Byorder of the Bankruptcy Appellate Panel, the precedential effect of this decision is limited to the case and parties pu rsuant to 6th C ir. B AP LBR 8013- 1(b). See also 6th C ir. B AP LBR 8010- 1(c).
File Name: 06b0015n.06
BANKRU PTCY APPELLATE P ANEL OF THE SIXTH CIRC UIT

In re: RANDALL

J. HAKE and MARY ANN HAKE,

Debtors.

_________________________________________ BUCKEYE RETIREMENT CO., L .L.C., LTD ., Appellan t,

v. No. 06-8007
RANDALL

J. HAKE and MARY ANN HAKE, Appellee s.

_________________________________________

Appeal from the United States Bankruptcy Court for the Northern District of Ohio, Eastern Division

.

No. 04-41352

. Submitted : August 23, 2006 Decided and Filed: September 14, 2006 Befor e: AUG, PARSONS , and SCOTT , Bankr uptcy Appellat e Panel Judg es.

____________________ COUNSEL
ON BRIE F: F. Dean Armstro ng, ARMSTR ONG LAW FIRM, Fl oss moo r, I llin ois , Te rry J. Walrath, THE CADL E COMPANY, Newton Falls, Ohio, for Appellant. Mark A. Bea trice, Jerry R. Krzys, M ANCHE STER , BENNE TT, P OWER S & ULLMAN, Y oungs town, Ohio, for Appe llees.2 ____________________ OPINION

____________________ MAR CIA PHILLI

PS PARSONS, Bankruptcy Appellate Panel Judge . The bankruptcy court held that Buckey e Retirement Co., L.L .C., Ltd. (“Buckey e”) violated Fed. R. Bankr. P. 9011(b) by fili ng, in the individual debtors’ chapter 11 case, a motion for leave to f ile an adversary

proceeding

on behalf of the bankruptcy estate to recover monies contributed by the debtor Ra

ndall Hak e to his 401(k) retirement account. As sanctions, the court ordere d Buckey e to pay directly to the deb tors’ attorney the fee s incurr

ed in oppo sing the

motion for

leave. B uckey

e appea ls both the finding of the violation and the sanctions award. For the rea sons that follow, the orders of the bankruptcy court are AFFI RMED.
I. ISSUE ON APPEAL The issue on appeal is whether the bankruptcy court abused its discretion in finding that Buckey e violate d Rule 9011 and awa rding sa nctions a gainst i t that wer e pay able to th e debtor s’ at to rn ey.
II. JURISDIC TION AND STANDARD OF REVIEW
The Bankruptcy

Appellate Panel (“BAP”) has jurisd iction to de cide this a

ppeal. The United States District Court for

the Northern

District of Ohio has authorized appeals to the BAP, and a final order of the bankruptcy c ourt may be appe aled by rig ht under 28 U.S.C. § 158(a)(1). An order, for th e purpose of an appeal, is final if it “ends the litigation on the merits and lea ves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United States , 489 U.S. 794, 798, 109 S. Ct. 1494, 1497 (1989). The bankruptcy c ourt’s order imposing sanctions on Buckey e for a violation of Fed. R. Bankr. P. 9011 was a final order

. Cf. In re Jeanne tte Corp ., 832 F.2d 43, 46 (3rd Cir. 1987) (or

der impos ing Ru le 9011 sanctions only final upon assessment of c ounsel’s fees and expenses).3

“Bankruptcy

courts’ decisions regarding the imposition of

sanctions [under Rule 9011] are reviewed under an abuse of discretion standard.” Corzin v. Fordu (In re Fordu) , 201 F.3d 693, 711 (6th Cir. 1999). “An abuse of discretion occurs only when the [trial] court ‘relies upon clearl y
erron eous fin dings of fact or when it improperly applies the law or uses an erroneous leg al standard.’” In re Downs , 103 F.3d 472, 480-81 (6th Cir. 1996). “An abuse of discretion is defined

as a ‘definite and firm

conviction that the [bankruptcy cour t] committed a clear error of judgment.” In re M.J. Waterman &

Assocs., Inc. , 227 F.3d 604, 607-08 (6th Cir. 2000) (quoting Soberay Mach. & Equip. Co. v. MRF Lt d. , 181 F.3d 759, 770 (6th Cir.1999)). “The question is not how the reviewing court would have ruled, but rather whether a reasonable person could agre e with the bankruptcy

court’s decision ; if

reasonable persons could differ as to the is sue, then

there is n o abuse of discretion.” Id. at 608 (citations omitted).
III. FACTS
OnMarch 25, 2004, Randall J. Hake and Mary AnnHake filed for bankruptcy relief under chapter 11 of the Bankruptcy

Code. Buckey

e is the largest unsecured cre ditor in the debtors’ case, with a pre-petition judgment against the debtors in excess of $1.8 million.
OnAugust 24, 2005, while the debtors’ chapter 11 case was pending, Victor O. B uente, Jr., general counsel for Buckey

e, sent a letter to the debtors’ counsel, Mark A. Bea trice, a dvising h im that he had noticed in the debtors’ July 2005 monthly operating r eport that the debtors had accrued or withheld $500 for a 401(k) contribution. Mr. Buente stated in the letter tha t the debtors had no authority to take this action and that such contributions were prohibited while t he ir cas e was pe ndin g, citing and enclosing a copy of In re Keating , 298 B.R. 104 (Ba nkr. E.D. Mich. 2003 ). Mr. B uente requested that the debtors place the withheld funds in their bankruptcy operating account

and cea se any further 401(k) c ontributio

ns. He al so asked M

r. Bea trice to r eply to this request by Aug

ust 31, 2005, or he would bring the matter to the court’s attention. (J.A. D).
OnSeptember

16, 2005, Mr. Buente sent a second letter to Mr. Be atrice indicating that the debtors had apparently

disregarded his earlier re quest because the debtors’ August 2005 mo nthly operatingreport s tated tha t the debt ors h ad accrue d or withheld $1,500 for 401(k) deposits. Mr.4

Buente asked Mr. Beatrice to reply by September 23, 2005, o r t he matter would be brought to the bankruptcy

court’s attention. (J.A. E). Mr. Beatrice responded to Mr. B uente in a letter dated September 16, 2005, wherein he indicated that the debtor Randall Ha ke had only

recent ly become eligible to participate in the 401(k) retirement plan but “[i]n light of your comments regarding the same,
. . . he has ceased making any further contributions since y our letter.” (J.A. F). In re sponse, Mr. Buente sent a t hird lette r to Mr. Be at rice on September 21, 2005, stating that Mr. Hake’s cessatio n of furt her 401( k) contr ibutions wa s “a step

in the rig ht direc tion” but th

at: [Mr. Hake] should also endeavor . . . to retrieve the contributions from the entity now holding them, as he had

neither the rig ht nor the privileg e to make such contributions in the first place. His post-petition earnings are prope rty of the estate

under 1 1 U.S.C. § 1115(a)(2). Please advise if he will seek retur n of the $2,000 contributions reported on the operating reports. (J.A. G). When the debtors made no further response to Bucke ye’s dema nds, Buckey

e f iled on Octo ber 28, 2005, a Mo tion For L eave Of Court To F ile Adver

sary Proceed ing (“M otio n For Leave ”), requestingpermission to file on behalf of the bankruptcy estate a turnover action

against Mr. Hake and the custo dian/trus tee of hi s 401(k) r etireme nt plan to r

ecover the $2,50 0 in

contributions. In a Memorandum

filed in support of the Motion F or Leave, Bu ckey e asser ted that the debtor s’ postpetition earning s were property of their bankruptcy estate under 11 U.S.C. §§ 541(a)(7) and 1115(a)(2) and that the 401(k) contributions were subject to turnover u nder 11 U.S.C. § 542. Bu ck eye also maintained that the debtors had refused demands to bring the funds into the estate, citing Mr. Buente’s letters to Mr. Beatrice , copies of which were attached. As in Mr. Buente’ s first letter to Mr . B ea tr ic e, Bu ck eye also referenced Keating , noting that the court therein had concluded inruling on the Un it ed States trustee’ s motion to di smiss for s ubstantia l abuse un

der 11 U. S.C. § 707(b) that the debtor’s 401(k) contributions were not allowable e xpenses.
The debt ors filed a memora

ndum in oppo sition to the Motion For Lea ve, statin g that po stpetition persona

l earnin gs of an individua

l chapter 11 debtor are not property of the estate under § 541(a)( 6) which

specific ally

excludes f

rom the de finition of

propert y of the estate, “earnings from services performed by

an individual debtor after the commencement of the ca se.” They noted that while § 1115 does include post-petition earnings in the definition of property of a chapter 11 estate, the section was added in the Bankruptcy Abuse Prevention and Consumer Protection Act of 20055

(Pub. L. 109-8) (“BA

PCPA”) and only applies to case s filed on or after October 17, 20 05 . The debtors distinguished the Keating decision cited by B ucke ye, pointing out that it a

ddresse d allowab le expenses for a

chapt er 13 d ebtor and th at unl ike th e earni ngs of a chapter 11 debtor, the earning s of a chapter 13 debtor are expressly property of the

estate under 11 U.S.C. § 1306.
At the hearing on November 16, 2005, the bankruptc y court indicate d that it

would deny the Motion For

Lea ve, ag reeing with the de

btors tha t their pos t-petitio n earnin gs wer e not prop erty

of the estate. The court also observed that Buckey e had failed to set

forth in the Motion For Leave w hy it should be permitted

to bring an action on behalf of the estate, utilizing the standar d espoused by the Sixth Circuit Court of Appeals in Canadian Pac. Fo rest Prod s. Ltd. v. J

.D. Irvin g, Ltd. ( In re Gibson Group) , 66 F.3d 1436, 1438-39 (1995). The bankruptcy co urt foun d this failure to be inexplicab le because it had recently advised Buckey

e of th e Gibson Group criteria in a

m emorandum

opinion and order dated September 30, 2005, wherein the cour t dismissed anothe r adversary procee ding tha

t Bucke ye had atte mpted to pursue on behalf of the Hake bankrup tcy

estate ( Buckeye Retireme nt Co. v. Hake , No. 04-4189). The bankruptcy court noted that one element of the Gibson Group test which requires a cost/be nefit analy sis was es

pecially critica l in the inst

ant case because only $2,000 of the $2,500 had been contributed by Mr. Hake—the rest had been contributed by his emp loy er—and t

hat any withdrawal from a

401(k) w ould likely

involve ta

xation and p enalties , thus producing the possibility of no be nefit to the estate. Accordingly, the c ourt con cluded that denial of the Motion For Leave was warranted by

Buckey e’ s failure to a ddress the law governing derivative actions by a third party , even if arguendo , the debt ors’ post-petition

earning s otherwi se fellwithin the

definition of prope

rty of the estate. The bankruptcy court’s ruling in this regard was incorporated in an order entered Nove mber 23, 2005.
Two days afte

r the hearing on the Motion For L eave, the bankrup tcy court sua sponte entered

anorder pursuant to Fed. R. Bankr. P. 9011(c)( 1)(B), directing Buc keye a nd its counsel to appear at a hearing on December

7, 2005, and show cause “why they should not

be sanctioned for filing the Motion For

Lea ve on the b asis that i

t was file d in

violation of Fed. R. Bankr. P. 9011(b)(1) and/or (2).” The only

witness at the show cause hearing was Victor O . Buente, who testified that he had been a practicing attorney

for 25 yea

rs an d had worked for Buckey e and its affiliates for over 136

ye ars. He also te stified th at prior t o writing the first letter to th e debtor s’ counsel regarding the 401(k) contribu

tions, he had re search ed the le gal issue “perhaps a full day, perha

ps two full days,” andt hat his research included the cases of In re Herberman , 122 B .R. 27 3 (Ba nkr. W. D. Te xa s 1990), and In re Har

p , 166 B.R. 740 (Bankr. N.D. Ala. 1993). Mr. Buente further testified that prior to filing the Motion For Lea ve he had considered the Gibson Group fact ors andhad the motion reviewed by Buckey e’s outsid e counse l. Mr. Bue

nte denie d that the

re was a n imprope

r motive in filing the Motion For Leave or that it was filed

for the purpo se of har

assment, delay

or needl essly increasing the cost of litigation.
Inan eleven-page orde

r entered December 13, 2 00 5, the bankruptcy c ourt concluded that sanctions were a

ppropria te and imp osed sanc

tions “in the amount o f Debtors’ attorney ’s fees in responding to the Motion For Leave and a ppearing at the He aring on such motion.” The court directed the debtors’ counsel to file an itemized statement of such fees and indicated tha t upo n a review as to rea sonableness it would enter a subsequent order rega rding the amount of

the sanc tions. The order a

lso includ

ed a spec ific find

ing that Mr. Bue nte was not credi

b le wit h respec t to his assertion that Buckey e had “(i) a good faith belief for its position in the Motion For L eave or (ii) a colorab le claim in a sserting that all of Deb tor’s post-petition earnings were property of the bankruptcy

estate.” The court not ed that the on ly case a uthority provided by

Mr. Buente to Mr. Beatrice in the lett

ers was Keating , a dissimilar case, and that § 1115, cited in the Motion For Leave,
was admittedly inapplicable to the ca se at hand. The co urt also rejected the assertion that the Herberman and Harp decision s provide d the go od faith b asis for the motion, observing that these

cases had not been previously cited and that both of

them wer e disting uishable from the case at hand. According

to the bankruptcy

court, Herberman held that the post-petition income of a doctor’ s sole proprietorship fell withi

n th e defini tion of pr

operty of the es tate unde

r § 541(a )(7) but expressly noted in footnote 19 that the income of a debtor working for a third party is insulated

frompropert

y of the estate because it is not the debtor’s business being oper ated. As to Harp , the bankruptcy c ourt explained that the case relied heavily on Herberman in concluding that the d ebtor/ph ysi cian’s p ostpetition income was property of the estate and that it adopted Herberman ’s “‘well-reasoned and well-articulated’ analysis, which presumably include[d] footnote 19.”7

The bankrup tcy

court al so found in

its order that Mr. B uente was not credible instating that the Motion For Leave wa s not interposed for the purpose of ha ra ss me nt or de la y. As stated by the court: Taking the case as a whol e, the condu ct of Bu ckey e Retire ment amou

nts to harassm ent. So far in this case, Buckey e Retirement has (i ) filed almo st fifty (50) motions for R

ule 2 004 e xa ms; (ii ) objected to Debtors setting a bar date; (iii) objected to the extension of the Debtors’ exclusivity period; (iv) s ought the imposition of a Chapter 11 trustee; (v) filed d uplicati ve claims; (vi) filed, without leave of this Court, adversa

ry procee dings al legedl

y on behalf of the estate seeking to avoid allegedly

fraudulent transfers; and (vii) objected t o every f ee application filed by counsel f or the De btors.
OnJanuary

20, 2006, the debtors’ attorney filed an application for interim compensation in the amount of

$952 for services rendered in opposing the Motion For L eave and a Notice Of Hear ing

on the application, setting a hearing date of February

15, 2007, and

providing

that any objectio ns to the applicatio n must be fi led by February 10, 2006. On Fe bruary 8, 20 06, prior to the scheduled hearing date and objection deadline, the bankruptcy court entered an order finding the requested fees

reasona ble an d d ir ec ti ng Bu ck eye to pay the debtors’ c ounsel fees in the amount of $9 52 . B uc ke ye timely appeal ed this ord er, the December 13, 2005 order finding the Rule 9011 violation, and the court’s November 18, 2005 order to show cause.
DISCUSSION
FederalRule of Bankruptcy Procedure 9011(b) and (c) provides in per tinent part the follo wing: (b) REPRESENTATIONS TO THE COURT. By presenting to the court (whether by signing , filin g, su

bmitting, or later advocating) a petition, pleading , written motion, or other paper, an attor ney or unrepresente d party

is certif yin g that to the best of the person’s knowledge, information, an d belief, formed after an inquiry reasonable under the circumstances,— (1) it is not being presented for any improper purpose, such as to

harass or to caus e unnecessary

delay or ne edless increase in the cost of litigation; (2) the claim s, defen ses, and other legal contentions therein are warranted by

existing law or by a nonfri volous ar gument f or the exte

nsion, mo dificati o n, or reversal of existing law or the establishment of new law;8

(3) t he allegations and other factual conte ntions have evidentiary

support or, i f specific ally

so id entified , are lik

ely to have e

videntia ry support after a r

easonab le opportunity for further

investigation or discovery ; and (4) the denials of factualcontentions are warranted on the evide nce or, i f specif

ically so identified, are reasonably based on a lack of information or belief. (c) SANCTIONS. If, after notice and a reasonable opportunity

to respond, the court determines that subd ivisio n (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorney s, law firms, or parties that have violated subdivision (b) or are responsible for the violation. (1) How Initiated.

. . . . (B) On Court’s Initiative. On its own initiative, the court may enter an order descr i bing the specific conduct that appears to violate subdivision (b) and directingan attor

ney , law fir

m, or par ty to show cause why

it has notviolated subdivision (b) with respect thereto. (2) Nature of S anct ion; L imitations. A sanction imposed f or violati on of this r

ule shallbe limited to what is sufficient to deter repetition of such conduct or compar

able conduct by o thers simi larly

situated. Subject to

the limitat

ions i n subparagraphs (A) and (B), the sanct ion may consist of, or include, directives of a nonmonetary nature, an order

to pa y a penalty into court, or, if imposed on motion and wa rranted for effective deterrence , an order directing pay ment to the movant of

some or all of the reasonable attorneys’ fees and other expenses incurred as a dir ect result of the violation. (A) Mone tary sanction s may

not be aw arded a

gainst a repres ented pa

rty for a violation of subdivision (b)(2). (B) Monetary sanc

tions may not be awar

ded on the court 's initi ative unl ess the court issues its order to showcaus e before a voluntary dismissal or settleme nt of the claim s made by

or aga inst the pa

rty which is, o

r whose attorneys ar

e, to be sanctioned. (3) Order. When

imposing sanctions, the court shall describe the conduct determined to constitute a violation of this rule and explain the basis for the sanction imposed. Accord ing to the Sixth Circ

uit Court of

Appeals , “the te st

for imposing Rule 9011 sanctions is whether the individual’s conduct was reasonable under the circ umstances.” In re Downs , 103 F.3d 472, 481 (6th Cir . 1996). I t has bee n held that Fed. R. Bankr. P. 9011(b) has both a subjective and objective component: the objective inquiry is set forth in paragraph (2) which que stions whether the suit was filed after a reasonable inve stigation into the la w and the facts; th e subjec tive inquir y is9

contained in paragraph

(1) and requires a determination of why the movant

filed the motion. See In re Collins , 250 B.R. 645, 661 (Bankr. N.D. I ll. 2000).
Bu ck eye argues in this appeal that the bankruptcy court abused its discretion in ruling that Bu ck eye violated Rule 9011(b)(1) and (2). Bu ckey e also asserts t

hat beca use the c ourt’s show cause order only refe renced the Motion For L eave, the bank ruptcy cour t’s consideration of Buckey e’s previous conduct in the case was a denial of du e process and a violation of Rule 9011(c)(1)(B )’s requirement

that the sh

ow cause order de scribe the specif

ic violative conduct. Buckey e also argues that the bankruptcy c ourt exceeded its author it y b y imposing sanctions ag ainst Buckey e for a violation of Rule 9011(b)(2) and by making the sanctions payable dire ctly to the debtors’ counsel. Las tl y, Buckey

e maintai ns that the court erred by setting the sanction amount without giving Bu ck eye an oppor

tunity to challenge that amount. Each of these ar guments will be addressed in turn.
As set forth in its brief, Buckey e’s first point of contention is that the bankruptcy c ourt clearly erred in finding

a violation of Rule 9 011(b)( 2), which provide s that the f iling of a docume

nt is a certification

“formed after an inquiry reasonable un der the circumst ances,” that “the

claims, defense s, and

other legal contentions therein are war ranted by e

xisting law or by a nonfrivolous argument for the e xtension, mo dificati on, or re versal o f existing law or the establishment of new law.” Buckey

e asserts that there is a split of authority on the issue of

whether an individual chapter 11 debtor’s post-petition income is property of the estate and

that its vie

w is supported by a litera l reading of § 541(a)(6) and the Herberman and Harp decisions. Buckey e observes that at the hearing on the Motion For Leave , the bankruptcy c ourt itself acknowledged the conflict in the case law by stating, “I believe

that the better r

eason[ed ] cases fi nd that ea rnings o f the Deb tor are

not prope

rty of the bankruptcy e state and are not excepted by Se ction 541( a)(6), despite a ny t ension tha t may exist [ ] between 541(a)(6) and 541(a)(7).” Buckey e also argues that

the enactment

of § 1115 by Co ngress
was an implicit recognition that the case s which ha

d conclud ed that a chapter 11 debtor ’s postpetition earnings were property of the estate were correc

t.
Section 54 1(a) of

the Ban kruptcy Code prov

ides in pe rtinent pa rt:1 Under § 103(a) of the Bankruptcy Code, provisions of chapter 5 apply to chapter

11 cases so under pr

e-BAPCPA

cases, § 541 is the s ole defi nition pro vision for

propert y of the esta te in chapter 11 cases

. The pre-BAPCAP version of chapter 11 had no corollary to chapter 13’s § 1306 whichexpressly includes in the chapter 13 estate, “earnings from service s performed by the debtor after the commencement of the case . . . .” See 11 U.S.C. § 1306(a)(2).

10 The comme

ncement of a cas e under section 301, 302, or 303 of this title creates an estate. Such esta

te is compr

ise d of a ll of the following property , wherever located and by whomeve

r held: (1) Except as provided i n subsect ions (b) a nd (c)( 2) of this s ectio n, all leg al or equitable interests of the debtor in property as of the commencement of the case.

. . . . (6) Proceeds, products, offspring, re nts, or profits of or from property of the estate, except such as are earnings from service s performed by an individual debtor after the commencement of the case. (7) Any interest inproperty that

the estate acquires after the commenc ement of the case. From a readi ng of the se provis ions, it is evidentthat (a)(1) of § 541includes in the estate the debtor’s property

interests existing as of the petition date, plus any inter est that the estate

acquires

or is generated by

the estate post-pet ition, incl uding pr oceeds, products , offsprin g, ren ts, or profi

ts, unless such proc eeds, et

c., are earning s from ser

vices pe rformed by a n individua

l debtor p ost

petition. See 11 U.S.C. § 541(a)(6) and (7) ; In re Ball ard , 238 B.R. 610, 623 (Bankr. M.D. L a. 1999). Becau se an indi

vidual d e btor’s post-petition earnings genera lly are not an inter

est that the debtor has as of the filing of the petition and because they are nototherwis e proce eds, etc ., of esta te pr op er ty, they are

not property of the e state under a straight-forward reading

of § 541(a). Id. at 620 (“Ever yone knows that a debtor’s post-petition wages, earning s, etc., . . . are not property of the estate.”). Consistent with this reading, virtually eve ry court that

has consi dered th

is issue ha s held that the post-petition wages of an individual in chapter 11 are not property of the e state. 1 See Roland

v. Unum Life I

ns. Co. of Am. , 223 B.R. 499, 502 (E.D. Va. 1998), and cases cited in n.5. As explained by the district cour

t in Roland , the only

source o f debate

on this issue

is sole proprietorships, with these cases “all address[ing] the problem of separating income derived from the businessitself, which is in the estate, and income derived from the personal services of the debtor11

whichis not in the estate.” Id . at 502 n.4 (citing, inter alia, In re Herberman , 122 B.R. 273). The Roland court g oes on to st

ate: Despite [these cases’] diffe ring approach to the sole proprietorship iss ue, it is importantto note that all of these cases hold that income derived solely from personal services (‘wages’)

are excluded from the estate by § 541(a)(6).

. . . The sole exce

ption is In re Har

p , 166 B.R. 740 (Bankr. N.D. Ala. 1993), whichfound that all post-petition wage income wa s pr operty of the e state. Harp , however, rests upon a mistaken reading of Herberman. Se e Herberma n , 122 B.R. at 286, 287 n.19 (income from wage ear ners not working for the estate is not included inthe esta

te); see also In re Re ed , 184 B.R. 733 (Ba nkr. W .D. Te x. 19 95) (J udge Clark clarifying

that his reasoning in Herberman was only appli cable to sole proprietorships, not individ ual wag e earne

rs); In re Larson , 147 B. R. 39, 43-44 (Bankr. D.N.D. 1992) (di scussing limitations

inapplying Herberman to individual wage earners). Harp’s interpretation of 541(a)(6 ), finding that allpost-petition wages are property of the

estate and therefore must be used to satisfy the claims of

credito rs, cannot be reconciled with the Supreme Court’s statement in Toibb v. Ra dloff , 501 U.S. 157, 111 S. Ct. 2197, 115 L. Ed.2d 145 (19 91) that “there is no . . . provision in Chapter 11 requiring

a debtor to pay f

uture wages to a creditor.” Id . at 166, 111 S. Ct. at 2202. . . . Roland v. Unum Life Ins. Co. of Am. , 223 B.R. at 502 n.4 and 5. Se e also Rob ert J. Keach, Dead Man Filing Redux; Is the New Individual Cha pter E leven U

nconstitu tional? , 13 Am. B ankr. I nst. L. Rev. 483, 484 (Winter 2005) (“While the ‘earnings exception’ of section 541(a)(6) has sometimes been construe d more na

rrowly in s ole propr

ietor ch apter 11 cases, a

t a minimum, income di

rectly attributa ble to pos t-petition services of the individual debtor is excluded from the chapter 11 estate.”). Applying this discus sion to the

facts of the instan t case, i tis evident that the bankruptcy c ourt did not err in

holding t hat the de

btors’ c ontributions to the 401(k ) retirement plan, having been derived from Mr. Hake’s post-petition wages, wer e not property of

the estat e, alt hough the court’s denial of the Motion For Leave is not before this court. Rather, the pertine nt issue is whether Buckey e’s filing of the Motion For Lea ve was warranted by

existing law or by a no nfrivolous argument for a mod

ific ation of existing law, formed after an inquiry reasonable under the circumst ances. Contrary to the bankr uptcy court’s obse

rvation , the Harp decision does provide support for Buckey

e’s position that Mr. Hake’s ear ning s were p ropert y of the es tate, altho ugh pl ainly th is case stands alone and appears to be inconsistent with the applicable provisions of the12

Bankruptcy

Code. However, the bankruptcy court’s findingthat Rule 9011(b)(2) had been violated

was not based only on the lack of support for the property

of the es tate arg

ument. B uckey

e had als o fai led to directly addre ss in its Motion For Leave the Gibson Group test that under Sixth Circui t precedent determines whether a party may bring

a derivative action on

behalf o f the esta

te. While Buckey e asser ted that the Motion F or Le ave set f orth the f acts nec essary

to apply three of the four Gibson Group factors an d that coun sel had c onsidere d the four th facto r, the co st/benef

it analy sis, prior to filing the motion, the bankruptcy c ourt did not find counsel credible in this regard since the Motion For Leave

did n ot refere nce Gibson Group even though the court had explicitly informed Bu ck eye of these requirements in a memorandum opinion entered in another

adversary

proceeding less than 30 days bef

ore Buckey

e filed the Motion For Lea ve. And, while the Rule 9011 determination generally turns on an objective inquiry, the la ck of objective support f

or Buck ey e’s positi o n w as exacerbated by the court’s determination that Mr. Buente was not credible in h is assert i on that he had a good faith belief in the leg al position underlying

the Motion For Leave. The court’s finding in this reg ard is s upported by the fa ct that neither the letters to Mr. Beatriceby M r. Buen te nor the Motion For Leave cited Harp ; the only

case referenced

in the lett

ers was Keating which pr ovided no auth ority on the issue since it addressed require ments under chapter 13 ; and Mr. B uentealso cited § 1115 as though it were controlling even thou gh it only applies to cases commenc ed onor after October 17, 2005, which would exclude the present case. “A trial court’s findings based on de terminations regarding the cre dibility of witnesses

are generally

entitled to great deference .” G audiano v. C.I.R. , 216 F.3d 524, 536 (6th Cir. 2000). When the entire record is considered, we a re unable to conclude that the ba nk ru pt cy court cl early erred in its determination that Rule 9011(b)(2) had been violated. See In re Am. Telecom Corp , 319 B.R. 857, 872 (Bankr. N.D. I ll. 2004) (“If an attorne y fails to conduct a r

easonable legal

inquiry, the rule has been violated even if he holds a good- faith belief that his client is entitled to relief under the law.”).
Si mi la rl y, we fi nd no ab us e o f d is cr et io n w it h r eg ar d t o t he ba nk ru pt cy cour t’s ruling that Bu ck eye violated

Rule 9011(b)(1) which prohibits a motion from being presented for an improper purpose, such as to

harass or to caus e unnece ssary delay or needl ess increase in the cost of litigation.13

The same evidence which the bankruptcy court cited in its conclusion that Mr. Buente was not credibl e also supported its c onclusion that th e Mot ion For Leave was interposed for purposes of harassm ent. Furthermore, the cou rt cited B uckeye ’s litigious conduct throughout the case which included filing almost 50 motions for Rule 2004 exams, filing actions purportedly on beha lf of the estate without prior court approval, and even objecting to the imposition of a bar date.
Bu ck eye asserts that it was error for the bankruptcy c ourt to consider its prior conduct in the

casesince the

court’s show cau se order

only refer enced the Moti on F or Le ave and Rule 9011(c)(1)(B), which pertains to sanctions imposed on the court’s own initia tive, cle arly

requires the order to describe the specific conduct that appears sanctionable. H owe ver, Buckey e was not sanctioned

for its previous conduct in the case; the court merely evaluated Buckey

e’s entire pattern of filings i n th e case in order to properly determine if Buckey

e’s motive in filing the Motion For Leave was to ha rass the debtors. See, e. g., In re K TMA Acqui

sition Corp ., 153 B.R. 238, 266 (Bankr. D. Minn.1993 ) (condu

ct is hara ssing wh en objectively it persist ently irritates or torments the other party and in making determination of whether filing violates Rule 9011(b)(1), court should consider whethe rthe re is some motive to harass). Moreover, Buckey e was expressly put on notice of the potential for sanctions in this regard by t he bankr uptcy court’s show cau se order

refer encing Rule 90 11 (b )( 1) . A cc or di ng ly, the ba nkrup tcy court ’s con sider ation of Buck eye’s prio r fili ngs was not inappropriate.
Bu ck eye also argues that the bankruptcy court exceeded its authority by imposing sanctions agains tit for a vi ol ati on o f Ru le 9 011 (b) (2) . In t his reg ard, Bu ckey e is corr ect that R

ule 9011(c)(2)(A) provides that “[m]onetary sanctions may not be awarde d again st a repr esented party for a violation of subdivision (b)(2).” However, the bankruptc y court found not only

a violation of subdivision (b)(2) in this case but also a violation of subdivision (b)(1) for which sanctions may be assessed agains t a re pr es en te d p ar ty. There is no indication in the present case that the bankruptcy court imposed separate sanctions for each violation or otherwise assessed sanctions ag ai ns t B uc ke ye for an amount greater than if just one violation had occur red. As such, we fi nd no improper application of the law.14

As to the assertion that it was error for the co urt to order Buckey e to pay the sanc

tions directly to the deb tors’ co

unsel, B uckey

e relies on the sen

te nce in subdivis ion (c)(2) of Rule 9011 whichprovides that “the sanction may consist of, . . . if imposed on motion . . . , an orde r directingpayment

to the mova

nt of some

or all of the reasonable attorney s’ fees and other expenses incurre d as a

direct result of the violation.” Buckey e maintains that under this provision the court could only award pa

yment of attorney

fees if the sanction action had been initiated by a party on motion. Howeve

r, this Panel has re cognize d that notw ithstandin g this la nguag e, bankr

uptcy courts have the inher

ent powe r to impose

sanctions on a scope broader than that of Bankr uptcy Rule 9011, including monetar

y sa nctions, a nd that und

er simil ar fa cts, the b ankruptc y c ourt did no t err in awarding attorne ys f ees on a R

ule 9011 matter

raised on the court’s own initiative. Knowles Bldg. Co. v. Zinni

(In re Zinni) , 261 B.R. 196, 203 (B.A.P. 6th Cir. 2001). We reaffirm that conclusion today and likewise f

ind no error.
The last issue raised by B uckeye is thatthe bankruptcy c ourt erred in not holding a hearing

on the amount of t he sanction imposed. Buckey e contends that it was prepared to object to the requested fees because they

included time for services unrelated to opposing the Motion For Leave. Regar dless of the validity

of Buck ey e’s obje ction, wh

ile it is regrettable that a hearing and objection deadline were set on the amount of sanctions and no hearing was held, the Sixth Circui t Co urt of Appeals has obser ved that a trial cou rt is entitled t

o “wide discretion” in determining the amount of sanctions to impose. Runfola & Assocs., Inc

. v. Spectrum Reporting II, Inc. , 88 F.3d 368 (6th Cir. 1996). As noted

by the debtors, it has been recognized that in the exercise of this discretion, it is not necessary for a court familiar with the objectionable conduct to hear e vidence on the app

ropriate ness of a sanction. See Ordower v. Feldman , 826 F.2d 1569, 1575-76 (7th Cir. 1987) (judge familiar with procee dings did

not abuse his discre tion by awardin g $1,000 sanction without fi

rst hearing evidence of attorney’s f

ees). See also Union Planters Bank v. L & J. Dev. Co. , 115 F.3d 378, 385 (6th Cir. 1997) (imposition of

sanctions without a full evidentiary he aring did not violate due process) (citing In re Big Rapids Mall Assocs ., 98 F.3d 926, 929 (6th Cir. 19 96) (recognizing that an evidentiary hearing is “not necessarily

required where the court has full knowledge of the facts and is familiar with the conduct o f the attorneys.”); INVST Fin. Group, Inc. v. Chem-Nuclear Sys., Inc. , 815 F.2d 391, 405 (6th

Cir. 1987) (explaining that “no hearing is required whe re an attorney is sanc

tioned for15

filing frivolous motions ungrounded in law or fact, and where the judge impo sing sanctions has participated in the proceedings.”))

. The amount of sanctions awarded in this case was nominal, only $952. Based upon a review of the entire r

ecord in this case , we are

unable to

conclude

that the a

mount awa

rded wa s so unreasonable, even if it included unrelated ser vices, as to constitute an abuse of discretion.
CONCLUSION For the foregoing r

easons, the orders of the bankruptcy court are AFFI

RMED.