Davant v. Bailey

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE:
JAMIE ALAN BAILEY
Debtor.
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SHANNAN DAVANT
Plaintiff,
v.
JAMIE ALAN BAILEY,
Defendant.
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Case No. 09-2564
Chapter 13
Adv. Proc. No. 10-15
MEMORANDUM OPINION
Shannan Davant filed this adversary proceeding against Jamie Alan Bailey (the “Debtor”)
to determine whether certain debts owed to her, arising out of the parties divorce, are excepted from
the Debtor’s anticipated Chapter 13 discharge. After the filing of the adversary complaint, Ms.
Davant, pro se, filed a Motion for Sanctions against the Debtor and his counsel under Fed. R. Bankr.
P. 9011 and 28 U.S.C. § 1927. Ms. Davant also filed a Motion to Dismiss the Debtor’s bankruptcy
filing.
For the reasons stated herein, the court will deny the Motion for Sanctions and will set a
status conference on the Motion to Dismiss the Debtor’s bankruptcy filing.
I. BACKGROUND
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Ms. Davant and the Debtor obtained a divorce from the Family Court of Taylor County on
April 10, 2009. As part of the divorce decree, Ms. Davant was awarded one-half of the equity in the
parties’ formal marital home, and the Debtor was ordered to buy-out Ms. Davant’s one-half interest
for $27,000. 	In addition, the Debtor was ordered to pay Ms. Davant 	$500 monthly until she
remarried, pay Ms. Davant’s attorney $15,525 in fees, and provide medical and dental care for their
two children.
The Debtor appealed the Family Court decree to the Circuit Court of Taylor County, but that
appeal was denied on June 15, 2009. Following a August 5, 2009 hearing on a contempt motion
filed by Ms. Davant, she was specifically awarded authority to place a lien on the formal marital
home. The judgment was for $42,525, plus $2,000 in additional attorney’s fees.
Having received no payment from the Debtor, Ms. Davant filed a second petition for
contempt on October 22, 2009. The hearing on the contempt motion was set for November 19,
2009; however, on November 10, 2009, the Debtor filed a Chapter 13 bankruptcy petition, which
stayed the contempt hearing. On December 15, 2009, Ms. Davant and her attorney filed a proof of
claim in the Debtor’s bankruptcy case for $48,818.50.
II. DISCUSSION
In her motion for sanctions for alleged violations of Fed. R. Bankr. P. 9011 and 28 U.S.C.
§ 1927, Ms. Davant contends that the Debtor filed bankruptcy in bad faith and for an improper
purpose; namely, to hinder, delay, harass, and to maliciously cause her to incur additional attorney’s
fees in an attempt to circumvent rulings from the Family Court of Taylor County. In addition, Ms.
Davant claims that the Debtor made misrepresentations in providing information on his bankruptcy
petition and schedules. 	These same allegations serve as the basis for Ms. Davant’s Motion to
Dismiss the Debtor’s bankruptcy petition.
A. 	Sanctions Under Fed. R. Bankr. P. 9011 and 28 U.S.C. § 1927
Ms. Davant asserts that the Debtor filed bankruptcy on November 10, 2009 – just eight days
before a second contempt hearing before the Family Court of Taylor County. 	In her view, the
Debtor’s bankruptcy filing was solely to avoid the contempt proceeding. 	Moreover, Ms. Davant
alleges that the Debtor, through bankruptcy, is improperly attempting to discharge certain child
support obligations, failing to fully pay certain obligations, and making misrepresentations to the
court regarding the status of those payments. 	Ms. Davant further contends that the Debtor’s
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bankruptcy filing is just another legal tactic in a long line of frivolous litigious filings that are
intended to harass her, delay proceedings, and drive up her litigation costs.
Under Fed. R. Bankr. P. 9011, when an attorney submits a document to the court, the
attorney is certifying that to the best of the attorney’s “knowledge, information, and belief, formed
after an inquiry reasonable under the circumstances” that the document “(1) is not being presented
for any improper purpose, such as to harass or cause unnecessary delay or needless increase in the
cost of litigation . . . .[and] (3) the allegations and other factual contentions have evidentiary support
. . . .” Rule 9011, which conforms to Fed. R. Civ. P. 11, 1 only applies to acts undertaken in a case
before the court; it does not apply to pre-litigation conduct by a party. E.g., Nationwide Mut. Ins.
Co. v. Burke, 897 F.2d 734, 739 (4th Cir. 1990) (stating that to be sanctionable under Rule 11, a
misrepresentation must be submitted in a pleading before the district court); Adduono v. World
Hockey Asso., 824 F.2d 617, 621 (8th Cir. 1987) (stating that Rule 11 only applies when the attorney
has signed a pleading, motion, or other paper before the court). The overriding “purpose of Rule
11 is to deter baseless filings” and streamline the administration of cases in federal courts. Cooter
& Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990).
Under 28 U.S.C. § 1927, “[a]ny attorney . . . admitted to conduct cases in any court of the
United States . . . who so multiplies the proceedings in any case unreasonably and vexatiously may
be required by the court to satisfy personally the excess costs, expenses, and attorney’s fees
reasonably incurred because of such conduct.” Whereas Rule 11 sanctions are based on the filing
of a particular paper, § 1927 applies whenever an attorney “multiplies the proceedings.” Section
1927 is “concerned only with limiting the abuse of court processes.” Roadway Express, Inc. v.
Piper, 447 U.S. 752, 762 (1980). For this reason, a court considering the propriety of a § 1927
award must focus “on the conduct of the litigation and not on its merits.” DeBauche v. Trani, 191
F.3d 499, 511 (4th Cir. 1999). Thus, § 1927 does not apply to initial filings inasmuch as the initial
filings do not “multiply the proceedings.” E.g., DeBauche, 191 F.3d at 511-12 (filing of single
frivolous complaint, as matter of law, could not be held to have “multiplied the proceedings”).
1 10 Collier on Bankruptcy ¶ 9011.02 (Alan N. Resnick & Henry J. Sommer, eds. 15 th ed.
rev. 2010) (“Because Rule 9011 conforms to Civil Rule 11, precedents that have been and will
be developed under the latter will be of significant assistance in interpreting the former.”).
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Here, in support of her contentions that the Debtor and/or his attorney have violated either
Rule 9011 or § 1927, Ms. Davant alleges that: (1) the Debtor is currently in contempt of the Taylor
County Family Court and filed bankruptcy to avoid the enforcement of the contempt order – filing
8 days before a scheduled contempt hearing; (2) the Debtor misrepresented that he made efforts to
purge himself of contempt at his bankruptcy meeting of creditors; (3) the Debtor told her that she
“would never see a dime” in connection to what was owed her in her divorce proceeding; (4) the
Debtor filed a September 29, 2009 Petition for Modification in the Taylor County Family Court,
which Ms. Davant claims is improper and frivolous, and later withdrew it on the phantom assertion
that he had discovered a remedy for his financial situation; (5) the Debtor filed a Motion for
Modification of Parenting Plan and Motion for Contempt, the hearing on which occurred in Taylor
County on March 31, 2010, which Ms. Davant claims is frivolous and contains numerous
misrepresentations; (6) the Debtor is attempting to discharge a medical bill that is part of his child
support obligations and has failed to make his children’s insurance co-payments; (7) the Debtor
misrepresented at his meeting of creditors that he has complied with all his child support obligations;
(8) the Debtor misrepresented facts in his bankruptcy petition and schedules, such as claiming his
children as dependents, inflating expenses related to his children, improperly valuing the marital
home, falsifying the amount of liens on the marital home, including Tom Dyer, an attorney, as an
unsecured creditor, that was paid by Ms. Davant in regards to a criminal proceeding initiated by the
Debtor against her;2 (9) the Debtor has failed to pay the mortgage at 4 Greenmeadow Lane, and his
other debts, despite having the means to pay them; (10) the Debtor moved out of the former marital
home and is attempting to discharge that mortgage obligation; (11) in April 2009, the Debtor stated
that his credit card debt was about $5,800, but in his November 2009 bankruptcy, he lists credit card
debt of about $47,500.
In addition to the above alleged acts, Ms. Davant claims that the Debtor and his attorney
have engaged in a pattern of filing frivolous claims for the purpose of harassment, delay, and to
cause Ms. Davant to incur attorney’s fees. This alleged pattern includes: (a) filing a false police
report against Ms. Davant; (b) making a police report that Ms. Davant’s fiancé had abused the
2 The debt owed to Tom Dyer was subsequently removed by the Debtor in an amended
Schedule F.
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Debtor’s autistic, minor child; (c) filing a January 16, 2009 Emergency Petition for Modification of
Parenting Plan, which was denied, (d) entering into a February 2009 Mediation Agreement regarding
child custody, and then breaching that agreement; (e) appealing the Family Court’s findings on April
5, 2009, regarding custody and apportioning expenses, which decision was affirmed by the Circuit
Court; (f) filing a Motion to Stay the April 5, 2009 order, which was denied; (g) filing a false, June
7, 2009 police report against her with the West Virginia State Police; (h) filing a false June 10, 2009
police report against her with the Magistrate Court of Taylor County, including a domestic violence
charge against Ms. Davant’s new husband; and (i) making a November 2009 accusation against Ms.
Davant and her new husband of child abuse as part of a psychiatric evaluation report needed to get
medical services for the parties’ autistic son.
Even taking the above allegations made by Ms. Davant as true, she has failed to demonstrate
that she is entitled to relief in this court for either a violation of Rule 9011 or § 1927. Regarding
Rule 9011, this court is only concerned with documents filed by the Debtor in this court. What the
Debtor may have filed in the Family Court of Taylor County, and the penalty, if any, for those
filings is a matter reserved to the Family Court of Taylor County. Thus, allegations (1), (4), (5), and
(c),(e), 	(f), listed above, cannot form a basis for imposing Rule 9011 sanctions in this court.
Likewise, Rule 9011 requires that documents be filed with this court. Consequently, allegations (2),
(3), (7), (9), 10), (11), and (a), (b), (d), (g), (h), and (i) provide no grounds to impose sanctions under
Rule 9011. That leaves only allegation (6) and (8) as a possible grounds for Rule 9011 sanctions.
Concerning allegation (6), the court is not aware of any specific document filed in this court
whereby the Debtor is attempting to avoid making his children’s medical insurance co-pays. The
Debtor did list as an unsecured debt an amount owed to the Center for Autism Related Disorders on
Schedule F, his schedule unsecured debts, but the Debtor is required to list all unsecured debts on
Schedule F, and listing that entity as unsecured (whether or not the debt is subject to being
discharged) is nothing more than what is required by the Bankruptcy Code. Thus, allegation (6)
cannot form a basis for Rule 9011 sanctions.
Concerning allegation (8) – his alleged misrepresentation of facts on his bankruptcy
schedules, the court finds no sanctionable conduct. More specifically, listing his son and daughter
as dependents does not necessarily mean that they qualify as dependents under the Internal Revenue
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Code. Likewise, the court finds no impropriety in listing Tom Dyer, Ms. Davant’s criminal attorney,
as a possible creditor on his original Schedule F. 	Finally with regard to allegedly inflating the
expenses related to the care of his children, improperly valuing the marital home, and falsifying the
amount of liens against the marital home, Ms. Davant has failed to state how the Debtor’s statements
are baseless, intended to harass her, cause her unnecessary delay, or increase the costs of this
litigation. 	The Debtor did acknowledge an error in his schedules regarding the amount of debt
secured by the former marital residence, but that mistake was apparently addressed at his meeting
of creditors, and the Debtor filed an amended Schedule D to correct the misstatement. In sum, the
amount and nature of the Debtor’s alleged misrepresentations on his schedules do not, in this court’s
view, warrant the imposition of Rule 9011 sanctions.
Regarding the alleged violation(s) of 28 U.S.C. § 1927, the only documents filed in this court
that are of relevance are the Debtor’s bankruptcy petition and his responses to pleadings and motions
filed in this adversary proceeding, which was initiated by Ms. Davant. The Debtor has not
“multiplied proceedings” before this court sufficient to be held liable under § 1927.
B. 	Motion to Dismiss Bankruptcy Petition3
In support of her motion to dismiss the Debtor’s bankruptcy filing, Ms. Davant incorporates
all the allegations underlying her motion for Rule 9011 and § 1927 sanctions, and, in addition,
argues that the totality of the circumstances of this case demonstrates that the bankruptcy petition
was filed in bad faith.
As stated by the United States Supreme Court, “[t]he principal purpose of the Bankruptcy
Code is to grant a ‘fresh start’ to the ‘honest but unfortunate debtor.’” Marrama v. Citizens Bank,
549 U.S. 365, 367 (2009) (citation omitted). Under 11 U.S.C. § 1307(c), a court may convert or
dismiss a Chapter 13 bankruptcy case for “cause.” In determining whether “cause” is present to
dismiss or convert, the court may consider whether a debtor filed the Chapter 13 bankruptcy petition
3 As the legal basis for seeking dismissal of the Debtor’s bankruptcy case, Ms. Davant
cites to Fed. R. Bankr. P. 1017 and 9013, and 11 U.S.C. §§ 1112(b) and 1307(c). The Federal
Rules of Bankruptcy Procedure cited by Ms. Davant provide her with no right of relief.
Likewise, this is a Chapter 13 case – not a Chapter 11 case – and § 1112(b) is not applicable.
Section 1307(c) provides a list of “cause” to either dismiss or convert a Chapter 13 case and the
court will adjudicate her motion pursuant to § 1307(c).
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in bad faith. E.g., Marrama, 549 U.S. at 379 (2009) (“Under § 1307(c), a Chapter 13 proceeding
may be dismissed or converted to Chapter 7 ‘for cause.’ One such ‘cause’ recognized by bankruptcy
courts is ‘bad faith.’”); In re Kestell, 99 F.3d 146, 149 (4th Cir. 1999) (“[T]he Bankruptcy Code, both
in general structure and in specific provisions, authorizes bankruptcy courts to prevent the use of
the bankruptcy process to achieve illicit objectives.”); Carolin Corp. v. Miller, 886 F.2d 693, 698
(4th Cir. 1989) (finding that a good faith requirement to filing a bankruptcy petition is implicit in the
Bankruptcy Code)
In determining if bad faith is present, the court is to consider the totality of the
circumstances, focusing on “the fairness involved in the initiation of Chapter 13 bankruptcy
proceedings . . . .” In re Love, 957 F.2d 1350, 1355, 1360 (7th Cir. 1992). In viewing the totality of
the circumstances, the court should consider “objective evidence of a fundamentally unfair result
and subjective evidence that a debtor filed a petition for an fundamentally unfair purpose that was
not in line with the spirit of the Bankruptcy Code . . . .” Love, 957 F.2d at 1357. The moving party
under 11 U.S.C. § 1307(c) bears the burden of proof, and a court should be “reluctant to dismiss a
petition under Section 1307(c) for lack of good faith.” Love, at 1355-56. Factors that a court should
consider in determining the existence of a good faith filing include: (1) the nature of the debt,
including the question of whether the debt would be nondischargeable in a Chapter 7 proceeding;
(2) the timing of the petition; (3) how the debt arose; (4) the debtor’s motive in filing the petition;
(5) how the debtor's actions affected creditors; (6) the debtor’s treatment of creditors both before and
after the petition was filed; and (7) whether the debtor has been forthcoming with the bankruptcy
court and the creditors. Id. at 1357; see also Marrama, 549 U.S. at 375 n.11 (stating that conduct
sufficient to constitute bad faith under § 1307(c) “must, in fact, be atypical” and is limited to
extraordinary cases).
Here, Ms. Davant accuses the Debtor of filing bankruptcy for an improper purpose, namely
to avoid the enforcement of the orders of the Taylor County Family Court, to harass her, to delay
proceedings, and to cause her additional expenses. Ms. Davant further infers that the Debtor has
incurred numerous debts in contemplation of bankruptcy, and is using his bankruptcy filing as a
sword, not a shield, against her. In her view, this bankruptcy filing is part of the Debtor’s non-
economic goal that she “not see a dime.” If true, such allegations may support a finding that the
Debtor’s case was filed in bad faith. See, e.g., Huckfeldt v. Huckfeldt (In re Huckfeldt), 39 F.3d 829,
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832-33 (8th Cir. 1994) (“C. Huckfeldt filed a Chapter 7 petition to frustrate the divorce court decree
and to push his ex-wife into bankruptcy. He then manipulated his immediate earnings to ensure that
the Chapter 7 proceeding would achieve these non-economic motives. . . . . [S]uch conduct has long
been considered unworthy of bankruptcy protection.”).
The Debtor denies Ms. Davant’s allegations of nefarious motives in his bankruptcy filing.
Instead, he asserts that he has been unable to make the lump sum equitable distribution payment
ordered by the Family Court to Ms. Davant. He claims that he did not file bankruptcy until Ms.
Davant garnished his wages, and, moreover, he asserts that through his Chapter 13 plan, he will pay
his domestic support obligations to Ms. Davant. The Debtor states that he seeks to employ one of
the legitimate aims of Chapter 13, which is to obtain a discharge of his debts (at least those not
excepted from discharge).
In short, the court cannot rule on Ms. Davant’s motion to dismiss the Debtor’s bankruptcy
case in the absence of an evidentiary hearing, where the court can weigh the evidence and credibility
of the witnesses.
III. CONCLUSION
The court will deny Ms. Davant’s motion to sanctions under Fed. R. Bankr. P. 9011 and 28
U.S.C. § 1927, and will set a scheduling conference on Ms. Davant’s motion to dismiss the Debtor’s
bankruptcy petition as a bad faith filing under 11 U.S.C. § 1307(c).4
4 Ms. Davant, proceeding pro se, is held to a lesser standard in her pleadings than ones
drafted by an attorney. White v. White, 886 F.2d 721, 722-23 (4th Cir. 1989). Ms. Davant filed
her motion to dismiss the Debtor’s bankruptcy case in the context of her adversary proceeding
against the Debtor to declare her marital debts excepted from his anticipated Chapter 13
discharge. A motion to dismiss a bankruptcy case under § 1307(c) should be filed in the
Debtor’s main bankruptcy case – not this adversary proceeding. Consequently, the court will
direct the Clerk to docket the relevant documents in the Debtor’s main bankruptcy case, No.
1:09-bk-02564, and all further proceedings and filings related to the motion to dismiss shall take
place under that case number.
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