Allen et al v. Fitzgerald

Response re Notice

W.D. Va.March 21, 2019

JUSTIN E. SIMMONS (540) 983-7795 jsimmons@woodsrogers.com {2457304-1, 116760-00002-01} P.O. Box 14125, Roanoke, Virginia 24038-4125 10 S. Jefferson Street, Suite 1400, Roanoke VA 24011 P (540) 983-7600  F Main (540) 983-7711 Direct (540) 904-4545 w w w . w o o d s r o g e r s . c o m Charlottesville  Lynchburg  Richmond  Roanoke March 21, 2019 Hon. Julia C. Dudley, Clerk United States District Court Western District of Virginia 210 Franklin Road S.W., Ste. 540 Roanoke, VA 24011-2208 Re: Allen v. Fitzgerald, Nos. 7:18-cv-00134 and 5:18-cv-00057 Appellants’ Response to United States Trustee’s (“UST”) Citation of Supplemental Authority, dated March 14, 2019 [Docket #134], as to Law Solutions Chicago LLC, et al. v. Corbett, 1:18-cv-00677-AKK, 2019 WL 1125568 (N.D. Ala. Mar. 12, 2019) (“Corbett”), pursuant to Federal Rule of Bankruptcy Procedure 8014(f) Dear Ms. Dudley: This appeal is largely about whether the bankruptcy court appropriately used its inherent power to impose severe monetary and non-monetary sanctions on Appellants. Appellants argue that those sanctions must be vacated because they are founded upon an unprecedented expansion of the inherent power. That power, while broad, can only support sanctions for litigation misconduct that occurred in the case before the court, and against lawyers who had contact with that court. Imposing inherent-power sanctions was particularly inappropriate because the bankruptcy court refused to award relief under 11 U.S.C. §526(c), and thus “thwart[ed]” the statute that Congress enacted specifically to punish “debt relief agenc[ies]” like UpRight. United States v. Aleo, 681 F.3d 290, 307 (6th Cir. 2012) (Sutton, J., concurring). This appeal, therefore, requires the Court to analyze whether the bankruptcy court exceeded the permissible scope of the inherent power. Corbett is irrelevant to that analysis. There, the bankruptcy court sanctioned UpRight because it found that UpRight had breached a settlement agreement with the bankruptcy administrator, and thus had also violated the court’s order approving that settlement. The district court affirmed an 18-month suspension on UpRight filing new cases as well as a $150,000 sanction. But it did not do so only based on the inherent power and §105, as the UST misleadingly states. Rather, the monetary sanctions were civil penalties imposed under Bankruptcy Rule 9011(c) and 11 U.S.C. §§526(c) and 707(b)(4)(B), not the inherent power, and were affirmed as appropriate exercises of that statutory and rule-based authority. 2019 WL 1125568, at *5-9. Corbett is inapposite because, unlike here, the sanctions affirmed were not founded upon the inherent power. Case 7:18-cv-00134-MFU Document 136 Filed 03/21/19 Page 1 of 3 Pageid#: 23645 Hon. Julia C. Dudley March 21, 2019 Page 2 {2457304-1, 116760-00002-01} And while the practice suspension in Corbett was based on the inherent power, there was no suggestion, as there is here, that the bankruptcy court had exceeded that power by sanctioning lawyers who indisputably had no contact with that court. Corbett is simply a routine application of the principle that a federal court has the power to control admission to its bar and to discipline attorneys who appear before it. Appellants therefore submit that Corbett does not “support[]” the judgment below. Sincerely, WOODS ROGERS PLC /s/Justin E. Simmons Richard C. Maxwell (VSB No. 23554) Christopher W. Stevens (VSB No. 41931) Justin E. Simmons (VSB No. 77319) Woods Rogers PLC P.O. Box. 14125 Roanoke, VA 24038-4125 (540) 983-7600 (t.) (540) 938-7711 (f.) rmaxwell@woodsrogers.com cstevens@woordsrogers.com jsimmons@woodsrogers.com Brian L. Shaw (pro hac vice) Terence G. Banich (pro hac vice) Fox Rothschild LLP 321 N. Clark Street, Ste. 800 Chicago, IL 60654 (312) 541-0151 (t.) bshaw@foxrothschild.com tbanich@foxrothschild.com Counsel for Defendants-Appellants Case 7:18-cv-00134-MFU Document 136 Filed 03/21/19 Page 2 of 3 Pageid#: 23646 Hon. Julia C. Dudley March 21, 2019 Page 3 {2457304-1, 116760-00002-01} CERTIFICATE OF SERVICE I hereby certify that on March 21, 2019, I filed the foregoing letter using the Court’s CM/ECF system, which will send notice of the filing to the following counsel of record: Sumi Sakata Department of Justice Executive Office of United States Trustees 441 G St., NW, Suite 6150 Washington, DC 20530 Margaret K. Garber W. Joel Charboneau Office of the United States Trustee 210 First Street SW, Suite 505 Roanoke, VA 24011 Counsel for Plaintiff-Appellee /s/Justin E. Simmons Case 7:18-cv-00134-MFU Document 136 Filed 03/21/19 Page 3 of 3 Pageid#: 23647