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In re Reed

United States Court of Appeals, Eighth Circuit

April 25, 2018

In re: Evette Nicole Reed Debtor
Evette Nicole Reed Seth A. Albin Trustee Critique Services, LLC Ross Harry Briggs Appellant Honorable Charles E. Rendlen, III Interested party - Appellee United States Bankruptcy Court Interested party In re: Ross H. Briggs Petitioner

          Submitted: January 9, 2018

          Appeals from United States District Court for the Eastern District of Missouri - St. Louis

          Before WOLLMAN, COLLOTON, and BENTON, Circuit Judges.

          BENTON, Circuit Judge.

         The bankruptcy court[1] sanctioned Ross H. Briggs for contempt of an order and for misleading the court. The district court[2] affirmed. Having jurisdiction under 28 U.S.C. §§ 158(d)(1) and 1291, this court affirms.


         Critique Services LLC was a bankruptcy-services business run by Beverly Holmes Diltz. Working with Critique were attorneys Briggs and James C. Robinson. In June 2014, the bankruptcy court suspended Robinson from practicing in the United States Bankruptcy Court for the Eastern District of Missouri. This court affirmed. Robinson v. Steward (In re Steward), 828 F.3d 672 (8th Cir. 2016).

         Briggs agreed to represent about 100 of Robinson's clients who had bankruptcy cases pending in the Eastern District. In late 2014, the bankruptcy court ordered Robinson to show cause why it should not order disgorgement of his attorney's fees in some of those cases. The bankruptcy court also ordered the trustees in these cases to provide the court with specific information about the fees.

         To comply with the order, the trustees sent a letter to Critique, Robinson, and Briggs asking for documents and information. Briggs responded: "all of my legal services rendered on behalf of the debtors in question were afforded free of charge and no fee was paid to or shared with me in these cases. Accordingly, there are no checks, ledgers or account statements that relate to such non-existent fees." He added: "I . . . do not possess any document of [Critique]" or "any documents which are encompassed within [the trustees'] request to Mr. Robinson."

         The trustees moved to compel Critique, Robinson, and Briggs to turn over the requested documents and information. On January 13, 2015, the bankruptcy court held a hearing on the motion. Arguing about the motion, Briggs discussed his relationship with Critique and Diltz, eventually agreeing to help obtain the documents and information. On January 23, the bankruptcy court ordered Critique, Robinson, and Briggs to turn over to the trustees specific fee-related documents and information. The bankruptcy court noted that to comply with the order, Briggs might need to seek the documents and information from third parties or "mak[e] inquiries" with Critique or Robinson.

         On July 6, the bankruptcy court issued an order finding that Critique, Robinson, and Briggs "had failed to comply with the Order Compelling Turnover." The bankruptcy court explained that it was "considering the imposition of monetary sanctions and/or nonmonetary sanctions or the taking of any other appropriate action for non-compliance." The order gave Critique, Robinson, and Briggs seven days to either comply with the order compelling turnover or file a brief addressing why sanctions should not be imposed. Briggs filed a brief opposing sanctions. On July 22, the bankruptcy court ordered Briggs to show cause why he should not be sanctioned. Briggs responded by questioning the bankruptcy court's authority, also arguing that sanctions were not warranted.

         On April 20, 2016, the bankruptcy court sanctioned Briggs. It reviewed at length the disciplinary records of several people associated with Critique, including Briggs. See Briggs. v. Labarge (In re Phillips), 433 F.3d 1068, 1071 (8th Cir. 2006) (holding Briggs violated Fed.R.Bankr.P. 9011, but vacating sanctions); In re Wigfall, No. 02-32059, slip op. at 2 (Bankr. S.D. Ill. August 15, 2002) (suspending Briggs "from filing any new cases in the United States Bankruptcy Court for the Southern District of Illinois for a period of three (3) months.") It found "Briggs to be in contempt of the Order Compelling Turnover, " and that he "deliberately and with deceptive intent made misleading representations to the Court regarding the true nature of his relationship with the Critique Services Business and Diltz." With some exceptions, the order banned Briggs for six months from representing new bankruptcy clients, practicing before U.S. Bankruptcy Court for the Eastern District of Missouri, and using that court's electronic-filing system. It also required him to take 12 hours of continuing legal education in professional ethics, and permanently prohibited him "from being financially or professionally involved with or connected to, whether formally or informally or otherwise, " Critique, Diltz, Robinson, and other individuals and entities affiliated with Critique.

         Briggs appeals. While the appeal was pending, Briggs requested reinstatement to practice before the United States Bankruptcy Court for the Eastern District of Missouri. He directed his request first to the chief bankruptcy judge, then to the chief district judge. Both ruled that Briggs's request was improper. Briggs also appeals the chief district judge's judgment.


         Briggs says that as an Article I court, the bankruptcy court did not have constitutional authority to sanction him under these circumstances. This is a legal issue that this court reviews de novo. See Walton v. LaBarge (In re Clark), 223 F.3d 859, 862, 864 (8th Cir. 2000).

         Briggs focuses on Stern v. Marshall, 564 U.S. 462 (2011). There, the bankruptcy court, in an adversary proceeding, entered summary judgment on a counterclaim for tortious interference. Stern, 564 U.S. at 470-71. The Court explained that the bankruptcy court had statutory authority to enter final judgment on the counterclaim under 28 U.S.C. § 157(b)(2)(C). Id. at 482. As to statute's constitutionality, the Court said: "When a suit is made of 'the stuff of the traditional actions at common law tried by the courts at Westminster in 1789, ' and is brought within the bounds of federal jurisdiction, the responsibility for deciding that suit rests with Article III judges in Article III courts." Id. at 484, quoting Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 90 (1982) (Rehnquist, J., concurring in judgment).

         The Stern counterclaim met that standard-and could only be heard by an Article III court-because it involved "the most prototypical exercise of judicial power: the entry of a final, binding judgment by a court with broad substantive jurisdiction, on a common law cause of action, when the action neither derives from nor depends upon any agency regulatory regime." Id. at 494 (emphasis added on last two phrases). Even if a counterclaim is statutorily authorized, "Congress may not bypass Article III simply because a proceeding may have some bearing on a bankruptcy case; the question is whether the action at issue stems from the bankruptcy itself or would necessarily be resolved in the claims allowance process." Id. at 499. The Court concluded that the bankruptcy court "lacked ...

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