511 B.R. 843
Bankr. S.D. Tex.2014Background
- Debtor Dr. Michael Brown filed Chapter 11; a trustee was later appointed after transfers and undisclosed assets were discovered; Brown died in October 2013.
- Carol Paredes, a former girlfriend, possessed two iPhones (an iPhone 4S used in U.S. and an international phone) and had text messages potentially relevant to the estate (including a message from driver Jean‑Paul Marongin: “I know where everything is”).
- Trustee's investigators viewed the iPhone 4S and the Marongin text in October 2013 but did not seize or copy it; Paredes later agreed to provide the data but the phone’s data was lost shortly before her December 5, 2013 Rule 2004 examination.
- Paredes’s counsel, Michael Aviles (not admitted in Southern District of Texas and never pro hac vice), represented her, failed to disclose the iPhone 4S was lost, and later delivered a replacement iPhone (5S) while representing it would be produced.
- Trustee moved to compel turnover and for sanctions for contempt and spoliation; after hearings, the court declined sanctions against Paredes but found Aviles engaged in serious professional misconduct and imposed compensatory sanctions and referral to disciplinary authorities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Failure to appear at original Nov. 22, 2013 Rule 2004 exam | Trustee: Paredes failed to obey the 2004 Exam Order by missing the Nov. 22 date. | Paredes/Aviles: Short notice; later agreed to and attended Dec. 5 exam. | No contempt: short notice + pro se status + prompt appearance on Dec. 5 made contempt inappropriate. |
| Failure to produce documents in response to the Amended 2004 Notice | Trustee: Paredes failed to produce requested documents (text messages) in violation of the Notice. | Paredes/Aviles: Unclear service, possible lack of notice, trustee tacitly accepted delayed production. | No contempt: although nonproduction occurred, trustee tacitly consented and no prejudice shown. |
| Spoliation of evidence (loss of iPhone 4S/data) and adverse‐inference sanction | Trustee: Paredes intentionally/negligently destroyed evidence; seek monetary sanctions and adverse inference. | Paredes: Loss could be accidental; attempted to share messages; no bad faith; trustee had opportunity to seize phone earlier. | No spoliation sanction: trustee failed to prove bad faith by clear and convincing evidence; mitigation exists and trustee had opportunities to preserve data. |
| Attorney misconduct (Aviles’ nondisclosure, unauthorized practice, candor) | Trustee: Aviles misled court, concealed loss of phone, practiced without pro hac vice, causing unnecessary costs. | Aviles: Oversight on pro hac; claimed he did not know phone was irretrievable until Dec. 26; later self‑remedied with CLE and donation. | Held against Aviles: court found his testimony not credible, breach of candor and unauthorized practice; imposed monetary reimbursement to trustee and referral to NY disciplinary authority. |
Key Cases Cited
- United States v. Fidanian, 465 F.2d 755 (5th Cir.) (federal courts’ inherent contempt power)
- Ingalls v. Thompson (In re Bradley), 588 F.3d 254 (5th Cir.) (bankruptcy contempt authority)
- Placid Ref. Co. v. Terrebonne Fuel & Lube, Inc. (In re Terrebonne Fuel & Lube, Inc.), 108 F.3d 609 (5th Cir.) (contempt powers of federal courts)
- United States v. City of Jackson, Miss., 359 F.3d 727 (5th Cir.) (clear and convincing standard for contempt elements)
- United States v. Rylander, 460 U.S. 752 (Sup. Ct.) (inability to comply as defense to contempt)
- Whitfield v. Pennington, 832 F.2d 909 (5th Cir.) (mitigating circumstances may preclude contempt)
- Brewer v. Dowling, 862 S.W.2d 156 (Tex. App.) (definition of spoliation)
- Trevino v. Ortega, 969 S.W.2d 950 (Tex.) (elements for spoliation under Texas law)
- In re Advanced Modular Power Sys., Inc., 413 B.R. 643 (Bankr. S.D. Tex.) (bad‑faith requirement for adverse‑inference spoliation sanction)