In Re: Residential Capital, LLC

Background

Robynne Ariel Fauley appealed two orders entered by the Southern District of New York Bankruptcy Court in the Chapter 11 bankruptcy of Residential Capital, LLC and related debtors. The bankruptcy court had rejected Fauley’s “Notice of Fraud,” later supplements, and a filing called the “Motion – Response to Continue and Stay.” It found that these documents did not request relief available under the Bankruptcy Code. The bankruptcy court also directed the clerk not to accept any further pleadings from Fauley in the bankruptcy case.

Fauley’s filings made allegations concerning Perkins Coie, LNV Corporation, the ResCap Liquidating Trust, mortgage-related documents, and foreclosure litigation. The district court noted that the filings were lengthy and difficult to understand, often referred to matters already litigated elsewhere, and did not clearly identify a form of relief that the bankruptcy court could provide. Fauley had also attached briefing from earlier mortgage litigation. The district court further noted that she raised one argument for the first time in her reply brief and therefore would not consider it.

Issues and analysis

The district court addressed two questions: whether the bankruptcy court should have granted relief based on Fauley’s filings, and whether it properly barred her from making additional filings.

The court held that the bankruptcy court did not err in concluding that the filings sought no relief it could provide. A bankruptcy request for an order generally must be made through a written motion, and Fauley conceded on appeal that the Notice of Fraud was not a motion or pleading. The district court independently reviewed the filings and concluded that they could not reasonably be understood as seeking relief available in the bankruptcy case. It also observed that rules preventing relitigation of issues already decided would apply to matters Fauley had previously litigated.

The court next considered the restriction on future filings. Federal courts and bankruptcy courts may restrict abusive or repetitive filings. The district court found that the relevant factors supported a filing restriction, including Fauley’s use of materials from prior litigation, her concession that her bankruptcy filings did not properly seek relief, the expense imposed on other parties, and the burden created by the confusing submissions.

However, the district court concluded that the bankruptcy court’s order was incomplete because it provided no mechanism for Fauley to request permission to file in the future. The court modified the order to allow Fauley to seek permission from the bankruptcy court before making further filings. It left the bankruptcy court to determine the procedure for requesting that permission.

Disposition

The district court affirmed the April 24, 2018 order. It affirmed the May 2, 2018 order as modified to allow Fauley to seek permission from the bankruptcy court before filing additional documents. The district court directed the clerk to terminate the pending motions and the appeal.