William Carroll v. RedPen Properties, L.L.C

Case: 16-30996 Document: 00513908053 Page: 1 Date Filed: 03/13/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 16-30996 March 13, 2017
Summary Calendar
Lyle W. Cayce
Clerk
In the Matter of: WILLIAM DOUGLAS CARROLL and CAROLYN K.
CARROLL,
Debtors
WILLIAM DOUGLAS CARROLL; CAROLYN K. CARROLL; PAMELA K.
ALONSO; CYNTHIA G. O'NEAL,
Appellants
v.
SAMERA L. ABIDE,
Appellee
Appeal from the United States District Court
for the Middle District of Louisiana
Before HIGGINBOTHAM, PRADO, and HAYNES, Circuit Judges.
PER CURIAM:
The bankruptcy court declared William Douglas Carroll, Carolyn K.
Carroll, Pamela K. Alonso, and Cynthia G. O’Neal vexatious litigants and set
forth a pre-filing injunction against them. It also sanctioned the Carrolls,
jointly and severally, in the amount of $49,432. The district court affirmed,
and we affirm for substantially the same reasons.
Case: 16-30996 Document: 00513908053 Page: 2 Date Filed: 03/13/2017
No. 16-30996
I.
Appellants in this matter are William Douglas Carroll and Carolyn K.
Carroll (collectively, the Carrolls) and their daughters, Pamela K. Alonso and
Cynthia G. O’Neal (collectively, the Carroll Daughters). The Carrolls filed
their bankruptcy petition on May 21, 2008. RedPen Properties, L.L.C., whose
membership consists solely of the Carrolls, filed its bankruptcy petition that
same year. The trustee in both of these bankruptcy cases was Samera L. Abide,
and the cases were substantially consolidated in 2014.
On October 5, 2015, Abide sought relief against the Carrolls and the
Carroll Daughters due to their conduct in the bankruptcy cases. In granting
Abide’s motion in part, the bankruptcy court carefully laid out the troublesome
conduct of Appellants in a thorough, twenty-two-page opinion. The bankruptcy
court detailed a series of notable actions by Appellants that demonstrated their
pattern of harassment, which included: seeking to frustrate the sale of a five-
acre tract of land, filings related to a movables adversary brought by the
Carroll Daughters (“Movables Adversary”), 1 orders of contempt entered
against Appellants, attempts to frustrate the sale of the Carrolls’ residence and
movables, and two attempts to remove Abide that were wholly unsupported by
evidence.
After recounting the bad faith conduct of Appellants, the bankruptcy
court determined that “the Carrolls’ true motives [were] to harass the trustee
1 In the Movables Adversary, the Carroll Daughters sought to establish their
ownership in certain antiques and other movable property that was in the Carrolls’
possession at the time of the Carrolls’ bankruptcy filing. The Carroll Daughters claimed that
this property was transferred to them in 2005. Due to concerns regarding the ability of the
bankruptcy court to hear this claim under Stern v. Marshall, 564 U.S. 462 (2011), the district
court withdrew the reference. The case was then heard by the district court, which, in
granting summary judgment in favor of Abide, stated that it “seriously question[ed] the
legality of the actions taken by [the Carroll Daughters] and the Carrolls.” We affirmed.
Alonso v. Abide (In re RedPen Properties, L.L.C.), 568 F. App’x 338 (5th Cir. 2014).
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and thereby delay the proper administration of the estate in the hope that they
would be able to retain their assets, or make pursuit of the assets so
unappealing that the trustee would be compelled to settle on terms favorable
to the [appellants].” The court specifically found that Appellants were bad
faith filers and noted that Appellants’ failure to pay previous contempt
sanctions ordered against them “demonstrates that monetary sanctions alone
will not deter them.” Accordingly, the bankruptcy court “enjoin[ed] them and
anyone acting on their behalf from filing any pleading or document in this case
or its associated cases or adversary proceedings, and from filing any future
cases in [the Bankruptcy Court for the Middle District of Louisiana], without
first obtaining bankruptcy court permission.” The bankruptcy court then
assessed monetary sanctions, under 11 U.S.C. § 105, in the amount of $49,432
against the Carrolls. This figure represented the attorneys’ fees incurred “in
defending the trustee removal motions and the injunction complaint, along
with the Carrolls’ motion for stay pending appeal.”
The Carrolls and the Carroll Daughters appealed to the district court,
which affirmed the bankruptcy court’s order in a similarly detailed twenty-
five-page opinion. On appeal to us, the Carrolls and the Carrol Daughters
challenge the pre-filing injunction against them, and the Carrolls additionally
challenge the imposition of monetary sanctions.
II.
Although it is not altogether clear whether jurisdiction is proper under
28 U.S.C. § 158, the bankruptcy court’s order is a collateral order under the
Cohen doctrine. See Markwell v. Cty. of Bexar, 878 F.2d 899, 901 (5th Cir.
1989); see also Chaves v. M/V Medina Star, 47 F.3d 153, 156 (5th Cir. 1995). 2
2We need not decide if an award of attorneys’ fees alone would constitute a collateral
order in this context because here the bankruptcy court’s order labeled the Appellants
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“We review the imposition of sanctions for an abuse of discretion.”
Chaves, 47 F.3d at 156 (citation omitted). “A Bankruptcy Court does not abuse
its discretion unless its ruling is based on an erroneous review of the law or on
a clearly erroneous assessment of the evidence.” In re Yorkshire, LLC, 540
F.3d 328, 331 (5th Cir. 2008) (quoting Chaves, 47 F.3d at 156). Furthermore,
we review the facts that form the basis of the court’s decision to sanction for
clear error. FDIC v. Maxxam, Inc., 523 F.3d 566, 576–77 (5th Cir. 2008).
III.
We begin by noting the bankruptcy court has numerous tools by which
to sanction the conduct of individuals. “Federal courts have inherent powers
which include the authority to sanction a party or attorney when necessary to
achieve the orderly and expeditious disposition of their dockets.” Scaife v.
Associated Air Ctr. Inc., 100 F.3d 406, 411 (5th Cir. 1996) (citation omitted);
see also Citizens Bank & Tr. Co. v. Case (In re Case), 937 F.2d 1014, 1023 (5th
Cir. 1991). “Such powers may be exercised only if essential to preserve the
authority of the court and the sanction chosen must employ the least possible
power adequate to the end proposed.” Nat’l Gas Pipeline Co. of Am. v. Energy
Gathering, Inc., 86 F.3d 464, 467 (5th Cir. 1996) (quoting Anderson v. Dunn,
19 U.S. 204, 231 (1821)). A court must make a specific finding of bad faith in
order to impose sanctions under its inherent power. See Chaves, 47 F.3d at
156. Moreover, when sanctions are imposed under the inherent power, this
court’s “investigation of legal and evidentiary sufficiency is particularly
probing” and this court must “probe the record in detail to get at the underlying
facts and ensure the legal sufficiency of their support for the district court’s
vexatious litigants and enjoined them from future filings. See generally Ali v. Quarterman,
607 F.3d 1046, 1048 (5th Cir. 2010).
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more generalized finding of ‘bad faith.’” Crowe v. Smith, 151 F.3d 217, 236 (5th
Cir. 1998).
Federal courts also have authority to enjoin vexatious litigants under the
All Writs Act, 28 U.S.C. § 1651. See Newby v. Enron Corp., 302 F.3d 295, 302
(5th Cir. 2002). Moreover, under 11 U.S.C. § 105, “a bankruptcy court can
issue any order, including a civil contempt order, necessary or appropriate to
carry out the provisions of the bankruptcy code.” Placid Refining Co. v.
Terrebonne Fuel and Lube, Inc. (In re Terrebonne Fuel & Lube, Inc.), 108 F.3d
609, 613 (5th Cir. 1997). When considering whether to enjoin future filings,
the court must consider the circumstances of the case, including four factors:
(1) the party’s history of litigation, in particular
whether he has filed vexatious, harassing, or
duplicative lawsuits; (2) whether the party had a good
faith basis for pursuing the litigation, or simply
intended to harass; (3) the extent of the burden on the
courts and other parties resulting from the party’s
filings; and (4) the adequacy of alternative sanctions.
Baum v. Blue Moon Ventures, LLC, 513 F.3d 181, 189 (5th Cir. 2008) (quoting
Cromer v. Kraft Foods N. Am., Inc., 390 F.3d 812, 818 (4th Cir. 2004)).
With these legal principles in mind, we turn to the arguments on appeal
and affirm for substantially the same reasons asserted by the district court.
Addressing the pre-filing injunction first, the bankruptcy court considered the
relevant factors in issuing its pre-filing injunction. See Baum, 513 F.3d at 189.
To the extent that appellants maintain that sanctions cannot be imposed
against them because they are pro se litigants, they are incorrect. See
Farguson v. MBank Hous., N.A., 808 F.2d 358, 359 (5th Cir. 1986); see also
Clark v. Mortenson, 93 F. App’x 643, 652 (5th Cir. 2004).
To the extent that Appellants challenge the bankruptcy court’s finding
that they acted in bad faith, our probing review of the record establishes that
the finding of bad faith is well supported. As both the bankruptcy court and
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the district court meticulously explained, Appellants have engaged in conduct
intended to harass and delay. Appellants’ suggestion that their conduct was
not done in bad faith is belied by their repeated attempts to litigate issues that
have been conclusively resolved against them or that they had no standing to
assert and by their unsupported and multiple attempts to remove Abide as the
trustee. Although it is correct that the conduct of the Carroll Daughters was
less pervasive than that of the Carrolls, their conduct was still in bad faith.
Specifically, the bankruptcy court discussed the Carroll Daughters’ conduct in
the Movables Adversary, in which the district court had to hold the Carroll
Daughters in contempt and order them to make Abide whole as to all costs
involved in filing her motions to compel. 3 Yet, the Carroll Daughters remained
undeterred, persisted in their unsupported filings, and eventually triggered
another motion for contempt by failing to pay the attorneys’ fees as ordered.
At bottom, the record fully supports the bankruptcy court’s determination of
bad faith, and Appellants have not established that any of the bankruptcy
court’s findings were clearly erroneous.
3 Construing their pro se brief liberally, see Price v. Digital Equip. Corp., 846 F.2d
1026, 1028 (5th Cir. 1988), Appellants maintain that the bankruptcy court could not sanction
the Carroll Daughters for conduct that occurred before the district court in the Movables
Adversary once the order of reference was withdrawn because the Movables Adversary is a
separate proceeding. We have determined that “the inherent power does not extend to
collateral proceedings that do not threaten the court’s own judicial authority or proceedings.”
Positive Software Sols., Inc. v. New Century Mortg. Corp., 619 F.3d 458, 460–61 (5th Cir.
2010) (quoting Maxxam, 523 F.3d at 593). Here, by contrast, the conduct by the Carroll
Daughters in the district court occurred in the same bankruptcy case. See 2 COLLIER ON
BANKRUPTCY § 301.03 (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2015) (“The term
‘case’ . . . refers to the overall spectrum of legal action taken under one of the debtor relief
chapters. It is the widest term functionally. The term ‘proceeding,’ by contrast, refers to any
particular action raised or commenced within the case, including motions and adversary
proceedings, whether such actions raise disputed or consensual matters.”). Accordingly, the
bankruptcy court could sanction the Carroll Daughters for their conduct in the Movables
Adversary.
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We next address the bankruptcy court’s order that the Carrolls pay
$49,432, which represents the amount of attorneys’ fees incurred by Abide in
responding to certain instances of the Carrolls’ bad faith conduct. “[Section
105] has been interpreted as supporting the inherent authority of the
bankruptcy courts to impose civil sanctions for abuses of the bankruptcy
process.” In re Clark, 223 F.3d 859, 864 (8th Cir. 2000) (citation omitted); see
also In re Tucker, 224 F.3d 766, 2000 WL 992448, at *3 (5th Cir. 2000)
(unpublished) (rejecting the argument that the bankruptcy court erred in
holding that section 105 authorized the imposition of sanctions where the
sanctioned individuals participated in an abuse of process). The Carrolls
appear to argue that this sanction was erroneous because the estate has
already incurred these attorneys’ fees. This argument misunderstands that
the purpose of ordering the Carrolls to pay these fees is to prevent the estate
from bearing the costs of their vexatious conduct. Accordingly, the attorneys’
fees award is not erroneous.
AFFIRMED.
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