Consumer Bankruptcy Journal Summer 2017 - Page 44

THE PREEMPTION OF STATE COURT CLAIMS to accomplishment and execution of federal law, i.e. implied preemption. Id. However, the intent that state law be preempted must be “clear and manifest,” and there is always a presumption that Congress did not intend to preempt a state law. Id. at 611-12. An interesting distinction is then made between what the Graber Court considered “custom-built” bankruptcy rules, and rules that were imported into the bankruptcy process. Id. at 612. For example, the court explained that the automatic stay was created “for the specific purpose of bankruptcy”, and thus would preempt any competing state rule. Id. By contrast, Congress used existing federal rules for other aspects of the bankruptcy process, such as the rules governing adversary proceedings. Id. These rules, the court reasoned, are not specific to bankruptcy, and thus no intent to preempt state law exists. Id. The court concluded that frivolous litigation rules fall into the latter category and do not preempt state law abuse of process claims. Id. In doing so, the court repeatedly returned to congressional intent, first rejecting any consideration of the “chilling effect” on bankruptcy filings, because it is presumed that Congress already considered this possibility when it chose not to explicitly preempt state law. Id. at 616-17. The court was also unconcerned about the chance of “disrupting the uniformity in bankruptcy law,” because any state court action could not be filed until the underlying claim reached final judgment and all appeals were exhausted. Id. at 617. Finally, the Graber Court stated that the possibility of a state court interpreting bankruptcy law in an abuse of process case was not problematic because federal and state courts often interpret the laws of the other jurisdiction. Id. at 619. It explained that “[t]here is no more reason to question a state court’s aptitude at applying federal law now than there has been for the last two 44 CONSUMER BANKRUPTCY JOURNAL hundred years.” Id. at 619. The Graber Court then concluded that, despite the many jurisdictions finding otherwise, preemption does not always exist when the challenged actions occurred in bankruptcy court. Id. How Practitioners Can Navigate these Muddy Waters The lesson from these cases for both practitioners and defense attorneys is twofold. First, it is noted that none of these cases suggest any limitation on the ability to seek sanctions in bankruptcy court. Generally speaking, wide latitude is afforded to bankruptcy judges to “impose sanctions upon attorneys, law firms, or parties for the filing and prosecution of pleadings and other papers which are found to be frivolous under Rule 9011(b).” In re Belmonte, B.R. 17, 29 (Bankr. E.D.N.Y. 2015). A bankruptcy court may deem a filing frivolous for several reasons, such as the attempt to set forth an argument that is unwarranted under existing law, or a frivolous argument to change the existing law. Branch Banking & Trust Co. v. Michael’s Enters. of Va., Inc. (In re Michael’s Enters. of Va., Inc.), No. 14-30611, 2014 Bankr. LEXIS 4654 (Bankr. E.D. Va. Nov. 6, 2014). While the Rule is not intended to “deter an attorney’s enthusiasm or creativity in եՅȁѡɥ̳t)ͅѥ́ݥ͕ݡ)́䁙Յȁ̸ͥ)!ظ5ɱ%ɔ5ɱ)9Ĵఀȁ ȸ1a%L(Ā ȸLMи䰀Ȥ)Mѥ܁ѡȁ́ȁ́Ѽ)͕͕Ёѽɹݡ+qͼձѥ́ѡɽ́)͔չɕͽ䁅ٕѥͱ䳊t)ݡMѥԡ́)э䁍ЁѼхq䁅ѥ)ͅ䁽ȁɽɥїѼɕٕ)͔ɽ̻tTL (ܰԡ͕ͼ5Ʌظ) ѥ镹́ 5̸TL԰(Ԁܤѥѡɐѡɥ)э䁍́չȃ ԡ)%մѡѥ́مѼѥ)ȁхͅѥ́́ѡ)MյȀ$$$)э䁍Ёɔչи)Q́͡ձչѽ́)ѥѡЁѡ́)Ѽѡ͔ݡ݅Ёѡɥ)ɥ͑ѥ̸䁍ѡЁձ)չȁѡ䁽͔)ɽ́ͼ͕ѕѡ)э䁅ѥ͕%хѱ)ȁ̰ѡ́́ѕ)ɕ䁙́ݡٔ)͔ɥٽ́ѥѥ)]ѥչѥѕȁѡэ)ѥ́ՑͥݥѠ)ѡѕЁqхtՍЁȁѡ)ɥͭ́є͵ͅ)ݥѡЁɕٕ䁅Ё=є)ݡѡ ɵЁ͵͕ѡ)͔ɽ́Ёѡ)хѡ=ɑЁ)ͼչѥյ䁩ՑиQ)́ѡЁѡѥЁ䁱)Ё́ɥٽ́ѥѥ)ͼ͡ձɕѡѥ)ѕѥѼɕٕȁѡ͔́)хєи)ȁ͔ѽɹ̰ѡѽ)͍͕=ɑѕ)ɥ䁩ɥ͑ѥ́ݥѥՔ)Ѽɽ٥ͥ́ȁ͕́))э))Սа)ɕɑ́ѡɥ͑ѥ])ѡٕݡݕЁ͔)́Ёѡ́ͥѥѡ=ɑ)ͥ́͡ѡЁЁݽeЁͅɥ)՝ѼЁхє)Ёѡٕ%͕ͥ)Ս͔Ёѡɕх)Ё́ѡɕɔͅѼЁ)ѕɵݡѡȁȁɥ͑ѥ)ѡɥ䰁ЁͼѡɽɅ)ɔ䁍Ё̸ͥѕȁ)ͽչͥ́ȁ٥ȁյ)ՑЁ́ՍɕЁѡ)͵ͅЁѡхQ)ɕЁAمͥ́͡)ѡЁѽɹ́ѥՔѼɥѡ͔)ѥٕ́ɥ͑ѥ́ѡЁͽ)ЁɕѥЁ)ɕɕȁɽѥѥɔ)ɕѥȁ͵ͅ)ٕ)9ѥͽѥ յȁ эѽɹ