The Sixth Circuit joined the Second, Third and Seventh Circuits in holding that a bankruptcy court is a “court of the United States.”
The Ninth and Tenth Circuits have held that bankruptcy courts are not courts of the U.S.
To decide another case where the outcome would either elevate or deprecate the status of bankruptcy courts, the Supreme Court should grant certiorari. Since he would remain liable even after winning in the Supreme Court, the lawyer who lost in the Sixth Circuit may not pursue a final appeal.
The issue arose in the Sixth Circuit following the bankruptcy court’s imposition of $207,000 in sanctions against an attorney. Upheld in district court, the bankruptcy judge imposed sanctions under both 28 U.S.C. Section 1927 and the court’s inherent powers under Section 105 of the Bankruptcy Code.
Section 1927 enables “any court of the United States” to impose sanctions on an attorney who “unreasonably and vexatiously” multiplies the proceedings. On appeal to the Tenth Circuit, the sanctioned attorney contended that the bankruptcy court is not a “court of the United States” and thus cannot sanction under Section 1927.
Noting the split among the circuits, Circuit Judge Helene N. White said in the opinion on June 15 that her circuit has not addressed the question in a reported opinion. In two unreported decisions, the Tenth Circuit said that bankruptcy courts are courts of the U.S.
Without elaboration, Judge White found those decisions “persuasive” and sided with the Second, Third and Seventh Circuits.
A contrary ruling on “court of the U.S.” would not have affected the outcome because Judge White also held that sanctions were proper under Section 105. She held that the lawyer’s conduct justified all the sanctions imposed by the bankruptcy court, because the lawyer’s baseless litigation and appeals delayed the trustee in making distributions to unsecured creditors and diminished the estate.
The sanctioned attorney did not respond to an e-mail inquiring whether he might file a certiorari petition.