Needler v. Casamatta (In re Miller Auto. Grp. Inc.)

• Decision Date: 12 August 2015
• Docket Number: BAP No. 14–6047.
• Citation: 536 B.R. 828
• Parties: In re MILLER AUTOMOTIVE GROUP INC., doing business as Miller Chrysler Dodge, doing business as Miller Chrysler Dodge Jeep Inc., Debtor William L. Needler, Movant–Appellant v. Daniel J. Casamatta, U.S. Trustee–Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Eighth Circuit

536 B.R. 828

In re MILLER AUTOMOTIVE GROUP INC., doing business as Miller Chrysler Dodge, doing business as Miller Chrysler Dodge Jeep Inc., DebtorWilliam L. Needler, Movant–Appellant

v.Daniel J. Casamatta, U.S. Trustee–Appellee.

BAP No. 14–6047.

United States Bankruptcy Appellate Panel of the Eighth Circuit.

Submitted: July 22, 2015.

Filed: Aug. 12, 2015.

William L. Needler of Ogallala, NE, pro se.

Adam Eric Miller, Kansas City, MO, for appellee.

Before SCHERMER, SALADINO and SHODEEN, Bankruptcy Judges.

Opinion

SALADINO, Bankruptcy Judge.

William L. Needler and William L. Needler and Associates, Ltd. (collectively “Needler”) appeal from an order of the bankruptcy court¹ imposing sanctions against Needler and a subsequent order denying Needler's motion to reconsider. We have jurisdiction over this appeal from entry of the bankruptcy court's final order pursuant to 28 U.S.C. § 158(b). For the reasons set forth below, we affirm.

FACTUAL BACKGROUND

On January 11, 2013, Needler electronically filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Western District of Missouri on behalf of “Miller Chrysler Dodge Inc.” Because Needler is not admitted to practice in the Western District of Missouri, he also filed a motion to appear pro hac vice and an application to be employed as debtor's attorney. Over the objection of the United States Trustee, the bankruptcy court approved Needler's application with the admonition that his fees and activities would be closely scrutinized.

The United States Trustee soon discovered that the entity “Miller Chrysler Dodge Inc.” did not legally exist and, when the error was not timely corrected, filed a motion to dismiss the Chapter 11 case. The motion noted that a similarly named entity, “Miller Chrysler Dodge Jeep, Inc.,” did exist at one time, but in 2011 was merged into the entity “Miller Automotive Group, Inc.” On February 3, 2013, Needler filed an amended voluntary petition under the proper name of the debtor—Miller Automotive Group, Inc.

During the course of the Chapter 11 case, Needler received several orders from the clerk of the court to show cause for failure to comply with local filing requirements. Needler was unsuccessful in obtaining authority for the debtor to use cash collateral and to retain a broker to attempt to sell the business. He was also unsuccessful in his attempt to get the United States District Court for the Western District of Missouri to withdraw the reference of the bankruptcy case from the bankruptcy court. Relief from the automatic bankruptcy stay was sought and obtained by the two primary creditors, Ally Financial, Inc., and Chrysler Group, LLC. Ultimately, on April 24, 2013, the bankruptcy case was dismissed on the debtor's motion. The court closed the case file on May 29, 2013. During the pendency of the Chapter 11 case, Needler never sought nor obtained approval of any attorney fees and expenses.

Approximately six months later, the United States Trustee filed a motion to reopen the Chapter 11 proceeding to accord relief to the debtor and for cause pursuant to 11 U.S.C. § 350(b). Specifically, the United States Trustee asserted that she had received a written complaint from the debtor and debtor's principals concerning the conduct of Needler and his co-counsel² in the representation of the debtor. As part of the motion to reopen, the United States Trustee also asserted that Needler failed to communicate accurate information about the case to the debtor, that Needler made potentially false and misleading representations to the debtor and its officers concerning the case, and that Needler may have filed documents and taken actions in the bankruptcy case which were not authorized and resulted in unnecessary litigation and expense. The United States Trustee further noted that Needler had filed a state court action against the debtor and the debtor's principals for attorney fees in excess of $49,000.00. After consideration, the bankruptcy court granted the motion to reopen without a hearing. After the case was reopened, Needler attempted to object to the motion to reopen, which objection was denied as moot since the court had already granted the motion.

Thereafter, the United States Trustee filed a motion to compel Needler to disgorge all fees previously paid and to determine the reasonableness of any fees Needler asserted against the debtor. Subsequently, at a preliminary hearing on the United States Trustee's motion, Needler was ordered to file a final fee application. He did so, seeking more than $63,000.00 in fees and $3,600.00 in expenses. The United States Trustee objected to the fee application, as did David and Gloria Miller, the principals of the debtor. On May 13, 2014, the United States Trustee then filed the amended motion that is the subject of this appeal. In the amended motion, the United States Trustee requested the disgorgement of all fees paid to Needler, along with the imposition of additional sanctions “pursuant to [the] Court's inherent authority, 11 U.S.C. § 105(a) and Fed. R. Bankr. P. 9011.” Sanctions were requested because:

Mr. Needler committed numerous serious acts of misconduct which violated the Federal Rules of Bankruptcy Procedure and the local rules of practice before this Court, and Mr. Needler's conduct evidences a pattern of such misconduct in cases filed in this court as pro hac vice counsel to Chapter 11 debtors.

In addition to disgorgement, the amended motion requested a declaration that Needler is entitled to no compensation for services rendered in the Chapter 11 case, denial of permission to appear pro hac vice before the Western District of Missouri in the future, and directing the clerk of the court to revoke Needler's electronic filing access. Needler objected to the amended motion and the parties engaged in discovery.

On July 22, 2014, an evidentiary hearing was held in the bankruptcy court, which was more than eight months after the case was reopened for cause, five months after the initial motion to disgorge fees and deny compensation, and two months after the amended motion requesting disgorgement and additional sanctions. At each step along the way, Needler was afforded the opportunity to file objections, responses and briefs, and to otherwise participate in the proceedings. After the July 22, 2014, evidentiary hearing, Needler was given the further opportunity to file a post-hearing brief with his closing argument.

On October 24, 2014, the bankruptcy court issued its detailed memorandum opinion regarding the matters before the court—Needler's final fee application and the amended motion for denial of compensation, disgorgement of fees and imposition of sanctions filed by the United States Trustee. The court denied Needler's fee application and granted the United States Trustee's motion for disgorgement and other sanctions. Needler then sought reconsideration, which was denied in a detailed order dated December 19, 2014. Needler then timely filed his notice of appeal.

STANDARD OF REVIEW

A bankruptcy court's findings of fact are reviewed for clear error, and conclusions of law are reviewed de novo. Briggs v. LaBarge (In re Phillips), 433 F.3d 1068, 1071 (8th Cir.2006) (citation omitted). “A bankruptcy court's decision to impose sanctions is reviewed for an abuse of discretion.” Id. (citing Schwartz v. Kujawa (In re Kujawa), 270 F.3d 578, 581 (8th Cir.2001) ); Grunewaldt v. Mut. Life Ins. Co. of N.Y. (In re Coones Ranch, Inc.), 7 F.3d 740, 743 (8th Cir.1993) (“We apply an abuse-of-discretion standard of review in all aspects of Rule 11 (and by analogy, Rule 9011 ) cases.”) (citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990) ). “When an appellate court reviews a district court's factual findings, the abuse-of-discretion and clearly erroneous standards are indistinguishable. A court of appeals would be justified in concluding that a district court had abused its discretion in making a factual finding only if the finding were clearly erroneous.” Hartmarx, 496 U.S. at 401, 110 S.Ct. 2447. A finding is clearly erroneous if, after examining the entire record, we are left with a definite and firm conviction that the bankruptcy court has made a mistake. Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948) ). Where there are two permissible views of the evidence, the fact finder's choice between them cannot be clearly erroneous. Id. at 574, 105 S.Ct. 1504.

DISCUSSION

Notice and opportunity to be heard must be afforded to the party to be sanctioned prior to the imposition of sanctions. Walton v. LaBarge (In re Clark), 223 F.3d 859, 864 (8th Cir.2000) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 56–57, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) ); Fed. R. Bankr. P. 9011(c). “[N]otice must be given that the court is considering imposing sanctions.” Id. at 864–65. The United States Trustee's motion to reopen, which was filed in November 2013, put Needler on notice as to most of the allegations against him. Thereafter, Needler filed objections and at least two preliminary hearings were held. In May 2014, a detailed amended motion for sanctions was filed clearly describing the sanctions being sought (those that were ultimately imposed) and the factual basis for seeking the sanctions. Needler filed an objection and an amended objection to that motion and appeared at the evidentiary hearing on July 22, 2014. At that hearing, he cross-examined witnesses, but apparently chose not to testify himself. We see no problem with the notice and opportunity to respond provided to Needler—and, importantly, Needler does not raise any.³

Federal Rule of Bankruptcy Procedure 8014(a)(5) requires the appellant's brief to contain a statement of the issues presented on appeal. Needler's brief identified eleven...