Appeal from the United States Bankruptcy Court for the Central District of California Honorable Robin L. Riblet, Bankruptcy Judge, Presiding Bk. No. 09-14394-RR
SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
Argued and Submitted on May 13, 2011, at Pasadena, California
Filed - September 26, 2011
Before: KIRSCHER, SARGIS*fn2 and PAPPAS, Bankruptcy Judges.
Appellants, chapter 7*fn3 debtors Keith and Rhonda Speir ("Speirs"), appeal an order from the bankruptcy court denying their disgorgement motion against their former bankruptcy attorney, appellee, Lawrence Noble, Esq. ("Noble"). We VACATE the bankruptcy court's order and REMAND this matter with instructions that the bankruptcy court conduct an evidentiary hearing concerning the motion.
I. FACTUAL AND PROCEDURAL BACKGROUND
In August 2006, Speirs filed a complaint in state court against Steve and Leana Smith ("Smiths") for damages and rescission of a real estate contract. The matter was tried before an arbitrator in January 2009. An interim award in favor of Smiths was issued on March 19, 2009. In April 2009, Smiths moved for attorney's fees and costs from Speirs. Speirs opposed the motion. In July 2009, the arbitrator issued a revised award determining Smiths to be the prevailing party and awarding them a total of $203,412.57 for attorney's fees, costs, and interest.
Smiths subsequently learned that shortly after the interim award was issued on March 19, Speirs had engaged in what Smiths thought were fraudulent transfers of real property. On July 31, 2009, Smiths sued Speirs in state court to set the transfers aside.
On August 24, 2009, Smiths's revised award of $203,412.57 for
attorney's fees and costs against Speirs became a judgment
$206,327.57, plus interest. In September 2009, Smiths
to conduct judgment debtor examinations of Speirs in aid
enforcement of the state court judgment. Ms. Speir
allegedly evaded service of the examination order. On October 21, 2009,
day before Mr. Speir's scheduled debtor's examination,
filed a chapter 7 bankruptcy petition, thereby staying
fraudulent transfer action.
1. Events leading up to Smiths's Rule 2004 motion.
On February 2, 2010, Smiths moved for an order directing 11 Speirs to submit to a Rule 2004 examination due to their inability to get Speirs to submit to one voluntarily. To support their 13 motion, Smiths submitted various letter and email correspondence 14 between their counsel, Matt Guasco ("Guasco"), and Noble. For the 15 greater part of December 2009 and early January 2010, the parties 16 argued over whether Speirs could appear by stipulation and notice 17 rather than court order, whether Speirs had to produce documents 18 going back one year or two years, and whether Speirs had to 19 disclose their tax returns.
On January 6, 2010, Noble sent Guasco a letter again 21 asserting that Speirs would not appear pursuant to a court order, 22 but that his clients wished to "get on with the Rule 2004 23 examinations." On January 8, 2010, Smiths agreed that Speirs 24 could appear at their examinations and produce documents without a 25 court order, provided that objections to production of documents 26 were made in writing before the examinations. Noble was receptive 27 to the arrangement. Accordingly, Guasco mailed Noble a revised, 28 proposed stipulation for Noble's review.
On January 12, 2010, Guasco forwarded Noble a draft Rule 2004 2 notice of examination and production of documents for Noble's 3 review, which proposed examination dates of January 21 and 29, 4 2010. Noble responded by letter dated January 14, 2010, stating 5 that the proposed dates were "impracticable," and that Speirs 6 refused to provide Smiths with copies of tax returns because their 7 request was untimely. However, that same day, Noble told Guasco 8 in a telephone conversation that the draft stipulation was 9 acceptable, so Guasco emailed Noble a final version for Noble's 10 signature.
Guasco sent emails to Noble on January 15, 18, and 19, 2010, 12 because he had not yet received Noble's signature on the 13 stipulation. Finally, on January 20, Noble called Guasco and 14 stated, for the first time, that he had "several problems with the 15 stipulation," that he needed "instructions" from Speirs, and that 16 he would "get back" to Guasco. Guasco emailed Noble on 17 January 21, asking Noble if he was going to sign the stipulation 18 that day, to which Noble replied that he would not be hearing ...