In a pair of cases, the Tenth Circuit laid down standards for awarding counsel fees as a result of misconduct, regardless of whether the sanction is imposed under Rule 11, the court’s inherent powers, or Section 105(a) of the Bankruptcy Code.
A bankruptcy appeal called on Chief District Judge Marcia S. Krieger of Denver to interpret the White and Farmer decisions from the Tenth Circuit in 1990 and 2015, respectively. She concluded that last year’s Farmer decision requires a bankruptcy court to utilize the White standards when imposing sanctions under Section 105(a).
The bankruptcy court had dismissed a former husband’s chapter 11 petition because, the judge said, it was filed to disrupt a matrimonial case and foster a scheme to divert money to the man’s fiancée. The bankruptcy court awarded the former wife $19,500 in compensation for her attorneys’ fees. The husband appealed.
Judge Krieger reversed and remanded because the bankruptcy court had not evaluated the fee award using White standards. She said that Farmer expanded White to cover punitive sanctions based on the court’s inherent authority, not just sanctions imposed under Rule 11.
If the primary purpose of awarding attorneys’ fees is to sanction someone for abuse of the judicial process, White standards must be used “regardless of the authority upon which imposition is founded,” Judge Krieger said.
Under White, Fees must be calculated for reasonableness using the lodestar method and must be the minimum to deter “undesirable behavior.” The court must also determine whether the offender can pay the sanction and take any other appropriate factors into consideration, such as the “offending party’s history” and the degree of malice or bad faith.