Court Opinion

ID: 4192597
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:01:50.698721+00
Date Added: 2024-06-11T14:40:19.301329
License: Public Domain

FILED
                                                              APR 24 2017
 1                         NOT FOR PUBLICATION
 2                                                       SUSAN M. SPRAUL, CLERK
                                                           U.S. BKCY. APP. PANEL
                                                           OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.     EC-16-1258-TaBJu
                                   )
 6   GOLD STRIKE HEIGHTS           )      Bk. No.     15-90811
     HOMEOWNERS ASSOCIATION,       )
 7                                 )
                    Debtor.        )
 8   ______________________________)
                                   )
 9   DON H. LEE,                   )
                                   )
10                  Appellant,     )
                                   )
11   v.                            )      MEMORANDUM*
                                   )
12   GARY FARRAR, Chapter 7        )
     Trustee,                      )
13                                 )
                    Appellee.      )
14   ______________________________)
15                   Argued and Submitted on March 23, 2017
                            at Sacramento, California
16
                             Filed – April 24, 2017
17
               Appeal from the United States Bankruptcy Court
18                 for the Eastern District of California
19    Honorable Ronald H. Sargis, Chief Bankruptcy Judge, Presiding
20
     Appearances:          Appellant Don H. Lee argued pro se; Joshua
21                         P. Hunsucker of Neumiller & Beardslee argued
                           for appellee
22
23   Before:   TAYLOR, BRAND, and JURY, Bankruptcy Judges.
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(c)(2).
 1                               INTRODUCTION
 2        The bankruptcy court held Indian Village Estates, LLC and
 3   appellant Don Lee in civil contempt under 11 U.S.C. § 105(a)1
 4   for violating the automatic stay.      It awarded Appellee, the
 5   chapter 7 trustee for debtor Gold Strike Heights Homeowners
 6   Association, $7,244 in compensatory damages.      In the main,
 7   Appellant does not dispute that some sanction was warranted;
 8   instead, he argues that the amount was excessive because
 9   Appellee unnecessarily multiplied the proceedings.      The
10   bankruptcy court, however, considered the reasonableness of the
11   fee award; it partially agreed with Appellant, and cut
12   Appellee’s requested fees by about a third.
13        We AFFIRM the bankruptcy court.
14                                  FACTS
15        The facts are not in dispute.
16        Initial proceedings.    Debtor Gold Strike Heights Homeowners
17   Association filed a voluntary chapter 7 petition on August 20,
18   2015.    Appellee was appointed as the chapter 7 trustee.     Four
19   days later, Appellant and Indian Village Estates sued Debtor in
20   the Calaveras County Superior Court.      About one day after that,
21   Appellant received actual notice of the bankruptcy filing.
22        Appellee eventually removed the lawsuit to the bankruptcy
23   court and then moved to dismiss the adversary proceeding;
24   Appellant did not oppose; and the bankruptcy court granted the
25   requested dismissal.
26
27        1
             Unless otherwise indicated, all chapter and section
28   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.

                                      2
 1        The contempt proceedings.    Thereafter in the main
 2   bankruptcy case, Appellee filed a motion for civil contempt
 3   sanctions.    He argued that Appellant and Indian Villages
 4   Estates, although they knew they had violated the automatic stay
 5   shortly after case initiation, failed to take steps to remedy
 6   the violation and terminate the litigation.    He sought about
 7   $13,000 in costs and expenses allegedly necessary to obtain a
 8   dismissal.
 9        Appellant and Indian Village Estates opposed, arguing that
10   the stay violation was inadvertent and harmless.    They claimed
11   that, other than filing the action, they did not prosecute the
12   state court action.    Appellee, they urged, never asked that the
13   case be dismissed until March 2016; and they asserted that they
14   were ready to dismiss the case in March 2016, when Appellee’s
15   counsel offered to prepare a stipulation to dismiss the case.
16   Finally, they argued that, because a simple stipulation to
17   dismiss would have ended the matter, all of Appellee’s expenses
18   and costs were unnecessary.
19        The court apparently issued a tentative ruling before
20   hearing.2    After hearing, it entered a civil minute order
21   granting Appellee’s motion for sanctions, finding Appellant and
22   Indian Villages Estates in contempt, and awarding Appellee
23   $7,244.00 in civil sanctions.    It incorporated the findings of
24   fact and conclusions of law as stated in the civil minutes.
25
          2
             Appellant did not provide it in his excerpts of record;
26   nor did he provide a transcript of the hearing. The Clerk of
27   Court directed appellant to provide all necessary transcripts by
     February 10, 2017. BAP Dkt. 12. Appellant indicated that
28   hearing’s transcript was unnecessary. BAP Dkt. 16.

                                       3
 1   Appellant timely appealed.
 2                                JURISDICTION
 3        The bankruptcy court had jurisdiction under 28 U.S.C.
 4   §§ 1334 and 157(b)(2).   We have jurisdiction under 28 U.S.C.
 5   § 158.
 6                                   ISSUE
 7        Whether the bankruptcy court abused its discretion in
 8   awarding Appellee $7,244, rather than a lesser amount, in
 9   compensatory sanctions under § 105(a).
10                            STANDARD OF REVIEW
11        We review for an abuse of discretion the decision to hold a
12   party in civil contempt and the determination of the proper
13   amount of sanctions.   Knupfer v. Lindblade (In re Dyer),
14   322 F.3d 1178, 1191 (9th Cir. 2003); Rediger Inv. Servs. v.
15   H. Granados Commc’ns, Inc. (In re H Granados Commc’ns, Inc.),
16   503 B.R. 726, 731 (9th Cir. BAP 2013).       A bankruptcy court
17   abuses its discretion if it applies the wrong legal standard,
18   misapplies the correct legal standard, or if it makes factual
19   findings that are illogical, implausible, or without support in
20   inferences that may be drawn from the facts in the record.        See
21   TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th
22   Cir. 2011) (citing United States v. Hinkson, 585 F.3d 1247, 1262
23   (9th Cir. 2009) (en banc)).
24                                 DISCUSSION
25        Section 362(k) allows individuals to recover damages for
26   willful violations of the automatic stay.       11 U.S.C. § 362(k).
27   Chapter 7 trustees, as representatives of bankruptcy estates,
28   however, are excluded from § 362(k).       Havelock v. Taxel

                                       4
 1   (In re Pace), 67 F.3d 187, 193 (9th Cir. 1995), amended
 2   (Oct. 11, 1995).    Instead, they must rely on “the civil contempt
 3   remedy provided by § 105(a).”    In re Dyer, 322 F.3d at 1190.
 4   When determining whether a party is subject to civil contempt
 5   for violating the automatic stay, the threshold inquiry focuses
 6   on a finding of “willfulness.”    Id. at 1191.   The bankruptcy
 7   court, thus, must find: (1) the party knew the automatic stay
 8   existed; and (2) the party intended the act that violated the
 9   stay.   Id.
10        At oral argument, Appellant candidly acknowledged that he
11   had a duty to do something in the face of a stay violation, but
12   did not; this comports with similar admissions in his briefs.
13   Cf. Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 (9th
14   Cir. 2002) (“A party violating the automatic stay, through
15   continuing a collection action in a non-bankruptcy forum, must
16   automatically dismiss or stay such proceeding or risk possible
17   sanctions for willful violations pursuant to § 362([k]).”).       He
18   thus waived any argument that he did not willfully violate the
19   automatic stay.    As a result, we turn our attention to his
20   concern over the amount of the sanctions.
21        The bankruptcy court did not abuse its discretion by
22   awarding Appellee $7,244 based on Appellant’s civil contempt.
23   Civil contempt sanctions must either be compensatory or designed
24   to coerce compliance.    In re H Granados Commc’ns, Inc., 503 B.R.
25   at 736; see In re Dyer, 322 F.3d at 1192.    “Attorneys’ fees are
26   an appropriate component of civil contempt sanctions.”
27   In re H Granados Commc’ns, Inc., 503 B.R. at 736 (citing
28   In re Dyer, 322 F.3d at 1195).    “This includes reasonable

                                      5
 1   attorneys’ fees incurred in the process of voiding the stay
 2   violation.”   Id. (citing In re Dyer, 322 F.3d at 1195).       But if
 3   the incurred fees do not flow from the stay violation, then
 4   their award is improper.     Id. (citing In re Dyer, 322 F.3d at
 5   1195 & n.19).
 6        Here, Appellee requested $11,435 in fees, plus additional
 7   amounts if the motion was opposed, broken into four categories
 8   (removal; status conference and miscellaneous case issues; the
 9   motion to dismiss; and the motion for sanctions).      This
10   represented 40.9 hours of work.       Appellee attached detailed time
11   sheets.    But the bankruptcy court did not award Appellee all of
12   the requested fees; it awarded Appellee $7,244.00.
13        On appeal, Appellant focuses his argument on the
14   reasonableness of the awarded fees.      His theme is that the
15   Trustee saw the stay violation as a lucrative opportunity and
16   unnecessarily multiplied proceedings to drum up fees.        The
17   bankruptcy court’s decision below shows that it partially agreed
18   with Appellant.   It was concerned that the Trustee “appears to
19   have taken additional, possibly unnecessary steps, in dealing
20   with the violation.”   Civil Minutes, August 4, 2016, 6.
21        The bankruptcy court, however, placed this concern in
22   context.   First, it determined: “It is clear from the totality
23   of the circumstances that the Plaintiffs are locked in a death
24   spiral battle with the Trustee and Debtor.”      Id. at 7.    Second,
25   it noted Appellant’s inaction: “If Plaintiffs had taken
26   5 minutes, they could have unilaterally filed a dismissal of the
27   state court action.”   Id.    Given this inaction, the bankruptcy
28   court concluded that “Plaintiffs cannot be reasonably heard to

                                       6
 1   complain that the Bankruptcy Trustee” removed the action and
 2   filed a motion to dismiss, despite Appellant’s “intent” to
 3   dismiss the adversary proceeding and stated non-opposition to
 4   dismissal, because they “were unwilling to lift a finger to
 5   rectify their continuing violation of the automatic stay.”      Id.;
 6   see also id. (“The ‘Opposition’ filed by Plaintiffs demonstrates
 7   that they intentionally continued in violation of the automatic
 8   stay, placing the burden on the Trustee to address this
 9   continuing violation.”).      The bankruptcy court then concluded:
10        Trustee’s counsel has spent more time, which may well
          relate to necessary work concerning the underlying
11        dispute, possible rights and interests asserted by
          Plaintiffs, and rights of the estate. The court
12        computes that $7,244.00 in attorneys’ fees relates
          directly to, and were caused by, Plaintiffs, and each
13        of their failure to correct their continuing violation
          of the automatic stay.
14
15   Id. at 10.    The bankruptcy court reduced Appellee’s fee request
16   by $4,191.    Appellant may believe that the fees awarded are
17   unreasonable, but he does not address how the bankruptcy court’s
18   reduction in the amount of fees was insufficient.
19        Last, Appellant argues that the bankruptcy court erred by
20   ignoring evidence that he and Appellee agreed in March 2016 that
21   Appellee would prepare a stipulation dismissing the adversary
22   proceeding.    We disagree.   The bankruptcy court canvassed the
23   evidence and discussed the issue over the course of at least a
24   page and a half of single-spaced text.     It concluded:
25        However, nothing other than Don Lee’s statement,
          facing this sanctions motion, that the Trustee stated
26        that the Trustee would prepare a dismissal nor a
          stipulation to end the case has been presented to the
27        court. The court does not find this statement
          credible. There is no indication that there was ever
28        the expectation or inclination that the Trustee would

                                        7
 1        prepare the dismissal.
 2   Id. at 9.    In reaching this conclusion, the bankruptcy court
 3   considered: oral argument at the hearing; declarations from
 4   Appellant and Appellant’s then-attorney; and the emails
 5   Appellant offered as proof.    This conclusion, based on the
 6   court’s credibility determination, was not illogical,
 7   implausible, or without support in the record.    The Trustee’s
 8   failure to provide declaratory evidence denying any agreement to
 9   prepare the stipulation does not make reversal necessary.      The
10   bankruptcy court did not believe Appellant; he did not need more
11   than argument from the Trustee on this point.    We are not left
12   “with the definite and firm conviction that a mistake has been
13   committed.”    Anderson v. City of Bessemer City, NC, 470 U.S.
14   564, 573 (1985) (internal citation omitted).
15        From Appellant’s perspective, all it would have taken to
16   dismiss his admittedly void state court lawsuit was a simple
17   filing and he believes $7,244 in attorney’s fees to accomplish
18   that task seems excessive and disproportionate.    The problem
19   with this view is that for the Trustee, the representative of
20   the defendant in the suit, much more was required to dismiss the
21   case.    Nor did the Trustee have the reasonable option of doing
22   nothing — unattended lawsuits have a life of their own.
23        In sum and on this record,3 we cannot find error in the
24   bankruptcy court’s reasonableness calculation.
25
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          3
27           As we note above, Appellant did not provide us with the
     hearing transcript, nor did he include the tentative ruling
28   issued before the matter, which does not appear on the docket.

                                      8
 1                         CONCLUSION
 2   Based on the foregoing, we AFFIRM.
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