In re W.A.R. LLP

• Decision Date: 27 January 2012
• Docket Number: Civil Action No. 11–1574 (RCL).
• Citation: 467 B.R. 543
• Court: U.S. District Court — District of Columbia
• Parties: In re W.A.R. LLP

467 B.R. 543

In re W.A.R. LLP

Civil Action No. 11–1574 (RCL).

United States District Court, District of Columbia.

Jan. 27, 2012.

Wade Robertson, Memphis, TN, pro se.

Wade Anthony Robertson, Stanford, CA, pro se.

Ty Clevenger, Youngkin & Burns, PLLC, Bryan, TX, for W.A.R. LLP.Patrick John Kearney, Selzer Gurvitch Rabin & Obecny, Chartered, Bethesda, MD, for William C. Cartinhour, Jr.

MEMORANDUM AND ORDER

ROYCE C. LAMBERTH, Chief Judge.

Before the Court is the appeal of the joint-appellants, debtor W.A.R. LLP and insider-creditor Wade Robertson, from various decisions of the bankruptcy court inter alia overruling objections to the trustee's report of “no assets” for distribution and denying appellants' motion for sanctions against appellee William C. Cartinhour, Jr. Upon consideration of the parties' appellate briefs [12] [19] [21], the applicable law, and the entire record herein, the Court will affirm the decisions of the bankruptcy court.

I. BACKGROUND

The instant bankruptcy case and appeal is in essence a tangent to previous litigation in this district court between the founding partners of the debtor partnership W.A.R. LLP, Wade Robertson and William Cartinhour. Judge Ellen Huvelle entered judgment [165] in that litigation, Robertson v. Cartinhour, Civil No. 09–1642, on April 25, 2011, and there are still motions pending in that case. Robertson initiated that litigation on April 28, 2009, filing a complaint [1] against Cartinhour seeking a declaratory judgment that Cartinhour had agreed to hold Robertson harmless for any alleged claims the former might have against the latter related to the partnership. Cartinhour filed his answer [2] on October 28, 2009, and included counterclaims against Robertson. Cartinhour alleged that Robertson had fraudulently induced him to invest a total of $3.5 million in the partnership, which served as a vehicle for class action litigation, in return for a fixed percentage of the recovery obtained in that litigation. Robertson initially invested $1 million, and although the litigation stalled and ultimately was dismissed, Robertson represented to Cartinhour that the merits of the case remained strong and persuaded Cartinhour to invest first another $1 million and then a third payment of $1.5 million. Cartinhour sought return of those funds from Robertson.

Cartinhour moved to amend his counter-complaint [45] on February 5, 2010. Cartinhour sought to allege additional facts following a January 11, 2010 hearing, particularly that Robertson had caused W.A.R. LLP to lend to Robertson at least $3,405,000 of the $3.5 million invested in the partnership by Cartinhour. Cartinhour thus sought to add a claim for a constructive trust over the diverted assets, and also sought to add a claim for dissolution of the partnership and for a receivership against W.A.R. LLP. Cartinhour dropped the latter two claims, involving the legal status of the partnership, by the time of the filing of the joint pre-trial statement [121], which does not include W.A.R. LLP as a party; the record further shows that the partnership did not make an appearance or file any responsive pleadings in the case before Judge Huvelle. Cartinhour filed the amended counterclaim [61] on February 22, 2010. On that same date, Cartinhour filed a motion for a temporary restraining order and preliminary injunction putting a freeze on the assets lent by W.A.R. LLP to Robertson. Judge Huvelle granted the motion by order [90] on March 26, 2010, and required transfer of the remaining funds to the clerk of the court for imposition of a constructive trust. Those funds ultimately included $600,074.92 from Robertson's personal brokerage account, $4,611.66 primarily from W.A.R. LLP's bank accounts, $20,713.75 held by counsel for Robertson, and $5,000.00 held by law firm Sutherland Asbill & Brennan. Robertson appealed that order [91] on March 28, 2010.

On November 9, 2010, Robertson filed suit in the Southern District of New York in Robertson v. Cartinhour, Civil No. 10–8442. This suit was styled as a civil RICO action but involved the same factual dispute as the case before Judge Huvelle. This suit prompted Cartinhour to file a motion for an injunction [128] against the institution of further suits by Robertson. Judge Huvelle denied the motion by order [147] on December 30, 2010. Although Judge Huvelle declined to impose a sweeping anti-filing injunction, Judge Huvelle noted in the order that between the institution of the instant suit and the date of the order, Robertson had engaged in a variety of frivolous filings:

Robertson proceeded to file no less than fourteen motions, including a motion to reconsider an order granting Cartinhour leave to amend his counter-claims, a motion to quash a subpoena for documents that Robertson had already agreed to produce, and a motion to recuse. Two of those motions were sufficiently meritless, and were considered by the Court to have been filed recklessly and in bad faith, so as to justify the award of attorney's fees against Robertson under 28 U.S.C. § 1927, which permits the award of fees “against an attorney who frustrates the progress of judicial proceedings.”

The Court of Appeals has been equally frustrated by Robertson's vexatious litigation strategy, finding sanctions to be “abundantly justified” after Robertson filed his fourth motion to stay despite being warned, less than a week earlier, that the Court “looks with extreme disfavor upon unnecessary pleadings.” ... Prior to imposing those sanctions, the Circuit Court had summarily denied Robertson's motion for disqualification and sanctions against Cartinhour's counsel; Robertson's petition for mandamus seeking recusal; Robertson's motion for clarification and reconsideration, where the Court explicitly warned him that it “will not hesitate to impose sanctions” ...; Robertson's emergency motion to stay a preliminary injunction; and Robertson's motion for sanctions and a stay, noting, inter alia, that certain orders of the district court were unappealable.

In addition to the flurry of appellate activity and the sanctions imposed to date, this Court has had to rule on endless motions for recusal, motions to stay, motions for reconsideration, and motions to quash.

...

The Court ... warns Robertson, as did the Court of Appeals, that if he should continue to pursue his strategy of unnecessarily proliferating this litigation, this Court will not hesitate to entertain a renewed motion for an injunction.

(internal citations and modifications omitted). Less than one week after Cartinhour filed his motion for an injunction, an outside W.A.R. LLP creditor filed an involuntary Chapter 7 bankruptcy petition in the Western District of Tennessee against W.A.R. LLP—the genesis of the suit subject to the instant appeal.

Following institution of the Tennessee bankruptcy proceeding, Judge Huvelle held a hearing [182] on November 19, 2010 regarding the effect of that proceeding on the suit in light of the automatic bankruptcy stay, see 11 U.S.C. § 362(a)(1) (providing for an automatic stay over actions “to obtain possession of or to exercise control over property of the bankruptcy estate”). Judge Huvelle during the hearing ruled that the case could go forward:

“362 Section (a)(1) does not stay claims against Robertson because he is not the debtor. Rather, W.A.R. is the debtor and Robertson's status as a partner of the partnership does not entitle him to protections of the automatic stay.... But to avoid any interference whatsoever with the jurisdiction of the Bankruptcy Court, I specifically direct that any ruling on Mr. Cartinhour's rescission and dissolution claims will not be binding on the estate of the partnership in the partnership's bankruptcy case.

...

Finally [Cartinhour] has abandoned any claims I should note that might be subject to the automatic stay including the derivative claims on behalf of the partnership, constructive trust on the 4,000 in the registry.¹ That was the only amount of money that was transferred out of the partnership account as opposed to all the other amounts that are in the registry right now, with the exception of this 4,000, came out of his personal accounts with Schwab, Mr. Robertson's personal accounts. And Mr. Cartinhour is giving up the appointment of a receiver against the partnership so that such appointment would not be subject to the automatic stay.

...

I have ruled loud and clear that the automatic stay does not interfere with us proceeding in this fashion. After Judge Huvelle's ruling, the debtor in the Tennessee case filed a motion on November 22, 2010 for a temporary restraining order and for a preliminary injunction to enforce the automatic bankruptcy stay and restrain further proceedings in Judge Huvelle's case; Cartinhour in turn filed a motion for relief in the Tennessee case from the automatic bankruptcy stay. Judge Paulette J. Delk of the Tennessee bankruptcy court entered an order on November 23, 2010 denying the debtor's motion and granting Cartinhour's motion. Judge Delk ruled in accord with Judge Huvelle that “the automatic stay does not prevent the D.C. lawsuit from going forward, because neither the debtor nor property of the estate will be affected by the trial.” Since the D.C. lawsuit involved a dispute between Robertson and Cartinhour that did not implicate partnership property, the automatic stay did not apply to that case. However, “[o]ut of an abundance of caution,” Judge Delk “expressly” found that “sufficient cause exists under 11 U.S.C. § 362(d)(1) to modify the stay to permit the D.C. lawsuit to go forward.” Thus, even if the D.C. lawsuit did implicate partnership property, Judge Delk granted Cartinhour relief from the automatic stay to continue prosecution of the suit in front of Judge Huvelle.

Cartinhour filed a motion to dismiss, or abstain in, the bankruptcy case in Tennessee, or to transfer venue to the District of Columbia, on December 3, 2010. The Tennessee court...