United States District Court, D. Colorado
In re: STEVEN E. MUTH, Debtor.
KIMBERLEY KROHN, Appellee STEVEN E. MUTH, Appellant,
March 11, 2016.
Steven E. Muth, In Re: Seth Herschel Kretzer, Law Office of
Seth Kretzer, Houston, TX.
Steven E. Muth, Appellant: Seth Herschel Kretzer, Law Office
of Seth Kretzer, Houston, TX.
Krohn, Appellee: Colin E. Moriarty, LEAD ATTORNEY, Joanne
Underhill & Associates, P.C., Greenwood Village, CO.
AND ORDER ON APPEAL
S. Krieger, Chief United States District Judge.
MATTER comes before the Court on the Debtor Steven E.
Muth's appeal of the United States Bankruptcy Court for
the District of Colorado's March 5, 2015 Order awarding
attorney fees to Creditor Kimberly Krohn. In reviewing this
matter, the Court has considered the designated record and
written arguments of the parties, including Mr. Muth's
Opening Brief (#23), Ms. Krohn's Response Brief (#28),
and Mr. Muth's Reply Brief (#30).
jurisdiction pursuant to 28 U.S.C. § 158(a), the Court
REVERSES the Bankruptcy Court's March 5, 2015 Order
awarding fees, and REMANDS the case to the Bankruptcy Court
for further proceedings.
Debtor, Mr. Muth, and Ms. Krohn are former spouses who have
been litigating issues from their domestic case in state
court for several years. In those proceedings, a judgment
entered for Ms. Krohn against Mr. Muth. Mr. Muth filed his
voluntary Chapter 11 bankruptcy petition on August 13, 2012,
thereby staying Ms. Krohn's collection on the judgment.
bankruptcy case, Ms. Krohn filed a proof of claim for a
non-dischargeable domestic support obligation of
approximately $45,000. She also filed a motion to dismiss the
bankruptcy case under 11 U.S.C. § 1112(b)(1), asserting
as " cause" that Mr. Muth had no reasonable
likelihood of rehabilitation and that the bankruptcy case had
been filed in bad faith. In the same motion, Ms. Krohn
requested that sanctions be imposed against Mr. Muth in the
form of an award of attorney fees and costs that were
incurred as a result of the bankruptcy filing. The Bankruptcy
Court held an evidentiary hearing on the motion.
3, 2013, the Bankruptcy Court granted Ms. Krohn's motion
and dismissed Mr. Muth's case for cause, finding that Mr.
Muth had demonstrated no reasonable likelihood of
rehabilitation and that he filed his case in bad faith. The
Bankruptcy Court further determined that Ms. Krohn was
entitled to recover attorney fees and costs incurred as a
result of the bankruptcy filing. Relying on its inherent
authority and equitable powers under 11 U.S.C. § 105(a),
the Bankruptcy Court found that imposition of sanctions
against Mr. Muth was appropriate because he had filed the
bankruptcy case, in part, " to disrupt his domestic
proceedings and " implement a scheme to divert money to
his fiancee." The Bankruptcy Court noted that Mr. Muth
had many months to consider withdrawing his bankruptcy case
after Ms. Krohn contested the filing, but he declined to do
so. For these reasons, the Bankruptcy Court concluded that
Ms. Krohn " should not be required to bear the full cost
of Mr. Muth's bad faith filing." The Bankruptcy
Court directed Ms. Krohn to file a detailed fee application
and motion for entry of judgment, which she did.
the Bankruptcy Court had an opportunity to quantify the fee
award, Mr. Muth appealed the July 3, 2013 Order to the United
States Bankruptcy Appellate Panel (BAP) of the Tenth Circuit.
See 28 U.S.C. § 158(b). Proceeding pro
se, Mr. Muth identified portions of the Bankruptcy
Court's ruling to which he objected. As to the attorney
fee award, he argued that because he did not file his
bankruptcy petition in bad faith, he should not have to pay
any attorney fees. He urged the BAP to " deny attorney
fees for [the Bankruptcy Court's] false findings for
found no error in the dismissal of the bankruptcy case.
Although the BAP did not separately address the fee award in
its opinion, it found no error in the Bankruptcy Court's
finding that Mr. Muth had filed his case in bad faith. In the
introduction of its opinion, the BAP states that it was
addressing Mr. Muth's appeal of both the dismissal of his
case and the award of attorney fees. Ultimately, the BAP
affirmed both the dismissal and the award of attorney fees to
Mr. Krohn. Mr. Muth did not appeal from the BAP decision.
appeal having been resolved, the Bankruptcy Court addressed
quantification of the fee award. An evidentiary hearing was
held, and on March 5, 2015, the Bankruptcy Court entered an
order awarding fees to Ms. Krohn in the amount of $19,546.17
plus interest. The Bankruptcy Court iterated that it had
previously dismissed the bankruptcy case because it was filed
in bad faith and determined that Ms. Krohn was entitled to
her reasonable fees. The Bankruptcy Court ...