Court Opinion

ID: 3059321
Source: CourtListenerOpinion
Date Created: 2015-10-14 00:32:19.437327+00
Date Added: 2024-06-11T11:49:31.464526
License: Public Domain

[DO NOT PUBLISH]

                      IN THE UNITED STATES COURT OF APPEALS

                                   FOR THE ELEVENTH CIRCUIT
                                    ________________________            FILED
                                                               U.S. COURT OF APPEALS
                                            No. 11-12191         ELEVENTH CIRCUIT
                                        Non-Argument Calendar      OCTOBER 5, 2011
                                      ________________________        JOHN LEY
                                                                       CLERK
                                D.C. Docket No. 0:10-cv-61207-FAM
                                  Bkcy No. 0:08-bkc-19067-JKO

IN RE: CREATIVE DESPERATION INC.,

          Debtor .
___________________________

CHARLES FRANKEN,
CHARLES D. FRANKEN PA,

llllllllllllllllllllllllllllllllllllllll                        Plaintiffs - Appelees,

                                                versus

BARRY E. MUKAMAL,
Trustee,

llllllllllllllllllllllllllllllllllllllll                        Defendant - Appellant.

                                     ________________________

                           Appeal from the United States District Court
                               for the Southern District of Florida
                                 ________________________

                                           (October 5, 2011)
Before HULL, PRYOR and BLACK, Circuit Judges.

PER CURIAM:

       Barry Mukamal, as the successor Chapter Seven Trustee (Trustee) of debtor

Creative Desperation, Inc., appeals an order denying attorneys’ fees incurred while

defending a bankruptcy court sanction award on appeal. After review, we affirm

the district court.

                                I. BACKGROUND

       On September 11, 2009, the United States Bankruptcy Court for the

Southern District of Florida, relying on its inherent powers, sanctioned Charles D.

Franken (Franken) for unauthorized and frivolous pleadings filed during a

bankruptcy proceeding. On January 26, 2011, the district court affirmed the

sanction order and the amount of the sanction. On March 28, 2011, the Trustee

requested an award of attorneys’ fees by the district court for defending the

sanctions award. The Trustee failed to cite any statute or rule authorizing a

recovery of attorneys’ fees, but rather based his request solely on a causation

argument extrapolated from dicta in Norelus v. Denny’s, Inc., 628 F.3d 1270 (11th

Cir. 2010). On April 15, 2011, the district court denied the request without

explanation. On May 3, 2011, the Trustee filed a notice of appeal.

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                           II. STANDARD OF REVIEW

      A court reviews the denial of a request for attorneys’ fees and costs for

abuse of discretion. Sahyers v. Prugh, Holliday & Karatinos, P.L., 560 F.3d 1241,

1244 (11th Cir. 2009). A court’s decision to deny sanctions is also reviewed for

an abuse of discretion. Peer v. Lewis, 606 F.3d 1306, 1311 (11th Cir. 2010). This

court will find an abuse of discretion only when a decision is in clear error, the

district court applied an incorrect legal standard or followed improper procedures,

or when neither the district court’s decision nor the record provide sufficient

explanation to enable meaningful appellate review. Id.; Cox Enters., Inc. v. News-

Journal Corp., 510 F.3d 1350, 1360 (11th Cir. 2007).

                                 III. DISCUSSION

      The Trustee raises two issues. First, the Trustee argues the district court

abused its discretion by refusing to award attorneys’ fees for the defense of the

sanction order on appeal. Alternatively, the Trustee argues the district court failed

to explain its denial, preventing this court from adequately reviewing the district

court’s decision, and mandating a remand to the district court.

      Section 105 of Tile 11 of the United States Code imbues bankruptcy courts

with the same inherent powers as federal district courts to sanction abusive

conduct. In re Porto, 645 F.3d 1294, 1304 n.6 (11th Cir. 2011). The key to

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awarding sanctions under a court’s inherent powers is a finding of bad faith by the

sanctioned person. Id. at 1304. Here, the bankruptcy judge awarded sanctions

pursuant to his inherent powers under 11 U.S.C. § 105.

      On appeal to a district court from a bankruptcy court, a party can seek

sanctions in manners similar to those available in a court of appeals. A party can

be sanctioned under 28 U.S.C. § 1927 for actions taken on appeal. See Reynolds v.

Roberts, 207 F.3d 1288, 1302 (11th Cir. 2000); Bonfiglio v. Nugent, 986 F.2d

1391, 1394–95 (11th Cir. 1993). In addition, a district court may order sanctions

for a frivolous bankruptcy appeal under Bankruptcy Rule 8020, the bankruptcy

equivalent of Rule 38 of the Federal Rules of Appellate Procedure. Finally, a

court’s inherent power to sanction extends to the conduct of parties during

appeals. See Gallop v. Cheney, 642 F.3d 364, 370 (2d Cir. 2011); Wheeler v.

C.I.R., 528 F.3d 773, 782 (10th Cir. 2008); Stalley v. Methodist Healthcare, 517

F.3d 911, 920 (6th Cir. 2008); FEC v. Toledano, 317 F.3d 939, 953 (9th Cir.

2002); Perry v. Pogemiller, 16 F.3d 138, 140 (7th Cir. 1993).

      Despite the extensive number of available methods to seek and obtain

attorneys’ fees as a sanction in the district court, the Trustee did not ground his

request in any of them. Instead, the Trustee sought an attorneys’ fee award by

requesting an extension of the public-policy rationale outlined in Norelus.

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      Norelus involved a district court’s award of sanctions under 28 U.S.C.

§ 1927. 628 F.3d at 1297. The sanctioned attorneys argued that the district court

abused its discretion by including in the sanctions award the costs, expenses, and

attorneys’ fees incurred in prosecuting the sanction proceedings. Id. Relying on

the plain language of 28 U.S.C. § 1927, the Norelus court upheld the award. Id. at

1298. The statute allows for recovery of costs “incurred because of such

conduct,” and the court reasoned that without the sanctionable conduct, no

sanction procedures would have been required. Thus, the sanctionable conduct

caused the costs of obtaining sanctions. Id. In addition, the court gave in to

“temptation” and provided an additional reason for allowing discretion to award

the costs of prosecuting a sanctions motion, specifically that not allowing such an

award would “undercut” the purposes of sanctions by preventing full

compensation to the harmed party. Id. Because an aggrieved party should not be

discouraged from pursuing sanctions, recovery of the costs associated with

pursuing sanctions must be possible. Id. at 1298–99.

      Norelus did not involve the recovery of costs associated with defending a

sanction award on appeal. However, the Trustee urges this court to find that the

district court abused its discretion in refusing to extend Norelus to appellate

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attorneys’ fees. Such an extension is precluded by the Supreme Court’s holding in

Cooter & Gell v. Hartmarx, Corp., 496 U.S. 384, 407 (1990).

      In Cooter & Gell, the Court overturned an award of attorneys’ fees incurred

in defending a Rule 11 sanction award on appeal. Id. at 405–06. The Court

rejected the very same causation argument advocated by the Trustee in this case.

The Court held that the costs of an appeal of a Rule 11 sanction order is not

directly caused by the underlying sanctionable conduct, but rather by the district

court’s sanction order. Id. at 407. The court recognized that additional rules

safeguard against frivolous appeals from sanction orders, that meritorious appeals

should never be discouraged, and that the traditional American Rule generally

prevents prevailing litigants from collecting attorneys’ fees from the losing party.

Id. at 407–09.

      This court continues to apply Cooter & Gell to appeals from Rule 11

sanction orders, even in the bankruptcy context. In re Porto, 645 F.3d at 1306–07.

Other courts of appeals have applied Cooter & Gell’s bright-line rule to cases

ordering sanctions under 28 U.S.C. § 1927 and a court’s inherent powers. Manion

v. Am. Airlines, Inc., 395 F.3d 428, 433–34 (D.C. Cir. 2004) (§ 1927); In re

Kujawa, 270 F.3d 578, 582–83 (8th Cir. 2001) (inherent powers); Conner v.

Travis County, 209 F.3d 794, 801 (5th Cir. 2000) (inherent powers). The only

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court to adopt the Trustee’s causation argument by distinguishing between Rule 11

sanctions and a court’s inherent powers was overturned on appeal. In re Kujawa,

256 B.R. 598, 612 (8th Cir. BAP 2000), rev’d, 270 F.3d 578 (8th Cir. 2001). In

reversing, the Eighth Circuit relied solely on Cooter & Gell. Each case cited by

the Trustee in support of his position either pre-dates Cooter & Gell or does not

involve an award of appellate attorneys’ fees.

      Here, the Trustee did not argue Franken’s appeal itself was frivolous, but

instead argued that the causal link between Franken’s sanctionable conduct in the

bankruptcy court was sufficient alone to justify an award of attorneys’ fees by the

district court. This argument contradicts binding Supreme Court precedent, and

the district court did not abuse its discretion by declining to adopt this incorrect

legal standard.

      The Trustee also claims that the district court’s perfunctory disposition of

the motion was an abuse of discretion. When a party in a counseled case makes

only passing references to an issue in his brief, but does not devote a discrete

section of his brief to the argument of that issue and presents those references only

as background to claims that he has expressly advanced, the party has abandoned

that issue on appeal. United States v. Jernigan, 341 F.3d 1273, 1284 n.8 (11th Cir.

2003); Greenbriar, Ltd. v. City of Alabaster, 881 F.2d 1570, 1573 n.6 (11th Cir.

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1989). Here, the Trustee fails to discuss anywhere in the argument section of his

opening brief the issue of the district court’s perfunctory denial. Thus, the Trustee

abandoned this issue.

       Even if the argument was not abandoned, the court would not remand the

case. Generally, a district court only abuses its discretion when both the district

court’s opinion and the record fail to provide adequate explanation to allow

meaningful appellate review. Cox Enterprises, Inc., 510 F.3d at 1360.1 Here, the

district court’s denial without explanation does not prevent meaningful appellate

review. The record demonstrates that the Trustee only presented the district court

with one legal theory of recovery. That legal theory did not require any findings

of fact by the district court, but only an application of the facts the district court

affirmed on appeal. Thus, the district court could not have abused its discretion by

failing to make factual findings. Furthermore, the district court could not have

abused its discretion by applying an incorrect legal standard. As discussed above,

rejection of the Trustee’s argument was legally correct. In sum, the district court’s

       1
         This case should be distinguished from the court’s recent holding in Thompson v.
Relationserve Media, Inc., 610 F.3d 628, 637–38 (11th Cir. 2010). Thompson held that the
Private Securities Litigation Reform Act’s mandatory sanction procedures eliminated two key
aspects of a district court’s discretion in the Rule 11 context, and that the district court’s
perfunctory findings required remand for compliance with the PSLRA’s unique Rule 11 scheme.
Id. This is not a PSLRA case and the district court retained its traditional discretion.

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perfunctory denial of the Trustee’s legal argument does not demonstrate an abuse

of discretion. Thus, we affirm.

      AFFIRMED.

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