UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
BRUCE WAYNE WEDDLE
DEBTOR CASE NO. 90-00204
JIM SKAGGS, INC. PLAINTIFF
VS. ADV. NO. 90-0278
WEDDLE ENTERPRISES, INC., and
BRUCE WAYNE WEDDLE, Individually DEFENDANTS
OPINION AND ORDER
This matter is before the Court on the defendants' motion for sanctions pursuant to FRCP 11, made applicable in bankruptcy cases by Bankruptcy Rule 9011. The Court reserved its ruling on the motion for sanctions after entering a Summary Judgment for the defendants in this matter on December 3, 1990. All parties have submitted briefs.
Rule 11 provides in part that
[t]he signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer'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.
The defendants maintain that the plaintiff has violated Rule 11 in filing and pursuing what they have characterized as a frivolous action. The requirements set out in cases interpreting the rule include counsel's obligation to act in a manner comporting with an objective standard of lawyerly performance, and counsel's duty to ascertain the facts and review the law to determine whether the facts fit within a recognized entitlement to relief or defense. In re Bratton, 119 B.R. 166 (Bkrtcy. W.D.Ark. 1990). The current standard for imposing sanctions under Rule 11 is an objective question of reasonableness under the circumstances, not subjective bad faith. In re Chicago Midwest Donut, Inc., 82 B.R. 943 (Bkrtcy. N.D.Ill. 1988).
The bankruptcy court has wide discretion in determining what sanctions should be imposed for violation of a rule or rules. In re Lewis, 79 B.R. 893 (9th Cir. BAP 1987). This Court's task then is to determine whether or not the plaintiff violated Rule 11, and if so, what sanctions are appropriate. Making such a determination requires the Court to examine the conduct of the plaintiff for reasonableness at the time the Complaint in this proceeding was filed. At that time the plaintiff was involved in a lawsuit with Weddle Enterprises, Inc., Civil Action No. 88-CI-343, in Pulaski Circuit Court. Judgment for Weddle Enterprises, Inc. was later entered in that action.
The plaintiff's Complaint repeatedly characterizes Weddle Enterprises, Inc. as "the debtor", and prays for an order vacating the Findings of Fact, Conclusions of Law, and Judgment entered by the Pulaski Circuit Court, and for judgments in the amounts of $33,217.04 and $94,635.50. These are amounts prayed for in the plaintiff's Counterclaim in the Pulaski Circuit Court action which, as previously indicated, was resolved in favor of Weddle Enterprises, Inc. and against the plaintiff. While the relationship between Bruce Wayne Weddle, the debtor herein, and Weddle Enterprises, Inc. may be the subject of concern on the part of the plaintiff, this Court can discern no other purpose in the filing of the Complaint herein than to "re-try" the Pulaski Circuit Court action in this Court. The plaintiff misstated the facts and misapplied the law, attempting to cast its opponent in the Pulaski Circuit Court action in the role of "debtor" in order to subject it to certain sections of the Bankruptcy Code. In so doing, the plaintiff completely ignored the preclusive effect of the state court judgment. In the opinion of this Court, therefore, the filing of the Complaint was not reasonable under the circumstances. In consideration of all of the foregoing, it is the opinion of this Court that the motion for sanctions should be granted in favor of the defendants. The Court must therefore determine against whom to assess the sanctions, and in what amount. The record in this case reveals that the Verified Complaint was signed both by Mr. Moore, counsel for the plaintiff, Jim Skaggs, Inc., and the owner of the company, Jim Skaggs. In a situation where it is not apparent to the court whether it is the party or counsel representing the party that is responsible for the conduct which resulted in the sanction, the court may authorize the imposition of sanctions against both. In re U.S. Truck Co., Inc., 71 B.R. 99 (Bkrtcy E.D.Mich. 1987). The imposition of sanctions against both the plaintiff and plantiff's counsel herein is appropriate.
As concerns the amount of the sanction, the defendants have attached to their motion an affidavit of their attorney which represents that he expended 13.75 hours in defense of this action between September 10 and December 3, 1990; that he incurred expenses totalling $75.60; that the total fee and expenses claimed is $2138.17; and that as of December 3, 1990, the defendants had paid $776.55 in fees. The court in U.S. Truck Co. awarded "reasonable costs in the form of attorney fees" in an amount it determined after analysis of what the court considered "reasonable" in terms of time expended and hourly rate. In the opinion of this Court, the total amount claimed is reasonable under the circumstances of this case, and the plaintiff and its counsel are hereby ORDERED jointly to pay attorney fees and costs in the amount of $2138.17.
This is a final order dated this ___ day of March, 1991.
W. Thomas Bunch, Esq.
Frank Hampton Moore, Jr., Esq.