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Burton v. Infinity Capital Management

United States Court of Appeals, Ninth Circuit

June 4, 2014


Argued and Submitted, San Francisco, California: November 7, 2013.

Page 955

Appeal from the United States District Court for the District of Nevada. D.C. No. 2:11-cv-01129-RCJ-PAL. Robert Clive Jones, Chief District Judge, Presiding.

Kenneth R. Lund (argued) and Brian K. Terry, Thorndal, Armstrong, Delk, Balkenbush & Eisinger, Las Vegas, Nevada, for Defendant-Appellant Salvatore C. Gugino.

Daniel R. McNutt (argued), Carbajal & McNutt, LLP, Las Vegas, Nevada, for Defendants-Appellants Infinity Capital Management and Anne Pantelas.

Jan Paul Koch (argued), Law Office of Jan Paul Koch, Las Vegas, Nevada; Robert J. Kossack, Kossack Law Offices, Las Vegas, Nevada, for Plaintiffs-Appellees Freddy Joe Burton and Jan Paul Koch.

Before: Sidney R. Thomas, Ronald Lee Gilman[*], and Johnnie B. Rawlinson, Circuit Judges. Opinion by Judge Thomas; Dissent by Judge Gilman.


Page 956

THOMAS, Circuit Judge:

This case requires us to decide whether an attorney who prepares an order to show cause for a judge is entitled to absolute quasi-judicial immunity. We hold that he is not and affirm the judgment of the district court.


Freddy Joe Burton (" Burton" ) was injured in a bicycle-automobile collision. He incurred $271,101.87 in related medical expenses and loans and retained Jan Paul Koch (" Koch" ) to file a lawsuit on his behalf. Burton granted certain creditors, including Valley Hospital Medical Center, liens on his personal injury claim. Valley Hospital then sold its account receivable to Infinity Capital Management (" Infinity" ), the president of which is Anne Pantelas (" Pantelas" ). Koch settled Burton's personal injury claim for $185,000.

Koch placed the settlement funds in his client trust fund account and paid himself his attorney fee and costs. Koch then recommended that Burton declare bankruptcy and hire bankruptcy attorney David Crosby (" Crosby" ). After paying a retainer fee to Crosby and receiving his personal injury settlement exemption, Burton had $104,088.10 left of his settlement in the trust fund account.

That same month, Nancy Alff (" Alff" ), who represented Infinity at the time, told Koch that a state interpleader action would resolve the interests of the lien holders more quickly than the bankruptcy court. Infinity filed an interpleader lawsuit in state court against all other similarly situated lien holders making a claim upon Burton's settlement. Neither Burton nor

Page 957

Koch were named as parties in the state interpleader case. The Honorable Ronald Israel (" Judge Israel" ) was assigned to the case. Salvatore Gugino (" Gugino" ) was substituted for Alff as Infinity's attorney of record.

Crosby filed Burton's bankruptcy petition in bankruptcy court. Four days later, Judge Israel held a status hearing on the state interpleader case, and Koch attended that hearing at Judge Israel's request. At the hearing, Gugino appeared for Infinity, and Steven Baker (" Baker" ) appeared for one of the defendants in the case. Judge Israel questioned Koch as to why he had not interpled all of the funds that Burton had received for his settlement to the court clerk as required by Michel v. Eighth Judicial District Court ex rel. County of Clark, 117 Nev. 145, 17 P.3d 1003 (Nev. 2001). Koch informed Judge Israel that Burton had filed bankruptcy and he would be depositing the remaining settlement funds with the bankruptcy clerk. Those present at the hearing were confused about the proper course to take given the bankruptcy proceeding and the fact that Burton was neither a plaintiff nor defendant in interpleader. Both Gugino and Baker voiced concern about the interpleader case moving forward in light of the bankruptcy. Judge Israel ordered the parties to appear approximately two months later for a status hearing regarding the state of the bankruptcy proceeding.

Three days before the status hearing, Gugino sent all parties to the interpleader case and Koch a letter with a copy of the minutes from the prior hearing and an update on the bankruptcy case, including both an explanation of his initial attempt to resolve the interpleader issue with the trustee and confirmation that Koch had deposited the settlement funds with the trustee.

Koch did not appear at the status hearing. At the hearing, Gugino handed a copy of his letter to Judge Israel, and he informed the court that Koch had deposited the settlement funds with the bankruptcy trustee. Judge Israel responded, " I ordered Mr. Koch to place all the funds in here. . . . I'm going to issue an order to show cause. I want Mr. Koch to appear and show -- tell us why he didn't deposit his attorney's fees into -- pursuant to Michel . . . . I want him to personally appear and tell why he hasn't; otherwise, I'll hold him in contempt." Neither Gugino nor Baker voiced any opposition to Judge Israel in light of the bankruptcy. The following colloquy then occurred:

MR. GUGINO: Well, the plaintiff in the case, the injured party was -- in addition to the -- the money that Mr. Koch was giving himself for his attorney's fees, he also paid Mr. Burton 16,500 under NRS 21.090. So.
MR. BAKER: Which is a fraudulent transfer.
MR. GUGINO: I -- I don't know what to say.
THE COURT: -- is -- well, obviously the bankruptcy court's going to have to deal with part of that, but who wants to prepare the order?
MR. GUGINO: What day?
THE COURT: Mr. Gugino?
MR. GUGINO: I'll prepare it, ...

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