Allnutt v. Wilcoxson ( 1998 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: FRED W. ALLNUTT, SR.,
Debtor.
FRED W. ALLNUTT, SR.,
Plaintiff-Appellant,
No. 97-2613
v.
STEPHEN L. WILCOXSON,
Defendant-Appellee,
MARK J. FRIEDMAN,
Trustee-Appellee.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
William M. Nickerson, District Judge.
(CA-95-3354-WMN, BK-94-5413)
Submitted: July 7, 1998
Decided: July 16, 1998
Before MURNAGHAN, WILLIAMS, and MOTZ, Circuit Judges.
_________________________________________________________________
Vacated and remanded by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
Lowell Harrison Becraft, Jr., Huntsville, Alabama, for Appellant. Ste-
phen L. Wilcoxson, Mark J. Friedman, Appellees Pro Se.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Fred W. Allnutt, Sr., appeals from the district court's order affirm-
ing the bankruptcy court's order imposing sanctions upon him for fil-
ing the underlying action without substantial justification. See Fed. R.
Bankr. P. 9011. He contends that sanctions pursuant to Rule 9011
cannot be imposed based upon the signing of pleadings in the state
court prior to removal of the action to federal court. We agree and
therefore vacate the district court's order and remand this action to the
district court with instructions to vacate the order imposing sanctions
and to remand the action to the bankruptcy court for further consider-
ation.
Allnutt issued a state court subpoena to Stephen L. Wilcoxson pur-
suant to Maryland Rule 2-404, which allows for the taking of a depo-
sition to perpetuate evidence before a civil action is filed. Allnutt
stated his intent to file an action in the Howard County Circuit Court
for relief with respect to expensive race car assets that were sold in
Allnutt's bankruptcy proceeding.
Wilcoxson removed the "action" from state court to the bankruptcy
court where Allnutt's bankruptcy proceeding was pending. The bank-
ruptcy court found that Allnutt lacked standing to challenge the sale
of assets, quashed the subpoena, denied Allnutt's motion to remand
the case, and dismissed the adversary proceeding. The bankruptcy
court also imposed $5000 in sanctions against Allnutt, finding that he
initiated the state court action without substantial justification and for
the improper purpose of harassment.
The district court initially dismissed his appeal from this order
because Allnutt filed his appeal brief one day late. After this court
vacated the dismissal order and remanded for the district court to
apply the test set forth in In re Serra Builders, Inc., 970 F.2d 1309,
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1311 (4th Cir. 1992), the district court determined that dismissal of
the appeal was not warranted and affirmed the bankruptcy court's
order. Allnutt now appeals, challenging the imposition of sanctions.
Federal Rule of Bankruptcy Procedure 9011 is the bankruptcy
equivalent of Rule 11 of the Federal Rules of Civil Procedure, which
authorizes a court to impose monetary sanctions against parties,
including pro se litigants, who file pleadings that are not well
grounded in fact and warranted by existing law or good faith argu-
ment for extension, modification, or reversal of existing law, or who
file pleadings for improper purposes such as harassment or delay. See
Fed. R. Bankr. P. 9011; Fed. R. Civ. P. 11; In re Kunstler, 914 F.2d
505, 513 (4th Cir. 1990). In deciding cases based on violations of
Rule 9011, courts may look to cases that interpret Fed. R. Civ. P. 11.
See In re Weiss, 111 F.3d 1159, 1170 (4th Cir. 1997), cert. denied,
___ U.S. ___, 66 U.S.L.W. 3171 (U.S. Nov. 3, 1997) (No. 97-366).
A pro se litigant has the same duties under Rule 9011 as an attorney.
See id.However, Rule 11 sanctions cannot be imposed for signing and fil-
ing a pleading in state court, when the action is later removed to fed-
eral court. See Kirby v. Allegheny Beverage Corp., 811 F.2d 253, 256
(4th Cir. 1987). Although sanctions can be imposed based on plead-
ings filed in federal court after the state court action is removed, see
Meadow Ltd. Partnership v. Meadow Farm Partnership , 816 F.2d
970, 970-71 (4th Cir. 1987), the signing of a pleading in a state court
action cannot be the basis for imposition of sanctions pursuant to Rule
11. Kirby, 811 F.2d at 257. In this case, the bankruptcy court imposed
Rule 9011 sanctions on Allnutt "for filing the instant action in the
Howard County Circuit Court without substantial justification." The
bankruptcy court based the sanctions on the initial filing in state court,
rather than on Allnutt's pleadings filed after removal to federal court
in which he continued to prosecute his claims. See Meadow Ltd.
Partnership, 816 F.2d at 970. Under our ruling in Kirby, the bank-
ruptcy court exceeded its authority in imposing the Rule 9011 sanc-
tions based on Allnutt's filing of the action in state court. See Cooter
& Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990) (imposition of
sanctions reviewed for abuse of discretion).
Accordingly we vacate the district court order affirming the bank-
ruptcy court's order imposing sanctions and remand this case to the
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district court for further remand to the bankruptcy court. On remand,
the bankruptcy court should vacate the sanctions imposed under
Bankruptcy Rule 9011 based on Allnutt's pleading filed in state court.
We note that the court may consider whether to impose Rule 9011
sanctions based on Allnutt's post-removal pleadings which sought to
continue to prosecute his claims, see Meadow Ltd. Partnership, 816
F.2d at 970, or to impose sanctions pursuant to the federal courts'
inherent powers. See Chambers v. NASCO, Inc., 501 U.S. 32, 43-44
(1991); Weiss, 111 F.3d at 1171-72; see also In re Heck's Properties,
Inc., 151 B.R. 739, 765 (S.D.W. Va. 1992) ("It is well-recognized,
however, quite apart from Rule 9011, that courts have the inherent
authority to impose sanctions upon [litigants] who [are] found to have
acted in bad faith, vexatiously, wantonly or for oppressive reasons.").
We dispense with oral argument because the facts and legal conten-
tions are adequately presented in the materials before the court and
argument would not aid the decisional process.
VACATED AND REMANDED
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