Court Opinion

ID: 66325
Source: CourtListenerOpinion
Date Created: 2010-04-26 06:09:02+00
Date Added: 2024-06-11T09:35:17.614314
License: Public Domain

[DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS
                                                                FILED
                      FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
                        ________________________ ELEVENTH CIRCUIT
                                                            OCT 17, 2008
                             No. 08-12220                 THOMAS K. KAHN
                         Non-Argument Calendar                CLERK
                       ________________________

                 D. C. Docket No. 07-00361-CV-FTM-29
                     BKCY No. 03-BK-23684-ALP

In Re: KEVIN ADELL,

                                                   Debtor.
__________________________________________________________________

JOHN RICHARDS HOMES BUILDING COMPANY, L.L.C.,

                                                           Plaintiff-Appellant,

                                  versus

KEVIN ADELL,

                                                          Defendant-Appellee.

                       ________________________

                Appeal from the United States District Court
                    for the Middle District of Florida
                     _________________________

                            (October 17, 2008)

Before CARNES, BARKETT and WILSON, Circuit Judges.
PER CURIAM:

      John Richards Homes Building Company, L.L.C. (“JRH”) appeals a district

court decision affirming a bankruptcy court order denying JRH sanctions against

Kevin Adell. See John Richards Homes Bldg. Co., L.L.C. v. Kevin Adell (In re

Kevin Adell), No. 2:07-cv-361-FTM-29SPC, 2008 U.S. Dist. LEXIS 22097 (M.D.

Fla. Mar. 18, 2008). This case involves an extended litigation between JRH and

Adell. In essence, Adell sued JRH over a construction contract dispute in

Michigan state court. Adell then commenced involuntary bankruptcy proceedings

against JRH under Chapter 7 of the Bankruptcy Code in the U.S. Bankruptcy Court

for the Eastern District of Michigan. 11 U.S.C. § 701 et seq. The bankruptcy court

dismissed the involuntary case, and JRH commenced proceedings in the Michigan

bankruptcy court, alleging bad faith in the filing of an involuntary case, under 11

U.S.C. § 303(i). On April 25, 2003, JRH obtained a judgment against Adell in the

amount of $6,413,230.68, comprised of $4,100,000 in compensatory damages,

$2,000,000 in punitive damages, and $313,230.68 in attorney’s fees.

      Adell then moved to Florida, where he filed for relief under Chapter 11 of

the Bankruptcy Code in the U.S. Bankruptcy Court for the Middle District of

Florida. 11 U.S.C. § 1101 et seq. JRH moved to dismiss Adell’s Chapter 11 case,

alleging that the petition was filed in bad faith. The bankruptcy court denied the

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motion, but the district court reversed and remanded. Adell promptly converted

his reorganization case to a liquidation and submitted his assets to a Chapter 7

trustee. 11 U.S.C. § 701 et seq. The conversion order was entered on May 17,

2005, and a Chapter 7 trustee was appointed to liquidate Adell’s assets. Adell paid

the April 25, 2003 sanctions judgment obtained by JRH in full, plus interest, on

April 3, 2006.

      Subsequently, JRH again moved for sanctions under 11 U.S.C. § 303(i),

alleging that Adell’s Chapter 11 case and later Chapter 7 case were filed in bad

faith, constituting an abuse of the judicial process, and that JRH was entitled to

sanctions. The bankruptcy court declined to impose sanctions, and the district

court affirmed. JRH now appeals the district court’s decision, arguing that both the

bankruptcy court and the district court abused their discretion by refusing to

impose further sanctions against Adell.

      We review a bankruptcy court’s ruling with respect to a request for sanctions

under 11 U.S.C. § 105(a) for an abuse of discretion. See Chambers v. NASCO,

Inc., 501 U.S. 32, 55, 111 S. Ct. 2123, 2139, 115 L. Ed. 2d 27 (1991); In re Albany

Partners, Ltd., 749 F.2d 670, 675 (11th Cir. 1984). A bankruptcy court “abuses its

discretion when it misconstrues its proper role, ignores or misunderstands the

relevant evidence, and bases its decision upon considerations having little factual

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support.” Arlook v. S. Lichtenberg & Co., 952 F.2d 367, 374 (11th Cir. 1992).

This Court will affirm unless it finds that the lower court “has made a clear error of

judgment, or has applied the wrong legal standard.” Amlong & Amlong, P.A. v.

Denny’s, Inc., 500 F.3d 1230, 1238 (11th Cir. 2006) (quotations and citations

omitted). “Short of that, an abuse of discretion standard recognizes there is a range

of choices within which we will not reverse the district court even if we might have

reached a different decision.” Siebert v. Allen, 506 F.3d 1047, 1049 n.2 (11th Cir.

2007) (quotations and citations omitted).

      Under Section 105(a) of the Bankruptcy Code, “[t]he court may issue any

order, process, or judgment that is necessary or appropriate to carry out the

provisions of this title.” 11 U.S.C. § 105(a). The bankruptcy court has the

“inherent power to impose sanctions” under appropriate circumstances.

Chambers, 501 U.S. at 46, 111 S. Ct. at 2134. However, the bankruptcy court is

not required to do so. Section 105(a) is, on its face, a discretionary tool for the

courts. JRH is incorrect as a matter of law to argue that the bankruptcy court must

award sanctions, when the plain language of the statute provides solely that the

court “may issue any . . . judgment . . . .” 11 U.S.C. § 105(a) (emphasis added).

JRH has not cited any precedent that supports its claim that the bankruptcy court

must impose sanctions. Rather, JRH has misrepresented the holdings in numerous

                                            4
cases by stating that various courts held that a finding of bad faith requires the

imposition of sanctions, when the courts merely held that a finding of bad faith

permits the imposition of sanctions.

      Given the discretionary nature of sanctions, we are satisfied by the

bankruptcy court’s decision that “Adell attempted to pursue a legitimate goal

within the utmost of his ability and, therefore, to impose a sanction would be a

double punishment in addition to the $2 million judgment imposed by the

Michigan Bankruptcy Court.” Order on Motion for Reconsideration or Rehearing

on Order Denying Amended Motion to Impose Sanctions (Bankr. Doc. # 888) at

10. The bankruptcy court’s power to sanction “must be exercised with restraint

and discretion.” Chambers, 501 U.S. at 44, 111 S. Ct. at 2132. The bankruptcy

court exercised that restraint appropriately here.

      Furthermore, the district court did not abuse its discretion by affirming the

bankruptcy court. We agree with the district court that “Judge Paskay clearly

recognized his power and authority to impose sanctions and that such a decision

was a matter of discretion. Judge Paskay thus followed the correct legal

standards.” In re Kevin Adell, 2008 U.S. Dist. LEXIS 22097, at *4 (citations

omitted). Judge Paskay has not made any clear error of judgment. Indeed, both the

bankruptcy court and the district court were well within the bounds of their

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authority.

                                       CONCLUSION

      Upon review of the parties’ briefs and the record, we discern no reversible

error. Accordingly, we affirm the opinion of the district court.

      AFFIRMED.

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