Opinion
Case No. 11-20061-TPA Adv. No. 11-2197 Doc. No. 52
09-13-2011
In re: MICHAEL A. RODGERS and SHEILA B. RODGERS, Debtors MICHAEL A. RODGERS and SHEILA B. RODGERS, Plaintiffs, v. EMC MORTGAGE CORPORATION, Defendant.
ORDER
On September 8, 2011, the Defendant filed its Answer, Affirmative Defenses, and Counterclaim, Document No. 52. The Counterclaim portion of this pleading makes the allegation that the Second Amended Complaint "sets forth no more than a frivolous claim" and charges that the Debtors have done little to prosecute the action or engage in discovery, thereby prolonging both this adversary proceeding and the underlying bankruptcy case. See Counterclaim at ¶¶11, 13. The Counterclaim asks that the Court order that the Debtors and their attorney pay costs and attorney fees to the Defendant as a sanction pursuant to 11 U.S.C. §105(a). While the Court is sympathetic with the view that litigation should be both merit-based and conducted expeditiously, it is also sensitive to tactics that smack more of an effort to intimidate than anything else. In this instance and at this juncture, the Court finds that the Counterclaim has come dangerously close to that point, if not gone beyond it. Therefore for the reasons that follow, it will be stricken.
In the first instance it appears to the Court that, if there is merit to the contentions made by the Defendant, the proper vehicle for imposing sanctions would be under Fed.R.Bankr.P. 9011, or possibly 28 U.S.C. §1927, rather than under Section 105(a). Rule 9011 makes clear that by signing a pleading an attorney represents that it is not being filed for an improper purpose such as harassment or delay, and is not frivolous. Sanctions can be awarded thereunder for violations of those duties. Section 1927 authorizes a court to impose sanctions against an attorney for "unreasonably and vexatiously" multiplying the proceedings in a case.
Given the availability of these specific and tailored remedies for just the sort of conduct the Defendant is alleging, the Court sees no reason to resort to Section 105(a). See In re Hill, 437 B.R. 503, 530 n.21 (Bankr. W.D. Pa. 2010) (court would not consider using its inherent power or Section 105(a) to impose sanctions when Rule 9011 was available for that purpose). This conclusion is further strengthened by In re Joubert, 411 F.3d 452 (3d Cir. 2005), wherein the court held that Section 105(a) has a limited scope and does not create substantive rights that would otherwise be unavailable under the Bankruptcy Code.
Practice under Rule 9011 is by motion, with certain well-defined procedural requirements, such as a 21-day waiting period after the motion is filed to allow the responding party an opportunity to voluntarily take remedial action. See Rule 9011(c)(1)(A); Kraus Indus., Inc. v. Moore, 2007 WL 2744194 *10 (W.D. Pa. 2007). This procedure cannot be circumvented by filing the matter as a counterclaim. See, e.g., Stark v. Gov't Accounting Solutions, Inc., 2008 WL 4683289 (S.D. Ohio 2008), Nolen v. Henderson Nat'l Corp., 986 F.2d 1428 (10th Cir. 1993). Furthermore, Rule 9011 was not intended to create a bad faith tort in favor of a party who has been subjected to harassing or vexatious litigation. See, Lenoir v. Tannehill, 660 F. Supp. 42, 44 (S.D. Miss. 1986). Section 1927 likewise does not create a separate and distinct cause of action, so it too requires the proponent to proceed by motion rather than by counterclaim. Kraus Indus., supra. Thus, the Court finds that if the Defendant wishes to pursue a remedy of sanctions in this case it should do so by motion under Rule 9011 or Section 1927.
Moreover, even if the Court were inclined to consider exercising its authority pursuant to 11 U.S.C. §105(a), a counterclaim would not be a prerequisite for doing so. See, e.g., In re Bennett, 298 F.3d 1059 (9th Cir. 2002) (citing Fed.R.Civ.P. 54(c)). The Defendant therefore remains free to try, by motion, to persuade the Court to act under that provision.
For the foregoing reasons, the Court will sua sponte strike the Counterclaim pursuant to Fed.R.Bankr.P. 7012(f)(1), while preserving the right of the Defendant to raise the same issues contained therein at an appropriate time and in an appropriate manner. The Court also finds that, due to the extensive allegations in the Affirmative Defenses portion of the pleading, requiring the Debtors to file a Reply thereto may be helpful to focus the issues in the case, and will thus order that to be done pursuant to Fed.R.Bankr.P. 7007, incorporating Fed.R.Civ.P. 7(a)(7).
AND NOW, this 13th day of September, 2011, for the reasons stated above, it is ORDERED, ADJUDGED and DECREED that,
(1) The Counterclaim is STRICKEN, without prejudice.
(2) On or before October 4, 2011, the Debtors shall file a Reply to the Affirmative Defenses.
Thomas P. Agresti, Chief Judge
United States Bankruptcy Court
Case Administrator to serve:
David Colecchia, Esq.
Debtors
Julie Tedjeske, Esq.