DEBTOR CASE NO. 97-70692





VS. ADV. NO. 97-7026








This matter is before the Court on the defendant=s Motion for Sanctions against counsel for the plaintiff. The Motion asks that the Court impose sanctions including, but not limited to, the defendant=s costs and reasonable attorney fees for violation of Federal Rule of Bankruptcy Procedure 9011, which makes Federal Rule of Civil Procedure 11 applicable in bankruptcy. Pursuant to KRS 453.260, the Commonwealth may be awarded costs as a prevailing party. The plaintiff has filed a Response to Motion for Sanctions, and this matter was submitted for decision by order of this Court entered on October 20, 1997. This Court has jurisdiction of this matter pursuant to 28 U.S.C. '1334(b); it is a core proceeding pursuant to 28 U.S.C. '157(b)(2)(I).

The defendant=s Motion contends that counsel for the plaintiff violated Rule 9011 (as it existed prior to the December 1, 1997 amendments) which provides in pertinent part:

The signature of an attorney ... constitutes a certificate that the attorney ... has read the document; that to the best of the attorney=s ... knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation or administration of the case. .... If a document is signed in violation of this rule, the court on motion or on its own initiative, shall impose on the person who signed it, the represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including a reasonable attorney=s fee.

The basis for the defendant=s contention is the allegation by the plaintiff that finding that his debt to the plaintiff is nondischargeable amounts to a violation of his rights as embodied in the 8th, 13th and 14th Amendments to the United States Constitution, a novel argument to say the least. The plaintiff also alleges that having to repay the debt is a hardship which he should not have to bear, and so should have a Ahardship discharge.@

As the defendant points out, the standard in the Sixth Circuit for imposing sanctions is most recently found in In re Big Rapids Mall Associates, 98 F.3d 926 (6th Cir. 1996). There the court stated: AIn this circuit, the test for imposition of Rule 11 sanctions is whether the individual attorney=s conduct was reasonable under the circumstances.@ At 930. See also Albright v. Upjohn Co., 788 F.2d 1217, 1221 (6th Cir. 1986). The court in Jackson v. Law Firm, 875 F.2d 1224 (6th Cir. 1989), enunciated the obligations of the attorney in light of the requirements of Rule 11. The attorney must make a reasonable inquiry concerning the facts and the law, and he must not file the document in question for any improper purpose. Id, at 1229. The defendant contends that the causes of action set out in the plaintiff=s Complaint and Amended Complaint have Ano support or justification in law, fact, or common sense,@ and the plaintiff=s counsel=s actions in making these allegations cannot be considered reasonable.

As set out in the Complaint and Amended Complaint, the plaintiff has alleged that he faces a hardship because he cannot pay the debt in his lifetime, that he is subject to involuntary servitude to the Commonwealth of Kentucky contrary to the 13th Amendment, that he should have a discharge Ain equity@ based on the equal protection guarantees of the 14th Amendment, and that the amount owing to the defendant is excessive and is therefore Acruel and unusual@ (the plaintiff=s 8th Amendment argument).

The facts which gave rise to these allegations are apparently as follows: the defendant obtained judgments against the plaintiff in Franklin Circuit Court, Kentucky in 1987 and 1990 totaling $190,720.00 in civil penalties for violations of Kentucky Revised Statutes Chapter 350. In December 1990, the plaintiff and his then wife filed a Chapter 7 petition and discharge was granted in June 1991. In April 1992, the plaintiff=s wife filed an adversary proceeding to determine the dischargeability of the claim of the defendant herein against her. The adversary proceeding was dismissed with prejudice in August 1992. The defendant began a garnishment of the plaintiff=s wages in December 1994. In August 1995, the plaintiff filed a Chapter 13 petition which was dismissed in November of that year because the plaintiff exceeded the $250,000.00 limit for unsecured liquidated noncontingent debt as set out in 11 U.S.C. '109.

After the dismissal of the Chapter 13 case, the defendant began garnishing the plaintiff=s wages again. In December 1995, the plaintiff filed a Chapter 11 case which was dismissed in April 1996 on the motion of the United States Trustee. Once again, the garnishment of the plaintiff=s wages resumed, and the plaintiff filed a Motion to Hold the Cabinet=s Garnishment in Abeyance or to Cancel Garnishment of Defendant=s Wages in Franklin Circuit Court in the 1989 civil case. In July 1996 the Franklin Circuit Court entered an order denying the plaintiff=s Motion and holding that the civil penalties owing to the defendant were nondischargeable in bankruptcy pursuant to 11 U.S.C. '523(a)(7). A dischargeability question under this subsection is of the type over which bankruptcy courts have concurrent, but not exclusive, jurisdiction. See In re Galbreath, 83 B.R. 549, 551 (Bkrtcy.S.D.Ill. 1988).

In June 1997, the plaintiff filed his fourth bankruptcy, the present Chapter 7 case. The debt to the defendant is listed therein in the amount of $432,586.34. In September 1997 the defendant was granted relief from the automatic stay to resume the garnishment. The defendant=s motion for relief was based on the ruling of the Franklin Circuit Court that the debt owed to it by the plaintiff was nondischargeable. This Court=s Order granting relief from stay also states that the plaintiff=s debt to the defendant is nondischargeable pursuant to 11 U.S.C. '523(a)(7). The plaintiff=s Motion to Reconsider Order Lifting Stay was overruled on October 17, 1997. There has been no further appeal.

In determining whether it was reasonable for counsel for the plaintiff to file the within Complaint and Amended Complaint, the Court must first consider that these pleadings seek to have the plaintiff=s debt to the defendant declared dischargeable. The issue of the dischargeability of this debt has been resolved. This Court has recited that it is nondischargeable, as set out above. The Franklin Circuit Court made the same determination in the interim between the third bankruptcy case and this one.

The contention that the plaintiff should have a so-called Ahardship discharge@ because the debt is large and cannot be paid off in the plaintiff=s lifetime has no basis in law or logic in a Chapter 7 proceeding. It certainly has no basis in the Bankruptcy Code. Counsel for the plaintiff makes some reference in this cause of action to 11 U.S.C. '523(a)(8). There is language about hardship in that subsection, but it has to do with student loans, and is inapplicable here. Further, many debtors have sizeable debts declared nondischargeable. Many others who have never filed bankruptcy are faced with huge debts which they struggle to pay off. Whether such a situation is caused by ill fortune, bad judgment, or violation of the law, as in the instant case, the law does not relieve a debtor of responsibility for his debt merely because it will cause him difficulty.

The other theories advanced by counsel for the plaintiff are equally baseless. For example, he expands on the hardship argument by claiming that the plaintiff is subject to involuntary servitude because he cannot pay off the debt in his lifetime. Counsel apparently did not bother to research the law concerning constitutional prohibitions against involuntary servitude. If he had, he would have discovered that

...a showing of compulsion is a prerequisite to proof of involuntary servitude. Thus a violation of the thirteenth amendment occurs when the debtor is compelled by force, coercion or imprisonment to labor for another against his will.

In re Cooper, 153 B.R. 898 (D.Colo. 1993), at 900. Being required to pay one=s just debts is not Aslavery@ or Apeonage.@ In re Higginbotham, 111 B.R. 955, 966 (Bkrtcy.N.D.Okl. 1990).

Counsel=s 14th Amendment argument is apparently directed to this Court=s powers of equity, but once again, the logic escapes this Court. The 14th Amendment protects against deprivation of life, liberty or property without due process of law, and guarantees equal protection of the law. Counsel seems to argue that because the defendant settled with the plaintiff=s wife, it was required by Aequity@ to settle with him. There is no definition of equity that encompasses this fantasy. There has been no showing, or even suggestion, that the plaintiff was denied equal protection or that he was deprived of anything without due process of law.

Finally, there is the theory that the debt owed to the defendant is an excessive fine and therefore Acruel and unusual.@ Here, counsel for the plaintiff mixes his 8th Amendment clauses. This amendment prohibits excessive fines, and cruel and unusual punishment. The cruel and unusual punishment aspect is generally regarded as applying to incarceration and capital punishment issues. Since the debt to the defendant is for civil penalties owed to a governmental unit, however, the plaintiff could have challenged the amounts when the judgments were entered. Austin v. U.S., 113 S.Ct. 2801 (1993) He did not make such an argument or otherwise appeal these judgments. It will not now suffice for him to come before this Court and declare that the debt is excessive, and ask that the Court reduce it or discharge it by way of Aequity.@ As stated in Matter of Milwaukee Cheese Wisconsin, Inc.,112 F.3d 845, 848 (7th Cir. 1997), A>[A] bankruptcy court is a court of equity= is not a mantra that makes the Bankruptcy Code dissolve.@

In conclusion, this Court finds that counsel for the plaintiff does not meet the standard of reasonableness necessary to avoid the imposition of sanctions under FRBP 9011. His filing of the within Complaint and Amended Complaint was ill-considered and not reasonable under the circumstances. The defendant should therefore be awarded costs and reasonable attorney fees against counsel for the plaintiff. The defendant sets out in its Affidavit in Support of Motion for Sanctions that its costs and fees in this matter amount to $1,095.00 in attorney=s fees, $87.50 in paralegal charges, and $32.45 for copies, postage, and mileage, for a total of $1,214.95. The Court considers these costs and fees more than reasonable. An order in conformity with this opinion will be entered separately.


By the Court -





Copies to:


Michael P. Wood, Esq.

John Hansen, Esq.