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Atkins v. Fischer

October 3, 2007

LESLIE ATKINS D/B/A LESLIE ATKINS COMMUNICATIONS, PLAINTIFF,
v.
BENSON J. FISCHER, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Currently before the Court are the [317] Motion for Sanctions and [318] Motion for Attorneys' Fees filed by Defendant The Fischer Organization, Inc. ("Fischer Organization"), seeking the imposition of attorneys' fees and interest against Karen H. Moore, Esq. and the law firm of Whiteford, Taylor & Preston, L.L.P. ("WTP"), counsel for the Chapter 7 Bankruptcy Trustee Roger Schlossberg (the "Trustee"), pursuant to 28 U.S.C. § 1927. Upon a searching review of the Fischer Organization's Motions, WTP's Opposition, the Fischer Organization's Reply, the entire record herein,*fn1 and the relevant case law and statutes, the Court shall deny the Fischer Organization's Motions for Sanctions and for Attorneys' Fees.*fn2

I: BACKGROUND

This case has had a long and tumultuous history and has been the subject of numerous opinions and orders of this Court as well as of the D.C. Circuit Court of Appeals. As such, the Court shall recite herein only those facts that are relevant to the Motions currently before the Court. Leslie Atkins brought this action in 1998 asserting claims based on a logo and label that she alleged she designed for a product conceived by Defendant Benson J. Fischer ("Fischer") known as "Redneck Beer." Atkins' Complaint asserted claims against Fischer, The Fischer Organization, which contracted with Atkins to use her designs, and Fischer Brewing, Inc. ("Fischer Brewing"), which manufactured Redneck Beer.

This case was settled in open court on January 27, 2006. Under the terms of the settlement Erie, the general liability insurance carrier for Fischer Brewing and Fischer as its President, agreed to pay the sum of $20,000 to Richard E. Schimel, Esq., as attorney for the Fischer Organization, for legal fees owed to Attorney Schimel. Def.'s Reply to Trustee's Resp. to Order to Show Cause (hereinafter "Def.'s Reply") at 10-11. During the settlement negotiations, counsel for the Trustee asserted that the $20,000 to be paid to Attorney Schimel belonged to Fischer's bankruptcy estate, rather than to Fischer or Attorney Schimel. Trustee's Resp. to Show Cause Order ("Trustee's Resp.") at 4-5; see also Def.'s Reply Ex. F (1/27/06 Tr. of Settlement Conf.) at 14:20-24. As a result, Erie and the Fischer Organization agreed to place the $20,000 in the Court Registry for the United States District Court for the District of Columbia under Civil Action No. 98-0800 (CKK), pursuant to LCvR 67.1(a)(2). Def.'s Reply at 11; Ex. F at 14:20-24.

On March 1, 2006, as authorized by the Court during the Settlement Conference in this matter, Attorney Schimel filed a Show Cause Order requesting that the Trustee "show cause . . . why the settlement proceeds should be part of the Bankrupt Estate of Benson J. Fischer." Show Cause Order at 2. The Court granted the Show Cause Order on March 7, 2006 and--following briefing on the Show Cause Order--issued a Memorandum Opinion on November 7, 2006 concluding that the Trustee's arguments were thoroughly addressed and disposed of by Bankruptcy Judge Teel's April 11, 2006 Supplemental Decision. See Mem. Op., Atkins v. Fischer, Civil Action No. 98-800 (D.D.C. Nov. 7, 2006). Nevertheless, the Court provided that:

In the event that the Trustee continues to believe that the $20,000 currently on deposit in the Court Registry is rightfully considered property of the bankruptcy estate, that issue is properly litigated before the Bankruptcy Court. Therefore, the Court shall allow the Trustee sixty (60) days -- until and including January 8, 2007 -- in which to raise the issue before the Bankruptcy Court.

Id. On January 8, 2007, the Trustee filed such a claim before the Bankruptcy Court and filed notice of his claim with this Court (hereinafter the "Bankruptcy Claim").

The Fischer Organization asserts that five days after the Court's November 7, 2006 Memorandum Opinion, Attorney Schimel "sent correspondence to [the Trustee and his counsel at WTP] requesting that the Trustee abandon [the Bankruptcy Claim], in exchange for which the Debtor would forego a claim for Rule 11 sanctions and interest on the settlement proceeds."

Mot. of the Fischer Org., Inc. for Attys Fees and Interest (hereinafter "Mot. for Sanctions") at 6. The Fischer Organization purports to attach a copy of that correspondence to its Motion for Sanctions, however no such document is attached.*fn3 In contrast, WTP proffers such a letter, dated July 10, 2007, from Attorney Schimel to the Trustee and Gary S. Posner, Esq. of WTP, enclosing a copy of a Motion for Rule 11 Sanctions and advising the Trustee and WTP that they could avoid the filing of the Motion for Rule 11 Sanctions by withdrawing the Bankruptcy Claim. See WTP Opp'n, Ex. A (the "Safe Harbor Letter"). WTP asserts that this letter followed upon Attorney Schimel's filing of an objection to the Bankruptcy Claim in the Bankruptcy Court on July 6, 2007. WTP Opp'n at 2-3.

WTP's Opposition further asserts that, following its receipt of the July 10, 2007 Safe Harbor Letter, on August 3, 2007 Attorney Posner sent Attorney Schimel a letter indicating that the Trustee had decided to formally withdraw the Bankruptcy Claim. WTP Opp'n at 3; id., Ex. B. Attorney Posner's August 3, 2007 letter further indicated that he could not be certain that the formal withdrawal would be filed that day, but that Attorney Schimel could rely upon Attorney Posner's letter "as a commitment to that course of action." Id. In fact, the Trustee's Withdrawal was filed with the Bankruptcy Court on August 3, 2007. See WTP Opp'n, Ex. C. Thereafter, according to WTP, on August 7, 2007, Attorney Schimel filed parallel motions seeking sanctions in this Court and in the Bankruptcy Court. WTP Opp'n at 3. Specifically, in this Court, the Fischer Organization filed its Motion for Sanctions and Motion for Attorneys' Fees. WTP filed its Opposition to those Motions on August 21, 2007; and the Fischer Organization filed its Reply on August 27, 2007. Also on August 7, 2007, the Fischer Organization filed a Motion to Disburse Funds in Court Registry, indicating that the Trustee had withdrawn the Bankruptcy Claim. The Court entered an Order disbursing those funds on October 2, 2007.

II: LEGAL STANDARD

The Fischer Organization seeks the imposition of attorneys' fees and interest against Attorney Moore and WTP pursuant to 28 U.S.C. § 1927. That statute provides:

Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, ...


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