Fred Damron's Case in United States Bankruptcy Court

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
ASHLAND DIVISION

IN RE: MARY GAIL FOWLER
DEBTOR CASE NO. 01-10615
MEMORANDUM OPINION

1. Background

This matter is before the court on a motion to recuse filed herein on October 9, 2003 and a second filing on the same matter of December 8, 2003, both by Frederick Damron ("Damron"). Damron is a former spouse of the debtor. He identifies himself as a creditor in this case although he is not scheduled as a creditor. In some pleadings he identifies himself as an "interested party," although he has not demonstrated that he has standing as an interested party. Damron's involvement in this case centers around the case trustee's administration of estate property in which Damron asserts that he has an interest, real estate located at 16230 Bowling Drive, Catlettsburg, Kentucky. He also asserts an interest in a 1992 Corvette automobile.

In the course of the divorce of the debtor and Damron, the report and recommendation of the domestic relations commissioner of the Boyd Circuit Court was that the subject real property, as well as the 1992 Corvette, be awarded to the debtor. This report was confirmed and adopted by the Boyd Circuit court. Damron appealed the order of the Boyd Circuit Court to the Kentucky Court of Appeals. The Court of Appeals affirmed the Boyd Circuit Court's award of the real property and the Corvette to the debtor, free of any claim of Damron. Damron moved the Supreme Court of Kentucky for discretionary review of the decision of the Court of Appeals; that motion was denied. He then petitioned the Supreme Court of the United States for a writ of certiorari regarding the Court of Appeals' decision. That petition was denied.

On November 13, 2001, the trustee filed adversary proceeding No. 01-1011 alleging the debtor's fraudulent transfer of the subject real property and the Corvette automobile to her daughter. The matter was eventually settled for the sum of $100,000.00. The trustee had retained counsel on a one-third contingency basis, and counsel filed his application for allowance of compensation on July 18, 2002, seeking $33,333.33, plus costs incurred. Damron's mother, Hazel Damron, was scheduled as a creditor in this case. On August 6, 2002 she filed an objection to the fee application. Her objection was overruled, and on September 24, 2002, an order was entered granting counsel his fee and costs.

On January 22, 2003 the trustee moved the court to employ counsel to clear title to the property at an hourly rate of $175.00. On March 24, 2003, an amended order was entered allowing the trustee to employ counsel on that basis. The trustee then filed a motion to sell the real property. Despite having no interest in the properties, Damron began filing a variety of pro se motions and objections, the primary purpose of which was to stop the sale. An order granting the motion to sell was entered on July 17, 2003. Damron filed more motions and objections, eventually filing a total of approximately 20, including his motions to recuse as set out above.

On July 18, 2003 Damron also attempted to file two claims in this case, Claim No. 3 in regard to the subject real property in the amount of $100,000.00 and Claim No. 4 in regard to the Corvette automobile in the amount of $20,000.00. The trustee objected to these claims on August 1, 2003, on the basis of their having been filed more than a year and a half after the last date to file claims in this case. On September 8, 2003, the court entered an order sustaining the trustee's objections and disallowing the claims. The order recites that Damron's interest in the subject real property and the Corvette automobile had already been adjudicated and that he had no interest in either the real property or the automobile. Various motions to alter, amend, etc., have been filed with respect to the order disallowing these claims.

The trustee filed a motion for sanctions pursuant to Federal Rule of Bankruptcy Procedure 9011 on July 21, 2003. There she set out the history of Damron's attempts to assert an interest in the subject property in the Kentucky courts. The trustee argued that Damron's filing of motions and proof of claim in regard to the real property when it had already been determined that he had no interest in this property was a violation of Rule 9011 in that all of these filings contained factual assertions that have no factual or evidentiary support. She further argued that the only purpose in filing these documents was to harass and cause unnecessary delay in the sale of the real property that would cause unnecessary delay to the creditors. The trustee requested an order requiring Damron to be sanctioned and for reasonable attorney fees. On September 17, 2003, after a hearing at which the court offered to allow Damron to withdraw his pending motions and claims, an order was entered imposing sanctions on Damron, a $1,000.00 penalty and attorney fees and costs.

The trustee filed a second motion for sanctions pursuant to Rule 9011 on October 9, 2003. There she represented that despite previous admonitions and the court's order imposing sanctions, Damron had continued to maintain in subsequent filings that he had an interest in the subject property. The trustee asked for a second order requiring Damron to pay a penalty and attorney fees. As set out above, Damron filed his motion to recuse on the same date, October 9, 2003.

The motion to recuse states that it is brought pursuant to 28 U.S.C. § 144 and 28 U.S.C. § 455, and alleges that the court is completely biased and prejudiced against Damron in this matter. It alleges impropriety on the part of the court and the trustee, all of which involves the prosecution of this case. It specifically alleges, among other things, that the court suggested to the trustee that she hire "his former law clerk" as counsel, allowed a contingent fee arrangement in counsel's representation of the trustee in Adv. No. 01-1011 "without a review of reasonableness" when the "local bar" would have charged $3000-$5000, allowed counsel an hourly rate of $175.00 in the action to clear title when the "local bar" charges $130.00 per hour, had ex parte communications with the trustee and her counsel, and allowed the trustee to deplete the estate. These allegations range from outright lies to irrelevancies.

While the court finds no purpose in replying to each specific allegation, the more outrageous among them should be addressed. As concerns the allegation that the court suggested "his former law clerk" as counsel to the trustee, it is outrageous to suggest that the court suggested anyone as counsel. Counsel for the trustee was employed by the Clerk of the United States Bankruptcy Court as a deputy clerk prior to entering private practice. In that capacity he served for a time as this court's courtroom deputy. He has never been employed as this court's law clerk. Since entering private practice he has represented this and other case trustees on many occasions, and his retention has always been sought and approved pursuant to the requirements of the Bankruptcy Code.

There is further no support for the equally outrageous and untrue allegation that the court had ex parte communications with the trustee and her counsel. Affidavits have been filed by the trustee and her counsel which state that no ex parte communications have occurred. Damron states in the affidavit attached to his motion that "on Monday, October 6, 2003, the Court changed the hearings on Affiants (sic) motions from Ashland to Lexington and from October 6 to October 31, by speaking ex parte to the former law clerk without the presence of the Affiant." The record in this case shows that Damron had set the above-referenced motions to be heard on October 8, 2003 in Ashland. The record further shows that an order was entered on October 6, 2003, rescheduling hearings on Damron's motions for October 31, 2003 in Lexington. Because of the lateness of the order continuing the matter, the court's staff contacted the trustee's counsel with instructions to see that Damron (who receives orders by mail instead of electronically as does counsel for the trustee) was informed of the court's order of continuance so that Damron would not make an unnecessary trip to Ashland. When counsel for trustee indicated inability to contact Damron, the staff member then reached Damron directly to inform him of the continuance. The presiding judge had no contact with either party. Another order was entered on the same day, directing that all future hearings in this case be held in Lexington, and that counsel or pro se filers contact the court's chambers to obtain a hearing date and time. Both of these orders were served on Damron.

2. Legal Analysis

Federal Rule of Bankruptcy Procedure 5004 governs disqualification of a bankruptcy judge. It provides as follows:

(a) Disqualification of Judge. A bankruptcy judge shall be governed by 28 U.S.C. § 455, and disqualified from presiding over the proceeding or contested matter in which the disqualifying circumstance arises or, if appropriate, shall be disqualified from presiding over the case.

Fed. R. Bankr. P. 5004(a). The statute referred to in the Rule, 28 U.S.C. § 455, provides in relevant part:

(a) Any justice, judge, or magistrate judge of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.

(b) He shall also disqualify himself in the following circumstances:

(1) Where he has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding; ...

28 U.S.C. § 455(a). Damron also cites 28 U.S.C. § 144 which provides:

Whenever a party to any proceeding in a district court makes and files a timely and sufficient affidavit that the judge before whom the matter is pending has a personal bias or prejudice either against him or in favor of any adverse party, such judge shall proceed no further therein, but another judge shall be assigned to hear such proceeding.

The affidavit shall state the facts and the reasons for the belief that the bias or prejudice exists, and shall be filed not less than ten days before the beginning of the term at which the proceeding is to be heard, or good cause shall be shown for failure to file it within such time. A party may file only one such affidavit in any case. It shall be accompanied by a certificate of counsel of record stating that it is made in good faith.

28 U.S.C. § 144. By its own terms, section 144 applies only to district court judges, and not to bankruptcy judges. Bankruptcy judges are subject to recusal only under 28 U.S.C. § 455. Fed. R. Bankr. P. 5004(a). The requirement that the judge assume that the facts asserted in the affidavit referenced in § 144 are true and examine them only for their legal sufficiency is therefore inapplicable here. Smith v. Hale (In re Smith), 317 F.3d 918, 932 (9th Cir. 2002); In re Goodwin, 194 B.R. 214, 221 (B.A.P 9th Cir. 1996); Diaz v. Botet (In re Diaz), 182 B.R. 654, 658 (Bankr. D. Puerto Rico 1995).

The court must therefore decide if there is cause for recusal pursuant to 28 U.S.C. § 455. While this statute imposes a duty to recuse where grounds exist, there is also a duty not to do so if no cause is shown. In re Computer Dynamics, Inc., 253 B.R. 693, 698 (E.D. Va. 2000). The standard for determining whether a judge should be disqualified is an objective one: whether a reasonable person with knowledge of all facts would conclude that the judge's impartiality could reasonably be questioned. Since the standard is objective, "the judge need not recuse himself based on the 'subjective view of a party' no matter how strongly that view is held." United States v. Sammons, 918 F.2d 592, 599 (6th Cir. 1990)(citing Browning v. Foltz, 837 F.2d 276, 279 (6th Cir. 1988), cert. denied, 488 U.S. 1018, 109 S. Ct. 816 (1989)).

Damron's motion to recuse is based on unsupported allegations and accusations that this court not only favored the trustee and her counsel, but actively conspired with them to deplete the bankruptcy estate so that they might be personally enriched. As stated above, these allegations are not only untrue, they are outrageous, and no reasonable person would give them any credence. In fact this court has been exceptionally tolerant of Damron and his unceasing efforts to assert an interest in property in which the highest court of Kentucky has already determined that he has no interest. The court's dealings with Damron have been fair and impartial; he has been afforded due process in every instance, with notice and an opportunity to be heard. Rulings in regard to the trustee and her counsel have been made in accordance with the requirements of the Bankruptcy Code. Finally, it should be noted that Damron has also filed a Complaint of Judicial Conduct or Disability with the Judicial Council of the Sixth Circuit. "The filing of a complaint with the Judicial Council is not grounds for disqualification." Winslow v. Winslow, 107 B.R. 752 (D. Colo. 1989).

This court would be remiss in its duties if it recused itself in this instance. As stated by the court in In re Womack, 253 B.R. 245, 246 (Bankr. E.D. Ark. 2000), "[a]lthough the Court has a duty to recuse where any of [the § 455] factors exist, there is a concomitant duty not to recuse on unsupported, irrational or tenuous speculation." Id. This court will therefore enter a separate order overruling Damron's motion to recuse.

Copies to:

Phaedra Spradlin, Esq., Trustee Ryan R. Atkinson, Esq., Attorney for Trustee

Frederick C. Damron, Pro Se

Debtor

George Stavros, Esq., Attorney for Debtor