## Facts

- Niles C. Taylor and Angela J. Taylor filed Chapter 13 bankruptcy while disputing their mortgage servicer’s addition of lender-placed flood-insurance charges.
- HSBC Bank USA, N.A. treated the Taylors’ payments as short due to the insurance dispute, placed funds in a suspense account, assessed late fees, and showed an increasing delinquency on its internal records.
- HSBC used a third-party electronic platform (NewTrak) to transmit limited loan data and assignments to foreclosure counsel rather than communicating directly.
- HSBC’s foreclosure counsel, Udren Law Offices, P.C., drafted a motion for relief from the automatic stay using NewTrak-provided figures, alleging three missed post-petition payments and a post-petition delinquency of $4,367, and referencing an unexplained suspense balance.
- Managing attorney Lorraine Doyle authorized filing the motion under her electronic signature after a limited review that compared the pleading to NewTrak screen prints rather than to a full payment history or accounting.
- The Taylors opposed the motion with cancelled checks and explained the flood-insurance dispute, contesting the accuracy of the alleged arrearage.
- Despite conflicting evidence, counsel continued to maintain the accuracy of the payment figures; the bankruptcy court directed counsel to obtain a full accounting from HSBC, which counsel failed to secure through the NewTrak-only process.
- The bankruptcy court imposed sanctions under Federal Rule of Bankruptcy Procedure 9011 against HSBC, the Udren Firm, Doyle, and name partner Mark Udren; the district court reversed as to all; the United States Trustee appealed.

## Issues

1. Whether the Udren Firm and Lorraine Doyle violated Federal Rule of Bankruptcy Procedure 9011 by filing and defending stay-relief papers without a reasonable inquiry into disputed and apparently inconsistent payment figures.
2. Whether sanctions could be imposed on Mark Udren individually based on his supervisory or name-partner status without findings of personal involvement or culpability.
3. Whether the district court had jurisdiction to reverse Rule 9011 sanctions against HSBC when HSBC did not appeal the bankruptcy court’s sanctions order.

## Decision

- The Third Circuit reversed the district court and reinstated Rule 9011 sanctions against the Udren Firm and Lorraine Doyle.
- The Third Circuit affirmed the district court’s reversal of sanctions against Mark Udren individually.
- The Third Circuit held the district court lacked jurisdiction to vacate sanctions against HSBC because HSBC did not appeal; it vacated the district court’s reversal as to HSBC, leaving the bankruptcy court’s sanctions against HSBC in effect.

## Legal Principles

- Rule 9011 requires an attorney to make a reasonable inquiry into the factual and legal basis of papers presented to the court; the duty is personal and cannot be satisfied by rote reliance on client-supplied or automated data.
- When filings present obvious warning signs (e.g., a large alleged delinquency despite evidence of ongoing payments), counsel must investigate beyond confirming that numbers on a screen match numbers in a pleading.
- A law firm’s internal processes and technology use must permit meaningful verification sufficient to comply with Rule 9011.
- Rule 9011 sanctions against an individual lawyer require findings tying the lawyer to the sanctionable conduct; supervisory role or name-partner status alone is insufficient.
- Appellate relief generally cannot be granted to a non-appealing party; “intertwined interests” do not justify extending relief absent the narrow circumstances where relief to the appellant necessarily requires relief to the non-appellant.

## Conclusion

The Third Circuit held that foreclosure counsel’s high-volume, technology-dependent workflow did not excuse filing and maintaining materially questionable stay-relief allegations without a reasonable factual inquiry, reinstating sanctions against the firm and signing attorney, rejecting sanctions based solely on name-partner status, and limiting appellate relief to parties that actually appealed.


In re Taylor, 655 F.3d 274 (3d Cir. 2011)