Fernando Cabrera-Mejia

OCR transcription for search; preserved printed pages are authoritative

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AUTHENTI
U.S. GOVER
INFORMA]

I

Case 2:08-bk-13505-PC Doc51 Filed 12/23/08 Entered 12/23/08 17:33:21 Deg

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ee FILED °
Le. 23
DEC < 3 2088
ENTERE:)
iwi Ste eee
DEC 23 2008
CEATRAL DISTRICT OF Eo oat,
BY: Daput, Thee

UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA

In re: Case No.: LAQ8-13505SB

FERNANDO CABRERA-MEAJIA, et al., (consolidated)

Debtors. Chapter 7

OPINION ON SANCTIONS

Date:
Time:
Ctrm:
Floor:

July 8, 2008
2:00 p.m.
1575

15th

Pursuant to Rule 9011(b)(1)' and (3),
§ 105(a) and the court’s inherent authority,
the court orders that Pite pay sanctions to the
court in the amount of $1000 for each motion

I. Introduction

This case raises the issue of whether,
and to what extent, the court should impose

sanctions on a law firm for filing twenty-one
relief from automatic stay motions in chapter
7 cases with no competent evidence to
support any of the motions and no intent to
proceed to a hearing on the merits of the
motions.

Under the facts of these cases, the
court finds that Pite Duncan LLP (“Pite”) filed
twenty-one relief from stay motions in bad
faith and with the improper purpose of
delaying and increasing the costs of litigation.
The court further finds that Pite knowingly or
recklessly filed the motions with no adequate
evidentiary support.

CATED
ENT
JON
KPO

filed after April 1, 2008, for a total of $21,000.
This payment is due thirty days from the date
of entry of this order.

ll. Relevant Facts

' Unless otherwise indicated, all chapter,
section and rule references are to the
Bankruptcy Code, 11 US.C.A. §§ 101-
1532 (West 2008) and to the Federal Rules
of Bankruptcy Procedure, Rules 1001-
9036.

Cc

At TRAN

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A. Background

In 2007, the court’s attention was
called to increasing foundational defects in
declarations filed with relief from stay motions
in chapter 7 cases involving real estate. The
supporting declarations often appeared
insufficient to establish the competency of the
declarant as a witness, and to lay the
required foundation for the admission of the
evidence. For example, while the
declarations contained information that was
likely retrieved from computer-generated
business records, the declarations usually
tailed to make a prima facie showing of the
declarants’ competency to testify to such
matters under applicable case law. See In re
Vinhnee, 336 B.R. 437, 444 (9th Cir, B.A.P.
2005).

As a result, subsequent to the filing of
each motion for relief from stay involving real
estate, the court issued an order for each
declarant in the accompanying declaration to
appear to testify.

B. Pite’s Actions

Between December 21, 2007 and
May 5, 2008, Pite filed forty-one motions for
relief from the automatic stay with this court
on behalf of home mortgage creditors.”
Twenty motions were filed before April 1,
2008 (“the first group”); the remaining twenty-
one were filed after April 1, 2008 (“the second
group”).

In response to the court’s orders for
declarants to appear and testify, Pite
commenced a suspicious pattern of filing and
then withdrawing such motions. By the end
of March 2008, Pite had withdrawn eight of
the motions in the first group, and had
received orders for witnesses to appear and
testify in twelve other first group motions that
were subsequently withdrawn. In
consequence, the court finds, Pite was on
notice when it filed the second group of

? The court continues to issue such orders.

3 The cases in which the twenty-one motions
were filed, and their dates are listed in
Appendix A hereto.

Page 2 of 15

motions that the declarants would be required
to appear and testify. Nonetheless, in April
and May 2008 Pite filed the twenty-one
motions in the second group and, after the
court issued orders for declarants to appear
and testify, withdrew ail but the two that were
denied.

Overall, Pite withdrew thirty-eight out
of forty-one motions filed with this court. With
two exceptions, all of the motions were
withdrawn within a week of the hearings on
the motions, even though all were filed at
least 24 days before the scheduled hearings
(as required by local rule). By the time the
withdrawals were filed, the court had
expended substantial time and effort in
preparing for the hearings.

The late withdrawal of a relief from
stay motion has an important impact on the
court. Both the clerk's office and chambers
staff put a lot of work into preparing for a
relief from stay hearing. Because of the late
date on which the motions were withdrawn, in
almost all cases the work was completely
done before the withdrawal became known in
chambers.’ This resulted in a large waste of
valuable staff time that could have been put
to good use on other cases pending in the
court.

On numerous occasions, Pite
requested a continuance so that the witness
could make travel plans to appear and testify.
Pite failed to produce a singie witness

“ Each motion was set for hearing on a

Tuesday. Thus no motion was withdrawn
either two or three days before the hearing,
because these were weekend days. Four
motions were withdrawn the day before the
hearing, four were withdrawn the Friday
before the hearing, four were withdrawn the
Thursday before the hearing, two were
withdrawn the Wednesday before the
hearing, and three were withdrawn a week in
advance. Of the remaining two motions, one
was withdrawn eight days before the hearing,
and other was withdrawn 12 days in advance.
Counsel never informed the court of the
withdrawal of a motion, apart from filing the
withdrawal electronically: in consequence,
court and chambers staff continued to work
on the motions notwithstanding the filing of
the notice of withdrawal.

CJ

a ee a ale A A A i a TN

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1 || pursuant to such a request. From the failure set forth in the declarations in support of
ever to produce a witness, the court infers motions for relief from stay, and (2) Pite did in
2 || that Pite knew, at the time each such request fact intend to prosecute the subject motions
was made, that the witness would not appear on the merits. Because none of the
3 {\to testify. The court finds that each such declarations appeared sufficient to
request was made in bad faith. accomplish either of the two objectives, the
4 Eventually, to protect the integrity of court ordered all thirteen declarants to appear
the court and the bankruptcy process, the in person and testify at the July 8 hearing.
5 || court issued an order (“OSC”) to Pite on June All thirteen declarants appeared at
2, 2008 (and amended on June 5, 2008) to the hearing. Three declarants testified as to
6 || appear and to show cause why it should not their knowledge of the matters discussed in
be sanctioned for filing relief from stay their respective declarations, and each
7 || motions with no intent to proceed to a hearing admitted to relying on computer-generated
on the merits.” The OSC ordered Pite to business records to obtain such information.
8 ll appear and to show cause why the court Each declarant failed to provide any
should not sanction it with respect to the testimony to support the declarant's
° |] twenty-one motions that it filed between April competence to testify with respect to such
1, 2008 and May 6, 2008. records. After the testimony of the three
10 Pite filed a response with thirteen declarants, Pite made an offer of proof (which
supporting declarations. The declarations was accepted by the court} that the testimony
11 attempted to establish that (1) the declarants of the ten remaining declarants would be
were competent to testify as to the matters substantially the same, and would not be
12 different from the first three in any material
13 respect.
® The order also required that Pite’s clients Pite failed to learn its lesson: three
44 show cause why sanctions should not be months later, Pite appeared on two more
imposed on them as well. The following occasions and withdrew motions on the
15 ||Parties were named in the OSC: Pite, hearing dates,’ after the court had again
Deutsche Bank National Trust Co. as trustee issued orders to produce its witnesses for
16 for Soundview Home Loan Trust 2006-WF1; testimony and had completed all of the work
Encore Credit Corp.; Moneyline Lending in preparation for the hearings.
17 || Service, inc. Option One Mortgage
Corporation; JP Morgan Chase Bank, N.A,; Ill. Analysis
ig || Golden Empire Mortgage, Inc.; U.S. Bank
National Association, Trustee for Lehman
19 || Brothers Structured Asset Investment Loan 5
Trust Sai) 2005-5; Casa Blanca Mortgage Subsequent to the issuance of the OSC, six
20 |{Inc.; Indymac Bank, F.S.B.; Wachovia creditors substituted Wolfe & Wyman LLP for
Mortgage; Homecomings Financial, LLC; Just Pite. One of the thirteen declarants appeared
21 || Mortgage Inc.; DB Home Lending, LLC; First on behalf of the six creditors: GMAC
Franklin, Wells Fargo Bank, N.A.; Argent Mortgage, LLC; Homecomings Financial LLC;
22 ||Mortgage Company, LLC; Wilmington Wilmington Trust; Suntrust Mortgage, Inc.;
Finance; Suntrust Mortgage, Inc.; New Century Mortgage Corp.; and Casa
23 || Washington Mutua! Bank. At the hearing on Blanca Mortgage, Inc. dba Shearson
July 10, 2008, the court discharged the order Mortgage.
a4 ||as to the clients, for lack of sufficient
evidence that they acted improperly. See, ’ Pite appeared on October 21, 2008 in In re
a5 |le.g. Caldwell v. Farris (In re Rainbow Mary Autera, case no. 08-12506, and on
Magazine, inc.), 136 B.R. 545, 554 (9th Cir. October 7, 2008 in in re Dornzell Johnson,
ag ||B.A.P. 1992) (noting that, “[w]here the client case no. 08-20936. In both cases, Pite failed
is unsophisticated and the actions arise from to produce its witness as ordered by the
27 ||a misreading of or failure to research the court. In both cases, Pite requested
applicable law, sanctions have been imposed dismissal at the hearing, and gave no
2a || solely on counsel”). advance notice of its intent.

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i?)

The OSC required Pite to show The court first turns to Rule 9011,"°

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cause why sanctions should not be imposed
on it in the amount of $5,000 per case “for
filing relief from stay motions, as to which you
were ... counsel, with no intent to proceed to
a hearing on the merits... .”° The order
further specified that the lack of intent
appeared from “the failure to produce a
witness, as required by Local Rule 9013-
1(a)(13)(A) and court orders issued pursuant
thereto in each of these cases, and the
subsequent withdrawal (or attempted
withdrawal) of each motion before or at the
hearing on the merits.”

The OSC stated that it rests on four
grounds: (a) the court’s inherent authority to
impose sanctions for misconduct before the
court; (b) § 105(a); (c) 28 U.S.C. § 1927;°
and (d) Rule 9011(b)(1) and (3). The OSC
consolidated the twenty-one cases involved
herein for the purposes of the show cause
order and hearing.

Sanctions are not warranted where
the claimant's evidence is merely weak. See,
e.g., Baker v. Alderman, 158 F.3d 516, 524
(11th Cir. 1998). However, the dectarants’
uniform refusal to provide any testimony in
support of their computer-generated evidence
prevents Pite from taking advantage of this
rule.

A. Rule 9011

® The OSC was also issued to each of Pite’s
clients who were the moving parties on the
motions here at issue. At the hearing, the
court discharged the OSC as to the clients,
on the grounds that there was insufficient
evidence that any of them, in contrast with
Pite, had acted improperly. The court does
not find that any of the clients is blameless,
but only that the evidence is insufficient for
the imposition of sanctions.

® The court declines to use § 1927 as a basis
for imposing sanctions, notwithstanding that
Pite has not opposed the imposition of
sanctions under this statute.

'° Rule 9011 provides in relevant part:

(b) Representations to the court

By presenting to the court
(whether by — signing, _ filing,
submitting, or later advocating)
a... written motion .. ., an
aitorney . . . is certifying that to
the best of the person’s
Knowledge, information, and
belief, formed after an inquiry
reasonable under the
circumstances —

(1) it is not being presented for
any improper purpose, such as
to harass or to cause
unnecessary delay or needless
increase in the cost of litigation;

(3) the allegations and other
factual contentions have
evidentiary support....

(c) Sanctions

lf, after notice and a reasonable
opportunity to respond, the court
determines that subdivision (b)
has been violated, the court
may, subject to the conditions
stated below, impose an
appropriate sanction upon the
attorneys [or] law firms . . . that
have violated subdivision (b) or
are responsible for the violation.

(1) How initiated

(B} On court’s initiative

On its own initiative, the court
may enter an order describing
the specific conduct that
appears fo violate subdivision
(b) and directing an attorney,
law firm, or party to show cause
why it has not violated
subdivision (b) with respect
thereto.

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1 || which authorizes the imposition of sanctions warranted by existing law or as
on a party (and not only on the party's good faith arguments for
2 || attorney) if that party or its attorney files a extension or modification of
paper with the court (a) for an improper existing law. Third, _ the
3 || purpose (such as to harass or to cause document must not be filed for
unnecessary delay or needless increase in any improper purpose.
4 |/the cost of litigation}, or (b) that makes
claims, defenses or other legal contentions
5 |! that are not warranted by existing law or by a Jackson v. O'Hara, Ruberg, Osborne &
nonfrivolous argument for the extension, Taylor, 875 F.2d 1224, 1229 (6th Cir. 1989).
§ || modification, or reversal of existing law or the Thus Rule 9011 sanctions are warranted
establishment of new law. Rule 9011 is the when a party files a pleading that (a} has no
7 |) bankruptcy counterpart to Federal Rule of reasonable factual basis; (b) is based on a
Civil Procedure 11: thus, caselaw legal theory that that has no reasonable
8 ll interpreting Rule 11 is applicable to Rule chance of success and that cannot be
9011. See 10 COLLIER ON BANKRUPTCY { advanced as a reasonable argument to
9 119011.02 (Alan N. Resnick & Henry J. change existing law; or (c) is filed in bad faith
Sommer eds, 15th ed. rev. 2008). or for an improper purpose.
10 Rule 9011 (like Rule 11) imposes The purpose of Rule 9011 is to
three obligations on an attorney: reduce frivolous claims, defenses or motions,
11 and to deter costly meritless maneuvers.
First, the attorney must conduct See, e.g., Kaplan v. DaimlerChrysler, A.G.,
12 a reasonable inquiry to 331 F.3d 1251, 1255 (11th Cir. 2003)
determine that the document is (citations and quotation marks omitted). It
13 well grounded in fact. Second, establishes an objective standard: whether a
the attorney must conduct a reasonable attorney in like circumstances
14 reasonable inquiry to determine could believe that the actions were factually
15 that the positions taken are ane legally justified. See Baker, 158 F.3d at
524.
16 The factors that a court should
consider in deciding whether to impose
17 sanctions under Rule 9011 include: whether
(2) Nature of — sanction; the improper conduct was willful or negligent;
18 limitations whether it was part of a pattern of activity or
an isolated event; whether it infected the
19 A sanction imposed for violation entire pleading or only one particular count or
of this rule shall be limited to defense; whether the person has engaged in
20 what igs sufficient to deter similar conduct in other litigation; whether the
repetition of such conduct or conduct was intended to injure; what effect it
24 comparable conduct by others had on the litigation process in time or
similarly situated. Subject to the expense; whether the responsible person is
39 limitations in subparagraphs (A) trained in the law."’
and (B), the sanction may
23 consist of, or include . . . an 1. Improper Purpose
order to pay a penalty into court
24 teas In determining whether a party has
violated Rule 9011, a court must consider
25 (3) Order both frivolousness and improper purposes on
a sliding scale. “{T]he more compelling the
26 When imposing sanctions, the showing as to one element, the less decisive
court shall describe the conduct
27 determined to constitute a
violation of this rule and explain
28 the basis for the sanction " See Fep. R. Civ. P. 11, Advisory
imposed. Committee Notes.

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1 || need be the showing as to the other.” /n re hearings on relief from stay motions involving
Marsch, 36 F.3d 825, 830 (9th Cir. 1994). real estate and knew of the expenses
2 Filing a motion with no intent to involved in prosecuting such motions.
proceed to a hearing on the merits violates Pite did not make any reasonable
3 |}Rule 9011. Rule 9011(b)(1) provides that inquiry into the likelihood of success of the
“[bly presenting to the court . . . [a] written motions in light of the court's requirements
4 ||motion, or other paper, an attorney or before making the filings. Instead, Pite
unrepresented party is certifying that to the admits that it was only affer the issuance of
° || best of the person's knowledge, information, orders to appear and testify that it began to
and belief, formed after an inquiry reasonable research and analyze the ltikelihood of
§ |! under the circumstances . . . it is not being success of the motions.
presented for any improper purpose... .” If Pite had responsibly made a
7 |) According to Rule 9011(b)(1), examples of reasonable inquiry into the likelihood of
improper purposes include (but are not success of the motions prior to the filings, it
8 || limited to) harassing, causing unnecessary could not in good faith have filed the motions
delay, or needlessly increasing the costs of here at issue. First, Pite admits that, at the
? || litigation. Improper purpose may be shown time it filed the motions, it anticipated
by excessive persistence in pursuing a claim imminent termination of the automatic stay by
10 |! or defense in the fact of repeated adverse the operation of law. Second, Pite knew the
rulings. See, e.g., indus. Risk Insurers v. level of difficulty of satisfying the evidentiary
11 || M.A.N. Gutehoffnungshutte, 141 F.3d 1434, requirements for the witness: Pite states
1448 (11th Cir. 1998}. that, “in preparing for the upcoming hearings,
12 A court may infer the purpose of filing Pite Duncan evaluated the requirements for
a motion from its consequences such as authenticating electronic business records
33 creating “a persistent pattern of abusive pursuant to the stringent evidentiary standard
litigation.” See, e.g., Aetna Life ins. Co. v. set forth in in re Vinh[njee.” It follows that, by
14 || Alla Med. Servs., inc., 855 F.2d 1470, 1476 April 1, 2008, after having researched and
1s (9th Cir. 1988). Likewise, evidence of a analyzed the likelihood of success for twenty
pleading’s frivolousness may “in such motions, Pite knew of the expenses
16 circumstances that warrant it infer that it was required to satisfy the evidentiary
filed for an improper purpose.” See, e.g., requirements. Nevertheless, Pite knowingly
7 Townsend v. Holman Consulting Corp., 929 or recklessly neglected to make any inquiry
F.2d 1358, 1365 (9th Cir. 1990). Ultimately, into competency of its declarants before filing
18 the purpose of Rule 9011 is “to deter the second group of motions after April 1,
baseless filings in district court’ and 2008,
19 streamline litigation. See, Cooter v. Hartmarx The declarants who testified in court
Corp., 496 U.S, 384, 393 (1990). complained of the expense in bringing
20 In its actions of repeatedly filing and witnesses to court to testify. The court finds
withdrawing (or attempting to withdraw) that bringing the declarants to testify in court
21 motions with no intent to proceed to a hearing is not prohibitively expensive. The motions
on the merits, Pite displays “a pattern of here at issue each involved debts of several
52 || abusive litigation activity.” Aetna, 855 F.2d at hundred thousand dollars. The travel
1476. expenses of bringing a witness to testify
23 For all twenty motions in the first would rarely exceed $1000, particularly given
group, filed between December 21, 2007 and that the court was generous in granting
oq |{April 1, 2008, the court ordered that the continuances in a number of the motions to
declarants appear at the hearing to testify. permit the declarants to make travel plans.
as || The court makes no finding that any of these Expending $1000 (or even $2000) to pursue
motions were filed for an improper purpose. a claim of several hundred thousand dollars
og || The court treats them as_ learning is clearly not prohibitive. Indeed, such an
experiences for Pite. expense barely exceeds the legal fees and
27 However, Pite refused to learn. The costs for the relief from stay motion itself.
court finds that, by the end of March 2008, “If a court finds that a motion .. . is
ag ||Pite clearly had notice of the court's filed in the context of a persistent pattern of
requirement for declarants to appear at the clearly abusive fitigation activity, it will be

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1 || deemed to have been filed for an improper the declaration (and, if necessary, to line out
purpose and sanctionable.” Aetna, 855 F.2d inapplicable parts).
2 || at 1476. Pite’s filing the twenty-one motions Pite did not begin to investigate the
in the second group, with full knowledge of legal requirements for admission of the
3 |ithis court’s evidentiary requirements, and evidence provided in the declarations until
subsequently withdrawing almost all of the after most of them had been filed. Thus Pite
4 || motions once ordered to comply with these failed to satisfy its investigatory obligations
requirements, constituted abusive litigation under Rule 9011(b)(3). If Pite had conducted
5 || activity. Accordingly, the court finds that the an inquiry beforehand, it would have learned
second group of motions was filed for an that many, if not all, of the declarants were
® || improper purpose in violation of Rule 9011. not competent to testify to at least some of
the facts included in their respective
7 2. Inadequate Evidentiary Support declarations.
The live witness testimony of the
8 Rule 9011(b){3) extends the declarants at the OSC hearing confirmed that
attorney’s certification to include that “the the motions lacked adequate evidentiary
° || allegations and other factual contentions support at the time of filing. For example,
have evidentiary support... .” Thus, before Kristy Wagner, a declarant employed by
10 |! filing evidentiary support for a motion, an Wachovia Mortgage, offered nothing but her
attorney has an obligation under Rule job title (department manager) as a
11 || 901 1(b)(3) to determine that the evidence is qualification for her competency to testify as
admissible, or at least that there is a good a witness to the factual contentions
12 || faith argument for its admissibility. * underlying her declaration. Similarly, Norman
Simply completing the mandatory Shaw, a dectarant employed by Washington
13 |! court form of declaration for a relief from stay Mutual, merely stated his job title (vice
vr motion” may be insufficient to satisfy this president) when asked why he was
rule. If the form declaration is not sufficient, competent to testify to the factual contentions
15 the moving party is required to supplement in his declaration. Pite’s offer of proof that
the remaining declarants would only provide
16 similar testimony shows that all of the
declarants were unable to provide admissible
17 "2 Rule 9011(b)(3) also permits an attorney to evidence to support the computer-generated
make factual allegations that are likely to evidence. See, In re Vinhnee, 336 B.R. 437,
1g || have evidentiary support after a reasonable 444 (8th Cir. B.A.P. 2005).
investigation or discovery. This provision is In consequence, the court finds that
19 || Mot applicable in this case for two reasons. none of the twenty-one motions in the second
First, the party relying on this alternative must group was supported by admissible evidence.
29 || 80 specify in the motion, which Pite did not Filing a motion without adequate evidentiary
do. Second, this provision is not applicable support is a violation of Rule 9011(b)(3), and
31 || to an affidavit or a declaration under penalty justifies the imposition of sanctions.
of perjury, which each of these cases
22 || involves. B. Section 105(a)} and Inherent Powers
+3 |{'° In this district, relief from stay motions Section 105(a) grants broad authority
must be made with mandatory court forms. to bankruptcy courts to enforce the provisions
24 |} The form for residential real estate requires of the U.S. bankruptcy code. See, e.g., In re
the movant to attach a copy of the Evergreen Sec. Lid., 381 B.R. 407, 475
25 || promissory note and mortgage (or deed of (Bankr. M.D. Fla. 2007). Pursuant to
trust) to show the debt and its secured status. § 105(a), the court has the inherent power “to
26 || The form also requires that the movant issue any order, process, or judgment that is
complete and attach a separate declaration necessary or appropriate to carry out the
27 || form to provide evidentiary support for the provisions of this title.” This power includes
motion and to establish that the declarant is the power to address wrongful conduct, such
23 || competent to testify to the matters set forth as bad faith or unreasonable, vexatious
therein. conduct, by any party or representative that

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1 ||has appeared before the court. Evergreen, the court’s time and resources. Thus, Pite
381 B.R. at 415. filed the motions in bad faith.
2 The court has the authority to take Thus, pursuant to § 105{a), the court
action sua sponte to prevent abuse of the has the inherent power to exercise authority
3 || bankruptcy process. Section 105(a) where necessary to protect the integrity of the
provides: “No [bankruptcy code] provision . . bankruptcy process. Accordingly, sanctions
4 providing for the raising of an issue by a in this case are supported by § 105(a) and
party in interest shall be construed to the court’s inherent power, as well as by Rule
° || preclude the court from, sua sponte, taking 9011.
any action or making any determination
6 || necessary or appropriate to . . . prevent an Cc. Amount of Sanctions
abuse of process;” In re Parsley, 384 B.R.
7 11438, 172-73 (Bankr, S.D. Tex. 2008) (citing § A bankruptcy court has wide
105(a) in support of its sua sponte order to discretion in determining the appropriate
8 || show cause against Countrywide after an sanction under Rule 9011. See, eg.,
attempt te withdraw a single relief from stay Caldwell v. Farris (in re Rainbow Magazine,
? || motion). Inc.), 136 B.R. 545, 555 (B.A.P. 9th Cir.
In addition, all federal courts, 1992). When imposing sanctions pursuant to
10 including bankruptcy courts, have inherent Rule 9011 and § 105 the court should impose
powers to enforce their orders and sanctions that are “appropriate” and the least
11 |} judgments. See, e.g., Caldwell v. Unified severe to adequately deter the acts of bad
Capital Carp. (in re Rainbow Magazine, Inc.), faith. See, e.g., id. ([A] court should impose
12 l'77 F.3d 278, 284 (9th Cir. 1996) (“By the least severe sanction likely to serve Rule
providing that bankruptcy courts could issue 11’s principal goal-deterrence.”); Jackson v.
13 |! orders necessary ‘to prevent an abuse of O'Hara, Ruberg, Osborne & Taylor, 875 F.2d
14 process,’ Congress impliedly recognized that 1224, 1229 (6th Cir. 1989} (“because
bankruptcy courts have the inherent power to deterrence, not compensation, is the principal
1s sanction”); In re Haque, 395 B.R. 799, goal of Rule 11, courts should impose the
803 (Bankr. S.D.Fla. 2008) (“The Court’s least severe sanction that is likely to deter”);
1g || Power to sanction resides both in 11 U.S.C. § in re Boyd, 143 B.R. 237, 242 (Bankr. C.D.
105(a) and in the inherent power of the Cal. 1992) (“In determining the . . . amount of
V7 federal courts to sanction improper conduct.”) sanciion, the court's discretion must be
(citations omitted). guided by the reasonableness of the sanction
The enforcement of a court order or requested and by the least severe sanction
18 ||. : ne : or
judgment is ordinarily exercised through a necessary to serve the principal goal of Rule
19 court’s contempt power -- the power of the 9011."). Thus, the court should consider
court to hold a person (who may or may not what amount is needed to deter Pite from
20 be a party to a proceeding in the court) in repetition of the same conduct, and what
contempt for not obeying an order of the amount is needed to deter similar activity by
31 || court. Chambers v. NASCO, inc., 501 U.S. other litigants.
32, 44 (1991} (“[Ijt is firmly established that In the context of motions for relief
>> {j [tlhe power to punish for contempts is from stay, courts have imposed harsh
innerent in all courts.) (citations omitted); sanctions on counsel and its clients for
23 Jove Engineering, inc. v. LR.S., 92 F.3d
1539, 1553 (11th Cir. 1996) (holding that
24 {| § 105 creates a statutory contempt power in
bankruptcy proceedings, distinct from the
zs || court’s inherent contempt powers”).
The court finds that Pite knowingly or
26 ||recklessly filed motions containing
inadequate evidentiary support. Further, it
27 || filed motions with the improper purposes of
delaying and increasing the costs of litigation.
2g || In addition to causing detriment to Pite’s own
clients, Pite’s filings unnecessarily drained

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supporting the motions with “unrefined and
unexamined form pleadings, instead of .. .
carefully considered legal papers.” in re
Haque, 395 B.R. at 805 (imposing jointly and
severally on the creditor and its law firm
sanctions in the amount of $2,114.10 foreach
of 45 false affidavits, prepared and filed by
the firm and signed by the client, falsely
claiming entitlement to default interest, for a
total sanction of $95,130.45); Nosek v.
Ameriquest Mortgage Co. (in re Nosek),
386B.R. 374 (Bankr. D. Mass. 2008)
(sanctioning the lender $250,000, the
lender's local counsel $25,000 and the
lender’s national counsel $100,000, where
the lender had misrepresented in its motion
that it was the holder of the note).”°

Pite's actions were not a matter of
insufficient notice of the court's requirements.
Prior to filing the second group of motions,
Pite fully knew of the court's evidentiary
requirements and the costs of satisfying such
requirements. Indeed, Pite filed half of all of
the real estate relief from stay motions
received by this court during that time period.

At the OSC hearing, Pite claimed it
had modified its practices and would not file
motions unless it is assured its clients can
and will present its deciarants at the
hearings. This is not true. Pite has recently
appeared in this court on two occasions to
withdraw motions for relief from stay, after the
court had issued orders for the declarants to
appear to testify. Again, each motion was
withdrawn on the date of the hearing, after
the court had completed all preparatory work.
As such, Pete’s conduct goes beyond the
“sloppy and unprofessional” conduct of
attorneys in in re Hague, 395 B.R. at 803:
itamounts to a knowing and systematic
disregard of the courts requirements
committed in bad faith.

© See also Parsley, 384 B.R. at 180-81,
where the court found that the movant acted
in bad faith in a single motion for relief from
stay by misrepresenting to the court that the
motion was a “good motion” when in fact it
contained factual inaccuracies about the
charges made on the loan at issue.
However, the court declined to impose
sanctions in light of corrective measures
taken by the firm. /d. at 182.

Pite’s acts of filing each of the
motions in the second group with no intent to
proceed to a hearing on the merits caused
unnecessary delay to chapter 7 debtors and
needless cost of litigation to creditors in
twenty-one cases. In addition, it required the
court to expend substantial. time and
resources in preparation for each hearing
before the motion was withdrawn. The court
reserved numerous hearing dates for Pite to
produce witnesses as ordered by the court.
Pite failed to present a single witness at any
of the hearings. The court concludes that
Pite filed the motions in bad faith and with no
intent to proceed to a hearing on the merits,
and should be sanctioned accordingly.

Taking account of the relevant
standards and all of the facts and
circumstances of these consolidated cases,
the court finds that sanctions the amount of
$1000 per motion is the least severe sanction
necessary to deter Pite and others similarly
situated from making abusive filings in the
future. Accordingly, Pite is ordered to pay to
the court $1,000 for each motion in the
second group, for a total of $21,000.

IV. Conclusion

The court finds that Pite filed twenty-
one relief from stay motions with no intent to
proceed to a hearing on the merits, in
violation of Rule 9011 and § 105. Pite’s
repeated filings of needless motions led to
delays in the resolution of debtors’ chapter 7
cases, increased costs to the debtors and
creditors, and a_ substantially increased
burden on the court. In consequence, the
court finds that Pite filed the motions for
improper purposes in violation of Rule
901 1(b}(1).

The court further finds that Pite
knowingly or recklessly filed the motions
without adequate evidentiary support in
violation of Rule 9011(b}(3), because the
declarations filed with these motions were not
competent to show that relief from stay was
warranted. The court further finds that Pite’s
actions amounted to bad faith conduct in
violation of § 105(a).

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Accordingly, the court imposes
sanctions in the amount of $1000 per motion
for a total of $21,000. The court further
orders that Pite pay this amount to the court
within thirty days of the entry of this order.

Dated: December 23, 2008

Hon, Samuel Ly/Bufford
United States Bankruptcy Judge

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Case 2:08-bk-13505-PC Doc51 Filed 12/23/08 Entered 12/23/08 17:33:21 Des¢

| certify that a true
£2 [23 Of

Steven W. Pite, Esq.

David E. McAllister, Esq.
Eddie R. Jimenez, Esq.
Daniel L. Hembree, Esq.
Alison J. Maloof, Esq.

Brian A. Paino, Esq.

Pite Duncan LLP

4375 Jutland Drive

San Diego, California 92117

U.S. Trustee

Department of Justice

725 South Figueroa Street
26th Floor

Los Angeles, California 90017

Dated: // 23/08

Main Document Page 11 of 15

CERTIFICATE OF MAILING

copy of this OPINION RE SANCTIONS was mailed on
to the parties listed below:

11

Pite Duncan, LLP: Motions for Relief of Stay
Debtor
Movan
Dateiof:
08-13131
Nery Walter Son
Suntrust Mortgage, Inc.
5/05/08
6/03/08
5/08/08
Withdrawal filed 5/30/08
08-14709
Gabriel Raul Cabrera and Maria Lara Cabrera
Washington Mutual Bank
5/06/08
6/03/08
5/13/08
Withdrawal filed 5/30/08
08-12195
Reginald Tinsley
Wilmington Finance
4/30/08
05/27/08
5/08/08
Withdrawal filed 5/22/08
08-14915
David Cardenas and Idalia Maldonado
Wells Fargo Bank, N.A.
4/28/08
05/27/08
5/08/08
Withdrawal filed 5/23/08
08-15000
Lawrence Martin Villalobos and Rene Rose Newell- Villalobos
Argent Mortgage Company, LLC
4/29/08
05/27/08
5/08/08
Withdrawal filed 05/22/08
07-19023
Deatra Clinton, Jr.
Wachovia Mortgage, fka World Savings Bank, FSB
4/17/08
5/20/08
4/28/08
Withdrawal filed 5/14/08
08-10454
Ronnita V. Darnell
U.S. Bank Nat'l Ass'n, Tr. for Lehman Brothers Structured Asset Inv. Loan Trust Sail 2005-5
4/16/08
5/20/08
4/28/08
Withdrawal filed 5/13/08
08-12279
Roberto M. Menezes and Olivia P. Menezes
New Century Mortgage Corporation
4/11/08
5/20/08
4/25/08
Withdrawal filed 5/13/08
08-12337
James Z. Pescasio
DB Home Lending, LLC
4/24/08
5/20/08
5/13/08
Denied on 5/20/08 Order 5/23/08
08-12432
Edgardo C. Glinoga and Helen M. Glinoga
Casa Blanca Mortgage, Inc., dba Shearson Mortgage
4/16/08
5/20/08
4/28/08
Withdrawal filed 5/19/08
08-12648
Haenam David Lee
Just Mortgage, Inc.
4/21/08
5/20/08
4/24/08
Withdrawal filed 5/08/08
08-13172
Jose Fidencio De La Rosa
Option One Mortgage Corporation
4/10/08
5/20/08
4/28/08
Withdrawal filed 5/14/08
08-13248
Sergio Leal
Indymac Bank, FSB
4/16/08
5/20/08
4/24/08
Withdrawal filed 5/15/08
08-13350
Charr Antuan Gahagan and Brandye Michell Gahagan
JP Mortgage Chase Bank, N.A.
4/11/08
5/20/08
4/24/08
Order denied on 5/23/08
Case 2:08-bk-13505-PC
Main Document
Page 12 of 15
Doc 51 Filed 12/23/08 Entered 12/23/08 17:33:21 Desc
1

Case No.
Debitor-
Doc No.
Date of aring
Disposition.
08-13643
Marian Lajuan Sparling; Re: 3466 North Greenbrier Road, Long Beach, California 90808; $150k
Homecomings Fin., LLC, fka Homecomings Fin. Network, Inc.
4/17/08
5/20/08
4/24/08
Withdrawal filed 5/13/08
08-13643
Marian Lajuan Sparling; Re: 3466 North Greenbrier Road, Long Beach, California 90808; $566k
Homecomings Fin., LLC, fka Homecomings Fin. Network, Inc.
4/30/08
5/27/08
5/08/08
Withdrawal filed 5/22/08
08-13771
De Jaun Blackburn
First Franklin A Division of Nat. City Bank IN
4/28/08
5/20/08
5/13/08
Withdrawal filed 5/12/08
08-13986
Rene A. Cruz
Golden Empire Mortgage, Inc.
4/11/08
5/20/08; 5/27/08
4/24/08; 5/22/08
Withdrawal filed 5/23/08
08-11531
Rocky Lyn Edwards; Re: 6245 Huntington Ridge Avenue, Las Vegas, Nevada 89139
Alliance Bancorp
2/29/08
4/01/08
3/20/08
Granted on 4/03/08
Rocky Lyn Edwards; Re: 1037 Arroyo Verde Road, #G, Pasadena, California 91030
Encore Credit Corp.
4/04/08
4/29/08
4/21/08
Withdrawal filed 4/28/08
08-11613
John Allen Youngblood
Wells Fargo Bank, N.A. as Tr. for the MLMI Trust Series 2006- WMC1
3/26/08
4/29/08
4/24/08
Withdrawal filed 4/28/08
08-11791 08-11939
Edgar Florian
Wash. Mutual Bank, F.A.
3/06/08
4/08/08
3/31/08
Withdrawal filed 4/28/08
Susi R Zecena
Moneyline Lending Serv., Inc.
4/04/08
4/29/08
4/21/08
Withdrawal filed 4/28/08 Denied 5/08/08
08-13505
Fernando Cabrera-Mejia
Deutsche Bank Nat'l Trust Co., as Tr.for Soundview Home Loan Trust 2006-WF1
4/03/08
4/29/08
4/24/08
Withdrawal filed 4/28/08
Case 2:08-bk-13505-PC
Main Document
Page 13 of 15
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2

Case Nož
Stor
06-15911
Lorece Wright
SCME Mortgage Bankers, Inc.
1/31/08
3/11/08; 4/29/08
2/12/08
Denied on 5/09/08
07-20408
Daryll John Stevens and Serena Fawn Stevens
Fin. Am., LLC
1/31/08
3/11/08; 4/29/08
2/12/08
Withdrawal filed 4/24/08
08-10768
Cynthia Ann Kalina
LaSalle Bank Midwest, NA
3/14/08
4/08/08
3/31/08
Withdrawal filed 4/17/08
08-11640
Anita Marie Clark
Wells Fargo Bank, N.A.
3/12/08
4/08/08
3/31/08
Withdrawal filed 4/23/08
08-11791
Edgar Florian
Wash. Mutual Bank, F.A.
3/06/08
4/08/08
3/31/08
Withdrawal filed 4/28/08
08-11612
Daniel Mucu and Sayra Leon
New Century Mortgage Corp.
2/28/08
4/01/08; 5/20/08
3/20/08; 5/13/08
Withdrawal filed 5/14/08
07-18651
Dwight A. Penn
U.S. Bank Nat'l Ass'n, solely as Tr. for the Holder of Bear Stearns Asset Backed Sec.
1/04/08
2/05/08; 3/25/08; 4/15/08
3/20/08
Withdrawal filed 4/14/08
07-21194
Sigrid Falcon Zandate
Wash. Mutual Bank, F.A.
1/11/08
2/05/08; 3/25/08; 4/15/08
3/20/08
Withdrawal filed 4/10/08
07-21348
Leonardo Q. Marin
Argent Mortgage Co., LLC
1/03/08
2/14/08; 3/25/08
3/20/08
Withdrawal filed 4/10/08
07-21486
Vidal Vega
People's Choice Home Loan, Inc.
1/02/08
2/05/08; 3/25/08; 4/15/08
3/20/08
Withdrawal filed 4/14/08
07-21488
Benjamin Silva
Bank of America, N.A.
1/31/08
3/11/08
2/12/08
Withdrawal filed 2/28/08
07-15768
Clifford Wayne Maddox
Homecoming Fin. Network, Inc.
1/22/08
2/26/08
2/12/08
Withdrawal filed 2/2508
07-19623
Billy Ray Michael Brock and Andrea Maria Lomento-Brock
Mortgageit, Inc.
1/16/08
2/26/08
2/12/08
Withdrawal filed 2/2508
07-19639
Noel Charros and Ana L. Charros
Argent Mortgage Co.
12/24/07
1/22/08; 2/26/08
2/12/08
Withdrawal filed 2/22/08
Case 2:08-bk-13505-PC
Doc 51
Main Document
Page 14 of 15
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3
Dat Hof
Lasposition

Case No.
Debtor
Doc No.
Date Filed
Date of Hearing
Date of Order
Disposition
07-20660
Kanika Lashaun Johnson
US Bank Nat'l Ass'n, as Tr.
12/26/07
1/22/08; 2/26/08
2/12/08
Withdrawal filed 2/22/08
07-20689
Misael Hernandez and Blanca Lilian Hernandez
The Chase Manhattan Bank, as Indenture Tr.
12/28/07
1/22/08; 2/26/08
2/12/08
Withdrawal filed 2/2508
07-20978
Louis James Salcido
BNC Mortgage, Inc.
12/21/07
1/22/08; 2/26/08
2/12/08
Withdrawal filed 2/22/08
07-21055
Maximino G. Lopez
HSBC Bank USA, Nat. Ass'n, as Tr. for Home Equity Loan Trust Series Ace 2005-HE7
12/21/07
1/22/08; 2/26/08
2/12/08
Withdrawal filed 2/22/08
38
Withdrawn
3
Denied
1
Granted
Case 2:08-bk-13505-PC
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4