Arrowhead Capital Finance, Ltd. v. Picturepro, LLC

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ARROWHEAD CAPITAL FINANCE,
LTD.,
Petitioner-Appellee,
v.
PICTUREPRO, LLC,
Respondent-Appellant.
No. 21-56063
D.C. No.
2:21-mc-00300-GW-JPR
MEMORANDUM*
Appeal from the United States District Court
for the Central District of California
George H. Wu, District Judge, Presiding
Argued and Submitted November 15, 2022
Pasadena, California
Before: WARDLAW and W. FLETCHER, Circuit Judges, and KENNELLY,**
District Judge.
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The Honorable Matthew F. Kennelly, United States District Judge for
the Northern District of Illinois, sitting by designation.
FILED
JAN 5 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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Picture Pro, LLC (“Picture Pro”) appeals the district court’s grant of
Arrowhead Capital Finance, Ltd.’s (“Arrowhead”) motion to enforce its subpoena
and denial of Picture Pro’s motion to dismiss. Picture Pro argues that the district
court erred in finding that it was served with a valid subpoena and imposing
sanctions under the court’s inherent authority. Arrowhead disagrees and asks this
Court to sanction Picture Pro for filing a frivolous appeal. We have jurisdiction
under 28 U.S.C. § 1291. We affirm, and we partially grant Arrowhead’s motion for
sanctions on appeal.
We “review a district court’s imposition of a discovery sanction for an abuse
of discretion, and any factual findings related to that sanction are reviewed for
clear error.” Merchant v. Corizon Health, Inc., 993 F.3d 733, 739 (9th Cir. 2021).
The district court’s finding that Picture Pro was served with a valid
subpoena in March 2020 was not clearly erroneous. Picture Pro argued in its reply
brief that the service of that subpoena is not before us on appeal, but it asserted
during oral argument that Arrowhead did not arrange for personal service of the
subpoena or provide proof of service. We will not consider arguments raised for
the first time during oral argument. Recycle for Change v. City of Oakland, 856
F.3d 666, 673 (9th Cir. 2017). But even considering Picture Pro’s contention on
the merits, it still fails because Arrowhead provided proof that a process server
personally served Picture Pro’s registered agent on March 10, 2020.

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Similarly, there is no merit to Picture Pro’s argument that the March 2020
subpoena was invalid. Picture Pro argues that a subpoena is valid only when the
issuing court has expressly approved it prior to service. But Federal Rule of Civil
Procedure 45 permits an attorney to “issue and sign a subpoena if the attorney is
authorized to practice in the issuing court.” Fed. R. Civ. P. 45(a)(3). The 1991
amendment to the Rule “ma[de] the rule explicit that the attorney acts as an officer
of the court in issuing and signing subpoenas,” and the note to the 2013 amendment
confirmed that “an attorney authorized to practice in that court may issue a subpoena,
which is consistent with current practice.” Fed. R. Civ. P. 45 advisory committee’s
notes to 1991 & 2013 amends. Because Arrowhead’s attorney is licensed to practice
in the issuing court and signed the subpoena, the district court was correct to
conclude that Arrowhead’s subpoena was valid.
Picture Pro also failed to preserve its objections to the subpoena’s breadth.
Rule 45 requires any objection to be “served before the earlier of the time specified
for compliance or 14 days after the subpoena is served.” Fed. R. Civ. P.
45(d)(2)(B). Picture Pro was served with the subpoena on March 10, 2020 and had
more than fourteen days to comply, so the deadline for objections was March 24,
2020. Because Picture Pro did not file its first motion until mid-June, its motions
were untimely and could not preserve any objections to Arrowhead’s subpoena.
The district court did not err in exercising its inherent authority to impose

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sanctions. Picture Pro contends that it lacked proper notice, but “failure to specify,
in advance of the disciplinary proceedings, that [the Court’s] inherent power was a
basis for those proceedings, d[oes] not serve to undercut its sanctioning authority.”
Miller v. Cardinale (In re DeVille), 361 F.3d 539, 550 (9th Cir. 2004). Rather,
“when using the inherent sanction power, due process is accorded as long as the
sanctionee is ‘provided with sufficient, advance notice of exactly which conduct
was alleged to be sanctionable, and [was] furthermore aware that [he] stood
accused of having acted in bad faith.’” Price v. Lehtinen (In re Lehtinen), 564 F.3d
1052, 1060 (9th Cir. 2009) (alterations in original) (quoting In re DeVille, 361 F.3d
at 549) , abrogated on other grounds by Gugliuzza v. FTC (In re Gugliuzza), 852
F.3d 884, 898 (9th Cir. 2017). “[S]anctions are available if the court specifically
finds bad faith or conduct tantamount to bad faith.” Fink v. Gomez, 239 F.3d 989,
994 (9th Cir. 2001).
The magistrate judge gave Picture Pro sufficient notice that she believed it
had acted in bad faith, noting that Picture Pro “ha[d] assiduously fought the
subpoena in two courts with largely baseless arguments, misrepresenting the
factual record and the case law along the way.” Picture Pro had an opportunity to
respond to the accusation when it filed a motion to set aside the magistrate judge’s
recommendation. That aside, Picture Pro’s challenge to the sanctions amount—
which it raised for the first time on appeal—fails because it did not raise the

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challenge in its objection to the magistrate judge’s recommendation. Earthquake
Sound Corp. v. Bumper Indus., 352 F.3d 1210, 1219 (9th Cir. 2003) (sanctionee
“waived its challenge to the reasonableness of the award of attorney’s fees by not
challenging it prior to . . . when the district court made its determination”).
Lastly, we grant in part Arrowhead’s motion for sanctions on appeal. “An
appeal is considered frivolous in this Circuit when the result is obvious or the
appellant’s arguments of error are wholly without merit,” Vernon v. City of Los
Angeles, 27 F.3d 1385, 1402 (9th Cir. 1994), and sanctions are warranted if the
arguments are “in direct conflict with ‘firmly established rules of law for which
there is no arguably reasonable expectation of reversal or favorable modification,’”
In re Becraft, 885 F.2d 547, 549 (9th Cir. 1989) (quoting McDougal v. Comm’r,
818 F.2d 453, 455 (5th Cir. 1987)). If some of the issues raised on appeal are not
frivolous, we may “award appellees their reasonable attorney fees incurred in
defending against [the frivolous issues] in this appeal.” Gaskell v. Weir, 10 F.3d
626, 629 (9th Cir. 1993).
Picture Pro’s arguments are largely frivolous. The plain text of Rule 45 is in
direct conflict with Picture Pro’s contention that subpoenas are invalid unless
expressly pre-approved, and it is clear that its motions were untimely under Rule
45(d)(2)(B) and did not preserve any overbreadth objections. Picture Pro waived
its other contentions—from challenging the service of the subpoena to disputing

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the sanctions amount—by either failing to raise them in its briefs before this Court
or to the district court. Accordingly, we exercise our discretion under Rule 38 to
award attorney’s fees for defending against these issues in this appeal.
Picture Pro’s notice argument, although lacking in merit, is not frivolous.
We will not overturn a district court’s decision “merely because that court applied
the wrong label to the righteous use of its inherent sanction power,” but we have
also stated that we “do not expect . . . that [sanctions] will be often justified in
future cases where the sanctioned party was not explicitly informed beforehand of
the precise ground for the imposition of sanctions.” In re DeVille, 361 F.3d at 550
n.4 (internal citation omitted). We therefore cannot say that Picture Pro’s notice
argument on appeal was entirely frivolous or “in direct conflict with ‘firmly
established rules of law.’” Becraft, 885 F.2d at 549 (quoting McDougal, 818 F.2d
at 455). For this reason, we decline to award attorney fees as a sanction under
Rule 38 for asserting this argument.
We refer the determination of an appropriate award of attorney’s fees under
Rule 38 to the Appellate Commissioner, who shall conduct whatever proceedings
she deems appropriate, and who shall have authority to enter an order awarding
fees. See 9th Cir. R. 39-1.6; 1.9.
We AFFIRM the district court’s order, GRANT in part the motion for
sanctions against Picture Pro for filing a frivolous appeal, and REFER the

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issue of the proper amount of sanctions to the Appellate Commissioner.

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