Colony Resorts LVH Acquisitions LLC v. Sun

OCR transcription for search; preserved printed pages are authoritative

10

11

12

13

14

15

16

17

18

13

20

21

22

23

24

25

26

27

28

AUTHENY

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Des
Main Document Page 1 of 10

LI XIA SUN,

Debtor.

LOS ANGELES DIVISION

COLONY RESORTS LVH ACQUISITIONS
LLC dba LAS VEGAS HILTON,

Plaintiff,
Vs.

LI XIA SUN,

Defendant.

Sommer” gee” Saag! gue Segue” et” Sta Sine” gee” ae eee” Se” “ee ge Seagate emg See! Senge ge! Moagae!” “eam Set” “meme”

T entered an Order To Show Cause herein on August 20, 2007 and have received written

responses and heard oral arguments from both sides at the hearing on September 12, 2007. The

IPATED

US. GOVERNMENT
FORMATION

GPO

|

Ste

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

| OCT 30 20

mo en Fo |

FILED

7h
Fass

OCT 3 0 any

CLERK, US BANKRUPTE
pffhTRai DISTRICT OF CauiEog

Case No. 06-12792' FB
Adv No. 06-01937

MEMORANDUM OF DECISION
RE ORDER TO SHOW CAUSE

Date: September 12, 2007

Time: 10:30 a.m.

Place: Courtroom 1345

INTRODUCTION

———Reputy Clerk |

16

11

12

13

14

15

16

1?

18

19

20

21

22

23

24

25

26

27

28

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Desc
Main Document Page 2 of 10

following are my findings of fact and conclusions of law with respect to my Order To Show
Cause.
SUMMARY

In summary, | find and conclude that monetary sanctions against Shun C. Chen (Chen),
counsel for Li Xia Sun (Sun), are warranted under the provisions of Federal Rule of Bankruptcy
Procedure 7037 and Federal Rule of Civil Procedure 37(a)(2)(A) and (a)(4)(B), as well as Local
Bankruptcy Rule 9013-1(c){2) and (c)(3) and Local Bankruptcy Rule 1002-2(a), for the reason
that the motions filed by Chen were unjustified and unreasonable in that they were filed in
violation of the rules cited. I find and conclude that the motions were an attempt by Chen to shift
to the plaintiff herein the cost of discovery of evidence that was and is more readily available
from Chen’s client’s memory and personal knowledge and that the motions were an improper
attempt to place an unreasonable burden on the plaintiff and were filed and served in violation of
the foregoing rules.

DISCUSSION

The underlying dispute in this adversary is between defendant Li Xia Sun (Sun),
bankruptcy debtor, and plaintiff, known as the Las Vegas Hilton (Hilton), which runs a casino.
Hilton alleged that Sun had accumulated at least $175,000 in gambling debt to Hilton, via a line
of credit at Hilton’s casino that she drew on by signing markers, Hilton asserts that this debt
should be nondischargeable under 11 U.S.C. § 523(a), alleging that Sun had represented in
various writings that she had the ability and intent to re-pay the funds borrowed while in fact her
intent was fraudulent and the debt should be nondischargeable.

As the lawsuit between Hilton and Sun progressed, a discovery dispute arose after Chen

propounded interrogatories to Hilton and Hilton responded and objected to the Sun

10

il

12

13

14

15

16

17

18

13

20

21

22

23

24

25

26

27

28

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Des
Main Document Page 3 of 10

interrogatories. Subsequently, pursuant to Local Bankruptcy Rule 7027-1 and Federal Rule of
Civil Procedure 33(a),' Chen filed two separate but simultaneous motions, the first, to compel
further responses, and the second, for leave to propound further interrogatories. Both motions
were heard on August 1, 2007 and denied. My Order To Show Cause followed. In arriving at
this decision, I have taken into account the parties’ discovery motion pleadings and their
responses to my Order To Show Cause.

Chen’s proposed interrogatories were numbered 1 through 15. Each of these
interrogatories was further divided into lettered subsections. In all, Chen included over 80
subsections in the proposed interrogatories. Often, a single subsection listed multiple questions.
For example, Interrogatory No. 3(G) requested, “[1] The names, addresses and telephone
numbers of any and all persons who spoke to Lisa concerning credit prior to each decision, [2]
whether such person has the authority to grant or deny credit, and [3] include the names,
addresses and telephone numbers of ail hosts (male and female} who participated in the
communication or translation with Lisa concerning credit.” (Notice of Motion and Motion for
Leave of Court to Propound Plaintiff with Attached Interrogatories (hereafter Motion to
Propound), Exhibit 1, 7:1-4.)

Some of the interrogatories requested information that Sun was more likely to have
access to than was Hilton. For example, Interrogatories No. 13(A) and (B) requested “[t]he date
and time Lisa obtained services from you” and “[a] full description of the services Lisa obtain

[sic] from you.” (Motion to Propound, Exhibit 1, 10:16-17.)

* Hereafter, “Local Rules” and “Federal Rules,” respectively, or “Federal and Local discovery mules.”

i?)

seston pee ee eerie ernie ath eer par

10

11

12

13

14

15

16

17

18

13

20

21

22

23

24

25

26

27

28

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Des
Main Document Page 4 of 10

Hilton, through its counsel, Michael B. Reynolds (Reynolds), had previously responded
to Set One of Chen’s interrogatories on February 1, 2007. Hilton answered some of the earlier
interrogatories but refused to answer others. Reynolds expressed to Chen objections that the
interrogatories exceeded the number permitted and that they were in general “overbroad,
argumentative, unduly burdensome, oppressive, [and] calculated to harass Plaintiff... .”
(Written Stipulation in Support of Motion to Compel Further Response to Interrogatories,
Exhibit A, 2:25--3:1.)

On April 19, Chen wrote to Reynolds’s firm that the interrogatories did not violate the
numerosity requirement because the subparts were integral to the primary questions. He
demanded that Hilton respond fully to the interrogatories or he would “file a motion to compel
further response.” (Plaintiff Las Vegas Hilton’s Response to Defendant’s Motion to Compel
Further Responses to Interrogatories and Motion for Leave to Propound Additional
Interrogatories (hereafter Hilton Response), 12.) On April 23, Reynolds responded that he
disagreed that the subparts were integral to the primary questions. Hilton did not send any
further response to the interrogatories.

Reynolds asserts that during a phone conversation on May 21, Reynolds offered to waive
the numerosity objection in exchange for an agreement that Sun would not seek to depose any
witnesses and that Chen refused this solution. (Hilton Response, 10:22--11:5.) However, in his
Motion to Compel, Chen argued inconsistently that his client could not afford to have Chen
depose witnesses and that this was the reason interrogatories were necessary.

At some point, the lawyers discussed filing a stipulation pursuant to Local Rule 9013-
l(c)(2). After an email exchange between the two parties that took place between May 21-31,

Reynolds sent a letter to Chen on May 21, by email and regular mail, including language that

C

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Des
Main Document Page 5 of 10

i?)

Reynolds wanted Chen to include in the stipulation. This language was included im the text ofa

longer letter, but was clearly indented and headed: “Issue 1: Hilton’s Position”, “Issue 2: Hilton’s

Position.” Chen did not include this language in the next draft of the stipulation, In response,
Reynolds declined to sign Chen’s proposed stipulation. Chen replied that he could not tell which
part of the May 21 letter was intended to be Hilton’s portion of the stipulation. No later emails
or letters were offered in evidence.

On June 21, Chen filed a document misleadingly entitled “Written Stipulation in Support
of Motion to Compel Further Response to Interrogatories.” However, this pleading was signed
only by Chen; Hilton’s counsel did not sign Chen’s proposal.

On June 21, Chen also filed two motions, one seeking to propound interrogatories to
Hilton, and the second seeking an order to compel Hilton to further respond to Sun’s original
interrogatories. After a hearing on August 1, 2007, I denied both motions. [ also issued an Order
To Show Cause why Chen should not be sanctioned pursuant to the Federal and Local discovery
rules.

After considering the parties’ written and oral responses to my Order To Show Cause, it
is my conclusion that monetary sanctions against Chen are warranted under Federal Rules of
Bankruptcy Procedure 7037, which incorporates Federal Rule 37, as well as Local Rule 9013-
1(c)(2) and Local Rule 1002-2(a).

Federal Rule 37(a)(4)(B) provides for sanctions when a motion to compel discovery is
denied. It states: “If the motion is denied, the court may enter any protective order authorized
under Federal Rule 26(c) and shall, after affording an opportunity to be heard, require the
moving party or the attorney filing the motion or both of them to pay to the party or deponent

who opposed the motion the reasonable expenses incurred in opposing the motion, including

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Dest
Main Document Page 6 of 10

attorney’s fees, unless the court finds that the making of the motion was substantially justified
or that other circumstances make an award of expenses unjust.” (Emphasis added.)

The Local Rules also provide for sanctions. Local Rule 1002-2(a) states: “The violation
of, or failure to conform to, the Local... Rules or F.R.B.P. . . shall subject the offending party of
counsel to such penalties, including monetary sanctions or the imposition of costs and attorneys’
fees payable to opposing counsel, as the court may deem appropriate.”

The questions, then, are whether Chen complied with Federal and Local discovery rules,
and if not, whether his motion to compel was substantially justified, or whether other
circumstances make an award of expenses unjust. I conclude that the answer to each of these
questions is “No.”

Federal Rule 37(a)(2)(A) requires the movant to confer in good faith to secure discovery
without court action before moving to compel. Under Local Rule 9013-1(c}(2), conferring in
good faith would have required Chen to “file and serve a notice of motion together with a written
stipulation.”

Chen has not complied with these rules. The document entitled “Stipulation” was not in
fact a stipulation, since (among other reasons) it did not state the positions of both parties as they
wished them to be stated and was not signed by both parties. Chen, the proponent, easily could
have complied with the Local Rule requiring a stipulation as an ingredient to any discovery
motion. Reynolds’ May 21 email and letter furnished Chen with the exact language that
Reynolds wished to include in any proposed stipulation to be filed with Chen’s motion. Chen
had only to copy Reynolds’ (clearly expressed and delineated) proposed insertion into Chen’s
proposed stipulation with a few simple computer strokes and send it to Reynolds to sign. Even iff

Chen’s misunderstanding was genuine as to the exact portion of the text of Reynolds’ May 21

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Des
Main Document Page 7 of 10

email and letter that Reynolds wanted included (a proposition that I believe is doubtful under the
circumstances), the reasonable and proper course of action would have been for Chen to attempt
to clear up any misunderstanding before filing. At the same time, I find no suggestion in the
evidence that Reynolds was acting unreasonably, that he would have made a clarifying
discussion difficult, or that Chen plausibly could have thought that his options were exhausted by
Reynolds’ latest email. I conclude that Chen was wholely unjustified in filing his unilateral
“stipulation,” written and signed only by himself. I find his actions, far from being substantially
justified, to be evidence of a bad faith attempt to make it appear that Reynolds (or Hilton) was
not cooperating with the discovery processes and rules. I also conclude from the entirety of the
evidence that no circumstances here make unjust an award of sanctions against Chen.

This conclusion in favor of awarding sanctions is strengthened by several additional
factual circumstances revealed in the moving papers. First, Chen refused to get the information
he needed by means of depositions, claiming that depositions were too expensive for his client,
yet Chen at the same time refused to pursue the information he needed by means of
interrogatories, which would have required him to comply with Reynolds’ reasonable request,
under the circumstances, that Chen waive the right to the very depositions he had vowed not to
seek. Second, the interrogatories Chen propounded to Hilton included questions that Chen could
much more easily and less expensively have answered by interviewing his own client. Third, in
his email exchange with Reynolds, Chen wrote: “As to your comment that a client should give
up if he/she cannot afford attorney’s fees, such proposition is outrageous. If money is the only
determining factor, I would not hesitate to suggest you to prepare for guillotine, if you have read

the history concerning French revolution. The legislature clearly intends to ask your client to

106

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Des
Main Document Page 8 of 10

pay for attorney’s fees for filing a frivolous lawsuit advocating Mafia’s position.” (Hilton
Response, 22.)

Taken as a whole, and considering the spirit of the Federal and Local discovery rules, the
foregoing leads me to conclude that Chen fell short of reasonable compliance with discovery
rules, which required him to attempt to confer with opposing counsel in good faith, and he was
not substantially justified in filing his motion to compel. Rather, I conclude that Chen’s motions,
including his pseudo-stipulation, were an attempt to harass Hilton and Reynolds and to generate
unnecessary pressure and expense for Hilton and Hilton’s counsel.

For the foregoing reasons, I find that Chen has violated Federal Rule 37(a)(2)(A) and
Local Rule 9013-1(c)(2). Further, I find that Chen is subject to sanctions under Federal Rule
37(a)(4)(B) and Local Rule 1002-2(a).

Therefore, Chen should be sanctioned by being ordered and directed to pay forthwith
monetary sanctions, as follows:

$7,623.50 ($395 X 19.3 hours) for time spent by Hilton’s counsel in direct response to

the June 21 Motion to Compel and Motion For Leave To Propound Interrogatories.

$58.50 in travel and parking expenses.

$7,682.50 total amount of sanctions.

Sanctions will not be awarded for time spent by Reynolds on discovery and the stipulation
negotiations prior to Chen’s filing of the June 21 motions, since Federal Rule 37(a)(4)(B)
provides only for “reasonable expenses incurred in opposing the motion.”
CONCLUSION
Sanctions in the sum of $7,682.50 are awarded to Reynolds’ firm, payable by Chen

within 20 days of the entry of thts order.

lo)

10

11

12

13

14

15

16

17

18

19

26

21

22

23

24

25

26

27

28

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Desc
Main Document Page 9 of 10

SO ORDERED.
Date: ¢ of 20 /o 4

Slvwrts & Renrvar,

Thomas B. Donovan
United States Bankruptcy Judge

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Case 2:06-ap-01937-TD Doc 22 Filed 10/30/07 Entered 10/30/07 14:32:42 Des
Main Document Page 10 of 10

NOTICE OF ENTRY OF JUDGMENT OR ORDER
AND CERTIFICATE OF MAILING

TO ALL PARTIES IN INTEREST LISTED BELOW:
1. You are hereby notified that a judgment or order entitled:

MEMORANDUM OF DECISION RE ORDER TO SHOW CAUSE
was entered on _/ 0/30 / O7

2. I hereby certify that I mailed a true copy of the order or judgment to the persons and
entities listed below on /0/ 0107.

Attorney for Defendant

Shun C. Chen

Law Offices of Shun C. Chen
4521 Campus Drive #324
Irvine, CA 926120-2621

Debtor/Defendant

Li Xia Sun

513 Golden Pardos Drive
Diamond Bar, CA 91765

Attorney for Plaintiff
Michael B. Reynolds

Snell & Wilmer LLP

600 Anton Blvd., Ste. 1400
Costa Mesa, CA 92626

Chapter 7 Trustee

Heide Kurtz

2515 S. Western Ave. #11
San Pedro, CA 90732

Office of the U. S. Trustee

Ernst & Young Plaza

725 S, Figueroa Street, 26" Floor
Los Angeles, CA 90017

Dated: | 0/30/07

fi ‘
VA Sid ‘Clerk

16