Krim v. First City Bancorp ( 2002 )


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  •                  IN THE UNITED STATES COURT OF APPEALS
                             FOR THE FIFTH CIRCUIT
                             _____________________
    
                                  No. 01-10491
                             _____________________
    
    In The Matter Of: FIRST CITY BANCORPORATION OF TEXAS INC.,
    
                                                                        Debtor.
    
    JERRY KRIM; HAROLD L. HARRIS, Individually and as Trustee of Mazel
    Inc. Profit Sharing Plan; GROUP OF SECURITIES LITIGATION CLAIMANTS;
    HARVEY GREENFIELD,
    
                                                                     Appellants,
    
                                     versus
    
    FIRST CITY BANCORPORATION OF TEXAS INC.,
                                                                       Appellee.
    
    _________________________________________________________________
    
                  Appeal from the United States District Court
                       for the Northern District of Texas
    
    
                                  March 5, 2002
    
    Before JOLLY, SMITH, and BENAVIDES, Circuit Judges.
    
    PER CURIAM:
    
         After listening to the oral arguments of the parties and
    
    closely examining the record, we conclude that the sanctioned
    
    lawyer   in    this   case,   Harvey       Greenfield,   was   appropriately
    
    sanctioned by the bankruptcy court.             His attitude and remarks
    
    toward opposing attorneys, opposing parties, and the bankruptcy
    
    court were -- to understate his conduct -- obnoxious.               Although
    
    incivility in and of itself is call for concern, what is most
    
    
    
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    disconcerting here is the rationale Greenfield gives for his
    
    behavior.        Greenfield asserts that his deplorable and wholly
    
    unprofessional        conduct      helps    him      recover        more    money    for   his
    
    clients. Unremorsefully and brazenly, Greenfield contends that his
    
    egregious behavior serves him well in settlement negotiations and
    
    is therefore appropriate.               Because we find that the bankruptcy
    
    court did not abuse its discretion when it issued sanctions in this
    
    case,    we    affirm     the    district      court’s        judgment      affirming      the
    
    bankruptcy court’s sanction order.
    
                                                   I
    
           In 1990, Jerry Krim, Harold L. Harris, and several other
    
    claimants       filed     a     class    action           lawsuit    against        FirstCity
    
    Bancorporation       of    Texas    Inc.       (“FirstCity”),         its    officers      and
    
    directors, and Donaldson, Lufkin & Jenrette Securities Corporation.
    
    Greenfield represented the plaintiff class.                         In 1992, the parties
    
    reached a $20 million dollar settlement.                     The settlement, however,
    
    was set aside when federal regulators seized control of FirstCity’s
    
    assets.       FirstCity then filed a bankruptcy petition under Chapter
    
    11.     Greenfield pursued the claims of the plaintiff class in
    
    bankruptcy, reaching a settlement agreement with FirstCity for over
    
    $10    million      in   cash    and    stock.        FirstCity       incorporated         this
    
    settlement agreement into its Joint Plan for Reorganization.
    
           FirstCity then filed a motion to sanction Greenfield, based in
    
    part    on    his   conduct     during     a       July    13,   1995      deposition      when
    
    
    
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    Greenfield deposed A. Robert Abboud, a director of FirstCity and a
    
    claimant in bankruptcy for indemnification of legal expenses.
    
    Abboud was represented by Hyman Schaffer.
    
         One day before the deposition, the bankruptcy judge conducted
    
    a telephone conference with Schaffer, Greenfield, and Kenneth
    
    Carroll (counsel for FirstCity Liquidating Trust).             During this
    
    hearing, the bankruptcy court directed the parties to restrict the
    
    deposition to issues pertinent to Abboud’s indemnification claim.
    
    The bankruptcy court also denied Greenfield’s motion for leave to
    
    refer to a confidential report compiled by Baker & Botts for the
    
    audit committee at FirstCity.     Finally, the bankruptcy court urged
    
    Greenfield not to engage in personal attacks during the deposition.
    
         At the deposition, in apparent defiance of the bankruptcy
    
    court’s order, Greenfield used the Baker & Botts report in the
    
    questioning of Abboud.       Also during the deposition, the parties
    
    continued to disagree about the proper scope of the deposition
    
    inquiry.    So, they again went to bankruptcy court to clarify the
    
    exact issues to be covered at the deposition.            At this second
    
    telephone   hearing,   the   bankruptcy   court   once   more    cautioned
    
    Greenfield to refrain from personal attacks.
    
         Despite   these   multiple    warnings,   during    the    deposition
    
    Greenfield stated that “I am going to have Mr. Abboud indicted.”
    
    He also accused Schaffer of having been fired from Sullivan and
    
    Cromwell.
    
    
    
                                        3
         Greenfield’s obnoxious behavior, however, was not limited to
    
    Abboud’s   deposition.     Some    of    the   other   statements   made   by
    
    Greenfield during the bankruptcy proceeding            -- noted by both the
    
    district court and the bankruptcy court -- are the following:
    
    
    !    He characterized other attorneys, including an Assistant
         United States Attorney, as (1) a “stooge”; (2) a “puppet”; (3)
         a “weak pussyfooting ‘deadhead’” who “had been ‘dead’ mentally
         for ten years”; (4) “various incompetents”; (5)“inept”; (6)
         “clunks”; (7) “falling all over themselves, and wasting
         endless hours”; (8) “a bunch of starving slobs”; and (6) an
         “underling who graduated from a 29th-tier law school.”
    
    !    He called the chairman of FirstCity a “hayseed” and a “washed-
         up has been,” and he also called other FirstCity directors
         “scoundrels.”
    
    !    He referred to one law firm, Carrington, Coleman, Sloman &
         Blumenthal, L.L.P. as “stooges” of another law firm, Vinson &
         Elkins, L.L.P.
    
    !    He referred to the work of other attorneys as “garbage” that
         demonstrated “legal incompetence” while involving “ludicrous
         additional time and expense.”
    
    !    He asserted that Vinson & Elkins was using FirstCity as a
         “private piggybank.”
    
    !    He described an executive compensation plan approved by the
         bankruptcy court as a “bribe.”
    
         The   bankruptcy    court   found   that   Greenfield’s    “egregious,
    
    obnoxious, and insulting behavior ... constituted an unwarranted
    
    imposition upon and an affront to [the bankruptcy court] and the
    
    parties and practitioners who have appeared in this bankruptcy that
    
    should not have to be endured in the future.”             Accordingly, the
    
    bankruptcy court imposed a monetary sanction of $22,500 and barred
    
    Greenfield from practicing in the bankruptcy courts of the Northern
    
    
                                         4
    District of Texas unless he first obtained written permission from
    
    the court.
    
         Greenfield appealed the sanction order to the district court.
    
    Meanwhile, in an unrelated appeal that involved sanctions against
    
    Greenfield for not conducting a reasonable inquiry into the facts
    
    before filing a pleading, we reversed the sanctions.               Krim v.
    
    BancTexas Group, Inc., 
    99 F.3d 775
     (5th Cir. 1996).          In the light
    
    of this decision, the district court remanded the case to the
    
    bankruptcy court for reconsideration.
    
         On remand, the bankruptcy court removed the sanction that
    
    barred   Greenfield   from   practicing   in    the   Northern   District’s
    
    bankruptcy   courts   but    maintained   the   monetary   penalty.      In
    
    addition, the court increased the penalty by $2,500 “in light of
    
    the other findings and conclusions and because Mr. Greenfield filed
    
    a motion seeking to have this Court lift all sanctions against him
    
    ... and therefore caused counsel for FirstCity Liquidating Trust,
    
    A. Robert Abboud, and Mr. Schaffer to devote time in appearing and
    
    responding to that motion....”
    
         Greenfield appealed to the district court, which affirmed.
    
    Greenfield now appeals the district court’s decision.
    
    
                                       II
    
         We review the bankruptcy court's findings of fact under the
    
    clearly erroneous standard and decide issues of law de novo.
    
    Henderson v. Belknap (In re Henderson), 
    18 F.3d 1305
    , 1307 (5th
    
    
                                        5
    Cir. 1994), cert. denied, 
    513 U.S. 1014
     (1994). The imposition of
    
    sanctions is discretionary -- thus, we review the exercise of this
    
    power for abuse of discretion. Matter of Terrebonne Fuel and Lube,
    
    Inc., 
    108 F.3d 609
    , 613 (5th Cir. 1997).           “A court abuses its
    
    discretion when its ruling is based on an erroneous view of the law
    
    or on a clearly erroneous assessment of the evidence.”            Chavez v.
    
    M/V Medina Star, 
    47 F.3d 153
    , 156 (5th Cir. 1995).                A court,
    
    however, should exercise restraint when considering using its
    
    inherent power to impose sanctions.       Id.
    
         In the instant case, the bankruptcy court assessed sanctions
    
    pursuant to (1) Rule 9011 of the Federal Bankruptcy Rules of
    
    Procedure and (2) its inherent authority to police practitioners
    
    before it.
    
         Greenfield   does    not   dispute   the   factual   basis     of   the
    
    bankruptcy court’s sanction order.        He thus concedes that he made
    
    the myriad rude and insulting comments outlined above.        Greenfield
    
    defends his comments in two ways.          First, he argues that the
    
    statements he made were, for the most part, correct.        We find this
    
    argument utterly meritless.        Greenfield was never engaged in
    
    stating plain facts -- he was engaged in hurling gratuitous and
    
    hyperbolic insults.      Second, Greenfield argues that the actions of
    
    both the court and the opposing attorneys caused his abusive
    
    conduct.   Obviously, any error on the part of the court or motive
    
    on the part of opposing attorneys in filing the sanction motion did
    
    
    
                                        6
    not give Greenfield carte blanche to launch personal attacks and to
    
    defy the court’s directive to cease his wholly unprofessional
    
    conduct.
    
         The only cognizable argument Greenfield makes is that the
    
    sanction imposed was unduly harsh.              Sanctions must be chosen to
    
    employ “the least possible power to the end proposed.”              Spallone v.
    
    United States, 
    493 U.S. 265
    , 280 (1990)(quoting Anderson v. Dunn,
    
    
    6 Wheat. 204
    , 231 (1821)).          In other words, the sanctioning court
    
    must use the least restrictive sanction necessary to deter the
    
    inappropriate behavior.            Here, the bankruptcy court repeatedly
    
    urged Greenfield not to engage in personal attacks.                  He did not
    
    respond    to    either    the   oral    or   the   written   warnings    of   the
    
    bankruptcy court.         We therefore hold that the bankruptcy court did
    
    not abuse       its   discretion    by   imposing    a   sanction   of   $25,000.
    
    Accordingly, the district court judgment affirming the bankruptcy
    
    court is
    
    
    
                                                                         AFFIRMED.
    
    
    
    
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