In Re: William Matthew Black

Filing 9

ORDER AND REASONS: IT IS HEREBY ORDERED that the Bankruptcy Court's July 20, 2016 Order is AFFIRMED as set forth in document. Signed by Judge Nannette Jolivette Brown on 7/18/2017.(mmv)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
In Re:
WILLIAM MATTHEW BLACK

CIVIL ACTION
CASE NO. 16-13200
SECTION: “G”(5)

ORDER AND REASONS
Before the Court is William Matthew Black’s (“Black”) appeal from the United States
Bankruptcy Court’s July 20, 2016 Order issuing sanctions against Black’s counsel in his Chapter
11 bankruptcy proceeding. Considering the briefs filed by the parties, the record and the applicable
law, for the reasons that follow, the Court will affirm the Bankruptcy Court’s July 20, 2016 Order.
I. Background
On July 31, 2015, Black filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code.1 Joanne and Walter Gallinghouse, Gallinghouse & Associates, Inc., and G &
A Publishing (collectively, “the Gallinghouse entities”) filed several proofs of claims as creditors
against the bankruptcy estate of Black, arising from a civil judgment against Black and a criminal
judgment against his former wife Deborah Black.2 The Gallinghouse entities also filed an
adversary proceeding against Black seeking to have the debt owed to them under the state court
judgment against Black be declared non-dischargeable under 11 U.S.C. § 523(a),3 and Black filed
an adversary proceeding against the Gallinghouse entities seeking to avoid the civil judgment as a

1

Bankruptcy Rec. Doc. 1, Case No. 15-11935 (Bankr. E.D. La).

2

Bankruptcy Rec. Doc. 13 at 11–12, Case No. 15-11935 (Bankr. E.D. La).

3

Bankruptcy Rec. Doc. 1, Case No. 15-1071 (Bankr. E.D. La).

preference under 11 U.S.C. § 547.4 On June 6 and 7, 2016, the Bankruptcy Court conducted a trial
on the complaint of the Gallinghouse entities, the adversary complaint of Black, and on Black’s
objections to the Gallinghouse entities’ proofs of claims.5
During the trial, counsel for Black attempted to present testimony of an expert whose
opinions were not previously disclosed to the Gallinghouse entities and related evidence that was
not previously disclosed.6 The Gallinghouse entities objected to the introduction of the testimony
and evidence, and the Bankruptcy Court excluded the testimony and evidence from trial.7 Black’s
counsel sought to make a proffer of the evidence, and the Bankruptcy Judge, as the finder of fact,
excused himself from the courtroom while the proffer was made into the record in order to preserve
the issue for appeal.8
Both parties subsequently submitted post-trial memoranda to the Bankruptcy Court.9 The
Gallinghouse entities then filed a “Motion to Strike Post-Trial Memoranda and for Rule 11
Sanctions,” arguing that the memoranda submitted by Black made reference to the evidence that
was excluded at trial.10 In response to the Gallinghouse entities’ motion to strike, Black filed
amended post-trial memoranda removing the references to the excluded evidence.11 On July 13,

4

Bankruptcy Rec. Doc. 1, Case No. 15-1073 (Bankr. E.D. La).

5

Bankruptcy Rec. Doc. 96, Case No. 15-11935 (Bankr. E.D. La).

6

Bankruptcy Rec. Doc. 101-1 at 2, Case No. 15-11935 (Bankr. E.D. La).

7

Id.

8

Id.

9

Bankruptcy Rec. Docs. 99–100, Case No. 15-11935 (Bankr. E.D. La); Bankruptcy Rec. Doc. 32, Case No.
15-1073 (Bankr. E.D. La); Bankruptcy Rec. Docs. 56, 57, Case No. 15-1071 (Bankr. E.D. La).
10

Bankruptcy Rec. Doc. 101, Case No. 15-11935 (Bankr. E.D. La).

11

Bankruptcy Rec. Docs. 104–106, Case No. 15-11935 (Bankr. E.D. La); Bankruptcy Rec. Doc. 34, Case

2

2016, the Bankruptcy Court conducted a hearing on the motion to strike.12 During the hearing the
Bankruptcy Judge stated that he found Black’s counsel’s conduct “to be a very serious matter.”13
Therefore, the Bankruptcy Judge stated that, while he was not going to strike Black’s amended
post-trial memoranda, he was “going to sanction [Black’s counsel] for a violation of the Court’s
order,” which the Bankruptcy Judge found he had “inherent power to do without reference to Rule
11.”14
On July 20, 2016, the Bankruptcy Court issued a written Order granting the motion to the
extent that it requested that the following portions of Black’s original post-trial memoranda be
stricken from the record: (1) in Case No. 15-01073, document number 32; (2) in Case No. 1501071, document number 56; and (3) in Case No. 15-11935, documents number 98, 98-1, 98-2,
98-3, 98-4, 99, 99-1, 99-2, 99-3, 100, 100-1,100-2, 100-3.15 The Bankruptcy Court also granted
the motion to the extent that it requested sanctions be assessed against counsel for Black “for the
costs and legal fees associated with the preparation, filing and attendance at the hearing of the
present Motion to Strike in the amount of $3,000.00.”16 The Bankruptcy Court denied the motion
to the extent it requested that the amended post-trial memoranda be stricken from the record.17 On

No. 15-1073 (Bankr. E.D. La); Bankruptcy Rec. Doc. 58, Case No. 15-1071 (Bankr. E.D. La).
12

Bankruptcy Rec. Doc. 109, Case No. 15-11935 (Bankr. E.D. La).

13

Bankruptcy Rec. Doc. 115 at 9, Case No. 15-11935 (Bankr. E.D. La).

14

Id.

15

Bankruptcy Rec. Doc. 110, Case No. 15-11935 (Bankr. E.D. La).

16

Id. at 2.

17

Id.

3

July 21, 2016, Black filed a notice of appeal of the Bankruptcy Court’s July 20, 2016 Order.18
II. Issues Raised on Appeal
A.

Black’s Appellant Brief
Black argues that the Bankruptcy Court erred in ordering sanctions against his counsel for

four reasons: (1) the Gallinghouse entities filed a “Motion to Strike Post-Trial Memorandum and
for Rule 11 Sanctions” despite the requirement under Bankruptcy Rule 9011(c)(1)(A) that a
Motion for Rule 11 Sanctions be made separately from other motions or requests; (2) the
Gallinghouse entities never presented the motion for sanctions to Black’s counsel before filing the
motion as required by the Safe Harbor provisions of Rule 9011(c)(1)(A); (3) the Gallinghouse
entities did not serve Black’s counsel with a copy of the motion 21 days prior to filing the motion
as required by Rule 9011; and (4) the offending papers had been revised in accordance with the
issues enumerated by the Gallinghouse entities in their motion for sanctions.19
Black asserts that the Bankruptcy Court’s decision to impose sanctions is discretionary,
and so the exercise of the power is reviewed for abuse of discretion.20 Black contends that a
bankruptcy court abuses its discretion when it: “(1) applies an improper legal standard or follows
improper procedures, or (2) rests its decision on findings that are clearly erroneous.”21 Here, Black
argues that the Bankruptcy Court “did not follow the restrictive covenants contained within the
revised Rule 9011 requirements” in ordering sanctions against his counsel, and so the Order was

18

Rec. Doc. 1.

19

Rec. Doc. 5 at 6–7.

20

Id. at 7–8 (citing Shipes v. Trinity Industries, 987 F. 2d 311, 323 (5th Cir. 1993)).

21

Id. at 8 (citing Cahill v. Walker & Patterson, P.C. (In re Cahill), 428 F. 3d 536, 539 (5th Cir. 2005)).

4

clearly an abuse of discretion.22
Black contends that following the trial held on June 6 and June 7, 2016, the Bankruptcy
Court ordered counsel to file post-trial memoranda.23 According to Black, he attached four exhibits
to the post-trial memorandum filed in Case No. 15-11935, and the Gallinghouse entities moved to
strike the exhibits from the record because they were not offered into evidence at trial and sanctions
were appropriate as a result.24 Black contends that Exhibit 2 to his post-trial memorandum was
admitted at trial as Trial Exhibit 239 and Exhibit 3 was admitted as Trial Exhibit 243.25
Nevertheless, Black asserts that “upon review of the situation [his counsel] took a conservative
approach and in response filed on June 30, 2016 a First Amended Brief/Memorandum on
Objection to Proof of Claim No. 2 (Doc 104) removing Exhibits No. 1, (Trial Doc. 246); No. 2
(Trial Doc. 239) and No. 3 (Trial Doc. 243); leaving only [Exhibit 4] the Gallinghouse Proof of
Claim No. 2 attached thereto.”26
Black also notes that he hired Frank Tranchina (“Tranchina”) as an expert in domestic
relations and community property law to testify at the trial, but Tranchina did not prepare a report
of his findings or proposed testimony.27 According to Black, at trial the Gallinghouse entities
objected to allowing Tranchina to testify, and the Bankruptcy Judge sustained the objection.28

22

Id. at 8–9.

23

Id. at 9–10.

24

Id. at 10–12.

25

Id. at 12.

26

Id. at 13.

27

Id.

28

Id.

5

Black notes that the Gallinghouse entities’ motion to strike Black’s post-trial memoranda objected
to the inclusion of Tranchina’s expert report in Black’s post-trial memoranda, and in response
Black’s counsel removed the offending language and exhibits from his post-trial memoranda.29
Black asserts that Tranchina did not prepare an expert report, but he contends that Exhibit 2 was a
sworn descriptive list of community property prepared by Tranchina, and Exhibit 3 was an analysis
of the sworn descriptive list prepared by Black’s counsel.30 Black contends that both exhibits were
removed from his amended post-trial memoranda after the Gallinghouse entities raised the issue
in their motion.31 Finally, Black notes that the Gallinghouse entities objected to the inclusion of
references to the valuation of a Thrift Savings Plan account in the post-trial memorandum filed in
Case No. 15-1071 and the post-trial memorandum filed in Case No. 15-1073, and in response
Black’s counsel removed references to the account from his amended post-trial memoranda.32
Addressing the first issue raised on appeal, Black contends that the Bankruptcy Court erred
in ordering sanctions against his counsel because the Gallinghouse entities filed a “Motion to
Strike Post-Trial Memorandum and for Rule 11 Sanctions” despite the requirement under
Bankruptcy Rule 9011(c)(1)(A) that a Motion for Rule 11 Sanctions be made separately from other
motions or requests.33 Black contends that the Bankruptcy Court’s decision allowing the
Gallinghouse entities to file these motions in combination violated the clear language or Rule

29

Id. at 14.

30

Id. at 15.

31

Id. at 16.

32

Id. at 16–17.

33

Id. at 17.

6

9011(c)(1)(A) and was therefore unreasonable.34
Turning to the second issue raised on appeal, Black contends that the Bankruptcy Court
erred in ordering sanctions against his counsel because the Gallinghouse entities never presented
the motion for sanctions to his counsel before filing the motion as required by the safe harbor
provisions of Rule 9011(c)(1)(A).35 He asserts that the Fifth Circuit has found that the safe harbor
provisions are intended to “protect litigants from sanctions wherever possible in order to mitigate
Rule 11’s chilling effects, formalize procedural due process considerations, such as notice for the
protection of the party accused of sanctionable behavior, and encourage the withdrawal of papers
that violate the rule without involving the Court.”36 Black contends that the Fifth Circuit has held
that strict compliance with Rule 11 is mandatory, and the Bankruptcy Court erred in not
considering the safe harbor requirements.37
Addressing the third issue raised on appeal, Black contends that the Bankruptcy Court erred
in ordering sanctions against his counsel because the Gallinghouse entities failed to serve the
motion for sanctions to his counsel at least 21 days before filing the motion.38 Black contends that
the motion was served on his counsel the same day it was filed with the Bankruptcy Court and set
for hearing 19 days later.39 Therefore, Black asserts that the Gallinghouse entities failed to comply

34

Id. at 18.

35

Id.

36

Id. at 19 (quoting The Cadle Co. v. Pratt (In re Pratt), 524 F. 3d 580, 587 (5th Cir. 2008)).

37

Id. at 19–20 (citing In re Pratt, 524 F. 3d at 586–87).

38

Id. at 20.

39

Id. at 21.

7

with the mandatory notice requirements found at Rule 9011, and the Bankruptcy Court erred in
imposing sanctions without the service requirement being met.40
Finally, turning to the fourth issue raised on appeal, Black argues that the Bankruptcy Court
erred in imposing sanctions because the offending papers had been revised in accordance with the
issues enumerated by the Gallinghouse entities in their motion for sanctions.41 Black notes that the
Safe Harbor provision provides that a motion for sanctions be served on the offending party at
least 21 days before filing the motion, and if during this period the alleged violation is corrected
then the motion should not be filed.42 Therefore, because his counsel corrected all issues raised by
the Gallinghouse entities in the motion, Black contends that the Bankruptcy Court erred in ordering
sanctions.43
B.

The Gallinghouse Entities’ Appellee Brief
The Gallinghouse entities argue that the Bankruptcy Court had inherent authority to issue

sanctions against Black’s counsel pursuant to 11 U.S.C. § 105(a) for willful disobedience of a
court order.44 The Gallinghouse entities contend that this case is distinguishable from In re Pratt,
where the Fifth Circuit reversed a bankruptcy court’s award of sanctions pursuant to Bankruptcy
Rule 9011 because in that case there was no suggestion that the sanctioned conduct was in violation
of court orders or that the sanctions were imposed pursuant to the bankruptcy court’s inherent

40

Id. at 21–22.

41

Id. at 22.

42

Id. at 24.

43

Id. at 26.

44

Rec. Doc. 6 at 9–10 (citing Chambers v. NASCO, Inc., 501 U.S. 32 (1991); In re Case, 937 F.2d 1014,
1023 (5th Cir 1991)).

8

authority.45 Here, the Gallinghouse entities note that the Bankruptcy Judge found that sanctions
were appropriate pursuant to the court’s “inherent power . . . without reference to Rule 11.”46
The Gallinghouse entities cite Ginsbery v. Evergreen Sec., Ltd., an Eleventh Circuit
opinion, upholding the issuance of sanctions pursuant to the bankruptcy court’s inherent power,
which the Eleventh Circuit concluded was “not affected by the safe harbor provision of Rule
9011.”47 The Gallinghouse entities also cite an order by a district court in the Southern District of
Mississippi upholding sanctions imposed by a bankruptcy court pursuant to its inherent authority.48
The Gallinghouse entities contend that “[t]he Post-Trial Memoranda submitted on behalf of Black
was done with the intent to defy [Bankruptcy] Court Orders and prejudice the finder of fact (the
[Bankruptcy] Court) by the submission of evidence which was held inadmissible.”49 Therefore,
the Gallinghouse entities argue that the Bankruptcy Court properly exercised its inherent authority
to enforce its prior orders by awarding sanctions.50
The Gallinghouse entities note that sanctions awarded pursuant to a federal court’s inherent
authority are reviewed under an abuse of discretion standard.51 The Gallinghouse entities argue
that Black has not shown an abuse of discretion by the Bankruptcy Court.52 Instead, they contend

45

Id. at 11 (citing 524 F.3d 580 (5th Cir. 2008)).

46

Id. (citing Rec. Doc. 2-2 at 96).

47

Id. (citing 570 F.3d 1257, 1273 (11th Cir. 2009)).

48

Id. at 12 (citing In re: Wyatt & McAlister, PLLC, 2014 U.S. Dist. LEXIS 119018 (S.D. Miss 2016)).

49

Id.

50

Id.

51

Id. (citing Chaves v. M/V Medina Star, 47 F.3d 153 (5th Cir. 1995)).

52

Id.

9

that “Black’s only basis for claiming that the abuse of discretion standard for reversal has been
met is that Bankruptcy Rule 9011 does not permit him to be sanctioned.”53 However, because “the
Bankruptcy Court did not rely on Rule 9011, but rather its inherent authority to act when its orders
have been willfully violated,” the Gallinghouse entities assert that “Black can provide no basis to
suggest any erroneous view of the law.”54
C.

Black’s Reply Brief
In his reply brief, Black points out that the Gallinghouse entities originally requested

sanctions before the Bankruptcy Court in their “Motion to Strike Post Trial Memoranda and for
Rule 11 Sanctions.”55 However, at some point, Black contends that the Gallinghouse entities
realized they had not complied with the Rule 9011 safe harbor provisions when they filed the
motion, and upon this realization they began to argue that sanctions should be issued for violation
of the Bankruptcy Court’s Order.56 Black asserts that the Bankruptcy Court excluded the testimony
of his expert witness, but he contends that there was no order excluding documents.57 Black notes
that his counsel “took immediate steps to withdraw any and all named ‘Offending Documents’
upon notification by the filing of the Motion to Strike and for Rule 11 Sanctions.”58 He argues that
“[t]he action to amend and remove the offending documents was swift and caused no disruption

53

Id. at 13.

54

Id.

55

Rec. Doc. 7 at 6.

56

Id. at 7.

57

Id.

58

Id. at 8.

10

or delay in the proceedings before the [Bankruptcy] Court; and there was no finding of contemp[t]
or bad faith.”59 Therefore, he asserts that the actions taken by his counsel were appropriate under
the circumstances.60
Black notes that under 11 U.S.C. § 105 the Bankruptcy Court “may issue any order,
process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy
Code].”61 However, he also notes that the Fifth Circuit has explained that Section 105 “cannot alter
another provision of the [Bankruptcy Code],” and “[a] Bankruptcy Court’s supplementary
equitable powers under § 105(a) may not be exercised in a manner that is inconsistent with the
other more specific provisions of the Code.”62 Black contends that the Gallinghouse entities are
“essentially asking the Court to use its equitable jurisdiction and Section 105 to expand the scope
of recovery under Rule 9011.”63 However, Black avers that the Fifth Circuit has upheld
Bankruptcy Court sanction awards issued pursuant to Section 105 based on conduct that would
also give rise to sanctions under Rule 9011.64 Moreover, Black argues that in Chambers v. NASCO,
Inc. the Supreme Court recognized that “courts could use their inherent authority to sanction

59

Id.

60

Id. at 9.

61

Id.

62

Id. (quoting In re Zale Corporation, 62 F.3d 746, 760 (5th Cir. 1995)).

63

Id. Black also cites opinions of other circuit courts of appeal finding that “the equitable discretion conferred
upon the Bankruptcy Court by Section 105(a) is limited and cannot be used in a manner inconsistent with the
commands of the Bankruptcy Code.” Id. at 10 (quoting In re Ludlow Hosp. Soc., Inc., 124 F.3d 22, 27 (1st Cir. 1997).
Id. at 11 (citing In re Myrvang, 232 F. 3d 1116, 1124 (9th Cir. 2000); In re Fesco Plastics Corp., 996 F. 2d 152, 154
(7th Cir. 1993); IRS v. Kaplan (In re Kaplan), 104 F. 3d 589, 597–98 (3rd Cir. 1997); Noonan v. Secretary of Health
and Human Sevs. (In Re Ludlow Hosp. Soc’y, Inc.), 124 F. 3d 22, 27 (1st Cir. 1997)).
64

Id. at 12 (citing Sommers v. Barry (In re Cochener), 297 F. App’x 382 (5th Cir. 2008); Friendly Fin.
Discount Corp. v. Tucker (In re Tucker), 224 F. 3d 766 (5th Cir. 2000)).

11

parties even though procedural rules would also provide a remedy.”65 However, in Chambers
Black contends that the district court issued sanctions for “fraud, filing false and frivolous
pleadings, and engaging in delay, oppression, and harassment tactics.”66 Black asserts that none of
these issues are presented here because there was “no finding of bad faith, contempt, fraud, delay
harassment, or oppression.”67 Accordingly, Black submits that the Bankruptcy Court abused its
discretion in issuing sanctions.68
III. Jurisdiction
The Court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a)(1), which
authorizes appellate review of final orders, judgments and decrees of a United States Bankruptcy
Court entered consistent with 28 U.S.C. § 157.69 In appeals from bankruptcy courts, district courts
sit as an appellate court.70
IV. Standard of Review
A district court reviews a bankruptcy court’s conclusions of law de novo, findings of fact
for clear error, and mixed questions of law and fact de novo.71 A district court may affirm, reverse
or modify a bankruptcy court’s ruling, or remand the case for further proceedings.72 “As ‘the

65

Id. (citing Chambers v. NASCO, Inc., 501 US 32 (1991)).

66

Id. (citing Chambers, 501 U.S. at 41).

67

Id.

68

Id. at 13.

69

28 U.S.C. § 158(a)(1).

70

28 U.S.C. § 1334(b).

71

In re Nat’l Gypsum Co., 208 F.3d 498, 504 (5th Cir. 2000).

72

Fed. R. Bankr. P. 8013.

12

imposition of sanctions is a matter of discretion for the bankruptcy court,’” the district court
reviews this issue under an abuse of discretion standard.73 “A court abuses its discretion when its
ruling is based on an erroneous view of the law or on a clearly erroneous assessment of the
evidence.”74
V. Law and Analysis
A.

Sanctions under Bankruptcy Rule 9011
“Bankruptcy Rule 9011 is substantially identical to [Federal Rule of Civil Procedure] 11.”75

Therefore, the Fifth Circuit has recognized that courts “may refer to Rule 11 jurisprudence when
considering sanctions under Rule 9011.”76
Pursuant to Rule 9011(b) of the Federal Rules of Bankruptcy Procedure, by presenting a
filing to a bankruptcy court, an attorney “is certifying to the best of [his] knowledge, information,
and belief” that: (1) the filing is not being presented for an improper purpose such as to harass,
unnecessarily delay, or needlessly increase 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 are likely to have evidentiary
support after an opportunity for discovery; and (4) the denials of factual contentions are warranted

73

In re Pratt, 524 F.3d 580, 584 (5th Cir. 2008) (quoting In re Sadkin, 36 F.3d 473, 475 (5th Cir. 1994)).

74

In re First City Bancorporation of Tex. Inc., 282 F.3d 864, 867 (5th Cir. 2002) (quoting Chaves v. M/V
Medina Star, 47 F.3d 153, 156 (5th Cir. 1995) (quotation marks omitted)).
75

In re Case, 937 F.2d 1014, 1022 (5th Cir. 1991).

76

In re Pratt, 524 F.3d at 586 (citations omitted).

13

on the evidence or are reasonably based on a lack of information and belief.77 Under Bankruptcy
Rule 9011(c)(1) a bankruptcy court may impose sanctions “[i]f, after notice and a reasonable
opportunity to respond, the court determines that subdivision (b) has been violated.”78
Bankruptcy Rule 9011(c)(1)(A), which governs the procedure for filing a motion for
sanctions, provides:
A motion for sanctions under this rule shall be made separately from other motions
or requests and shall describe the specific conduct alleged to violate subdivision
(b). It shall be served as provided in Rule 7004. The motion for sanctions may not
be filed with or presented to the court unless, within 21 days after service of the
motion (or such other period as the court may prescribe), the challenged paper,
claim, defense, contention, allegation, or denial is not withdrawn or appropriately
corrected, except that this limitation shall not apply if the conduct alleged is the
filing of a petition in violation of subdivision (b). If warranted, the court may award
to the party prevailing on the motion the reasonable expenses and attorney's fees
incurred in presenting or opposing the motion. Absent exceptional circumstances,
a law firm shall be held jointly responsible for violations committed by its partners,
associates, and employees.79
Pursuant to Bankruptcy Rule 9011(c)(1)(B), a bankruptcy court may issue sanctions sua sponte
after “enter[ing] an order describing the specific conduct that appears to violate subdivision (b)
and directing an attorney, law firm, or party to show cause why it has not violated subdivision (b)
with respect thereto.”80 If a motion for sanctions pursuant to Bankruptcy Rule 9011 is filed, the
bankruptcy court may issue an order directing payment to the movant of part or all of the
reasonable attorneys’ fees and other expenses directly resulting from the violation.81 However,

77

Fed. R. Bankr. P. 9011(b).

78

Fed. R. Bankr. P. 9011(c)(1).

79

Fed. R. Bankr. P. 9011(c)(1)(A).

80

Fed. R. Bankr. P. 9011(c)(1)(B).

81

Id.

14

Bankruptcy Rule 9011(c)(2)(B) states that monetary sanctions under Bankruptcy Rule 9011 may
not be imposed sua sponte unless the bankruptcy court issues a show-cause order against the party
that is to be sanction.82
The Fifth Circuit has recognized that “the plain language of Rule 9011 mandates that the
movant serve the respondent with a copy of the motion before filing it with the court,”83 and the
failure to comply with Rule 9011’s safe harbor provisions “should result in the rejection of the
motion for sanctions.”84 In Elliott v. Tilton, the Fifth Circuit noted that “[s]anctions may be ordered
if the court, on its own initiative, enters an order describing the offending conduct and directing
the offending parties to show cause why Rule 11 has not been violated.”85 However, the Fifth
Circuit found that the safe harbor provisions precluded the imposition of sanctions under Rule 11
because “sanctions were imposed on motion of the opposing party and not on the court’s own
initiative.”86
In the present case, it is undisputed that the Gallinghouse entities did not serve their motion
for sanctions on Black and his counsel prior to filing the motion as required by Bankruptcy Rule
9011(c)(1)(A). Therefore, the safe harbor provisions precluded the imposition of sanctions under
Bankruptcy Rule 9011.

82

Fed. R. Bankr. P. 9011(c)(2)(B).

83

In re Pratt, 524 F.3d at 586 (citations omitted).

84

Id. (quoting Roth v. Green, 466 F.3d 1179, 1192 (10th Cir. 2006)).

85

64 F.3d 213, 216 (5th Cir. 1995).

86

Id.

15

B.

The Bankruptcy Court’s Inherent Powers to Sanction
Although sanctions were not proper under Bankruptcy Rule 9011, the Fifth Circuit has also

recognized that a bankruptcy court has inherent power to award sanctions for bad-faith conduct in
a bankruptcy court proceeding.87 In Chambers v. NASCO, Inc., the Supreme Court held that federal
district courts possess the power to assess attorney’s fees as sanctions for bad-faith conduct in
litigation, reasoning that such a power is one of the inherent or implied powers which a court must
necessarily possess “to manage their affairs and govern their affairs so as to achieve the orderly
and expeditious disposition of cases.”88 The Fifth Circuit has reasoned that “[t]hese principles
[articulated by the Supreme Court in Chambers] are equally applicable to the bankruptcy court.”89
The Fifth Circuit has recognized that a bankruptcy court must make “a specific finding that
[the party] engaged in bad faith conduct” before imposing sanctions under its inherent authority.90
In Elliott v. Tilton, the Fifth Circuit remanded the case to the lower court to determine whether a
finding of bad faith was appropriate because while the court “clearly indicated its displeasure at
[the party’s] conduct of this case, it failed to make a specific finding of bad faith.”91 However, in
Blanco River, L.L.C. v. Green, the Fifth Circuit held that “[w]hen bad faith is patent from the
record and specific findings are unnecessary to understand the misconduct giving rise to the

87

Id.

88

Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991) (quoting Link v. Wabash R. Co., 370 U.S. 626, 630–31,

(19621)).
89

In re Case, 937 F.2d at 1023.

90

In re Yorkshire, LLC, 540 F.3d 328, 332 (5th Cir. 2008) (citing Elliott, 64 F.3d at 217).

91

Elliott, 64 F.3d at 217. See also Goldin v. Bartholow, 166 F.3d 710, 722 (5th Cir. 1999) (“[T]he district
court merely made general complaints about the sanctioned party,” as it does not support the “required high level of
culpability” of bad faith.).

16

sanction, the necessary finding of ‘bad faith’ may be inferred.”92 The Fifth Circuit stated that “it
would be empty formalism to find an abuse of discretion for failure to invoke the magic words bad
faith.”93 “A court abuses its discretion when its finding of bad faith is based on an erroneous view
of the law or a clearly erroneous assessment of the evidence.”94
In Chambers, the Supreme Court recognized that “[a]s long as the party receives an
appropriate hearing, . . . the party may be sanctioned for abuses of process occurring beyond the
courtroom, such as disobeying the court’s orders.”95 Moreover, the Fifth Circuit has held that
violating a court order can constitute bad faith.96 In Sandifer v. Gusman, a district court denied an
attorney leave to enroll as co-counsel in a case.97 The attorney then filed a related lawsuit (Sandifer
II), and the district court struck the attorney from the case, finding that the attorney “clearly
attempted to and did make an end run around [the Sandifer I order] by filing another suit.”98
Subsequently, the attorney filed another related lawsuit (Sandifer III), and, after a hearing, the
district court sanctioned the attorney for violating its orders.99 On appeal, the Fifth Circuit
determined that “based on the record as a whole [it could not] say the district court abused its

92
Blanco River, L.L.C. v. Green, 457 F. App’x 431, 438 (5th Cir. 2012) (quoting In re Sealed Appellant, 194
F.3d 666, 671 (5th Cir. 1999)).
93

Id. at 439.

94

Sandifer v. Gusman, 637 F. App’x 117, 121 (5th Cir. 2015) (quoting Crowe v. Smith, 261 F.3d 558, 563
(5th Cir. 2001)).
95

Chambers, 501 U.S. at 57.

96

Sandifer, 637 F. App’x at 122.

97

Id. at 119.

98

Id. at 122.

99

Id.

17

discretion in finding that [the attorney] violated those orders.”100 The Fifth Circuit held that the
district court did not abuse its discretion in issuing sanctions because “[v]iolating those orders
constitutes bad faith.”101
During the trial in the instant case, counsel for Black attempted to present testimony of an
expert whose opinions were not previously disclosed to the Gallinghouse entities and related
evidence that was not previously disclosed.102 The Bankruptcy Court excluded the testimony and
evidence from trial.103 Black subsequently submitted post-trial memoranda to the Bankruptcy
Court, which made reference to the evidence that was excluded at trial.104 The Gallinghouse
entities then filed a “Motion to Strike Post-Trial Memoranda and for Rule 11 Sanctions.”105 The
Bankruptcy Court conducted a hearing on July 13, 2016.106 During the hearing the Bankruptcy
Judge stated that he found Black’s counsel’s conduct “to be a very serious matter.”107 Therefore,
the Bankruptcy Judge stated that, while he was not going to strike Black’s post-trial memorandum,
he was “going to sanction [Black’s counsel] for a violation of the Court’s order,” which the

100

Id.

101

Id. at 122. See also Chambers, 501 U.S. at 57 (“As long as the party receives an appropriate
hearing, . . . the party may be sanctioned for abuses of process occurring beyond the courtroom, such as disobeying
the court's orders.” (citation omitted)).
102

Bankruptcy Rec. Doc. 101-1 at 2, Case No. 15-11935 (Bankr. E.D. La).

103

Id.

104

Bankruptcy Rec. Docs. 99–100, Case No. 15-11935 (Bankr. E.D. La); Bankruptcy Rec. Doc. 32, Case
No. 15-1073 (Bankr. E.D. La); Bankruptcy Rec. Docs. 56, 57, Case No. 15-1071 (Bankr. E.D. La).
105

Bankruptcy Rec. Doc. 101, Case No. 15-11935 (Bankr. E.D. La).

106

Bankruptcy Rec. Doc. 109, Case No. 15-11935 (Bankr. E.D. La).

107

Bankruptcy Rec. Doc. 115 at 9, Case No. 15-11935 (Bankr. E.D. La).

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Bankruptcy Judge found he had “inherent power to do without reference to Rule 11.”108
As discussed above, a bankruptcy court must make “a specific finding that [the party]
engaged in bad faith conduct” before imposing sanctions under its inherent authority.109 However,
“[w]hen bad faith is patent from the record and specific findings are unnecessary to understand the
misconduct giving rise to the sanction, the necessary finding of ‘bad faith’ may be inferred.”110
Moreover, violating a court order can constitute bad faith.111 Here, the Bankruptcy Court
determined that Black’s counsel violated its order excluding evidence and testimony from Black’s
expert at trial when he submitted post-trial memoranda which referenced the excluded evidence.112
Indeed, the Court notes that after the evidence was excluded, the Bankruptcy Judge left the
courtroom to allow Black to proffer the evidence into the record without the factfinder hearing the
evidence. Nonetheless, Black submitted the excluded evidence to the factfinder in his post-trial
memoranda. The Bankruptcy Court also found Black’s counsel’s conduct of submitting excluded
evidence to the factfinder “to be a very serious matter.”113
Although the Bankruptcy Court did not explicitly state that Black’s counsel engaged in bad
faith conduct, a finding of bad faith may be inferred. Here, the Bankruptcy Court specifically
invoked its inherent power and noted that Black’s counsel’s misconduct was a very serious matter

108

Id.

109

In re Yorkshire, 540 F.3d at 332.

110

Blanco River, 457 F. App’x 431, 438 (5th Cir. 2012) (quoting In re Sealed Appellant, 194 F.3d 666, 671
(5th Cir. 1999)).
111

Sandifer, 637 F. App’x at 122.

112

Bankruptcy Rec. Doc. 115 at 9, Case No. 15-11935 (Bankr. E.D. La).

113

Id.

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and a violation of the Bankruptcy Court’s order. Therefore, the finding of bad faith may be inferred
from the record. Accordingy, the Bankruptcy Court did not abuse its discretion in issuing sanctions
for violating its prior order pursuant to its inherent authority because the “finding of bad faith [was
not] based on an erroneous view of the law or a clearly erroneous assessment of the evidence.”114
VI. Conclusion
For the reasons discussed above, the safe harbor provisions precluded the imposition of
sanctions under Bankruptcy Rule 9011. However, the Bankruptcy Court did not abuse its
discretion in issuing sanctions pursuant to its inherent authority. Accordingly,
IT IS HEREBY ORDERED that the Bankruptcy Court’s July 20, 2016 Order is
AFFIRMED.

18th
NEW ORLEANS, LOUISIANA, this ______ day of July, 2017.
________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

114

Sandifer, 637 F. App’x at 121.

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