IN RE RAPISARDA

PAT MORGENSTERN-CLARREN, Bankruptcy Judge

Throughout this contentious and protracted litigation, the debtor Carol Rapisarda Shanker and her non-debtor husband Howard Shanker have claimed that the law firm of McIntyre, Kahn Kruse Co., L.P.A. forged the debtor's signature on a mortgage dated April 7, 1994 and that the firm fraudulently induced Howard Shanker to sign it. On November 2, 2005, this court issued a memorandum of opinion and order finding that the debtor and Howard Shanker failed to prove their claims and that the McIntyre firm's mortgage is a valid lien on the debtor's real estate. (Docket 123, 124). The court did not make any finding as to the amount secured by that mortgage, leaving that for another day.

On February 18, 2006, the debtor filed a "Motion to Reconsider Allowed Claim of Defendant MKK." (Docket 160). In it, she claims that the court should reconsider the $765,493.86 allowed claim under federal rule of bankruptcy procedure 3008 and, on reconsideration, limit the claim to $50,000.00. The debtor bases this on a document she attached titled "Agreement." The document has signature lines for Carol Shanker and the McIntyre firm. The McIntyre firm signed the document, but Carol Shanker did not. The document says in part:

The [McIntyre firm] has performed services for both Howard Shanker and Carol Rapisarda Shanker for which there is currently outstanding balances in excess of $350,000.00. To induce [the McIntyre firm] to continue its representation of Howard Shanker, Carol Rapisarda Shanker, Human Services Plaza Partnership, or any related business entity of Howard Shanker's (including American Games, Inc) and Carol Rapisarda Shanker's (including Valley Veterinary Services, Inc.), Carol Rapisarda Shanker has agreed to guarantee the past and future legal bills and expenses for services performed or to be performed.

Of the existing bills Carol Rapisarda Shanker acknowledges that $50,000.00 of said bills were her joint and several obligation. [The McIntyre firm] agrees to limit Carol Rapisarda Shanker's liability on said existing obligations to $50,000.00, plus any bills to Valley Veterinarian Services, Inc. in the future. This limitation of liability shall survive only on the condition that Carol Rapisarda Shanker does not end up in bankruptcy, voluntary or involuntary.

(Docket 160, exh. A).

The debtor argues that the McIntyre firm's allowed claim should be reconsidered and limited in amount because: (1) she just received this document with the McIntyre firm's exhibits for the evidentiary hearing scheduled for (and held on) February 24, 2006; (2) the document is binding on the McIntyre firm; (3) the bankruptcy limitation is void as against public policy and also violates the "spirit" of 11 U.S.C. § 525; and (4) the McIntyre firm "has perhaps submitted a false claim" because the firm filed a claim for $765,493.86, when its claim could not be greater than $50,000.00 under this document. The McIntyre firm responds that: (1) the document in question was produced to the debtor and Howard Shanker before the October 19, 2005 hearing that resulted in the November 2, 2005 memorandum of opinion and order; (2) the debtor did not sign the document and the proposed agreement never went into effect; (3) there is no law supporting the debtor's public policy argument; and (4) even though the debtor and her counsel attended the February 24, 2006 hearing on the issue of whether the McIntyre firm's secured debt is sufficient to support its $200,000.00 credit bid, the debtor did not participate in that hearing. The McIntyre firm asks for sanctions under federal rule of civil procedure 11. (Docket 166).

The debtor relies on bankruptcy code § 502(j) and federal rule of bankruptcy procedure 3008. Bankruptcy code § 502(j) states that a claim that has been allowed or disallowed may be reconsidered for cause and that a reconsidered claim may be allowed or disallowed according to the equities of the case. 11 U.S.C. § 502(j). Bankruptcy rule 3008 implements this section by providing that a party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate. FED R. BANKR. P. 3008.

The November 2, 2005 decision made by this court that preceded the debtor's motion is that the McIntyre firm did not forge the debtor's signature on the mortgage and did not fraudulently induce Howard Shanker to sign. There is nothing in the current motion to reconsider that relates to that finding. The only thing the motion to reconsider seeks to do is to limit the amount of the McIntyre firm's secured claim to $50,000.00. There is no basis in law or fact, therefore, for the motion to reconsider.

The court also finds that the agreement is not a newly-produced document. The document was produced by the McIntyre firm before the October 19, 2005 hearing, about four months before the debtor filed this motion. There is no factual basis for the implication that the document was newly-produced and supported reconsidering the court's decision.

An examination of the document itself shows additional flaws in the debtor's argument. The debtor argues that the document binds the McIntyre firm, yet she offers no legal reasoning for why this is so. The document is not signed; the debtor makes no argument that she signed it or that the McIntyre firm's offer to enter into the agreement ever matured into a legally binding contract. The debtor also offers no legal support whatsoever for her statement that the bankruptcy limitation is void as against public policy. Her argument that the limitation violates the spirit of bankruptcy code § 525 is frivolous. Section 525 provides that government entities and private employers may not discriminate against debtors in the manner specified in the statute. 11 U.S.C. § 525. There is nothing in that section that would apply to the relationship between the McIntyre firm and the debtor.

For these reasons, the debtor's motion to reconsider does not state good cause and is denied.

The McIntyre firm asks the court to impose sanctions on the debtor for "continued, frivolous conduct and violations of Rule 11." See FED. R. BANKR. P. 9011. Rule 9011 has a safe-harbor provision that applies when a party seeks to invoke it against another party. The rule requires the complaining party to make a demand that the offending filing be withdrawn voluntarily within 21 days. It is only after that time period, and absent action, that the complaining party may move for sanctions. Any such motion must be made separately from other motions or requests. FED. R. BANKR. P. 9011(c)(1)(A). The Sixth Circuit interprets this rule strictly, requiring a party to follow the two-step procedure. Ridder v. City of Springfield, 109 F.3d 288, 294 (6^th Cir. 1997).

The McIntyre firm did not show that it made the required demand on the debtor and did not make its request by separate motion. The request for sanctions is denied based on these procedural infirmities.

Bankruptcy rule 9011 also expressly provides that the court, on its own initiative, may:

. . . enter an order describing the specific conduct that appears to violate subdivision (b) and directing an attorney . . . or party to show cause why it has not violated subdivision (b) with respect thereto.

FED. R. BANKR. P. 9011(c)(1)(B).

Subdivision (b) states:

(b) Representations to the Court. By presenting to the court . . . [a] written motion . . . an attorney . . . is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, —

(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

The court finds that the following conduct appears to violate subdivision (b)(1), (2) and/or (3):

(1) the debtor's representation that the document titled Agreement was somehow newly-discovered, thus warranting a motion to reconsider;

(2) the debtor's argument without legal support that the document was binding on the McIntyre firm despite the fact that the debtor did not sign it;

(3) the debtor's legal argument that the bankruptcy limitation clause is against public policy, for which no law in support was cited;

(4) the debtor's legal argument that the agreement violates the spirit of 11 U.S.C. § 525, without supporting legal authority that such an argument is legally relevant;

(5) the debtor's statement that the McIntyre firm "has perhaps submitted a false claim;"

(6) the filing of an objection to the claim without standing to do so. The trustee is the party in interest in this chapter 7 with the responsibility to review and allow or challenge claims. See 11 U.S.C. § 704(a)(5). A debtor does not generally have standing to object to claims unless the debtor can show a residual interest in the estate's property. See In re IF Corp., 219 B.R. 483 (S.D. Ohio 1998). There is no such showing here; and

(7) the filing of this motion and then the failure to participate in the hearing that was set for this same issue.

The debtor is to file her response to this show cause order on or before March 15, 2006. The court will then take the matter under advisement without further hearing.

IT IS SO ORDERED.