Personal Attacks on Trustee Not Sanctionable – But Not Helpful Either

Posted by NCBRC - May 31, 2017

Invective and personal attacks on the chapter 7 trustee did nothing to further the debtors’ arguments in their motion to dismiss but did not amount to sanctionable conduct. Geltzer v. Brizinova (In re Brizinova), No. 12-42935, Adv. Proc. No. 15-1073 (Bankr. E.D. N.Y. March 3, 2017) (on appeal to the District Court for the Eastern District of New York, No.17-1465).

The trustee, Robert Geltzer, moved for a contempt order and sanctions against Karimvir Dahiya, counsel for the debtors, Estella Brizinova and Edward Soshkin, based on statements he made in connection with a motion to dismiss an adversary complaint in the debtors’ bankruptcy case. In the motion to dismiss, Mr. Dahiya stated, among other things, “Geltzer having realized that he has gotten money from the sons, he could extract more, he has begun his extortionist journey again.” Generally, Mr. Geltzer maintained that Mr. Dahiya’s statements were part of a personal crusade against him, were vexatious and in bad faith, and represented a course of conduct Mr. Dahiya generally followed against bankruptcy trustees.

Mr. Geltzer also sought sanctions for a statement in the reply brief for the motion to dismiss concerning another case, Geltzer v. Ng (In re Ng), No. 12-1343, in which Mr. Dahiya represented the debtor. In the reply brief, Mr. Dahiya said of the settlement in Ng that it “was an Agreement, that was signed only on the basis of being urged: ‘Sometimes, it takes a stronger person to walk away.’ I decided to walk away.” Mr. Geltzer argued that the advice to “walk away,” was given by the mediator and its inclusion in the briefing in the Brizinova case was an impermissible disclosure of a statement made during mediation. He also argued that the statement was in contravention of the Stipulated Order and Mediation Order in the Ng case under which Mr. Dahiya agreed to comply with rules of professional conduct and the Local Bankruptcy Rules.

Beginning with Mr. Dahiya’s alleged violation of the Stipulated Order and Mediation Order in the Ng case, the Brizinova court found that an order out of another court enjoining certain conduct should be addressed by the court issuing the injunction. The Brizinova court therefore denied the motion for sanctions without prejudice with respect to that claim.

The court also addressed whether Mr. Dahiya’s comment concerning the Ng case, violated Local Rule 9019-1(1) which stresses nondisclosure of “views and suggestions of the mediation participants with respect to possible pathways to a settlement, any settlement proposals advanced by a party or the mediator, and whether a mediation participant was willing to accept a mediator’s proposal.” It found that, although Mr. Geltzer asserted that the comment was made by the mediator, Mr. Dahiya did not attribute the statement to any particular participant in the mediation process and the comment was otherwise too vague to violate the Local Rule.

Turning to Mr. Geltzer’s claims under section 105(a), Mr. Dahiya argued that the court did not have inherent power to sanction him for his conduct under that section. The court disagreed. Section 105(a) permits a court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.” The court found that under the Code and Second Circuit precedent, a court has “the inherent authority to supervise the proceedings that take place before it and, as part of that authority, the ability to impose sanctions when necessary.”

The Second Circuit has found that to justify sanctions an attorney’s conduct must be entirely meritless, and he must have acted for improper purposes. Bad faith is essential to sanctions under section 105(a). Turning to the language Mr. Geltzer sought to have sanctioned, including “extortionist,” “threaten into further submission,” “unexpected accretion,” “frivolous,” and “dig more,” the court found that while the invectives likely detracted from any valid argument the debtors might have made, the language appeared to be in furtherance of Mr. Dahiya’s representation of the debtors. For that reason, the element of bad faith was not present and the language did not merit sanctions under section 105(a).

Finally, the court addressed Mr. Geltzer’s argument that Mr. Dahiya’s personal comments about him were in violation of the New York’s Rules of Professional Conduct, 22 NY CRR §§ 1200 et seq. which prohibit an attorney from “making multiple derogatory and unprofessional attacks upon the personal attributes of another attorney,” knowingly advance a claim that is unwarranted under the law, or otherwise fail to behave with a threshold amount of decorum in court proceedings. The court found that “viewed in the context of the Motion to Dismiss, the statements are more accurately viewed as rhetorical flourishes than as knowing and material statements that are false.” Moreover, the language did not cross the line between zealous representation and sanctionable expressions of personal opinion as to “the justness of a cause, the credibility of a witness, the culpability of a civil litigant or the guilt or innocence of the accused.” While Mr. Dahiya mentioned “extortion” in his list of invectives against Mr. Geltzer, he did not threaten to pursue criminal charges against him.

In conclusion, the court found that Mr. Dahiya’s statements in the context of the otherwise appropriate motion to dismiss, were not sanctionable. It denied the motion without prejudice with respect to Mr. Dahiya’s possible violation of the Ng court’s injunction order, and denied the remaining claims with prejudice.

Brizinova Bankr. ED NY opinion March 2017

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