Wednesday, February 4, 2026
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Court of Appeal:
Counsel Cited for Not Following Local Rule About Bankruptcy
Opinion Says Both Sides Were Derelict in Failing to Timely Inform Court of Plaintiff’s Pending Proceedings Where First District Guidelines Call for Notice, Outside Assurance That Petition Would Not Affect Appeal Is No Excuse
By Kimber Cooley, associate editor
Div. Five of the First District Court of Appeal has admonished two sets of attorneys for misconduct for failing to comply with local appellate rules requiring that any party “who is aware of a bankruptcy that could cause or impose a stay” to give notice of the filing, rejecting both sides’ attempt to excuse their silence by asserting that insolvency experts informed them that the plaintiff’s filing would not affect the appeal.
Justice Danny Y. Chou authored Monday’s opinion, saying:
“Our local rules require that all parties promptly notify us about a bankruptcy that could affect our ability to decide an appeal. Despite this requirement, the parties in this case waited over four months after the filing of a bankruptcy petition by [a] plaintiff…and just two days before oral argument to tell us about that petition….[P]laintiffs…now contend that the automatic bankruptcy stay precludes us from deciding this appeal… If plaintiffs are correct, then the parties’ failure to provide timely notice of the bankruptcy would have caused this court to squander its valuable time and resources.”
However, he continued:
“Fortunately, plaintiffs are not correct….Although the harm to this court caused by the parties’ violation of our local rules is therefore minimized, this does not excuse their misconduct. Although we do not sanction the parties, we do admonish them and advise them to learn and follow our local rules in the future.”
Presiding Justice Teri L. Jackson and Justice Mark B. Simons joined in the opinion.
Bankruptcy Petition
The bankruptcy petition was filed last September by Navellier and Associates Inc. (“NAI”), a company that allegedly provided investment advice to fellow advisory firm FolioMetrix. NAI’s chairman, Louis Navellier, alleged that he loaned FolioMetrix $1.5 million in 2013 and that he secured a personal guarantee for repayment by its founders Jerry Murphey and Greg Rutherford.
Navellier alleges that Donald Putnam, who was involved in discussions regarding a possible merger of FolioMetrix with another entity, agreed to repay the debt as part of an asserted assumption of obligations relating to the transaction. After Putnam refused to sign a draft promissory note to reflect the purported agreement, NAI and Navellier filed a complaint against him and others in March 2019, asserting claims for breach of contract and fraud.
In 2024, a jury returned a defense verdict, and then-San Francisco Superior Court Judge Kathleen Kelly (now retired) ordered the plaintiffs to pay $317,960.96 in attorney fees pursuant to Civil Code §1717. The plaintiffs filed a notice of appeal on Dec. 30, 2024.
Neither the plaintiffs’ lawyer, San Francisco-practitioner Samuel Kornhauser, nor defense counsel, Therese Cecile Tuttle of the San Francisco-based Tuttle Law Group LLP and Marina Del Rey attorney Lewis Richard Walton Jr. of Walton & Walton, LLP, promptly informed the court that NAI had filed a petition in bankruptcy court while the appeal was pending.
Local Rule
First District Court of Appeal Local Rule 21 demands that “[a]ny party to a matter pending before this court who is aware of a bankruptcy that could cause or impose a stay of proceedings in this court must promptly give notice of such bankruptcy,” and include a “copy of…any stay order issued by that court” as well as “an explanation of whether a stay…is in effect.”
Although attorneys for both sides admitted that they were aware of the filing, the court was not informed until Jan. 20, two days before oral argument was set to begin.
Chou noted that both sides “pled ignorance of rule 21” and asserted that they obtained advice from bankruptcy counsel that the proceedings would not affect the appeal. Unpersuaded, Chou said that “neither excuse absolves” the lawyers because they bore a professional responsibility to be knowledgeable about local court rules.
The jurist added:
“[R]ule 21(a) required the parties to provide notice of any bankruptcy that ‘could cause or impose a stay of’ this appeal….Thus, the parties had to provide this court with notice of NAI’s bankruptcy if there was any possibility, however remote, that it stayed this appeal….As evidenced by plaintiffs’ claim at oral argument that NAI’s bankruptcy did stay this appeal due to defendants’ claim for prevailing party attorney fees, that possibility undoubtedly existed here.”
Acceptance of Responsibility
Saying that, “[t]o their credit, all counsel did, for the most part, accept responsibility for the…failure to comply with rule 21,” he declared that “we decline to impose sanctions at this time” and remarked:
“[W]e admonish counsel to comply with our local rules in the future and to ‘promptly’ notify us if a bankruptcy petition has been filed by one of the parties so we do not waste our limited time and resources….Indeed, even though we…may resolve this appeal notwithstanding NAI’s bankruptcy, the parties’ failure to promptly notify us about that bankruptcy still forced us to issue orders that should not have been necessary and to waste time and resources discussing their failure to comply with rule 21 at oral argument and in this opinion.”
Finding that the automatic bankruptcy stay issued in NAI’s proceedings “does not affect the appeal” because NAI was the plaintiff rather than the defendant in the underlying lawsuit, he rejected the other challenges to the attorney fee award.
The case is Navellier v. Putnam, 2026 S.O.S. 323.
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