Reznick v. United States Trustee

• Court: Court of Appeals for the Ninth Circuit
• Decided: October 25, 2024
• Docket: 23-3543
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS OCT 25 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: DA & AR HOSPICE CARE. INC. No. 23-3543 BAP No. 22-1128 Debtor _________________________________ MEMORANDUM*

Mr. MICHAEL EUGENE REZNICK,

Appellant,

v.

UNITED STATES TRUSTEE, Los Angeles; YVETTE HARGROVE- BROWN; DA & AR HOSPICE CARE, INC.,

Appellees.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Farris, Lafferty, and Corbit, Bankruptcy Judges, Presiding

Submitted October 23, 2024** Pasadena, California

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Before: TALLMAN, R. NELSON, and BRESS, Circuit Judges.

Pro se appellant Michael Reznick, an attorney, filed an unauthorized Chapter

11 bankruptcy petition on behalf of DA & AR Hospice Care, Inc., which he did not

represent. He was sanctioned by the United States Bankruptcy Court for the

Central District of California and referred to that District’s three-judge disciplinary

panel. The Bankruptcy Court found he committed fraud on the court and violated

the Bankruptcy Rules, see Fed. R. Bankr. P. 9011, and the disciplinary panel

suspended him from practicing in that Bankruptcy Court for three years. Reznick

appealed the Bankruptcy Court’s decision to our Bankruptcy Appellate Panel

(BAP). The BAP affirmed. Reznick then appealed to us, and we, too, AFFIRM.1

The Bankruptcy Court’s decision to refer Reznick to the disciplinary panel

was not an abuse of discretion. The court identified the correct legal standard and

applied it appropriately. See United States v. Hinkson, 585 F.3d 1247, 1263 (9th

Cir. 2009) (en banc), as modified on denial of reh’g, 611 F.3d 1098 (9th Cir.

2010). And the factual findings that the Bankruptcy Court relied on were not

clearly erroneous. Decker v. Tramiel (In re JTS Corp.), 617 F.3d 1102, 1109 (9th

Cir. 2010).

First, Reznick’s April 2022 email alone shows that Reznick had no

1 The Bankruptcy Court had jurisdiction under 28 U.S.C. § 1334(a), the BAP had jurisdiction under 28 U.S.C. §§ 158(b), (c)(1), and we have jurisdiction under 28 U.S.C. § 158(d)(1).

2 23-3543 objectively reasonable basis to believe that he could file for bankruptcy on behalf

of the Hospice. In that email, Reznick states that he filed the bankruptcy petition

on “thin air” and “bullshit” that didn’t “pass the smell test.” He suggests that he

could not prove that the Hospice was related to an entity controlled by Dr. De La

Llana, that he “never confirmed” Dr. Daniel Rose owned the Hospice, and that he

had “nothing to disprove that Ailene Rivera [was] not in fact the legitimate owner”

of the Hospice. Reznick explains that he lacked any information corroborating his

filing authority since at least October 2021. And while he argues that Rivera

cannot be the owner of the Hospice under California law because she is not a

licensed physician, this argument is irrelevant. As the BAP explained, even if

Rivera could not own the Hospice, that does not mean that Reznick had an

objectively reasonable basis to believe that he had the authority to file for

bankruptcy on the Hospice’s behalf.

There is also other evidence that Reznick lacked a reasonable basis to file

the bankruptcy petition. In the same April 2022 email, Reznick admitted that,

when he filed the bankruptcy petition, he had no “documentation whatsoever that

proves the legitimacy of . . . our team’s management and control” of the Hospice.

Reznick further conceded to the Bankruptcy Court at the show cause hearing that

he may have been “[e]gregiously negligent.” Thus, it was reasonable to conclude

that Reznick violated Rule 9011 by filing a frivolous, unsupported, or improper

3 23-3543 bankruptcy petition. See Fed. R. Bankr. P. 9011(b).

Second, and for much the same reasons, the Bankruptcy Court’s factual

finding that Reznick’s actions constituted fraud on the court was not clearly

erroneous. See In re JTS Corp., 617 F.3d at 1109. It was not illogical,

implausible, or lacking record support for the Bankruptcy Court to conclude that

Reznick never intended to reorganize the Hospice but instead intended to defraud

the court, and we are convinced that the district court committed no clear error of

judgment. See Hinkson, 585 F.3d at 1261–62; Gov’t of Guam v. Guerrero, 11

F.4th 1052, 1055 (9th Cir. 2021).

Reznick wrote in the April 2022 email that he had “no documentation” to

disprove the United States Trustee’s allegations that he “fil[ed] a fraudulent

bankruptcy petition.” He also stated that he “[could not] fathom for the life of me”

that such documentation would not exist, suggesting he knew that the filing was

unauthorized and fraudulent. This conclusion is buttressed by Reznick’s own

characterization of the companies and bankruptcy filings with which he had been

involved as “questionable.” In that email, he repeatedly seeks cover in the form of

“anything . . . that shows legitimacy,” and suggests that he had repeatedly warned

his clients that filing the bankruptcy petition on behalf of the Hospice could result

in disciplinary action. “Under the circumstances,” Reznick stated, the order to

show cause stemming from the fraud allegations came “as no surprise.” Taken

4 23-3543 together, this evidence supports the Bankruptcy Court’s finding that Reznick was

not only negligent but knowingly misrepresented his relationship with the Hospice

to defraud the court.

Additionally, the Bankruptcy Court’s fraud conclusion is supported by Ms.

Hargrove-Brown’s supplemental declaration and the declarations of Hatty Yip (the

United States Trustee), Ailene Rivera, Paul Laurel, and Rosalie Manuel. In her

supplemental declaration, for example, Ms. Hargrove-Brown suggests that Reznick

worked in concert with others as part of a larger scheme to manipulate her to file

an illegitimate bankruptcy petition. This supplemental declaration reasonably

shows that Reznick orchestrated a scheme to file an unauthorized bankruptcy

petition as his clients attempted a hostile takeover of the Hospice, and the

Bankruptcy Court’s decision to give this declaration credence was reasonable.

At bottom, then, the Bankruptcy Court’s factual findings were not clearly

erroneous and its application of the law to those facts was not “illogical,

implausible, or without support in inferences that may be drawn from the facts in

the record.” Hinkson, 585 F.3d at 1262 (cleaned up). Nor did the Bankruptcy

Court deny Reznick due process in the order to show cause proceedings. Thus, the

Bankruptcy Court did not abuse its discretion by referring Reznick for discipline

proceedings.

AFFIRMED.

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