Albina Gregorievna Lumetta v. Arborlake Homeowners Association

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ALBINA GREGORIEVNA LUMETTA,
Plaintiff-Appellant,
v.
ARBORLAKE HOMEOWNERS
ASSOCIATION,
Defendant-Appellee.
No. 17-55722
D.C. No.
3:16-cv-01817-AJB-JLB
MEMORANDUM*
Appeal from the United States District Court
for the Southern District of California
Anthony J. Battaglia, District Judge, Presiding
Argued and Submitted November 9, 2018
Pasadena, California
Before: RAWLINSON, MELLOY,** and HURWITZ, Circuit Judges.
Albina Gregorievna Lumetta obtained a discharge under 11 U.S.C. § 727 in
2015. Later that year, she applied for an order to show cause (“OSC”) why
Arborlake Homeowners Association (“Arborlake”) should not be held in contempt
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The Honorable Michael J. Melloy, United States Circuit Judge for the
U.S. Court of Appeals for the Eighth Circuit, sitting by designation.
FILED
FEB 27 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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of court and sanctioned for violating the discharge order. Arborlake had resumed a
pre-bankruptcy, state-court collection action against Lumetta and her husband after
the discharge, but at all times expressly represented to the state court that Lumetta’s
debt had been discharged and that it sought relief only against the husband. The
bankruptcy court tentatively granted the application before holding several hearings
on the matter. After the hearings, the bankruptcy court reversed course and denied
the application. The district court affirmed. We have jurisdiction to review the
district court’s order under 28 U.S.C. § 158, and we affirm.
1. The bankruptcy court did not abuse its discretion when it denied
Lumetta’s OSC application. Arborlake may have committed a technical violation
of the discharge injunction, but the bankruptcy court was not obligated to issue
sanctions for such a violation. Rather, bankruptcy courts have broad discretion to
decide whether to impose sanctions. See Renwick v. Bennett (In re Bennett), 298
F.3d 1059, 1069 (9th Cir. 2002) (“[T]he bankruptcy court clearly had discretion to
impose sanctions under section 105(a).” (emphasis added)). Given the minor nature
of the violation of the discharge order here, the bankruptcy court did not abuse that
discretion. See United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en
banc) (explaining that a court abuses its discretion when it applies an incorrect legal
rule or when its “application of the correct legal standard was (1) ‘illogical,’ (2)
‘implausible,’ or (3) without ‘support in inferences that may be drawn from the facts

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in the record.’” (quoting Anderson v. City of Bessemer City, 470 U.S. 562, 577
(1985))).
2. The bankruptcy court also did not abuse its discretion nor fail to comply
with any applicable procedural rule in holding hearings and in denying Lumetta’s
request for further discovery before declining to issue the OSC.
AFFIRMED.

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Lumetta v. Arborlake Homeowners Ass’n, No. 17-55722
Rawlinson, Circuit Judge, dissenting:
I respectfully dissent. In my view, the bankruptcy court abused its discretion
when it failed to hold Arborlake Homeowners Association in contempt despite a
blatant violation of the discharge order.
Although arising in the context of 11 U.S.C. § 362, we have rejected the
assertion that an attorney is excused from liability for violating the automatic stay
based on a state court’s directives. See Sternberg v. Johnston, 595 F.3d 937, 945
(9th Cir. 2010), as amended, overruled on other grounds by Am. Servicing Co. v.
Schwartz-Tallard (In re Schwartz-Tallard), 803 F.3d 1095, 1100 (9th Cir. 2015)
(en banc).
In Sternberg, we held that “the law required [counsel] to take corrective
action” when confronted with a state court order contravening the automatic stay.
Id. at 944. We emphasized that “[t]o comply with his affirmative duty under the
automatic stay, [counsel] needed to do what [she] could to relieve the violation....
At a minimum, [she] had an obligation to alert” the state court “to the conflicts
between the order and the automatic stay.” Id. at 945 (internal quotation marks
omitted).
As with the automatic stay, the discharge injunction “is intended to give the
FILED
FEB 27 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
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debtor a breathing spell from his creditors.” Id. (citation omitted). As in
Sternberg, the state court order “intruded upon [Lumetta’s] breathing spell” and
counsel for Arborlake Homeowners Association “did not act to try to fix that
problem.” Id.
We noted in Sternberg that it was not necessary for the debtor to ask for
modification of the order or for the creditor to make a collection effort for the
violation to be willful. See id. Rather, failure to alert the state court “to the
obvious conflicts between the [state court order and the discharge order]”
constituted a willful violation. Id. see also Burton v. Infinity Capital Mgmt., 862
F.3d 740, 747 (9th Cir. 2017) (similarly recognizing that “the automatic stay
imposes on non-debtor parties an affirmative duty of compliance, which includes
alerting the court of potential conflicts between an order and the automatic stay”)
(citation and internal quotation marks omitted). No principled basis exists to treat
violation of a discharge order any differently. I respectfully dissent.
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