Inherent Power Sanctions: Discovery Rules Inadequate Where Party Not Only Failed to Produce But Made Affirmative Misrepresentations to Conceal Document’s Existence — $257,000 Awarded Apply Goodyear’s But-For Causation Test

Goldstein v. Bavelis (In re Bavelis), 2018 U.S. App. LEXIS 32632 (6th Cir. Nov. 19, 2018):

Quick Capital, a company owned by Ted Doukas, held a promissory note signed by George Bavelis, a debtor in Chapter 11 bankruptcy. Quick Capital filed a proof of claim against Bavelis's bankruptcy estate, and then sold and assigned its claim to Socal, an unrelated entity. However, Doukas and his attorney, Gary Goldstein (together, "Doukas"), concealed the assignment from Bavelis and the bankruptcy court, and litigated the entire case as if Quick Capital was still the interested party. After Bavelis finally uncovered the deception, the bankruptcy court ordered Doukas and Goldstein to pay $257,228.31 in sanctions, which represented a portion of Bavelis's costs and attorney's fees.

The principal issue [*2]  concerns the amount of the bankruptcy court's fee award. Doukas claims the bankruptcy court's sanctions were not limited to the costs and fees Bavelis incurred "but for" their bad conduct, as required by Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1184, 197 L. Ed. 2d 585 (2017). Because the bankruptcy court properly applied Haeger, we AFFIRM.

I.

This case involved extensive litigation regarding the Chapter 11 bankruptcy. The basic facts of Bavelis's bankruptcy were related in an earlier appeal, which will not be repeated herein. In re Bavelis, 773 F.3d 148, 151-55 (6th Cir. 2014). We affirmed the bankruptcy court's judgment. Id. at 161.

This appeal concerns the conduct of Doukas and his counse

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