Appeal from Bankruptcy Court Case No. 09 B 13534 Adversary No. 09 A 667
The opinion of the court was delivered by: Hon. Harry D. Leinenweber
MEMORANDUM OPINION AND ORDER
Before the Court is Appellant Julia Mannix's appeal of the Bankruptcy Court's entry of sanctions against her under Rule 9011. Because the Court agrees that the Bankruptcy Court was without subject matter jurisdiction when it entered the sanctions, the Order of Sanctions is vacated.
Julia Mannix ("Mannix") was the attorney for Plaintiff, James Kafantaris ("Kafantaris" or "Plaintiff"). Mannix filed a lawsuit in Cook County Chancery Court (07 CH 38002) on behalf of Plaintiff on December 21, 2007. The suit accused Plaintiff's sister, Kanella Signore ("Signore" or "Defendant") of essentially taking advantage of their invalid mother, Jean Kafantaris ("Jean"), to drain her accounts -- accounts that were held in joint tenancy with Plaintiff.
On April 16, 2009, Signore and her husband (collectively, the "Defendants") filed for protection under Chapter 7 of Title 11 of the United States Bankruptcy Code. On August 3, 2009, Attorney Mannix filed an Adversary Complaint in the bankruptcy action that was largely factually identical to the Cook County action.
Signore's attorney served Mannix with a letter pursuant to Federal Rule of Bankruptcy Procedure 9011 and demanded Mannix withdraw the suit or face sanctions. Mannix did not and on October 18, 2009, Bankruptcy Judge Jacqueline P. Cox denied a Motion to Dismiss as well as the Motion for Sanctions.
On September 15, 2010, Signore moved for sanctions under Federal Rule of Civil Procedure 16(f) and scheduled a hearing for September 22, 2010. That motion dealt entirely with alleged failures by Mannix to meet deadlines, return phone calls, appear at scheduled court dates and comply with other discovery and procedural requirements. The motion did not invoke Rule 9011 and sought dismissal of the adversary complaint and "reasonable attorney fees and costs incurred in defending the case." See Def.'s Mot. for Sanctions, ECF No. 1-1, PageIDs 54-58.
On September 17, 2010, Judge Cox granted a Motion for Summary Judgment and a docket entry indicates the adversary case was closed on September 21, 2010. On September 22, 2010, Judge Cox continued the hearing on the Rule 16(f) sanctions to October 27, 2010. Plaintiff filed a timely notice of appeal on October 1, 2010. On October 12, 2010, Plaintiff filed its response to the Motion for Sanctions.
On October 22, 2010, Defendants filed their reply in support of their motion for sanctions. The reply is somewhat broader than the original motion, and bolstered the arguments for Rule 16(b) sanctions by also alleging the action itself was meritless. Still, the reply did not seek Rule 9011 sanctions. (Nor could it, as Rule 9011 motions "shall be made separately from other motions." FED. R. BANKR. P. 9011(c)(1)(A).).
On November 5, 2010, the Bankruptcy Court entered an order reopening the case, stating that it had been closed "due to clerical error" and reopening it pursuant to Rule 60(a). The appeal was docketed in this Court on November 12, 2010. On May 5, 2011, this Court entered its judgment affirming Judge Cox's grant of summary judgment. The hearing on the motion for sanctions was continued several times until September 8, 2011, when it was finally argued.
At that hearing, Defendants' attorney stated "all we're really seeking is for reimbursement of expenses and for reimbursement of those fees associated with what has been outlined to be constant delay throughout this litigation." Tr. of Proceedings of Sept. 8, 2011, 3, ECF No. 5-1, PageID 321. Defendants asked for $5,254.22 to cover $2,614.22 in costs and $2,640 in attorneys' fees associated with Mannix's delays. Id.
But when Mannix denied she should pay anything, and that Defendants should have filed for sanctions under Rule 26 and 37, Defendants' attorney again bolstered his motion with reference to the early Rule 9011 attempt and the alleged meritlessness of the case. Id. at 7-8, ECF No. 5-1, Page ID 325-326. After much back and forth about ...