In re: Prosser, No. 14-1633 (3d Cir. 2015)
Annotate this CaseProsser filed a Chapter 11 bankruptcy petition in 2006, which was converted to a Chapter 7 petition. Carroll was appointed as trustee. At a 2008 trial to adjudicate creditors’ objections to Prosser’s claim of exemptions, Stelzer, Prosser’s former “valet and personal assistant,” testified that Prosser asked him to destroy computer hard drives after Prosser filed for bankruptcy. The Bankruptcy Court denied the exemptions. Carroll and others initiated an adversary proceeding, seeking denial of discharge under 11 U.S.C. 727(a), Prosser deposed Stelzer in an effort to undermine his testimony; Prosser Counsel inquired into the payment of Stelzer’s legal fees by third parties and contacts Stelzer had with Carroll and Carroll’s counsel. Prosser Counsel later sought an evidentiary hearing into “a bribery scheme,” asserting that Stelzer gave unfavorable testimony during the Exemptions Trial in exchange for payment of his attorney fees in multiple litigations and that Carroll’s counsel had misrepresented Carroll’s contacts with Stelzer. Ultimately, Carroll obtained an award of legal fees and expenses against Prosser Counsel (28 U.S.C. 1927) contending that the Adversary Complaint, the Fee Objections, and the Conflicts Motion were patently meritless. The district court vacated, holding that the Adversary Complaint and Fee Objections could not have “multiplied” the adversary proceedings. The Third Circuit reversed, reinstating the sanctions.
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