By MIA BURNS
Capital News Service
November 29, 1999

WASHINGTON - The Supreme Court on Nov. 29 rejected a Rockville attorney's appeal of his suit against a bankruptcy court that he said "demonized" him and his former client.

It was the second defeat in the high court for Tracy Mulligan, who had an earlier appeal of his case, Tracy E. Mulligan v. Associates Leasing Inc., turned down in July.

Mulligan said last week that he realized if he was turned down again by the Supreme Court it would be the last chance for his case, which he paints as a fight for women's rights and the rights of spouses in bankruptcy cases.

But it has been a crusade for Mulligan alone, who still faces sanctions in the bankruptcy case that sparked his suit. His former client has said she wants no longer wants any part of the suit and the bankruptcy trustee has declined comment.

"This case originated in 1992 and I'm exhausted of comments about it," said Mark Friedman, the bankruptcy trustee.

The case began in October 1992 when Fred Allnut of Ellicott City filed Chapter 11 bankruptcy for JFC Excavating Co., a construction firm that sat on land that Allnut purchased with his wife, Joanne. Charles Jay Miller Inc., bought the company after it was put up for sale by the bankruptcy court and later sold a large portion to Associates Leasing Inc.

After the company had been sold, Mulligan said Joanne Allnut approached him and asked if she "had any claim to property she had worked on and co-signed for."

"They worked together from 1967 until 1982," said Mulligan, who said the Allnuts jointly borrowed money to buy equipment for the company. "None of the equipment was transferred to JFC. Half of it was not subject to sale."

Mulligan said that the property of JFC "was considered jointly owned" by the couple and should not have been put up for sale as "a sole proprietorship" in bankruptcy court. On those grounds, Mulligan and Joanne Allnut sued in state court in Howard County in September 1995 over the sale of the property.

But Friedman asked to intervene in the state suit and was allowed to do so. In March 1998, the bankruptcy court imposed sanctions on Joanne Allnut of more than $100,000, claiming that her case "had not been filed in good faith and had been done to harass the Chapter 11 trustee and disrupt orderly conduct of the case," said Mulligan.

According to Mulligan's filing with the Supreme Court, the bankruptcy court accused him of secretly representing Fred Allnut, which he strongly denied.

"When I undertook the engagement, I told the husband that I was representing his wife only and that if his interest was in conflict with hers at any point or impaired her claim, I would sue him in a heartbeat," Mulligan said in his petition.

Mulligan said Fred Allnut was described in bankruptcy court documents as a man with "a notorious career ... as a tax protester." In that atmosphere, Mulligan said, Joanne Allnut and "anyone associated in any way with his (Fred Allnut's) case was treated with abuse and contempt from the moment he appeared in court."

Joanne Allnut paid the court-imposed sanctions earlier this year, then withdrew from the case, leaving only Mulligan. "I really don't want to talk about it," she said earlier this month.

Mulligan, who still faces sanctions from the bankruptcy court, said he hoped the Supreme Court would step in and agree with him that the "bankruptcy court does not have subject-matter jurisdiction" in Joanne Allnut's claim.

"This case is important because it concerns the rights of a spouse in a bankruptcy case," Mulligan said, adding that his former client never had her day in court.