Nijjar v. Salven (In re Nijjar), 1:18-cv-01691-DAD

In re: DALIP SINGH NIJJAR Debtor.

VIRPAL K. NIJJAR, VK NIJJAR FARMS, LLC, and NIJJAR FARMS, INC., Appellants, v. JAMES E. SALVEN, Chapter 7 Trustee, Appellee.

No. 1:18-cv-01691-DAD

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

February 25, 2020

Appeal from the United States Bankruptcy Court for the Eastern District of California, Fredrick E. Clement, Bankruptcy Judge

Bankruptcy Petition No. 17-12781-A-7

Adversary Proceeding No. 17-01066

ORDER AFFIRMING THE BANKRUPTCY COURT'S AWARD OF ATTORNEYS' FEES

(Doc. No. 1)

The matter is before the court on appeal by Virpal K. Nijjar, NK Njjar Farms, LLC, and Nijjar Farms, Inc. (collectively the "appellants") from a November 28, 2018 order (the "Order") by the U.S. Bankruptcy Court for the Eastern District of California granting appellee James E. Salven's motion for attorneys' fees. The court has reviewed the briefing filed in connection with the appeal and deems the matter suitable for decision on the papers. See Fed. R. Bankr. P. 8019(b); Fed. R. Civ. Pro. 78(b); Local Rule 230(g). For the reasons set forth below, the court affirms the Order of the bankruptcy court.

BACKGROUND

This matter arises from an adversary proceeding (the "Proceeding") related to the bankruptcy case filed by Dalip S. Nijjar (the "Debtor"), Virpal K. Nijjar's ex-husband. See Nijjar v. Salven (In re Nijjar), No. 17-01066 (Bankr. E.D. Cal. 2016); In Re Nijjar, No. 17-12781 (Bankr. E.D. Cal. 2016). The Proceeding, in which appellee, a Chapter 7 Trustee, seeks to recover real property and interests in VK Nijjar Farms, LLC and Nijjar Farms, Inc., is premised on the claim that Dalip Nijjar and Virpal Nijjar engaged in a sham divorce in an attempt to insulate certain of their assets from bankruptcy. See Nijjar v. Salven (In re Nijjar), No. 17-01066 (Bankr. E.D. Cal. 2016).

As part of the Proceeding, appellee issued requests for production to appellants on June 12 and 15, 2018. (Doc. No. 8 at 7.) Due to delays and disagreements over the scope of discovery, the parties became enmeshed in a discovery dispute, leading appellee to file a motion to compel production of 23 items on August 29, 2018. (Id. at 10); Nijjar v. Salven (In re Nijjar), No. 17-01066 (Doc. No. 196). After a hearing on September 26, 2018, the bankruptcy court entered an order on September 28, 2018 compelling appellants' production of 20 of the 23 items requested by appellee. (Doc. No. 8 at 11); Nijjar v. Salven (In re Nijjar), No. 17-01066 (Doc. Nos. 209-11; 213). Appellee then filed a motion for attorneys' fees pursuant to Federal Rule of Civil Procedure ("FRCP") 37(a)(5), which the bankruptcy court granted on November 28, 2018 at the conclusion of the hearing on the motion. Nijjar v. Salven (In re Nijjar), No. 17-01066 (Doc. Nos. 214; 222-24). Specifically, the bankruptcy court ordered that Virpal Nijjar pay $16,747.11 in attorneys' fees; VK Nijjar Farms, LLC, $6,441.20 in attorneys' fees; and Nijjar Farms, Inc., $2,576.48 in attorneys' fees —all to Fear Waddell, P.C., appellee's counsel (the "Order"). (Id. at Doc. No. 224.) The court also ordered that appellants' law firm, Gilmore Magness Janisse ("GMJ"), be held jointly and severally liable for the abovementioned attorneys' fees. (Id.) Appellants and GMJ now appeal from the Order.

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JURISDICTION

As a threshold issue, the court must determine whether it should hear this appeal. Appellants and GMJ argue that an appeal from an award of attorneys' fees is immediately appealable as to counsel and appealable with leave of the court as to the parties. (Doc. No. 7 at 9-10.) Appellee contends that the appeal is not properly before this court because: 1) GMJ only appealed the Order as counsel, not as appellant; and 2) appellants failed to seek leave of the court before pursuing their appeal. (Doc. No. 8 at 14-15.)

Appeals from the bankruptcy court to the district court are governed by 28 U.S.C. § 158. Appeals of final orders are by right, whereas appeals of interlocutory orders require leave of court. 28 U.S.C. § 158(a)(1)-(3); Fed. R. Bankr. P. 8003-04.

Appellants are appealing an order awarding attorneys' fees entered pursuant to Federal Rule of Civil Procedure 37, which, when imposed on parties, is "normally . . . considered to be interlocutory." David v. Hooker, Ltd., 560 F.2d 412, 416 n.6 (9th Cir. 1977); see also Sali v. Corona Reg'l Med. Ctr., 884 F.3d 1218, 1221 n. 3 (9th Cir. 2018). Appellants were thus required to seek leave of the court, which they failed to do. See 28 U.S.C. § 158(a)(3); Fed. R. Bankr. P. 8004. The court will nonetheless treat their appeal as a motion seeking leave to appeal and grant that motion pursuant to Federal Rule of Bankruptcy Procedure ("FRBP") 8004(d).

Appellee does not dispute that GMJ had the right to immediately appeal the order awarding attorneys' fees. (Doc. No. 8 at 14); see David, 560 F.2d at 415-16 (recognizing the right of a non-party to appeal an order awarding attorneys' fees and expenses under FRCP 37). But appellee correctly points out that GMJ was not named as an appellant in the Notice of Appeal, the Opening Letter, or the Opening Brief (see Doc. Nos. 1, 2, 7), though GMJ was clearly referenced as an appellant in the briefing. (See Doc. Nos. 7, 9.) The failure to include a would-be appellant on a Notice of Appeal is normally fatal to an appeal. See United States ex rel. Alexander Volkhoff, LLC v. Janssen Pharmaceutica N.V., 945 F.3d 1237, 1243, 1244-45 (9th Cir. 2020) (noting that non-compliance with Federal Rule of Appellate Procedure 3(c) and the notice of appeal's strict appellant-naming requirements creates a jurisdictional bar to appeal); compare Fed. R. App. P. 3, with Fed. R. Bankr. P. 8003. The Ninth Circuit noted in Alexander Volkhoffthat several cases allowed exceptions to the appellant-naming requirement for attorneys who "mistakenly appealed sanctions orders in the names of their parties[] when the attorneys signed and were otherwise named in the filings." 945 F.3d at 1245 (citing Detabali v. St. Luke's Hosp., 482 F.3d 1199, 1204 (9th Cir. 2007); Retail Flooring Dealers of Am., Inc. v. Beaulieu of Am., LLC, 339 F.3d 1146, 1149 (9th Cir. 2003); Aetna Life Ins. Co. v. Alla Med. Servs., Inc., 855 F.2d 1470, 1473 (9th Cir. 1988)). All of these cases involved attorneys who were appealing sanctions imposed only on counsel—their intent to appeal those sanctions is thus self-evident. See Detabali, 482 F.3d at 1204; Retail Flooring Dealers, 339 F.3d at 1149; Aetna Life Ins. Co, 855 F.2d at 1473.

Here, however, the Order imposed attorneys' fees on appellants and made GMJ jointly and severally liable for those fees; both now seek to appeal the Order. This creates a potential conflict of interest; in the event the court overturns the Order only as to GMJ, appellants—GMJ's own clients—would be left alone to bear the burden of paying appellee's attorneys' fees.¹ Given this potential conflict of interest, the court cannot assume from the Notice of Appeal that GMJ intended to appeal not just as counsel to appellants but also on its own behalf. Thus, GMJ, a purported appellant not named in the Notice of Appeal, fails to meet the jurisdictional requirements for the court to hear its appeal.

STANDARD OF REVIEW

A district court reviews a "bankruptcy court's findings of fact under the clearly erroneous standard . . . and its conclusions of law de novo." Cotchett, Pitre & McCarthy v. Siller, 520 B.R. 796, 801 (E.D. Cal. 2014), aff'd sub nom. In Re CWS Enterprises, Inc., 870 F.3d 1106 (9th Cir. 2017) (internal quotation marks and citations omitted).

A bankruptcy court's "attorneys' fee determination will only be reversed if the court abused its discretion or erroneously applied the law." In re Bennett, 298 F.3d 1059, 1063 (9th Cir. 2002) (citations omitted). Applying that high standard, the court "will not reverse an awardof fees unless [it has] a definite and firm conviction that the bankruptcy court committed clear error in the conclusion it reached after weighing all of the relevant factors." In re Eliapo, 468 F.3d 592, 596 (9th Cir. 2006).

The court may affirm the bankruptcy court's ruling "on any ground supported by the record, even if it differs from the ground relied upon by the bankruptcy court." Thrifty Oil Co. v. Bank of Am. Nat. Tr. & Sav. Ass'n, 322 F.3d 1039, 1046 (9th Cir. 2003).

ANALYSIS

Appellants contend that the bankruptcy court erred in awarding attorneys' fees because: 1) the bankruptcy judge concluded that an award of such fees was justified as a "cost of doing business" in violation of the American Rule against fee-shifting; and 2) the bankruptcy judge failed to provide justification for the award of attorneys' fees under FRCP 37(a).² (Doc. No. 7 at 10-14.) Neither argument is availing.

A. An Award of Attorneys' Fees is Expressly Authorized by FRCP 37

In its Order, the bankruptcy court specified that it was awarding attorneys' fees pursuant to FRCP 37(a)(5), made applicable to adversary proceedings by FRBP 7037. Nijjar v. Salven (Inre Nijjar), No. 17-01066 (Doc. No. 224). Under FRCP 37(a)(5), if a party moves to compel discovery and the motion is granted,

the court must, after giving an opportunity to be heard, require the party or deponent whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees. But the court must not order this payment if:

(i) the movant filed the motion before attempting in good faith to obtain the disclosure or discovery without court action;

(ii) the opposing party's nondisclosure, response, or objection was substantially justified; or

(iii) other circumstances make an award of expenses unjust.

Despite this express rule, appellants contend that such an award, when termed by the awarding court as a "cost of doing business," violates the American Rule against fee-shifting because it lacks a statutory basis. (Doc. No. 7 at 10.) This argument is baseless. Th...