In re Letourneau, 09 B 9199.
| Decision Date | 04 February 2010 |
| Docket Number | No. 09 B 9199.,09 B 9199. |
| Citation | 422 B.R. 132 |
| Parties | In re Michael LETOURNEAU, Alleged Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Jeffrey W. Finke, Chicago, IL, for Debtor Michael Letourneau.
Kathryn Gleason, Office of the U.S. Trustee, Chicago, IL, for William T. Neary, United States Trustee.
This matter is before the court for ruling following a hearing on the court's order of June 8, 2009. The June 8 order required alleged debtor Michael Letourneau to show cause why he should not be sanctioned for violating Rule 9011 of the Federal Rules of Bankruptcy Procedure by filing an involuntary bankruptcy case against himself. For the reasons discussed below, Letourneau violated Rule 9011(b)(1), and he will be sanctioned pursuant to Rule 9011(c).
The court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1334(a) and the district court's Internal Operating Procedure 15(a). This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A) and (O). See Baermann v. Ryan (In re Ryan), 411 B.R. 609, 613 (Bankr.N.D.Ill.2009); Troost v. Kitchin (In re Kitchin), 327 B.R. 337, 359 (Bankr. N.D.Ill.2005). The court retains jurisdiction although the case was dismissed on July 13, 2009. Kitchin, 327 B.R. at 359; In re Slaughter, 191 B.R. 135, 139 (Bankr. W.D.Wis.1995).
The following facts are drawn from the court's docket,1 Letourneau's written response to the June 8 order, the transcript of a September 3, 2009, evidentiary hearing, and other proceedings in the case.
On March 19, 2009, an involuntary chapter 7 bankruptcy petition was filed against Michael Letourneau. (Dkt. No. 1). The first page of the petition listed Letourneau's name, what purported to be Letourneau's social security number, and Letourneau's home address in Bannockburn, Illinois. The second page gave the names and addresses of three petitioning creditors: Peter Hoogheem, Emery Moorehead, and Gina Hanusa. According to the petition, Letourneau owed each of these creditors a "partnership debt" in a particular amount. The second page also bore what purported to be the signatures of the petitioning creditors.
Although a summons must be issued to an alleged debtor in an involuntary case, see Fed. R. Bankr.P. 1010(a), the docket showed no summons was issued to Letourneau. Apart from the filing of the petition, in fact, the docket reflected no activity at all in the early days of the case. After almost a month in which essentially nothing happened, the court entered an order setting a status hearing for June 8, 2009, and notifying the petitioning creditors that if they failed to appear the case would be dismissed for want of prosecution. (Dkt. No. 5). A copy of the order was mailed to the petitioning creditors and to Letourneau at the addresses shown on the petition.
Meanwhile, on May 14, 2009, American Chartered Bank filed a motion to modify the stay in order to complete a foreclosure action in Illinois state court in connection with Letourneau's Bannockburn property. (Dkt. No. 9). The motion said that a judgment of foreclosure and sale had been entered in the action the previous September a judicial sale of the property had been held in January 2009, and the sale had been approved that same month, all before the filing of the involuntary bankruptcy case against Letourneau.
None of this was terribly surprising. The surprise came later in the motion (which was granted on May 20). The bank asserted that the bankruptcy court's docket showed Letourneau himself had paid the filing fee for the involuntary case. (Id. at 5, ¶ 15). An inspection of the docket bears out this assertion. The second entry states:
At the June 8 status hearing, neither Letourneau nor the petitioning creditors appeared. Only counsel for the U.S. Trustee was there, along with another lawyer who said that putative creditor Peter Hoogheem had come to him after receiving papers from the case in the mail. According to the lawyer, Hoogheem denied signing the petition against Letourneau.
That same day, the court entered an order stating that alleged debtor Letourneau, not the petitioning creditors, appeared to have filed the involuntary case, because the docket showed Letourneau had paid the filing fee, and the signatures of the creditors may have been forged. The goal of the case therefore seemed to have been to gain the benefit of the automatic stay without filing a voluntary chapter 7 case. Letourneau was ordered to appear on July 8 (later continued to July 13) and show cause why he should not be sanctioned for filing a case for an improper purpose in violation of Rule 9011(b)(1). (Dkt. No. 14).
Shortly before the July 13 hearing date, Letourneau filed a written response to the show cause order through counsel. (Dkt. No. 19). In his response, Letourneau did not deny filing the petition and paying the fee. He said, however, that he had been "a victim of a fraudulent mortgage rescue firm which claimed to be assisting him." (Id. at 1). According to Letourneau, he had received a phone call advising him to call a California firm that could supposedly save his home. Letourneau made the call and was instructed to prepare and record a quitclaim deed transferring an interest in the property to a Qaiser Jehan. Letourneau prepared and recorded the deed. .
After the recording of the deed, the California firm demanded $2,500 in rent from Letourneau, a payment characterized as a charitable donation to a non-profit entity run by Jehan. Letourneau said he could not make the payment. He was told that someone (it is unclear who) would make the payment for him, and he was left with the impression that the debt would somehow be settled later. (Id. at 3).
Letourneau said he was then sent an e-mail telling him to provide the sender with "`three names and addresses of your friends or any body [sic].'" (Id. at 3 and Ex. B). The e-mail said "we will make papers" (meaning the involuntary bankruptcy petition) that would be sent to Letourneau for him to "file over there quickly" (meaning file with the bankruptcy court). (Id.) When Letourneau received the petition, he said, it had already been filled out and signed. He neither prepared nor signed it. He was directed to the bankruptcy court's web site and was told "to file the papers and pay the filing fee." (Id. at 3).
On July 13, the date of the show cause hearing, Letourneau and his lawyer appeared along with counsel for the U.S. Trustee. The court expressed a desire to hear Letourneau's explanation from his own mouth. (Tr. dated July 13, 2009, at 2 10-11). The U.S. Trustee, however, asked to participate in the hearing and requested a continuance to perform additional investigation. (Id. at 2, 6). The hearing was therefore continued to September 3, 2009. At the suggestion of Letourneau's lawyer (id. at 7), the underlying bankruptcy case was dismissed (Dkt. No. 24).
When September 3 arrived, though, Letourneau's lawyer announced at the hearing that the situation had changed. Letourneau had been notified that the Justice Department was conducting a criminal investigation of him in connection with the mortgage fraud matter. (Tr. dated Sept. 3, 2009, at 24). Accordingly, Letourneau (who appeared for the hearing only out of concern that he had been ordered to do so) declined to testify in his own behalf and declined to offer any additional evidence in response to the court's show cause order. (Id. at 24-26). If required to testify, his lawyer said, Letourneau would invoke his Fifth Amendment privilege against self-incrimination. (Id. at 24).
The U.S. Trustee nevertheless called Letourneau as a witness, and as predicted he invoked his Fifth Amendment privilege to every question. Among the questions in response to which Letourneau took the Fifth were questions about whether he filed the involuntary petition, whether he paid the filing fee, whether he owed the petitioning creditors partnership debts, whether he believed any of the petitioning creditors had signed the petition, and whether the petition was filed to delay the foreclosure action on the Bannockburn property. (Id. at 29-31).
The U.S. Trustee also called Peter Hoogheem as a witness. Hoogheem testified that Letourneau had been his neighbor for about fifteen years, but he denied having ever been in business with Letourneau or in a partnership with him. (Id. at 51). Hoogheem added that he had first seen the involuntary petition after the clerk's office served him with a notice in the case, that he had not signed the petition, and that he had not authorized anyone else to sign it for him. (Id. at 51-52). He had no idea who signed his name or when. (Id. at 54).
Letourneau's involuntary bankruptcy case was filed for an improper purpose in violation of Rule 9011(b)(1) of the Bankruptcy Rules. An appropriate sanction will be imposed under Rule 9011(c) for the violation.
Rule 9011 is the bankruptcy analogue of Rule 11 of the Federal Rules of Civil Procedure and indeed is "essentially identical" to Rule 11. In re Collins, 250 B.R. 645, 659 (Bankr.N.D.Ill.2000) (internal quotation omitted). Like Rule 11, Rule 9011 is intended to deter baseless and abusive litigation and litigation tactics. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990); Corley v. Rosewood Care Ctr., Inc., 388 F.3d 990, 1013 (7th Cir.2004); Kitchin, 327 B.R. at 337.2
Under Rule 9011(b), an attorney or unrepresented party who presents "a petition, pleading, written motion, or other paper" to the court, whether by "signing, filing, submitting, or later advocating," makes four certifications to the court. Three are certifications that the legal assertions in the case have a...
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