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Klein v. Weidner

United States District Court, E.D. Pennsylvania

June 30, 2017



          Juan R. Sánchez, J.

         Movant Michael J. Antonoplos, the court-appointed receiver for DMW Marine, LLC, a Defendant in the above-referenced action, seeks an award of sanctions pursuant to 28 U.S.C. § 1927 and the Court's inherent authority against the law firm Maschmeyer Karalis P.C. and two Maschmeyer attorneys (collectively, Respondents) for their filing and pursuit of what the Receiver contends was a meritless adversary action against him in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania. Respondents filed the adversary action as part of DMW's bankruptcy proceedings in which they served as counsel to the Trustee. Because this Court lacks authority to impose sanctions under § 1927 for litigation conduct before the Bankruptcy Court, and because the sanctions motion is untimely in any event, the sanctions motion will be dismissed.


         In August 2008, Plaintiff Deborah D. Klein filed this action against her ex-husband, Douglas M. Weidner, and DMW, which Weidner then controlled, among other Defendants. The lawsuit arose out of a $548, 797.07 judgment Klein had obtained against Weidner in California for spousal and child support arrearages. To collect the judgment, Klein sought to set aside under the Pennsylvania Uniform Fraudulent Transfer Act certain transfers by Weidner of real property and other assets. She also sought to reverse-pierce DMW's corporate veil, enabling her to treat DMW's assets as Weidner's personal assets for purposes of satisfying his debt to her.

         In January 2010, the month before trial, Klein filed an emergency motion for appointment of a receiver for DMW so as to prevent Weidner from concealing the company's assets.[1] This Court granted the motion and appointed Antonoplos as Receiver “to manage, operate and preserve all of the property, real, personal and mixed, belonging to DMW Marine, LLC . . . together with all the rents, income and profits from the company.” Order ¶ 1, Jan. 19, 2010, ECF No. 137. The following month, after a bench trial, this Court entered judgment in favor of Klein on her remaining claims, including her claim to reverse-pierce DMW's corporate veil. The Court also issued an order extending and modifying Antonoplos's receivership of DMW. See Order, Feb. 16, 2010, ECF No. 147.

         Fifteen months later, in May 2011, DMW filed a bankruptcy petition in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania.[2] Michael H. Kaliner was appointed as Trustee in the bankruptcy case in June 2011, and the Bankruptcy Court thereafter approved the Trustee's application to employ the Maschmeyer firm as counsel.

         In May 2013, the Trustee, represented by Maschmeyer attorneys Paul Maschmeyer and Linda Alle-Murphy, filed an adversary action against the Receiver, alleging the Receiver had dissipated DMW's assets by paying Klein out of customer deposits and cash on hand that should have been used for operating expenses, rather than out of the company's profits, allegedly in violation of this Court's receivership orders, and by taking excessive compensation for essentially no work. See generally Compl., Kaliner v. Antonoplos (In re DMW Marine, LLC), No. 13-290 (Bankr. E.D. Pa. May 16, 2013). The Trustee asserted claims against the Receiver for negligence and breach of fiduciary duty, and sought to avoid certain transfers of funds as preferential transfers or fraudulent conveyances under the Bankruptcy Code.[3] The filing and pursuit of this adversary action against the Receiver are the basis for the instant sanctions motion.

         In February 2014, nine months after the adversary action was filed, the Receiver moved to dismiss the action for lack of subject matter jurisdiction based on the Barton doctrine, which, subject to certain exceptions, “requires a party seeking to sue a court-appointed receiver, to first obtain leave of the appointing court.” In re VistaCare Grp., LLC, 678 F.3d 218, 222 (3d Cir. 2012); see also Barton v. Barbour, 104 U.S. 126, 128 (1881) (stating the “general rule that before suit is brought against a receiver leave of the court by which he was appointed must be obtained”). The Trustee opposed the motion, arguing the Barton doctrine was inapplicable and, alternatively, the Receiver had waived the right to raise the doctrine.

         In April 2014, the Bankruptcy Court issued an opinion which thoroughly analyzed the jurisdictional issue and concluded (1) the Barton doctrine applied; (2) neither of the two recognized exceptions to the doctrine-the statutory exception or the “ultra vires” exception[4]- applied; and (3) assuming application of the doctrine was waivable, no waiver had occurred. Although recognizing that, in ordinary circumstances, the appropriate remedy would be to dismiss the adversary action for lack of subject matter jurisdiction, the Bankruptcy Court also noted that if the case were dismissed, the Trustee would likely be unable to cure the jurisdictional defect by seeking this Court's leave to pursue the action because the claims would be time-barred. Given the likelihood that dismissal based on the Barton doctrine would preclude the Trustee from pursuing his claims against the Receiver-and in light of the unique relationship between bankruptcy courts and the district courts of which they are a part, which, in the Bankruptcy Court's view, muted the concerns animating the Barton doctrine-the Bankruptcy Court did not dismiss the adversary action. Instead, the court issued its opinion as a Report and Recommendation asking this Court to determine whether:

(1) the reference of this adversary proceeding should be withdrawn;
(2) the Trustee should be granted authorization to proceed before the bankruptcy court in this adversary proceeding;
(3) it should decline either to withdraw the reference or authorize the Trustee to proceed before the bankruptcy court and instead, should instruct the bankruptcy [court] to enter an order granting the Defendant's Motion and dismissing this adversary proceeding for lack of jurisdiction; or
(4) it should enter any other appropriate order.

Kaliner v. Antonoplos (In re DMW Marine, LLC), Misc. No. 14-105, R. & R. (E.D. Pa. May 24, 2014), ECF No. 1.[5]

         Upon review of the Report and Recommendation, this Court issued an order in August 2014 declining to either withdraw the reference of the adversary action or authorize the Trustee to proceed with the action, and directing the Bankruptcy Court to take whatever action it deemed appropriate with respect to the Receiver's motion to dismiss. In the order, the Court noted that since the filing of the Report and Recommendation, the Trustee had neither requested leave to pursue the adversary action against the Receiver, nor presented any argument why the Court should withdraw the reference. See Kaliner v. Antonoplos (In re DMW Marine, LLC), Misc. No. 14-105, Order 2 (E.D. Pa. Aug. 26, 2014) (citing VistaCare for the proposition that “[a] party seeking leave of court to sue a [receiver] [under the Barton doctrine] must make a prima facie case against the [receiver], showing that its claim is not without foundation” (citation and ...

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