FILED

NOT FOR PUBLICATION APR 08 2014

MOLLY C. DWYER, CLERK

UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: JERRY L. ICENHOWER, DBA No. 12-56953 Seaview Properties; et al., D.C. No. 3:09-cv-00589-BTM- Debtors, BLM

GERALDINE A. VALDEZ; et al., MEMORANDUM*

Appellants,

v.

KISMET ACQUISITION, LLC,

Appellee.

In re: JERRY L. ICENHOWER, DBA No. 12-56954 Seaview Properties; et al., D.C. No. 3:09-cv-00590-BTM- Debtors, BLM

GERALDINE A. VALDEZ; et al.,

Appellants,

v.

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.

KISMET ACQUISITION, LLC,

Appellee.

Appeal from the United States District Court for the Southern District of California Barry T. Moskowitz, District Judge, Presiding

Argued and Submitted February 11, 2014 Pasadena, California

Before: FARRIS, N.R. SMITH, and WATFORD, Circuit Judges.

Attorneys Geraldine A. Valdez and Enrique Hernandez-Pulido appeal from

the bankruptcy court’s imposition of sanctions. We have jurisdiction under 28

U.S.C. § 158(d)(1), and we affirm.

Although the district court remanded to the bankruptcy court to reconsider

the amount of sanctions against Valdez, we have jurisdiction to consider the legal

question of whether the attorneys’ conduct was sanctionable. See In re Lehtinen,

564 F.3d 1052, 1057 (9th Cir. 2009); In re Dyer, 322 F.3d 1178, 1187 (9th Cir.

2003). And, although Kismet has relinquished any claim to the sanctions awarded

against the attorneys, this does not moot the appeal. The sanction awarded against

Hernandez — twenty hours of Continuing Legal Education in ethics — cannot be

relinquished by Kismet. See Lasar v. Ford Motor Co., 399 F.3d 1101, 1108-09

(9th Cir. 2005); Riverhead Sav. Bank v. Nat'l Mortg. Equity Corp., 893 F.2d 1109,

2 1112 (9th Cir. 1990). The sanction awarded against Valdez — joint and several

liability for roughly $700,000 in compensatory sanctions awarded against her

client — was vacated by the district court. On remand, the bankruptcy court might

award monetary sanctions payable to the court or a nonmonetary sanction, neither

of which could be relinquished by Kismet. See Lasar, 399 F.3d at 1108-09;

Riverhead Sav. Bank, 893 F.2d at 1112. Thus, Valdez has a legally cognizable

interest in the outcome of this case.

This Court “directly review[s] the bankruptcy court's decision.” In re

Caneva, 550 F.3d 755, 760 (9th Cir. 2008). A bankruptcy court's imposition of

sanctions pursuant to its inherent authority is reviewed for abuse of discretion. See

Doi v. Halekulani Corp., 276 F.3d 1131, 1140 (9th Cir. 2002); cf. Cooter & Gell v.

Hartmarx Corp., 496 U.S. 384, 405 (1990).

Here, the bankruptcy court did not abuse its discretion. First, Valdez’s

objections to the documents proposed by Kismet to transfer the Villa interest were,

even if technically correct, substantially motivated by bad faith. See Dyer, 322

F.3d at 1196; Fink v. Gomez, 239 F.3d 989, 992 (9th Cir. 2001). Valdez knew that

her client would not sign even correct transfer documents, and her purpose in

objecting was to delay implementation of the bankruptcy court’s judgment. See

Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 649 (9th Cir. 1997).

3 Second, Valdez encouraged her client to obtain an amparo injunction in Mexico to

delay and frustrate the required transfer of the Villa interest to Kismet, and

Hernandez advised that the amparo should be recorded and concealed from

Kismet. See Dyer, 322 F.3d at 1196; Primus, 115 F.3d at 649. Even if his duty to

protect client confidences prevented Hernandez from notifying Kismet of the

amparo, he was not permitted to advise his client to keep the amparo secret, thus

facilitating the amparo’s being recorded and used to impede implementation of the

judgment.

Finally, in light of the district court’s vacatur of the compensatory sanctions

awarded against Valdez, her argument that those sanctions are not supported by a

proper finding of causation is inapposite.

AFFIRMED.

4

FILED

Valdez v. Kismet Acquisition, LLC, No. 12-56953+ APR 08 2014

MOLLY C. DWYER, CLERK

WATFORD, Circuit Judge, concurring in the judgment: U.S. COURT OF APPEALS

I don’t think the bankruptcy court abused its discretion by deciding to

sanction the two lawyers. But I do have concerns about the severity of the sanction

imposed against Ms. Valdez.

The picture that emerges from my review of the record is that of a lawyer

doing her best to protect an obstinate client from the all-but-certain wrath of the

bankruptcy court. Valdez advised Diaz-Barba to comply with the bankruptcy

court’s judgment, and she told him in no uncertain terms that he risked being held

in contempt if he refused to do so. Diaz-Barba rejected that advice. When it

became clear that Diaz-Barba felt so strongly about the supposed illegality of the

judgment under Mexican law that he was willing to be held in contempt, Valdez

helped him pursue the amparo action. She had been advised by Diaz-Barba’s

lawyers in Mexico that the amparo action would allow the Mexican courts to

determine whether the bankruptcy court’s judgment in fact violated Mexican law.

Valdez recognized that a ruling by a Mexican court validating Diaz-Barba’s

reasons for refusing to comply with the judgment represented his best (and

probably his only) hope of fending off contempt sanctions.

Valdez can perhaps be faulted for some of the tactics she used in pursuing

the amparo strategy; certainly the bankruptcy court didn’t abuse its discretion in so Page 2 of 2 concluding. But I don’t think Valdez committed misconduct simply by deciding to

pursue the strategy in the first place, which is the view that seemed to drive the

severity of the sanction the bankruptcy court decided to impose. In my view, any

sanction imposed against Valdez should be far less severe than the $700,000

sanction that has now been vacated.