Rule 11 Sanctions

RULE 11 and other SANCTIONS

In re Lehtinan, 564 F.3d 1052 (9th Cir. 2009)

Bankruptcy court was authorized to suspend an attorney from practice under its inherent

authority to sanction for bad faith conduct.

In re Brooks-Hamilton, 400 B.R. 238 (9th Cir. BAP 2009)

After remand to the bankruptcy court for further findings, the BAP remanded once again to

determine, in accordance with the 4-part test of In re Crayton, infra whether the six-month

suspension imposed on the attorney in question was appropriate

.

In re Stasz, 387 B.R. 271 (9th Cir. BAP 2008)

Failure to comply with repeated orders to appear at a Rule 2004 exam justified order of

contempt and award of attorney fees as sanctions.

Hale v. United States Trustee, 509 F.3d 1139 (9th Cir. 2007)

Bankruptcy court did not abuse discretion in sanctioning counsel for repeatedly assisting

pro se debtors without appearing as counsel and without performing critical and necessary

services.

In re Brooks-Hamilton, 329 B.R. 270 (9th Cir. BAP 2005), aff’d in part, rev’d in part, remanded,

271 Fed.Appx. 654 (2008).

Bankruptcy court did not abuse discretion in imposing a six-month suspension from

practice.

In re Hercules Enterprises, Inc., 387 F.3d 1024 (9th Cir. 2004)

In order to find civil contempt, “the bankruptcy court had to find that he violated a specific

and definite order and that he had sufficient notice of its terms and the fact that he would be

sanctioned if he did not comply.” Bankruptcy court had power to sanction for civil contempt, but

not to make such sanction nondischargeable in future bankruptcies.

In re DeVille, 361 F.3d 539 (9th Cir. 2004)

Bankruptcy court properly sanctioned attorneys pursuant to its inherent power, but the

B.A.P. was correct that neither that power nor B.R. 9011 authorized punitive sanctions.

In re Silberkraus, 336 F.3d 864 (9th Cir. 2003)

Fact that the debtor filed a bankruptcy petition only two days before a state court was to

schedule a trial date on a creditor’s claims for specific performance; the admissions by the debtor

and his counsel that reorganization was impossible over the objections of creditors; and the fact

that bankruptcy could not have provided more value to the debtor than proceeding with the state

court action support bankruptcy court’s finding that filing was frivolous and for an improper

purpose. Rule 9011(c)(1)(A)’s safe harbor provision does not apply to the filing of the initial

petition.

In re Dyer, 322 F.3d 1178 (9th Cir. 2003)

“Serious” punitive damages may not be awarded under § 105 for civil contempt of the

automatic stay by entities who are not individuals. Only compensatory sanctions, attorney fees and

271

compliance with the stay may be awarded. The bad faith required to find a violation of the

automatic stay is something less than what’s required to impose Chambers sanctions. Nor can

punitive sanctions be awarded under the court’s inherent power to sanction.

Chambers v. NASCO, Inc., 501 U.S. 32, 111 S.Ct. (1991)

In re Larry’s Apartment, L.L.C., 249 F.3d 832 (9th Cir. 2001)

Bankruptcy court must apply federal law in determining what sanctions are to be imposed

for conduct by attorney or party in bankruptcy court litigation.

Estrada v. Speno and Cohen, 244 F.3d 1050 (9th Cir. 2001)

District court may order a default judgment without considering alternative sanctions when

a party willfully, repeatedly, and persistently disobeys court orders to attend court proceedings.

Primus Automotive Financial Services, Inc. v. Batarse, 115 F.3d 644 (9th Cir. 1997)

Court must make finding of bad faith as a condition to awarding sanctions under Nasco

In re Rainbow Magazine, Inc., 77 F.3d 278 (9th Cir. 1996)

Chambers sanctions may be imposed by bankruptcy court even on a nonparty. Sequoia

legislatively overruled

Trulis v. Barton, 67 F.3d 779 (9th Cir. 1995)

Rule 11 – Nasco and § 1927 sanctions for continuing lawsuit without client authority, etc.

Ortega v. O’Connor, 50 F.3d 778 (9th Cir. 1995)

There is no dispute that, in a proper case, a trial court may exclude a party’s witness as a

sanction for failure to comply with a pretrial order. See FRCP 16(f); Ackley v. Western Conf. Of

Teamsters, 958 F.2d 1463, 1471 (9th Cir. 1992); United States v. Valencia, 656 F.2d 412, 415 (9th

Cir. 1981).

In re Marsch, 36 F.3d 825 (9th Cir. 1994)

Distinguishing Townsend, court finds that a filing may be filed for an improper purpose,

even if it isn’t frivolous. A restitutionary award compensating the opposing party for unnecessary

litigation expenses – as opposed to a punitive fine paid to the court – is a particularly appropriate

sanction in cases involving manipulative petition filed principally for purposes of delay and

harassment

Hedges v. RTC, 32 F.3d 1360 (9th Cir. 1994), cert. denied, 514 U.S. 1082 (1995)

Rule 9011 was amended from “bankruptcy court” to “judicial officer” so District Courts

may now impose sanctions in bankruptcy appeals

Gaskell v. Weir, 10 F.3d 626 (9th Cir. 1993)

1. Burden of proof is on sanctionee to prove inability to pay

2. The district court did not abuse its discretion in basing the sanctions on the attorney fees

reasonably incurred by the defendants in defending the lawsuit. In a case like this, where the

original complaint is the improper pleading, all attorney fees reasonably incurred in defending

against the claims asserted I the complaint form the proper basis for sanctions. See Lockary v.

272

Kayfetz, 974 f.2d 1166, 1176-77 (9th Cir. 1992) (approving a Rule 11 sanction based on the

attorney fees incurred to combat the improper pleading).

Combs v. Rockwell Int’l Corp., 927 F.2d 486 (9th Cir. 1991), cert. denied, 502 U.S. 859 (1991)

Falsifying deposition transcripts is good cause for dismissal.

Lockary v. Kayfetz, 974 F.2d 1166 (9th Cir. 1992), cert. denied, 508 U.S. 931 (1993)

Nasco sanctions reviewed

Ferdik v. Bonzelet, 963 F.2d 1258 (9th Cir. 1992), cert. denied, 506 U.S. 915 (1992)

In determining whether to dismiss a case for failure to comply with a court order, the

district court must weigh five factors including

(1) the public’s interest in expeditious resolution of litigation;

(2) the court’s need to manage its docket;

(3) the risk of prejudice to the defendants

(4) the public policy favoring disposition of cases on their merits and

(5) the availability of less drastic alternatives

Thompson, 782 F.2d at 831; Henderson, 779 F.2d at 1423-24.

Although it is preferred, it is not required that the district court make explicit findings in

order to show that it has considered these factors and we may review the record independently to

determine if the district court has abused its discretion Malone, 833 F.2d at 130. Henderson at

1424.

Business Guides, Inc. v. Chromatic Commun. Enterprises, Inc., 111 S.Ct. 922 (1991)

Party held to reasonable inquiry standard, even though it did not sign pleading

Business Guides - 892 F.2d 802 (9th Cir. 1989), aff’d, 498 U.S. 533, 111 S.Ct 922 (1991) -

reasonable inquiry – objective standard applied (complete review)

Cooter & Gell v. Hartmarx Corp. 496 U.S. 384 (1990)

1. Rule 41 (a)(1) dismissal does not deprive court of jurisdiction to decide Rule 11 issue

2. Abuse of discretion standard of review applies to all aspects of Rule 11 award.

3. Rule 11 does not authorize District Court to impose attorney fee incurred on appeal

U.S. v. Stringfellow, 911 F.2d 225 (9th Cir. 1990)

Failure to cite relevant authority does not alone justify imposition of sanctions.

Townsend v. Holman Consulting Corp., en banc, 929 F2d 1358 (9th Cir. 1990)

Sanctions may be imposed for failure to conduct reasonable investigation before filing

complaint, Murphy overruled – complete review of Rule 11 9th Cir. Cases

In re Fitzsimmons, 920 F.2d 1468 (9th Cir. 1990)

Failure to request transcript and post fee for 8 months = bad faith. No need ton consider

alternative sanctions when bad faith involved.

Adriana Int’l Corp. v. Thoeren, 913 F.2d 1406 (9th Cir. 1990), cert. denied, Lewis & Co. v.

Thoeren, 498 U.S. 1109 (1991)

Dismissal appropriate for outrageous conduct

Bank of Maui v. Estate Analysis, Inc., 904 F.2d 470 (9th Cir. 1990)

Uncertainty of B.A.P. decision’s binding effect on circuit precludes sanctioning party

seeking contrary result. Issue: whether creditor can sue for fraudulent conveyances

Maisonville v. F2 America, Inc., 902 F.2d 746 (9th Cir. 1990), cert. denied, Dombroski v.

F2America, Inc., 498 U.S. 1025 (1991)

FRCP 11 sanction proper for attorney’s failure to make reasonable inquiry before filing

factually frivolous motion for reconsideration

In re Donovan, 871 F.2d 807 (9th Cir. 1989)

Failure to prosecute B.A.P. appeal – dismissed as sanction; failure to consider alternatives

West Coast Theater Corp. v. City of Portland, 897 F.2d 1519 (9th Cir. 1990)

Party cannot avoid dismissal by arguing that her attorney is to blame – complete noncooperation

justified dismissal under Rule 41

Hamilton Copper & Steel Corp. v. Primary Steel, Inc., 898 F.2d 1428 (9th Cir. 1990)

When is dismissal appropriate for failing to abide by court instructions

In re Villa Madrid, 110 B.R. 919 (9th Cir. B.A.P. 1990)

Sanctions on attorney for filing client’s bad faith bankruptcy petition

Hudson v. Moore Business Forms, Inc. 898 F.2d 684 (9th 1990)

Lack of opportunity to respond orally before Rule 11 sanctions imposed does not violate

due process if attorney had full opportunity to respond in writing – duty to mitigate

In re Karelin, 109 B.R. 943 (9th Cir. B.A.P. 1990)

FRCP 16(f) – no abuse is excluding evidence not exchanged with the other side

Zambrano v. City of Tustin, 885 F.2d 1473 (9th Cir. 1989)

Court may impose sanctions for violation of local rules only upon showing of bad faith,

willful disobedience, or gross negligence or recklessness

In re Balboa Improvements, Ltd., 99 B.R. 966 (9th Cir. B.A.P. 1989)

Court may award sanctions even if it lacks subject matter jurisdiction

Greco v. Stubenberg, 859 F.2d 1401 (9th Cir. 1988)

District court properly dismissed appeal for failure to meet deadlines

In re Bersher Investment, 95 B.R. 126 (9th Cir. B.A.P. 1988)

Failure of debtor’s counsel to notify movant that he would not opposed motion justifies

sanctions

King v. Idaho Funeral Service Assoc, 862 F.2d 744 (9th Cir. 1988)

In re Asher Film Ventures Int’l., Inc., 89 B.R. 80 (9th Cir. B.A.P. 1988)

Sanctions against attorney for pleadings upheld

In re Akridge, 89 B.R. 66 (9th Cir. B.A.P. 1988)

Union’s prosecution of 523(a)(6) case against a strike breaker was for purposes of

harassment only

In re Webre, 88 B.R. 242 (9th Cir. B.A.P. 1988)

Relitigation of issues decided solely for harassment

Zaldivar, v. City of L.A. , 780 F.2d 823, 828 (9th Cir. 1986)