Desiderio v. Parikh et al

Filing 8

MEMORANDUM AND ORDER - For the foregoing reasons, the Order of the Bankruptcy Court is VACATED and REMANDED for further findings consistent with this Memorandum and Order. The Clerk of the Court is directed to mark this appeal CLOSED. E.D. Bankruptcy Adv. Proc. No. 08-08062-478. So Ordered by Judge Joanna Seybert on 3/28/2013. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-------------------------------------X
JOHN DESIDERIO,
Appellant,

E.D. Bankr. Adv. Proc.
No. 08-08062-478

-againstMEMORANDUM & ORDER
12-CV-2148(JS)

SUNIL PARIKH; MEENA PARIKH; MARC A.
PERGAMENT; WEINBERG, GROSS &
PERGAMENT, LLP,

Appellees.
-------------------------------------X
APPEARANCES
For Appellant:
John S. Desiderio, Esq.
18 Bedford Avenue
New Hyde Park, NY 11040
For Appellees:

Marc A. Pergament, Esq.
Weinberg, Gross & Pergament, LLP
400 Garden City Plaza, Suite 403
Garden City, NY 11530

SEYBERT, District Judge:
Pending before the Court is an appeal arising out of a
Chapter

7

bankruptcy

action

filed

in

the

United

States

Bankruptcy Court for the Eastern District of New York by debtor
Sunil

Parikh

(the

“Appellant”)

“Debtor”).

commenced

an

Appellant

adversary

John

Desiderio

proceeding

against

(the
the

Debtor, seeking a dismissal of the Debtor’s case under 11 U.S.C.
§ 707(a) and/or the denial of the Debtor’s discharge under 11
U.S.C. § 727.

On May 24, 2011, the Bankruptcy Court issued a

decision after trial (“Decision After Trial”), finding that the
Debtor

had

filed

his

Chapter

7

case

in

bad

faith.

The

Bankruptcy
dismiss

Court,

the

discharge.

however,

bankruptcy

denied

case

and

the

Appellant’s

instead

denied

request

the

to

Debtor’s

On June 28, 2011, the Appellant filed a motion for

sanctions against the Debtor; the Debtor’s wife, non-party Meena
Parikh (“Meena”); the Debtor’s lawyer, Marc A. Pergament, Esq.;
and

Mr.

Pergament’s

(“WGP”).

firm,

Weinberg,

Gross

&

Pergament

LLP

The Appellant now appeals the order of Bankruptcy

Judge Robert E. Grossman denying his request for sanctions.

For

the following reasons, the order of the Bankruptcy Court is
VACATED and REMANDED for further findings consistent with this
Memorandum and Order.
BACKGROUND
The Court assumes familiarity with the facts of the
underlying

adversary

proceeding,

Grossman’s Decision After Trial.

which

are

detailed

in

Judge

The Court will only briefly

summarize those facts that are pertinent to the pending appeal.
In or around 2004, the Appellant was awarded a default
judgment in state court against the Debtor and a non-party on a
claim for non-payment of a promissory note in the amount of
$76,143.77.

(Decision After Trial at 20.)

The Appellant was

later awarded additional judgments in the amounts of $7,062.50
and

$42,380.35

for

attorney’s

enforcing the promissory note.

fees

and

costs

(Id. at 20-21.)

2

incurred

in

On

May

13,

2006,

the

Debtor

filed

a

Chapter

13

Petition with the assistance of counsel, which was dismissed on
November 2, 2006 on motion of the Chapter 13 Trustee.

(Id. at

5-6.)

filed

Approximately

nine

months

later,

the

Debtor

a

Chapter 7 Petition with the assistance of different counsel (id.
at 7), Appellees Mr. Pergament and WGP.

The schedules filed

with the Chapter 7 Petition, however, did not disclose all of
the debts and assets that the Debtor disclosed in the schedules
filed with the Chapter 13 Petition.

(Id. at 7.)

The Appellant filed a claim on October 1, 2007,1 and on
November 29, 2007, Bankruptcy Judge Dorothy Eisenberg entered an
order authorizing the Appellant to serve Rule 2004 subpoenas on
the

Debtor

and

his

(Appellant Ex. 18.)2

wife

Meena

(the

“Examination

Order”).

On November 4, 2008, Judge Eisenberg held

the Debtor and Meena in contempt due to their “willful refusal
and failure” to comply with the Appellant’s 2004 subpoenas and
the Examination Order.

(Id.)

They were each sanctioned $100

per day, to be paid to the Appellant, for every day as of the
date of the order “until they produce[d] the documents demanded
pursuant to the 2004 Subpoena[s], Examination Order, and the
1

At the time the claim was filed, the Debtor owed the Appellant
over $280,000. (Compl. ¶ 6.)
2

The parties appear to confuse the exhibit numbers with their
ECF document numbers throughout their submissions. “Appellant
Ex. ___” as used herein refers to the exhibit numbers, not the
ECF document numbers.
3

Supplemental Document Request, and appear[ed] for examination at
the place designated in the 2004 Subpoenas, at a date and time
mutually agreeable to the parties.”

(Id.)

The Debtor, Meena,

and WGP were also held jointly and severally liable for the
Appellant’s attorney’s fees, in the amount of $6,758.10, “due to
their representations that the documents produced were complete
when in fact they were incomplete and insufficient.”

(Id.)

The

attorney’s fees were paid; however, the $100 per day sanction
was not and remains outstanding.
On

March

27,

2008,

the

Appellant

commenced

an

adversary proceeding against the Debtor seeking dismissal of the
Chapter

7

§ 707(a)
§ 727.
1,

Petition

and/or

as

the

(Appellant

bad

denial

(Compl. ¶ 1.)

2008

a

faith

of

filing

the

under

Debtor’s

11

discharge

U.S.C.
under

The Debtor answered the Complaint on May

Ex.

14),

and

on

November

18,

2008,

the

Appellant filed a motion for summary judgment (Bankr. Case No.
08-08-8062,
Eisenberg

on

Docket
April

Entry
2,

22),

2009

(id.

which
at

was
Docket

denied

by

Entry

41).

Judge
The

Appellant sought leave to file an interlocutory appeal to the
district court on April 10, 2009, which was denied by District
Judge Joseph F. Bianco on July 30, 2009.

(Id. at Docket Entry

61.)
The case was transferred to Judge Grossman for trial,
which took place over the course of five days between November
4

2009 and June 2010.
Trial 2-3.)

(Id. at Docket Entry 60; Decision After

On May 24, 2011, Judge Grossman issued the Decision

After Trial, finding that the Debtor had commenced the Chapter 7
proceeding in bad faith and denying his discharge pursuant to
§ 727(a)(4)(A),

(a)(2)(A).

(Decision

After

Trial

at

50.)

Despite the finding of bad faith, Judge Grossman denied the
Appellant’s request that the Chapter 7 Petition be dismissed,
stating that it was in the “best interest of all parties in
interest”

to

“keep[]

th[e]

case

open

and

under

the

scrutiny of the trustee and oversight of the Court.”

direct
(Id. at

35-36.)
On
sanctions
relief:

in

June
the

28,

2011,

adversary

the

Debtor

proceeding

filed

seeking

a

motion

the

for

following

(1) an order directing that judgment be entered in

favor of the Appellant against the Debtor and Meena for the
unpaid sanctions previously imposed by Judge Eisenberg in the
Chapter 7 proceeding and (2) the imposition of new sanctions
against the Debtor, Meena, Mr. Pergament, and WGP in the amount
of

$239,252.69

in

attorney’s

fees

and

costs

incurred

in

challenging the Chapter 7 filings and prosecuting the adversary
proceeding and $14,701.00 in attorney’s fees and costs incurred
in preparing the motion for sanctions.
that sanctions were warranted because:

5

The Appellant argued

(a) the Debtor’s Chapter 7 Petition was for
an improper purpose under the provisions of
Bankruptcy Rule 9011, (b) the Debtor, Meena,
Pergament, and [WGP] attempted to manipulate
the
bankruptcy
process
to
thwart
[the
Appellant] in violation of Section 105(a) of
the Bankruptcy Code, (c) Pergament and [WGP]
unreasonably and vexatiously multiplied the
proceedings
in
this
matter,
and
(d)
Pergament
and
thus,
[WGP],
certified
Debtor’s petition and schedules without any
inquiry, much less a reasonable inquiry
under
the
circumstances,
as
to
the
completeness
and/or
accuracy
of
the
information therein in violation of Section
707(b)(4)(C) & (D) of the Bankruptcy Code.
(Desiderio Aff. in Support of Sanctions (“Desiderio Aff.”) at
12-13.)
Judge Gross heard oral argument on March 5, 2012 and
denied the Appellant’s motion on the record, stating as follows:
You brought a case, you win.
The debtor
can’t get a discharge.
There’s a 7 -- you
win. Now you’re bringing a case to say the
reasons you won that you proved in front of
me is the basis, one, I never should have
had to brought the case, that what right do
these people have to raise a defense, what
right did a law firm have to represent a
client,
what--you’re
the
most
injured
plaintiff I’ve ever seen that won.
It’s
ridiculous.
The
only
sanctions
I’m
considering is you, if you want to know the
truth.
. . .
That’s what I’m considering. And whether or
not I go there, I’m not sure. But you want
to talk about vexatious litigation; you want
to talk about pleadings that make absolutely
no sense. Read your own papers, all right?
. . . I don’t know--get something else to
6

do. Get another case. Find something else
to do in your life. You’re too young to be
wasting
your
entire
existence
on
this
ridiculous case.
Go find the . . .
defendant. Sue him in state court. Collect
any monies you can. I told you you could do
that.
Are you ever going to collect?
I
have no idea.
You’re suing a guy who you
knew the odds of collecting on were probably
small.
You made a decision not to settle,
your decision, completely your decision.
Live with it, all right? Live with it. But
to continue . . . .
But don’t bring this stuff in my courtroom
again, don’t do it, because the next time
you do, then I will figure out sanctions.
I’m going to deny the motion.
(Hr’g Tr. 19-20.)

Thank you.

Judge Grossman also expressed concern that

the Appellant was seeking sanctions in the form of attorney’s
fees, even though the Appellant’s counsel was not billing the
Appellant for his services.3

Instead, counsel sought sanctions

in the amount of the fees “incurred” but not paid.
17.)

(Hr’g Tr.

Judge Grossman stated that this was “not quite but almost

. . . one of the most absurd things that ha[s] been before
[him].”

(Hr’g Tr. 18.)

Judge Grossman did not mention the

Appellant’s request for a judgment against the Debtor and Meena
for the unpaid sanctions previously imposed by Judge Eisenberg.
A form order denying the Appellant’s motion in its entirety was
3

The Appellant’s counsel is his son. In exchange for
representing the Appellant in the adversary proceeding, the
Appellant was paying his son’s mortgage. Thus, there were no
contemporaneous billing records, because the Appellant was not
formally billed for his son’s services. (Hr’g Tr. 9-11, 15-18.)
7

entered on March 13, 2012.

(Order on Motion for Sanctions,

Docket Entry 1-2, at 2.)
The Appellant appealed Judge Grossman’s decision to
the undersigned on May 1, 2012.
on

May

16,

2012.

It

is

The Appellant filed his brief

forty-six

pages--almost

double

the

applicable page limit, see E.D.N.Y. LOCAL RULE 7.1(c)--and was
filed without seeking an enlargement of the page limit.
Appellees--the

Debtor,

Meena,

Mr.

Pergament,

and

The

WGP--filed

their opposition brief five days late on June 4, 2012.

And the

Appellant filed his reply brief on June 15, 2012, which also
almost doubles the applicable page limit.
DISCUSSION
As a preliminary matter, the Appellant asks this Court
to reject the Appellees’ opposition brief as untimely.

The

Court denies this request and hereby retroactively grants the
Appellees an extension of time to file their opposition.

The

Court finds that such an extension is/was warranted in order to
give the Appellees sufficient time to respond to the arguments
in the Appellant’s unauthorized enlarged opening brief.

Also,

although the Court may, it will not limit its review of the
Appellant’s opening brief to the first twenty-five pages.
The

Court

will

briefly

summarize

the

standard

of

review and applicable law before turning to the merits of the
Appellant’s appeal.
8

I.

Applicable Law
A.

Standard of Review on a Bankruptcy Appeal
Federal

district

courts

have

jurisdiction

to

hear

appeals from final judgments, orders, and decrees of bankruptcy
judges.

FED. R. BANKR. P. 8013.

“[f]indings

of

fact,

whether

Typically, a bankruptcy court’s
based

on

oral

or

documentary

evidence, shall not be set aside unless clearly erroneous,” id.;
see also Momentum Mfg. Corp. v. Emp. Creditors Comm. (In re
Momentum Mfg. Corp.), 25 F.3d 1132, 1136 (2d Cir. 1994), and its
legal conclusions are reviewed de novo, see Momentum Mfg. Co.,
25 F.3d at 1136.

An order of the Bankruptcy Court granting or

denying a motion for sanctions, however, is reviewed for abuse
of discretion.

See Baker v. Latham Sparrowbush Assocs. (In re

Cohoes Indus. Terminal, Inc.), 931 F.2d 222, 227 (2d Cir. 1991);
Solow v. Kalikow (In re Kalikow), 602 F.3d 82, 91 (2d Cir.
2010).

“The

bankruptcy

court

‘necessarily

abuse[s]

its

discretion if it based its ruling on an erroneous view of the
law or on a clearly erroneous assessment of the evidence.’”

In

re Kalikow, 602 F.3d at 91 (quoting Klein v. Wilson, Elser,
Moskowitz, Edelman & Dicker (In re Highgate Equities, Ltd.), 279
F.3d 148, 152 (2d Cir. 2002)).

9

B.

Bankruptcy Court’s Ability to Impose Sanctions
The

Appellant

here

sought

sanctions

pursuant

to

Bankruptcy Rule 9011, the Court’s inherent power under 11 U.S.C.
§§ 105(a), 707(b)(4)(C)-(D), and/or 28 U.S.C. § 1927.
1.

Rule 9011

Rule 9011(b) states, in relevant part, that a party
who

presents

a

pleading,

“certifying

that

information,

and

under

the

to

the

belief,

circumstances”

written
best
formed
that

motion,
of

the

after
the

an

or

other

paper

is

person's

knowledge,

inquiry

reasonable

document

is

not

being

presented for an improper purpose, that the legal contentions
made are warranted by existing law, and that the contentions
have evidentiary support.

FED. R. BANKR. P. 9011(b).

If a court

finds that a party is responsible for violating Rule 9011(b),
the

court

may

impose

sanctions.

FED. R. BANKR. P. 9011(c).

Accordingly, such sanctions are at the discretion of a court and
“should only be imposed if it is patently clear that a claim has
absolutely no chance of success.”
Inc.

v.

Walker

Mfg.

Co.,

61

F.3d

K.M.B. Warehouse Distrib.,
123,

131

(2d

Cir.

1995)

(internal quotation marks and citation omitted).4

4

Although these cases discuss sanctions in the context of Rule
11 of the Federal Rules of Civil Procedure, Rule 9011 “parallels
Federal Rule of Civil Procedure 11, containing ‘only such
modifications as are appropriate in bankruptcy matters.’” In re
Cohoes Indus. Terminal, Inc., 931 F.2d 222, 227 (2d Cir. 1991)
(quoting Cinema Serv. Corp. v. Edbee Corp., 774 F.2d 584, 585
10

2.

The Court’s Inherent Power

Section 105(a) permits a court to “issue any order,
process, or judgment that is necessary or appropriate to carry
out the provisions” of the Bankruptcy Code.

11 U.S.C. § 105(a).

Although Section 105 does not specifically mention sanctions or
awarding

attorneys’

fees,

the

Second

Circuit

has

held

that

Section 105(a) empowers courts to “exercise equity in carrying
out the provisions of the bankruptcy code.”
Techs.,

L.L.C.,

423

F.3d

166,

184

(2d

In re Smart World

Cir.

2005)

(emphasis

omitted) (internal quotation marks and citation omitted).

This

equitable power does not, however, provide an independent basis
for a court to act.

See id.

Rather, the language of Section

105(a) “suggests that an exercise of Section 105(a) power be
tied to another Bankruptcy Code section and not merely to a
general

bankruptcy

concept

or

objective.”

quotation marks and citation omitted).

Id.

(internal

So while the extent of

Section 105(a)’s equitable reach is disputed, it is agreed that
it is “plainly limited by the provisions of the [Bankruptcy]
Code.”

Id. at 183.

(3d Cir. 1985)). And the Second Circuit has held that the
“application of Rule 9011 is informed by Rule 11 jurisprudence.”
Id. at 227.
11

Here, the Appellant seeks sanctions for violations of
Section 707(b)(4) of the Bankruptcy Code, which provides, in
relevant part, as follows:
(C)

The signature of an attorney on a petition, pleading,
or written motion shall constitute a certification
that the attorney has-(i)

performed a reasonable investigation
circumstances that gave rise to the
pleading, or written motion; and

(ii) determined
that
written motion-(I)

the

petition,

into the
petition,

pleading,

or

is well grounded in fact; and

(II) is warranted by existing law or a good faith
argument for the extension, modification, or
reversal of existing law and does not constitute
an abuse under paragraph (1).
(D)

The signature of an attorney on the petition shall
constitute a certification that the attorney has no
knowledge after an inquiry that the information in the
schedules filed with such petition is incorrect.

11 U.S.C. § 707(b)(4)(C)-(D).
The Second Circuit has also recognized the ability of
bankruptcy courts and district courts to “derive from § 105(a)
. . . the power to sanction bad-faith serial filers.”
Casse, 198 F.3d 327, 337 (2d Cir. 1999).
3.

28 U.S.C. § 1927

Section 1927 states:
Any attorney or other person admitted to
conduct cases in any court of the United
States or any Territory thereof who so
multiplies the proceedings in any case
12

In re

unreasonably and vexatiously may be required
by the court to satisfy personally the
excess costs, expenses, and attorneys' fees
reasonably incurred because of such conduct.
28 U.S.C. § 1927.
‘narrowly

and

“Courts in this circuit construe the statute

with

great

caution,

so

as

not

to

stifle

the

enthusiasm or chill the creativity that is the very lifeblood of
the law.’”
2004)

Romeo v. Sherry, 308 F. Supp. 2d 128, 148 (E.D.N.Y.

(quoting

1985)).

Mone

The

v.

purpose

C.I.R.,
of

the

774

F.2d

statute

is

570,

574

to

deter

(2d

Cir.

dilatory

tactics, unnecessary delays in litigation, and bad faith conduct
by

attorneys.

Id.

(citing

United

States

v.

Int’l

Bhd.

of

Teamsters, Chauffeurs, Warehousemen & Helpers of Am., AFL–CIO,
948 F.2d 1338, 1345 (2d Cir. 1991); Hudson Motors P’ship v.
Crest Leasing Enters., Inc., 845 F. Supp. 969, 978 (E.D.N.Y.
1994);

Herrera

v.

Scully,

143

F.R.D.

545,

551–552

(S.D.N.Y.

1992)).
II.

Whether the Bankruptcy Court Abused Its Discretion
There are two issues that the Court must address on

this appeal:
in

denying

Eisenberg’s

(1) whether Judge Grossman abused his discretion
the

Appellant’s

unpaid

sanctions

request
and

for

(2)

a

judgment

whether

Judge

on

Judge

Grossman

abused his discretion in denying the imposition of new sanctions
against the Debtor, Meena, Mr. Pergament, and WGP.
will address each separately.

13

The Court

A.

In Failing to Enter Judgment on the Prior Award of
Sanctions
Although

the

Appellant’s

request

for

an

entry

of

judgment on Judge Eisenberg’s sanction order was raised in his
motion for sanctions (see Desiderio Aff. 18-19, 23, 42) and was
denied by Judge Grossman (Order on Motion for Sanctions at 1-2),
Judge Grossman failed to explain why he exercised his discretion
to deny the request, which appears to have been unopposed by the
Debtor or Meena.

“Absent any such explanation, [the Court]

cannot evaluate whether the court abused its discretion when it
denied [the Appellant’s request].”

Capone v. Weeks, 326 F.

App’x 46, 47 (2d Cir. 2009) (remanding a denial of a motion for
sanctions for “clarification of its decision and for additional
findings of fact or conclusions of law” because the Circuit was
“unable

to

assess,

on

the

record

before

district court abused its discretion”).

[it],

whether

the

Accordingly, the Court

hereby VACATES the portion of Judge Grossman’s order denying the
Appellant’s request for an entry of judgment and REMANDS the
case for further findings.
B.

In Failing to Impose New Sanctions
The Appellant also moved for the imposition of new

sanctions
arising

against

out

of,

the

Debtor,

inter

alia,

Meena,
Judge

Mr.

Pergament,

Grossman’s

and

Decision

WGP

After

Trial, which concluded that the Chapter 7 Petition had been

14

filed by the Debtor in bad faith, evidence of intentionally
fraudulent

conveyances

of

the

Debtor’s

assets

with

Meena’s

assistance to Meena and other third parties, and Mr. Pergament
and WGP’s alleged failure to conduct a reasonable inquiry into
the facts set forth in the Debtor’s Chapter 7 filings or to
correct misstatements in the filings upon discovery.5

While such

actions/inactions

sanctions,

could

warrant

the

imposition

of

ultimately the decision whether to impose sanctions is within
the sound discretion of the bankruptcy judge.
Here,

Judge

Grossman

appears

to

have

denied

the

Appellant’s request for sanctions because he did not feel that
attorney’s fees were an appropriate sanction, given that the
Appellant had yet to pay the fees in full.
with Judge Grossman’s rationale.

There are two issues

First, whether sanctions are

warranted and the appropriate type/amount of sanctions are two
separate issues that involve distinct analyses, see, e.g., In re
Spectee Grp., Inc., 185 B.R. 146, 160 (Bankr. S.D.N.Y. 1995);
Kanbar v. Christian de Ville de Goyet (In re Omega Trust), 120
B.R. 265, 270-71 (Bankr. S.D.N.Y. 1990), and here Judge Grossman
appears to have skipped to the second step--determining the type
and amount of sanctions to impose--without addressing whether
5

The Appellant also noted in his sanctions motion that, pursuant
to the terms of the promissory note--the document upon which the
Debtor’s debt to the Appellant is based--the Appellant is
entitled to all reasonable legal fees and expenses incurred in
collecting the debt. (Desiderio Aff. 18.)
15

sanctions were warranted in the first instance.

Second, there

is

suggest

at

least

whether

some

fees

nonetheless

authority

that

were

in

the

incurred,

recoverable.

See

Circuit
but

Heisman

to

not

Trophy

yet

paid,

Trust

v.

that
are
Smack

Apparel Co., 379 F. App’x 12, 13-14 (2d Cir. 2010) (affirming a
district

court’s

award

of

attorney’s

fees

as

a

sanction

notwithstanding the fact that the fees had not yet been paid).
Accordingly,

the

Court

hereby

VACATES

the

portion

of

Judge

Grossman’s order denying the Appellant’s request to impose new
sanctions and REMANDS for further findings regarding whether the
actions of the Debtor, Meena, Mr. Pergament, and/or WGP were
sanctionable.
CONCLUSION
For the foregoing reasons, the order of the Bankruptcy
Court is VACATED and REMANDED for further findings consistent
with this Memorandum and Order.

The Clerk of the Court is

directed to mark this appeal CLOSED.

SO ORDERED.

/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:

March
28 , 2013
Central Islip, NY

16