In Re Cadillac Ex Rel. DeLorean & DeLorean Cadillac, Inc.

265 B.R. 574, 2001 Bankr. LEXIS 996, 38 Bankr. Ct. Dec. (CRR) 57
CourtUnited States Bankruptcy Court, N.D. Ohio
DecidedAugust 9, 2001
Docket19-10526
StatusPublished
Cited by12 cases

This text of 265 B.R. 574 (In Re Cadillac Ex Rel. DeLorean & DeLorean Cadillac, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Cadillac Ex Rel. DeLorean & DeLorean Cadillac, Inc., 265 B.R. 574, 2001 Bankr. LEXIS 996, 38 Bankr. Ct. Dec. (CRR) 57 (Ohio 2001).

Opinion

JOINT MEMORANDUM OF OPINION

PAT E. MORGENSTERN-CLARREN, Bankruptcy Judge.

Following their arrest for attempted theft and forgery at the Cadillac by DeLo-rean dealership, and after being arraigned and bound over on those charges by Lakewood Municipal Court Judge Patrick Carroll, Thomas Carnes, Ronald Lutz, and Matthew Perri (“Petitioners”) filed involuntary Chapter 7 bankruptcy petitions *578 against DeLorean and Judge Carroll. Because the statements in the petitions were not true, and because Judge Carroll was protected by judicial immunity, this Court granted summary judgment to DeLorean and Judge Carroll and dismissed the petitions. In re Cadillac by DeLorean, 262 B.R. 711 (Bankr.N.D.Ohio 2001).

DeLorean and Judge Carroll now move for sanctions under 11 U.S.C. § 803(i) and Federal Rule of Bankruptcy Procedure 9011. 1 Asserting that Petitioners’ filing was unreasonable and done in bad faith, DeLorean asks for costs and attorneys’ fees, as well as compensatory and punitive damages. Judge Carroll requests costs, attorneys’ fees, and punitive damages.

For the reasons stated below, the Court grants DeLorean’s motion in part, awarding costs, and attorneys’ fees under § 303(i)(l), as well as punitive damages under § 303(i)(2)(B). The Court denies DeLorean’s request for compensatory damages because there was insufficient evidence to support the claim. Judge Carroll’s motion is granted under § 303.

JURISDICTION

Jurisdiction exists under 28 U.S.C. § 1334 and General Order No. 84 entered on July 16, 1984 by the United States District Court for the Northern District of Ohio. This is a core proceeding under 28 U.S.C. § 157(b).

FACTS

These Chapter 7 filings have their origins in Petitioners’ belief that the United States filed for bankruptcy in 1933 and that the Secretary of Transportation serves as its receiver. Under this theory, each petitioner can pay for goods by creating papers and presenting them to merchants, who are in turn to present the documents to the Secretary for payment. Payment is to come from an account somewhere that was created at each petitioner’s birth and now totals about $1 million.

When two of the Petitioners (accompanied by the third) tried to buy Cadillacs from DeLorean with such papers, they were arrested at the DeLorean dealership, charged with attempted theft and forgery, arraigned before Judge Carroll, and bound over by him to the county grand jury for further proceedings.

Ten days later, Petitioners filed the involuntary petitions at issue here, claiming that DeLorean and Judge Carroll owed them money. In these filings, Petitioners certified that:

1. they were eligible to file the petitions under Bankruptcy Code § 303(b);
2. DeLorean and Judge Carroll were not paying their debts as they became due; and
3. within 120 days before the filing of the petitions, a custodian was appointed or took possession of DeLo-rean and Judge Carroll’s property.

Their justification for thinking that DeLo-rean and Judge Carroll owed them money appears to be this: in their view, DeLore-an had an obligation to present their papers to the Secretary for redemption through the birth accounts. By failing to do so, DeLorean converted the papers, the consequence of which is that DeLorean was required to give the cars to Petitioners without any payment. When DeLore-an did not turn over the cars, they somehow transformed into contraband. Judge Carroll became a creditor of Petitioners, in their view, because he wrongly failed to release them from the criminal charges.

*579 In dismissing both petitions, this Court held inter alia that Petitioners’ claims were factually and legally unsubstantiated, Petitioners were not eligible to file the petitions because the alleged debtors did not owe them money, and the doctrine of judicial immunity precluded them from filing an involuntary proceeding against Judge Carroll. In re Cadillac by DeLore-an.

DeLorean and Judge Carroll then filed timely motions for sanctions supported by detailed records of legal services and costs relating to these cases. Nothing was filed in opposition to the motions. Nevertheless, the Court held an evidentiary hearing on notice to all parties. Carnes and Perri attended, but Lutz did not.

Mark DeLorean, President of DeLore-an, testified at the hearing that shortly after Petitioners were arrested, he received a registered letter telling him that if he did not release the Cadillacs, a Chapter 7 involuntary bankruptcy case would be filed against him. The letter, which had signature lines for Lutz and Carnes, 2 stated further that if the “men in custody” were not released, articles would be published on the internet that DeLorean and Judge Carroll were using contraband [i.e., the Cadillacs] to launder drug money, with copies to the IRS and the United States Attorney General, among others. The letter concluded: “Please advise us as to how, when, and where the property will be released to us. You have 24 hours to comply with our demand.”

Two days later, Petitioners filed this Chapter 7 against DeLorean, as well as the one against Judge Carroll. The DeLo-rean filing, which was publicized in a local newspaper, caused consternation and confusion at DeLorean. Employees needed to be reassured that the dealership was on sound financial footing. Friends, acquaintances, and potential customers called to find out what was going on. Existing customers asked whether their warranties would be honored and their vehicles would be serviced. Various members of the media requested information about the filing. In Mr. DeLorean’s opinion, the DeLorean name, which stands for honesty and integrity after 25 years in business, was damaged by the involuntary filing. He did not, however, have any concrete examples of lost business or damage to the company’s goodwill.

At the hearing, Carnes admitted that he did not make any inquiry into the facts before filing the petitions and that the statements made in the petitions were not true. Although Carnes said that the filings were Petitioners’ “only recourse,” he was not able to explain what he meant by this statement. Perri, when called to testify as if on cross-examination, invoked his Fifth Amendment privilege against self-incrimination. The Court inquired if either Carnes or Perri wished the Court to consider their financial situation in determining the sanctions issue. Both declined the opportunity.

THE POSITIONS OF THE PARTIES

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Cite This Page — Counsel Stack

Bluebook (online)
265 B.R. 574, 2001 Bankr. LEXIS 996, 38 Bankr. Ct. Dec. (CRR) 57, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-cadillac-ex-rel-delorean-delorean-cadillac-inc-ohnb-2001.