Shanel Ann Stasz

OCR transcription for search; preserved printed pages are authoritative

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AUTHE

U.S. GOV
INFOR}

Case 2:05-bk-43980-RK Doc 114 Filed 05/06/08 Entered 05/06/08 15:27:34 Desc

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ORDERED PUBLISHED APR 15 2008

HAROLD S. MARENUS, CLERK
BKCY. APP. PANEL
OF. THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

‘bato

In re: ) BAP No. CC-07-1367-MoCK
)
SHANEL STASZ, ) Bk. No. LA 05-43980 AA
)
Debtor. )
)
)
SHANEL STASZ, )
)
Appellant, ) BANKRUPTCY APPELLATE
) OF THE NINTH CIRC
v. ) OPINION ATrue Copy
) Attest:
ROSENDO GONZALEZ, Chapter 7 )
Trustee, )
) Harpld S. Marenus, Cle
Appellee. )
) pT Deguty incen
Date: 05

Submitted Without Oral Argument
on March 19, 2008

Filed - April 15, 2008

Appeal from the United States Bankruptcy Court
for the Central District of California

Hon. Alan M. Ahart, Bankruptcy Judge, Presiding.

Before: MONTALI, CASE’ and KLEIN, Bankruptcy Judges.
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RECEIVED =

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MAY ~ 6 2008

CENTAAL SISTRICT OF CALIFORIER
Las Depa Ce

‘Hon. Charles G. Case, II, Bankruptcy Judge for the District
of Arizona, sitting by designation.

[TICATED

RNMENT

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MONTALI, Bankruptcy Judge:

In the matter before us we hold that an order of civil
contempt issued in a contested matter within a main bankruptcy
case, unlike in an adversary proceeding, is a final, appealable
order. We publish this decision because it requires us to decide
an issue of first impression in this circuit regarding the
finality of this type of civil contempt order.

A Chapter 7 trustee obtained a bankruptcy court order
requiring the debtor to appear at a Rule 2004? examination (“2004
examination”) and produce documents to the trustee. The debtor
repeatedly failed to appear for the 2004 examination and brought
two motions before the court alleging that the 2004 examination
and discovery requests were improper. Although the court denied
the debtor’s motions, she continued to evade the 2004
examination.

The trustee filed a motion to find the debtor in civil
contempt, to order her to appear for the 2004 examination and
produce documents, and to impose monetary sanctions on the
debtor. The court granted the trustee’s motion and awarded

sanctions. The debtor appealed and we AFFIRM.

*7Unless otherwise indicated, all chapter, section and rule
references are to the Bankruptcy Code, 11 U.S.C. §8§ 101-1330, and
to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037, as
enacted and promulgated prior to the effective date of The
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,
Pub. L. 109-8, 119 Stat. 23. All references to Local Rules are
to the Local Bankruptcy Rules for the Central District of
California.

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I. FACTS

1. Order for Debtor to Appear at Rule 2004 Examination and

Related Motions

On February 5, 2007, the bankruptcy court entered an order
{the “2004 Order”) requiring Chapter 7 Debtor Shanel Stasz
(“Debtor”) to appear for an examination by Chapter 7 Trustee,
Rosendo Gonzalez (“Trustee”), pursuant to Rule 2004.? Through
the 2004 examination, Trustee sought information regarding
$10,000 that Debtor received post-petition.

Debtor filed a Motion for Protective Order, arguing that she
should not be required to appear for the 2004 examination or to
produce documents because she had “submitted to the Trustee the
source of the money as post-petition and received from the
largest creditor in this matter, Hugo Quackenbush.” She argued
that the 2004 examination was improper because its purpose was
not limited to the scope of Debtor’s estate. Debtor’s Motion for
Protective Order was denied on March 21, 2007.

On March 22, 2007, Debtor called Trustee’s counsel and
requested that the 2004 examination scheduled for the next day be
postponed because her car was “in the shop.” Trustee’s counsel
agreed to reschedule the 2004 examination for March 28, 2007.

On March 27, 2007, Debtor informed Trustee’s counsel that

she would not be attending the 2004 examination because she was

Rule 2004(a) provides that “On motion of any party in
interest, the court may order the examination of any entity.”
Rule 2004(b) limits the scope of the 2004 examination to “the
acts, conduct, or property or to the liabilities and financial
condition of the debtor, or to any matter which may affect the
administration of the debtor’s estate, or to the debtor’s right
to a discharge.”

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ill and her car was still in the shop. She also told Trustee's
counsel that she had filed a Motion for Reconsideration of Order
Denying Protective Order.

Debtor’s Motion for Reconsideration was denied on April 25,
2007. On April 26, 2007, Trustee’s counsel noticed a new date
for the 2004 examination - May 3, 2007. Debtor did not attend

this 2004 examination or produce any documents to Trustee.

2. Trustee’s Motion to Find Debtor in Contempt

On June 11, 2007, Trustee filed a Motion to Find Debtor in
Civil Contempt for Willful Refusal to Comply with Court Order; to
Compel Production of Documents and Participation Pursuant to
Order for Rule 2004 Examination; Request for Sanctions (“the

Motion”). Debtor opposed the Motion.

3. Continuance of the Contempt Motion

The Motion was originally set for hearing on July 11, 2007,
but was continued to September 12 to allow Debtor an additional
opportunity to produce documents by August 16 and to appear for a
2004 examination on August 20. On August 16 Debtor faxed a
notice of objections to the document request to Trustee’s
counsel.* In response, Trustee’s counsel postponed the upcoming
2004 examination. He requested that Debtor contact him within

ten days to meet and confer regarding her failure to produce

‘All objections were identical: “The documents requested
are objected to since they are outside of the scope of a 2004
Examination and as such are irrelevant to ascertaining the
debtor’s estate.”

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documents.

In the Supplemental Declaration of Trustee’s Counsel in
support of the Motion, Trustee’s counsel stated that he had
incurred more fees since the filing of the Motion, increasing the
total fee request to $4,178.00. Debtor objected to Trustee’s
counsel’s declaration on the grounds that he was ineligible to
practice law beginning on August 16, 2007. Debtor also asserted
that the deadline for preparing a discovery stipulation was

September 4, not August 30.

4, September 12 Hearing on the Motion

At the hearing, Debtor repeated her argument from the
pleadings that Trustee’s counsel was ineligible to practice law
beginning on August 16, 2007. Trustee’s counsel asked the court
to “order [Debtor] one more time to produce the documents,” to
which the Court replied, “But she’s already been ordered to do
that, hasn’t she?” Trustee’s counsel responded that the Court
had already ordered her to produce the documents.

The bankruptcy court granted the Motion and awarded
sanctions for contempt in the amount of $3,278.50 by an order

entered on September 24, 2007. Debtor timely appealed.

II. ISSUE
Did the bankruptcy court err in granting Trustee’s contempt

motion and ordering Debtor to pay sanctions to Trustee?

III. STANDARD OF REVIEW

We review a bankruptcy court’s award of sanctions for civil

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contempt under an abuse of discretion standard. See S&C Home

Loans, Inc. v. Farr (In re Farr), 278 B.R. 171, 175 (9th Cir. BAP

2002); Miller v. Cardinale (In re Deville), 280 B.R. 483, 492

(9th Cir. BAP 2002), aff’d, 361 F.3d 539 (9th Cir. 2004). A
bankruptcy court abuses its discretion if it bases its decision
on an erroneous view of the law or clearly erroneous factual

findings. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405

(1990). Otherwise, to reverse for abuse of discretion we must
have a definite and firm conviction that the bankruptcy court
committed a clear error of judgment in the conclusion it reached.

SEC v. Coldicutt, 258 F.3d 939, 941 (9th Cir. 2001).

IV. JURISDICTION

Trustee argues that the order granting sanctions for civil
contempt is not a final order. If the order is not final, then
the panel lacks jurisdiction to hear this appeal absent leave to
appeal an interlocutory order. See 28 U.S.C. § 158(a). We
conclude that the order granting sanctions on a motion for an
order of contempt made under Rule 9020 is final.

A final order “ends the litigation on the merits and leaves
nothing for the court to do but execute the judgment.” Catlin v.

United States, 324 U.S. 229, 233 (1945). Trustee bases his

argument that the order lacks finality solely on Cunningham v.

Hamilton County, Ohio, 527 U.S. 198 (1999). In Cunningham, the

Supreme Court held that an order imposing sanctions against a
non-party attorney for discovery violations under Federal Rule of
Civil Procedure 37(a) was not a final order because it did not

end the litigation. Cunningham, 527 U.S. at 210. In Markus v.

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Gschwend (In re Markus), 313 F.3d 1146 (9th Cir. 2002), the Ninth

Circuit applied Cunningham to an appeal of sanctions awarded by a

bankruptcy court within an adversary proceeding. The Markus
court found the sanctions order to be interlocutory and not
appealable “until final judgment is entered.” Markus, 313 F.3d
at 1151.

The instant appeal differs significantly from an appeal of
discovery sanctions that were awarded in general litigation or in
an adversary proceeding in bankruptcy. The sanctions order here
was issued in the main Chapter 7 case, rather than within an
adversary proceeding. The order did not award sanctions fora
discovery violation under Federal Rule of Civil Procedure 37,
which is applicable to adversary proceedings in bankruptcy
through Bankruptcy Rule 7037. Instead, the court awarded
sanctions for civil contempt due to Debtor’s failure to comply
with the court’s 2004 Order that Debtor appear at a 2004
examination and produce documents to Trustee’s counsel before the

2004 examination. Thus, neither Cunningham nor Markus directly

addresses the procedural context of the case at hand.

While civil contempt orders entered “during the course of a
pending civil action” are not appealable until final judgment,”
the Ninth Circuit has allowed immediate appeals of sanctions
orders that dispose of the only issue before the court. See

Shuffler v. Heritage Bank, 720 F.2d 1141, 1145 (9th Cir. 1983)

(order finding party in contempt of prior judgment is final);

56RC v. Elmas Trading Corp., 824 F.2d 732, 732 (9th Cir.
1987).

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Hilao v. Estate of Marcos, 103 F.3d 762, 764 (9th Cir. 1996)

(post-judgment orders of contempt are final and appealable).
Rule 9020 provides that motions for contempt in bankruptcy
cases are contested matters governed by Rule 9014.° In this
case, the contested matter alleging Debtor’s contempt was the
only matter before the court. The order entered resolving a
contested matter has the status of a judgment under Federal Rule

of Civil Procedure 58. Fed. R. Civ. P. 58, incorporated by Fed.

R. Bankr. P. 9021. It follows that the court’s award of
Sanctions was a final order that ended the particular contested
matter.

If the award of sanctions were not appealable now, it is
unclear when the order would become final and appealable. Unlike
an adversary proceeding or a civil action outside bankruptcy, the
culmination of the bankruptcy case does not result ina final
judgment.

Because the sanctions order stands alone and requires no

‘Although some courts continue to require a party seeking an
order of contempt to apply to the court for an Order to Show
Cause Re Contempt, we note that Rule 9020 supersedes this
procedure and renders it unnecessary. From 1987 until 2001, Rule
9020(b) provided in relevant part that “[c]lontempt committed in a
case or proceeding pending before a bankruptcy judge ... may be
determined by the bankruptcy judge only after a hearing on
notice,” and that “{t]he notice may be given on the court’s own
initiative or on application of the United States attorney or by
an attorney appointed by the court for that purpose.” In 2001,
Rule 9020 was amended to simply state that “Rule 9014 governs a
motion for an order of contempt made by the United States trustee

or a party in interest.” Hence, a request for civil contempt is
a contested matter and, as such, “relief should be requested by
motion.” Motions for contempt are ordinary contested matters and

need not involve an application for an Order to Show Cause.

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further action by the bankruptcy court, the order is a final

order, and the panel has jurisdiction under 28 U.S.C. § 158.

V. DISCUSSION
Bankruptcy courts have the power to impose civil contempt.

See Caldwell v. Unified Capital Corp. (In re Rainbow Magazine,

Inc.), 77 F.3d 278, 284-85 (9th Cir. 1996); see also 11 U.S.C.
§ 105(a). In order to hold a debtor in contempt, the bankruptcy

court must find that the debtor “violated a specific and definite

order of the court.” Knupfer v. Lindblade (In re Dyer), 322 F.3d

1178, 1191 (9th Cir. 2003). Because Debtor’s conduct
demonstrates her repeated refusal to comply with the court’s
clear order to appear for a 2004 examination, we cannot find that
the bankruptcy court abused its discretion by holding Debtor in
civil contempt and imposing sanctions on her.

The bankruptcy court’s 2004 Order was a definite and
specific order. It set forth the date, time, and place of the
2004 examination and stated that “IT IS ORDERED that [Debtor]
appear for examination.” Debtor does not allege that the 2004
Order contained any ambiguity.

More than six months elapsed between the issuance of the
2004 Order and the hearing on Trustee’s Motion. The 2004
examination was scheduled and rescheduled for four different
dates. Twice, Debtor communicated excuses for her unavailability
to Trustee’s counsel on the eve of the 2004 examination. Twice,
Debtor petitioned the court to excuse her from appearing at the
2004 examination and from producing documents to Trustee's

counsel. The court denied Debtor’s Motion for Protective Order

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and Motion for Reconsideration. Debtor claimed that she did not
receive notice of Trustee’s counsel’s third attempt to hold a
2004 examination. Even if this contention were true, it does not
excuse Debtor’s subsequent noncompliance. Trustee’s Motion was
continued from the original July 11 date to allow Debtor the
opportunity to produce documents and attend a 2004 examination in
August. Debtor refused to provide the required documents and
objected to the request on the date the documents were to be
produced. Trustee’s counsel cancelled the August 2004
examination after Debtor failed to produce documents.

In support of her appeal, Debtor argues that sanctions
should not be awarded because Trustee’s counsel was ineligible to
practice law beginning on August 16, 2007, and because he
allegedly failed to comply with Local Rules regarding discovery
disputes. She also complains of alleged deficiencies in
Trustee’s Motion. We do not find Debtor’s arguments persuasive.

First, Debtor’s conduct during the time when Trustee’s
counsel was eligible to practice law provides sufficient grounds
for holding Debtor in civil contempt. The sanctions awarded did
not include attorney’s fees incurred when Trustee’s counsel was
ineligible to practice law.’ The sanctions awarded by the court
were limited to attorney’s fees for work performed prior to the
filing of the Motion on June 11, 2007. Trustee’s counsel
submitted a supplemental declaration requesting additional

attorney's fees for his continued attempts to conduct a 2004

"Trustee’s counsel was temporarily suspended from practice
for non-payment of his bar fees, not for misconduct.

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examination after the filing of the Motion. The court did not
include these additional fees in its sanctions award, but only
awarded the original amount requested. In addition, the Motion
was based on Debtor’s conduct prior to June 11, 2007 - all of
which occurred when Trustee’s counsel was eligible to practice
law. The majority of events that transpired between Debtor and
Trustee’s counsel occurred when Trustee’s counsel was eligible to
practice law.

Second, Debtor’s contention that Trustee’s counsel did not
comply with Local Rule 9013-1(c), which pertains to discovery
disputes, does not affect the award of sanctions. Local Rule
9013-1(c) provides that in the event of a dispute arising under
Rule 2004, “counsel for the parties shall meet in person or by
telephone in a good faith effort to resolve the discovery
dispute” and that “[i]f£ counsel are unable to settle their
differences, the party seeking discovery shall file and serve a
notice of motion together with a written stipulation.” Trustee’s
counsel attempted to meet and confer with Debtor, in accordance
with Local Rule 9013-1(c) (1). Instead of contacting Trustee’s
counsel by telephone or arranging to meet him in person, as the
rule requires, Debtor faxed Trustee’s counsel a letter
instructing him to prepare a stipulation, as described by Local
Rule 9013-1(c) (2). Trustee’s counsel prepared his portion of the
stipulation and gave Debtor an opportunity to contribute to the
stipulation. Debtor claimed that she was ill and unable to
prepare her portion of the stipulation by August 30, 2007.
Instead, she composed a letter objecting to the amount of time

she was given to review the stipulation and to the format of the

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stipulation, and faxed this letter on August 30.

Debtor seems to argue that Trustee’s counsel bore the
responsibility of complying with Local Rule 9013-1(c); he did not
comply with the Local Rule; and therefore sanctions cannot be
awarded against Debtor. Debtor’s argument is unpersuasive for
both factual and logical reasons. First, Trustee’s counsel seems
to have done all that he could to comply with the rule despite
Debtor’s lack of cooperation. Debtor did not meet and confer
with Trustee’s counsel, and she did not take part in preparing
the discovery stipulation. Second, Debtor’s attempt to shift
blame onto Trustee’s counsel does not excuse her blatant and
persistent evasion of the court-ordered 2004 examination.

Third, Debtor’s argument that the Motion cites inapplicable
law and misquotes a Rule of Bankruptcy Procedure also lacks

merit. The Motion cites the Rainbow Magazine decision which,

although factually different from the case at hand, stands for
the proposition that bankruptcy courts have the power to hold
parties in civil contempt. Although the Motion quotes an
obsolete version of Rule 9020, which was amended in 2001, Debtor
presents nothing to suggest this inaccuracy affected the court’s
decision to impose sanctions.

None of the arguments presented by Debtor on appeal
establish that the bankruptcy court applied an erroneous view of
the law or clearly erroneous factual findings when making its
decision to hold Debtor in contempt. We conclude that the court

did not abuse its discretion to impose sanctions on Debtor.

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VI. CONCLUSION
For the foregoing reasons, we AFFIRM the bankruptcy court’s
order granting the contempt Motion and awarding sanctions to

Trustee.

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U.S. Bankruptcy Appellate Panel
of the Ninth Circuit

125 South Grand Avenue, Pasadena, California 91105
Appeals from Central California (626) 229-7220
Appeals from all other Districts (626) 229-7225

NOTICE OF ENTRY OF JUDGMENT

BAP No.: CC-07-1367-MoCK
RE: SHANEL ANN STASZ

A separate Judgment was entered in this case on 04/15/2008.

BILL OF COSTS:

Desc

Bankruptcy Rule 8014 provides that costs on appeal shall be taxed by the Clerk of the
Bankruptcy Court. Cost bills should be filed with the Clerk of the Bankruptcy Court

from which the appeal was taken. 9th Cir. BAP Rule 8014-1

ISSUANCE OF THE MANDATE:

The mandate, a certified copy of the judgment sent to the Clerk of the Bankruptcy
Court from which the appeal was taken, will be issued 7 days after the expiration of the

time for filing a petition for rehearing unless such a petition is filed or the time is

shortened or enlarged by order. See Federal Rule of Appellate Procedure 41.

APPEAL TO COURT OF APPEALS:

An appeal to the Ninth Circuit Court of Appeals is initiated by filing a notice of appeal
with the Clerk of this Panel. The Notice of Appeal should be accompanied by payment
of the $455 filing fee and a copy of the order or decision on appeal. Checks may be

made payable to the U.S. Court of Appeals for the Ninth Circuit. See Federal Rules of

Appellate Procedure 6 and the corresponding Rules of the United States Court of

Appeals for the Ninth Circuit for specific time requirements.

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CERTIFICATE OF MAILING

The undersigned, deputy clerk of the U.S. Bankruptcy Appellate Panel of the Ninth Circuit,
hereby certifies that a copy of the document on which this certificate appears was transmitted
this date to all parties of record to this appeal.

By: Vincent Barbato, Deputy Clerk
Date: April 15, 2008