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NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-15-1125-DKiG 

)

WILLIAM ROBERT NORRIE, ) Bk. No. 13-25751-BR

)

Debtor. ) Adv. Proc. No. 14-01755-BR

______________________________)

)

MARK BLISS, )

)

Appellant, )

)

v. ) M E M O R A N D U M1

)

JOHN NORRIE, Trustee of the )

561 Brooks Avenue Trust Dated )

March 14, 2007, )

)

Appellee. )

______________________________)

Argued and Submitted on January 21, 2016

at Pasadena, California

Filed - January 29, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Barry Russell, Bankruptcy Judge, Presiding.

 

Appearances: Appellant Mark Bliss argued pro se. 

 

Before: DUNN, KIRSCHER, and GAN,2 Bankruptcy Judges.

FILED

JAN 29 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

1 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.

2 Hon. Scott H. Gan, United States Bankruptcy Judge for

the District of Arizona, sitting by designation.
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The bankruptcy court denied Appellant’s motion for sanctions

(“Sanctions Motion”) against Appellee’s counsel pursuant to

Rule 9011,3 and this appeal followed. We conclude that the

bankruptcy court’s findings of fact and conclusions of law with

respect to the standards for evaluating a request for Rule 9011

sanctions were not sufficient to support its ruling on the

Sanctions Motion. Accordingly, we VACATE and REMAND this matter

for further proceedings. 

I. FACTUAL BACKGROUND

In order to understand Appellant’s issues in this appeal, it

is necessary to evaluate them in context with other litigation

and proceedings that have taken place in the chapter 7 bankruptcy

case of William Robert Norrie (“William”). We highlight in

somewhat summary form the disputes and proceedings in the

bankruptcy court that inform our review of the appeal before us. 

At the heart of the disputes is William’s interest in a Venice,

California apartment complex (“Venice Property”).4

A. The Venice Property

William purchased the Venice Property in 2005. In

connection with the purchase, William borrowed $1,496,250

3 Unless otherwise indicated, all chapter and section

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

all “Rule” references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037. The Federal Rules of Civil Procedure

are referred to as “Civil Rules.”

4 Unless otherwise noted, the facts relating to the

Venice Property and the bankruptcy court litigation involving it

are taken from the bankruptcy court’s findings of fact and

conclusions of law entered in one of the disputes and adopted by

the District Court on appeal.

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(“Loan”) from Luther Burbank Savings (“Luther”). As security for

the Loan, William granted Luther a first position deed of trust

on the Venice Property. 

On or about January 9, 2008, William transferred all of his

interest in the Venice Property to his newly-formed, solely owned

limited liability company ("LLC") for no consideration. A grant

deed reflecting the transfer was recorded with the Los Angeles

County Recorder on the same date. William confirmed to Luther in

2010 that the LLC was “solely owned by myself.” 

William filed a chapter 7 petition on July 1, 2013. In his

schedules and statement of financial affairs, William did not

list either the Venice Property or his interest in the LLC as

assets, did not list the Loan debt he owed Luther with respect to

the Venice Property, and did not disclose his transfer of the

Venice Property to the LLC.5 As a result, the chapter 7 trustee

had no knowledge of the existence of the Venice Property. 

Enter Mark Bliss, aka Mark O'Gorman ("Appellant"), William's

former friend and business associate. Appellant informed the

chapter 7 trustee of William’s ownership interest in the Venice

Property and apparently assisted the chapter 7 trustee in the

prosecution of a fraudulent transfer adversary proceeding

("Venice Property Litigation") filed against William and the LLC. 

The Venice Property Litigation resulted in the entry of a default

judgment (“Default Judgment”) against the LLC and recovery of the

5 After filing his bankruptcy case, William continued to

collect the rents from the Venice Property, and, in November

2013, William attempted to obtain a refinance of debt on the

Venice Property.

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Venice Property for the benefit of William’s bankruptcy estate.6

Less than 24 hours before the July 1, 2014, scheduled

hearing on the chapter 7 trustee’s motion for default judgment

(“Default Motion”) against the LLC, John Norrie (“John”),

William’s brother, filed both a motion to continue the hearing

(“Continuance Motion”) and a motion to intervene (“Intervention

Motion”)7 in the Venice Property Litigation. In filing the

motions, John asserted, as purported trustee, alleged rights of

The 561 Brooks Avenue Trust Dated March 14, 2007 (“Brooks

Trust”). According to John, the Brooks Trust was formed for the

purpose of holding title to the Venice Property for the benefit

of William’s sons. Michael Kwasigroch was the attorney

representing the Brooks Trust with respect to both motions. 

The bankruptcy court denied the Continuance Motion on the

basis that John should have brought the Continuance Motion

sooner,8 and set the Intervention Motion for hearing

6 Both William and the LLC filed motions to dismiss the

Venice Property Litigation, which the bankruptcy court denied. 

It then set March 25, 2014, as the deadline for William and the

LLC to file their answers in the Venice Property Litigation. The

LLC did not answer, but instead attempted to appeal the denial of

its motion to dismiss to this Panel. That appeal was dismissed

May 9, 2014, when our motions panel denied the LLC’s motion for

leave to appeal.

7 The Intervention Motion was filed at 8:45 p.m. the

evening before the hearing on the Default Motion.

8 The bankruptcy court noted in the context of its ruling

on the Intervention Motion that John, as the purported managing

member of the LLC, had hired counsel for the LLC to file the

motion to dismiss the Venice Property Litigation and to prosecute

(continued...)

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approximately ten weeks out. After the hearing on the Default

Motion, the bankruptcy court made written findings of facts and

conclusions of law, which it forwarded to the District Court with

its recommendation for entry of the Default Judgment.9 The

bankruptcy court subsequently conducted proceedings on the

Intervention Motion.

The chapter 7 trustee opposed the Intervention Motion on the

basis that Appellant, not John, was the trustee of the Brooks

Trust. John countered that Appellant had been automatically

terminated as trustee of the Brooks Trust as a result of an

involuntary bankruptcy petition having been filed against him,

but in any event was removed as trustee by William not later than

November 15, 2010, under the procedures set forth in the trust

formation documents. 

The bankruptcy court denied the Intervention Motion on

October 27, 2014. In its findings of fact and conclusions of

law, the bankruptcy court charged the Brooks Trust with notice of

the Venice Property Litigation as early as February 18, 2014,

based on John’s participation in the Venice Property Litigation

8(...continued)

the interlocutory appeal when that motion was denied by the

bankruptcy court. The bankruptcy court charged the Brooks Trust

with John’s knowledge as the purported trustee.

9 John, as Trustee of the Brooks Trust, appealed entry of

the bankruptcy court’s order after hearing on the Default Motion,

which stated only that the bankruptcy court would review the

chapter 7 trustee’s proposed findings of fact and conclusions of

law and submit them with its recommendation to the District Court

for review and entry of a final judgment against the LLC. Our

motions panel, noting that the BAP had no jurisdiction over the

order, dismissed the appeal.

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as the purported managing member of the LLC. The bankruptcy

court found, inter alia, that the Intervention Motion was

untimely filed, that John had presented no evidence in support of

the Intervention Motion or that he was the trustee of the Brooks

Trust, that the chapter 7 trustee had presented evidence both

that Appellant was the trustee of the Brooks Trust and that the

Brooks Trust had no interest in the Venice Property, and that the

Intervention Motion was moot where the District Court had entered

the Default Judgment on September 11, 2014. 

B. The Brooks Trust Litigation

On November 18, 2014, John, as trustee of the Brooks Trust,

filed an adversary proceeding (“Brooks Trust Litigation”), the

complaint in which appeared to seek (1) a declaration that John,

not Appellant, was the trustee of the Brooks Trust, and (2) that

a trust should be imposed on the Venice Property for the benefit

of the Brooks Trust. Mr. Kwasigroch was the attorney

representing the Brooks Trust in the Brooks Trust Litigation. 

The chapter 7 trustee and Appellant were the named defendants in

the Brooks Trust Litigation. After motions to dismiss had been

filed by the chapter 7 trustee and Appellant, John filed an

amended complaint (“Amended Complaint”) on December 15, 2014.

Appellant withdrew his original motion to dismiss the initial

complaint after the Amended Complaint was filed but thereafter

filed a further motion to dismiss the Amended Complaint.

The Amended Complaint asserted seven claims for relief:

(1) a declaration that John is the trustee of the Brooks Trust;

(2) specific performance of alleged agreements between Joe Davis,

William’s former father-in-law, and William that the Venice

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Property was to be held by the Brooks Trust for the benefit of

William’s sons;

(3) imposition of a constructive trust;

(4) imposition of a resulting trust;

(5) imposition of an equitable lien;

(6) imposition of an express lien;

(7) judicial foreclosure of the Venice Property.

Notably, like the original complaint, the Amended Complaint

sought no damages against Appellant. In fact, the Amended

Complaint stated expressly that no claim was being asserted

personally against Appellant.10 Ultimately, the Brooks Trust

filed a Rule 7041 notice of dismissal as to Appellant on

January 14, 2015.11 

10 The Amended Complaint provided:

For clarity, Plaintiff hereby alleges and acknowledges

that Plaintiff IS NOT seeking damages for any action of

[Appellant], or the chapter 7 trustee, in preparing,

filing, submitting, testifying in, petitioning, or in

any other way participating in any legal proceeding.

These allegations are made as the assertions made by

the chapter 7 trustee and [Appellant] were made in

legal proceedings, BUT THEREBY CREATE A DISPUTE AS TO

THE RIGHTS AND DUTIES OF THE PARTIES, SPECIFICALLY, WHO

THE PROPER AND TRUE TRUSTEE OF THE [BROOKS TRUST] IS. 

However, no damages or monetary recovery is requested

based on any action of any party in participating in

any legal proceeding.

11 On February 24, 2015, the bankruptcy court dismissed

the Amended Complaint without leave to amend on the chapter 7

trustee’s motion. In doing so, the bankruptcy court rejected the

arguments of the Brooks Trust that the chapter 7 trustee was on

constructive or inquiry notice of the Brooks Trust’s alleged

(continued...)

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Approximately three weeks later, Appellant filed the

Sanctions Motion, the denial of which forms the basis for this

appeal. The Sanctions Motion sought monetary sanctions against

Mr. Kwasigroch, because the claims alleged in the Amended

Complaint 

. . . are barred under law and . . . are not warranted

under existing law and . . . contain factual allegations

that do not have evidentiary support. This conduct

constitutes a continuing pattern of bad faith and

improper litigation tactics. As such, [Mr.] Kwasigroch

is subject to sanctions under [Rule] 9011(b)(2) and (3). 

The court should award [Appellant] his reasonable

attorney fees he has and will incur to bring the

[Sanctions Motion] in the amount of $7,535.00 against

[Mr.] Kwasigroch.

Although the Sanctions Motion was filed February 3, 2015, it (and

the declaration of Appellant’s counsel, John C. Feely, in support

of it) was dated December 18, 2014, the date it purportedly was

served on Mr. Kwasigroch. Appellant was dismissed from the

adversary proceeding on January 14, 2015, more than 21 days after

Mr. Kwasigroch was served with the Sanctions Motion, but before

the Sanctions Motion was filed. Supported by Mr. Feely’s

declaration regarding compliance with the safe harbor provisions

of Rule 9011, Appellant sought an additional $12,187.50 in

11(...continued)

interest in the Venice Property, and ruled in effect that the

chapter 7 trustee’s strong arm powers provided in § 544 entitled

the chapter 7 trustee to status as a bona fide purchaser with

respect to the Venice Property. The Brooks Trust appealed the

dismissal to the District Court as well as a subsequent order

authorizing the chapter 7 trustee to sell the Venice Property,

which appeal was dismissed as moot, where no stay had been

obtained, and the Venice Property had been sold. The District

Court’s dismissal order is now on appeal at the Ninth Circuit.

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sanctions representing the attorney fees incurred in researching

and drafting a motion to dismiss the adversary proceeding,

allegedly made necessary because the adversary proceeding

remained pending. Appellant sought a total of $19,722.50 in

sanctions against Mr. Kwasigroch through the Sanctions Motion. 

The Sanctions Motion was opposed. 

The hearing on the Sanctions Motion was held March 11, 2015

(“Sanctions Hearing”), along with other matters. The transcript

of the Sanctions Hearing is sixteen pages long, but only twentythree lines relate to the Sanctions Motion:

And the next one is – let’s see which order I should

take these. Well, I’ll take it, I guess, in reverse

order. Number 11. That’s the, [Appellant’s] motion

for sanctions against the attorney. That’s going to be

denied. The fact that you lose something doesn’t –

everything in this case is not frivolous, that is, not

warranted for sanctions. I think I have, of course,

awarded sanctions before, but just because I have

before doesn’t mean that just because I’ve done it that

everybody’s entitled to sanctions because they prevail.

The last motion had to do with just prevailing party. 

That’s different than, you know, sanctions for filing

frivolous motions. That’s totally different. That’s a

much easier – but this one, I’ve looked at it. Yes, I

disagreed with the pleadings and I’ve ruled

accordingly. But that doesn’t make it frivolous. If

that were the case, that’s all I would do, and any

other judge would be doing, is ruling sanctions up and

back if people lose. That’s just – I think you’ve

gotten a little carried away on what’s happened.

So that’s going to be denied. By the way, I will

prepare an order on – well, no. I think on that one,

why don’t you, counsel, why don’t you just prepare that

order.

March 11, 2015 Hr’g Tr. at 5:6-6:3.

Appellant appealed the order denying the Sanctions Motion. 

He asserts on appeal, inter alia, that the bankruptcy court’s

dismissal of the Amended Complaint without leave to amend

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established that it was meritless when it was filed.12 Appellant

contends the bankruptcy court abused its discretion because it

did not find that the claims in the Amended Complaint, as filed

by Mr. Kwasigroch, seeking a determination that the Brooks Trust

held an interest in the Venice Property, violated the provisions

of Rule 9011(b)(2) and (3).13

12 Appellant also filed a motion seeking a declaration

that he was the prevailing party in the Brooks Trust Litigation. 

Despite vigorous opposition from the Brooks Trust, the bankruptcy

court determined under LBR 7054-1 that Appellant was the

prevailing party. No appeal was taken from that determination,

and it does not appear from the docket that Appellant has sought

fees or costs as a result of his prevailing party status.

13 As relevant to the Sanctions Motion, Rule 9011

provides:

Rule 9011. Signing of Papers; Representations to the Court;

Sanctions; Verification And Copies of Papers

(a) Signature. Every petition, pleading, written motion, and

other paper, except a list, schedule, or statement, or amendments

thereto, shall be signed by at least one attorney of record in

the attorney's individual name. A party who is not represented

by an attorney shall sign all papers. Each paper shall state the

signer's address and telephone number, if any. An unsigned paper

shall be stricken unless omission of the signature is corrected

promptly after being called to the attention of the attorney or

party.

(b) Representations to the Court. By presenting to the court

(whether by signing, filing, submitting, or later advocating) a

petition, pleading, written motion, or other paper, an attorney

or unrepresented party is certifying that to the best of the

person's knowledge, information, and belief, formed after an

inquiry reasonable under the circumstances,— 

. . . .

(2) the claims, defenses, and other legal contentions therein are

(continued...)

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II. JURISDICTION

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

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

§ 158.

III. ISSUES

Whether the bankruptcy court abused its discretion when it

denied the Sanctions Motion.

IV. STANDARDS OF REVIEW

A bankruptcy court's decision declining to impose sanctions

pursuant to Rule 9011 is reviewed for abuse of discretion. 

Trulis v. Barton, 107 F.3d 685, 691 (9th Cir. 1995); Classic Auto

Refinishing, Inc. v. Marino (In re Marino), 37 F.3d 1354, 1358

(9th Cir. 1994)(“We review the denial of sanctions under

[Rule 9011] for an abuse of discretion.”). 

The Panel must 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). 

13(...continued)

warranted by existing law or by a nonfrivolous argument for the

extension, modification, or reversal of existing law or the

establishment of new law; 

(3) the allegations and other factual contentions have

evidentiary support or, if specifically so identified, are likely

to have evidentiary support after a reasonable opportunity for

further investigation or discovery; 

. . . .

(c) Sanctions. If, after notice and a reasonable opportunity to

respond, the court determines that subdivision (b) has been

violated, the court may, subject to the conditions stated below,

impose an appropriate sanction upon the attorneys, law firms, or

parties that have violated subdivision (b) or are responsible for

the violation.

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First, we consider de novo whether the bankruptcy court applied

the correct legal standard. Id. A bankruptcy court abuses its

discretion if it applies an incorrect legal standard or

misapplies the correct legal standard. TrafficSchool.com v.

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

V. DISCUSSION

Rule 9011

“Pursuant to Rule 9011, bankruptcy courts have the authority

to sanction parties, attorneys, and law firms who present (sign,

file, submit, or later advocate) a petition, pleading, or paper

to a bankruptcy court that is either frivolous or presented for

an improper purpose.” Winterton v. Humitech of N. Cal., LLC

(In re Blue Pine Grp., Inc.), 457 B.R. 64, 75 (9th Cir. BAP

2011), rev’d in part, 526 F. App’x. 768 (9th Cir. 2013)(affirmed

as to standards; reversed as to amount of sanctions). Both the

Ninth Circuit and this Panel previously have articulated in

detail the process and standards for evaluating a motion for

sanctions filed pursuant to Rule 9011. 

“In determining if sanctions are warranted under Rule 9011,

the bankruptcy court must consider both frivolousness and

improper purpose on a sliding scale, where the more compelling

the showing as to one element, the less decisive need be the

showing as to the other.” Dressler v. The Seeley Co.

(In re Silberkraus), 336 F.3d 864, 870 (9th Cir. 2003)(internal

citation omitted).

The word “frivolous,” when used in connection with

sanctions denotes a filing that is both baseless—lacks

factual foundation—and made without reasonable competent

inquiry. Townsend v. Holman Consulting Corp., 929 F.2d

1358, 1362 (9th Cir. 1990). An attorney has a duty to

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conduct a reasonable factual investigation as well as to

perform adequate legal research that confirms that his

position is warranted by existing law (or by a good

faith argument for a modification or extension of

existing law). Christian v. Mattel, Inc., 286 F.3d

1118, 1127 (9th Cir. 2002). Thus, a finding that there

was no reasonable inquiry into either the facts or the

law is tantamount to a finding of frivolousness. 

Townsend, 929 F.2d at 1362.

The Ninth Circuit has held that the standard to

determine the reasonableness of an attorney's inquiry as

to facts contained in signed documents submitted to a

court is an objective one. In considering sanctions

under Rule 9011, the bankruptcy court must measure the

attorney's conduct “objectively against a reasonableness

standard, which consists of a competent attorney

admitted to practice before the involved court.” Valley

Nat'l Bank of Ariz. v. Needler (In re Grantham Bros.),

922 F.2d 1438, 1441 (9th Cir. 1991); G.C. & K.B. Inv.,

Inc. v. Wilson, 326 F.3d 1096, 1109 (9th Cir. 2003). 

Additionally, an improper purpose is analyzed under an

objective standard. In re Grantham Bros., at 1443.

In re Blue Pine Grp., Inc., 457 B.R. at 75. 

The Bankruptcy Court’s Findings

As stated above, we review the order denying the Sanctions

Motion for abuse of discretion. “If the bankruptcy court fails

to identify or misapplies the correct legal rule of law, [our]

inquiry ends there, and we ‘must conclude that the bankruptcy

court abused its discretion.’” Fear v. U.S. Trustee

(In re Ruiz), 541 B.R. 892, 896 (9th Cir. BAP 2015), quoting

Hinkson, 585 F.3d at 1262.

Under Ninth Circuit standards, a bankruptcy court “must

consider both frivolousness and improper purpose” when ruling on

a motion for sanctions under Rule 9011. Here, the bankruptcy

court made no findings as to whether the Amended Complaint was

filed for an improper purpose. As to whether the Amended

Complaint was frivolous, the bankruptcy court stated only

“everything in this case is not frivolous,” and “Yes, I disagreed

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with the pleadings and I’ve ruled accordingly. But that doesn’t

make it frivolous.”

 From this limited record, we are unable to determine, de

novo, whether the bankruptcy court applied the correct legal

rule, set forth in the Ninth Circuit’s decision in

In re Silberkraus and this Panel’s decision in In re Blue Pine

Grp., Inc., when it denied the Sanctions Motion. Without

complete findings, we may vacate a judgment and remand the case

to the bankruptcy court to make the requisite findings. See,

e.g., First Yorkshire Holdings, Inc. v. Pacifica L 22, LLC

(In re First Yorkshire Holdings, Inc.), 470 B.R. 864, 870 (9th

Cir. BAP 2012). We do so reluctantly in this case because we

fear contributing to a record of litigation that already is both

extended and contentious, but we see no appropriate alternative. 

The litigants in any dispute are entitled to a court’s rationale

for its decisions.

VI. CONCLUSION

For the foregoing reasons, we VACATE the bankruptcy court’s

order denying the Sanctions Motion and REMAND for further

proceedings consistent with this Memorandum Decision.

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