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Elliot v. Phh Mortgage Corp.

United States District Court, N.D. New York

August 25, 2017

JOHN A. ELLIOT, Appellant,
v.
PHH MORTGAGE CORPORATION as servicer for Keybank National Association, Appellee.

         APPEARANCES:

          For Appellant:

          James F. Selbach, Esq.

         For Appellee:

          Nicole DiStasio, Esq. Thomas Szaniawski, Esq.

          MEMORANDUM-DECISION AND ORDER

          Hon. Brenda K. Sannes, United States District Court Judge:

         I. INTRODUCTION

         Appellant John A. Elliott appeals from a June 30, 2016 Order of United States Bankruptcy Judge Diane Davis denying his motion for sanctions under Fed.R.Bankr.P. 9011. For the reasons set forth below, that Order is affirmed.

         The history of this dispute dates back to a motion filed by the Appellant and Renee L.Elliott (Debtors) in the underlying bankruptcy action under 11 U.S.C. §§ 105(a) and 524 seeking sanctions against Appellee for alleged violations of a discharge injunction. (Dkt. No. 4-8). Appellee responded and cross-moved for sanctions against Appellants' attorney, James Selbach, alleging that his motion itself violated Fed.R.Bankr.P. 9011(b). On February 9, 2016, the bankruptcy court held a hearing on the motions and denied the relief requested by both sides. (Dkt. No. 4-24). At that hearing, the bankruptcy court found that Appellee's motion was procedurally deficient because a request for relief under Rule 9011 must be brought by a separate motion. (Dkt. No. 10, p. 10). However, the bankruptcy court also found that notwithstanding Appellee's procedural error, it had satisfied the safe-harbor requirement in Fed.R.Bankr.P. 9011(c)(1)(A). (Id.). That rule provides in part:

A motion for sanctions under this rule shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subdivision (b). . . . The motion for sanctions may not be filed with or presented to the court unless, within 21 days after service of the motion (or such other period as the court may prescribe), the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected, except that this limitation shall not apply if the conduct alleged is the filing of a petition in violation of subdivision (b).

         Fed. R. Bankr. P. 9011(c)(1)(A). The bankruptcy court noted that Appellee's attorneys had emailed Appellants giving Selbach the chance to withdraw the motion. (Dkt. No. 10, p. 10). As a result of that email, the bankruptcy court determined that Selbach was on notice and had been afforded the requisite safe harbor pursuant to Rule 9011(c). (Id.). Thus, the bankruptcy court found that the rule was satisfied and directed Appellee's attorney to refile its application for Rule 9011 relief in a new, separate motion “and have it returnable at the March 8 hearing.” (Id.).[1]

         Appellee re-filed the motion on March 15, 2016. (Dkt. No. 4-17). Thereafter, Appellant filed opposition papers, in which he repeatedly argued that the safe-harbor provision had not been satisfied. (Dkt. Nos. 4-23; 4-31). At an April 5, 2016 hearing, the bankruptcy court ruled that the safe-harbor provision had not been satisfied because PHH did not serve Selbach with the motion for sanctions 21 days prior to filing it with the Court. (Dkt. No. 4-32, p. 2). The Court denied Appellee's Rule 9011 motion based on Appellee's “failure to strictly adhere to the procedural requirements of Rule 9011(c)(1)(A).” (Dkt. No. 4-32).

         On April 26, 2016, Appellants filed a Rule 9011 motion for sanctions against Appellee, claiming, inter alia, that Appellee's prior contention that the safe-harbor had been satisfied was frivolous. (Dkt. No. 4-33). Appellee responded that it had relied on the bankruptcy court's decision that the safe-harbor had been satisfied and that it had followed the instruction to re-file its Rule 9011 motion. (Dkt. No. 4-37). At the hearing on June 1, 2016, the Bankruptcy Court denied Appellant's motion noting that Appellee “had substantive basis to bring the motion.” (Dkt. No. 8-1, p. 11; see Dkt. No. 4-38) Thereafter, Appellant filed the pending appeal.

         II. ...


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