United States District Court, E.D. North Carolina, Western Division
RICHARD B. SPOOR, Appellant,
JOHN M. BARTH, Appellee. IN RE: AMERLINK, LTD., Debtor. No. 14-145-8-CRA
W. FLANAGAN UNITED STATES DISTRICT JUDGE.
matter is before the court on appeal by defendant-appellant
Richard B. Spoor ("appellant"), from final order of
the United States Bankruptcy Court dated February 3, 2017,
(DE 1-1), denying appellant's revised motion for
sanctions against counsel for plaintiff-appellee John M.
Barth ("appellee"), including Michael J. Small,
Reginald B. Gillespie, Jr., and N. Hunter Wyche, Jr., and the
law firms of Foley & Lardner LLP and Wilson &
Ratledge, PLLC, which motion was filed in the course of an
adversary proceeding commenced by appellant September 12,
2014. The parties have submitted briefs on appeal, and in
this posture the issues raised are ripe for ruling. Because
the facts and legal arguments are adequately presented in the
briefs and record, the court dispenses with any argument, as
the same would not aid significantly the decisional process.
For the reasons that follow, the court affirms the bankruptcy
court's order denying sanctions.
adversary proceeding constitutes the latest in a series of
actions arising from events surrounding the demise of Amer
Link, Ltd. ("debtor"), a North Carolina corporation
engaged in the business of selling materials for construction
of log homes. According to the complaint, appellant founded
the debtor and was, at various times the CEO, Treasurer,
Chairman of the Board and majority shareholder. (DE 14-1 at 6
¶ 6). Appellee is the father of John M. Barth Jr.
("Barth Jr.") who became President and CEO of the
debtor in September 2006. (Id. ¶ 7).
petition for Chapter 11 bankruptcy, later converted to a
Chapter 7 proceeding ("the bankruptcy case"),
constitutes the first action leading to the instant
proceeding. In that action, the bankruptcy court for this
district appointed as trustee Stephen L. Beaman ("the
trustee") by order entered November 23, 2009. The
trustee filed an adversary proceeding naming as defendants,
among others, appellant and appellee. That adversary
proceeding concluded in settlement executed July 26, 2011.
The memorandum of settlement provides "[t]rustee
shall... to the fullest extent of his power and authority,
release any and all claims now known or hereafter acquired by
the Trustee or the estate against . . . [appellee] . .
." (DE 14-1 at 336). The bankruptcy court approved
settlement September 19, 2011.
to the complaint, between years 2011 and2014, appellant's
counsel represented various plaintiffs in actions litigated
before North Carolina courts (collectively, "the state
court actions") arising from facts surrounding the
debtor's bankruptcy, naming appellee as defendant in
each. In the first, third, and fourth state
court actions, filed October 5, 2011, May 22, 2014, and July
30, 2014, respectively, appellant was joined as plaintiff,
and, in the second action, filed February 14, 2012, appellant
was never joined as a party because, after the superior court
ordered that appellant be so joined, plaintiffs took
voluntary dismissal. Although each of the state court actions
arises from facts surrounding debtor's bankruptcy, the
North Carolina courts have determined that claims asserted in
the state court actions are distinct from claims waived by
the trustee where the state court plaintiffs suffered
injuries "separate and distinct from other [debtor]
shareholders or [debtor] itself." Spoor v.
Barth, 781 S.E.2d. 627, 636 ( N.C. Ct. App. 2016); see
Newton v. Barth, 788 S.E.2d. 653, 661 ( N.C. Ct.
App. 2016) ("To be sure, the allegations in the Newton
and Diorio Plaintiffs' complaints do relate to conduct
that undoubtedly harmed [debtor] itself. However, the
gravamen of the Newton and Diorio Plaintiffs' fraud and
[Unfair and Deceptive Trade Practices] claims is not merely
that they were injured by [debtor]' s collapse and the
resulting breach of its contractual obligations to them, but
instead that they never would have suffered any
injury if they had not been fraudulently induced into
entering into contracts with [debtor] as a result of
commenced this adversary proceeding September 12, 2014,
seeking declaratory judgment that the state court actions
could have been brought by the bankruptcy trustee and,
therefore, those actions are barred by the trustee's
release and must be dismissed where the state court
plaintiffs lack standing. Appellee also sought an injunction
requiring appellant to cause dismissal of the state court
actions and a pie-filing injunction prohibiting appellant
from filing any additional actions concerning issues
encompassed by the settlement agreement without prior
authorization of the court. On September 26, 2014, appellant
moved to dismiss the complaint pursuant to Federal Rules of
Civil Procedure 12(b)(6), (7), and 19(a), on the grounds that
appellee failed to state a claim, failed to join necessary
parties, that the court lacked jurisdiction, and that
appellee's request for injunctive relief was prohibited
under the Anti-Injunction Act, 28 U.S.C. § 2283. On
October 1, 2014, appellee filed a motion seeking injunctive
relief as described in the prayer for relief. On December 19,
2014, the bankruptcy court denied appellee's motion for
injunctive relief and granted appellant's motion to
dismiss the adversary proceeding.
dismissal appellant moved for sanctions pursuant to North
Carolina Rule of Civil Procedure 11, 28 U.S.C. § 1927,
11 U.S.C. § 105, and the court's inherent authority
as codified in part in Federal Rule of Bankruptcy Procedure
9011, on the ground that arguments advanced in support of
appellee's motion for injunctive relief, and in
opposition to appellant's motion to dismiss, were
frivolous and unnecessarily multiplied proceedings. After
hearing held January 4, 2017, the bankruptcy court denied the
motion by order entered February 3, 2017. The bankruptcy
court held that although appellee obtained none of the relief
sought in the complaint, appellee's filings were not
frivolous, vexatious, nor otherwise advanced in bad faith.
This appeal followed.
Standard of Review
court has jurisdiction to hear appeals from "final
judgments, orders, and decrees" of the bankruptcy court.
28 U.S.C § 158(a)(1). The court reviews the bankruptcy
court's legal determinations de novo. Ford Motor
Credit Co. v. Reynolds & Reynolds Co. (In re JKJ
Chevrolet MX 26 F.3d 481, 483 (4th Cir. 1994).
The court reviews the bankruptcy court's decisions on
sanctions for abuse of discretion. See In re Weiss.
111 F.3d 1159, 1169 (4th Cir. 1997). The court reviews the
bankruptcy court's findings of fact for clear error.
Green v. Staples (In re Greenl 934 F.2d 568, 570
(4th Cir. 1991). A finding of fact is "clearly
erroneous" when "although there is evidence to
support it, the reviewing court on the entire evidence is
left with the definite and firm conviction that a mistake has
been committed." Anderson v. City of Bessemer
City, 470 U.S. 564, 573 (1985). A court necessarily
abuses its discretion "if it base[s] its ruling on an
erroneous view of the law or a clearly erroneous assessment
of evidence." Cooter & Gell v. Hartmarx
Corp, 496 U.S. 384, 405 (1990).
Analysis of Sanctions Under the Court's Inherent
Authority, Fed.R.Bankr.P. 9011, and 11U.S.C.§105
arguments pertaining to the court's inherent authority to
issue sanctions and its authority to issue sanctions under
Federal Rule of Bankruptcy Procedure 9011 and 11 U.S.C.
§ 105 turn on similar legal ...