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In Re Wilson District Court Decision Denying Stay of Discovery 03 Jun 2009

In Re Wilson District Court Decision Denying Stay of Discovery 03 Jun 2009

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This document is the U.S. District Court's order in the appeal of the U.S. Bankruptcy Court's decision relating to the U.S. Trustee discovery. This is a filing from CIVIL ACTION NO. 09-2381, a District Court appeal related to the case In Re Wilson, Case No. 07-11862, a matter before the U.S. Bankruptcy Court for the Eastern District of Louisiana.
This document is the U.S. District Court's order in the appeal of the U.S. Bankruptcy Court's decision relating to the U.S. Trustee discovery. This is a filing from CIVIL ACTION NO. 09-2381, a District Court appeal related to the case In Re Wilson, Case No. 07-11862, a matter before the U.S. Bankruptcy Court for the Eastern District of Louisiana.

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Published by: William A. Roper Jr. on Oct 31, 2010
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10/31/2010

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Option One is the former name of Sand CanyonCorporation. Because all the parties refer to Sand Canyon asOption One, the Court will use that name.1UNITED STATES DISTRICT COURTEASTERN DISTRICT OF LOUISIANAIn re: CIVIL ACTIONRON WILSON AND LARHONDA WILSON,DebtorsNO. 09-3281 c/wNO. 09-3283(Order Ref: All Cases)SECTION "F"ORDER AND REASONSBefore the Court are Fidelity and Option One’s motions forstay pending appeal. For the reasons that follow, the motions areDENIED.
Background
Ron Wilson, Sr. and LaRhonda Wilson (Debtors) filed avoluntary petition under Chapter 13 of the Bankruptcy Act onSeptember 29, 2007. Option One Mortgage Corporation
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holds amortgage secured by debtors’ residence. Option One filed a Motionfor Relief from Stay on January 7, 2008; the Debtors objected,asserting they were current on their payments. The motion wasdenied because Option One failed to provide evidence of default.
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Dory Goebel is both an employee of Fidelity and anofficer of Option One. Goebel signed this affidavit solely in hercapacity as an officer of Option One. Fidelity has a contractualrelationship with Option One to provide administrative supportservices to Option One regarding mortgage loans to borrowers suchas the debtors. Fidelity asserts its only connection to thedebtors’ bankruptcy case was that Goebel was a Fidelity employee.2Option One filed a second Motion for Relief from Stay on March 10,2008. Attached to that motion was an affidavit by Dory Goebel,
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assistant secretary at Option One, attesting to the nonpayment offour installments. Debtors again objected, asserting all paymentshad been made and filed proof of payment into the record.Because of the conflicting evidence, the bankruptcy courtissued Orders to Show Cause against Option One, Dory Goebel, andcounsel for Option One. The court held a hearing on the secondmotion to lift the stay and the show cause orders on June 26, 2008.At the hearing, counsel for Option One, Clay Wirtz, admitted thatOption One had received five payments post-petition, but had failedto amend or correct the information in the lift-stay motion orGoebel’s affidavit. The court found that Wirtz had violated hisethical duty of candor to the court and sanctioned him $1,000. Italso sanctioned Option One and Goebel $5,000 for failing to appearand $5,000 for filing a false affidavit. The court continued thehearing on the orders to show cause, set for August 21, 2008.Fidelity moved to appear as an interested entity, which thebankruptcy court granted, and the court issued an order to showcause as to Fidelity, also set for hearing on August 21, 2008. The
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The bankruptcy court also ruled on a motion to stay,allegedly filed by Option One. Option One asserts it filed themotion to stay to be heard by the district court, and thereforethere was no motion to stay before the bankruptcy court. Theparties have not appealed the bankruptcy court’s ruling on theissue of stay, and the Federal Rules of Bankruptcy Procedure Rule8005 permits the parties to seek a stay directly from the districtcourt.3United States Trustee entered an appearance in the case on June 30,2008.At the August 21st hearing, the Trustee requested theopportunity to conduct additional discovery. After hearingtestimony, the court granted the request and directed the Trusteeto propound discovery “on the court’s behalf” on Option One andFidelity to obtain documentation relating to the case. The Trusteeissued discovery requests to Fidelity, Option One, and The BolesLaw Firm in fall 2008. All three filed motions to quash thediscovery requests, which were denied by the bankruptcy court onFebruary 6, 2009. Fidelity filed a Motion for Clarification andOption One filed a Motion for Reconsideration, in which Fidelityjoined.
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The bankruptcy court denied all three motions on March27, 2009. Fidelity and Option One filed motions with this Courtfor leave to appeal the bankruptcy court’s orders denying themotions to quash, motion for reconsideration, and motion forclarification.Fidelity and Option One now move to stay the bankruptcyproceedings pending the outcome of the appeal.
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