Thomas v. Office of Tenn. Attorney Gen. (In re Thomas)

IN RE: WILLIAM HAROLD THOMAS, JR., Debtor.

WILLIAM HAROLD THOMAS, JR., Appellant, v. OFFICE OF THE TENNESSEE ATTORNEY GENERAL; MICHAEL WILLEY,Senior Assistant Attorney General, Appellees.

No. 20-8002

BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

November 23, 2020

By order of the Bankruptcy Appellate Panel, the precedential effect of this decision is limited to the case and parties pursuant to 6th Cir. BAP LBR 8024-1(b). See also 6th Cir. BAP LBR 8014-1(c).

File Name: 20b0009n.06

Appeal from the United States Bankruptcy Court for the Western District of Tennessee at Memphis.

No. 2:16-bk-27850—Jennie D. Latta, Judge.

Before: BUCHANAN, MASHBURN, and PRICE SMITH, Bankruptcy Appellate Panel Judges.

COUNSEL

ON BRIEF: William H. Thomas, Jr., Memphis, Tennessee, in pro per. Stuart F. Wilson-Patton, OFFICE OF THE TENNESSEE ATTORNEY GENERAL, Nashville, Tennessee, for Appellees.

OPINION

RANDAL S. MASHBURN, Bankruptcy Appellate Panel Judge. Debtor-Appellant William H. Thomas, Jr.'s pursuit of a "Rule 11" motion backfired when the Bankruptcy Court determined that it was the Debtor himself who should be sanctioned for filing the motion. The Bankruptcy Court found that the motion failed to comply with the procedural "safe harbor" requirements of Federal Rule of Bankruptcy Procedure 9011, but then also considered the motion on substantive grounds. For the reasons stated, we affirm based on procedure alone.

ISSUES ON APPEAL

The Debtor stated six issues on appeal, including, among others, whether the Bankruptcy Court erred in concluding that (i) the Debtor lacked standing due to the appointment of a Chapter 11 trustee and (ii) the Debtor's motion lacked merit. The Debtor also questioned whether the Bankruptcy Court properly awarded sanctions to the opposing party, the Office of the Tennessee Attorney General, and properly awarded such sanctions without conducting a hearing. Significantly, the Debtor did not appeal the Bankruptcy Court's denial of the Debtor's motion for failure to comply fully with the procedural requirements of Rule 9011.

Because the Panel finds the procedural grounds to be both threshold and dispositive in this case, this opinion addresses only whether the Bankruptcy Court abused its discretion in (i) denying the Debtor's motion for sanctions for failure to comply with Rule 9011 procedural requirements, (ii) awarding sanctions against the Debtor, and (iii) doing so without conducting a hearing. The Panel declines to review the Bankruptcy Court's decisions as to the Debtor's standing and the merits of the Debtor's arguments.

JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit (the "Panel") has jurisdiction to decide this appeal. The United States District Court for the Western District of Tennessee has authorized appeals to the Panel, and no party elected to have this appeal heard by the district court. 28 U.S.C. § 158(b)(6), (c)(1). Final orders of the bankruptcy court are appealable as of right. 28 U.S.C. § 158(a)(1). "Orders in bankruptcy cases qualify as 'final' when they definitively dispose of discrete disputes within the overarching bankruptcy case." Ritzen Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 586 (2020) (citing Bullard v. Blue Hills Bank, 575 U.S. 496, 501, 135 S. Ct. 1686 (2015)). The Panel recently recognized that bankruptcy court orders imposing sanctions under Rule 9011 are final, appealable orders. In re Lane, 604 B.R. 23, 27 (B.A.P. 6th Cir. 2019). Such orders do not become final until assessment of any fees and expenses. Id. (citing Hoover v. Jones (In re Jones), 546 B.R. 12, 15 (B.A.P. 6th Cir. 2016)).

In this case, the Debtor filed his notice of appeal on March 3, 2020, six days after entry of the Bankruptcy Court's Order Denying "Motion for Sanctions Pursuant to Rule 9011 of the Federal Rules of Bankruptcy Civil Procedure Against the Office of the Tennessee Attorney General Including Michael Willey" on February 26, 2020 ("Order Denying Motion for Sanctions"), but before the entry of a supplemental Order Granting Award of Attorney Fees to Tennessee Attorney General's Office on May 29, 2020 ("Order Awarding Fees"). (Order Denying Motion for Sanctions, Bankr. Case No. 16-27850, ECF No. 854; Order Awarding Fees, ECF No. 1140). Despite being premature, the Debtor's notice of appeal is valid pursuant to Rule 8002(a), which treats notices of appeal filed after announcement of a decision or order but before entry of the order as having been filed "on the date of and after the entry." Fed. R. Bankr. P. 8002(a). The premature notice of appeal is considered "suspended" until entry of the final order and "ripened" upon such entry. Markowitz v. Campbell (In re Markowitz), 190 F.3d 455, 460-61 (6th Cir. 1999). Jurisdiction vested in the Panel upon the final disposition by the Bankruptcy Court on May 29, 2020. See id.

In this case, the Bankruptcy Court included in the Order Denying Motion for Sanctions an award to the Attorney General of the attorney's fees and expenses it incurred in opposing the Debtor's Motion and left only the determination of the amount for a later date. Since the Debtor timely appealed the Order Denying Motion for Sanctions, the Panel may consider issues relating to the award of sanctions generally. The Debtor would need to file a new notice of appeal after entry of the Order Awarding Fees only if he appealed an issue particular to that order or if that order altered or amended the Order Denying Motion for Sanctions. See Markowitz, 190 F.3d at 460. Such is not the case.

The Panel reviews orders awarding sanctions for an abuse of discretion by the bankruptcy court. B-Line, LLC v. Wingerter (In re Wingerter), 594 F.3d 931, 936 (6th Cir. 2010); Mapother & Mapother, P.S.C. v. Cooper (In re Downs), 103 F.3d 472, 480-81 (6th Cir. 1996) (adopting the abuse of discretion standard for review of Rule 9011 decisions). An abuse of discretion may be found when the Panel has a "definite and firm conviction that the [court below] committed a clear error of judgment." Mayor of Baltimore v. West Virginia (In re Eagle-Picher Indus., Inc.), 285 F.3d 522, 529 (6th Cir. 2002) (citations omitted). A court "abuse[s] its discretion if it base[s] its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S. Ct. 2447, 2461 (1990). In conducting its review, the Panel does not substitute its judgment for that of the bankruptcy court. See Eagle-Picher, 285 F.3d at 529. Instead, the Panel asks "whether a reasonable person could agree with the bankruptcy court's decision; if reasonable persons could differ as to the issue, then there is no abuse of discretion." Id. (quoting Barlow v. M.J. Waterman & Assocs., Inc. (In re M.J. Waterman & Assocs., Inc.), 227 F.3d 604, 608 (6th Cir. 2000)).

The Panel reviews any findings of fact for clear error and conclusions of law de novo. Wingerter, 594 F.3d at 935-36.

FACTS

The Debtor commenced his Chapter 11 bankruptcy case in 2016, and in late 2018 a creditor moved for the appointment of Chapter 11 trustee. The Tennessee Department of Transportation ("TDOT"), represented by the Office of the Tennessee Attorney General, and specifically Michael Willey (collectively, the "Attorney General"), filed a notice of joinder, as did another creditor. The Bankruptcy Court granted the motion in January 2019, and promptly approved the appointment of Michael Collins as Chapter 11 Trustee. The Debtor appealed the Bankruptcy Court's order and filed a motion to stay the order pending appeal, which the Bankruptcy Court denied.

One year later, on January 20, 2020, the Debtor filed a motion titled Motion for Sanctions Pursuant to Rule 9011 of the Federal Rules of Bankruptcy Civil Procedure Against the Office of the Tennessee Attorney General Including Michael Willey ("Motion for Sanctions" or "Motion"). (Motion, Bankr. Case No. 16-27850, ECF No. 787). The Debtor certified that he served the Motion through the Bankruptcy Court's electronic filing and noticing system.

The Debtor's Motion largely consists of his reference to and description of four attachments: (i) a December 9, 2019 letter from the Debtor to Mr. Willey in which the Debtor states that he intended the letter to comply with Rule 9011 notice requirements before the Debtor proceeded with filing a motion for sanctions; (ii) a December 20, 2019 response letter from Mr. Willey; (iii) a pleading filed by Mr. Willey for the Attorney General on behalf of TDOT on January 9, 2020; and (iv) a January 17, 2020 letter from the Debtor to Mr. Willey that makes no mention of Rule 9011.

Aside from the attachments, the Debtor made two conclusory statements in the Motion. First, he contended that Mr. Willey has "file[d] pleadings, motions and other papers that were improper and submitted in order to harass and cause delay and increase the cost of litigation without necessary support required by 9011(b)(2)(3) and (4)." (Motion at 1). Second, the Debtor contended that the January 9, 2020 pleading "contained numerous other erroneous conclusions of law and statements of fact which have been outlined by Debtor in a letter dated January 17, 2020." (Id. at 2). In the Motion, the Debtor quoted two paragraphs from the January 9, 2020 pleading for the initial allegedly erroneous conclusion of law or statement of fact but did not explain the error. The Debtor included no facts or argument in the Motion itself to support his conclusions. Instead, the Debtor relied entirely on letter attachments both for the substance of his arguments and for compliance with the notice requirement of Rule 9011. Debtor purported to have sent both letters by email.

Finally, the Debtor requested a hearing "to determine what corrective actions are required and whether any sanctions should be granted." (Id. at 3). The Debtor signed his Motion as "Pro se Attorney," and provided his Tennessee attorney license number.

The Attorney General filed a...