In re: Cesar Montiel Perez ( 2022 )

FILED
OCT 18 2022
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. SC-21-1173-LBF
CESAR MONTIEL PEREZ,
Debtor. Bk. No. 18-07545-MM7
MAURICE GRAYTON, Adv. No. 20-90002-MM
Appellant,
v. MEMORANDUM∗
TIFFANY L. CARROLL, United States
Trustee, San Diego,
Appellee.
Appeal from the United States Bankruptcy Court
for the Southern District of California
Margaret M. Mann, Bankruptcy Judge, Presiding
Before: LAFFERTY, BRAND, and FARIS, Bankruptcy Judges.
INTRODUCTION
Maurice Grayton appeals the bankruptcy court’s judgment imposing
$2,990 in fines and damages under § 110.1 The bankruptcy court granted in
∗ This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
1 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532. “Rule” references are to the Federal Rules of
Bankruptcy Procedure, “Civil Rule” references are to the Federal Rules of Civil
Procedure, and “LBR” references are to the Local Bankruptcy Rules for the Southern
District of California.
1
part the United States Trustee’s (“UST”) motion for summary judgment,
finding that Grayton was a bankruptcy petition preparer (“BPP”) within
the meaning of § 110(a)(1) and had violated several subsections of that
statute by failing to disclose his name, address, and social security number,
executing documents on behalf of the debtor, giving legal advice, and
failing to file a disclosure of compensation. The bankruptcy court rejected
Grayton’s defenses that the debtor was an expert on bankruptcy issues and
had authorized Grayton to sign the schedules and that Grayton was under
duress when he abided by the debtor’s demand to prepare the bankruptcy
documents.
We AFFIRM.
FACTS
A. Bankruptcy Events
Cesar Montiel Perez (“Debtor”) filed a chapter 7 bankruptcy petition
in December 2018. The petition, Statement of Financial Affairs (“SOFA”),
and Official Form 106Dec, “Declaration About an Individual Debtor’s
Schedules” (“Form 106Dec”) all indicated that Debtor had not paid or
agreed to pay someone who is not an attorney to help fill out the
bankruptcy forms. The SOFA and the Form 106Dec, however, were signed,
“Maurice Grayton for Cesar Montiel Perez.” An application for waiver of
the filing fee, which indicated that Debtor was unemployed, was also filed
and granted. Although the application did not include Grayton’s name or
signature, the UST later alleged that Grayton had prepared the form and
2
advised Debtor on how to obtain the waiver, noting that the financial
information on the application was “created” by Grayton and differed from
that which Debtor provided to Grayton.
Debtor failed to appear for his initial § 341(a) meeting of creditors,
and his case was dismissed. Thereafter, motions to reopen and to vacate
the dismissal were filed in Debtor’s name; the notice of the motion to
reopen stated that it was being served by “Maurice Grayton, Movant, for
Cesar Montiel Perez.” The bankruptcy court granted the motions.
In May 2019, Debtor’s case was dismissed after the bankruptcy court
granted the UST’s motion for denial of discharge under § 727(a)(8) on the
ground that Debtor had received a discharge in a case commenced within
eight years before the filing of the current petition.
B. The UST’s Adversary Proceeding Seeking Relief Under § 110
In January 2020, the UST filed an adversary complaint against
Grayton alleging several violations of § 110. The complaint contained the
following causes of action: (1) violation of § 110(b)(1) (failure to sign and
print name and address on documents); (2) violation of § 110(b)(2) (failure
to provide Rule 9009 notice re official forms); (3) violation of § 110(c)(1)
(failure to provide BPP’s social security number); (4) violation of § 110(e)(1)
(execution of documents on behalf of debtor); (5) violation of
§ 110(e)(2)(B)(vii) (giving legal advice); (6) violation of § 110(g) (collecting
filing fee from debtor); and (7) violation of § 110(h)(2) (failure to provide a
declaration disclosing fee received from debtor).
3
The complaint sought, under §§ 110(h)(3) and (i)(1), disgorgement to
the Debtor of the $1,371 fee he paid to Grayton plus double damages based
on Grayton’s fraudulent and deceptive conduct and, under §§ 110(j)(1) and
(j)(2), a permanent injunction based on a pattern of fraudulent, unfair or
deceptive conduct. In addition, the prayer for relief included a request that
Grayton be fined $500 for each violation of § 110, or $22,500, and that the
bankruptcy court triple these fines, for a total of $67,500.
Grayton filed an answer, in which he alleged he acted under duress
in following Debtor’s instructions to prepare and file the documents. He
alleged that Debtor was an “active outlaw motor cycle [sic] gang member,
who intimidated Defendant.” The answer included statements suggesting
that Grayton believed the adversary proceeding was a criminal matter. He
stated, “Defendant vehemently request [sic] an entry and/or a plea of NOT
GUILTY . . . .” He also invoked his “U.S. Constitution protections pursuant
[to] the 5th and 14th Amendments[] from being compelled to give
testimony that could incriminate Defendant . . . .” And he requested court-
appointed counsel. The caption and signature block indicated that he
demanded a jury trial.
Grayton refused to cooperate in discovery, even while propounding
on the UST numerous interrogatories, requests for admissions (“RFAs”),
and requests for production of documents. The interrogatories and RFAs
sought admissions and answers not from the UST but from Debtor and his
significant other, Irma Cisneros a.k.a. Irma Adelman (“Adelman”). Grayton
4
refused to meet and confer as required under Rule 7016 and LBR 7016-1(c)
and to respond to the UST’s discovery requests. He also failed to meet the
bankruptcy court’s extended deadline to provide his initial disclosures. He
instead filed (1) a motion for summary judgment alleging that the
bankruptcy court lacked jurisdiction because the adversary proceeding was
untimely and that the complaint lacked merit, and (2) a motion in limine
seeking to exclude evidence that he had engaged in fraudulent, unfair, or
deceptive conduct. The UST opposed both motions.
Grayton failed to appear at the court-scheduled hearing on his
motion for summary judgment and his requests for court-appointed
counsel and for a jury trial. The bankruptcy court denied the motion for
summary judgment, finding that it had jurisdiction, the complaint was
timely, and there were disputed factual issues. The court also denied the
other two requests, finding that Grayton had no right to either court-
appointed counsel or a jury trial. The bankruptcy court extended the
discovery cutoff to give the UST time to seek orders to compel. Grayton
appealed the denial of his motions to the District Court for the Southern
District of California (“District Court”), which eventually dismissed the
appeal as interlocutory. Grayton’s notice of appeal included a request for
the adversary proceeding to be transferred to the District Court on the
ground that he did not consent to a trial conducted by Judge Mann.
At a subsequent hearing, the bankruptcy court denied Grayton’s
motion in limine and his oral motion to recuse. Grayton appealed the order
5
denying the motion in limine to the District Court, which dismissed the
appeal as untimely.
In the meantime, Grayton filed a motion to compel discovery and for
sanctions under Civil Rule 37, applicable via Rule 7037. He also filed a
motion to dismiss the complaint pursuant to Civil Rule 37(b)(2)(A)(v). The
UST filed an omnibus objection and a motion to compel initial disclosures
and for discovery sanctions. The bankruptcy court denied Grayton’s
motions and granted the UST’s. The bankruptcy court reiterated that it saw
no basis for recusal, apparently addressing a reference made in Grayton’s
motion to compel. Grayton appealed the denial of his motion to compel to
the District Court, which dismissed for failure to prosecute. Grayton also
appealed to the District Court the bankruptcy court’s order granting the
UST’s motion to compel attendance at deposition and for sanctions. The
appeal was dismissed as interlocutory.
In May 2021, the UST filed a motion seeking summary judgment on
all causes of action in the complaint. Most of the facts underlying the
motion were deemed admissions based on unanswered RFAs. Grayton did
not file an opposition, but he appeared at the hearing. He refused to
answer any of the court’s questions “without the presence or assistance of
counsel or before a jury.” The bankruptcy court later issued its order
granting in part the UST’s motion; shortly thereafter, the bankruptcy court
issued an order approving the UST’s motion to withdraw the remaining
claims and for entry of a final judgment. Grayton timely appealed.
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JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
Did the bankruptcy court err in denying Grayton’s request for court-
appointed counsel?
Did the bankruptcy court err in denying Grayton’s jury demand?
Did the bankruptcy court err in denying Grayton’s motion for
summary judgment?
Did the bankruptcy court abuse its discretion in denying Grayton’s
motion in limine?
Did the bankruptcy court abuse its discretion in denying Grayton’s
motion to recuse?
Did the bankruptcy court abuse its discretion in denying Grayton’s
motion to dismiss the adversary proceeding, to compel discovery, and for
sanctions under Civil Rule 37?
Did the bankruptcy court abuse its discretion in granting the UST’s
motions to compel attendance at deposition and for initial disclosures and
for sanctions?
Did the bankruptcy court err in granting summary judgment in favor
of the UST?
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STANDARDS OF REVIEW
We review de novo the bankruptcy court’s grant or denial of
summary judgment. Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771
F.3d 1119, 1125 (9th Cir. 2014). Entitlement to a jury trial is a question of
law that we also review de novo. Cal. Scents v. Surco Prods., Inc., 406 F.3d
1102, 1105 (9th Cir. 2005). Under de novo review, “we consider a matter
anew, as if no decision had been made previously.” Francis v. Wallace (In re
Francis), 505 B.R. 914, 917 (9th Cir. BAP 2014).
We review the bankruptcy court’s evidentiary rulings and its rulings
on the imposition of discovery sanctions for abuse of discretion. See Yeti by
Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1105-06 (9th Cir. 2001).
Likewise, the bankruptcy court’s denial of a motion to recuse, Hale v. U.S.
Tr. (In re Basham), 208 B.R. 926, 930 (9th Cir. BAP 1997), and its award of
fines for violations of § 110 are reviewed for abuse of discretion. Frankfort
Digital Servs., Ltd. v. Neary (In re Reynoso), 315 B.R. 544, 550 (9th Cir. BAP
2004), aff’d, 477 F.3d 1117 (9th Cir. 2007). Denial of a request for court-
appointed counsel is also reviewed for abuse of discretion. See Agyeman v.
Corr. Corp. of Am., 390 F.3d 1101, 1103 (9th Cir. 2004).
To determine whether the bankruptcy court abused its discretion, we
conduct a two-step inquiry: (1) we review de novo whether the bankruptcy
court “identified the correct legal rule to apply to the relief requested”; and
(2) if it did, we consider whether the bankruptcy court’s application of the
legal standard was illogical, implausible, or without support in inferences
8
that may be drawn from the facts in the record. United States v. Hinkson, 585
F.3d 1247, 1262 (9th Cir. 2009) (en banc).
DISCUSSION
It is difficult to ascertain from Grayton’s briefing what issues are on
appeal. His opening brief does not clearly articulate precisely how the
bankruptcy court erred in its rulings. Grayton seems to challenge the
judgment and all of the bankruptcy court’s interlocutory rulings, so we
address them herein.
A. The bankruptcy court did not abuse its discretion in denying
Grayton’s request for court-appointed counsel.
The bankruptcy court correctly held that there is no right to counsel
in bankruptcy cases or actions therein, citing Lassiter v. Department of Social
Services of Durham County, 452 U.S. 18, 26-27 (1981), which held that there is
no Sixth Amendment right to counsel unless the defendant faces the loss of
physical liberty if he loses. See also Wynn v. Eriksson (In re Wynn), 889 F.2d
644, 646 (5th Cir. 1989) (holding that bankruptcy court did not err in
permitting debtor’s counsel to withdraw and rejecting debtor’s argument
that he was being deprived of his constitutional right to counsel of choice
in civil litigation). The bankruptcy court also correctly noted that California
Government Code § 68651, although requiring appointment of counsel in
civil cases in certain specified courts, was not applicable.2 On appeal,
2
That statute provides, in relevant part, that “[l]egal counsel shall be appointed
to represent low-income parties in civil matters involving critical issues affecting basic
human needs in those specified courts selected by the Judicial Council as provided in
9
Grayton has not argued otherwise, nor has he cited any applicable law to
the contrary.
B. The bankruptcy court did not err in denying Grayton’s jury
demand.
The bankruptcy court denied Grayton’s jury demand, citing Gould v.
Clippard, 340 B.R. 861, 881-82 (M.D. Tenn. 2006) (holding that BPPs
defending litigation for violations of § 110 are not entitled to a jury trial
because actions under that statute are core proceedings), and In re Bascus,
548 B.R. 742, 748 (Bankr. S.D. Tex. 2016) (holding that rights established in
§ 110 fall into the “public rights” exception and thus do not carry the right
to a jury trial). See also Demos v. Brown (In re Graves), 279 B.R. 266, 271-72
(9th Cir. BAP 2002) (holding that there is no constitutional or statutory
right to a jury trial in an injunction action under § 110(j)). Again, Grayton
proffers no citation to authority suggesting that this ruling was in error.
C. The bankruptcy court did not err in denying Grayton’s motion for
summary judgment.
Civil Rule 56(a), made applicable by Rule 7056, provides that
summary judgment is appropriate when “there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of
law.” The moving party bears the initial burden of demonstrating an
absence of a genuine issue of material fact. See Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 n.10 (1986). The court must view the
this section.” Cal. Gov’t Code § 68651(a).
10
evidence in the light most favorable to the non-moving party and draw all
justifiable inferences in its favor. Fresno Motors, LLC, 771 F.3d at 1125.
In Grayton’s motion for summary judgment, he argued that the
bankruptcy court lacked jurisdiction over the adversary proceeding
because he was neither a debtor nor a creditor and because the complaint
was untimely, erroneously citing Rule 4004, which sets the deadline for
filing complaints objecting to discharge. Grayton also argued that there
were disputed factual issues regarding whether Debtor was employed (i.e.,
whether the fee waiver application truthfully stated Debtor was
unemployed) and whether Debtor consented to Grayton executing the
documents. He again asserted that he was entitled to a jury trial. The UST
opposed the motion. With that opposition, the UST submitted the
declaration of her counsel, David Ortiz. Ortiz testified that he had met with
Debtor and Adelman, who, among other things, informed Ortiz that they
had paid Grayton $1,371 for assistance and advice regarding the
preparation of the bankruptcy documents. Adelman provided a copy of a
text message exchange between herself and Grayton (the “Text Messages”),
in which she stated that Grayton had been paid more than originally
agreed and asked him to “see this thing thru.” Grayton responded,
attaching a “Bill of Cost” and stating that he “no longer desire[d] 2 deal w
the matter nor the stressors.” The image of the “Bill of Cost” attached to the
Text Messages is a handwritten itemization of charges totaling $1,371.
11
The bankruptcy court denied the motion, concluding that it had core
jurisdiction over the adversary proceeding and that the complaint had been
timely filed. The bankruptcy court held that material factual disputes,
which Grayton admitted were present, precluded summary judgment. The
court also noted that because § 110(e)(1) is a strict liability statute, Debtor’s
consent to Grayton’s preparation of the documents was irrelevant.
On appeal, Grayton does not specifically address these conclusions.
Apparently in response to the bankruptcy court’s ruling on the consent
issue, he states that the motion for summary judgment “was premised on
the legal theory that the UST’s lack of forth coming [sic] and had presented
an Adversary Complaint with ‘Unclean Hands’, [sic] thus requesting the
Court to Impeach Debtor Perez pursuant to Federal Rule of Evidence
(FRE) 613 and FRE 806.” He then states that he believes that, at a jury trial,
Debtor would have been impeached on cross-examination. These
arguments do not show that the bankruptcy court erred in denying the
motion.
As noted, Grayton appealed to the District Court the bankruptcy
court’s denial of his motion for summary judgment. In his notice of appeal,
he included a “REQUEST TO ENTER NON-CONSENT TO A TRIAL
CONDUCTED BY JUDGE MANN AND REQUEST FOR REMOVAL TO
THE U.S. DISTRICT COURT.” On appeal, he complains that the
bankruptcy court did not rule on this request. Leaving aside the procedural
error of inserting such a request into a notice of appeal, Grayton’s
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arguments are simply a continuation of his assertion that he had the right
to a jury trial, which he did not.
D. The bankruptcy court did not err in denying Grayton’s motion in
limine.
Grayton’s motion in limine sought to exclude evidence of Grayton
engaging in fraudulent, unfair, or deceptive acts, on the ground that the
UST would not be able to meet her burden of proof and that such evidence
would be “speculative, irrelevant, and prejudicial.” His memorandum of
points and authorities reflected a complete misapprehension of the
purpose of a motion in limine. He instead focused on the merits of the
UST’s claims, repeating many of the arguments made in his motion for
summary judgment. To the extent any arguments were applicable, the
motion was premature, as most of the arguments made could have been
raised in the context of a trial, had Grayton not completely refused to
cooperate in discovery or to answer the bankruptcy court’s questions.
Grayton seemed particularly concerned about the admission of the Text
Messages, although he argued that they supported his allegation that he
had acted under duress.
The bankruptcy court generously addressed the superfluous issues
raised in the motion, but it ultimately denied the motion as moot because
the court had already found Grayton not entitled to a jury trial and that it
would “assess the admissibility and credibility of evidence at trial,
removing the need for advance evidentiary rulings.” The bankruptcy court
13
went on to state that the motion would have to be denied in any event
because it was premature and lacked specificity.
On appeal, Grayton once again fails to provide any argument or
authority showing that the bankruptcy court’s ruling on the motion in
limine was in error, and we see none.
E. The bankruptcy court did not abuse its discretion in denying
Grayton’s oral motion to recuse.
At the hearing on Grayton’s motion in limine, although he did not
directly request recusal, he appeared to suggest that the bankruptcy court
had already decided certain issues against him. The transcript of the
telephonic hearing has several gaps, so his reasons are unclear. Apparently
out of an abundance of caution, the bankruptcy court stated at the
conclusion of the hearing, “I am not biased. I will admit that it is difficult
when I’m interrupted but it does not prevent me from being fair to you and
any other person that comes before me. And so to the extent you are
suggesting I recuse[,] I deny that motion.” This ruling was adopted in the
minute order entered after the hearing.
“Recusal is appropriate where a reasonable person with knowledge
of all the facts would conclude that the judge’s impartiality might
reasonably be questioned. Actual bias isn’t required; the appearance of
impropriety can be a sufficient basis for judicial recusal.” Blixseth v.
Yellowstone Mountain Club, LLC, 742 F.3d 1215, 1219 (9th Cir. 2014)
(citations and quotation marks omitted). Our review of the record reveals
14
nothing to suggest that the bankruptcy court’s conduct raised any
appearance of impropriety. To the contrary, the bankruptcy court
demonstrated remarkable patience in dealing with Grayton’s nearly
incomprehensible pleadings and arguments. For example, the court took
time to explain that some subsections of § 110 imposed strict liability, and it
significantly reduced the fines requested by the UST and instructed the
UST to discuss a payment plan with Grayton.
On appeal, Grayton argues that he was entitled to recusal “for a
much more fit and competent finder of the material facts.” The argument
that follows assigns error to the bankruptcy court’s rulings, which is not a
basis for recusal. He also accuses the bankruptcy court of bias. For
example, he argues that the July 14, 2021, status conference transcript
suggests that the bankruptcy court was biased and prejudiced toward
Grayton and that she acted with a “reckless deliberate indifference” to his
rights. Grayton also accuses the bankruptcy court of incompetence and
carelessness and being unethical. And in his reply brief, he accuses the
bankruptcy court of being prejudiced against disabled veteran African-
American BPPs.
A review of the cited transcript, however, reveals nothing to suggest
bankruptcy court bias. That hearing was held after the bankruptcy court
had entered its order partially granting the UST’s motion for summary
judgment; the purpose of the status conference was to determine whether
the UST wished to pursue her remaining claims. The bankruptcy court
15
limited Grayton’s comments, stating that it would not hear argument
regarding previously decided issues. Otherwise, the court took the time to
explain, in response to Grayton’s claim that the UST’s allegations were
false, that it had limited the scope of its ruling to statements made by
Grayton in his own papers.
At bottom, Grayton’s bias allegations appear to be based solely on
the fact that the bankruptcy court ruled against him. This is not a valid
basis for recusal. Liteky v. United States, 510 U.S. 540, 555 (1994). In short,
Grayton has not established any bias or antagonism warranting recusal.
F. The bankruptcy court did not err in denying Grayton’s motion to
dismiss, to compel discovery, and for sanctions.
In Grayton’s motion to dismiss the adversary proceeding, to compel
discovery, and for sanctions under Civil Rule 37, he alleged that the UST
had failed to respond to his interrogatories and requests for admission. He
argued that the bankruptcy court’s ruling denying his motion for summary
judgment, which concluded that there were disputed factual issues,
supported dismissal because the UST’s failure to answer his discovery
requests undermined his ability to prepare for trial.
The UST filed an opposition noting that the motion lacked specificity,
did not comply with Civil Rule 37 because Grayton had not attempted to
meet and confer, and he failed to provide any legal or factual basis for
dismissal.
16
The bankruptcy court denied the motion. It noted that requests for
admission and interrogatories could only be addressed to a party, while
Grayton’s discovery requests were addressed to Debtor and Adelman. The
court also noted that Grayton’s requests for production pertained to Debtor
or his company and might not be in the control of the UST. Accordingly,
the court continued the hearing for the UST to address whether she had
turned over all documents within her control. The bankruptcy court also
concluded that, even if sanctions were warranted, dismissal was not
appropriate because the motion was the first time Grayton had raised
discovery issues. After the continued hearing, the bankruptcy court found
that the UST had complied fully with all of Grayton’s discovery requests.
On appeal, Grayton disputes whether the UST had control over the
Debtor or Adelman, citing the Ortiz declaration in opposition to Grayton’s
motion in limine, which stated that he had personal knowledge of the facts
stated in that motion. Grayton seems to be referring to the Text Messages,
but he does not elucidate further. Grayton simply states in various ways
that the bankruptcy court was wrong and attacks Ortiz’s competence and
ethics.
But the bankruptcy court correctly found that Grayton’s discovery
requests failed to comply with the discovery rules because they were
directed to non-parties. See Civil Rules 33, 34, and 36. And there was no
showing that the UST failed to respond to procedurally proper discovery
17
requests. The bankruptcy court did not abuse its discretion in denying
Grayton’s motion.
G. The bankruptcy court did not abuse its discretion in granting the
UST’s motions to compel and for sanctions.
The UST’s initial motion to compel was based on Grayton’s failure to
meet and confer and to provide initial disclosures as required by the Rules,
despite the bankruptcy court’s direction to do so. The UST requested the
court order Grayton to pay as a sanction the UST’s expenses incurred in
filing and serving the motion to compel. Grayton filed no opposition. The
bankruptcy court granted the motion. Rather than issuing another motion
to compel (the bankruptcy court had orally ordered Grayton twice before
to comply with the discovery rules), the court ruled that Grayton would be
precluded from presenting any documents that had not been produced to
the UST. The court also awarded the UST fees of $1,339.20 as a sanction.
The UST also filed a motion to compel Grayton’s attendance at a
deposition and for additional sanctions. Again, Grayton did not file an
opposition, and the bankruptcy court granted the motion. In a
subsequently filed status report, the UST indicated that although Grayton
appeared at the rescheduled deposition, he had refused to answer any
questions, asserting a blanket Fifth Amendment privilege.
On appeal, Grayton does not seem to assign error to the bankruptcy
court’s granting of the motions to compel, but he argues that “Attorney
Ortiz is not allowed to bill Appellant at any hourly rate, for any amount of
18
time spent on tasks . . . .“ He seems to argue that doing so violated “the
code of ethics.” But he cites no authority for this proposition, and otherwise
does not provide any basis upon which we could find reversible error in
these rulings.
H. The bankruptcy court did not err in granting summary judgment
for the UST.
In May 2021, the UST filed her motion seeking summary judgment.
The primary evidence in support of the motion consisted of deemed
admissions based on Grayton’s failure to respond to the UST’s RFAs.
Grayton did not file a written opposition, but he appeared at the hearing,
and the court permitted him to argue.
After the hearing, the bankruptcy court entered an order granting in
part the UST’s motion. As an initial matter, the court noted that while the
deemed admissions were not necessarily sufficient to justify summary
judgment on all issues, Grayton had not asked for relief from the RFAs,
and he had admitted many facts in his answer, motion for summary
judgment, and motion in limine. In those documents, Grayton did not deny
preparing and filing documents for Debtor but asserted that he did so
under duress.
Section 110 of the Bankruptcy Code prescribes penalties for “persons
who negligently or fraudulently prepare bankruptcy petitions.” It defines a
BPP as “a person, other than an attorney for the debtor or an employee of
such attorney under the direct supervision of such attorney, who prepares
19
for compensation a document for filing[.]” § 110(a)(1). The statute defines
“document for filing” as “a petition or any other document prepared for
filing by a debtor in a United States bankruptcy court or a United States
district court in connection with a case under this title.” § 110(a)(2).
The bankruptcy court found that Grayton qualified as a BPP under
§ 110(a)(1), based on his admissions that he helped Debtor prepare and file
his bankruptcy schedules and evidence that Grayton expected to be paid
for his services. Grayton does not argue to the contrary. The bankruptcy
court also found that Grayton assisted with preparing and filing numerous
bankruptcy documents. 3
Section 110 imposes several requirements on BPPs. These include the
requirements that a BPP must sign any document for filing and provide his
social security number and name and address. §§ 110(b)(1) and (c)(1). A
BPP must also file a declaration disclosing any fee received in the twelve
months before the petition date and any unpaid fee charged to the
debtor. § 110(h)(2). Section 110 prohibits a BPP from signing documents on
behalf of the debtor or giving legal advice. § 110(e).
3
Those documents were: (1) the petition; (2) fee waiver; (3) request for extension
of time to file certificate of counseling; (4) schedules, summary of assets and liabilities,
and SOFA; (5) Chapter 7 statement of current monthly income; (6) amended schedules;
(7) second amended schedules; (8) request for 45-day extension of time to file schedules;
(9) motion to vacate dismissal; (10) motion to reopen; (11) notice of motion to vacate
dismissal; and (12) notice of motion to reopen.
20
The bankruptcy court found no triable issues of fact and thus granted
summary judgment on the UST’s first, third, fourth, fifth, and seventh
causes of action, as follows:
1. Grayton violated § 110(b)(1) by failing to sign and print his
name and address on the documents.
2. Grayton violated § 110(c)(1) by failing to list his social security
number on the documents he filed.
3. Grayton violated § 110(e)(1) by executing documents on
Debtor’s behalf. The court also found that whether this was
done at Debtor’s instruction was not relevant because § 110 is a
strict liability statute and consent is not an element of the cause
of action.
4. Grayton violated §§ 110(e)(2)(A) and (e)(2)(B)(vii) by providing
legal advice to Debtor regarding bankruptcy procedure and
rights. The court found that Debtor’s legal expertise was
irrelevant given that § 110 is a strict liability statute.
5. Grayton violated § 110(h)(2) by failing to file a declaration
disclosing any fee received in the twelve months before the
petition date and any unpaid fee charged to the debtor.
The bankruptcy court found that there were triable issues of fact
regarding the remaining causes of action and thus denied the motion in
part.
21
The bankruptcy court rejected Grayton’s defense that he acted under
duress in abiding by Debtor’s demands that Grayton fill out the schedules.
The test for duress is objective and requires proof of: (1) an immediate
threat of death or serious bodily injury that is constant and specific; (2) a
well-grounded fear that the threat will be carried out; and (3) lack of a
reasonable opportunity to escape the threatened harm. United States v.
Gordon, 526 F.2d 406, 407 (9th Cir. 1975). Grayton alleged that Debtor made
threats against him and his family; he also construed the Text Messages as
threatening. There was evidence that in early 2020 Grayton sought a
restraining order against Debtor, which was ultimately denied. At the
hearing on the restraining order, Debtor allegedly tapped Grayton on the
back, and Grayton filed a police report with the bailiff and filed a civil
complaint against Debtor for assault and battery.
The bankruptcy court found that, even if the allegations were true,
there was no evidence of an immediate threat of death or serious bodily
injury that was constant and specific at the time the § 110 violations
occurred—Grayton did not seek the restraining order until over a year after
the documents were filed. It also found that Grayton’s general fear of
Debtor after filing the documents was not substantial enough to be
considered a well-grounded fear that some vague threat would be carried
out. Finally, the bankruptcy court found that Grayton was never without a
reasonable opportunity to escape harm because law enforcement was
present in the courtroom when Debtor allegedly assaulted Grayton.
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The bankruptcy court awarded $2,000 in damages to be paid to
Debtor pursuant to § 110(i)(1), which provides:
If a bankruptcy petition preparer violates this section or
commits any act that the court finds to be fraudulent, unfair, or
deceptive, on the motion of the debtor, trustee, United States
trustee (or the bankruptcy administrator, if any), and after
notice and a hearing, the court shall order the bankruptcy
petition preparer to pay to the debtor—
(A) the debtor’s actual damages;
(B) the greater of—
(i) $2,000; or
(ii) twice the amount paid by the debtor to the
bankruptcy petition preparer for the preparer’s services; and
(C) reasonable attorneys’ fees and costs in moving for damages
under this subsection.
As discussed above, the bankruptcy court found that Grayton
violated various sections of § 110; the court also found, as an alternative
basis for the award, that Grayton engaged in unfair or deceptive conduct
by failing to provide his information on documents filed with the court.
The bankruptcy court also awarded fines of $990 pursuant to
§ 110(l)(1), which authorizes a fine of up to $500 for each failure to comply
with any provision of subsection (b), (c), (d), (e), (f), (g), or (h). Section
110(l)(2)(D) requires tripling of those fines if the court finds that the BPP
“prepared a document for filing in a manner that failed to disclose the
identity of the bankruptcy petition preparer.” The bankruptcy court did
not award the full amount requested by the UST, noting that it had
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discretion to do so and that reducing the fines was warranted in light of
Grayton’s financial situation. It found a total of 33 violations and awarded
$10 per violation for a total of $330, tripled to $990, payable to the UST.
The bankruptcy court declined to impose a permanent injunction
against Grayton acting as a BPP because there was no evidence Grayton
had acted as a BPP and violated § 110 in other cases.
Grayton’s appellate brief consists mostly of blanket allegations that
the bankruptcy court was wrong and that it was biased and incompetent.
His primary argument is that the judgment was based on false and
misleading allegations and that the complaint fails to set forth the elements
of a strict liability claim. In support, he cites Lucas v. City of Visalia, 726 F.
Supp. 2d 1149, 1154 (E.D. Cal. 2010), in which the district court granted in
part the defendant’s motion to dismiss a complaint under Civil Rule
12(b)(6) for failure to state claims for manufacturing and design defects in a
products liability case. It is not clear how this case applies.
Grayton also complains that he was not permitted to present his
defense. He does not, however, explain how the bankruptcy court erred in
its application of the undisputed facts to the law. He continues to assert
that there are disputed factual issues with respect to Debtor’s employment
and his consent to Grayton preparing and filing documents and whether
he prepared the documents under duress. But he does not explain how the
bankruptcy court erred in its analysis of those issues. He also argues that
the bankruptcy court used his own filed papers against him, which
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violated his Fifth Amendment right against self-incrimination. He provides
no specifics, nor does he cite any authority or argument to support this
assertion. In short, Grayton has not articulated any reversible error in the
bankruptcy court’s ruling.
CONCLUSION
For these reasons, the bankruptcy court did not err in awarding
damages and fines for Grayton’s violations of § 110. We therefore AFFIRM.
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