Sanctions in the Michigan Election Case and in Bankruptcy Court (Pt. 1)

Bankruptcy can be a raucous forum sometimes. The ongoing Boy Scouts case is filled with instances of sexual abuse, giving rise to deep emotions. The National Rifle Association case had allegations of forum shopping, mismanagement, and bad faith. That being said, no one has ever accused one of my restaurant clients of operating a child sex-trafficking ring in its basement, nor has anyone accused the U.S. Trustee of being a lizard man being controlled by George Soros. Bankruptcy doesn’t often see the ridiculous antics which characterize partisan politics and the darker corners of the internet. This is for two important reasons: one is self-respect - most of us practice before the same judges, time and time again, and reputation, once tarnished, is hard to repair. The other is the regime of sanctions which can make bad behavior an expensive proposition. While sanctions are the exception rather than the norm, there are some cases where bad behavior by litigants pushes judges to the point of writing a long and scathing opinion finding that sanctions should be awarded.

On August 25, 2021, U.S. District Judge Linda Parker released a 110-page opinion granting sanctions in Case No. 20-13134, King v. Whitmer (E.D. Mich. 8/25/21), a case arising out of the failed attempt to decertify the 2020 election results in Michigan. The case is not a bankruptcy opinion, but the same legal grounds apply in all federal litigation, including bankruptcy. There have been numerous cases in which the same doctrines were applied in the bankruptcy setting, a few of which we’ll discuss here. As of this writing, the amount of sanctions to be awarded has not yet been determined.

In discussing the Michigan elections case and the bankruptcy cases to follow, I don't want to seem as though I am mocking the attorneys involved. While these are particularly egregious cases, I hope that my attorney readers will view them as an object lesson that could apply to any of us (albeit on a smaller and less public scale) if we allow passion and busyness to overcome our professional judgment.

Factual Background in the Michigan Case

On November 25, 2020, several Republican voters and candidates filed suit against Michigan Governor Gretchen Whitmer and other state officials seeking to overturn the results of the Presidential election in Michigan, which Joe Biden had won by 150,000 votes. A few days later, they filed an Amended Complaint and a request for emergency injunctive relief. They claimed violations of the Elections and Electors clause of the Constitution, the Fourteenth Amendment equal protection clause, the Fourteenth Amendment due process clause, and violations of the Michigan election laws. By December 7, 2020, the suit was effectively over when the Court denied the request for injunctive relief on the basis that: (1) the state had not waived immunity under the Eleventh Amendment, (2) the claims were barred by laches, (3) the plaintiffs lacked standing, (4) their claims were moot, and (5) abstention was appropriate. The Court also found that the plaintiffs were unlikely to succeed because violation of state election law, even if proven, did not violate the Elections and Electors clause of the Constitution and the claim that the defendants had conspired to switch votes from Donald Trump to Joe Biden was nothing more than belief, conjecture, and speculation.

The plaintiffs then sought relief from the Supreme Court arguing that their claims would be moot once electors cast their votes on December 14, 2020. The Supreme Court did not rule by December 14 and in fact, did not deny the petition until February 21, 2021.

Meanwhile, on December 15, 2021, the City of Detroit (which had been added to the suit) sent a safe harbor letter to the plaintiffs under Fed.R.Civ.P. 11. On December 22, 2020, the State Defendants filed a motion to dismiss the suit. The motion included a request for sanctions under 28 U.S.C. §1927. When the plaintiffs finally responded on January 14, 2021, they did not respond to the motion to dismiss but did address the request for sanctions. On the same day, they voluntarily dismissed their suit.

On January 5, 2021, the city of Detroit filed a Rule 11 “Motion for Sanctions, for Disciplinary Action, for Disbarment Referral and for Referral to State Bar Disciplinary Bodies.” On January 28, 2021, the Governor and Secretary of State of Michigan filed a motion for sanctions under 28 U.S.C. Sec. 1927.

The Court scheduled a hearing which was continued to July 12, 2021, and required that any attorney whose name appeared on any of the briefs or motions must appear.

The Court conducted a six-hour hearing on July 12, 2021. At the hearing, the attorneys who signed the pleadings argued that they had done so just as local counsel without reviewing the documents, while the attorneys who did not sign the pleadings argued that they could not be held responsible because they had not signed any pleadings. Attorney L. Lin Wood argued that he had never entered an appearance in the case even though his name appeared as “Of Counsel.” When asked if his name was placed on the document without his permission, he equivocated.

On August 25, 2021, the Court issued its ruling granting sanctions. The Court discussed three grounds for liability: Fed.R.Civ.P. 11, 28 U.S.C. §1927, and the Court’s inherent authority.

Tomorrow’s post will discuss Fed.R.Civ.P. 11.