In re: Tony Pham and Lindsie Kim Pham
CC-14-1342-KiBrD
| 9th Cir. BAP | Sep 2, 2015Background
- Chapter 7 Trustee sued transferees in an adversary proceeding seeking avoidance/recovery of four condominium transfers; Debtors (Tony and Lindsie Pham) were nonparty witnesses who had been deposed by trustee subpoenas.
- Trustee served Civil Rule 45 subpoenas for Debtors’ depositions and document production; Debtors’ counsel Nguyen accepted service but depositions became contentious (interpreter issues, scheduling, alleged premature termination).
- Trustee moved to compel Debtors’ attendance/production and sought $17,515 in attorney’s fees as sanctions, citing Local Bankruptcy Rules (LBR) 1001-1(f), 7026-1(c) and 9011-3.
- Bankruptcy court ordered depositions/documents and awarded the trustee $17,515 jointly and severally against Debtors and Nguyen under the cited LBRs.
- On appeal the BAP held the bankruptcy court abused its discretion because the court relied on local rules that conflict with the Federal Rules for sanctioning discovery by nonparties and failed to make adequate findings to support sanctions under the proper federal rules.
Issues
| Issue | Trustee/Pltf Argument | Debtors/Nguyen Def. Argument | Held |
|---|---|---|---|
| Whether LBRs 1001-1(f), 7026-1(c) or 9011-3 authorize awarding attorney’s fees as sanctions against nonparty witnesses and their counsel for discovery abuse | Local rules permit sanctions for failure to cooperate in discovery; court may rely on those LBRs to award fees | LBRs conflict with the Federal Rules; sanctions for nonparty subpoenas must follow Civil Rule 45/Rule 37 procedure | LBRs are invalid to the extent they authorize such sanctions here; bankruptcy court erred relying on them |
| Proper procedural basis to sanction a nonparty for subpoena noncompliance (Rule 45 vs Rule 37) | Trustee relied on local rules rather than Civil Rule 45; argued Rule 37(a)(5) supports fees for motions to compel nonparty attendance | Debtors: protections of Civil Rule 45 apply; sanctions under Rule 37 limited for nonparty subpoenas and require compliance with Rule 45 procedures | Civil Rule 45 (and its procedures) governs enforcement of nonparty subpoenas; sanctions under Rule 37 have limited application and court did not make required Rule 45 findings |
| Whether appellate affirmance possible under Civil Rule 37 despite bankruptcy court citing LBRs | Trustee argued Plise not controlling; court could affirm on any basis supported by record (including Rule 37) | Appellants argued Plise precludes imposing Civil Rule 37 sanctions on nonparties without following Rule 45 procedures | BAP declined to affirm under Rule 37 because bankruptcy court failed to make adequate factual findings required by Rule 52/7052 to support such sanctions |
Key Cases Cited
- In re Plise, 506 B.R. 870 (9th Cir. BAP 2014) (Civil Rule 45 — enforcement and limits on awarding attorney’s fees against nonparty subpoena recipients)
- Pennwalt Corp. v. Durand-Wayland, Inc., 708 F.2d 492 (9th Cir. 1983) (motions to compel nonparty depositions subject to Civil Rule 37 sanctions procedure)
- TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011) (abuse-of-discretion standard for discovery sanctions review)
- Sigma Micro Corp. v. Healthcentral.com (In re Healthcentral.com), 504 F.3d 775 (9th Cir. 2007) (local bankruptcy rules must be consistent with federal rules)
- Anwar v. Johnson, 720 F.3d 1183 (9th Cir. 2013) (local rules may not enlarge or conflict with substantive federal rights)