John Richards Homes Building Co. v. Kevin Adell , 296 F. App'x 837 ( 2008 )

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
OCT 17, 2008
No. 08-12220 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 07-00361-CV-FTM-29
BKCY No. 03-BK-23684-ALP
In Re: KEVIN ADELL,
Debtor.
__________________________________________________________________
JOHN RICHARDS HOMES BUILDING COMPANY, L.L.C.,
Plaintiff-Appellant,
versus
KEVIN ADELL,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(October 17, 2008)
Before CARNES, BARKETT and WILSON, Circuit Judges.
PER CURIAM:
John Richards Homes Building Company, L.L.C. (“JRH”) appeals a district
court decision affirming a bankruptcy court order denying JRH sanctions against
Kevin Adell. See John Richards Homes Bldg. Co., L.L.C. v. Kevin Adell (In re
Kevin Adell), No. 2:07-cv-361-FTM-29SPC, 2008 U.S. Dist. LEXIS 22097 (M.D.
Fla. Mar. 18, 2008). This case involves an extended litigation between JRH and
Adell. In essence, Adell sued JRH over a construction contract dispute in
Michigan state court. Adell then commenced involuntary bankruptcy proceedings
against JRH under Chapter 7 of the Bankruptcy Code in the U.S. Bankruptcy Court
for the Eastern District of Michigan. 11 U.S.C. § 701 et seq. The bankruptcy court
dismissed the involuntary case, and JRH commenced proceedings in the Michigan
bankruptcy court, alleging bad faith in the filing of an involuntary case, under 11
U.S.C. § 303(i). On April 25, 2003, JRH obtained a judgment against Adell in the
amount of $6,413,230.68, comprised of $4,100,000 in compensatory damages,
$2,000,000 in punitive damages, and $313,230.68 in attorney’s fees.
Adell then moved to Florida, where he filed for relief under Chapter 11 of
the Bankruptcy Code in the U.S. Bankruptcy Court for the Middle District of
Florida. 11 U.S.C. § 1101 et seq. JRH moved to dismiss Adell’s Chapter 11 case,
alleging that the petition was filed in bad faith. The bankruptcy court denied the
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motion, but the district court reversed and remanded. Adell promptly converted
his reorganization case to a liquidation and submitted his assets to a Chapter 7
trustee. 11 U.S.C. § 701 et seq. The conversion order was entered on May 17,
2005, and a Chapter 7 trustee was appointed to liquidate Adell’s assets. Adell paid
the April 25, 2003 sanctions judgment obtained by JRH in full, plus interest, on
April 3, 2006.
Subsequently, JRH again moved for sanctions under 11 U.S.C. § 303(i),
alleging that Adell’s Chapter 11 case and later Chapter 7 case were filed in bad
faith, constituting an abuse of the judicial process, and that JRH was entitled to
sanctions. The bankruptcy court declined to impose sanctions, and the district
court affirmed. JRH now appeals the district court’s decision, arguing that both the
bankruptcy court and the district court abused their discretion by refusing to
impose further sanctions against Adell.
We review a bankruptcy court’s ruling with respect to a request for sanctions
under 11 U.S.C. § 105(a) for an abuse of discretion. See Chambers v. NASCO,
Inc., 501 U.S. 32, 55, 111 S. Ct. 2123, 2139, 115 L. Ed. 2d 27 (1991); In re Albany
Partners, Ltd., 749 F.2d 670, 675 (11th Cir. 1984). A bankruptcy court “abuses its
discretion when it misconstrues its proper role, ignores or misunderstands the
relevant evidence, and bases its decision upon considerations having little factual
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support.” Arlook v. S. Lichtenberg & Co., 952 F.2d 367, 374 (11th Cir. 1992).
This Court will affirm unless it finds that the lower court “has made a clear error of
judgment, or has applied the wrong legal standard.” Amlong & Amlong, P.A. v.
Denny’s, Inc., 500 F.3d 1230, 1238 (11th Cir. 2006) (quotations and citations
omitted). “Short of that, an abuse of discretion standard recognizes there is a range
of choices within which we will not reverse the district court even if we might have
reached a different decision.” Siebert v. Allen, 506 F.3d 1047, 1049 n.2 (11th Cir.
2007) (quotations and citations omitted).
Under Section 105(a) of the Bankruptcy Code, “[t]he court may issue any
order, process, or judgment that is necessary or appropriate to carry out the
provisions of this title.” 11 U.S.C. § 105(a). The bankruptcy court has the
“inherent power to impose sanctions” under appropriate circumstances.
Chambers, 501 U.S. at 46, 111 S. Ct. at 2134. However, the bankruptcy court is
not required to do so. Section 105(a) is, on its face, a discretionary tool for the
courts. JRH is incorrect as a matter of law to argue that the bankruptcy court must
award sanctions, when the plain language of the statute provides solely that the
court “may issue any . . . judgment . . . .” 11 U.S.C. § 105(a) (emphasis added).
JRH has not cited any precedent that supports its claim that the bankruptcy court
must impose sanctions. Rather, JRH has misrepresented the holdings in numerous
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cases by stating that various courts held that a finding of bad faith requires the
imposition of sanctions, when the courts merely held that a finding of bad faith
permits the imposition of sanctions.
Given the discretionary nature of sanctions, we are satisfied by the
bankruptcy court’s decision that “Adell attempted to pursue a legitimate goal
within the utmost of his ability and, therefore, to impose a sanction would be a
double punishment in addition to the $2 million judgment imposed by the
Michigan Bankruptcy Court.” Order on Motion for Reconsideration or Rehearing
on Order Denying Amended Motion to Impose Sanctions (Bankr. Doc. # 888) at
10. The bankruptcy court’s power to sanction “must be exercised with restraint
and discretion.” Chambers, 501 U.S. at 44, 111 S. Ct. at 2132. The bankruptcy
court exercised that restraint appropriately here.
Furthermore, the district court did not abuse its discretion by affirming the
bankruptcy court. We agree with the district court that “Judge Paskay clearly
recognized his power and authority to impose sanctions and that such a decision
was a matter of discretion. Judge Paskay thus followed the correct legal
standards.” In re Kevin Adell, 2008 U.S. Dist. LEXIS 22097, at *4 (citations
omitted). Judge Paskay has not made any clear error of judgment. Indeed, both the
bankruptcy court and the district court were well within the bounds of their
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authority.
CONCLUSION
Upon review of the parties’ briefs and the record, we discern no reversible
error. Accordingly, we affirm the opinion of the district court.
AFFIRMED.
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