Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_14-cv-02179/USCOURTS-casd-3_14-cv-02179-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

IN RE ROBERT W. BUECHEL AND

CARI DONAHUE,

Appellants,

CASE NO. 14cv2179-GPC(NLS)

Bankruptcy Case No. 14-4191-LT

ORDER AFFIRMING SANCTIONS

ORDERED BY THE

v. BANKRUPTCY COURT

THOMAS H. BILLINGSLEA, JR.,

CHAPTER 13 TRUSTEE, 

 Appellee.

This case comes before the Court on appeal from an order of the Bankruptcy

Court for the Southern District of California (“Bankruptcy Court”) in a Chapter 13

bankruptcy proceeding. On September 12, 2014, Appellants, Debtor Robert W.

Buechel and Attorney Cari Donahue, filed notice with the Court appealing the

Bankruptcy Court’s imposition of sanctions under its inherent power under 11 U.S.C.

§ 105(a). Based on the reasoning below, the Court AFFIRMS the sanctions ordered by

the Bankruptcy Court.

Background 

This appeal arose from a voluntary Chapter 13 bankruptcy petition filed by

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Appellants on May 29, 2014. (See S.D. Cal. Bankr. Case No. 14-04191-LT13. ) It was 1

not Appellants’ first bankruptcy petition. 

On June 29, 2010, Appellant Debtor and his wife filed a voluntary Chapter 11

bankruptcy petition. (S.D. Cal. Bankr. Case No. 10-11371-LT7.) In response, Appellee

Anne Dierickx, one of the creditors involved, initiated an adversary proceeding on June

15, 2011, to determine the dischargeability of the debt owed by Appellant Debtor and

his wife to her. (S.D. Cal. Bankr. Case No. 11-90294-LT, Dkt. No. 1.) On February 13,

2012, the bankruptcy court granted Appellant Debtor’s motion to convert the Chapter

11 bankruptcy case into a Chapter 7 bankruptcy case. (S.D. Cal. Bankr. Case No. 10-

11371-LT7, Dkt. No. 230.) On November 27, 2012, the Bankruptcy Court closed the

Chapter 7 case and discharged the debtor, but the adversary proceeding continued. (See

S.D. Cal. Bankr. Case No. 10-11371-LT7, Dkt. No. 253.) Appellant Attorney

represented Appellant Debtor in the adversary proceeding.2

On July 18, 2013, Appellant Debtor filed his first voluntary Chapter 13 petition.

(S.D. Cal. Bankr. Case No. 13-07298-LT13, Dkt. No. 1.) On October 10, 2013, the

BankruptcyCourt dismissed the case without prejudice. (S.D. Cal. Bankr. Case No. 13-

07298-LT13, Dkt. No. 25.) Appellant Attorney also represented Appellant Debtor in

that matter. 

On May 29, 2014, Appellant Debtor filed his second voluntary Chapter 13

bankruptcy petition, once again represented by Appellant Attorney. (Dkt. No. 13-1,

Appellants Record on Appeal (“ROA”), Ex. 1.) On June 4, 2014, Appellants filed notice

of the Chapter 13 petition in the adversary proceeding. (Dkt. No. 14-2, Appellee ROA

No. 13.) The notice asserted that the “filing of the [Chapter 13 petition] automatically

All bankruptcy cases referred to in this order were held before the Honorable Laura S. Taylor 1

in the Bankruptcy Court for the Southern District of California. 

Appellant Attorney did not represent Appellant Debtor from the outset of the adversary

2

proceeding. Appellant Attorney first appeared on the case docket as Appellant Debtor’s attorney on

July 9, 2013. (See S.D. Cal. Bankr. Case No. 11-90294-LT, Dkt. No. 43.)

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stays collection and actions against the debtors, the debtors’ property, and certain

codebtors pursuant to Bankruptcy Code § 362(a).” (Id.) 

On June 5, 2014, the Bankruptcy Court issued an Order to Show Cause Re

Dismissal of Chapter 13 Case and Sanctions(“OSC”). (Dkt. No. 13-4, Appellants ROA,

Ex. 4.) The OSC directed Appellants to appear before the Bankruptcy Court and show

cause as to why the Chapter 13 case should not be dismissed as a bad faith filing, and

why Appellants should not be sanctioned under 11 U.S.C. § 105(a) and the Bankruptcy

Court’s inherent authority. (Id.) TheBankruptcyCourt explicitly “directed [Appellants]

to appear” before the Bankruptcy Court on June 13, 2014, and set June 11, 2014, as the

deadline for filing documents in support of or in opposition to the OSC. (Id.) 

Appellants did not submit any documents in opposition to the OSC, nor did they

appear at the hearing. (See Dkt. No. 13-5, Appellants ROA, Ex. 5.) Instead, on June 12,

2014, during a telephonic conference in the adversary proceeding, attorney Laurence

Haines appeared on behalf of Appellant Debtor and requested a continuance of the OSC

hearing. (Id.) The Bankruptcy Court continued the OSC hearing to July 18, 2014. (Id.) 

On July 16, 2014, two day before the continued OSC hearing, Appellants

submitted a request for dismissal of the Chapter 13 bankruptcy case. (Dkt. No. 13-6,

Appellants ROA, Ex. 6.) 

On July 18, 2014, Appellants did not appear at the continued OSC hearing before

the Bankruptcy Court. Instead, Vanessa Kajy appeared as the attorney for Appellant

Debtor. (Dkt. No. 14-2, Appellee ROA No. 17.) The Bankruptcy Court dismissed the

Chapter 13 case, but specifically retained jurisdiction to assess sanctions against

Appellants regarding the OSC. (Id.) The Bankruptcy Court continued the OSC hearing

to August 27, 2014. (Dkt. No. 13-7, Appellants ROA, Ex. 7.) The Bankruptcy Court

informed Appellants that Appellant Debtor had waived his right to file a written

response, but noted that Appellants “must appear at the continued hearing.” (Id.)

Additionally, the Bankruptcy Court put Appellants on notice that it would “further

consider sanctions.” (Id.) 

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On August 27, 2014, the Bankruptcy Court held the final OSC hearing.

Appellants did not appear personally. (See S.D. Cal. Bankr. Case No. 14-04191-LT13,

Dkt. No. 69.) Laurence Haines appeared as the attorney for Appellant Debtor. (Id.) In

the Order on Order to Show Cause Re Dismissal of Chapter 13 Case and Sanctions

(“Order on OSC”), the Bankruptcy Court concluded that Appellants “acted in bad faith

and engaged in willful misconduct,” and therefore found sanctions appropriate. (Dkt.

No. 13-8, Appellants ROA, Ex. 8.) The Bankruptcy Court sanctioned Appellants under

its inherent authority pursuant to 11 U.S.C. § 105(a). (Id.) The Bankruptcy Court

ordered compensatory sanctions in the amount of $2,133.00 against Appellants, jointly

and severally, payable to Appellee Dierickx. (Id.) TheBankruptcyCourt also stated that,

as a sanction against Appellant Attorney, it would “report the facts related to this OSC

to the California State Bar and to the Standing Committee on Attorney Discipline of the

United States District Court for the Southern District of California[.]” (Id.)

On September 12, 2014, Appellants filed notice of appeal. (Dkt. No. 1.) On

January 30, 2015, Appellants submitted an opening brief. (Dkt. No. 12.) On February

3, 2015, Appellants submitted a designation of record on appeal and exhibitsin support

of their opening brief. (Dkt. No. 13.) On February 26, 2015, Appellee Thomas H.

Billingslea, Chapter 13 Trustee (“Appellee Trustee”) submitted a responsive brief,

designation of record on appeal, and record on appeal in support of that brief. (Dkt. No.

14.) On February 27, 2015, Appellee Dierickx submitted a joinder to Appellee Trustee’s

responsive brief and related papers. (Dkt. No. 15.) On April 27, 2015, Appellants

submitted a reply brief. (Dkt. No. 18.) 

Discussion

On appeal, Appellants challenge the compensatory and coercive sanctions

3

While the BankruptcyCourt used the term “coercive sanction” to refer to reporting Appellant 3

Attorney to the California State Bar and to the Committee on Attorney Discipline of the United States

District Court for the Southern District of California, the sanction acts more as a disciplinary sanction.

(See Dkt. No. 13-8, Appellants ROA, Ex. 8 at 5.) A coercive sanction is, “by [its] very nature[,]

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imposed by the Bankruptcy Court. (Dkt. No. 12.) 4

A. Jurisdiction and Standard of Review

The Court has jurisdiction to review appeals fromthe BankruptcyCourt under 28

U.S.C. § 158(a). The Court reviews the Bankruptcy Court’s award of sanctions for an

abuse of discretion. Hale v. U.S. Trustee, 509 F.3d 1139, 1146 (9th Cir. 2007). Under

the abuse of discretion standard, the court will not reverse unless it is “definitely and

firmly convinced that the bankruptcy court committed a clear error of judgment.” In re

Tennant, 318 B.R. 860, 866 (B.A.P. 9th Cir. 2004) (citation omitted). Due process is a

question of law that is reviewed de novo. Miller v. Cardinale (In re DeVille), 280 B.R.

483, 492 (B.A.P. 9th Cir. 2002), aff’d, 361 F.3d 539 (9th Cir. 2004). 

B. Bankruptcy Court’s Inherent Power Pursuant to 11 U.S.C. § 105(a)

Appellants argue that the Bankruptcy Court’s Order on OSC imposing sanctions

did not comport with due process, and request that the Order on OSC be vacated. (Dkt.

No. 12 at 15, 18.) Appellee contendsthat this appealshould be dismissed and is without

merit because the Bankruptcy Court correctly used its inherent powers to sanction

Appellants after they failed to respond to the OSC. (Dkt. No. 14 at 13.) 

Under 11 U.S.C. § 105(a), the Bankruptcy Court may “sua sponte, tak[e] any

action or mak[e] any determination necessary or appropriate to enforce or implement

court orders . . . or to prevent an abuse of process.” A court may impose sanctions in the

conditional,” and thus a sanction that “operates whether or not a party remains in violation of the court

order” is not coercive. Whittaker Corp. v. Execuiar Corp., 953 F.2d 510, 517 (9th Cir. 1992) (internal

quotation marks and citations omitted). Because this sanction as to Appellant Attorney was not

conditional, the Court will refer to it as a disciplinary sanction. 

Appellants also raise the issue of “[w]hether the Bankruptcy Court erred by considering late 4

responses to the OSC filed by [Appellee Dierickx]. . . after the cutoff time of 4:00 PM on June 11,

2014 pursuant to the [OSC.]” (Dkt. No. 12 at 6.) The Court notes that Appellee Dierickx submitted

a response to the OSC at 4:00:08 PM on June 11, 2014. (Dkt. No. 14-2, Appellee ROA No. 14.) The

Court feels that an eight second delay is not substantial enough to have prejudiced Appellants.

Regardless, Appellants present no legal support, nor do Appellants address the filing time in the

substantive portion of their brief; therefore the Court will not address this issue.

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form of attorney’s fees or disciplining attorneys. See Chambers v. Nasco, Inc., 501 U.S.

32, 43, 45-46 (1991). The Ninth Circuit Court of Appeals has held that, through 11

U.S.C. § 105(a), the Bankruptcy Court has the same inherent power to sanction that

Chambers acknowledged for Article III courts. Caldwell v. Unified Capital Corp. (In re

Rainbow Magazine, Inc.), 77 F.3d 278, 284 (9th Cir. 1996). When a bankruptcy court

invokes its inherent power to sanction, due process requires that the parties be given

“sufficient, advance notice” that they stand accused of bad faith and of the alleged

sanctionable conduct. In re DeVille, 361 F.3d 539, 549 (9th Cir. 2004).

C. Due Process

i. Bad Faith 

Imposing sanctions under the Bankruptcy Court’s inherent power “requires a

finding of bad faith.” In re DeVille, 361 F.3d at 548 (citing Chambers, 501 U.S. at 49.).

This finding must be “explicit.” Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1196

(9th Cir. 2003). 

Appellants assert that the Bankruptcy Court did not make an explicit finding of

bad faith before imposing sanctions against Appellants. (See Dkt. No. 12 at 6, 15-17.)

Appellants instead conclude that the Bankruptcy Court made an “improper [bad faith]

purpose inference[.]” (Id. at 17.) Appellee argues that the Bankruptcy Court explicitly

found that Appellants acted in bad faith. (Dkt. No. 14 at 12.) 

In the Order on OSC, the Bankruptcy Court made an explicit finding of bad faith.

(Dkt. No. 13-8, Appellants ROA, Ex. 8.) The Bankruptcy Court found that Appellants

filed the Chapter 13 case in bad faith in order to improperly delay the adversary

proceeding. (Id.) In particular, Appellants’ timing in providing Appellee with notice of

the Chapter 13 case and stay the day before a default prove up hearing in the adversary

proceeding, coupled with Appellants’ subsequentrequest for a voluntary dismissal, gave

the Bankruptcy Court cause for concern. (Id. at 3.) When Appellants “provided no

defense or explanation,” the Bankruptcy Court concluded that Appellants “acted in bad

faith and engaged in willful misconduct.” (Id.) 

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Therefore, contrary to Appellants’ argument, the Bankruptcy Court, as the fact

finder, made an explicit finding of bad faith before sanctioning Appellants. (See id.)

ii. Notice and Opportunity for a Hearing

The Supreme Court has cautioned that sanctions “should not be assessed lightly

or without fair notice and an opportunity for a hearing[.]” Roadway Express, Inc. v.

Piper, 447 U.S. 752, 767 (1980). The Ninth Circuit Court of Appeals has held that due

process “guarantees the attorney a ‘hearing, if requested,’ before sanctions may be

imposed” on that attorney. Kirshner v. Uniden Corp. of Am., 842 F.2d 1074, 1082 (9th

Cir. 1988) (quoting Miranda v. S. Pac. Transp. Co., 710 F.2d 516, 523 (9th Cir. 1983))

(emphasis added).

Appellants do not challenge the issue regarding fair notice, but question whether

the Bankruptcy Court “erred in not conducting an evidentiary hearing prior to imposing

sanctions[.] ” (Dkt. No. 12 at 6.) Appellee argues that Appellants did not provide any

5

excuses to the Bankruptcy Court for why they did not appear at the OSC hearings and

did not provide any legal support for why the Court should consider the excuses on

appeal for the first time. (Dkt. 14 at 13.) 

Here, Appellants not only had three opportunities to appear at the OSC hearing

to present evidence as to why sanctions were not warranted, but were also directed to

appear at the OSC hearing by the Bankruptcy Court. (See, e.g., Dkt. No. 13-4,

Appellants ROA, Ex. 4.) Yet Appellants submitted no written response to the OSC, and

did not appear personally at any of the OSC hearings. (See Dkt. Nos. 14-5, 14-7, 14-8,

Appellants ROA, Exs. 5, 7, 8.) Moreover, Appellants never requested a hearing after

receiving notice that the Bankruptcy Court was considering sanctions. Therefore, the

Court concludes that Appellants were given multiple opportunities to be heard by the

Bankruptcy Court, and thus were accorded due process. 

Although Appellants present the issue of whether an evidentiary hearing should have been 5

held for the purpose of hearing mitigating and aggravating factors, Appellants present no legal support,

nor do Appellants address this issue in the substantive portion of the brief. (See Dkt. No. 12.) 

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D. Sanctions

i. Compensatory Sanctions 

Appellants argue that the Bankruptcy Court erred by imposing compensatory

damages as to Appellant Attorney based on her sending special appearance counsel to

request a continuance of the OSC hearing on August 27, 2014. (Dkt. No. 12 at 6.) 6

Appellants further argue that Appellant Attorney’s reason for not attending the OSC

hearing on August 27, 2014, attending to a criminal matter in Los Angeles for another

client, “was a selfless act worthy of great weight as a mitigating factor” because

Appellant Attorney chose her criminal client’s best interest over her own. (Id. at 6, 17.) 7

Appellee contends that the Bankruptcy Court was correct in issuing limited monetary

sanctions, and argues that the Court should not consider the excuse for Appellant

Attorney’s absence from the OSC hearing on August 27, 2014, because Appellants did

not provide the excuse to the Bankruptcy Court and did not provide any legal support

for why the Court should consider the excuse now. (Dkt. Nos. 14 at 13, 15 at 2.) 

The Bankruptcy Court awarded a compensatory sanction of $2,133 against

Appellants, jointly and severally, to be paid to Appellee Dierickx. (Dkt. No. 13-8,

Appellants ROA, Ex. 8.) The Bankruptcy Court took into consideration a response to

the OSC submitted by Appellee Dierickx. (See Dkt. No. 14-2, Appellee ROA No. 14.)

Appellee Dierickx requested sanctions in the amount of $3,333 to compensate for

attorney’s fees incurred due to the filing of the Chapter 13 petition and the delay of the

adversary proceeding. (Id. At 12-14.) The Bankruptcy Court found that the OSC only

On appeal, Appellants do not challenge the compensatory sanctions as to Appellant Debtor. 6

(See Dkt. No. 12.) 

Appellant Attorney fails to acknowledge that by choosing not to attend the OSC hearing on

7

August 27, 2014, she not only risked her own “potential sanction exposure,” but also that of Appellant

Debtor, who was her client just as much as the client in the criminal proceeding. (Dkt. No. 12 at 17.)

Appellant Attorney alleges that she notified the Bankruptcy Court of the conflict in advance of the

OSC hearing on August 27, 2014, but the record and the docket reflect no such notice. (Dkt. No. 12-1

at ¶ 3.) Appellant Attorney should have filed a request to continue the OSC hearing on August 27,

2014, based on the conflict with a court date. 

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provided appropriate notice that sanctions “would be sought . . . in connection with the

delay of the adversary proceeding,” and thus limited the sanction to the amount of

$2,133 in attorney’s fees. (Dkt. No. 13-8, Appellants ROA, Ex. 8.) The Court finds the

compensatory sanctions were reasonable for the same considerations. 

ii. Disciplinary Sanctions 

The Ninth Circuit Court of Appeals has held that the Bankruptcy Court has the

inherent authority to sanction attorney misconduct. In re Brooks Hamilton, 400 B.R.

238, 247 (B.A.P. 9th Cir. 2009) (citing Hale, 509 F.3d at 1148). Such disciplinary

sanctions can extend as far as suspending the attorney. See In re Lehtinen, 564 F.3d

1052, 1062 (9th Cir. 2009). In In re Lehtinen, the bankruptcy court suspended the

attorney from practicing before the bankruptcy court of the Northern District of

California for three months because he failed to attend meetings and hearings pertaining

to the bankruptcy case, failed to inform the debtor of the confirmation hearing, and

committed other bad faith acts. Id. at 1056-57. The Ninth Circuit Court of Appeals

affirmed the disciplinary sanction because it fell within the bankruptcy court’s inherent

power. Id. at 1062.

Here, the BankruptcyCourt decided to refer Appellant Attorney to the California

State Bar and the Local Disciplinary Committee because of its finding that she acted in

bad faith by filing the Chapter 13 petition to improperly delay the adversary proceeding,

and her “willful failure to comply with the [Bankruptcy] Court’s directives in the OSC

itself.” (See Dkt. No. 13-8, Appellants ROA, Ex. 8.) Therefore, the disciplinary

sanctions on appeal before the Court fall within the BankruptcyCourt’s inherent power.

See In re Lehtinen, 564 F.3d at 1062. 

When reviewing disciplinary sanctions against attorneys, the Court determines

“whether (1) the disciplinary proceeding is fair, (2) the evidence supports the findings,

and (3) the penalty imposed was reasonable.” In re Nguyen, 447 B.R. 268, 276 (B.A.P.

9th Cir. 2011) (en banc). The Bankruptcy Court considered these three factors in the

Order on OSC. (See Dkt. No. 13-8, Appellants ROA, Ex. 8 at 3-4.) It concluded that the

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proceeding was fair, the Bankruptcy Court “personally observed problematic conduct”

that led to its decision, and the sanction wasreasonable. (Id.) The Court agrees with the

Bankruptcy Court’s reasoning and conclusion regarding the factors from In re Nguyen. 

Additionally, the BankruptcyCourt looked to certain ABAguidelinesin assessing

the reasonableness of the disciplinary sanction against Appellant Attorney. (See Dkt.

No. 13-8, Appellants ROA, Ex. 8 at 3-4.) The Bankruptcy Court found state bar referral

and referral to the Local Disciplinary Committee reasonable because Appellant

Attorney’s improper conduct “violated a duty to the legal systemand profession[.]” (Id.)

Furthermore, Appellant Attorney’s two failures to appear at OSC hearings, despite the

explicit direction of the Bankruptcy Court, served as an aggravating factor that

supported this disciplinary sanction. (Id.)

The Court is not “definitely and firmly convinced that the bankruptcy court

committed a clear error of judgment.” See In re Tennant, 318 B.R. at 866. Therefore, the

Court finds that the Bankruptcy Court did not abuse its discretion when imposing

compensatory and disciplinary sanctions on Appellants. 

Conclusion 

Based on the above, the Court AFFIRMS the sanctions ordered by the Bankruptcy

Court. The Clerk of Court shall close the case. 

IT IS SO ORDERED. 

DATED: June 23, 2015

HON. GONZALO P. CURIEL

United States District Judge

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