Court Opinion

ID: 2981172
Source: CourtListenerOpinion
Date Created: 2015-09-22 19:25:18.35806+00
Date Added: 2024-06-11T11:44:24.441185
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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 12a0622n.06

                                          No. 11-3572

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

                                                                                     FILED
In re: MICHELLE L. REESE,              )                                        Jun 13, 2012
                                       )
      Debtor.                          )                                  LEONARD GREEN, Clerk
_______________________________________)
                                       )
WMS MOTOR SALES,                       )
                                       )                ON APPEAL FROM THE
      Plaintiff-Appellee,              )                BANKRUPTCY APPELLATE
                                       )                PANEL OF THE SIXTH
v.                                     )                CIRCUIT
                                       )
MICHELLE L. REESE,                     )
                                       )                        OPINION
      Defendant,                       )
                                       )
IRENE K. MAKRIDIS,                     )
                                       )
      Attorney-Appellant.              )
_______________________________________)

Before: MOORE, ROGERS, and GRIFFIN, Circuit Judges.

       KAREN NELSON MOORE, Circuit Judge. Attorney-Appellant Irene K. Makridis

appeals the Bankruptcy Appellate Panel’s (“BAP”) imposition of sanctions for filing a frivolous

appeal in bankruptcy proceedings involving WMS Motor Sales (“WMS”). After concluding that

Makridis’s conduct was egregious enough to warrant sanctions under Federal Rule of Bankruptcy

Procedure (“Bankruptcy Rule”) 8020, the BAP remanded the case to the Bankruptcy Court for the

Northern District of Ohio to conduct an evidentiary hearing to determine the appropriate amount of

the award. Following the hearing, the Bankruptcy Court ordered Makridis to pay WMS $7,613.85
No. 11-3572
WMS Motor Sales et al. v. Reese

to cover WMS’s costs related to the appeal. Makridis again appealed to the BAP, and on May 18,

2011, the BAP issued an order affirming the bankruptcy court’s determination. Because the BAP

did not abuse its discretion in granting WMS’s motion for sanctions and because the bankruptcy

court’s award was reasonable, we AFFIRM the BAP’s May 18, 2011 judgment.

                                       I. BACKGROUND

       Makridis was an attorney for Michelle Reese, who filed for Chapter 7 bankruptcy in 2008

in the U.S. Bankruptcy Court for the Northern District of Ohio. During those proceedings, Reese

sought to discharge a debt owed to WMS, and WMS filed a complaint challenging that action.

Following a bench trial, the bankruptcy court determined that the debt was not dischargeable and

ordered Reese to pay the $6,343 liability. The bankruptcy court entered the order on June 26, 2009.

       On July 24, 2009, after the time to appeal had passed, Makridis filed both a motion to extend

time to file a notice of appeal and a notice of appeal on behalf of Reese. Neither document provided

any reason for the delay in filing. On July 28, 2009, the bankruptcy court denied the motion to

extend time, noting that the time for filing the notice of appeal had passed and that Reese had failed

to make any allegation of excusable neglect as the court’s rules required in order to justify granting

a motion to extend time. On July 29, 2009, Makridis filed a motion for reconsideration and attached

an affidavit from Reese explaining a reason for the delay. Finding that the motion fell short of the

requirements for relief from judgment under Federal Rule of Civil Procedure 59(e), the bankruptcy

court denied that motion as well. On August 6, 2009, Makridis filed an “amended” notice of appeal

to the BAP challenging the bankruptcy court’s denial of the motion to extend time. In response,

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WMS filed a motion warning Makridis that it would seek sanctions under Bankruptcy Rule 9011(c)

if Makridis continued to file frivolous pleadings in the case.

       On November 23, 2009, Reese sent a letter to the BAP notifying it that she had not

authorized the appeal and requesting that the appeal be dismissed.1 On December 8, 2009, the BAP

granted Reese’s motion and voluntarily dismissed the case. WMS then filed a motion for sanctions

against Makridis under Bankruptcy Rule 8020. On February 18, 2010, the BAP granted WMS’s

motion. WMS Motor Sales v. Reese (In re Reese), No. 09-8053 (B.A.P. 6th Cir. Feb. 18, 2010).

       In granting WMS’s motion, the BAP concluded that “[t]he arguments raised by Makridis in

support of the appeal are wholly without merit.” Id. slip op. at 3. Specifically, the BAP rejected

Makridis’s argument that the bankruptcy court erred in refusing to grant the motion to extend the

time for appeal, noting that “[i]t is well established that Rule 8002(c)(2) requires a showing of

excusable neglect,” and that Makridis had failed to make any such showing. Id. Furthermore, the

BAP also rejected Makridis’s argument that the motion for reconsideration should have been

construed as an amended motion to extend the time for appeal, concluding that even had the motion

been so construed, it could not have been granted because the amended motion was filed beyond the

twenty-day time period during which requests for extensions were permitted under the rules. In

conclusion, the BAP stated, “This appeal does not involve serious, controversial, doubtful, or even

novel questions. Makridis’s arguments lack any conceivable merit, and this has been apparent for

       1
         Makridis vigorously disputes Reese’s contention that Makridis lacked authority to file the
appeal. Whether Makridis had authority, however, is irrelevant to this appeal because the BAP did
not rest its sanctions determination on that issue.

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a long time.” Id. slip op. at 4 (citation omitted). Accordingly, the BAP dismissed the appeal and

remanded the case to the bankruptcy court for a hearing to determine the appropriate amount of

damages.

        At the subsequent evidentiary hearing, WMS’s attorney, Randil Rudloff, testified concerning

his $200 per hour rate, his method of timekeeping, and the amount of time he spent working on the

BAP appeal. During cross-examination, Makridis questioned Rudloff only about the level of

specificity in his timekeeping entries. She did not challenge his billing rate or the number of hours

spent working on the appeal. Furthermore, when asked by the court whether she wanted to put on

any defense, Makridis declined. Following the hearing, the bankruptcy court entered an order

granting WMS’s request for $7,613.85 in damages and costs. The court found Rudloff’s hourly rate

and the time spent on the appeal both to be reasonable figures, and noted that Makridis had failed

to challenge any aspect of the damages calculation.

        The BAP affirmed the bankruptcy court’s award. WMS Motor Sales v. Reese (In re Reese),

No. 10-8078 (B.A.P. 6th Cir. May 18, 2011). The BAP noted that Makridis’s sole argument on

appeal centered on her belief that her conduct involved a good-faith attempt to clarify the law,

making the full amount of damages unwarranted. Because Makridis did not present that defense to

the bankruptcy court, however, the BAP refused to consider it on appeal. Nevertheless, the BAP

reiterated its prior conclusion that the appeal did not involve a novel issue and that Makridis’s failure

to show excusable neglect was fatal to her claims. The panel further noted that even if it were to

consider the merits of Makridis’s arguments concerning whether her conduct was justified, the

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claims would fail on account of the harm she caused to WMS in forcing it to defend her clearly

meritless appeal.

       Following the BAP’s decision, Makridis filed a timely notice of appeal to the Sixth Circuit

with respect to the May 18, 2011 order. WMS has since filed with the BAP another motion for

sanctions under Bankruptcy Rule 8020 that seeks recovery of the $5,600 incurred in defending the

second appeal in that court. On July 21, 2011, the BAP granted the motion and ordered Makridis

to pay WMS’s requested amount in full. WMS Motor Sales v. Reese (In re Reese), No. 10-8078

(B.A.P. 6th Cir. July 21, 2011).

                                         II. ANALYSIS

       Although our circuit has never reviewed a BAP order imposing sanctions pursuant to

Bankruptcy Rule 8020, the Eleventh and Seventh Circuits have both held that the applicable standard

of review is abuse of discretion. See DeLauro v. Porto (In re Porto), 645 F.3d 1294, 1306 (11th Cir.

2011); Busson-Sokolik v. Milwaukee Sch. of Engr’g (In re Sokolik), 635 F.3d 261, 269 (7th Cir.),

cert. denied, 131 S. Ct. 3039 (2011). Binding precedent in this circuit involving sanctions awards

under analogous court rules provides further support for this standard of review. See Cooter & Gell

v. Hartmarx Corp., 496 U.S. 384, 405 (1990) (mandating the abuse-of-discretion standard in cases

involving Federal Rule of Civil Procedure 11); Mapother & Mapother, P.S.C. v. Cooper (In re

Downs), 103 F.3d 472, 480 (6th Cir. 1996) (same under Bankruptcy Rule 9011). Accordingly, we

review the BAP’s order granting sanctions under Bankruptcy Rule 8020 for abuse of discretion.

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       Bankruptcy Rule 8020 permits the BAP to “award just damages and single or double costs”

if, after providing the appellant reasonable opportunity to respond, the BAP determines that an

appeal from a bankruptcy judge’s order or judgment is frivolous. The rule is materially the same as

Federal Rule of Appellate Procedure 38 (“Appellate Rule 38”),2 and is intended to provide the BAP

and district courts hearing bankruptcy appeals with coextensive authority to award sanctions for a

frivolous appeal. Fed. R. Bankr. P. 8020 Advisory Committee Notes (1997 Amendment). Thus, as

guidance in determining the propriety of the BAP’s sanctions under Bankruptcy Rule 8020, we look

to our cases applying Appellate Rule 38. Cf. In re Downs, 103 F.3d at 480–81 (noting that

Bankruptcy Rule 9011 “closely tracks” Federal Rule of Civil Procedure 11 and applying the

standards under Rule 11 to review sanctions awarded by a bankruptcy court).

       We have held that sanctions are warranted under Appellate Rule 38 “only in the rare case

when an appeal involves an improper purpose, such as harassment or delay, or when . . . an appeal

consists of baseless or improperly raised arguments.” B & H Med., L.L.C. v. ABP Admin., Inc., 526
F.3d 257, 271 (6th Cir. 2008) (citation and internal quotation marks omitted). Frivolous appeals,

       2
        Specifically, Bankruptcy Rule 8020 provides:
       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.
Appellate Rule 38 similarly states:
       If a court of appeals determines that an appeal is frivolous, it may, after a separately
       filed motion or notice from the court and reasonable opportunity to respond, award
       just damages and single or double costs to the appellee.

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such as those in which “the result is obvious or [the] appellant’s argument is wholly without merit,”

also may warrant sanctions. Dubay v. Wells, 506 F.3d 422, 433 (6th Cir. 2007) (internal quotation

marks omitted). Similarly, “[s]anctions are appropriate where the appeal was prosecuted with no

reasonable expectation of altering the district court’s judgment . . . or out of sheer obstinacy.”

Allinder v. Inter-City Prods. Corp. (USA), 152 F.3d 544, 552 (6th Cir. 1998) (internal quotation

marks omitted), cert. denied, 525 U.S. 1178 (1999). The amount of damages that should be awarded

for a frivolous appeal is a matter of discretion. 16AA Charles Alan Wright et al., Federal Practice

and Procedure § 3984.1 (4th ed.).

       With these principles in mind, we now turn to the case at hand. At the time of Makridis’s

appeal, Bankruptcy Rule 8002 required that a notice of appeal to the BAP “be filed with the clerk

within 10 days of the date of the entry of the judgment, order, or decree appealed from.” Fed. R.

Bankr. P. § 8002(a). The rule nevertheless gave bankruptcy judges discretion to extend the time for

filing the notice of appeal under certain circumstances. Id. § 8002(c)(1). In order to warrant such

discretion, the rule provided that

       [a] request to extend the time for filing a notice of appeal must be made by written
       motion filed before the time for filing a notice of appeal has expired, except that such
       a motion filed not later than 20 days after the expiration of the time for filing a notice
       of appeal may be granted upon a showing of excusable neglect.

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Id. § 8002(c)(2).3 The appeal for which the BAP sanctioned Makridis involved her challenge to the

bankruptcy court’s conclusion that she had failed to demonstrate excusable neglect to justify

extending the time in which to file her notice of appeal.

        Makridis argues, as she did before the BAP, that “the excusable neglect language of Rule

8002(2)(c) [sic] is unworkable and a party’s failure to show it would not be fatal to a motion to

extend time.” Appellant Br. at 22; see also Reply Br. at 10 (“Appellant acknowledges that her

reading of Federal Bankruptcy Rule 8002(2)(c) [sic] was incorrect at the outset. She has endeavored

however to show that the rule’s requirement for a showing of excusable neglect is not workable for

litigants.”). Makridis further concedes that her position “is contrary to existing law, and [that she]

had no legal authority for such a position.” Id. Nevertheless, Makridis argues that the rule should

be reconsidered to avoid “deny[ing] relief for the ordinary neglect and the vicissitudes of life.” Id.4

        3
         Bankruptcy Rule 8002 is analogous to Appellate Rule 4(a), which governs the time for filing
a notice of appeal in a civil case in federal court. See FED . R. BANKR. P. 8002 advisory committee’s
note; FED . R. APP. P. 4(a). Bankruptcy Rule 8002 was amended effective December 1, 2009, and
now provides fourteen days to file a notice of appeal and twenty-one days to file the motion for an
extension of time.
        4
         As an initial matter, Makridis argues that the BAP erred in failing to consider fully the issues
presented in the underlying appeal. It is unclear to us what more the BAP should have done.
Although it did not decide the question whether Makridis’s filing was unauthorized, a determination
on this issue could not have worked in Makridis’s favor. Moreover, the BAP did consider both
assignments of error presented in the appeal and, after brief discussion, found them to be “wholly
without merit.” In re Reese, No. 09-8053, slip op. at 3 (6th Cir. Feb. 18, 2010). No more was
required. To the extent that Makridis’s arguments constituted defenses that should have been
presented at the evidentiary hearing, those arguments were waived, and the BAP had no obligation
to consider them.

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       Contrary to Makridis’s position, it is clear that misinterpreting the rules governing the time

for filing does not usually constitute excusable neglect. Although Makridis cites it repeatedly in her

brief, Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380

(1993), does not suggest otherwise. Instead, Pioneer recognizes that “inadvertence, ignorance of the

rules, or mistakes construing the rules do not usually constitute ‘excusable’ neglect.” Id. at 392; see

also Marsh v. Richardson, 873 F.2d 129, 131 (6th Cir. 1989) (analyzing excusable neglect under

Bankruptcy Rule 8002(c)’s analogue, Appellate Rule 4(a)(5), and concluding that miscalculating the

time period for filing is not excusable, but instead “indicate[s] a serious lack of diligence and

inattention to the everyday detail of the practice of law”); Duncan v. Washington, No. 93-1171, 1994
WL 232397, at *3 (6th Cir. May 27, 1994) (holding that an attorney’s “misunderstanding of [Rule

8002(c)] was not excusable”). In light of these longstanding precedents, Makridis’s suggestion that

a showing of excusable neglect “perhaps should not be required,” Appellant Br. at 10, is frivolous.

       Makridis’s assertion that the BAP should have considered her arguments concerning the need

to clarify the documents on which a litigant should rely in determining the timeline for filing a

motion to extend the time to file a notice of appeal similarly misses the mark. Makridis does not

appear to have raised this argument until her second appearance before the BAP. The BAP therefore

justifiably considered it waived. In re Reese, No. 10-8078, slip op. at 3 (B.A.P. 6th Cir. May 18,

2011). Even if we were to decide otherwise, the argument fails on its merits. Although Makridis

concedes that she erred in reading the docket, she insists that the BAP missed an opportunity to

resolve any “confusion in the way judgments are entered by the Clerk.” Appellant Br. at 28. In light

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of the unambiguous rule that the time period for filing a notice of appeal begins to run upon the

clerk’s entry of judgment, Fed. R. Bankr. P. 8002(a), Makridis’s argument cannot be classified as

a colorable attempt to clarify the law. That Makridis made these arguments in “good faith,” see

Appellant Br. at 32, is of no import. Bad faith is not required to warrant an award of sanctions under

Rule 38. Dubay, 506 F.3d at 433. Accordingly, the BAP’s determination that Makridis’s appeal

“lack[ed] any conceivable merit” and that sanctions were warranted was not an abuse of discretion.

Cf. Wilton Corp. v. Ashland Castings Corp., 188 F.3d 670, 677 (6th Cir. 1999) (imposing sanctions

after concluding that the appeal involved an “insubstantial” issue that had already been “clearly

resolved” and for which the plaintiff could have “no reasonable expectation of altering the district

court’s judgment based on law or fact” (internal quotation marks omitted)).

       Turning to the bankruptcy court’s determination of the amount of the sanctions, Makridis

first argues that the BAP abused its discretion in not considering all of her arguments against the

amount of the sanctions award.5 Makridis argued to the BAP that the bankruptcy court had failed

to discount the amount of the sanctions based on her good intentions in clarifying the court’s rules.

       5
         Makridis’s reply brief also appears to challenge—for the very first time—the propriety of
the BAP’s remand order directing the bankruptcy court to determine the amount of sanctions.
Though we are not obligated even to consider such a belated argument, we note that remand orders
in the Appellate Rule 38 context are hardly unprecedented. See, e.g., Wilton Corp. v. Ashland
Castings Corp., 188 F.3d 670, 678 (6th Cir. 1999) (granting sanctions for a frivolous appeal under
Appellate Rule 38 and remanding to the district court for a hearing on damages and costs); see also
16AA CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3984.3 (4th ed.)
(collecting cases and noting that appellate courts can and do remand to the district court for a hearing
to determine the proper damages after granting sanctions under Appellate Rule 38). The BAP was
thus well within its discretion in taking that approach.

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The BAP, however, considered the argument waived by virtue of Makridis’s failure to assert it as

a defense at the evidentiary hearing. In re Reese, No. 10-8078, slip op. at 3 (B.A.P. 6th Cir. May 18,

2011). We agree with the BAP’s conclusion. Cf. Terry v. LaGrois, 354 F.3d 527, 532 (6th Cir.

2003) (declining to consider an argument on appeal that was not made in the court below). Because

the argument was waived before the BAP, we likewise have no occasion to consider it here.

       Makridis next argues that the bankruptcy court’s failure to make explicit factual findings

concerning her ability to pay requires this court to find an abuse of discretion. We disagree. We

acknowledge that our cases would require this outcome in cases applying Federal Rule of Civil

Procedure 11. See Jackson v. Law Firm of O’Hara, Ruberg, Osborne and Taylor, 875 F.2d 1224,

1230 (6th Cir. 1989) (stating that when applying sanctions under Rule 11, “[f]ailure to consider

ability to pay is . . . an abuse of discretion”); Forbes v. Dixon (In re Dixon), No. 91-6427, 1992 WL
233900, at *3 (6th Cir. Sept. 22, 1992) (unpublished opinion) (concluding that Jackson’s

requirements are binding in the context of Bankruptcy Rule 9011 and remanding for consideration

of the sanctioned party’s ability to pay on account of the bankruptcy court’s failure to do so in the

first instance). Makridis, however, cites no authority to support extending Jackson’s holding to

appeals involving Appellate Rule 38 or, by extension, to Bankruptcy Rule 8020. Indeed, both the

plain language of the relevant rules and our precedents granting broad authority under Appellate Rule

38 counsel against such an extension.

       Rule 11 and Bankruptcy Rule 9011 mandate that sanctions are “limited to what suffices to

deter repetition” of the offending conduct “or comparable conduct by others similarly situated” and

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require the sanctioning court to “explain the basis for the sanction” levied. Fed. R. Civ. P. 11(c)(4),

(c)(6); Fed. R. Bankr. P. 9011(c)(2), (c)(3). Appellate Rule 38 and Bankruptcy Rule 8020, in

contrast, contain no such restrictions.       Instead, although our precedents clearly consider

reasonableness and deterrent value, an award of sanctions by an appeals court is wholly discretionary

and limited only by the court’s finding “that (1) the appeal is frivolous, and (2) sanctions are

appropriate.” Allinder, 152 F.3d at 552. Accordingly, appellate courts need not always affirmatively

request information on the sanctioned party’s ability to pay before determining a just award.

       This is not to suggest that a court of appeals or the BAP cannot consider ability to pay when

fashioning an appropriate sanction. To the contrary, if the party facing sanctions raises its inability

to pay or the unreasonableness of a particular sanction in light of its deterrent value, the appellate

court could consider those arguments when determining a “just” amount of damages. Here,

however, Makridis failed to raise these issues before either the bankruptcy court or the BAP. In fact,

she concedes in her reply brief that she “has not presented any evidence on her ability to pay.” Reply

Br. at 9. Moreover, Makridis presented no challenge to the amount or reasonableness of the costs

incurred by WMS in defending the appeal. In light of Makridis’s failure to present any defense, the

bankruptcy court found both that the hourly rate was “within the ordinary range of fees in this

region” and that the hours spent on the case were reasonable. No. 08-04172 R. 82 (Bankr. Ct. Op.

re Sanctions at 8–9 & n.3). That being the case, neither the bankruptcy court nor the BAP abused

its discretion in failing to consider Makridis’s ability to pay before awarding WMS the full amount

requested pursuant to Bankruptcy Rule 8020.

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       Finally, Makridis challenges the BAP’s July 21, 2011 order awarding additional sanctions

for filing a second frivolous appeal. Makridis, however, has not filed a notice of appeal with respect

to this judgment. Federal Rule of Appellate Procedure 3(c)(1)(B) requires that a notice of appeal

“designate the judgment, order, or part thereof being appealed.” The notice of appeal that we have

before us, however, was filed on May 26, 2011 and designates only “the final judgment of the

Bankruptcy Appellate Panel, which judgment was entered on 18th day of May, 2011” as relevant to

this appeal. Although as a general rule we will consider all errors that occur before the final

judgment in a case, “[w]e will not, . . . absent specific mention in the notice of appeal, entertain

issues raised in post-judgment motions if the notice of appeal states only that the appeal is from the

final order or the final judgment.” Caudill v. Hollan, 431 F.3d 900, 906 (6th Cir. 2005); see also

Caldwell v. Moore, 968 F.2d 595, 598 (6th Cir. 1992) (“[W]here a notice of appeal specifies a

particular order, only the specified issues related to that order may be raised on appeal.”). As a

result, we will not consider the merits of the BAP’s July 21, 2011 sanctions order.

                                       III. CONCLUSION

       We are cognizant of the need to weigh the imposition of sanctions carefully in order to avoid

chilling parties’ exercise of their rights of appeal. See B & H Med. L.L.C., 526 F.3d at 271. But the

BAP’s determination that the appeal in this case was “wholly without merit,” was not an

unreasonable one.     Because the resulting award of sanctions was appropriate under these

circumstances, we AFFIRM the BAP’s May 18, 2011 judgment. We decline, however, to award

attorney fees with respect to the instant appeal.

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