Attorney James W. Hill ("Hill") appeals an order from the United States Bankruptcy Court for the District of Alaska sanctioning him for filing a frivolous and improper Chapter 13 petition in violation Rule 9011 of the Federal Rules of Bankruptcy. See 6 ABR 316 (I/00). The bankruptcy court awarded a monetary sanction against Hill of $1,000 to creditors Donald Reynolds and Parris Reynolds ("Reynolds") in connection with a Chapter 13 petition Hill filed for the now deceased debtor, Eldridge C. Sisson. In addition, the bankruptcy court imposed a non-monetary sanction prohibiting Hill from any future "bare bones" filings of Chapter 13 petitions. See id. The question on appeal is whether Hill's filing of a Chapter 13 petition for his client, when his client's debt exceeded the limit for eligibility, warranted sanctions under Federal Rule of Bankruptcy 9011.

Pursuant to 28 U.S.C. § 158(b), a district court has jurisdiction over final orders of a bankruptcy court when a party to a proceeding does not consent to have the appeal heard by the Bankruptcy Appellate Panel. See 28 U.S.C. § 158(b). Thus, because Hill did not agree to an appeal before the bankruptcy appellate court, the case is properly before this Court. See In re Sisson, 6 ABR 316 (1/00).

The Reynolds sued Eldridge Sisson in state court for damages and obtained a default judgment for over $500,000. Following the judgment, the Reynolds obtained a writ of execution and seized all of Sisson's property. See id. Apparently, Sisson was an           7 ABR 38  alcoholic suffering from depression. See id. Sisson hired Hill to file a Chapter 13 petition in bankruptcy on Sisson's behalf. See id. Sisson died and the bankruptcy court eventually dismissed the petition because an estate cannot proceed under Chapter 13. See id. The Reynolds moved for sanctions against Hill arguing that the filing of the petition was frivolous. See id. Specifically, the Reynolds argued that Sisson was clearly ineligible for Chapter 13 as his debt--including the $500,000 judgment-- exceeded $269,250.00, which is the ceiling imposed by statute. See 11 U.S.C. § 109(e) (adjusted for inflation under 11 U.S.C. § 104). The Reynolds had not moved to dismiss the original action on this basis and it did not figure into the bankruptcy court's dismissal of the claim.

The bankruptcy court imposed sanctions on Hill finding that the Chapter 13 petition fit the definition of a frivolous filing under Bankruptcy Rule 9011. See id. ¹ According to the bankruptcy court, the petition was not warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law because Sissson's debt exceeded the amount allowed under Chapter 13 at the time the petition was filed. See id. The Ninth Circuit applies a sliding scale comparing frivolousness and improper purpose in determining whether conduct is sanctionable. In re Marsch, 36 F.3d 825, 831 (9^th Cir. 1994). The bankruptcy court concluded that since the filing was clearly not warranted by law, it was not necessary to consider whether Hill filed the petition for an improper purpose. See 6 ABR 316 (1/00). In determining the amount and type of sanctions to impose, the bankruptcy court considered relevant the failure of opposing counsel to raise the issue of Chapter 13 ineligibility at any time during the proceedings. See id. Because the case could have been dismissed much sooner if opposing counsel had raised the issue, the court refused to award a monetary sanction that would compensate all of the Reynolds' attorney fees. See id.

A court's decision to impose a sanction is to be reviewed de novo. See In re Chisum,847 F.2d 597, 599 (9^th Cir. 1988)(noting that whether specific conduct warrants sanctioning is a legal question, which must be reviewed de novo). ² Whereas the court's decision on the amount and type of sanction imposed is reviewed for an abuse of discretion. See In re Marsch, 36 F.3d 825, 831 (9^th Cir. 1994). Disputes over a court's factual determinations regarding good faith are to be reviewed under a clearly erroneous standard. See Chisum, 847 F.2d. at 600.

Bankruptcy Rule 9011 provides that all attorneys and unrepresented parties must certify that any papers filed with the court are: one, warranted by law or are not frivolous in seeking changes in the current law; and two, are not being filed for an improper purpose. See Fed. R. Bank. P. 901 l(b). The determination of whether a filing is frivolous and improper is to be done on a sliding scale, "where the more compelling the showing as to one element, the less decisive need be the showing as to the other." See Marsch , 36 F.3d at 830. This is in contrast to the Ninth Circuit's interpretation of the identical language in Rule 11 of the Federal Rules of Civil Procedure, which only requires certification that filings are non-frivolous. See id. at 829-30. Based on policy considerations, the Ninth Circuit has read the improper purpose element as a grounds for sanction out of Rule 11. See id. at 830. In the bankruptcy context, however, the Ninth Circuit has determined that both should be analyzed on a sliding scale. See id. Once a court has determined that Rule 9011 has been violated, sanctions are mandatory. See In re Chisum, 847 F.2d 597,599 (9^th Cir. 1988).

The bankruptcy court determined that the filing of the Chapter 13 petition by Hill was frivolous and not warranted by law because of the approximately $500,000 judgment against Sisson. The $500,000 judgment clearly exceeded the $269,250.00 cap on debt an individual          7 ABR 40  may have to qualify under Chapter 13. See 11 U.S.C. § 109(e). Hill originally claimed that because he disputed the amount of the judgment, it should not be included as part of the calculation for eligibility for Chapter 13 bankruptcy. The bankruptcy court rejected this argument, pointing to the rule provided by the Ninth Circuit Bankruptcy Appellate Panel ("BAP"), which clearly includes disputed debt in the calculation to determine whether an individual qualifies for Chapter 13. See In re Sylvester, 19 B.R. 671, 672-73 (B.A.P. 9^th Cir. 1982) (stating that debt that is disputed by a debtor is included in the calculation to determine an individual's eligibility for Chapter 13). The bankruptcy court went on to say that because the law is clear as to the inclusion of disputed debt in the calculation for Chapter 13 eligibility, and because Sisson obviously did not qualify, the filing violated 9011. On a sliding scale, the court essentially found that, because the filing was not warranted by law, there was no need to find an improper motive. This Court reaches the same conclusion, but does so following a different rationale. See Bank of Maui v. Estate Analysis, Inc.,904 F.2d 470 (9^th Cir. 1990).

The Ninth Circuit has stated that a decision by a BAP cannot be the basis for a Rule 9011 sanction. See Maui, 904 F.2d at 472 ("for the purposes of Bankruptcy Rule 9011, its binding effect is so uncertain that it cannot be the basis for sanctioning a party for seeking a contrary result in a district where the underlying issue has never been resolved."). The Ninth Circuit has also determined that district courts are not bound by the BAP. See id. In a concurring opinion in Bank of Maui v. Estate Analysis, Inc., Judge O'Scannlain suggested that the Ninth Circuit Judicial Council should adopt an order requiring all bankruptcy courts to be bound by the BAP. See id. However, the Judicial Council has not acted on this suggestion. See Order Continuing Bankruptcy Appellate Panels of the Ninth Circuit, dated April 28, 1995) ³

In Maui, the bankruptcy court sanctioned the Bank of Maui for a frivolous filing because, under a prior decision by BAP, the bank did not have standing. See Maui, 904 F.2d at 471. The Ninth Circuit reversed because, explaining that the precedentiai effect of a BAP          7 ABR 41  ruling is too uncertain for purposes of rule 9011 sanctions. See id. at 472 (finding that even though the bank's position on standing was held by only a minority of courts in a separate circuit, the filing was not frivolous). Similarly, the Ninth Circuit has not rulled on whether the calculation for eligibility under Chapter 13 bankruptcy includes disputed debt. However, three other circuits as well as the BAP for the Ninth Circuit have determined that disputed debt is included. See In re Sylvester, 19 B.R. 67I, 672-73 (B.A.P. 9^th Cir. 1982); In re Nicholes, 184 B.R. 82, 89 (B.A.P. 9^th Cir. 1995); In re Mazzeo, 131 F.3d 295,304-05 (2d Cir. 1997); United States v. Verdunn, 89 F.3d 799, 802 n.9 (11^th Cir. 1996); In re Knight, 55 F.3d 231, 234-35 (7^th Cir. 1995).

Like Maui, only a small minority of courts have found that disputed debt should not be included in the calculation for eligibility under Chapter 13, none of which are within the Ninth Circuit. See In re Lambert, 43 B.R. 913,917 (Bankr. D. Utah 1984); In re Troyer, 24 B.R. 727,730 (Bankr. N.D. Ohio 1982); Matter of DeBrunner, 22 B.R. 36-37 (Bankr. D. Neb. 1982). However, even the minority of courts that have found that disputed debt may be excluded from the calculation, have held that if the disputed debt is clearly noncontingent and liquidated, it should be included in the calculation. See In re Lambert, 43 B.R. 913,917 (Bankr. D. Utah 1984); In re Troyer, 24 B.R. 727, 730 (Bankr. N.D. Ohio 1982); Matter of DeBrunner, 22 B.R. 36-37 (Bankr. D. Neb. 1982). For example, the bankruptcy court for the district of Utah noted that

[t]he majority of courts take the position that debtors seeking Chapter 13 relief are reqmred by Section 109(e) to include in their eligibility computations even those debts that are disputed. A minority of courts hold that only those disputed debts that are clearly noncontingent and liquidated are to be counted.

In Lambert, there was an action in state court to settle a dispute as to the amount of debt owed, which was taking place concurrently with the petition for Chapter 13 in bankruptcy court. See id. at 916. The Lambert court decided that because the debt was still disputed in state court, action on the petition should be stayed until the state court action was final. See id. The Lambert court held that disputed debt should not automatically be included in a calculation for Chapter 13, and thus it was proper to stay the petition until the dispute was settled. See id. at 924. In contrast to the dispute pending in state court in Lambert, Sisson had a final judgment entered against him owing to the Reynolds. Hill's dispute of the judgment against Sisson is thus not "bona fide." See Lambert , 43 B.R. at 923 (stating that "if it is found that a contin-          7 ABR 42  gency does not exist or has been discharged, then the debt is liquidated as to liability and can be counted for eligibility purposes"). Thus, even under the minority view, there was no basis in law for the filing of a Chapter 13 petition when there was a judgment for over $500,000 entered against Sisson.

The determination of whether a filing is frivolous and improper is to be done on a sliding scale, "where the more conlpelling the showing as to one element, the less decisive need be the showing as to the other." See In re Marsch, 36 F.3d 825, 830 (9^th Cir. 1994). Once a court has determined that Rule 9011 has been violated, sanctions are mandatory. See In re Chisum, 847 F.2d 595,599 (9^th Cir. 1988). Because the law is clear on the amount of debt an individual may have and still be eligible for Chapter 13 Bankruptcy, and because a reasonable investigation by Hill would have discovered the judgment against Sisson that made him ineligible for a Chapter 13 petition, the filing of the petition was without basis in law and thus frivolous under Rule 9011. See 11 U.S.C. § 109(e); Fed. R. Bank. P. 9011. Further, because the petition was wholly unwarranted by taw, the frivolousness of the filing is so compelling as to preclude the need for a finding of an improper purpose on a sliding scale. See Marsch, 36 F.3d at 829.

On appeal, Hill admits that he made a mistake in filing the petition for Sisson whose debt exceeded the amount eligible for a petition under Chapter 13. However, Hill argues that because neither the court nor the opposing party raised the issue until after dismissal, his mistake was not frivolous or improper. Hill cites no law in support of this argument. The Second Circuit, in dictum, has noted that a party that never moved to dismiss a petition, and failed to alert the court to its frivolity, is estopped from asserting that the petition was filed frivolously. See In re Cohoes Indus. Terminal, Inc., 931 F.2d 222, 229-30 (2^nd Cir. 1991). The court in Cohoes was persuaded by numerous factors that do not exist in this case, including a statement by the opposing party that admitted that the frivolous filing was to their advantage because it provided them a forum for litigation. See id. In contrast, the Reynolds incurred extra hours of attorney fees as a result of the petition without any notable benefit from the filing of the petition. Thus, this Court declines to follow the dictum in the Second Circuit concerning estoppel of sanctions when they were not raised in the original action.

         7 ABR 43  Consequently, the petition filed by Hill was not warranted by law and therefore is sanctionable as a frivolous filing under 9011. Thus, reviewing the decision de novo, this Court affirms the bankruptcy court's imposition of sanctions.

As to the amount of sanctions, this Court finds that the bankruptcy court did not abuse its discretion in fining Hill $1,000 and prohibiting him from any future "bare bones" filings. A sanction is limited to "what is sufficient to deter repetition of such conduct," including nonmonetary directives and awards of all or part of attorney fees to the moving party. See Fed. Bank. R. 9011. First, the prohibition on "bare bones" filings by Hill, serves to deter repetition of similar filings in the future. Second, in the imposition of less than the full amount of attorney fees, the bankruptcy court appropriately considered the amount Of time that would have been saved had the moving party simply filed for dismissal on the grounds of an ineligible petition rather than pursuing a claim of bad faith. This Court thus affirms the imposition of both monetary and non-monetary sanctions against Hill as appropriate under Rule 9011.

IT IS THEREFORE ORDERED:

The motion at Docket No. 17, requesting that the order imposing sanctions be vacated, is DENIED.

Dated at Anchorage, Alaska, this 3^rd day of November, 2000.

JAMES K. SINGLETON, JR.
United States District Judge

NOTES: