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In re Patel

United States District Court, N.D. Illinois, Eastern Division

May 6, 2014

In re: PARESH VASANT PATEL, Debtor.
v.
EMIL BENZAKRY and EMIL & SONS LLC, Appellees/Cross-Appellants. PARESH VASANT PATEL, Appellant/Cross-Appellee, In re: KALPITA PARESH PATEL, Debtor. KALPITA PARESH PATEL, Appellant/Cross-Appellee,
v.
EMIL BENZAKRY and EMIL & SONS LLC, Appellees/Cross-Appellants.

MEMORANDUM OPINION AND ORDER

GARY FEINERMAN, District Judge.

Upon this court's rejection of Paresh Patel's and Kalpita Patel's separate appeals of the bankruptcy court's denial of their requests for a discharge of debts owed to Emil Banzakry and Emil & Sons LLC (together, "Plaintiffs"), 2013 WL 2151547 (N.D. Ill. May 15, 2013), Plaintiffs moved for sanctions under Federal Rule of Bankruptcy Procedure 8020 against the Patels and their attorney for filing frivolous appeals. Doc. 30 (13 C 657); Doc. 34 (13 C 103). Sanctions are denied.

Background

The related and materially identical appeals and sanctions motions will be discussed together, with all docket references to Case No. 13 C 103 unless noted otherwise. This action arises from the Patels' motion to discharge their debts under Chapter 7 of the Bankruptcy Code. Plaintiffs, the Patels' alleged creditors, commenced adversary proceedings in which they asserted three grounds to deny the Patels a discharge: (1) that the Patels made false or fraudulent statements in violation of 11 U.S.C. § 523(a); (2) that the Patels failed to retain business records "from which the debtor's financial condition or business transactions might be ascertained, " in violation of 11 U.S.C. § 727(a)(3); and (3) that the Patels failed to "explain satisfactorily... any loss of assets or deficiency of assets to meet the debtor's liabilities, " in violation of 11 U.S.C. § 727(a)(5). Doc. 1-3 at pp. 9-13. The parties cross-moved for summary judgment, and the Patels also moved to strike certain portions of Plaintiffs' statements of undisputed material facts. The bankruptcy court denied the Patels' motions and granted summary judgment to Plaintiffs on the §§ 727(a)(3) and 727(a)(5) grounds. Doc. 12-1 at 2-3. The Patels appealed to this court, arguing that the bankruptcy court erred in (1) granting summary judgment to Plaintiffs under §§ 727(a)(3) and 727(a)(5); (2) denying the Patels' motion to strike; (3) denying the Patels' motion for summary judgment on the §§ 523 and 727 grounds; and (4) denying a discharge to the Patels. This court affirmed the bankruptcy court's denial of discharge under § 727(a)(5), and found it unnecessary to address the other grounds. 2013 WL 2151547, at *4-5.

This court explained that "[a]lthough the Patels purport to challenge the bankruptcy court's ruling that they failed to provide the satisfactory explanation required by § 727(a)(5), they have forfeited their argument by failing to develop or support their challenge." Id. at *3. This court reasoned as follows:

The Patels' argument regarding § 727(a)(5) is so thin as to constitute a forfeiture. All the Patels do [in their briefs on appeal] is assert in conclusory fashion that they did not violate § 727(a)(5) and then name a litany of documents they claim to have turned over to Plaintiffs; they do not cite relevant legal authorities or even say where those documents are in the record on appeal, except for Paresh's answers to interrogatories. Even supposing that the Patels did turn over the documents they reference, they do not say how those documents explain what became of their assets or offer any argument as to why that explanation is satisfactory-which is a problem, as "§ 727(a)(5) requires a satisfactory explanation for the whereabouts of a debtor's assets."
...
The most that can be said for the Patels, though perhaps even this is too generous, is that they turned over documents from which a person with the relevant expertise in accounting or recordkeeping could derive a satisfactory explanation of the whereabouts of their assets, and that they gave this court a vague description of those documents. If all that is true, then perhaps the court could dig through the record, find the referenced documents, analyze them at length in light of the governing legal authorities, and ultimately piece together a satisfactory explanation of what became of the Patels' assets. But § 727(a)(5) puts the burden of coming up with that satisfactory explanation on the Patels, not on the court.

Id. at *3-4 (citations omitted).

Plaintiffs first requested sanctions under Rule 8020 in their response brief on appeal. Doc. 14 at 9, 48-49. The court denied that request because Rule 8020 "is explicit in allowing for sanctions only upon a separately filed motion or notice from the district court, " and "[t]here has been no such separately filed motion in this case, and nor has this court notified the parties that it is considering awarding costs." 2013 WL 2151547, at *5 (internal quotation marks omitted). On May 20, 2013, five days after the court's decision affirming the bankruptcy court's denial of discharge, Plaintiffs filed a motion for sanctions in the bankruptcy court, which was denied for lack of jurisdiction on September 3, 2013. Doc. 37 at 6. Ten days later, on September 13, 2013, Plaintiffs filed the present motion for sanctions before this court. Doc. 34.

Discussion

At the outset, the Patels argue that the sanctions motion should be denied because Plaintiffs did not timely file it in this court within fourteen days of this court's May 15, 2013 decision affirming the bankruptcy court's decision. Doc. 41 at 1-2. The Patels rely on Federal Rule of Civil Procedure 54(d), which provides in relevant part that "[u]nless a statute or a court order provides otherwise, the motion [for attorney's fees] must... (i) be filed no later than 14 days after the entry of judgment." Fed.R.Civ.P. 54(d)(2)(B)(i). In the alternative, the Patels argue that the governing rule is Northern District of Illinois Local Rule 54.3(b), which imposes a 91-day time limit to file a sanctions motion after the entry of judgment. Doc. 41 at 2.

As Plaintiffs correctly note in their reply brief, neither of these rules governs the filing of a Rule 8020 motion. Federal Rule of Bankruptcy Procedure 7054, which governs fee motions, explicitly provides that "Rule 54(a)-(c) [of the Federal Rules of Civil Procedure] appl[y] in adversary proceedings"; Rule 54(d) is excluded by implication. Fed.R.Bankr.P. 7054. And Local Rule 54.3(a) specifies that "this rule does not apply to motions for sanctions under Fed.R.Civ.P. 11 or other sanctions provisions, " a category that includes Rule 8020. N.D.Ill. L.R. 54.3(a). Although the court requested supplemental briefing on the timeliness issue, Doc. 36, neither party identified authority specifying how soon after the district court enters judgment on a bankruptcy appeal that the prevailing party must file a Rule 8020 motion for sanctions in the district court. This court will not make the Patels' argument for them, and accordingly will proceed to analyze Plaintiffs' Rule 8020 motion on its merits. See Arlin-Golf, LLC v. Vill. of Arlington Heights, 631 F.3d 818, 822 (7th Cir. 2011) (where the party "cited no relevant legal authority to the district court to support the proposition..., the argument is waived"); Judge v. Quinn, 612 F.3d 537, 557 (7th Cir. 2010) ("perfunctory and undeveloped arguments, and arguments that are unsupported by pertinent authority, are waived") (internal quotation marks omitted). And because the court denies Plaintiffs' motion on the merits, the timing issue is moot in any event.

Rule 8020 provides: "If a district court... determines that an appeal from an order, judgment, or decree of a bankruptcy judge is frivolous, it may, after a separately filed motion or notice from the district court... and reasonable opportunity to respond, award just damages and single or double costs to the appellee." Fed.R.Bankr.P. 8020. Rule 8020 sanctions "compensate the prevailing party for the expense of having to defend a wholly meritless appeal, and by deterring frivolity, they preserve the appellate calendar for cases truly worthy of consideration." Dungaree Realty, Inc. v. United States, 30 F.3d 122, 125 (Fed. Cir. 1994) (internal quotation marks omitted). "An appeal is frivolous when the result is obvious or when the appellant's arguments are wholly without merit." In re Sokolik, 635 F.3d 261, 270 n.3 (7th Cir. 2011) (quoting ...


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