Motion For Sanctions Against J. Mark Brewer and the Law Firm of Brewer & Pritchard, P.C.

Rigorist writes:

My apologies for posting this as a comment on an older blog entry and for being several days behind the news. [Phil Groom says: absolutely no apology needed, rigorist; on the contrary, massive vote of thanks for this!]

The bankruptcy trustee has asked the judge to sanction Mr. Brewer and his law firm for filing this bankruptcy case in a motion dated 4 September, 2008

Text of motion follows (this might take more than one post):

—
MOTION FOR SANCTIONS AGAINST
J. MARK BREWER AND THE LAW FIRM OF BREWER & PRITCHARD, P.C.

THIS MOTION SEEKS AN ORDER THAT MAY ADVERSELY AFFECT YOU. IF YOU OPPOSE THE MOTION, YOU SHOULD IMMEDIATELY CONTACT THE MOVING PARTY TO RESOLVE THE DISPUTE. IF YOU AND THE MOVING PARTY CANNOT AGREE, YOU MUST FILE A RESPONSE AND SEND A COPY TO THE MOVING PARTY. YOU MUST FILE AND SERVE YOUR RESPONSE WITHIN 7 DAYS OF THE DATE THIS WAS SERVED ON YOU. YOUR RESPONSE MUST STATE WHY THE MOTION SHOULD NOT BE GRANTED. IF YOU DO NOT FILE A TIMELY RESPONSE, THE RELIEF MAY BE GRANTED WITHOUT FURTHER NOTICE TO YOU. IF YOU OPPOSE THE MOTION AND HAVE NOT REACHED AN AGREEMENT, YOU MUST ATTEND THE HEARING. UNLESS THE PARTIES AGREE OTHERWISE, THE COURT MAY CONSIDER EVIDENCE AT THE HEARING AND MAY DECIDE THE MOTION AT THE HEARING. REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEY.

To the
Honorable Marvin Isgur,
United States Bankruptcy Judge:

Randy W. Williams, chapter 7 trustee (the “Trustee”) of the estate of St. Stephens the Great, LLC (the “Debtor”) files this Motion for Sanctions.

1. On August 28, 2008. this Court held a hearing on the Trustee’s Motion to Dismiss this case. The Motion was granted with prejudice. The Court found that the case was filed in bad faith. The Court reserved jurisdiction to consider any sanctions motions filed in this matter. The Trustee hereby requests that the Court enter sanctions against J. Mark Brewer and the law firm of Brewer & Pritchard, P.C. for filing this case in bad faith, and that said sanctions be, for among other things, reimbursement of the time and expenses spent by the Trustee and a punitive award to discourage such behavior in the future payable to the Clerk of Court. The Trustee also asks the Court to consider whether sanctions should be entered against St. Stephen the Great Charitable Trust and Philip W. Brewer.

2. The Debtor filed a voluntary chapter 11 case on June 4, 2008 [Docket No. 1]. The case was converted to chapter 7 based on the Motion of the U.S. Trustee [Docket No. 8]. The Trustee was appointed on June 26, 2008.

3. J. Mark Brewer is an attorney licensed to practice before this Court and the Chairman of the Debtor.

4. It is undisputed by Mr. Brewer that St. Stephens the Great, Ltd. is a corporation chartered in the United Kingdom. He claims that he is “authorized” to use the designation of LLC for St. Stephen the Great, Ltd. However, the term Limited Company in the United Kingdom is not synonymous with the U.S. concept of limited liability company. At one time, the Debtor operated bookstores in England and Wales. It operated the bookstores on behalf of the registered charity, St. Stephens the Great Charitable Trust. On June 2, 2008, St. Stephens the Great Registered Charity terminated its agreement with the Debtor to operate the stores, effectively stripping it of its only asset. (See Exhibit 1 attached hereto). Mr. Brewer admitted at the hearing on August 28, 2008 that the entity to whom operating rights was transferred (ENC Management Company) is another company set up by him and his brother Philip Brewer. The following web site has some interesting information about ENC and the Brewers, http://cartoonchurch.wordpress. com/2008/06/10/who-are-the-enc-management-company/.* [Copied below for quick reference – Phil]

5. The chapter 11 schedules reflect that the Debtor owns no assets. [Docket No. 16]. Neither the schedules nor statement of financial affairs disclose the relationship between the Debtor and St. Stephen the Great Registered Charity or ENC. Further there is no disclosure of a bank account even though the schedules and statement of financial affairs disclose that the Debtor allegedly handled significant sums of money. The Statement of Financial Affairs shows that tens of thousands of dollars were paid to the Brewer & Pritchard PC law firm pre-petition for services rendered and the filing of this case. [Docket No. 15, pp 5 and 9].

6. The Court was not informed of the existence of ENC at the time of the status conference on June 25, 2008.

7. It is clear from Mr. Brewer’s arguments to the Court on August 28, 2008 that the above referenced and numbered case was filed to protect St. Stephens the Great Registered Charity, ENC and himself from claims being made related to the bookstores in the United Kingdom. For example, see the attached Exhibit 2 from the Employment Tribunals of England and Wales. It is also without question that at the time of filing, there were no assets of the Debtor to reorganize.

8. The Trustee seeks compensatory sanctions as well as sanctions to deter Mr. Brewer and his firm from similar future conduct. Mr. Brewer and his firm engaged in a concerted scheme to mislead this Court and to file a bad faith bankruptcy case. Mr. Brewer’s action in failing to disclose the true name of the Debtor and the cancellation of its contract and assignment of those rights to another closely held company of Mr. Brewer is a fraud on this Court. A “fraud on the court” is an intentional act by an officer of the Court to deflect the Court from knowing all of the facts necessary to make an appropriate judicial decision on the matter before it. Pearson v. First NH Mortgage Corp., 200F.3d 30, 37 (1St Cir. 1999). Brewer’s failure to properly identify the Debtor, his conflicts in representing the Debtor while simultaneously being its chairman, and his position in ENC and St. Stephen the Great Registered Charity are all matters of significance that should have been disclosed, but as the docket and pleadings in this case reflect, none of these key events was disclosed. Further, at the initial status conference Mr. Brewer failed to inform the Court that there was no longer any business of the Debtor to reorganize because of the cancellation of the agreement to operate the bookstores and the assignment of those rights to ENC.

9. Brewer violated his duty of candor to the Court as well as other provisions of the Texas Disciplinary Rules by attempting to persuade the Court to allow this case to proceed. Brewer’s actions may also violate Title 18 of the United States Code.

10. Moreover, Brewer filed this case in the United States to gain a stay against the claims of creditors against himself individually, ENC and St. Stephen the Great Registered Charity. Mr. Brewer argued to the Employment Tribunal that the proceedings before it were stayed by operation of 11 U.S.C. §362. Heexpressed displeasure with the Trustee when he informed Mr. Brewer that the Trustee did not agree that administrative matters related to regulatory issues under United Kingdom employment law were not stayed and that in any event, Mr. Brewer should provide copies of records requested in connection with those proceedings to the Tribunal and the Trustee. All of the foregoing conduct violates Bankruptcy Rule 9011.

11. This Court has the inherent authority to protect the integrity of the bankruptcy process by the imposition of appropriate sanctions. In re Rainbow Magazine, Inc., 77F.3d 278 (9th Cir. 1996). As was noted by the Ninth Circuit in that case, “[t]here can be little doubt that the bankruptcy courts have the inherent power to sanction vexatious conduct presented before the court.” Id. at 284.

12. The appropriate sanction for committing a fraud on the court is not limited to the harm caused but should be determined with a view toward deterring future conduct. Pearson v. First NH Mortgage Corp., 200F.3d 30, 42 (1st Cir. 1999). The Trustee requests that monetary sanctions be imposed against Mr. Brewer and his law firm in an amount of not less than $10,000 in order to compensate the Trustee for his costs incurred in responding to the wrongful acts and presenting same to this Court. The Trustee also seeks his attorney’s fees and expenses of $5,000 incurred in the filing and prosecution of this motion. Should the motion be granted and the order appealed, the Trustee seeks a further award of $25,000 in attorney’s fees for an unsuccessful appeal to the United States District Court, an additional $40,000 for an unsuccessful appeal to the Fifth Circuit and an additional $50,000 if an application for writ of certiorari is filed with the United States Supreme Court and the writ is denied. In the event any monetary sanctions imposed herein are not paid within fifteen (15) days of entry of the order granting the sanctions then the Trustee requests that an additional sanction of $100.00 a day be imposed for the failure to comply with the terms of the order.

13. Finally, with respect to deterring future conduct, the Trustee requests that Mr. Brewer and his firm be sanctioned an additional $10,000 payable to the Clerk of Court and that Mr. Brewer be required to complete 20 hours of continuing legal education in the area of legal ethics over the next year and file a certificate of completion with the Court.

14. At best, as this Court has already found, Mr. Brewer’s conduct was in bad faith. The Trustee submits as set forth herein that such bad faith also amounts to a fraud on the Court. At worst, his conduct violates § 157 of Title 18 and possibly other statutes. As an attorney and a law firm, Mr. Brewer and Brewer & Pritchard owe a duty of candor and honesty to this Court and to the bankruptcy process. The acts that are the subject of this motion violate that duty. In addition, the filing of this case in the United States where almost everycreditor is located in the United Kingdom brings disrepute to the Bankruptcy Courts of the United States as they are being used as a haven for a party attempting to escape justice where it was formed and where it did business. Mr. Brewer seeks to use the designation of St. Stephen as a charity to somehow suggest that his conduct does not bear scrutiny. In fact, just the opposite should be true, any attempt by an alleged charity to escape or defer its obligations should be subject to the utmost in candor and disclosure so that no question of impropriety exists. Here, just the opposite is demonstrated by Mr. Brewer’s conduct, and he and his firm must bear responsibility for these actions and make amends to this Court, the Trustee and most significantly the bankruptcy process so that creditors, especially those in a situation like this who are looking at the system from outside U.S. borders, can see that parties who would attempt to subvert the law to escape their responsibilities will be punished.

15. Accordingly, the Trustee requests that the Court grant the Trustee’s motion, enter sanctions consistent with the foregoing and grant such other relief as is just.

–MOTION ENDS–

From the Cartoon Church Back-up Site:

Who are the ‘ENC Management company’?

Posted in Blog posts by Dave Walker on June 10th, 2008

I was interested to find out about the ‘ENC Management company’, the company operating most of the former SPCK bookshops. I looked them up on the Companies House website, along with the new companies for the Durham Cathedral and Chichester shops. The name given on the Companies House site is the ‘ENC SHOP MANAGEMENT CO.’

Here are the company ‘appointments’:

ENC SHOP MANAGEMENT CO.
Company Number: FC028292
SECRETARY: BREWER, SANDRA K
DIRECTOR: BREWER, J MARK
DIRECTOR: BREWER, PHILIP W

DURHAM CATHEDERAL SHOP MANAGEMENT CO.
Company Number: FC028290
SECRETARY: BREWER, SANDRA K
DIRECTOR: BREWER, J MARK
DIRECTOR: BREWER, PHILIP W

CHICHESTER SHOP MANAGEMENT CO.
Company Number: FC028291
SECRETARY: BREWER, SANDRA K
DIRECTOR: BREWER, J MARK
DIRECTOR: BREWER, PHILIP W

For comparison, the ‘bankrupt’ Saint Stephen the Great:

SAINT STEPHEN THE GREAT
Company Number: 06110519
DIRECTOR: BREWER, JOHN MARK
DIRECTOR: BREWER, KAREN ELLEN
DIRECTOR: BREWER, SANDRA KAY

It is, quite blatantly the same people.

Dyfrig made some really useful extra points on my site before it died mid-morning. Here are some of them:

The company that’s filed for bankruptcy in the US is SSG-LLC. The first thing to note is that companies go bankrupt in America – in the UK, individuals go bankrupt, companies go into liquidation. The Chapter 11 filing protects the American company in America and under any contracts with people or bodies outside America which are expressed to be under American law. So only if an SPCK worker’s contract is expressed to be with SSG-LLC will that person be affected by the change in employment. …

In order to trade in England & Wales, an organisation must either be a limited company (this includes charities that are limited by guarantee) or a limited liability partnership (it could be an unlimited partnership, but this is unlikely). Overseas companies therefore normally create a company in England & Wales. Saint Stephen the Great is a registered company in Poole. As at today, June 10th, it is neither in adminstration nor liquidation. Just because SSG-LLC is in bankruptcy in the US doesn’t mean that SSG Ltd in Poole is subject to the same protection, because it’s a separate legal entity from SSG-LLC.

Also:

On the whole St Stephen the Great Ltd / SSG-LLC issue, there is indeed only one company with that name registered in England & Wales, and that company is NOT in administration according to Companies House. Something called SSG LLC may have applied for Chapter 11 in the States, but I’m not clear how that can apply to an English-registered company. (ENC is actually registered with an “FC” number, which means it’s a foreign company – perhaps ENC has been registered in England and THEN gone into Chapter 11 in the States?).

The Trust’s website purports that there is a company called Saint Stephen the Great LLC, but that is incorrect, as companies is England & Wales cannot have that suffix – they must carry “Ltd” (or “Cyf”). The Trust may hold itself out as “SSG LLC” but that is not its identity and the legally registered company is Saint Stephen the Great Ltd, a company limited by guarantee and a registered charity.