FILED FEB 20 2019 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. NC-18-1139-BKuF
FAROUK E. NAKHUDA, Bk. No. 4:14-bk-41156-RLE
Debtor.
ANDREW W. SHALABY,
Appellant. MEMORANDUM*
Argued and Submitted on November 29, 2018 at San Francisco, California
Filed – February 20, 2019
Appeal from the United States Bankruptcy Court for the Northern District of California
Honorable Roger L. Efremsky, Bankruptcy Judge, Presiding
Appearances: Appellant Andrew W. Shalaby argued pro se.
Before: BRAND, KURTZ and FARIS, Bankruptcy Judges.
* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. INTRODUCTION
Appellant Andrew W. Shalaby appeals an order denying his motion
for relief from judgment under Civil Rule 60(b)(5)1 and (b)(6) and an order
denying his request for leave to file a supplemental brief. We AFFIRM.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
A. The prior sanctions order
This case has a lengthy history. We limit our discussion to those facts
relevant for this appeal.2 In November 2014, the bankruptcy court issued an
order to show cause (OSC) directing Shalaby, the attorney for debtor
Farouk E. Nakhuda, to show cause why he should not be sanctioned for
actions he took during the debtor's case. In re Nakhuda, 544 B.R. at 895-96.
Ultimately, the bankruptcy court entered an order sanctioning
Shalaby ("Sanctions Order"). Among other things, Shalaby was suspended
from the practice of law in the bankruptcy courts for the Northern District
of California until he completed twenty-seven hours of continuing legal
education ("CLE Provision") and lost his e-filing privileges until he
completed ECF training provided by the clerk's office ("ECF Provision" and
1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all "Rule" references are to the Federal Rules of Bankruptcy Procedure, and all "Civil Rule" references are to the Federal Rules of Civil Procedure. 2 A more thorough background of this appeal can be found in the Panel's published decision in Shalaby v. Mansdorf (In re Nakhuda), 544 B.R. 886 (9th Cir. BAP 2016).
2 together with the CLE Provision, the "Suspension Provisions"). The court
imposed the ECF Provision based on Shalaby's admitted practice of failing
to obtain wet ink signatures from clients on documents filed with the court
and his apparent failure to review local ECF rules prior to practicing in
bankruptcy courts in the Northern District.
Shalaby timely appealed the Sanctions Order to the BAP. While the
appeal was pending, Shalaby completed the CLE requirement and was
reinstated to practice before the bankruptcy court in the Northern District,
and he completed the ECF training, thus restoring his ECF filing privileges.
Id. at 889 n.2.
The BAP affirmed the bankruptcy court's ruling on the ECF Provision
based on violations of ECF Administrative Procedures and Local Rules
5005-2(d) and 9011-1. Id. at 902-05. Shalaby had argued that the ECF
Provision was moot due to his compliance or, alternatively, that his failure
to obtain wet ink signatures was an innocent mistake, had since been
corrected, and could not be subject to sanctions. The Panel disagreed that
the matter was moot, explaining that Shalaby's compliance did not moot
the legal question of whether his conduct was sanctionable. Id. at 905 n.11.3
Shalaby appealed those points affirmed by the BAP to the Ninth
3 The Panel reversed some monetary sanctions, holding that the bankruptcy court had misapplied applicable law for sua sponte sanctions under Rule 9011. Id. at 899-902. The Panel was silent on the CLE Provision. However, since the bankruptcy court had also based that sanction on Rule 9011, we believe the CLE Provision was also reversed.
3 Circuit Court of Appeals, including the ECF Provision. The Ninth Circuit
affirmed the BAP on the ECF Provision, ruling that the bankruptcy court
had not abused its discretion. Shalaby v. Mansdorf (In re Nakhuda), 703 Fed.
App'x. 621 (9th Cir. 2017).
The catalyst which led to this appeal is what the Ninth Circuit stated
in its decision with respect to the ECF Provision:
The record supports the bankruptcy court’s finding that Shalaby’s continued failure to obtain the debtor’s original ink signature on documents electronically filed with the court violated the local rules. The error was brought to Shalaby’s attention, yet he continued to violate the rules. The district [sic] court did not abuse its discretion by suspending his filing privileges until he had received training.
Id. at 622 (emphasis added).
Shalaby timely filed a petition for rehearing, arguing that the circuit's
finding on the ECF Provision constituted reversible error. Specifically,
Shalaby argued that the finding — "The error was brought to Shalaby's
attention, yet he continued to violate the rules" — was not supported by
the record. Shalaby maintained that once he learned of the rule regarding
wet ink signatures he immediately changed his practice; thus, he did not
"continue[] to violate the rules" as the Ninth Circuit had found and which
provided the factual basis for its decision to affirm.
The Ninth Circuit denied Shalaby's request for rehearing in a one-
sentence order. No appeal was taken to the U.S. Supreme Court.
4 The Ninth Circuit issued its mandate on December 14, 2017.
B. Shalaby's Civil Rule 60(b) motion
Subsequently, three years after the Sanctions Order had been issued,
Shalaby filed in the bankruptcy court a "Motion to Amend Pre-Appeal
Sanction and Suspension Order" ("60(b) Motion"). He argued that the
Suspension Provisions in the Sanctions Order had to be stricken because
the Ninth Circuit's factual finding to support and affirm the ECF Provision
was erroneous. According to Shalaby, the bankruptcy judge had "personal
knowledge" that the circuit's decision was erroneous and contradicted the
record. Shalaby argued that he never violated the wet ink signature rule
after learning about it for the first time at the OSC hearing in November
2014, and that the bankruptcy judge knew this to be true.
Shalaby explained that the reason for the 60(b) Motion was a pending
motion to disqualify him as counsel in a products liability case in Illinois.
Opposing counsel in that case was using the Suspension Provisions of the
Sanctions Order as a basis for revoking his pro hac vice status. In a
nutshell, the Sanctions Order was detrimentally affecting his ability to
practice law.
In the 60(b) Motion, Shalaby mentioned Civil Rule 59 in a heading
but never discussed it again, and he offered a block quotation of Civil Rule
60(b), subdivisions (1) through (6). Notwithstanding this "spaghetti"
approach, Shalaby appeared to be seeking relief under Civil Rule 60(b)(5)
5 and (b)(6), noting that Civil Rule 60(b)(5) was "directly on point" but that
Civil Rule 60(b)(6) also provided grounds for relief. Shalaby argued that
this was not a motion to reverse an appellate decision; rather, it was a
proper motion to amend and strike the Suspension Provisions from the
Sanctions Order nunc pro tunc on the grounds of fairness, justice and the
bankruptcy judge's personal knowledge that Shalaby did not continue to
violate ECF rules.
Without a hearing, the bankruptcy court entered an order denying
the 60(b) Motion on the grounds that it was procedurally improper and
substantively unwarranted ("60(b) Order"). The court determined that
Shalaby had failed to provide any basis for why it should depart from the
doctrine of law of the case or the mandate rule. The court also determined
that Shalaby had failed to show any grounds for striking the Suspension
Provisions from the Sanctions Order under Civil Rule 60(b)(5) or (b)(6).
Undeterred, the next day Shalaby filed a request for leave to file a
supplemental brief in support of the 60(b) Motion. The bankruptcy court
promptly denied Shalaby's request ("Brief Order").
Shalaby timely appealed the 60(b) Order and the Brief Order.
C. Post-appeal events
Previously, a motions panel entered an order striking Shalaby's reply
brief (due to the lack of an appellee in this case) and denying his request for
judicial notice in support of his reply. Dkt. no. 17. However, we exercise
6 our discretion to VACATE that order because the reply brief and RJN
provide a strong and clear basis for affirming the 60(b) Order.
While this appeal was pending, Shalaby filed a motion to reconsider
the 60(b) Order, again arguing that the bankruptcy judge knew that
Shalaby had not continued to violate the wet ink signature requirement
once he learned of it, and that the Ninth Circuit had erred in finding to the
contrary. The bankruptcy court denied the motion and squarely addressed
the alleged erroneous finding at issue. Citing to the appellate record for the
Sanctions Order, the bankruptcy court found that the circuit had not erred.4
II. JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
III. ISSUES
1. Did the bankruptcy court abuse its discretion by applying law of the
case to the Sanctions Order?
2. Did the bankruptcy court abuse its discretion by denying the 60(b)
4 The bankruptcy court found that the record before the Ninth Circuit had shown that Shalaby was aware of the wet ink signature requirement in June 2014, but that it was not until some six months later "that he even began to correct his shoddy practices in [the Nakhuda] case. The court does not know if he corrected his mistakes in any of the other bankruptcy cases in which he is counsel." RJN at 9 n.3. This order also provides some background for Shalaby's troubles with the Illinois court. In short, he was not truthful on his pro hac vice application, stating that he had never been suspended by any court or investigated by a state bar. Apparently, defense counsel discovered the untrue statements and brought it to the Illinois court's attention.
7 Motion?
3. Did the bankruptcy court err by denying Shalaby's request for leave
to file a supplemental brief?
IV. STANDARDS OF REVIEW
We review the bankruptcy court's decision whether to apply the
doctrine of law of the case for an abuse of discretion. See S. Oregon Barter
Fair v. Jackson Cty., Oregon, 372 F.3d 1128, 1136 (9th Cir. 2004) (citing United
States v. Lummi Indian Tribe, 235 F.3d 443, 452 (9th Cir. 2000)). But see Am.
Express Travel Related Servs. Co. v. Fraschilla (In re Fraschilla), 235 B.R. 449,
454 (9th Cir. BAP 1999) (applying a "de novo" standard of review).
We review the bankruptcy court's denial of a motion under Rule
9024, which incorporates Civil Rule 60(b), for an abuse of discretion.
Tennant v. Rojas (In re Tennant), 318 B.R. 860, 866 (9th Cir. BAP 2004).
A bankruptcy court abuses its discretion if it applied the wrong legal
standard or its findings were illogical, implausible or without support in
the record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir.
2011).
V. DISCUSSION
To recap the relevant procedural history, Shalaby challenged the
Suspension Provisions in his appeal of the Sanctions Order to the BAP. The
BAP reversed, at least implicitly, the CLE Provision but affirmed the ECF
Provision. Shalaby appealed the BAP's ruling on the ECF Provision to the
8 Ninth Circuit Court of Appeals, which affirmed. In doing so, the circuit
made what has become the controversial finding that Shalaby continued to
violate the wet ink signature requirement in the ECF rules after learning of
its existence. Shalaby raised this exact issue in his petition for rehearing,
arguing that the Ninth Circuit's finding was not supported by the record.
The Ninth Circuit denied the request for rehearing. No appeal was taken to
the U.S. Supreme Court. The Ninth Circuit then entered its mandate. The
decision as to the ECF Provision became final.
A. The bankruptcy court did not abuse its discretion by applying law of the case to the Sanctions Order.
Under the doctrine of law of the case, a court is generally precluded
from reconsidering an issue previously decided by the same court, or a
higher court in the identical case. Lummi Indian Tribe, 235 F.3d at 452. “For
the doctrine to apply, the issue in question must have been decided
explicitly or by necessary implication in [the] previous disposition.” Id.
(internal quotation marks and citation omitted). Shalaby's failure to comply
with ECF rules was at issue in the prior appeal, and the precise issue of
whether he continued to violate the wet ink signature requirement after
learning of it was the subject of the petition for rehearing, which the Ninth
Circuit considered and denied.
While observance of the doctrine of law of the case is discretionary,
the prior decision should be followed unless (1) it is clearly erroneous and
9 enforcing it would work a manifest injustice; (2) intervening controlling
authority makes reconsideration appropriate; or (3) substantially different
evidence was adduced at a subsequent trial. Alaimalo v. United States, 645
F.3d 1042, 1049 (9th Cir. 2011); Caldwell v. Unified Capital Corp. (In re
Rainbow Magazine, Inc.), 77 F.3d 278, 281 (9th Cir. 1996); In re Fraschilla, 235
B.R. at 454. The bankruptcy court found that none of the exceptions for
departing from law of the case was present.
Shalaby argues that the first exception — the decision is clearly
erroneous and enforcing it would work a manifest injustice — applied here
and that the bankruptcy court erred in finding otherwise. Stating only that
any clear error by the Ninth Circuit was "absent," the bankruptcy court did
not elaborate on why this exception was not met, at least in the 60(b) Order
on appeal. Shalaby maintains that no one, including the bankruptcy court
or the trustee, ever alleged that he continued to violate the wet ink
signature requirement after learning of it, and that the Ninth Circuit's
finding to the contrary was "nothing short of untrue." While the Sanctions
Order noted that Shalaby had violated ECF rules on multiple occasions, it
did not appear to suggest that he continued to violate the rule regarding
wet ink signatures after learning of it or that this was a basis for imposing
the ECF Provision.
In any case, the record for the Sanctions Order paints an entirely
different picture than the one Shalaby portrays, and we find it
10 incomprehensible that he continues to assert arguments he knows are
untrue. In his brief on appeal before the Ninth Circuit, the chapter 7 trustee
argued that Shalaby knew as early as June 2014 about the wet ink signature
requirement, but yet he persisted in ignoring the rule for another six
months — until the OSC was issued in November 2014 — before rectifying
the problem. The trustee supported his argument with a deposition taken
of the debtor in June 2014. There, Shalaby admitted his failure to obtain wet
ink signatures from clients on documents filed with the court, and the
trustee told Shalaby that this practice was problematic. See Trustee's
Response Brief, Case No. 16-60017, dkt. no. 11, pp. 22-23, citing to his
excerpts of the record, dkt. no. 12, pp. 83-84. Notably, this same deposition
transcript was presented to the bankruptcy court prior to the OSC hearing,
see Case No. 14-41156, dkt. no. 178-3, pp. 7-9, and it was also before the
BAP, see Case No. 15-1149, dkt. no. 23, pp. 576-578.
Thus, contrary to Shalaby's contention, evidence of his failure to
comply with the wet ink signature requirement after learning of it was
presented to every court, including the Ninth Circuit Court of Appeals.
Presuming he reviewed the trustee's brief and record, Shalaby was aware
of the argument and the evidence he now contends did not exist. It also
establishes the falsity of Shalaby's contention in the 60(b) Motion that he
did not learn of the wet ink signature requirement until the OSC hearing in
November 2014.
11 Accordingly, the bankruptcy court did not err in finding the absence
of any clear error by the Ninth Circuit with respect to the ECF Provision.
Given the lack of any other exceptions to the rule, the court did not abuse
its discretion by applying law of the case to the Sanctions Order.5
On a side note, Shalaby fails to recognize that the Ninth Circuit could
have affirmed the ECF Provision on the basis that he failed to comply with
the wet ink signature requirement multiple times prior to learning of the
rule; he did not have to continue to violate it after the fact for the sanction
to stand. As a bankruptcy attorney, Shalaby is charged with knowing ECF
rules for the bankruptcy court. Thus, failing to comply with them subjected
him to sanctions.
B. The bankruptcy court did not abuse its discretion in denying the 60(b) Motion.
The next issue is whether the bankruptcy court abused its discretion
in denying the 60(b) Motion to any extent that the motion requested relief
beyond the confines of law of the case. See Cool Fuel, Inc. v. Cal. State Bd. of
Equalization (In re Cool Fuel, Inc.), 2006 WL 6810933, at *6 (9th Cir. BAP June
21, 2006). The 60(b) Motion did not precisely identify which subdivision
Shalaby was asserting for relief. And the imprecision continues. He now
5 The bankruptcy court also determined that the mandate rule applied. Shalaby does not present any argument on this. Accordingly, this issue has been waived. City of Emeryville v. Robinson, 621 F.3d 1251, 1261 (9th Cir. 2010) (issues not argued "specifically and distinctly" in a party's opening brief are waived).
12 argues that he sought relief under Civil Rule 60(b)(1) and (b)(6). The
bankruptcy court determined that Shalaby was seeking relief under Civil
Rule 60(b)(5) and (b)(6). We agree.
Civil Rule 60(b)(5), applicable here by Rule 9024, allows a party to
obtain relief from a judgment or order if: (1) it has been satisfied, released
or discharged; (2) it is based on an earlier judgment that has been reversed
or vacated; (3) or applying it prospectively is no longer equitable. Shalaby
never articulated which of the three grounds provided a basis for relief or
cited any case law to help the court make that determination. The CLE
Provision was reversed on appeal; therefore, striking it from the Sanctions
Order would have no effect. The ECF Provision was not reversed or
vacated, so the second ground would not apply to that. Shalaby had
satisfied the ECF Provision by this time, but he did not assert the first
ground as a basis for striking that portion of the Sanctions Order, assuming
he could even do so.
Given Shalaby's expressions of fairness and justice, the bankruptcy
court assumed that he was relying on ground three — that applying the
Sanctions Order was no longer equitable. This was a reasonable
assumption. This provision of Civil Rule 60(b)(5) provides a means by
which a party can ask a court to modify or vacate a judgment or order if "a
significant change either in factual conditions or in law" renders continued
enforcement "detrimental to the public interest." Horne v. Flores, 557 U.S.
13 433, 447 (2009) (citing Rufo v. Inmates of Suffolk Cty. Jail, 502 U.S. 367, 384
(1992)). Modification of an order may be warranted under Civil Rule
60(b)(5) if changed factual conditions make compliance substantially more
onerous, when a decree proves to be unworkable because of unforeseen
obstacles, when enforcement of the decree without modification would be
detrimental to the public interest, or where compliance becomes legally
impermissible. SEC v. Coldicutt, 258 F.3d 939, 942 (9th Cir. 2001) (citing
Rufo, 502 U.S. at 388). Relief from a court order should not be granted,
however, simply because a party finds it is no longer convenient to live
with the terms of the order. Id.
The bankruptcy court determined that Shalaby had failed to satisfy
any of the above conditions for relief from the Sanctions Order:
Mr. Shalaby has made no showing that satisfies any of these factors; he merely argues that the Sanctions Order has led to opposing counsel seeking to revoke his pro hac vice admission in another court in which he is currently litigating based on the fact that he was suspended and failed to disclose it in his application. To the extent the Sanctions Order presents an 'unforeseen obstacle' to Mr. Shalaby obtaining pro hac vice admission in any court, assuming this court has authority to do so, it declines to afford Mr. Shalaby the relief he seeks.
The only argument Shalaby raises here is that the bankruptcy court
erred in finding that there would be no injustice by leaving the Sanctions
Order as is. Of course, he begins this argument with the faulty premise that
the bankruptcy judge knew the Ninth Circuit had erred yet he refused to
14 fix the error. Shalaby's failure to disclose the sanction to the Illinois court
now haunts him. However, as the bankruptcy court correctly noted,
vacating the ECF Provision in the Sanctions Order is not warranted simply
because it may be inconvenient for Shalaby.
Shalaby did not show that any significant change either in factual
conditions or the law occurred here warranting relief from the Sanctions
Order. Accordingly, the bankruptcy court did not abuse its discretion in
denying relief under Civil Rule 60(b)(5).
The bankruptcy court also denied relief under Civil Rule 60(b)(6),
determining that Shalaby had shown neither injury nor extraordinary
circumstances warranting relief. We agree that relief under Civil Rule
60(b)(6) was not available here but on a different basis. A motion brought
under Civil Rule 60(b)(6) — the "catch-all" provision — applies only when
the reason for granting relief is not covered by any of the other reasons set
forth in Rule 60. Cmty. Dental Servs. v. Tani, 282 F.3d 1164, 1168 n.8 (9th Cir.
2002); Lafarge Conseils Et Etudes, S.A. v. Kaiser Cement & Gypsum Corp., 791
F.2d 1334, 1338 (9th Cir. 1986). In his 60(b) Motion, Shalaby argued that
Civil Rule 60(b)(5) was "directly on point," and the arguments he made fell
directly within the scope of that subdivision. Therefore, relief under Civil
Rule 60(b)(6) was not available. Additionally, Shalaby failed to articulate a
proper argument for such relief, and this failure provided another basis for
denying it.
15 C. Shalaby waived any challenge to the Brief Order.
Although Shalaby appealed the Brief Order, he did not articulate any
argument on the matter in his opening brief. Issues which are not argued
specifically and distinctly in a party's opening brief are waived. City of
Emeryville, 621 F.3d at 1261. In any case, filing a supplemental brief at that
time was foreclosed. The bankruptcy court had already entered the 60(b)
Order announcing its decision to deny the 60(b) Motion. In reality,
Shalaby's request for leave to file a supplemental brief was a motion for
reconsideration of the 60(b) Order, arguing that the "clearly erroneous"
exception to law of the case was met and that the bankruptcy court erred in
determining otherwise. That is the issue squarely before this Panel, which
we have determined against Shalaby. To the extent his request for leave
was a motion to reconsider, there were no grounds upon which to grant it.
VI. CONCLUSION
For the reasons stated above, we AFFIRM. 6
6 We decline to address additional issues Shalaby raises that are outside the scope of this appeal, such as the propriety of the BAP's ruling in the prior appeal and its reliance on Local Rule 9011-1 to affirm the bankruptcy court's ruling on the ECF Provision.