In re Sattler

Case Type:
Case Status:
BAP No. NV-19-1174-LBG (9th Circuit, Jun 01,2020) Not Published
BAP for 9th Cir. affirmed ruling of bankruptcy court (D. Nev.) denying debtor's motion to vacate orders entered in his involuntary chapter 7 case: a preservation order, an order denying his motion to dismiss and granting the petitioning creditors’ unopposed counter motion for summary judgment, and the order for relief. Debtor's motion to vacate, filed after the expiration of the appeal periods for the subject orders, failed to establish cause under Civil Rule 60(b)/FRBP 9024. Order approving withdrawal of counsel did not deprive debtor of due process or prevent debtor from timely appealing.
Procedural context:
Debtor appealed to BAP for 9th Circuit the bankruptcy court’s (D. Nev.) order denying his motion to vacate orders entered in his involuntary chapter 7 case: a preservation order, an order denying his motion to dismiss and granting the petitioning creditors’ unopposed counter motion for summary judgment, and the order for relief.
During 2016, 2017, and 2018, petitioning creditors (“Petitioning Creditors”) made several loans to Sattcom Video, LLC (“Sattcom”), a Nevada limited liability company managed by Mr. Sattler. in the amounts of $4.6 million, $1.37 million, and $4.48 million, respectively. Each of the loans was secured by an interest in Sattcom’s assets. Mr. Sattler executed unconditional personal guarantees for each promissory note. The guarantees also provided that the lenders were not required to seek payment from any other source before demanding payment from Mr. Sattler. Sattcom failed to make the required installment payments that came due on October 1, 2018. On October 23, 2018, Petitioning Creditors sent to Andrew Platt, counsel for Sattcom and Mr. Sattler, a written demand to pay all amounts due under the loans. Mr. Platt acknowledged the default and the lender’s rights under the loan documents., and stated that Sattcom was unable to repay the outstanding balance or even a meaningful portion of it. Shortly thereafter, Petitioning Creditors filed an involuntary chapter 7 petition against Mr. Sattler. Petitioning Creditors filed a motion for a preservation order under § 303(f), requesting entry of an order prohibiting Mr. Sattler from transferring assets or using assets for anything other than the payment of ordinary living and/or business expenses. Petitioning Creditors submitted evidence that Mr. Sattler, both pre- and post-petition, used loan proceeds not to fund and expand Sattcom’s business but for his personal purposes, including gambling and purchasing luxury items as well as transferring funds and other assets to self-settled asset protection trusts and other entities he controlled. Mr. Sattler, through counsel, filed a limited opposition. After a hearing, the court entered an order granting the motion (“Preservation Order”). The Preservation Order prohibited Mr. Sattler from disposing of any assets and required the filing and serving of a 13-week cash flow budget within seven days; it further prohibited Mr. Sattler from transferring any assets of his trusts without further court order. Mr. Sattler’s proposed budget was agreed to by the Petitioning Creditors, and the bankruptcy court entered a stipulated order approving it on December 3, 2018. That same day, Mr. Sattler filed a motion to dismiss the involuntary petition, accompanied by his declaration, arguing that the obligations to the Petitioning Creditors were disputed as to liability and amount, and that the numerosity requirement for filing an involuntary petition was not met. Petitioning Creditors filed an opposition to the motion to dismiss and a countermotion for summary judgment (the “Countermotion”), arguing that there were no disputed issues of material fact and that the evidence supported all of the requirements for the filing of an involuntary petition. On January 3, 2019, Petitioning Creditors filed an emergency motion f or contempt against Mr. Sattler, which also requested that an interim trustee be appointed. Petitioning Creditors alleged that Mr. Sattler had violated the Preservation Order by selling property of the estate, i.e., real property in Lake Tahoe, California. The bankruptcy court heard both motions on January 9, 2019. Mr. Sattler did not appear. John Schneringer of G&G appeared on his behalf. At that hearing, the bankruptcy court asked Mr. Schneringer whether Mr. Sattler was aware of the fact that counsel was seeking to withdraw; Mr. Schneringer answered in the affirmative. The court noted that although there were dispositive motions set for hearing on March 1, 2019, there was sufficient time for Mr. Sattler to obtain replacement counsel. The bankruptcy court granted the motion to withdraw and the motion for contempt. The hearing on Mr. Sattler’s motion to dismiss and the Countermotion took place as scheduled on March 1, 2019. Mr. Sattler appeared pro se, and the bankruptcy court permitted him to present argument. He made no substantive arguments but stated that he could not afford replacement counsel and that Trustee had refused to permit him access to the proceeds from the Lake Tahoe property. The bankruptcy court referred Mr. Sattler to the Legal Aid Center of Southern Nevada. With that, the court delivered its ruling, finding that, as a matter of law, there were no disputed issues of material fact regarding the requirements for entry of an order for relief and that Petitioning Creditors were entitled to judgment as a matter of law. On March 5, 2019, the court denied the motion to dismiss and granting the Countermotion, and an order for relief. On April 12, 2019 (after the expiration of the appeal period for the March 5 orders), Mr. Sattler, through newly hired counsel, filed a motion to vacate (1) the order for relief; (2) the order denying his motion to dismiss and granting the Countermotion; and (3) the Preservation Order.
Lafferty, Brand, Gan

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