UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 93-2613

Summary Calendar

In the Matter of

UNITED MARKETS INTERNATIONAL, INC.,

Debtor.

W. STEVE SMITH, TRUSTEE,

Appellee,

versus

R. DAVID LEGG,

Appellant.

Appeal from the United States District Court

for the Southern District of Texas

(April 28, 1994)

Before GARWOOD, SMITH and DeMOSS, Circuit Judges.

PER CURIAM:

This is an appeal of a "death penalty" sanction imposed by the

district court on appellant R. David Legg. The district court

struck Legg's pleadings and stayed him from filing further

pleadings in the action until he pays the more than $60,000 in

sanctions previously entered against him. We AFFIRM.
 

1For clarity, this opinion will refer to the relevant cases by

docket number. Legg is an attorney who has represented himself in

most of these proceedings, although he has counsel for this appeal.

 

2We note that effective December 1, 1993, the bankruptcy court

granted trustee Smith's "Motion to Substitute Counsel." Because

Smith left the law firm of Woodward, Hall & Primm, P.C. in late

1993, he had requested authorization to substitute the "Law Offices

of W. Steve Smith" as "counsel for the trustee" in place of

Woodward, Hall & Primm, P.C. This authorization was granted, and

contrary to allegations raised by Legg in his Supplemental Brief,

the substitution of counsel does not "moot" anything or deprive

Smith of his status as trustee.

 

3In the Southern District of Texas, pursuant to 28 U.S.C. §

157(a), all cases related to a bankruptcy proceeding are

automatically referred to the local bankruptcy court. However,

regardless of the standing automatic reference of such matters to

bankruptcy court, "the district court may withdraw ... any case or

proceeding referred under this section, on its own motion or on

timely motion of any party, for cause shown." 28 U.S.C. § 157(d).

Thus the term "withdrawal of the reference," as used in this

opinion, means that a district court entered an order effectively

transferring a bankruptcy adversary proceeding from the bankruptcy

court to the district court.

2

Facts and Procedural History

This consolidated case arose from the 1985 bankruptcy of

United Markets International, Inc. ("UMI") -- of which Legg is the

former president and sole shareholder -- and from numerous related

lawsuits and adversary proceedings involving Legg.1 The appellee in

this case is W. Steve Smith, Trustee for the UMI bankruptcy

estate.2

After several orders to consolidate and withdraw the

reference3, three bankruptcy adversary proceedings in the UMI

bankruptcy were combined into one district court case, H-92-2141 in

the Southern District of Texas, from which Legg now appeals. Case

H-92-2141 includes adversary proceedings 85-0375, 85-0932 and 87-
 

4The lawsuit docketed as H-88-1958 was filed by Legg against

trustee Smith and several other parties, alleging racketeering,

tortious interference with contract and intentional infliction of

emotional distress, all in connection with a purported conspiracy

of all the defendants in a scheme to destroy UMI. The district

court dismissed Legg's complaint, entering judgment to that effect

on January 31, 1989. One year later, Legg filed a Rule 60(b) motion

to vacate the final judgment. The district court denied the motion.

Legg appealed to the Fifth Circuit, and on March 25, 1991, we

dismissed the appeal as "frivolous," ordering Legg to pay to each

appellee their reasonable costs and attorneys' fees as damages.

Upon our order, the trial court fixed such damages at $5,009.00 and

ordered Legg to pay such amount to Smith as trustee. The $5,009.00

sanction order has not been paid and was one of the sanctions

enforced in the order now being appealed.

3

0866, as well as a district court sanction in CA-88-1958.4 Because

an understanding of these and other underlying lawsuits is

necessary to a disposition of this appeal, the relevant cases are

summarized below:

(1) Adversary Proceeding 85-0375, Smith v. Legg: In this

proceeding, Smith, the bankruptcy trustee, sued Legg on behalf of

the UMI estate to recover $300,000 that Legg had transferred from

UMI to himself and used to purchase a high-rise condominium. The

bankruptcy court:

(a) found that Legg had breached his fiduciary duty by

converting UMI's assets when UMI was insolvent with the

actual intent to hinder, delay and defraud UMI's

creditors; 

(b) imposed a constructive trust on the condo in favor of the

UMI estate; 

(c) rendered judgment against Legg in favor of the UMI estate

for more than $300,000; 

(d) ordered Legg to turn over the condo and contents to
 

5The judgment of $300,000 plus interest has not been paid.

Smith stated in the June 25, 1993 hearing before the trial court

that, with accrued interest, "the total is in excess of $400,000 at

this time." In addition, as of the June 25, 1993 hearing, Legg had

not yet complied with the order to account for any money he took

from UMI.

 

6The main UMI bankruptcy case, 85-00872-H2-5, was commenced on

February 7, 1985 by the filing of an involuntary Chapter 11

petition by several of UMI's creditors. The creditors were granted

an Order of Relief on March 28, 1985. The bankruptcy court found

4

trustee; 

(e) ordered Legg to provide an accounting to the trustee for

all UMI funds used by him; and 

(f) found that Legg's homestead claim on the condo was

subject to the estate's constructive trust. 

Legg appealed, but the bankruptcy court's decision in 85-0375 was

affirmed by the district court on January 31, 1992 and affirmed by

this court on April 19, 1993. The reference was withdrawn in 1992

and what remained of 85-0375 -- basically the conclusion of the

appeals and the enforcement of the judgment and order to account --

was consolidated into H-92-2141 (the district court case now on

appeal)5.

(2) Adversary Proceeding 85-0932, Legg v. Obaid, et. al (This

case was originally filed by Legg in district court but was removed

to bankruptcy court as an adversary proceeding): In this

proceeding, Legg sued seven creditors of UMI, attempting to

challenge the validity of the creditors' $2 million in claims

against the UMI estate, and thus attempted to challenge the

validity of the March 28, 1985 Order of Relief granted in the main

bankruptcy case.6 The bankruptcy court in 85-0932 dismissed Legg's
that Legg's attorney at the time consented to the bankruptcy

court's order with Legg's knowledge and consent.

In yet another lawsuit, H-88-1706 in the Southern District of

Texas, Legg attempted in 1988 to directly appeal the main

bankruptcy case, claiming that the March 28, 1985 Order of Relief

was a "fraud upon the Court." The district court on July 7, 1988

dismissed Legg's appeal as untimely, noting in addition that the

appeal was meritless. Legg appealed to the Fifth Circuit, and on

December 2, 1988, we affirmed, noting that "Legg's arguments

supporting his belated appeal to the district court are so

obviously without merit that we must warn him of the possibility

that sanctions may be incurred if he pursues the filing of further

frivolous pleadings or appeals in this court." Legg petitioned the

United States Supreme Court for certiorari, which was denied.

5

suit against the creditors and (a) held that Legg was without

standing to bring such claims because they belong to the UMI

estate; (b) found that Legg knew full well when he filed the claims

that they were improper and unauthorized; (c) noted that all Legg's

claims "appear to be wholly without merit based on evidence

previously presented to this court"; and (d) sanctioned Legg more

than $63,000 under Federal Rule of Civil Procedure 11 for the

creditors' incurred costs and fees because the lawsuit was

"interposed for the unlawful purpose of harassing [the UMI

creditors], causing delay and unnecessarily increasing the costs of

litigation." Legg appealed, but the bankruptcy court's decision in

85-0932 was affirmed by the district court on March 12, 1990 and

affirmed by this court on June 20, 1991. On June 25, 1993, the
 

7The $63,693.06 in sanctions -- which included $4,534.00 to

Trustee Smith, $6,288.75 to Aegis Corporation and $52,870.31 to

Essam Obaid, et. al., has not been paid and was one of the

sanctions enforced in the order now being appealed.

6

reference was withdrawn and what remained of the case -- the

enforcement of the sanctions -- was consolidated into H-92-2141

(the case now on appeal).7

(3) Adversary Proceeding 87-0866, Smith v. Legg: In this

proceeding, the trustee Smith sought recovery from Legg of

additional fraudulent transfers. Legg raised a statute of

limitations defense to Smith's claims. Legg also asserted a

counterclaim against Smith as trustee, seeking, inter alia, an

accounting and claiming that the trustee appointment was void. Legg

also asserted a cross-claim against Obaid, OBALCO and OTS (UMI

creditors who were also defendants in Adversary 85-0932), claiming

breach of a 1983 contract between OBALCO and UMI, tortious

interference, emotional distress and "bad faith filing of their

original involuntary [bankruptcy] petition [against UMI]." On March

30, 1989, Legg was ordered by the bankruptcy court to pay Smith

$400 as a sanction for failure to comply with discovery requests.

In 1992, before any of the issues in the case were resolved, the

reference for Adversary 87-0866 was withdrawn and the case was

consolidated into the district court case docketed H-92-2141 (the

consolidated case now on appeal).

In a hearing before the district court on June 25, 1993,

Legg's original answer, counterclaim and cross-claims were struck
 

8Smith's motion listed all the outstanding sanctions, orders

and judgments against Legg and alleged that "Legg's cavalier

attitude of unnecessary litigation, frivolous appeal and refusal to

obey orders of this and various other courts should not be

condoned." Smith moved the court to hold Legg in civil contempt, or

alternatively, to dismiss Legg's counterclaim and cross-claims and

deny any right of further appeal until Legg has complied with all

court orders. The motion for enforcement had been on file for

nearly two months before the hearing date, and Legg had ample

opportunity to respond to the motion, both in writing and by oral

argument to the court.

7

by the district court as a sanction, and the court entered a

written order to that effect on July 1, 1993. It is from that order

that Legg now appeals.

Events Surrounding the Striking of Legg's Pleadings

At the hearing on June 25, 1993, the trial court heard

arguments from both Smith and Legg regarding Smith's "Motion For

Enforcement of Court Orders."8 After hearing arguments from both

parties, the district court stated that Legg's arguments were

unsupported by the record, adding that, "I certainly don't find Mr.

Legg to be credible." The court granted Smith's motion to enforce

the court orders, and made the following statements to Legg:

"It's not Mr. Smith that's making unsubstantiated

allegations, it's you. I think you're living in a dream

world. I don't think you've got any personal claim

against these people. Any claim against these people

belong[s] to UMI, and that's UMI sitting right over

there, the trustee. You don't have any claim against Mr.

Smith. Mr. Smith is trying to do his job despite the way

you have handled everything in this case."

The court denied Legg's motion for leave to file an amended

counterclaim, and continued:

"I am striking your pleadings in this case, Mr. Legg, for

failing to abide by the Court's sanctions. That is, this

Court, the Bankruptcy Court and the Court of Appeals."
 

9We note that in the hearing and subsequent written order,

Legg was also threatened with civil contempt if he did not pay the

sanctions -- or satisfy the court with proof that he was unable to

pay them -- by a specified date. However, any contempt order was

not made an issue on appeal and is therefore not before us. The

appellate record does not reveal whether an order of civil contempt

was ever issued. In the issues on appeal raised in Legg's brief

(filed on October 28, 1993) as well as in the five issues listed in

his separate "Statement of Issues on Appeal," filed on August 12,

1993, Legg complains only of the trial court's decision to strike

his pleadings and refusal to allow him to replead until he pays the

sanctions. Legg's main concern in this appeal appears to be what he

calls a denial of access to the courts to pursue his claims. In all

Legg's writings to this court -- including his "Supplemental Brief"

filed on January 31, 1994 -- he never once raises as an issue on

appeal any threat of or use of civil contempt by the district

court. Therefore, we make no determination or comment in this

opinion on whether civil contempt is or was appropriate in this

case.

 

10Note that the "fraudulent transfer" claim in 87-0866 was

separate from and in addition to the 85-0375 "fraudulent transfer"

claims that were adjudged against Legg in the bankruptcy court in

8

Six days later, on July 1, 1993, the court entered a written order

confirming its decision: "Mr. Legg's pleadings in this matter are

hereby STRICKEN for failure to pay the sanctions assessed against

him. ... Mr. Legg is STAYED from filing further pleadings in this

matter until all sanctions assessed against him have been paid."9

The main consequence of the trial court's decision to strike

Legg's pleadings was an involuntary dismissal of Legg's

counterclaim against Smith and his cross-claims against the UMI

creditors. Legg's answer was also struck by the district court, and

Legg complains on appeal that he has been denied "the right to

defend himself in an action initiated against him," meaning trustee

Smith's allegations from bankruptcy adversary proceeding 87-0866

that Legg had made additional fraudulent transfers of UMI assets to

himself.10 However, our examination of the record in this appeal
85-0375 and were affirmed on appeal. The older 85-0375 claims

resulted in a final order to account and a money judgment against

Legg; these have not been satisfied and are still in effect. (See

our previous discussion of Adversary Proceeding 85-0375).

 

11Taylor v. Combustion Eng., Inc., 782 F.2d 525, 527-27 (5th

Cir. 1986); see also Natural Gas Pipeline Co. v. Energy Gathering,

Inc., 2 F.3d 1397, 1406-07 (5th Cir. 1993)(noting that a federal

district court's power to impose sanctions for bad-faith behavior

during litigation is inherent and goes beyond powers granted by

specific Federal Rules of Civil Procedure), cert. denied sub nom.,

Fox v. Natural Gas Pipeline Co., 114 S.Ct. 882 (1994).

9

satisfies us that the "fraudulent transfer" claim brought by Smith

against Legg in 87-0866 (which was later consolidated into H-92-

2141) was waived by Smith in open court on June 25, 1993. 

Therefore, the affirmative relief awarded to trustee Smith in

H-92-2141, which Legg appeals and which we affirm in this opinion,

consists of: 

(a) a final order enforcing the sanctions previously entered

against Legg; (b) the striking of Legg's pleadings (resulting in

the involuntary dismissal, or "death penalty sanction," of Legg's

counterclaim against Smith and cross-claims against the UMI

creditors); and (c) an order staying Legg from filing further

pleadings in this action until all the sanctions against him are

paid. We will review these orders for abuse of discretion.

A federal district court has both specific and inherent power

to control its docket, and this includes the power to dismiss a

case (or here, a counterclaim and cross-claim) as a sanction for a

party's failure to obey court orders.11 Striking a defendant's

answer and denying a request to replead is equally as harsh a

sanction as dismissal of a plaintiff's case with prejudice, and the
 

12Pressey v. Patterson, 898 F.2d 1018, 1021 n.2 (5th Cir.

1990).

 

13Frame v. S-H, Inc., 967 F.2d 194, 202 (5th Cir. 1992); Price

v. McGlathery, 792 F.2d 472, 474 (5th Cir. 1986)(no abuse of

discretion found in involuntary dismissal of case when litigant had

"a history of disobedience to this court's Orders").

 

14Pressey, 898 F.2d at 1021; See also E.E.O.C. v. General

Dynamics, 999 F.2d 113, 119 (5th Cir. 1993)(noting that the "death

penalty" sanction of striking pleadings is appropriate "only under

extreme circumstances" such as willfulness or bad faith).

10

two sanctions are reviewed by the same standard.12 We will uphold

a district court's involuntary dismissal of a lawsuit unless the

district court abused its discretion.13 The Fifth Circuit has

confined such sanctions under the district court's inherent power

to instances of "bad faith or willful abuse of the judicial

process."14 We hold that Legg's behavior meets this standard.

Despite being told by court after court that his allegations

were meritless and frivolous, and despite being sanctioned more

than $68,000 due to his frivolous claims and appeals, Legg

continued to abuse the judicial process by pursuing claims that he

knew belonged to the UMI estate, claims that he has repeatedly

failed to document, and/or claims that have been previously

litigated, have been adjudged against him, and have been upheld on

appeal. Legg's counterclaim and cross-claims that were struck by

the trial court below fit into these categories. We note that the

same trial judge who struck Legg's pleadings below had heard the

majority of prior appeals in the UMI bankruptcy proceeding and

therefore had a close familiarity with the relevant issues and the

disposition of past cases involving Legg. Immediately before
11

striking Legg's pleadings, the district court stated that Legg has

no personal claim against the UMI creditors, and that if any claim

exists, it belongs to the UMI estate and can only be pursued by the

trustee. The court also stated that Legg had no claim against Smith

as trustee. Legg's claim against Smith was based solely on a

challenge to the bankruptcy Order of Relief and the order

appointing Smith as trustee, both of which have been separately

challenged and affirmed on appeal. Legg acknowledged in his motion

for leave to replead that the adverse disposition of his many

appeals has altered his standing to bring his counterclaim and

cross-claims. Smith contends, and we agree, that even before Legg's

claims in H-92-2141 were struck, those claims were already either

moot or meritless. He has brought the same claims before court

after court and has had them adjudged against him on each occasion.

We note additionally that Legg in his appellate brief

attempts, again, to dredge up and re-litigate these old contentions

-- for example, his own culpability for converting UMI assets

(already decided in 85-0375 and affirmed on appeal), and the

validity of the claims filed by the UMI creditors (85-0932

determined emphatically that Legg has no standing to bring these

claims, and any new challenge to the disposition of the main

bankruptcy case is untimely. See footnote 6). Legg appears to

believe that if he is allowed to present these meritless claims

before a jury, somehow he will be vindicated. He states in his

Reply Brief that "the jury may well decide that Obaid's claims are

false, that Smith has breached his fiduciary duty, and that Legg
 

15The court's written order premises its decision on Legg's

"failure to pay the sanctions assessed against him." However, the

court at the June 25, 1993 hearing indicated to Legg that he was

also being held accountable for his general pattern of behavior

during the litigation surrounding the UMI bankruptcy, for example,

his continuing to pursue his meritless claims and not complying

with other court orders. During the hearing, in the context of

striking Legg's pleadings and threatening to hold him in contempt,

the judge made these statements to Legg: 

"There's a judgment against you that you haven't paid"; 

"Mr. Smith doesn't want anything from you except an accounting";

"I want you to cooperate and give the information to Mr. Smith. If

the money that was taken out of UMI was spent, tell him where it

was spent. If it wasn't taken out, show him why it wasn't taken

out. Isn't that simple enough? ... Let's get this thing over with."

"[It's you] that's making unsubstantiated allegations";

"I don't think you've got any personal claim against these people";

"You don't have any claim against Mr. Smith. Mr. Smith is trying

to do his job despite the way you have handled everything in this

12

has been the aggrieved party all along." Such frivolous arguments

amply support the trial court's observation that Legg "is living in

a dream world." We take Legg's past lack of success in the federal

courts into account in assessing his credibility in the case before

us. Moody v. Miller, 864 F.2d 1178, 1179 n.1 (5th Cir. 1989). Our

statement describing the sanctioned litigant in Coane v. Ferrara

Pan Candy Co., 898 F.2d 1030, 1034 (5th Cir. 1990), is equally

applicable to Legg:

"Like any litigant, [Legg] was entitled to his day in

court. But he was not entitled to use his special skills

and his knowledge as an attorney to maneuver this suit to

his advantage, and to defy the orders of the court

designed to advance its resolution."

Id. at 1034 (affirming involuntary dismissal sanction for attorney

litigant who refused to obey court orders or pay a previously

imposed sanction). Legg cannot complain of "denial of access to the

courts" after he has abused the court system time and time again

and has failed to comply with numerous court orders.15 "We can ill
case."

13

afford to permit litigants to waste scarce court resources with

disingenuous or frivolous arguments and motions asserted purely to

hinder and delay the efficient operation of justice." McLeod,

Alexander, Powel & Apffel, P.C. v. Quarles, 894 F.2d 1482, 1487

(5th Cir. 1990)(holding that party's "bad faith and callous

disregard of [his] responsibilities" justified court's striking of

pleadings and entry of default judgment against him).

Legg complains that the trial court erred by striking his

pleadings for failure to pay the sanctions without holding a factfinding hearing and making written findings on the issue of Legg's

financial inability to pay. Legg claims that he is too poor to pay

the sanctions, and that therefore the court's order enjoining him

from filing further pleadings until the sanctions are paid has

"wrongly precluded Legg from access to the courts, and constituted

a denial of due process." Legg's claimed inability to pay is not

established in the appellate record before us, and even if it were

established, that would not in all cases preclude the court's

order. This Circuit has previously affirmed and employed similar

sanctions against "vexatious and harassing litigants." Gelabert v.

Lynaugh, 894 F.2d 746, 748 (5th Cir. 1990); cf. Sassower v. Mead

Data Cent., Inc., 114 S.Ct. 4, 5 (1993); Day v. Day, 114 S.Ct. 4,

5 (1993). In Gelabert, a federal district court sanctioned a

prisoner litigant for court costs and further "forbade the clerk of

court to accept for filing any further lawsuits on behalf of

Plaintiff until the sanction is satisfied." Gelabert complained
14

that he was too poor to pay the sanction and would never be able to

pay it as long as he remained in prison. We affirmed, holding that

inability to pay is no reason to overturn the sanction:

"Like any other pastime, recreational litigation has its

price; such sanctions as this are imposed for the very

purpose of causing the would-be pro se prisoner litigant,

with time on his hands and a disposition to retaliate

against the system, to think twice before cluttering our

dockets with frivolous or philosophical litigation."

Gelabert, 894 F.2d at 748; See also Moody v. Miller, 864 F.2d 1178,

1179 n.2 (5th Cir. 1989)(noting Fifth Circuit's decision to

prohibit frivolous litigant "from prosecuting any more IFP appeals,

absent certification of his good faith by the district court, until

he paid the sanctions in six of these cases."). If Legg is

insolvent as he claims, then additional monetary sanctions will not

be effective against him, and he has no incentive to refrain from

pursuing his frivolous counterclaim and cross-claims and forcing

his opponents to incur greater and greater legal fees and costs.

The court's order precluding further pleadings until the sanctions

are paid is appropriate in this context. 

"Courts do not sit for the idle ceremony of making orders

and pronouncing judgments, the enforcement of which may

be flouted, obstructed, and violated with impunity, with

no power in the tribunal to punish the offender."

Waffenschmidt v. Mackay, 763 F.2d 711, 716 (5th Cir. 1985), cert.

denied sub nom., Currey v. Waffenschmidt, 474 U.S. 1056 (1986). 

We therefore AFFIRM the district court's order striking Legg's

pleadings and staying Legg from filing further pleadings in this

action until he pays the sanctions previously entered against him.
 

16We note that there may be other sanction orders, judgments

and orders to pay costs now existing and in effect against Legg.

Our opinion today does not alter Legg's already existing obligation

to obey orders issued by any court or to pay any judgments or

sanctions that might be outstanding. The sanctions listed herein,

however, are those that we can identify as being referred to by the

district court order which we affirm in this opinion.

15

The following is a list of the sanctions Legg must pay before

the stay will be lifted:16

(1) $400.00, ordered by the bankruptcy court in Adversary

Proceeding 87-0866 on March 30, 1989;

(2) $4,534.00, ordered by the bankruptcy court in Adversary

Proceeding 85-0932 on February 14, 1989;

(3) $6,288.75, ordered by the bankruptcy court in Adversary

Proceeding 85-0932 on February 14, 1989;

(4) $52,870.31, ordered by the bankruptcy court in Adversary

Proceeding 85-0932 on February 14, 1989;

(5) $5,009.00, ordered by a district court in Civil Action H88-1958 on December 6, 1991.

Smith urges us to take further action against Legg, arguing

that a court may structure the sanctions necessary or warranted to

control its docket, to maintain the orderly administration of

justice or to enforce its orders, and he cites Vinson v. Heckmann,

940 F.2d 114, 116-17 (5th Cir. 1991). In Vinson, we affirmed the

dismissal of a 42 U.S.C. § 1983 suit found to be frivolous by the

district court. Id. at 115. In addition, we noted that Vinson, like

Legg in this case, had been warned and sanctioned both by district

courts and appellate courts on numerous occasions because his

filings were frivolous, and that Vinson had been warned that more

severe sanctions would be imposed if he filed any more frivolous

actions. We then sua sponte ordered a more stringent sanction on
wjl\opin\93-2613.opn

ace 16

Vinson, directing all trial and appellate courts within our

supervisory jurisdiction to decline acceptance of any filing by

Vinson unless he obtained specific pre-authorization by a judge of

the forum court. Id. at 116-17.

We decline at this time to extend Vinson-type sanctions to

Legg in this appeal, but we take this occasion to warn Legg that

any future frivolous claims and appeals filed by him or on his

behalf will be met with that remedy.

TRIAL COURT ORDER AFFIRMED.