This is part 3 of our discussion of sanctions in the Michigan elections case and in Bankruptcy Court. This installment examines 28 U.S.C. §1927. Introduction to Section 1927 A second basis for sanctions is found in 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.Section 1927 is different than Rule 11 in several important respects. First, it only applies to attorneys or any “other person admitted to conduct cases.” Next, the conduct covered is limited to vexatiously and unreasonably multiplying proceedings, although this may be accomplished by submitting frivolous pleadings. Additionally, there is no safe harbor letter required. Lastly, the remedy is limited to satisfying excess costs and fees incurred. Judge Parker described the standard under Section 1927 in this way: Section 1927 provides that any attorney “who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess of costs, expenses, and attorneys” fees reasonably incurred because of such conduct. The purpose of a sanctions award under this provision is to deter dilatory litigation practices and to punish aggressive tactics that far exceed zealous advocacy. Section 1927 imposes an objective standard of conduct on attorneys, and courts need not make a finding of subjective bad faith before assessing monetary sanctions. A court need only determine that an attorney reasonably should know that a claim pursued is frivolous. Simple inadvertence or negligence, however, will not support sanctions under § 1927. Ultimately, “[t]here must be some conduct on the part of the subject attorney that trial judges, applying collective wisdom of their experience on the bench, could agree falls short of the obligations owed by a member of the bar to the court . . . . Opinion, pp. 20-21 (cleaned up). Section 1927 in the Elections Case In Michigan, Gov. Gretchen Whitmer and Secretary of State Jocelyn Benson filed a motion for sanctions under section 1927 (as well as under the court’s inherent authority which will be discussed separately).  The main ground considered by the court was that the plaintiffs refused to dismiss their suit as being moot for months after the electoral votes had been cast. This was significant because they had stated that expedited relief was necessary in order to prevent the suit from becoming moot. According to the plaintiffs, December 14, 2020 was the magic date after which the court could no longer grant relief. On December 22, 2020, Gov. Whitmer and Secretary Benson filed a motion to dismiss. The case was finally dismissed on January 14, 2021. At first blush, allowing a suit to linger on the docket for one month after it should have died does not seem that egregious. However, the reason given for allowing the action to pend bothered the court. The reason stated was somewhat magical. Notwithstanding the fact that no court had recognized them to be valid electors, three of President Trump’s proposed electors took the position that they were the truly appointed electors. According to Judge Parker: In other words, Plaintiffs’ attorneys maintain that this lawsuit was no longer moot after December 14 because three Plaintiffs subjectively believed that they had become electors. The attorneys cite no authority supporting the notion that an individual’s “personal opinion” that he or she is an elector is sufficient to support the legal position that the individual is in fact an elector. Of course, such a belief is contrary to how electors are appointed in Michigan. In any event, Plaintiffs’ attorneys fail to provide a rational explanation for why this event breathed life into this action. Moreover, prior to the July 12 hearing, Plaintiffs never told anyone about this newly-formed subjective belief. They did not tell this Court that the case would no longer be moot after December 8, despite telling this Court the exact opposite when filing this lawsuit on November 25. And they did not tell the Supreme Court that the case would no longer be moot after December 14, despite telling that Court the exact opposite on December 11. The fact that it was never shared suggests that counsel’s argument as to why the case had to be pursued after December 14 is contrived. Opinion, pp. 48-49. While the delay was not particularly lengthy, it unnecessarily caused the parties and the court to expend resources. As Judge Payne pointed out: Here, Plaintiffs conceded that their claims were moot after December 14. Yet, in the month that followed, Plaintiffs refused to voluntarily dismiss their claims, forcing Defendants to file their motions to dismiss and the Court to decide Plaintiffs’ motion for additional time to respond to the motions to dismiss, which Plaintiffs ultimately did not do. In the end, Plaintiffs’ attorneys prolonged the inevitable and “caused both [the State Defendants and Intervenor-Defendants] and the [C]ourt to waste resources” in the meantime. Opinion, pp. 50-51. Section 1927 in Bankruptcy Court Grossman v. Wehrle (In re Royal Manor Management, Inc.), 652 Fed. Appx. 330 (6thCir. 2016) is a good example of how 28 U.S.C. §1927 applies in the bankruptcy context. In that case, an insider submitted a proof of claim for over $2 million. However, the agreement supporting the claim was redacted. The creditors’ committee objected to the claim and it was denied when no timely response was filed. At this point, attorney Grossman entered the picture. He had a 40% contingency fee interest in the claim. However, it turned out that the redacted portion of the agreement showed that the transaction was a loan between insiders and did not affect any of the debtors in bankruptcy. From November 2008 to January 2013, attorney Grossman filed dozens of pleadings seeking to advance the bogus claim or gum up the works of the bankruptcy proceeding. Many of the pleadings he filed were attempts to prevent a hearing from taking place on sanctions against him, including a request to recuse the judge. One of the last pleadings he filed was an objection to the trustee’s motion to compromise with his former client on the basis that the compromise would prejudice him.   The bankruptcy court ultimately sanctioned attorney Grossman $207,004 under section 1927. The Sixth Circuit Court of Appeals affirmed the sanction award. It stated that "Section 1927 sanctions are warranted when an attorney objectively 'falls short of the obligations owed by a member of the bar to the court and which, as a result, causes additional expense to the opposing party.'" 652 Fed. Appx. 330 at *16. For whatever reason, the attorney viewed his prime directive as to fight on and on and on. In wartime, it is irresponsible for generals to send their troops to die after the war has been lost. Similarly, in court, it is unprofessional to continue to throw pleadings into the mix long after it is objectively clear that the case is over. How the Cases are Different and How They Are Similar In the Michigan elections case, the proceedings were multiplied for a period of just one month. In the Grossmancase, the litigation went on for four years. Thus, there was a substantial difference in how long the proceedings were multiplied. However, in both cases. failure to acknowledge that the case should not proceed resulted in expense to the other parties. It did not matter whether that cost was incurred over a relatively brief period of time or years. However, it is important to remember that the statute uses the terms “vexatiously” and “unreasonably” to describe the conduct which unnecessarily prolongs cases and results in sanctions. Most reorganization proceedings fail. The job of a debtor’s attorney is to give the client the possibility of a breakthrough. There is a big difference between refusing to give up at the first sign of trouble and continuing to recycle rejected arguments time and time again. Tomorrow I discuss the court’s inherent authority to sanction.

Yesterday I introduced King v. Whitmer (E.D. Mich. 8/25/21), the case in which Judge Linda Parker wrote a 110-page opinion awarding sanctions under three separate legal grounds. Today we look at sanctions under Fed.R.Civ.P. 11, the longest section of the opinion, as well as a case where sanctions were assessed under Fed.R.Bankr.P. 9011, its bankruptcy counterpart. Introduction to Rule 11 Fed.R.Civ.P. 11(b) and (c) and its bankruptcy counterpart, Fed.R.Bankr.P. 9011(b) and (c) each state that: (b) Representations to the Court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,— (1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; (3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief. (c) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. A sanctions proceeding may be initiated in one of two ways. First, a party may request sanctions, but only after serving the proposed motion on the opposing party and giving that party 21 days in which to withdraw or appropriately correct the challenged paper, claim, defense, contention or denial. Fed.R.Civ.P. 11(c)(2). This is known as the “safe harbor” since it gives an offending party an opportunity to withdraw a sanctionable pleading or other document. In the alternative, the court may “order an attorney, law firm, or party to show cause why conduct specifically described in the order has not violated subsection (b).” Fed.R.Civ.P. 11(c)(3). There is no safe harbor in a court-initiated proceeding, but the court must give the party sufficient notice of the potential violation and an opportunity to respond. Rule 11 in the Michigan Election Case Rules 11 and 9011 have both a subjective and an objective component. The subjective requirement is that a pleading must not be presented for an improper purpose. The objective component looks at whether the arguments being presented are supported by existing law or a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law and that the allegations being made have evidentiary support, or are likely to have evidentiary support, after further investigation or discovery. According to Judge Linda Parker, the objective standard is intended to “eliminate any ‘empty-head pure-heart’ justification for patently frivolous arguments.” Opinion, p. 25. Subdivision (c) makes clear that parties that can be sanctioned are “the attorneys, law firm, or parties that have violated subjection (b)” by signing a pleading in violation of Rule 11 or “are responsible for the violation.” The Court used the “responsible for the violation” language to prevent the parties who had authorized the lawsuit, but had not actually signed it, to avoid liability. The involvement of attorney L. Lin Wood posed a particular issue for the court. He was equivocal as to whether he had participated in drafting the lawsuit or had authorized that his name be included. Mr. Wood said that he was not aware that his name was included but that he would not have objected. He also claimed that he did not know that he was subject to being sanctioned until he read an article in the newspaper.  The Court rejected his arguments because it found that he never notified the court that his name had been included in error. Furthermore, he failed to submit any affidavits that would establish his non-participation despite being given an opportunity to do so. He also tweeted a link to an article referencing the sanctions motion, told a federal judge that the City of Detroit was trying to get him disbarred, and took credit for filing the lawsuit in a brief filed with the Delaware Supreme Court. Another attorney, who claimed that he did not read the pleading until the day it was filed and spent about an hour reviewing it, did not fare well either. Under Rule 11, an attorney’s signature on a pleading constitutes a certificate that he has read it. The court found it difficult to believe that the attorney read an 830-page pleading in just “well over an hour.” Rule 11 requires that a “safe harbor” letter be sent with a copy of the proposed motion for sanctions at least twenty-one days before the motion is filed. Because the City of Detroit was the only party that sent a safe harbor letter (and because the court did not issue its own show cause order), the City of Detroit was the only party eligible to seek sanctions under Rule 11. On substantive grounds, the Court had no trouble finding that Rule 11 had been violated. Judge Parker found that the suit was subject to several obvious defenses. She stated: The Court said it before and will say it again: At the inception of this lawsuit, all of Plaintiffs’ claims were barred by the doctrines of mootness, laches, and standing, as well as Eleventh Amendment immunity. Further, Plaintiffs’ attorneys did not provide a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law to render their claims ripe or timely, to grant them standing, or to avoid Eleventh Amendment immunity. The same can be said for Plaintiffs’ claims under the Elections and Electors, Equal Protection, and Due Process Clauses, and the alleged violations of the Michigan Election Code. Finally, the attorneys have not identified any authority that would enable a federal court to grant the relief sought in this lawsuit. Plaintiffs asked this Court to enjoin the State Defendants from sending Michigan’s certified results to the Electoral College; but as reported publicly, Governor Whitmer had already done so before Plaintiffs filed this lawsuit. Plaintiffs sought the impoundment of all voting machines in Michigan); however, those machines are owned and maintained by Michigan’s local governments, which are not parties to this lawsuit. Plaintiffs demanded the recount of absentee ballots, but granting such relief would have been contrary to Michigan law as the deadline for requesting and completing a recount already had passed by the time Plaintiffs filed suit. Further, a recount may be requested only by a candidate. And while Plaintiffs requested the above relief, their ultimate goal was the decertification of Michigan’s presidential election results and the certification of the losing candidate as the winner—relief not “warranted by existing law or a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law.” Fed. R. Civ. P. 11(b)(2). Opinion, pp. 53-55 (record references and citations omitted). In the ordinary case, it is difficult to see how failing to anticipate an affirmative defense would violate Rule 11. However, standing and the ability to sue a state defendant were both integral to the rights being asserted. Additionally, the lack of authority to overturn an election result is also a pretty big hole in the case being filed. The Court was even more direct in skewering some of the specific allegations made in the affidavits that the plaintiffs relied upon. For purposes of brevity, I am only going to give a few examples. A witness “observed passengers in cars dropping off more ballots than there were people in the car.” Michigan law allowed a household member or family member to drop off a ballot.An allegation was made that Michigan law was violated because ballots without postmarks were counted when it was permissible to drop off an absentee ballot in person.At the hearing on July 12, the attorneys filing the suit alleging violations of Michigan election law demurred by saying that they were not experts in Michigan election law. The Court stated, “What is sanctionable is counsel’s allegation that violations of the Michigan Election Code occurred based on those facts, without bothering to figure out if Michigan law actually prohibited the acts described.”  Opinion, pp. 63-64. An affiant named Matt Ciantar submitted the following which was attached to the complaint in support: The afternoon following the election[,] as I was taking my normal dog walk (mid-afternoon), I witnessed a dark van pull into the small post office located in downtown Plymouth, MI. I witnessed a young couple . . . pull into the parking lot . . . and proceed to exit their van (no markings) . . . and open[] up the back hatch and proceed[] to take 3-4 very large clear plastic bags out . . . and walk them over to a running USPS Vehicle that appeared as if it was “waiting” for them. . . . There was no interaction between the couple and any USPS employee which I felt was very odd. . . . They did not walk inside the post office like a normal customer to drop of[f] mail. It was as if the postal worker was told to meet and standby until these large bags arrived. . . . [T]he bags were clear plastic with markings in black on the bag and on the inside of these clear bags was another plastic bag that was not clear (could not see what was inside) . . . . [There were] what looked like a black security zip tie on each back [sic] as if it were “tamper evident” type of device to secure the bag. . . . [B]y the time I realized I should take pictures of the bags once I noticed this looked “odd[,]” they had taken off. The other oddity was that [sic] the appearance of the couple. After the drop, they were smiling, laughing at one another. What I witnessed and considered that what could be in those bags could be ballots going to the TCF center or coming from the TCF center . . . . Opinion, pp. 71-72. The Court stated: Absolutely nothing about this affidavit supports the allegation that ballots were delivered to the TCF Center after the Election Day deadline. And even if the Court entertained the assertion of Plaintiffs’ counsel that this affidavit “is one piece of a pattern” reflecting fraud or Defendants’ violations of Michigan election laws, this would be a picture with many holes. This is because a document containing the lengthy musings of one dog-walker after encountering a “smiling, laughing” couple delivering bags of unidentified items in no way serves as evidence that state laws were violated or that fraud occurred. Opinion, pp. 72-73. Another affiant stated: There was [sic] two vans that pulled into the garage of the counting room, one on day shift and one on night shift. These vans were apparently bringing food into the building . . . . I never saw any food coming out of these vans, coincidently it was announced on the news that Michigan had discovered over 100,000 more ballots—not even two hours after the last van left. Opinion, p. 74. The Court countered: But nothing described by Carone connects the vans to any ballots; nothing connects the illusory ballots to President Biden; and nothing connects the illusory votes for President Biden to the 100,000 ballots “coincidently” announced on the news as “discovered” in Michigan. Yet not a single member of Plaintiffs’ legal team spoke with Carone to fill in these speculation-filled gaps before using her affidavit to support the allegation that tens of thousands of votes for President Biden were fraudulently added. . . . And speculation, coincidence, and innuendo could never amount to evidence of an “illegal vote dump”—much less, anything else. Opinion, pp. 74-75 and 76. The Court found pervasive violations of Rule 11. The combination of legal theories which were barred by applicable law, theories that were submitted without being investigated and factual allegations relying on speculation, coincidence and innuendo were sufficient to violate the rule. Rule 11 in Bankruptcy Court Rule 9011, which applies in bankruptcy court, substantially follows Rule 11.  It would be difficult to find a bankruptcy case with facts as outlandish as King v. Whitmer. Instead, I found a much more mundane case in which systems and procedures broke down to the detriment of the debtor and the court. In re Taylor, 655 F.3d 274 (3rd Cir. 2011) involved a lender and a law firm using an automated system to generate pleadings in bankruptcy court. As a result of glitches in the software, the firm filed a motion for relief from automatic stay which alleged that the debtor had not made any payments since filing chapter 13 and that the debtor had no equity in its property without any factual basis. The law firm also submitted requests for admissions, seeking admission of facts which the law firm knew, or should have known, were false. At one hearing, the court asked an associate why he couldn’t get information from the client and was told that the attorneys were only permitted to speak with the client through the automated query system. The court initiated an order to show cause under Fed.R.Bankr.P. 9011(c)(1)(B). After multiple hearings, the court awarded sanctions. The court rejected the argument that the law firm was reasonably relying on the information provided by its client. The court focused on Ms. Doyle, a senior attorney with the firm. Doyle's reliance on HSBC was particularly problematic because she was not, in fact, relying directly on HSBC. Instead, she relied on a computer system run by a third-party vendor. She did not know where the data provided by NewTrak came from. She had no capacity to check the data against the original documents if any of it seemed implausible. She effectively could not question the data with HSBC. In her relationship with HSBC, Doyle essentially abdicated her professional judgment to a black box. In re Taylor, 655 F.3d at 285. The bankruptcy court awarded sanctions that could be viewed as creative. The young attorney was questioned by the court was not sanctioned due to his inexperience. The senior attorney was ordered to complete three hours of continuing legal education in professional responsibility. The owner of the firm had to learn how the automated system worked and spend a day observing its use. The court also required the owner of the firm and the senior attorney involved to conduct a training session for all attorneys on their responsibilities under Rule 9011 and procedures for escalating queries under the software system. Lastly, the court ordered the creditor to send a copy of its opinion to all of its attorneys with a letter informing them that they were allowed to contact the creditor directly. On appeal, all sanctions were upheld except for those against the owner of the firm who was found not to have participated in the sanctionable conduct. This was a case where the remedy chosen by the court was aimed at remedying the deficient practices and correcting them rather than financially penalizing the offending parties. How the Cases are Similar and How They Are Different In King v. Whitmer, the plaintiffs sought to overturn an election. In In re Taylor, the creditor sought to foreclose upon a home. The elections case was marked by a brazen attempt to ignore both the law and the ethical obligations of the attorneys. The Taylor case was marked by a series of technological mishaps which caused the attorneys to file erroneous pleadings and make misrepresentations to the court. However, in both cases, the opposing party was put through unnecessary expense and delay due to pleadings which should not have been filed. As a result, both violated the applicable version of Rule 11. Tomorrow I will discuss 28 U.S.C. §1927.

   The ruling came in  Cal Coast Univ. v. Alekna (In re Aleckna), 2021 U.S. App. LEXIS 27128, 2021 WL 4097155 (3rd Cir. 9 September 2021).  The debtor owed $6,300 toward tuition payments prepetition, and had scheduled the university as disputed.  Upon seeking transcripts and advising the university of the bankruptcy, the university eventually sent transcripts with no graduation date shown.  Upon inquiry, the university asserted that she did not technically graduate due to the financial hold on her account.  The university filed a complaint alleging that the debt was nondischargeable and Ms. Aleckna filed a counterclaim that the university violated the automatic stay by failing to issue a transcript in an attempt to collect on the prepetition debt.  The university agreed to withdraw the nondischargeability action with prejudice.  After a bench trial, the bankruptcy court determined that providing an incomplete transcript is tantamount to providing no transcript, and that this constituted a violation of the automatic stay.  It went further to find this violation willful justifying attorneys fees and damages, which totaled approximately $100,000 as of 2016.  The District Court affirmed, rejecting the university's argument that the law on the issue was 'sufficiently uncertain as to whether it was solely required to provide a transcript, not a complete transcript.    The University cited to a prior decision in  In re University Medical Center, 973 F.2d 1065 (3rd Cir. 1992) that allowed a defense to a willful violation if the alleged violation was 'sufficiently uncertain', allowing a good faith defense to such an action when the law on the issue was uncertain.  The 3rd Circuit initially concluded that the 2005 amendment contained in 11 U.S.C. 362(k) did not overruled the University Medical case.  This provision limits the exception to §362 damages to when such violation is based on an action taken by an entity in good faith belief that the stay had terminated due to the debtor's failure to file a timely notice of intention.  §362(k) does not provide a means to disprove willfulness, but rather that the defendant is not liable for a willful violation as log as it believed in good faith that the stay had terminated.  University Medical provided a mechanism to challenge the willfulness element itself.  The Circuit Court then went on to find that the University could not avail itself of the remedy in University Medical, as it could not identify any persuasive authority that supports its position that the law was uncertain.  It noted no authority that addresses the specific issue of whether a college violates the stay by refusing to provide a transcript that affirmatively includes the graduation date.  In the absence of such authority it must point to authority that reasonably supports its belief that its actions were in accordance with the stay.   The cases cited by the University were distinguishable in that the debt in such cases was concededly nondischargeable.  The final argument by the University was that there was no affirmative injury to the debtor, other than $230.16 for the time she took off to attend the trial in the case.  The 3rd Circuit found that such damages constituted a legitimate financial harm, and that attorneys fees incurred constitute additional financial harm when incurred to enjoin further violations of the stay.  Finally, the District Court addressed her injuries in awarding 1) three copies of her certified transcript including the graduate date, 2) a diploma, as well as 3) prelitigation attorneys fees.  While the first two are non-monetary, the stay is intended to protect both financial and non-financial interests.11 In re Lansaw, 859 F.3d 657, 667-68 (3rd Cir. 1992)↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com 

Bankruptcy can be a raucous forum sometimes. The ongoing Boy Scouts case is filled with instances of sexual abuse, giving rise to deep emotions. The National Rifle Association case had allegations of forum shopping, mismanagement, and bad faith. That being said, no one has ever accused one of my restaurant clients of operating a child sex-trafficking ring in its basement, nor has anyone accused the U.S. Trustee of being a lizard man being controlled by George Soros. Bankruptcy doesn’t often see the ridiculous antics which characterize partisan politics and the darker corners of the internet. This is for two important reasons: one is self-respect - most of us practice before the same judges, time and time again, and reputation, once tarnished, is hard to repair. The other is the regime of sanctions which can make bad behavior an expensive proposition. While sanctions are the exception rather than the norm, there are some cases where bad behavior by litigants pushes judges to the point of writing a long and scathing opinion finding that sanctions should be awarded. On August 25, 2021, U.S. District Judge Linda Parker released a 110-page opinion granting sanctions in Case No. 20-13134, King v. Whitmer (E.D. Mich. 8/25/21), a case arising out of the failed attempt to decertify the 2020 election results in Michigan. The case is not a bankruptcy opinion, but the same legal grounds apply in all federal litigation, including bankruptcy. There have been numerous cases in which the same doctrines were applied in the bankruptcy setting, a few of which we’ll discuss here. As of this writing, the amount of sanctions to be awarded has not yet been determined.In discussing the Michigan elections case and the bankruptcy cases to follow, I don't want to seem as though I am mocking the attorneys involved. While these are particularly egregious cases, I hope that my attorney readers will view them as an object lesson that could apply to any of us (albeit on a smaller and less public scale) if we allow passion and busyness to overcome our professional judgment. Factual Background in the Michigan Case On November 25, 2020, several Republican voters and candidates filed suit against Michigan Governor Gretchen Whitmer and other state officials seeking to overturn the results of the Presidential election in Michigan, which Joe Biden had won by 150,000 votes. A few days later, they filed an Amended Complaint and a request for emergency injunctive relief. They claimed violations of the Elections and Electors clause of the Constitution, the Fourteenth Amendment equal protection clause, the Fourteenth Amendment due process clause, and violations of the Michigan election laws. By December 7, 2020, the suit was effectively over when the Court denied the request for injunctive relief on the basis that: (1) the state had not waived immunity under the Eleventh Amendment, (2) the claims were barred by laches, (3) the plaintiffs lacked standing, (4) their claims were moot, and (5) abstention was appropriate. The Court also found that the plaintiffs were unlikely to succeed because violation of state election law, even if proven, did not violate the Elections and Electors clause of the Constitution and the claim that the defendants had conspired to switch votes from Donald Trump to Joe Biden was nothing more than belief, conjecture, and speculation. The plaintiffs then sought relief from the Supreme Court arguing that their claims would be moot once electors cast their votes on December 14, 2020. The Supreme Court did not rule by December 14 and in fact, did not deny the petition until February 21, 2021. Meanwhile, on December 15, 2021, the City of Detroit (which had been added to the suit) sent a safe harbor letter to the plaintiffs under Fed.R.Civ.P. 11. On December 22, 2020, the State Defendants filed a motion to dismiss the suit. The motion included a request for sanctions under 28 U.S.C. §1927. When the plaintiffs finally responded on January 14, 2021, they did not respond to the motion to dismiss but did address the request for sanctions. On the same day, they voluntarily dismissed their suit. On January 5, 2021, the city of Detroit filed a Rule 11 “Motion for Sanctions, for Disciplinary Action, for Disbarment Referral and for Referral to State Bar Disciplinary Bodies.” On January 28, 2021, the Governor and Secretary of State of Michigan filed a motion for sanctions under 28 U.S.C. Sec. 1927. The Court scheduled a hearing which was continued to July 12, 2021, and required that any attorney whose name appeared on any of the briefs or motions must appear. The Court conducted a six-hour hearing on July 12, 2021. At the hearing, the attorneys who signed the pleadings argued that they had done so just as local counsel without reviewing the documents, while the attorneys who did not sign the pleadings argued that they could not be held responsible because they had not signed any pleadings. Attorney L. Lin Wood argued that he had never entered an appearance in the case even though his name appeared as “Of Counsel.” When asked if his name was placed on the document without his permission, he equivocated. On August 25, 2021, the Court issued its ruling granting sanctions. The Court discussed three grounds for liability: Fed.R.Civ.P. 11, 28 U.S.C. §1927, and the Court’s inherent authority. Tomorrow’s post will discuss Fed.R.Civ.P. 11.

Why does New York state sue its college students? Thousands have been taken to court, and can defend themselves only in Albany — even if they live hundreds of miles away? This article can be found at Hechinger Report at  https://hechingerreport.org/new-york-states-attorney-general-sues-suny-students-over-debt/

Written by:Liara Aurelia SilvaBarron & Newburger, P.C. Austin, Texas https://bn-lawyers.com              In a pair of decisions, the Bankruptcy Court for the Western District of Texas took on two big issues arising in a dischargeability case concerning allegations of sexual misconduct: whether defamation findings in state court are binding in bankruptcy as well as whether messages in “private” Facebook groups are discoverable.  Joseph Mazzara v. Donna Shute Provencher, Adv. No. 19-05026-cag (Bankr. W.D. Tex. Dec. 4, 2020); Joseph Mazzara v. Donna Shute Provencher, Adv. No. 19-05026-cag (Bankr. W.D. Tex. Apr. 7, 2021). The opinions can be found here and here.  The decisions stem from a lawsuit filed by Joseph Mazzara against Donna Shute Provencher in Virginia State court.  Mazzara alleged that Provencher posted on a Christendom College Alumni Facebook page where she accused him of sexual assault and of having been investigated for it while he was a student at Christendom College.  Mazzara claimed that Provencher’s allegations were false and defamatory.  Shortly before trial, Provencher filed for relief under Chapter 7 of the Bankruptcy Code and Mazzara, in turn, initiated an adversary proceeding against Provencher to determine the dischargeability of the debt.  Defamation Claims and Dischargeability  The bankruptcy court granted a motion to lift the automatic stay filed by Mazzara and held that the defamation claim needed to be litigated in state court.  In the state court proceedings, Provencher stipulated to liability and agreed to entry of judgment in favor of Mazzara for $25,000 plus interest and costs.   The bankruptcy court then considered Mazzara’s arguments that the judgment entered against Provencher in state court could be nondischargeable under Section 523(a)(6) of the Bankruptcy Code due to the applicability of res judicata or judicial estoppel.  Section 523(a)(6) provides that willful and malicious injury by a debtor to another entity or to the property of another entity is nondischargeable. The Court’s first decision focused on res judicata (claim preclusion and issue preclusion).  The Court found against Mazzara on the issue of claim preclusion but found for him on the issue of collateral estoppel (or issue preclusion).  Essentially, because Virginia rejects the majority view that default judgments cannot be used for collateral estoppel purposes, the Court found that the issue of defamation was actually litigated, and collateral estoppel applied.  It reasoned that Provencher had hired an attorney, made appearances, filed motions, stipulated to liability, and did not appeal the judgment when finding the matter was actually litigated.  The Court also concluded that the dollar amount of the debt was subject to res judicata.  However, the Court ruled that it would need to hear further evidence on whether Provencher’s intent was willful and malicious under Section 523(a)(6) because this was not an element of defamation in Virginia, and was therefore not litigated in the state court proceedings. Discovery of “Private” Facebook messages              In a subsequent discovery dispute in the adversary proceeding, the Court considered whether certain documents requested by Mazzara were required to be produced.  Provencher claimed that the documents were conversations she had in a private Facebook group, “Christendom Survivors: The Order of the Phoenix” after Mazzara had threatened to sue.   Provencher asserted that the restricted interest chatroom was for survivors of sexual assault and their supporters, that they engaged in “supportive venting,” and that they discussed rumors concerning parties unrelated to the litigation.  She also claimed that the Facebook group could not be found via search and a third party cannot be a participant in the group without permission from the group members.   Provencher argued that disclosure of the conversations would violate the Facebook group members’ reasonable expectation of privacy under the U.S. Constitution.  Provencher relied, in part, on a criminal holding that the government did not violate the Fourth Amendment when a cooperating witness gave the government access to a defendant’s Facebook profile.  Provencher claimed there was no such waiver in her case.  The Court found this argument unpersuasive and refused to extend Fourth Amendment protections to limit discovery in civil cases that do not involve government actors.  It also noted that there is a general consensus that social networking content is discoverable so long as the requests are not overly broad, unduly burdensome, irrelevant, or disproportionate.             Finally, the Court held that the documents were relevant because they could reasonably serve as evidence to determine the only remaining issue in the adversary proceeding – whether Provencher’s intent was willful or malicious when she had posted about Mazzara on the Christendom College Alumni Facebook page.  Practice Points              The pair of decisions illustrate several practice points.  It is important to be mindful of state law standards that intersect with adversary proceedings.  Here, Virginia’s departure from the majority view on default judgments for collateral estoppel purposes played a major role in the Court’s findings.  The particular elements of defamation in Virginia also meant that the Court had to hear additional evidence to determine dischargeability even after accepting the state court’s findings.  This may be especially important when a bankruptcy case is in a different state than the state court proceedings which was the case here.              This adversary proceeding also illustrates that many communications which we may intuitively think of as private are indeed discoverable.  As the Court noted, the Federal Rules of Civil Procedure permit broad discovery with little differentiation between public and private content so long at is relevant and not privileged.  A prudent attorney will warn her clients not to comment on ongoing litigation in any form of social media since even “private” discussions could be discoverable.    

   In a decision that may have reflected some frustration at the creditor's conduct, the a bankruptcy court in Oregon granted the debtor's request for $4,123.50 in fees for defending a motion for relief from stay on an automobile lease with a subsidiary of Nissan Motor Acceptance Company that had gone to final evidentiary hearing, when the creditor's counsel produced no evidence at such trial.  The case involved a confirmed chapter 13 plan which had assumed the automobile lease.   Nissan filed a motion for relief from stay asserting that the debtor had defaulted by missing three payments.  The Debtor denied the amount of default alleged, and offered to cure any default.  Nissan then acknowledged that in fact only one payment had been missed, but asserted that the payment had increased post-petition.  No explanation had been given for the reason for such increase.  Nissan refused to accept any payments following the motion for relief from stay.  Nissan did not respond to repeated requests for information from Debtor's counsel, including counsel's request for production.     Trial was set on the request, and debtor's counsel filed an exhibit list, a witn4ess list, and a copy of the exhibit to be introduced at trial.  No documents were filed by Nissan, and at trial Nissan did not have any witnesses available to testify or any documents to produce.  Debtor's counsel made an offer of proof that debtor had tendered sufficient funds to cure the alleged default, and that Nissan never sent a statement showing the increase in the lease payment or provided any explanation for the increase.  At the hearing, Nissan's counsel explained for the first time that the increase was due to Debtor's move to a different state post-petition, but produced no evidence to that effect.  The Court found that Nissan failed to produce evidence of the increase in the lease payment to sustain a finding of default, and that Nissan failed to carry it's burden of proof to show a default supporting the request for relief from stay, and thus denied the request to lift stay.  The court directed Nissan to provide payment instructions to Debtor, and absent such instructions Debtor would be deemed current.  Following trial Debtor's counsel requested $4,123.50 in fees pursuant to Fed. R. Civ. P. 54(d), made applicable to contested matters by Fed. R. Bankr. P. 9014(c) asserting he was the prevailing party on the motion for relief from stay and entitled to fees under Oregon's reciprocal fee statute.  In keeping with it's prior conduct, Nissan failed to timely respond to the motion.  After being given an additional 14 days to respond, Nissan objected alleging that the motion was denied for failure to prosecute rather than on the merits.  The court initially concluded that Debtor was the prevailing party in the matter, in that he was the party who received a favorable judgment on the claim.  The court went into much more depth in discussing whether the action was to enforce a judgment.  Oregon's reciprocal fee statute: ORS 20.096 provides in part:In any action or suit in which a claim is made based on a contract that specifically provides that attorney fees and costs incurred to enforce the provisions of the contract shall be awarded to one of the parties, the party that prevails on the claim shall be entitled to reasonable attorney fees in addition to costs and disbursements, without regard to whether the prevailing party is the party specified in the contract and without regard to whether the prevailing party is a party to the contract.ORS 20.096(1).  The court cited the Supreme Court's decision in Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 451-52, 127 S. Ct. 1199, 167 L. Ed. 2d  178 (2007)  which found that an award of attorneys fees based on a contract is not precluded simply because the fees were incurred in bankruptcy litigation.  The bankruptcy court went on to conclude that if a motion for relief from stay requires the court to determine and enforce contractual provisions, then such action is based on a contract.  As the only allegation ultimately relied on by Nissan was that the Debtor was in default due to an increase in the lease payment pursuant to paragraph 17 of the lease, such action was based on a contract.  The court noted this distinguished the case from motions based on adequate protection, equity 8in property, or the necessity of the property for a successful reorganization.   Given the lack of any objection to the reasonableness of the fees, the court also found that the fees requested were reasonable.  The court noted no fees were requested attributable to the single missed payment on the lease.Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, Fl 33609-1703813 870-3100https://hillsboroughbankruptcy.com  

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 Judge Funk in Jacksonville ruled in favor of the debtor as to a debt that was not scheduled before the claims bar date in a chapter 7, but where the claim was filed in time to share in any distribution.  In re Simmons, 2021 Bankr. LEXIS 2302, Case no 3:18-bk-03267-JAF, Adv 3:20-ap-0081-JAF (Bankr. M.D. Fla. 24 August 2021).   The specific factual background is a bit unusual.  The debtor filed a chapter 7 case in September 2018, initially presumed to be a no asset case.  When it appeared there may be assets to pay creditors, a notice of claims bar date was set for 14 February 2019.  A discharge had already been entered on 26 December 2018.  On 15 January 2020 Debtors supplemented schedule F to add Creative Enters. HK as a general unsecured creditor in the amount of $55,000.   Creative filed a claim in the amount of $79,654.58 on 23 January 2020.  Creative then filed an adversary proceeding asserting that the debt should be nondischargeable under §523(a)(3)(A), noting that the amendment adding them was filed almost a year after the claims bar date had been set.  However it appears no distribution had yet been made to creditors, and Creative would be entitled to receive a distribution if assets are recovered.  11 U.S.C. 523(a)(3)(A) provides that a debt that is not scheduled in time to timely file a proof of claim is not discharged unless the creditor has actual knowledge of the case in order to timely file a claim.  Judge Mark noted that this section should be read in conjunction with §726(a)(2)(C) which provides that a late filed claim is treated as if it was filed timely if the creditor did not possess actual knowledge of the case in time to file a timely claim, and if the claim is filed in time for it to be paid.    The court noted that courts are split on whether a debt in this situation is nondischargeable.   Cases following the plain language approach find the language of §523(a)(3)(A) requires that the debt be nondischargeable even if the creditor knew of the case in time to file a tardy proof of claim and share equally in the distribution.  Disagreeing with this approach, cases following the distribution approach take a holistic view, and ready §523(a)(3)(A) in conjunction with §726(a)(2)(C).  These courts note that the central purpose of the Bankruptcy Code is to allow a fresh start, and that exceptions to discharge must be narrowly construed.  Since §523(a)(3)(A) is only concerned with the ability to file a claim, when a creditor is able to do so and share equally in the distribution, the creditor's rights to such assets had been adequately protected, and the debt should not be excepted from discharge.1  The court distinguished Samuel v. Baitcher (In re Baitcher), 781 F.2d 1529, 1534 (11th Cir. 1986) in that such case had to consider grounds pled under §§523(a)(2), (a)(3), (a)(4), and (a)(6).  None of these counts were pled in the case at bar.1 In re Snyder, 544 B.R. 905, 909-910 (Bankr. M.D. Fla. 2016).↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, Fl 33609-1703813 870-3100https://hillsboroughbankruptcy.com