Having a doctor’s letter included in your Social Security Disability Insurance (SSDI) benefits application could significantly help your claim. Medical professionals, especially your treating physician, add a level of credibility and helps examiners understand how your condition impedes your ability to work. However, not all doctor’s letters are effective. You want to ensure that, if […] The post How Do I Ask My Doctor to Write My Disability Letter? appeared first on .

A common fear people have when discussing the idea of filing for bankruptcy is losing their property, especially their house. Equity is the key factor when determining how your home is handled in bankruptcy. Your equity is the proceeds you would realize if you sold your home after all liens, fees, and other costs were […] The post How Much Equity Can You Have in a Home and Still File For Bankruptcy in Pennsylvania? appeared first on .

 https://www.cityandstateny.com/policy/2021/09/nyc-and-taxi-drivers-have-very-different-ideas-how-tackle-medallion-debt/185660/

 https://www.cutimes.com/2021/09/29/former-melrose-cu-ceo-alan-kaufman-sentenced-to-prison/

A Reaffirmation Agreement is an agreement that Chapter 7 debtors may sign to reassume personal liability for secured debt and keep the collateral. Most often Chapter 7 debtors will reaffirm debt for their car, boat, rv, or other high-value personal property.  Filing a Chapter 7 bankruptcy petition breaks all contracts the debtor had previously. Signing and filing a Reaffirmation Agreement re-creates the contractual relationship between creditor and debtor. Usually, the debtor must be current on the loan, although debtors’ attorneys have succeeded in rolling small amounts of loan arrears into the balance of the Reaffirmation Agreement.  In many cases, it may not be worth it to reaffirm a debt unless the creditor offers you some benefit such as a lower interest rate. What Does Reaffirm Mean? Normally, a Chapter 7 debtor is discharged of debt and the secured lender can repossess a car or boat or other property (called “the collateral”) once the bankruptcy case closes, or sooner if the lender files a Motion for Relief from the Automatic Stay with the Bankruptcy Court. In many cases, however, the lender will not seek to repossess the collateral if you are up to date on the payments. In order to keep the collateral, a debtor reaffirms the debt by signing a new contract reassuming personal liability for mortgage or car debt. This overrides the discharge and the debtor remains liable for this debt following the entry of the discharge order and the closure of his or her bankruptcy case. You should speak with your lawyer to find out if reaffirmation is right for you. Usually, the terms of the Reaffirmation Agreement will mirror the terms of the original loan, and that is why it may not always be a good idea to sign them. Some debtor’s attorneys have been successful in negotiating more favorable terms, such as a lower interest rate. Reaffirmation Agreements and Bankruptcy Exemptions In order to retain the collateral and sign and file a Reaffirmation Agreement, the attorney for the Chapter 7 debtor must creatively apply exemptions to any equity the debtor has in the collateral to protect the collateral from the seizure and sale by the Chapter 7 Trustee for the benefit of creditors. Is a Reaffirmation Agreement Necessary? Entering into a Reaffirmation Agreement is always wholly voluntary. However, since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“the Act”) was passed into law, Chapter 7 debtors wishing to retain any collateral securing debt are supposed to file a Reaffirmation Agreement to definitively prevent lenders from repossessing the collateral after the bankruptcy case closes.  Why? Because most secured loans contain a clause providing that filing bankruptcy itself violates the contract between lender and debtor. While this is a point of frequent litigation, from a lender’s point of view the act of filing bankruptcy and a discharge of the underlying debt reduces the lender’s available remedies if the debtor later defaults on payments.  All a lender can do at that point is repossess the collateral and sell it. Most of the time collateral sells at auction for far less than the debtor owns on the loan, but absent a Reaffirmation Agreement the lender can no longer pursue the debtor for any account deficiency because that debt has been discharged, meaning, the debtor no longer is personally responsible to pay that debt. The upshot is, even if a Chapter 7 debtor remains up to date on monthly payments, if the debtor does not sign and file a Reaffirmation Agreement the lender is sometimes free to exercise the right to repossess the collateral under the Act once the bankruptcy case closes and anytime thereafter regardless of whether the debtor is current on payments, or not. This is why you need to discuss the specific facts of your case with your attorney to see if Reaffirmation is appropriate for you. How Long Do You Have to File a Reaffirmation Agreement? A Reaffirmation Agreement must be filed within 60 days after the first scheduled 341(a) Meeting of Creditors. This deadline may be extended by the Bankruptcy Court.  What Happens When You Reaffirm a Debt? Once a Chapter 7 debtor executes a Reaffirmation Agreement, the lender or the debtor’s attorney files it with the Bankruptcy Court and the Court schedules a Reaffirmation Hearing. What Happens at a Reaffirmation Hearing? A debtor and his or her attorney appear at the courtroom of the judge assigned to the debtor’s Chapter 7 case. The hearing may be in person or held remotely, especially since the onset of Covid-19. The judge will ask the debtor questions about his or her finances in order to determine whether entering into the Reaffirmation Agreement is in the debtor’s best interests. The judge’s primary concern is whether the debtor can realistically afford to make the monthly payments going forward. A Chapter 7 debtor should consider carefully whether the monthly payment is affordable, because if it is not and the debtor fails to make payments, the lender then has the right to foreclose or repossess and also the right to sue for the account deficiency, since the Reaffirmation Agreement overruled a discharge of that debt. In many cases signing a Reaffirmation agreement may not be the best move and you need to discuss the same with your lawyer. What Happens if I Do Not Sign a Reaffirmation Agreement? If you do not sign a Reaffirmation Agreement when the secured creditor sends you one, you run the risk of having the collateral repossessed following the closure of your Chapter 7 Bankruptcy case. What Happens if You Do Not Reaffirm a Mortgage? Probably nothing if you keep current on your mortgage payments. If a debtor reaffirms a mortgage and continues to make monthly mortgage payments, the lender will report the account as current to the credit bureaus. However, as a matter of practice, most mortgage lenders do not send debtors a Reaffirmation Agreement to sign.  There is little risk that the lender will foreclose on the debtor’s property as long as the debtor makes monthly mortgage payments timely and in full. Foreclosure is an expensive procedure for mortgage lenders, so as long as you keep current on the mortgage you should be able to stay in the house. If you do not reaffirm a mortgage and at some point in the future you can no longer afford to make monthly mortgage payments, you can walk away from the property with no personal liability for the mortgage because you received a discharge of that debt. Can I Sell My House if I Did Not Reaffirm? Yes, you can. You are still the record owner of the property, and if you did not reaffirm you are not personally liable for the mortgage. The property could be sold for less than what you owe (short sale) and you would not be liable for the deficiency on your account, but this would require the approval of the mortgage lender. Can I Trade in My Car After Reaffirmation? Yes, you can trade your car in as long as your new loan pays off the balance of your previous loan.   Can I Cancel a Reaffirmation Agreement? Yes, you have 60 days to rescind a Reaffirmation Agreement, if the court approved it but you subsequently changed your mind. Does Reaffirming Help Credit? Yes! The lender will report your loan as current to the credit bureaus. If you do not reaffirm, the lender does not report payments you make in many cases, so making monthly payments without a Reaffirmation Agreement may not help rebuild your credit following your Bankruptcy case. Should I Reaffirm? Can I Reaffirm? If you are considering filing bankruptcy but are concerned about whether you should reaffirm any secured debt, or whether the collateral you want to keep has too much equity to reaffirm, contact an experienced bankruptcy attorney to schedule your free consultation. To be forewarned is to be forearmed! Knowledge gives you power to do the right thing. The post What is a Reaffirmation Agreement in a Chapter 7 Bankruptcy? appeared first on David M. Offen, Attorney at Law.

 That article can be found at Jacobin Magazine at  https://www.jacobinmag.com/2021/09/nyc-taxi-cab-medallion-debt-speculative-bubble-values-nytwa-city-hall

 The bipartisan duo of Sen. John Cornyn from Texas and Sen. Elizabeth Warren from Massachusetts have introduced a new bill tackling bankruptcy venue. The Bankruptcy Venue Reform Act of 2021, which can be found here, is the latest attempt by the Senators to level the bankruptcy playing field. The new bill, which is supported by the Commercial Law League of America and a national network of insolvency professionals, expands upon the Senators prior work.A Renewed Sense of PurposeThe bill contains a new set of findings and statement of purpose.(a) FINDINGS.—Congress finds that— (1) bankruptcy law provides a number of venue options for filing bankruptcy under chapter 11 of  title 11, United States Code, including, with respect to the entity filing bankruptcy— (A) any district in which the place of incorporation of the entity is located; (B) any district in which the principal place of business or principal assets of the entity are located; and (C) any district in which an affiliate of the entity has filed a pending case under title 11, United States Code; (2) the wide range of permissible bankruptcy venue options has led to an increase in companies filing for bankruptcy outside of their home district— the district in which the principal place of business or principal assets of the company is located; (3) the practice described in paragraph (2) is known as ‘‘forum shopping’’; (4) forum shopping has resulted in a concentration of bankruptcy cases in a limited number of districts; (5) forum shopping— (A) prevents small businesses, employees, retirees, creditors, and other important stake holders from fully participating in bankruptcy cases that have tremendous impacts on their lives, communities, and local economies; and (B) deprives district courts of the United States and courts of appeals of the United States of the opportunity to contribute to the development of bankruptcy law in the jurisdictions of those district courts; and (6) reducing forum shopping in the bankruptcy  system will strengthen the integrity of, and build public confidence and ensure fairness in, the bankruptcy system.  (b) PURPOSE.—The purpose of this Act is to prevent the practice of forum shopping in cases filed under chapter 11 of title 11, United States Code.  Cracking Down on State of Incorporation and Affiliate Filing Abuses The proposed legislation replaces 28 U.S.C. Sec. 1408, the current venue statute, with a revamped section. The proposal creates separate rules for individuals and entities. As with existing law, individuals may file in the district where their domicile, residence or principal assets have been located for the preceding 180 days or the longest part of the preceding 180 days. An entity other than an individual may file in the district where its principal place of business or principal assets have been located for the prior 180 days or the greater part of the preceding 180 days. An entity may also file in the district where an affiliate that owns or controls 50% of the voting stock of the entity or an entity that is its general partner has a pending case, but only if the affiliate filed in a proper district.    The new rules for entities change two provisions of existing law. First, the state of incorporation is eliminated as a permissible venue. Many U.S. corporations are incorporated in Delaware (or more recently in Nevada) but do not have any physical presence there. Second, the ability to file based on an affiliate's filing is greatly limited. In the recent National Rifle Association case, the NRA created a Texas-based subsidiary, caused that entity to file bankruptcy in Texas and then used that filing to bootstrap the NRA's case into Texas. The NRA case was an example of how a company can manufacture venue under existing law. If the Cornyn-Warren bill were passed, affiliate venue could only be used to allow a filing if the parent company had already filed in a permissible venue.The legislation also adds definitions of principal place of business and principal assets. For a company that files reports with the Securities and Exchange Commission, its principal place of business would be the address contained on its SEC filings absent proof by clear and convincing evidence. The definition of principal assets would exclude cash. In one notorious case, a Russian company transferred funds to the U.S. and then claimed jurisdiction here based on the cash. This legislation would prevent a company from shifting its bank account to the desired forum and then filing based on the transferred cash. There is also a provision which would not allow affiliate filing based on equity ownership if that ownership had changed in the preceding year. New Transfer ProvisionsThe proposal also contains new rules for challenging venue. If a motion to dismiss a case based on improper venue or transfer it is filed, the court must rule upon the motion within fourteen days after it is filed. Additionally, the proponent of venue must establish that its venue is proper by clear and convincing evidence. Under existing law, there have been cases where a motion to transfer venue was filed in the first week of a case but the hearing was not held for months by which time the case was far along and transfer would be made more difficult. Additionally, under existing law, substantial deference is granted to the debtor's choice of forum. The requirement to justify a filing choice by clear and convincing evidence turns this existing law on its head.Easier Access for Governmental AttorneysFinally, the legislation contains a provision requiring the Supreme Court to prescribe rules allowing governmental attorneys to appear in any bankruptcy court, district court or bankruptcy appellate panel without paying a fee or associating local counsel. This has been a priority of many state attorney general's offices which can be required to appear in cases filed on a national basis.The Need for the LegislationAccording to a press release from Sen. Warren's office, over the past twenty years, 70% of companies with assets over $100 million have filed in a district other than the one where the principal office is located. Sen. Warren stated:Wealthy corporations should not be able to run across the country to find a favorable court to file bankruptcy. While they manipulate the system to file for bankruptcy wherever they please, affected communities — like workers, creditors, and consumers — lose. This bipartisan bill will prevent big companies from cherry-picking courts that they think will rule in their favor and to crack down on this corporate abuse of our nation's bankruptcy laws.Sen. Cornyn emphasized the detriment to small businesses.Corporations seeking courts sympathetic to their interests often ‘forum shop,’ tilting the playing field away from small businesses. I urge my colleagues to support this bipartisan, common-sense solution to close this loophole and help restore public trust in our bankruptcy system.The two senators have introduced bankruptcy venue legislation together since 2018. Sen. Cornyn was Texas Attorney General when Enron filed bankruptcy in the Southern District of New York based upon a minor affiliate. His office tried unsuccessfully to bring the case back to Texas where the criminal cases of the Enron executives were pending. Before being elected to the Senate, Sen. Warren taught bankruptcy at several law schools, including the University of Texas and Harvard.The Current EnvironmentFor many years, large cases gravitated to just two districts, the District of Delaware, where many large companies were incorporated, and the Southern District of New York, where many large banks are present. In recent years, the Southern District of Texas and the Eastern District of Virginia have become favored filing sites as well. The Southern District of Texas created a complex case panel consisting of just two judges, Judge Marvin Isgur and Judge David Jones (who I must add are outstanding judges). The Southern District of Texas saw many oil and gas filings, as well as J.C. Penney and Tailored Brands (owner of Men's Wearhouse and Joseph A. Bank). Toys R Us chose the Eastern District of Virginia as the locus for its bankruptcy case. While the transition from a duopoly to a gang of four has brought large case filings to a larger number of bankruptcy courts, they reinforce that under current law, venue remains largely discretionary for large companies while small companies and individuals do not have this freedom. Outside of big bankruptcy cases, forum shopping is condemned as an abuse. Under today's bankruptcy venue laws, forum shopping for large companies has become an entitlement. 

This is the final installment of our investigation into the Michigan elections case and the three forms of sanctions awarded as well as how the same principles apply in Bankruptcy Court. This installment discusses sanctions under the court's inherent authority. The Court’s Inherent Authority The final type of sanction available arises under the Court’s inherent authority. In Chambers v. NASCO, Inc., 501 U.S. 32, 49-50 (1991), the Supreme Court held that courts have an inherent authority to sanction bad faith conduct in litigation. In the Sixth Circuit (where the Michigan elections case was pending), the test is: (i) the claims advanced were meritless; (ii) counsel knew or should have known this; and (iii) the motive for filing the suit was for an improper purpose such as harassment. Opinion, p. 42. An award under the Court’s inherent authority is limited to compensating the opposing party for fees incurred solely because of the misconduct. Prior to awarding sanctions, the court must give the offending party notice that sanctions are being considered and the opportunity to respond. The plaintiffs in the Michigan case argued that the comments to Fed.R.Civ.P. 11 suggested that Rule 11 displaced the court’s inherent authority. However, Judge Payne found that sanctions under Rule 11 could exist side by side with the power to sanction under the Court’s inherent authority. Unlike 28 U.S.C. §1927, which can apply to counsel and to persons admitted to conduct cases, sanctions under the court’s inherent authority may be applied to counsel and parties to litigation. As with section 1927, sanctions under the court’s inherent authority are compensatory rather than punitive, meaning that the opposing party may recover its fees and costs incurred.     The Michigan Court did not have difficulty finding that it could award sanctions under its inherent authority. As discussed in the preceding subsections, Plaintiffs’ counsel advanced claims that were not well-grounded in the law, as demonstrated by their: (i) presentment of claims not warranted by existing law or a nonfrivolous argument for extending, modifying, or reversing the law; (ii) assertion that acts or events violated Michigan election law, when the acts and events (even if they occurred) did not; and (iii) failure to inquire into the requirements of Michigan election law. Plaintiffs’ counsel advanced claims that were also not well-grounded in fact, as demonstrated by their (i) failure to present any evidentiary support for factual assertions; (ii) presentment of conjecture and speculation as evidentiary support for factual assertions; (iii) failure to inquire into the evidentiary support for factual assertions; (iv) failure to inquire into evidentiary support taken from other lawsuits; and (v) failure to inquire into Ramsland’s outlandish and easily debunked numbers. And, for the reasons discussed above, Plaintiffs’ counsel knew or should have known that these claims and legal contentions were not well-grounded in law or fact. Moreover, for the reasons also discussed above, the Court finds that Plaintiffs and their counsel filed this lawsuit for improper purposes. Opinion, p. 102. Sanctions Under The Court’s Inherent Authority in Bankruptcy Court When bankruptcy courts award sanctions under their inherent authority, they do so under 11 U.S.C. §105, which allows the court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.”  In re Cochener, 360 B.R. 542 (Bankr. S.D. Tex. 2007), aff’d, Cochener v. Barry, 297 Fed.Appx. 382 (5th Cir. 2008) illustrates sanctions under section 105 in bankruptcy. In the Cochener case, a less experienced bankruptcy attorney recognized that there were problems with a case he was handling and asked a more experienced bankruptcy counsel to step in. Attorney Barry realized that the debtor may have omitted assets from her schedules and that the trustee and the debtor’s ex-husband were both concerned about this. Attorney Barry attempted to extricate the debtor from the case. He filed a motion to dismiss the case in which he asserted that (1) "No creditor in this case would suffer any legal prejudice by its dismissal;" and (2) "The interests of the creditors and Debtor would be better served by the dismissal of this bankruptcy proceeding rather than its continuation and adjudication." This was problematic because creditors would be better off if the trustee discovered undisclosed assets and administered them. Attorney Barry then informed the trustee that he assumed that the continued 341 meeting would be adjourned based on the motion to dismiss. He advised the debtor not to attend the meeting and neither he nor the debtor did attend. They then failed to attend a second continued meeting. When the trustee requested that the debtor appear at a Rule 2004 examination, attorney Barry did not respond. However, when an examination was noticed, attorney Barry responded that the trustee was overreaching by requesting documents on transactions that took place more than one year prior to bankruptcy. In fact, a fraudulent transfer action could be brought under state law for transactions going back four years. The Rule 2004 exam was reset several times. The debtor did not produce documents and did not attend the examination. When the debtor failed to appear, attorney Barry filed a motion to withdraw. At this point, he had been involved in the case for approximately five months. When attorney Barry withdrew, the Trustee filed a response stating that he reserved the right to seek sanctions. Nearly five years later, the Trustee filed his motion for sanctions. At the hearing on motion for sanctions it came out that attorney Barry had been sanctioned twice before in the prior year. The court denied sanctions under Rule 9011 for the reason that the Trustee did not send a safe harbor letter until after it was too late to withdraw the offending pleading. However, the court found that it could award sanctions under its inherent authority. The court found that attorney Barry had engaged in bad faith conduct in five instances: (1) Barry concocted a reason for the Debtor not to attend the continued Meeting of Creditors, and then instructed her not to attend this meeting; (2) Barry himself did not attend the continued Meeting of Creditors; (3) Barry filed a Motion to Dismiss the Debtor's case, which included blatantly false factual and legal contentions, for the purpose of delaying and hindering the Trustee's further examination of the Debtor at the continued Meeting of Creditors; (4) Barry drafted a letter to the Trustee, dated October 17, 2001, grossly misstating the law regarding the allowable reach-back period for fraudulent transfers under the Bankruptcy Code in an attempt to mislead the Trustee and avoid having to produce documents; and (5) Barry instructed the Debtor not to produce the documents requested by the Trustee on June 6, 2001, which both prior counsel to the Debtor (i.e., Hawks) and the Debtor herself had already committed to produce. 360 B.R. at 574.  The Court awarded sanctions of $25,121.89. This award was affirmed on appeal. How the Cases are the Same and Different The Michigan Elections case and the Cochener case are substantially different. In the Michigan case, the sanctions under the court’s inherent authority largely duplicated the court’s analysis under the other forms of sanctions and related to the pleadings filed in the case. In the Cochener case, sanctions were not available under any other basis and primarily involved conduct outside of court as opposed to filing frivolous pleadings. The Cochener case is particularly tragic because the attorney was trying to extricate the client from the client’s bad deeds. None of the five incidents were particularly egregious in and of themselves. However, as in the Grossman case discussed yesterday, it was the cumulative pattern of conduct which proved sanctionable. The commonality between King v. Whitmer and Cochener was that both cases involved a bad faith attempt to manipulate the court system. While the Michigan case was an attempted assault on democracy, Cochener was more an attempt to blur the lines a little bit which went on too long to be ignored. Conclusion In the ordinary course, attorney conduct is regulated by professionalism and self-interest. Sanctions are available for cases that fall outside the bounds of zealous advocacy, cases in which the judicial process has been misused. Sanctions differ from punitive damages in that they are primarily intended to compensate parties injured by bad faith litigation. The Michigan case involved an attempt to derail democracy while the various bankruptcy examples involved more mundane cases of debtor-creditor relationships gone amuck. The three forms of sanctions may all be appropriate in the same case, as shown by King v. Whitmer, or there may only be a single remedy available as shown in some of the bankruptcy examples. The final question is what should the attorneys have done differently to avoid being sanctioned. The lazy answer is to say they should never have filed frivolous pleadings. However, sometimes even good attorneys show bad judgment. The lesson to be learned from the four cases in this series of posts is that there are frequently moments when the attorney could have stepped aside and blunted the consequences of rash decisions. In King v. Whitmerone such lost opportunity was when the City of Detroit sent its Rule 11 safe harbor letter on January 5, 2021. Some of the attorneys, particularly local counsel, played a small role in submitting the scandalous pleadings. If they had filed a notice with the court disavowing the pleadings filed under their signature (or their signature block) by January 26, 2021, they would not have been subject to sanctions under Rule 11. When the District Court denied the request for preliminary injunction on December 7, 2020 and the self-described mootness date of December 14, 2020 passed, the plaintiffs could have non-suited their claims. Waiting until January after motions to dismiss had been filed was the conduct which led the court to conclude that the attorneys had unreasonably and vexatiously multiplied the proceedings. In re Tayloris a bit more difficult. In that case, the debtor’s lawyer never sent a safe harbor letter (and was in fact sanctioned himself) so that sanctions were initiated on the court’s own initiative. It may be that the firm dealing with a volume lift stay practice didn’t recognize its peril until it was too late. However, it could have at least apologized to the debtor and offered to work with the debtor instead of blaming the black box. The Grossman case is much more obvious. At some time during the four years that the attorney flooded the court with pleadings, he could have just said no. The Cochener case contains a detail I did not discuss above. The Trustee’s counsel contacted attorney Barry on numerous occasions over the years to try to work out a resolution. Maybe attorney Barry didn’t think he had done anything that egregious. Maybe he thought the trustee’s attorney was being a pest. However, with the benefit of hindsight, he most likely could have settled for much less prior to the time the motion for sanctions was filed. Another detail I didn’t mention was that when the trustee finally recovered the debtor’s hidden assets, one of them had been vandalized by the debtor. At that point, the attorney’s instinct for self-preservation might have kicked in and saved himself a lot of trouble down the road. I was going to end with the saying, when you find yourself in a hole, stop digging. However, I think I will close with a different saying: there is no bad situation you can find yourself in which can’t be made worse by doubling down on your original bad decisions. Many thanks to Eliana Jimenez for her editorial assistance with this series and my other recent blog posts.

This is part 3 of our discussion of sanctions in the Michigan elections case and in Bankruptcy Court. This installment examines 28 U.S.C. §1927. Introduction to Section 1927 A second basis for sanctions is found in 28 U.S.C. §1927, which provides that: Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.Section 1927 is different than Rule 11 in several important respects. First, it only applies to attorneys or any “other person admitted to conduct cases.” Next, the conduct covered is limited to vexatiously and unreasonably multiplying proceedings, although this may be accomplished by submitting frivolous pleadings. Additionally, there is no safe harbor letter required. Lastly, the remedy is limited to satisfying excess costs and fees incurred. Judge Parker described the standard under Section 1927 in this way: Section 1927 provides that any attorney “who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess of costs, expenses, and attorneys” fees reasonably incurred because of such conduct. The purpose of a sanctions award under this provision is to deter dilatory litigation practices and to punish aggressive tactics that far exceed zealous advocacy. Section 1927 imposes an objective standard of conduct on attorneys, and courts need not make a finding of subjective bad faith before assessing monetary sanctions. A court need only determine that an attorney reasonably should know that a claim pursued is frivolous. Simple inadvertence or negligence, however, will not support sanctions under § 1927. Ultimately, “[t]here must be some conduct on the part of the subject attorney that trial judges, applying collective wisdom of their experience on the bench, could agree falls short of the obligations owed by a member of the bar to the court . . . . Opinion, pp. 20-21 (cleaned up). Section 1927 in the Elections Case In Michigan, Gov. Gretchen Whitmer and Secretary of State Jocelyn Benson filed a motion for sanctions under section 1927 (as well as under the court’s inherent authority which will be discussed separately).  The main ground considered by the court was that the plaintiffs refused to dismiss their suit as being moot for months after the electoral votes had been cast. This was significant because they had stated that expedited relief was necessary in order to prevent the suit from becoming moot. According to the plaintiffs, December 14, 2020 was the magic date after which the court could no longer grant relief. On December 22, 2020, Gov. Whitmer and Secretary Benson filed a motion to dismiss. The case was finally dismissed on January 14, 2021. At first blush, allowing a suit to linger on the docket for one month after it should have died does not seem that egregious. However, the reason given for allowing the action to pend bothered the court. The reason stated was somewhat magical. Notwithstanding the fact that no court had recognized them to be valid electors, three of President Trump’s proposed electors took the position that they were the truly appointed electors. According to Judge Parker: In other words, Plaintiffs’ attorneys maintain that this lawsuit was no longer moot after December 14 because three Plaintiffs subjectively believed that they had become electors. The attorneys cite no authority supporting the notion that an individual’s “personal opinion” that he or she is an elector is sufficient to support the legal position that the individual is in fact an elector. Of course, such a belief is contrary to how electors are appointed in Michigan. In any event, Plaintiffs’ attorneys fail to provide a rational explanation for why this event breathed life into this action. Moreover, prior to the July 12 hearing, Plaintiffs never told anyone about this newly-formed subjective belief. They did not tell this Court that the case would no longer be moot after December 8, despite telling this Court the exact opposite when filing this lawsuit on November 25. And they did not tell the Supreme Court that the case would no longer be moot after December 14, despite telling that Court the exact opposite on December 11. The fact that it was never shared suggests that counsel’s argument as to why the case had to be pursued after December 14 is contrived. Opinion, pp. 48-49. While the delay was not particularly lengthy, it unnecessarily caused the parties and the court to expend resources. As Judge Payne pointed out: Here, Plaintiffs conceded that their claims were moot after December 14. Yet, in the month that followed, Plaintiffs refused to voluntarily dismiss their claims, forcing Defendants to file their motions to dismiss and the Court to decide Plaintiffs’ motion for additional time to respond to the motions to dismiss, which Plaintiffs ultimately did not do. In the end, Plaintiffs’ attorneys prolonged the inevitable and “caused both [the State Defendants and Intervenor-Defendants] and the [C]ourt to waste resources” in the meantime. Opinion, pp. 50-51. Section 1927 in Bankruptcy Court Grossman v. Wehrle (In re Royal Manor Management, Inc.), 652 Fed. Appx. 330 (6thCir. 2016) is a good example of how 28 U.S.C. §1927 applies in the bankruptcy context. In that case, an insider submitted a proof of claim for over $2 million. However, the agreement supporting the claim was redacted. The creditors’ committee objected to the claim and it was denied when no timely response was filed. At this point, attorney Grossman entered the picture. He had a 40% contingency fee interest in the claim. However, it turned out that the redacted portion of the agreement showed that the transaction was a loan between insiders and did not affect any of the debtors in bankruptcy. From November 2008 to January 2013, attorney Grossman filed dozens of pleadings seeking to advance the bogus claim or gum up the works of the bankruptcy proceeding. Many of the pleadings he filed were attempts to prevent a hearing from taking place on sanctions against him, including a request to recuse the judge. One of the last pleadings he filed was an objection to the trustee’s motion to compromise with his former client on the basis that the compromise would prejudice him.   The bankruptcy court ultimately sanctioned attorney Grossman $207,004 under section 1927. The Sixth Circuit Court of Appeals affirmed the sanction award. It stated that "Section 1927 sanctions are warranted when an attorney objectively 'falls short of the obligations owed by a member of the bar to the court and which, as a result, causes additional expense to the opposing party.'" 652 Fed. Appx. 330 at *16. For whatever reason, the attorney viewed his prime directive as to fight on and on and on. In wartime, it is irresponsible for generals to send their troops to die after the war has been lost. Similarly, in court, it is unprofessional to continue to throw pleadings into the mix long after it is objectively clear that the case is over. How the Cases are Different and How They Are Similar In the Michigan elections case, the proceedings were multiplied for a period of just one month. In the Grossmancase, the litigation went on for four years. Thus, there was a substantial difference in how long the proceedings were multiplied. However, in both cases. failure to acknowledge that the case should not proceed resulted in expense to the other parties. It did not matter whether that cost was incurred over a relatively brief period of time or years. However, it is important to remember that the statute uses the terms “vexatiously” and “unreasonably” to describe the conduct which unnecessarily prolongs cases and results in sanctions. Most reorganization proceedings fail. The job of a debtor’s attorney is to give the client the possibility of a breakthrough. There is a big difference between refusing to give up at the first sign of trouble and continuing to recycle rejected arguments time and time again. Tomorrow I discuss the court’s inherent authority to sanction.

Yesterday I introduced King v. Whitmer (E.D. Mich. 8/25/21), the case in which Judge Linda Parker wrote a 110-page opinion awarding sanctions under three separate legal grounds. Today we look at sanctions under Fed.R.Civ.P. 11, the longest section of the opinion, as well as a case where sanctions were assessed under Fed.R.Bankr.P. 9011, its bankruptcy counterpart. Introduction to Rule 11 Fed.R.Civ.P. 11(b) and (c) and its bankruptcy counterpart, Fed.R.Bankr.P. 9011(b) and (c) each state that: (b) Representations to the Court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,— (1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; (3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief. (c) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. A sanctions proceeding may be initiated in one of two ways. First, a party may request sanctions, but only after serving the proposed motion on the opposing party and giving that party 21 days in which to withdraw or appropriately correct the challenged paper, claim, defense, contention or denial. Fed.R.Civ.P. 11(c)(2). This is known as the “safe harbor” since it gives an offending party an opportunity to withdraw a sanctionable pleading or other document. In the alternative, the court may “order an attorney, law firm, or party to show cause why conduct specifically described in the order has not violated subsection (b).” Fed.R.Civ.P. 11(c)(3). There is no safe harbor in a court-initiated proceeding, but the court must give the party sufficient notice of the potential violation and an opportunity to respond. Rule 11 in the Michigan Election Case Rules 11 and 9011 have both a subjective and an objective component. The subjective requirement is that a pleading must not be presented for an improper purpose. The objective component looks at whether the arguments being presented are supported by existing law or a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law and that the allegations being made have evidentiary support, or are likely to have evidentiary support, after further investigation or discovery. According to Judge Linda Parker, the objective standard is intended to “eliminate any ‘empty-head pure-heart’ justification for patently frivolous arguments.” Opinion, p. 25. Subdivision (c) makes clear that parties that can be sanctioned are “the attorneys, law firm, or parties that have violated subjection (b)” by signing a pleading in violation of Rule 11 or “are responsible for the violation.” The Court used the “responsible for the violation” language to prevent the parties who had authorized the lawsuit, but had not actually signed it, to avoid liability. The involvement of attorney L. Lin Wood posed a particular issue for the court. He was equivocal as to whether he had participated in drafting the lawsuit or had authorized that his name be included. Mr. Wood said that he was not aware that his name was included but that he would not have objected. He also claimed that he did not know that he was subject to being sanctioned until he read an article in the newspaper.  The Court rejected his arguments because it found that he never notified the court that his name had been included in error. Furthermore, he failed to submit any affidavits that would establish his non-participation despite being given an opportunity to do so. He also tweeted a link to an article referencing the sanctions motion, told a federal judge that the City of Detroit was trying to get him disbarred, and took credit for filing the lawsuit in a brief filed with the Delaware Supreme Court. Another attorney, who claimed that he did not read the pleading until the day it was filed and spent about an hour reviewing it, did not fare well either. Under Rule 11, an attorney’s signature on a pleading constitutes a certificate that he has read it. The court found it difficult to believe that the attorney read an 830-page pleading in just “well over an hour.” Rule 11 requires that a “safe harbor” letter be sent with a copy of the proposed motion for sanctions at least twenty-one days before the motion is filed. Because the City of Detroit was the only party that sent a safe harbor letter (and because the court did not issue its own show cause order), the City of Detroit was the only party eligible to seek sanctions under Rule 11. On substantive grounds, the Court had no trouble finding that Rule 11 had been violated. Judge Parker found that the suit was subject to several obvious defenses. She stated: The Court said it before and will say it again: At the inception of this lawsuit, all of Plaintiffs’ claims were barred by the doctrines of mootness, laches, and standing, as well as Eleventh Amendment immunity. Further, Plaintiffs’ attorneys did not provide a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law to render their claims ripe or timely, to grant them standing, or to avoid Eleventh Amendment immunity. The same can be said for Plaintiffs’ claims under the Elections and Electors, Equal Protection, and Due Process Clauses, and the alleged violations of the Michigan Election Code. Finally, the attorneys have not identified any authority that would enable a federal court to grant the relief sought in this lawsuit. Plaintiffs asked this Court to enjoin the State Defendants from sending Michigan’s certified results to the Electoral College; but as reported publicly, Governor Whitmer had already done so before Plaintiffs filed this lawsuit. Plaintiffs sought the impoundment of all voting machines in Michigan); however, those machines are owned and maintained by Michigan’s local governments, which are not parties to this lawsuit. Plaintiffs demanded the recount of absentee ballots, but granting such relief would have been contrary to Michigan law as the deadline for requesting and completing a recount already had passed by the time Plaintiffs filed suit. Further, a recount may be requested only by a candidate. And while Plaintiffs requested the above relief, their ultimate goal was the decertification of Michigan’s presidential election results and the certification of the losing candidate as the winner—relief not “warranted by existing law or a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law.” Fed. R. Civ. P. 11(b)(2). Opinion, pp. 53-55 (record references and citations omitted). In the ordinary case, it is difficult to see how failing to anticipate an affirmative defense would violate Rule 11. However, standing and the ability to sue a state defendant were both integral to the rights being asserted. Additionally, the lack of authority to overturn an election result is also a pretty big hole in the case being filed. The Court was even more direct in skewering some of the specific allegations made in the affidavits that the plaintiffs relied upon. For purposes of brevity, I am only going to give a few examples. A witness “observed passengers in cars dropping off more ballots than there were people in the car.” Michigan law allowed a household member or family member to drop off a ballot.An allegation was made that Michigan law was violated because ballots without postmarks were counted when it was permissible to drop off an absentee ballot in person.At the hearing on July 12, the attorneys filing the suit alleging violations of Michigan election law demurred by saying that they were not experts in Michigan election law. The Court stated, “What is sanctionable is counsel’s allegation that violations of the Michigan Election Code occurred based on those facts, without bothering to figure out if Michigan law actually prohibited the acts described.”  Opinion, pp. 63-64. An affiant named Matt Ciantar submitted the following which was attached to the complaint in support: The afternoon following the election[,] as I was taking my normal dog walk (mid-afternoon), I witnessed a dark van pull into the small post office located in downtown Plymouth, MI. I witnessed a young couple . . . pull into the parking lot . . . and proceed to exit their van (no markings) . . . and open[] up the back hatch and proceed[] to take 3-4 very large clear plastic bags out . . . and walk them over to a running USPS Vehicle that appeared as if it was “waiting” for them. . . . There was no interaction between the couple and any USPS employee which I felt was very odd. . . . They did not walk inside the post office like a normal customer to drop of[f] mail. It was as if the postal worker was told to meet and standby until these large bags arrived. . . . [T]he bags were clear plastic with markings in black on the bag and on the inside of these clear bags was another plastic bag that was not clear (could not see what was inside) . . . . [There were] what looked like a black security zip tie on each back [sic] as if it were “tamper evident” type of device to secure the bag. . . . [B]y the time I realized I should take pictures of the bags once I noticed this looked “odd[,]” they had taken off. The other oddity was that [sic] the appearance of the couple. After the drop, they were smiling, laughing at one another. What I witnessed and considered that what could be in those bags could be ballots going to the TCF center or coming from the TCF center . . . . Opinion, pp. 71-72. The Court stated: Absolutely nothing about this affidavit supports the allegation that ballots were delivered to the TCF Center after the Election Day deadline. And even if the Court entertained the assertion of Plaintiffs’ counsel that this affidavit “is one piece of a pattern” reflecting fraud or Defendants’ violations of Michigan election laws, this would be a picture with many holes. This is because a document containing the lengthy musings of one dog-walker after encountering a “smiling, laughing” couple delivering bags of unidentified items in no way serves as evidence that state laws were violated or that fraud occurred. Opinion, pp. 72-73. Another affiant stated: There was [sic] two vans that pulled into the garage of the counting room, one on day shift and one on night shift. These vans were apparently bringing food into the building . . . . I never saw any food coming out of these vans, coincidently it was announced on the news that Michigan had discovered over 100,000 more ballots—not even two hours after the last van left. Opinion, p. 74. The Court countered: But nothing described by Carone connects the vans to any ballots; nothing connects the illusory ballots to President Biden; and nothing connects the illusory votes for President Biden to the 100,000 ballots “coincidently” announced on the news as “discovered” in Michigan. Yet not a single member of Plaintiffs’ legal team spoke with Carone to fill in these speculation-filled gaps before using her affidavit to support the allegation that tens of thousands of votes for President Biden were fraudulently added. . . . And speculation, coincidence, and innuendo could never amount to evidence of an “illegal vote dump”—much less, anything else. Opinion, pp. 74-75 and 76. The Court found pervasive violations of Rule 11. The combination of legal theories which were barred by applicable law, theories that were submitted without being investigated and factual allegations relying on speculation, coincidence and innuendo were sufficient to violate the rule. Rule 11 in Bankruptcy Court Rule 9011, which applies in bankruptcy court, substantially follows Rule 11.  It would be difficult to find a bankruptcy case with facts as outlandish as King v. Whitmer. Instead, I found a much more mundane case in which systems and procedures broke down to the detriment of the debtor and the court. In re Taylor, 655 F.3d 274 (3rd Cir. 2011) involved a lender and a law firm using an automated system to generate pleadings in bankruptcy court. As a result of glitches in the software, the firm filed a motion for relief from automatic stay which alleged that the debtor had not made any payments since filing chapter 13 and that the debtor had no equity in its property without any factual basis. The law firm also submitted requests for admissions, seeking admission of facts which the law firm knew, or should have known, were false. At one hearing, the court asked an associate why he couldn’t get information from the client and was told that the attorneys were only permitted to speak with the client through the automated query system. The court initiated an order to show cause under Fed.R.Bankr.P. 9011(c)(1)(B). After multiple hearings, the court awarded sanctions. The court rejected the argument that the law firm was reasonably relying on the information provided by its client. The court focused on Ms. Doyle, a senior attorney with the firm. Doyle's reliance on HSBC was particularly problematic because she was not, in fact, relying directly on HSBC. Instead, she relied on a computer system run by a third-party vendor. She did not know where the data provided by NewTrak came from. She had no capacity to check the data against the original documents if any of it seemed implausible. She effectively could not question the data with HSBC. In her relationship with HSBC, Doyle essentially abdicated her professional judgment to a black box. In re Taylor, 655 F.3d at 285. The bankruptcy court awarded sanctions that could be viewed as creative. The young attorney was questioned by the court was not sanctioned due to his inexperience. The senior attorney was ordered to complete three hours of continuing legal education in professional responsibility. The owner of the firm had to learn how the automated system worked and spend a day observing its use. The court also required the owner of the firm and the senior attorney involved to conduct a training session for all attorneys on their responsibilities under Rule 9011 and procedures for escalating queries under the software system. Lastly, the court ordered the creditor to send a copy of its opinion to all of its attorneys with a letter informing them that they were allowed to contact the creditor directly. On appeal, all sanctions were upheld except for those against the owner of the firm who was found not to have participated in the sanctionable conduct. This was a case where the remedy chosen by the court was aimed at remedying the deficient practices and correcting them rather than financially penalizing the offending parties. How the Cases are Similar and How They Are Different In King v. Whitmer, the plaintiffs sought to overturn an election. In In re Taylor, the creditor sought to foreclose upon a home. The elections case was marked by a brazen attempt to ignore both the law and the ethical obligations of the attorneys. The Taylor case was marked by a series of technological mishaps which caused the attorneys to file erroneous pleadings and make misrepresentations to the court. However, in both cases, the opposing party was put through unnecessary expense and delay due to pleadings which should not have been filed. As a result, both violated the applicable version of Rule 11. Tomorrow I will discuss 28 U.S.C. §1927.