Marino

Classic Auto Refinishing (Classic Auto) seeks review of an opinion of the Bankruptcy Appellate Panel (BAP) affirming the bankruptcy court’s dismissal of Classic Auto’s complaint against debtors Salvatore James Marino and Dolores Carmen Marino, 143 B.R. 728 . The Marinos cross appeal, arguing that the bankruptcy court should have awarded them sanctions under Bankruptcy Rule 9011. We affirm.

I.

Classic Auto operated a business on the premises of an automobile dealership owned and operated by Salvatore James Marino and Jim Marino Imports (JMI). Classic Auto won a judgment of $741,000 against Marino and JMI in California state court based on fraud and breach of contract. By the time the state court entered the judgment, it was Classic Auto’s only asset.

In April and May 1991, Classic Auto and Marino engaged in settlement discussions during which Classic Auto repeatedly pointed out that Marino’s threats of bankruptcy were *1356 not persuasive because the judgment was not dischargeable since it was based on fraud.

On May 21, 1991, Marino filed a petition under Chapter 11 of the Bankruptcy Code. Classic Auto and its owner did not have funds with which to hire bankruptcy counsel.…