Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Blasingame

United States Bankruptcy Appellate Panel of the Sixth Circuit

November 7, 2016

In re: Earl Benard Blasingame; Margaret Gooch Blasingame, Debtors. Church Joint Venture, L.P.; Farmers & Merchants Bank, Plaintiffs-Appellees, Edward L. Montedonico, Jr., Plaintiff,
Earl Benard Blasingame, et al., Defendants, Martin A. Grusin, Appellant.

          Argued: March 1, 2016

         Appeal from the United States Bankruptcy Court for the Western District of Tennessee at Memphis. No. 08-28289-Jennie D. Latta, Judge.


          Edward M. Bearman, Memphis, Tennessee, for Appellant.

          Bruce W. Akerly, CANTEY HANGER LLP, Dallas, Texas, for Appellees.

         ON BRIEF:

          Edward M. Bearman,

          Gary E. Veazey, Memphis, Tennessee, for Appellant. Bruce W. Akerly, CANTEY HANGER LLP, Dallas, Texas, for Appellees.

          Before: HARRISON, HUMPHREY, and PRESTON, Bankruptcy Appellate Judges.


          C. KATHRYN PRESTON, Chief Bankruptcy Appellate Panel Judge.

         Attorney Martin A. Grusin ("Grusin") appeals the bankruptcy court's orders imposing sanctions against him. Sanctions were separately awarded against attorney Tommy L. Fullen ("Fullen"), but he did not appeal. The bankruptcy court imposed monetary sanctions pursuant to Federal Rule of Bankruptcy Procedure 9011 and 28 U.S.C. § 1927 in the form of attorney fees and expenses that Chapter 7 Trustee Edward L. Montedonico ("Trustee") and creditors Church Joint Venture ("CJV") and Farmers and Merchants Bank, Adamsville, TN ("FMB") (together, "Church Joint Venture"), [1] incurred relating to Debtors' bankruptcy case and litigation arising in that case.


         In analyzing Grusin's assertions that the bankruptcy court abused its discretion in awarding sanctions against him pursuant to Federal Rule of Bankruptcy Procedure 9011 and 28 U.S.C. § 1927, the Panel will address the following issues:

1. Did the bankruptcy court err in sanctioning Grusin pursuant to Federal Rule of Bankruptcy Procedure 9011 when the movant had not complied with the safe harbor requirement?
2. Did the bankruptcy court err in awarding sanctions pursuant to 28 U.S.C. § 1927 based upon an erroneous determination that Grusin's conduct vexatiously multiplied the proceedings?


         On January 21, 2015, the Panel entered an order finding that it has jurisdiction over this appeal because the Amended Order Setting Amount of Additional Sanctions was a final order and Appellant's Amended/Corrected Notice of Appeal was filed within the time provided by Federal Rule of Civil Procedure 58.

         The Panel reviews the bankruptcy court's imposition of sanctions under the abuse of discretion standard. Corzin v. Fordu (In re Fordu), 201 F.3d 693, 711 (6th Cir. 1999).

[A]n order granting sanctions under 28 U.S.C. § 1927 is . . . reviewed for an abuse of discretion. Dixon v. Clem, 492 F.3d 665, 671 (6th Cir. 2007). "An abuse of discretion is defined as a definite and firm conviction that the [court below] committed a clear error of judgment." Mayor and City Council of Baltimore, Md. v. W.Va. (In re Eagle-Picher Indus., Inc.), 285 F.3d 522, 529 (6th Cir. 2002) (internal quotation marks and citation omitted). The abuse of discretion must be more than harmless error to provide cause for reversal. Tompkin v. Philip Morris USA, Inc., 362 F.3d 882, 897 (6th Cir. 2004) (citations omitted). Sanctions based upon an erroneous view of the law or an erroneous assessment of the evidence are necessarily an abuse of discretion. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 2461, 110 L.Ed.2d 359 (1990); Salkil v. Mount Sterling Tp. Police Dept., 458 F.3d 520, 527-28 (6th Cir.2006). See also Parrott v. Corley, 266 F.Appx. 412, 415 n. 1 (6th Cir. 2008) (arguments concerning an error in statutory interpretation or due process related to sanctions are reviewed de novo).

In re Royal Manor Mgmt., Inc., 525 B.R. 338, 346 (B.A.P. 6th Cir. 2015), aff'd sub nom. Grossman v. Wehrle (In re Royal Manor Mgmt., Inc.), Case No.15-3146, 2016 WL 3268743 (6th Cir. June 15, 2016).


         In July and August of 2008, Earl Benard Blasingame ("Benard Blasingame") and Margaret Gooch Blasingame ("Margaret Blasingame") (together, "Debtors") met with Grusin and attorney Hank Shackelford ("Shackelford"), to discuss their financial situation, including their personal exposure in pending garnishment and debt collection proceedings.[2] On August 8, 2008, Margaret Blasingame executed an engagement letter with Grusin. Margaret Blasingame assigned to Grusin her interest in $20, 000 held by the McNairy Circuit Court [Tennessee] as payment for representation in connection with Church Joint Venture v. Aqua Air Aviation, and related issues arising from that case. Grusin, who was not a bankruptcy attorney, referred Debtors to Fullen, a local bankruptcy attorney. Debtors hired Fullen to represent them in a bankruptcy case. On August 15, 2008, Fullen signed a voluntary chapter 7 petition as the attorney for Debtors and filed it on their behalf.

         The petition, schedules, and statement of financial affairs ("SoFA"), as initially filed, did not disclose several trusts for which Debtors were trustees[3] (collectively, the "Trusts"), certain household goods, and the pre-petition assignment to Grusin. Debtors amended these documents multiple times throughout the proceedings. Following lengthy discovery, including 2004 examinations, Trustee and Church Joint Venture filed an adversary proceeding (Adv. No. 09-00482) against Debtors, the Trusts, the Corporations[4] and Debtors' children[5] on September 29, 2009. Pursuant to the complaint, Trustee and Church Joint Venture sought a declaration that the Trusts are alter egos or reverse alter egos of Debtors, sought avoidance of certain transfers, sought denial of Debtors' discharges under several Bankruptcy Code sections, and objected to Debtors' claim to certain exemptions. On April 26, 2010, Church Joint Venture and Trustee filed Plaintiffs' Motion for Partial Summary Judgment ("PSJ Motion") seeking judgment on those counts of the complaint objecting to Debtors' discharges.

         On June 30, 2010, attorney Joseph Townsend ("Townsend")[6] filed Defendants' Response To Plaintiffs' Motion For Partial Summary Judgment On Discharge Claims ("Response to PSJ Motion"). Grusin co-signed this filing as the attorney for the Trusts, the Corporations, Katherine Blasingame Church and Earl Benard Blasingame, Jr. (collectively with Debtors, "Defendants"). In the opening paragraph of the Response to PSJ Motion, Debtors asserted an "advice of counsel" defense and posited that the petition, schedules, SoFA, and amendments were correctly completed, arguing that the Trusts were not assets of Debtors. In their Response to PSJ Motion, Defendants also incorporated by reference an appendix of exhibits, including a Joint Affidavit[7]filed in support of a previous motion to dismiss the complaint as to the children, the Trusts, and the Corporations. Grusin co-signed the Joint Affidavit as attorney for the Corporations, the Trusts, Katherine Blasingame Church, and Earl Benard Blasingame, Jr. Defendants also requested the dismissal of the adversary proceeding against the non-debtor defendants in their Response to PSJ Motion. On February 22, 2011, the bankruptcy court entered an Order Granting in Part, Denying in Part Plaintiff's Motion for Partial Summary Judgment. The bankruptcy court denied Debtors' discharges pursuant to 11 U.S.C. § 727(a)(4) based on the errors and omissions in the petition and schedules. The bankruptcy court also denied Benard Blasingame's discharge pursuant to 11 U.S.C. § 727(a)(5) for failure to explain loss of assets. The bankruptcy court rejected Debtors' advice of counsel defense.

         On March 8, 2011, Debtors filed Debtors' Motion to Alter or Amend Judgment. This filing was signed by Townsend, on behalf of the Law Offices of Tommy L. Fullen, and included Fullen's name in the signature block. Debtors attempted to bolster their advice of counsel defense by filing two similar affidavits executed by Grusin and Fullen. In his affidavit, Fullen admitted his mistake in failing to disclose the Trusts. Grusin's affidavit admitted that he offered advice to Fullen and Debtors that the Trusts were not assets of the bankruptcy estate and that "there was no need for the Debtors to add those Trusts and/or Corporations nor the benefits they received from those Trusts and/or Corporations, on their Petition for Bankruptcy." (Grusin Aff. at 2-3, Adv. No. 09-00482 ECF No. 126-1). The bankruptcy court denied the motion.

         Following a motion by Church Joint Venture, the bankruptcy court entered an order disqualifying Grusin, Fullen, and Townsend as counsel for Debtors and other defendants. On April 8, 2013, the bankruptcy court granted a motion to set aside the judgment pursuant to Federal Rule of Civil Procedure 60(b) (the "Rule 60(b) Motion"), brought by Debtors' new counsel, David Cocke ("Cocke").[8] Grusin gave deposition and direct testimony in connection with the trial on the complaint seeking denial of Debtors' discharge, during which he attempted to explain the advice he had given Debtors: Grusin asserted that he had spoken "inartfully" in his affidavit. He explained that the advice he had given Debtors related only to whether the Trusts were protected under Tennessee law and, thus, not a part of the estate. He further asserted that he did not know whether Debtors had a duty to disclose the Trusts on their bankruptcy petition, schedules, and SoFA and had not intended to give Debtors advice on that question.

         On January 30, 2012, the bankruptcy court entered an Order Granting Motion for Derivative Standing, allowing Church Joint Venture to bring a malpractice action against Grusin and Fullen on behalf of the bankruptcy estate. Following the filing of the malpractice action, Church Joint Venture filed a Motion for Sanctions Against Tommy L. Fullen and Martin A. Grusin ("Sanctions Motion").

         In the Sanctions Motion, Church Joint Venture requested sanctions for abuse of the litigation process, relying on Federal Rule of Bankruptcy Procedure 9011, 28 U.S.C. § 1927, and the inherent power of the court. Church Joint Venture asserted that the bankruptcy case should never have been filed and that Fullen and Grusin exhibited gross negligence in handling the case from the start, which, parenthetically, would likely cost Debtors their discharge. Church Joint Venture posited that Grusin and Fullen exhibited a total lack of responsibility toward the completion of Debtors' Schedules and SoFA, and total failure to responsibly advise Debtors post-petition with respect to timely filing amendments or supplements and defending Debtors in the adversary proceeding. Further, they accused Fullen and Grusin of changing their stories under oath and being "less than candid with the Court." Id. at 26. Church Joint Venture sought payment of attorney fees, costs, and expenses related to attendance at 2004 examinations, filing and prosecution of the objection to discharge, responding to the motions for reconsideration of the order granting partial summary judgment, and the prosecution of the appeal from the order that granted the Rule 60(b) Motion. Church Joint Venture also requested that Fullen and Grusin be ordered to disgorge all fees and/or property received from Debtors for legal services related to the case, attend 25 hours of ethics courses, provide 40 hours of pro bono work and make a $5000 donation to a local pro bono or legal services organization or program. Additionally, Church Joint Venture requested that Fullen and Grusin be banned from practicing law in the bankruptcy court for the Western District of Tennessee and be referred to the State Bar of Tennessee for additional discipline.

         The bankruptcy court entered its Order Granting Sanctions on July 16, 2014. (Order Granting Sanctions, Adv. No. 09-00482 ECF No. 528). At the outset, the bankruptcy court recounted the procedural history of the case, noting that the discharge trial and malpractice case were on-going. The court then undertook an analysis of each of ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.