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NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NV-15-1318-DoKiL

)

GLOYD GREEN and GAIL HOLLAND, ) Bk. No. 2:14-bk-15981-ABL

)

Debtors. )

______________________________)

)

GLOYD GREEN; GAIL HOLLAND, )

)

Appellants, )

)

v. ) MEMORANDUM*

)

HOWARD FAMILY TRUST DATED )

AUGUST 21, 1998; OSCAR BRANNON)

HOWARD III; ROBERT GRAHAM; )

JERIMY L KIRSCHNER; ANTHONY )

L. BARNEY; LAWYERSWEST, LTD., )

)

Appellees. )

 )

Argued and Submitted on October 21, 2016

at Las Vegas, Nevada

Filed – November 17, 2016

Appeal from the United States Bankruptcy Court

For the District of Nevada

Honorable August B. Landis, Bankruptcy Judge, Presiding

_______________________

Appearances: Christopher P. Burke argued for appellants Gloyd

Green and Gail Holland; Jerimy L. Kirschner argued

for appellees Jerimy L. Kirschner, Robert Graham,

LawyersWest, Ltd., and Howard Family Trust Dated

August 21, 1998; Anthony L. Barney argued for

appellees Anthony L. Barney and Oscar Brannon

Howard III.

__________________

FILED

NOV 17 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

* This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8024-1.
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Before: DORE,** KIRSCHER, and LAFFERTY, Bankruptcy Judges.

INTRODUCTION

Gloyd Green and Gail Holland (collectively, “Greens”) appeal

an order declining to sanction Truman Holt, trustee of the Howard

Family Trust dated August 21, 1998 (“Holt”), Holt’s attorneys

Jerimy L. Kirschner, Robert Graham and LawyersWest, Ltd., Oscar

Brannon Howard III and his attorney Anthony L. Barney

(collectively, “Appellees”). We AFFIRM.

FACTS

Prior to filing their bankruptcy case, the Greens provided

their bankruptcy counsel, Mr. Burke, with a $32,000 retainer. 

The Greens obtained $7,500 of the funds used to pay Mr. Burke’s

retainer through a loan from Gail Holland’s mother, Theresa

Holland.1

At the initial § 3412 meeting of creditors (“Meeting of

Creditors”), the Greens testified that Gail obtained the $7,500

from an account held jointly in Gail and Theresa’s name (“Joint

Account”). The funds in the Joint Account belonged to Theresa,

but Gail had spoken with Theresa on the telephone and Theresa had

allowed her to withdraw the funds. The Greens transferred the

** Honorable Timothy W. Dore, United States Bankruptcy Judge

for the Western District of Washington, sitting by designation.

1 We use Gail and Theresa for clarity since there are two

Ms. Hollands, but mean no disrespect.

2 Unless otherwise indicated, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 

“Rule” references are to the Federal Rules of Bankruptcy

Procedure.

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$7,500 drawn from the Joint Account to Mr. Burke. The exact

method of transmission of the $7,500 from the Joint Account to

Mr. Burke is not clear from the record.

Mr. Burke’s employment application, the Greens’ Statement of

Financial Affairs and the Disclosure of Compensation of Attorney

for Debtor(s) identify the Greens as the source of the $32,000

retainer paid to Mr. Burke. They do not disclose that $7,500 of

the $32,000 came from Theresa. Theresa is listed as a creditor

on the Greens’ Schedule F in the amount of $7,500, for a loan

incurred in 2014.

On February 25, 2015, the Appellees filed a motion seeking

to disqualify Mr. Burke as bankruptcy counsel for the Greens and

require Mr. Burke to disgorge the retainer and any fees paid to

him in connection with the case. On February 26, 2015, the

Appellees filed an amended motion to disqualify Mr. Burke

(“Disgorgement Motion”). The arguments in the Disgorgement

Motion included that the transfer of the $7,500 from Theresa

should have been disclosed, the transfer of the $7,500 from

Theresa plus the Greens’ debt to Theresa created an actual

conflict of interest rendering Mr. Burke ineligible to be

bankruptcy counsel for the Greens, and Mr. Burke violated

§§ 327(a) and 329 and Rules 2014 and 2016.

On February 27, 2015, Mr. Burke sent a letter and a draft

motion for sanctions under Rule 9011 (“Draft Sanctions Motion”)

to Mr. Kirschner and Mr. Barney asserting that he would file it

if the Disgorgement Motion was not withdrawn within 21 days. The

Appellees did not withdraw the Disgorgement Motion.

On March 2, 2015, Gail testified under oath in an

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evidentiary hearing related to another motion in the Greens’

bankruptcy case. The issue of the retainer was raised, and when

asked who had paid Mr. Burke’s retainer, Gail responded, “We paid

it.”

On March 20, 2015, the final day of the 21-day safe harbor

period under Rule 9011, Mr. Burke filed a response to the

Disgorgement Motion. Attached to the response are two

declarations, one from Mr. Burke and one from Gail, stating,

among other things, that Theresa did not pay Mr. Burke anything

and did not have a payment agreement with Mr. Burke. Mr. Burke’s

declaration also stated the retainer was paid to him directly by

the Greens. Theresa died prior to the Meeting of Creditors and,

therefore, was not available to testify or otherwise provide

information about the $7,500 loan transaction.

On March 27, 2015, Holt filed a reply regarding the

Disgorgement Motion (“Disgorgement Reply”).3 In it, Holt

acknowledges that the loaned $7,500 was transmitted indirectly

from Theresa to Mr. Burke, but argues that, regardless of the

means of transmission, Theresa is still the “source” of the funds

under § 329(a) and that her loan to the Greens should have been

disclosed by Mr. Burke and the Greens.

On May 1, 2015, the bankruptcy court gave an oral ruling

denying the Disgorgement Motion. In its oral ruling, the

bankruptcy court determined that the entire retainer came

3 The Disgorgement Motion was filed by Holt and

Mr. Howard III, although it was signed only by Mr. Kirschner. 

The Disgorgement Reply was filed solely by Holt and signed only

by Mr. Kirschner.

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directly from the Greens to Mr. Burke and, therefore, Mr. Burke

did not violate the disclosure requirements of § 329(a) and

Rules 2014 and 2016 or the employment requirements of § 327(a). 

The bankruptcy court declined to interpret the “source of such

compensation” language from § 329(a) to require the disclosure of

the indirect transfer of the loaned funds from Theresa to

Mr. Burke.

On May 5, 2015, the bankruptcy court entered an order

denying the Disgorgement Motion.

On July 11, 2015, the Greens filed a motion seeking

sanctions under Rule 9011 against the Appellees for filing and

failing to withdraw the Disgorgement Motion (“Sanctions Motion”). 

After a hearing, the bankruptcy court gave an oral ruling denying

the Sanctions Motion. Thereafter, on September 1, 2015, the

bankruptcy court entered its order denying the Sanctions Motion. 

This appeal timely followed.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C.

§§ 1334 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C.

§ 158.

ISSUE

Did the bankruptcy court abuse its discretion when it

declined to award Rule 9011 sanctions against the Appellees for

filing and failing to withdraw the Disgorgement Motion?

STANDARDS OF REVIEW

We review a bankruptcy court’s refusal to impose Rule 9011

sanctions for abuse of discretion. Classic Auto Refinishing,

Inc. v. Marino (In re Marino), 37 F.3d 1354, 1358 (9th Cir.

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1994). We apply a two-part test to determine whether the

bankruptcy court abused its discretion. United States v.

Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009) (en banc). 

First, we consider de novo whether the bankruptcy court applied

the correct legal standard. Id. Second, we consider if its

application of the correct legal standard or its factual findings

are illogical, implausible or without support in the record. 

Id.; DeLuca v. Seare (In re Seare), 515 B.R. 599, 614 (9th Cir.

BAP 2014).

DISCUSSION

The Greens assert the bankruptcy court abused its discretion

in two ways when it denied the Sanctions Motion. First, they

argue the bankruptcy court abused its discretion by ruling as a

matter of law that the Sanctions Motion could not be granted

because the Draft Sanctions Motion did not contain the

declarations attached to the Sanctions Motion. Second, they

argue the bankruptcy court abused its discretion when it denied

the Sanctions Motion because the Disgorgement Motion was

factually and legally frivolous.

The bankruptcy court applied the correct legal standard. 

The bankruptcy court quoted the applicable portions of

Rule 9011(b), and cited In re Blue Pine Group, Inc., 448 B.R.

267, 271 (Bankr. D. Nev. 2010), affirmed in part and vacated in

part by In re Blue Pine Group, 526 F. App’x 768 (9th Cir. 2013),

Operating Engineers Pension Trust v. A-C Co., 859 F.2d 1336, 1344

(9th Cir. 1988), Larez v. Holcomb, 16 F.3d 1513, 1522 (9th Cir.

1994), and Strom v. United States, 641 F.3d 1051, 1059 (9th Cir.

2011) for the propositions that: (1) Rule 9011 sanctions are

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reserved for exceptional cases and cases where the action is

clearly frivolous, legally unreasonable, or without legal

foundation, (2) the party to be sanctioned must have made an

objectively reasonable investigation into the relevant law and

facts, and (3) sanctions should not be levied against a party

raising a novel issue of law when there is no case law to the

contrary. Rule 9011 is the applicable Rule, and the cases

properly recite the Ninth Circuit law on the issuance of

Rule 9011 sanctions.

The bankruptcy court did not abuse its discretion by ruling

as a matter of law that the Sanctions Motion could not be granted

because the Draft Sanctions Motion did not contain evidence. The

bankruptcy court made no such ruling.

The bankruptcy court did discuss the lack of evidence

attached to the Draft Sanctions Motion in its oral ruling: “the

[Draft Sanctions Motion] . . . did not contain any other exhibits

confirming that the debtors were the exclusive and direct payor

of the monies received by their counsel,” and “[t]here was no

affidavit evidence [when the Disgorgement Motion was filed] . . .

from debtors’ counsel and from Gail confirming that Gail had made

the payment directly to Mr. Burke as opposed to the payment

having been made directly by T[h]eresa to Mr. Burke.” Nowhere in

the bankruptcy court’s oral ruling or its order denying the

Sanctions Motion, however, is there a statement that the lack of

evidence with the Draft Sanctions Motion doomed the Sanctions

Motion as a matter of law. Rather, the oral ruling demonstrates

the bankruptcy court considered the lack of evidence as one

factor in assessing whether there was a sufficient inquiry into

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the facts and an objectively reasonable basis to file the

Disgorgement Motion. The bankruptcy court denied the Sanctions

Motion because, “[t]he Court on the record before it is satisfied

that it was sufficiently unsettled, that it was objectively

reasonable for the creditors’ attorney to take the position that

they did in filing the motion that is the subject of the

sanctions motion here.”

The Greens’ larger point, that Holt and Mr. Howard III

should have withdrawn the Disgorgement Motion after discovering

the indirect nature of the transfer of funds from Theresa to

Mr. Burke, does not give full credit to the arguments asserted in

the Disgorgement Motion and the Disgorgement Reply. The

Appellees argued that even the indirect transfer of funds from

Theresa was a fact that needed to be disclosed to satisfy

§ 329(a) and Rule 2016.

There is no binding Ninth Circuit law providing that counsel

need not disclose the indirect transfer of funds from a third

party insider used to pay a bankruptcy attorney’s retainer. The

requirements for disclosure under § 329(a) and Rule 2016 are

broad and determined on a case-by-case basis. Neben & Starrett,

Inc. v. Chartwell Fin. Corp. (In re Park-Helena Corp.), 63 F.3d

877 (9th Cir. 1995). “The duty is one of complete disclosure of

all facts.” Id. at 881, quoting In re Plaza Hotel Corp.,

111 B.R. 882, 883 (Bankr. E.D. Cal. 1990). The applicant “must

disclose the precise nature of the fee arrangement, and not

simply identify the ultimate owner of the funds.” Id. (internal

quotations omitted).

Without binding Ninth Circuit law to the contrary, the

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Appellees’ argument that the indirect transfer of funds from

Theresa to Mr. Burke should have been disclosed is not legally

frivolous, and the bankruptcy court did not abuse its discretion

when it declined to sanction the Appellees. Because there is a

legally non-frivolous argument that the indirect transfer of

funds should have been disclosed, the Greens’ argument that the

Appellees should have expended more time investigating whether

the $7,500 was transferred directly from Theresa to Mr. Burke or

indirectly from Theresa to Mr. Burke through Gail fails as well.4

If Theresa should have been disclosed as the ultimate “source” of

the funds regardless of how they were transferred from Theresa to

Mr. Burke, then the issue of whether the funds were transferred

directly or indirectly is not dispositive.

The Appellees argue that Mr. Barney, Mr. Howard III and Holt

should not be sanctioned because they did not “present” an

argument to the bankruptcy court under Rule 9011(b). These

arguments were briefed and discussed at oral argument before the

bankruptcy court. The bankruptcy court, however, did not clearly

rule on whether Mr. Barney, Mr. Howard III and Holt would have

been subject to Rule 9011 sanctions if it had decided to award

them. The bankruptcy court did not need to rule on that issue

since it determined there was no sanctionable conduct. Because

the bankruptcy court did not explicitly rule on the issue and its

resolution is not necessary to our disposition of this appeal, we

decline to rule on it as well.

4 As the bankruptcy court noted in its oral ruling, further

investigation of the direct versus indirect payment issue was

complicated by Theresa’s death prior to the Meeting of Creditors.

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CONCLUSION

The bankruptcy court indicated it was a “close” call or

question on four occasions in its oral ruling. Regardless, the

bankruptcy court identified the correct legal standard and

neither its application of that standard nor its factual findings

were illogical, implausible or without support in the record. 

Accordingly, the bankruptcy court did not abuse its discretion in

denying the Sanctions Motion, and we AFFIRM.

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