Salyer v. Sharp
Filing
75
ORDER signed by Senior Judge Lawrence K. Karlton on 4/13/11, ORDERING that the court acknowledges that its prior order was ambiguous as to the remedy it issued. Accordingly, the court clarifies the remedy in this order. The court is REMANDING the cas e to the Bankruptcy Court to decide, in the first instance, whether discovery from or testimony of Salyer or his criminal counsel is reasonably necessary to dispose of a particular matter before the Bankruptcy Court in the adversary proceedings. Appellants shall file their initial motions to stay before the Bankruptcy Court within 14 days of the issuance of this order.(Kastilahn, A)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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IN RE:
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SK FOODS, L.P.
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Debtor.
BRADLEY SHARP,
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Plaintiff,
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CIV. NO. S-10-1492 LKK
v.
SSC FARMS 1, LLC, et al.,
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Defendants.
/
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IN RE:
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SK FOODS, L.P.
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CIV. NO. S-10-1493 LKK
Debtor.
/
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IN RE:
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SK FOODS, L.P.
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Debtor.
BRADLEY SHARP,
CIV. NO. S-10-1496 LKK
Plaintiff,
v.
CSSS, L.P., et al.,
Defendants.
/
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IN RE:
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SK FOODS, L.P.
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Debtor.
BRADLEY SHARP,
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Plaintiff,
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CIV. NO. S-10-1497 LKK
v.
FRED SALYER IRREVOCABLE
TRUST, et al.,
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Defendants.
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IN RE:
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SK FOODS, L.P.
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Debtor.
BRADLEY SHARP,
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Plaintiff,
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CIV. NO. S-10-1498 LKK
v.
SKF AVIATION, LLC., et al.,
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Defendants.
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IN RE:
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SK FOODS, L.P.
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Debtor.
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BRADLEY SHARP,
CIV. NO. S-10-1499 LKK
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Plaintiff,
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v.
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SCOTT SALYER, et al.,
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Defendants.
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IN RE:
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SK FOODS, L.P.
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Debtor.
BRADLEY SHARP,
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CIV. NO. S-10-1500 LKK
Plaintiff,
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v.
O R D E R
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SCOTT SALYER, et al.,
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Defendants.
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Before the court is a motion for rehearing on this court’s
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December
10,
2010
order
reversing
the
denial
of
a
stay
of
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proceedings before the Bankruptcy Court, brought by the Bankruptcy
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Trustee (“Trustee”). The court resolves the ambiguity in its prior
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order below.
I. BACKGROUND
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On December 10, 2010, the court reversed a decision of the
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bankruptcy court denying a motion to stay adversarial proceedings.1
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As to remedy, the court ordered “a stay of all further bankruptcy
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proceedings where Appellants make a credible showing that discovery
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from or testimony of Scott Salyer or his criminal counsel is
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relevant to the proceedings. The court wishes to be clear, the
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orders heretofore issued on a preliminary basis are unaffected by
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this order.” Order at 23. The court did not indicate what issues,
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if any, were to be remanded to the Bankruptcy Court.
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The court incorporates its December 10, 2010 order.
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Initially, the court set this motion to be heard on January
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31, 2011. On January 25, 2011, however, the Trustee and Appellants
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filed a stipulation to continue the hearing to a date no later than
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March 31, 2011 so that the parties could engage in mediation. On
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January 27, 2011, the court continued the hearing to April 11,
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2011. On March 28, 2011, Appellants filed a supplemental objection
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to the Trustee’s motion. On April 4, 2011, the Trustee filed a
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reply brief and the unsecured creditors joined the Trustee’s
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motion.2 The motion was heard on April 11, 2011.
II. ANALYSIS
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The Trustee has moved for a rehearing on three issues, all
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of which concern interpretation of the court’s order on remedy.
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Specifically, he requests clarification as to whether the
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December 10, 2010 order constitutes an entry of a stay in the
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bankruptcy proceedings. He further requests that this court
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establish a procedure and time frame for the parties to submit
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evidence in support of and in opposition to the specific stays.
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Additionally, he argues that the court should amend the standard
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set forth in the prior order to require a stay where testimony
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of Scott Salyer (“Salyer”) or his criminal counsel is necessary,
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rather than relevant, to the proceedings.3
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The committee of unsecured creditors requests permission to
file a brief as unofficial amicus curiae and for permission to
appear for oral argument. The court grants this request.
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The Trustee has also argued, in the alternative, that if the
December 10, 2010 order was to operate as a stay, that it should
only apply to the adversary proceedings where Salyer is a party.
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The court acknowledges that its prior order was ambiguous
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as to the remedy it issued. Accordingly, the court clarifies4
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the remedy as follows: The court found that the due process
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rights of Appellants may be infringed if they cannot adequately
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defend themselves in the adversary proceedings without discovery
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from or testimony of Salyer, who cannot be compelled to testify
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under the Fifth Amendment, or his criminal counsel, who cannot
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be compelled to violate the attorney-client privilege.
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Nonetheless, the court recognizes that it is possible for the
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adversary proceedings to continue without offending these
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rights. Thus, the court is remanding the case to the Bankruptcy
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Court to decide, in the first instance, whether discovery from
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or testimony of Salyer or his criminal counsel is reasonably
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necessary5 to dispose of a particular matter before the
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Bankruptcy Court in the adversary proceedings. A matter is
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reasonably necessary if Appellants cannot adequately defend
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themselves in an adversary proceeding without evidence from
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Salyer or his criminal counsel. The Bankruptcy Court’s decisions
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on these matters may be directly appealed to this court on the
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Appellants challenge this court’s jurisdiction to clarify
its prior order. Under Fed. R. Civ. P. 60(a), “the court may
correct . . . a mistake arising from oversight or omission whenever
one is found in a judgment, order, or other part of the record.”
Under this rule, the court may amend its prior order to better
reflect its understanding of the issues and appropriate remedy.
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Upon further reflection, the court finds that the relevance
standard it previously ordered is too broad. Given the significant
overlap between testimony in the adversary proceedings and the
criminal proceedings, discovery from or testimony of Salyer or his
criminal counsel would almost necessarily be relevant.
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same grounds that the court had jurisdiction to hear the appeal
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of the first order denying a stay of proceedings.
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Further, Appellants shall file their initial motions to
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stay before the Bankruptcy Court within fourteen (14) days of
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the issuance of this order.6 These motions must be set for
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hearing as early as practicable under the Bankruptcy Court’s
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local rules and procedures. The Bankruptcy Court shall issue
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written orders explaining the basis for its decisions to stay or
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not to stay the proceedings. Additionally, the court recognizes
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that an adversary proceeding may not be subject to a stay at
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this time, but may, through the course of litigation, require a
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stay under the standard set forth above. In this situation,
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Appellants shall file a motion to stay proceedings within
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fourteen (14) days of their discovery of new evidence or
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circumstances, which they contend reasonably requires evidence
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from Salyer or his criminal counsel to adequately defend
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themselves. This motion must also be set for hearing as early as
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practicable. In addition to the burden set forth above,
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Appellants must also demonstrate why the new facts or
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circumstances that are claimed to exist were not shown at the
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time of the initial motion and were only reasonably discovered
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within fourteen (14) days of the filing of the motion.
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Appellants may not sit on their rights. Failure to bring a
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The court assumes that Appellants intend to stay all
adversary proceedings due to their representations at oral
argument. The court is in no way requiring the Appellants to seek
such stays.
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timely motion to stay will result in denial of the motion.
Moreover, in his reply, the Trustee attempts to introduce
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new evidence in support of his argument that the court amend its
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prior order. Specifically, the court concluded that the
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Bankruptcy Court’s finding that the preliminary injunction will
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not protect the Trustee and creditors was in clear error because
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the Bankruptcy Court presented no explanation as to why the
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preliminary injunction was insufficient to protect those
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interests. The Trustee now attempts to seek this court’s
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consideration of recent events to suggest that the preliminary
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injunction may actually be insufficient. This evidence must
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first be brought before the Bankruptcy Court in a motion to
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amend or lift a stay. If the Trustee decides to bring such a
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motion, the losing party may appeal the Bankruptcy Court’s order
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on the motion to this court, as is customary in this case. At
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this time, however, it is not appropriate for the court to
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consider this new evidence.7
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IT IS SO ORDERED.
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DATED:
April 13, 2011.
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The court notes that in its prior order affirming the
Bankruptcy Court’s preliminary injunction, the court decided an
issue that was not previously raised before the Bankruptcy Court:
namely, whether counsel for the non-debtor entity-Appellants could
recover fees. The court only did so pursuant to stipulation of the
parties and in light of the unique relationship between the
Bankruptcy and District Courts. No such stipulation exists here
and, thus, the court declines to decide this question in the
instant motion.
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