Kenoyer v. Cardinale (In re Kenoyer)

489 B.R. 103

In re Derald KENOYER, Debtor.Derald Kenoyer, Plaintiff,

v.Noreen Cardinale, Martha L. Caron, and Mary Margaret Bush, Defendants.

Bankruptcy No. 11–53472–ASW.

Adversary No. 11–05130.

United States Bankruptcy Court, N.D. California.

March 20, 2013.

Kathryn S. Diemer, Dominique Sopko, Judith Whitman, Diemer, Whitman and Cardosi, San Jose, CA, for Plaintiff.

Stephen D. Finestone, Law Offices of Stephen D. Finestone, San Francisco, CA, for Defendants, pro se.

DECISION GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

ARTHUR S. WEISSBRODT, Bankruptcy Judge.

Defendants Noreen Cardinale, Martha Caron, and Margaret Bush (collectively referred to as “Defendants”) have moved for summary judgment, or in the alternative summary adjudication, on Plaintiff Derald Kenoyer's claims against Defendants relating to Defendants' alleged violation of the automatic stay. Attorney Stephen Finestone represents Defendants, and attorneys Kathryn Diemer and Judith Whitman ¹ represent Mr. Kenoyer. Mr. Kenoyer filed a late Opposition, which Mr. Kenoyer wrote himself. After a telephonic conference with Mr. Finestone and Ms. Diemer, the Court extended the briefing schedule, and Ms. Diemer filed an Opposition on behalf of Mr. Kenoyer. Defendants replied to the second Opposition. Having considered the parties' written arguments, evidence, and statements made at the hearing on December 13, 2012, and for the reasons explained below, the Defendants' Motion for Summary Judgment is granted.

I. Standard of Review

A court shall grant summary judgment if the pleadings and any filed affidavits, discovery responses and deposition testimony show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed. R. Bankr.P. 7065 (incorporating Fed.R.Civ.P. 56); Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 584–85, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Material facts are those that may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable factfinder to return a verdict for the non-moving party. Id. at 248, 106 S.Ct. 2505.

When determining whether such a factual dispute exists, the Court may not weigh the evidence or make credibility determinations. Id. at 255, 106 S.Ct. 2505;see also Bravo v. City of Santa Maria, 665 F.3d 1076, 1083 (9th Cir.2011). Instead, “the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in [the non-movant's] favor.” Anderson, 477 U.S. at 255, 106 S.Ct. 2505 (citing to Adickes v. S.H. Kress & Co., 398 U.S. 144, 158–159, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)). If a genuine dispute as to a material fact exists, then summary judgment must be denied. Id. at 249–50, 106 S.Ct. 2505. However, if the non-moving party carries the burden of proof and fails to make a sufficient showing to establish an element which is essential to that party's case, then summary judgment must be entered. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

II. Issues Presented

In this proceeding, Mr. Kenoyer contends that Defendants violated the automatic stay, 11 U.S.C. § 362(a)(1) and (6), which went into effect on April 13, 2011, when Mr. Kenoyer filed for bankruptcy. Within the two main issues—whether § 362(a)(1) or (6) have been violated—the Court has identified the following specific issues:

(1) Did it violate the automatic stay for Ms. Cardinale, as the state court plaintiff, and for Ms. Cardinale's attorneys to make a post-petition attempt to enforce a pre-petition trial subpoena that was served on Mr. Kenoyer, the bankruptcy debtor?

(2) Does it make any difference that Mr. Kenoyer was severed from the state court litigation shortly after the filing of Mr. Kenoyer's bankruptcy petition?

(3) Does it make any difference that Mr. Kenoyer never testified or produced documents in response to the subpoena?

(4) Does the breadth of the subpoena matter? In other words, does it make a difference whether the subpoena was narrowly directed to the claims against non-debtor co-defendants,or whether the subpoena was more broadly directed at claims against Mr. Kenoyer?

(5) Was it Defendants' obligation to seek relief from the automatic stay before seeking to enforce the subpoena, or was it instead incumbent on Mr. Kenoyer to seek injunctive relief under 11 U.S.C. § 105(a) to prevent enforcement of the subpoena?

(6) Did it violate the automatic stay, 11 U.S.C. 362(a)(6), when Mr. Kenoyer's alleged involvement in the tortious conduct was discussed at the state court trial of the claims asserted against the non-debtor co-defendants?

As to these issues, both sides have produced substantially the same evidence, and neither party has raised a factual dispute. Instead, the dispute between the parties is whether the Defendants are entitled to judgment as a matter of law under this set of undisputed material facts, which are detailed below.

The issues before the Court are purely legal. See Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1213 (9th Cir.2002) (“Whether the automatic stay provisions of 11 U.S.C. § 362(a) have been violated is a question of law.”). Significantly, the issues are also novel. Although several courts, including the Ninth Circuit Bankruptcy Appellate Panel, have addressed similar issues within the context of discovery, this Court has found no binding or persuasive legal precedent which squarely addresses the issues, particularly with respect to a trial subpoena.

III. Statement of Undisputed Material Facts

In support of the motion and the contention that there was no violation of the automatic stay nor any resulting damages, Defendants have offered the declaration of Ms. Caron with supporting attachments. In opposition to the motion, Mr. Kenoyer has offered the declaration of Ms. Diemer with supporting attachments. These declarations, their attachments, and the Court's own docket together demonstrate the following material facts, which neither side has disputed. The exhibits attached to Ms. Diemer's declaration were lettered and will be referred to herein as Ex. A, Ex. B, etc. The exhibits attached to Ms. Caron's declaration were numbered and will be referred to herein as Ex. 1, Ex. 2, etc.

Ms. Caron and Ms. Bush were Ms. Cardinale's attorneys in a state court case pending against Mr. Kenoyer and several others in Contra Costa County in which Ms. Cardinale alleged a conspiracy to commit fraudulent transfers. Caron Decl. at ¶¶ 1, 12, 22. The other state court defendants were Daniel R. Miller, Sr., Keith Charles Knapp, Home Loan Services Corporation dba California Home Loans, Daniel R. Miller, Jr., and Patrice Miller. The state court case was set for trial to commence on April 18, 2011. Caron Decl. at ¶ 4; Diemer Decl. at ¶ 6.

Before trial in the state court, and approximately three weeks before Mr. Kenoyer filed for bankruptcy, Ms. Cardinale's attorneys issued a subpoena (hereafter, “the Subpoena”) on March 23, 2011, which was served on Mr. Kenoyer on March 30, 2011. Caron Decl. at ¶¶ 4–5; Diemer Decl. at ¶ 2. The Subpoena required Mr. Kenoyer to appear at trial on April 18, 2011, and to produce records. Caron Decl. at ¶ 4; Ex. A & Ex. 2 “Civil Subpoena”; Ex. 3 “Proof of Service.” According to the Subpoena, “The witness has exclusive custody of the original of documents which will be offered as evidence in the trial of this matter, and is a party defendant who acted as loan agent for many of the loans which are the subject of this action.” (Emphasis added).

The Subpoena sought numerous records. The Subpoena was aimed, specifically, at all writings concerning Mr. Kenoyer's affiliation with co-defendants in the state court action, as well as writings pertaining to numerous entities, such as Napa Valley, Inc., Pashlin, Inc., PEG, Inc. and others. The Subpoena also sought records pertaining to 23 separate pieces of real property. The Subpoena sought information relating to Daniel R. Miller, Jr.,² to Patrice Miller,³ and to Daniel R. Miller, Sr.⁴ However, the Subpoena also sought information concerning Mr. Kenoyer: Mr. Kenoyer's agreements and investments with Daniel R. Miller, Jr., and other non-defendants; Mr. Kenoyer's commissions and fees; Mr. Kenoyer's affiliation and agreements with California Home Loans or Keith Charles Knapp; the recordation of two deeds of trust in Mr. Kenoyer's favor; money loaned or advanced by Mr. Kenoyer to the co-defendants; written communications between Mr. Kenoyer and Daniel Miller, Jr.; and Mr. Kenoyer's net worth. Subpoena Attachment at ¶¶ 13–24 and 35.

On April 11, 2011, Ms. Caron received a telephone call from Mr. Kenoyer's attorney, Ms. Whitman, advising of Mr. Kenoyer's intention to file a bankruptcy petition. Caron Decl. at ¶ 6. According to Ms. Caron, Ms. Whitman at that time demanded that the state court claims against Mr. Kenoyer be dismissed, with prejudice. Id. Ms. Caron agreed to sever the claims against Mr. Kenoyer, but not to dismiss the claims. Id. Ms. Caron also stated that Ms. Whitman acknowledged that Mr. Kenoyer would still be required to testify, but that Ms. Caron agreed to relieve Mr. Kenoyer to “standby status on Monday, April 18 [.]” Id.

On April 12, 2011, Ms. Caron flew to California for purposes of trying the state court case. Id. at ¶ 7. The very next day, April 13, 2011, at 3:16 p.m., Mr. Kenoyer filed a petition with the bankruptcy court under chapter 7, initiating this bankruptcy case. On April 14, 2011, the Notice of Stay of Proceedings, dated April 13, 2011, was served on Ms. Caron and Ms. Bush. Diemer Decl.; Ex. B & Ex. 5 “Notice of Stay of Proceedings” and “Certificate of Service”; Caron Decl. at ¶ 8.

On April 15, 2011, Ms. Caron received a letter (hereafter, “the April 15 Letter”) from Mr. Kenoyer's attorney, Ms. Diemer, stating that Ms....