Girls Gone Wild Bankruptcy Attorney Escapes Liability for Frivolous Appeal (In re GGW Brands, LLC, 2014 US. Dist. Lexis 61557 and 74138)

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

Federal Law Applies in a Case which State Law and Federal Claims are Alleged - Wilcox v. Arpaio (June 2, 2014)

The parties were involved in a mediation and reached a "settlement" of both the State Law and Federal Law Claims.  The Appellant alleged that a settlement was not reached and the Respondent filed a motion to enforce the agreement.  In an attempt to prove up the settlement, a variety of emails were introduced into evidence but were objected to as privileged by the Appellant.  The Appellant alleged that State Law should apply and that State Law would prevent such emails from being introduced into evidence.


The 9th Circuit determined that since the settlement involved both federal and state claims, the Federal Rules of Evidence controlled.  However, the Appellant waived such argument.  Nonetheless, the 9th Circuit determined that even if State Law applied, the privilege law would still permit the evidence to be admissible.


The Court upheld the settlement.


Wilcox v. Arpaio - 9th Cir. 2014

Blueberry Farm vs. Candor and Civility (Michigan BK Court 2014)

The potential lack of candor to the Court and an overzealous advocate resulted in the Debtor's interest in a blueberry farm being sold by the Bankruptcy Trustee.  In a two year ordeal, the Trustee fought the Debtor in his exemptions, filed suit against the non-filing spouse and was postured to sell a blueberry farm for $135,000.00.  During the two year ordeal, the Debtor apparently negotiated with its creditors to "pay off" the creditors for a reduced amount. 


The Court having been advised of the "pay off" noted that no withdrawal of the claims were on file.  As a result, the Court authorized the sale.


Immediately after the oral announcement of the sale, the Debtor's counsel, advised the Court that a higher offer was received.  The Court was not persuaded by the last minute antics by the Debtor's counsel and did not consider the "new" offer and even mentioned that the Debtor's counsel sat silent until he lost the motion to sell.


The moral of the story is that one whom sits on its rights may end up blue in the face ....


In re Adan Mendez Case Number 09-10662 

Kreiger v. Capital One (Nev 2014) - There is No Discharge for Non Filing Spouse

Nevada was the leader in the number of bankruptcy filings.  As the filings are going down, debtor's counsel are focusing on the fair debt collection practices act and fair credit reporting act. 


In a case involving a leading Las Vegas debtor's attorney....he filed suit on behalf of his father asserting that father is entitled to a discharge of a community debt and the creditor is violating the  FCRA.


The District Court of Nevada dismissed the case based upon the reading of In re Kimmel, 378 B.R. 630 (9th Cir. 2007) and Norwest Financial v. Lawver, 109 Nev 242 (1993).  The Court found that that in a community property state, the non-filing spouse's personal liability for the community debt survives the bankruptcy discharge of the filing spouse's liability for the debt.  However, a creditor is prohibited from pursing community property acquired after the bankruptcy to satisfy the non filing spouse's personal liability on the debt.


Although this is a not a published decision, the argument is sound and the citations are proper.  2014 U.S. Dist Lexis 43437 (Kreiger v. Capital One, March 28, 2014 - Case Number 2:13-cv-01389-LDG (VCF)).

I am pleased to announce that I prevailed in the 9th Circuit and the District Court was reversed! Shapiro v. Henson 1-9-14

I am pleased to advise that the 9^th Circuit reversed the district court’s decision affirming the denial of my motion for turnover of property pursuant to 11 USC 542(a).  This case challenged the holding of  the 8^th Circuit of In re Pyatt which was adopted by the Bankruptcy Court and the District Court. 

 The 9^th Circuit  held that the Trustee’s turnover power is not restricted to property of the estate at the time the motion for turnover is filed.   A copy of the published decision is attached. 

Shapiro v. Henson

9th Cir. BAP - Published - Pre-petiton tax sale but not recorded is valid - also good case law on amendments to complaint

The Debtor purchased real property prior to a tax sale, the tax sale took place pre-petition but was not recorded until after the filing.  The Debtor filed a complaint against the county to avoid the tax sale as a fraudulent transfer, declaratory judgment, injunction, violation of the stay and for unjust enrichment. 

The Count filed a motion to dismiss the complaint under 12(b)(6).  The Bankruptcy Court dismissed the complaint and found that due to undue delay (and futility) no amendment would be permitted.  The Debtor appealed and the BAP affirmed.

The BAP went through the standards of a motion to dismiss and affirmed.  An interesting point is their discussion of the case law on amendments to complaints after the filing of a 12(b)(6) motion and the "Foman Factors". 

2014/01/03/TrachtGut-13-1229

Violation of Discharge Injunction - Even Though Agreement Indicated Debt Would Not be Discharged 9th Cir. BAP - Unpublished

In an unpublished 9th Cir. BAP decision, the Court analyzed, what we all should know, is that a debt is discharged even though a contract indicated that if the debtor filed bankruptcy, the underlying debt would not be discharged.  The Creditor was well aware of the Bankruptcy, the discharge order but still filed suit in small claims to obtain a monetary judgment.  The Bankruptcy Court found that the Creditor did not subjectively know the injunction applied to him.  The BAP reversed such finding but remanded the case back for a trial on damages (the debtor never proved up actual damages).

Of particular note is that this was an adversary proceeding but violations of discharge injunctions must be done by motion.  The BAP instructed the BK Court to treat the adversary proceeding as a contested proceeding.  Some fairly good case law was cited in this 20 page decision (pro se v. attorney)

12-27-13 Chionis - 9th Cir BAP