FILED NOV 20 2018 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY.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. SC-18-1120-LSF
JUANA MEDINA, Bk. No. 3:17-bk-03963-LA13
Debtor. JUANA MEDINA,
Appellant,
v. MEMORANDUM*
DANIEL’S JEWELERS,
Appellee.
Argued and Submitted on October 25, 2018 at Pasadena, California
Filed – November 20, 2018
Appeal from the United States Bankruptcy Court for the Southern District of California
Honorable Louise DeCarl Adler, Bankruptcy Judge, Presiding
* 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. Appearances: Michael G. Doan argued for Appellant; Richard William Snyder argued for Appellee.
Before: LAFFERTY, SPRAKER, and FARIS, Bankruptcy Judges.
INTRODUCTION
Debtor Juana Medina appeals the bankruptcy court’s order
overruling her objection to the claim of Appellee Daniel’s Jewelers1 and
granting Daniel’s related motion to quash discovery requests. Ms. Medina
objected to the $879.82 claim on grounds that it was barred by the
applicable statute of limitations. The bankruptcy court overruled the
objection for lack of prosecution when Ms. Medina, without explanation,
failed to appear for a scheduled evidentiary hearing on the issue of when
she last made a payment to Daniel.
We find no abuse of discretion in the bankruptcy court’s overruling
of the objection and thus AFFIRM that ruling. The appeal of the
bankruptcy court’s ruling on the claim objection renders the discovery
1 Daniel’s Jewelers assigned its claim to Merchants Acquisition Group LLC (“MAG”) on November 3, 2017. Appellee’s counsel refers to Appellee as “Sherwood Management Co., Inc. dba Daniel’s Jewelers and Merchants Acquisition Group, LLC dba Merchants Credit Solutions.” For ease of reference and consistency with the bankruptcy court’s decision, we refer to Appellee as “Daniel.”
2 ruling moot. We therefore DISMISS that aspect of the appeal for lack of
jurisdiction.
FACTUAL BACKGROUND
Ms. Medina filed a chapter 132 petition on June 30, 2017. On Schedule
E/F, she listed an undisputed $422 nonpriority unsecured debt to “S M
C/Daniels Jewelers,” described as a “charge account.” Her chapter 13 plan,
which provided for a pro rata distribution of $4,500 to holders of unsecured
claims, was confirmed without objection on October 4, 2017.
On October 25, 2017, Daniel filed a proof of claim in the amount of
$879.82, of which $678.79 was alleged to be secured by a purchase money
security interest in a ring, leaving the remaining $201.03 unsecured.
Attached to the proof of claim was a statement of account and a copy of a
signed credit agreement. The next day, Ms. Medina filed an objection to
that claim on grounds that the last payment on the account was made more
than four years prior to the bankruptcy filing and thus the claim was
barred by the applicable statute of limitations.3 She also requested an
award of attorney’s fees under California Civil Code § 1717. That same day,
2 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. 3 Ms. Medina also objected to the claim on the ground that it did not include an itemized statement of account or a copy of the writing on which it was based. She later withdrew those baseless objections.
3 Ms. Medina propounded discovery on Daniel, consisting of fourteen
interrogatories, fourteen requests for admissions, and fifteen document
requests (the “Initial Discovery”). Daniel did not respond to the Initial
Discovery under the erroneous assumption that no contested matter was
yet pending.
Over the next few weeks, Daniel filed an opposition to the claim
objection, Ms. Medina filed a reply, and Daniel filed a surreply.
Ms. Medina also amended her schedules to show the debt as “disputed.”
She filed a declaration stating that she was no longer in possession of any
of the jewelry securing the debt to Daniel and that she did not recall
making any payments to Daniel since May of 2013. She then filed a motion
in limine to preclude Daniel from contesting the issues deemed admitted
by its failure timely to answer the requests for admission propounded in
the Initial Discovery.
On January 5, 2018, the bankruptcy court issued a tentative ruling in
which it struck Daniel’s surreply but stated that Daniel could argue the
“new facts (re: payment dates by debtor) in court.” The tentative also
sustained the objection in part and denied it in part, finding that the proof
of claim was prima facie valid and, “[a]t best, if the statute of limitations
expired prepetition (and the Reply to Reply alleges otherwise), this claim is
4 unsecured to the extent of $201.03.”4 With respect to attorney’s fees, the
tentative stated that the court had been unable to locate a legible attorney’s
fee clause in the copy of the credit agreement provided to the court.
At the hearing on the claim objection on January 10, 2018, the court
concluded that resolution of the statute of limitations issue required a
determination of the date Ms. Medina had made her last payment to
Daniel. The court set the matter for an evidentiary hearing on January 24.
Ms. Medina’s counsel, Christopher Bush, stated that he was uncertain
whether his client would be available on that date, to which the court
responded that the evidentiary hearing could be rescheduled so long as
Mr. Bush notified the court by January 16. Mr. Bush did so, but because
Daniel did not stipulate to a continuance, counsel for both parties appeared
at the scheduled January 24 hearing.
At that hearing, the court continued the evidentiary hearing to
February 21. Mr. Bush suggested that the hearing be continued to March 7
to be heard concurrently with Ms. Medina’s recently filed motion to
compel, which sought an order compelling Daniel to respond to the Initial
4 The wording in the court’s tentative is confusing, but it appears to be an acknowledgment that Ms. Medina’s confirmed plan did not provide for any secured claim by Daniel. See Shook v. CBIC (In re Shook), 278 B.R. 815, 826 (9th Cir. BAP 2002) (creditor with express notice of its proposed treatment in chapter 13 plan is required to object to it or be bound by it). This does not mean than Daniel lost its lien, if any, by virtue of the confirmed plan, but only that it was not entitled to treatment as a secured creditor under the plan. See id. at 824-25. During subsequent hearings, Daniel’s counsel and the court both referred to the claim as an unsecured claim for $201.03.
5 Discovery and was noticed for hearing on March 7. Daniel objected to a
continuance of the evidentiary hearing, noting that it had provided an
accounting to Ms. Medina showing that the last payment had been made in
June 2013 so that the discovery requests were unnecessary. The court
suggested that Daniel move to “quash” the Initial Discovery and scheduled
the evidentiary hearing for February 21, warning Mr. Bush: “And your
client better be here; and if she’s not, the matter will be against your client,
along with fees toward counsel, because that’s when the court’s setting this
for hearing.” The court thereafter issued a minute order which provided:
“Hearing continued to 2/21/18 at 3:00 for Evidentiary hearing. Debtor to be
present or it will be against her along with fees towards Counsel.”
Two days later, Ms. Medina’s counsel filed an ex parte motion to
continue the evidentiary hearing “until discovery is complete and in light
of the present unconfirmed deposition set for February 20, 2018” and
because Ms. Medina was unable to attend the February 21 hearing.
Although the motion was supported by counsel’s declaration stating that
Ms. Medina could not appear, there was no declaration from Ms. Medina
(or anyone else) explaining why. The bankruptcy court denied the motion.
On February 8, 2018, Daniel filed an “Ex Parte Omnibus Motion to
Quash Discovery Devices, Deny Motion in Limine, and Impose Sanctions”
6 (the “Motion to Quash”).5 The Motion to Quash alleged that discovery
requests propounded on October 26, 2017, January 11, 2018, and January
25, 2018 were not properly signed; alternatively, Daniel requested that the
court sanction Ms. Medina and/or her counsel under Civil Rule 26(g)(3)
(applicable in bankruptcy via Rule 7026) because discovery was
propounded for an improper purpose. The court did not sign the proposed
order because the matter had not been set for hearing and because the
order was not signed by the filing attorney. Although Daniel never filed a
notice of hearing or a motion to shorten time, on February 13, 2018, the
court entered an order shortening time so the matter could be heard on
February 21.
At the February 21 hearing, the court granted Daniel’s Motion to
Quash in part and denied it in part without prejudice. The court granted
the motion as to the Initial Discovery on grounds that (I) it was premature;
and (ii) it was interposed for an improper purpose and was an abuse of
discovery in violation of Civil Rule 26(g)(1)(B)(ii)-(iii)6 because the expense
5 As noted by the bankruptcy court, the Motion to Quash was in essence a motion (or cross-motion) in limine with respect to the initial propounding of discovery. 6 Those subsections provide:
(g) Signing Disclosures and Discovery Requests, Responses, and Objections.
(1) Signature Required; Effect of Signature. Every disclosure (continued...)
7 and burden of the Initial Discovery was not justified by the dollar amount
at stake and because it was unreasonable to propound discovery for a claim
objection before knowing whether it would be opposed, whether the
claimant would exchange information voluntarily, and what issues would
be contested. Based on these findings, the bankruptcy court found that the
imposition of sanctions under Civil Rule 26(g)(3)7 was warranted and
6 (...continued) under Rule 26(a)(1) or (a)(3) and every discovery request, response, or objection must be signed by at least one attorney of record in the attorney's own name--or by the party personally, if unrepresented--and must state the signer’s address, e-mail address, and telephone number. By signing, an attorney or party certifies that to the best of the person's knowledge, information, and belief formed after a reasonable inquiry: ... (B) with respect to a discovery request, response, or objection, it is: ... (ii) not interposed for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; and (iii) neither unreasonable nor unduly burdensome or expensive, considering the needs of the case, prior discovery in the case, the amount in controversy, and the importance of the issues at stake in the action. 7 That subsection provides:
(3) Sanction for Improper Certification. If a certification violates this rule without substantial justification, the court, on motion or on its own, must impose an appropriate sanction on the signer, the party on whose behalf the signer was acting, or both. The sanction may include an order to pay the reasonable expenses, including attorney's fees, caused by the violation.
8 concluded that an appropriate sanction would be to grant the Motion to
Quash. The court denied Daniel’s request for attorney’s fees without
prejudice to Daniel filing a separate request for fees.8
Ms. Medina did not appear at the evidentiary hearing. Her counsel
requested another continuance, which the bankruptcy court denied. The
court noted that it had ordered Ms. Medina to appear and had denied her
ex parte motion for a continuance. It also noted that no testimony from
Ms. Medina had been presented explaining why she could not appear:
[T]here is no evidence in this record of any compelling reason, other than the convenience of counsel, not to show up today with his client in tow. There’s nothing like: I’m in hospital. There’s nothing like: I begged, pleaded and jumped up and down and could not get the day off from work or an hour off from work or any time off from work. There’s nothing in the record. The record is silent as to why Ms. Medina has not shown up today. And so there were no grounds for the continuance when I denied it on the ex parte request. There were no grounds on [sic] the continuance when I denied the request made in open court on the 24th of January. She had a month to get her affairs in order. Today’s the 21st. Today’s the day she needed to show up. She hasn’t shown up, the record will so reflect.
Accordingly, the court overruled the objection to claim “based on the
failure of the objector to appear in prosecution of that matter.” The court
entered its Order: (1) Overruling Objection to Claim No. 3 filed by Daniel’s
8 To date, Daniel has not filed a motion for attorney’s fees.
9 Jewelers; and (2) Granting, in Part, Motion of Daniel’s Jeweler’s to Quash
Discovery Devices, Deny Motion in Limine and Impose Sanctions” (the
“Order”) on April 27, 2018. Debtor timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334
and 157(b)(2)(B). We have jurisdiction over the appeal of the court’s
overruling of the objection to claim under 28 U.S.C. § 158.
ISSUES
Did the bankruptcy court abuse its discretion in overruling Debtor’s
objection to Daniel’s proof of claim for failure to prosecute?
Should the appeal of the bankruptcy court’s ruling on the Motion to
Quash be dismissed as moot?
STANDARDS OF REVIEW
We review the bankruptcy court’s decision to dismiss a claim
objection for failure to prosecute for an abuse of discretion. See Lee v.
Roessler-Lobert (In re Roessler-Lobert), 567 B.R. 560, 567 (9th Cir. BAP 2017)
(dismissal of adversary proceeding for failure to prosecute). A bankruptcy
court abuses its discretion if it applies the wrong legal standard, misapplies
the correct legal standard, or makes factual findings that are illogical,
implausible, or without support in inferences that may be drawn from the
facts in the record. See TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832
(9th Cir. 2011) (citing United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir.
10 2009) (en banc)).
The Panel will overturn a dismissal sanction only if it has a definite
and firm conviction that it was clearly outside the acceptable range of
sanctions. In re Roessler-Lobert, 567 B.R. at 567.
We may affirm on any basis supported by the record. Caviata Attached
Homes, LLC v. U.S. Bank, Nat’l Ass’n (In re Caviata Attached Homes, LLC), 481
B.R. 34, 44 (9th Cir. BAP 2012).
DISCUSSION
A. The bankruptcy court did not abuse its discretion in overruling Debtor’s objection to claim for failure to prosecute.
A bankruptcy court has inherent power to dismiss a case sua sponte
for lack of prosecution. See Henderson v. Duncan, 779 F.2d 1421, 1423 (9th
Cir. 1986).9 Dismissal is a harsh penalty that should be imposed only in
extreme circumstances and must be supported by a showing of
unreasonable delay. Id.
In determining whether to dismiss a case for lack of prosecution, the
bankruptcy court must weigh: “(1) the public’s interest in expeditious
resolution of litigation; (2) the court’s need to manage its docket; (3) the risk
of prejudice to the defendants; (4) the public policy favoring disposition of
cases on their merits[;] and (5) the availability of less drastic sanctions.” Id.
9 Because Civil Rule 41 applies in contested matters, see Rule 9014(c), we look to cases decided under that rule for the applicable legal standards.
11 (citations omitted). “Ideally, the bankruptcy court should make explicit
findings concerning these factors, but such findings are not required. In the
absence of such findings, the appellate court must review the record
independently to determine whether the dismissal was an abuse of
discretion.” In re Roessler-Lobert, 567 B.R. at 568 (citing Henderson, 779 F.2d
at 1424).
The bankruptcy court overruled Ms. Medina’s claim objection
because she failed to appear at the scheduled evidentiary hearing after her
counsel had been warned, both orally and in writing, that if she did not
appear, the court would rule against her. The bankruptcy court also based
its ruling on the fact that no evidence had been presented offering a
justification for Ms. Medina’s nonappearance.
Although the bankruptcy court did not make explicit findings
regarding each of the relevant factors, given the small amount at issue, we
are justified in inferring the existence of the factors from our review of the
record. Those factors support the bankruptcy court’s ruling. The first two
factors–the public’s interest in expeditious resolution of litigation and the
court’s need to manage its docket–weigh in favor of dismissal. The matter
had been pending for four months and had generated numerous filings
and three hearings. This level of activity was disproportionate to the
amount at issue and the fact that the sole issue to be decided was the date
of Ms. Medina’s last payment to Daniel. Importantly, Ms. Medina does not
12 argue that she was unduly prejudiced by the court’s ruling.10 The public
policy favoring disposition on the merits weighs slightly against dismissal,
but not enough to outweigh the other factors. Finally, with respect to the
availability of less drastic sanctions, “[a]n explicit discussion of alternatives
is not mandatory, especially if the court actually tried alternatives or
warned the plaintiff before ultimately dismissing the case.” In re Roessler-
Lobert, 567 B.R. at 570 (citing Moneymaker v. CoBen (In re Eisen), 31 F.3d 1447,
1454-55 (9th Cir. 1994)). Here, the bankruptcy court, after continuing the
hearing once, explicitly warned Ms. Medina’s counsel, both orally and in
writing, that if his client did not appear for the February 21 evidentiary
hearing, the court would rule against her. Under these circumstances, the
court’s ruling against Ms. Medina was not “clearly outside the acceptable
range of sanctions.” Id. at 567.
Ms. Medina argues that the court erred in overruling her claim
objection “by default.” She contends that she was unable to appear at the
February 21 hearing due to her work schedule. But no evidence of this was
included with her ex parte motion to continue the evidentiary hearing. The
10 As noted, Ms. Medina’s confirmed plan called for approximately $4,500 to be paid pro rata to nonpriority unsecured claims. The overruling of Ms. Medina’s claim objection would thus slightly reduce the distribution to the holder of each allowed unsecured claim but would have no impact on Ms. Medina’s financial circumstances or her ability to complete the plan. Arguably, after the bankruptcy is completed, Daniel could attempt to enforce its security interest, but Ms. Medina has not made this argument, nor is such a scenario likely given the amount at issue and her assertion that she no longer owns any of the collateral.
13 motion and the supporting declaration of counsel stated only that “[t]he
Debtor is unable to attend the February 21, 2017 [sic] hearing.” Ms. Medina
points out the bankruptcy court’s erroneous statement in its written
findings that “counsel appeared at the January 24 hearing and confirmed in
open court that the February 21 date was convenient for the Debtor. The
Court continued the evidentiary hearing to that date to accommodate the
Debtor.” In fact, the transcript of the January 24 hearing reflects that the
clerk informed the court that she had previously given Mr. Bush the
February 21 date for the continued evidentiary hearing; although Mr. Bush
did not confirm that date, he did not object to it. Thus, even though the
bankruptcy court incorrectly recounted the colloquy regarding the hearing
date, that error did not impact the propriety of its ruling.
B. The bankruptcy court made no substantive ruling on the claim objection.
Ms. Medina also argues that the bankruptcy court erred in overruling
her claim objection because her declaration established that the statute of
limitations had expired and because Daniel was deemed to have admitted
that the account was past the statute of limitations when it failed to answer
Ms. Medina’s requests for admissions. In addition, Ms. Medina argues that
the bankruptcy court erred in ruling that the claim was partially secured.
But the bankruptcy court made no substantive ruling regarding
whether the statute of limitations had expired, nor did it rule that the claim
14 was partially secured. Accordingly, these arguments are irrelevant to the
issues on appeal.
C. The appeal of that portion of the Order granting Daniel’s Motion to Quash in part is rendered moot by the affirmance of the court’s order overruling the claim objection.
An appeal becomes moot if no effective relief can be granted. “We
cannot exercise jurisdiction over a moot appeal.” Ellis v. Yu (In re Ellis), 523
B.R. 673, 677 (9th Cir. BAP 2014) (citing United States v. Pattullo (In re
Pattullo), 271 F.3d 898, 900 (9th Cir. 2001)). Here, the bankruptcy court’s
overruling of Ms. Medina’s claim objection was based solely on her failure
to prosecute. It was not predicated upon any of the discovery rulings, as
the bankruptcy court never reached the merits of the objection. Because we
are affirming the bankruptcy court’s order overruling the claim objection,
we cannot grant any effective relief from the bankruptcy court’s order on
the Motion to Quash even if we were to reverse it. Thus, there is no
“present live controversy” and the appeal of that portion of the order is
moot. See Allard v. DeLorean, 884 F.2d 464, 466 (9th Cir. 1989).11
CONCLUSION
For these reasons, we AFFIRM the bankruptcy court’s overruling of
Ms. Medina’s objection to claim for her failure to prosecute. Our affirmance
11 Even if we were to consider the merits of the court’s ruling on the Motion to Quash, the record fully supports the bankruptcy court’s granting of Civil Rule 26(g) sanctions.
15 of that ruling renders moot the issues presented by the Motion to Quash,
thus we DISMISS the appeal of that ruling.