Fourth District, Division 1 Sanctions Party and His Counsel for Not Notifying It About a Bankruptcy Case with Automatic Stay Implications.
The next case is not that remarkable for affirming a $96,000 award of fees to a receiver and his counsel, but reminds us that the trial court can equitably divide the fees against parties other than the receivership estate and that counsel must notify courts about bankruptcy proceedings replete with automatic stay implications.
In Neuman v. Baker, Case Nos. D052102/D052796 (4th Dist., Div. 1 June 30, 2009) (unpublished), the appellate court was reviewing a trial court’s decision to assess receivership fees and costs against an intervenor business and intervenor’s principal Mr. Leisher (even though the lower court equitably ordered that the award be borne equally by all the parties). The problem on appeal is that intervenor and its principal never notified the Court of Appeal that intervenor had been in bankruptcy for quite some time.
This did not sit well with the appellate panel deciding the appeal. Because principal sought to be absolved from the fee award (having the effect of shifting fee responsibility to the bankrupt business), he was seeking continuation of an action against the debtor that could be detrimental to the bankruptcy estate. (See Parker v. Bain, 68 F.3d 1131, 1135-1138 (9th Cir. 1995); Keitel v. Heubel, 103 Cal.App.4th 324, 333 (2002).) However, the portion of the appeal trying to reverse the fee award entirely was not stayed because appellate success would inure to the benefit of the bankruptcy estate. (Parker, supra, 68 F.3d at 1138.) Based on these bankruptcy principles, the appellate panel decided that equity demanded that Mr. Leisher be held jointly and severally liable for the total amount of expenses imposed against bankrupt intervenor and himself. Beyond that, the Court of Appeal sanctioned Mr. Leisher and his counsel $900 apiece for failing to give notice of intervenor’s bankruptcy.