In re Volpert
| Decision Date | 18 January 1995 |
| Docket Number | Bankruptcy No. 93 B 13982. Adv. No. 93 A 01705. |
| Citation | 177 BR 81 |
| Parties | In re Thomas R. VOLPERT, Jr., Debtor. John VOLPERT, Sr., Plaintiff, v. Bernard ELLIS, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Brodsky and Hoxha, Chicago, IL, for plaintiff.
FINDINGS OF FACT AND CONCLUSIONS OF LAW ON MOTION FOR SANCTIONS UNDER 28 U.S.C. § 1927
The instant Adversary Complaint relates to the bankruptcy proceeding of Thomas R. Volpert, Jr. ("Debtor"), filed under Chapter 7 of 11 U.S.C. § 101, et seq. (the "Bankruptcy Code"). Plaintiff John Volpert, Sr. ("Plaintiff") filed this Adversary against Debtor seeking to bar dischargeability of certain debts under 11 U.S.C. § 523(a) and to bar Debtor's discharge under 11 U.S.C. § 727(a).
The instant Motion by Plaintiff seeks sanctions against Debtor's counsel Bernard Ellis ("Ellis") under 28 U.S.C. § 1927 for multiplying proceedings in this Adversary "unreasonably and vexatiously" ("Motion"). Basically, this Motion relates to Ellis's resistance to orders to answer Counts 4, 5, and 7 of the Adversary Complaint. For reasons stated herein, the Motion is allowed and sanctions are imposed in the amount of $1,000.00.
The following appears from the record and the evidentiary hearing held on the Motion:
On June 30, 1993, Debtor Thomas R. Volpert, Jr. filed his petition for relief under Chapter 7 of the Bankruptcy Code. Debtor thereafter retained attorney Bernard Ellis to represent him in matters relating to the pending bankruptcy case. Ellis is an attorney admitted to the practice of law in the State of Illinois and in the United States District Court for the Northern District of Illinois.
On December 29, 1993, Plaintiff filed this Adversary Complaint. He asserted therein that certain debts allegedly owed him by Debtor should be deemed non-dischargeable under § 523(a) of the Bankruptcy Code and that Debtor should be denied a discharge under § 727(a). Debtor was served with summons and Adversary Complaint on December 30, 1993, and was thereby required to file an appearance and answer on or before January 29, 1994. A status hearing was held in this Adversary on February 2, 1994. Debtor had not answered or otherwise pleaded to Plaintiff's Complaint by that date. Ellis appeared at that hearing on Debtor's behalf and this Court allowed him to file an answer within fourteen days, by February 15, 1994.
As of April 14, 1994, Ellis had still not yet filed his appearance or answered the Complaint. Accordingly, that day Plaintiff filed a Motion for Order of Default. That Motion was set April 21, 1994, for hearing. On that date, Ellis appeared on Debtor's behalf. Hearing on the Motion for Default was again continued until May 11, 1994, to give Ellis an opportunity to prepare pleadings.
Ellis then filed a motion to dismiss all counts of the Complaint for Plaintiff's lack of standing. Alternatively, the same motion sought dismissal of Counts 1, 2, 3, and 6 on various other grounds. There were no alternative grounds asserted for dismissal of Counts 4, 5, and 7. On May 2, 1994, the Motion to Dismiss for Lack of Standing was considered and denied for reasons stated from the bench. Other grounds were asserted as to Counts 1, 2, 3, and 6, and Ellis was ordered to answer Counts 4, 5, and 7 within seven days. Instead, on May 11, 1994 (the date set for hearing on Plaintiff's motion for default), he moved for reconsideration of his Motion to Dismiss the entire Complaint for lack of standing. That Motion for reconsideration was heard and denied on May 11, for reasons stated from the bench. Debtor-Defendant was then ordered once again to answer Counts 4, 5, and 7 of the Complaint within seven days, and Ellis was expressly warned that failure to so answer would constitute grounds for an entry of default on those counts. Ellis repeatedly assured this Court he would file the requested answer within seven days, by May 18, 1994. Since conduct of both counsel was less than laudable at that hearing, they were both cautioned that formal proceedings might result from any repetition of their lack of civility.
Despite his express promise to do so, and the repeated orders to do so, Ellis failed to file an answer to Counts 4, 5, and 7 of the Complaint by May 18. Instead, on May 19, 1994, Ellis filed a Motion to Dismiss those counts individually. In the alternative, he moved this Court to require more definite statements as to each. A hearing was scheduled on that Motion for May 25, 1994.
On May 25, this Court denied Debtor's then pending Motion to Dismiss Counts 4, 5, and 7, for reasons stated from the bench. Plaintiff was given fourteen days to file a more definite statement as to those counts, and Debtor was yet again ordered to answer Counts 4, 5, and 7 of Plaintiff's Complaint by a date after the more definite statement was to be filed.
On June 22, 1994, almost five months from the date an answer was originally due, and after the foregoing history of events, Ellis finally filed Debtor's Answer to Counts 4, 5, and 7. The purported answer was legally insufficient, however, in that Debtor failed to admit, deny, or otherwise state, as required by Fed.R.Civ.P. 8 (Fed.R.Bankr.P. 7008), that an admission or denial could not be made, with respect to the most critical allegations in the Complaint. The important matters alleged were thereby avoided in this purported "Answer." In response, Plaintiff filed a Motion to Strike Debtor's Answer in its entirety. On July 1, 1994, this Court heard that Motion to Strike and allowed it, for reasons stated from the bench. An Order of Default was thereupon entered on Plaintiff's pending Motion against Debtor-Defendant as to Counts 4, 5, and 7. That order was entered due to repeated failure of Defendant to comply with express court orders to answer these Counts and the fact that those counts were then in default.
On July 11, 1994, Ellis moved to vacate the Default Order and to grant to Debtor leave to file a First Amended Answer to Counts 4, 5, and 7. Ellis failed, however, to serve Plaintiff's counsel with a copy of the proposed Amended Answer. This was the second time he had failed to serve his opponent in advance of a hearing, although they officed in the same building. For his failure to notice Plaintiff's counsel properly, this Motion was denied.
On July 15, 1994, Debtor moved this Court to reconsider the earlier Motion to Vacate Default and for Leave to File a First Amended Answer to Counts 4, 5, and 7. Ellis again failed, however, to serve Plaintiff's counsel with a copy of the proposed Answer. By this point, it certainly appeared that Ellis was withholding proper notice from his opponent either through gross indifference or a desire to "play hard ball." On July 25, 1994, when this latest Motion was presented, Defendant was given until July 27, 1994, to tender a proposed Amended Answer on proper notice to Plaintiff's counsel, and the new Motion was set for hearing on July 28.
On July 28, 1994, this Court conducted a hearing on Debtor's pending Motion. The earlier Default Order was vacated and Debtor was permitted to file his First Amended Answer instanter. Roughly six months had elapsed from the time Debtor was first ordered to answer the Complaint until the date he complied with these orders. At the July 28, 1994, hearing, Plaintiff was given leave to file an application for sanctions against Ellis within 28 days.
On August 8, 1994, Plaintiff filed his Motion for Sanctions under 28 U.S.C. § 1927, alleging that Ellis multiplied these proceedings "unreasonably and vexatiously." This Court conducted an evidentiary hearing on Plaintiff's Motion for Sanctions, and final argument was heard. The parties fully briefed the legal issues involved.
As a threshold issue, it must first be considered whether a bankruptcy judge has authority to entertain the pending Motion. Plaintiff has moved for sanctions under 28 U.S.C. § 1927, which provides that:
any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys\' fees reasonably incurred because of such conduct.
28 U.S.C. § 1927. Most courts considering § 1927 sanctions have held that authority to impose such sanctions turns on whether a particular court is authorized to exercise powers traditionally vested in a "court of the United States or any Territory thereof."1 Although legislative history surrounding enactment of § 1927 is sparse, the Historical and Revision Notes appended to 28 U.S.C.A. § 1927 refer to the definition of "court of the United States" set forth in 28 U.S.C. § 451. Section 451, a definition section applicable to all of Title 28, presently provides in relevant part:
As used in this title:
The term "court of the United States" includes the Supreme Court of the United States, courts of appeals, district courts constituted by chapter 5 of this title, including the Court of International Trade and any court created by Act of Congress the judges of which are entitled to hold office during good behavior.
28 U.S.C. § 451.
Ellis objects to this Court's authority to impose sanctions under § 1927. He premises his objection on his reading of § 1927 under which only "courts of the United States or any Territory thereof" have authority to levy § 1927 sanctions. Ellis asserts that bankruptcy courts are not "courts of the United States" as defined in § 451, and concludes that this Court therefore lacks jurisdiction to entertain the pending motion.
The Seventh Circuit has yet to resolve expressly the issue of whether bankruptcy judges may impose § 1927 sanctions. Several panel opinions in this Circuit...
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