n important issue involving §1927 of Title 28, U.S.C. (the Judicial Code) is whether a bankruptcy court has jurisdiction to impose sanctions under this statute. The U.S. Court of Appeals for the Tenth Circuit in Jones v. Bank of Santa Fe¹ ruled that a bankruptcy court lacked jurisdiction to issue sanctions under §1927, which states:

Any attorney or other person admitted to conduct cases in any court of the U.S. 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, expenses, and attorneys' fees reasonably incurred because of such conduct.²

The court had to determine whether a bankruptcy court was a court of the United States. As part of analysis, the court examined Judicial Code §451, which contained a definition of the phrase "court of the United States" and was applicable to all of the provisions in the Judicial Code. Section 451 stated:

The term "court of the United States" includes the Supreme Court of the United States, courts of appeals and district courts constituted by chapter 5 of this title, including the Court of International Trade and any court created by Act of Congress the judges of which are entitled to hold office during good behavior.³

Section 451 restricted courts of the U.S. to courts in which judges had lifetime appointments; however, bankruptcy judges were appointed for 14 years. The Tenth Circuit concluded that the failure of bankruptcy judges to serve with lifetime tenure precluded bankruptcy judges from utilizing §1927.

Another pertinent court of appeals decision is In re Volpert.⁴ There, the Seventh Circuit Court of Appeals discussed whether a bankruptcy court had jurisdiction to impose sanctions under §1927. The Seventh Circuit also thought that the critical issue was whether a bankruptcy court was a "court of the United States." The court also analyzed §451, which stated:

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A practitioner would be well advised to move simultaneously under both §§1927 and 105(a) when he or she seeks sanctions other than under Federal Rule of Bankruptcy Procedure 9011(a).

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Bankruptcy courts are not listed explicitly in the section. Nor are bankruptcy courts "district courts constituted by chapter 5 of [Title 28]," for bankruptcy courts are constituted by chapter 6 of Title 28. Likewise, bankruptcy judges are not "entitled to hold office during good behavior." Rather, they serve a specified term of 14 years. Moreover, as the Ninth Circuit has noted, because the "good behavior" language contained in §451 mirrors that contained in Article III, it is reasonable to infer that the phrase "court[s] of the United States" denotes Article III courts whose judges have life tenure and may be removed only by impeachment. Therefore, a bankruptcy court is not a "court of the United States" within the strict meaning of §451.⁵

The court declined to employ §1927 to impose sanctions.⁶ The Seventh Circuit affirmed the judgment based on a bankruptcy court's authority to issue sanctions pursuant to Bankruptcy Code §105(a).⁷

A bankruptcy court has the authority to impose sanctions pursuant to §105(a); this provision states:

The court may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.⁸

In order to impose sanctions pursuant to §105(a) a movant must demonstrate bad faith.⁹ A court may use its inherent powers to sanction an attorney if the attorney's actions are devoid of any merit so as lead to the conclusion that the attorney's actions were taken in furtherance of an improper purpose.¹⁰ The Tenth Circuit Court of Appeals has stated:

We believe, and hold, that §105 intended to imbue the bankruptcy courts with the inherent power recognized by the Supreme Court in Chambers. The power to maintain order and confine improper behavior in its own proceedings seems a necessary adjunct to any tribunal charged by law with adjudication of disputes. We should not lightly infer its absence, and we see no reason to do so here.¹¹

The criteria for imposing sanctions under §§1927 and 105(a) are identical, therefore they are a factual record that supports the imposition of sanctions under §1927 and §105(a).¹² For example, in Jones v. Bank of Santa Fe (In re Courtesy Inns Ltd. Inc.)¹³ the Tenth Circuit held that a debtor's principal could be sanctioned pursuant to §105(a) for filing a bad faith chapter 11 case. The record made a remand unnecessary. The debtor filed the case without an attorney. This was a single asset real estate case in which the value of the collateral was less than that of the claim of the mortgagee. The sole purpose of filing the chapter 11 case was to forestall the secured creditor from foreclosing.

In conclusion, the preceding discussion raises important questions concerning a bankruptcy court's authority to impose sanctions pursuant to §1927. A practitioner would be well advised to move simultaneously under both §§1927 and 105(a) when he or she seeks sanctions other than under Federal Rule of Bankruptcy Procedure 9011(a).

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Footnotes

¹ 40 F. 3d 1084 (10th Cir. 1994). Return to article

² 28 U.S.C. §1927. Return to article

³ 28 U.S.C. §451. Return to article

⁴ 110 F.3d 494 (7th Cir. 1997). Return to article

⁵ Id. at 498. Return to article

⁶ Id. at 499. Return to article

⁷ Id. at 500-02. Return to article

⁸ 11 U.S.C. §105(a). Return to article

⁹ Chambers v. NASCO Inc., 501 U.S. 32, 47 (1991); In re Eatman, 182 B.R. 386, 396 (Bankr. S.D.N.Y. 1995). Return to article

¹⁰ Oliveri v. Thompson, 803 F.2d 1265, 1272-73 (2d Cir. 1986) cert. denied, 480 U.S. 918 (1987). Return to article

¹¹ Jones v. Bank of Santa Fe (In re Courtesy Inns Ltd. Inc.), 40 F. 3d 1084 (10th Cir. 1994)(citations omitted). Return to article

¹² See In re Volpert, 110 F.3d 494, 500-02 (7th Cir. 1997). Return to article

¹³ 40 F. 3d 1084 (10th Cir. 1994). Return to article