Kenneth J. Catanzarite v. GCL, LLC, et al.

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-12766
Non-Argument Calendar
____________________
In re:
DAYMARK REALTY ADVISORS, INC.,
DAYMARK PROPERTIES REALTY, INC.,
DAYMARK RESIDENTIAL MANAGEMENT, INC.,
Debtors.
___________________________________________________
KENNETH J. CATANZARITE,
Plaintiff-Appellant,
versus
GCL, LLC,
INFINITY URBANCENTURY, LLC,
ETIENNE LOCOH,
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2 Opinion of the Court 21-12766
TODD A. MIKLES,
SOVEREIGN CAPITAL MANAGEMENT GROUP, LLC, et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court
for the Southern District of Florida
D.C. Docket No. 0:20-cv-61032-RS
____________________
Before W ILLIAM PRYOR , Chief Judge, L UCK , and L AGOA , Circuit
Judges.
PER CURIAM:
Kenneth Catanzarite appeals the denial of relief from a judg-
ment of the bankruptcy court. The district court affirmed the
award of sanctions against Catanzarite for violating a preliminary
injunction that barred “the commencement of any further actions
under the same or similar facts or circumstances to” lawsuits he
had filed against bankruptcy creditors. The district court also ruled
that Catanzarite forfeited his opportunity to object to the amount
of sanctions imposed. We affirm.
In 2018, Daymark Realty Advisors, Incorporated, Daymark
Properties Realty, Incorporated, and Daymark Residential Man-
agement, Incorporated, filed separate petitions for bankruptcy
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21-12766 Opinion of the Court 3
under Chapter 11 of the Bankruptcy Code, which the bankruptcy
court consolidated. Catanzarite, an attorney licensed in California
and admitted to appear
pro hac vice in the bankruptcy court, filed
adversary complaints against the Daymark companies for Richard
Carlson and eleven other plaintiffs (the Carlson plaintiffs) and for
Katherine Looper and six other plaintiffs. Those plaintiffs com-
plained of breach of fiduciary duties and other wrongdoing in han-
dling their investments in several properties, including their inter-
ests as tenants-in-common in the Congress Center, an office tower
in Chicago, Illinois. Later, Catanzarite moved successfully to con-
vert the bankruptcy petition to an action under Chapter 7 of the
Bankruptcy Code.
Catanzarite also sued Daymark creditors, including Todd
Mikles, Etienne Locoh, GCL, LLC, and other entities related to the
Daymark companies (the Mikles creditors). Catanzarite filed nine
putative class action complaints for the Carlson plaintiffs in Califor-
nia and Utah courts against various combinations of the Mikles
creditors. The complaints alleged that the creditors were alter egos
of and shared common control of and culpability for the Daymark
companies’ mishandling of investments in the Congress Center
and other properties.
The Mikles creditors entered an agreement to settle their
claims with the bankruptcy trustee, Chad Paiva, and obtained an
injunction that stayed the nine lawsuits.
See 11 U.S.C. § 105(a); Fed.
R. Bankr. P. 7001(7). After a hearing attended by Catanzarite, the
creditors, and the Trustee on August 27, 2019, the bankruptcy
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4 Opinion of the Court 21-12766
court issued an order that “enjoin[ed] continuation of the [nine]
Subject Lawsuits or the commencement of any further actions un-
der [the] same or similar facts or circumstances to the Subject Law-
suits” for 60 days. On the Mikles creditors’ motion, and after a sec-
ond hearing, the bankruptcy court issued a second preliminary in-
junction that extended the stay to December 11, 2019.
On November 7, 2019, Catanzarite, as counsel for Katherine
Looper and nine other plaintiffs (the Looper plaintiffs), filed in a
California court a complaint alleging that Mikles and GCL assisted
the Daymark companies to defraud investors in connection with
the Congress Center and another property. Catanzarite also filed a
notice of lis pendens on GCL property.
The Mikles creditors moved to enforce the injunction and to
impose sanctions. The bankruptcy court held a hearing on the mo-
tion attended by the creditors, Catanzarite, and the Trustee. The
Trustee testified about Catanzarite’s actions, the effect on the stay,
and maintaining control of the property of the estate.
The bankruptcy court granted the motion and sanctioned
Catanzarite. The bankruptcy court ruled that Catanzarite, as coun-
sel for and in active concert with the Carlson plaintiffs,
see Fed. R.
Civ. P. 65(d)(2)(B), violated the injunction by filing a civil action
and lis pendens for the Looper plaintiffs “based upon TIC owner-
ship interests in the Congress Center,” which was the same subject
“matter[] explicitly enjoined by the Second Preliminary Injunction
Order.” And the bankruptcy court stated that it earlier had sanc-
tioned Catanzarite for creating a website containing false and
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21-12766 Opinion of the Court 5
misleading statements about the Daymark bankruptcy. The bank-
ruptcy court stayed the Looper action and ordered Catanzarite to
reimburse the Mikles creditors and “Trustee Paiva for any actual
attorneys’ fees and expenses incurred in connection with” the
Looper action. Although the Trustee was not a party to the mo-
tion, the bankruptcy court found “it appropriate to compensate the
bankruptcy estate . . . in light of the pending settlement motion in
the main bankruptcy case and the intent of the injunctive relief in
this adversary proceeding—to maintain the status quo pending the
hearing to consider approval of that settlement . . . .”
As directed by the bankruptcy court, the Mikles creditors
and the Trustee timely filed affidavits for and redacted time records
of the fees and expenses they sought as compensatory sanctions.
On January 29, 2020, the Mikles creditors requested $49,020.50 in
attorneys’ fees, and on February 5, 2020, the Trustee requested
$13,333 for similar expenses. On February 25, 2020, almost three
weeks after the expiration of the seven-day deadline imposed by
the bankruptcy court, Catanzarite objected to the affidavits.
The bankruptcy court denied Catanzarite’s objection to the
affidavits as untimely. The bankruptcy court found that Catanza-
rite “failed to timely object to either affidavit” or “to timely move
for an extension of time to object” and that his notice of late filing
“offered a variety of excuses for missing the deadline, none of
which [rose] to the level of excusable neglect.” The bankruptcy
court awarded the full amount of attorneys’ fees that the Mikles
creditors requested as “incurred in connection with responding to
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6 Opinion of the Court 21-12766
the [Looper action] and prosecuting the [motion to enforce], and
. . . not excessive.” As to the Trustee, the bankruptcy court found
that “certain time entries include time for both main case issues as
well as the pertinent issues in this adversary proceeding” and, being
“unable to determine which portion of [specific] entries [were] at-
tributable to the [Looper action] and the [motion to enforce], . . .
[it] exercise[d] its discretion and award[ed] only 50% of the fees
billed” on four days in December 2019. The bankruptcy court
awarded the Trustee $11,639.25 in attorneys’ fees.
The district court affirmed the imposition of sanctions and
the fee awards. The district court ruled that, “under the plain lan-
guage of Rule 65(d)(2)(B), [Catanzarite], as the attorney for the en-
joined Carlson [plaintiffs], was bound by the Preliminary Injunc-
tion” and violated it by filing an action “based on similar ownership
interests and the same or similar facts or circumstances.” The dis-
trict court rejected Catanzarite’s argument that he could engage in
prohibited conduct for another client. The district court ruled that
Catanzarite’s “failure to object to the fee affidavit[s] and his conclu-
sory and vague challenges to the reasonableness of the fees . . .
[were] fatal to his argument” challenging the accuracy and veracity
of the affidavits. The district court also ruled that the bankruptcy
court did not abuse its discretion in determining the fee awards af-
ter carefully reviewing the affidavits and time records that the Mi-
kles creditors and the Trustee submitted. The district court re-
jected as refuted by the record Catanzarite’s argument that award-
ing sanctions to the Trustee violated his right to due process.
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21-12766 Opinion of the Court 7
“[A]s [the] second court of review,” we “examine[] inde-
pendently the factual and legal determinations of the bankruptcy
court and employ[] the same standard of review as the district
court.”
In re Ocean Warrior, Inc., 835 F.3d 1310, 1315 (11th Cir.
2016) (quoting
In re Fisher Island Invs., Inc., 778 F.3d 1172, 1189
(11th Cir. 2015)). We review the imposition of sanctions for abuse
of discretion and related findings of fact for clear error.
Id. Under
the abuse-of-discretion standard, we must affirm “unless the [bank-
ruptcy] court made a clear error of judgment, or has applied the
wrong legal standard.”
Id. (internal quotation marks omitted). So
the bankruptcy court enjoys a “a range of choice within which we
will not reverse . . . even if we might have reached a different deci-
sion.”
Schiavo ex. rel. Schindler v. Schiavo, 403 F.3d 1223, 1226
(11th Cir. 2005).
The bankruptcy court did not err in determining that Catan-
zarite was bound by the injunction. Federal Rule of Civil Procedure
65 binds three categories of persons to comply with an injunction:
“the parties; the parties’ . . . attorneys; and other persons who are
in active concert or participation” with persons in the first two cat-
egories. Fed. R. Civ. P. 65(d)(2)(B). The Rule binds an attorney to
an injunction to the same extent as a party. So, as the bankruptcy
court explained, Catanzarite could not “engag[e] in conduct in
which [the parties,] the Carlson [plaintiffs,] themselves could not
engage.”
Catanzarite misinterprets Rule 65(d)(2)(B) as prohibiting at-
torneys only “from engaging in enjoined conduct
on behalf of an
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8 Opinion of the Court 21-12766
enjoined party.” “We are not at liberty to add terms or posit an
interpretation that differs from the explicit language of” a federal
rule of procedure.
United States v. Orozco, 160 F.3d 1309, 1316
(11th Cir. 1998). Rule 65(d)(2)(B) plainly bars a party’s attorney
from engaging in enjoined conduct regardless of his client’s situa-
tion. Because Catanzarite was bound to obey the injunction, we
need not address his argument that the bankruptcy court erred by
ruling, in the alternative, that he was bound to the injunction by
acting in concert with his clients under Rule 65(d)(2)(C).
Catanzarite violated the injunction. The injunction ex-
pressly prohibited “the commencement of any further actions un-
der same or similar facts or circumstances to the Subject Lawsuits.”
Two of the subject lawsuits involved Mikles creditors mishandling
investors’ tenancy-in-common interests in the Congress Center. In
the complaint and lis pendens, Catanzarite repeated many of the
facts and legal arguments made in the subject lawsuits.
The bankruptcy court did not abuse its discretion. “Con-
gress has empowered bankruptcy courts broadly to issue any order,
process, or judgment that is necessary or appropriate to carry out
the provisions of the Bankruptcy Code, 11 U.S.C. § 105(a), includ-
ing sanctions to enforce . . . [an] injunction.”
In re McLean, 794 F.3d
1313, 1319 (11th Cir. 2015). The bankruptcy court sanctioned Ca-
tanzarite for the permissible purpose of compensating the Trustee
and the Mikles creditors for losses caused by Catanzarite’s noncom-
pliance.
See Local 28, Sheet Metal Workers’ Int’l Ass’n v. EEOC,
478 U.S. 421, 443 (1986). The Trustee was entitled to compensation
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21-12766 Opinion of the Court 9
even though he did not move to enforce the injunction or join the
Mikles creditors’ motion. The Trustee was a party in the bank-
ruptcy case in which the injunction issued for the purpose of main-
taining the status quo pending the resolution of a proposed settle-
ment between the estate and the Mikles creditors.
See E.E.O.C. v.
Guardian Pools, Inc., 828 F.2d 1507, 1514–15 (11th Cir. 1987). Ca-
tanzarite’s violation of the injunction interrupted the progress of
the bankruptcy case and required the Trustee and the Mikles cred-
itors to incur expenses related to the Looper action and to the en-
forcement of the injunction.
Catanzarite argues that he was denied due process with re-
spect to the award to the Trustee, but he was “given fair notice that
his conduct may warrant sanctions and the reasons why” as well as
“an opportunity to respond . . . and to justify his actions,”
In re
Mroz, 65 F.3d 1567, 1575–76 (11th Cir. 1995). The motion to en-
force outlined Catanzarite’s willful disobedience of the injunction.
During the hearing on the motion, the Trustee testified about the
effect that Catanzarite’s noncompliance had on the bankruptcy
proceedings, and Catanzarite presented a defense. As the district
court stated, Catanzarite “was on notice that the bankruptcy court
was . . . considering whether and how [his] actions may have af-
fected the Trustee and the estate and whether that should give rise
to sanctions.” And the bankruptcy court afforded Catanzarite the
opportunity to object to the Trustee’s affidavit and time records,
but Catanzarite delayed filing a response. This process was suffi-
cient to satisfy due process.
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10 Opinion of the Court 21-12766
The bankruptcy court also did not abuse its discretion in de-
termining the fee awards. The bankruptcy court ensured that its
awards were “calibrated to the damages caused by” Catanzarite’s
noncompliance by limiting the award to “cover[ing] the legal bills
that the litigation abuse occasioned.”
Goodyear Tire & Rubber Co.
v. Haeger, 137 S. Ct. 1178, 1186 (2017) (internal quotation marks
omitted and alterations adopted). The bankruptcy court “carefully
reviewed the Affidavits and time records” the Trustee and the Mi-
kles creditors submitted and found that the fees were “incurred in
connection with responding to the [Looper action] and in prose-
cuting” the motion to enforce the injunction. The bankruptcy
court noticed an inadvertent duplication of fees by the Trustee and
adjusted the amount requested to account for the error. Catanza-
rite contests the amounts of the awards, but he forfeited the oppor-
tunity to challenge those amounts by failing timely to object to the
affidavits,
see Green v. Graham, 906 F.3d 955, 963 (11th Cir. 2018).
We AFFIRM the sanctions against Catanzarite.
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