In re Walker

• Decision Date: 20 June 2006
• Docket Number: No. 03-32158-BKC-PGH.,03-32158-BKC-PGH.
• Parties: In Re: James F. WALKER, Debtor.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Florida

356 B.R. 834

In Re: James F. WALKER, Debtor.

No. 03-32158-BKC-PGH.

United States Bankruptcy Court, S.D. Florida, West Palm Beach Division.

June 20, 2006.

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Robert A Angueira, Esq, Hollywood, for Eleanor C. Cole, Florida Precision Caliper Inc, Creditors.

Kevin C Gleason, Esq, Hollywood, for Robert S. Pettus, Creditor.

Mary Alice Gwynn, Esq, Delray Beach, for Eleanor C. Cole, Carl Shuhi, Creditors.

Bruce I Kravitz, Esq, West Palm Beach, for Eleanor C. Cole, Carl Shuhi, Creditors.

Theresa M Lemme, Esq, West Palm Beach, for Coronado Estates of Boynton Beach Homeowners Association, Inc., Creditor.

Thomas M Messana, Esq, Ft. Lauderdale, for Linda Walden, Interested Party.

Gary M Murphree, Esq, Miami, for Deborah Menotte, Ferrell Schultz PA, Creditors.

Arthur C Neiwirth, Esq, Ft. Lauderdale, for Eleanor a Cole; Creditor.

Lisa M Pisciotta, Esq, Miami, for Susan Lundborg, Creditor.

Scott J. Reit, Esq, Ft. Lauderdale, for Cat Cay Yacht Club Inc, David C. Hardin, Esq, Creditors.

Craig P Rieders, Esq, Miami, for Linda Walden, Interested Party.

Morgan Roger Rood, Esq, Ft. Lauderdale, for Michael J Satz, Interested Party.

Gary J Rotella, Esq, Ft. Lauderdale, for James F. Walker, Gary 4 Rotella & Associates PA, Gary J. Rotella, Creditors.

Carlos E. Sardi, Esq, Miami, for Linda Walden, Interested Party.

Carl Shuhi, c/o Bruce I Kravitz, West Palm. Beach, for Carl Shuhi, Creditor.

Max G Soren, Esq, Miami, for Ferrell Law PA, Interested Party.

Alicia Trinley, Esq, West Palm Beach, for Alan. R. Simon, Creditor,

Scott A Underwood, Esq, Fort Lauderdale, for Linda Walden, Interested Party.

John L Walsh, Esq, Ft. Lauderdale, for Patricia A Dzikowski, Trustee.

Jack F Weins, Esq, Boca Raton, for Mary A. Gwynn, Interested Party.

Aviva L Wernick, Esq, Miami, for Susan Lundborg, Creditor.

E Clayton Yates, Esq, Ft. Pierce, for Carol Ann Walker, Interested Party.

MEMORANDUM ORDER GRANTING IN PART AND DENYING IN PART SUSAN LUNDBORG'S MOTION TO (1) QUASH SUBPOENA AND ENTER PROTECTIVE ORDER, AND FOR CONTEMPT AND SANCTIONS AGAINST DEBTOR AND HIS COUNSEL FOR VIOLATION OF THE MEDIATION ORDER; (2). DISMISS ALL SANCTIONS. MOTIONS OF DEBTOR AND HIS COUNSEL AGAINST HER; AND (3) ENLARGE HER TIME TO COMPLETE THE RECORD AND ISSUES WITH RESPECT TO APPEALS AFFECTED BY DEBTOR'S SANCTION MOTIONS [C.P. 1317]

PAUL G. HYMAN, Bankruptcy Judge.

This matter came before the Court for hearing on April 17, 2006 and on May 26, 2006, upon Susan Lundborg's ("Lundbore") Motion To: (1) Quash Subpoena And Enter Protective Order And For. Contempt And Sanctions Against Debtor And His Counsel For Violation Of The Mediation Order ("Lundborg's Motion to Quash"); (2) Dismiss, All Sanctions Motions Of Debtor And His Counsel Against Her ("Lundborg's Motion to Dismiss"); and (3) Enlarge Her Time To Complete The Record And Issues With Respect To Appeals Affected By Debtor's Sanctions Motions ("Lundborg's Motion to Enlarge Time") [C.P. 1317] (collectively the "Omnibus Motion")¹, and upon James F. Walker ("Debtor") and Debtor's Attorney, Gary J. Rotella, Esquire's ("Rotella") (collectively "Rotella") Response thereto [C.P. 1453] (the "Response").

BACKGROUND

The matters before the Court relate to a series of sanctions motions in a case that has the dubious distinction of having been over-litigated. This case has also been distinguished by significant palpable acrimony between the parties and their attorneys.² Debtor filed for relief under Chapter 7 of the Bankruptcy Code on April 25, 2003. Debtor's Schedules show an insolvent estate with $101.00 in assets and $1,095,257.28 in liabilities. None of the scheduled liabilities was indicated by the Debtor to have been contingent, unliquidated, or disputed. On May 12, 2005, Lundborg timely filed Proof of Claim No. 5 ("Lundborg's Proof of Claim"), wherein she asserted claims against the estate for expenses incurred with respect to the real property known as Lot 32, North Cat Cay, Bahamas (the "Cat Cay Property").

The Omnibus Motion seeks dismissal of four sanctions motions³ filed by Rotella (collectively "Rotella's Pending Sanctions Motions") against Lundborg and her counsel, Daniel Lubell, Esquire ("Lubell"), Aviva Wernick, Esquire ("Wernick"), and Hughes, Hubbard & Reed, LLP ("Hughes LLP"). The Omnibus Motion also: 1) seeks to quash the Subpoena and Notice of Taking Deposition Duces Tecum ("Subpoena") served on Lundborg on January 19, 2006; 2) seeks sanctions against Rotella for having caused the Subpoena to be filed and served upon Lundborg at a court-ordered mediation; and 3) seeks enlargement of time to complete the record and the issues on appeal for Lundborg's three appeals of various orders of this Court.

1. Lundborg's Motion to Dismiss Rotella's Pending Sanctions Motions

As indicated above, Lundborg's Motion to Dismiss seeks dismissal of the following four pending sanctions motions by Rotella against Lundborg and her counsel.

A. Debtor's Motion to Strike

On May 27, 2005, Rotella filed Debtor's Emergency Motion To Strike Susan Lundborg's Proof Of Claim; Motion for Compensatory And Punitive Sanctions Against Lundborg, Wernick, Lubell, and Hughes, LLP Pursuant To 28 U.S.C. § 1927 and 11 U.S.C. § 105 For Filing Fraudulent Proof Of Claim; and Motion To Immediately Refer Lundborg, Wernick, and Lubell To United State's [sic] Attorneys Office For Criminal Prosecution For Filing Fraudulent Proof Of Claim Pursuant to 18 U.S.C. §§ 152 and 3571 [C.P. 926] ("Debtor's Motion to Strike"). Debtor's Motion to Strike seeks sanctions against Lundborg and her counsel for Lundborg's allegedly having filed a fraudulent proof of claim. The issue of Debtor's standing was raised at the April 17, 2006 hearing on this matter, however no evidence relative to the issue of Debtor's standing was presented. Therefore, on May 2, 2006 the Court suet sponte entered an Order Sitting Evidentiary Hearing (the "Order Setting Evidentiary Hearing")[C.P. 1487], which set a supplemental evidentiary hearing on the issue of Debtor's standing for May 26, 2006. The Order Setting Evidentiary Hearing permitted any party in interest to present evidence on the issue of whether disallowance of Lundborg's Proof of Claim would have created a surplus of assets to be returned to Debtor at the time that Rotella filed Debtor's Motion to Strike,

B. Debtor's Stay Sanctions Motion

The Cat Cay Property, which the parties have litigated over for several years, was at one time owned by Debtor and his nonfiling wife, Carol Ann Walker. Debtor asserted on his bankruptcy schedules that the Cat Cat Property was exempt, however the Court subsequently determined that the Cat Cay Property was not exempt, See Memorandum Order Determining Choice of Law for Trustee's Objection to Exemptions and Setting Briefing Schedule For Further Submissions by the Parties [C.P.192] (determining that pursuant to 11 U.S.C. § 522(3)(2)(B), the law of the Commonwealth of the Bahamas is the applicable "nonbankruptcy law" governing determination of Debtor's claimed exemption in the Cat Cay Property); and Memorandum Order Sustaining Trustee's Objection to Debtor's Interest in Real Property Claimed as Exempt [C.P.228](finding that Bahamian law does not provide an exemption for real property held by husband and wife as joint tenants and therefore Debtor's interest in the Cat Cay property was not exempt).

In 1996 Eleanor C. Cole ("Cole"), a judgment creditor of the. Debtor, domesticated her judgment against Debtor in the Bahamas. Cole thereafter sought and received relief in the courts of the Bahamas for a judicial sale of the Cat Cay Property to satisfy her judgment. A Bahamian Court Order entered on September 3, 2002 (the "Bahamian Sale. Order") authorized the sale of, the Cat Cay Property to Lundborg. The sale, although authorized, was not completed prior to Debtor's filing for bankruptcy protection on April 25, 2003.

On May 5, 2004, this Court heard Lundborg's Motion for Reconsideration of Order Finding Susan Lundborg in Contempt of Court and Awarding Sanctions [C.P. 294]. On May 12, 2004, the Court entered an Order re Susan Lundborg's Motion for Reconsideration of Order Finding Susan Lundborg in Contempt of Court and Awarding Sanctions (the "May 13, 2004 Order")[C.P.354]. The May 13, 2004 Order determined that pursuant to 11 U.S.C. § 541. Debtor's interest in the Cat Cay Property had become property of the bankruptcy estate as of the petition date. The May 13, 2004 Order found that Lundborg violated the automatic stay between January 2004 and March 2004, through her efforts to have the Bahamian courts force the completion of the sale of the Cat Cay Property. See the May 13, 2004 Order at 2-3. The May 13, 2004 Order vacated this Court's finding of contempt against Lundborg, but enjoined her "from proceeding with any sale or transfer of Debtor's interest in the Cat Cay Property or proceeds thereof without first obtaining relief from stay". Id. ¶¶ 1,4. The May. 13, 2004 Order was entered "without prejudice to the Trustee's right to seek sanctions against Susan Lundborg for violation of the automatic stay." Id. ¶ 9.

On July 13, 2005, Debtor filed a Motion for Contempt and Sanctions for Violations of 11 U.S.C. § 362 and Enforcement of Automatic Stay Against Susan Lundborg [C.P.1004]("Debtor's Stay Sanctions Motion"). On July 27, 2005, Lundborg filed a Response to Debtor's [Stay Sanctions Motion] and Cross-Motion Against Debtor and Debtor's Counsel for Contempt and Sanctions for Violations of 11 U.S.C. § 362 and 28 U.S.C. § 1927 and Enforcement of the Automatic Stay ("Lundborg's Stay Sanctions Cross-Motion") [C.P.1071] (collectively, the "Stay Violations Motions"). Each side alleged in the Stay Violations Motions that the other side had violated the automatic stay subsequent to the May 13, 2004 Order, by participating in litigation in the Bahamas relating to ownership of the Cat Cay Property.

An evidentiary...