Stipp v. CML-NV One, LLC (In Re Plise)
506 B.R. 870
| 9th Cir. BAP | 2014Background
- Stipp, debtor's former counsel, was sanctioned $10,000 for noncompliance with subpoenas in a Rule 2004 discovery against him as a nonparty.
- CML-NV One, LLC, creditor in the debtor’s chapter 7 case, sought Rule 2004 examinations and production of documents from Stipp and MSJM.
- CML served subpoenas under Civil Rule 45; Stipp timely served written objections under Rule 45(c)(2)(B) and later sought a protective order.
- The bankruptcy court granted CML’s Countermotion to Compel, denied Stipp’s protective order, and sanctioned Stipp despite the objections based on discovery violations.
- The panel held that Civil Rule 37 was misapplied to a nonparty; sanctions could only arise under Civil Rule 45 (contempt) after a court order directing compliance.
- The panel reversed the sanctions award, concluding the court failed to follow the proper Rule 45 procedure and standards for nonparties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the court abuse discretion on sanctions against a nonparty? | Stipp argues Rule 45 governs; no contempt order issued first. | CML contends sanctions were proper under Rule 37(a)(5) for noncompliance. | Yes; the court abused by applying Rule 37 to a nonparty; sanctions must use Rule 45 after a compelling order. |
Key Cases Cited
- Pennwalt Corp. v. Durand-Wayland, Inc., 708 F.2d 492 (9th Cir. 1983) (sanctions against nonparties under Rule 37 not available; contempt framework under Rule 45 applies)
- In re Exxon Valdez, 142 F.R.D. 380 (D.D.C. 1992) (contempt sanctions not available under Rule 37; contempt under Rule 45; nonparty objections discussed)
- In re Sciaba, 334 B.R. 524 (Bankr. D. Mass. 2005) (Rule 26-37; sanctions against nonparties governed by Rule 45 for subpoenas)
- In re Nicole Energy Servs., Inc., 356 B.R. 786 (Bankr. N.D. Ohio? 2007) (nonparty discovery sanctions framework including Rule 45 considerations)
- DG Creditor Corp. v. Dabah (In re DG Acquisition Corp.), 151 F.3d 75 (2d Cir. 1998) (privilege and privilege log timing;Log requirements in subpoena responses)