Court Opinion

ID: 4218062
Source: CourtListenerOpinion
Date Created: 2017-11-06 22:01:52.404483+00
Date Added: 2024-06-11T14:42:25.966514
License: Public Domain

FILED
                                                           NOV 06 2017
 1                         NOT FOR PUBLICATION
                                                       SUSAN M. SPRAUL, CLERK
                                                         U.S. BKCY. APP. PANEL
 2                                                       OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
                              OF THE NINTH CIRCUIT
 4
 5   In re:                        )      BAP No. CC-17-1000-LSTa
                                   )
 6   TONY PHAM; LINDSIE KIM PHAM, )       Bk. No. 8:12-bk-18847-CB
                                   )
 7                  Debtors.       )      Adv. No. 8:12-ap-01619-CB
     ______________________________)
 8                                 )
     JONATHAN T. NGUYEN,           )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      M E M O R A N D U M*
11                                 )
     JEFFREY IAN GOLDEN,           )
12   Chapter 7 Trustee,            )
                                   )
13                  Appellee.      )
     ______________________________)
14
                Argued and Submitted on September 29, 2017
15                        at Pasadena, California
16                          Filed - November 6, 2017
17            Appeal from the United States Bankruptcy Court
                  for the Central District of California
18
         Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding
19                       _________________________
20   Appearances:     Richard Lawrence Antognini argued for Appellant;
                      Ashley M. McDow of Baker & Hostetler LLP argued
21                    for Appellee.
                           _________________________
22
     Before: LAFFERTY, SPRAKER, and TAYLOR, Bankruptcy Judges.
23
24
25
26        *
           This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8024-1.
 1                                 INTRODUCTION
 2            This is the second appeal arising from the bankruptcy
 3   court’s award of sanctions for discovery abuses.        Before the
 4   first appeal, the bankruptcy court awarded attorney’s fees to
 5   Appellee Jeffrey I. Golden (“Trustee”) and against Debtors Tony
 6   Pham and Lindsie Kim Pham and their former counsel, Appellant
 7   Jonathan Nguyen.      Debtors were nonparty witnesses in the
 8   Trustee’s adversary proceeding to avoid and recover allegedly
 9   fraudulent transfers of real property.        The attorney’s fees were
10   sought and imposed as a sanction under local rules for failure
11   to comply with the Trustee’s subpoenas for depositions and
12   document production and for counsel’s failure to meaningfully
13   meet and confer with Trustee’s counsel.        This Panel vacated and
14   remanded the sanctions award, holding that the bankruptcy court
15   had erred in relying on local bankruptcy rules as authority for
16   the sanctions and because its findings were insufficient to
17   support the sanctions under the appropriate authority.        Pham v.
18   Golden (In re Pham), 536 B.R. 424 (9th Cir. BAP 2015).
19            On remand, the Trustee and Debtors, but not Nguyen,
20   submitted supplemental briefing.        Although the Trustee cited
21   Civil Rule 451 and the court’s inherent power as a basis for the
22   sanctions against Debtors and Nguyen, the bankruptcy court
23   reimposed the sanctions solely under Civil Rule 37(a)(5)
24
          1
           Unless specified otherwise, all chapter and section
25   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all
26   “Rule” references are to the Federal Rules of Bankruptcy
     Procedure, and all “Civil Rule” references are to the Federal
27   Rules of Civil Procedure. “LBR” references are to the Local
     Bankruptcy Rules for the U.S. Bankruptcy Court for the Central
28   District of California.

                                       -2-
 1   (applicable via Rule 7037) against Nguyen only.      The court also
 2   denied Debtors’ motion to vacate the original sanctions order
 3   and for an order requiring the Trustee to turn over the
 4   sanctions paid.
 5        In reimposing the sanctions after remand, the bankruptcy
 6   court improperly relied on Civil Rule 37(a)(5) as the sole
 7   source of authority for the sanctions award, and its findings do
 8   not support the sanctions award.      Therefore, we VACATE and
 9   REMAND the amended sanctions order.      We REVERSE in part the
10   bankruptcy court’s order denying Debtor’s motion to vacate the
11   original sanctions order because, although the request to vacate
12   was moot, the request to turn over the funds was not.
13                                  FACTS
14        The Panel’s prior opinion contained a detailed factual
15   recitation that we need not repeat here.      In summary, and as
16   noted above, Debtors were nonparty witnesses in an adversary
17   proceeding brought by the Trustee to avoid and recover allegedly
18   fraudulent transfers of condominium units by Mrs. Pham to the
19   defendants.    Nguyen represented defendants and Debtors.
20        During the course of discovery in the adversary proceeding,
21   the Trustee issued subpoenas to Debtors under Civil Rule 45,
22   commanding them to appear for depositions and to produce
23   documents.    For reasons that are detailed in the Panel’s prior
24   opinion, the Trustee’s counsel did not complete Mrs. Pham’s
25   examination, and Mr. Pham did not appear for deposition or
26   produce documents.    Additionally, Nguyen did not cooperate in
27   scheduling a meet and confer or in preparing a joint discovery
28   stipulation.    The Trustee ultimately filed a motion to compel,

                                     -3-
 1   which the bankruptcy court granted.    The bankruptcy court also
 2   granted the Trustee’s request for attorney’s fees, ordering
 3   Nguyen and Debtors to pay the Trustee $17,515 “as a sanction for
 4   abusive conduct in the course of discovery pursuant to Local
 5   Bankruptcy Rules 1001-1(f), 7026-1(c), and 9011-3” (the
 6   “Sanctions Order”).
 7        Nguyen and Debtors jointly appealed the Sanctions Order to
 8   this Panel.    By then, Debtors had complied with the subpoenas,
 9   so the only issue on appeal was whether the sanctions award was
10   appropriate.    In a published opinion, Pham v. Golden
11   (In re Pham), 536 B.R. 424 (9th Cir. BAP 2015), the Panel
12   vacated and remanded the Sanctions Order, holding that the
13   bankruptcy court had abused its discretion in awarding discovery
14   sanctions under LBR 1001-1(f), 7026-1(c), and 9011-3 because
15   those rules did not provide the proper legal basis for discovery
16   sanctions against nonparties and their counsel.
17        In its opinion, the Panel noted that Civil Rule 37(a)(5)
18   authorizes an award of expenses, including attorney’s fees,
19   incurred for a motion to compel a nonparty’s attendance at a
20   deposition.    In re Pham, 536 B.R. at 431.   Noting that much of
21   the conflict in the case had stemmed from securing Debtors’
22   appearance for depositions and Nguyen’s alleged interference
23   with Mrs. Pham’s deposition, the Panel stated, “Debtors and
24   Nguyen could have been sanctioned for attorney’s fees under
25   Civil Rule 37(a)(5) for any failure to comply with the
26
27
28

                                     -4-
 1   subpoenas.”2       Id.   But because the bankruptcy court’s findings
 2   were not sufficient to support sanctions under Civil Rule 37,
 3   the Panel vacated and remanded for further proceedings.          Id. at
 4   434.
 5              After remand, Debtors, represented by their new counsel,3
 6   filed a motion under Civil Rule 60(b) (applicable via Rule 9024)
 7   to vacate as void the Sanctions Order and for turnover of the
 8   sanctions, which Nguyen had paid.4         The Trustee opposed the
 9   motion, arguing that the BAP had not only vacated but remanded
10   the Sanctions Order; the Trustee thus requested an opportunity
11   to brief alternate grounds for the sanctions and to retain the
12   sanctions pending a further ruling by the bankruptcy court.          At
13   the hearing on the matter, the bankruptcy court orally denied
14   Debtors’ motion and set a briefing schedule and a further
15   hearing.
16              In the Trustee’s supplemental brief, he argued that
17   sanctions could be imposed against Debtors under Civil
18   Rule 45(g) and the court’s inherent power.         The Trustee did not
19   specifically request sanctions against Nguyen, but he alleged
20
21          2
           As discussed below, Civil Rule 37(a)(5)(A) authorizes an
22   award of expenses, including attorney’s fees, for a nonparty’s
     failure to attend a deposition, but it does not authorize such an
23   award for a nonparty’s failure to comply with a document
     production request.
24
            3
           Nguyen withdrew as counsel for Debtors and Defendants while
25   the first appeal was pending.
26          4
           The BAP’s mandate was docketed in the adversary proceeding
27   on January 4, 2016. For reasons that are not clear from the
     record, the bankruptcy court took no action on the mandate until
28   Debtors filed their motion to vacate in May 2016.

                                          -5-
 1   that both Debtors and Nguyen engaged in bad faith conduct and
 2   requested that the court enter an order: (1) affirming its prior
 3   award of sanctions under Civil Rule 45 and Rule 9016 and the
 4   court’s inherent authority; and (2) making specific findings
 5   regarding the violations of the subpoenas and the bad faith
 6   nature of the Debtors’ and Nguyen’s conduct.
 7        Debtors filed an opposition, arguing that the Trustee had
 8   not complied with the procedures required for a contempt finding
 9   under Civil Rule 45 and that Debtors had not acted in bad faith.
10   Debtors also objected to the amount of the sanctions as
11   “exceptionally high and unjustified.”   Nguyen did not file a
12   brief.   The Trustee filed a reply arguing that he was not
13   required to seek an order to compel compliance before seeking
14   sanctions under Civil Rule 45, that Debtors had received
15   adequate notice of the sanctions motion, and that sanctions
16   against Debtors and Nguyen were substantively justified.
17        At the hearing on September 6, 2016, Nguyen did not appear.
18   The Trustee argued for the first time that sanctions could be
19   imposed under Civil Rule 37(a)(5), citing the Panel’s prior
20   opinion.   After hearing argument, the bankruptcy court decided,
21   based on its recollection of events, that sanctions solely
22   against Nguyen were appropriate:
23        I’d be quite happy just sanctioning the attorney here
          for what happened because he . . . was doing things
24        that were just totally inappropriate, including
          questioning the Court’s ability to send out a notice
25        to the Defendants in an action. . . . I don’t know
          how much the Debtors were involved in the shenanigans,
26        but the attorney knew what he was doing was
          inappropriate. It was not what an officer of the
27        court does.
28              Since he’s the one who paid, what do you think,

                                    -6-
 1        [counsel], of somehow forming the order to comply with
          what BAP said, that I can’t do it under the Local
 2        Rule, and making it only against the attorney? I’m
          quite happy with that.
 3
 4   Hr’g Tr. (Sept. 6, 2016) at 13:8-14:8.   The court further
 5   remarked:
 6        Mr. Nguyen caused a lot of problems, and I – what do
          you think, [counsel], I mean, since he is the one who
 7        paid the sanctions, and, frankly, as far as I can
          tell, he’s the one who caused a lot of these problems,
 8        I am happy with an order that says it’s Mr. Nguyen who
          has to pay. . . .
 9
10   Id. at 17:7-12.
11        After noting that it could impose sanctions under Civil
12   Rule 37(a)(5), Civil Rule 45, and its inherent powers, the court
13   stated that it would enter an amended order reimposing the
14   sanctions against Nguyen only.    Thereafter, the bankruptcy court
15   entered its amended order (the “Amended Sanctions Order”), but
16   it imposed sanctions solely under Civil Rule 37(a)(5), finding
17   that:
18        Prior Counsel is properly sanctioned for, among other
          things, representing both Debtors and Defendants,
19        engaging in bad faith conduct by withholding documents
          responsive to properly issued subpoenas, and
20        interfering in the examination of Lindsie Kim Pham. In
          aggravation, the Court notes that Debtors, not
21        Defendants, were directing the course of the adversary
          litigation and that Prior Counsel was not properly
22        representing the interests of Defendants. In
          particular, the Court notes that Prior Counsel
23        vehemently opposed the sending of any notices by the
          Court directly to Defendants (an apparent attempt to
24        keep Defendants ignorant as to the course of the
          litigation).
25
               The award of sanctions of $17,515.00
26        (“Sanctions”) in favor of the Trustee is due and
          proper sanctions to compensate the bankruptcy estate
27        for the harm resulting from the conduct of Prior
          Counsel. As was stated in Pham, et al., v. Golden
28        (In re Pham), 536 B.R. 424 (9th Cir. BAP 2015), the

                                      -7-
 1        BAP opinion remanding this matter, “Debtors and Nguyen
          could have been sanctioned for attorney’s fees under
 2        Civil Rule 37(a)(5) for any failure to comply with the
          subpoenas.” This Court now grants the Motion pursuant
 3        to Civil Rule 37(a)(5). The Court orders the
          Sanctions to be paid by Prior Counsel. Debtors shall
 4        not be liable for the Sanctions.
 5        The bankruptcy court also entered an order denying Debtors’
 6   motion to vacate the Sanctions Order and for turnover.    Nguyen
 7   timely appealed both orders.
 8                               JURISDICTION
 9        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
10   §§ 1334 and 157(b)(2)(A).   We have jurisdiction under 28 U.S.C.
11   § 158.   Orders imposing sanctions on nonparties for failure to
12   comply with discovery are final for purposes of appeal.
13   Pennwalt Corp. v. Durand-Wayland, Inc., 708 F.2d 492, 494 n.3
14   (9th Cir. 1983).
15                                  ISSUES
16        Whether Nguyen waived his right to appeal the Amended
17   Sanctions Order or the denial of the Debtors’ motion to vacate.
18        Whether the bankruptcy court abused its discretion in
19   reaffirming the sanctions award against Nguyen under Civil
20   Rule 37(a)(5).
21        Whether the bankruptcy court abused its discretion in
22   denying Debtors’ motion to vacate and for turnover.
23                           STANDARD OF REVIEW
24        The bankruptcy court’s imposition of discovery sanctions is
25   reviewed for abuse of discretion, Stipp v. CML-NV One, LLC
26   (In re Plise), 506 B.R. 870, 876 (9th Cir. BAP 2014) (citing
27   Freeman v. San Diego Ass’n of Realtors, 322 F.3d 1133, 1156 (9th
28   Cir. 2003)), as is its ruling on a motion to vacate.   See

                                     -8-
 1   Tennant v. Rojas (In re Tennant), 318 B.R. 860, 866 (9th Cir.
 2   BAP 2004).
 3          A bankruptcy court abuses its discretion if it applies the
 4   wrong legal standard, misapplies the correct legal standard, or
 5   if its factual findings are clearly erroneous.
 6   TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th
 7   Cir. 2011).
 8                                DISCUSSION
 9          As discussed below, we decline to deem Nguyen’s arguments
10   on appeal waived for failure to participate in the proceedings
11   after remand because he did not have adequate notice that
12   sanctions under Civil Rule 37(a)(5) were being sought against
13   him.    While the court’s inherent power could have formed the
14   basis for the sanctions, its findings were insufficient for us
15   to affirm on that basis.
16          A clarification regarding the application of Civil
17   Rule 37(a)(5) is required, as it appears the bankruptcy court
18   may have misinterpreted the Panel’s prior opinion.    There, the
19   Panel stated, “Civil Rule 37(a)(5) authorizes an award of
20   expenses, including attorney’s fees, incurred for a motion to
21   compel the nonparty’s attendance.”    In re Pham, 536 B.R. at 431
22   (emphasis added).    The authorities cited in support of that
23   proposition – Pennwalt Corp., 708 F.2d at 494 n.4, and Civil
24   Rule 30(d)(2) – deal exclusively with a nonparty’s failure to
25   appear for a deposition and do not apply to a nonparty’s failure
26   to produce documents.    Later in the opinion, the Panel stated:
27   “Debtors and Nguyen could have been sanctioned for attorney’s
28   fees under Civil Rule 37(a)(5) for any failure to comply with

                                     -9-
 1   the subpoenas.”   In re Pham, 536 B.R. at 431.   And in the
 2   opinion’s conclusion, the Panel stated, “because the bankruptcy
 3   court applied incorrect standards of law and failed to make the
 4   necessary findings required under Rule 7052 for us to affirm
 5   under Rule 37, we VACATE and REMAND the Compel Order for further
 6   proceedings consistent with this opinion.”   Id. at 434.
 7        These last two quotes, read in isolation, imply that Civil
 8   Rule 37(a)(5) authorizes an award of attorney’s fees incurred in
 9   seeking an order to compel Debtors to appear at their
10   depositions and to produce documents.   But those quotes must be
11   read in the context of the Panel’s initial reference to Civil
12   Rule 37(a)(5), which made clear that, as applied to nonparties,
13   the rule authorizes an attorney’s fee award only with respect to
14   a motion to compel appearance at a deposition.    The Panel’s
15   subsequent references to Civil Rule 37(a)(5) thus applied only
16   to Mr. Pham’s failure to appear for deposition and Nguyen’s
17   alleged interference with Mrs. Pham’s deposition and not for any
18   failure to produce documents.
19        As discussed below, although Civil Rule 45 is the proper
20   authority for sanctioning a nonparty’s failure to produce
21   documents, the procedural requirements of that rule were not
22   followed.
23        Finally, the bankruptcy court correctly denied Debtors’
24   motion to vacate, but it erred in denying their motion for
25   turnover of the sanctions paid.
26
27
28

                                     -10-
 1   A.       Although Nguyen did not participate in the proceedings
              after remand, we will not deem waived his arguments on
 2            appeal.
 3            The Trustee argues that Nguyen waived his right to appeal
 4   the Amended Sanctions Order because he did not file a
 5   supplemental brief or otherwise participate in the proceedings
 6   after remand despite being served with the relevant papers.       But
 7   the Trustee’s supplemental briefing was, at best, ambiguous
 8   regarding whether sanctions were being sought against Nguyen.
 9   In the introduction to his initial supplemental brief, the
10   Trustee requested “that the Court order the Debtors to pay the
11   Estate the sum of $17,515.00 – the amount of the prior sanctions
12   award – for failing to comply with the deposition and document
13   request subpoenas.” (Emphasis added).      And in the conclusion to
14   that brief, the Trustee requested:
15            that the Court enter an order: (1) affirming its prior
              award of sanctions in the Second Sanctions Order under
16            Fed. R. Civ. P. 45 and Fed. R. Bankr. P. 9016 as well
              as the Court’s inherent authority to sanction bad
17            faith conduct; (2) making specific findings regarding
              the violations of the Debtor Subpoenas and the bad
18            faith nature of the Debtors’ and Defense Counsel’s5
              conduct . . . .
19
20            Even though the brief contained allegations of bad faith on
21   Nguyen’s part, it simply was not clear that sanctions were being
22   sought specifically and solely against Nguyen.
23            Moreover, Nguyen did not have notice that sanctions could
24   be imposed under Civil Rule 37(a)(5).      The Trustee’s briefs did
25   not cite that rule as a basis for the sanctions; the Trustee’s
26
27
          5
           The Trustee identified Nguyen as “Defense Counsel” in the
28   introduction to the supplemental brief.

                                       -11-
 1   counsel first cited that rule at the September 6 hearing.    As a
 2   general rule, a court proposing to impose sanctions must “notify
 3   the person charged both of the particular alleged misconduct and
 4   of the particular disciplinary authority under which the court
 5   is planning to proceed.”   Miller v. Cardinale (In re DeVille),
 6   361 F.3d 539, 548 (9th Cir. 2004).
 7        In DeVille, the bankruptcy court sanctioned a debtor and
 8   his counsel under its inherent powers for improper filings and
 9   attempts to remove an adversary proceeding from state court.
10   The sanctioned parties appealed to this Panel, arguing, among
11   other things, that they did not have sufficient notice of the
12   authority for the imposition of sanctions because the court’s
13   orders to show cause referenced only Rule 9011.   The BAP
14   rejected this argument, holding that the appellants had adequate
15   notice that the court’s inherent authority was implicated
16   because the orders to show cause described in detail the
17   sanctionable conduct and addressed lack of good faith and
18   appellants’ manipulation of the bankruptcy system to frustrate a
19   state court trial.   Miller v. Cardinale (In re Deville),
20   280 B.R. 483, 497 (9th Cir. BAP 2002).   The Ninth Circuit Court
21   of Appeals affirmed.   In its opinion, the Court of Appeals noted
22   that the requirement for a court to give notice of an intent to
23   exercise inherent power was not absolute; rather the question
24   was whether the persons to be sanctioned under the court’s
25   inherent power were provided with sufficient advance notice of
26   exactly what conduct was alleged to be sanctionable and were
27   aware that they stood accused of acting in bad faith.
28   In re Deville, 361 F.3d at 549.   The Court of Appeals agreed

                                    -12-
 1   with the BAP that the bankruptcy court’s orders to show cause
 2   met this standard.      Id. at 550.
 3            The Trustee interprets DeVille as “an apt example that
 4   identifying the legal basis for the imposition of sanctions is
 5   not required to satisfy due process.”      The Court of Appeals in
 6   Deville warned, however, that its holding “should not be taken
 7   as an indication that this court regards a bankruptcy court’s
 8   non-reference to inherent power as a source of sanctioning
 9   authority as a matter of little consequence.”      Id. at 550 n.4.
10   We are thus not persuaded that DeVille eliminated the
11   requirement that a person to be sanctioned be put on notice of
12   the authority under which sanctions are sought.      Here, the
13   bankruptcy court awarded sanctions under Civil Rule 37(a)(5), a
14   basis that was not articulated in the Trustee’s supplemental
15   briefing.6
16            There is no question that Nguyen has standing to appeal the
17   bankruptcy court’s order.      As the sanctioned party, Nguyen is a
18   “person aggrieved” by the bankruptcy court’s order.      See
19   Fondiller v. Robertson (Matter of Fondiller), 707 F.2d 441, 442
20   (9th Cir. 1983) (only those persons directly and adversely
21   affected pecuniarily by an order of the bankruptcy court have
22   standing to appeal).
23            And even if notice were sufficient, we would not deem
24
25        6
           As noted, the prior Panel’s opinion suggested that Debtors
26   and Nguyen could have been sanctioned for attorney’s fees under
     Civil Rule 37(a)(5). In re Pham, 536 B.R. at 431. That
27   observation, however, did not constitute notice that the Trustee
     intended to seek – or that the bankruptcy court would order –
28   sanctions under that rule.

                                       -13-
 1   Nguyen’s arguments waived.   Although issues not presented to the
 2   trial court cannot generally be raised for the first time on
 3   appeal, we may consider such arguments if the issue presented is
 4   purely one of law and the opposing party will suffer no
 5   prejudice as a result of the failure to raise the issue below or
 6   if the trial court’s decision was plain error and injustice
 7   would otherwise result.   Enewally v. Washington Mutual Bank
 8   (In re Enewally), 368 F.3d 1165, 1173 (9th Cir. 2004).
 9        As explained below, the bankruptcy court’s exclusive
10   reliance on Civil Rule 37(a)(5) was legal error.    And no
11   prejudice will result to the Trustee for Nguyen’s failure to
12   raise his arguments in the bankruptcy court.    Debtors argued
13   that the Trustee did not follow the proper procedures for the
14   imposition of contempt sanctions under Civil Rule 45(g) and that
15   the facts did not support the imposition of sanctions under the
16   bankruptcy court’s inherent power.    Thus, the Trustee had the
17   opportunity to consider and respond to those arguments.
18   B.   The bankruptcy court erred in reaffirming the sanctions
          award under Civil Rule 37(a)(5).
19
20        Civil Rule 37(a)(5)(A) provides that if a motion to compel
21   is granted or discovery requests are complied with after the
22   filing of a motion to compel, “the court must, after giving an
23   opportunity to be heard, require the party or deponent whose
24   conduct necessitated the motion, the party or attorney advising
25   that conduct, or both to pay the movant’s reasonable expenses
26   incurred in making the motion, including attorney’s fees.”     But
27   the court is not to order such payment if “(i) the movant filed
28   the motion before attempting in good faith to obtain the

                                    -14-
 1   disclosure or discovery without court action; (ii) the opposing
 2   party’s nondisclosure, response, or objection was substantially
 3   justified; or (iii) other circumstances make an award of
 4   expenses unjust.”
 5            In the Panel’s prior opinion, it noted that attorney’s fees
 6   incurred for a motion to compel the Phams’ attendance at their
 7   depositions could have been awarded under Civil Rule 37(a)(5).
 8   See In re Pham, 536 B.R. at 431.      The Panel declined to affirm
 9   the sanctions on that basis because the bankruptcy court’s
10   findings were insufficient to support a sanctions award under
11   Civil Rule 37(a)(5): “the Compel Order provides no findings of
12   fact to support the court’s decision to sanction Appellants for
13   ‘abusive conduct in the course of discovery.’”      Id. at 434.
14            On remand, the bankruptcy court imposed sanctions under
15   Civil Rule 37(a)(5) based on the prior Panel’s remarks.      But the
16   only finding made by the bankruptcy court that was relevant to
17   sanctions under that rule was that Nguyen had interfered in
18   Mrs. Pham’s deposition.      As noted, the Trustee’s brief did not
19   put Nguyen on notice that sanctions were being sought against
20   him under Civil Rule 37(a)(5); thus Nguyen was not afforded the
21   opportunity to present any argument or evidence to justify his
22   conduct.7
23            Additionally, the bankruptcy court erred in relying on
24
          7
           In the prior Panel’s opinion, it noted that Nguyen’s
25   interference in Ms. Pham’s deposition consisted of an
26   “insignificant number of times” where Nguyen tried to clarify or
     correct a question or answer, mainly because no equivalent word
27   existed in Vietnamese for the English word Trustee’s counsel was
     using or the interpreter had used terminology different from
28   Trustee’s counsel’s. In re Pham, 536 B.R. at 427 n.6.

                                       -15-
 1   Civil Rule 37(a)(5) to sanction Nguyen for failure to produce
 2   documents requested by subpoena because that rule does not
 3   authorize sanctions for a nonparty’s failure to produce
 4   documents.    Pennwalt Corp., 708 F.2d at 494 n.4.   As explained
 5   long ago by the Eighth Circuit Court of Appeals:
 6          The purpose of Rule 37 is to provide the mechanism by
            which Rules 26 to 36 can be made effective. It is of
 7          limited application when applied to non-parties. It
            can only be used to order a non-party to answer
 8          written and oral questions under Rules 30 and 31. It
            has no application to a non-party’s refusal to produce
 9          documents.
10   Fisher v. Marubeni Cotton Corp., 526 F.2d 1338, 1341 (8th Cir.
11   1975).
12          The sole basis for enforcing a nonparty’s compliance with a
13   subpoena duces tecum for the production of documents is Civil
14   Rule 45.    See In re Plise, 506 B.R. at 877-78; see also Pennwalt
15   Corp., 708 F.2d at 494, and Fisher, 526 F.2d at 1341.    That rule
16   provides in part that “[t]he court . . . may hold in contempt a
17   person who, having been served, fails without adequate excuse to
18   obey the subpoena or an order related to it.”    Civil Rule 45(g).
19   Civil Rule 45 also grants procedural protections to nonparty
20   witnesses.    “A nonparty served with a subpoena has three
21   options: it may (1) comply with the subpoena, (2) serve an
22   objection on the requesting party in accordance with Civil
23   Rule 45(c)(2)(B), or (3) move to quash or modify the subpoena in
24   accordance with Civil Rule 45(c)(3).”    In re Plise, 506 B.R. at
25   878.    If the nonparty serves an objection or moves to quash the
26   subpoena, the requesting party must obtain a court order
27   directing compliance before seeking contempt sanctions for
28   noncompliance.    See Pennwalt Corp., 708 F.2d at 494 & n.5.    But

                                     -16-
 1   if, as here, the nonparty fails to object to a subpoena, the
 2   proper procedure is for the requesting party to seek an order of
 3   contempt under Civil Rule 45(g).     See Fisher, 526 F.2d at 1342;
 4   U.S. S.E.C. v. Hyatt, 621 F.3d 687, 694 (7th Cir. 2010).
 5           In the contempt proceeding, the nonparty witness is
 6   entitled to the “basic requirements of due process – adequate
 7   notice and proper hearing . . . .”      Fisher, 526 F.2d at 1342.
 8   And “the moving party has the burden of showing by clear and
 9   convincing evidence that the contemnors violated a specific and
10   definite order of the court.”     Knupfer v. Lindblade
11   (In re Dyer), 322 F.3d 1178, 1190-91 (9th Cir. 2003) (citation
12   omitted).
13           Rule 9020 provides that Rule 9014 governing contested
14   matters is applicable to motions for contempt in bankruptcy
15   proceedings.     In the Central District of California, LBR 9020-1
16   prescribes the procedure for obtaining an order of contempt:
17           Unless otherwise ordered by the court, contempt
             proceedings are initiated by filing a motion that
18           conforms with LBR 9013-1 and a lodged order to show
             cause. Cause must be shown by filing a written
19           explanation why the party should not be held in
             contempt and by appearing at the hearing.8
20
     LBR 9020-1(a).     The lodged order must “clearly identify” the
21
     allegedly contemptuous conduct, the possible sanctions, and the
22
     grounds for sanctions.     LBR 9020-1(c).   The order to show cause
23
24
         8
           Although LBR 9020-1 refers to an order to show cause why
25   “the party” should not be held in contempt, the rule does not
26   appear to be limited to contempt against parties to the
     litigation. For example, the rule requires “[p]ersonal service
27   of the issued order to show cause . . . on any entity not
     previously subject to the personal jurisdiction of the court.”
28   LBR 9020-1(e)(2).

                                      -17-
 1   must set a hearing on the matter.
 2        On remand, the Trustee invoked Civil Rule 45 as a basis for
 3   the sanctions.   And the bankruptcy court seemed to acknowledge
 4   that Civil Rule 45 was applicable.      See Hr’g Tr. (Sept. 6, 2017)
 5   at 18:2-15.   The court, however, did not cite Civil Rule 45 in
 6   its written order.   In any event, the Trustee did not follow the
 7   requisite procedure for obtaining an order of contempt, and the
 8   bankruptcy court could not have based the sanctions award on
 9   Civil Rule 45 without first affording Nguyen the procedural
10   protections of that rule.
11   C.   The bankruptcy court’s findings were insufficient to
          support an award of sanctions under its inherent power.
12
13        The Trustee cited the court’s inherent power as alternate
14   authority for the sanctions and, again, the bankruptcy court
15   acknowledged at the hearing that it could impose sanctions on
16   that basis.   Id. at 18:10-11.   Federal courts, including
17   bankruptcy courts, have inherent power to impose sanctions for a
18   broad range of willful or improper litigation conduct.
19   In re Dyer, 322 F.3d at 1196.    This inherent power includes the
20   authority to sanction the conduct of a nonparty who participates
21   in abusive litigation practices or whose actions or omissions
22   cause the parties to incur additional expenses.     Corder v.
23   Howard Johnson & Co., 53 F.3d 225, 232 (9th Cir. 1994).
24        Although a federal court is not prohibited from sanctioning
25   bad faith conduct by means of its inherent power simply because
26   that conduct could be sanctioned under a statute or court rule,
27   if a court rule governs the conduct at issue, the trial court
28   should ordinarily rely on the rule rather than its inherent

                                      -18-
 1   power.      Chambers v. NASCO, Inc., 501 U.S. 32, 50 (1991).   But
 2   “if, in the informed discretion of the court, neither the
 3   statute nor the Rules are up to the task, the court may safely
 4   rely on its inherent power.”      Id.    Those circumstances include
 5   the situation where the procedures for obtaining relief under
 6   the applicable rule were not followed.       See In re DeVille,
 7 280 B.R. at 494 (concluding that Rule 9011 sanctions could not
 8   support the bankruptcy court’s sanctions award in part because
 9   the proper procedures were not followed), aff’d, 361 F.3d 539
10   (9th Cir. 2004).      Rule 45 not being available because proper
11   procedures were not followed, it would have been appropriate for
12   the bankruptcy court to invoke its inherent power.
13            Before imposing inherent power sanctions on a nonparty, the
14   court must make an explicit finding of bad faith or improper
15   purpose.      In re Dyer, 322 F.3d at 1196-97; Pennwalt Corp.,
16 708 F.2d at 494.9     Although the Amended Sanctions Order did not
17   reference the court’s inherent power as authority for the
18   sanctions, the court found that Nguyen acted in bad faith by,
19   among other things, “withholding documents responsive to
20   properly issued subpoenas, and interfering in the examination of
21   Lindsie Kim Pham.”      We may affirm on any basis supported by the
22   record, Caviata Attached Homes, LLC v. U.S. Bank, N.A.
23   (In re Caviata Attached Homes, LLC,), 481 B.R. 34, 44 (9th Cir.
24   BAP 2012), but these findings were not sufficiently specific to
25
          9
26         The Ninth Circuit has not addressed whether a movant
     seeking sanctions under the court’s inherent power must show bad
27   faith by a preponderance of the evidence or by clear and
     convincing evidence. Lahiri v. Universal Music & Video Dist.
28   Corp., 606 F.3d 1216, 1219 (9th Cir. 2010).

                                       -19-
 1   support an award of sanctions under the court’s inherent power.
 2   A bad faith finding necessarily requires an inquiry into the
 3   motivation behind the offending conduct.   See In re Dyer,
 4 322 F.3d at 1196-97 (questioning bankruptcy court’s finding of
 5   bad faith in violating the automatic stay when there was no
 6   finding that the offending individuals were aware that their
 7   actions violated the stay, noting that “[m]ere ignorance or
 8   inadvertence is not enough to support a sanction award under the
 9   inherent authority.”).
10        At the September 6 hearing, the bankruptcy court stated
11   that Nguyen “knew what he was doing was inappropriate.”    It was
12   not clear, however, what conduct the court referred to, and that
13   comment was not converted into a formal finding of fact.     In the
14   Amended Sanctions Order, the court cited Nguyen’s dual
15   representation of Debtors and Defendants, noting that
16        Debtors, not Defendants, were directing the course of
          the adversary litigation and . . . [Nguyen] was not
17        properly representing the interests of Defendants. In
          particular, the Court notes that [Nguyen] vehemently
18        opposed the sending of any notices by the Court
          directly to Defendants (an apparent attempt to keep
19        Defendants ignorant as to the course of the
          litigation).
20
21        This finding could not have supported an award of sanctions
22   under the court’s inherent power because Nguyen had no notice
23   that this conduct was a basis for the sanctions being sought.
24   Due process requires advance notice of the nature of the conduct
25   and the accusation of bad faith.   See In re DeVille, 361 F.3d at
26   548 (“Ordinarily a court proposing to impose sanctions notifies
27   the person charged both of the particular alleged misconduct and
28   of the particular disciplinary authority under which the court

                                   -20-
 1   is planning to proceed.”).
 2   D.    The bankruptcy court erred in denying Debtors’ request for
           turnover of the sanctions paid.
 3
 4         Debtors’ motion to vacate was moot to the extent it sought
 5   vacation of the Sanctions Order; the prior Panel’s mandate had
 6   already vacated that order.    The bankruptcy court, however,
 7   erred in not ordering the Trustee to return the sanctions paid
 8   by Nguyen.   In fact, it is not clear to us why the Trustee did
 9   not immediately return the funds upon receiving notice of the
10   mandate.   Vacating the Sanctions Order eliminated any legal
11   basis for the Trustee to retain those funds – the effect was the
12   same as if the Sanctions Order never existed.    See Camreta v.
13   Greene, 563 U.S. 692, 713 (2011) (vacatur strips the decision
14   below of its binding effect and clears the path for future
15   litigation).   Accordingly, the bankruptcy court erred in not
16   requiring the Trustee to turn over the funds as requested by
17   Debtors.
18                                 CONCLUSION
19         For all of these reasons, we VACATE and REMAND the Amended
20   Sanctions Order for further proceedings in accordance with this
21   disposition.   As noted above, vacatur strips the Amended
22   Sanctions Order of its effect and requires the Trustee to return
23   the sanctions to the appropriate person(s)10 and restart the
24   process of requesting sanctions.    We REVERSE the bankruptcy
25   court’s denial of Debtors’ motion for an order requiring the
26
          10
27         The record reflects that Nguyen paid the sanctions, but it
     was unclear whether the Debtors reimbursed Nguyen for any or all
28   of the sanctions paid.

                                      -21-
 1   Trustee to turn over the sanctions.
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