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UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-14-1342-KiBrD

)

TONY PHAM and LINDSIE KIM ) Bk. No. SA 12-18847-CB

PHAM, )

) Adv. No. SA 12-01619-CB

Debtors. ) )

)

TONY PHAM; LINDSIE KIM PHAM; )

JONATHAN T. NGUYEN, )

)

Appellants, ) ) 

v. ) O P I N I O N

)

JEFFREY I. GOLDEN, Chapter 7 )

Trustee, )

)

Appellee. )

______________________________)

Argued and Submitted on July 23, 2015, 

at Pasadena, California

Filed - September 2, 2015

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding

 

Appearances: Appellants Tony Pham, Lindsie Kim Pham and Jonathan

T. Nguyen did not appear at oral argument; Ashley

McDow of Baker & Hostetler LLP argued for appellee

Jeffrey I. Golden, Chapter 7 Trustee. 

Before: KIRSCHER, BRANDT1 and DUNN, Bankruptcy Judges.

FILED

SEP 02 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

1 Hon. Philip H. Brandt, Bankruptcy Judge for the Western

District of Washington, sitting by designation.
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KIRSCHER, Bankruptcy Judge:

Tony and Lindsie Kim Pham (“Debtors”) and their attorney,

Jonathan T. Nguyen (“Nguyen”) (collectively, “Appellants”), appeal

an order compelling Debtors to appear for depositions and to

produce certain documents and sanctioning Appellants for the

chapter 72 trustee’s expenses incurred in bringing the motion to

compel under Local Bankruptcy Rules (“LBR”) 1001-1(f), 7026-1(c)

and 9011-3.3

Debtors have already produced the required documents and have

been deposed. The $17,515 sanction for attorney’s fees has been

paid. Appellants challenge only the sanctions award. Because the

bankruptcy court could not rely on these local rules to sanction

Appellants, we VACATE and REMAND. 

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 

Jeffrey I. Golden (“Trustee”) was appointed chapter 7 trustee

in Debtors’ case. He scheduled and held at least 15 continued 

§ 341(a) meetings of creditors to interview Debtors and to review

documents.

The Trustee filed an adversary complaint against two

2

 Unless specified otherwise, all chapter, code and rule

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

the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. All

“Civil Rule” references are to Federal Rules of Civil Procedure. 

3 The local rules referenced are the Local Bankruptcy Rules

for the U.S. Bankruptcy Court for the Central District of

California. We note that the bankruptcy court amended its local

rules effective January 5, 2015; however, in reviewing the public

notice associated with the revisions, we conclude that the

bankruptcy court did not amend the three local rules discussed

herein. 

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individuals, Phat The Bui (“Bui”) and Thuan Tran (“Tran”).4 The

Trustee alleged that Mrs. Pham had fraudulently transferred four

condominium units approximately sixteen months prior to the

petition date — three units to Bui and one to Tran. Debtors

disclosed the transfers to Bui in their statement of financial

affairs; they did not disclose the transfer to Tran. The Trustee

sought to avoid and recover the transferred property under the

Code and California law. Nguyen, who has practiced law for

twenty-one years, represented defendants Bui and Tran. Debtors

were not named as defendants and have never been parties to that

action. 

A. Events leading to the Trustee’s motion to compel

The Trustee issued subpoenas to Debtors pursuant to Civil

Rule 45, commanding them to appear for depositions and to produce

documents. Nguyen accepted service of the subpoenas on behalf of

Debtors via email. Debtors did not object to the subpoenas. 

Just prior to this, the Trustee’s counsel Michael Delaney

(“Delaney”) emailed Nguyen regarding dates for Debtors to be

deposed. Ultimately, Delaney scheduled Mrs. and Mr. Pham’s

depositions for March 17 and March 19, 2014, respectively. On

March 17, Nguyen and Mrs. Pham arrived at Delaney’s office prior

to the scheduled 10:00 a.m. start time. The attorney intending to

conduct Mrs. Pham’s deposition, Ashley McDow (“McDow”), was not

there and neither were the court reporter or the Vietnamese

interpreter. McDow arrived at 10:45 a.m. and asked Nguyen and

Mrs. Pham to wait for the interpreter, who was running late. The

4 Golden, Trustee, v. Bui, Case No. SA 12:bk-18847-CB, Adv.

Pro. No. SA 12-ap-01619-CB (Bankr. C.D. Cal.).

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court reporter arrived at 11:45 a.m. Around noon, when the

interpreter had still not arrived, McDow offered to take Mrs.

Pham’s deposition on March 19 at 1:00 p.m. at Nguyen’s office and

credit her the two hours she and Nguyen were left waiting. 

McDow took Mrs. Pham’s deposition as planned on March 19

between 1:13 p.m. and 6:00 p.m. McDow and Delaney arrived around

1:00 p.m. without enough copies of certain documents, so Nguyen

offered to let Delaney use his office’s copier, at no charge, to

make the necessary copies, approximately 180 pages. Nguyen said

that at 4:00 p.m. Delaney and McDow unilaterally took a 20-25

minute lunch break while he, Mrs. Pham, the court reporter and the

interpreter waited. At this point, the stories diverge. Nguyen

claims he told McDow during normal breaks and again at 5:30 p.m.

that he had to leave promptly at 6:00 p.m. McDow contends that at

6:00 p.m. Nguyen prematurely terminated Mrs. Pham’s deposition

without ever advising her of his intent to do so. McDow believed

she had 55 minutes remaining of her allowed time to depose Mrs.

Pham, after deducting time for breaks. 

According to the deposition transcript, at 5:54 p.m. Nguyen

stated for the record that he had told McDow during the last

recess he had to leave at 6:00 p.m. to pick up his son from soccer

practice. McDow stated that Nguyen had just told her for the

first time five minutes before of his need to leave by 6:00 p.m. 

Nguyen then indicated that he would speak to McDow later about

when she could complete her last hour of deposition with Mrs.

Pham. McDow proceeded for the next six minutes with questions to

Mrs. Pham. At 6:00 p.m., Nguyen announced he was leaving. While

McDow tried to ask Nguyen about scheduling the last hour, he

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walked off. 

As for Mr. Pham, Nguyen contended that he told McDow on March

17 that Mr. Pham would not be appearing for his deposition or

producing documents on March 19, because he had recently suffered

a stroke. He also gave McDow a copy of a doctor’s note. McDow

contended that she did not learn of Mr. Pham’s nonappearance until

Nguyen handed her the doctor’s note, which was illegible except

for Mr. Pham’s name and the word “stroke.” 

A series of emails between counsel ensued. On March 21,

Delaney emailed Nguyen inquiring about when Mrs. Pham’s deposition

could be completed. Delaney warned that if he heard nothing from

Nguyen by 2:00 p.m. March 25, he would file a motion to compel. 

Not hearing from Nguyen, Delaney sent a second email on March 25

at 5:27 p.m., stating his intention to prepare a motion to compel

Debtors’ depositions, as the doctor’s note failed to provide any

justification for denying the Trustee’s right to depose Mr. Pham. 

Delaney requested that counsel meet and confer by April 1 to

resolve any discovery disputes, citing LBR 7026-1(c)(2). 

Nguyen responded to Delaney’s email on March 26, indicating

that he was not presenting Mrs. Pham for further deposition based

on the March 17 incident and the events that occurred on March 19.

On April 15, another attorney for the Trustee, Yulia Fradkin

(“Fradkin”), emailed Nguyen reminding him that he had failed to

meet and confer with the Trustee’s counsel by April 1 to discuss

Mrs. Pham’s last hour of deposition pursuant to LBR 7026-1(c)(2). 

Fradkin warned that if Nguyen did not provide a date and time to

meet and confer within the next two days, they would proceed with

preparing a joint stipulation of any remaining discovery disputes. 

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If their issues could not be resolved, Fradkin warned they would

file a motion to compel the remainder of Mrs. Pham’s deposition. 

Fradkin requested further information about Mr. Pham’s medical

condition and inquired whether or not he would be appearing for

deposition.

On April 18, Fradkin sent Nguyen another email regarding his

apparent refusal to meet and confer about Debtors’ depositions. 

Fradkin warned that if Nguyen did not provide information for the

joint stipulation of remaining discovery disputes by April 21, the

Trustee’s counsel would file a motion to compel Debtors’

depositions. Fradkin advised Nguyen they would seek sanctions

under LBR 1001-1(f), 7026-1(c)(4), 9011-3 and 9020-1. 

Nguyen responded to Fradkin’s April 18 email, stating that he

had already met and conferred with McDow and then again with

Delaney.

B. The motion to compel 

1. The Trustee’s motion

Shortly thereafter, the Trustee moved for an order: (1)

compelling Debtors to attend depositions and to produce documents;

and (2) awarding attorney’s fees and costs jointly and severally

against Appellants (“Motion to Compel”).5 Overall, the Trustee

blamed Nguyen for the “intentional and purposeful interference in

discovery,” which the Trustee alleged severely disadvantaged his

5 The Trustee reiterated some discovery issues he had

recently with Nguyen and defendants Bui and Tran. In that case,

the Trustee prevailed on a motion to compel Bui and Tran to

produce documents. The Trustee stated that he was now moving for

attorney’s fees and costs resulting from Bui’s, Tran’s and

Nguyen’s “obtrusive behavior leading to the prior motion to

compel.” 

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efforts to void the fraudulent transfers. He questioned Mrs.

Pham’s need for an interpreter, considering that she had lived in

the U.S. for 30 years, attended high school and college here, and

had never requested an interpreter at any of the § 341(a)

meetings. The Trustee contended that Nguyen, as part of a delay

tactic, had repeatedly interfered in Mrs. Pham’s deposition,

contradicting the interpreter and “correcting” his interpretation

of certain questions and answers. Besides the remaining 55

minutes, the Trustee argued he was entitled to an additional two

hours of deposition time with Mrs. Pham due to Nguyen’s

interference.6 

As for Mr. Pham, the Trustee contended that other than the

doctor’s note, which he argued was insufficient to excuse Mr.

Pham’s nonappearance, Nguyen provided no reason why Mr. Pham could

not appear for deposition or produce the subpoenaed documents. 

The Trustee argued that if Mr. Pham wanted relief from the

subpoena, he had to move to quash it. Absent such relief, argued

the Trustee, he was entitled to depose Mr. Pham for seven hours

per Civil Rule 30.7

In his request for sanctions, the Trustee contended

6

 In reviewing the deposition transcript, which the Trustee

failed to produce until his reply, we counted an insignificant

number of times where Nguyen tried to clarify or correct a

question/answer, mainly because no equivalent word existed in

Vietnamese for the English word McDow was using or the interpreter

had used terminology different from McDow’s. Nguyen’s alleged

“interference” does not appear to have consisted of more than a

few minutes total. 

7 The Trustee contended that Debtors had also refused to

produce documents pursuant to the subpoena duces tecum, including

readily-available bank statements and tax returns. Appellants

contended that Mrs. Pham had nothing left in her custody and

possession that she had not already produced at § 341(a) meetings

and/or at her deposition. 

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Appellants’ bad faith conduct had cost the estate approximately

$12,000. In particular, the Trustee contended that Nguyen had

refused to meet and confer and to provide information for the

joint discovery stipulation as required by LBR 7026-1(c)(3). The

Trustee argued that LBR 1001-1(f), 7026-1(c)(4) and 9011-3 all

provided for imposing sanctions on “counsel or a party” for

failing to comply with the local rules, to cooperate in discovery

procedures or to provide information necessary to prepare the

joint discovery stipulation. 

2. Appellants’ opposition

Appellants opposed the Motion to Compel, countering that it

was the Trustee’s counsel who failed to show good faith efforts to

resolve any discovery disputes. Nguyen contended that on March 19

he believed the Trustee’s counsel was no longer interested in

taking Mr. Pham’s deposition because: (1) he had explained to

counsel that Mr. Pham was bed-ridden due to a recent stroke and

gave McDow a copy of the doctor’s note; (2) during the multiple 

§ 341(a) meetings Mr. Pham recalled little or had no knowledge of

the facts at issue in the fraudulent transfer proceeding; and (3)

McDow failed to say anything on March 17 about rescheduling Mr.

Pham’s deposition to March 19 when she knowingly scheduled Mrs.

Pham for the same date. Further, counsel had not contacted Nguyen

about Mr. Pham’s deposition until March 25, after the discovery

deadline; the deposition was never re-noticed. 

Appellants noted that the Trustee’s moving papers failed to

provide any evidence showing Nguyen’s alleged “interference” with

Mrs. Pham’s deposition, namely, any excerpts of the transcript or

any statements in counsels’ declarations. Appellants refuted the

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Trustee’s accusation that Mrs. Pham was “faking” her need for an

interpreter. 

Appellants argued that sanctions were not appropriate because

a series of mistakes were made by the Trustee’s counsel; the March

17 and 19 depositions were carelessly managed and counsel appeared

to be either disorganized and reckless or engaging in

gamesmanship. Appellants argued that Debtors were the ones

entitled to sanctions against the Trustee and his counsel and

requested $8,450 for expenses incurred to oppose the Motion to

Compel. 

3. The Trustee’s reply

In reply, the Trustee argued that Nguyen had not complied

with LBR 7026-1 as contended; he had not met and conferred with

counsel to resolve any discovery disputes. The Trustee disputed

any contention that Mr. Pham’s deposition was taken off calendar

based on the doctor’s note, which the Trustee maintained provided

no excuse for his nonattendance. The Trustee further argued that

Debtors had not complied with the subpoena duces tecum as they

contended; they had never provided the requested bank statements

and tax returns, which may or may not have been in their custody

or possession but certainly were under their control. 

In conclusion, the Trustee argued he was entitled to

reasonable expenses incurred in bringing the Motion to Compel

under Civil Rule 37(a)(5)(A). The Trustee stated that he would

file a declaration contemporaneously with the lodging of the

proposed order showing his expenses to ensure that all were

included. 

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C. The bankruptcy court’s ruling on the Motion to Compel

At the hearing on the Motion to Compel, the bankruptcy court 

stated several times that: Debtors were the parties “being

sued[;]” they had an obligation to disclose everything to the

Trustee and were required to answer the Trustee’s questions no

matter how long it took; and they risked having a judgment entered

against them if they did not cooperate and give the Trustee what

he needed. See Hr’g Tr. (June 3, 2014) at 8:8-10; 8:14-15; 11:13-

15; 25:13-16; 28:15-19; 38:15-20; 39:9-13. After ordering Debtors

to appear for depositions and to produce the requested documents,

the bankruptcy court ruled on the sanctions request. The

following is the extent of its oral ruling:

THE COURT: I’m awarding attorney’s fees because we 

shouldn’t be here. . . . You needed to do what the rule

said you had to do before we had to come here to court.

. . . .

THE COURT: You didn’t do what you were supposed to do and

that as a lawyer is not forgivable at this point. You

should know better. You are — have a state Bar card. You

are supposed to do what you’re supposed to do as a lawyer

and you were supposed to do many things that you didn’t do

before coming here today.

So I’m going to go ahead and grant on #14.00 [the Motion

to Compel] [] attendance, the production of documents and

the awarding of attorney’s fees. 

Id. at 42:16-17; 43:3-5; 43:11-19. 

The Trustee submitted a proposed order for the Motion to

Compel, which stated that Appellants were ordered to pay the

Trustee “the sum of $__ . . . as a sanction for abusive conduct in

the course of discovery pursuant to Local Bankruptcy Rules 1001-

1(f), 7026-1(c), and 9011-3[.]” In support, Delaney submitted a

declaration setting forth the total amount of the Trustee’s fees

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associated with preparing and prosecuting the Motion to Compel —

$17,515. Delaney expressly waived any right to costs. 

Appellants objected to the proposed order, arguing that the

Trustee’s increased attorney’s fee request of $17,515 was not

presented until after the hearing, which denied their due process

rights. Appellants further contended that awarding the sanction

of attorney’s fees was contrary to the Panel’s recent decision in

Stipp v. CML-NV One, LLC (In re Plise), 506 B.R. 870 (9th Cir. BAP

2014), which Appellants contended held that a court may not order

a nonparty to pay sanctions for discovery violations under Civil

Rule 37. 

In reply, the Trustee disputed any violation of Appellants

due process rights; he had stated in the Motion to Compel that he

would seek payment of all fees and costs relating to preparing and

prosecuting the Motion to Compel, including any future fees and

expenses. Further, argued the Trustee, Appellants were given

ample opportunity at the hearing to present their arguments on the

matter. The Trustee also disputed the applicability of Plise,

noting that the bankruptcy court awarded sanctions under LBR 1001-

1(f), 7026-1(c)(4) and 9011-3, not Civil Rule 37. 

Making minor changes to the proposed order, the bankruptcy

court entered its order granting the Motion to Compel (“Compel

Order”). Appellants were ordered to pay the Trustee $17,515 “as a

sanction for abusive conduct in the course of discovery pursuant

to Local Bankruptcy Rules 1001-1(f), 7026-1(c), and 9011-3[.]” 

II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334

and 157(b)(2)(A). As to the portion of the Compel Order awarding

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sanctions, the order is sufficiently final for immediate appeal. 

In re Plise, 506 B.R. at 876 (citing Pennwalt Corp. v. DurandWayland, Inc., 708 F.2d 492, 494 n.3 (9th Cir. 1983)(orders

imposing sanctions on nonparties for failure to comply with

discovery are considered final for purposes of appeal)). Out of

an abundance of caution, however, we granted Appellants leave to

appeal the Compel Order. Therefore, we have jurisdiction under 28

U.S.C. § 158. 

III. ISSUE

Did the bankruptcy court abuse its discretion when it imposed

the sanction of attorney’s fees against Appellants for discovery

abuse under LBR 1001-1(f), 7026-1(c) and 9011-3? 

IV. STANDARDS OF REVIEW

The imposition of discovery sanctions is reviewed for abuse

of discretion. In re Plise, 506 B.R. at 876 (citing Freeman v.

San Diego Ass’n of Realtors, 322 F.3d 1133, 1156 (9th Cir. 2003)). 

A bankruptcy court abuses its discretion if it applies the wrong

legal standard, misapplies the correct legal standard, or if its

factual findings are clearly erroneous. TrafficSchool.com, Inc.

v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011). 

The validity of a local court rule is a question of law

reviewed de novo. Steinacher v. Rojas (In re Steinacher), 283

B.R. 768, 771-72 (9th Cir. BAP 2002)(citing Jones v. Hill (In re

Hill), 811 F.2d 484, 485-86 (9th Cir. 1987)). 

V. DISCUSSION

The bankruptcy court abused its discretion in sanctioning

Appellants under LBR 1001-1(f), 7026-1(c) and 9011-3. 

During the hearing on the Motion to Compel, the bankruptcy

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court stated repeatedly that Debtors are debtors in bankruptcy and

subject to duties to disclose certain information to their

appointed trustee. See § 521. We do not question this important

statutory obligation imposed on debtors. However, the court also

stated repeatedly that Debtors were “being sued.” In this

adversary proceeding, the Trustee did not sue the Debtors; they

were nonparty witnesses. Also, the Trustee was not operating

under Rule 2004 to obtain their examination or the production of

documents. In these circumstances, Debtors were entitled to the

protections provided them as nonparty witnesses under the Federal

Rules of Civil Procedure and the Bankruptcy Rules, particularly

Civil Rule 45 and Rule 9016 (incorporating Civil Rule 45), which

were cited in the issued subpeonas.

Further, we fail to see how Nguyen, an attorney for a

nonparty, would be subject to complying with a “meeting of

counsel,” a “joint discovery stipulation” or any other aspect of

discovery by the Trustee under Civil Rule 26 or LBR 7026-1(c). 

Appellants argue that the bankruptcy court erred by failing

to apply the proper procedure afforded nonparties when imposing

sanctions for noncompliance with a subpoena under Civil Rule 45. 

Specifically, Appellants argue that the procedure followed here

conflicts with our holding in Plise. There, a creditor of the

debtor served a nonparty witness with a subpoena compelling him to

appear for a Rule 2004 examination and to produce documents. In

re Plise, 506 B.R. at 872-73. The nonparty witness timely served

his written objections to the subpoena duces tecum on the creditor

and later moved for a protective order. Id. at 873-74. In

response, the creditor filed a countermotion to compel and

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requested attorney’s fees. Id. at 874-75. The bankruptcy court

denied the nonparty’s motion for protective order, granted the

creditor’s countermotion to compel and awarded the creditor

$10,000 for its attorney’s fees incurred in bringing the

countermotion to compel pursuant to Civil Rule 37(a)(5). Id. at

876. 

We reversed, holding that the sanction of attorney’s fees

could not be imposed on a nonparty witness for noncompliance with

a subpoena duces tecum under Civil Rule 37 (incorporated by Rule

7037); rather, Civil Rule 45 is the sole basis for enforcing a

nonparty’s noncompliance with a subpoena duces tecum. Id. at 877-

79. See also Civil Rule 34(c), incorporated by Rule 7034, which

provides that motions to compel a nonparty to produce documents

are governed by Civil Rule 45. Under Civil Rule 45, the nonparty

must first be subject to an order compelling discovery and then

fail to comply with that order before the court can invoke its

contempt powers and impose a sanction of attorney’s fees. Id.

See also Pennwalt Corp., 708 F.2d at 494.

Our holding in Plise is narrower than Appellants contend. 

First, to receive the procedural protections of Civil Rule 45, the

nonparty witness must timely object to a subpoena duces tecum,

either by serving written objections to the requesting party or by

a motion to quash. In re Plise, 506 B.R. at 879. See also

Pennwalt Corp., 708 F.2d at 494 n.5 (once the subpoenaed party

objects, the protections of Civil Rule 45(d) come into play and

the party seeking discovery must obtain a court order directing

compliance). Debtors did not serve any written objections on the

Trustee regarding production of the requested documents or file a

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motion to quash.

Next, for a subpoenaed nonparty’s failure to attend a

deposition, Civil Rule 37(a)(5) authorizes an award of expenses,

including attorney’s fees, incurred for a motion to compel the

nonparty’s attendance. Pennwalt Corp., 708 F.2d at 494 n.4 (Civil

Rule 37 sanctions apply to motions to compel nonparties to attend

depositions); Civil Rule 37(a)(5)(A) (expressly referencing a

“party or deponent” and stating that the sanction of attorney’s

fees may be imposed on the party, the deponent, the attorney

advising the party or deponent whose conduct necessitated the

motion to compel, or both). See also Civil Rule 30(d)(2),

incorporated by Rule 7030, which provides that the court may

impose a sanction of reasonable attorney’s fees incurred by any

party on a “person” who impedes, delays or frustrates the fair

examination of a deponent; and Civil Rule 30(d)(3)(C), which

provides that any such sanction is governed by Civil Rule

37(a)(5). In this case, much of the conflict stemmed from

securing Debtors’ appearance for depositions and Nguyen’s alleged

interference with Mrs. Pham’s deposition.

Debtors and Nguyen could have been sanctioned for attorney’s

fees under Civil Rule 37(a)(5) for any failure to comply with the

subpoenas. The bankruptcy court, however, did not impose

sanctions under Civil Rule 37(a)(5), but rather relied on three

local rules to impose them. We conclude that none of these local

rules support the sanction of attorney’s fees in this context. We

review them in reverse order. 

 

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A. The bankruptcy court could not rely on LBR 9011-3.

LBR 9011-3(a) — Violation of Rules8 — provides that violation

of the Rules or the LBR may subject the offending party or counsel

to penalties, including the monetary sanction of attorney’s fees

and costs payable to opposing counsel. In other words, this rule

allows the bankruptcy court to impose sanctions for any infraction

of a local or federal bankruptcy rule. However, Rule 9011

(incorporating Civil Rule 11), expressly prohibits the use of this

rule to sanction violations respecting “disclosure and discovery

requests, responses, objections, and motions that are subject to

the provisions of Rules 7026 through 7037.” See Rule 9011(d). 

In adopting the Code, Congress delegated to the Supreme Court

the power to make and enforce general bankruptcy rules. 28 U.S.C.

§ 2071. Pursuant to this authority, the Supreme Court promulgated

Rule 9029,9 which authorizes district courts, or bankruptcy courts

8 Violation of Rules. The violation of, or failure to

conform to, the [Fed. R. Bankr. P] or these rules may subject the

offending party or counsel to penalties, including monetary

sanctions, the imposition of costs and attorneys’ fees payable to

opposing counsel, and/or dismissal of the case or proceeding.

9

 Rule 9029(a) provides, in relevant part:

(1) Each district court acting by a majority of its district

judges may make and amend rules governing practice and

procedure in all cases and proceedings within the district

court’s bankruptcy jurisdiction which are consistent with —

but not duplicative of — Acts of Congress and these rules and

which do not prohibit or limit the use of the Official Forms. 

Rule 83 F.R.Civ.P. governs the procedure for making local

rules. A district court may authorize the bankruptcy judges

of the district, subject to any limitation or condition it

may prescribe and the requirements of [Rule] 83 F.R.Civ.P.,

to make and amend rules of practice and procedure which are

consistent with — but not duplicative of — Acts of Congress

and these rules and which do not prohibit or limit the use of

the Official Forms. Local rules shall conform to any uniform

numbering system prescribed by the Judicial Conference of the

United States.

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with authority from the district courts, to adopt their own local

bankruptcy rules. In re Steinacher, 283 B.R. at 772. Under Rule

9029, however, this power is strictly limited. Sigma Micro Corp.

v. Healthcentral.com (In re Healthcentral.com), 504 F.3d 775, 784

(9th Cir. 2007)(citing 10 COLLIER ON BANKRUPTCY ¶ 9029.01[1](Alan N.

Resnick & Henry J. Sommer, eds., 15th ed. rev. 2006)). A local

rule of bankruptcy procedure cannot be applied in a manner that

conflicts with the federal rules; it must be consistent with the

Code, the Rules and the Civil Rules. Anwar v. Johnson, 720 F.3d

1183, 1189 (9th Cir. 2013); In re Steinacher, 283 B.R. at 772. 

Local bankruptcy rules may not “enlarge, abridge, or modify any

substantive right.” Anwar, 720 F.3d at 1189 (citing Sunahara v.

Burchard (In re Sunahara), 326 B.R. 768, 782 (9th Cir. BAP 2005)). 

Any local rule that is inconsistent with the Acts of Congress and

the Rules must be held invalid. In re Healthcentral.com, 504 F.3d

at 784; In re Sunahara, 326 B.R. at 783. 

To the extent LBR 9011-3 conflicts with Rule 9011 in

authorizing sanctions for discovery violations, it is invalid. If

LBR 9011-3 is not intended to be used to support a sanction for

attorney’s fees respecting discovery abuse, clearly the bankruptcy

court abused its discretion in applying it in this context to

Appellants. Either way, LBR 9011-3 cannot support the sanction.

B. The bankruptcy court could not rely on LBR 7026-1(c). 

LBR 7026-1(c), specifically (c)(4)10 — Cooperation of Counsel;

10 Cooperation of Counsel; Sanctions. The failure of any

counsel either to cooperate in this procedure, to attend the

meeting of counsel, or to provide the moving party the information

necessary to prepare the stipulation required by this rule within

7 days of the meeting of counsel will result in the imposition of

sanctions, including the sanctions authorized by [Rule] 7037 and

LBR 9011-3. 

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Sanctions — allows the bankruptcy court to impose sanctions on

counsel who fail to cooperate in disclosure or discovery, to

attend the meeting of counsel or to provide the moving party the

information necessary to prepare the stipulation required by LBR

7026-1. For awarding the sanction of attorney’s fees, LBR 7026-

1(c)(4) relies, in part, on the sanction authority authorized by

LBR 9011-3, which we have determined conflicts with Rule 9001's

express prohibition of sanctions relating to discovery abuse. 

As noted above, we fail to see how the requirements of LBR

7026-1 apply to counsel for a nonparty. However, even if they do,

two problems exist. First, the attorney’s fees were imposed

jointly and severally on Nguyen and Debtors; LBR 7026-1(c)(4)

expressly applies only to counsel. Second, and more importantly,

no such sanction is authorized by Rule 7026 (incorporating Civil

Rule 26). Civil Rule 26 — the rule governing discovery generally

— expressly provides that Civil Rule 37(a)(5) governs the award of

expenses in connection with requests for protective orders and/or

successful oppositions thereto. See Civil Rule 26(c)(3).

Civil Rule 26 does not provide for the imposition of

sanctions except in one circumstance — improper certification in

signing disclosure and discovery requests, responses and

objections. See Civil Rule 26(g)(3). Improper certification was

not an issue here. Thus, because Rule 7026 does not expressly

provide for sanctions for discovery abuse, in particular

attorney’s fees with respect to a motion for a protective order,

opposition thereto, or a motion to compel, neither can LBR 7026-1. 

To the extent LBR 7026-1(c)(4) is inconsistent with Rule 7026, it

is invalid and cannot support the sanction of attorney’s fees. 

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C. The bankruptcy court could not rely on LBR 1001-1(f).

LBR 1001-1(f)11 is a “catch all” rule providing for the

sanction of attorney’s fees for the failure of “counsel or of a

party” to comply with the LBRs, the Civil Rules or the Rules, or

with any order of the bankruptcy court. Rule 1001, the rule from

which LBR 1001-1(f) is derived, provides for the scope of the

Rules and Bankruptcy Forms and states that the Rules and Forms

govern procedure in bankruptcy cases. Rule 1001 does not

expressly authorize sanctions for violating other federal rules. 

Therefore, LBR 1001-1(f) is inconsistent with Rule 1001 in that it

grants the court sanction authority not provided for in Rule 1001. 

Thus, it is invalid, and the bankruptcy court could not rely on

this local rule to sanction Appellants.

In summary, the bankruptcy court abused its discretion when

it imposed the sanction of attorney’s fees against Appellants for

alleged discovery abuse under LBR 1001-1(f), 7026-1(c) and 9011-3. 

Although the court could have sanctioned Appellants under Rule

7037, and we can affirm on any basis supported by the record, the

insufficient findings made by the bankruptcy court prevent us from

doing so. We are particularly concerned about the court’s

erroneous assumptions that may have caused it to err in awarding

sanctions in the first place: that Debtors were parties to the

adversary proceeding; and that because they are debtors they are

not entitled to the protections afforded nonparties in discovery

under the Rules. 

The Motion to Compel was a contested motion under Rule 9014

11 Sanctions for Noncompliance with Rules. The failure of

counsel or of a party to comply with these Local Bankruptcy Rules,

with the F.R.Civ.P. or the [Fed. R. Bankr. P.], or with any order

of the court may be grounds for the imposition of sanctions. 

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and subject to Civil Rule 52(a) (incorporated by Rule 7052), which

requires the bankruptcy court to find facts specifically and state

its conclusions of law separately. First Yorkshire Holdings, Inc.

v. Pacifica L 22 (In re First Yorkshire Holdings, Inc.), 470 B.R.

864, 870 (9th Cir. BAP 2012). The bankruptcy court’s findings,

made at the hearing, merely state that Nguyen (not Debtors) failed

to comply with discovery, namely, LBR 7026-1. We conclude that

LBR 7026-1, as promulgated, imposes obligations, such as “meet and

confer” and “joint discovery stipulation” on parties but not on

nonparties. Further, the Compel Order provides no findings of

fact to support the court’s decision to sanction Appellants for

“abusive conduct in the course of discovery.” 

VI. CONCLUSION

Accordingly, because the bankruptcy court applied incorrect

standards of law and failed to make the necessary findings

required under Rule 7052 for us to affirm under Rule 37, we VACATE

and REMAND the Compel Order for further proceedings consistent

with this opinion.12

12 Because we are vacating and remanding the Compel Order, we

need not address Appellants’ argument that they were denied due

process because the Trustee failed to present his fees evidence

until after the bankruptcy court had already awarded them. 

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