In Re Schivo
462 B.R. 765
Bankr. D. Nev.2011Background
- Huntsman initially faced dismissal of 25 bankruptcy cases due to lack of prepetition credit counseling under BAPCPA, leading to disgorgement of fees after findings of no value in services.
- Huntsman later filed a Motion to Re-open (Oct. 2010) based on a purported Moody's/Dow Jones press release claiming a new federal law addressing a computer virus, which he believed nullified sanctions.
- Court independently researched and found no such law or enactment, and determined the press release was fake (April Fool’s Day 2006).
- Huntsman then filed a Motion to Redact transcripts related to prior proceedings; the court denied the motion for lack of legal basis and specificity.
- The court ordered Rule 9011 show-cause proceedings and ultimately imposed sanctions, including a bar on certain motions, a public reprimand via this opinion, and referral to the Nevada State Bar.
- Huntsman admitted difficulty verifying the press release and did not authenticate the press release; the court found multiple Rule 9011 violations and severe deterrent sanctions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Huntsman violated Rule 9011(b)(2) | Huntsman believed the press release indicated a valid law | The press release was fake and no law existed | Yes, violated 9011(b)(2). |
| Whether Huntsman violated Rule 9011(b)(3) | Factual assertions were supported by evidence | Factual assertions lacked admissible evidentiary support | Yes, violated 9011(b)(3). |
| Whether Huntsman violated Rule 9011(b)(3) in Motion to Redact | Motion to Redact had merit and needed relief | Motion lacked evidentiary support and proper basis | Yes, violated 9011(b)(3) through lack of support and mischaracterization. |
| Appropriateness of sanctions under Rule 9011 | Sanctions are excessive or improper | Sanctions necessary to deter frivolous conduct | Sanctions imposed (bar on certain motions, public reprimand, State Bar referral) appropriate to deter conduct. |
Key Cases Cited
- In re Blue Pine, LLC, 457 B.R. 64 (9th Cir. BAP 2011) (reasonableness standard; need for factual/legal investigation to avoid frivolous filings)
- Townsend v. Holman Consulting Corp., 929 F.2d 1358 (9th Cir. 1990) (frivolousness determined by lack of factual basis and reasonable inquiry)
- Latman v. Burdette, 366 F.3d 774 (9th Cir. 2004) (evidence admissibility/exclusion relevant to Rule 9011 sanctions)