NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

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No. 14-1287

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In Re: RAFAIL THEOKARY,

 Debtor

RAFAIL THEOKARY, Appellant

v.

TOM SHAY; ERIC ABBATIELLO; SHOWPLACE FARMS; GAITWAY FARMS, 

INC.; JOHN DOES (1-10) entities or legal entities that become known after filing 

_____________

Appeal from the United States District Court 

for the Eastern District of Pennsylvania

(D.C. Civ. No. 2-10-cv-00058)

District Judge: Luis F. Restrepo

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Submitted Under Third Circuit L.A.R. 34.1(a)

December 11, 2014

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Before: VANASKIE, GREENBERG, and COWEN, Circuit Judges.

(Opinion Filed: February 5, 2015)

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OPINION*

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VANASKIE, Circuit Judge.

 

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does 

not constitute binding precedent.
2

Rafail Theokary appeals the dismissal of an adversary action he commenced in the 

course of his Chapter 7 bankruptcy proceedings. The adversary action was dismissed as 

a sanction for Theokary’s submission of a fraudulent expert report on damages. 

Theokary contends that the Bankruptcy Court exceeded its authority by dismissing the 

adversary action in its entirety, rather than just limiting his damage award. We find that 

the Bankruptcy Court acted well within its inherent authority and did not abuse its 

discretion in dismissing the adversary action. Accordingly, we will affirm. 

I.

Prior to the bankruptcy proceeding in which the underlying adversary action was 

brought, Theokary leased three horses from a farm that is not a party to this action. He 

then hired Appellees Tom Shay and Eric Abbatiello to care for the leased horses. 

Theokary also boarded two of the horses with Appellee Showplace Farms (“Showplace”), 

while the other horse was stabled at Appellee Gaitway Farms, Inc. (“Gaitway”). 

Theokary did not pay any of the Appellees for any of their services. In turn, they each 

individually filed suit in the Superior Court of New Jersey during April and May of 2006, 

seeking payment for the care and boarding of the horses. On May 23, 2006, Theokary 

filed a Chapter 13 bankruptcy case with the Bankruptcy Court for the District of New 

Jersey. This filing resulted in the Appellees dismissing their respective state court actions 

without prejudice. However, on October 5, 2006 the New Jersey Bankruptcy court 

dismissed Theokary’s Chapter 13 bankruptcy for “bad faith filing.” In re Theokary, 444 

B.R. 306, 313 (Bankr. E.D. Pa.). 
3

On February 16, 2007, Theokary filed a Chapter 7 bankruptcy case in the 

Bankruptcy Court for the Eastern District of Pennsylvania. The filing of that case

resulted in the horses being incorporated into the bankruptcy estate that same day

pursuant to 11 U.S.C. § 541(a)(1). Despite receiving notice of the bankruptcy petition, 

Shay and Abbatiello, exercising stablemen’s liens, sold the horses two days later, on 

February 18, 2007. 

Claiming the sale violated the automatic stay imposed by operation of law when 

he filed his Chapter 7 petition, see 11 U.S.C. § 362(a)(3), Theokary filed an adversary

action against the Appellees on February 20, 2009. Trial of the adversary action was 

bifurcated, with the liability phase of the trial commencing in November of 2009. In a 

memorandum and order dated February 24, 2011, the Bankruptcy Court found that Shay 

and Abbatiello willfully violated the automatic stay imposed under 11 U.S.C. § 362(a)(3).

In re Theokary, 444 B.R. at 315. As to Gaitway and Showplace, however, the 

Bankruptcy Court concluded that they had not violated the automatic stay, and entered 

judgment in their favor. Id. at 326. 

Following the liability finding, the Bankruptcy Court allowed the parties to engage 

in discovery on damages. As part of the damages discovery, Theokary’s counsel 

delivered to opposing counsel a report from Theokary’s purported expert witness that 

Theokary himself had delivered to his lawyers with the name of the expert, Samuel 

Paparo, redacted from both documents. The report was essentially identical to the 

“PLAINTIFF’S STATEMENT OF DAMAGES OR OTHER RELIEF” filed in the 

adversary action in September of 2009 as part of a Joint Pre-Trial Statement. (Supp. 
4

App. 123-124.)1 Indeed, both the expert report submitted on behalf of Paparo in April of 

2011 and the damages statement presented in September of 2009 estimated lost breeding 

revenue of $1,350,000, based on the astounding representation that the two horses who 

were mares would birth seven foals per year over a five year period.2 Significantly, the 

September 2009 Joint Pretrial Statement that included the estimation of Theokary’s 

damages did not list Paparo as a witness, but instead identified Antonius Kimbrough as 

an expert witness for Theokary with “knowledge of the value of standardbred horses,

breading fees, purse monies and the like.” (Supp. App 145.) Theokary’s lawyers, acting 

pursuant to Theokary’s direction, sought a protective order to limit the disclosure of the 

expert’s identity and to preclude Appellees from communicating with him. The 

Bankruptcy Court denied this motion, directing production of unredacted copies of the 

report and curriculum vitae. 

Upon receipt of the unredacted report and curriculum vitae, counsel for Shay and 

Abbatiello questioned their authenticity and obtained from the Bankruptcy Court an order 

directing that the documents be produced in their native electronic file format, i.e., the 

format in which they were created. Production in native file format was sought so that 

the metadata concerning the origin of the documents could be examined.

 

1 Theokary and Appellees filed separate appendices. References to Theokary’s 

appendix will be to “App. at ” while references to Appellees’ appendix will be to “Supp. 

App. at. ”.

2 The gestation period for a foal is eleven months, making the identical 

representations in the pre-trial statement and the expert’s report physically impossible.
5

Theokary, however, did not produce the unredacted curriculum vitae and report in 

native file format. Instead, on the day of Paparo’s deposition, an amended version of the 

report in portable document format was produced. 

After taking Paparo’s deposition, Shay and Abbattielo moved in limine to preclude 

Paparo from testifying. The motion also sought dismissal of the adversary action because 

Theokary could not prove damages without an expert. The Bankruptcy Court 

consolidated the hearing on the motion in limine with the damages trial, which 

commenced on June 13, 2011. 

On the first day of the damages trial, the Bankruptcy Court permitted the defense 

expert to be called out of order to accommodate that expert’s schedule. The defense 

expert testified that in his opinion the three horses had a combined value of $4,000 when 

they were sold at the stablemen’s lien sale.

After a lengthy voir dire, the Bankruptcy Court ruled that Paparo was not qualified 

to opine on damages.3 Theokary, however, was allowed to present evidence as to his 

counsel fees. On the final day of the damages trial, Theokary moved to discharge his 

counsel. The Bankruptcy Court granted the motion after first receiving the testimony of 

Theokary presented as on cross-examination by defense counsel. 

On April 10, 2012, the Bankruptcy Court issued a thorough and well-reasoned 

Memorandum and Order that found that Theokary had manufactured the Paparo report 

“in an attempt to commit a fraud upon the court and that [Theokary’s] conduct warrants 

 

3 Theokary does not contest this ruling in this appeal.
6

dismissal of [the] adversary proceeding based upon the exercise of this court’s ‘inherent 

power.’” (App. 84.) Theokary appealed both the Bankruptcy Court’s order of February 

24, 2011 dismissing the claims against Showplace and Gaitway, and its April 10, 2012

order dismissing the adversary action as a sanction. The District Court, in a 

memorandum and order dated October 29, 2013, affirmed the dismissal of the adversary 

action. The District Court did not separately address Theokary’s appeal as to Showplace 

and Gaitway, concluding that the Bankruptcy Court’s sanction was wholly dispositive. 

This appeal followed. 

II.

The District Court had appellate jurisdiction over the final order of the Bankruptcy 

Court under 28 U.S.C. § 158(a)(1). We have jurisdiction to hear this appeal under 28 

U.S.C. §§ 158(d) and 1291. We exercise the same standard of review as did the District 

Court. See Fellheimer, Eicher & Braverman, P.C. v. Charter Technologies, Inc., 57 F.3d 

1215, 1223 (3d Cir. 1995). Under this standard of review, the Bankruptcy Court’s factual 

findings are assessed for clear error, a narrow standard of review which requires that we 

“accept the ultimate factual determination of the fact-finder unless that determination 

either is completely devoid of minimum evidentiary support displaying some hue of 

credibility or bears no rational relationship to the supportive evidentiary data.” Id. 

(quoting Hoots v. Pennsylvania, 703 F.2d 722, 725 (3d Cir. 1983). Our consideration of 

the Bankruptcy Court’s legal determination is plenary. Id. “In our review of the 

imposition of sanctions, the primary question before us is whether the sanctioning court 

abused its discretion.” Id. 
7

III.

Theokary does not assail the Bankruptcy Court’s factual finding that he 

manufactured the Paparo report in an attempt “to commit a fraud upon the court by 

knowingly and in bad faith offering this evidence under false pretenses.” (App. 96a.) 

Instead, he challenges the Bankruptcy Court’s authority to dismiss the adversary action as 

a sanction after having found that Shay and Abbatiello violated the Bankruptcy Code’s

automatic stay provision.

It has long been established that a “court may safely rely on its inherent power” to 

levy sanctions when parties engage in “bad-faith conduct.” Chambers v. NASCO, Inc., 

501 U.S. 32, 50 (1991). Moreover, it is beyond dispute that courts are endowed with the 

intrinsic authority to dismiss an action sua sponte. Link v. Wabash R. Co., 370 U.S. 626, 

629-30 (1962) (citing 3 William Blackstone, Commentaries (1768), 295–296)). This 

power derives from a court’s inherent duty to administer, manage, and adjudicate 

disputes, as well as the court’s obligation to regulate the conduct of the attorneys and 

parties who appear before it. Chambers, 501 U.S. at 32. This authority “include[s] the 

ability to do whatever is reasonably necessary to deter abuse of the judicial process.” 

Eash v. Riggins Trucking Inc., 757 F.2d 557, 567 (3d Cir. 1985) (en banc) (citing Nat'l 

Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639, 643, (1976) (per curiam)). A 

court, therefore, is empowered to vacate its own judgment upon a showing that a party 

has committed fraud, Chambers, 501 U.S. at 44 (citations omitted), or to dismiss an

ongoing action as a sanction for a party’s “flagrant bad faith” conduct, Nat'l Hockey 

League, 427 U.S. at 643.
8

Theokary argues that, irrespective of his wrongful conduct, the Bankruptcy Court 

was required to award damages pursuant to 11 U.S.C. § 362(k)(1) based on the 

undisputed evidence of his losses, such as his attorney’s fees, that were unrelated to the 

false expert reports. In a similar vein, Theokary also maintains that the District Court 

erred when it did not consider his appeal from the Bankruptcy Court’s determination that 

Gaitway and Showplace did not willfully violate the automatic stay. He argues that 

because this judgment predated the submission of the false expert report, it was wholly 

unconnected to his fraud and untainted by that evidence. 

To use an analogy, Theokary essentially asserts that the Bankruptcy Court should 

have been more akin to a skilled surgeon using a scalpel, extracting only those portions of 

the evidence and proceedings actually touched by disease. This argument fails to 

recognize that his fraudulent conduct did not simply impact the tainted evidence, the

damages trial, or the adversarial proceedings as a whole – it represented a direct and 

brazen affront to the judicial process. As the Supreme Court aptly noted over seventy 

years ago:

[T]ampering with the administration of justice in the manner 

indisputably shown here involves far more than an injury to a 

single litigant. It is a wrong against the institutions set up to 

protect and safeguard the public, institutions in which fraud 

cannot complacently be tolerated consistently with the good 

order of society. 

Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 246 (1944). This norm still 

holds true today. Dismissal was properly imposed in this case “not merely to penalize 

those whose conduct may be deemed to warrant such a sanction, but to deter those who 
9

might be tempted to such conduct in the absence of such a deterrent.” Nat'l Hockey 

League, 427 U.S. at 643. 

Further, we cannot endorse Theokary’s proposition that the District Court should 

have considered his appeal with respect to Gaitway and Showplace. The Bankruptcy 

Court’s sanction in this matter has larger implications – it was leveled for the dual 

purposes of punishing Theokary for his wrongdoing and preserving the dignity of the

court. We conclude, therefore, that the Bankruptcy Court properly exercised its inherent 

authority by dismissing the adversary action, and the District Court appropriately 

affirmed the dismissal of the action against all parties as a sanction for egregious 

misbehavior. 

Theokary persists that the Bankruptcy Court was obligated to impose damages 

because Congress has decreed that “an individual injured by any willful violation of a 

stay provided by this section shall recover actual damages, including costs and 

attorneys’ fees, . . .” 11 U.S.C. § 362(k) (1) (emphasis added). He contends that because 

Congress included the mandatory language “shall,” the Bankruptcy Court was required to 

award him damages that were undisputed and not directly tainted by the false expert 

report. 

We have previously rejected the proposition that rules and statutes enacted by 

Congress necessarily limit the court’s ability to impose sanctions under its inherent 

power. Fellheimer, 57 F.3d at 1224. In this regard, “‘we do not lightly assume that 

Congress has intended to depart from established principles’ such as the scope of a 

court’s inherent power.” Chambers, 501 U.S. at 47 (quoting Weinberger v. Romero–
10

Barcelo, 456 U.S. 305, 313 (1982)). Statutory schemes “are not substitutes for the 

inherent power, for that power is both broader and narrower than other means of 

imposing sanctions.” Id. 

The plain language of § 362(k)(1) neither modifies nor limits the Bankruptcy 

Court’s inherent powers. 4 Rather, § 362(k)(1) is merely a damages provision. 

Theokary was required to prove his losses pursuant to § 362(k)(1) through competent 

evidence. As part of his damages case, he manufactured an expert report. The 

submission of fabricated evidence, regardless of the merits or validity of the underlying 

claim, always constitutes egregious misconduct. Hazel-Atlas, 322 U.S. at 246. We 

conclude that the Bankruptcy Court properly exercised its inherent powers to levy 

sanctions in a live controversy over which it had jurisdiction. As aptly put by our sister 

circuit, “we find it surpassingly difficult to conceive of a more appropriate use of a 

court's inherent power than to protect the sanctity of the judicial process — to combat 

those who would dare to practice unmitigated fraud upon the court itself.” Aoude v. 

Mobil Oil Corp., 892 F.2d 1115, 1119 (1st Cir. 1989). 

IV.

 

4 Theokary cites a string of cases that ostensibly support his contention that a 

Bankruptcy Court is divested of its inherent power to dismiss an adversary proceeding 

after liability under § 362 is established. However, these cases do not support his 

position and, in any event, are not binding upon us. See In re Duby, 451 B.R. 664, 670 

(B.A.P. 1st Cir. 2011) (noting that a willful violation of § 362(k) mandates damages 

without discussing the Bankruptcy Court’s inherent authority to dismiss an action); In re 

Grine, 439 B.R. 461, 468 (Bankr. N.D. Ohio 2010) (same); In re Crawford, 388 B.R. 

506, 518 (Bankr. S.D.N.Y. 2008), aff'd in part, vacated in part, remanded, 476 B.R. 83 

(S.D.N.Y. 2012) (same). 
11

The Bankruptcy Court determined that dismissal was warranted only after 

considering the factors we enumerated in Poulis v. State Farm Fire and Casualty Co., 

747 F.2d 863, 868 (3d Cir. 1984).5 On appeal, Theokary argues that because the amount 

of damages sought by way of the manufactured expert report was not greater than the 

amount claimed in the September 2009 Joint Pre-Trial Statement, the sanction of 

dismissal was not warranted. He also contends that because the District Court found that 

one Poulis factor – the meritoriousness of his claim – weighed against dismissal, the 

sanction of dismissal should be set aside. No single Poulis factor, however, is 

dispositive. See Briscoe v. Klaus, 538 F.3d 252, 263 (3d Cir. 2008). And the fact that 

the report that Theokary manufactured simply tracked the plainly inflated damages set 

forth in a pretrial statement does not lessen the fraud he attempted to perpetrate. Under 

these circumstances, we cannot find an abuse of discretion in the Bankruptcy Court’s 

consideration of the Poulis factors.

V.

For the reasons discussed above, we will affirm the District Court’s order dated 

October 29, 2013, denying Theokary’s appeal from the Bankruptcy Court. 

 

5 Those factors are:

(1) the extent of the party’s personal responsibility; (2) the prejudice to the 

adversary caused by the failure to meet scheduling orders and respond to 

discovery; (3) a history of dilatoriness; (4) whether the conduct of the party 

or the attorney was willful or in bad faith; (5) the effectiveness of sanctions 

other than dismissal, which entails an analysis of alternative sanctions; and 

(6) the meritoriousness of the claim or defense. 

Emerson v. Thiel College, 296 F.3d 184, 190 (3d Cir. 2002).