Valdez v. Kismet Acquisition, LLC (In Re Icenhower)

FILED
NOT FOR PUBLICATION APR 08 2014
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: JERRY L. ICENHOWER, DBA No. 12-56953
Seaview Properties; et al.,
D.C. No. 3:09-cv-00589-BTM-
Debtors, BLM
GERALDINE A. VALDEZ; et al., MEMORANDUM*
Appellants,
v.
KISMET ACQUISITION, LLC,
Appellee.
In re: JERRY L. ICENHOWER, DBA No. 12-56954
Seaview Properties; et al.,
D.C. No. 3:09-cv-00590-BTM-
Debtors, BLM
GERALDINE A. VALDEZ; et al.,
Appellants,
v.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
KISMET ACQUISITION, LLC,
Appellee.
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
Before: FARRIS, N.R. SMITH, and WATFORD, Circuit Judges.
Attorneys Geraldine A. Valdez and Enrique Hernandez-Pulido appeal from
the bankruptcy court’s imposition of sanctions. We have jurisdiction under 28
U.S.C. § 158(d)(1), and we affirm.
Although the district court remanded to the bankruptcy court to reconsider
the amount of sanctions against Valdez, we have jurisdiction to consider the legal
question of whether the attorneys’ conduct was sanctionable. See In re Lehtinen,
564 F.3d 1052, 1057 (9th Cir. 2009); In re Dyer, 322 F.3d 1178, 1187 (9th Cir.
2003). And, although Kismet has relinquished any claim to the sanctions awarded
against the attorneys, this does not moot the appeal. The sanction awarded against
Hernandez — twenty hours of Continuing Legal Education in ethics — cannot be
relinquished by Kismet. See Lasar v. Ford Motor Co., 399 F.3d 1101, 1108-09
(9th Cir. 2005); Riverhead Sav. Bank v. Nat'l Mortg. Equity Corp., 893 F.2d 1109,
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1112 (9th Cir. 1990). The sanction awarded against Valdez — joint and several
liability for roughly $700,000 in compensatory sanctions awarded against her
client — was vacated by the district court. On remand, the bankruptcy court might
award monetary sanctions payable to the court or a nonmonetary sanction, neither
of which could be relinquished by Kismet. See Lasar, 399 F.3d at 1108-09;
Riverhead Sav. Bank, 893 F.2d at 1112. Thus, Valdez has a legally cognizable
interest in the outcome of this case.
This Court “directly review[s] the bankruptcy court's decision.” In re
Caneva, 550 F.3d 755, 760 (9th Cir. 2008). A bankruptcy court's imposition of
sanctions pursuant to its inherent authority is reviewed for abuse of discretion. See
Doi v. Halekulani Corp., 276 F.3d 1131, 1140 (9th Cir. 2002); cf. Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 405 (1990).
Here, the bankruptcy court did not abuse its discretion. First, Valdez’s
objections to the documents proposed by Kismet to transfer the Villa interest were,
even if technically correct, substantially motivated by bad faith. See Dyer, 322
F.3d at 1196; Fink v. Gomez, 239 F.3d 989, 992 (9th Cir. 2001). Valdez knew that
her client would not sign even correct transfer documents, and her purpose in
objecting was to delay implementation of the bankruptcy court’s judgment. See
Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 649 (9th Cir. 1997).
3
Second, Valdez encouraged her client to obtain an amparo injunction in Mexico to
delay and frustrate the required transfer of the Villa interest to Kismet, and
Hernandez advised that the amparo should be recorded and concealed from
Kismet. See Dyer, 322 F.3d at 1196; Primus, 115 F.3d at 649. Even if his duty to
protect client confidences prevented Hernandez from notifying Kismet of the
amparo, he was not permitted to advise his client to keep the amparo secret, thus
facilitating the amparo’s being recorded and used to impede implementation of the
judgment.
Finally, in light of the district court’s vacatur of the compensatory sanctions
awarded against Valdez, her argument that those sanctions are not supported by a
proper finding of causation is inapposite.
AFFIRMED.
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FILED
Valdez v. Kismet Acquisition, LLC, No. 12-56953+ APR 08 2014
MOLLY C. DWYER, CLERK
WATFORD, Circuit Judge, concurring in the judgment: U.S. COURT OF APPEALS
I don’t think the bankruptcy court abused its discretion by deciding to
sanction the two lawyers. But I do have concerns about the severity of the sanction
imposed against Ms. Valdez.
The picture that emerges from my review of the record is that of a lawyer
doing her best to protect an obstinate client from the all-but-certain wrath of the
bankruptcy court. Valdez advised Diaz-Barba to comply with the bankruptcy
court’s judgment, and she told him in no uncertain terms that he risked being held
in contempt if he refused to do so. Diaz-Barba rejected that advice. When it
became clear that Diaz-Barba felt so strongly about the supposed illegality of the
judgment under Mexican law that he was willing to be held in contempt, Valdez
helped him pursue the amparo action. She had been advised by Diaz-Barba’s
lawyers in Mexico that the amparo action would allow the Mexican courts to
determine whether the bankruptcy court’s judgment in fact violated Mexican law.
Valdez recognized that a ruling by a Mexican court validating Diaz-Barba’s
reasons for refusing to comply with the judgment represented his best (and
probably his only) hope of fending off contempt sanctions.
Valdez can perhaps be faulted for some of the tactics she used in pursuing
the amparo strategy; certainly the bankruptcy court didn’t abuse its discretion in so
Page 2 of 2
concluding. But I don’t think Valdez committed misconduct simply by deciding to
pursue the strategy in the first place, which is the view that seemed to drive the
severity of the sanction the bankruptcy court decided to impose. In my view, any
sanction imposed against Valdez should be far less severe than the $700,000
sanction that has now been vacated.