Court Opinion

ID: 68768
Source: CourtListenerOpinion
Date Created: 2010-04-26 06:37:17+00
Date Added: 2024-06-11T12:36:08.217630
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                           October 7, 2009

                                     No. 08-41104                      Charles R. Fulbruge III
                                   Summary Calendar                            Clerk

In the Matter of: TBYRD ENTERPRISES LLC

                                                   Debtor

THOMAS G. WAYLAND; TIMOTHY W. BYRD

                                                   Appellants
v.

U.S. TRUSTEE CHARLES F. McVAY

                                                   Appellee

                Appeal from the United States U.S. District Court
                        for the Southern District of Texas

Before DAVIS, SMITH, and DENNIS, Circuit Judges.
PER CURIAM:*

       *
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
                                  No. 08-41104

      The U.S. Bankruptcy Court for the Southern District of Texas imposed
monetary sanctions on the appellants for filing a bad faith bankruptcy petition
containing significant misstatements of fact. The appellants appealed to the
U.S. District Court for the Southern District of Texas, which remanded to the
bankruptcy court to clarify whether it had imposed the sanctions pursuant to
Fed. R. Bankr. P. 9011 or on the basis of the inherent powers of the bankruptcy
court. The bankruptcy court issued a second order clarifying that Rule 9011 was
the basis of the sanctions.   The district court affirmed that order, and the
appellants appealed to this court. The amount of the sanctions at issue is
$10,000 for Thomas Wayland and $5,000 for Timothy Byrd.
      “We review a district court’s affirmance of a bankruptcy court decision by
applying the same standard of review to the bankruptcy court decision that the
district court applied.” In re Martinez, 564 F.3d 719, 725-26 (5th Cir. 2009). “We
thus generally review factual findings for clear error and conclusions of law de
novo.” Id. at 726 (quoting In re OCA, Inc., 551 F.3d 359, 366 (5th Cir. 2008))
(internal quotation marks omitted). We review a bankruptcy court’s decision to
impose sanctions for abuse of discretion. In re First City Bancorporation of Tex.
Inc., 282 F.3d 864, 867 (5th Cir. 2002). “A court abuses its discretion when its
ruling is based on an erroneous view of the law or on a clearly erroneous
assessment of the evidence.” Id. (quoting Chaves v. M/V Medina Star, 47 F.3d
153, 156 (5th Cir. 1995) (internal quotation marks omitted).
      The bankruptcy court clearly had a sufficient evidentiary basis for its
factual conclusion that the appellants filed their bankruptcy petition in bad
faith. The appellants argue that sanctions under Rule 9011 are somehow akin
to criminal contempt sanctions and that bankruptcy courts therefore lack the
power to impose them, but there is no legal basis for equating the two types of
sanctions. See In re DeVille, 631 F.3d 539, 552-53 (9th Cir. 2004) (distinguishing

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                                  No. 08-41104

between the processes and purposes of Rule 9011 sanctions and criminal
contempt).
      The appellants further argue that the imposition of Rule 9011 sanctions
is not a “core” matter over which bankruptcy courts have jurisdiction to issue
final orders under 28 U.S.C. § 157. But the imposition of sanctions on litigants
in a bankruptcy case is clearly a matter “arising in” such a case, 28 U.S.C. §
157(b)(1), so bankruptcy courts have jurisdiction to issue such orders. See In re
Memorial Estates, Inc., 950 F.2d 1364, 1370 (7th Cir. 1991); cf. In re Southmark
Corp., 163 F.3d 925, 930-31 (5th Cir. 1999) (holding that a lawsuit alleging
malpractice by an accountant in a bankruptcy case was a “core” matter within
a bankruptcy court’s jurisdiction).
      Finally, the appellants argue that the bankruptcy court lacked the power
to impose Rule 9011 sanctions on remand because the U.S. Trustee did not cross-
appeal from the original imposition of sanctions. But the bankruptcy court’s
decision on remand only clarified the legal basis of the sanctions the court had
initially imposed (and also reduced the amount of the sanction against Mr.
Wayland after he expressed remorse). No cross-appeal is needed in order to give
an appellate court the power to remand for clarification of the legal basis for the
imposition of sanctions. See Crowe v. Smith, 151 F.3d 217, 240 (5th Cir. 1998)
(vacating an order imposing sanctions under an incorrect theory, and remanding
for consideration of whether sanctions could be imposed under an alternative
theory, when only the parties who were sanctioned had appealed).
      For the foregoing reasons, we AFFIRM the district court’s judgment
affirming the bankruptcy court’s sanctions order.

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