Beverly Byrd and Ralph T. Byrd

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at GREENBELT
In re: 	*
*
Ralph T. Byrd, 	*
Beverly S. Byrd, 	* 	Case No. 	04-35620-TJC
* 	(Substantively consolidated with
* 	01-25006-TJC)
*
Debtors. 	* 	Chapter 7
*
*
* 	Docket Nos. 433 and 520
*
*
*
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
MEMORANDUM OPINION AWARDING SANCTIONS FOR THE
DEBTORS’ FAILURE TO PRODUCE DOCUMENTS AND FINDING THE
DEBTORS IN CONTEMPT FOR VIOLATING THE PRODUCTION
ORDER
Before the Court is the Motion to Hold Debtors in Contempt and For Award of
Monetary Sanctions (the “Contempt Motion”) (Docket No. 520), filed by Gregory P.
Johnson, the Chapter 7 Trustee (the “Trustee”). In the Contempt Motion, the Trustee
seeks to hold Ralph T. Byrd and Beverly S. Byrd (the “Debtors”) in contempt for failure
to comply with an order of this Court requiring the Debtors to produce documents and
information by January 30, 2007. The Trustee also seeks sanctions to compensate the
Date signed September 27, 2007
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Trustee for his efforts to obtain the requested information from the Debtors over the past
year, which culminated in the Trustee filing the Motion to Compel Production of
Documentation and Information by the Debtors, Docket No. 433 (“Motion to Compel”)
and then the Contempt Motion. For the reasons stated herein, the Court will award
sanctions against the Debtors in favor of the Trustee on behalf of the estate in the amount
of $17,293. The Court also finds the Debtors to be in contempt.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334, 157(a),
and Local Rule 402 of the United States District Court for the District of Maryland. This
is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A). The following constitutes the
Court’s findings of fact and conclusions of law.
I. 	FINDINGS OF FACT
This bankruptcy case, and the predecessor bankruptcy case of Ralph Byrd, Case
No. 01-25006, has a long and protracted history. That history has been summarized in a
number of recent opinions by this Court. See, e.g., Memorandum of Decision Granting
the Motion of the Chapter 7 Trustee to Authorize the Removal of Persons and Property
from 4901 Sundown Road, Laytonsville, MD, at pages 2-7 (Docket No. 480).
Contemporaneously herewith, the Court is issuing a Memorandum Opinion Finding the
Respondents in Contempt and Awarding Sanctions for Violations of the Automatic Stay,
the Barton Doctrine and the Injunction Order. That Memorandum Opinion provides a
summary of this case at pages 4-6 and will not be repeated here.
On April 19, 2006, soon after the case was converted to Chapter 7, the Trustee,
through counsel, sent a letter to the Debtors requesting that the Debtors produce various
documents and information. The Trustee had unsuccessfully sought to obtain these
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documents prior to the conversion to Chapter 7. The Debtors did not comply previously
or in response to the April 19 letter. The Trustee sent the Debtors follow-up letters
requesting documents dated May 8, 2006, June 9, 2006, and June 16, 2006, to no avail.
The Trustee made another request for documents at the meeting of creditors held on July
21, 2006, and sent yet another follow-up letter dated September 18, 2006, again to no
avail. See Trustee Exhibits 3, 4, 5, 6 and 7.
On October 24, 2006, the Trustee filed the Motion to Compel, Docket No. 433.
The Trustee sought an order requiring the Debtors to produce documents and certain
information and imposing sanctions for the Debtors’ refusal to do so.
The Court held a hearing on the Motion to Compel on December 1, 2006. The
Trustee testified that the Debtors had refused to produce the requested documents and
repeatedly ignored his requests. He testified about his frustration in dealing with the
Debtors and the additional and unnecessary costs the estate was incurring as a result of
the Debtors’ dilatory and uncooperative tactics.
The Debtors argued that they previously produced for inspection the originals of
all of the documents that the Trustee requested. The Debtors admitted that, of whatever
originals they had previously produced, they did not allow the Trustee to either keep the
originals or make copies. The Debtors had no copies, letters, or evidence of any sort to
support their contention that they had previously produced originals for inspection. The
Debtors did not introduce any evidence whatsoever in connection with the Motion to
Compel; neither Debtor testified. Ralph Byrd, a Maryland attorney, simply argued from
the podium. Other than their contention that they previously produced some or all of the
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requested information, the Debtors offered no other reason for not producing the
documents.
At the hearing, the Court announced it would grant the Motion to Compel and
give the Debtors until January 30, 2007, to produce the requested information. On
December 8, 2006, the Court entered the Order Granting Trustee’s Motion to Compel
Production of Documentation and Information (the “Production Order”). Docket No.
477. The Court deferred ruling on the Trustee’s request for sanctions until after the
January 30, 2007, production deadline in the order. Production Order at p. 6. The
Debtors filed a motion to reconsider the Production Order, which the Court denied, but
they did not appeal the Production Order. See Docket Nos. 489 and 493.
On January 30, 2007, the Debtors sent the Trustee a letter stating that they could
not make many of the documents available for production because they were “misplaced
during the course of moving.” The Debtors did not submit any documents with the
January 30 letter.
The Trustee filed the Contempt Motion on February 15, 2007. In it, the Trustee
contends that the Debtors failed to comply with the Production Order and should be held
in contempt, and the Court should impose sanctions against the Debtors. The Court set a
hearing on the Contempt Motion and the sanction request in the Motion to Compel for
April 2, 2007.
On the morning of April 2, 2007, the Debtors filed their long-overdue response to
the Contempt Motion. Docket No. 533. Along with their response, the Debtors served
and filed a fairly extensive amount of documents that purport to be responsive to the
Trustee's document request. In their response, the Debtors contested a number of points
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raised by the Trustee about the Debtors’ conduct throughout this case, but offered no
explanation for the delay in producing the required documents until that morning.
The Court sua sponte continued the scheduled hearing to allow the Trustee an
opportunity to review the Debtors’ document production of April 2nd . See Order
Continuing Hearing on Trustee’s Motion for Contempt. Docket No. 534. The hearing on
the Contempt Motion and the sanction request in the Motion to Compel was rescheduled
for April 25, 2007 for 2:00 p.m.
The Trustee’s presentation in support of the Contempt Motion and the sanction
request took up the afternoon of the April 25 hearing. The Trustee plainly established
that many of the documents produced by the Debtors on April 2 were responsive to the
Trustee’s earlier letters and the Production Order, and that he was provided no
explanation for the Debtor’s failure to produce the documents timely. The Court
continued the hearing and advised the Debtor that, at the continued hearing, it expected to
hear the Debtors’ explanation for their failure to comply timely with the Production
Order. The hearing was continued to July 18, 2007, at which neither Debtor appeared.
The Trustee seeks sanctions for reimbursement of costs and fees in connection
with his efforts to obtain the documents and information from the Debtors. Those efforts
include:
o 	draft and send the letters dated May 6, 2006; June 9, 2006; June
16, 2006; and September 18, 2006.
o 	prepare the Motion to Compel, Docket No. 433;
o 	review and consider the Debtors’ motion to strike the Motion to
Compel (Docket No. 455);
o 	review and respond to the Debtors’ opposition to the Motion to
Compel (Docket No. 456);
o 	review and consider the Debtors’ motion to reconsider the
Production Order (Docket No. 489);
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o 	prepare and file the Contempt Motion (Docket No. 520) and
request for expedited hearing thereon (Docket No. 521);
o 	review and respond to the Debtors’ emergency motion to strike the
Motion to Compel (Docket No. 533);
o 	review the documents produced belatedly on April 2, 2007;
o 	prepare for and attend the hearings scheduled for December 1,
2006, April 2, April 25 and July 18, 2007.
The support for the fees and costs incurred by the trustee was contained in several
exhibits. After the conclusion of the hearing, and while the matter was under advisement,
counsel for the Trustee filed a fee application. Docket No. 660. As is customary, counsel
submitted with the fee application billing records in support of the fees. The application
contains the complete billing records of the amount of fees incurred in connection with
the Trustee’s efforts to obtain the documents, file the Motion to Compel and the
Contempt Motion. See Docket No. 660, Exhibit 3 page 1 and 2 of 21; and pages 8 -10 of
21. These amounts are $2,957.00 in connection with the Trustee’s efforts to obtain
documents (Docket No. 660, Exhibit 3 page 1 and 2 of 21) and $14,336.00 in connection
with the Motion to Compel and the Contempt Motion (Docket No. 660, Exhibit 3 pages 8
- 10 of 21). 	The Court will consider the record of the hearing to be reopened to accept
this supplemental information. The Court has reviewed the fees and finds and concludes
that the fees incurred are reasonable compensation for actual, necessary services rendered
to the Trustee.
The Court further finds that, having reviewed the Debtors’ filings set forth above
in opposition to the Trustee’s efforts to obtain the documentation and information, the
Debtors’ objections were without merit and filed for the purpose of delay. The Court
further finds and concludes that the Debtors had no just cause for their refusal to provide
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the documents and information to the Trustee in response to his letters, or for their failure
to comply with the Production Order.
II. 	CONCLUSIONS OF LAW
The Bankruptcy Code imposes specific duties on a debtor to cooperate with the
trustee and to deliver to the trustee property of the estate and the estate’s books and
records. Specifically, Section 521(a) provides that a debtor shall:
(3) If a trustee is serving in the case, cooperate with the trustee as necessary to enable
the trustee to perform the trustee's duties under this title
(4) if a trustee is serving in a case, surrender to the trustee all property of the estate
and any recorded information, including books, documents, records, and papers,
relating to property of the estate, whether or not immunity is granted under
section 344 of this title;…
11 U.S.C. §§ 521(a)(3);(4) (2004).1 The duties imposed on debtors in Section 521 are
essential to the effective and efficient administration of the estate.
A debtor may be sanctioned for failing to cooperate with the trustee. In re Paige,
365 B.R. 632, 638 (Bankr. N.D. Tex. 2007) (citing In re Cochener, 360 B.R. 542 (Bankr.
S.D. 2007). For example, in In re Stinson, 269 B.R. 172 (Bankr. D. Ohio 2001) the
trustee, at the meeting of creditors, informed the debtor that she would be receiving a tax
refund which was property of the estate and requested that the debtor provide copies of
the income tax returns and turnover the tax refund when she received it. Id. at 173.
When the debtor did not comply, the trustee sent a letter to the debtor requesting that she
provide a copy of her tax return and turnover any refund that she had received. Id. In
response, the debtor provided copies of her tax returns but did not turnover her tax refund
1 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), P.L. 109-8, 119
Stat. 23, reordered this provision. Because the Debtors' case was filed prior to the effective date of
BAPCPA, the Court will cite to the provision as it stood prior to the effective date of BAPCPA. See P.L.
109-8 § 1501.
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which the debtor had received. Id. Subsequently, the trustee sent another letter
requesting the debtor turnover her tax refund and warning the debtor that a motion for
turnover would follow if the debtor did not comply. Id. at 174. When the debtor did not
comply, the Trustee filed a motion for turnover that was granted. Id. Again, the debtor
failed to turnover the tax refund and the trustee sent another letter warning the debtor that
if she didn't comply with the turnover order sanctions would be sought. Id. 	The debtor
did not comply and the trustee filed a motion for sanctions. In that motion, the trustee
requested turnover of the tax refund as well as sanctions for the costs and attorneys fees
incurred for sending the multiple letters and filing the turnover motion and the sanctions
motion. Id. at 173. The bankruptcy court granted the trustee's motion for sanctions and
stated:
a chapter 7 debtor has an affirmative duty to cooperate with
the case trustee in the administration of the bankruptcy
estate…This includes a duty to surrender to the trustee all
property of the estate…This duty to cooperate is based
upon one of the very simple goals of any chapter 7 case—
to maximize the return to creditors through the orderly
liquidation of the assets. Where a debtor fails to cooperate
with the case trustee, the trustee is then forced to expend
estate resources in pursuing the debtor's cooperation, which
results in the reduction of the distribution to creditors.
Id. at 176.
The Court concludes that sanctions against the Debtors are in order. This case
typifies the situation contemplated in Stinson, where the conduct of a recalcitrant debtor
required the trustee to expend an inordinate amount of estate resources in a wasteful
effort to fulfill his duties. The record here establishes a continuous, ongoing effort by the
Debtors to frustrate the Trustee’s administration of the estate. The Debtors have turned a
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request for documents by the Trustee into a costly, year-long charade. The Trustee made
numerous attempts to obtain the information without Court intervention, but the Debtors
ignored all five letters from the Trustee requesting documents, not to mention the
substantial efforts by the Trustee before the case was converted to Chapter 7.
The Debtors offered no plausible explanation for their failure to produce the
information. Their claim that they previously made the originals available was contested
by the Trustee under oath, while the Debtors themselves refused even to take the stand in
support of their position. They offered no evidence whatsoever in support of their claim,
and admitted they did not allow the Trustee to make copies of the original documents
they purportedly previously produced.
Further, the Court finds and concludes that the Debtors willfully refused to
comply with the Production Order. The Court gave the Debtors sixty days to produce
documents that had been requested by the Trustee eight months earlier. Notwithstanding
the inordinate amount of time granted to the Debtors, they did not comply with the
Production Order. Moreover, they did not comply until the morning of the hearing
scheduled for April 2, 2007, at which hearing the Trustee was seeking the imposition of
sanctions and an order of contempt. The Debtors offered no explanation for their failure
to produce the documents on January 30, 2007, or for their delay in producing the
documents until April 2, 2007. The Court has given the Debtors ample opportunity to
explain the delay in producing the information; yet the Debtors have failed to do so.
The Court will award sanctions against the Debtors in the amount of $17,293
which represents the Trustee’s reasonable and necessary fees and costs of pursuing the
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document requests and information, preparing and prosecuting the Motion to Compel,
and preparing and prosecuting the Contempt Motion.
The Court also finds the Debtors to be in contempt for their willful violation of
the Production Order. A Bankruptcy Court has the power, pursuant to 11 U.S.C. § 105(a)
to hold a party in civil contempt and award sanctions. See In re Walters, 868 F.2d 665
(4th Cir. 1989).
To establish civil contempt, a movant must show each of
the following elements by clear and convincing evidence:
(1) the existence of a valid decree of which the alleged contemnor had
actual or constructive knowledge;
(2) ...that the decree was in the movant's "favor";
(3)...that the alleged contemnor by its conduct violated the terms of the
decree, and had knowledge (at least constructive) of such violations; and
(4)...that [the] movant suffered harm as a result.
JTH Tax, Inc. v. H&R Block E. Tax Servs., 359 F.3d 699, 705 (4th Cir. 2004) (quoting
Ashcraft v. Conoco, Inc., 218 F.3d 288, 301 (4th Cir. 2000)). The purpose of a contempt
sanction is “…remedial and intended to coerce the contemnor into compliance with court
orders or to compensate the complainant for losses sustained…” as a result of the
contemptuous conduct. Cromer v. Kraft Foods N. Am., Inc., 390 F.3d 812, 822 (4th Cir.
2004) (quoting Buffington v. Baltimore County, 913 F.2d 113, 133 (4th Cir. 1990)). To
that end, “…a district court has broad discretion to fashion an appropriate coercive
remedy in a case of civil contempt, based on the nature of the harm and the probable
effect of alternative sanctions.” United States v. Darwin Constr. Co., 873 F.2d 750, 756
(4th Cir. 1989).
In this case, Ralph Byrd was in court at the hearing on December 1, 2006, at
which the Court announced from the bench that it was going to enter an order granting
the Motion to Compel and require the Debtors to produce the documents and information
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by January 30, 2007. The Court issued the Production Order on December 8, 2006,
requiring the Debtors to produce the documents and information by January 30, 2007.
The Debtors had actual knowledge of the Production Order, including the January 30,
2007 deadline imposed therein, as established by their Motion to Reconsider Order
Granting Trustee’s Motion to Compel Production of Documents and Information, filed by
the Debtors on December 18, 2006. Docket No. 489. There, they specifically refer to the
Production Order and the January 30 deadline. Id. at ¶ 2. The Debtors failed to comply
with the Production Order, and were given ample notice and opportunity of the claim of
sanctions and contempt against them. Accordingly, the Trustee has established the
elements of contempt. However, while the Court will enter an order holding the Debtors
in contempt, it will not grant sanctions in addition to those granted above for their failure
to produce documents and information, because those sanctions include the fees incurred
by the Trustee in pursuing the documents and Contempt Motion after the Debtors
violated the Production Order.
Finally, as the Production Order is the third order that the Debtors have willfully
violated within the past eight months of this case, the Court is denying the Debtors their
discharge for the reasons stated in Section II.D. of the Memorandum Opinion Finding the
Respondents in Contempt and Awarding Sanctions for Violations of the Automatic Stay,
the Barton Doctrine and the Injunction Order, issued contemporaneously herewith. The
basis for the denial of the Debtors’ discharge is set forth in detail there.
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III. 	CONCLUSION
For the foregoing reasons the Court will enter an order awarding sanctions against
the Debtors in the amount of $17,293 to compensate the Trustee for his costs in pursuing
the documents and information, and finding the Debtors to be in contempt.
Copies To:
Debtors- Ralph T. Byrd and Beverly S. Byrd
Trustee- Gregory P. Johnson
Trustee’s Counsel- James M. Hoffman
END OF MEMORANDUM
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