In re: Gold Strike Heights Homeowners Association

FILED APR 24 2017 1 NOT FOR PUBLICATION 2 SUSAN M. SPRAUL, CLERK U.S. BKCY.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 26 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. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9