Girls Gone Wild Global (GGWG) appealed a decision in an attempt to unwind a Settlement Agreement which was approved by the California Bankruptcy Court. The underlying case involved the Wynn Las Vegas LLC's attempt to collect a judgment against Joseph R. Francis (the principal of Girls Gone Wild) for over 2 million dollars on an unpaid marker. Wynn filed a Nevada State Court complaint against a variety of Francis' entities alleging that he was the alter ego of such entities and against their attorney seeking declare that funds held in Trust belonged to one of those entities. In 2013, a variety of the entities filed for Bankruptcy Protection in California. A Chapter 11 Trustee was appointed. In March 2013, the Debtors removed the Alter Ego case to the U.S. Bankruptcy Court for the District of Nevada. The Debtors then attempted to transfer the case back to California and Wynn sought to remand the case back to state court.
During the interim, the Debtor's attorney for one of the bankrupt entities admitted that such funds were received from Girls Gone Wild Direct, one of the bankrupt entities. The Trustee, GGWD entered into a settlement agreement which provided for some payment to Wynn and was approved by the California Bankruptcy Court.
As the funds were located in Nevada, a stipulation was entered in Nevada because the Nevada Courts had jurisdiction over the alter ego claims. In July 2013, GGWG filed an opposition to the motion to approve the stipulation alleging that the property held by the attorney was owned by a third party. The Nevada Bankruptcy Court approved the stipulation and GGWG appealed the decision. Wynn filed a motion to dismiss the appeal based upon standing.
On May 1, 2014, the Nevada District Court granted the motion to dismiss because GGWG did not have standing and was simply a "stranger" to the appeal. It had no personal stake in the outcome of the litigation. The Court reserved its ruling on the frivolousness of the appeal under Bankruptcy Rule 8020.
On May 29, 2014, the District Court found that the appeals were frivolous under Bankruptcy Rule 8020. The Court found that that GGWG should have known the murkiness surrounding its status and that the obvious result would be a dismissal of the appeal.
The Court, did not impose sanctions on GGWG's counsel because of the frivolous conduct was "the taking of the appeal, not the way in which the appeal was litigated". The Court could not infer that the "bulk of the blame for the frivolous appeal rests with {GGW Global's] attorneys"
Rightfully or wrongfully, the attorneys representing GGWG were given a free pass. If the Federal District Court determined that the arguments were not warranted and the attorneys pursue an appeal of an action clearly barred by law (i.e. no possible way to have standing), then fees could have been awarded. As an attorney I am pleased with the decision as sometimes we need to make arguments that are "on the line" but if the Court determined that the appeal was in fact frivolous then the attorneys should have gotten out of the line of fire. See, In re Action (US Dist Ct, 2007) ; Malhiot, 735 F.2d 1133 (9th Cir. 1984) and Kalombo 886 F.2d 258 (9th Cir. 1989). I have to assume that Wynn Las Vegas is not insolvent so the fees should not hurt their bottom line but they will end up having an uncollectable judgment...for the time being.... the saga continues
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