In Re: HVI Cat Canyon, Inc.

Filing 43

OPINION by Judge Dale S. Fischer. The order of the Bankruptcy Court is AFFIRMED. (Made JS-6. Case Terminated.) See Opinion for specifics. (jp)

JS-6
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CV 21-8390 DSF
Bk. Ct. No. 9:19-bk-11573 MB
IN RE HVI CAT CANYON, INC.,
Debtor.

OPINION

Appellant GIT, Inc. appeals the Bankruptcy Court’s order
granting $275,000 in fees and expenses to the Chapter 7 Trustee,
Appellee Brad D. Krasnoff, as a contempt sanction for a failure to
comply with a Bankruptcy Court discovery order. GIT does not appeal
the finding of contempt itself; it appeals only the amount of sanctions
and the Bankruptcy Court’s authority to impose sanctions under its
inherent authority without an explicit finding of bad faith or willful
misconduct.
“The sanctions imposed as a result of a contempt finding are
reviewed to determine whether the [lower] court abused its discretion.”
Whittaker Corp. v. Execuair Corp., 953 F.2d 510, 515 (9th Cir. 1992).
Review for abuse of discretion is a two-step inquiry. First, the
appellate court conducts a de novo review of whether the lower court
identified the correct legal rule to apply. If it did, the lower court’s
decision will be upheld unless application of the legal standard was
illogical, implausible, or without support in inferences that may be
drawn from the facts in the record. See United States v. Hinkson, 585
F.3d 1247, 1261-63 (9th Cir. 2009) (en banc). Underlying factual

findings are reviewed for clear error. In re Dyer, 322 F.3d 1178, 1191
(9th Cir. 2003).
GIT’s arguments with respect to the lodestar analysis are
meritless. The Bankruptcy Court had already approved the Trustee’s
counsel’s hourly rates earlier in the bankruptcy proceedings and,
absent some argument from GIT, was under no obligation to revisit
that finding. Whether or not the Trustee made explicit arguments
regarding the reasonableness of all of his fees and expenses, (1) the
Trustee provided itemized fee and expense statements but GIT failed to
challenge any of the specific items on those statements, and (2) the
Bankruptcy Court, in any event, did scrutinize the requested fees and
expenses and cut them slightly for lack of reasonableness.
GIT’s argument that the Bankruptcy Court had to make a finding
of bad faith is based on the incorrect premise that sanctions were
imposed under the Bankruptcy Court’s inherent powers. The
Bankruptcy Court directly invoked its statutory authority under 11
U.S.C. § 105 for the imposition of sanctions. See EOR 337 (Vol. 3), EOR
428 (Vol. 4).
GIT also contends that the Bankruptcy Court compensated the
Trustee for fees and expenses that were not related to the contempt or
necessary for resolving the contempt. GIT made these arguments
before the Bankruptcy Court and the Bankruptcy Court considered
them in detail. The Bankruptcy Court rejected GIT’s position and
explicitly found, as a factual matter, that the fees and expenses
incurred were incurred due to the contempt. See EOR 424-27, 431-36
(Vol. 4). GIT has made no showing that those factual findings were
clearly erroneous. It instead repeats the arguments made before the
Bankruptcy Court and encourages this Court to find differently.

2

The Bankruptcy Court did not abuse its discretion in arriving at
the amount of fees and expenses to award as a compensatory contempt
sanction. The order of the Bankruptcy Court is AFFIRMED.

Date: May 26, 2023

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S. Fischer
Dale S
United States District Judge

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