Phillips v. Gilman (In re Gilman)
| Decision Date | 12 July 2019 |
| Docket Number | BAP Nos. CC-18-1066-TaLS |
| Parties | In re: KEVAN HARRY GILMAN, Debtor. TAMMY R. PHILLIPS; TAMMY R. PHILLIPS, A PROFESSIONAL LAW CORPORATION, Appellants, v. KEVAN HARRY GILMAN; SHIRLEE L. BLISS, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
NOT FOR PUBLICATION
BAP Nos. CC-18-1100-TaLS (related)
MEMORANDUM*Argued and Submitted on November 29, 2018 at Pasadena, CA
Appeal from the United States Bankruptcy Court for the Central District of California
Appearances: Charles Quentin Jakob argued for Appellants; Mark E. Ellis of Ellis Law Group, LLP, argued for Appellee.
Before: TAYLOR, LAFFERTY, and SPRAKER, Bankruptcy Judges.
This appeal concerns litigation that no economically rational actor would perpetuate.
Tammy R. Phillips and Tammy R. Phillips, a Professional Corporation (jointly, "Creditors") obtained a pre-petition judgment against Debtor Harry Gilman based on $8,250 in statutory damages under the Rosenthal Fair Debt Collection Practices Act (the "Act"). The Act allows for recovery of attorneys' fees, so the judgment included a $100,000 fee award. California law also allows for recovery of attorneys' fees when collecting such a judgment. Thus, when Debtor filed a chapter 7 case, he scheduled Creditors as holding a $150,000 claim; Creditors asserted that their claim for nonbankruptcy collection costs actually approximated $1 million.
Debtor's bankruptcy estate was not asset rich. So Creditors took actions to maximize chances of recovery on the judgment. First, they objected to Debtor's claim of a homestead exemption. They have beensuccessful in part, but this litigation continues. Second, they obtained a judgment denying Debtor's discharge. No one questions the facial appropriateness of this type of bankruptcy activity, but the volume of sanctions, discovery, and reconsideration motions engendered by Creditors in these activities was far, far beyond that normally seen in such cases. For purposes of this appeal, we focus only on the activity in the main case and identify 28 such motions filed by Creditors. Thus, as the bankruptcy judge resignedly commented—while being repeatedly interrupted—at a hearing: Hr'g Tr. (June 7, 2017) 58:23-60:10.
Eventually, Creditors filed the three motions relevant to these appeals. The motions collectively and respectively seek more than $700,000 in fees and costs for litigation in the bankruptcy case under CCP § 685.040,1 an award under Civil Rule 37, and a sanctions award under Rule 9011, § 105, and the bankruptcy court's inherent authority.2 The bankruptcy courtallowed $137,907.66 in fees and costs and denied the other two motions; in the process, it awarded Gilman $2,000 in costs. Creditors appeal from each of these determinations. In a separate opinion, we affirm the bankruptcy court's decision to deny a portion of the fee request and a portion of a fee request in the adversary proceeding as untimely under the applicable California law. In this memorandum we deal with all other issues arising in the main case and determine that the bankruptcy court did not err.
Accordingly, we AFFIRM.
In 2011, Debtor filed a chapter 7 petition. He scheduled a $150,000 debt to Creditors. He also initially scheduled two pieces of property, one in Van Nuys, California. On Schedule C, he claimed a CCP § 704.730 enhanced homestead exemption on the Van Nuys property. He stated: "Debtor has [c]ancer and has not been able to work in his business."
Creditors filed a nondischargeability and objection to discharge adversary proceeding against Debtor and pursued it with tenacity. Creditors also objected to his homestead exemption. Given the scheduled assets and claims, collection of any significant portion of the prepetition judgment was dependent on minimizing the exemption claims, avoiding discharge so that Creditors could pursue postpetition assets, and, given Debtor's age and health, some significant luck.
Debtor initially did not oppose the objection to exemption; thebankruptcy court sustained it. In the meantime, however, Debtor filed an amended Schedule C and claimed a reduced exemption ($104,000), on a reduced property value ($433,000), and again sought an enhanced exemption based on his cancer diagnosis. Creditors objected to the amended exemptions, and Debtor sought and obtained relief from the first exemption order under Civil Rule 60(b)(1).
Eventually, in August of 2012, the bankruptcy court concluded that, while Debtor was entitled to a homestead exemption, evidentiary issues required trial as to the claim for a $4,000 enhanced homestead exemption. Creditors then unsuccessfully sought reconsideration. The order denying Creditors' renewed objection to the homestead exemption claim was not entered for over two years (the "Homestead Exemption Order"). Creditors appealed.
Leading up to the enhanced exemption trial, the parties participated in discovery; as relevant here, Creditors served requests for admissions on Debtor. The parties also attempted to mediate the dispute, but Creditors' principal did not attend the mediation in person. Debtor sought sanctions for this failure, but the bankruptcy court denied the motion.
The bankruptcy court finally held the evidentiary hearing in July of 2015 and concluded that Debtor was not entitled to an enhanced homestead (the "Disability Enhancement Order").
Having prevailed (in part) on their exemption objection, Creditorssought to recover their fees and other sanctions. First, in January of 2016, they filed a motion seeking attorneys' fees based on their state law rights (the "Judgment Enforcement Motion"). They requested a lodestar award of $756,425 (1,915 hours at $395 per hour) plus other costs.
Later that year, Creditors filed two sanctions motions. The first sought sanctions under Civil Rule 37 because Debtor allegedly failed to admit something later proven at trial (the "Civil Rule 37 Motion"). By this motion, they requested an award of $264,662 in attorneys' fees (670.031 hours at $395 per hour), plus other costs of $4,948.85. The second sought attorneys' fees under Rule 9011, § 105(a), and the bankruptcy court's inherent authority (the "Rule 9011 Motion"). Here, they requested an award of $440,835.80 in attorneys' fees (1,116.04 hours at $395 per hour) and $6,406.62 in costs.
After oral argument, the bankruptcy court denied both sanctions motions and awarded reduced fees and costs. It entered a memorandum decision that discussed these determinations and a separate order granting in part and denying in part the Judgment Enforcement Motion; it awarded fees of $134,214.50 and $3,693.16 in costs. It also entered an order denying the Rule 9011 Motion and awarding Debtor attorneys' fees and costs under Rule 9011(c)(11)(A) as well as orders denying two reconsideration motions. Finally, the bankruptcy court entered an order denying the Civil Rule 37 Motion.
The Creditors timely appealed from these determinations.
In the meantime, the district court affirmed the bankruptcy court's Homestead Exemption Order, but the Ninth Circuit affirmed in part and vacated and remanded for further proceedings. It concluded that the bankruptcy court properly granted Debtor's Civil Rule 60(b)(1) motion, but it vacated the Homestead Exemption Order because "the bankruptcy court made no findings regarding [Debtor's] intent to continue to reside in the property." Phillips v. Gilman (In re Gilman), 887 F.3d 956, 966 (9th Cir. 2018).
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.
Did the bankruptcy court abuse its discretion in granting in part and denying in part the Judgment Enforcement Motion?
Did the bankruptcy court abuse its discretion in denying the Civil Rule 37 Motion?
Did the bankruptcy court abuse its discretion in denying the Rule 9011 Motion and awarding Debtor costs?
We review "de novo questions of law concerning entitlement to attorney's fees." PSM Holding Corp. v. Nat'l Farm Fin. Corp., 884 F.3d 812, 828 (9th Cir. 2018). But we review the amount of "attorney fees awardedunder state law for abuse of discretion." Id. (alterations and internal quotation marks omitted).
It is well established in this Circuit that a reviewing court "will not disturb a bankruptcy court's award of attorneys' fees unless the bankruptcy court abused its discretion or erroneously applied the law." Countrywide Home Loans, Inc. v. Hoopai (In re Hoopai), 581 F.3d 1090, 1095 (9th Cir. 2009) ); Amick v. Bradford (In re Bradford), 112 B.R. 347, 353 (9th Cir. BAP 1990). We afford broad deference to the bankruptcy court's determinations on fee awards because of its "superior understanding of the litigation and the desirability of avoiding frequent appellate review of what essentially are factual matters." Rodriguez v. Disner, 688 F.3d 645, 653 (9th Cir. 2012) (quoting Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)).
This deference is especially appropriate in the context of fee awards because the bankruptcy court has the benefit of two distinct but equally valid perspectives concerning the reasonableness of the fees requested: first, the bankruptcy court observes, in an immediate, particularized, and firsthand basis, the delivery of services in connection with particular matters or hearings, and can thus assess the difficulty of the tasks presented and other factors that should dictate the likely time and skill necessary to produce the services, as well as the quality of the services; second, the bankruptcy court has the added perspective of presiding...
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