United States District Court, N.D. New York
JOHN A. ELLIOT, Appellant,
PHH MORTGAGE CORPORATION as servicer for Keybank National Association, Appellee.
F. Selbach, Esq.
DiStasio, Esq. Thomas Szaniawski, Esq.
MEMORANDUM-DECISION AND ORDER
Brenda K. Sannes, United States District Court Judge:
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.
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denial is not withdrawn or appropriately corrected, except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).
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
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).
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.