Opinion
Case No. 20-23359-LMI
2021-11-05
IN RE: MICRON DEVICES, INC., Debtor.
Marc P. Barmat, Robert C. Furr, Esq., Jason S. Rigoli, Esq., Boca Raton, FL, for Trustee. Ariel Rodriguez, Office of the US Trustee, Miami, FL, for U.S. Trustee. David C. Cimo, Esq., Miami, FL, Special Counsel, Pro Se. Julia Kefalinos, Miami, FL, for Debtor.
Marc P. Barmat, Robert C. Furr, Esq., Jason S. Rigoli, Esq., Boca Raton, FL, for Trustee.
Ariel Rodriguez, Office of the US Trustee, Miami, FL, for U.S. Trustee.
David C. Cimo, Esq., Miami, FL, Special Counsel, Pro Se.
Julia Kefalinos, Miami, FL, for Debtor.
ORDER GRANTING MOTION TO SANCTION LAURA PERRYMAN
Laurel M. Isicoff, Chief United States Bankruptcy Judge
This matter came before the Court for hearing on August 11, 2021 (the "Hearing") upon the Motion for Imposition of Monerary [sic] and Non-Monetary Sanctions against Laura Perryman (ECF #482) (the "Trustee's Motion") filed by Tarek Kiem, the Subchapter V Chapter 11 Trustee (the "Trustee"), the Kennedy Lewis Parties’ Joinder to Subchapter V Chapter 11 Trustee's Motion for Imposition of Monetary and Non-Monetary Sanctions against Laura Perryman (ECF #483) (the "Joinder") (collectively, the "Sanction Motions") filed by Kennedy Lewis Investment Management LLC ("KLIM"), KL Acquisition Corporation ("KL Acquisition Corp."), Richard Monje, and David Kho (collectively, the "Kennedy Lewis Parties" and with the Trustee, the "Movants"), and Laura Perryman [sic] Objection to Trustee [sic] Motion for Sanctions and Injunctive Relief (ECF #571) (the "Response") filed by Laura Perryman. The Court, having reviewed the Sanction Motions, the Response, and the notices of fees and costs filed by both the Trustee and the Kennedy Lewis Parties , finds that sanctions, both monetary and non-monetary, are appropriate because throughout the course of this bankruptcy case, Ms. Perryman has repeatedly filed frivolous and baseless pleadings with the Court that were untimely, asserted facts not before the Court, attempted to relitigate issues already decided, and improperly sought relief on behalf of third parties.
See Notice of Filing Itemization of Fees and Costs, Pursuant to Order on Trustee's Motion for Imposition of Monetary and Non-Monetary Sanctions against Laura Perryman ECF No. 550 (ECF #568).
See Notice of Filing Declaration of Stephen Baldini, Esq. as to Excess Fees (ECF #569).
Factual Background
On December 7, 2020 (the "Petition Date"), the Debtor filed a voluntary petition (ECF #1) (the "Petition") for relief under subchapter V of chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Florida. On February 19, 2021, the Court entered an Order to Show Cause Why Debtor Should Not Be Removed as Debtor-In-Possession and Setting Hearing (ECF #180) (the "Order to Show Cause"). The Order to Show Cause noted that there were "disputes as to who is in charge of the Debtor, concerns regarding alleged interference by the co-founder/majority shareholder, and concerns about the majority shareholder taking action ultra vires. " On March 8, 2021, following a hearing, the Court entered an Order Removing the Debtor-in-Possession and Expanding the Powers of Subchapter V Trustee (ECF #206). Subsequently, the Trustee took over operating the business of the Debtor and possession of all property of the Debtor's estate. On April 1, 2021, the Trustee filed Trustee's Motion for Approval of the Settlement Agreement Entered into by the Subchapter V Chapter 11 Trustee, Kennedy Lewis Investment Management, LLC, and Stimwave Technologies Inc . (ECF #234) (the "9019 Motion") which the Court approved , after conducting a two-day trial.
Order Granting Trustee's Motion for Approval of Settlement Agreement (ECF #234) and Approving Settlement Agreement (ECF #393) (the "Approval Order").
The Sanction Motions seek sanctions against Ms. Perryman pursuant to the Court's inherent authority, 11 U.S.C. § 105(a), 28 U.S.C. § 1927, and Rule 9011 of the Federal Rules of Bankruptcy Procedure for the unnecessary expenses incurred by the Trustee and the Kennedy Lewis Parties due to Ms. Perryman's numerous frivolous filings in this case.
The Trustee's Motion also cited to 28 U.S.C. § 1651(a), the All Writs Act, as additional authority for the imposition of sanctions in the form of an injunction. (ECF #482 at ¶19).
The following are examples of Ms. Perryman's filings that were frivolous, untimely, asserted facts not before the Court, attempted to relitigate issues already decided, and/or improperly sought relief on behalf of third parties:
a. Motion to Quash 2004 Exam (ECF #156) (the "Motion to Quash"); withdrawn at (ECF #164);
b. Continuously purporting to act as Debtor's principal after having "resigned"
on February 8, 2021. (See ECF ##160, 161, 175, and Tr. of 2/19/2021 Hearing 13:11-14:3; 24:25-27:3; 30:12-31:2 (ECF #190));
c. Motion to Terminate Arbitration and Enjoin District Court Action (ECF #192), denied because the Court has no jurisdiction over actions that only involve Ms. Perryman, a non-debtor party (ECF #221);
d. Motion for Protective Order (ECF #231) denied because the Motion for Protective Order filed by Ms. Perryman sought relief on behalf of the Debtor (ECF #242);
e. Creditor Laura Perryman Objection to Debtors’ [sic] Motion for Entry of an Order Approving Compromise and Settlement Under Bankruptcy Rule 9019 (ECF #383) (the "Objection to Approval Order") overruled as untimely (it was filed after the conclusion of the evidentiary hearings) and for laying out facts that were never introduced into evidence, although Ms. Perryman and Micron Medical Corporation (represented by counsel at the evidentiary hearing) were given an opportunity to do so (ECF #393) ;
f. Creditor Laura Perryman Motion for Reconsideration of Compromise and Settlement Under Bankruptcy Rule 9019 and Injunctive Relief for Declartory [sic] Judgement [sic] on Perryman 3rd Party Work Product (ECF #405) (the "Motion for Reconsideration"), wherein Ms. Perryman attempted to relitigate numerous issues previously addressed by this Court during the two-day trial on the 9019 Motion and impermissibly sought relief on behalf of third parties. Further, Ms. Perryman alleged, without any basis to do so, that the "Trustee has stolen and refused to return tangible assets of the Creditor and MMC" and "MMC and StimGuard plan to file a stolen property report if these items cannot be returned." (ECF #405, at paras. 5, 24);
g. Ms. Perryman's appeal of the Approval Order (ECF #422) (the "Appeal") only to allow it to be dismissed for not complying with the associated deadlines (ECF #473);
h. Perryman Objection to 3rd Party Asset Inventory Turnover and Injunctive Relief Pending Appeal (ECF #470) which improperly made arguments on behalf of Micron Medical Corporation and was overruled by the Court (ECF #476). The Court warned Ms. Perryman "once again," "that as a non-attorney, she has no authority to represent the interests of third parties, including
Debtor's former counsel alleged "As of February 8, 2021, Ms. Perryman is no longer employed in any capacity by the Debtor... However, since that time, Ms. Perryman continues to hold herself out to the public as an agent of the Debtor. Moreover, since Ms. Perryman's separation from the Debtor she actively interfered with the company's ability to operate and its continued existence." (ECF #175 at para. 6).
At the hearing on the Motion for Protective Order, the Court advised Ms. Perryman: "you only represent yourself. You don't represent the debtor. So if the debtor has concerns regarding discovery, then [the debtor] will raise those objections if and at such time discovery is requested from the debtor." Tr. of 4/7/2021 Hearing 17:7-13 (ECF #292).
The Court is not unsympathetic to Ms. Perryman's loss of her mother during the final moments of the last day of trial, but that situation did not excuse the untimely objection, nor justify the failure to submit evidence, which deadlines all expired prior to the first day of trial.
Micron Medical Corporation." The Court also reminded Ms. Perryman that she is subject to Rule 9011 sanctions;
i. Perryman Motion to Compel Deposition of Tarek Kiem (ECF #467) (the "Motion to Compel") where the Court stated "There is no basis for a motion to compel until Tarek Kiem fails to appear at a properly scheduled and noticed deposition or says he will not appear." (ECF #469);
j. Complaint for Breach of Fiduciary Duty, Aiding and Abetting Breach of Fiduciary Duty, Professional Negligence, Unjust Enrichment, Tortious Interference, Fraudulent Conveyance, and Demand for Jury Trial (Case No. 21-01152-LMI, ECF #1) (the "Perryman Adversary Proceeding"), which improperly sued the Trustee and his counsel including allegations which, on their face, were untrue. ;
k. Plaintiff Perryman's Motion to Withdraw the Reference of Adversary Proceeding Pursuant to 28 U.S.C. § 157(d) ; Memorandum of Points and Authorities (Case No. 21-01152-LMI, ECF #17) (the "Motion to Withdraw the Reference") and then dismissing the adversary proceeding when the Court advised her that, even if the reference was withdrawn, the case would probably stay before the Court unless and until it was ready for trial;
l. Pro Se Motion for Continuance of Hearing (Case No. 21-01152-LMI. ECF #27) (the "Motion to Continue") seeking to continue the hearings on the motions to dismiss the Perryman Adversary Proceeding filed by the Trustee and the Kennedy Lewis Parties to a date after a hearing on Ms. Perryman's Motion to Withdraw the Reference, which the Court denied. See Order Denying Pro Se Motion for Continuance of Hearing (Case No. 21-01152-LMI, ECF #34).
m. Notice of Dismissal Without Prejudice of the Perryman Adversary Proceeding, in which Ms. Perryman alleged this Court has a conflict of interest. (Case No. 21-01152-LMI, ECF #42).
At the June 24, 2021, hearing on the Perryman Objection to 3rd Party Asset Inventory Turnover and Injunctive Relief Pending Appeal (ECF #470), the Court advised Ms. Perryman: "I want you to know that I find that your filing of your objection is a violation of Rule 9011, and I will remind you that you are subject to that same rule, which means that you have to have a good faith basis in law and in fact before you file a pleading before this Court." Tr. of 6/24/2021 Hearing 17:9-14 (ECF #480).
This complaint was ultimately replaced by an Amended ComplaintAmended Complaint for Breach of Fiduciary Duty, Aiding and Abetting Breach of Fiduciary Duty, Professional Negligence, Unjust Enrichment, Tortious Interference, Fraudulent Conveyance, Conspiracy, and Demand for Jury Trial (Case No. 21-01152-LMI, ECF #10).
ANALYSIS
28 U.S.C. § 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.
To allow sanctions pursuant to section 1927, the following three elements must be satisfied: (1) whether Ms. Perryman qualifies as "any attorney or other person admitted to conduct cases," (2) whether this Court is considered "any court of the United States or any Territory thereof," and (3) whether Ms. Perryman has "unreasonably and vexatiously multiplied the proceedings." 28 U.S.C. § 1927.
Although Ms. Perryman is not an attorney, section 1927 sanctions can apply to pro se litigants in the Eleventh Circuit. See In re Ocean 4660 LLC , 569 B.R. 850, 873-74 (Bankr. S.D. Fla. 2017). Thus, the first element is satisfied. Regarding the second element, Ms. Perryman has not challenged this Court's authority to issue section 1927 sanctions. The Court notes, however, that the Eleventh Circuit recently reaffirmed this Court's authority to do so by virtue of its jurisdiction derived from the district court through the order of referral. As to the final, and most critical element, the Eleventh Circuit has held that "an attorney multiplies proceedings ‘unreasonably and vexatiously’ within the meaning of the statute only when the attorney's conduct is so egregious that it is ‘tantamount to bad faith.’ ... And for purposes of § 1927, bad faith turns not on the attorney's subjective intent, but on the attorney's objective conduct." Amlong & Amlong, P.A. v. Denny's, Inc., 500 F.3d 1230, 1239 (11th Cir. 2007).
In re Wizenberg , 838 F. App'x 406, 412 (11th Cir. 2020), noted that since bankruptcy jurisdiction rests in the District Court, and the Bankruptcy Court is exercising the bankruptcy jurisdiction through an order of referral, a bankruptcy court can impose section 1927 sanctions based on that referred authority. In Wizenberg v. Wizenberg, 612 B.R. 454, 459 (S.D. Fla. 2020), Judge Roy Altman held that a bankruptcy court is not a court of the United States and therefore could only recommend sanctions under section 1927 but could not impose them. The Eleventh Circuit upheld Judge Altman's ultimate ruling, but wrote in a footnote (noting the split of authority of the issue) that it declined to opine whether the bankruptcy court is a "court of the United States", since that was not raised as an issue on the appeal.
As the Court detailed above, Ms. Perryman has filed multiple pleadings with this Court since the inception of this case that have led to the unreasonable multiplication of proceedings. The Court finds that procedurally, some of the pleadings filed by Ms. Perryman may have been "proper" – that is, her right to file a motion for reconsideration, her right to file an appeal, and her right to respond to relief sought. However, most of Ms. Perryman's pleadings were not proper. Some pleadings were filed late ; some were filed "too early" ; some were baseless (either already adjudicated or never brought up when it should have been brought up) ; some asserted rights of third parties when told repeatedly she could not do so ; and some were never pursued or were withdrawn. In addition, Ms. Perryman's filing of the complaint in the Perryman Adversary Proceeding was another attempt by Ms. Perryman to raise her objections to the Approval Order and her dismissal of the complaint after finding out that this Court would probably end up keeping the case until at least trial, is further evidence that the filing of the Perryman Adversary Proceeding was objectively done in bad faith.
See supra para. e.
See Motion to Compel where Ms. Perryman sought to compel the Trustee's attendance at a deposition that the Trustee had never stated he would not attend.
See supra paras. e. and f.
See supra paras. e., f. and h.
See supra paras. a., g. and m.
Accordingly, the Court finds Ms. Perryman's pleadings unreasonably multiplied the proceedings in this case and finds it appropriate to impose monetary sanctions against Ms. Perryman under section 1927. Therefore, Ms. Perryman is personally liable for the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct.
Monetary Sanctions
Under section 1927 "the dollar amount of the sanction must bear a financial nexus to the excess proceedings, i.e., the sanction may not exceed the ‘costs, expenses, and attorneys' fees reasonably incurred because of such conduct.’ " Amlong , 500 F.3d at 1239.
At the Hearing, the Court directed the Trustee and the Kennedy Lewis Parties to file an itemization of their fees and costs directly related to Ms. Perryman's conduct, not related to the adversary proceeding. The Trustee seeks monetary sanctions in the total amount of $3,990.00 and the Kennedy Lewis Parties seek monetary sanctions in the total amount of $8,240.00.
The Court will not award any fees or costs arising with respect to the adversary proceeding, because the parties did not request that the Court retain jurisdiction to do so when Ms. Perryman dismissed the proceeding.
In determining to what extent the Court should sanction Ms. Perryman, the Court takes into account that Ms. Perryman purportedly acted at all times pro se. Balanced against that, however, are this Court's multiple, repeated warnings to Ms. Perryman about her frivolous and unfounded filings. The fact that procedurally, as Ms. Perryman argues, she may have had the technical right to file something (e.g. a motion to reconsider, or an appeal), this Court reminded Ms. Perryman that anything she filed was required to be based on law and fact, neither of which was satisfied in virtually anything Ms. Perryman filed.
Without taking away anything from Ms. Perryman's intellectual abilities, which are clearly superior, the Court finds it hard to believe that Ms. Perryman prepared the vast majority of pleadings she has filed without the assistance of counsel. However, for purposes of this Court's decision, the Court will accept Ms. Perryman's repeated assurances that everything she submitted was done solely by her efforts.
Within these frameworks, the Court has reviewed the fee statements filed by each of the Trustee and the Kennedy Lewis Parties. The Court notes that the Movants have only sought fees for certain of the many problematic filings by Ms. Perryman. The Court also notes that the Trustee is not seeking any compensation for the time he had to spend dealing with Ms. Perryman's actions but only for his counsel's time. The Court finds that the fees requested by Trustee's counsel in the amount of $3,990.00 is reasonable. The Court finds that the fees of the Kennedy Lewis Parties need to be reduced by $3,075.00 – 1.5 hours of Ms. Presa's time and 1.0 hour of Mr. Baldini's time. While the Court appreciates that the Kennedy Lewis Parties wanted two lawyers and able local counsel to be involved in all aspects of this case, that is not a cost that is appropriate to fully shift to Ms. Perryman. The Court is deducting the cost of Ms. Presa's attendance at the Motion for Reconsideration hearing and an additional .5 relating to Ms. Presa's review, along with Mr. Baldini of the two pleadings for which recovery is sought. The Court is deducting an hour of Mr. Baldini's time to reflect adjustment for the same overlapping review. Therefore, the Court finds that Ms. Perryman is responsible for monetary sanctions in the amount of $5,165.00 to the Kennedy Lewis Parties, and $3,990.00 to the estate for the additional fees incurred by the Trustee's counsel.
Reasonableness of the fees is measured in accordance with the criteria set forth in Johnson v. Georgia Highway Exp., 488 F.2d 714 (5th Cir. 1974) as reaffirmed in Norman v. Housing Authority of the City of Montgomery, 836 F.2d 1292 (11th Cir. 1988). In re Lyubarsky, 615 B.R. 924, 934 (Bankr. S.D. Fla. 2020). Those factors are (i) the time and labor involved; (ii) the novelty and difficulty of the questions; (iii) the skill requisite to perform the legal service properly; (iv) the preclusion of other employment by the attorney due to acceptance of the case; (v) the customary fee; (vi) whether the fee is fixed or contingent; (vii) time limitations imposed by the client or the circumstances; (viii) the amount involved and the results obtained; (ix) the experience, reputation, and ability of the attorneys; (x) the "undesirability" of the case; (xi) the nature and length of the professional relationship with the client; and (xii) awards in similar cases.
Injunctive Relief
The Court now addresses the Movants’ request for injunctive relief. The Court has authority to enjoin Ms. Perryman from future filings with the Court pursuant to its inherent authority, under section 105 and under Rule 9011. "Federal courts, including bankruptcy courts, possess inherent authority to impose sanctions." In re Evergreen Sec., Ltd. , 570 F.3d 1257, 1263 (11th Cir. 2009). "This power is derived from the court's need to manage [its] own affairs so as to achieve the orderly and expeditious disposition of cases." Id. (internal citations omitted). "To impose sanctions under the court's inherent power, the court must find bad faith." Id. at 1273. "A finding of bad faith is warranted where an attorney knowingly or recklessly raises a frivolous argument .... A party also demonstrates bad faith by delaying or disrupting the litigation .... Further, continually advancing ‘groundless and patently frivolous litigation’ is ‘tantamount to bad faith.’ " Id. at 1273-74 (internal citations omitted).
Under Section 105, the court may take any action "necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process." 11 U.S.C. § 105(a).
The Eleventh Circuit has held that the inherent authority to sanction includes pre-filing restrictions such as enjoining future filings without leave of the court. See Martin-Trigona v. Shaw , 986 F.2d 1384, 1386-87 (11th Cir. 1993) ; Riccard v. Prudential Ins. Co. , 307 F.3d 1277 (11th Cir. 2002). This Court is familiar with such pre-filing restrictions.
See Order Setting Forth the Conditions for Barbara Stone Pro Se Filings in Case No. 20-01071-LMI at ECF #52.
This Court has warned Ms. Perryman repeatedly regarding her filing of baseless pleadings, raising issues already adjudicated, and raising arguments on behalf of third parties. Accordingly, this Court finds that injunctive relief is warranted as Ms. Perryman demonstrated bad faith by delaying the litigation in this case by continuously advancing groundless arguments, despite the Court's warnings of possible sanctions.
CONCLUSION
The record in this case is clear, Ms. Perryman multiplied these proceedings, dragging them on for longer than they should have taken, in a completely unreasonable, vexatious, and nonsensical manner. Accordingly, for the reasons set forth above, and based on the record, it is
ORDERED :
1. The Sanction Motions are GRANTED.
2. Monetary sanctions in the amount of $3,990.00 are awarded to the Trustee.
3. Monetary sanctions in the amount of $5,165.00 are awarded to the Kennedy Lewis Parties.
4. Ms. Perryman will have 45 days from the date of this Order to make the payments described in paragraphs 2 and 3.
5. The following procedures shall apply to any document that Ms. Perryman seeks to file with this Court, unless the filings are done on her behalf by an attorney admitted to this Court:
a. To obtain leave to make a filing, Ms. Perryman shall submit to the Court a "Motion For Leave to File" which will be a short summary of the proposed filing that:
i. Shall be double-spaced and printed in 12-point or larger type in an easily readable font;
ii. Shall not exceed two pages in length;
iii. Shall be styled as "Motion for Leave to File";
iv. Shall briefly (a) state that she seeks the Court's approval to make a particular filing, (b) explain the legal purpose or basis of the pleading, and (c) describe the nature of the pleading with specificity; and
v. Shall be delivered by e-mail to the Court at: flsb-emergency-filings@flsb.uscourts.gov.
b. The Court will review such submissions in chambers and, if appropriate, enter an order denying the request, granting it, or scheduling the matter for hearing, depending on the circumstances and the Court's conclusions;
c. Grounds for denying Ms. Perryman leave to make a proposed filing include, but are not limited to, filings that are deemed to be repetitive, duplicative, vexatious, incoherent, and/or pertaining to issues already decided by the Court;
d. In its discretion, the Court may (a) order Ms. Perryman to mail a copy of the proposed filing to her chambers for further review, (b) order any interested party to show cause as to why the Ms. Perryman should not be permitted to make a proposed filing, and/or (c) grant in part and deny in part leave to make a proposed filing;
e. Any violations of this Order may result in further sanctions.
See Barash v. Kates , 586 F. Supp. 2d 1323, 1331 (S.D. Fla. 2008).
See In re Dicks, 306 B.R. 700, 708 (Bankr. M.D. Fla. 2004).