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In re Sanchez

United States District Court, E.D. New York

May 19, 2017

In re ALBA SANCHEZ, Debtor.

          For the Appellant KENNETH ROSELLINI

          For the Appellee DAVID J. DOYAGA

          MEMORANDUM AND ORDER

          FREDERIC BLOCK, Senior United States District Judge

         Kenneth Rosellini (“Rosellini”), attorney for the debtor in the underlying bankruptcy action, Alba Sanchez (“Sanchez”), appeals from an order of the United States Bankruptcy Court of the Eastern District of New York (“Bankruptcy Court”) denying his motion to vacate a prior order which sanctioned him for failing to appear at four hearings despite three orders to do so. Rosellini contends that the Bankruptcy Court exceeded its inherent authority when it sanctioned him without a finding of bad faith. For the reasons set forth below, the Bankruptcy Court's order denying Rosellini's motion to vacate for sanctions (“Order”) is affirmed.

         BACKGROUND

         Sanchez filed a Chapter 7 petition (“Petition”) with the Bankruptcy Court on September 18, 2013. Subsequently, the Bankruptcy Court issued a Final Notice of Section 521 deficiencies and, when Sanchez or her counsel failed to file the requisite documents, issued an order to show cause why the Petition should not be dismissed on or before December 3, 2013. On that date, the Bankruptcy Court held a hearing for which neither Sanchez nor Rosellini showed.

         Accordingly, on December 12, 2013, Sanchez's case was dismissed, and the Bankruptcy Court issued a second order, directed solely at Rosellini, to show cause why he had failed to prosecute Sanchez's case (“First Order”). On January 7, 2014, the date set for a hearing by the First Order, Rosellini did not appear. Thus, on January 22, 2014, the Bankruptcy Court once more ordered Rosellini to appear and show cause why he should not be sanctioned for his unexplained absences on December 12, 2013, and January 7, 2014 (“Second Order”). At a third hearing held on February 6, 2014, Rosellini again failed to appear. As a result, on March 10, 2014, the Bankruptcy Court issued an order sanctioning Rosellini $1, 000 for his noncompliance with its prior orders (“Sanctions Order”). Rosellini ultimately paid this sum on October 17, 2014.

         Months later, on January 6, 2015, Rosellini filed a letter, in lieu of a motion, seeking to vacate the Sanctions Order (“Motion”). The Sanctions Order “did not reference any Rule or Statute, ” Rosellini contended, and he thus “assume[d] that the [s]anction was issued under the [Bankruptcy] Court's Inherent Powers/Civil Contempt Powers.” Motion at 2. Contending that “a[ny] Court's exercise of the Inherent Power to Sanction requires a finding of bad faith, due to the potency of the Sanction Power, ” Rosellini maintained that he had “exhibited no bad faith.” Id. As support, Rosellini advanced four arguments. First, he claimed that he had “well served” Sanchez “in the bankruptcy courts.” Id. Second, he stressed that “no allegation of bad faith ha[d] been alleged against the Debtor's Counsel by any party to the case”; indeed, “no party to th[e underlying] action ha[d] sought or supported the sanction.” Id. Third, “as soon as he [had] found out about the [s]anctions proceeding, he took action and contacted the [Bankruptcy] Court.” Id. at 2-3. Lastly, the Sanctions Order's “potency, ” which had already prompted one of Rosellini's clients to raise concerns about his possible competence, strongly militated in favor of its vacatur. Id. at 3. If it was left untouched, Rosellini would have to labor with a permanent “stain upon . . . [his] reputation.” Id.

         On the same day on which it had been filed, the Bankruptcy Court issued a show cause order compelling Rosellini to appear before it. Once he did, a hearing on the Motion's merits was immediately held. On September 18, 2016, the Bankruptcy Court denied the Motion and signed the Order.

         Rosellini has timely appealed.

         DISCUSSION

         I. Standard of Review

         This Court reviews the bankruptcy court's “conclusions of law de novo, and findings of fact under a clearly erroneous standard.” In re Ionosphere Clubs, Inc., 922 F.2d 984, 988 (2d Cir. 1990). In matters committed to its discretion, including the propriety of imposing sanctions, the bankruptcy court's decision is reviewed for abuse of discretion. See In re Blaise, 219 B.R. 946, 949-50 (B.A. P.2d Cir. 1998) (citation omitted); see also, e.g., Schlaifer Nance & Co. v. Estate of Andy Warhol, 194 F.3d 323, 333 (2d Cir. 1999) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 50 (1991) (stating that sanctions imposed under district court's inherent power are reviewed for abuse of discretion)). The bankruptcy court abuses its discretion if it bases its decision on an erroneous view of the law or upon clearly erroneous factual findings or if the reviewing court has a definite and firm conviction that the bankruptcy court committed a clear error of judgment in reaching its conclusions. Id. (citing, among others, Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990)).

         II. The Bankruptcy Court's Authority to ...


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