee ("Trustee") sent a routine letter to the Debtor's counsel with a copy of the letter going to the Debtor. It is undisputed that the letter outlined the deficiency, requested a response, and detailed the possibility that the Trustee might file a Motion to Convert or Dismiss. Shortly thereafter, on June 24, 1996, the Trustee's office received a phone call from the Debtor in which the Debtor informed the Trustee that he was seeking new counsel. Granting the Debtor's request, the Trustee agreed to forebear filing a motion to convert or dismiss for two more weeks and asked the Debtor to have his new attorney, Ernest P. Francis, call the Trustee. It is undisputed that on July 10, 1996, Mr. Francis counsel for Debtor contacted the Trustee and said that he would call again on July 16, 1996, after he could review the file. Further, it is undisputed that counsel for the Debtor did not contact the Trustee on July 16th as Mr. Francis claimed he would do. Another six weeks passed. On August 30, 1996, the Trustee filed the United States Trustee's Motion to Convert or Dismiss ("Motion to Dismiss").
On September 11, 1996, Mr. Francis contacted the Trustee's office and threatened to petition the court for Rule 9011 sanctions if the Trustee did not withdraw his Motion to Dismiss. On that same day the Trustee responded with a letter that stated that these motions were of a routine nature and that, given the delay, creditors may be prejudiced. The Trustee in his September 11, 1996 letter mentioned that the matter could easily be handled by a consent order in which a definite date could be set for the filing of the disclosure statement and plan.
The Debtor, and his counsel, elected not to cooperate in a consent order and instead opted to wage a "Titanic" litigation battle. The Debtor filed an opposition to the Trustee's Motion to Dismiss. After a hearing in which the court denied the Trustee's Motion to Dismiss conditioned on the Debtor filing a disclosure statement and plan within sixty days, the Debtor filed a motion to alter or amend the judgment on the grounds that the judgment violated due process. The court denied the Debtor's motion to alter or amend judgment. Following that, the Debtor filed a motion for sanctions, which was denied. The Debtor then appealed the denial of the motion for sanctions.
On appeal, the United States District Court for the District of Maryland stated that the appeal was clearly frivolous and that the Trustee was justified in filing a motion to dismiss or to convert after the Debtor's long delay. The transcript from the February 9, 1997 hearing scolds counsel for the Debtor.
During the time period between the Trustee's Motion to Dismiss and the Debtor's Motion for Sanctions, the Debtor filed a Motion Against U.S. Trustee Regarding Accusations on Possible Conflicts of Interests. This new battle was created following a conversation which occurred after an October, 1996 hearing between the Trustee and Mr. Francis. During this conversation a member of the Trustee's office told Mr. Francis of public record documents filed in another bankruptcy case that could potentially show a conflict of interest on the part of Mr. Francis. Two months after the conversation in which the possibility of conflict of interest was brought to his attention, Mr. Francis filed a Motion Against U.S. Trustee Regarding Accusations on Possible Conflict of Interest. The Trustee filed an opposition. The motion was denied.
The 9011 sanction motion currently before the Court stems from the Trustee's objections to the Debtor's application for award of interim compensation filed June 9, 1997. See R. 4. On July 1, 1997, the Trustee objected to five parts of the application numbered here (1) through (5):
(1) Opposition to the Department of Justice Motion for
Appointment of a trustee or Examiner in the Koba
Associates Chapter 11 case; 21.4 hours
(2) Preparation of Disclosure Statement and Plan
19.1 hours
(3) Responding to the Motion of the United States Trustee
And other accusations by the Trustee; 22.8 hours
(4) Preparation of Rule 11 Motion against United States Trustee
1.5 hours
(5) Opposition to the fee application of previous counsel
31.4 hours
The Trustee objected to part one on the grounds that the 21.4 hours were performed for a separate affiliate of the Debtor and provided "little, if any, apparent benefit to the estate of this Debtor-in-possession." The objection to part two was based on the lack of results of the 19.1 hours of time spent in preparation of the Disclosure statement and Plan. The Trustee stated that "the disclosure statement prepared and filed by applicant on January 6, 1997 did not provide adequate information as required by the Bankruptcy Code" and that the Court had denied approval of the plan. The Trustee objected to part three on the basis that the services did not provide any benefit to the estate. The Trustee went further, stating that the September 11, 1996 letter made the expenditure of these services pointless as the letter "outlines the process normally followed in this District which minimizes expense to an estate while prodding the case to a resolution." The Trustee's objection to part four was based on the Trustee's belief that the first Rule 9011 motion prepared by the Debtor did nothing more than delay and add to the "burden of the Court's docket." Finally, the expenditure of 31.4 hours of time spent under part five on opposing the fee application did not benefit the estate and "such an effort for such a small sum is out of proportion in this case where the Debtor's principal asset is his residence which has been appraised at approximately $2,000,000.00." The Trustee calculated the actual fee savings as a result of the Debtor's opposition to only $1,065.30 after subtracting the time spent attempting to deny former counsel's fee applications.
The Debtor's response to the Trustee's objection, among other arguments supporting the fee application, raised issues pertaining to the Trustee's credibility and integrity. The following was used by the Bankruptcy Court in its decision denying Debtor's motion for sanctions:
The Debtor\'s response alleged that the United States Trustee\'s attorney is a "Liar and one who has blatantly discriminated against this Debtor" (p. 1); that he "lied to Debtor\'s Counsel in July 1996" (p. 1); that he "told a bold-faced lie to this Court on at least one previous occasion" (p. 1); that he was using the objection to fees "as a soapbox to defend himself and his fellow miscreants at the Department of Justice from Debtor\'s allegations of misconduct on their part" (p. 5); that he "conveniently overlooks his own conflicts of interests in objecting to the current fee application" (p. 2); that the objection reflects "the unholy alliance between the United States Trustee and Mr. Grossman; the United States Trustee overlooked Mr. Grossman\'s unethical behavior behavior because Mr. Grossman was attacking Debtor and his counsel" (p. 3); that "the only inadequate disclosure that has occurred in this case is that of which the United States Trustee is guilty" (pp. 3-4); and that "the failure of a liar to cite pertinent authority is...
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