Kismet Acquisition v. Alejandro Diaz-Barba

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE: JERRY L. No. 12-56329
ICENHOWER, DBA
Seaview Properties; D.C. Nos.
DONNA L. ICENHOWER, 3:08-cv-02326-BTM-BLM
Debtors, 3:08-cv-02329-BTM-BLM
3:08-cv-02409-BTM-BLM
3:08-cv-02410-BTM-BLM
KISMET ACQUISITION, 3:09-cv-00329-BTM-BLM
LLC, 3:09-cv-00330-BTM-BLM
Plaintiff-Appellee, 3:09-cv-00331-BTM-BLM
3:09-cv-00332-BTM-BLM
v. 3:09-cv-00432-BTM-BLM
3:09-cv-00457-BTM-BLM
ALEJANDRO DIAZ-BARBA;
MARTHA MARGARITA
BARBA DE LA TORRE,
Defendants-Appellants.
IN RE: JERRY L. No. 12-56418
ICENHOWER, DBA
Seaview Properties; D.C. Nos.
DONNA L. ICENHOWER, 3:08-cv-02326-BTM-BLM
Debtors, 3:08-cv-02329-BTM-BLM
3:08-cv-02409-BTM-BLM
3:08-cv-02410-BTM-BLM
KISMET ACQUISITION, 3:09-cv-00329-BTM-BLM
LLC, 3:09-cv-00330-BTM-BLM
2 IN RE: ICENHOWER
Plaintiff-Appellant, 3:09-cv-00331-BTM-BLM
3:09-cv-00332-BTM-BLM
v. 3:09-cv-00432-BTM-BLM
3:09-cv-00457-BTM-BLM
ALEJANDRO DIAZ-BARBA;
MARTHA MARGARITA
BARBA DE LA TORRE, OPINION
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of California
Barry T. Moskowitz, District Judge, Presiding
Argued and Submitted
February 11, 2014—Pasadena, California
Filed June 26, 2014
Before: Jerome Farris, N. Randy Smith,
and Paul J. Watford, Circuit Judges.
Opinion by Judge Farris
IN RE: ICENHOWER 3
SUMMARY*
Bankruptcy
The panel affirmed the district court’s judgment affirming
in part and vacating in part the bankruptcy court’s post-
judgment imposition of contempt sanctions on defendants for
failing to transfer a Mexican coastal villa to the plaintiff in a
bankruptcy adversary proceeding.
The panel held that the bankruptcy court had jurisdiction,
post-judgment, to substitute a property transferee because it
retained jurisdiction to supervise the course of conduct
mandated by the judgment.
The panel held that even though the bankruptcy court’s
contempt and sanctions orders were based solely on
affidavits, they did not violate due process because, in light
of the defendants’ noncompliance with the judgment, the
defendants bore the burden of showing their inability to
comply. The panel held that the judgment was sufficiently
specific to support a finding of civil contempt because it
ordered the defendants to undertake a specific and definite
course of conduct: to transfer the villa interest to the plaintiff
or its assignee. The panel rejected the defendants’ argument
that Mexican law rendered compliance with the judgment
impossible. The panel also held that the bankruptcy court’s
findings of contempt for a particular period were not clearly
erroneous.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4 IN RE: ICENHOWER
The panel held that the bankruptcy court did not err in
issuing an order abrogating a defendant’s attorney-client
privilege.
On the plaintiff’s cross-appeal, the panel held that the
district court did not err in vacating compulsory sanctions of
$25,000 per day for a period before the defendants were put
on notice that their continued occupation of the villa would
trigger such sanctions.
COUNSEL
Edward I. Silverman (argued), Sandler, Lasry, Laube, Byer &
Valdez, LLP, San Diego, California, for Defendant-
Appellant/Cross-Appellee Alejandro Diaz-Barba.
D. Anthony Gaston (argued), Law Offices of D. Anthony
Gaston, San Diego, California, for Defendant-
Appellant/Cross-Appellee Martha Margarita Barba De La
Torre.
Janet D. Gertz (argued) and Ali M.M. Mojdehi, Cooley LLP,
San Diego, California, for Plaintiffs-Appellees/Cross-
Appellants.
IN RE: ICENHOWER 5
OPINION
FARRIS, Circuit Judge:
This appeal arises from contempt sanctions issued by the
bankruptcy court against defendants Alejandro Diaz-Barba
and Martha Margarita Barba De La Torre (collectively, the
“Diazes”) for failing to transfer a Mexican coastal villa to
plaintiff Kismet Acquisition, LLC. The district court
confirmed that the Diazes’ conduct was sanctionable, but
remanded for consideration of appropriate sanctions. The
Diazes appealed the conclusion that their conduct was
sanctionable, and Kismet cross-appealed part of the district
court’s decision reversing the bankruptcy court.
We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1).
Despite the district court’s partial remand to the bankruptcy
court to recalculate the amount of fees and costs, immediate
review is proper: this appeal concerns primarily legal
questions regarding the propriety of the bankruptcy court’s
contempt orders, the factfinding to be conducted by the
bankruptcy court on remand is not related to a central issue
raised on appeal, and the Panel’s decision might dispose of
the case and obviate the need for factfinding. See In re
Lehtinen, 564 F.3d 1052, 1057 (9th Cir. 2009); In re Dyer,
322 F.3d 1178, 1187 (9th Cir. 2003); In re Bonner Mall
P'ship, 2 F.3d 899, 904 (9th Cir. 1993). We affirm.
I.
A. The bankruptcy court’s underlying judgment.
Debtors Jerry and Donna Icenhower owned an interest in
Villa Vista Hermosa, a coastal villa in Jalisco, Mexico. Their
6 IN RE: ICENHOWER
interest was not a fee simple, as Mexican law prohibits
foreign nationals from owning title to land within 100
kilometers of the border or 50 kilometers of the coast. See
Brady v. Brown, 51 F.3d 810, 814, 817 n.8 (9th Cir. 1995).
Rather, Debtors held the beneficial interest in a fideicomiso
trust — an arrangement wherein a Mexican bank holds title
to property and a foreign national is granted the right to its
use. See id. at 814. A fideicomiso trust may be created only
with a permit issued by the Mexican Ministry of Foreign
Affairs. See id.
On March 4, 2002, Debtors purchased H&G, a shell
company, and transferred the Villa interest to H&G. On
December 15, 2003, Debtors filed for bankruptcy protection.
On June 7, 2004, H&G sold the Villa interest to the Diazes
for $1.5 million.
On August 23, 2004, the bankruptcy trustee filed an
action seeking to avoid the transfer of the Villa interest from
Debtors to H&G as a fraudulent conveyance. On August 3,
2006, the trustee filed an action seeking to avoid the transfer
from H&G to the Diazes as an unauthorized postpetition
transfer. H&G did not appear in either action. By agreement
approved by the bankruptcy court on November 30, 2006,
Kismet purchased the estate’s assets and was substituted for
the trustee.
On June 2, 2008, following a bench trial, the bankruptcy
court ruled for Kismet in both actions. On the same day, the
court issued a separate judgment, ordering the Diazes, under
11 U.S.C. § 550(a):
[a] to take all actions necessary to execute and
deliver any and all documents needed to undo
IN RE: ICENHOWER 7
the avoided transfer, and to take all actions
necessary to cause the property to be
reconveyed to a fideicomiso trust naming
[Kismet] as the sole beneficiary for the benefit
of the bankruptcy estate; or
[b] alternatively, at [Kismet]’s sole option
made upon proper noticed motion, the court
reserves jurisdiction to enter a monetary
judgment in favor of Kismet, and against
Defendants, in an amount necessary to make
the estate whole at the time of judgment.
On July 29, 2008, the court filed an Amended Consolidated
Judgment, in which it clarified that the Villa interest was an
interest in a fideicomiso trust, not a fee simple, and required
the Diazes to comply within 10 days. Following denials of a
stay pending appeal by both the bankruptcy court and district
court, the Diazes faced a compliance deadline of September
13, 2008.
B. Initial attempts by Kismet to effect the transfer.
Following the bankruptcy court’s issuance of the ACJ,
Kismet took the initiative in preparing documents by which
the Diazes would transfer the Villa interest. On August 7,
2008, Kismet provided the Diazes a draft power of attorney
to be used to convey the Villa interest to Kismet or its
assignee. The Diazes objected that the power of attorney
involved a conflict of interest, as the persons nominated to act
on their behalf worked at the same law firm as Kismet’s
counsel, and impermissibly allowed Kismet to transfer the
Villa interest to persons beyond the jurisdiction of U.S.
courts.
8 IN RE: ICENHOWER
On September 4, 2008, Kismet proposed that, rather than
execute a power of attorney, the Diazes appear before a
notary public in Mexico to execute appropriate transfer
documents. On September 9, Kismet sent the Diazes a
proposed transfer instrument that named a Mexican company,
Axolotl Inmobiliaria S. de R.oL. C.V., Kismet’s assignee, as
the beneficiary of the fideicomiso. The Diazes rejected this
document two days later, arguing that it should have specified
Kismet as the beneficiary of the fideicomiso “for the benefit
of the bankruptcy estate” and included language explicitly
referencing the bankruptcy case. On September 26, Kismet
circulated a new version of the transfer agreement that stated
that the bankruptcy court would continue to maintain
jurisdiction over the ACJ. Again, the Diazes objected that the
document named Axolotl as beneficiary. Also on September
26, counsel for Ms. Barba de la Torre wrote to Kismet, “[M]y
client is advised by Mexican counsel that the specific
performance portion of the Bankruptcy Court judgment (i.e.
undoing of the avoided transaction) cannot at least at this
stage of these proceedings, be accomplished under Mexican
law.”
On September 29, following an ex parte application by
Kismet, the bankruptcy court ordered the Diazes to show
cause why they should not be held in contempt. On
September 30, the bankruptcy court ordered Mr. Diaz to
submit to a deposition and produce documents relevant to his
and Ms. Barba de la Torre’s attempts to comply with the
ACJ. At his deposition, Mr. Diaz testified that counsel had
advised him that signing the transfer documents would violate
Mexican law. He also testified that, pursuant to advice of
counsel, he sought to enjoin transfer of the Villa interest
through an amparo — a Mexican proceeding to ensure that an
individual’s constitutional rights are not violated by a
IN RE: ICENHOWER 9
Mexican official. The Diazes also submitted declarations
from two of their attorneys stating that Mexican law
prevented them from complying with the ACJ.
Arguing that these statements waived attorney-client
privilege, Kismet moved on October 15 to compel discovery
of communications with counsel regarding the
“impossibility” defense or correspondence with Mexican
officials. The bankruptcy court granted Kismet’s motion on
October 22. The Diazes produced responsive documents on
November 7.
C. The Diazes’ continued delay and obstruction.
The disclosed documents indicate that, rather than make
a good faith effort to comply with the ACJ, the Diazes sought
to delay and obstruct its implementation. On September 8,
Mr. Diaz told his counsel: “I will not sign anything that
executes a trust agreement . . . . I will not cooperate with
these brigands, making a mockery of [M]exican law and
attempting to circumvent it.” Mr. Diaz’s counsel responded:
I understand that but we don’t need to reveal
it to [Kismet’s counsel] yet. Better to let him
think we are preparing to cooperate while we
get our ducks in a row in Mexico. Therefore,
[to] the extent [we] can point to defects, we
can send back the draft document and make
them change it again causing delay.
In another email, Mr. Diaz’s counsel noted that her objection
to a proposed transfer document “should throw a wrench in
the works.”
10 IN RE: ICENHOWER
One means by which the Diazes sought to obstruct the
bankruptcy court’s judgment was by soliciting intervention
by Mexican officials. As Mr. Diaz’s attorney stated in an
email: “I think the only thing we can do now is work with the
Mexican authorities to try to ensure that the order cannot be
accomplished.” On September 4, Mr. Diaz instructed his
counsel to lobby Ambassador Joel Hernandez Garcia, a legal
advisor in the Mexican Ministry of Foreign Affairs, to sign a
document stating that compliance with the ACJ would be
impossible under Mexican law. The next day, Ambassador
Garcia agreed to sign a more limited form of such a
declaration, omitting any statement that the Diazes would be
subject to penalties in Mexico if they complied with the ACJ.
On August 6, 2008, Mr. Diaz contacted the Ministry of
Foreign Affairs in an attempt to ensure that the Ministry did
not issue a fideicomiso permit to Kismet. On September 26,
the Diazes filed an amparo, seeking to enjoin the transfer of
the Villa interest. In a September 30 email, an attorney for
the Diazes stated that the plan was to keep the amparo a
secret until they had it recorded, and that they would then
want to present the certificate of recording “as an obstacle for
transferring title.” Nonetheless, the amparo was soon
dismissed, as Kismet had not sought to have the ACJ
recognized in Mexico and thus there was no official Mexican
action to enjoin. Finally, the Diazes circulated in Mexico a
narrative highly critical of the bankruptcy judge and
orchestrated radio advertisements denouncing Kismet.
At a hearing on November 13, 2008, the bankruptcy court
held the Diazes in contempt. The court also found that, as a
result of the Diazes’ actions, Kismet was unlikely to receive
a fideicomiso permit. However, a permit would not be
necessary to transfer the Villa interest to Axolotl, a Mexican
IN RE: ICENHOWER 11
corporation. Thus, the bankruptcy court ordered the Diazes,
within one week, to sign a document transferring the Villa
interest to Axolotl or another assignee of Kismet. The court
ruled that, if the Diazes did not purge their contempt by
November 19, compulsory sanctions would issue at the rate
of $25,000 per day. The court also imposed compensatory
sanctions, retroactive to September 9, of $4,150 per day in
lost rental value and $205.48 per day in lost use of the
property. Finally, the court required the Diazes to pay Kismet
its attorney’s fees and costs related to preparing documents to
carry out the transfer of the Villa interest.
D. Renewed attempts to effect the transfer.
The transfer was originally scheduled to close in Mexico
on November 19. However, on November 18, the notary
public who had agreed to oversee the transaction suddenly
withdrew, despite having previously approved the transfer
documents. Kismet arranged for a different notary to preside
over the closing, but that notary soon withdrew, as well. She
reported that she had been contacted by an agent of the
Diazes’ counsel who had allegedly been hired to investigate
the transaction. The notary was thus concerned about the risk
to herself if she proceeded with the transaction. Further, she
allegedly believed that every notary in the area had been
contacted that day to ensure that no notary would participate
in the transaction.
On November 20, the bankruptcy court heard argument
on why the transfer had failed to close. The Diazes argued
that the notaries had withdrawn based on legitimate
objections to the transfer, whereas Kismet argued that their
withdrawal was solely due to the Diazes’ intimidation. The
court deferred resolving this dispute until a hearing on
12 IN RE: ICENHOWER
December 4, but ordered the Diazes to close the transaction
by November 25. To avoid interference with the notary, the
court ordered that Kismet not inform the Diazes of the
notary’s name until the time of closing.
The closing was scheduled for November 25. Prior to
that date, a relative of the Diazes attempted to identify and
influence the notary, though the Diazes disclaimed
involvement. On November 25, but before the transaction
closed, Guillermo Rivera, a close friend of Mr. Diaz, crashed
his truck through the Villa’s gate and, together with his
associates, took the property “hostage.” After the transfer
was executed, counsel for Kismet learned of Mr. Rivera’s
actions and that he refused to leave except pursuant to Ms.
Barba de la Torre’s instructions. Counsel for Kismet
requested the Diazes to instruct Mr. Rivera and his associates
to vacate the Villa, but the Diazes refused.
E. The bankruptcy court’s further rulings.
At a hearing on December 4, the bankruptcy court ruled
that the Diazes were at fault for failing to close the
transaction on November 19. The Court imposed compulsory
sanctions of $25,000 per day, retroactive to November 20,
until the Diazes complied with the ACJ. Rejecting the
Diazes’ argument that they had complied simply by signing
the transfer documents, the court ruled that, if Mr. Rivera had
in fact occupied the property on the Diazes’ behalf prior to
the closing, this would have violated a preliminary injunction,
incorporated into the ACJ, which prohibited “making
unavailable . . . any part of the villa property.” Compulsory
and compensatory sanctions would issue until possession was
restored.
IN RE: ICENHOWER 13
The Diazes vacated the Villa on December 5. On
December 11, the court heard argument and testimony
regarding Mr. Rivera’s occupation of the Villa. At the end of
the hearing, the court found that Mr. Rivera had “invaded”
the Villa prior to the closing in concert with the Diazes. The
court held the Diazes in contempt of the preliminary
injunction, issued compulsory and compensatory sanctions
for the period November 25 to December 5, and granted
Kismet’s application for attorney’s fees from November 25
to December 11.
F. The district court’s order.
On June 15, 2012, the district court issued its decision on
appeal. It found no clear error in the bankruptcy court’s
factual findings and affirmed most of the bankruptcy court’s
rulings. However, it (1) reversed the imposition of $225,000
in compulsory sanctions from November 26 to December 4,
and the imposition of compensatory sanctions for loss of use
of the villa, and (2) vacated the district court’s awards of
attorney’s fees and costs and remanded for recalculation of
fees and costs.
II.
This Court’s role in bankruptcy appeals is “essentially the
same” as that of the district court. In re Caneva, 550 F.3d
755, 760 (9th Cir. 2008). We review de novo whether the
bankruptcy court properly exercised jurisdiction,
Mayweathers v. Newland, 258 F.3d 930, 934 (9th Cir. 2001);
whether it afforded the Diazes due process, Thomas, Head &
Greisen Emps. Trust v. Buster, 95 F.3d 1449, 1458 (9th Cir.
1996); and whether it correctly ruled that Mr. Diaz waived
attorney-client privilege, Home Indem. Co. v. Lane Powell
14 IN RE: ICENHOWER
Moss & Miller, 43 F.3d 1322, 1326 (9th Cir. 1995). We
review for abuse of discretion the bankruptcy court’s finding
of civil contempt and imposition of sanctions. F.T.C. v.
Affordable Media, LLC, 179 F.3d 1228, 1239 (9th Cir. 1999);
Thomas, Head, 95 F.3d at 1458. We review for clear error
the bankruptcy court’s findings of fact in connection with the
civil contempt order. Affordable Media, 179 F.3d at 1239.
III.
The Diazes challenge the bankruptcy court’s rulings on
seven grounds: (1) the bankruptcy court lacked jurisdiction to
substitute Axolotl as transferee, (2) the bankruptcy court
violated due process in imposing certain sanctions, (3) the
ACJ was not sufficiently specific to support a finding of
contempt, (4) Mexican law rendered compliance with the
ACJ impossible, (5) the bankruptcy court’s findings of
contempt for the period up to November 25 were clearly
erroneous, (6) the bankruptcy court lacked jurisdiction to
quantify fees and costs in its order of December 18, 2008, and
(7) the bankruptcy court improperly abrogated attorney-client
privilege. Kismet cross-appeals on a single ground: that the
district court erred in vacating the compulsory sanctions
imposed for the period from November 26, 2008, to
December 4, 2008. We consider these issues in turn.
A.
We first consider the Diazes’ argument that the
bankruptcy court lacked jurisdiction to substitute Axolotl as
transferee on November 13, after the ACJ was appealed on
August 6. After an appeal is filed, a court generally may not
“alter or expand upon the judgment.” In re Padilla, 222 F.3d
1184, 1190 (9th Cir. 2000). However, a court retains
IN RE: ICENHOWER 15
jurisdiction to supervise a required course of conduct. See
Hoffman v. Beer Drivers & Salesmen's Local Union No. 888,
536 F.2d 1268, 1276 (9th Cir. 1976) (holding that a trial court
retains jurisdiction to modify an injunction post-appeal
“where the court supervises a continuing course of conduct
and where as new facts develop additional supervisory action
by the court is required”); Meinhold v. U.S. Dep't of Def.,
34 F.3d 1469, 1480 n.14 (9th Cir. 1994) (holding that court
retained jurisdiction to expand injunction, despite pending
appeal, where court was serving supervisory role).
Here, even if substituting Axolotl as transferee constituted
altering or expanding upon the ACJ, it was within the
bankruptcy court’s retained jurisdiction to supervise the
course of conduct mandated in the judgment, namely
transferring the Villa interest to Kismet (or its assignee). The
Diazes had taken action to obstruct this transfer, and the
bankruptcy court reasonably concluded that “Kismet would
have precious little success in getting a permit for a
Fideicomiso trust in Mexico.” To account for these changed
facts, the bankruptcy court ordered the Villa transferred to
Axolotl, which, as a Mexican corporation, could receive the
property without using a fideicomiso. This order was within
the court’s jurisdiction.
B.
We next consider the Diazes’ argument that the
bankruptcy court’s contempt and sanctions orders, except
those based on evidence submitted at the December 11
hearing regarding conduct starting on November 25, violated
due process since they were issued solely based on affidavits.
Ordinarily, courts “should not impose contempt sanctions
solely on the basis of affidavits.” Peterson v. Highland
16 IN RE: ICENHOWER
Music, Inc., 140 F.3d 1313, 1324 (9th Cir. 1998). However,
once an alleged contemnor’s noncompliance with a court
order is established, the burden shifts to the alleged
contemnor to “produce[] sufficient evidence of [its] inability
to comply to raise a question of fact.” United States v.
Rylander, 656 F.2d 1313, 1318 (9th Cir. 1981), rev'd on other
grounds, 460 U.S. 752 (1983). If the alleged contemnor does
not raise a question of fact through affidavits, and does not
seek the opportunity to present its defense through live
testimony, a court does not violate that party’s due process
rights by holding it in contempt solely based on affidavits.
See Thomas, Head, 95 F.3d at 1458 (holding that contempt
order did not violate due process where, although district
court did not hold evidentiary hearing, contemnors “had
ample notice and an opportunity to respond to the possibility
that the court would find them in contempt” and did not
request an evidentiary hearing); Donovan v. Mazzola,
716 F.2d 1226, 1240 (9th Cir. 1983) (affirming contempt
order issued after show cause hearing in which contemnors
could have, but did not, present testimony regarding their
inability to comply with order).
Here, there was no dispute that, prior to executing the
transfer documents on November 25, 2008, the Diazes did not
comply with the ACJ. The Diazes thus bore the burden of
showing their inability to comply. In seeking to discharge
this burden, the Diazes did not raise an issue of fact through
affidavits. Nor did they submit, or ask to submit, oral
testimony. But not for lack of opportunity. At the November
13 hearing, Kismet called Mr. Diaz to testify, and there is no
indication that the Diazes could not have called witnesses, as
well. At the December 4 hearing, the Diazes could also
presumably have called witnesses, and they admit that they
did not ask that the hearing be continued to allow for a fuller
IN RE: ICENHOWER 17
evidentiary presentation regarding the ordered sanctions.
Neither have they argued that there are witnesses they would
have called had the bankruptcy court permitted it. Having
failed to raise an issue of fact through documentary evidence
or to seek to discharge their burden of production through live
testimony, the Diazes cannot now argue that the bankruptcy
court deprived them of due process.
C.
We turn now to the Diazes’ argument that the ACJ was
insufficiently specific to support a finding of contempt. A
party may be held in civil contempt only if it “violated a
specific and definite order of the court.” Dyer, 322 F.3d at
1191 (quoting In re Bennett, 298 F.3d 1059, 1069 (9th Cir.
2002)).
Here, the ACJ was sufficiently specific. Although the
bankruptcy court left it to the parties to determine which steps
were necessary under Mexican law to create a fideicomiso, it
nonetheless ordered the Diazes to undertake a specific and
definite course of conduct: to transfer the Villa interest to
Kismet or its assignee. There was also no ambiguity
regarding the proper beneficiary of the fideicomiso. “[A]
party may freely assign the proceeds of his judgment or the
value of his recovery,” Pony v. Cnty. of L.A., 433 F.3d 1138,
1144 (9th Cir. 2006), and here, Kismet assigned the benefit
of the judgment to Axolotl. Thus, even before it was
explicitly ordered on November 13, the Diazes knew they
could comply with the ACJ by transferring the Villa interest
to Axolotl.
18 IN RE: ICENHOWER
D.
We next consider the Diazes’ argument that Mexican law
rendered compliance with the ACJ impossible. Citing
authority from outside this Circuit, the Diazes argue that a
party may not be held in contempt if compliance with the
court’s order would require violating the laws of a foreign
country. See Remington Rand Corp.-Del. v. Bus. Sys. Inc.,
830 F.2d 1260 (3d Cir. 1987); Kilbarr Corp. v. Bus. Sys. Inc.,
B.V., 990 F.2d 83 (3d Cir. 1993).
Even if this rule applied in this Circuit, the Diazes have
not shown that compliance with the ACJ would violate
Mexican law. For one, this Court held in Brady v. Brown,
51 F.3d 810 (9th Cir. 1995), that a similar order, requiring
defendant to execute a power of attorney so that his Mexican
property could be conveyed to a fideicomiso for plaintiff’s
benefit, “did not violate Mexican law.” Id. at 819. Moreover,
although a permit from the Ministry of Foreign Affairs is
necessary to create a fideicomiso, the ACJ respected Mexican
fideicomiso procedures: it ordered the Diazes to take all
actions necessary, according to Mexican law, to create a
fideicomiso, and the court “expressly retain[ed] continuing
jurisdiction in [the ACJ] ‘to consider alternative remedies if
the trust [could not] be established under Mexican law.’”
The Diazes argue that the ACJ could be enforced in
Mexico only if it were officially recognized, or homologated,
according to Mexican law. But the ACJ did not need to be
enforced in Mexico: the bankruptcy court’s in personam
jurisdiction over the Diazes empowered it to issue an order,
enforceable in the United States, requiring the Diazes to take
action abroad. See Ramirez & Feraud Chili Co. v. Las
IN RE: ICENHOWER 19
Palmas Food Co., 146 F. Supp. 594, 604 (S.D. Cal. 1956),
adopted by 245 F.2d 874 (9th Cir. 1957) (per curiam).
The Diazes also argue that fideicomisos are voluntary
agreements and are unenforceable if entered into from the
coercion of a foreign government. However, the ACJ does
not require that the conveyance documents be enforceable,
only that the Diazes sign them. As the bankruptcy court
noted, “Once [the] transfer documents are executed, [the
Diazes] are free to challenge them in Mexico. . . . They have
complied with this Court’s order at that point.”
Finally, the Diazes argue that signing the conveyance
documents would expose them to liability for falsely
representing that they were acting voluntarily. Critically,
though, the declaration of Ambassador Garcia of the Ministry
of Foreign Affairs does not state that signing the fideicomiso
would subject the Diazes to liability. Nor do other documents
from the Ministry. Moreover, even if the Diazes are correct
that a foreign court order constitutes duress under Mexican
law, it seems highly unlikely, and the Diazes have not shown,
that the object of duress is subject to liability for submitting
to it. In short, even if “legal impossibility” excuses
noncompliance, the Diazes have not demonstrated that
compliance with the ACJ was legally impossible.
E.
The Diazes argue that the bankruptcy court’s findings of
contempt for the period up to November 25 are clearly
erroneous. However, there is no question that, prior to
executing the conveyance documents on November 25, the
Diazes did not comply with the ACJ. To avoid contempt, the
Diazes needed to show that, although they had taken all
20 IN RE: ICENHOWER
reasonable steps to comply, compliance was impossible. See
Stone v. City & Cnty. of S.F., 968 F.2d 850, 856 (9th Cir.
1992); Rylander, 656 F.2d at 1318. Yet, the record reflects
actions by the Diazes to delay compliance. Thus, the findings
of contempt are not clearly erroneous.
F.
Although the Diazes argue that, in light of their appeal of
December 10, the bankruptcy court lacked jurisdiction to
enter its order of December 18, quantifying fees and costs
awarded in its order of December 4, this issue is moot. The
December 18 order was vacated by the district court, and
Kismet has not appealed this part of the district court’s order.
G.
We turn now to the Diazes’ challenge to the bankruptcy
court’s order abrogating Mr. Diaz’s attorney-client privilege
with respect to “all documents that refer or relate to
communications with or by counsel (a) regarding the defense
of ‘impossibility’ to a sanction of contempt; (b) regarding
correspondence with or from any Mexican government
official in regards to the [ACJ].”
This order was not error. The crime-fraud exception to
attorney-client privilege applies when “the client was
engaged in or planning a criminal or fraudulent scheme when
it sought the advice of counsel to further the scheme,” and
where “the attorney-client communications for which
production is sought are ‘sufficiently related to’ and were
made ‘in furtherance of [the] intended, or present, continuing
illegality.’” In re Napster, Inc. Copyright Litig., 479 F.3d
1078, 1090 (9th Cir. 2007), abrogated on other grounds by
IN RE: ICENHOWER 21
Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100 (2009)
(quoting In re Grand Jury Proceedings, 87 F.3d 377, 381–83
(9th Cir. 1996)). Further, “voluntary disclosure of the content
of a privileged attorney communication constitutes waiver of
the privilege as to all other such communications on the same
subject.” Weil v. Inv./Indicators, Research & Mgmt., Inc.,
647 F.2d 18, 24 (9th Cir. 1981); see also Hernandez v.
Tanninen, 604 F.3d 1095, 1100 (9th Cir. 2010).
Here, Mr. Diaz testified at his deposition on October 10,
2008, that his communications with counsel contributed to
(1) his position that signing the power of attorney prepared by
Kismet would violate Mexican law, (2) his decision to contact
the Ministry of Foreign Affairs, and (3) his decision to file
the amparo. This testimony gave the bankruptcy court
reasonable cause to believe that Mr. Diaz consulted his
attorneys for the purpose of furthering his obstruction of the
ACJ. Additionally, having invoked advice of counsel in
support of his position regarding Mexican law and his
argument that contacting the Ministry and seeking the
amparo were consistent with compliance with the ACJ, Mr.
Diaz implicitly waived privilege with regard to
communications on those subjects.
H.
Finally, we consider Kismet’s argument that the district
court erred in vacating the compulsory sanctions of $25,000
per day for the period from November 26, 2008 (the day after
the transfer) to December 4, 2008 (when the bankruptcy court
put the Diazes on notice that continued occupation of the
Villa would result in daily compulsory sanctions). Before
compulsory sanctions may be imposed, a contemnor must
have an “opportunity to reduce or avoid the fine through
22 IN RE: ICENHOWER
compliance.” Int'l Union, United Mine Workers of Am. v.
Bagwell, 512 U.S. 821, 829 (1994). Thus, at the least, a
contemnor must be given notice that it will face compulsory
sanctions if it fails to take a particular action. See id.
Here, even if occupation of the Villa violated the
bankruptcy court’s preliminary injunction, which was
incorporated into the ACJ and prohibited “making
unavailable . . . any part of the villa property,” the Diazes
were not adequately put on notice until December 4 that
continued occupation of the Villa would trigger compulsory
sanctions. On November 13, 2008, the bankruptcy court
ordered compulsory sanctions if the Diazes did not “sign such
documents as proffered by [Kismet] . . . [that] show[] a
transfer to Axolotl or other assignee that Kismet may
designate.” Although, on November 20, the bankruptcy court
prohibited the Diazes from “tak[ing] any steps to render
ineffectual . . . the conveyance document,” the court did not
notify the Diazes that violating this order would subject them
to compulsory sanctions. In any event, the conveyance
document was not rendered wholly ineffectual, as it still
transferred legal title and permitted Axolotl to invoke
Mexican law to protect its property interests. In fact, the
bankruptcy court had explicitly recognized that it was
concerned with the transfer of title, not securing possession:
[I]f [occupants of the Villa are] there by the
time the thing closes, this is something you
may have to deal with on a post-closing
basis. . . . [T]he Court is not going to be
deciding what would eventually be an eviction
proceeding of property in Mexico. Once your
client has rights under the transfer documents,
your client has whatever rights are conferred
IN RE: ICENHOWER 23
under Mexico law. This is not the Court’s
concern.
Not until December 4, when Kismet notified the court of the
occupation and compulsory sanctions were imposed until it
ended, were the Diazes given an opportunity to avoid
sanctions by vacating the Villa.
IV.
The parties have submitted several requests for judicial
notice. Judicial notice may be taken “at any stage of the
proceeding.” Fed. R. Evid. 201(d). We “may judicially
notice a fact that is not subject to reasonable dispute because
it . . . can be accurately and readily determined from sources
whose accuracy cannot reasonably be questioned,” Fed. R.
Evid. 201(b), including “court filings and other matters of
public record,” Reyn's Pasta Bella, LLC v. Visa USA, Inc.,
442 F.3d 741, 746 n.6 (9th Cir. 2006). We “must take
judicial notice if a party requests it and the court is supplied
with the necessary information.” Fed. R. Evid. 201(c).
Here, the Diazes have requested judicial notice of two
notices of appeal filed in the bankrutcy court, and Kismet has
requested judicial notice of the Diazes’ emergency motion for
a stay of judgment pending appeal and the district court’s
order denying that motion. Each of these requests is
unopposed. Kismet has also requested judicial notice of the
notarized transfer document executed on November 25, 2008.
Although the Diazes challenge the accuracy of the submitted
document, their challenge lacks substance. They state merely
that the document’s accuracy “can be — and is hereby —
reasonably questioned”; they do not contend that the Spanish-
language document is not what they signed on November 25
24 IN RE: ICENHOWER
or that the document was mistranslated. In fact, they rely
extensively on the translation in arguing that the document
favors their case. We grant each of the requests for judicial
notice.
AFFIRMED.