Volpert, Matter of

• Decision Date: 01 April 1997
• Docket Number: No. 95-3379,95-3379
• Parties: , 30 Bankr.Ct.Dec. 772 In the Matter of Thomas R. VOLPERT, Jr., Debtor. Appeal of Bernard M. ELLIS.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 494

110 F.3d 494

65 USLW 2743, 30 Bankr.Ct.Dec. 772

In the Matter of Thomas R. VOLPERT, Jr., Debtor.

Appeal of Bernard M. ELLIS.

No. 95-3379.

United States Court of Appeals,Seventh Circuit.

Argued Dec. 4, 1996.

Decided April 1, 1997.

Bernard M. Ellis (argued), Chicago, IL, for appellant.

Joel A. Brodsky, Brodsky & Hoxha, Chicago, IL, for appellee.

Jennifer A. Keller (argued), Cassiday, Schade & Gloor, Chicago, IL, pro se.

Carolyn Quinn, Cassiday, Schade & Gloor, Chicago, IL, pro se.

Before RIPPLE, MANION and DIANE P. WOOD, Circuit Judges.

RIPPLE, Circuit Judge.

The appellant, Bernard M. Ellis, while representing a debtor in bankruptcy court, repeatedly filed untimely responsive pleadings and repeatedly failed to give notice of pleadings to opposing counsel. Explicitly relying on 28 U.S.C. § 1927 for authority, the bankruptcy judge fined Mr. Ellis $1,000 for his actions. The district court affirmed the bankruptcy court's sanction order. Mr. Ellis now appeals the district court's judgment. We affirm.

I BACKGROUND

On June 30, 1993, Thomas Volpert filed a petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. Attorney Bernard M. Ellis represented Volpert in the bankruptcy proceedings. After Volpert filed his petition, Volpert's uncle filed a seven-count complaint, which Volpert was required to answer by January 29, 1994. Volpert did not respond by that deadline.

Instead, on February 2, Mr. Ellis appeared at a status hearing before the bankruptcy court and received an additional fourteen days to answer. When the new deadline came and went without an answer being filed, Volpert's uncle moved for an order of default. On April 21, Mr. Ellis, in response, appeared before the bankruptcy court and succeeded in having the hearing on the motion for default continued until May 11.

On May 2, Mr. Ellis filed a motion to dismiss the uncle's complaint on the ground that the uncle had no standing. In addition, he sought the dismissal of counts 1, 2, 3 and 6 on other grounds. The bankruptcy court denied the motion to dismiss for lack of standing and ordered Mr. Ellis to respond to counts 4, 5 and 7 within seven days. On May 11, however, Mr. Ellis did not file an answer. Instead, he asked the bankruptcy court to reconsider the denial of the motion to dismiss. The bankruptcy court declined to reconsider its prior ruling and warned Mr. Ellis that failure to respond to counts 4, 5 and 7 by May 18 would result in an entry of default on those counts.

Despite repeated assurances that he would file an answer by May 18, Mr. Ellis again missed the deadline. Rather, on May 19, he again moved to dismiss counts 4, 5 and 7. In the alternative, Mr. Ellis asked for a more definitive statement with respect to each of those counts. On May 25, the bankruptcy court denied the motion to dismiss, but it ordered the uncle to file a more definitive statement within fourteen days. The bankruptcy court also ordered Mr. Ellis to answer counts 4, 5 and 7 after the more definitive statement was to be filed.

On June 22, almost five months from the date an answer was originally due, Mr. Ellis finally filed an answer to counts 4, 5 and 7. The answer, though, was found to be legally insufficient by the bankruptcy court. On July 1, the bankruptcy court struck the answer and entered an order of default on counts 4, 5 and 7. On July 11, Mr. Ellis moved to vacate the default order and for leave to file an amended answer. Because Mr. Ellis had failed to serve opposing counsel with a copy of the proposed amended answer, the bankruptcy court denied the motions. The bankruptcy court noted that this occasion was not the first time that Mr. Ellis had failed to serve counsel, notwithstanding the fact that both attorneys had their offices in the same building. Mr. Ellis again failed to serve counsel, this time on July 15, with a motion to reconsider the bankruptcy court's denial of the July 11 motions.

On July 25, the bankruptcy court gave Mr. Ellis until July 27 to give opposing counsel proper notice of the proposed amended answer. On July 28, the bankruptcy court vacated its default order and allowed Mr. Ellis to file the amended answer. By that time, six months had elapsed since Mr. Ellis was first ordered to file an answer. Volpert's uncle then moved for sanctions pursuant to 28 U.S.C. § 1927. The bankruptcy court ruled that Mr. Ellis' delays in filing Volpert's answer, the legal insufficiency of the answer that was filed, and Mr. Ellis' repeated failure to serve opposing counsel with proper notice demonstrated conduct that unreasonably and vexatiously multiplied the bankruptcy court's proceedings. Accordingly, the bankruptcy court granted the motion for sanctions and awarded Volpert's uncle $1,000 in attorney's fees under § 1927. See Volpert v. Ellis (In re Volpert), 177 B.R. 81 (Bankr.N.D.Ill.1995).

Mr. Ellis appealed the sanction to the district court. Before the district court, Mr. Ellis contended that, because bankruptcy courts are not "court[s] of the United States," they do not have the authority to order sanctions under § 1927. The district court took the view that bankruptcy courts are not "court[s] of the United States" because their judges do not serve during good behavior. Nevertheless, the district court held, bankruptcy courts are empowered indirectly with the authority of the district courts to impose sanctions under § 1927. The district court reasoned that, because 28 U.S.C. § 151 states that bankruptcy judges "shall constitute a unit of the district court," bankruptcy courts are subsumed within the district court apparatus and have the authority, as arms of the district court, to impose sanctions under § 1927 in cases that have been referred to them. Consequently, the district court affirmed the sanction. See Volpert v.

Volpert (In re Volpert), 186 B.R. 240 (N.D.Ill.1995).

II DISCUSSION

We note at the outset that Mr. Ellis does not contend that the bankruptcy court's sanction was unconstitutional under Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), or that the sanction was beyond the bankruptcy court's statutory authority under 28 U.S.C. § 157(b). ¹ Nor does Mr. Ellis claim that the $1,000 sanction was an abuse of discretion. Indeed, he concedes that the amount was reasonable and that he did in fact unreasonably and vexatiously multiply the proceedings before the bankruptcy court. His sole contention in this appeal is that the bankruptcy court lacked the authority to impose the sanction under § 1927.

The issue of whether bankruptcy courts possess the power to sanction under § 1927 is an unresolved one in this circuit. In re Memorial Estates, Inc., 950 F.2d 1364, 1369-70 (7th Cir.1991), cert. denied, 504 U.S. 986, 112 S.Ct. 2969, 119 L.Ed.2d 589 (1992). Although we affirmed a bankruptcy court's decision to impose fees under § 1927 in In re TCI Ltd., 769 F.2d 441 (7th Cir.1985), ² we did not discuss whether § 1927 applies to bankruptcy courts. See Webster v. Fall, 266 U.S. 507, 511, 45 S.Ct. 148, 149, 69 L.Ed. 411 (1925) ("Questions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents."); cf. Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 119 & n. 29, 104 S.Ct. 900, 918 & n. 29, 79 L.Ed.2d 67 (1984) (" '[W]hen questions of jurisdiction have been passed on in prior decisions sub silentio, this Court has never considered itself bound when a subsequent case finally brings the jurisdictional issue before us.' ") (quoting Hagans v. Lavine, 415 U.S. 528, 533 n. 5, 94 S.Ct. 1372, 1377 n. 5, 39 L.Ed.2d 577 (1974)).

A.

Section 1927 of Title 28 provides:

Any attorney ... 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 (emphasis added). Bankruptcy courts, therefore, can impose sanctions under § 1927 only if they can exercise the powers that are conferred upon the "court[s] of the United States or any Territory thereof." ³ Regardless of whether bankruptcy courts can exercise such powers, both parties in this case agree, as an initial matter, that bankruptcy courts are not themselves "court[s] of the United States" within the strict meaning of the term. That term is defined in 28 U.S.C. § 451, which defines terms for purposes of Title 28:

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. Bankruptcy courts are not listed explicitly in the section. Nor are bankruptcy courts "district courts constituted by chapter 5 of [Title 28]," for bankruptcy courts are constituted by chapter 6 of Title 28. Likewise, bankruptcy judges are not "entitled to hold office during good behavior." Rather, they serve a specified term of fourteen years. See 28 U.S.C. § 152(a)(1). Moreover, as the Ninth Circuit has noted, because the "good behavior" language contained in § 451 mirrors that contained in Article III, it is reasonable to infer that the phrase "court[s] of the United States" denotes Article III courts whose judges have life tenure and may be removed only by impeachment. See Perroton v. Gray (In re Perroton), 958 F.2d 889, 893 (9th Cir.1992). Bankruptcy courts are not Article III courts. Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 60-61, 102 S.Ct. 2858, 2866, 73 L.Ed.2d 598 (1982). Therefore, a bankruptcy court is not a "court of the United States" within the...