Bernhard v. Kull (In re Bernhard)

638 B.R. 331

IN RE Gary BERNHARD, Debtor.

Gary Bernhard, Plaintiff

v.Brian Kull, Theresa Kull, Paul Bucco, et al., Defendants

Bky. No. 11-15799 ELF

Adv. No. 19-167

United States Bankruptcy Court, E.D. Pennsylvania.

Signed March 21, 2022

Paul A. Bucco, Davis, Bucco & Ardizzi, Conshohocken, PA, for Defendants Brian Kull, Theresa B. Kull, and John J. Dorsey.

Albert A. Ciardi, III, Daniel S. Siedman, Ciardi Ciardi & Astin, Philadelphia, PA, for Defendants Davis, Bucco, & Ardizzi, David S. Makara, John J. Dorsey, Nathaniel J. Flandreau, and Paul A. Bucco.

John J. Dorsey, Davis Bucco, Conshohocken, PA, for Defendants Brian Kull, and Theresa B. Kull.

Mark S. Pearlstein, Law Office of Mark S. Pearlstein, Anthony A. Frigo, The Law Offices of Anthony A. Frigo, Wayne, PA, for Plaintiff.

MEMORANDUM

ERIC L. FRANK, U.S. BANKRUPTCY JUDGE

I. INTRODUCTION

In this adversary proceeding, Plaintiff Gary Bernhard ("the Debtor") requested a determination that Defendants Brian Kull ("Mr. Kull") and his wife, Theresa B. Kull (collectively, "the Kulls"), along with the Kulls’ attorneys ("the Bucco Defendants"),¹ were in contempt of the discharge order ("Discharge Order") entered on December 15, 2011in this chapter 7 bankruptcy case. After a trial, and by opinion and order entered on February 22, 2022, I determined that the debt owed by the Debtor to the Kulls had been discharged, that the Kulls’ collection efforts violated the discharge order, but that the Defendants’ conduct did not constitute contempt of the discharge order. See In re Bernhard, ––– B.R. ––––, 2022 WL 532737 (Bankr. E.D. Pa. Feb. 22, 2022). The Debtor has appealed that decision. (Doc. # 148).

Prior to the trial of this adversary proceeding, the Debtor filed a motion under Fed. R. Bankr. P. 9011 ("the Motion") (Doc. # 31), requesting sanctions against the Kulls, Paul Bucco and the Law Firm (collectively, "Respondents"). The Motion focused on the sufficiency of the Kulls’ answer ("the Answer") to the Debtor's complaint in this adversary proceeding ("the Complaint"). Essentially, the Debtor argued that by answering the Complaint with responses such as "the document speaks for itself" and "the allegation is a conclusion of law that requires no response," the Respondents violated Fed. R. Bankr. P. 9011. The Debtor requested that the court strike certain allegations in the Answer or deem them admitted and award reasonable attorney's fees.

On December 18, 2019, I held a hearing on the Motion. I took the matter under advisement, but did not rule on the Motion prior to the trial of this adversary proceeding or entry of my opinion and order deciding the matter on February 22, 2022.

By order entered February 28, 2022, I denied the Motion. (Doc. # 146). The Debtor has appealed the order denying the Motion. (Doc. # 149).

Pursuant to Local Bankruptcy Rule 8003-1, I submit this Memorandum to explain the reasons for the denial of the Motion.

II. THE CONTENT OF THE MOTION

In the Motion, the Debtor asserts that the Respondents violated Fed. R. Bankr. P. 9011 by failing to "to ethically and honestly answer the Adversary Complaint." (Motion, Introduction).

The Motion contained 99 paragraphs and is 44 pages long.

In Paragraphs 1-7, the Debtor quotes Rule 9011 and describes counsel's efforts to comply with the procedural requirements of Rule 9011(c).

In Paragraphs 8-28, the Debtor refers to the Kulls’ prepetition litigation against him, quotes certain averments made by Kulls in various pleadings and identifies what the Debtor considers to be conflicts between the statements made by the Kulls in those pleadings and the Answer.²

Paragraphs 29-36 are a de facto memorandum of law on the subject of judicial admissions in which the Debtor cites more than dozen cases and set out lengthy quotations from several cases.

Paragraphs 37-80 begin with a lengthy discussion of Fed. R. Civ. P. 8, which is incorporated in Fed. R. Bankr. P. 7008.³ Again, the Motion provides citations and lengthy quotations from a number of cases. The Debtor then identifies fifteen (15) paragraphs of the Kulls’ Answer to the Complaint (Nos. 19, 20, 23, 25, 26, 30, 32, 36, 37, 55, 56, 60, 67, 79, 87) in which the Kulls responded to the Complaint's references to prior pleadings or documents by stating that "the document speaks for itself."⁴ The Debtor asserts that these responses failed to comply with Rule 8 ’s requirement that the pleading "fairly respond" to the substance of the Complaint's allegations.

In Paragraphs 81-85, the Debtor identifies five (5) paragraphs in the Kulls’ Answer to the Complaint (Nos. 35, 78, 95, 101 and 122) in which the Kulls responded to the Complaint's references to prior pleadings or documents by denying the allegation and adding that the allegation was denied as a conclusion of law to which no response is required. The Debtor asserts that these responses also failed to comply with Rule 8.

In Paragraphs 86-94, the Debtor asserts that the Kulls raised two (2) meritless, affirmative defenses in their Answer to the Complaint: the Kulls’ Eleventh Affirmative Defense (asserting that the Debtor's claim for emotional distress damages "should be dismissed as frivolous in violation of [Rule 11]") and the Twelfth Affirmative Defense (invoking the Rooker-Feldman doctrine).

III. DISCUSSION

A. Rule 9011 – General Principles

Fed. R. Bankr. P. 9011 provides, in part:

(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.

A lengthy exposition on Rule 9011 is not necessary to resolve the Motion. But a few points of law warrant mention.

"The purpose of Rule 11 is to deter litigation abuse that is the result of a particular ‘pleading, written motion, or other paper’ and, thus, streamline litigation." In re Schaefer Salt Recovery, Inc., 542 F.3d 90, 97 (3d Cir. 2008) ; see also Charles Alan Wright, Arthur R. Miller, et al., 5A Fed. Prac. & Proc. Civ. § 1336.3 (4th ed. West. 2021) ("Wright and Miller") (the main purpose of Rule 11 is to deter improper behavior, not to compensate the victims of it or punish the offender).⁵

If all the procedural prerequisites for determining whether a Rule 11 violation has occurred have been met, see Fed. R. Bankr. P. 9011(c)(1) — and there is no issue in this case regarding those procedural prerequisites — the decision to impose sanctions is discretionary, not mandatory. See Waltz v. Cty. of Lycoming, 974 F.2d 387, 390 (3d Cir. 1992) ; In re GSC Grp., Inc., 502 B.R. 673, 754 (Bankr. S.D.N.Y. 2013). If sanctions are imposed, they must be "limited to what is sufficient to deter repetition" of the conduct that violated the rule. See Fed. R. Bankr. P. 9011(c)(2).

B. The Asserted Violations of Rule 7008

1.

The Debtor's request for sanctions is largely grounded in their assertion that the Kulls’ violated Fed. R. Bankr. P. 8 (incorporated by Fed. R. Bankr. P. 7008 ) by filing the Answer.⁶

This is the first problem with the Debtor's request for sanctions. Rule 8 is not Rule 11. A violation of Rule 8 is not a per se violation of Rule 11. See Elan Microelectronics Corp. v. Apple, Inc., 2009 WL 2972374, at *4 (N.D. Cal. Sept. 14, 2009) ("whether a party has complied with Rule 11(b) and whether it has complied with Rule 8 are two separate inquiries").

Rule 8 prescribes the requirements for pleadings filed in federal court. The general purpose and functioning of Rule are explained well in a leading treatise:

[ Rule 8 ] is intended to inform a pleader how to challenge and place in issue some or all of the allegations in the preceding pleading. The provision directs the author of a responsive pleading, whether it be an answer or a reply, to state in short and plain terms his defenses to each claim asserted against him and to admit or deny the allegations upon which the adverse party relies. ... A failure to deny an allegation when a responsive pleading is required results in it being treated as admitted according to Rule 8(b)(6). As has been noted in many judicial opinions, the theory of Rule 8(b) is that a defendant's pleading should apprise the opponent of those allegations in the complaint that stand admitted and will not be in issue at trial and those that are contested and will require proof to be established to enable the plaintiff to prevail.

5 Wright & Miller § 1261 (footnotes omitted).⁷

The primary remedy for violating Rule 8 is not an award of monetary sanctions. Most commonly, a party aggrieved by a violation of Rule 8(b) will invoke either: (1) Rule 12(f) to request that the answer be stricken, typically with leave to amend⁸ or (2) Rule 8 itself to request that the corresponding allegation be treated as an admission.⁹

Here, the Debtor jumped right to a request for monetary sanctions.

In invoking Rule 9011, the Debtor did not identify the subsection of Rule 9011(b) he claims the Kulls violated. I presume that he relies on either Rule 9011(b)(1) or (b)(4).

2.

With respect to Rule 9011(b)(1) — which refers to the presentation of a document to purposefully harass or cause unnecessary...