Court Opinion

ID: 6221185
Source: CourtListenerOpinion
Date Created: 2022-02-12 01:00:36.294016+00
Date Added: 2024-06-11T08:57:21.010374
License: Public Domain

Case: 21-20067     Document: 00516199696        Page: 1   Date Filed: 02/11/2022

           United States Court of Appeals
                for the Fifth Circuit                             United States Court of Appeals
                                                                           Fifth Circuit

                                                                         FILED
                                                                  February 11, 2022
                                 No. 21-20067                       Lyle W. Cayce
                                                                         Clerk

   In re Cleveland Imaging and Surgical Hospital, L.L.C.,

                                                                        Debtor.

   Camil Kreit; Samir Kreit; Fadi Ghanem,

                                                                   Appellants,

                                     versus

   Christopher L. Quinn, the CI Litigation Trustee,

                                                                      Appellee.

                  Appeal from the United States District Court
                      for the Southern District of Texas
                               No. 4:19-CV-3069

   Before Higginbotham, Smith, and Ho, Circuit Judges.
   Jerry E. Smith, Circuit Judge:
         This case arises from the bankruptcy of Cleveland Imaging and Surgi-
   cal Hospital, L.L.C. (“CISH”), which, starting in 2002, owned and operated
   a four-bed hospital in Cleveland, Texas. Camil Kreit, Samir Kreit, and Fadi
   Ghanem are doctors who invested in CISH and served on its board.
         In 2014, CISH filed for bankruptcy. Many of its assets were sold, but
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                                         No. 21-20067

   its causes of action were placed in trust so they could be liquidated on behalf
   of its creditors. For that purpose, Christopher Quinn was appointed trustee.
           In 2019, however, the doctors filed an adversary proceeding in which
   they asserted causes of action that the bankruptcy court had placed in trust
   for CISH’s creditors. That led the bankruptcy court to sanction them, con-
   cluding that by attempting to seize control of trust property, the doctors had
   knowingly violated its order confirming the liquidation plan. The doctors
   appealed, but those sanctions were largely upheld by the district court. The
   doctors again appeal. Because every issue they raise is meritless, we affirm.

                                                I.
                                               A.
           Understanding the sanctions order at issue here requires a bit of back-
   ground on the CISH bankruptcy. In 2012, the doctors sued CISH for breach
   of contract in state court. When one of CISH’s creditors learned that the
   hospital had ceased operations on account of the suit, the creditor success-
   fully petitioned a state court to appoint a receiver, who then put CISH into
   bankruptcy in September 2014.
           In subsequent bankruptcy proceedings, the doctors competed with
   one of their rivals on the CISH board to purchase the hospital from CISH’s
   estate. Ultimately, the bankruptcy court approved a sale of the hospital to
   that rival in August 2015. The doctors objected but did not appeal.
           Two months later, however, Camil Kreit wrote to numerous govern-
   mental entities 1 to allege that the receiver and the doctors’ rival had rigged
   the asset sale and taken actions to injure CISH. In those communications,

           1
           In all, Kreit contacted the U.S. Trustee’s Office, the local U.S. Attorney’s Office,
   the Texas Attorney General’s Office, the U.S. Department of Justice, and the Federal
   Trade Commission.

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   Kreit identified himself as one of CISH’s managers, raised various causes of
   action on its behalf, and requested any available administrative remedies.
   When the bankruptcy court learned of Kreit’s actions, it sanctioned him. It
   reasoned that Kreit had sought to assert control over causes of action that
   properly belonged to CISH and that that violated the automatic stay, which
   prohibits “any act . . . to exercise control over property of the estate.”
   11 U.S.C. § 362(a)(3). Kreit appealed, but we upheld those sanctions. Kreit
   v. Quinn (In re Cleveland Imaging & Surgical Hosp., L.L.C.), 690 F. App’x
   283, 287 (5th Cir. 2017) (per curiam). 2
             Meanwhile, in June 2016, the bankruptcy court confirmed a liquida-
   tion plan for CISH. As before, the doctors objected but did not appeal. As
   part of that plan, CISH’s remaining assets—including its causes of action—
   were placed into the CI Litigation Trust. Quinn was appointed trustee to
   pursue those claims and liquidate them on behalf of the creditors.
             Two aspects of the plan are notable. First, it kept the automatic stay
   in place for the benefit of the trust. Second, it provided that the trust would
   terminate automatically on December 31, 2018.

                                                 B.
             That brings us to this appeal. In June 2019, the doctors filed an adver-
   sary proceeding in the bankruptcy court against CISH’s estate and another
   one of their rivals. They alleged that their rival had defrauded CISH before
   the bankruptcy filing and that the receiver 3 had breached his fiduciary duties
   by failing adequately to pursue claims that could serve to recover assets for

             2
                 Kreit’s petition for certiorari was denied. See Kreit v. Quinn, 138 S. Ct. 429
   (2017).
             3
            Although the doctors did not sue the receiver, their attorney later admitted that
   was a mistake.

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                                            No. 21-20067

   CISH. The bankruptcy court responded by ordering the doctors to show
   cause why they should not be sanctioned for violating the automatic stay kept
   in place by its confirmation order.
           After holding two hearings, the bankruptcy court decided to sanction
   the doctors using its inherent power under Section 105 of the Bankruptcy
   Code. 4 It concluded that the doctors had brought causes of action that prop-
   erly belonged to the trust. Accordingly, the bankruptcy court determined
   that they had attempted to assert control over trust property—thereby violat-
   ing the automatic stay kept in place by its confirmation order. As required to
   exercise its inherent authority, 5 the court also found, by clear and convincing
   evidence, that the doctors had acted in bad faith. That finding was driven by
   its conclusion that the doctors had knowingly violated its confirmation
   order. 6
           The bankruptcy court then imposed two categories of sanctions.
   First, it ordered the doctors to pay for the costs that the trust had incurred as
   a result of their adversary—namely, the fees that Quinn and his attorneys had
   charged it for responding to the adversary and litigating the show-cause
   motion. 7 Second, it enjoined the doctors from violating the automatic stay in

           4
            That section gives bankruptcy courts the power to “issue any order, process, or
   judgment that is necessary or appropriate to carry out the provisions” of the Bankruptcy
   Code. 11 U.S.C. § 105(a).
           5
               Cadle Co. v. Moore (In re Moore), 739 F.3d 724, 729–30 (5th Cir. 2014).
           6
             In particular, the bankruptcy court emphasized that the doctors knew about the
   confirmation order and had been rejected by multiple attorneys before finding one who was
   willing to file their complaint. It also noted that it had previously sanctioned Camil Kreit
   for engaging in similar conduct.
           7
            On the bankruptcy court’s instructions, Quinn had moved for the court to use its
   inherent authority to order the doctors to show cause why they should not be sanctioned.
   He then prosecuted the show-cause motion. Under the confirmation order and trust agree-
   ment, the trust was obligated to pay the fees incurred by Quinn and his attorneys in defend-

                                                  4
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                                           No. 21-20067

   the future. That injunction was to be enforced with future sanctions of
   $100,000 per individual per violation. Then, in a separate order, the bank-
   ruptcy court dismissed the doctors’ adversary proceeding with prejudice.
            The doctors paid the monetary sanctions to Quinn, who accepted
   them on behalf of the trust. 8 Then, they appealed the sanctions order to the
   district court, which affirmed in part and vacated in part. As relevant here,
   it affirmed the monetary sanctions because it agreed with the bankruptcy
   court’s determination that the doctors had violated the automatic stay in bad
   faith. But it vacated the “$100,000 sanction for future violations” as “puni-
   tive and beyond the bankruptcy court’s authority.” 9
            Once again, the doctors appealed. Quinn, however, did not cross-
   appeal the vacatur of the punitive sanctions.

                                                 II.
            “We review ‘the decision of a district court sitting as an appellate
   court in a bankruptcy case by applying the same standards of review to the
   bankruptcy court’s findings of fact and conclusions of law as applied by the
   district court.’” 10 That means we usually review the bankruptcy court’s

   ing its interests.
            8
             The doctors paid the sanctions to Quinn, not the trust itself, because a trust is not
   a “separate legal entity” under Texas law. Hollis v. Lynch, 827 F.3d 436, 443 (5th Cir.
   2016) (quoting Ray Malooly Tr. v. Juhl, 186 S.W.3d 568, 570 (Tex. 2006)). Instead, a trust
   is merely a “fiduciary relationship governing the trustee with respect to the trust prop-
   erty.” Id. (quoting Juhl, 186 S.W.3d at 570). As a result, it is the trustee who has possession
   of a trust’s property. See id. (“A trust cannot possess anything as it is not an entity under
   Texas law.”).
            9
             Bankruptcy courts lack the power to impose sanctions so punitive that they
   amount to a finding of criminal contempt. Griffith v. Oles (In re Hipp, Inc.), 895 F.2d 1503,
   1509 (5th Cir. 1990).
            10
             In re Lopez, 897 F.3d 663, 668 (5th Cir. 2018) (quoting Endeavor Energy Res., L.P.
   v. Heritage Consol., L.L.C. (In re Heritage Consol., L.L.C.), 765 F.3d 507, 510 (5th Cir.

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                                      No. 21-20067

   legal conclusions de novo and its factual findings for clear error. Edwards Fam.
   P’ship v. Johnson (In re Cmty. Home Fin. Servs., Inc.), 990 F.3d 422, 426 (5th
   Cir. 2021). But when the bankruptcy court sanctions a party using its inher-
   ent authority, our review is closer. We uphold those sanctions only if (1) the
   bankruptcy court finds that the party acted in bad faith or willfully abused the
   judicial process and (2) its finding is supported by clear and convincing evi-
   dence. In re Moore, 739 F.3d at 729–30.

                                          III.
             Before we can get to the merits, we must confirm we have jurisdiction.
   Rivero v. Fid. Invs., Inc., 1 F.4th 340, 343 (5th Cir. 2021). It turns out that we
   have jurisdiction over some—but not all—of the doctors’ claims.

                                           A.
             We start with the dismissal of the doctors’ adversary proceeding. On
   appeal, the doctors say that the bankruptcy court was wrong to dismiss their
   adversary proceeding; they ask us to reinstate it. But they never filed a notice
   of appeal that properly embraced that issue under the bankruptcy rules, and
   that means we don’t have jurisdiction. Dorsey v. U.S. Dep’t of Educ. (In re
   Dorsey), 870 F.3d 359, 363 (5th Cir. 2017).
             The bankruptcy court dismissed the doctors’ adversary and sanc-
   tioned them in two separate orders. It entered the dismissal order on the
   docket for the doctors’ adversary proceeding, but it entered the sanctions
   order on the docket for the underlying Cleveland Imaging bankruptcy pro-
   ceeding. In response, the doctors filed only a single notice of appeal on the
   Cleveland Imaging docket. That notice designated only the sanctions order as
   the subject of the appeal. And as an exhibit, the doctors attached only the

   2014)).

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   sanctions order, not the dismissal order. There are two reasons why that
   notice of appeal didn’t encompass the dismissal order and, accordingly, why
   we don’t have jurisdiction.
           First, a “notice of appeal in [a] main bankruptcy proceeding” cannot
   “serve as a notice of appeal in [a related] adversary proceeding.” Dorsey,
   870 F.3d at 362. Instead, the “main bankruptcy case and adversary proceed-
   ing must be treated as distinct for the purpose of appeal.” Id. at 363 (quoting
   Dietrich v. Tiernan (In re Dietrich), 490 F. App’x 802, 804 (6th Cir. 2012)).
   After all, “adversary proceedings are discrete judicial units.” Id. Given that
   the doctors didn’t file a notice of appeal on the adversary docket, their notice
   didn’t embrace the dismissal of their adversary proceeding. Thus, we lack
   jurisdiction.
           Second, the doctors’ notice of appeal did not comply with the require-
   ments of the bankruptcy rules for appealing the adversary proceeding. Notic-
   ing an appeal from a bankruptcy court is “more demanding” than noticing
   an appeal from a district court. Fadayiro v. Ameriquest Mortg. Co., 371 F.3d
   920, 922 (7th Cir. 2004). 11 Unlike the latter, the former requires that a notice
   of appeal “be accompanied by the judgment, order, or decree, or the part of
   it, being appealed.” Fed. R. Bankr. P. 8003(a)(3)(B). And the doctors
   included only the sanctions order, not the dismissal order, with their notice
   of appeal. That means their notice failed to comply with Rule 8003, so we
   lack jurisdiction.

                                              B.
           Next, the punitive sanctions. The doctors once again press their claim
   that the forward-looking sanctions were punitive and beyond the authority of

           11
             That’s likely because a single bankruptcy case can involve many parties and many
   adjacent adversary proceedings. Fadayiro, 371 F.3d at 922.

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                                        No. 21-20067

   the bankruptcy court. But they won on this issue before the district court, and
   Quinn did not cross-appeal. “[A] prevailing party generally may not appeal
   a judgment in its favor.” 12 Such a party may do so when it continues to suffer
   an injury from the judgment. See Camreta v. Greene, 563 U.S. 692, 702–03
   (2011). But the doctors have already received everything they wanted with
   respect to the punitive sanctions; they fail to identify any additional injury
   they have suffered from the district court’s judgment. Thus, they don’t have
   an injury-in-fact, and we don’t have jurisdiction. See id. at 701–02.

                                              C.
           We end our discussion of jurisdiction with a relatively unusual issue.
   Recall that the terms of the trust agreement stated it would terminate no later
   than December 31, 2018—six months before the doctors filed their adversary
   proceeding and eight months before Quinn and his attorneys accepted the
   sanctions award on behalf of the trust. It appears that the doctors figured this
   out just after briefing had been completed. Several weeks later, they filed an
   emergency motion to strike Quinn’s filings, set aside his actions since 2018,
   and vacate the district court’s order affirming the sanctions order. They
   claimed that Quinn didn’t have standing to defend the sanctions order
   because he was no longer a trustee and therefore had no interest in preserving
   it. In supplemental briefing, they also claimed that Quinn didn’t have stand-
   ing to file or prosecute the show-cause motion despite the bankruptcy court’s
   request for him to do so.
           Making matters more complicated, the doctors filed a similar motion
   on the underlying bankruptcy court docket around the same time. Then,
   before we heard oral argument, the bankruptcy court ruled on that motion.

           12
             Zente v. Credit Mgmt., L.P., 789 F.3d 601, 603–04 (5th Cir. 2015) (quoting Ward
   v. Santa Fe Indep. Sch. Dist., 393 F.3d 599, 603 (5th Cir. 2004)).

                                              8
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   It agreed with the doctors that the trust had “terminated as a matter of law”
   in 2018. And although Quinn continues to possess the trust assets, 13 the
   bankruptcy court held that the terms of the trust prohibit him from exercising
   wind-up powers after its termination. Those powers would have let Quinn
   continue to exercise his powers as trustee for a reasonable time until he dis-
   tributed the trust assets to beneficiaries. Tex. Prop. Code § 112.052.
           The upshot of all this is that the doctors hope it will lead us to vacate
   the sanctions order and dismiss this appeal for lack of jurisdiction. After all,
   standing implicates our subject-matter jurisdiction. Ortiz v. Am. Airlines,
   Inc., 5 F.4th 622, 627 (5th Cir. 2021). And though it would have been prefer-
   able for the doctors to raise these issues before, we have an obligation to
   assure ourselves of our jurisdiction. Rivero, 1 F.4th at 343–44. Even so, we
   conclude that the bankruptcy court had jurisdiction to enter the sanctions
   order and that we and the district court have jurisdiction to hear this appeal.
           Let’s start with the sanctions order. The bankruptcy court entered it
   under its inherent authority under 11 U.S.C. § 105(a), 14 which gives bank-
   ruptcy courts the power to issue civil contempt orders. See Placid Refin. Co.
   v. Terrebonne Fuel & Lube, Inc. (In re Terrebonne Fuel & Lube, Inc.), 108 F.3d
   609, 613 (5th Cir. 1997) (per curiam). Because the sanctions order sought to
   “compensate another party for the contemnor’s violation” of a court order,
   it qualifies as such an order. Id. That matters because “an order of civil
   contempt is considered part of the underlying case”—here, the Cleveland
   Imaging bankruptcy case. Garrett v. Coventry II DDR/Trademark Montgomery
   Farm, L.P. (In re White-Robinson), 777 F.3d 792, 795 (5th Cir. 2015) (per

           13
                They are in a bank account he controls.
           14
               In relevant part, Section 105(a) provides that bankruptcy courts may “sua
   sponte, tak[e] any action . . . necessary or appropriate to enforce or implement court orders
   or rules, or to prevent an abuse of process.”

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   curiam). Therefore, because the bankruptcy court had jurisdiction over the
   Cleveland Imaging bankruptcy case, it had jurisdiction to enter the sanctions
   order, too.
           Likewise, we have (and the district court had) jurisdiction to consider
   the doctors’ appeal. The doctors say that Quinn doesn’t have standing to
   defend their appeal. The problem with that theory is that standing isn’t the
   right doctrine by which to articulate their objection to Quinn’s status as a
   party. A litigant must be able to show standing when “seek[ing] to initiate or
   continue proceedings in federal court.” 15 Quinn is seeking to defend an appeal
   initiated by the doctors. Thus, for this case to be capable of resolution under
   Article III, he doesn’t need to show he would have standing.
           Nonetheless, Article III requires an “opposing party” to have “an
   ‘ongoing interest in the dispute’ . . . that is sufficient to establish ‘concrete
   adverseness’” between the litigants. Bond, 564 U.S. at 217 (quoting Camreta,
   563 U.S. at 701). Normally, this requirement is hardly worth mentioning.
   After all, a litigant unquestionably has an interest in a case when there is
   “relief being sought at its expense” by another. Id. And standing’s tracea-
   bility and redressability requirements will typically guarantee that that’s the
   case. Hence, nothing is usually lost when courts say that Article III’s
   requirement of a “genuine, live dispute between adverse parties” is
   “implement[ed]” through the “doctrine of standing.” Carney v. Adams, 141
   S. Ct. 493, 498 (2020).
           Here, the doctors have standing to appeal the sanctions order. Their
   injury—being forced to pay over $40,000 in sanctions—is a “traditional

           15
              Bond v. United States, 564 U.S. 211, 217 (2011) (emphasis added); see also Va.
   House of Delegates v. Bethune-Hill, 139 S. Ct. 1945, 1950 (2019) (noting that standing is
   required for those “invoking the power of a federal court” (emphasis added) (quoting Hol-
   lingsworth v. Perry, 570 U.S. 693, 704 (2013))).

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   tangible harm[ ]” that meets the injury-in-fact requirements of Article III.
   TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2204 (2021). That injury is
   “fairly traceable” to Quinn’s conduct in accepting the sanctions award on
   behalf of the trust. Carney, 141 S. Ct. at 498 (quoting Hollingsworth, 570 U.S.
   at 704). And this injury could be “redressed by judicial relief.” TransUnion,
   141 S. Ct. at 2203. If the bankruptcy court wrongly sanctioned the doctors,
   this court could order the sanctions returned from their possessor (Quinn) to
   their rightful owner (the doctors)
          Even so, sometimes an opposing party lacks such an interest even
   when an initiating party can show it has standing. Look no further than Cam-
   reta, 563 U.S. at 701–03, in which the Court concluded that a child protective
   service worker who had received qualified immunity nonetheless had stand-
   ing to appeal. The Ninth Circuit held that he had violated the Fourth
   Amendment by interviewing a minor at school without a warrant or her par-
   ents’ consent; it then concluded that he was entitled to qualified immunity
   because that right was not “clearly established.” Id. at 699–700. That in-
   jured the worker by establishing an “adverse constitutional ruling” that
   required him to “change the way he performs his duties or risk a meritorious
   damages action.” Id. at 703.
          Nonetheless, the Supreme Court ultimately concluded that it didn’t
   have jurisdiction. Why? Because for a federal court to exercise jurisdiction
   under Article III “the opposing party also must have an ongoing interest in
   the dispute.” Id. at 701 (emphasis added). In Camreta, the minor had moved
   to Florida and was “only months away from her 18th birthday” and “high
   school graduation.” Id. at 711. As a result, she no longer had an interest in
   preserving the Ninth Circuit’s constitutional holding. Id. That lack of “a
   stake in the outcome” meant that there was no longer a live controversy for
   the Court to resolve. Id. at 710–11.

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           Quinn, however, still has a “stake in the outcome” that is adequate to
   confer our jurisdiction despite the termination of the trust. True, Quinn no
   longer has legal ownership of the trust assets. Nonetheless, as even the doc-
   tors recognized at oral argument, the assets are still in a bank account that he
   controls.
           Quinn has a cognizable interest in continuing to possess the assets. On
   termination, a former trustee like Quinn has a duty to return the trust prop-
   erty to the beneficiaries of the trust. 16 And a former trustee’s fiduciary duty
   with respect to that property doesn’t end until the property has been distrib-
   uted to beneficiaries. 76 Am. Jur. 2d Trusts § 335, Westlaw (database up-
   dated Nov. 2021). Thus, even though Quinn may lack wind-up powers and
   doesn’t have legal ownership of the property, he has an interest in defending
   his continued possession of the trust assets so he can fulfill his fiduciary
   duties and return the property to the trust beneficiaries. 17 That’s enough to
   give him a meaningful interest in this case, so we have jurisdiction.
                                                IV.
           That brings us finally to the merits. The doctors’ remaining claims
   have none.

                                               A.
           The doctors say that the bankruptcy court erred in finding they had
   violated its confirmation order by filing their adversary proceeding. That
   court reached that conclusion because its confirmation order preserved the

           16
             Restatement (Third) of Trusts § 76 (Am. L. Inst.), Westlaw (database
   updated Oct. 2021); cf. Tex. Prop. Code § 114.001(a) (“The trustee is accountable to
   a beneficiary for the trust property . . . .”).
           17
              In its amended order on termination of the trust, the bankruptcy court indicated
   that Quinn may request its guidance for distributing the trust property, but he does not yet
   appear to have done so.

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   automatic stay, which prevents “any act . . . to exercise control over property
   of the estate.” 11 U.S.C. § 362(a)(3). In the court’s view, the doctors’ filing
   violated that provision by attempting to “tak[e] control over assets of the
   estate which [had] bec[o]me assets of the trust.” The doctors dispute this
   holding on two grounds, but neither is persuasive.
           First, the doctors claim the automatic stay permitted adversary pro-
   ceedings like theirs to be filed. They highlight language from Campbell v.
   Countrywide Home Loans, Inc., 545 F.3d 348, 356 (5th Cir. 2008), that they
   insist reveals that filing an adversary proceeding does not violate the auto-
   matic stay. 18 But as we later clarified, “[w]hile the language in Campbell
   could suggest a broad rule, the holding was narrow: the automatic stay does
   not bar the filing of proofs of claims in the debtor’s bankruptcy case.” Cowin
   v. Countrywide Home Loans, Inc. (In re Cowin), 864 F.3d 344, 352 (5th Cir.
   2017) (emphasis added). That’s because the Bankruptcy Code explicitly
   permits such actions to be filed against a debtor. See 11 U.S.C. § 501(a).
           The doctors haven’t cited a comparable textual exception for their
   adversary proceeding, which—unlike a proof of claim—undermined the
   “orderly liquidation [and] administration of the estate.” Cowin, 864 F.3d
   at 352 (quoting Prewitt v. N. Coast Vill., Ltd. (In re N. Coast Vill., Ltd.),
   135 B.R. 641, 643 (9th Cir. BAP 1992)). Campbell thus doesn’t show that the
   bankruptcy court erred in concluding that the doctors violated its confirma-
   tion order.
           Second, the doctors maintain that their adversary proceeding was
   properly filed because they had “derivative standing” to litigate the trust’s

           18
             The “automatic stay serves to protect the bankruptcy estate from actions taken
   by creditors outside the bankruptcy court forum, not legal actions taken within the bank-
   ruptcy court.” Campbell, 545 F.3d at 356 (quoting In re Sammon, 253 B.R. 672, 681 (Bankr.
   D.S.C. 2000)).

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   claims on its behalf. Based on In re Louisiana World Exposition, Inc., 832 F.2d
   1391, 1397–98 (5th Cir. 1987), they say they had the power to assert the trust’s
   claims because Quinn had “refuse[d] or [was] unable to act in the best
   interest[s] of creditors.” That claim faces two problems.
           The first is that the doctors forfeited it. They didn’t include it in their
   statement of issues on appeal or press it before the district court. 19 The doc-
   tors were required to do both to preserve that claim. 20 Since they didn’t, that
   claim has been forfeited.
           The second problem is that the doctors’ theory is wrong. Louisiana
   World Exposition, 832 F.2d at 1397, permits only creditors’ committees to assert
   derivative standing on behalf of a debtor. The doctors are no such commit-
   tee. What’s more, that decision “generally” requires “that the debtor-in-
   possession ha[s] refused unjustifiably to pursue the claim” and “that the
   committee first receive leave to sue from the bankruptcy court” before filing.
   Id. The doctors never demanded that Quinn pursue their claims and never
   received permission from the bankruptcy court to file their adversary. Thus,
   notwithstanding Louisiana World Exposition, the doctors violated the confir-
   mation order by filing their adversary.

                                                B.
           The doctors make their last stand on the bad-faith requirement. Recall
   that a bankruptcy court may sanction litigants only if it finds, by clear and
   convincing evidence, that they acted in bad faith or willfully abused the judi-

           19
                 Instead, they took the opposite position: that their claims were direct, not
   derivative.
           20
             See Frazin v. Haynes & Boone, L.L.P. (In re Frazin), 732 F.3d 313, 324 (5th Cir.
   2013); Smith v. H.D. Smith Wholesale Drug Co. (In re McCombs), 659 F.3d 503, 510 (5th Cir.
   2011).

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   cial process. In re Moore, 739 F.3d at 729–30. The bankruptcy court found
   that the doctors were acting in bad faith because they had knowingly violated
   the confirmation order. The doctors say this determination was erroneous.
   We disagree.
           Clear and convincing evidence supports the bankruptcy court’s find-
   ing that the doctors knowingly violated its confirmation order. The doctors
   were unquestionably aware of the confirmation order; they had even objected
   to it when the bankruptcy court was deciding whether to enter it. When
   Camil Kreit violated that order by seeking to assert control over a different
   fraud claim that belonged to the trust, the bankruptcy court sanctioned him.
   Despite being on notice that the fraud claims belonged to the trust, the doc-
   tors shopped around to find an attorney who would file their suit. After they
   succeeded in finding one, each of them reviewed the draft complaint and
   approved it before the lawyer filed it. And Kreit ultimately admitted that he
   knew that complaint incorporated arguments that had been rejected by this
   court. This evidence leads us to the “firm” conclusion that the doctors knew
   that the confirmation order barred them from filing this adversary proceed-
   ing. Crowe v. Smith, 261 F.3d 558, 563 (5th Cir. 2001). That means they did
   so in bad faith. The bankruptcy court’s sanctions order was justified.
           The doctors contest that determination on two grounds. 21 In their
   view, they “were left with no choice because the fiduciary refused to protect
   and prosecute the claims of the estate,” and their actions “were good faith
   efforts to preserve the claims of the estate in the only manner left to them
   under the framework of the Bankruptcy Code.” Once again, both of those

           21
                The doctors characterize one of their arguments as a due process challenge, but
   it is better understood as a challenge to the bankruptcy court’s bad-faith finding, which was
   a necessary prerequisite for it to sanction the doctors using its inherent authority. See
   Moore, 739 F.3d at 730.

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Case: 21-20067       Document: 00516199696        Page: 16   Date Filed: 02/11/2022

                                   No. 21-20067

   arguments fail.
          The first is based on a blatant mischaracterization of the record. The
   doctors never asked Quinn to pursue the claims against their rival, so Quinn
   could never have “refused” to do so. The second fails for the same reason.
   The doctors could have helped to preserve the claims of the estate by notify-
   ing Quinn and asking him to pursue them. Instead, in the words of the bank-
   ruptcy court, “they just hauled off and filed the suit seeking relief that
   belongs” to the trust. Hence, the doctors haven’t cast doubt on the bank-
   ruptcy court’s conclusion that they were acting in bad faith when they filed
   their adversary. The factual findings stand.
          AFFIRMED.

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