Jan M. Sensenich v. PHH Mortgage Corporation

The heart of judicial authority is a court’s ability to enforce obedience to the court’s lawful rules. Here, the bankruptcy court imposed a $75,000 fine against a mortgage creditor for 75 violations of the same bankruptcy rule across three independent cases. The creditor perpetrated these violations despite having promised the court to mend its ways after a previous $9,000 court fine for similar rule violations. The Second Circuit reversed, holding that the bankruptcy rule at issue did not allow punitive fines. Then, contrary to seven circuits, the panel held that it could not affirm the $75,000 fine on the alternate ground of inherent power because the bankruptcy court did not analyze this ground. The panel also held that this ground required a finding of bad faith. In dissent, Judge Bianco observed the panel decision would endanger the ability of bankruptcy courts to enforce their rules against serial violators. The questions presented are:

1. Whether appellate courts may affirm a bankruptcy sanctions order on an alternate correct ground even if the order does not analyze the ground.

2. Whether sanctions based on inherent judicial power always require a finding of bad faith.

3. Whether Bankruptcy Rule 3002.1 authorizes punitive fines as a form of “appropriate relief.”