In re: Jeffrey J. Prosser v. , 777 F.3d 154 ( 2015 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 14-1633
______________
IN RE: JEFFREY J. PROSSER, DEBTOR
JEFFREY J. PROSSER
v.
TOBY GERBER; FULBRIGHT AND JAWORSKI, LLP;
JAMES J. LEE; VINSON & ELKINS, LLP;
STAN SPRINGEL; JAMES P. CARROLL;
FOX ROTHSCHILD, LLP; GENOVESE, JOBLOVE &
BATTISTA, P.A.; PAUL BATTISTA; THERESA VAN
VLIET; ALVAREZ & MARSHAL, LLC
James. P. Carroll, Chapter 7 Trustee of the bankruptcy
estate of Jeffrey J. Prosser,
Appellant
______________
APPEAL FROM THE DISTRICT COURT
OF THE VIRGIN ISLANDS
(D.C. No. 3-11-cv-00136)
District Judge: Hon. Curtis V. Gomez
______________
Argued: December 9, 2014
______________
Before: CHAGARES, JORDAN, and SHWARTZ, Circuit
Judges.
(Filed: January 26, 2015)
______________
OPINION
______________
Samuel H. Israel, Esq. [ARGUED]
William H. Stassen, Esq.
Fox Rothschild
2000 Market Street
20th Floor
Philadelphia, PA 19103
Yann Geron, Esq.
Fox Rothschild
100 Park Avenue
Suite 1500
New York, NY 10017
Bernard C. Pattie, Esq.
Suite 5
1244 Queen Cross Street
Christiansted, VI 00820
Counsel for the Appellant
2
Norman A. Abood, Esq. [ARGUED]
Suite 203
152 North Summit Street
Toledo, OH 43604
Robert F. Craig, Esq.
Suite 203
14301 First National Bank Parkway
Omaha, NE 68154
Lawrence H. Schoenbach, Esq.
Suite 1305
111 Broadway
The Trinity Building
New York, NY 10006
Counsel for the Appellee
SHWARTZ, Circuit Judge.
James P. Carroll, trustee of debtor Jeffrey J. Prosser’s
bankruptcy estate, appeals the District Court’s order vacating
the Bankruptcy Court’s imposition of 28 U.S.C. § 1927sanctions. The Bankruptcy Court imposed sanctions because
of the numerous and inflammatory submissions Prosser’s
counsel filed in Prosser’s bankruptcy and associated
adversary proceeding. Because these filings vexatiously and
unnecessarily multiplied the bankruptcy proceedings and the
Bankruptcy Court did not abuse its discretion by imposing
such sanctions, we will reverse the District Court’s order
vacating them.
3
I
Prosser filed a Chapter 11 bankruptcy petition in 2006.
His petition was converted to a Chapter 7 petition and Carroll
was appointed as trustee of Prosser’s estate. During the
relevant portion of his bankruptcy proceedings, Prosser was
represented by attorneys Norman Abood, Robert Craig, and
Lawrence Schoenbach (collectively, the “Prosser Counsel”),
and Carroll was represented by Fox Rothschild, LLP (“Fox
Rothschild”).
A trial took place in 2008 to adjudicate creditors’
objections to Prosser’s claim that certain property was exempt
from the bankruptcy proceedings (the “Exemptions Trial”).
Arthur Stelzer, Prosser’s former “valet and personal
assistant,” App. 2652, testified for the creditors. He testified
that Prosser asked him to destroy several of Prosser’s
computer hard drives after Prosser filed for bankruptcy.
Based in part on Stelzer’s testimony, the Bankruptcy Court
denied the exemptions Prosser claimed. Thereafter, Carroll
and others initiated an adversary proceeding, seeking denial
of Prosser’s discharge under 11 U.S.C. § 727(a), based on
evidence that “the debtor has concealed, destroyed, mutilated,
falsified, or failed to keep or preserve any recorded
information . . . from which the debtor’s financial condition
or business transactions might be ascertained.” 11 U.S.C.
§ 727(a)(3).
In connection with this adversary proceeding, Prosser
deposed Stelzer in an effort to undermine his testimony at the
Exemptions Trial. During the January 12, 2010 deposition, at
which the Bankruptcy Judge presided, the Prosser Counsel
inquired into the payment of Stelzer’s legal fees by third
4
parties and contacts Stelzer had with Carroll and Carroll’s
counsel. With respect to his legal fees, Stelzer explained that
he had felt “intimidated” and “frightened” when first served
with a subpoena in connection with the Exemptions Trial and
that prompted him to seek legal representation. App. 81.
Stelzer explained that these legal fees were paid either by the
debtor companies or by the law firm representing the trustee
in a separate but related Chapter 11 proceeding. When asked
whether, as a result of this arrangement, Stelzer had an
“understanding” that he would do something “in exchange for
them paying for [his] fees,” he replied, “[w]ell, if I’m called
for whatever, just to come tell the truth.” App. 80, 82.
As to Stelzer’s contact with Carroll, Dana Katz, a Fox
Rothschild attorney representing Carroll, stated to the
Bankruptcy Judge that Carroll had “never spoken to Mr.
Stelzer outside of trial testimony during the exemptions
proceedings.” App. 61. Stelzer, however, testified that he
and Carroll once had dinner together “long before” Stelzer
testified at the Exemptions Trial. App. 77. According to
Stelzer, they discussed “how [Stelzer’s] life was just in
general,” “general, light conversation,” “[t]he wine [they] had
for dinner,” and “what it was like to work for Mr. Prosser,
Mrs. Prosser, and the children, general, really general
chitchat.” Id. Stelzer testified that he and Carroll did not
discuss Prosser’s hard drives, Prosser’s finances, or the
possibility that Stelzer might later be called to testify in a
future proceeding such as the Exemptions Trial.
Two weeks later, on January 26, 2010, the Prosser
Counsel filed a motion for an evidentiary hearing into what
they labeled an alleged bribery scheme, asserting that Stelzer
gave unfavorable testimony during the Exemptions Trial in
5
exchange for “payment of his attorney fees in multiple
litigations,” App. 181, and that Carroll’s counsel had
misrepresented Carroll’s contacts with Stelzer.1 The District
Court referred the motion to the Bankruptcy Judge on January
29, 2010. That same day, the parties coincidentally appeared
before the Bankruptcy Court to address other matters. During
the January 29, 2010 hearing, the Bankruptcy Court discussed
the Prosser Counsel’s motion for an evidentiary hearing and
suggested it be opened as a “miscellaneous adversary”
proceeding.2
During that hearing, William Stassen, a Fox
Rothschild attorney, addressed the contacts between Carroll
and Stelzer. He informed the Bankruptcy Court that Katz’s
statement that Carroll and Stelzer had never met prior to the
Exemptions Trial was inaccurate and that Carroll had in fact
1
That same day, the Prosser Counsel also filed a
motion to stay trial in the separate adversary proceeding
relating to Prosser’s request for a discharge.
2
“Miscellaneous proceedings” and “adversary actions”
are familiar vehicles for court proceedings, but an amalgam
called a “miscellaneous adversary” is not, and the reference
appears to be simply a misstatement when the Bankruptcy
Court intended to propose the filing of a miscellaneous
proceeding. That conclusion is borne out by the Court’s later
statement in a memorandum opinion that “Prosser was
ordered to file the [motion for a hearing] in the main
bankruptcy case . . . pending in the Bankruptcy Division so
that the Court could open a Miscellaneous Proceeding but
[the Prosser Counsel] filed this Adversary instead.” App. 466
n.2.
6
met Stelzer for dinner before Fox Rothschild became
Carroll’s counsel. Stassen stated:
[W]e will submit to the Court a corrected
statement for the Court’s record. Quite frankly,
Your Honor, Ms. Katz is devastated. I mean,
she’s really upset that she made the
representation to the Court. I can say
emphatically that it was clearly not a knowing
statement with regard to [Carroll] not having
contact with Mr. Stelzer.
App. 596.3 The Bankruptcy Court acknowledged Stassen’s
statement without comment, and the hearing moved on to
other matters.
On January 31, 2010, apparently in response to the
District Court’s referral of their motion for an evidentiary
hearing to the Bankruptcy Court, the Prosser Counsel issued a
press release entitled “HEARING ORDERED ON BRIBERY
SCHEME” in which they stated that Prosser was “the target
of [an] alleged bribery scheme” through which Stelzer was
provided with free legal services “in exchange for his
testimony.” App. 598. The following day, the Prosser
Counsel filed an adversary complaint (the “Adversary
Complaint”) in Bankruptcy Court against Carroll and Fox
Rothschild, among others, on the basis of their “apparent
3
On February 12, 2010, Katz filed a certification with
the Bankruptcy Court to correct the record, stating she had
learned after the deposition that Carroll “had met one time
with Mr. Stelzer prior to his deposition in February 2008.”
App. 109.
7
bribery” of Stelzer. App. 4. The Adversary Complaint
repeated the allegation from their press release that Stelzer
had been provided “free legal services . . . in exchange for his
testimony.” App. 598. It also quoted Stelzer’s deposition
testimony about his dinner with Carroll and asserted that
Carroll was “attempt[ing] to distance [himself] from Mr.
Stelzer,” as shown by his counsel’s statement that he and
Stelzer had never interacted. App. 46. The Adversary
Complaint contended that Fox Rothschild had “violated their
duty of candor to the Court” by failing to report the alleged
bribery scheme. App. 42. It further alleged that Carroll had
failed to report this possible bribery scheme to the United
States Attorney as required under 18 U.S.C. § 3057.4 The
Adversary Complaint sought discovery and a hearing “to
determine whether sanctions, disqualification and/or referral
for further disciplinary proceedings should be imposed.”
App. 3.
The same day the Prosser Counsel filed the Adversary
Complaint, they also filed two objections to Carroll’s and Fox
Rothschild’s quarterly applications for compensation and
reimbursement of expenses (the “Fee Objections”),
contending that “serious questions ha[d] arisen with regard to
the conduct of [Carroll] and/or his [c]ounsel as [were] more
4
This statute provides, in pertinent part, that if a
bankruptcy trustee has “reasonable grounds for believing”
that a violation of federal law “relating to insolvent debtors
. . . has been committed,” the trustee “shall report to the
appropriate United States attorney all the facts and
circumstances of the case, the names of the witnesses and the
offense or offenses believed to have been committed.” 18
U.S.C. § 3057(a).
8
fully detailed in the Adversary Complaint.” App. 249-50.
The following day, February 2, 2010, the Prosser Counsel
filed a motion for a hearing regarding an alleged conflict of
interest between Carroll and his attorneys (the “Conflicts
Motion”) arising from payment of Stelzer’s legal fees from
estate assets in exchange for Stelzer’s testimony. The
Conflicts Motion argued that Stelzer and Carroll’s attorneys
“may have engaged in criminal activity (i.e. bribery).” App.
103.
On March 10, 2010, the Bankruptcy Court dismissed
the motion for an evidentiary hearing underlying the
Adversary Complaint as against Fox Rothschild, holding that,
“[b]ased on the corrections made orally by Fox Rothschild
during the omnibus motions hearing on January 29, 2010 and
in writing thereafter, it is clear that there is no issue in dispute
with regard to the veracity of the representation.” App. 468
(footnote omitted). That same day, the Bankruptcy Court
denied the Conflicts Motion, holding that Carroll was not
represented by conflicted counsel, that no specific conduct
had been identified warranting an evidentiary hearing as to
Carroll, and that the Conflicts Motion was based on Sixth
Amendment law generally applicable only in criminal
proceedings. On March 15, 2010, the Prosser Counsel
voluntarily dismissed the claims embodied in the motion for
an evidentiary hearing as against Carroll individually and
withdrew the Fee Objections.5
5
After the claims against Carroll were dismissed, the
Bankruptcy Court asked the United States Trustee to refer the
allegations to the United States Attorney, but it stated that it
did so only because the allegations were serious, not because
it perceived a factual basis for the bribery accusation. The
9
On April 2, 2010, Carroll moved for legal fees and
expenses against the Prosser Counsel pursuant to 28 U.S.C.
§ 1927, contending that the Adversary Complaint, the Fee
Objections, and the Conflicts Motion “were so patently
meritless that the Court can reach no conclusion other than
that they were vexatiously filed for the purpose of multiplying
the proceedings.” App. 560.
The Bankruptcy Court granted Carroll’s § 1927 motion
against the Prosser Counsel. It found that “the litigation
against Fox Rothschild should never have been initiated,” as
the misstatement that Carroll and Stelzer had never met prior
to the Exemptions Trial “was a mistake, promptly corrected,
and the matter could have been resolved without this suit by a
simple phone call between counsel and the subsequent
corrected statement to the Court.” App. 1609. The
Bankruptcy Court explicitly concluded that the Prosser
Counsel had “unreasonably and vexatiously multiplied
proceedings in bad faith, constituting [a] violation of 28
U.S.C. § 1927[,] by filing” the Adversary Complaint, the Fee
Objections, and the Conflicts Motion, App. 1609,6 and
ultimately awarded Carroll $137,024.02 for the expenses
associated with these filings and related proceedings.7
Bankruptcy Court ultimately decided that referral for a
criminal or disciplinary investigation was unwarranted.
6
Relatedly, the Bankruptcy Court stated at an earlier
hearing in 2010 that it was “delayed from getting to the merits
of particular motions because of all the subsidiary litigation,
most of which seems to not have a great deal of merit.” Supp.
App. 109.
7
In a later opinion and order filed on December 20,
2011, the Bankruptcy Court spent nearly 110 pages
10
The Prosser Counsel appealed the Bankruptcy Court’s
sanctions order to the District Court. On February 14, 2014,
the District Court held that the Bankruptcy Court erred by
imposing sanctions. The District Court held that the
Adversary Complaint and the Fee Objections could not have
“multiplied” the adversary proceedings under § 1927 because
§ 1927 does not apply to a filing that initiates a proceeding,
and the Fee Objections had been filed in the bankruptcy case,
not the adversary proceeding. The District Court also stated
that the Bankruptcy Court had not explained how the Prosser
Counsel’s actions were in bad faith, noting that “the litigation
against Carroll was of limited duration” and that, while some
evidence in the record suggested bad faith, other evidence
suggested the Prosser Counsel’s actions were not a result of
“dilatory or aggressive litigation practices, but rather the
legitimate zeal of attorneys representing their client.” App.
2868. For these reasons, the District Court “vacat[ed] the
Bankruptcy Court’s [orders imposing sanctions] and
remand[ed] this matter for further proceedings consistent with
this Memorandum Opinion.” App. 2869.
exhaustively addressing Prosser’s amended Adversary
Complaint and the request for a referral of bribery allegations
to the United States Attorney. After thoroughly reviewing the
extensive record before it, the Bankruptcy Court dismissed
the claims against the remaining parties and concluded that
disqualification or referral for criminal or disciplinary
investigation were not warranted, as it could “find no
evidence of a bribery scheme,” and while it was troubled by
the use of estate assets to pay for a witness’s counsel without
court approval, it noted that, in general, “there is nothing
improper about a third party paying legal fees for” Stelzer.
App. 2731.
11
On remand, the Bankruptcy Court concluded that,
because the District Court had “found no bad faith” in the
Prosser Counsel’s conduct, “it would be a waste of time to do
anything other than comply with the District Court’s
directions, which [it] read [to] require that, since the
[sanctions] orders have been vacated, that the funds be
returned.” Supp. App. 921. The Bankruptcy Court thereafter
entered an order directing Carroll to release from escrow
sanctions payments that had been made up to that point.
Order, In re: Jeffrey J. Prosser, No. 3:10-ap-03001 (Bankr.
D.V.I. Mar. 18, 2014), ECF No. 424.
Carroll filed his Notice of Appeal on March 14, 2014,
challenging the District Court’s February 14 order.
II
We have jurisdiction over appeals from orders
imposing sanctions pursuant to 28 U.S.C. § 158(d)(1); see In
re Miller, 730 F.3d 198, 202-03 (3d Cir. 2013).8 The
8
The District Court resolved the appeal of the
sanctions order after all other relevant proceedings were
concluded. Thus, even if the appeal was premature when
filed, there were no other relevant matters pending and hence
it was ripe for adjudication by the time the District Court
ruled. Moreover, although the District Court’s order vacated
the Bankruptcy Court’s order imposing sanctions and said it
was remanding for further proceedings, its opinion stated that
it was “revers[ing]” the sanctions decision, App. 2868,
because it found, in essence, that no proceedings had been
multiplied and no facts concerning bad faith had been
12
Bankruptcy Court had jurisdiction pursuant to 28 U.S.C. §
157, and the District Court had jurisdiction to review the
Bankruptcy Court’s order under 28 U.S.C. § 158(a). Our
review requires us to “‘stand in the shoes’ of the District
Court and review the Bankruptcy Court’s decision” to impose
sanctions. In re Pransky, 318 F.3d 536, 542 (3d Cir. 2003)
(quoting In re Krystal Cadillac Oldsmobile GMC Truck, Inc.,
142 F.3d 631, 635 (3d Cir. 1998)). “The imposition or denial
of sanctions is subject to abuse-of-discretion review.” Miller,
730 F.3d at 203. “An abuse of discretion occurs when the
court bases its opinion on a clearly erroneous finding of fact,
an erroneous legal conclusion, or an improper application of
law to fact.” LaSalle Nat’l Bank v. First Conn. Holding Grp.,
established. Because the District Court held that § 1927
sanctions could not apply to the filing of an adversary
complaint and that the facts did not support a finding of bad
faith, the Bankruptcy Court reasonably concluded that the
District Court’s decision left it with only ministerial tasks
relating to the return of sanctions funds that had been placed
in escrow. See Supp. App. 921 (Bankruptcy Court stating: “I
don’t know how I can find differently, even on a remand. So
I agree it would be a waste of time to do anything other than
comply with the District Court’s directions, which I read
require that, since the orders [imposing sanctions] have been
vacated, that the funds be returned.”); see also In re Pransky,
318 F.3d 536, 541 (3d Cir. 2003) (noting bankruptcy court on
remand was not required to do additional fact-finding but
only to perform ministerial mathematical calculations).
Accordingly, because the Bankruptcy Court was required to
perform only ministerial tasks on remand, the order vacating
the sanctions award was a final order. Pransky, 318 F.3d at
540.
13
LLC, 287 F.3d 279, 288 (3d Cir. 2002); see also Pransky, 318
F.3d at 542 (reviewing bankruptcy court’s “findings of fact
for clear error and its legal conclusions de novo”); In re
Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions,
278 F.3d 175, 181 (3d Cir. 2002) (stating that bad faith under
§ 1927 is a finding of fact reviewable for clear error).
III
Section 1927 provides:
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.
28 U.S.C. § 1927. Such “sanctions are intended to deter an
attorney from intentionally and unnecessarily delaying
judicial proceedings, and they are limited to the costs that
result from such delay.” LaSalle, 287 F.3d at 288 (emphasis
omitted). “[C]ourts should exercise this sanctioning power
only in instances of a serious and studied disregard for the
orderly process of justice.” Id. (internal quotation marks and
alteration omitted).
The language and purpose of the statute reflect that
these sanctions are aimed at deterring lawyers’ bad faith
conduct that disrupts the administration of justice by
multiplying proceedings in “any court of the United States.”
14
28 U.S.C. § 1927. A bankruptcy court is a unit of a district
court, and as a result, it may impose § 1927 sanctions. In re
Schaefer Salt Recovery, Inc., 542 F.3d 90, 105 (3d Cir. 2008).
In the bankruptcy context, the proceedings include
adjudication of both the bankruptcy petition and adversary
proceedings, which are “essentially . . . self-contained
trial[s]—still within the original bankruptcy case.” In re
Mansaray-Ruffin, 530 F.3d 230, 234 (3d Cir. 2008); see also
In re TCI Ltd., 769 F.2d 441, 442-44, 449-50 (7th Cir. 1985)
(affirming § 1927 sanctions for filing of baseless amended
complaint in adversary action during bankruptcy). Thus, the
filing of an adversary complaint may multiply the
proceedings in a bankruptcy case, as it can increase the cost
of the entire bankruptcy proceeding of which it is a part.
The District Court incorrectly held that the only
proceeding that could have been multiplied here was the
adversary proceeding. This view both ignores the fact that
the adversary proceeding was only a part of the bankruptcy
case and fails to account for the barrage of other filings the
Prosser Counsel submitted as part of the bankruptcy based on
the very events that served as the basis for the Adversary
Complaint. Thus, the District Court erred in focusing only on
the filing of the Adversary Complaint and holding that such a
filing could not constitute sanctionable conduct under § 1927.
Having concluded that the relevant proceedings
include both the overarching bankruptcy and the associated
adversary proceeding, we next examine whether the
Bankruptcy Court’s imposition of § 1927 sanctions
constituted an abuse of discretion. To impose § 1927
sanctions, a court must “find an attorney has (1) multiplied
proceedings; (2) in an unreasonable and vexatious manner;
15
(3) thereby increasing the cost of the proceedings; and (4)
doing so in bad faith or by intentional misconduct.”
Prudential, 278 F.3d at 188. A court imposing § 1927
sanctions must find bad faith, but that finding need not be
made explicitly. Id. at 189 (“An implicit finding of bad faith
will support sanctions just as well so long as it is not an abuse
of discretion, not based upon clearly erroneous factual
findings, and not based upon an error of law.”); see also
Baker Indus., Inc. v. Cerberus Ltd., 764 F.2d 204, 209 (3d
Cir. 1985) (finding bad faith standard was met “in light of the
entire record and the expressions of the district court judge,
who employed the very words of the statute”). “Indications
of . . . bad faith are findings that the claims advanced were
meritless, that counsel knew or should have known this, and
that the motive for filing the suit was for an improper purpose
such as harassment.” Prudential, 278 F.3d at 188 (internal
quotation marks omitted).
We conclude that the Bankruptcy Court did not abuse
its discretion in imposing sanctions, as its order did not rest
on “a clearly erroneous finding of fact, an erroneous legal
conclusion, or an improper application of law to fact.”
LaSalle, 287 F.3d at 288. Under the clearly erroneous
standard of review, the record supports the Bankruptcy
Court’s finding that the Prosser Counsel had unreasonably
and vexatiously multiplied and increased the cost of the
proceedings in bad faith.9 First, the Prosser Counsel
multiplied the proceedings. The Adversary Complaint,
9
The District Court exceeded its appellate function by
essentially substituting its view of the facts, rather than
reviewing whether the Bankruptcy Court’s factual findings
were unsupported.
16
request for referral to the United States Attorney, Fee
Objections, and Conflicts Motion created new issues for
Carroll and the Bankruptcy Court to address. Second, there is
a basis for concluding that these filings were “unreasonabl[e]
and vexatious[].” Id. These multiple filings were, as the
Prosser Counsel admitted, prompted entirely by Stelzer’s
deposition testimony that a third party was paying his legal
fees and by Katz’s innocent mistake concerning Stelzer’s
contact with Carroll, which was quickly clarified on the
record. As the Bankruptcy Court observed, the Prosser
Counsel could have simply inquired into Stelzer’s fee
arrangement and resolved any confusion regarding his dinner
with Carroll without initiating an adversary proceeding, filing
motions and objections, or alleging a vast bribery scheme.
The Prosser Counsel’s failure to engage in such a reasonable
inquiry to ensure their accusations had a basis in fact
indicates that they engaged in objectively unreasonable
conduct. Furthermore, as the Bankruptcy Court stated in its
opinion declining to refer the matter for criminal or
disciplinary action, the Prosser Counsel’s process in
advancing their bribery allegations was “suspect,” in that they
initially filed the motion for an evidentiary hearing in the
District Court despite the fact that the Bankruptcy Court had
witnessed Stelzer’s deposition and had ordered the parties to
address the issue, and despite the fact that the Prosser Counsel
filed the Adversary Complaint after having reported the issue
to the United States Attorney—part of the very relief they
requested in their complaint. Moreover, they issued press
releases “in an apparent effort to discredit [opposing]
counsel.” App. 2654. Third, the Prosser Counsel’s repeated
filings based on a single fact that did not substantiate the
bribery accusation plainly delayed and increased the cost of
the bankruptcy proceeding, as the parties and the Bankruptcy
17
Court expended significant time and resources addressing
them rather than the merits of the bankruptcy case. Fourth
and finally, although the Bankruptcy Court’s reasons for its
finding of bad faith could have been more explicit, its finding
was supported by both “the entire record” and its use of “the
very words of the statute.” Baker Indus., 764 F.2d at 209.
The Prosser Counsel’s bribery accusations and the
tactics they employed, from the press release to the request
for a referral to law enforcement to the motions, objections,
and Adversary Complaint, all show a desire to read nefarious
motives into a relatively unremarkable event with no proof
that the allegedly bribed witness had been influenced at all.
In light of this record, the Bankruptcy Court’s factual finding
of bad faith was not clearly erroneous, and the Court did not
abuse its discretion by imposing sanctions under § 1927.
IV
For the foregoing reasons, we will reverse the District
Court’s order vacating the Bankruptcy Court’s imposition of
sanctions and remand with instructions that the District Court
reinstate the order imposing them.
18