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In re Himmelfarb

United States District Court, D. Hawaii

November 25, 2014

In re: DOUGLAS BRUCE HIMMELFARB, Debtor, Bankr. No. 13-00229

For Douglas Bruce Himmelfarb, Appellant: Christopher J. Muzzi, LEAD ATTORNEY, Moseley Biehl Tsugawa Lau & Muzzi, Honolulu, HI.

For Christopher Rothko, Marion Kahan, Appellees: Jonathan Bach, LEAD ATTORNEY, PRO HAC VICE, Cooley LLP, New York, NY; Robert G. Klein, LEAD ATTORNEY, McCorriston Miller Mukai MacKinnon LLP, Honolulu, HI.

ORDER AFFIRMING IN PART, VACATING IN PART, AND REMANDING IN PART BANKRUPTCY COURT ORDERS

Susan Oki Mollway, Chief United States District Judge.

I. INTRODUCTION.

In contravention of a Stipulated Protective Order and an Amended Discovery Order, Debtor Douglas Bruce Himmelfarb turned over certain discovery to the press and others. The bankruptcy court held him in contempt, sanctioned him over $68, 000, and fined him $9, 000. Himmelfarb now appeals. This court affirms the bankruptcy court's determination that Himmerlfarb was in contempt of court but remands for further consideration the sanction and fine amounts in light of the discussion contained in the present order. The court also remands to the bankruptcy court the matters raised in Himmelfarb's countermotion to hold Marion Kahan in contempt for overdesignating material as confidential.

II. BACKGROUND.

On February 14, 2013, Douglas Bruce Himmelfarb filed for bankruptcy under Chapter 11. See U.S. Bankr. Ct. No. 13-00229, Docket # 1. Himmelfarb owns a painting that may be an U.S. Bankr. Ct. No. 13-00229, Docket # 15, Page 10 of 32. See (indicating that Himmelfarb owns 75% of a " Mark Rothko Ex. No. 7" that he values at $30, 000, 000).

In an attempt to establish the authenticity of his purported Rothko painting, Himmelfarb sought discovery under Rule 2004 of the Federal Rules of Bankruptcy Procedure from Marion Kahan, the manager of certain documents and artworks held by Rothko's children, including Christopher Rothko, and Mark Rothko's estate. Out of a desire to avoid getting dragged into litigation over the authenticity of the Rothko painting, Kahan negotiated a Stipulated Protective Order with Himmelfarb, signed by Bankruptcy Judge Robert J. Faris. The Stipulated Protective Order was filed on August 7, 2013. See U.S. Bankr. Ct. No. 13-00229, Docket # 97.

The Stipulated Protective Order gave each party to it the right to designate as " confidential" any document or discovery response that the party viewed in good faith as containing " information involving trade secrets, or confidential business or financial information." See id. ¶ 1. Any party to the Stipulated Protective Order could also designate information disclosed during a deposition as " confidential." See id. ¶ 2. All discovery was to " be used by the party or parties to whom the information is produced solely for the purpose of this case." See id. ¶ 3. " Confidential" information could only be disclosed to a limited group of people, including counsel and counsel's employees in the bankruptcy case, consultants and experts, the court, and certain witnesses. See id. ¶ 4.

Any party contending that material designated as " confidential" was not actually " confidential" could give written notice of that contention to the other party, who would then have twenty-five days to apply to the bankruptcy court for an order designating the material as " confidential." See id. ¶ 8. Even if challenging a " confidential" designation, a party was required to treat the material in issue as " confidential" until the designation was withdrawn, an opponent failed to timely apply to the court for a ruling that the material was " confidential, " or the court ruled that the material was not " confidential." See id. ¶ 9.

On September 11, 2013, Kahan produced to Himmelfarb copies of a photograph of his painting as well as a black and white negative of the photograph, asking that the material be kept " confidential" pursuant to the Stipulated Protective Order. See Excerpts of Record 275-78.

On October 16, 2013, Himmelfarb's attorney sent an e-mail to Kahan's attorney noting that the pictures and negative were marked " as Confidential pursuant to the protective order, " but that Himmelfarb's attorney did not see " how these documents fall within the definition of 'confidential' under the protective order and request that you remove that designation." See ECF No. 24-1, PageID # 869.

Kahan's attorney responded the following day, October 17, 2013, stating that Himmelfarb had ignored a previous request that he explain why he wanted the " confidential" designation removed. Kahan's attorney's e-mail noted that she was a third party with no interest in giving Himmelfarb material " for purposes beyond the present litigation." ECF No. 24-1, PageID # 868.

Himmelfarb's attorney responded the same day:

The present litigation is a Chapter 11 bankruptcy. Your clients were served with subpeonas in a bankruptcy case under Fed. R. Bankr. Pro. Rule 2004. The scope of a Rule 2004 Subpoena relates " to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or the debtor's right to a discharge." The pictures and negative are of a painting that is the property of the debtor. The debtor's plan is to sell the painting. We intend to use the pictures and/or the negative and the fact that it was produced by Ms. Kahan as part of the information that will be provided to prospective purchasers.

ECF No. 24-1, PageID # 868.

In a letter dated October 29, 2013, Himmelfarb's attorney complained to Bankruptcy Judge Faris about the " confidential" designation on the photographs and negative. See ECF No. 24-1, PageID # 871. In that letter, Himmelfarb included background information, noting that Kahan had produced 21 pages of documents, all of which she had designated " confidential." Id. The letter then explained that Himmelfarb needed to use the photographs and negative to market his picture and discussed the e-mail correspondence concerning Himmelfarb's request to remove the " confidential" designation from the photographs and negative. The letter did not actually ask that the " confidential" designation be removed from documents other than the photographs and negative. Id.

According to his letter of October 29, 2013, Himmelfarb had proposed the previous day that Kahan remove the " confidential" designation from the pictures and the negative if they were accompanied by a disclaimer stating that Kahan was not in the business of authenticating paintings and that the production of the pictures and negative was not a warranty of any kind as to the authenticity of Himmelfarb's painting. Id. The letter requested a telephonic discovery conference regarding the " confidential" designation on the pictures and negative, but not with respect to any other document (or the depositions that took place the following month). Id.

At a status conference on November 8, 2013, at which the " confidential" designation was discussed, Bankruptcy Judge Faris directed Himmelfarb and Kahan to work on a " disclaimer." See U.S. Bankr. Ct. No. 13-00229, Docket # 160.

There is no dispute that, on November 22, 2013, Himmelfarb took the deposition of Kahan, whose counsel indicated at the beginning of the deposition that everything in it was " confidential" and subject to the Stipulated Protective Order. Bankruptcy Judge Faris noted that Kahan so designated virtually all of the discovery because she did not want to be drawn into litigation concerning whether Himmelfarb's painting was, in fact, a Rothko, or to create any perception that she supported or opposed any authenticity claim. See Memorandum of Decision on Motion for Order of Contempt and Sanctions, U.S. Bankr. Ct. No. 13-00229, Docket # 272, Page 2 of 10.

Himmelfarb implies that, on December 11, 2013, in accordance with the Stipulated Protective Order, he challenged Kahan's " confidential" designation regarding the depositions. See ECF No. 5, PageID # 94. The alleged challenge he refers to ...


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