case number of fifteen dash eight zero five three and eight zero five five games a low robert c sanders appellants versus frederick l raincy or trustee argument not to exceed fifteen minutes for a thank you good afternoon i'm a please the court rick ashton here on behalf of the appellant james lowe at this time i'd like to request three minutes f in entering its content in sanctions order the bankruptcy court aired in two material respects one with respect to each order with respect to the the contempt order the bankruptcy court erred in holding that mr folson in his attorney's violated the automatic stay by bringing a state court action which to alleged what the bankruptcy court held to be solely derivative claims but which it is our contention that those were individual claims thus resulting in a violation of the automatic stay the second was with respect to the sanctions order whereby the court has granted and it seems to be continuing to grant want to go forward basis fees for fees in violation of baker botts because the first issue is dispositive in this case i would like to spend the majority of my time dealing with that today in looking at the bankruptcy court's decision judge hoffman held that mr folson in his attorneys were usurping or taking over property of the estate by filing a state court action that was filed on january twenty fourth two thousand and thirteen that state court action was filed under what's called the ohio civil rico claim or the o c p which it's been referred to in our in our filings with this court the statutory code section ohio is twenty nine twenty three point three four and specifically the bankruptcy court held that because mr full sun was a shareholder of the debtor in bankruptcy and g p his claims that were brought in the state court action claims which were using damages incurred by in g p solely as a measuring stick for his own individual damages thereby violated the automatic stay that ruling was an air under both the plain reading of the text of the statute as well as if if this court is to look at the statute and determine that the phrase indirectly injured which is what we're focusing on is somehow ambiguous if we make to that step nonetheless the canons of statutory interpretation nonetheless result in the fact that mr folson when he filed that case own those claims individually and i think the perfect synopsis of the issue was in this court certification order as you may recall we asked that that question be certified so that the supreme court of law could thereby make a ruling it to not it declined that jurisdiction but this call this court ultimately entered an order granting that certification whereby this court stated if a shareholder of a corporation has standing to bring his own individual claim under the c p a the shareholders individual claim is his own personal property not property of the corporation and that was the case with mr folson state court case and i think let's look at the text of the statute the text of the court  in the certification current the supreme court did yes your honor and does that give you any inkling of what this this supreme court thought no it doesn't and actually in a footnote in a reply brief your honor we cited a case while saying that this court can take nothing of the fact that the supreme court declined to answer that question because it can be any of a multitude of reasonings the supreme court doesn't give you it for why it would not take an issue it just doesn't it could be because this is so unique that maybe it's not a a decision that is going to be overarching that that occurs on a very frequent basis and it's pretty overarching to to the general assembly of ohio is apt to make an end in acting the c p a made the specific step in added the specific language of including indirect entered into that into that phrase all a g of the statute so the well i have two responses that night and thank you for bringing that up your honor because i think it is critical that this court focus on the fact that the sole issue that would determine the bankruptcy court in prove that the bankruptcy court was incorrect is that it's a standing issue it's not a merits you if mr folson had standing to bring this claim which it's our position that he did by definition he was had standing to bring his own individual claim and thus not a claim that was property of the bankruptcy estate but the corporation but indirectly flow to mr folson as a as a shareholder in that corporation and i think using the back backdrop of federal rico will get us to that determination show that's correct so i'm moving beyond just the plain language so the plain language uses the term indirectly injured i think this court noted in certification order that there's nothing in there that's limiting it it uses were legit slater's are presumed to mean what they say and say what they mean and there's u s supreme court case law out there saying that and so we can't just it's the rule against  out words that the statute or that the general legislature puts in the statute but more importantly even if we move be on the direct statutory framework and the text of those c p a at the time the o c an active there was a whole body of federal rico claims and and rulings based upon the rico statute and why that's important is because the rico statute only uses the phrase injury or injured it's not prefaced by direct or indirect in the result body of case law that dealing with shareholders bringing claims that were by virtue of their ownership in a corporation the federal courts were saying no that's in direct a shareholder has indirect injury in federal rico will not allow you to recover under the federal rico statute but in those cases when the shareholder really claim that there's been damage to the corporation that's where the true damages are well the damages would be to the shareholder and i think this is the bankers trust line of cases as the shareholder has a cause of action the cause of action is going to be reduced by whatever the directly injured in this case the corporation would recover under the single satisfaction rule and so yes is it a measure of the shareholders damages absolutely but it's not the same damages in this case f directly injured in this case the estate of n g p if there was a direct injury of one million dollars completely in g p determines well i'm going to settle that lawsuit for six hundred thousand dollars there still is residual damages out there to the shareholder because the claim was not resolved for the full amount of the total body of damages that assumes a million dollars is known but if there's no real unknown number it's anyone's guess but your honor i think state courts in this case would be deal with on a routine basis is determining us to you have a well played complaint you have a claimant bringing a claim well pled complaint and then ultimately it's the burden in that's what we feel should happen here is because once again we're just dealing with standing in not the actual merits it's let the state court decide that is a burden that mr folson is going to have to bear in the state courts ultimately he's going to have to prove up that the violation of the statute impacted him in that damages resulted thereby that's just courts are dealing with that on a routine basis daily basis your honor is that that's a burden that mr folson his a state will have to prove up in the state court but once again we're just dealing with standing this court doesn't have to go that far to determine what was the amount of damages this court just needs to determine based upon the statutory text of the o c p a twenty one twenty three point three four does mr full center mr folson state have a independent claim for indirect injury so any time you have a corporation owned by more than one shareholder corporation makes decision business isn't to sell a case using your example a million dollars for six hundred thousand dollars so that means any other shareholder who doesn't agree with that analysis has his or her own claim and can still start that in state court well i think so your honor the now the argument always going to be in state court is is how remote is it i mean we're going back to law school and paul's graph how far do we look down the path i think with this case and i understand we're going because they could open up the floodgates and that was something that the federal courts were concerned about and that's why federal courts made the distinct determination to say this is limited to direct injury when the ohio general simply added direct or indirect to the to the state statute but that's still an argument that will be decided at the merits in that case so if that aggrieved shareholder decides to bring the claim they're going to have to do a business judgment determination to think what was the true value and is it worth that fight for something that may not be worth worthy of fighting for in years in court but with respect to shareholders your honor i think once again the federal law is instructive because there was federal law dealing specifically under the federal statute dealing specifically with shareholders and saying i think that was the hope holmes case saying shareholders it's indirect and we're not going to open up the floodgates under under  federal rico well ohio in our case a national enterprise's that was a case that listed at the time that the ohio rico statute was enacted around the time it compiled all the federal cases saying shareholders are indirect and thus don't have standing under a federal rico claim so when the ohio general simply enact it the ohio civil rico statute they use that specific  well i see my time is up also unless there's additional questions i'll save my time for a bottle or thank you thank you good afternoon good afternoon your honor that afternoon i am robert sanderson of talent i think mr ashton covered all the points i was hoping he would cover but there was one point judge settles a claim of a backdrop the state does that mean a shareholder can run off into state court and file a ohio corrupt practices act and a wouldn't that opened a floodgate of of litigation i think there is two points that should be referenced with respect to that issue and one is that the decision whether to open floodgates or to allow a cause of action is ultimately policy decision which is legislative in the nature if the legislature believed that it wanted the most muscular state rico statue in the country and it wanted to expand the scope of standing  in the manner that we argue it was expanded then it's it has the prerogative to do that and we believe that it currently did so in this particular instance the the second point i wanted to make on the sort of flood gate issue is that the us a shareholder would still have to find a counsel who under rule eleven would be prepared to file a very serious of federal fraud i mean a state fraud action so it's not like willy nilly any discontented shareholder who didn't like a settlement that a trustee reached would have the ability to run into court he would have to have facts that warranted bringing such a serious case under the state rico statute and he would have to prevail on the merits of that case and as as sure the court knows it's a multi pronged elements of a rico case so i i don't believe that the the danger of there being a lot of second guessing of trustees through court to geisha using the fraud statute is really is really likely to materialise but then even if it does i would submit that it was the legislature's decision to allow that that they wanted to police the commercial marketplace so not only do is there a criminal rico cause of action they express lee permitted a civil rico cause of action for trouble damages and they expanded the standing of that noticeably far beyond what the federal statute is that's a policy decision to to combat civil fraud in the commercial marketplace and if if that's a determination they made  i think under the controlling case law it is to be respected particularly under the canons of statutory construction that plain language is given it's plain meaning and and here  think the language could not be more clear the the term a person indirectly injured the statute itself doesn't define that so one then must use the ordinary common dictionary meaning of it and  clearly mr folsom was injured but of the damages that mr false than he or his estate have this different and distinct from that of the corporation it's different and distinct because the the the corp it has to do with the it's not just the under measuring of the gas there was a summary judgment entered in the common pleas court that the defendants had had mismeasured mr false ins oil and gas production crediting only a third of what was actually produced that clearly was an injury to the corporation right now the trustee then the defendants then file their involuntary petition  trustee was appointed and the case proceeded to a two a compromise the entry that mr folson sustained is the variance between  the amount that the expert witnesses and the common pleas court believed his companies were harmed roughly thirty six million dollars and the amount of the compromise that was accepted the point is is that  there was a if there's a different legal standard that a civil jury would apply in looking at a breach of contract case in terms of of the burden of proof on the plaintiff to prove his damages the bankruptcy judge in looking at whether to approve a compromise looks at it with a different standard which is simply whether the proposed compromise falls anywhere within the range of a reasonable compromise even if it's at the very low end of that if it's in that big band then it passes muster and it's approved so the injuries that mr falseness abstain and i believe they are distinct from the corporation's injuries are that  blocked his ability to have a jury decide the claims and as a result his company and he and directly sustain were able to obtain only a small portion of the of the full amount that owed in other words they were not made whole so the comp the company his companies were directly damaged but he had indirect injury because of basically flowing from the same fact the fact of a denial of a jury trial on the issues but he is indirectly harmed and since the statute doesn't have any particular term of you know special definition for in we think that that that whole that whole plan to not go to trial of a day before the trial you know let's take it into bankruptcy court that entire ten year  plan to block mr colson's remedies and state court we believe directly down damaged his corporation and indirectly damage him  way in it with respect to what this statutory statute means with respect to referenced indirectly notwithstanding efforts to understand the legislative intent when they made that change the statute this appeal presents a relatively simple and straightforward issue this bill is that bill is about contempt and not about standing but it's about contempt did the bankruptcy court correctly find that appellant in contempt word contempt of court for violating the automatic stay when they fall the state court action which is sort of claims oh and by the debtor secondly should the bankruptcy court have awarded fees attorney fees to to the trustees counsel and expenses incurred by the counsel in the fin in his request for attorney's fees and expenses as requested by the brinks a court that they file their statement of record with respect to the contempt issue your honor we're going to start with second three sixty two it's very clear any act to obtain possession or control over property of the state is a and so it's not simply a question of standing this before the court today mr ranson or the trustee does not contest whether the appellant in a separate different case with different factual circumstances might be able to assert some claim for indirect damages or actual damages that they incurred indirectly but that's not this case this court asked on several occasions what was the nature of the claim the nature of the damages and quite frankly your honour's i do not understand the responses to adequately address that particular issue we understand the appellant's now claim that what they're really looking for is the difference between the value of what the trustee settle this case for and the value that they place on the claims that the debtor had against columbia gas but about the same claim you are as i think it is the same claim it is the same claim and that's the point that there is no in the record injury there is no separate claim that they've been able to identify but importantly as well your honor the facts before judge hoffman were the actual facts pled or allegations put in the state court action the state court action and not seek to make even that distinction between the whatever the trustee was going to settle for what they valued the claim themselves that in fact the state court action that was pled and i quote they sought the following the damages sustained by in g p from the summer one thousand nine hundred nine to the present in the form of lost profits and the loss of oil and gas rights to two twenty thousand acres in the appalachian marcellus shale gas daughter even if it properly pled or not it's probably if they pled that particular distinction as part of the state court action it still would be a violation the next day because mr fulton by his own admission is not seeking to recover on an indirect claim that  if you look in a dictionary and direct as the find that is not a direct course or path deviating from a straight line round the belt and indirect course and sailing as an example so even if we were to try to understand or try to give the upon say the plain meaning to that particular word it would suggest an injury that is further removed more remote distinct from the injury suffered by in g p and in this case your honor that simply not the case third your honour's the o c p a specifically states that a party asserting a claim for indirect damages or indirect injury rather can recover actual damages that the person sustain the issue of ownership of a claim so this particular circumstance irrespective whether the o c p a grandstanding to an equity holder to pursue a claim for indirect damages directly recoverable by a company as is the case in the situation that's irrelevant to whether that equity holder has the right to pursue that claim because in this particular instance in g p own that claim the right to pursue damages for that is suffered at the hands of columbia gas right on or close the estate without a minister not claim certainly that the question be whether the shareholders were in the best best position pursue that claim and again it would be a state court action yes in that context if the banks they were not pending if the claimant not been administered in a bankruptcy then it would revert petition the court for authority to pursue that claim in the in the in the event that the trustee was not willing to pursue it but in this case it was clear that basically they understood that the trustee was in fact pursuing that client because trustee of course had a settlement pending before the court basically and the fact that that that the state court action was followed and was being pursued there was no mirror is no simple issue for the estate because columbia gas refused to complete the settlement unless the banks a court issued an injunction in this particular area know all involved plaintiffs who had distinct identifiable injuries separate and distinct from those that were held by the primary partner a party that's not the case in this particular situation who also know that much was made of the the what the what the legislature did when in fact that the statute recognizing what the federal statutes typically provided for to provide for and the fact that they used were in direct had to have the meaning that they're said add as judge hof mentioned in his opinion they simply could have said by virtue of the statute we intend that an equity holder and separately file and pursue claims that otherwise would be deemed derivative of those of the corporation that's not what happened in this case and we suggest your honor we recognize that the fact that there has to be in court to not accept the sort of occasion that doesn't bind this court but we suggest your honor that the that that in all problems probability has some impact on the decision not to not exercising its inherent authority to enforce its orders and to punish contemptuous conduct and doing so those fees to be allowed have to be deemed to be reasonable in the context of this particular case these fees were incurred by the trustee only because of the contentious action i missed the folsom and the attorneys who helped them pursue the state court action and so in this particular case those fees were reasonable they were incurred as a result of that contemptuous action so the imposition of sanctions  in terms of this court your view of that of that that decision will be based upon an abuse of discretion abuse of discretion standard and for that effect a minute to contempt we're being called upon to address the proper something i was going to get to but i would certainly touch on it at this point time not because the in this particular case the the burden to establish contempt is very high it requires a clear and convincing evidence and so according  the issue in court that makes the finding based on the facts before and in this case judge up in the facts before him or that the appellant fall the case in state court seeking to pursue the exact cause of action that was owned by the corporation because he found that that contemptuous action to occur he's entitled to a great deference in the review of that particular that particular decision basically in our papers we cited several cases particularly long term care management case is in our materials  contempt is within the discretion of this record so the standard review is whether the court abused its discretion as we believe the case of the already and the facts of this particular case both point to the fact that it should be an abuse of discretion standard as opposed to know in terms of the review as the court is aware baker botts was a supreme court decision based on section three thirty of the banks to go in that case the supreme court held that the section three thirty allows for the reimbursement for actual necessary expenses of the trustee and it wasn't a sharing type of statute so the fees in that particular case that were being challenged were fees that were going to have paid to the professionals and the court ruled that that's inappropriate because it would benefit the professionals and not the estate so that's the  contemptuous party likewise we believe the opponents are under a misconception they suggest in their papers that if the court were to allow the fia ward under section one hundred five the later it and award in the section three thirty could be different and therefore the damages including attorneys fees and even pick a boss the supreme court specifically said that their decision was not going to undermine circumstances where it particular statute provided for the award of the county's fees as part of the  damage component the walker case of the worst case for you in this area isn't though i mean it seems to be much more plausible versus the baker botts which you have distinguished as being the three thirty case but yes on except for the fact that walker so helped decide it that i think makes a clear distinction because for example other courts since the walk decision have refused to follow it most specifically the ninth circuit most recently has not followed the walk decision and it's pretty decision and you look at walker and i think it's very fairly clear that the court missed the mark in the in the walk decision by not allowing those particular fees indirect means a lot of consternation of the issue of standing but and in fact this case is about contempt a breach of the of the of the automatic stay by mr folson with the help of his of his counsel what they did was clearly by the words on the paper in the complaints they filed not only once but twice when he filed them in a complaint they sought to recover a claim that was known by the debtor clear distinct no question about it now they would like this court to believe that basically we all know what we really wanted to do was to get the vast difference in value between what the trustee was going to settle for and what we think the value that claim was worth but as this court noted from the questions it asked appellants counsel the fact of matter is that that claim even if pled the way that they now want to put plead it still be a violation of the automatic stay because of that judge hoffman's issuance of a contempt citation was appropriate the appropriate standard for a view was a piece discretion from the facts before that before judge hoffman it is clear he had a clear basis to basically make that decision and to award attorneys fees for the for the contemptuous conduct unless the court has any additional questions that will conclude my presentation i think  a few points in rebuttal i do agree that this is a straightforward case but the straightforward case is that mr folson and now his the state cannot be held in contempt for exercising rights that they own themselves not planes that are somehow an asset of the a state and i think you know by way of backdrop when we talk about the zero c p a when it was an act it was designed to be the toughest and most comprehensive rico act in the nation and state of the art legislation this was something that was meant to broaden who could bring the claim under it and in fact it does so by talking about bringing standing to those who are direct or indirectly injured and i think another point that needs to be addressed is judge opperman i think you raise the question is that the same been enacted by the ohio general assembly allowing him to bring his own individual claims that claim which rose when as mr sanders had more aptly described when ultimately there was an involuntary bankruptcy resulting in this reduced settlement amount once that settlement amount was or the settlement was agreed to in funded by the trustee in the columbia house entities that's when the rico claim became clear indefinite isn't that of just a measure left i mean what happened to purge years before the involuntary petition was filed and well no i think you have to look at the rico claims as a series of predicate acts the last predicate acts of starting with under reporting of the gas through involuntary bankruptcy with the ultimate goal is to settle that claim that mr folson and or his companies would have had for pennies on the dollar and so the last predicate act in which case the when the claim rose was when the settlement was was agreed to between the trustee in the columbia gas entities and i know mr jackson has stated that columbia gas would not settle well that's untrue they did settle when that agreement was the ninety one thousand motion was approved by the court on nine twenty six of two thousand and fourteen and so i think there was also the comment that well when the general simply inactive the civil rico claim they had to know about just the common law in the civil rico statute so there was after the civil rico statute adopted by ohio what did exist was the federal body of case law that had limited shareholders saying that they could not bring federal rico claims because the claims were indirect w ohio and enacting the ohio's consumer or the ohio rico claim deal c p a specifically use the very terminology in direct injury that federal courts had said shareholders cannot bring claims of under the federal law unless there are any questions i see i'm out of time thank you