In Re Taylor

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

_____________

No. 10-2154
_____________

In re: NILES C. TAYLOR; ANGELA J. TAYLOR,
Debtors

ROBERTA A. DEANGELIS, Acting United States Trustee,
Appellant

_____________

On Appeal from the District Court
for the Eastern District of Pennsylvania
(No. 09-cv-02479, 07-cv-15385 (bankruptcy))
District Judge: Honorable John P. Fullam
___________

Argued March 22, 2011

Before: FUENTES, SMITH and VAN ANTWERPEN,
Circuit Judges

(Opinion Filed: August 24, 2011)
Frederic J. Baker, Esq.
Robert J. Schneider, Esq.
George M. Conway, Esq.
United States Department of Justice
Office of the United States Trustee
833 Chestnut St., Suite 500
Philadelphia, PA 19107

Ramona Elliott, Esq.
P. Matthew Sutko, Es.q
John P. Sheahan, Esq. (argued)
United States Department of Justice
Executive Office for United States Trustees
20 Massachusetts Ave. NW, Suite 8100
Washington, DC 20530
Attorneys for Appellant

Jonathan J. Bart, Esq. (argued)
Wilentz Goldman & Spitzer, P.A.
Two Penn Center Plaza, Suite 910
Philadelphia, PA 19102
Attorney for Appellees

OPINION

Fuentes, Circuit Judge

The United States Trustee, Region 3 (“Trustee”),
appeals the reversal by the District Court of sanctions
originally imposed in the bankruptcy court on attorneys Mark

2
J. Udren and Lorraine Doyle, the Udren Law Firm, and
HSBC for violations of Federal Rule of Bankruptcy
Procedure 9011. For the reasons given below, we will
reverse the District Court and affirm the bankruptcy court‟s
imposition of sanctions with respect to Lorraine Doyle, the
Udren Law Firm, and HSBC.1 However, we will affirm the
District Court‟s reversal of the bankruptcy court‟s sanctions
with respect to Mark J. Udren.

I.

A. Background

This case is an unfortunate example of the ways in
which overreliance on computerized processes in a high-
volume practice, as well as a failure on the part of clients and
lawyers alike to take responsibility for accurate knowledge of
a case, can lead to attorney misconduct before a court. It
arises from the bankruptcy proceeding of Mr. and Ms. Niles
C. and Angela J. Taylor. The Taylors filed for a Chapter 13
bankruptcy in September 2007. In the Taylors‟ bankruptcy
petition, they listed the bank HSBC, which held the mortgage
on their house, as a creditor. In turn, HSBC filed a proof of
claim in October 2007 with the bankruptcy court.

We are primarily concerned with two pleadings that
HSBC‟s attorneys filed in the bankruptcy court—(1) the
request for relief from the automatic stay which would have
permitted HSBC to pursue foreclosure proceedings despite
the Taylors‟ bankruptcy filing and (2) the response to the

1
Although HSBC was sanctioned by the bankruptcy court, it
did not participate in this appeal.

3
Taylors‟ objection to HSBC‟s proof of claim. We are also
concerned with the attorneys‟ conduct in court in connection
with those pleadings. We draw our facts from the findings of
the bankruptcy court.

1. The proof of claim (Moss Codilis law
firm)

To preserve its interest in a debtor‟s estate in a
personal bankruptcy case, a creditor must file with the court a
proof of claim, which includes a statement of the claim and of
its amount and supporting documentation. Tennessee Student
Assistance Corp. v. Hood, 541 U.S. 440, 447 (2004); Fed. R.
Bank. P. 3001; Official Bankruptcy Form 10. In October
2007, HSBC filed such a proof of claim with respect to the
Taylors‟ mortgage. To do so, it used the law firm Moss
Codilis.2 Moss retrieved the information on which the claim
was based from HSBC‟s computerized mortgage servicing
database. No employee of HSBC reviewed the claim before
filing.

This proof of claim contained several errors: the
amount of the Taylors‟ monthly payment was incorrectly
stated, the wrong mortgage note was attached, and the value

2
Moss Codilis is not involved in the present appeal.
However, it is worth noting that the firm has come under
serious judicial criticism for its lax practices in bankruptcy
proceedings. “In total, [the court knows] of 23 instances in
which [Moss Codilis] has violated [court rules] in this District
alone.” In re Greco, 405 B.R. 393, 394 (Bankr. S.D. Fla.
2009); see also In re Waring, 401 B.R. 906 (Bankr. N.D.
Ohio 2009).

4
of the home was understated by about $100,000. It is not
clear whether the errors originated in HSBC‟s database or
whether they were introduced in Moss Codilis‟s filing.3

2. The motion for relief from stay

At the time of the bankruptcy proceeding, the Taylors
were also involved in a payment dispute with HSBC. HSBC
believed the Taylors‟ home to be in a flood zone and had
obtained “forced insurance” for the property, the cost of
which (approximately $180/month) it passed on to the
Taylors. The Taylors disputed HSBC‟s position and
continued to pay their regular mortgage payment, without the
additional insurance costs.4 HSBC failed to acknowledge that
the Taylors were making their regular payments and instead
treated each payment as a partial payment, so that, in its
records, the Taylors were becoming more delinquent each
month.

Ordinarily, the filing of a bankruptcy petition imposes
an automatic stay on all debt collection activities, including
foreclosures. McCartney v. Integra Nat’l Bank North, 106
F.3d 506, 509 (3d Cir. 1997). However, pursuant to 11
U.S.C. § 362(d)(1), a secured creditor may file for relief from
the stay “for cause, including the lack of adequate protection
of an interest in property” of the creditor, in order to permit it
to commence or continue foreclosure proceedings. Because

3
HSBC ultimately corrected these errors in an amended court
filing.
4
This dispute has now been resolved in favor of the Taylors.
(App. 199.)

5
of the Taylors‟ withheld insurance payments, HSBC‟s records
indicated that they were delinquent. Thus, in January 2008,
HSBC retained the Udren Firm to seek relief from the stay.

Mr. Udren is the only partner of the Udren Firm; Ms.
Doyle, who appeared for the Udren Firm in the Taylors‟ case,
is a managing attorney at the firm, with twenty-seven years of
experience. HSBC does not deign to communicate directly
with the firms it employs in its high-volume foreclosure
work; rather, it uses a computerized system called NewTrak
(provided by a third party, LPS) to assign individual firms
discrete assignments and provide the limited data the system
deems relevant to each assignment.5 The firms are selected
and the instructions generated without any direct human
involvement. The firms so chosen generally do not have the
capacity to check the data (such as the amount of mortgage
payment or time in arrears) provided to them by NewTrak
and are not expected to communicate with other firms that
may have done related work on the matter. Although it is
technically possible for a firm hired through NewTrak to
contact HSBC to discuss the matter on which it has been
retained, it is clear from the record that this was discouraged

5
LPS is also not involved in the present appeal, as the
bankruptcy court found that it had not engaged in wrongdoing
in this case. However, both the accuracy of its data and the
ethics of its practices have been repeatedly called into
question elsewhere. See, e.g., In re Wilson, 2011 WL
1337240 at *9 (Bankr. E.D.La. Apr. 7, 2011) (imposing
sanctions after finding that LPS had issued “sham” affidavits
and perpetrated fraud on the court); In re Thorne, 2011 WL
2470114 (Bankr. N.D. Miss. June 16, 2011); In re Doble,
2011 WL 1465559 (Bankr. S.D. Cal. Apr. 14, 2011).

6
and that some attorneys, including at least one Udren Firm
attorney, did not believe it to be permitted.

In the Taylors‟ case, NewTrak provided the Udren
Firm with only the loan number, the Taylors‟ name and
address, payment amounts, late fees, and amounts past due. It
did not provide any correspondence with the Taylors
concerning the flood insurance dispute.

In January 2008, Doyle filed the motion for relief from
the stay. This motion was prepared by non-attorney
employees of the Udren Firm, relying exclusively on the
information provided by NewTrak. The motion said that the
debtor “has failed to discharge arrearages on said mortgage or
has failed to make the current monthly payments on said
mortgage since” the filing of the bankruptcy petition. (App.
65.) It identified “the failure to make . . . post-petition
monthly payments” as stretching from November 1, 2007 to
January 15, 2008, with an “amount per month” of $1455 (a
monthly payment higher than that identified on the proof of
claim filed earlier in the case by the Moss firm) and a total in
arrears of $4367. (App. 66.) (It did note a “suspense
balance” of $1040, which it subtracted from the ultimate total
sought from the Taylors, but with no further explanation.) It
stated that the Taylors had “inconsequential or no equity” in
the property.6 Id. The motion never mentioned the flood
insurance dispute.

6
The U.S. Trustee now points out that the motion also
claimed that the Taylors were not making payments to other
creditors under their bankruptcy plan and argues that this
claim was false as well. Since the bankruptcy court did not

7
 Doyle did nothing to verify the information in the
motion for relief from stay besides check it against “screen
prints” of the NewTrak information. She did not even access
NewTrak herself. In effect, she simply proofread the
document. It does not appear that NewTrak provided the
Udren Firm with any information concerning the Taylors‟
equity in their home, so Doyle could not have verified her
statement in the motion concerning the lack of equity in any
way, even against a “screen print.”

At the same time as it filed for relief from the stay, the
Udren Firm also served the Taylors with a set of requests for
admission (pursuant to Federal Rule of Bankruptcy Procedure
7036, incorporating Federal Rule of Civil Procedure 36)
(“RFAs”). The RFAs sought formal and binding admissions
that the Taylors had made no mortgage payments from
November 2007 to January 2008 and that they had no equity
in their home.

In February 2008, the Taylors filed a response to the
motion for relief from stay, denying that they had failed to
make payments and attaching copies of six checks tendered to
HSBC during the relevant period. Four of them had already
been cashed by HSBC.7

make any findings with respect to this issue, we will not
consider it.
7
It is not clear from the briefing whether the last two checks,
for February and March 2008, had actually been submitted to
HSBC at the time the motion was filed; appellees deny that
they were. However, appellees do not dispute that checks for

8
 3. The claim objection and the response
to the claim objection

In March 2008, the Taylors also filed an objection to
HSBC‟s proof of claim. The objection stated that HSBC had
misstated the payment due on the mortgage and pointed out
the dispute over the flood insurance. However, the Taylors
did not respond to HSBC‟s RFAs. Unless a party responds
properly to a request for admission within 30 days, the
“matter is [deemed] admitted.” Fed. R. Civ. P. 36(a)(3).

In the same month, Doyle filed a response to the
objection to the proof of claim. The response did not discuss
the flood insurance issue at all. However, it stated that “[a]ll
figures contained in the proof of claim accurately reflect
actual sums expended . . . by Mortgagee . . . and/or charges to
which Mortgagee is contractually entitled and which the
Debtors are contractually obligated to pay.” (App. 91.) This
was indisputably incorrect, because the proof of claim listed
an inaccurate monthly mortgage payment (which was also a
different figure from the payment listed in Doyle‟s own
motion for relief from stay).

4. The claim hearings

In May 2008, the bankruptcy court held a hearing on
both the motion for relief and the claim objection. HSBC was
represented at the hearing by a junior associate at the Udren
Firm, Mr. Fitzgibbon. At that hearing, Fitzgibbon ultimately

October and November 2007 and January 2008 had been
cashed.

9
admitted that, at the time the motion for relief from the stay
was filed, HSBC had received a mortgage payment for
November 2007, even though both the motion for stay and the
response to the Taylors‟ objection to the proof of claim stated
otherwise.8 Despite this, Fitzgibbon urged the court to grant
the relief from stay, because the Taylors had not responded to
HSBC‟s RFAs (which included the “admission” that the
Taylors had not made payments from November 2007 to
January 2008). It appears from the record that Fitzgibbon
initially sought to have the RFAs admitted as evidence even
though he knew they contained falsehoods. (App. 101-102.)9

8
Appellees concede that, by the time the May hearing was
held, HSBC had received all of the relevant checks.
9
Appellees now claim that “[i]t is clear from the record, that
Mr. Fitzgibbon honestly disclosed to the Court that these
checks had just been received by [the] Udren [Firm] and that
the only issue was that of flood insurance.” (App‟ee Br. 16.)
However, this disclosure did not occur until after Fitzgibbon
had attempted to enter the RFAs, which made contrary
claims, as evidence, and debtor‟s counsel raised the issue. As
the bankruptcy court described it, “[Fitzgibbon] first argued
that I should rule in HSBC‟s favor . . . On probing by the
court, he acknowledged that as of the date of the continued
hearing, he had learned that [the Taylors] had made every
payment.” (App. 196, emphasis added.) In a Rule 9011/11
proceeding such as the present one, one would expect the
challenged parties to be scrupulously careful in their
representations to the court.

10
 The bankruptcy court denied the request to enter the
RFAs as evidence, noting that the firm “closed their eyes to
the fact that there was evidence that . . . conflicted with the
very admissions that they asked me [to deem admitted]. They
. . . had that evidence [that the assertions in its motion were
not accurate] in [their] possession and [they] went ahead like
[they] never saw it.” (App. 108-109.) The court noted:

Maybe they have somebody there churning out
these motions that doesn‟t talk to the people
that—you know, you never see the records, do
you? Somebody sends it to you that sent it
from somebody else.

(App. 109.) “I really find this motion to be in questionable
good faith,” the court concluded. (App. 112.)

After the hearing, the bankruptcy court directed the
Udren Firm to obtain an accounting from HSBC of the
Taylors‟ prepetition payments so that the arrearage on the
mortgage could be determined correctly. At the next hearing,
in June 2008, Fitzgibbon stated that he could not obtain an
accounting from HSBC, though he had repeatedly placed
requests via NewTrak. He told the court that he was literally
unable to contact HSBC—his firm‟s client—directly to verify
information which his firm had already represented to the
court that it believed to be true.

At the end of the June 2008 hearing, the court told
Fitzgibbon: “I‟m issuing an order to show cause on your firm,
too, for filing these things . . . without having any knowledge.
And filing answers . . . without any knowledge.” (App. 119.)
Thereafter, the court entered an order sua sponte dated June

11
9, 2008, directing Fitzgibbon, Doyle, Udren, and others to
appear and give testimony concerning the possibility of
sanctions.

5. The sanctions hearings

The order stated that the purpose of the hearing
included “to investigate the practices employed in this case by
HSBC and its attorneys and agents and consider whether
sanctions should issue against HSBC, its attorneys and
agents.” (App 96-98.) Among those practices were “pressing
a relief motion on admissions that were known to be untrue,
and signing and filing pleadings without knowledge or
inquiry regarding the matters pled therein.” Id. The order
noted that “[t]he details are identified on the record of the
hearings which are incorporated herein.” Id. In ordering
Doyle to appear, the order noted that “the motion for relief,
the admissions and the reply to the objection were prepared
over Doyle‟s name and signature.” Id. However, this order
was not formally identified as “an order to show cause.”

The bankruptcy court held four hearings over several
days, making in-depth inquiries into the communications
between HSBC and its lawyers in this case, as well as the
general capabilities and limitations of a system like NewTrak.
Ultimately, it found that the following had violated Rule
9011: Fitzgibbon, for pressing the motion for relief based on
claims he knew to be untrue; Doyle, for failing to make
reasonable inquiry concerning the representations she made in
the motion for relief from stay and the response to the claim
objection; Udren and the Udren Firm itself, for the conduct of
its attorneys; and HSBC, for practices which caused the
failure to adhere to Rule 9011.

12
 Because of his inexperience, the court did not sanction
Fitzgibbon. However, it required Doyle to take 3 CLE credits
in professional responsibility; Udren himself to be trained in
the use of NewTrak and to spend a day observing his
employees handling NewTrak; and both Doyle and Udren to
conduct a training session for the firm‟s relevant lawyers in
the requirements of Rule 9011 and procedures for escalating
inquiries on NewTrak. The court also required HSBC to send
a copy of its opinion to all the law firms it uses in bankruptcy
proceedings, along with a letter explaining that direct contact
with HSBC concerning matters relating to HSBC‟s case was
permissible.10

B. The District Court’s Decision

Udren, Doyle, and the Udren Firm (but not HSBC)
appealed the sanctions order to the District Court, which
ultimately overturned the order. The District Court‟s decision
was based on three considerations: that the confusion in the
case was attributable at least as much to the actions of

10
Taylor‟s counsel was also ultimately sanctioned and
removed from the case. Counsel did not perform
competently, as is evidenced by the Taylors‟ failure to contest
HSBC‟s RFAs. She also made a number of inaccurate
statements in her representations to the court. However, it is
clear that her conduct did not induce the misrepresentations
by HSBC or its attorneys. As the bankruptcy court correctly
noted, “the process employed by a mortgagee and its counsel
must be fair and transparent without regard to the quality of
debtor‟s counsel since many debtors are unrepresented and
cannot rely on counsel to protect them.” (App. 214.)

13
Taylor‟s counsel as to Doyle, Udren, and the Udren Firm; that
the bankruptcy court seemed more concerned with “sending a
message” to the bar concerning the use of computerized
systems than with the conduct in the particular case; and that,
since Udren himself did not sign any of the filings containing
misrepresentations, he could not be sanctioned under Rule
9011. Although HSBC had not appealed, the District Court
overturned the order with respect to HSBC, as well.

The United States trustee then appealed the District
Court‟s decision to this court.11

II.

Rule 9011 of the Federal Rules of Bankruptcy
Procedure, the equivalent of Rule 11 of the Federal Rules of
Civil Procedure, requires that parties making representations
to the court certify that “the allegations and other factual
contentions have evidentiary support or, if specifically so
identified, are likely to have evidentiary support.” Fed. R.
Bank. P. 9011(b)(3).12 A party must reach this conclusion
based on “inquiry reasonable under the circumstances.” Fed.
R. Bank. P. 9011(b). The concern of Rule 9011 is not the
truth or falsity of the representation in itself, but rather
whether the party making the representation reasonably

11
The bankruptcy court had jurisdiction under 28 U.S.C. §
157(a). The District Court had jurisdiction under 28 U.S.C. §
158(a)(1), except as discussed below. We have jurisdiction
under 28 U.S.C. § 158(d).
12
“[C]ases decided pursuant to [Fed. R. Civ. P. 11] apply to
Rule 9011.” In re Gioioso, 979 F.2d 956, 960 (3d Cir. 1992).

14
believed it at the time to have evidentiary support. In
determining whether a party has violated Rule 9011, the court
need not find that a party who makes a false representation to
the court acted in bad faith. “The imposition of Rule 11
sanctions . . . requires only a showing of objectively
unreasonable conduct.” Fellheimer, Eichen & Braverman,
P.C. v. Charter Tech., Inc., 57 F.3d 1215, 1225 (3d Cir.
1995). We apply an abuse of discretion standard in reviewing
the decision of the bankruptcy court. See Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 405 (1990). However, we
review its factual findings for clear error. Stern v. Marshall, -
-- U.S. ---, 131 S. Ct. 2594, 2627 (2011) (Breyer, J.,
dissenting).

In this opinion, we focus on several statements by
appellees: (1) in the motion for relief from stay, the
statements suggesting that the Taylors had failed to make
payments on their mortgage since the filing of their
bankruptcy petition and the identification of the months in
which and the amount by which they were supposedly
delinquent; (2) in the motion for relief from stay, the
statement that the Taylors had no or inconsequential equity in
the property; (3) in the response to the claim objection, the
statement that the figures in the proof of claim were accurate;
and, (4) at the first hearing, the attempt to have the requests
for admission concerning the lack of mortgage payments
deemed admitted. As discussed above, all of these statements
involved false or misleading representations to the court. 13

13
Appellees expend great energy in questioning the factual
findings of the bankruptcy court, but we, like the District
Court before us, see no error.

15
 A. Alleged literal truth

As an initial matter, the appellees‟ insistence that
Doyle‟s and Fitzgibbon‟s statements were “literally true”
should not exculpate them from Rule 9011 sanctions. First,
it should be noted that several of these claims were not, in
fact, accurate. There was no literal truth to the statement in
the request for relief from stay that the Taylors had no equity
in their home. Doyle admitted that she made that statement
simply as “part of the form pleading,” and “acknowledged
having no knowledge of the value of the property and having
made no inquiry on this subject.” (App. 215.) Similarly, the
statement in the claim objection response that the figures in
the original proof of claim were correct was false.

Just as importantly, appellees cite no authority, and we
are aware of none, which permits statements under Rule 9011
that are literally true but actually misleading. If the
reasonably foreseeable effect of Doyle‟s or Fitzgibbon‟s
representations to the bankruptcy court was to mislead the
court, they cannot be said to have complied with Rule 9011.
See Williamson v. Recovery Ltd. P’ship, 542 F.3d 43, 51 (2d
Cir. 2008) (a party violates Rule 11 “by making false,
misleading, improper, or frivolous representations to the
court”) (emphasis added).

In particular, even assuming that Doyle‟s and
Fitzgibbon‟s statements as to the payments made by the
Taylors were literally accurate, they were misleading. In
attempting to evaluate whether HSBC was justified in seeking
a relief from the stay on foreclosure, the court needed to
know that at least partial payments had been made and that
the failure to make some of the rest of the payments was due

16
to a bona fide dispute over the amount due, not simple
default. Instead, the court was told only that the Taylors had
“failed to make regular mortgage payments” from November
1, 2007 to January 15, 2008, with a mysterious notation
concerning a “suspense balance” following. (App. 214-15.)
A court could only reasonably interpret this to mean that the
Taylors simply had not made payments for the period
specified. As the bankruptcy court found, “[f]or at best a
$540 dispute, the Udren Firm mechanically prosecuted a
motion averring a $4,367[] post-petition obligation, the aim
of which was to allow HSBC to foreclose on [the Taylors‟]
house.” (App. 215.) Therefore, Doyle‟s and Fitzgibbon‟s
statements in question were either false or misleading.

B. Reasonable inquiry

We must, therefore, determine the reasonableness of
the appellees‟ inquiry before they made their false
representations. Reasonableness has been defined as “an
objective knowledge or belief at the time of the filing of a
challenged paper that the claim was well-grounded in law and
fact.” Ford Motor Co. v. Summit Motor Prods., Inc., 930
F.2d 277, 289 (3d Cir. 1991) (internal quotations omitted).
The requirement of reasonable inquiry protects not merely the
court and adverse parties, but also the client. The client is not
expected to know the technical details of the law and ought to
be able to rely on his attorney to elicit from him the
information necessary to handle his case in the most effective,
yet legally appropriate, manner.

In determining reasonableness, we have sometimes
looked at several factors: “the amount of time available to the
signer for conducting the factual and legal investigation; the

17
necessity for reliance on a client for the underlying factual
information; the plausibility of the legal position advocated; .
. . whether the case was referred to the signer by another
member of the Bar . . . [; and] the complexity of the legal and
factual issues implicated.” Mary Ann Pensiero, Inc. v. Lingle,
847 F.2d 90, 95 (3d Cir. 1988). However, it does not appear
that the court must work mechanically through these factors
when it considers whether to impose sanctions. Rather, it
should consider the reasonableness of the inquiry under all
the material circumstances. “[T]he applicable standard is one
of reasonableness under the circumstances.” Bus. Guides,
Inc. v. Chromatic Commc’ns Ents., Inc., 498 U.S. 533, 551
(1991); accord Garr v. U.S. Healthcare, Inc., 22 F.3d 1274,
1279 (3d Cir. 1994).

Central to this case, then, is the degree to which an
attorney may reasonably rely on representations from her
client. An attorney certainly “is not always foreclosed from
relying on information from other persons.” Garr, 22 F.3d
1278. In making statements to the court, lawyers constantly
and appropriately rely on information provided by their
clients, especially when the facts are contained in a client‟s
computerized records. It is difficult to imagine how attorneys
might function were they required to conduct an independent
investigation of every factual representation made by a client
before it could be included in a court filing. While Rule 9011
“does not recognize a „pure heart and empty head‟ defense,”
In re Cendant Corp. Derivative Action Litig., 96 F. Supp. 2d
403, 405 (D.N.J. 2000), a lawyer need not routinely assume
the duplicity or gross incompetence of her client in order to
meet the requirements of Rule 9011. It is therefore usually
reasonable for a lawyer to rely on information provided by a
client, especially where that information is superficially

18
plausible and the client provides its own records which appear
to confirm the information.

However, Doyle‟s behavior was unreasonable, both as
a matter of her general practice and in ways specific to this
case. First, reasonable reliance on a client‟s representations
assumes a reasonable attempt at eliciting them by the
attorney. That is, an attorney must, in her independent
professional judgment, make a reasonable effort to determine
what facts are likely to be relevant to a particular court filing
and to seek those facts from the client. She cannot simply
settle for the information her client determines in advance—
by means of an automated system, no less—that she should
be provided with.

Yet that is precisely what happened here. “[I]t
appears,” the bankruptcy court observed, “that Doyle, the
manager of the Udren Firm bankruptcy department, had no
relationship with the client, HSBC.” (App. 202.) By working
solely with NewTrak, a system which no one at the Udren
Firm seems to have understood, much less had any influence
over, Doyle permitted HSBC to define—perilously
narrowly—the information she had about the Taylors‟ matter.
That HSBC was not providing her with adequate information
through NewTrak should have been evident to Doyle from the
face of the NewTrak file. She did not have any information
concerning the Taylors‟ equity in the home, though she made
a statement specifically denying that they had any.

More generally, a reasonable attorney would not file a
motion for relief from stay for cause without inquiring of the
client whether it had any information relevant to the alleged
cause, that is, the debtor‟s failure to make payments. Had

19
Doyle made even that most minimal of inquiries, HSBC
presumably would have provided her with the information in
its files concerning the flood insurance dispute, and Doyle
could have included that information in her motion for relief
from stay—or, perhaps, advised the client that seeking such a
motion would be inappropriate under the circumstances.

With respect to the Taylors‟ case in particular, Doyle
ignored clear warning signs as to the accuracy of the data that
she did receive. In responding to the motion for relief from
stay, the Taylors submitted documentation indicating that
they had already made at least partial payments for some of
the months in question. In objecting to the proof of claim, the
Taylors pointed out the inaccuracy of the mortgage payment
listed and explained the circumstances surrounding the flood
insurance dispute. Although Doyle certainly was not obliged
to accept the Taylors‟ claims at face value, they indisputably
put her on notice that the matter was not as simple as it might
have appeared from the NewTrak file. At that point, any
reasonable attorney would have sought clarification and
further documentation from her client, in order to correct any
prior inadvertent misstatements to the court and to avoid any
further errors. Instead, Doyle mechanically affirmed facts
(the monthly mortgage payment) that her own prior filing
with the court had already contradicted.

Doyle‟s reliance on HSBC was particularly
problematic because she was not, in fact, relying directly on
HSBC. Instead, she relied on a computer system run by a
third-party vendor. She did not know where the data
provided by NewTrak came from. She had no capacity to
check the data against the original documents if any of it
seemed implausible. And she effectively could not question

20
the data with HSBC. In her relationship with HSBC, Doyle
essentially abdicated her professional judgment to a black
box.

None of the other factors discussed in the Mary Ann
Pensiero case which are applicable here affect our analysis of
the reasonableness of appellees‟ actions. This was not a
matter of extreme complexity, nor of extraordinary deadline
pressure. Although the initial data the Udren Firm received
was not, in itself, wildly implausible, it was facially
inadequate. In short, then, we find that Doyle‟s inquiry
before making her representations to the bankruptcy court
was unreasonable.

In making this finding, we, of course, do not mean to
suggest that the use of computerized databases is inherently
inappropriate. However, the NewTrak system, as it was
being used at the time of this case, permits parties at every
level of the filing process to disclaim responsibility for
inaccuracies. HSBC has handed off responsibility to a third-
party maintainer, LPS, which, judging from the results in this
case, has not generated particularly accurate records. LPS
apparently regards itself as a mere conduit of information.
Appellees, the attorneys and final link in the chain of
transmission of this information to the court, claim reliance
on NewTrak‟s records. Who, precisely, can be held
accountable if HSBC‟s records are inadequately maintained,
LPS transfers those records inaccurately into NewTrak, or a
law firm relies on the NewTrak data without further
investigation, thus leading to material misrepresentations to
the court? It cannot be that all the parties involved can
insulate themselves from responsibility by the use of such a
system. In the end, we must hold responsible the attorneys

21
who have certified to the court that the representations they
are making are “well-grounded in law and fact.”

C. Notice

Doyle, Udren, and the Udren Firm also argue on
appeal that they had insufficient notice that they were in
danger of sanctions.14 Rule 9011 directs that a court “[o]n its
own initiative . . . may enter an order describing the specific
conduct that appears to violate [the rule] and directing an
attorney . . . to show cause why it has not violated [the rule].”
Fed. R. Bank. P. 9011(c)(1)(B). Due process in the
imposition of Rule 9011 sanctions requires “particularized
notice.” Jones v. Pittsburgh Nat’l Corp., 899 F.2d 1350,
1357 (3d Cir. 1990). The meaning of “particularized notice”
has not been rigorously defined in this circuit. In Fellheimer,
we noted that this requirement was met where the sanctioned
party “was provided with sufficient, advance notice of exactly
which conduct was alleged to be sanctionable.” Fellheimer,
57 F.3d at 1225. In Simmerman v. Corino, 27 F.3d 58, 64 (3d
Cir. 1994), we held that “the party sought to be sanctioned is
entitled to particularized notice including, at a minimum, 1)
the fact that Rule 11 sanctions are under consideration, 2) the
reasons why sanctions are under consideration . . . .”

The bankruptcy court‟s June order was clearly in
substance an order to show cause, even if it was not

14
Any claim regarding a due process right to notification of
the form of sanctions being considered has been waived by
appellees, as it was not raised in their papers, either here or in
the district court. United States v. Pelullo, 399 F.3d 197, 222
(3d Cir. 2005).

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specifically captioned as such. The more difficult question is
whether the court adequately described “the specific conduct
that appear[ed] to violate” Rule 9011, so as to give sufficient
notice of “exactly which conduct was alleged to be
sanctionable.” As mentioned above, the court‟s June order
identified “pressing a relief motion on admissions that were
known to be untrue, and signing and filing pleadings without
knowledge or inquiry regarding the matters pled therein” as
the conduct the court wished to investigate. (App. 119) The
judge also told Fitzgibbon, “I‟m issuing an order to show
cause on your firm, too, for filing these things . . . without
having any knowledge. And filing answers . . . without any
knowledge.” Id. The June order also made specific reference
to “the motion for relief, the admissions and the reply to the
objection.”

In these particular circumstances, the notice given to
appellees was sufficient to put them on notice as to which
aspects of their conduct were considered sanctionable. At
that point in the case, the Udren Firm lawyers had only filed
three substantive papers with the court—totaling six
(substantive) pages—and the court found all of them
problematic. Appellees‟ claim that they believed that the
only issue at the time of the hearing was Fitzgibbon‟s
inability to contact HSBC is simply not plausible in light of
the language of the June order and the bankruptcy court‟s
statements at the hearing, which were incorporated by
reference into the June order. In a case in which more
extensive docket activity had taken place, the bankruptcy
court‟s order might not have been sufficient to inform
appellees as to which of their filings were sanctionable, but,
given the unusual circumstances here, it was. But see
Martens v. Thomann, 273 F.3d 159, 178 (2d Cir. 2001)

23
(requiring specific identification of individual challenged
statements to uphold imposition of sanctions).

D. The Udren Firm and Udren’s individual
liability

We also find that it was appropriate to extend
sanctions to the Udren Firm itself. Rule 11 explicitly allows
the imposition of sanctions against law firms. Fellheimer, 57
F.3d 1215 at 1223 n.5. In this instance, the bankruptcy court
found that the misrepresentations in the case arose not simply
from the irresponsibility of individual attorneys, but from the
system put in place at the Udren Firm, which emphasized
high-volume, high-speed processing of foreclosures to such
an extent that it led to violations of Rule 9011.

However, we do not find that responsibility for these
failures extends specifically to Udren, whose involvement in
this matter was limited to his role as sole shareholder of the
firm.

E. The District Court’s reversal of sanctions
against HSBC

Ordinarily, of course, a party which does not appeal a
decision by a district court cannot receive relief with respect
to that decision. “[T]he mere fact that a [party] may wind up
with a judgment against one [party] that is not logically
consistent with an unappealed judgment against another is not
alone sufficient to justify taking away the unappealed
judgment in favor of a party not before the court.” Repola v.
Morbark Indus., Inc., 980 F.2d 938, 942 (3d Cir. 1992).
However, “where the disposition as to one party is

24
inextricably intertwined with the interests of a non-appealing
party,” it may be “impossible to grant relief to one party
without granting relief to the other.” United States v. Tabor
Court Realty Corp., 943 F.2d 335, 344 (3d Cir. 1991). In
Tabor Court Realty, a contract dispute, the assignee of a
property had failed to appeal a decision, while the assignor
had (and had ultimately prevailed). Given that the dispute
was over the disposition of the property, it was impossible to
grant relief to the assignor without also granting relief to the
assignee.

In this instance, whether the lawyers at the Udren Firm
violated Rule 9011 is a question analytically distinct from
whether HSBC was responsible for any violations of Rule
9011. A court might find that HSBC was responsible for
violations, whereas, say, Udren himself was not. It was
entirely possible for HSBC to comply with the sanctions
ordered (a letter to its firms informing them that they are
permitted to consult with HSBC) without affecting the
interests of the lawyers at the Udren Firm. Therefore, the
interests of the lawyers at the Udren Firm and HSBC were not
“inextricably intertwined,” and the District Court lacked
jurisdiction to reverse the sanctions against HSBC.

F. Alternative basis for the District Court’s
decision

In reversing the bankruptcy court‟s decision, the
District Court focused on that court‟s apparent attention to the
broader problems of high-volume bankruptcy practice in
imposing sanctions. It is true that the bankruptcy judge noted
that appellees were not the first attorneys to run into these
sorts of difficulties in her court. But she nonetheless made

25
individualized findings of wrong-doing after four days of
hearings and issued sanctions thoughtfully chosen to prevent
the recurrence of problems at the Udren Firm based on what
she had learned of practices there. Insofar as she considered
the effect of the sanctions on the future conduct of other
attorneys appearing before her, such considerations were
permissible. After all, “the prime goal [of Rule 11 sanctions]
should be deterrence of repetition of improper conduct.”
Waltz v. County of Lycoming, 974 F.2d 387, 390 (3d Cir.
1992).

G. Conclusion

We appreciate that the use of technology can save both
litigants and attorneys time and money, and we do not, of
course, mean to suggest that the use of databases or even
certain automated communications between counsel and
client are presumptively unreasonable. However, Rule 11
requires more than a rubber-stamping of the results of an
automated process by a person who happens to be a lawyer.
Where a lawyer systematically fails to take any responsibility
for seeking adequate information from her client, makes
representations without any factual basis because they are
included in a “form pleading” she has been trained to fill out,
and ignores obvious indications that her information may be
incorrect, she cannot be said to have made reasonable inquiry.
Therefore, we find that the bankruptcy court did not abuse its
discretion in imposing sanctions on Doyle or the Udren Firm
itself. However, it did abuse its discretion in imposing
sanctions on Udren individually.

III.

26
 For the foregoing reasons, we will reverse the District
Court with respect to Doyle and the Udren Firm, affirming
the bankruptcy court‟s imposition of sanctions. With respect
to HSBC, as discussed previously, the District Court lacked
jurisdiction to reverse the sanctions, as do we; therefore, we
vacate the District Court‟s order with respect to that party,
leaving the sanctions imposed by the bankruptcy court in
place. We will affirm the District Court with respect to
Udren individually, reversing the bankruptcy‟s court
imposition of sanctions.

27