Unpublished Dispositionnotice: Seventh Circuit Rule 53(b)(2) States Unpublished Orders Shall Not Be Cited or Used As Precedent Except to Support a Claim of Res Judicata, Collateral Estoppel or Law of the Case in Any Federal Court Within the Circuit.in the Matter of Richard Lewis, Debtor.appeal of Richard Rheinstrom, 920 F.2d 935 (7th Cir. 1990)

ORDER

This appeal is from an order of the district court affirming the bankruptcy court's award of sanctions pursuant to 28 U.S.C. § 1927 in favor of the trustee and against the debtor's attorney. The issues raised on appeal are: 1) whether bad faith must be found as a matter of law in order to award fees under section 1927; and 2) whether the amount of the sanction is supported by the evidence in the record.

Attorney Richard Rheinstrom filed a petition for relief under Chapter 13 of the bankruptcy code along with other documents on behalf of his client, Richard Lewis, on February 17, 1989. He submitted a second plan to the trustee in April. The trustee served notice of his objections to the plan and the fees that Rheinstrom requested. The trustee also asked for sanctions against Rheinstrom. These matters were before the bankruptcy court on May 11, 1989, the same day that Rheinstrom filed a third plan. Rheinstrom did not appear at the evidentiary hearing scheduled on June 22, 1989. Based on the record, the bankruptcy judge made findings of fact and conclusions of law and entered an order in which: 1) he awarded Rheinstrom nothing in attorney's fees; 2) he ordered Rheinstrom to return money paid to him by the debtor; and 3) he granted the trustee's motion for sanctions. The order required the trustee to prepare a fee statement that would be granted if Rheinstrom failed to object within 7 days and provided for a hearing on August 3 if Rheinstrom did file an objection.

Rheinstrom neither filed an objection nor appeared in court on August 3, 1989. The confirmation hearing was continued to September 28, 1989, at which time Rheinstrom filed his objection and voluntarily dismissed the case on behalf of his client. An evidentiary hearing was held on the trustee's statement of fees. The bankruptcy court judge then entered an order against Rheinstrom, awarding the trustee $1,750 in attorney's fees and $10.80 in costs. The district court affirmed this order and denied Rheinstrom's motion for reconsideration.

We review an order imposing sanctions under section 1927 for an abuse of discretion. Walter v. Fiorenzo, 840 F.2d 427, 433 (7th Cir. 1988). "We must affirm the ... judgment unless it is based on clear errors of fact or it is an abuse of discretion." Kapco Mfg. Co., Inc. v. C & O Enterprises, Inc., 886 F.2d 1485, 1491 (7th Cir. 1989). Our review of the facts extends to the findings made by the bankruptcy court, while we consider questions of law de novo. Matter of Bonnett, 895 F.2d 1155, 1157 (7th Cir. 1989).

Section 1927 permits the award of costs against any attorney "who so multiplies the proceedings in any case as to increase costs unreasonably and vexatiously." 28 U.S.C. § 1927. Because section 1927 is punitive, a court may impose sanctions under this section only to sanction needless delay caused by the dilatory conduct of counsel. Knorr Brake Corp. v. Harbil, Inc., 738 F.2d 223, 226 (7th Cir. 1984). The bankruptcy judge found that Rheinstrom had submitted pleadings that did not rise to the minimal level expected of an attorney and that this lack of care vexatiously multiplied and prolonged the proceedings, causing the trustee to incur additional expenses and attorney's fees.

Rheinstrom asserts that his conduct was not vexatious. He insists that mere errors in preparation are not sufficient to justify the imposition of fees. He argues that the bankruptcy court found no instance of bad faith on his part and that bad faith must be found as a matter of law before sanctions can be imposed.

The law of the Seventh Circuit is to the contrary. The word, "vexatious" does not imply that subjective bad faith is a necessary prerequisite to a sanction. Hill v. Norfolk and Western Ry. Co., 814 F.2d 1192, 1202 (7th Cir. 1987). Sanctions under section 1927 are proper against an attorney "where that attorney has acted in an objectively unreasonable manner." Walter, 840 F.2d at 433. "Section 1927 permits a court to insist that the attorney bear the costs of his own lack of care." In re TCI Ltd, 769 F.2d 441 (7th Cir. 1985).

The bankruptcy court judge noted several instances of Rheinstrom's lack of care: 1) the petition originally named Rheinstrom as the debtor; 2) his petition relied on an exemption statute repealed in 1981; and 3) his pleadings were "replete with incomprehensible typographical errors." The bankruptcy judge determined that it was because of such carelessness that the trustee spent extra time and money on this case.

Section 1927 allows a court to require an attorney to satisfy personally any excess costs incurred by his having multiplied proceedings unreasonably and vexatiously. 28 U.S.C. § 1927. The amount of sanctions under section 1927 "must be a carefully measured response to the sanctioned conduct." Kapco, 886 F.2d at 1496. Rheinstrom contends that the fee petition submitted by the trustee was deficient because it did not include dates or descriptive information for the work done. In support of his argument, Rheinstrom relies on cases that interpret 11 U.S.C. § 330, which controls a trustee's request for money from the bankruptcy estate. The requirements of that statute are not relevant to the instant case, in which the trustee is asking that his costs be paid by the sanctioned attorney himself.

The information that was not included in the trustee's fee statement regarding dates and the specific services was supplied at the evidentiary hearing through testimony. The bankruptcy judge found the rates charged for the attorney's fees reasonable after listening to what he determined to be credible testimony. The bankruptcy judge further noted that Rheinstrom did not take advantage of his opportunity for discovery. The bankruptcy judge had an adequate basis for making the factual determination of the amount of the sanction.

The bankruptcy court did not abuse its discretion in finding Rheinstrom's conduct vexatious and in imposing sanctions in the amount of $1,750 in attorney's fees and $10.80 in costs. Accordingly, the decision of the district court is AFFIRMED.