United States District Court, W.D. Texas
CARL N. MERKLE Plaintiff,
PILGRIM REO, LLC ET AL. Defendants.
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE
RICHARD B. FARRER UNITED STATES MAGISTRATE JUDGE.
Honorable Senior United States District Judge David A. Ezra
Report and Recommendation concerns the Motion for
Attorneys' Fees, see Dkt. No. 32, filed by Pilgrim REO,
LLC and Capital Crossing Servicing Company LLC. The motion
seeks an award of fees against pro se litigant Carl N.
Merkle. It was referred to me for disposition on April 23,
2019, pursuant to Western District of Texas Local Rule CV-72
and Appendix C. See text order. Authority to enter this
recommendation stems from 28 U.S.C. § 636(b)(1)(B). For
the reasons set forth below, Pilgrim and Capital
Crossing's Motion, Dkt. No. 32, should be DENIED without
Merkle, however, is WARNED that instituting further frivolous
or vexatious appeals, or engaging in frivolous or vexations
motions practice, in any case in this Court will subject him
to sanctions. Likewise, he is further warned that engaging in
ad hominem attacks against opposing parties or their counsel
will have similar consequences, as will failing to comply
with the local rules or the governing rules of civil
procedure. The possible consequences include but are not
limited to monetary sanctions and the issuance of a
Factual and Procedural Background
thorough factual and procedural background for this case has
been the subject of prior orders issued by the District
Court, and for present purposes it's sufficient to
discuss only a few background matters. Carl N. Merkle
instituted this litigation to appeal various orders issued by
the Bankruptcy Court in an underlying bankruptcy action.
About six months later, Merkle filed an “Emergency
Motion to Permanently Transfer Merkle's Bankruptcy case
from 16-50026 to 5:18-cv-00588.” Dkt. No. 27. Merkle
sought to “transfer [here] all litigation and all
remaining administrative matters that the [Bankruptcy Court]
could conceivably [entertain] [ ] in the future on appealed
matters, and transfer all of that permanently to the U.S.
District Court into case 5:18-cv-00588 (“588” or
“18-588”).” Id. Pilgrim and
Capital Crossing opposed the motion, noting that Merkle had
failed to cite any statute, rule, or judicial decision that
would authorize or permit his requested relief. See Dkt. No.
28. Pilgrim and Capital Crossing requested in their
opposition an award of $1, 500 in attorneys' fees for
having to respond to Merkle's motion, which they argued
was frivolous in that it is unfounded in law and fact.
District Court denied Merkle's motion on April 8, 2019,
noting that Merkle cited no authority to support the
requested relief, the motion was untimely, and, contrary to
some of Merkle's allegations, a mandatory withdrawal of
the reference of bankruptcy matters from the Bankruptcy Court
to the District Dourt did not apply. See Dkt. No.
31. The District Court denied Pilgrim and Capital
Crossing's request for $1, 500 in attorneys' fees
without prejudice, explaining that they could file a separate
motion requesting fees. See Id. Shortly thereafter,
Pilgrim and Capital Crossing duly filed a separate motion
requesting the aforementioned attorney's fees.
See Dkt. No. 32. In that motion, presently before
the Court, they seek $2, 340 in fees pursuant to the
Court's inherent authority to prevent abusive litigation
practices and also pursuant to Federal Rule of Bankruptcy
reasons discussed below, Pilgrim and Capital Crossing's
Motion should be denied at this juncture. In recommending its
denial, however, I am compelled to warn Merkle of the
consequences of engaging in frivolous or vexatious litigation
tactics; his pro se status will not protect against sanctions
stemming from future behavior of that nature in this Court.
courts have inherent power to assess attorney's fees and
litigation costs when a party has “acted in bad faith,
vexatiously, wantonly or for oppressive reasons.”
F.D. Rich Co. v. United States ex rel. Industrial
Lumber, 417 U.S. 116, 129 (1974); Batson v. Neal
Spelce Assocs., Inc., 805 F.2d 546, 551 (5th Cir. 1986).
This inherent power, however, “must be exercised with
restraint and discretion.” Roadway Express, Inc. v.
Piper, 447 U.S. 752, 764 (1980). Accordingly, “a
federal court, acting under its inherent authority, may
impose sanctions against litigants or lawyers appearing
before the court so long as the court makes a specific
finding that they engaged in bad faith conduct.” In
re Yorkshire, LLC, 540 F.3d 328, 332 (5th Cir. 2008).
Further, to comport with due process, “before imposing
sanctions in accordance with its inherent authority, the
Court must afford the party notice and an opportunity to be
heard.” Williams v. Chase Home Fin. LLC, No.
3:15-CV-0904-N, 2015 WL 13742549, at *5 (N.D. Tex. Jun. 17,
2015) (citing Kenyon Int'l Emergency Servs., Inc. v.
Malcolm, 2013 WL 2489928, at *6 (5th Cir. 2013)).
Rule of Bankruptcy Procedure 8020, which applies to appeals
to district courts from orders of the bankruptcy courts,
authorizes district courts to award “just damages and
single and double costs” in connection with any
frivolous appeal, once there has been a separately filed
motion or notice concerning sanctions has issued from the
court and a reasonable opportunity to respond has been
afforded. See Fed. R. Bank. P. 8020(a). Under the
rule, a district court may also discipline or sanction a
party appearing before it for “other misconduct,
” provided the party receives “reasonable notice,
an opportunity to show cause to the contrary, and, if
requested, a hearing.” Fed. R. Bank. P. 8020(b).
these standards here, I recommend against an award of
attorney's fees at this time. Pilgrim and Capital
Crossing's motion invokes conduct that does not rise to
the level required to support an attorney's fees
sanction. Merkle, they contend, “has filed numerous
frivolous motions, which have unnecessarily complicated this
appeal and needlessly increased the cost of
litigation.” Dkt. No. 32 at 4. Viewed through the
required lens of “restraint and discretion, ”
this type of behavior by pro se litigant Merkle-although
frustrating and costly-is alone here not enough to mandate an
award of sanctions, unless and until it continues beyond a
clear warning from the Court like the one included in this
order. See United States v. Clampitt, 281 Fed.Appx.
337, 338 (5th Cir. 2008) (pro se parties are
“beneficiaries of a degree of leniency and
flexibility” when sanctions are at issue). Much the
same is true of “routine fail[ures] to confer with
Appellee's' counsel before filing such
motions.” Dkt. No. 32 at 4. Such behavior runs afoul of
the local rules and could, after a warning like the one
included in this order, expose even a pro se litigant to
sanctions. Markel should consider himself warned as to each
of these matters. All litigants, even those proceeding pro
se, are expected to adhere to the local rules and the
governing rules of procedure, and also to refrain from filing
frivolous or vexatious motions or appeals.
troubling are Pilgrim and Capital Crossing's contentions
that “Mr. Merkle's replies routinely devolve into
ad hominem attacks rather than providing any legal
support or analysis.” Id. According to Pilgrim
and Capital Crossing, “Mr. Merkle has been warned
multiple times about the obligations imposed on all
litigants, and it is well within this Court's discretion
to sanction Mr. Merkle for such inappropriate conduct at this
point in time.” Id. Pilgrim and Capital
Crossing don't cite any warning issued by this Court.
Rather, it appears Merkle was previously warned by the
Bankruptcy Court that his pro se status would not excuse him
from the relevant procedural and substantive rules and the
consequences of an inappropriately contentious demeanor.
See Dkt. No. 5-2 at 12. While Merkle was placed on
notice that any pleadings that seek relief outside the
Bankruptcy Court's jurisdiction would be stricken, he was
also informed that he was “free to appeal any decision
that [the Bankruptcy] Court makes.” Id. at 14.
Because this Court has not yet warned Merkle of the
consequences of his conduct in this Court, it would in my
view be unjust-in light of Merkle's pro se status-to
impose sanctions at this juncture.
firm warning to Merkle is in order. I note that in addition
to this litigation, Merkle has instituted nine other
actions in this Court. All or a majority of those actions appear
to involve appeals and multiple rounds of motion practice of
a very questionable nature. Merkle's ...