Reitman v. Pleasure Point Arena, LLC ( In re Pleasure Point Marina, LLC)

Ninth Circuit Bankruptcy Appellate Panel Case No. CC-15-1030-FKiKu (November 3, 2015)
In the Ninth Circuit Bankruptcy Appellate Panel's ("BAP") ruling determined not to be appropriate for publication; the BAP determined that the bankruptcy court did not abuse its discretion in sanctioning the client for his role in hindering the discovery process and disobeying the bankruptcy court's order. The review of whether sanctions are appropriate is based on who acted in bad faith, the party or the attorney, and to what degree. The BAP agreed that the bankruptcy court abused its discretion in sanctioning the Appellant based on not attending the in-person meet and confer ordered by the bankruptcy court. The BAP affirmed the bankruptcy court's award of sanctions against the Appellant based on the Appellant's failure to execute the required stipulation by the date in which the bankruptcy court ordered.
Procedural context:
Naran Reitman ("Appellant") appealed the bankruptcy court's ruling in favor of Please Point Marina, LLC ("Appellee") award monetary sanctions against Appellant for failure to comply with the bankruptcy court's order related to a discovery dispute.
Ronald and Linda Lerg ("Lergs") were the plaintiffs in a state court action against the Appellee. The Lergs had proposed an offer of compromise; however, based on the Appellee's non-acceptance of the offer of compromise the Lergs commenced an involuntary bankruptcy against the Appellee. The Lergs retains bankruptcy counsel but Appellant was never completely replaced as counsel for the Lergs. Appellee filed a motion to dismiss the involuntary bankruptcy based on the Lergs being the only petitioning creditor. The Lergs responded asserting that they had twelve creditors supporting the involuntary petition; however, Lergs' petition only included two creditors. A day before the hearing on the Appellee's motion to dismiss, Appellant filed a joinder to the involuntary petition. Appellant asserted that he was a creditor based on the Appellee's assignment of a promissory note in favor of the Lergs. The bankruptcy court denied the Appellee's motion to dismiss and set the matter for trial. The bankruptcy court also set an expedited discovery schedule related to the involuntary petition. Appellee's first request for production of documents was responded to by the Lergs' bankruptcy counsel via written response asserting that all documents were attached to pleadings already filed with the bankruptcy court. Appellee served a second request for production fo documents on the Lergs and a request for production of documents on Appellant. Appellant asserts that he provided Lergs' and Appellant's bankruptcy counsel all information needed to response to both requests. Appellee's counsel inquired as to the status of the discovery responses, and the Lergs' and Appellant's counsel responded that he would respond upon his return from vacation (2 days prior to date the list of witnesses and exhibits were due). Appellees filed a motion to compel the responses and sought monetary sanctions from all related parties. The bankruptcy court entered an order setting additional requirements related to the discovery disputes. Among them was an in-person meet and confer and requirement to file a stipulation related to the discovery issues. Appellant did not attend the meet and confer in person and ulitmately did not execute the required stipulation related to the discovery disputes. Additional dispute arose at the hearing between the Appellant and his bankruptcy counsel.
FARIS, KIRSCHER and KURTZ, Bankruptcy Judges

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