# Petition — Kaye v. Luce

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1982
- **Citation:** 459 U.S. 831

## Text

81-2212

aa

ALEXANDER L. STEVAS,
CLERK

IN THE
Supreme Court of the United States

October Term, 198!

MICHAEL KAYE,
Petitioner,

v.

LUCE, FORWARD, HAMILTON & SCRIPPS;
and THEODORE W. GRAHAM,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

MICHAEL KAYE

610 Chalcedony Street, No. 4
San Diego, California 92109
Telephone: (714) 483-7483

Petitioner Pro Se

May 24, 1982

INTERIM PrinTinG & MAILING COMPANY
1105 West Morena BOULEVARD, SAN DieGo, CALIFORNIA 92110 — 275-3050

rae
QUESTIONS PRESENTED

1. Whether due process in a fee sanction case under Roadway
Express, Inc. v. Piper, 447 U.S. 752 (1980), requires: (a) specification of
charges and advance notice of hearing prior to any consideration of
sanctions, (b) bifurcation of the sanction hearing from any hearing on the
merits in the case in chief, and (c) opportunity at the sanction hearing to
call favorable witnesses and to confront and cross-examine adverse
witnesses, before the District Court may recommend the disbarment of
an attorney in an opinion earmarked for publication or impose monetary
sanctions against the attorney in an amount exceeding $36,000.

2. Whether a Roadway Express fee sanction in an amount exceeding
$36,000 for filing a motion to reopen a bankruptcy case is sufficiently
tantamount to a tort judgment for malicious prosecution or abuse of
process to warrant the Seventh Amendment safeguard of trial by jury.

3. Whether the assessment of a punitive fee sanction against an
attorney for an alleged abuse of process, “bordering on attempted fraud
upon the Court,” is so functionally indistinguishable from a fine for
criminal contempt as to necessitate trial by jury under the Sixth
Amendment when the amount of the penalty exceeds $36,000.

4. Whether district judges have discretionary power under Rule 7 of
the Federal Rules of Appellate Procedure to deter or obstruct appeals
from their own decisions by imposing exaggerated cost bond assessments
which bear no reasonable relationship to actual costs and which
exceed an appellant's financial resources, or whether 28 U.S.C. § 47
compels a narrower reading of Rule 7 and confines the district judge's
discretion to the setting of a bond amount which approximates as closely
as possible the actual costs that would be taxable in the appellee's favor if
the appeal fails.

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA

In the Matter of )
‘ Chapter XI!
SAMUEL T. H. SHEN ;
) Bankruptey Nos. 74-607-K
and ) 74-608-K
CAROLYN JEAN SHEN, ‘ OPINION
)
Debtors. )
)

Incredibly, after six years of proceedings in the bankruptcy court
involving seventeen different appeals and eight different lawyers for the
bankrupts, Mr. and Mrs. Samuel T. H. Shen, ex-debtors, and Mr.
Michael Kaye, their lawyer, have moved, pursuant to Bankruptcy Rule
515, to reopen the bankruptcy proceedings in order to charge the Trustee
in Bankruptcy, Mr. Theodore Graham, and his counsel, the law firm of
Luce, Forward, Hamilton and Scripps, with certain acts of misconduct.
The bankruptcy proceedings were dismissed voluntarily on December 20,
1979, several months after the Shens and Mr. Kaye had executed in the
presence of the court a release of the very claims and demands against the
Trustee and his counsel which are herein asserted as grounds for the
motion to reopen. When stripped of the ill-supported arguments urged
on this Court by Mr. Kaye, the feeble excuse which underlies his out-
rageous attempt to set aside the release is that he exercised “poor

judgment” in signing the release and disavowing participation in any

further proceedings to challenge the release. We might add that he has
exercised even worse judgment in attempting to repudiate his signature
and in unashamedly abusing the processes of the courts. Mr. Kaye's
initiation and pursuit of the present motion raises a substantial question
as to his legal ethics’ as well as his right to continue to practice before this
Court.2 This Court finds that the motion is an unreasonable and
vexatious multiplication of the Shen's bankruptcy proceedings, is an
abuse of the Court's processes, and is frivolous, bordering on an attempt
to have the Court become a party to fraud. The Court futher finds that
the Shens and Mr. Kaye have willfully and in bad faith committed this
abuse. For these reasons, and those set forth below, the motion to reopen
is denied, and attorneys’ fees and costs incurred by Mr. Graham and the
firm of Luce, Forward, Hamilton and Scripps in connection with the
Mr. Kaye in the amount of $36,339.29.

I

Only the details of the labyrinthine bankruptcy proceedings most
pertinent to the motion presently under consideration are here discussed.
In March, 1974, the Shens first sought relief under the federal bank-
ruptcy laws by filing a petition for relief under Chapter XII of the
Bankruptcy Act. Theodore Graham was appointed operating trustee
shortly after the filing of the initial Chapter XII petition. The firm of
Luce, Forward, Hamilton and Scripps, in which Mr. Graham is a
partner, was appointed counsel to Mr. Graham throughout his tenure as
Trustee. On November 7, 1975, the Shens were adjudicated bankrupts.
On June 4, 1976, Mr. and Mrs. Shen filed a petition for arrangement
under Chapter XI of the Bankruptcy Act and were again adjudicated
bankrupts shortly thereafter. Mr. Graham proffered his resignation as
Trustee of the Shen estate to the bankruptcy court on October 31, 1978,
and the court accepted his resignation on November 9, 1978. On March
26, 1979, Martin Goldberg, the special auditor appointed by the bank-
ruptcy court, filed his report approving the Trustee's handling of the
Shen estate. An order formally discharging Mr. Graham as Trustee was

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entered on May 18, 1979. In his Memorandum of Opinion Re: Fee
Applications dated July 18, 1978, Judge Katz noted the following:

“Suffice it to say that at the commencement of these
proceeding the debtors were insolvent in every sense of
the word. Today, some four years later, all unsecured
creditors have been paid in full with interest, the so called
‘equity claimant’ class of creditors has been satisfied, the
secured creditor problems are basically resolved, and the
debtors have an estate, net to them, approximating over
$1 million.

It cannot be gainsaid that the in‘lationary real estate
market in Southern California was at least in part respon-
sible for this success. However, it is also due in large
measure to the efforts of Mr. Graham who undertook to
resolve many of the problems facing the debtors and, in
my opinion did so with a view in mind of serving the
interests of his constituency, namely the creditors, while
at the same time protecting the debtors. He did this in the
face of numerous changes of counsel for the debtors as
well as the oft evident contrariness of Mr. Shen.”

The Shens again filed a Chapter XII petition on November 2/, 1979, and
voluntarily dismissed the bankruptcy proceedings on December 20, 1979.

After Mr. Graham's resignation as Trustee, he and his law firm sought
collection of fees and determination of any claims the Shens might have
against them arising from the fulfillment of their respective duties to the
Shen estate during the period of the Graham trusteeship. These issues
were resolved through a settlement, the terms of which were embodied in
a stipulated order signed by Judge Katz and approved by the Shens and
their attorney Michael Kaye on April 20, 1979. The signatures of Samuel
T. H. Shen, Carolyn Jean Shen, and Michael Kaye all appear on an
attachment to Judge Katz’ order indicating that the stipulated order was
approved both as to form and content, and that all rights of appeal and
reconsideration of the order were waived. The findings of fact incor-
porated in Judge Katz’ order included the following:

1-4

Trustee's final repert and account is accurate

3. The Trustee has satisfactorily performed all of the
duties required of him under the National Bankruptcy
Act, Rules promulgated by the United States
Supreme Court, and all orders and judgments of this

SAMUEL T. H. SHEN and CAROLYN JEAN
SHEN released the Trustee and his counsel of their own
free will without undue influence being exerted upon

;

5. The release attached hereto is fair to SAMUEL T.
H. SHEN and CAROLYN JEAN SHEN, debtors and

set tied
6. SAMUEL T. H. SHEN and CAROLYN JEAN

SHEN have received the advice of competent counsel
regarding the release.

9. The withdrawals, dismissals and release by the
debtors and debtors-in-possession are reasonable and
appropriate. The offer by the Trustee and his counsel is
reasonable and appropriate. Such withdrawals,
dismisse Is, release and offer will substantially reduce the
litigation and administrative expenses in these proceed-
ings and will resolve all disputes and claims, known or
unknown, arising directly or indirectly out of these pro-
ceedings and will resolve all disputes and claims, known
or unknown, arising directly or indirectly out of these
proceedings between the debtors and the Trustee or his
counsel, all as more specifically set forth in the release
attached hereto.”

Judge Katz’ conclusions of law included the following:

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“1. The release attached hereto is legally binding and
enforceable according to its terms.

2. The fees and costs awarded by the provisions
hereinbelow are reasonable in all respects.

3. The Trustees Report and Account is accurate and
proper and no liability of the Trustee nor his counsel has
been established with respect to matters referred to in said
Report and Account and no evidence has been offered to
establish the same.”

Following his findings of facts and conclusions of law, Judge Katz
ordered, among other things:

“That LUCE, FORWARD, HAMILTON & SCRIPPS
and each of its partners and associates, THEODORE W.
GRAHAM, individually and as Trustee of the above-
named debtors in any and all proceedings under the
National Bankruptcy Act, including the Chapter XII pro-
converted Chapter XII proceedings, and the agents,
employees, successors and assigns of each of them are
released and forever discharged from any and all liability,
claims, demands, actions, and causes of action, known or
unknown, of every kind, description and nature, now
existing or hereafter arising which SAMUEL T. H.
SHEN, CAROLY JEAN SHEN, as bankrupts, debtors-
in-possession or the successors or assigns of cither of
them have at any time held, presently hold, or with the
passage of time will hold, all as more particularly set forth
in the release attached hereto and incorporated herein by
this reference; if there be any conflict between the terms
hereof and said release, the terms of the release shall
control.”

The settlement further encompassed a release which was referred to in
Judge Katz’ order and signed by both Mr. and Mrs. Shen. The release is,

in Mr. Kaye's terms, a “comprehensive exculpatory instrument.” It

1-6

provides that both Mr. Graham and the Luce, Forward firm “are hereby
released and forever discharged from any and all liability, claims,
demands, actions, and causes of actions, known or unknown, of every
kind, description and nature, now existing, or hereafter arising which
claims have been held, are presently held, or with the passage of time will
be held by the Releasing Parties or any of them.”

The release also provided that the parties had executed the release of
their own free will, were not acting under undue influence, and that they
had consulted with counsel and received advice regarding the execui.on
of the release. The final paragraph of the release was the following

attorneys’ fees provision:

“7. In the event either of the Releasing Parties later
attempts to set aside this release, claim that this release is
unenforceable, in whole or in part, or seeks to impose
liability upon any of the Released Parties with respect to
the matters released under this release, ail Releasing
Parties jointly and severally agree to pay any and all
attorneys’ fees incurred by one or more of the Released
Parties in their attempts to establish the effectiveness or
application of this release.”

At the time the release was executed, Mr. Kaye stated in open court
that he would never appear to challenge the release which he had
approved by signing it.’ Nonetheless, Mr. Kave filed the present motion
and appeared at the hearing to represent the Shens, at which time he
indicated that he wished to repudiate the signature he had made earlier in
open court. His motivation for so doing was set forth in his affidavit,
which makes clear that he now has concluded that execution of the
release by him and his approval of it represented poor judgment on his
part.

All agree that the Shen's estate is now fully solvent. The Shens do not
seek to have the bankruptcy court resume general administration over
the Shen's property. Rather, they seek a variety of sanctions against Mr.

1-7

Graham and his law firm on a number of grounds, which include refusal
to surrender books and records of the estate, concealment of records,
illegal seizure of mail, failure to disclose conflicts of interest, filing of
false accounts, breach of fiduciary duty, and fraud on the bankruptcy
court, each and every one of which was the subject of the aforesaid
release of claims and demands.

As the Court has made clear, the release is a valid, duly executed
document approved by the Court and the parties at a special hearing, and
it operates as a bar against further pursuit of the claims and demands
specified therein, even through a proceeding under Bankruptcy Rule 515.
But were the Court to look beyond the release and consider the merits of
the outrageous charges brought against Mr. Graham and his firm in the
light most favorable to the debtors, it still would dismiss the charges as
being frivolous, bordering on attempted fraud upon the Court.

ll

A motion to reopen bankruptcy proceedings under Bankruptcy Rule
515 is addressed to the sound discretion of the trial judge, and the
granting or denial of such a motion will be reversed only for abuse of that
discretion. In Re Haker, 411 F.2d 568 (Sth Cir. 1969); Kheel v.
Bethlehem Steel Co., 355 F.2d 187 (9th Cir. 1965). Such a motion will be
granted only for cause shown, Hull v. Powell, 309 F.2d 3 (9th Cir. 1962),
and the determination of what constitutes sufficient good cause is within
the trial court's discretion. Bartle v. Markson, 357 F.2d 517 (2d Cir.
1966). The burden of proof in establishing good cause is on the party
seeking to reopen the bankruptcy proceeding. In Re Fair Creamery Co..,
193 F.2d 5 (6th Cir. 1951).

Of the many obstacles to be overcome by the Shens in order to meet
their burden of proof to show good cause to reopen none is more
formidable than the general release signed by the Shens and approved by
their legal counsel, Michael Kaye. As is obvious from a reading of those
provisions set forth in Section I, supra, the release is a broad instrument,
the purpose of which is to put to rest precisely the types of claims the

1-8

Shens are asserting as grounds for their Rule 515 motion. The release by
its terms embraces “all liability, claims, demands, actions, and causes of
actions, known or unknown, of every kind, description and nature, now
existing, or hereafter arising * * *.”

The Shens urge this Court to find the release invalid and unenforce-
able. The arguments they offer in support of such a finding are less than
clear, but apparently are grounded in what they term as Mr. Graham's
“double fiduciary status” at the time the release was executed. This
status, Mr. and Mrs. Shen contend, results from Mr. Graham's position
as ex-trustee of the Shen estate and his alleged usurpation of Mr. Kaye's
role in advising the Shens on the merits of the settlement and release.

It is beyond question that bankruptcy trustees occupy a fiduciary
position in releation (sic) to administration of bankruptcy estate assets.
In Re Combined Metals Reduction Co., 557 F 2d 179 (9h Cir. 1977). It
is unclear, however, what fiduciary duty lingers after the trustee's resig-
nation has been accepted by the bankruptcy court and the trustee is
attempting to resolve questions of liability with ex-debtors. The Shens
have offered no authority in support of their assertion that an ex-trustee
operates in a fiduciary capacity in negotiating a settlement and release of
liability with debtors. Resolution of this precise issue is not required by
the facts of the present case though, since this Court finds that Mr.
Graham's disclosures were more than adequate, whether or not he was
operating as a fiduciary in negotiating the settlement and release here at
issue.

“In the case of releases, us in other instances of dealing between the
fiduciary and the person for whom he is acting, there must be proof of
full disclosure by the trustee of the facts of the situation and the legal
rights of the beneficiary * * *.” Bogert, The Law of Trusts and Trustees,
§ 943. This Court finds that there was full disclosure on the part of Mr.
Graham, and that the Shens were fully aware of the facts giving rise to
their claims as well as their legal rights, which they have vigorously
pursued throughout the course of their bankruptcy proceedings. For

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example, the facts of the mail interception claims raised by the Shens
were known to them well in advance of the settlement and release. On
February 13, 1979, Mr. Shen stated these claims in a letter to Mr.
Graham. The same claims were raised again at hearings on February 20,
1979, and March 12, 1979. Indeed, the legal theory of the mail intercep-
tion claim, based in part on Bivens v. Six Unknown Named Agents of the
Federal Bureau of Narcotics, 403 U.S. 388 (1971), which is raised here as
a ground for rescinding the release and reopening the case, was concisely
laid out in January, 1979, at page four of the “Debtors’ Opposition to
Proposed Order Modifying the Order Authorizing Trustee to Employ
Real Property Manager” filed by Mr. Kaye on behalf of Mr. and Mrs.
Shen.

Similarly, the estate records claim was raised by Mr. Shen ina letter to
Mr. Graham dated February 7, 1979. Mr. Kaye seconded those claims by
letter of February 8, 1979, to Mr. Graham. The detailed responses of the
Luce, Forward firm, stating their position on the question of turnover of
records, also served to inform the Shens of the facts surrounding the
records issue. The legal theory of their records claim was set forth in full
in April, 1979, in the debtors’ opposition to the Trustee's fee application
for the period from April 25, 1978, to April 1, 1979.

Mr. Shen's testimony on July 5, 1978, during an examination pursuant
to Rule 205, demonstrates that in relation to the remaining claims
asserted as a basis for the motion here under consideration—the Trustee's
handling of the Fifth and Fir and Cherokee Avenue properties and the B
& H Music litigation--there was sufficient disclosure on Mr. Graham's
part and sufficient knowledge on Mr. Shen's part to support the validity
of the release of those claims. The bulk of the substance of these claims is
also outlined in the Trustee's motion to determine his responsibilities and
liabilities filed on August 7, 1978. Furthermore, the problems associated
with the Fifth and Fir property were fully set out, including the conflict
of interest problem, during the June 21, 1978, hearing on the debtors’
motion to remove the real property manager. The request for additional
findings proposed by Mr. Kaye, dated July 27, 1978, shows detailed

knowledge of the conflict of interest issue. This Court's conclusion as to
the adequacy of disclosure is provided further equitable support by the
facts that Mr. Graham's firm held the estate records open for the Shens’
inspection,’ that the Shens refused to avail themselves of this oppor-
tunity, and that the Trustee actively and promptly sought to ferret out
and to resolve these liability issues.°

The second facet of Mr. Graham's “double fiduciary status” allegedly
stems from his usurpation of the role of the Shen's lawyer, Mr. Kaye, by
means of a telephone conversation with Mr. Shen on the evening prior to
the April 18, 1979, hearing at which the Shens executed the settlement
and release. This Court finds that whatever influence Mr. Graham may
have exercised on Mr. Shen's judgment on the evening of April 17 was
more than compensated for by the advice of Mr. Kaye on the morning of
April 18. The memorandum of release signed by the Shens contains in
paragraphs four and five an explicit acknowledgment that the release was
entered into without undue influence and upon advice of their lawyer.
These acknowledgments were corroborated by Judge Katz’ findings of
fact Nos. 4 and 6. Moreover, Mr. Kaye himself by his signature approved
these documents as to form and content.

This Court concludes that the grounds offered by the Shens for
invalidating the release are entirely insufficient. Thus, they have failed to
overcome the primary barrier to meeting their burden of persuasion on
the showing of good cause required to open the bankruptcy proceedings.
In addition to the reasons already provided, refusal to reopen the
bankruptcy proceedings is further compelled by a number of additional
factors. First, the Shens waived their rights to have the release
reconsidered, but nonetheless pursued them with this motion.
Furthermore, attorney Kaye stated to the bankruptcy court that he
would not appear to challenge the release which he signed, but nonethe-
less has so appeared. Second, Judge Katz independently found the terms
of the release and settlement fair, and both Judge Katz and auditor
Goldberg approved the Trustee's handling of the Shen estate. Finally,
federal courts have emphasized that “it is important to litigants and the

public alike that there be effective and expeditious disposition of disputes
which reach the courts, and this consideration is remarkably important
in matters of bankruptcy.” California Airmotive Corp. v. Bass, 354 ¥.2d
453, 455 (Mh Cir. 1965). The effective and expeditious disposition of
disputes such as the ones here at issue will be greatly furthered if courts
honor settlements such as the one challenged by this motion. The motion
to reopen the bankruptcy proceedings involving the Shens is accordingly
DENIED.

Wl
Paragraph 7 of the release here at issue provides that the releasing
parties shall pay any and all attorneys’ fees incurred by the released
parties resulting from any attempt to set the release aside. Thus, as a
matter of contractual right, this Court awards attorneys’ fees in favor of
Mr. Graham and the firm of Luce, Forward, Hamilton and Scripps to be
paid by Mr. and Mrs. Shen.

In addition, this Court finds Mr. Kaye jointly liable for those same
attorneys’ fees under the inherent power of this Court, recently
reaffirmed by the United States Supreme Court in Roadway Express,
Inc. v. Piper, 4 U.S.1..W. 4836 (June 23, 1980). Although the “American
rule” is that generally a prevailing party is not entitled to recovery of
attorney's fees, Arcambel v. Wiseman, | U.S. (3 Dall.) 306 (1796), federal
courts retain the inherent power to tax counsel fees against a party who
has willfully and in bad faith abused judicial processes. Roadway, supra,
4% U.S.L.W. at 4840. The instant motion to reopen is an example of such
willful and bad faith abusc.

On July 5. 1978, during the course of an cxamination of Mr. Shen
pursuant to Rule 205, Mr. Kaye made the following statement:

“MR. KAYE: LET ME EXPRESS ON THE
RECORD OUR HUGE AND UNLIMITED
ADMIRATION FOR THE IRONCLAD LANGUAGE
DESIGNED BY MR. BROWN IN THIS PROPOSED
APPLICATION FOR STIPULATED ORDER. IT

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COVERS MUCH MORE-WELL, FOR THE PUR-
POSE THAT MR. BROWN IS OFFERING IT, IT
SIMPLY PROTECTS THE TRUSTEE. IT COVERS
MUCH MORE THAN WE THINK IS NEEDED ON
BEHALF OF THE TRUSTEE OR OTHER PARTIES
THAT THE TRUSTEE HAS SOUGHT TO PROTECT
BY THE ORDER. ONE OF THE MOST OBJECTION-
ABLE FEATURES OF THE PROPOSED STIPU-
LATED ORDER APPEARS IN PARAGRAPH 3 OF
THE STIPULATION ON PAGE 4 BEGINNING
LINES 10 THROUGH LINE 17. WE HAVE HERE A
GENERAL RELEASE AND ALSO A WAIVER OF
THE PROVISIONS OF CALIFORNIA CIVIL CODE
SECTION 1542. NOW, THAT PROVISION OF THE
CALIFORNIA CIVIL CODE WOULD PROVIDE
THAT ANY GENERAL RELIEF THAT WE MAKE
WOULDN'T EXTEND TO CLAIMS WHICH WE
MIGHT HAVE THAT WE’RE UNAWARE OF AT
THE PRESENT TIME AND WHICH IF WE HAD
BEEN AWARE OF, IT WOULD HAVE MATERIAL-
LY AFFECTED OUR SETTLEMENT.

* * * AND IF WE SHOULD LATER DISCOVER A
MAJOR DISCREPANCY, WE WOULD BE BARRED
BY THIS WAIVER, BY THIS VERY BROAD,
GENERAL RELEASE FROM EVER OBTAINING A
RECOVERY ON SOMETHING-IN EFFECT WE
ARE BEING ASKED TO SIGN AWAY IN THE
BLIND ANY CLAIMS WHICH WE MAY HAVE.

MR. KAYE: WELL, THIS EXHIBIT | IS~COVERS
EVERY CONCEIVABLE POSSIBILITY UNDER THE
SUN, AND RUNS FAR BEYOND ANY PROTEC-
TION THAT MAY BE REQUIRED BY THE
TRUSTEE.” R.T. 5-7.

1-13

Thus, Mr. Kaye demonstrated his awareness that the release challenged
through the motion here under consideration had the legai effect of
barring “every conceivable possibility under the sun.” Nonetheless, he
proceeded to challenge the release on the basis of a number of issues
which had already been contested by both sides prior to the execution of
the release.

This awareness on Mr. Kaye's part of the legal effect of the release,
coupled with several other facts, leads this Court inexorably to the
conclusion that the present motion to reopen was made vexatiously,
unreasonably, in bad faith and was willfully abusive. First, the Shens
offered almost nothing in the way of factual support of their challenge to
the release which had not been brought to light prior to the settlement
and release. Second, their legal arguments on the invalidity of the release
were manifestly transparent in their lack of merit. Their usurpation of
counsel theory was particularly vacuous. Third, as Mr. Kaye's affidavit
and statements at the hearing make evident, his motivation in bringing
this action was to rectify what he saw as errors of judgment, on both his
and the Shens’ part, in negotiating the release. It is not a legitimate
ground for challenging a release and settlement that a better deal could
have been, or should have been negotiated by a party or his attorney.
Fourth, there was a marked chasm between the charges of crime and
corruption leveled by Mr. Kaye, who injected them with a great deal of
vituperative rhetoric, and the facts offered in support of those charges.
Finally, this Court finds it disturbing whenever an officer of this Court
seeks to repudiate a signature to a document made in open court.

In addition, pursuant to 18 U.S.C. § 1927, this Court assesses the costs
of this motion against attorney Kaye. That statute provides:

“Any attorney or other person admitted to conduct
cases in any court of the United States or any Territory
thereof who so multiplies the proceedings in any case as
to increase costs unreasonably and vexatiously may be
required by the court to satisfy personally such excess
costs.”

1-14

In these days of crowded dockets and increasing caseloads, the time of
federal courts is an ever more precious resource, which this Court will
not tolerate having squandered in pursuit of manifestly unmeritorious
motions. Such motions contribute to the glacial pace of modern
litigation, which as the Supreme Court has recently emphasized, breeds
frustration with the federal courts, and ultimately disrespect for the law.

In assessing the amount of attorneys’ fees to be awarded as reasonable
compensation for the work performed in responding to the Shens’
motion to reopen, this Court has been guided by the criteria outlined in
Kerr v. Screen Extras Guild, Inc., 526 F.2d 67 (%h Cir. 1975), cert.
denied, 425 U.S. 951 (1976). In particular, the computation was based on
amount of material involved in the Shens’ charges, 324 hours by the
Luce, Forward firm and an additional 39.5 hours by the Seltzer, Caplan
firm, and a reasonable hourly billing rate, averaging approximately $85
an hour for the Luce, Forward firm, $150 an hour for Mr. McMahon's
26.5 hours as the attorney of record, and $35-$40 an hour for 13 hours of
law clerk research. Also specifically considered were the time limits
imposed for organizing, reviewing, and presenting voluminous materials
dealing with the Shens’ estate, the high quality of the work performed by
respondents’ counsel, their success in defeating the motion to reopen, the
experience, reputation, and ability of respondents’ counsel, and the
acrimonious nature of the task of dealing with the Shens and Mr. Kaye.

Accordingly, IT IS HEREBY ORDERED that the motion to reopen
bankruptcy proceedings is DENIED, and that attorneys’ fees in the
amount of $31,883 and costs in the amount of $4,456.29 are assessed
jointly and severally against Mr. and Mrs. Shen and Mr. Michael Kaye
to be paid within thirty (30) days.

Dated: September 10, 1980.

am H. r
United States District Judge

1-15
FOOTNOTES

Rule of Professional Conduct of the State Bar of California 2-110
States:

“A member of the State Bar shall not seek or accept
employment to accomplish any of the following objec-
tives, nor shall the member do so if the members knows
or should know that the person solicited for or offering
the empioyment wishes to accomplish any of the follow-
ing objectives:

(A) Bring a legal action, conduct a defense, or
assert a position in litigation, or otherwise take steps,
solely for the purpose of harassing or maliciously
injuring any person or to prosecute or defend a case
solely out of spite.

(B) Present a claim or defense in litigation that is
not warranted under existing law, unless it can be
supported by good faith argument for an extension,
modification or reversal of existing law.

(C) Take or prosecute an appeal solely for delay, or
for any other reason not in good faith.”

This Court recommends pursuant to Local Rule 110-6 that the
Standing Committee on Discipline review Mr. Kaye's qualifications
to remain a member of the Bar of this Court.

On April 18, 1979, before the Honorable Herbert Katz, Mr. Kaye
stated: “Mr. Shen's decision is made and | believe it will stand and |
am not going to come back to unmake it.” Transcript of the after-
noon session, April 18, 1979, p. 10.

See, ¢.g., letters dated March 8, 1979, anc March 14, 1979, from the
Luce, Forward firm to Mr. Kaye.

Trustee filed his motion to determine the responsibility and
on August 7, 1978, just weeks after the issues were
the Rule 205 examination.

bEF
i

FILED

2-1
FEB 4 1981
UNITED STATES COURT OF APPEALS
RICHARD H DEANS

FOR THE NINTH CIRCUIT GMs Us coum cr or

In the Matter of SAMUEL T. H. SHEN,
and CAROLYN JEAN SHEN,

Debtors.
No. 80-5784
MICHAEL KAYE, BK # 74-607K
BK # 74-608
Appellant,
ORDER

vs.

LUCE, FORWARD, HAMILTON & SCRIPPS:
and THEODORE W. GRAHAM,

Appellees.

i

Before: TANG and CANBY, Circuit Judges

Upon due consideration, the court enters the following order:

1. Appellant's motion for an extension of time to respond to
appellee's motion to dismiss this appeal is granted, and the opposition
heretofore received is ordered filed;

2. Appellees’ motion to dismiss this appeal as moot is denied;
3. The certificate of record, heretofore received, is ordered filed; and

4. Appellant shall file his opening brief on or before forty (40) days
from the entry of this order.

Mo Cal 1/26/81*

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA

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74-608-K
)
)
)

In the Matter of
SAMUEL T. H. SHEN and Bankruptcy Nos. 74-607-K
CAROLYN JEAN SHEN,

Debtors. MEMORANDUM AND ORDER

Heretofore this Court denied a motion of Mr. and Mrs. Samuel T.
Shen, ex-debtors, and their attorney, Mr. Michael Kaye, to reopen
bankruptcy proceedings in order to charge the trustee in bankruptcy, Mr.
Theodore Graham, and his counsel, Luce, Forward, Hamilton and
Scripps, with misconduct on the grounds that a duly executed, valid
release acted as a bar to reopening the bankruptcy proceedings. This
Court further found that the motion was “an unreasonable and vexatious
multiplication of the Shen's bankruptcy proceedings,” promulgated by
bad-faith motives and thereupon imposed joint and severa! liability upon
Mr. Kaye and the Shens for costs and attorney's fees in the amount of
$36,339.29. Mr. Kaye, im propria persona, appealed this Court's
judgment to the Ninth Circuit Court of Appeals. The Shens and
appellees, Mr. Graham and Luce, Forward, Hamilton and Scripps,
entered into a settlement of this Court's judgment on September 16,
1980, with full satisfaction of the judgment taking place on November I1,

3-2

1980. Appellees’ motion to dismiss the appeal as moot was denied by the
Court of Appeals. Appellees now move to require appellant to file a cost
bond of $15,000 pursuant to Rule 7 of the Federal Rules of Appellate
Procedure. Initially appellees requested a cost bond of $25,000, including
$20,000 for anticipated attorney's fees and $5,000 for costs. Later
appellees amended the figure downward to $15,000, giving no
breakdown as to what portion of the bond would cover attorney's fees
and what portion would cover costs.

Rule 7 provides:

“The district court may require an appeilant to file a bond

or provide other security in such form and amount as it

finds necessary to ensure payment of costs on appeal in a

civil case.”
Prior to the 1979 Amendment, Rule 7 required the filing of a $250 bond,
allowing the court to increase the amount upon a proper motion by
appellee. The 1979 Amendment, as reflected by the Advisory Committee
Note, dispensed with the requirement of a $250 bond, leaving the
imposition of an appeal bond to the discretion of the district court. The
decision to delete the $250 filing requirement was made upon the
presumption that “[tjoday it bears no relationship to actual costs.”
Advisory Committee Note, 1979 Amendment to Rule 7. Nowhere in the
prior rules, the amended Rule 7 or in any of the case law is mention made
of including attorney's fees as part of the costs contemplated by Rule 7.
Rather, Rule 7 applies only to those routine taxable costs authorized by
28 U.S.C. § 1920 and Rule 39 of the Federal Rules of Appellate
Procedure. 9 Moore's Federal Practice par. 207.06 at 7-10.

Therefore, the costs of appeal contemplated by Rule 7 are: the docket
fee, 28 U.S.C. § 1921; costs of briefs, appendices, and copies of records,
Rule 3%(c), and preparation and transmission of the record and the cost
of the reporter's transcript if necessary, Rule 3%e). Appellees originally
stated that a reasonable dollar figure for their costs, as enumerated
above, is $5,000. Therefore,

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IT IS HEREBY ORDERED that appellees’ motion to require
appellant. Michael Kaye, to file a cost bond to ensure payment of costs
on appeal is GRANTED, provided, however, the amount of the cost
bond shall be $5,000 instead of $15,000.

Dated: October 5, 1981.

United States District Judge

FILED

41
JAN 18 1982
UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT “ERK US. COURT OF APPEALS

IN THE MATTER OF
SAMUEL T.H. SHEN and
CAROLYN JEAN SHEN,

Debtors.
No. 80-5784
MICHAEL KAYE, Bankruptcy Nos. 74-607-K
74-608-K
Appellant,
ORDER

Vv.

LUCE, FORWARD, HAMILTON &
SCRIPPS; AND THEODORE W.
GRAHAM,

Appellees.

Appeal from the United States District Court
for the Southern District of California

William H. Orrick, District Judge, Presiding
Argued and Submitted January 5, 1982

Before: CHOY, GOODWIN, and FARRIS, Circuit Judges

The appeal is dismissed for the refusal of Appellant Michael Kaye to
post the cost bond fixed by the district court pursuant to Rule 7, Fed. R.
App. P., by order filed October 5, 1981, and for the failure of the
Appellant to file within a reasonable time thereafter a motion for relief or

4-2

for reduction of the amount of the bond by showing his inability to
comply with the court's order.

The panel of this court before which this appeal was set for hearing on
January 5, 1982, is advised that Appellant filed a motion regarding this
matter in the Clerk's Office in San Francisco on January 4, 1982. When
the panel receives copies of that motion, it will consider it, and if it
decides to amend this order, it will do so within seven (7) days from the
date this order is filed.

rILED

FEB 24 1982
UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT “LERK. U.S. COURT OF APPEALS

5-1

IN THE MATTER OF
SAMUEL T.H. SHEN and
CAROLYN JEAN SHEN,

Debtors. No. 80-5784

Bankruptcy Nos. 74-607-K

MICHAEL KAYE, 74-608-K

Appellant,
ORDER
v.

LUCE, FORWARD, HAMILTON &
SCRIPPS: AND THEODORE W.
GRAHAM,

Appellees.

~~ > eS ~~~ HS K~ Se ~ - - KOO YKYKOOYKrOOTLYrOOTrl Trl Trlr Orel

Before: CHOY, GOODWIN and FARRIS, Circuit Judges.

The panel as constituted in the above case has voted to deny the
petition for rehearing. The petition for rehearing is denied.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_0101%3A1. Public record. Not legal advice.