Natural v. Peatross, No. 22-02956-JBM7 (2025)

Case details
Full caption
In re: Nupeutics Natural, Inc.; Gladstone v. Peatross
Country
United States
Jurisdiction
Federal
Decided
2025
Disposition
Motion Denied
Majority
United States Bankruptcy (J.) (unanimous Court)
© 2025 Thomson Reuters. No claim to original U.S. Government Works.In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T.GLADSTONE, CHAPTER 7 TRUSTEE, Plaintiff, v. JESSICALAINE PEATROSS, Defendant.United States Bankruptcy Court, S.D. California. | December 5, 2025 | Slip Copy | 2025 WL3546838Document Detailsstandard Citation:In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T.GLADSTONE, CHAPTER 7 TRUSTEE, Plaintiff, v. JESSICA LAINEPEATROSS, Defendant., No. AP 24-90036-JBM, 2025 WL 3546838(Bankr. S.D. Cal. Dec. 5, 2025)All Citations:Slip Copy, 2025 WL 3546838Search DetailsSearch Query:adv: (openai "artificial intelligence" chatgpt "google gemini" "westlawcocounsel" "large language model") (hallucinat! fake fictitious spuriousnonexistent "non-existent" "made up" imagined /p (gpt ai "artificialintelligence" chatgpt chaton perplexity openai copilot "google gemini""google bard" grok "mata v. avianca" claude llm llms)) (hallucinat! fakefictitious spurious nonexistent "non-existent" "made up" imagined) +3(precedent case "legal authority" "legal case") & DATE(aft 1/1/2023)Jurisdiction:CaliforniaDelivery DetailsDate:December 12, 2025 at 4:12 AMDelivered By: Client ID:NOCLIENTIDOutlineMEMORANDUMDECISION REAMENDED ORDERTO SHOW CAUSEWHY THE COURTSHOULD NOTSANCTIONDEFENDANT'SCOUNSEL FORCOUNSEL'SCONDUCT INCONNECTIONWITH A MOTIONFILED WITHTHE COURT ANDDEFENDANT'SDECLARATIONFILED WITH THECOURT (p.1)All Citations (p.23)
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.12025 WL 3546838Only the Westlaw citation is currently available.WRITTEN DECISION –NOT FOR PUBLICATIONUnited States Bankruptcy Court, S.D. California.In re: NUPEUTICSNATURAL, INC., Debtor.LESLIE T. GLADSTONE,CHAPTER 7 TRUSTEE, Plaintiff,v.JESSICA LAINEPEATROSS, Defendant.Bk. Case No. 22-02956-JBM7|Adv. Case No. 24-90036-JBM|Date: October 22, 2025|December 5, 2025MEMORANDUM DECISION RE AMENDEDORDER TO SHOW CAUSE WHY THE COURTSHOULD NOT SANCTION DEFENDANT'SCOUNSEL FOR COUNSEL'S CONDUCT INCONNECTION WITH A MOTION FILEDWITH THE COURT AND DEFENDANT'SDECLARATION FILED WITH THE COURTJ. BARRETT MARUM, Judge United StatesBankruptcy CourtINTRODUCTION*1 This matter originally stems from a motionfiled by Deepali Milie Joshi, counsel for Defendantin this adversary proceeding (“Counsel”), whichCounsel used generative artificial intelligence (“AI”)to prepare. This, of course, is not in and of itself aproblem – using AI is quickly becoming a standard partof the practice of law. The problem for Counsel beganwhen she failed to check any of the AI-generated legalcitations included in the motion, which were mostlyincorrect and in one instance was an AI hallucination ofa case that does not exist. Despite her failure to checkthe AI-generated legal citations, Counsel filed themotion containing the erroneous and nonexistent legalcitations, thereby certifying under Rule 9011(b)1 thatthe Defendant's position in the motion was warrantedby existing law cited therein, when it was not. Indoing so, Counsel violated Rule 9011; this much sheconcedes. But Counsel compounded her initial Rule9011 violation through her subsequent representationsand responses to the Court regarding Counsel's useof the erroneous and nonexistent legal citations in themotion.At nearly every turn since she filed the motion,Counsel has not been transparent or forthcoming withthe Court as to facts problematic with her practicein the adversary proceeding, notwithstanding that theCourt clearly was trying to elicit specific informationfrom Counsel with respect to the motion that she filed.Counsel did not readily offer that she had relied onAI to draft the motion, or that she failed to checkthe legal citations in the motion prior to filing it, orlater, that Counsel did not have the Defendant's signeddeclaration at the time that Counsel intended to file theDefendant's declaration in an opposition paper due twomonths before the motion.Instead, Counsel presented facts to the Court in amanner designed to obscure her problematic decisions.This included Counsel's representation to the Courtthat her client, the Defendant, had done two things onMay 27, 2025: first, that the Defendant had signed herdeclaration that Counsel was supposed to file with theCourt on that date (filed subsequently in July 2025)and, second, that the Defendant had sent Counsel theDefendant's signed declaration on the same date; thelatter being a requirement for Counsel's compliancewith the Local Bankruptcy Rules for Counsel's use ofthe Defendant's electronic signature on the Defendant'sdeclaration. Neither representation turned out to betrue. Counsel eventually admitted that her reticenceto disclose these facts was based on her desire to not“make the situation worse” with the Court.*2 The Court's concerns with Counsel's use of AIin the motion led it to issue an Order to ShowCause to Counsel in August 2025. In September2025, the Court issued an Amended Order to ShowCause that expanded on the grounds for potential
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.2sanctions for Counsel's conduct. The Court heardthe Amended Order to Show Cause on October22, 2025. At the hearing, appearances were madeby Counsel and Plaintiff's counsel. Defendant Dr.Peatross was also present virtually and was swornin by the Court, which received her testimony. Afterhearing argument presented by Counsel, and brieflyby Plaintiff's counsel, as well as taking Dr. Peatross'stestimony, the Court took the matter under submission.The Court has reviewed and considered the followingin rendering this decision: Defendant's Oppositionto Trustee's Motion For Summary Judgment and/orSummary Adjudication as to 2nd, 3rd, and 4th Causesof Action (ECF No. 43); Court's Tentative Ruling(ECF No. 44); Court Minutes for the hearing onJuly 16, 2025 (ECF No. 46); Defendant's Notice ofMotion and Motion to Enlarge Time and For Leaveto File Omitted Opposition Documents (ECF No. 47);Trustee's (I) Opposition to Motion to Enlarge TimeFor Leave to File Omitted Opposition Documents and(II) Status Report (ECF No. 49); Court Minutes forthe hearing on August 13, 2025 (ECF No. 52); OrderDenying Defendant's Motion to Enlarge Time and ForLeave to File Omitted Opposition Documents (ECFNo. 53); Order to Show Cause Why the Court Shouldnot Sanction Defendant's Counsel for using FictitiousCase Citations in a Motion and Violating the LocalRules with Respect to her Client's Signature Page(ECF No. 54); Counsel's Response to Order to ShowCause and Declaration (ECF No. 57); Court's TentativeRuling (ECF No. 58); Declaration of Jessica LainePeatross (ECF No. 59); Court Minutes (ECF No. 60);Amended Order to Show Cause why the Court Shouldnot Sanction Defendant's Counsel for using FictitiousConduct in Connection with a Motion Filed with theCourt and Defendant's Declaration Filed with the Court(ECF No. 62);2 Defendant's Ex Parte Applicationto Extend Deadline to File Supplemental Briefing(ECF No. 65); Declaration of Deepalie Milie Joshi asSupplemental Response to the Court's Amended Orderto Show Cause (ECF No. 75); Court Minutes for thehearing on October 22, 2025 (ECF No. 80); and theaudios and/or transcripts for the hearings on July 16,2025, August 13, 2025, and October 22, 2025.3Based on the foregoing, the Court now discharges itsAmended Order to Show Cause as follows: the Courtdetermines that Counsel violated Rule 9011 and theLocal Bankruptcy Rules when she filed the motion andthrough her subsequent representations to the Courtin connection with the motion. In doing so, Counselacted in bad faith or conduct tantamount to bad faith.As a result, the Court imposes sanctions on Counsel,detailed below, pursuant to Rule 9011 and the Court'sinherent powers authority.The Court does not undertake this decision lightly.Counsel is a long-time, well-liked, and respectedmember of the San Diego bankruptcy bar. Amongother things, she has served on the Court's unpaidvolunteer mediation panel, and she has served thelocal bankruptcy community as a board member ofthe San Diego Bankruptcy Forum. That said, Counsel'sconduct in this matter was so far outside the bounds ofacceptable behavior for an officer of the BankruptcyCourt or a member of the San Diego bankruptcy barthat the Court cannot let Counsel's transgressions gowith impunity. And although Counsel couches herconduct as a series of negligent and reckless actionsbuttressed by a subjective good faith belief, at a certainpoint, the Court cannot accept that narrative due toCounsel's misrepresentation of facts to the Court. Itis an unfortunate stumble for Counsel, but one thatthe Court concludes must be addressed and remediedthrough the imposition of sanctions, which the Courtdetails below.*3 The following constitutes the Court's findings offact and conclusions of law pursuant to Rule 7052.FACTSA. Defendant's Opposition to Plaintiff's Motion forSummary Judgment – May 2025The Defendant's opposition to Plaintiff's Motion forSummary Judgment (“MSJ”) came due on May27, 2025. On the evening of May 27,4 Counselfiled a two-page document styled as the Defendant'sopposition to the MSJ. ECF No. 43. The document,comprised of two sentences for a total of six lines,referenced a memorandum of points and authorities,the declarations of Defendant and Counsel, and theDefendant's statement of contested facts and issues;nothing, however, was attached to the filing. AndDefendant filed nothing additional on the docketin support of her opposition to the MSJ. This had
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.3the practical effect of rendering the Plaintiff's MSJunopposed.Five days prior to the scheduled hearing on the MSJ,the Court issued a tentative ruling in which it notedthe deficiencies with the Defendant's opposition. ECFNo. 44. The Court also prohibited the Defendant fromfiling any documents prior to the MSJ hearing in anattempt to address the issue. Id. It noted, however,that it would hear from the parties “regarding thecircumstances that led to the Defendant's apparentfailure to file the documents referenced in theOpposition and the appropriate outcome as a result.”Id.At the July 16 hearing on the MSJ, Counsel representedthat the omission of documents in support of theDefendant's opposition to the MSJ was inadvertent andbased on her mistake. As a result, the Court providedCounsel with a July 25 deadline to file a motion withrespect to the omitted documents.B. Defendant's Motion to Enlarge Time and ForLeave to File Omitted Opposition Documents – July2025On July 24, Counsel filed a Motion to Enlarge Timeand For Leave to File Omitted Opposition Documents(“Motion”), which consisted of 209 pages. ECF No.47. In the Motion, Counsel sought leave to file thedocuments she asserted she inadvertently omitted fromthe two-page opposition to the MSJ filed in May.Attached to Counsel's declaration in support of theMotion was a combined PDF that Counsel assertedcontained the documents she intended to file in May aspart of the Defendant's MSJ opposition. The omitteddocuments included the Defendant's declaration insupport of her opposition to the MSJ, which borethe Defendant's electronic signature (in the form of“/s”) and provided that the Defendant had executedthe declaration on May 27, 2025, in Ibiza, Spain(“Defendant's May 27 Declaration”). This declarationsubsequently developed into an issue in this adversaryproceeding as the Court will discuss below.The Plaintiff opposed the Defendant's Motion. ECFNo. 49. In her opposition, the Plaintiff asserted that theMotion contained a case citation that Plaintiff's counselcould not locate and another citation that was incorrect.The Plaintiff also alleged indicia of bad faith; namely,that Counsel produced the omitted opposition papers toPlaintiff two days after the July 16 hearing, rather thanimmediately following the hearing when the Plaintiffrequested them, and that it appeared that Counsel hadaltered the omitted opposition papers following theJuly 16 hearing.C. Hearing on the Defendant's Motion – August 13,2025*4 On August 13, 2025, the Court heard the Motion,along with the MSJ and a continued pre-trial statusconference. The Court questioned Counsel aboutcase citations included in the Motion. Specifically,Counsel's citation to In re Verdi, 2019 WL 6712136(Bankr. E.D. Cal. 2019) in the Motion was especiallytroubling because the Court was unable to identifyany case with either this name or Westlaw citation. Atthe August 13 hearing, Counsel initially representedthat the Verdi citation was simply a placeholder casestanding for the proposition she sought, and that sheforgot to go back and find a case to replace it:THE COURT: Can you comment, though, Ms. Joshi,on the case? Because I've looked for it too, and itdoesn't seem to exist.COUNSEL: And again, I have egg on my face whereit was the [ ] case, I should say, was cited more ofa wish list item in that I had intended to go backand insert a more substantive case.THE COURT: Wait. Wait a minute, wait a minute.Hold on, Ms. Joshi. You're telling me that, ina document that you filed with the Court, youput a case that does not exist, and you weregoing to go back and then find a case thatstood for that proposition, but you didn't do that,and you filed a document with a case that'scompletely fabricated? Is that what you're tellingme? Because that's what it sounds like.COUNSEL: [Long pause] I --THE COURT: It's a yes-or-no question, Ms. Joshi.COUNSEL: Yes.Ex. A, Hr'g Tr. 10:10-25-11:1, Aug. 13, 2025.The Motion contained two other problematic citations.First, Counsel in the Motion cited to Local Bankruptcy
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.4Rule 1001-2 as “instruct[ing] that technical failuresshould not thwart substantive adjudication.” ECF No.47-1 at 6. However, that Local Bankruptcy Rule isactually titled “Amendment by General Order” anddiscusses amendments to the Local Bankruptcy Rulesby the Court's General Order. See L.B.R. 1001-2. Ithas nothing at all to do with “technical failures” or“substantive adjudication” of anything.Second, Counsel in the Motion cited to In reCaneva, 550 F.3d 755 (9th Cir. 2008), for theproposition that “[t]he Ninth Circuit applies [the]Pioneer [factors] flexibly, recognizing that no singlefactor is dispositive.” ECF No. 47-1 at 3. In re Caneva,however, is a Ninth Circuit decision addressingobjections to discharge under 11 U.S.C. § 727(a)(3)and does not contain any reference to Pioneer Inv.Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S.380 (1993) or the standard for excusable neglect underRule 9006(b)(1).Although Counsel's references to nonexistent andimproper case citations and local bankruptcy rulesin a paper filed with the Court were concerningenough, following the Plaintiff's oral argument at thehearing, it became clear, and Counsel so admittedin direct response to the Court's questions, that shehad in fact used AI to draft the Motion. It wasthe AI that created the Verdi case citation through ahallucination, a common error that AI models makewhen drafting legal papers. More alarming, however,Counsel admitted at the hearing that she failed to checkwhether the case citation was correct or even whetherthe case truly existed.THE COURT: Ms. Joshi ... I did not hear you saythat you used artificial intelligence as part of yourdrafting process for this brief. [ ] [D]id you in factuse AI?COUNSEL: I did, Your Honor.THE COURT: You did? Okay. So the placeholdercase we talked about, In re Verdi, I think it was,is that a case that you came up with or a case thatthe AI came up with?COUNSEL: The AI, Your Honor.THE COURT: Okay. And then so what you told meearlier about you making it up [,] that citation wasnot correct; the AI did it. And then you failed tocheck it, is what it sounds like, because if you hadchecked it, you would have seen that it did notexist.*5 COUNSEL: Your Honor, whatever -- I douse AI, which I'm questioning now. I typicallyhighlight all of the cases that are provided, or Ieven instruct the AI not to include cases. But I dogo back and check them. So when I meant I left itas a placeholder, it was meant to -- I meant to goback and check it, and I did not.Ex. A, Hr'g Tr. 24:1, 3-22, Aug. 13, 2025.The Court was left troubled that Counsel would useAI to draft the Motion but then fail to ensure thatthe document filed with her ECF credentials containedaccurate legal citations. This conduct reflects poorly onCounsel's judgment and constitutes a failure to complywith her ethical obligations as an attorney and, thus, isa serious offense as a lawyer.In addition, the Court raised the issue of theDefendant's “wet ink” signature on the Defendant'sMay 27 Declaration, when Defendant was out of thecountry and on another continent. Counsel representedto the Court that because Defendant was out of thecountry on May 27, documents had been transmittedback and forth by email.THE COURT: ... [Y]our client's declaration that yousubmitted along with this motion, that was theproposed declaration to be filed in support of youropposition, I believe is dated May 27th, and itindicates that your client signed it in Ibiza. Soobviously she didn't come to your office to signthe declaration. How did she get her signature onthat declaration to you?COUNSEL: Your Honor, first, my client liveson the East Coast. She's not local. But at thetime we were preparing the opposition and herdeclaration, she was actually on vacation in Ibiza.So all documents were being transmitted back andforth by email.THE COURT: Okay. And so she emailed you backher signed signature page on her declaration onthe 27th of May?COUNSEL: Correct, Your Honor.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.5THE COURT: Okay. I want you to submit that file tome, for my in-camera review, and I want to lookat the actual file itself. So you should feel free toredact any information in the file that is attorney-client privilege. But I want to look at the file itself,and I want you to email it to us ....And so I want you, before the end of the day,to send that file to this email so that I canlook at it. And like I said, ... if there's attorney-client information in there, feel free to redact thatinformation in some way. But I need you to sendme the file with the metadata intact, on the PDFor JPEG, or whatever it was that your client sentback to you from Ibiza with her signature on thatdeclaration.COUNSEL: Yes, Your Honor.Ex. A, Hr'g Tr. 25:8-25-26:1-16, Aug. 13, 2025.Following arguments presented, the Court took theMotion under submission.D. Counsel's submission of the Defendant's signedMay 27 Declaration to the Court for in camerareview – August 13, 2025Later in the afternoon of August 13, 2025, Counselsent an email to the Court, in which she attached:(1) a screenshot of text messages exchanged betweenCounsel and the Defendant that included an image ofthe Defendant's signature on her May 27 Declaration;and (2) a standalone image of the Defendant's signaturepage on her May 27 Declaration. In her email to theCourt, Counsel stated:Judge Marum:The requested documents are attached. Thesignature pages were delivered by my clientthrough text message, not email. I made anexception since my client was out of the country.*6 Ex. B, Hr'g Tr. 30:22-25, Oct. 22, 2025.5 Emphasisadded.The screenshot of the text message communicationsbetween the Defendant and Counsel did not include thedate on which the messages were exchanged. Upon theCourt's inspection of the metadata associated with bothimages provided by Counsel, it showed that Counseltook the screenshot of the text message conversationon August 13 at 4:00 p.m. But the metadata forthe standalone image of the Defendant's May 27Declaration, purportedly signed by the Defendant onMay 27, reflects that the photo was taken on August13 at 6:57 p.m.It goes without saying that neither the Defendant norCounsel could have taken the photo of the Defendant'ssignature on her declaration almost three hours afterCounsel sent her email to the Court on August13. What explained this impossibility was that theDefendant was physically on the East Coast, such thatmetadata captured in the image was based on EasternDaylight Time and thus three hours ahead of PacificDaylight Time, the time zone from which Counsel sentthe email.What was clear from the images submitted to the Courtwas that the Defendant had not sent those particularimages to Counsel on May 27.As a result, the image of the Defendant's signed May 27Declaration that Counsel sent to the Court on August13 was created on August 13 and not on May 27.And that means Counsel's email message to the Courtreferenced above – in which she represented that thefile she had submitted to the Court was the one herclient sent her on May 27 – was not true.The Court subsequently denied the Defendant'sMotion. ECF No. 53. In the order denying theMotion, the Court assessed the Defendant's requestto extend time under Rule 9006 based on excusableneglect pursuant to the factors set forth under PioneerInvestment Services Co. v. Brunswick Associates Ltd.,507 U.S. 380, 395 (1993). As the Court noted inthe order, in Pioneer, the Supreme Court stated that“any indication at all of bad faith” would supporta bankruptcy court's determination in declining toconclude that neglect was excusable. ECF No. 53 at3 (quoting Pioneer, 507 U.S. at 398-99). The Courtfound that Counsel had engaged in bad faith conduct,through the tardy production of the Defendant'sopposition to the Plaintiff, filing the Motion withnonexistent legal authority and failing to check thecase citations, issues with the Defendant's May 27Declaration, and Counsel's failure to comply with theLocal Bankruptcy Rules with respect to not having
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.6possession of the Defendant's signed declaration at thetime of filing. Id. at 6-7.E. Court's Initial OSC and Counsel's Response andDeclaration – August and September 2025In response to Counsel's representations at the August13 hearing and the additional issue arising from herin camera submission, the Court issued an Orderto Show Cause on Why the Court Should notSanction Defendant's Counsel for using FictitiousCase Citations in a Motion and Violating the LocalRules with Respect to her Client's Signature Page(“Initial OSC”). ECF No. 54. In the Initial OSC, theCourt highlighted the Verdi AI hallucination and thediscrepancy in the metadata of the images Counselsubmitted to the Court for in camera review.*7 On September 5, 2025, Counsel filed a Responseto the Initial OSC, which she supported with herdeclaration. In her response, Counsel admitted thatshe violated Rule 9011 by filing a pleading with thefalse AI citation; but she pointed out that the Motioncontained only one fabricated citation. See ECF No.57 at 1-3. Counsel also asserted a lack of evidencethat she had actual knowledge that the Verdi citationwas fabricated. Id. at 6. As to the Defendant's May27 Declaration, in her September 5 Response, Counsel“aver[ed] that she was in possession of the ‘wet ink’signature of her client on May 27, 2025, but negligentlyfailed to save a copy of the signature which resultedin her obtaining in [sic] image of the signature of herclient on August 13, 2025.” Id. at 2.In her own Declaration filed in support of herResponse, Counsel attested as follows:• Counsel obtained the Defendant's “approval andsignature on the declaration for filing purposes.[Defendant] sent the signature page by textmessage on May 27, 2025 since she was out ofthe country.” ECF No. 57-1 at 4 17.• Counsel “failed to save [her] client's signaturepage in the client's file when she texted it to me.[Counsel] intended to export it from [Counsel's]text messages to save in the client file at a latertime. Unfortunately, one of [Counsel's] phone'ssoftware updates removed the photo from [her]texts to free up storage space.” Id. at 5 23.• “When the Court requested [Counsel's] client'ssignature page, [Counsel] asked [her] client toresend the photo of the page she had previouslysigned. That is the photo [Counsel] provided tothe Court for in-camera review.” Id. at 5 24.According to Counsel, her failure to save theDefendant's May 27 Declaration was an act of simplenegligence. ECF No. 57 at 2-3, 7. None of this turnedout to be accurate.On September 9, 2025, Counsel filed a declarationfor the Defendant that addressed the Defendant'sMay 27 Declaration. ECF No. 59. In her declaration,the Defendant attested that she was travelinginternationally on or around May 27, and as such, sheand Counsel communicated primarily through emailand text messages. Id. at 2 3. She attested thatCounsel “asked for [Defendant's] permission to use[Defendant's] electronic signature on the declaration insupport the Opposition.” Id. at 2 4. The Defendantalso attested that she recalled “giving [her] attorneypermission to use [Defendant's] electronic signatureon the declaration” and that Defendant “approved thecontents” of her declaration and gave permission forher electronic signature on the document. Id. at 2 ¶¶5, 7.The Defendant's September 9 Declaration raisedadditional issues, as it appeared that the Defendant hadnot signed her May 27 Declaration in Ibiza, Spain,notwithstanding Counsel's representations to the Courtat the August 13 hearing, in her Response to the InitialOSC, and in her Declaration signed under penaltyof perjury submitted in support of Counsel's OSCresponse.F. Court's Amended OSC and Counsel'sSupplemental Response – September 2025The Court subsequently issued an Amended Orderto Show Cause (“Amended OSC”) to, among otherthings, identify with particularity the legal authority forpotential sanctions against Counsel. ECF No. 62.On October 14, 2025, Counsel filed a declaration as asupplemental response to the Court's Amended OSC.ECF No. 75. In her declaration, Counsel attested thather prior representations to the Court with respectto her possession of the Defendant's signed May 27
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.7Declaration were based on her sincere belief that shehad obtained the signed document. 77. at 5 8. Inparticular, Counsel attested as follows:• “When the Court asked me if I had obtained myclient's signature on her declaration before filingit with the Court and how I did so, I immediatelyresponded yes and by email. I answered as suchbecause that [sic] I sincerely believed that I haddone as such. It is standard practice for myclients who cannot be physically present in theoffice, and at the time I had no reason to believeotherwise.” ECF No. 75 at 4-5 8.*8 • “When I searched for the ‘wet ink’ documenton August 13, 2025, I could not readily find thedocument in my email history or the client's file.So, I then checked my text history with my clientknowing that sometimes we communicated bytext, especially if she is traveling. When I checkedmy phone, I saw that all of my past texts withmy client were no longer available. I still didnot question whether or not I had obtained myclient's ‘wet ink’ signature and I assumed thatthe file had been in my texts and inadvertentlyerased. The idea that I would file a declarationwithout my client's review and signature is soabhorrent that I sincerely did not believe it waspossible.” Id. at 5 9.• “On September 08, 2025, I was able to havea more detailed conversation with my clientregarding the case's status, the OSC, and thesubject declaration.” Id. at 5 10.• “To my dismay, my client said that she did notremember whether she signed the declaration, butshe did remember giving me approval to use herelectronic signature and did remember approvingthe contents of the declaration. Because myclient's recollection did not match my recollectionand because neither of us were able to confirmwhich was the true recollection, my clientand I prepared the declaration regarding herrecollection.” Id. at 5 11.• “After discussing with my ethics’ counsel, I feltthat the subsequent declaration by my clientregarding her recollection of events needed tobe filed with the Court because we were unableto find confirmation of whose recollection wascorrect.” Id. at 6 13.Apparently, notwithstanding the Court's request forthe in camera submission on August 13, 2025, it wasnot until September 8, 2025 – 26 days later – thatCounsel had a “more detailed conversation with [her]client regarding the case's [sic] status, the OSC, and thesubject declaration.” See ECF No. 75 at 10.G. The Court's hearing on the Amended OSC –October 22, 2025The Court heard the Amended OSC on October 22.At the hearing, the Court questioned Counsel on theDefendant's May 27 Declaration:THE COURT: ... As I was piecing everythingtogether, with the various declarations and filingsthe conclusion that I reached is that, on August13th, the signature page that your client sent toyou, was something that she signed on August13th and that you knew that on August 13th. Isthat correct?COUNSEL: Yes, Your honor.THE COURT: Why didn't you tell me, in the in-camera submission on August 13th, that that wasthe case?COUNSEL: I sincerely believed that I had hersigned declaration in my text messages whichhad been erased. I don't file declarations withouthaving the client see it, having the client sign offon it. I remember the circumstances during thetime being somewhat chaotic, and my thoughtwas, there's no way that I don't have her signaturepage. And so I didn't think that it was harmful toask her to review it and send a signature page thatday.THE COURT: But you made the decision not to tellme that that's what you were doing. And what Ihad specifically asked you for at the hearing wasan electronic copy of the file your client signed,an electronic copy of the signature page that yourclient sent to you on May 27th. And what yougave me instead was something that you knew ...that she had signed on the 13th and you didn't tellme that. And that's what I don't understand is why,
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.8at that point, were you not transparent with theCourt about what had happened?COUNSEL: Honestly, I was afraid of making thingsworse.THE COURT: ... Ms. Joshi, I appreciate your candidresponse just there, but by not being transparent,you have made the situation worse, because I hadto discover that that file was a file from August13th by looking at the metadata. And at thatpoint, what you should have done is told me, wecan't find the signature page, and so here is thesignature page that my client signed today. We arestill looking, we will keep looking, and we willtry to find the signature page that my client sentme on May 27th. But that's not what you did.*9 And also, in the way that you submittedthe text messages, it doesn't show the date onwhich the text messages were exchanged withyour client. And that may be because you -- one oftwo things is possible. That may be because youwere trying to obscure the date on which you sentthose text messages with your client. Or it couldhave been that you were trying to show me thefact that your client had the image [ ] file in thetext message exchange.But your submission -- and I'm going to assumeit was the latter ... [,] to the Court still didn't saythese are the text messages that I had with myclient on August 13th. The implication was thatthe screenshot of the text messages were fromMay 27th when your client provided the signaturepage to you when she was in Ibiza. Do you haveany response to that?COUNSEL: No, Your Honor. I mean, that is the firsttime that I've been asked for a client signaturepage. I certainly did not mean to mislead theCourt. I was afraid of making things worse, notjust for me, but for my client. And I understandnow that I should have trusted the Court more andbeen more transparent.THE COURT: Where was your client on August13th when she signed the declaration or signedthe signature page that you submitted for my in-camera review?COUNSEL: I believe she was in Florida.THE COURT: Okay. So it's dated the 27th of May,and it says she was in Ibiza, Spain.COUNSEL: I understand.THE COURT: Okay. So I mean, it's just additionalinformation that makes it appear that you weretrying to mislead me as to what this document wasthat you were submitting for my review.COUNSEL: I didn't think of it as a new declaration.I thought of it as a re-signing of a previousdeclaration.Ex. B, Hr'g Tr. 4:22-25, 5-7:1-18, Oct. 22, 2025.Subsequently Counsel stated that the Defendantapproved the content of the Defendant's declarationfor filing, either through email or over the phone. Ex.B, Hr'g Tr. 8:6-7, 10, Oct. 22, 2025. The Court askedCounsel whether she had looked through her emailsto confirm whether she was in possession of an emailfrom the Defendant that authorized the signing of thedeclaration on May 27 or whether Counsel had askedthe Defendant to look through Defendant's emails forsuch an email; to both questions, Counsel respondedno. Id. at 8:11-17. The Court asked Counsel whethershe had reviewed call logs to confirm calls with theDefendant on May 27 when the Defendant was inIbiza. Id. at 8:21-23. Again, Counsel responded no. Id.at 8:24.Dr. Peatross testified that her best recollection wasthat she gave Counsel verbal permission to sign theDefendant's declaration. Ex. B, Hr'g Tr. at 13:15-16,21-22; 14:3, Oct. 22, 2025. The Court also askedwhether the Defendant had reviewed her records (e.g.,text messages or email) with respect to the Defendant'sapproval of her declaration on or around May 27; theDefendant conducted a search of her emails during thehearing and testified that she did not have any emailswith respect to her approval of the declaration on oraround May 27. Id. at 15:5-25.The Court went back to Counsel and asked why, ifshe was aware on August 13 that she did not haveher client's the signed declaration, that Counsel waitednearly a month to advise the Court – and then onlythrough the Defendant's September 9 declaration.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.9COUNSEL: ... I had just assumed that 1 lost it. Ididn't think ... that I hadn't obtained it.THE COURT: I see [ ]. So your assumption, betweenAugust 13th and the early part of September, wasthat you had the signature. It had been -- you'dlost it somehow, through either a technologicalupdate, or however that happened, you lost it.*10 COUNSEL: Correct.THE COURT: And so after the 13th, you didn't keeplooking for it?COUNSEL: No.THE COURT: Is that right?COUNSEL: I looked for it again in preparing forthe response for the initial OSC. I did haveethics counsel help me with that response. And Iprovided what I could find, but we didn't discussit further.Ex. B, Hr'g Tr. 18:19-25; 19:9, Oct. 22, 2025.Following a short break during the hearing, the Courtspecifically asked what efforts Counsel took to look forthe signed declaration, after August 13 and leading toher filing the Defendant's declaration on September 8.COUNSEL ... [I]t was in preparing the response,working with counsel, that's when I conducted amore thorough investigation.THE COURT: And can you give me a little moredetail there about what it was that you did to tryto find the signature page from May 27th?COUNSEL: I checked my email history. I checkedthe text message history. I checked the clientfile more thoroughly. I checked the papers that Ihad at the – our office is mainly paperless, butfor documents where the – for example, a clientcomes in or mails in a signature, we keep thosefor some time just to make sure they're scannedin. Usually we end up with multiple copies.So I checked the paper file of what we did haveat the office. I mean, that's -- I didn't pull the calllogs. I'm sorry; I didn't think of it. Typically, wedon't pull the call logs until we try to do invoicing,to see if there's anything that was overlooked orshould be accepted from the bill. But that wasabout -- that was the extent of my investigation.Ex. B, Hr'g Tr. 26:11-25, 27:1-4, Oct. 22, 2025.This last representation to the Court, however, is notcongruent with Counsel's prior representation at thesame hearing that she had not searched her emailswith respect to the Defendant's authorization to file thedeclaration with the Defendant's electronic signature.ANALYSISA. Legal Authority for Sanctions1. Federal Rule of Bankruptcy Procedure 9011Rule 9011(b), titled “Representations to the Court,”provides that:By presenting to the court a petition, pleading,written motion, or other document--whether bysigning, filing, submitting, or later advocating it-an attorney or unrepresented party certifies that, tothe best of the person's knowledge, information, andbelief formed after an inquiry reasonable under thecircumstances:(1) it is not presented for any improper purpose,such as to harass, cause unnecessary delay, orneedlessly increase litigation costs;(2) the claims, defenses, and other legalcontentions are warranted by existing law or bya nonfrivolous argument to extend, modify, orreverse existing law, or to establish new law;(3) the allegations and factual contentionshave evidentiary support-or if specifically soidentified, are likely to have evidentiary supportafter a reasonable opportunity for furtherinvestigation or discovery; and(4) the denials of factual contentions arewarranted on the evidence--or if specifically soidentified, are reasonably based on a lack ofinformation or belief.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.10*11 Here, Counsel concedes that she violated Rule9011 when she filed the Motion with improperand nonexistent legal authority. But when the Courtinitiates sanctions under Rule 9011, the Court isrequired “to apply a higher ‘akin to contempt’ standardthan in the case of party-initiated sanctions ....” Rochav. Fiedler, 2025 WL 1219007, at *1 (9th Cir. Apr.28, 2025) (citing In re Nakhuda, 544 B.R. 886,890 (9th Cir. BAP 2016), aff'd, 703 F. App'x 621(9th Cir. 2017)). “Akin to contempt” means “conductthat is particularly egregious and similar to conductthat would be sanctionable under the standards forcontempt.” In re Nakhuda, 544 B.R. at 901. In otherwords, the Court must find bad faith conduct orconduct tantamount to bad faith, which includes lackof forthrightness with the court. Id. (collecting cases);see also Rocha, 2025 WL 1219007, at *1 (citingPrice v. Lehtinen (In re Lehtinen), 564 F.3d 1052,1061 (9th Cir. 2009) (quoting Fiak v. Gomez, 239F.3d 989, 994 (9th Cir. 2001)), overruled on othergrounds by In re Gugliuzza, 852 F.3d 884, 898 (9thCir. 2017) (findings tantamount to bad faith include“that counsel's conduct was outrageously improper,unprofessional and unethical.”)). That said, “bad faithor willful misconduct consists of something moreegregious than mere negligence or recklessness.” In reLehtinen, 564 F.3d at 1058.Recently bankruptcy courts have confronted a spateof Rule 90116 violations by bankruptcy attorneyswho fail to review and verify legal citations in Ai-generated documents filed with the court. See, e.g.,Kheir v. Titan Team LLC, et al. (In re Kheir), -- B.R.----, 2025 WL 3083272 (Bankr. S.D. Tex. Nov. 4,2025) (attorney violated Rule 9011(b)(2), among otherthings, by citing cases created by generative Al in aresponsive document filed with the court in which theattorney failed to verify that the citations referencedreal cases or that case quotations were accurate); Inre Jackson Hosp. & Clinic, Inc., --- B.R. ----, 2025WL 3251167, at *15 (Bankr. M.D. Ala. Nov. 20, 2025)(attorney's use of AI-generated misrepresentations oflaw in documents filed with the court violated Rule9011); In re Richburg, 671 B.R. 918, 921, 925 (Bankr.D.S.C. 2025) (attorney violated Rule 9011 by usinggenerative AI in a motion filed with the court in whichthe attorney failed to verify the sources cited); In reMartin, 670 B.R. 636, 649 (Bankr. N.D. Ill. 2025) (indetermining that attorney violated Rule 9011 by filinga document with improper legal authority, the court“announce[d] loudly and clearly (so that everyonehears and understands) that lawyers blindly relyingon generative AI and citing fake cases are violatingBankruptcy Rule 9011 and will be sanctioned.”). Thesecases make clear that where an attorney uses AI toassist in drafting a motion or document filed with thecourt, the attorney must verify that the AI-generatedlegal citations in any court-filed documents are trueand correct. See In re Martin, 670 B.R. at 648 (“Thebottom line is this: at this point, no lawyer should beusing ChatGPT or any other generative AI productto perform research without verifying the results.”)(emphasis added).2. The Court's Inherent Powers AuthorityBankruptcy courts also have the power to sanctionattorneys for improper conduct pursuant to the court'sinherent powers (or sanctions) authority. See In reLehtinen, 564 F.3d 1052, 1058 (9th Cir. 2009). Theinherent powers authority allows the court to sanctiona broad range of improper conduct. But the court'simposition of sanctions under its inherent powersauthority requires it “make an explicit finding of badfaith or willful misconduct. See id. (quoting Knupfer v.Lindblade (In re Dyer), 322 F.3d 1178, 1196 (9th Cir.2003)); see also Fink, 239 F.3d at 994 (“[S]anctionsare available if the court specifically finds bad faithor conduct tantamount to bad faith.”) (emphasisadded). Conduct tantamount to bad faith includes thatwhich is “outrageously improper, unprofessional[,]and unethical under any reading of California's ethicalstandards for attorneys.” In re Lehtinen, 564 F.3d at1061. Nevertheless, a court's imposition of sanctionsunder its inherent powers authority “does not authorizesignificant punitive damages.” Id. at 1059 (citing Inre Dyer, 322 F.3d at 1194). Instead, “[c]ivil penaltiesmust either be compensatory or designed to coercecompliance.” Id. (citing In re Dyer, 322 F.3d at 1192).B. Counsel's conduct as whole since May 27,2025, supports findings by the Court that Counselengaged in bad faith or conduct tantamount to badfaith.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.111. Counsel's fling of the Motion, which she knewcontained AI-generated legal citations that she did notreview or verify prior to filing, constituted bad faithand/or conduct tantamount to bad faith.*12 Counsel does not dispute that she violated Rule9011 when she filed the Motion without verifying theAI-generated legal citations in the document. In theCourt's view, this action was neither negligent norreckless; it constitutes bad faith or conduct tantamountto bad faith. Counsel's decision to file the Motionwithout verifying any of the legal citations referencedin the document was improper given her knowledgethat she used AI to create the legal citations. It isan attorney's basic ethical obligation to verify anylegal citations in a document filed with any court,irrespective of how the attorney procured the citation,whether through a traditional legal database or AI.Over the past couple of years, much discussionhas been had over the use of generative AI in thepractice of law. The State Bar of California early onissued guidance for attorneys on the use of generativeartificial intelligence in the practice of law.7 It shouldsurprise absolutely no attorney in California, in thiscurrent environment, that an attorney's use of AI intheir representation of a client comes with an existingresponsibility to comply with the law and proceduralrules, such as Rule 9011 and Local Bankruptcy Rules,and with ethical duties imposed by the state bar andenforced by the courts. The availability, convenience,and increased pervasiveness of AI in the practice oflaw does not absolve an attorney of their duties andresponsibilities as officers of the court, long existingbefore the ubiquity of AI. It is both puzzling andalarming that an attorney would use AI to generatea pleading, motion, or any other document, whichincludes AI-generated legal authority, and concludethat under any circumstance, filing the documentwith the court without review or verification of thedocument is ever appropriate. Such a decision is theepitome of a serious lapse in judgment. Short of a trueemergency8 – for example, an unanticipated medicalemergency that prevented Counsel from verifying thelegal authorities cited in the Motion – there can be nojustification for an attorney's failure to verify the legalcitations in a document that the attorney then files withthe court.And here, Counsel presented no such justification,other than Counsel generally failed to verify thecitations; again, a fact that Counsel only admitted afterthe Court specifically questioned her on whether sheverified the citations in the Motion.Counsel initially asserted in her response to the InitialOSC that there was only one AI-hallucination in theMotion. And certainly, the Court observes that, unlikeother Rule 9011 cases involving improper use of AI,here, the Motion only contained reference to a handfulof legal citations: Pioneer, In re Caneva, In re Verdi,Rules 1001 and 9006, and LBR 1001-2. Cf. In re Kheir,2025 WL 3083272, at *4 (containing 32 non-existentcases or misrepresentations of authority). Of thesehandful of legal citations, only the Pioneer citationwas correct – Verdi was an AI hallucination and theremaining citations were either wholly incorrect (suchas the references to In re Caneva and Local BankruptcyRule 1001-2), or not quite accurate.9*13 The Court considers Counsel's failure to verifythese citations on par with (or perhaps more egregiousthan) a lawyer's failure to verify citations in a documentlittered with AI-hallucinations or otherwise inaccuratecitations. Here, at most, Counsel's verification of thesix legal citations referenced in the six-page Motionshould have taken 15 minutes – or at most 30 minutes.This was not a difficult exercise. Had Counsel botheredto copy and paste the Verdi case into a traditional legaldatabase, she would have quickly learned, as did theCourt and opposing counsel, that the case does notexist. And although Counsel filed the document late inthe evening of July 24, she was not without the timeto do so. The Court's deadline to file the Motion wasactually July 25. It appears that Counsel had an earlymorning flight on July 25 to leave on vacation, whichprompted Counsel to file the Motion as is and withoutverification of the legal citations in the document. ThatCounsel did not bother to perform this relatively quickand required exercise prior to filing the Motion isstunning.Even after she filed the Motion, Counsel could haveread and verified the handful of legal citations and filedan amended motion or withdrawn the document; shechose neither. Instead, it appears that Counsel, in a rushto begin a personal vacation, allowed the Motion to
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.12stand as filed, leaving both the Court and opposingcounsel to expend time and energy to look for legalcitations that were incorrect or simply did not exist.There is no justification for Counsel's conduct.In sum, the Court concludes that Counsel's filing of theMotion, based on her knowledge that she used AI todraft the document including legal citations, but failedto read or verify any of the legal citations prior to oreven after the filing, constituted bad faith or conducttantamount to bad faith.2. Counsel's subsequent representations to the Courtconstituted bad faith or conduct tantamount to badfaith.Even if the Court had concluded that Counsel's filing ofthe Motion without having checked the AI-generatedcitations was not in and of itself bad faith or conducttantamount to bad faith, the Court finds that herconduct in the matter thereafter satisfies the requisitefinding for the imposition of sanctions. Counselunsurprisingly attempts to frame her subsequentconduct as negligent and unreasonable rather thantaken in bad faith. At the October 22 hearing, Counselemphasized that her representations to the Court asto the Defendant's May 27 Declaration were basedon Counsel's belief that she obtained and had in herpossession the Defendant's signed declaration at thetime that Counsel thought she had filed the declarationon May 27. Counsel also argued that she did notintend to mislead the Court. Counsel's conduct as awhole, however, belies her assertions. The Court thusrejects Counsel's characterization of her conduct asnegligent, reckless, or based on her good faith belief ofcircumstances that did not exist.In her email to the Court submitting the Defendant'ssigned declaration for in camera review, Counselstated in her email: “The requested documents areattached. The signature pages were delivered by myclient through text message, not email. I made anexception since my client was out of the country.”Counsel's representations in the email, however, werenot true; and Counsel knew they were not true whenshe sent the email and the two images to the Court.First, Counsel submitted to the Court an image of thesignature page of the Defendant's declaration, signedby the Defendant under penalty of perjury and datedMay 27, 2025, from Ibiza, Spain. But as Counselconceded at the October 22 hearing, the Defendantdid not sign the declaration on May 27 – she signedit on August 13. And the Defendant did not sign thedeclaration from Ibiza, Spain – she signed it in fromthe East Coast, where the Defendant resides and wasphysically present on August 13. Counsel explainedthat in her mind, this was appropriate because it wasa “re-signing” of the declaration. This explanationis nonsensical, given that, as discussed below, theDefendant had not previously signed the declarationin any manner. Moreover, there is no indication in therecord that Counsel asked Defendant to look for thesigned May 27 Declaration – it appears that Counsel'simmediate request to the Defendant on August 13 wasto “re-sign” the Defendant's May 27 Declaration.*14 Counsel neither followed the Court's specificdirective on August 13 nor was she truthful in herrepresentations to the Court in the email. At theOctober 22 hearing, the Court noted that becauseCounsel submitted the text messages without areference to a date, it appeared to the Court thatCounsel was either attempting to obscure the date inwhich the text messages were exchanged or trying toevidence the existence of the image file within the textmessages exchange between Counsel and her client;the Court stated on the record that it would inferthe latter. Based on the Court's review of Counsel'sconduct as a whole, however, the Court now concludesthat Counsel was more likely than not trying to obscurethe August 13 date in the text message exchange withher client.In the Court's view, the screenshot of the text messageexchange between Counsel and the Defendant, inwhich the Defendant sent Counsel an image of hersigned declaration, was taken in such a manner so asto shroud the date and time of the communications;thereby supporting the inference that Counsel wassharing with the Court evidence of the Defendant'stransmission of the signed declaration in May 2025and not on August 13. Had the Court not takenthe additional step of reviewing the metadata ofthe screenshot and the image submitted by Counsel,it would have appeared facially that Counsel had
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.13provided the declaration signed by Dr. Peatross on May27, 2025 from Ibiza, Spain. At the October 22 hearing,Counsel conceded that she was not transparent aboutthe date and manner in which the Defendant signedthe declaration that Counsel submitted to the Court onAugust 13.Second, it is now clear to the Court that prior to August13, Dr. Peatross had not signed her declaration inany manner on or around May 27, notwithstandingCounsel's numerous representations to the Court to thecontrary. Counsel admitted at the October 22 hearingthat she could not find any documentary evidenceto support that the Defendant sent Counsel a copyof the Defendant's signed declaration on or aroundMay 27. During the same hearing on October 22, Dr.Peatross looked through her records and testified thatshe could not locate a communication in which shesent Counsel the signed declaration on or around May27. Dr. Peatross's testimony was that she only gaveCounsel verbal authorization to file her declaration onor around May 27.In spite of Counsel's representations and attestations,Counsel neither obtained from the Defendant nor wasin possession of the Defendant's signed declaration onMay 27. Thus, Counsel's representations at the August13 hearing, in her August 13 email to the Court, in herresponse to the Initial OSC, and in her declaration insupport of her response to the Initial OSC were nottrue.That Counsel believed she had a copy of theDefendant's signed declaration somewhere in herpossession during this period of time does not justifythat she in fact did not. At various points - Counsel'srepresentations to the Court at the August 13 hearing,her in camera submissions to the Court, her email tothe Court transmitting the submissions, her response tothe initial OSC, and her declaration filed in support ofthe initial OSC - Counsel bore an obligation to reviewher records and confirm her belief that she had a signeddeclaration from the Defendant as she represented tothe Court. Counsel did not, even in the face of theCourt's specific inquiries and requests to Counsel.The Court does not find credible that Counsel, anexperienced attorney, failed to conduct a full searchfor the Defendant's signed May 27 declaration afterthe Court specifically requested to see the signeddeclaration in a same day in camera submission or afterthe Court issued the Initial OSC. Counsel's assertionof good faith belief is this regard is not supportedby the record and does not provide a defense for themisrepresentations that she made to the Court.*15 In sum, the Court finds that Counsel acted inbad faith or conduct tantamount to bad faith in herrepresentations to the Court.C. Counsel's acts in bad faith or conducttantamount to bad faith supply the basis for theCourt's imposition of sanctions under Rule 9011and/or its inherent powers authority.Based on the foregoing, the Court concludes thatCounsel committed several violations.10 First, Counselviolated Rule 9011(b)(2) when she filed the Motionwith improper and nonexistent AI-generated legalcitations that Counsel failed to review or verify beforefiling the document. Second, Counsel violated Rule9011(b)(3) by making factual contentions to the Court– in her in camera submission email to the Court,at the August 13 hearing, and in her responses anddeclarations to the OSCs – as to the Defendant'sMay 27 Declaration that lacked evidentiary support;namely, that the Defendant signed her declaration onMay 27 and/or that Counsel was in possession of theDefendant's signed declaration on May 27, neitherof which was true. Third, Counsel violated LBR5005-4(d) when she presented the Motion and attachedthe Defendant's May 27 Declaration with an electronicsignature to the Motion when Defendant had not signedthe declaration before filing, notwithstanding thatCounsel filed the Motion two months after Defendantwas supposed to have signed her May 27 declaration.Counsel also violated LBR 5005-8 given that shewas never in possession of the Defendant's originalsignature on her May 27 declaration either on May27, when Counsel intended to present the declaration,or on July 24, when Counsel filed the Motion andattached the Defendant's May 27 Declaration to it.In reaching these conclusions, the Court tookinto account mitigating circumstances that Counseldetailed on the record at the October 22 hearing. Thisincludes that Counsel has implemented the use ofcase management software in her practice and hired a
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.14bookkeeper in July on a contract basis, which alleviatesthe time she previously spent on a monthly basis onbookkeeping matters. In addition, Counsel detailedsome of the online continuing legal education coursesshe has already taken and that she has secured herhusband's assistance as her case manager.Pursuant to Rule 9011(c)(4)(ii), the Court will orderCounsel to pay a penalty to the Court in the amountof $950. In determining the sanctions amount, theCourt considered an amount substantially higher,but settled on this amount as appropriate given themitigating circumstances, that this is Counsel's firstknown instance of a violation with the Court and thatCounsel is a sole practitioner. Judges in this Districtdo not routinely sanction lawyers and the Court isconfident that this experience plus the fact that theCourt is issuing monetary sanctions of any amount(along with the other sanctions detailed below) willbe sufficient to deter Counsel and other practitionersfrom engaging in conduct like what Counsel did here.And that is the goal of Rule 9011; a higher amountof monetary sanctions is not needed to achieve it andso the Court settled on the amount listed above. TheCourt considered but declines to award fees and coststo Plaintiff's counsel in the form of compensatorysanctions under the Court's inherent powers authority.See Miller v. Cardinale (In re Deville), 280 B.R.483, 494 (9th Cir. BAP 2002), aff'd sub nom. In reDe Ville, 361 F.3d 539 (9th Cir. 2004) (under itsinherent authority sanctioning power,11 the bankruptcycourt may require an attorney to pay the opposingparty's reasonable attorney's fees and expenses). IfCounsel continues to engage in conduct such as thatdetailed in this Memorandum Decision, however, theCourt's considerations will not result as favorablyfor Counsel or any other practitioner that engages insimilar conduct.CONCLUSION*16 Based on the foregoing, the Court imposessanctions on Counsel pursuant to Rule 9011 andits inherent powers authority. Such sanctions arenecessary to deter repetition of Counsel's conduct byCounsel and amongst other bankruptcy practitioners inthis judicial district.The Court will concurrently enter an order that imposessanctions as follows:1. Pursuant to Federal Rule of BankruptcyProcedure 9011(c)(4)(A)(ii), Counsel will beordered to pay a penalty into the Court inthe amount of $950 within 30 days of entryof the order entered concurrently with thisMemorandum Decision;2. Counsel must register for and complete four hourseach of continuing legal education regarding (1)the use of AI in the legal practice and (2) practicemanagement offered by and/or through the StateBar of California for a total of eight hourswithin 12 months from entry of the order enteredconcurrently with this Memorandum Decision.At least half of this continuing legal educationrequirement, or four hours, must be completedthrough in-person programs. Counsel must file acertification with the Court in this matter within30 days upon completion of this requirement;3. Counsel must present a copy of this MemorandumDecision to Dr. Peatross within 30 days fromentry of the order entered concurrently withthis Memorandum Decision. Counsel must file acertification with the Court in this matter uponcompletion of this requirement;4. The Court revokes Counsel's authorization asa registered CM/ECF filer in this court to fileany documents in the U.S. Bankruptcy Courtfor the Southern District of California signedelectronically by a person other than Counselusing an “/s/” or “s/” signature pursuant to LocalBankruptcy Rule 5005-4(d), for a period of two(2) years, by and through December 31, 2027.Counsel is not permitted to file a document signedby a person other than herself using an “/s/” or “s/”electronic signature during that period of time;and5. Counsel is required to comply with the Court'sGeneral Order No. 210,12 effective immediatelyfrom entry of the order entered concurrently withthis Memorandum Decision.Finally, the Court advises Counsel that it will referher to the Standing Committee on Discipline for
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.15the United States District Court for the SouthernDistrict of California. See Civil Local Rule 2.2(e);Local Bankruptcy Rule App'x B (providing that CivilLocal Rule 2.2 applies in the Bankruptcy Court).The Court makes this referral both so the StandingCommittee can determine whether further disciplinemay be appropriate and in the hopes that the StandingCommittee will be an additional resource to Counsel asshe implements changes in her practice to ensure shenever again ends up in a situation like this one.As the Court noted at the outset, its impositionof sanctions was a difficult decision. The Court isconfident that Counsel will learn from this experienceand will have a long career practicing before the Court.EXHIBIT AExcerpts from Transcript of Hearing on August 13,2025UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF CALIFORNIAIn Re: NUPEUTICS NATURAL, INC. Debtor.*17 Case No. 22-02956-JBMChapter 7San Diego, CaliforniaWednesday, August 13, 202510:00 AMADV#: 24-90036-JBMLESLIE T. GLADSTONE v. JESSICA LAINEPEATROSS1) MOTION FOR SUMMARY JUDGMENT AND/OR FOR SUMMARY ADJUDICATION OF FACTSOR ISSUES AS TO 2ND, 3RD, AND 4TH CAUSESOF ACTION FILED ON BEHALF OF LESLIE T.GLADSTONE (FROM 7/16/25)2) PRE-TRIAL STATUS CONFERENCE (FROM7/16/25)3) NOTICE OF MOTION AND MOTION TOENLARGE TIME AND FOR LEAVE TO FILEOMITTED OPPOSITION DOCUMENTS FILED ONBEHALF OF JESSICA LAINE PEATROSSTRANSCRIPT OF PROCEEDINGSBEFORE THE HONORABLE J. BARRETTMARUMUNITED STATES BANKRUPTCY JUDGEAPPEARANCES: Chapter 7 trustee: LESLIE T.GLADSTONE, ESQ. HILDA MONTES DE OCA,ESQ. Financial Law Group 5656 La Jolla BoulevardLa Jolla, CA 92037 (858) 454-9887For Jessica Laine Peatross: DEEPALIE MILIE JOSHI,ESQ. (Via Zoom) Joshi Law Group 3675 Ruffin RoadSuite 220 San Diego, CA 92123 (619) 332-2784Court Recorder: ELECTRONICALLY RECORDEDUnited States Bankruptcy Court 325 West F Street SanDiego, CA 92101Transcriber: SHARONA SHAPIRO eScribers, LLC7227 N. 16th Street Suite #207 Phoenix, AZ 85020(800) 257-0885Proceedings recorded by electronic sound recording;transcript provided by transcription service.absence. Yet whatever he said to my paralegal nearlyreduced her to tears, in that when I finally did havecell service and was able to speak with her, she waspanicked and didn't know what to do because someonefrom the trustee's office had called her and was tellingher to do something she didn't understand.So I don't understand -- when there's a situation likethat and you have a paralegal who may be not asexperienced, and instead of contacting her repeatedly,why wouldn't you contact the attorney that is listed inmy absence?
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.16THE COURT: Can you comment, though, Ms. Joshi,on the case? Because I've looked for it too, and itdoesn't seem to exist.MS. JOSHI: And again, I have egg on my face where itwas -- the case was -- the case, I should say, was citedmore as a wish list item in that I had intended to goback and insert a more substantive case.THE COURT: Wait. Wait a minute. Wait a minute.Hold on, Ms. Joshi. You're telling me that, in adocument that you filed with the Court, you put a casethat does not exist, and you were going to go back andthen find a case that stood for that proposition, but youdidn't do that, and you filed a document with a casethat's completely fabricated? Is that what you're tellingme? Because that's what it sounds like.MS. JOSHI: I --THE COURT: It's a yes-or-no question, Ms. Joshi.MS. JOSHI: Yes.THE COURT: Yeah. Okay. The next time you do that -well, let's get through today's hearing. I am never goingto see that from you again because that is -- that's veryserious.MS. JOSHI: Understood.THE COURT: Okay. Please continue with yourargument, if you have additional things that you wantme to consider.MS. JOSHI: Not in regards to the substantive motion,but I do have some additional comments in regards toMs. Gladstone's motion for summary judgment.*18 THE COURT: Well, we're not going to get to themotion for summary judgment on a substantive basistoday. We're just here on a status for that, because Idecided at the last hearing that I was going to requiresome additional briefing on that motion.And so we'll talk about the schedule for that additionalbriefing. But the schedule for that additional briefingmay be impacted by what I do on the motion to letyou file some late documents because, if I let you filethe documents late, the trustee obviously needs to havea chance to respond to those through a reply. And sothat may impact what we do with the overall schedule.So don't worry; I will hear from you regarding theschedule for that additional briefing.And so now I will look to Ms. Gladstone for anyargument that you'd like to offer.Ms. Joshi, I will hear from you, but let me start withtwo questions that I would like you to address, the firstbeing that I did not hear you say that you used artificialintelligence as part of your drafting process for thisbrief. But did you in fact use AI?MS. JOSHI: I did, Your Honor.THE COURT: You did? Okay. So the placeholder casethat we talked about, In re Verde, I think it was, is thata case that you came up with, or is that a case that theAI came up with?MS. JOSHI: The AI, Your Honor.THE COURT: Okay. And then so what you told meearlier about you making it up that citation was notcorrect; the AI did it. And then you failed to check it,is what it sounds like, because if you had checked it,then you would have seen that it didn't exist.MS. JOSHI: Your Honor, whatever -- I do use AI,which I'm questioning now. I typically highlight all ofthe cases that are provided, or I even instruct the AI notto include cases. But I do go back and check them. Sowhen I meant I left it as a placeholder, it was meant to-- I meant to go back and check it, and I did not.THE COURT: I misunderstood. I thought you weretelling me that you had personally come up with In reVerde, and then whatever the Westlaw site was, andput that in the brief. And that was not making a lot ofsense to me. So I'm glad that you clarified that you werenot the one that created the case, that it was the AI,and your omission was going back and -- well, youromission was not going back and checking it.MS. JOSHI: Correct, Your Honor. I'm simply not thatsmart to come up with such a complicated citation onthe fly.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.17THE COURT: It's a lot of effort to do that.Okay. My next question for you is, your client'sdeclaration that you submitted along with this motion,that was the proposed declaration to be filed in supportof your opposition, I believe is dated May 27th, andit indicates that your client signed it in Ibiza. Soobviously she didn't come to your office to sign thedeclaration. How did she get her signature on thatdeclaration to you?MS. JOSHI: Your Honor, first, my client lives in onthe East Coast. She's not local. But at the time we werepreparing the opposition and her declaration, she wasactually on vacation in Ibiza. So all documents werebeing transmitted back and forth through email.THE COURT: Okay. And so she emailed you back hersigned signature page on her declaration on the 27thof May?MS. JOSHI: Correct, Your Honor.*19 THE COURT: Okay. I want you to submit thatfile to me, for my in-camera review, and I want tolook at the actual file itself. So you should feel free toredact any information in the file that is attorney-clientprivilege. But I want to look at the file itself, and I wantyou to email it to us.And I will include -- well, actually, let me just giveit to you. Okay. So the email is all caps for thefirst part, CASB underscore -- and this is capitalizedtoo -- capital D, lowercase ept2, underscore, bk atCASB.uscourts.gov. You can also find this email in mychambers procedures under the cash collateral motionssection.And so I want you, before the end of the day, to sendthat file to this email so that I can look at it. And likeI said, feel free, if there's attorney-client informationin there, feel free to redact that information in someway. But I need you to send me the file with themetadata intact, on the PDF or JPEG, or whatever itwas that your client sent back to you from Ibiza withher signature on that declaration.MS. JOSHI: Yes, Your Honor.THE COURT: Okay. So with those two things out ofthe way, Ms. Joshi, let me hear from you regarding anyresponse that you have to Ms. Gladstone's argument.MS. JOSHI: Your Honor, honestly, I don't really haveany further argument. I feel that Ms. Gladstone hasmade her points, and I've made mine. As you said,there's some tension between the parties. That wasnever my intention. I had tried to be professionallycourteous and work with Mr. Levin throughout thiscase. The first time that Ms. Gladstone was --INDEXRULINGS: Ms. Joshi is to provide the file containingher client's signature page for her client's May 27,2025 declaration with its meta data intact for in-camera review through the dedicated email address forDepartment 2 before the end of the dayCERTIFICATIONI, Sharona Shapiro, certify that the foregoing transcriptis a true and accurate record of the proceedings.SHARONA SHAPIRO, CET-492eScribers7227 N. 16th Street, Suite #207 Phoenix, AZ 85020Date: November 27, 2025EXHIBIT BExcerpts from Transcript of Hearing on October22, 2025UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF CALIFORNIAIn Re: NUPEUTICS NATURAL, INC. Debtor.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.18Case No. 22-02956-JBMChapter 7San Diego, CaliforniaWednesday, October 22, 202510:00 AMADV#: 24-90036-JBMLESLIE T. GLADSTONE v. JESSICA LAINEPEATROSSAMENDED ORDER TO SHOW CAUSE WHYTHE COURT SHOULD NOT SANCTIONDEFENDANT'S COUNSEL FOR COUNSEL'SCONDUCT IN CONNECTION WITH A MOTIONFILED WITH THE COURT AND DEFENDANT'SDECLARATION FILED WITH THE COURTTRANSCRIPT OF PROCEEDINGSBEFORE THE HONORABLE J. BARRETTMARUMUNITED STATES BANKRUPTCY JUDGEAPPEARANCES: For Chapter 7 trustee: CHRISTINBATT, ESQ. Financial Law Group 5656 La JollaBoulevard La Jolla, CA 92037 (858) 454-9887For Jessica Laine Peatross: DEEPALIE MILIE JOSHI,ESQ. Joshi Law Group 3675 Ruffin Road Suite 220San Diego, CA 92123 (619) 332-2784ALSO PRESENT: Jessica Laine Peatross (Via Zoom)Court Recorder: CYNTHIA LAM United StatesBankruptcy Court 325 West F Street San Diego, CA92101Transcriber: SHARONA SHAPIRO eScribers, LLC7227 N. 16th Street Suite #207 Phoenix, AZ 85020(800) 257-0885Proceedings recorded by electronic sound recording;transcript provided by transcription service.And Ms. Joshi, I see your client is also on the Zoom.We will hear from her a little bit later if we need to.*20 I have read everything that you have submitted.Under the circumstances, I decided not to post atentative ruling, because I wanted to hear from youtoday, and potentially hear from your client, before Iexpressed my views on the situation that we're in.So with those comments, and keeping in mind thatI've read everything that you have submitted, is thereanything else that you'd like me to consider before weget to the questions that I may have for you and yourclient?MS. JOSHI: No, Your Honor, other than I'm reallysorry that this happened, and I am doing my best totake steps to make sure nothing like this ever happensagain.THE CLERK: Excuse me, Your Honor. Just onesecond. Ms. Joshi, I'm going to have -- thank you -- sowe can get an accurate -- thank you.THE COURT: Okay. Thank you for that, Ms. Joshi.That certainly came through in in your pleadings. Iappreciate you emphasizing that now.A few of the questions that I have relate to yourin-camera submission on August 13th. And as Iwas piecing everything together, with the variousdeclarations and filings, the conclusion that I reachedis that, on August 13th, the signature page that yourclient sent to you was something that she signed onAugust 13th and that you knew that on August 13th.Is that correct?MS. JOSHI: Yes, Your Honor.THE COURT: Why didn't you tell me, in the in-camerasubmission on August 13th, that that was the case?MS. JOSHI: I sincerely believed that I had her signeddeclaration in my text messages which had beenerased. I don't file declarations without having theclient see it, having the client sign off on it. I rememberthe circumstances during that time being somewhatchaotic, and my thought was, there's no way that I don't
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.19have her signature page. And so I didn't think that itwas harmful to ask her to review it and send a signaturepage that day.THE COURT: But you made the decision not totell me that that's what you were doing. And whatI had specifically asked you for at the hearing wasan electronic copy of the file your client signed, anelectronic copy of the signature page that your clientsent to you on May 27th. And what you gave meinstead was something that you knew -- you knew thatshe had signed on the 13th and you didn't tell me that.And that's what I don't understand is why, at that point,were you not transparent with the Court about what hadhappened?MS. JOSHI: Honestly, I was afraid of making thingsworse.THE COURT: I think -- Ms. Joshi, I appreciateyour candid response just there, but by not beingtransparent, you have made the situation worse,because I had to discover that that file was a file fromAugust 13th by looking at the metadata. And at thatpoint, what you should have done is told me, we can'tfind the signature page, and so here is the signaturepage that my client signed today. We are still looking,we will keep looking, and we will try to find thesignature page that my client sent me on May 27th. Butthat's not what you did.And also, in the way that you submitted the textmessages, it doesn't show the date on which the textmessages were exchanged with your client. And thatmay be because you -- one of two things is possible.That may be because you were trying to obscure thedate on which you sent those text messages with yourclient. Or it could have been that you were trying toshow me the fact that your client had the image -theimage file in the text message exchange.*21 But your submission -- and I'm going to assumeit was the latter. But your submission to the Court stilldidn't say these are the text messages that I had withmy client on August 13th. The implication was that thescreenshot of the text messages were from May 27thwhen your client provided the signature page to youwhen she was in Ibiza. Do you have any response tothat?MS. JOSHI: No, Your Honor. I mean, that is the firsttime that I've been asked for a client signature page.I certainly did not mean to mislead the Court. I wasafraid of making things worse, not just for me, but formy client. And I understand now that I should havetrusted the Court more and been more transparent.THE COURT: Where was your client on August 13thwhen she signed the declaration or signed the signaturepage that you submitted for my in-camera review?MS. JOSHI: I believe she was in Florida.THE COURT: Okay. So it's dated the 27th of May, andit says she was in Ibiza, Spain.MS. JOSHI: I understand.THE COURT: Okay. So I mean, it's just additionalinformation that makes it appear that you were tryingto mislead me as to what this document was that youwere submitting for my review.MS. JOSHI: I didn't think of it as a new declaration. Ithought of it as a re-signing of a previous declaration.THE COURT: Okay. I understand how you could reachthat conclusion.There's also a disconnect between your recollectionand your client's recollection. And I think, havingpieced everything together, that your collectiverecollection is that your client approved the contents ofthe declaration by responding to your email sometimeon May 27th, or thereabouts, but prior to the filing,responded to your email and said something along thelines of, yes, my declaration is fine, you can go aheadand file it. Is that an accurate summary of the collectiverecollection that you and your client have, or have I gotit wrong?MS. JOSHI: Yes, Your Honor, but I'm not sure that itwas through email or whether it was over the phone.THE COURT: Okay. So it might have been -- youmight have been talking with her on the telephone?MS. JOSHI: Correct.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.20THE COURT: Have you looked for an email from yourclient that authorized the filing of the declaration onthe 27th of May?MS. JOSHI: I have not.THE COURT: Has your client looked for an email thatauthorized the filing of the declaration on May 27th?MS. JOSHI: I have not asked her to.THE COURT: And you don't know if she hasindependently done that?MS. JOSHI: I don't.THE COURT: Okay. Have you checked yourtelephone call logs to see if you were talking to yourclient on the 27th of May when she was in Ibiza?MS. JOSHI: I have not.THE COURT: Okay. So as you're standing here today,you don't have any -- you don't really know how it isthat your client might have approved the filing of thedeclaration with her signature on it. And it sounds tome like you haven't looked really to determine whethershe did that, aside from checking her text messages,which are gone. Is that right?MS. JOSHI: I mean, I can check the logs. I just didn'tthink of pulling them up.THE COURT: Okay. But you haven't done that as oftoday.More generally speaking, how is your client signingdocuments in this case? For example, how did she signthe declarations that you submitted in opposition to thesummary judgment motion after this May 27th filing?MS. JOSHI: I typically send her the declaration byemail and a PDF, and then I call her or text her, lettingher know it's ready for her review, and to let me knowif there's any changes, or if there's any corrections thatneed to be made. Then she typically signs it, on thedevice that she has available to her, and sends that back.*22 There have been instances where the informationthat she's typed in -- it's not accepted by ECF. ECF willgive an error message saying this document cannot beuploaded in its standard format. So then you have totry to print the PDF to another PDF and try to uploadthat. But even still, sometimes it wipes out some of theinserted text, like, for example, on the signature linewhere the client states, on this day, in this place, if it'styped in, then it can get erased.THE COURT: This is not the subject of today's OSC,but you should also check your filings to make sureyou're stripping out the comments in the PDFs, becausethere's at least one filing that you made, with respectto your client's declaration, where there are commentsthat are showing up in the PDF that came through ECF.And I don't think that that was intentional.The comments themselves are innocuous. They simplyreflect that somebody made a change to the declarationto insert -- I think it was the city and the date that it wassigned. So they're totally innocuous. But in the futurethey may not be innocuous.And so you should, as a matter of standard practice, bestripping those out of the PDF documents that you'refiling with the Court, because ECF apparently does notdo that, even if you step through all the process thatyou're supposed to step through for ECF purposes. Butagain, that's not that's not the subject of today's orderto show cause.So let me -- I think at this point it would be good to hearfrom your client, unless there's something else that youwant to tell me?MS. JOSHI: No, Your Honor.THE COURT: Okay. I'll hear from you again after weTHE WITNESS: I just looked back at my records. Ididn't see that. So I saw --THE COURT: So you --THE WITNESS: I saw the declaration to review, atsome point in the time, but I don't -- didn't signanything.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.21THE COURT: I was perhaps a little too specific. Soat some point before May 27th, did your lawyer sendyou a copy of the declaration that your lawyer wantedto file, in opposition to the summary judgment motion,and ask you to review it for accuracy?THE WITNESS: Correct.THE COURT: And you don't remember specificallywhat date that was, but it was before the 27th of May?THE WITNESS: I think so, yes. And -- yeah, it hadto have been, because I remember giving her verbalpermission to sign for me.THE COURT: How did you give her permission to signthe declaration?THE WITNESS: I often --we often talk on the phonejust to save time and energy. I get -- I'm on thecomputer all day every day. So I believe I rememberher calling me and just saying it's fine to sign for me,the declaration looks fine. I didn't realize until later thatit was a law in California to have a physical signature.THE COURT: Okay. So it sounds like your bestrecollection is that this happened over the telephone asopposed to an email. Is that right?THE WITNESS: Correct. Correct.THE COURT: When you signed your declaration onAugust 13th, how did you do that?THE WITNESS: I have -- let's see, I believe I printedthat one out and signed it and sent it back via email.There was only one of two ways I signed documents.I print them out and I sign them and screenshot it andsend it back. Or I annotate on my Mac with a signaturethat's saved in my computer.THE COURT: You were taking me my next question.Mr. Paluso, can we get the first example up on thescreen, please?THE CLERK: And Dr. Peatross, can you see myscreen?THE WITNESS: Yes.THE CLERK: Okay.*23 THE COURT: Ms. Peatross, you just mentionedthat you sometimes will sign documents with anannotated signature that you place on the documentthrough your Macintosh.THE WITNESS: Right.THE COURT: This that we're showing you is ECFnumber 59. It's one of the declarations that you filed, orI should say, that your lawyer filed in opposition to themotion for summary judgment. Is this an example of atime when you've there anything else that you wouldlike me to consider?MS. JOSHI: No, Your Honor.THE COURT: Okay. I have one final -- what I thinkis the final question for you. And that is, you knew,on August 13th, that you had not been able to locatethis signature page that you believed that you had. Whydid it take a full month, almost a full month for meto get the supplemental filing, on September 5th andSeptember 9th, with your client's declaration? Sometime in that period, why didn't you tell me that you hadnot been able to locate this originally signed file?MS. JOSHI: I'm sorry, Your Honor. Perhaps I'mmisunderstanding the dates. On August 13th, I doremember that I was at home that day because I wasill. And the Court had given me a deadline by the endof the day. I wanted to make sure that I didn't have therecord somewhere in the office. But again, it's not mypractice to file anything without a client's signature.Like, that's just -- it's just wrong. So yeah, I didn't -- Ihad just assumed I lost it. I didn't -- I didn't think that-- I didn't think that I hadn't obtained it.THE COURT: I see. Okay. So your assumption,between August 13th and the early part of September,was that you had the signature. It had been -- you'd lostit somehow, through either a technological update, orhowever that happened, you lost it.MS. JOSHI: Correct.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.22THE COURT: And so after the 13th, you didn't keeplooking for it?MS. JOSHI: No.THE COURT: Is that right?MS. JOSHI: I looked for it again in preparing for theresponse for the initial OSC. I did have ethics counselhelp me with that response. And I provided what Icould find, but we didn't really discuss it further.THE COURT: Thank you for the clarification. I thinkI understand the timeline a little bit better now.MS. JOSHI: Right. And I mean, I do -- I do tell herwhat's going on, you know, letting her know that, hey,this is happening. But it's not -- hopefully it's not toimpact your case or your defense, in any way, that thisis separate. And so that's when we did have a more in-depth conversation about her signing the declaration.And she had remembered that she gave me verbalpermission but not -- she had not actually signed it. Sothat is when I prepared the supplemental declaration.THE COURT: Thank you, Ms. Joshi. I take from yoursubmissions that you have not yet reported this to thestate bar of California; is that correct?MS. JOSHI: No, Your Honor.THE COURT: No. And I'm not saying that there's a --MS. JOSHI: Correct.THE COURT: Okay. And then did you tell meearlier that, at some point between August 13th andSeptember 9th, when I got your client's declarationfiled, did you do a more detailed review of yourrecords at some point between the 13th of August andSeptember 9th?*24 MS. JOSHI: Between the 13th of August andSeptember 8th, Your Honor.THE COURT: September 8th. Okay.MS. JOSHI: I believe that that was the date that theresponse for the OSC was filed. So it was in preparingthe response, working with counsel, that's when Iconducted a more thorough investigation.THE COURT: And can you give me a little bit moredetail there about what it was that you did to try to findthe signature page from May 27th?MS. JOSHI: I checked my email history. I checkedthe text message history. I checked the client file morethoroughly. I checked the papers that I had at the -- ouroffice is mainly paperless, but for documents where the-- for example, a client comes in or mails in a signature,we keep those for some time just to make sure they'rescanned in. Usually we end up with multiple copies.So I checked the paper file of what we did have at theoffice. I mean, that's -- I didn't pull the call logs. I'msorry; I didn't think of it. Typically, we don't pull thecall logs until we try to do invoicing, to see if there'sanything that was overlooked or should be acceptedfrom the bill. But that was about -- that was the extentof my investigation. THE COURT: Thank you for that,Ms. Joshi. That's helpful for me to have those twodifferent -- it's helpful for me to have what you didduring the two different time periods in mind as I'mthinking about this.I want to shift gears a little bit because, in yoursubmissions to the Court, and then some of the thingsthat you said today, you indicated that you havetaken some steps to try to prevent these issues fromhappening in the future. Included in those steps thatyou've taken are attending some online CLE coursesand some practice management issues.And I was hoping you could expand a little bit, if you ifyou could, on the practice management issues and whatsteps you have taken, in that regard, to try to preventthese things from happening in the future, includingwhether you have hired support staff or anything elsethat you may have done.MS. JOSHI: Yes, Your Honor. So actually, at thebeginning of July, July 2nd, I believe -- I've alwaysoperated as a sole proprietorship. But we did transitionto a law corporation. And so since that time,we've been transitioning to new practice managementsoftware from -- we've tried them all. We've triedPracticePanther, Clio, Jubilee, which is a
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.23THE COURT: But it sounds like your best estimate -and I realize it's just an estimate -- is that this was tento fifteen hours per month that you won't have to doany longer because you've hired this person?MS. JOSHI: Yes, Your Honor.THE COURT: Okay. Thank you, Ms. Joshi. I didn'thave anything else that I needed to ask you as far asclarifying questions.I'm going to read into the record the email that yousent me. I'm not going to read into the record the textmessages that your client sent you, because obviouslythose are privileged communications, even thoughthere really isn't any attorney-client advice in there, butwe'll keep those as privileged.But the email that you sent to the Department 2mailbox, I'm just going to read that into the recordbecause it's not otherwise in the record. And then I'mgoing to take the matter under submission.*25 Okay? So for the record, this is the text of theemail that Deepalie Milie Joshi sent to the court sharedemail box on August 13th, 2025 at a little bit after 4p.m.It says, “Judge Marum, the requested documents areattached. The signature pages were delivered by myclient through text message, not email. I made anexception since my client was out of the country”.That's the end of the email message. And with that, I'mgoing to take this matter under submission, and I willissue a written order that resolves it.Okay. Thank you, everyone. We'll be in recess.THE CLERK: Thank you, Your Honor.(Whereupon these proceedings were concluded at10:55 AM)CERTIFICATIONI, Sharona Shapiro, certify that the foregoing transcriptis a true and accurate record of the proceedings.SHARONA SHAPIRO, CET-492eScribers7227 N. 16th Street, Suite #207 Phoenix, AZ 85020Date: November 27, 2025All CitationsSlip Copy, 2025 WL 3546838Footnotes1Unless otherwise indicated, all section and chapter references herein are to the Bankruptcy Code, 11 U.S.C.§§ 101, et seq. All “Rule” references are to the Federal Rules of Bankruptcy Procedure and all “LocalBankruptcy Rule” or “LBR” references are to the Local Bankruptcy Rules for the United States BankruptcyCourt for the Southern District of California.2The Court incorporates its Amended OSC, which includes the legal authority for potential sanctions, intothis Memorandum Decision as if stated herein.3Excerpts of the hearing transcripts for the hearings on August 13, 2025, and October 22, 2025, are attachedto this Memorandum Decision as Exhibits A and B, respectively.4All dates referenced herein occurred in 2025 and omissions to the year in this Memorandum Decision arefor the purposes of brevity.5The Court read the content of Counsel's email to the Court into the record at the October 22 hearing.
In re: NUPEUTICS NATURAL, INC., Debtor. LESLIE T...., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.246Beyond the context of bankruptcy, the number of attorneys using generative AI to draft documents filed withthe courts – and being sanctioned based on improper use of AI under Civil Rule 11 and state law corollaries– is prolific. This is not an issue limited to filings in bankruptcy matters.7See Practical Guidance For the Use of Generative Artificial Intelligence in the Practice of Law, available athttps://www.calbar.ca.gov/Portals/0/documents/ethics/Generative-AI-Practical-Guidance.pdf.8Even if an attorney presents justification in the form of a medical emergency, the Court questions whetherfiling a document with the Court containing false information would be justified. The Court cannot think ofan instance in which knowingly filing a document or paper with the Court that contains false information isjustified.9The Motion contained reference to two bankruptcy rules that were not quite correct. First, the Motion statedthat Rule 9006(b)(1) “empowers the Court, ‘on motion made after the expiration of the specified period,’ topermit the act to be done ‘where the failure to act was the result of excusable neglect.’ ” ECF No. 47-1 at 3.But Rule 9006(b)(1)(B) provides that a court may extend time if “on motion made after the specified periodexpires, the failure to act within that period resulted from excusable neglect.”Second, the Motion stated that pursuant to Rule 1001, “[t]he Bankruptcy Rules ‘shall be construed to securethe just, speedy, and inexpensive determination of every case.” ECF No. 47-1 at 6. Rule 1001(a), however,states that the Federal Rules of Bankruptcy Procedure “must be construed, administered, and employedby both the court and the parties to secure the just, speedy, and inexpensive determination of every caseand proceeding.”10It also appears to the Court that Counsel may have violated certain of the California Rules of ProfessionalConduct with respect to her conduct addressed herein; in particular, the duty of candor to the tribunalpursuant to Rule 3.3 (providing, in part, that a lawyer may not “knowingly make a false statement of fact orlaw to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunalby the lawyer....”). This determination, however, is not required here and the Court need not and does notreach this determination in this Memorandum Decision.11Given that Rule 9011 sanctions were initiated by the Court and not on the Plaintiff's motion, payment of all ofpart of the Plaintiff's reasonable fees and expenses is not available under Rule 9011. See, e.g., In re DeVille,361 F.3d 539, 544 (9th Cir. 2004) (“As the text of [ ] Rule [9011] makes clear, an award to an adverse party‘of reasonable attorneys’ fees and other expenses’ can only be made pursuant to a ‘motion’ by that party.”).12See Bankruptcy General Order No. 210, available at https://www.casb.uscourts.gov/sites/casb/files/documents/general-orders/General%20Order%20210_2025-11-18.pdf.End of Document© 2025 Thomson Reuters. No claim to original U.S.Government Works.
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