United States Bankruptcy Appellate Panel of the Sixth Circuit
In re: Linda J. Lane, Debtor.
Linda J. Lane, Appellee. Sarah Dean; Kevin Dean, Appellants,
from the United States Bankruptcy Court for the Western
District of Kentucky at Louisville. No. 3:17-bk-32237-Joan A.
C. Bordy, SEILLER WATERMAN, LLC, Louisville, Kentucky, for
Dean, Sarah Dean, Mount Washington, Kentucky, pro se.
Before: BUCHANAN, DALES, and WISE, Bankruptcy Appellate Panel
W. DALES, BANKRUPTCY APPELLATE PANEL JUDGE.
appellants in this case, Sarah and Kevin Dean (the
"Deans" or the "Appellants"), by two
separate appeals challenge the orders of the Bankruptcy Court
for the Western District of Kentucky ("Bankruptcy
Court") finding them in contempt and issuing sanctions,
as well as orders denying motions for reconsideration. The
current appeal is just the latest in a series of appeals
emanating from the chapter 13 bankruptcy case of Linda J.
Lane (the "Debtor" or "Appellee"), which
has turned out to be an especially vexing proceeding for the
parties and the courts.
their Appellants' Designations of Record and Statements
of Issues to be Presented on Appeal, the Deans list numerous
issues on appeal. Many of the issues they did not address in
their briefing; other issues are not fully developed on
appeal or are unrelated to the orders that are currently
before the Panel. As to these unbriefed or underdeveloped
issues, the Panel will not address them because "[i]t is
well-established that issues adverted to in a perfunctory
manner, unaccompanied by some effort at developed
argumentation, are deemed waived." Church Joint
Venture, L.P. v. Bedwell (In re Blasingame),
598 B.R. 864, 874 (B.A.P. 6th Cir. 2019) (quoting Dillery
v. City of Sandusky, 398 F.3d 562, 569 (6th Cir. 2005)
(internal quotation marks and citations omitted)). In each
appeal, the Panel has fully considered the salient issue,
that is, whether the Bankruptcy Court erred in imposing
sanctions against the Deans.
AND STANDARD OF REVIEW
Bankruptcy Appellate Panel of the Sixth Circuit
("BAP" or the "Panel") has jurisdiction
to decide this appeal. The United States District Court for
the Western District of Kentucky has authorized appeals to
the Panel, and the parties did not elect to have this appeal
heard by the district court. 28 U.S.C. §§
158(b)(6), (c)(1). A final order of the bankruptcy court may
be appealed as of right pursuant to 28 U.S.C. §
158(a)(1). The Bankruptcy Court's order imposing
sanctions is a final, appealable order. See In re
Martin, 474 B.R. 789 (table), 2012 WL 907090, at *1
(B.A.P. 6th Cir. Mar. 7, 2012); see also B-Line, LLC v.
Wingerter (In re Wingerter), 594 F.3d 931, 936
(6th Cir. 2010). "An order imposing [Federal] Rule [of
Bankruptcy Procedure] 9011 sanctions is only final upon
assessment of fees and expenses." Hoover v.
Jones (In re Jones), 546 B.R. 12, 15 (B.A.P.
6th Cir. 2016). The Bankruptcy Court's order denying the
Appellants' motions for reconsideration is also a final,
appealable order. Hamerly v. Fifth Third Mortg. Co.
(In re J & M Salupo Dev. Co.), 388 B.R. 795, 800
(B.A.P. 6th Cir. 2008). The Panel reviews a bankruptcy
court's imposition of sanctions for abuse of discretion.
Wingerter, 594 F.3d at 936. Likewise, "[t]he
denial of a motion for reconsideration is reviewed for abuse
of discretion." In re Burrage, 464 B.R.
61(table), 2011 WL 6155716, at *1 (B.A.P. 6th Cir. Nov. 18,
2011). The Panel will find an abuse of discretion when, after
careful review, it has a "definite and firm conviction
that the [court below] committed a clear error of
judgment." Mayor and City Council of Baltimore, Md.
v. W.Va. (In re Eagle-Picher Indus., Inc.), 285
F.3d 522, 529 (6th Cir. 2002) (internal quotation marks and
Panel has elaborated on this standard of review in the
sanctions context as follows:
Sanctions based upon an erroneous view of the law or an
erroneous assessment of the evidence are necessarily an abuse
of discretion. Cooter & Gell v. Hartmarx Corp.,
496 U.S. 384, 405, 110 S.Ct. 2447, 2461, 110 L.Ed.2d 359
(1990); Salkil v. Mount Sterling Tp. Police Dept.,
458 F.3d 520, 527-28 (6th Cir. 2006). See also Parrott v.
Corley, 266 Fed.Appx. 412, 415 n.1 (6th Cir. 2008)
(arguments concerning an error in statutory interpretation or
due process related to sanctions are reviewed de novo).
Montedonico v. Blasingame (In re
Blasingame), 559 B.R. 676, 679 (B.A.P. 6th Cir. 2016),
aff'd, 709 Fed.Appx. 363 (6th Cir. 2018)
(quoting In re Royal Manor Mgmt., Inc., 525 B.R.
338, 346 (B.A.P. 6th Cir. 2015), aff'd sub nom.
Grossman v. Wehrle (In re Royal Manor Mgmt.,
Inc.), 652 Fed.Appx. 330 (6th Cir. 2016)). Nevertheless,
"[t]he abuse of discretion must be more than harmless
error to provide cause for reversal. Tompkin v. Philip
Morris USA, Inc., 362 F.3d 882, 897 (6th Cir. 2004)
(citations omitted)." Id. at 679.
this recent guidance in mind, the Panel turns to the merits
of the current appeals.
2014, the Debtor sold her home to the Deans. After the
closing, the Deans discovered mold in the basement. The
parties agreed to arbitration, and ultimately the arbitrator
awarded the Deans $28, 172.99, plus attorney fees of $98,
722.58. The Bullitt County Circuit Court confirmed the
arbitration award and entered a judgment against the Debtor
for $126, 895.57. The Deans then filed a judgment lien
against the Debtor's current residence.
14, 2017, the Debtor filed a chapter 13 bankruptcy petition
in the Western District of Kentucky. She listed the Deans on
Schedule D of her petition as secured creditors and the Deans
filed Proof of Claim No. 2.
Deans, through counsel, initially objected to the
Debtor's proposed chapter 13 plan. At the hearing on the
objection, however, the parties agreed that the only
unresolved issue was the interest rate on the Deans'
claim. Following the hearing, the Bankruptcy Court issued an
order setting the rate at 4.25%. The Bankruptcy Court
confirmed the Debtor's chapter 13 plan (the
"Plan"), and the Debtor is paying the Deans'
claim in full, with interest, over the term of the Plan.
October 13, 2017, the Deans filed a complaint against the
Debtor, commencing Adversary Proceeding No. 17-03062. In that
adversary proceeding, the Deans claimed damages of $300, 000
for Sarah Dean's respiratory problems allegedly
attributable to mold contamination. The Deans requested a
finding that the damages be declared non-dischargeable. The
Bankruptcy Court later dismissed the Adversary Proceeding,
and the Deans did not appeal from the dismissal order.
on November 2, 2017, shortly after the entry of the order
confirming the Debtor's Plan, the Deans filed a motion to
dismiss the Debtor's bankruptcy case. The Debtor
objected, and on February 5, 2018, the Bankruptcy Court
entered a Memorandum Opinion denying the motion to dismiss.
The Deans timely filed a notice of appeal from that order,
but the BAP dismissed that appeal for lack of jurisdiction,
concluding that the order declining to dismiss the
Debtor's bankruptcy case was not a final order. Dean
v. Lane (In re Lane), 598 B.R. 595 (B.A.P. 6th
Cir. 2019) ("BAP Case 18-8005").
March 2, 2018, while the appeal in BAP Case 18-8005 was still
pending, the Debtor sent the Deans a letter offering a
proposed payout of her claim ("Settlement Letter").
The Settlement Letter explained that it was not admissible as
evidence pursuant to Federal Rule of Evidence 408 ("Rule
408"). Nonetheless, the Deans immediately filed the
Settlement Letter on the docket, unaccompanied by any other
pleading or explanation of the purpose of the filing. The
Deans then designated the Settlement Letter as part of the
record on appeal in BAP Case 18-8005, which was still
April 13, 2018, the Debtor filed a motion for sanctions
against the Deans, her first such motion (Mot. for Sanctions,
Case No. 17-32237 ECF No. 62 (the "First Sanctions
Motion")).The First Sanctions Motion asserted the
Deans had violated Federal Rule of Bankruptcy Procedure 9011
("Rule 9011") and Rule 408 by filing the Settlement
Letter. On May 3, 2018, the Debtor also filed a motion to
strike the Settlement Letter (the "Motion to
Strike," ECF No. 74). The Deans filed a combined
objection to both the First Sanctions Motion and Motion to
Strike on May 14, 2018.
August 3, 2018, the Bankruptcy Court entered an opinion and
order granting the Debtor's motions. (ECF No. 97 (the
"First Sanctions Opinion").) The Bankruptcy Court
ordered the Settlement Letter stricken from the record,
sanctioned the Deans $5, 000 (payable to the Bankruptcy
Court), and awarded the Debtor attorney fees as part of the
sanction. The Deans filed a motion to alter or amend, which
the Bankruptcy Court denied, then filed a timely notice of
appeal and an amended notice of appeal seeking review of the
orders. The Panel docketed the appeal as BAP Case 18-8038.
the controversy surrounding their filing of the Settlement
Letter was simmering, the Deans filed another complaint
against the Debtor, commencing Adversary Proceeding No.
18-03022, through which they sought revocation of the order
confirming the Plan pursuant to 11 U.S.C. § 1330(a). On
May 14, 2018, the Debtor moved to dismiss the complaint in
the second adversary proceeding for failure to state a claim,
arguing that it raised substantially the same issues that the
confirmation order resolved or foreclosed by operation of
law. Three days later, on May 17, 2018, the Debtor filed a
second sanctions motion, asserting the Deans "have made
a habit of filing lengthy-meritless pleadings as a means to
harass [the Debtor] and have needlessly increased the cost of
this proceeding." (Mot. for Sanctions at 3, ECF No. 81
(the "Second Sanctions Motion").) On August 22,
2018, the Bankruptcy Court entered a memorandum opinion and
order granting the Debtor's motion to dismiss the second
adversary proceeding with prejudice. The Bankruptcy Court
found the issues raised in the second adversary complaint
repeated the Deans' previous objections to the
Debtor's chapter 13 Plan and therefore failed to state a
claim upon which relief could be granted.
September 4, 2018, the Bankruptcy Court entered a memorandum
opinion on the Second Sanctions Motion but did not set the
amount of sanctions. (ECF No. 110 (the "Second Sanctions
Opinion").) On September 14, 2018, the Deans filed a
motion for reconsideration of the second set of sanctions.
The Bankruptcy Court denied the reconsideration motion on
September 18, 2018. Nine days later, the Bankruptcy Court
entered an order requiring the Deans to pay the Debtor $2,
641 in attorney's fees for their filing of the frivolous
adversary proceeding. The Deans timely filed a notice of
appeal from this second sanctions order on October 9, 2018.
The Panel docketed the appeal as BAP Case 18-8040.
BAP Case No. 18-8038
that the Deans filed the Settlement Letter for an improper
purpose, the Bankruptcy Court granted the Debtor's First
Sanctions Motion pursuant to Rule 9011. Federal Rule of Civil
Procedure 11, made applicable to bankruptcy proceedings by
Rule 9011, provides, in part:
(b) Representations to the Court. By presenting to the court
(whether by signing, filing, submitting, or later advocating)
a petition, pleading, written motion, or other paper, an
attorney or unrepresented party is certifying that to the
best of the person's knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances,
(1) it is not being presented for any improper purpose, such
as to harass or to cause unnecessary delay or needless