Opinion ID: 204483
Heading Depth: 2
Heading Rank: 3

Heading: The Parties' Motions for Sanctions

Text: Finding no error in the district court's decision to grant MSOE's motion to strike portions of Busson-Sokolik's reply brief, we now turn to Busson-Sokolik's arguments that the district court erred (1) in denying his request for sanctions against MSOE under Fed. R. Bankr.P. 9011, and (2) in entering sanctions against him and his attorney, Chomi Prag, under Fed. R. Bankr.P. 8020. We review both determinations for abuse of discretion. [2] Such abuse occurs only when a court has acted contrary to the law or reached an unreasonable result. In re Rimsat, Ltd., 212 F.3d 1039, 1046 (7th Cir.2000).
An attorney is subject to sanctions under Fed. R. Bankr.P. 9011 when he submits a petition, pleading, written motion or other paper to the court that falls into one of four categories: (1) the document was submitted for an improper purpose (i.e., to harass one's adversary or to delay or drive up the costs of litigation); (2) the claims contained in the document are frivolous because they lack support under existing law; (3) the allegations contained in the document lack evidentiary support or are unlikely to have evidentiary support upon further investigation; or (4) the denials in the document are unwarranted based on the evidence. Fed. R. Bankr.P. 9011(b)(1)(4). A motion for sanctions may be made under Fed. R. Bankr.P. 9011(c)(1)(A), as Busson-Sokolik did in this case, but any such motion is subject to a 21-day safe harbor provision. Busson-Sokolik alleges sanctionable behavior on the part of MSOE based largely on statements contained in MSOE's brief before the district court. However, we need not reach the merits of any alleged violation on the part of MSOE because Busson-Sokolik undisputedly violated the safe harbor provision. On his own admission in the district court on October 31, 2008 and in his brief before this court, Busson-Sokolik concedes that he and his attorney did not provide MSOE with an adequate opportunity to withdraw the contested portions of its brief as required by the safe harbor provision of Fed. R. Bankr.P. 9011(c)(1)(A). While we appreciate the candor with which Busson-Sokolik and his counsel have acknowledged their error in failing to abide by the 21-day window, their forthcomingness is not sufficient to persuade us to revive an inquiry into the allegations raised. Though Busson-Sokolik correctly points out that courts are able to enter an order for sanctions on their own initiative, there is no requirement under Fed. R. Bankr.P. 9011(c)(1)(B) that a court act sua sponte to impose sanctions. Chief Judge Clevert denied Busson-Sokolik's motion for sanctions based on the safe harbor provision, a decision which we find comports with the law. To the extent that he was nevertheless empowered to impose sanctions under Fed. R. Bankr.P. 9011(c)(1)(B) and declined to do so, we choose not to disturb that judgment.
We now turn to the final issue for our review, namely whether the district court abused its discretion when it awarded sanctions for filing a frivolous appeal against Busson-Sokolik and his attorney, Chomi Prag. The district court's imposition of sanctions was based on Fed. R. Bankr.P. 8020, which reads as follows: If a district court or bankruptcy appellate panel determines that an appeal from an order, judgment, or decree of a bankruptcy judge is frivolous, it may, after a separately filed motion or notice from the district court or bankruptcy appellate panel and reasonable opportunity to respond, award just damages and single or double costs to the appellee. Chief Judge Clevert made several determinations in support of his finding that Busson-Sokolik's appeal, as litigated, was frivolous. He summarized Busson-Sokolik and Prag's behavior throughout the course of the proceedings as follows: Motions were filed by appellant without any basis in the rules, deadlines were ignored, procedural requirements were dismissed as unnecessary, and duplicative filings and objections were made thereby making it impossible for appellee to minimize its costs in this action. In his decision, Chief Judge Clevert referenced appellants' reliance on the merger doctrine despite having waived it, several misstatements in the record made by Prag, the Fed. R. Bankr.P. 9011 motion filed against MSOE, which he called baseless, and the improper filing of an appeal to this court while district court proceedings were still pending. We do not find that Chief Judge Clevert erred in imposing sanctions based on Fed. R. Bankr.P. 8020. Busson-Sokolik and his attorney were free to appeal their case to the district court, but ample evidence suggests that the manner in which the appeal was litigated bordered on the frivolous. [3] Courts consider a variety of factors in deciding whether to impose sanctions under Fed. R. Bankr.P. 8020. [4] We are not convinced that Busson-Sokolik and his attorney appealed in bad faith. However, bad faith is only one of the many factors to be considered in determining whether sanctions are appropriate in any given case. We are also not convinced that the appeal itself (as contrasted with the manner in which the appeal was litigated) was frivolous. Because of appellants' procedural error in failing to abide by the safe harbor provision of Fed. R. Bankr.P. 9011, the courts have never reached the merits of that claim. And because courts are able to find an exception to waiver, the merger argument, though unsuccessful, did have some basis in law. Appellants' most egregious errors in this litigation appear to have been procedural ones. These errors were numerous and well documented. Therefore, given the stringent standard of abuse of discretion by which we are bound, we find that the act of awarding sanctions under Fed. R. Bankr.P. 8020 was a reasonable exercise of Chief Judge Clevert's discretion. Notwithstanding the reasonableness of the decision to award sanctions and the reasonableness of MSOE's fees [5] , we do not find that the full amount awarded in the district court was necessary to achieve the deterrent purposes of Fed. R. Bankr.P. 8020. As such, we exercise this court's own discretion to reduce the sanctions imposed by half. In so doing, we acknowledge that [w]hile an award of attorney's fees may be necessary to fulfill the deterrent purposes of Rule 8020, the award should not subject Appellant to financial ruin. In re Bonfield, 2005 WL 2810702 at  (W.D.Wash.). The fees accrued in this case are sizeable and would be difficult for many litigants to pay. Recognizing that Busson-Sokolik is a student who has filed for bankruptcy and finding no evidence of bad faith on the part of Busson-Sokolik or his attorney, we conclude that a reduction in sanctions is warranted in this case.