                                                           FILED
                                                            NOV 15 2013
 1                                                      SUSAN M. SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
                                                          OF THE NINTH CIRCUIT
 2
                    UNITED STATES BANKRUPTCY APPELLATE PANEL
 3
                              OF THE NINTH CIRCUIT
 4
 5   In re:                        )       BAP No.      WW-12-1522-KuDTa
                                   )
 6   SIRFIANI CARLSON,             )       Bk. No.   08-41652
                                   )
 7                   Debtor.       )
     ______________________________)
 8                                 )
     JAMES H. MAGEE,               )
 9                                 )
                     Appellant,    )
10                                 )
     v.                            )       MEMORANDUM*
11                                 )
     DAVID M. HOWE, Chapter 13     )
12   Trustee; SIRFIANI CARLSON,    )
                                   )
13                   Appellees.    )
     ______________________________)
14
                    Argued and Submitted on October 17, 2013
15                           in Seattle, Washington
16                          Filed – November 15, 2013
17               Appeal from the United States Bankruptcy Court
                     for the Western District of Washington
18
              Honorable Brian D. Lynch, Bankruptcy Judge, Presiding
19
20   Appearances:     Deirdre P. Glynn Levin of Keller Rohrback LLP
                      argued for appellant James H. MaGee; Michael G.
21                    Malaier argued for appellee David M. Howe,
                      chapter 13 trustee.
22
23
     Before: KURTZ, DUNN and TAYLOR, Bankruptcy Judges.
24
25
26        *
           This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8013-1.
 1                              INTRODUCTION
 2        James MaGee appeals from the bankruptcy court’s order
 3   imposing against him $2,685 in sanctions.   MaGee also appeals
 4   from the bankruptcy court’s denial of his motion for
 5   reconsideration.   We AFFIRM both orders.
 6                                   FACTS
 7        Debtor Sirfiani Carlson filed her chapter 131 petition and
 8   her proposed chapter 13 plan on April 17, 2008.    On June 25,
 9   2008, the bankruptcy court entered an order confirming
10   Ms. Carlson's plan.   In relevant part, the confirmation order
11   provided that "the debtor shall inform the Trustee of any changes
12   in circumstances or receipt of additional income. . . ."     In
13   April 2009, Ms. Carlson and her family were involved in a serious
14   motor vehicle collision, in which their automobile was “rear-
15   ended” by another automobile.   Within days, Ms. Carlson retained
16   the Carr Law Firm (“Carr”) to represent her regarding her claim
17   against the driver of the other automobile (“Third Party Claim”).
18   Her other family members also retained Carr to represent them
19   regarding their third party claims.
20        In May 2009, Ms. Carlson and her husband met with MaGee to
21   discuss the modification of her chapter 13 plan.   At that
22   meeting, Ms. Carlson discussed with MaGee the fact that her
23   husband had lost his job, thereby leaving them with less income
24   available to make her chapter 13 plan payments.    Neither
25
          1
           Unless specified otherwise, all chapter and section
26   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all "Rule" references are to the Federal Rules of Bankruptcy
27
     Procedure, Rules 1001-9037. All “Civil Rule” references are to
28   the Federal Rules of Civil Procedure.

                                       2
 1   Ms. Carlson nor her husband mentioned at that meeting that they
 2   had been involved in the motor vehicle collision or that she had
 3   retained counsel to represent her regarding her Third Party
 4   Claim.
 5        In November 2009, Ms. Carlson reached a settlement with the
 6   other party to the motor vehicle collision, pursuant to which the
 7   other party's insurer agreed to pay $25,000, the policy limits,
 8   in settlement of Ms. Carlson's Third Party Claim.   Ms. Carlson
 9   used the entire $25,000 settlement to pay her medical bills and
10   attorneys fees.2
11        In June 2010, Ms. Carlson commenced a lawsuit in state court
12   against her own insurer regarding her underinsured motorist
13   coverage (“UIM Claim”).   Between late 2010 and early 2011,
14   discovery was taken in the UIM Claim litigation.    According to
15   Ms. Carlson and her husband, John Carlson (“Mr. Carlson”), during
16   the course of this discovery, they disclosed Ms. Carlson's
17   bankruptcy filing to both Carr and their insurer.   As the
18   Carlsons tell it, Carr thereafter directed the Carlsons to
19   contact their bankruptcy counsel to inquire whether their
20   collision-related claims needed to be disclosed in Ms. Carlson’s
21   bankruptcy case.   The Carlsons further testified that they then
22   telephoned MaGee’s law offices, spoke with one or more of MaGee’s
23
24        2
           There was some debate about this. Not all of the
25   settlement funds were paid directly to Ms. Carlson’s attorneys
     and health care providers. Apparently, some funds were paid
26   directly to Ms. Carlson. But she testified that she used the
     funds paid directly to her to pay medical bills that were not
27
     otherwise satisfied. We have found no evidence in the record
28   contradicting this testimony.

                                      3
 1   three staff members, and were told that they did not need to
 2   disclose their claims, that they did not need to worry about the
 3   claims because they did not constitute income.
 4        Carr attorney Matthew Van Gieson’s declaration testimony
 5   generally tends to corroborate the Carlsons’ version of these
 6   events.    But the specifics of the Carlsons’ phone conversation(s)
 7   with MaGee’s staff, particularly the date(s) the conversations
 8   occurred and the MaGee staff members involved, are unclear at
 9   best and internally inconsistent at worst.    Furthermore, all
10   three of MaGee’s staff members offered live testimony that they
11   did not recall any such phone conversations ever taking place or
12   that they never spoke to either of the Carlsons about the motor
13   vehicle accident or the claims.
14        Ms. Carlson’s husband John Carlson filed his own separate
15   bankruptcy case in February 2011.     He also retained MaGee as his
16   bankruptcy counsel.   According to Ms. Carlson, she attended one
17   of the pre-bankruptcy meetings between Mr. Carlson and MaGee, a
18   meeting held on December 30, 2010, at which the Carlsons
19   delivered to MaGee Mr. Carlson’s “W-2” and other documentation.
20   Ms. Carlson testified that she spoke directly with MaGee at this
21   meeting and asked him whether the claims needed to be disclosed
22   to anyone.   As Ms. Carlson explained it, MaGee gave her two
23   answers.   The first answer matched the answer she claims to have
24   received from MaGee’s employees, that she did not need to worry
25   about the claims because they were not income.    The second
26   answer, according to Ms. Carlson, was unique to MaGee.    MaGee
27   supposedly told Ms. Carlson that she did not need to worry about
28   reporting the claims because the chapter 13 trustee's office was

                                       4
 1   "a mess" due to internal issues and therefore was unlikely to
 2   catch any failure to disclose.    While Mr. Carlson could not
 3   recall the specifics of the discussion concerning the claims, his
 4   live testimony generally tended to corroborate Ms. Carlson’s
 5   statement that the claims were discussed during the December 30,
 6   2010 meeting with MaGee.
 7           MaGee offered a different version of these events.
 8   Initially, he asserted that he simply could not recall whether he
 9   had any in-person discussions directly with the Carlsons
10   regarding either the motor vehicle collision or the claims.
11   Later on, apparently having reviewed his notes and possibly other
12   law office records, he more-categorically denied that any such
13   discussion ever took place on December 30, 2010, or at any other
14   time.    According to MaGee, if he had known about the retention of
15   Carr, he would have sought to obtain bankruptcy court approval of
16   that employment.
17           Ms. Carlson never disclosed the claims to either the
18   chapter 13 trustee or the bankruptcy court.    In May 2011, an
19   arbitrator awarded Ms. Carlson close to $50,000 on account of her
20   UIM Claim.    And in June 2011, she filed a motion seeking to have
21   the arbitration award reduced to judgment.    In response, her
22   insurer filed a motion in the state court seeking to clarify to
23   whom the arbitration award should be paid in light of
24   Ms. Carlson's bankruptcy.    The insurer also apparently notified
25   the chapter 13 trustee regarding the arbitration award.
26           Upon receipt of notice of the arbitration award, the trustee
27   commenced discharge revocation proceedings against Ms. Carlson,
28   and on March 8, 2012, the bankruptcy court entered an order

                                        5
 1   revoking Ms. Carlson's discharge.      Based on the evidence
 2   presented during the discharge revocation proceedings, primarily
 3   Ms. Carlson’s declaration testimony that she told Carr about her
 4   bankruptcy and Magee’s staff about the claims, the bankruptcy
 5   court stated that it would reserve the issue of whether sanctions
 6   should be imposed against counsel.
 7        On the heels of the discharge revocation proceedings, the
 8   chapter 13 trustee filed a motion seeking to modify Ms. Carlson’s
 9   chapter 13 plan.   By way of the plan modification motion, the
10   trustee sought to use most of the proceeds from Ms. Carlson’s
11   $50,000 arbitration award judgment to pay the remaining amount
12   owed to her unsecured creditors.       Ms. Carlson opposed that
13   motion.   After holding two hearings on the plan modification
14   motion, the bankruptcy court determined that only $850 of the
15   arbitration award judgment was attributable to Ms. Carlson’s lost
16   wages, and only that portion of the judgment was property of the
17   estate that could and would be distributed pursuant to the
18   trustee’s proposed plan modification.
19        As for the attorney sanctions issue, the court stated at one
20   of the plan modification hearings that it was prepared to issue
21   an order to show cause regarding whether sanctions might be
22   appropriate against MaGee and Carr for “their knowing and
23   intentional failure to disclose to the trustee the material
24   change in [Ms. Carlson's] circumstances.”      Hr’g Tr. (Mar. 14,
25   2012) at 14:12-15.
26        On March 19, 2012, pursuant to the court's statements
27   regarding sanctions at the March 14, 2012 plan modification
28   hearing, the court issued its order to show cause.      That order

                                        6
 1   laid out the facts on which the court felt sanctions might be
 2   imposed; however, that order did not specify the legal basis
 3   pursuant to which sanctions might be imposed.   Nonetheless, on
 4   March 28, 2012, the bankruptcy court held a status conference on
 5   the order to show cause at which it notified MaGee that it was
 6   relying on its inherent authority as the legal basis for
 7   potentially issuing sanctions.3
 8        The bankruptcy court held a two-day evidentiary hearing on
 9   the order to show cause in July 2012.   Ultimately, it determined
10   that, under its inherent authority, it would impose $2,685 in
11   sanctions against MaGee, payable to the trustee and for
12   distribution to Ms. Carlson's creditors under her modified
13   chapter 13 plan.4   The bankruptcy court held that MaGee’s
14   response to Ms. Carlson's inquiry regarding the claims amounted
15   to bad faith and was an intentional or reckless misstatement
16   regarding the disclosure requirement under the plan confirmation
17   order.
18        The bankruptcy court primarily based its sanctions award on
19   MaGee’s conduct at the December 30, 2010 meeting with the
20   Carlsons.   The bankruptcy court credited Ms. Carlson's testimony
21   that MaGee told her at this meeting that she did not have to
22
23
          3
           To the extent MaGee might have raised some sort of due
24   process issue regarding the notice he received that the court was
     relying on its inherent authority, MaGee has forfeited that issue
25
     by not raising it either in the bankruptcy court or in this
26   appeal. See Rains v. Flinn (In re Rains), 428 F.3d 893, 902 (9th
     Cir. 2005).
27
          4
           The bankruptcy court did not award any sanctions against
28   Carr, and no one has appealed that ruling.

                                       7
 1   disclose the claims or any resulting recoveries because they were
 2   not income.    The court also credited Ms. Carlson’s testimony that
 3   MaGee told her that the trustee was unlikely to subsequently
 4   discover the claims, in light of the internal difficulties the
 5   trustee’s office was experiencing at the time.
 6           The bankruptcy court further found that MaGee's testimony
 7   was not credible regarding the December 30, 2010 meeting.     The
 8   court explained that it did not believe MaGee’s contentions that
 9   Ms. Carlson did not attend the December 30, 2010 meeting and that
10   he did not discuss the claims at that meeting.     The court entered
11   an order imposing $2,685 in sanctions against MaGee on August 31,
12   2012.
13           On September 10, 2012, MaGee filed a motion for
14   reconsideration of the sanctions award.     In essence, MaGee argued
15   that the bankruptcy court had erred in crediting Ms. Carlson's
16   testimony over his own testimony.      According to MaGee,
17   Ms. Carlson's testimony regarding her post-confirmation contacts
18   with MaGee and his employees was inconsistent with her other,
19   prior statements under oath regarding the same subject matter.
20   MaGee further argued that it was improper for the court to
21   ascribe any bad faith motive, or to conclude that he was being
22   coy, based on the uncertain and tentative nature of his initial
23   statements regarding whether he had any discussions with
24   Ms. Carlson concerning the claims.     As MaGee put it, the
25   uncertainty and tentativeness of his initial statements reflected
26   nothing more than his need to refresh his recollection by going
27   back and checking his own records before he could categorically
28   deny that he had met with Ms. Carlson and discussed the claims.

                                        8
 1        MaGee further pointed to several instances in which the
 2   Carlsons’ testimony supposedly had been impeached or the Carlsons
 3   had failed to inform him or anyone else of assets and changes in
 4   income notwithstanding their duty to disclose these items.    These
 5   instances, MaGee reasoned, fatally undermined the Carlsons’
 6   credibility.
 7        On October 3, 2012, the bankruptcy court entered an order
 8   denying MaGee’s reconsideration motion.    The court explained in
 9   detail its reasoning for crediting Ms. Carlson's testimony over
10   MaGee's testimony.   According to the bankruptcy court, there was
11   no genuine and material inconsistency between Ms. Carlson's live
12   testimony and her prior statements regarding her meeting with
13   MaGee on December 30, 2010, and their discussion concerning the
14   claims.   The bankruptcy court also explained that its credibility
15   assessments of both witnesses were based on its observation of
16   their live testimony and that MaGee had not presented any new
17   evidence or law that would justify reconsideration of the court's
18   sanctions order.
19        On October 12, 2012, MaGee timely filed a notice of appeal
20   from the sanctions order and the order denying his
21   reconsideration motion.
22                               JURISDICTION
23        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
24   §§ 1334 and 157(b)(2)(A).   We have jurisdiction under 28 U.S.C.
25   § 158.
26                                  ISSUE
27        Did the bankruptcy court err when it imposed sanctions
28

                                      9
 1   against MaGee?5
 2                               STANDARDS OF REVIEW
 3           We review the bankruptcy court’s sanctions award for an
 4   abuse of discretion.      See Price v. Lehtinen (In re Lehtinen),
 5   564 F.3d 1052, 1058 (9th Cir. 2009).
 6           The bankruptcy court abuses its discretion if it applies an
 7   incorrect legal standard or its findings of fact are illogical,
 8   implausible, or not supported by the record.        United States v.
 9   Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).
10           Whether the bankruptcy court proceedings comported with the
11   requirements of due process is a question of law we review de
12   novo.       Alonso v. Summerville (In re Summerville), 361 B.R. 133,
13   139 (9th Cir. BAP 2007).
14                                   DISCUSSION
15           Bankruptcy courts have inherent authority to sanction
16   attorneys appearing before them for a broad range of improper
17   conduct, even if the improper conduct was not specifically
18   prohibited by court order and even in the absence of explicit
19   statutory sanctioning authority.         See In re Lehtinen, 564 F.3d at
20   1058.       When an attorney intentionally or recklessly misconstrues
21   applicable law for an improper purpose, the attorney’s conduct
22
             5
23         Even though MaGee’s notice of appeal referenced both the
     sanctions order and the order denying his motion for
24   reconsideration, MaGee’s appeal briefs do not contain any
     arguments challenging the court’s order on the reconsideration
25   motion. Consequently, MaGee has forfeited any such arguments.
26   See Brownfield v. City of Yakima, 612 F.3d 1140, 1149 n.4 (9th
     Cir. 2010) (citing Greenwood v. Fed. Aviation Admin., 28 F.3d
27   971, 977 (9th Cir. 1994)); Cashco Fin. Servs., Inc. v. McGee
     (In re McGee), 359 B.R. 764, 771 n.7 (9th Cir. BAP 2006) (citing
28   Doty v. County of Lassen, 37 F.3d 540, 548 (9th Cir. 1994)).

                                         10
 1   constitutes bad faith and may subject the attorney to inherent
 2   authority sanctions.   See Fink v. Gomez, 239 F.3d 989, 993-94
 3   (9th Cir. 2001).
 4        Here, the bankruptcy court explicitly found that MaGee’s
 5   conduct constituted bad faith in that MaGee intentionally or
 6   recklessly misconstrued the disclosure requirements set forth in
 7   the confirmation order for the improper purpose of concealing the
 8   claims from the trustee and the bankruptcy court.
 9        MaGee argues on appeal that he had no duty, as Ms Carlson’s
10   counsel, to disclose the claims or the associated recoveries.     As
11   MaGee puts it, because he had no such duty, the bankruptcy court
12   should not have imposed sanctions against him based on the
13   nondisclosure of the claims.    According to MaGee, he had no such
14   disclosure duty here because he did not “objectively know” about
15   the claims or the recoveries.   He further argues that, absent his
16   actual knowledge, there is no legal basis for imposing upon him,
17   as the debtor’s counsel, a duty to inquire or to investigate
18   whether any post-confirmation changes of circumstances had
19   occurred that were subject to disclosure.
20        MaGee’s argument regarding duty is premised on his asserted
21   lack of knowledge of the claims.      But the bankruptcy court found
22   that MaGee knew of the claims no later than December 30, 2010,
23   when he met in person with Ms. Carlson, and she asked him whether
24   the claims needed to be disclosed.     MaGee disputes that this
25   meeting ever took place and that he ever told Ms. Carlson that
26   she did not need to disclose the claims.     Therefore, the efficacy
27   of MaGee’s argument regarding duty hinges on MaGee’s ability to
28   successfully challenge the bankruptcy court’s findings concerning

                                      11
 1   the December 30, 2010 meeting.
 2        There is no basis for us to overturn the bankruptcy court’s
 3   findings concerning the December 30, 2010 meeting.   There is
 4   sufficient evidence in the record, in the form of Ms. Carlson’s
 5   testimony, that she attended the December 30, 2010 meeting and
 6   inquired regarding whether the claims needed to be disclosed.
 7   According to Ms. Carlson’s testimony, MaGee in response told her
 8   that there was no need to disclose the claims because they were
 9   not income and because the chapter 13 trustee was unlikely to
10   later discover the claims in light of internal troubles within
11   the trustee’s office.
12        While MaGee’s own testimony told a different story, that
13   Ms. Carlson did not attend the December 30, 2010 meeting and that
14   he never spoke with her about the claims, the bankruptcy court
15   chose to credit Ms. Carlson’s testimony over MaGee’s testimony.
16   The bankruptcy court explicitly found that Ms. Carlson’s
17   testimony on this point was credible and that MaGee’s testimony
18   on this point was not credible.
19        “We must accord great deference to the trial court's
20   determination regarding whether a witness speaks the truth.”
21   Cooper v. Allustiarte (In re Allustiarte), 786 F.2d 910, 917 (9th
22   Cir. 1986).   The considerable deference conferred on credibility
23   findings is mandated by Civil Rule 52(a)(6) and its Bankruptcy
24   Rule cognate, Rule 8013.   See Anderson v. City of Bessemer City,
25   N.C., 470 U.S. 564, 575 (1985) (“When findings are based on
26   determinations regarding the credibility of witnesses, [Civil
27   Rule] 52(a) demands even greater deference to the trial court's
28   findings; for only the trial judge can be aware of the variations

                                       12
 1   in demeanor and tone of voice that bear so heavily on the
 2   listener's understanding of and belief in what is said.”).
 3        We acknowledge that the deference afforded to the bankruptcy
 4   court’s credibility findings is not limitless.   As Anderson
 5   explained:
 6             Documents or objective evidence may contradict the
          witness' story; or the story itself may be so
 7        internally inconsistent or implausible on its face that
          a reasonable factfinder would not credit it. Where
 8        such factors are present, the court of appeals may well
          find clear error even in a finding purportedly based on
 9        a credibility determination.
10   Anderson, 470 U.S. at 575.
11        Here, MaGee contends that Ms. Carlson’s live testimony at
12   the sanctions hearing was inconsistent with her prior deposition
13   and declaration testimony.   MaGee asserts that it is impossible
14   to reconcile Ms. Carlson’s live testimony with her failure to
15   even mention the December 30, 2010 meeting in her prior
16   statements under oath regarding her post-confirmation contact
17   with MaGee and his staff.    But MaGee cross-examined Ms. Carlson
18   about this very issue at the sanctions hearing, and Ms. Carlson
19   explained that her prior statements focused exclusively on her
20   telephone contacts with MaGee’s staff.   The bankruptcy court
21   found Ms. Carlson’s explanation both credible and plausible, and
22   we see no basis on this record to overturn that finding.
23        More generally, MaGee argues that the bankruptcy court
24   should not have chosen to credit Ms. Carlson’s testimony
25   regarding the December 30, 2010 meeting because of ambiguities
26   and/or inconsistencies in her story regarding her telephone
27   conversations with MaGee’s staff and because, according to MaGee,
28   Ms. Carlson failed to keep him informed regarding other changes

                                      13
 1   in her financial condition, including changes in her and her
 2   husband’s employment status.   Even if we assume that all of
 3   MaGee’s asserted facts in this regard are true, these facts do
 4   not contradict Ms. Carlson’s testimony regarding the December 30,
 5   2010 meeting, nor do they render that testimony so “internally
 6   inconsistent or implausible on its face that a reasonable
 7   factfinder would not credit it.”      Anderson, 470 U.S. at 575.
 8        Simply put, the bankruptcy court’s findings regarding
 9   Ms. Carlson’s and MaGee’s discussion of the claims at the
10   December 30, 2010 meeting were not illogical, implausible or
11   without support in the record.   Hinkson, 585 F.3d at 1262.    Thus,
12   we must uphold these findings.
13        Given that MaGee is charged with knowing of the claims as of
14   December 2010, he thereafter had a duty, as Ms. Carlson’s legal
15   representative and as an officer of the court, to help her to
16   comply with the bankruptcy court’s confirmation order by
17   facilitating her disclosure of the claims.     The bankruptcy court
18   found, however, that instead of helping Ms. Carlson to comply,
19   MaGee acted in bad faith by intentionally or recklessly
20   misstating her duty to disclose for the purpose of concealing
21   information subject to the confirmation order’s disclosure
22   requirements.   A litigant’s counsel engages in bad faith conduct
23   sanctionable under the bankruptcy court’s inherent authority when
24   he or she intentionally impedes enforcement of the court’s
25   orders.   See Miller v. Cardinale (In re Deville), 280 B.R. 483,
26   495–96 (9th Cir. BAP 2002), aff'd, 361 F.3d 539 (9th Cir.
27   2004)(affirming inherent authority sanctions award against
28   litigant and his counsel based in part on their mutual efforts to

                                      14
 1   hamper enforcement of the court’s orders); see also Fink,
 2   239 F.3d at 993-94 (holding that “reckless misstatements of law
 3   and fact, when coupled with an improper purpose . . . are
 4   sanctionable under a court's inherent power.”).
 5        In sum, we reject MaGee’s argument regarding duty because it
 6   is based on a false premise, that MaGee did not know about
 7   Ms. Carlson’s claims in December 2010.
 8        MaGee next posits three disparate facts which, according to
 9   him, should have caused the bankruptcy court to exclude the
10   claims from the “any changes in circumstances” disclosure
11   requirement.   The three posited facts are as follows: (1) the net
12   economic impact of the automobile collision and the associated
13   claims turned out to be “negative or neutral” for Ms. Carlson;
14   (2) the bankruptcy court ultimately determined that only $850 of
15   Ms. Carlson’s recoveries on her claims constituted estate
16   property; and (3) Ms. Carlson’s $50,000 recovery on the UIM Claim
17   was not reduced to judgment until after she received her
18   discharge.
19        For purposes of this appeal, we can assume the accuracy of
20   all three posited facts.   Nonetheless, none of them individually
21   or jointly establish that the claims should have been excepted
22   from the “any changes in circumstances” disclosure requirement.
23   As the bankruptcy court pointed out, the disclosure requirement
24   on its face is broad and does not explicitly provide for any
25   exceptions.    And as this Panel previously has opined, the types
26   of "changed circumstances" relevant to chapter 13
27   post-confirmation practice are those substantial and
28   unanticipated changes in a debtor's circumstances that can affect

                                      15
 1   the debtor's ability to make plan payments.    See Mattson v. Howe
 2   (In re Mattson), 468 B.R. 361, 368 & n.4 (9th Cir. BAP 2012)
 3   (citing Anderson v. Satterlee (In re Anderson), 21 F.3d 355, 358
 4   (9th Cir. 1994)).   None of MaGee’s posited facts establish that,
 5   at the time he counseled Ms. Carlson on the disclosure
 6   requirement, the claims could not and would not affect her
 7   ability to make plan payments.
 8        Put another way, none of the facts MaGee now relies on
 9   existed at the time he construed the disclosure requirement for
10   Ms. Carlson, and hence, none of them are relevant to the court’s
11   finding that MaGee intentionally or recklessly misconstrued the
12   disclosure requirement for the improper purpose of concealing the
13   claims from the trustee and the bankruptcy court.
14        At the discharge revocation hearing, the bankruptcy court
15   repeatedly explained to the litigants that the disclosure
16   requirement would be undermined if the party charged with
17   disclosure was granted the power to unilaterally decide for
18   themselves which changes in circumstances are material and
19   reportable and which are not.    We agree.   Indeed, we would state
20   this proposition even more emphatically.     Our bankruptcy system
21   cannot properly function unless debtors make full, candid and
22   complete disclosure of their financial affairs when the
23   Bankruptcy Code or the bankruptcy court’s orders direct them to
24   do so.   See Searles v. Riley (In re Searles), 317 B.R. 368, 378
25   (9th Cir. BAP 2004), cited with approval in, Retz v. Sampson
26   (In re Retz), 606 F.3d 1189, 1199 (9th Cir. 2010).     If debtors
27   (or their counsel) are able to evade their disclosure-related
28   responsibilities by making their own unilateral and self-serving

                                      16
 1   determinations of what is and is not material, the bankruptcy
 2   disclosure requirements would become largely unenforceable and
 3   our entire bankruptcy system would be threatened.
 4        Accordingly, on both relevancy and policy grounds, MaGee’s
 5   three posited facts do not justify or excuse his conduct relating
 6   to the nondisclosure of the claims.
 7        MaGee next challenges the amount of sanctions that the
 8   bankruptcy court imposed against him.   MaGee contends that the
 9   sanctions imposed were punitive in nature and hence improper.      We
10   agree with MaGee’s legal premise, that the bankruptcy court’s
11   inherent sanctions authority does not include the power to impose
12   punitive sanctions; rather, such sanctions must be compensatory
13   in nature or designed to coerce compliance.   See In re Lehtinen,
14   564 F.3d at 1059; Knupfer v. Lindblade (In re Dyer), 322 F.3d
15   1178, 1192, 1197-98 (9th Cir. 2003).
16        However, we disagree that the $2,685 in sanctions imposed
17   here were designed to be punitive.    To the contrary, the court
18   here explicitly designed the sanctions imposed to reimburse
19   Ms. Carlson (and derivatively her unsecured creditors) for the
20   attorney’s fees MaGee charged Carlson for his pre-confirmation
21   services in her bankruptcy case.    On this record, this was an
22   appropriate measure for the imposition of compensatory sanctions.
23   See generally In re Dyer, 322 F.3d at 1195 (noting that
24   reimbursement of a party’s attorney’s fees commonly is an
25   appropriate component of a compensatory civil sanctions award).
26        In essence, the bankruptcy court found that MaGee was not
27   entitled to retain those fees because his improper conduct
28   relating to the nondisclosure of the claims led to the revocation

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 1   of Ms. Carlson’s discharge – the primary benefit a debtor
 2   typically seeks to obtain by proposing and completing a
 3   chapter 13 plan.   MaGee has not challenged the bankruptcy court’s
 4   finding of a causal link between his conduct and the revocation
 5   of Ms. Carlson’s discharge, nor have we found anything in the
 6   record that would support such a challenge.6   As a result, we
 7   reject MaGee’s contention that the sanctions imposed were
 8   punitive in nature and hence improper.
 9        Magee has asserted only one other distinct argument in his
10   opening appeal brief.7   MaGee contends that the bankruptcy court
11   predetermined the issue of how and when he learned of the claims.
12   The court’s predetermination of this issue, MaGee reasons, is
13   established by the language of the court’s order to show cause,
14   which refers both to MaGee’s “knowing failure to disclose” the
15   claims and to MaGee “being informed” of the claims.   Order to
16   Show Cause (Mar. 19, 2012) at pp. 1-2.   According to MaGee, the
17   so-called predetermination of this issue was both an abuse of
18
          6
19         In his reply brief on appeal, MaGee notes that the
     bankruptcy court ultimately reinstated Ms. Carlson’s discharge,
20   and he urges the panel to vacate the sanctions order on that
     basis. However, in reviewing the sanctions order, we are not
21   permitted to consider documents and facts that were not before
22   the bankruptcy court at or before the time it ruled. See Oyama
     v. Sheehan (In re Sheehan), 253 F.3d 507, 512 n.5 (9th Cir.
23   2001); Kirschner v. Uniden Corp. of Am., 842 F.2d 1074, 1077–78
     (9th Cir. 1988).
24
          7
           MaGee’s opening brief also includes a section directly
25   challenging the bankruptcy court’s credibility findings. But we
26   already have addressed at length the court’s credibility findings
     in the course of our discussion of MaGee’s argument regarding
27   duty. Suffice it to say that nothing in MaGee’s argument
     challenging the court’s credibility findings persuades us to
28   alter our analysis and conclusion upholding those findings.

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 1   discretion and a violation of his due process rights.
 2        At its most fundamental level, MaGee’s procedural due
 3   process argument requires us to consider whether MaGee had “the
 4   opportunity to be heard [on the sanctions issue] at a meaningful
 5   time and in a meaningful manner.”    See Mathews v. Eldridge,
 6   424 U.S. 319, 333 (1976).   The record establishes that MaGee had
 7   an abundance of opportunity to be heard on the sanctions issue
 8   and that the bankruptcy court carefully considered MaGee’s
 9   presentation before it issued its final sanctions ruling.
10        More to the point, MaGee’s predetermination argument is both
11   factually and legally meritless.     The court set and heard two
12   days of live testimony in part to help it decide how and when
13   MaGee learned of the claims.   Indeed, this is precisely how the
14   bankruptcy court itself later described its decision to hear two
15   days of testimony as part of the show cause proceedings.    See
16   Order Denying Motion for Reconsideration (Oct. 3, 2012) at 3:2-9.
17   Moreover, the key evidence on which the bankruptcy court relied
18   in support of its finding that MaGee knew about the claims –
19   Ms. Carlson’s live testimony regarding her December 30, 2010
20   meeting with MaGee – was offered to the court as part of the
21   two-day evidentiary hearing, which was held several months after
22   the show cause order was issued.
23        Even if there existed a genuine factual basis for MaGee’s
24   predetermination argument, as a matter of law, the order to show
25   cause was not a final order, and consequently, the bankruptcy
26   court had the authority to alter any portion of its show cause
27   ruling unless and until the final sanctions order was entered.
28   See Balla v. Idaho State Bd. of Corr., 869 F.2d 461, 465 (9th

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 1   Cir. 1989) ("Courts have inherent power to modify their
 2   interlocutory orders before entering a final judgment."); see
 3   also Knutson v. Price (In re Price), 410 B.R. 51, 56 n.1 (Bankr.
 4   E.D. Cal. 2009) (bankruptcy court retained jurisdiction to change
 5   its interlocutory order unless appellate court granted leave for
 6   an interlocutory appeal).
 7                               CONCLUSION
 8        For the reasons set forth above, we AFFIRM the bankruptcy
 9   court's order imposing sanctions against MaGee and its order
10   denying MaGee’s motion for reconsideration.
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