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In re Media Group, Inc.

United States Bankruptcy Appellate Panel of the Ninth Circuit
Nov 14, 2006
BAP NC-05-1432-SAlMa (B.A.P. 9th Cir. Nov. 14, 2006)

Opinion


In re: MEDIA GROUP, INC., Debtor. LINDA SHAO; LAW OFFICES OF LINDA SHAO, Appellants, v. LOIS I. BRADY, Chapter 7 Trustee, Appellee BAP No. NC-05-1432-SAlMa United States Bankruptcy Appellate Panel of the Ninth CircuitNovember 14, 2006

NOT FOR PUBLICATION

Argued and Submitted at San Francisco, California: June 23, 2006

Appeal from the United States Bankruptcy Court for the Northern District of California. Honorable Leslie Tchaikovsky, Bankruptcy Judge, Presiding. Bk. No. 01-45924.

Before: SMITH, ALLEY[ and MARLAR, Bankruptcy Judges.

Hon. Frank R. Alley, United States Bankruptcy Judge for the District of Oregon, sitting by designation.

MEMORANDUM

Linda Shao (" Shao") and the Law Offices of Linda Shao, APLC (collectively, " Appellants" or " Shao") appeal a final order entered on October 25, 2005, that awarded compensatory sanctions in the amount of $29,062.50 to the chapter 7 trustee pursuant to the bankruptcy court's inherent authority under § 105(a). A timely notice of appeal was filed on November 1, 2005. We REVERSE in part, AFFIRM in part, and VACATE and REMAND in part.

I. FACTS

Shao, an attorney, represented Media Group, Inc. (" Debtor") prior to the bankruptcy filing. In October 2000, Shao received a settlement check in the amount of $35,000 (the " Funds") which was made payable jointly to Shao and Debtor. At that time, Debtor owed Shao for legal services. Shao sent the settlement check to Debtor without endorsing it, requesting that Debtor sign and return it. Instead, Debtor deposited the check in its bank account at the Far East National Bank (the " Bank"). The Bank accepted the check for deposit despite the lack of an endorsement by Shao.

In November 2001, Debtor filed its chapter 11 bankruptcy petition. Later that month, Shao filed suit in state court against the Bank for negligence and against certain of Debtor's officers for fraud and breach of contract (the " state court action").

Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as enacted and promulgated prior to the effective date (October 17, 2005) of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, Apr. 20, 2005, 119 Stat. 23.

Shao has settled her claim with the Bank in the state court action.

The case converted to a chapter 7, and in December 2002, the trustee filed an adversary proceeding against Shao based on, among other claims, an alleged violation of the automatic stay for the prosecution of the state court action. In May 2003, Shao filed a motion to dismiss the complaint. The court dismissed all the claims except the request for declaratory relief regarding Shao's asserted lien interest in the Funds.

In June 2003, the trustee filed a motion for partial summary judgment on the remaining claim. At the same time, Shao moved for sanctions under Rule 9011 against the trustee and her court-approved counsel, Reidun Stromsheim (" Stromsheim"), alleging that the complaint was frivolous. The court granted the trustee's motion for partial summary judgment, and also awarded sanctions against Stromsheim. Stromsheim appealed to the Bankruptcy Appellate Panel (" BAP"), and we affirmed the bankruptcy court's decision.

On April 26, 2004, prior to the entry of the BAP decision and without first seeking leave of the bankruptcy court, Shao issued a subpoena in the state court action directing Stromsheim to appear at a deposition on May 19, 2004. The subpoena also directed her to produce ten categories of documents:

1. Any and all documents that may prove correspondences between any member of your law firm (including yourself) and Iling Chiang [one of Debtor's principals], including but not limited to: phone logs, phone bills, phone notes, letters (however sent) and emails.

2. All records pertaining to any investigation involving Linda Shao made by or on behalf of your firm or the trustee before filing the complaint against Linda Shao in Adversary Proceeding # 02 7254 AT, of Bankruptcy Court case # 024485, including but not limited to: reports, phone logs, phone bills, phone notes, letters (however sent) and emails.

3. Any and all invoices that were ever submitted to the estate regarding your contacts with Iling Chiang.

4. Any and all documents that may prove correspondences between any member of your law firm (including yourself) and Jeff Chiou [one of Debtor's principals], including but not limited to: phone logs, phone bills, phone notes, letters (however sent) and emails.

5. Any and all documents that may prove correspondences between any member of your law firm (including yourself) and Scott Goodsale [Debtor's chapter 11 attorney] and any attorneys at Scott Goodsale's law firm, including but not limited to: phone logs, phone bills, phone notes, letters (however sent) and emails.

6. All records regarding any investigation of payments made by Media Group, Inc. or the Media Group, Inc. estate, to Scott Goodsale.

7. Any and all documents that may prove correspondences between any member of your law firm (including yourself) and any employee, agent or former employee of Media Group, Inc., including but not limited to: phone logs, phone bills, phone notes, letters (however sent) and emails.

8. Any and all correspondence between Lois Brady and Iling Chiang or Iling Chiang's attorney, including but not limited to: phone logs, phone bills, phone notes, letters (however sent) and emails.

9. Any and all correspondence between Lois Brady and Jeff Chiou or his attorney, including but not limited to: phone logs, phone bills, phone notes, letters (however sent) and emails.

10. Any and all documents that may prove correspondences between any member of your law firm (including yourself) and [the Bank] or any of its attorneys or agents, including but not limited to: phone logs, phone bills, phone notes, letters (however sent) and emails.

Subpoena, April 26, 2004.

On May 7, 2004, Stromsheim's associate, Elizabeth Murphy (" Murphy"), wrote Shao requesting that she withdraw the subpoena, asserting that a chapter 7 trustee and her counsel have quasi-judicial immunity in the performance of their functions and that the court that appointed them has exclusive jurisdiction over the prosecution of any legal process against them. Murphy also noted that from the list of documents requested in the subpoena, it appeared that Shao was improperly attempting to use the state court action to investigate the trustee's administration of the estate. Shao did not withdraw the subpoena.

On May 10, 2004, Murphy wrote Shao a second time, this time advising that the trustee would be seeking an order from the bankruptcy court enjoining the discovery. Later that day, the trustee filed 1) a complaint for injunctive relief, and 2) an ex parte application for a temporary restraining order (the " TRO") and an order to show cause regarding a preliminary injunction. The TRO motion was heard on May 13, 2004.

Shao brought to the hearing a written opposition to the TRO and a counter motion to disqualify the trustee and Stromsheim (the " motion to disqualify"). The court granted the TRO and scheduled a hearing on the preliminary injunction and the motion to disqualify for June 2, 2004.

At the hearing on June 2, 2004, the court denied the motion to disqualify without prejudice based on certain procedural defects. It also extended the TRO through June 30, 2004.

In response to the allegation that the service of the subpoena on Stromsheim was improper, Shao filed a formal motion for leave to take the deposition of Stromsheim (the " motion for leave"). The hearing was calendared for June 30, 2004.

On June 17, 2004, Shao filed a motion to dismiss the adversary proceeding (the " motion to dismiss"), which was scheduled to be heard on July 29, 2004.

On June 18, 2004, the trustee filed an opposition to the motion for leave, asserting that she and her professionals were protected by the doctrine of quasi-judicial immunity for their actions in administering the bankruptcy estate. She also moved for partial summary judgment (in the form of a cross motion), alleging that there were no disputed material facts with respect to her claim for a permanent injunction. The hearing on the summary judgment motion was scheduled for the same time as the motion for leave, June 30, 2004.

The matters were continued multiple times (at Shao's requests) and were finally heard on November 18, 2004. At the hearing, Shao requested that the complaint be dismissed because she conceded that the deposing of Stromsheim without first obtaining leave from the court was improper. Moreover, according to Shao, because her motion for leave had already been denied by the court, she would no longer prosecute the matter - rendering the request for a permanent injunction moot.

There was some uncertainty as to whether the motion for leave was actually decided in a prior hearing held on July 29, 2004. Although the bankruptcy court and Shao believed the motion was denied at the time, Stromsheim was under the belief that the matter had been continued. An examination of the record reflects that Stromsheim was correct; no final determination on the issue was made at the time.

Stromsheim responded that the request for partial summary judgment related only to the issuance of a permanent injunction, and that if the court deemed the motion for leave denied then the only remaining issue to be tried was the amount of damages suffered by the estate. In this regard, the court suggested the following alternative to proceeding to trial:

THE COURT: Okay. Okay, what I'm going to suggest -- I think what makes more sense is we dismiss this adversary proceeding. [The trustee] file[s] a motion under 362 if you want to or in the case and set it for hearing --

MS. STROMSHEIM: M-hm. All right.

THE COURT: -- just start with the legal issue and --

MS. STROMSHEIM: Very well. Very well.

THE COURT: Okay. Then we can just get rid of it because you don't need the adversary proceeding for that purpose. I will deal with a dismissal order of the adversary proceeding.

Transcript of Proceeding, November 18, 2004, p. 13.

As a result, the adversary was dismissed and, on July 21, 2005, the trustee filed a motion under § 105(a) for civil contempt damages (the " sanctions motions") in the amount of $29,062.50 for costs incurred in defending against the subpoena. She argued that Shao knew she was required to obtain leave of the bankruptcy court prior to attempting to depose a bankruptcy trustee's counsel in a non-bankruptcy forum. Further, the trustee maintained that Shao's actions were improper because 1) she was seeking to depose Stromsheim about events in the state court action which occurred one year prior to her actual employment; and 2) she was using the subpoena as a means to investigate the administration of the bankruptcy estate.

In opposition, Shao argued that 1) the trustee brought the sanctions motion only in retaliation for the sanctions order Shao had previously obtained against Stromsheim; 2) the trustee failed to provide clear authority in the Ninth Circuit that an attorney employed by a bankruptcy trustee has the same immunity as a trustee; 3) the bankruptcy court had already ruled that there were no grounds for the trustee to file a motion for attorneys' fees and costs based on § 105(a); 4) the sanctions motion was tardy as it was filed eight months after the adversary proceeding was dismissed; 5) the damages requested was comprised mostly of attorneys' fees that were incurred after the motion for leave was filed; and 6) the complaint for injunctive relief was filed without any prior warning or notice.

The sanctions motion was apparently filed eight months after the November 2004 ruling due to Shao's stated inability to appear in court or to respond to any motions from December 13, 2004 to May 19, 2005.

The trustee replied that the fees and costs incurred after Shao filed her motion for leave were necessitated by Shao's refusal to withdraw the subpoena, and further, her insistence throughout the proceedings that she was entitled to depose Stromsheim in the state court action without leave of the bankruptcy court.

The hearing on the sanctions motion was originally scheduled for August 18, 2005, but again, on request from Shao, it was continued to October 6, 2005.

Following the hearing, the bankruptcy court determined that Shao engaged in improper litigation tactics and acted in bad faith by issuing and refusing to withdraw the subpoena. More specifically, the court found that Shao had engaged in improper litigation tactics on two independent grounds: 1) she was advised by the trustee that, under the authority of In re Crown Vantage, Inc., 421 F.3d 963, 970 (9th Cir. 2005), a party may not take discovery of a trustee and/or her counsel without first obtaining leave; and 2) the events upon which the state court action was based occurred over one year prior to the appointment of the trustee and before Stromsheim was employed.

The bankruptcy court also concluded that Shao acted in bad faith by 1) repeatedly attempting to defend her conduct by contending that the law was uncertain as to whether a party could take discovery of an attorney employed by a bankruptcy trustee in a non-bankruptcy forum without prior leave; 2) failing to request guidance from the court in the face of this uncertainty; and 3) engaging in delay tactics such as repeatedly requesting (and obtaining) continuances, including filing a notice of unavailability for an extended period of time and filing motions after the close of the briefing schedule.

The bankruptcy court granted the sanctions motion and awarded compensatory damages in favor of the trustee in the amount of $29,062.50.

Appellants appeal.

II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. § 1334 and § § 157(b)(1) and (b)(2)(A). We have jurisdiction under 28 U.S.C. § § 158(b)(1) and (c)(1).

III. ISSUES

1. Whether the bankruptcy court erred in finding that a party cannot propound discovery on a bankruptcy trustee's attorney in a non-bankruptcy forum without first obtaining prior leave from the court.

2. Whether the bankruptcy court abused its discretion in awarding compensatory sanctions to the trustee pursuant to § 105(a).

3. Whether the bankruptcy court abused its discretion as to the amount of the sanctions.

IV. STANDARD OF REVIEW

The bankruptcy court's findings of fact are reviewed for clear error, conclusions of law are reviewed de novo, and mixed questions of fact and law are reviewed de novo. In re Kashani, 190 B.R. 875, 881 (9th Cir. BAP 1995).

We review the bankruptcy court's assessment of sanctions for an abuse of discretion. In re Rainbow Magazine, Inc., 77 F.3d 278, 283 (9th Cir. 1996). A court abuses its discretion if it bases its ruling " on an erroneous view of the law or on a clearly erroneous assessment of the evidence." In re Deville, 280 B.R. 483, 492 (9th Cir. BAP 2002).

Whether an appellant's due process rights were violated is a question of law which we review de novo. Id.; In re Garner, 246 B.R. 617, 619 (9th Cir. BAP 2000).

V. DISCUSSION

A. Current Law Does Not Expressly Prohibit a Party from Deposing an Attorney Employed by the Bankruptcy Trustee in a Non-Bankruptcy Forum

In Barton v. Barbour, 104 U.S. 126, 26 L.Ed. 672 (1881), the Supreme Court held that before a lawsuit can be brought against a court-appointed receiver in another forum, leave from the appointing court must first be obtained (the " Barton Doctrine"). 104 U.S. at 127. In the recently decided case of Crown Vantage, the Ninth Circuit interpreted the principle to apply to trustees in bankruptcy:

The Barton doctrine applies in bankruptcy, because " [t]he trustee in bankruptcy is a statutory successor to the equity receiver, " and " [j]ust like the equity receiver, a trustee in bankruptcy is working in effect for the court that appointed or approved him, administering property that has come under the court's control by virtue of the Bankruptcy Code."

Indeed, the policies underlying the Barton doctrine apply with greater force to bankruptcy proceedings than to other proceedings involving receivers. The filing of a bankruptcy petition creates a bankruptcy estate, consisting of all of the debtor's legal or equitable interests in property " wherever located and by whomever held." Thus, " [t]he district court in which the bankruptcy case is commenced obtains exclusive in rem jurisdiction over all of the property in the estate." The court's exercise of in rem bankruptcy jurisdiction " essentially creates a fiction that the property regardless of actual location - is legally located within the jurisdictional boundaries of the district in which the court sits." Thus, the jurisdiction of the bankruptcy court exceeds that of any other court-appointed receiver. The requirement of uniform application of bankruptcy law dictates that all legal proceedings that affect the administration of the bankruptcy estate be brought either in bankruptcy court or with leave of the bankruptcy court.

421 F.3d at 971 (citations omitted). The Ninth Circuit also interpreted the doctrine to include professionals employed by the bankruptcy trustee. Id. at 970.

Citing Barton, Appellants argue that a party is not prohibited from taking discovery of an attorney employed by the bankruptcy estate in a non-bankruptcy forum. They contend that the Supreme Court only intended that common law bar lawsuits against receivers in courts other than the court charged with the administration of the estate. In addition, they urge that while the principle of prohibiting the commencement of lawsuits was applied as a matter of first impression to bankruptcy trustees and their professionals by the Ninth Circuit in Crown Vantage, the holding should not be expanded to insulate an attorney employed by a bankruptcy trustee or her professionals from discovery.

Appellants analogize the situation here to that in In re Miller, 262 B.R. 499 (9th Cir. BAP 2001), where we held that discovery against a non-debtor defendant in a state court action was not a violation of the automatic stay. They argue that because pursuing discovery from a non-debtor defendant is not a violation of the stay, it should also not be a violation of the Barton Doctrine. We do not find this analysis particularly helpful. Filing a lawsuit against a non-debtor party, such as a trustee's attorney, may not be a violation of the automatic stay, but may very well be barred under Barton if leave is not first obtained.

Clearly, the Barton Doctrine prohibits a party from initiating legal action against a trustee or her professionals in a non-bankruptcy forum without prior leave from the court. Crown Vantage, 421 F.3d at 970-71. In the instant matter, the bankruptcy court expanded the doctrine to include discovery in an action in which neither the trustee nor her attorney were named parties:

While there are no reported cases dealing with [allowing a trustee to be] subpoenaed rather than su[ed], the principle is the same. The bankruptcy court has the right to control an attempt to exercise legal process against its officers.

Memorandum Decision, October 12, 2005, p. 13.

The court's expansion of the doctrine is not supported by a plain reading of either Barton or Crown Vantage; both are limited to the commencement of legal action against a court appointee. We decline to adopt such an expansion in this case.

The trustee refers us to In re Lickman, 304 B.R. 897 (Bankr. M.D. Fla. 2004), a case where the defendant caused subpoenas to be issued to a trustee's attorney and to a former bankruptcy judge's law clerk and judicial assistant. In that case, the court determined that if judicial immunity were applicable, it would be pointless to allow discovery. Id. at 902. The issue before us, however, is not whether judicial immunity is implicated, but whether Shao violated the Barton Doctrine when she subpoenaed the trustee's counsel in the state court action. Lickman provides no basis for expanding the Barton Doctrine to include discovery.

B. The Bankruptcy Court Abused Its Discretion in Part by Awarding Sanctions

The Supreme Court, in Chambers v. NASCO, Inc., 501 U.S. 32, 42-47, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991), held that Article III courts have an inherent authority to sanction bad faith or willful misconduct. The Ninth Circuit expressly included bankruptcy courts to possess such authority, illustrating that the court implicitly derived this power under § 105(a) . In re Rainbow Magazine, Inc., 77 F.3d at 284. In In re Dyer, the Ninth Circuit further clarified the authority of bankruptcy courts in this area:

Section 105(a) provides

Civil contempt authority allows a court to remedy a violation of a specific order (including " automatic" orders, such as the automatic stay or discharge injunction). The inherent sanction authority allows a bankruptcy court to deter and provide compensation for a broad range of improper litigation tactics.

The inherent sanction authority differs from the civil contempt authority in an additional respect as well. Before imposing sanctions under its inherent sanctioning authority, a court must make an explicit finding of bad faith or willful misconduct. In this context, " willful misconduct" carries a different meaning than the meaning employed in the context of determining whether an individual is entitled to damages under § 362(h) or a contempt judgment under § 105(a) for an automatic stay violation. With regard to the inherent sanction authority, bad faith or willful misconduct consists of something more egregious than mere negligence or recklessness. Although " specific intent to violate the automatic stay" may not be required in the contempt context, such specific intent or other conduct in " bad faith or conduct tantamount to bad faith, " is necessary to impose sanctions under the bankruptcy court's inherent power.

322 F.3d 1178, 1196 (9th Cir. 2003)(citations omitted).

The bankruptcy court, in exercising its inherent sanction authority under § 105(a), found that Shao engaged in improper litigation tactics by issuing and refusing to withdraw the subpoena and by acting in bad faith.

1. The bankruptcy court erred in finding that Shao's failure to obtain leave to issue the subpoena constituted an improper litigation tactic

The bankruptcy court determined that Shao engaged in improper litigation tactics in issuing and refusing to withdraw the subpoena for two independent reasons: 1) the law was clear that it was improper to sue a bankruptcy trustee and her professionals without obtaining leave from the court as supported by Crown Vantage; and 2) the issuance of the subpoena was improper as Shao attempted to depose Stromsheim in the state court action for events that took place one year prior to her employment.

Appellants assert that they did not engage in improper litigation tactics as the law at the time the subpoena was issued was not clear. In particular, Crown Vantage was not decided until after the subpoena was issued, and even then, the decision only addressed the application of Barton to lawsuits initiated against a trustee and his professionals - not discovery. As the commencement of a lawsuit and the propounding of discovery are two distinct legal processes, they maintain that the bankruptcy court erred by penalizing them for not adhering to a standard that was not clearly defined. We agree.

While the Barton Doctrine prohibits a party from suing a court appointed receiver in another forum, the application of the doctrine to a bankruptcy trustee and his professionals was not made clear until Crown Vantage was decided in August 2005, more than a year after the subpoena was issued. Even more importantly, neither Barton nor Crown Vantage supports the proposition that leave from the appointing court must be obtained before pursuing discovery in a case in which the court appointee is not a named party. We therefore conclude that the bankruptcy court erred in imposing sanctions against Shao on the ground that she violated the Barton Doctrine.

2. The bankruptcy court did not err in finding that Shao engaged in improper litigation tactics by pursuing discovery against the trustee's counsel

Independent of its erroneous finding of a violation of the Barton Doctrine, the bankruptcy court also found that Shao engaged in improper litigation tactics by attempting to depose Stromsheim in the state court action for events that took place one year prior to her employment as a means of investigating the trustee's administration of the bankruptcy estate. The bankruptcy court determined that this was an abuse of the state court process.

Appellants contend that the deposition of Stromsheim was wholly necessary from their perspective and that the bankruptcy court exceeded its jurisdiction by finding that the state court process was abused. We are unpersuaded.

First, Shao concedes that she subpoenaed Stromsheim, at least in part, to obtain information about the administration of the bankruptcy estate. Second, the record amply supports the bankruptcy court's findings that 1) the matters upon which Stromsheim was to be deposed in the state court action took place one year prior to her hiring; and 2) the discovery was designed to serve as a tool for investigating the trustee's administration of the bankruptcy estate. Thus, it was proper for the bankruptcy court to find Shao had engaged in improper litigation tactics.

3. The bankruptcy court erred in finding that Shao acted in bad faith

The bankruptcy court's award of sanctions is based in part on its findings that Shao engaged in bad faith by defending her failure to obtain leave from the court before issuing the subpoena and by engaging in improper delay tactics in connection with the prosecution of matters relating to the trustee's injunction proceeding.

The type of " bad faith" required for sanctions pursuant to a court's inherent power includes a wide range of willful improper conduct, among them: willful abuse of the judicial process, willful or reckless disregard of court rules, any act intended to mislead the court, and reckless conduct accompanied by an improper purpose. Fink v. Gomez, 239 F.3d at 993-94 (9th Cir. 2001). Mere ignorance or negligence is insufficient. Id.

As previously indicated, we do not believe the law was, or is, clear that leave from the bankruptcy court was required before Shao could properly issue the subpoena against Stromsheim. In addition, not only was the subpoena issued prior to the publication of Crown Vantage, but Crown Vantage is silent as to the application of the Barton Doctrine to discovery. Accordingly, to the extent that the bankruptcy court's finding of bad faith is based on this premise, it is in error.

As for the matter of improper delay tactics, the bankruptcy court found that Appellants repeatedly and without justification sought continuances of hearings, gave notice of an extended period of unavailability, filed tardy motions, and cited new cases at oral argument that were not cited in the briefs. First, we note that the bankruptcy court granted the various requests for continuances. Had the court believed the requests were improperly motivated, it could have denied them. Second, the record indicates that Shao's notice of unavailability was due to medical complications occasioned by a difficult pregnancy that the court, again, authorized. Third, while the late-filed motions and case citations may be indicative of negligence or even incompetence, they do not rise to the level of bad faith. Id.

Moreover, even if the record supported a finding of bad faith on the basis of improper delay tactics, which we believe it does not, Appellants were not given a fair opportunity to present a defense against the charge. The trustee's motion for sanctions did not cite delay tactics as a basis for relief; rather the court raised the issue sua sponte at the hearing. " [D]ue process guarantees need to be observed when a court resorts to its inherent power to punish misconduct simply because those powers are enormous; the procedural guarantees are the restraint that protects against intended or unintended abuse of that power." In re Dyer, 322 F.3d at 1178. Consequently, the bankruptcy court also erred in finding bad faith on the basis of Shao's alleged use of improper delay tactics.

C. The Matter Should be Remanded to the Bankruptcy Court for Further Findings Regarding the Appropriate Amount of Sanctions

The sanction award granted by the bankruptcy court is based on its findings of various areas of improper conduct by Appellants. However, the amount of the award attributable to each area of misconduct is not clear. Having determined that the court erred in finding that Appellants violated the Barton Doctrine and in finding that Appellants engaged in bad faith delay tactics, further findings of the court are required in terms of assessing the appropriate amount of sanctions, if any, that should be imposed for Appellant's use of the state court discovery process as an improper means of investigating the trustee's administration of the bankruptcy estate.

VI. CONCLUSION

Based upon foregoing, we find as follows:

1. The bankruptcy court's determination that Appellants violated the Barton Doctrine is REVERSED.

2. The bankruptcy court's finding that Shao issued the subpoena against Stromsheim as an improper litigation tactic to investigate the trustee's administration of the estate is AFFIRMED.

3. The bankruptcy court's finding that Appellants acted in bad faith is REVERSED.

4. The sanction amount of $29,062.50 is VACATED and REMANDED to the bankruptcy court to determine the appropriate sanction amount, if any, in light of this memorandum.

The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.

11 U.S.C. § 105(a).


Summaries of

In re Media Group, Inc.

United States Bankruptcy Appellate Panel of the Ninth Circuit
Nov 14, 2006
BAP NC-05-1432-SAlMa (B.A.P. 9th Cir. Nov. 14, 2006)
Case details for

In re Media Group, Inc.

Case Details

Full title:In re: MEDIA GROUP, INC., Debtor. v. LOIS I. BRADY, Chapter 7 Trustee…

Court:United States Bankruptcy Appellate Panel of the Ninth Circuit

Date published: Nov 14, 2006

Citations

BAP NC-05-1432-SAlMa (B.A.P. 9th Cir. Nov. 14, 2006)

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