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Alpern v. Lieb

United States Court of Appeals, Seventh Circuit
Dec 7, 1993
11 F.3d 689 (7th Cir. 1993)

Summary

holding Rule 11 sanction proceeding was exempt from automatic stay

Summary of this case from Cooper v. Dall. Police Ass'n

Opinion

Nos. 92-2035, 92-3501.

Submitted October 27, 1993.

Decided December 7, 1993.

Eugene W. Alpern, pro se.

Robert G. Toews, Office of the Atty. Gen., Chicago, IL, Joan S. Cherry, Asst. State's Atty., Chicago, IL, for Philip S. Lieb.

Rosalyn B. Kaplan, Asst. Atty. Gen., Robert K. Blain, Chicago, IL, for Allen S. Gabe.

Robert K. Blain, Chicago, IL, for Phyllis Alpern.

Appeal from the United States District Court for the Northern District of Illinois.

Before POSNER, Chief Judge, and CUMMINGS and BAUER, Circuit Judges.


The plaintiff filed a suit in the district court, which was dismissed as frivolous; and he has appealed. The defendants filed a motion in the district court for sanctions under Fed.R.Civ.P. 11. The motion was granted, and the plaintiff ordered to pay $3,350 to the defendants in attorney's fees as the sanction for filing a frivolous suit; the plaintiff has appealed this order too. While the appeals were pending, the plaintiff filed a petition for bankruptcy under Chapter 7 of the Bankruptcy Code, and he has now moved us to stay both appeals pursuant to 11 U.S.C. § 362, the automatic-stay provision. No trustee has been appointed, and the debtor has been proceeding both in the district court and in this court pro se.

The appeal from the dismissal of the plaintiff's suit is not subject to the automatic stay, because the suit was filed by rather than against the debtor. Martin-Trigona v. Champion Federal Savings Loan Ass'n, 892 F.2d 575, 577 (7th Cir. 1989); Carley Capital Group v. Fireman's Fund Ins. Co., 889 F.2d 1126 (D.C. Cir. 1989) (per curiam). Although for purposes of appeal the ruling on a Rule 11 motion is a "separate judicial unit," Cassidy v. Cassidy, 950 F.2d 381, 382 (7th Cir. 1991) — which is why there are two appeals before us — it does not necessarily follow that the motion should be treated for purposes of the automatic stay as a suit against the debtor (we can find no cases on the point). But probably it should be. The concern behind the automatic stay is that until the appointment of a trustee, the debtor may lack an adequate incentive to defend the suits against him; and once the trustee is appointed, he should be allowed to concentrate on marshaling the debtor's assets and preparing a plan of liquidation without the distraction of defending against a flurry of last-minute suits by disappointed creditors. Martin-Trigona v. Champion Federal Savings Loan Ass'n, supra, 892 F.2d at 577; In re Holtkamp, 669 F.2d 505, 507 (7th Cir. 1982); Maritime Electric Co. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir. 1991). This concern argues in favor of treating the Rule 11 motion and resulting appeal as if it were a separate action against the debtor.

But we agree with the defendants that a proceeding to impose sanctions under Rule 11 is exempt from the automatic stay, pursuant to 11 U.S.C. § 362(b)(4), which exempts actions brought pursuant to governmental police or regulatory powers. Papadakis v. Zelis, 230 Cal.App.3d 1385, 282 Cal.Rptr. 18, 21-22 (1991); O'Brien v. Fischel, 74 B.R. 546, 550 (D.Haw. 1987); but see In re Revere Copper Brass, Inc., 29 B.R. 584, 587-88 (Bankr.S.D.N.Y. 1983). We have found no federal appellate decisions on the question. Closest is Wade v. State Bar of Arizona, 948 F.2d 1122 (9th Cir. 1991) (per curiam), which held that attorney disciplinary proceedings instituted by the state bar are exempt under this provision from the automatic stay. It is not very close, because section 362(b)(4) speaks of the "commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power," and the motion for Rule 11 sanctions was filed by a private person. We do not think this is conclusive against the application of section 362(b)(4), but it suffices to distinguish Wade.

Rule 11 is not a simple fee-shifting provision, designed to reduce the net cost of litigation to the prevailing party. Compare 42 U.S.C. § 1988. It directs the imposition of sanctions for unprofessional conduct in litigation, and while the form of sanction is often and was here an order to pay attorney's fees to the opponent in the litigation, it is still a sanction, just as an order of restitution in a criminal case is a sanction even when it directs that payment be made to a private person rather than to the government. The Rule 11 sanction is meted out by a governmental unit, the court, though typically sought by a private individual or organization — a nongovernmental litigant, the opponent of the litigant to be sanctioned. There is no anomaly, given the long history of private enforcement of penal and regulatory law. The private enforcer, sometimes called a "private attorney general," can be viewed as an agent of the "governmental unit," the federal judiciary, that promulgated Rule 11 in order to punish unprofessional behavior. The fact that the sanction is entirely pecuniary does not take it out of section 362(b)(4). In re Commonwealth Cos., 913 F.2d 518, 522-23 (8th Cir. 1990).

A litigant should not be allowed to delay the imposition of sanctions indefinitely by the expedient of declaring bankruptcy. Allowing him to do so would not only increase the number of bankruptcy filings but also create incentives for unprofessional conduct in litigation by firms or individuals teetering on the edge of the bankruptcy abyss.

The motion to stay the appeals is

DENIED.


Summaries of

Alpern v. Lieb

United States Court of Appeals, Seventh Circuit
Dec 7, 1993
11 F.3d 689 (7th Cir. 1993)

holding Rule 11 sanction proceeding was exempt from automatic stay

Summary of this case from Cooper v. Dall. Police Ass'n

holding that section 362(b) excepts an action to enforce Rule 11 sanctions

Summary of this case from In re Emerald Casino, Inc.

finding Rule 11 sanctions exempt from bankruptcy stay

Summary of this case from Roberts v. Bennaceur

concluding that post-petition Rule 11 sanctions were excepted from the automatic stay by § 362(b)

Summary of this case from RDLG, LLC v. Leonard (In re Leonard)

concluding that a proceeding to impose Rule 11 sanctions is exempt from the automatic stay under § 362(b) because "the sanction is meted out by a governmental unit, the court"

Summary of this case from In Matter of Phillips

excepting attorney disciplinary proceedings from automatic stays in bankruptcy

Summary of this case from Osicka v. Office of Lawyer Regulation

In Alpern v. Lieb, the Seventh Circuit similarly held that a proceeding to impose sanctions under Fed. R. Civ. P. 11 was excepted from the automatic stay of bankruptcy, even though the sanctions were monetary where the court ordered the debtor to pay attorneys' fees for his misconduct in a different proceeding.

Summary of this case from Kupperstein v. Schall (In re Kupperstein)

reasoning that imposition of Rule 11 sanctions is a "separate judicial unit" and should be considered an action against a debtor subject to the automatic stay independent of whether the stay applies to the proceedings in which the court imposed sanctions

Summary of this case from Parker v. Bain

In Alpern, the plaintiff appealed an order requiring him to pay attorneys' fees as a sanction under Federal Rule of Civil Procedure 11 for filing a frivolous lawsuit.

Summary of this case from Erhardt v. Baldassarre (In re Erhardt)

disallowing the debtor "to delay the imposition of [Rule 11] sanctions indefinitely by the expedient of declaring bankruptcy," reasoning that to allow the debtor to do so would create improper incentives for unprofessional conduct by those "teetering on the edge of the bankruptcy abyss"

Summary of this case from Lehman's Inc. of Anderson v. Hittle

addressing whether imposition of sanctions under Fed. R. Civ. P. 11 in favor of a litigant was exempt from the automatic stay, and concluding that it was

Summary of this case from In re Yelverton

In Alpern, the court allowed a private party to proceed under the police power exception, however, nothing in the decision indicates that the court intended a broader application outside the context of a sanctions proceeding.

Summary of this case from In re Edison Mission Energy

In Alpern, the Seventh Circuit Court of Appeals held that a proceeding for Rule 11 sanctions, filed by a private litigant, did not violate the stay because it was within the §362(b)(4) exception.

Summary of this case from Miller v. Kelley (In re Miller)

treating defendants' motion for NRCP 11 attorney fees as a separate action against the plaintiff bankruptcy debtor, but holding the stay inapplicable because actions brought pursuant to governmental police or regulatory powers are statutorily exempt from the stay

Summary of this case from Nanyah Vegas, LLC v. Rogich

treating defendants’ motion for Rule 11 attorney fees as a separate action against the plaintiff bankruptcy debtor, but holding the stay was inapplicable because actions brought pursuant to governmental police or regulatory powers are statutorily exempt from the stay

Summary of this case from Okoye v. Reza Design & Constr.

In Alpern v. Lieb (11 F.3d 689 [7th Cir 1993]), the District Court dismissed a plaintiff's action as being frivolous and imposed sanctions upon him.

Summary of this case from Janis v. Janis
Case details for

Alpern v. Lieb

Case Details

Full title:EUGENE W. ALPERN, PLAINTIFF-APPELLANT, v. PHILLIP S. LIEB, ALLEN S. GABE…

Court:United States Court of Appeals, Seventh Circuit

Date published: Dec 7, 1993

Citations

11 F.3d 689 (7th Cir. 1993)

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