Gibbs v. Goddard Riverside Cmty. Ctr. (In re Gibbs)

658 B.R. 804

IN RE: Geddes Sean Schubert GIBBS, Natalie Fashina Langley Gibbs, Debtors.

Geddes S. Gibbs, Alfred McZeal, Jr., Plaintiffs, v. Goddard Riverside Community Center, Roderick L. Jones, Merrill T. Dobson,Andrea Cain Lawson, Christopher Auguste,Nancy Rochford, Marcia Bystryn, Howard Stein, Defendants.

Case No. 5:23-00406-MJC

Adversary Proceeding No. 5:23-00014-MJC

United States Bankruptcy Court, M.D. Pennsylvania

Signed March 15, 2024

Eve I. Klein, Duane Morris LLP, New York, NY, Lawrence Joel Kotler, Alison Morris, Alison C. Morris, Duane Morris LLP, Philadelphia, PA, for Defendants.

OPINION

Mark J. Conway, Bankruptcy Judge

I. Introduction

Before the Court is Defendants' Motion for Sanctions Against Alfred McZeal, Jr. Pursuant to Federal Rule of Bankruptcy Procedure 9011 ("Motion for Sanctions"). After a hearing, the Court granted the Motion and took under advisement the issue of what sanctions would be imposed. As more fully explained below, the Court has determined that an award of $75,000 in attorney's fees and an injunction from filing another action against Defendants in this Court without prior Court approval are the appropriate sanction in this proceeding.

II. Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Standing Order of Reference of the United States District Court for the Middle District of Pennsylvania dated March 11, 2016. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Although the main bankruptcy case and the Adversary Proceeding were dismissed, this Court retained jurisdiction over the Motion for Sanctions. See In re Schaefer Salt Recovery, Inc., 542 F.3d 90, 98 (3d Cir. 2008). Venue is proper pursuant to 28 U.S.C. § 1409(a).

III. Background

A. The Bankruptcy Case

Debtors Geddes and Natalie Gibbs ("Debtors") filed this voluntary Chapter 13 bankruptcy case without the assistance of legal counsel on February 27, 2023. This was Debtors' second recent bankruptcy filing. Debtors filed a Chapter 7 case on July 24, 2019 (Case No. 5:19-bk-03176) and received a discharge on November 8, 2019.¹ Because of Debtors' previous discharge, no discharge was available in this bankruptcy case.

Debtors filed this case to stay a pending sheriff's sale of their residence in Stroudsburg, Pennsylvania. On Schedule E/F, Debtors listed Freedom Mortgage Corporation ("Freedom Mortgage") with an unsecured debt of $273,426.59 and Homebridge Financial Services with an unsecured debt of $275,793.00. Freedom Mortgage objected to confirmation of Debtors' proposed Chapter 13 Plan because it did not provide for anticipated pre-petition arrears of approximately $89,151.38. See Bk. Dkt. # 28.² Freedom Mortgage later moved for relief from the automatic stay alleging three missed post-petition payments totaling $5,839.29. Debtors failed to respond to Freedom Mortgage's motion and the Court granted stay relief on June 8, 2023. See Bk. Dkt. # 72.

The original Chapter 13 Plan was met with objections by the Chapter 13 Trustee and Freedom Mortgage. The Court denied confirmation of the initial plan with leave to amend. Confirmation of the First Amended Plan was also denied after Debtors failed to serve the plan. Debtors' bankruptcy case was dismissed on August 10, 2023 pursuant to the Chapter 13 Trustee's Motion to Dismiss for failure to file an amended plan. See Bk. Dkt. # 136. In the Order dismissing the case, the Court specifically retained jurisdiction over the Motion for Sanctions. See Id.

B. The Adversary Proceeding

Acting pro se, Debtor Geddes Gibbs ("Debtor") and Alfred McZeal ("McZeal" and jointly with Debtor "Plaintiffs") commenced this action by filing a complaint ("Complaint") against Goddard Riverside Community Center ("GRCC") and seven individuals who are either employed by or are directors of GRCC. The factual predicate for the Complaint is Debtor's termination from his employment with GRCC. Debtor sought an accommodation from GRCC's CoVid 19 policies based on his religious beliefs. GRCC granted Debtor an accommodation, excusing him from the vaccination requirement but required him to wear a mask and provide weekly proof of negative CoVid tests. After he refused to comply, GRCC terminated his employment. The Complaint does not contain any facts relating to a relationship or transaction of any kind between McZeal and GRCC.

The Complaint asserts nineteen counts for civil rights violations, Fourth and Fifth Amendment violations, Equal Protection violations, Fair Debt Collection Practices Act violations, Racketeer Influenced and Corrupt Organizations Act violations, fraud, negligent misrepresentation, wrongful termination, civil conspiracy, unjust enrichment, equitable estoppel, cancellation of written instruments, intentional infliction of emotional/mental distress and pain, retaliation, and a declaratory judgment. Plaintiffs requested damages totaling over $22,250,000.

In response to the Complaint, Defendants filed a Motion to Dismiss the Complaint in its entirety ("Motion to Dismiss") and the Motion for Sanctions. Dkt. #'s 22 and 20. McZeal filed an Objection to the Motion for Sanctions. Dkt. # 31. Plaintiffs failed to respond to the Motion to Dismiss - claiming at the hearing that they were not served with the motion. The Court dismissed the Complaint and set an evidentiary hearing on the Motion for Sanctions. Without providing any reason or excuse, McZeal failed to appear for the evidentiary hearing and the Court granted the Motion for Sanctions.

IV. Discussion

A. Fed. R. Bankr. P. 9011

Defendants moved under Rule 9011 for sanctions against McZeal. Rule 9011 provides in material 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.

Fed. R. Bankr. P. 9011 (emphasis added).

Rule 9011 expressly applies to pro se parties. See In re Jones, 632 B.R. 138, 147 (Bankr. S.D. Ohio 2021) ("pro se litigants are not exempted from the duties of Rule 9011, including the obligation to put forth nonfrivolous arguments") (citing cases); In re Dizinno, 559 B.R. 400, 413 (Bankr. M.D. Pa. 2016); In re Theokary, 468 B.R. 729, 746 (Bankr. E.D. Pa. 2012).

If the court determines that a party has violated the Rule, the court may "impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation." Fed. R. Bankr. P. 9011(c). The purpose of the Rule is to deter baseless filings, In re Schaefer Salt Recovery, Inc., 542 F.3d 90, 99 (3d Cir. 2008), and "avoid unnecessary judicial effort, the goal being to make proceedings . . . more expeditious and less expensive," Jones, 632 B.R. at 146 (quoting 10 Collier on Bankr. ¶ 9011.01 (Richard Levin & Henry J. Sommer eds. 16th ed.)).

Rule 9011(c) has a specific procedure to be followed prior to sanctions being imposed:

(1) the motion must be made separate and apart from other motions or requests; (2) it must describe the specific representations or conduct that violated the Rule, and (3) it may not be filed with the court unless, within twenty-one days of service of the motion, the non-movant has not withdrawn or corrected the challenged behavior.

Dizinno, 559 B.R. at 414 (citing In re Ryan, 411 B.R. 609, 616 (Bankr. N.D. Ill. 2009)). Referred to as the "safe harbor" provision, Rule 9011(c) allows a party who is alleged to have committed a violation of Rule 9011, a period of twenty-one (21) days to correct or withdraw the pleading before a Rule 9011 motion is filed. In re Klitsch, 587 B.R. 287, 294 (Bankr. M.D. Pa. 2018).³

B. Conduct Giving Rise to Rule 9011 Sanctions

Defendants filed their Motion for Sanctions on May 30, 2023, the same day as the Motion to Dismiss. McZeal filed a largely incoherent response in opposition ("Objection") to the Motion for Sanctions but did not attend the scheduled evidentiary hearing. In his Objection, McZeal argued that the Motion for Sanctions was filed in bad faith and was being used for the improper purpose of harassing him and forcing him (and Debtor) to dismiss the Complaint. He further argued (without any proper legal authority) that he does not need to be a past employee of GRCC to have standing to bring this Complaint.

As stated above, the Complaint recites facts relating to only Debtor's employment with, and termination from GRCC. There is not a single fact relating to McZeal in the fifty-two page Complaint and over fifty pages of attached exhibits. Nevertheless, McZeal signed the pleadings under penalty of perjury that they were true and correct. See Dkt. # 1 at 53. Moreover, McZeal shamelessly demanded over $22 million dollars in damages in the Complaint, even though he failed to allege that he had any connection to the Defendants or sustained any injury in fact.

Throughout this proceeding, McZeal has been given multiple opportunities to explain how he has any connection to GRCC or the individual Defendants, and how he has been injured in any way that would give rise to a claim...