In re: Moniello
Order Affirming the Decision of the Bankruptcy Court. The clerk is directed to enter judgment and close the file. Signed by Judge Stefan R. Underhill on 9/17/2018 (Pincus, A).
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
No. 3:17-cv-01801 (SRU)
RULING AND ORDER ON APPEAL FROM
ORDER IMPOSING SANCTIONS
Michael Rozea, Esq. (“Attorney Rozea”) timely appealed an order of United States
Bankruptcy Judge James J. Tancredi dated October 10, 2017. Doc. No. 1-1, Notice of Appeal
from Bankruptcy Court, Order, at 1-4.1 The Order instructs Attorney Rozea to pay $2,000.00 to
the Clerk of the Court and $3,000.00 to Debtor Dorothy Moniello (“Moniello”), as well as
consult with “experienced bankruptcy counsel” to develop “a protocol with regard to motion for
relief from stay practice, reasonably calculated to avert the mistakes” found by the Bankruptcy
Court. Id. at 4.
In the Order, the Bankruptcy Court held that Attorney Rozea had “occasioned a cascade
of grave legal consequences, denigrated the legal process of [the Bankruptcy Court], and resulted
in the wrongful removal of a vulnerable human being from her home.” Order, Doc. No. 1-1, at 4.
As a result of that finding, the Bankruptcy Court sanctioned Attorney Rozea under “the inherent
authority” of the Bankruptcy Court, also relying on “undisputed core principles that relate to
An Amended Order was filed on December 19, 2017 to correct a reference to Federal Rule of
Bankruptcy Procedure 9011, which was referred to as Federal Rule of Bankruptcy Procedure 9019 on
page 4. Citations in this ruling are to the pages of the original Order.
Federal Rule of Bankruptcy Procedure 9011 [and] the Code of Professional Responsibility.”
Transcript of Bench Ruling on Order to Show Cause, Oct. 6, 2017 (“Bench Ruling Transcript”),
Doc. No. 10, at 8:4–8:7.
Attorney Rozea argued that the Order was based on an incorrect factual finding, and that
the Bankruptcy Court applied an erroneous standard in ordering sanctions against him. I am
unpersuaded by Attorney Rozea’s arguments. The Bankruptcy Court acted within its discretion
under its inherent authority and made no clearly erroneous factual findings against Attorney
Rozea. Accordingly, I affirm the decision of the Bankruptcy Court.
On July 6, 2016, Moniello, proceeding pro se, filed a chapter 13 bankruptcy petition in
United States Bankruptcy Court. See Order to Appear and Show Cause, Doc No. 16-18, at 2. On
August 30, 2016, Attorney Rozea filed a motion for relief from stay on behalf of Wells Fargo
Bank, National Association (“Wells Fargo”), asserting that Wells Fargo held title to Moniello’s
property.2 See Motion for Relief, Doc. No. 16-8, at 2. Judge Tancredi granted Wells Fargo’s
motion for relief from stay on September 23, 2016, granting relief to Wells Fargo and its
“successors and assignees.” Order Granting Relief from Stay, Doc. No. 16-10, at 2. Wells Fargo
had, however, sold its interest in the property to Shmuel Aizenberg on July 29, 2016. See Special
Warranty Deed from Wells Fargo to Shmuel Aizenberg, Doc. No. 16-2, at 3. The sale occurred
nearly two weeks before Attorney Rozea filed the motion for relief in which he represented to
the Bankruptcy Court that Wells Fargo still held title to the property. See Motion for Relief, Doc.
There is a discrepancy in the papers regarding whether Wells Fargo owned an undivided one-half
interest in the property in question or whether Wells Fargo owned the entire property. See Appellant’s
Brief, Doc. No. 16, at 3-4; Order to Appear and Show Cause, Doc. No. 16-18, at 2-3. That discrepancy is
not material to the issue here.
No. 16-8, at 2. Shmuel Aizenberg subsequently sold the property to Super Zen, LLC on
September 1, 2016. See Quit Claim Deed from Shmuel Aizenberg to Super Zen, LLC, Doc. No.
16-6, at 3.
On September 29, 2016, Super Zen LLC initiated a summary process action naming
“John Doe” and “Jane Doe” as the defendants. See Summons and Complaint of Summary
Process Action, Doc. No. 16-7, at 2. The summary process complaint alleged that a notice to quit
possession had been served upon each defendant on August 24, 2016, at a time when Moniello’s
bankruptcy stay was still in effect. Id. at 3.
Moniello filed a motion to vacate and/or reconsider the order granting relief from stay on
October 6, 2016. See Debtor Motion to Vacate Order Granting Relief from Stay, Doc. No. 16-11,
at 2. Wells Fargo filed a response in which Attorney Rozea indicated that Wells Fargo still
owned the property, even though Wells Fargo had actually sold the property months earlier to
Shmuel Aizenberg on July 29, 2016. See Response to Motion to Vacate, Doc No. 16-12, at 2–3;
Special Warranty Deed from Wells Fargo to Shmuel Aizenberg, Doc. No. 16-2, at 3. After the
Court reconsidered the order, it again granted relief from stay. Order Granting Motion to Vacate,
and, after Reconsideration, Granting Motion for Relief from Stay, Doc. No. 16-13. Moniello’s
chapter 13 bankruptcy case was dismissed on January 6, 2017. Order Reopening Case for a
Limited Purpose, Doc. No. 16-14, at 2.
On September 8, 2017, Moniello filed a second chapter 13 case in response to the
Connecticut Housing Session’s issuance of an execution for possession of her home following a
trial in Connecticut Superior Court that resulted in judgment in favor of Ocean Management,
LLC. Bankruptcy Case No. 17-31385, Doc. No. 1. Moniello filed an emergency motion to stay
the eviction. Bankruptcy Case No. 17-31385, Doc. No. 8. In the motion to vacate, Moniello
alleged that she provided a notice of bankruptcy filing to the Connecticut State Marshal who was
evicting her, but he proceeded with the eviction. Id. at 2. The Bankruptcy Court held a hearing
on September 18, 2018 regarding the emergency stay motion, during which time it discovered
that Attorney Rozea may have misrepresented Wells Fargo’s property interest during the first
bankruptcy proceeding. Order to Appear and Show Cause, Doc. No. 16-18, at 5–7; Appellant’s
Brief, at 7.
After the September 18 hearing, the Bankruptcy Court ordered a show cause hearing to
determine, among other things, whether Attorney Rozea should be sanctioned for his failure to
inform the Court about the sale of Wells Fargo’s property to Shmuel Aizenberg. Order to Appear
and Show Cause, Doc No. 16-18, at 5–7.
Judge Tancredi held a show cause hearing on September 29, 2017. Order to Show Cause
Hearing Transcript, Doc. No. 9 (“Hearing Transcript”). On October 6, 2017, Judge Tancredi
issued a bench ruling on the order to show cause. Bench Ruling Transcript, Doc. No. 10. In the
bench ruling, Judge Tancredi made a factual finding that Attorney Rozea should have known,
and should have disclosed, that Wells Fargo had sold its interest in Debtor Moniello’s property at
the time Wells Fargo filed a Motion for Relief from Stay and acted “without reasonable
diligence” in representing that Wells Fargo still owned the property. Order, at 4; Bench Ruling
Transcript, Doc. No. 10, at 11:2–11:24. The Judge held that Attorney Rozea did not disclose to
the Bankruptcy Court any information about the sale, and that that mistake allowed the
Bankruptcy Court to vacate the order of relief from stay under Federal Rule of Civil Procedure
60(b) (which provides grounds for relief from a final order for “mistake, inadvertence, surprise,
or excusable neglect”). Bench Ruling Transcript, Doc. No. 10, at 11:2–11:24.
At the conclusion of the bench ruling, Judge Tancredi ordered that sanctions be imposed
on Attorney Rozea, for a total of $2,000.00 payable to the Clerk of the Court and $3,000.00
payable to Debtor Dorothy Moniello. Bench Ruling Transcript, Doc. No. 10, at 19:5–19:22;
Order, at 4. He also ordered Attorney Rozea to consult with “experienced bankruptcy counsel” to
develop “a protocol with regard to motion for relief from stay practice, reasonably calculated to
avert the mistakes” found by the Bankruptcy Court. Order, at 4, see also Bench Ruling
Transcript, Doc. No. 10, at 19:23–20:9.
Attorney Rozea timely appealed Judge Tancredi’s sanctions order.
Standard of Review
A federal district court has jurisdiction to hear appeals of “final judgments, orders, and
decrees” of the bankruptcy court for the same district pursuant to 28 U.S.C. § 158(a). When
reviewing bankruptcy appeals, the district court reviews conclusions of law de novo and applies
the clearly erroneous standard to findings of fact. In re Ionosphere Clubs, 922 F.2d 984, 988 (2d
Cir. 1990). The district court may “affirm, modify, or reverse a bankruptcy court’s judgment,
order, or decree[,] or remand with instructions for further proceedings.” In re Indicon, 499 B.R.
395, 400 (D. Conn. 2013) (quoting former Federal Rule of Bankruptcy Procedure 8013).
This court has jurisdiction to hear the present appeal. A district court has jurisdiction to
hear appeals “from final judgments, orders, and decrees” of the bankruptcy court. 28 U.S.C. §
158(a). The Bankruptcy Court’s Order did not intend to leave open any issues pertaining to the
issue of sanctions, and thus is treated as a final order. Order, Doc. No. 1-1, at 1–4.
B. Imposition of Sanctions.
The issues Attorney Rozea raises on appeal are: (1) whether the Bankruptcy Court abused
its discretion by imposing sanctions based on a determination that Attorney Rozea’s conduct had
“occasioned a cascade of grave legal consequences” and “resulted in the wrongful removal of a
vulnerable human being”, and (2) whether the Bankruptcy Court “made a clearly erroneous
factual finding in determining that Wells Fargo sold its interest in the property at issue on July
29, 2016.” Appellant Rozea Brief, Doc. No. 16, at 2. As discussed below, I hold that the
Bankruptcy Court did not abuse its discretion by sanctioning Attorney Rozea under its inherent
authority and that its factual finding is not clearly erroneous.
1. The Bankruptcy Court did not abuse its discretion by sanctioning Attorney Rozea
under its inherent authority.
Federal Rule of Civil Procedure 11 requires that when an attorney presents a “pleading,
written motion, or other paper” to the court, the attorney must certify that the information
presented is not being put forth for an “improper purpose, such as to harass, cause unnecessary
delay, or needlessly increase the cost of litigation” and that all “factual contentions have
evidentiary support or…will have evidentiary support after a reasonable opportunity for further
investigation or discovery.” Fed. R. Civ. P. 11(b). The rule provides that the court may order an
attorney to show cause why conduct has not violated Federal Rule 11(b), and may issue
sanctions for violation of Federal Rule 11(b) on its own initiative. Fed. R. Civ. P. 11(c)(3).
Bankruptcy Procedure 9011 essentially mirrors Federal Rule of Civil Procedure 11. It
states, in relevant part, that by presenting pleadings, petitions, written motions, or other papers to
the court, an attorney or unrepresented party is certifying that “to the best of the person’s
knowledge...formed after an inquiry under reasonable circumstances,” that the paper 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….” Fed. R. Bankr. P. 9011(b)(1).
Pursuant to Bankruptcy Rule 9011(c), if, after notice and an opportunity to respond, the
bankruptcy court determines that an attorney has violated Bankruptcy Rule 9011(b), it may
impose “an appropriate sanction.” In re Withrow, 405 B.R. 505, 513 (B.A.P. 1st Cir. 2009); see
also Fed. R. Bankr. P. 9011(c)(1). A sanction “shall be limited to what is sufficient to deter
repetition of such conduct or comparable conduct by others similarly situated” and can include
an order to pay a penalty to the court or some or all of the reasonable attorneys’ fees and
expenses to the movant. Fed. R. Bankr. P. 9011(c)(2).
In addition to the authority of Fed. R. Civ. P. 11 and Bankruptcy Rule 9011, “[f]ederal
courts, including bankruptcy courts, possess inherent authority to impose sanctions against
attorneys and their clients.” In re Plumeri, 434 B.R. 315, 327–28 (S.D.N.Y. 2010) (internal
citation omitted); see also In re Kalikow, 602 F.3d 82, 96–97 (2d Cir. 2010) (implying that
bankruptcy courts may utilize their “inherent powers” to impose sanctions). In addition, the
Supreme Court has held that “[a]lthough a court ordinarily should rely on [Federal Rule 11 or
other Federal Rules] when there is bad-faith conduct in the course of litigation that could be
adequately sanctioned under the rules, the court may safely rely on its inherent power if, in its
informed discretion, neither the statutes nor the rules are up to the task.” Chambers v. NASCO,
Inc., 501 U.S. 32, 33 (1991) (“Federal courts have the inherent power to manage their own
proceedings and to control the conduct of those who appear before them. In invoking the
inherent power to punish conduct which abuses the judicial process, a court must exercise
discretion in fashioning an appropriate sanction, which may range from dismissal of a lawsuit to
an assessment of attorney’s fees.”).
The Second Circuit has held that a court can impose sanctions under its inherent authority
when it finds “clear evidence that (1) the offending party’s claims were entirely without color,
and (2) the claims were brought in bad faith—that is, motivated by improper purposes such as
harassment or delay.” Eisemann v. Greene, 204 F.3d 393, 396 (2d Cir. 2000).
Here, the Bankruptcy Court used its inherent authority to sanction Attorney Rozea for
misleading the Bankruptcy Court about facts essential to the exercise of the judicial function.
The Bankruptcy Court held that “Attorney Rozea unfortunately and improperly and falsely
represented that Wells Fargo was the holder of record title” at a time when Wells Fargo did not
“possess the necessary legal standing” because Wells Fargo had “transferred and assigned its
interest in the subject property”, and that the fact of the prior sale was “irrefutably
demonstrate[d]” by the record. Bench Ruling Transcript, Doc. No. 10, at 10:13–11:7.
The Bankruptcy Court could have sanctioned Attorney Rozea under Federal Rule of Civil
Procedure 11 and Federal Bankruptcy Rule 9011. However, the Bankruptcy Court also has a
great deal of discretion to impose sanctions under its inherent authority, and it did not abuse that
discretion here. See Chambers, 501 U.S. at 33. The Bankruptcy Court did not err in holding that
by seeking affirmation of relief of stay “without verification, without affidavit, and without
reasonable diligence[,]” Attorney Rozea misled the Bankruptcy Court. Id. at 11:8–11:14.
Even if the Bankruptcy Court did not find that Attorney Rozea explicitly acted with
deliberate bad faith, a comparison may be made to conscious avoidance in the fraud context,
where a defendant who acts “with a conscious purpose to avoid learning the truth” may satisfy
the knowing and willful elements of fraud. See United States v. Henry, 888 F.3d 589, 601 (2d
Cir. 2018). It is reasonable to conclude that by failing to investigate the identity of the true owner
of the property formerly owned by Wells Fargo, Attorney Rozea consciously avoided learning
the truth, and thus can be sanctioned here.
Furthermore, the Bankruptcy Court correctly determined that as a result of Attorney
Rozea’s failure to disclose the change in property ownership, a “cascade of grave legal
consequences” occurred, culminating in the removal of Moniello from her home. Order, Doc.
No. 1-1, at 4. Although Attorney Rozea argues that Ocean Management’s notice to quit, which
was served on Moniello on August 24, 2016, while Moniello’s stay was still in effect, was
actually void, Appellant’s Brief, Doc. No. 16, at 11, Attorney Rozea filed a response to
Moniello’s motion to vacate and/or consider the order granting relief from stay in which he
indicated that Wells Fargo still owned the property, thereby causing the Bankruptcy Court to
grant relief from stay. See Response to Motion to Vacate, Doc No. 16-12, at 2–3; Order Granting
Motion to Vacate, and, after Reconsideration, Granting Motion for Relief from Stay, Doc. No.
16-13. Moniello’s chapter 13 bankruptcy case was then dismissed on January 6, 2017, and she
was eventually evicted from her home. Order Reopening Case for a Limited Purpose, Doc. No.
16-14, at 2.
But for Attorney Rozea’s misrepresentations to the Bankruptcy Court, the series of events
that eventually led to Moniello’s removal would not have taken place. Id. at 19:5–19:9.
Therefore, sanctions were appropriately imposed.
2. The Bankruptcy Court’s factual finding is not clearly erroneous.
Attorney Rozea also argues on appeal that the Bankruptcy Court “made a clearly
erroneous factual finding in determining that Wells Fargo sold its interest in the property at issue
on July 29, 2016.” Appellant Rozea Brief, Doc. No. 16, at 2. He contends instead that Wells
Fargo sold its interest in the property at issue on August 17, 2016. Id. at 12.
Both the July 29 and the August 17 dates find documentary support in the record; the
warranty deed is dated July 29, 2016, and the sale closed on August 17, 2016. The meaningful
date is July 29, 2016, because that is the date that Attorney Rozea should have been able to
determine that Wells Fargo was parting with ownership of the property. Accordingly, the
Bankruptcy Court’s factual finding is not clearly erroneous. Even if it were, the error would be
harmless because it would not affect the correctness of the sanctions order. A finding that the
transaction was completed on August 17, 2016 instead of on July 29, 2016 would not change the
outcome here because Attorney Rozea filed the motion for relief from stay on August 30, 2016.
Because the date that Attorney Rozea filed the motion was later than either potential sale date,
the misrepresentation to the court remains sanctionable. Therefore, this basis for appeal fails.
For the reasons stated above, the Bankruptcy Court’s sanctions order is affirmed.
Attorney Rozea is ordered to pay $2,000.00 to the Clerk of the Bankruptcy Court and $3,000.00
to Debtor Dorothy Moniello, as well as consult with “experienced bankruptcy counsel” to
develop “a protocol with regard to motion for relief from stay practice, reasonably calculated to
avert the mistakes” that the Bankruptcy Court determined Attorney Rozea made.
The clerk is directed to close the file.
Dated at Bridgeport, Connecticut, this 17th day of September 2018.
/s/ STEFAN R. UNDERHILL
Stefan R. Underhill
United States District Judge
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