FILED AUG 21 2017 1 NOT FOR PUBLICATION 2 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT 4 5 In re: ) BAP No. CC-13-1282-TaKuPa ) 6 MARCELO BRITTO GOMEZ, ) Bk. No. 2:11-bk-26905-TD ) 7 Debtor. ) Adv. No. 2:11-ap-02360-RK ______________________________) 8 ) CARTER STEPHENS, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) MARCELO BRITTO GOMEZ; UNITED ) 12 STATES TRUSTEE, ) ) 13 Appellees. ) ______________________________) 14 Argued and Submitted on July 27, 2017 15 at Pasadena, California 16 Filed – August 21, 2017 17 Appeal from the United States Bankruptcy Court for the Central District of California 18 Honorable Thomas B. Donovan, Bankruptcy Judge, Presiding 19 20 Appearances: Appellant Carter Stephens argued pro se; Douglas Crowder argued for appellee Marcello Britto 21 Gomez. 22 Before: TAYLOR, KURTZ, and PAPPAS,** Bankruptcy Judges. 23 24 * 25 This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may 26 have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8024-1(c)(2). 27 ** 28 The Honorable Jim D. Pappas, United States Bankruptcy Judge for the District of Idaho, sitting by designation. 1 INTRODUCTION 2 Seven months after Carter Stephens filed a dischargeability 3 adversary complaint against chapter 71 debtor-defendant Marcelo 4 Gomez, the bankruptcy court dismissed it for lack of 5 prosecution. In that time, Stephens and his attorney had done 6 virtually nothing to move the case forward. By contrast, Debtor 7 had, by and large, diligently defended and participated in the 8 case. As it turns out, Stephens’s relationship with his 9 attorney had soured. On remand from the Ninth Circuit, we 10 determine that the bankruptcy court properly dismissed the case 11 for lack of prosecution. We reject Stephens’s argument that 12 only his attorney was responsible for the delay and inattention 13 that led to dismissal. The bankruptcy court repeatedly 14 admonished Stephens that he needed to prosecute the case. He 15 did not do so. Accordingly, we AFFIRM. 16 FACTS2 17 Stephens retained attorney Lori Smith to represent him in 18 litigation against Debtor. After Debtor filed a chapter 7 case, 19 Smith — on Stephens’s behalf — filed a § 523(a)(2)(A) and (a)(6) 20 21 1 Unless otherwise indicated, all chapter and section 22 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. All “Bankruptcy Rule” references are to the Federal Rules of 23 Bankruptcy Procedure, all “Civil Rule” references are to the 24 Federal Rules of Civil Procedure, and all “LBR” references are to the Local Bankruptcy Rules of the United States Bankruptcy 25 Court for the Central District of California. 26 2 We exercise our discretion to take judicial notice of 27 documents electronically filed in the adversary proceeding. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 28 227, 233 n.9 (9th Cir. BAP 2003).
2 1 nondischargeability complaint.3 After that, however, Smith’s 2 activity in the case was sporadic at best. 3 The September 1 status conference. The bankruptcy court 4 scheduled an initial status conference for September 1, 2011, 5 under LBR 7016-1(a).4 Debtor filed an LBR 7016-1 status report5 6 before the hearing; Stephens filed nothing. Similarly, Debtor 7 and his counsel appeared at the initial status conference; Smith 8 did not. Neither Smith nor anyone from Smith’s office explained 9 her non-attendance to the bankruptcy court (or to Stephens, for 10 that matter). The bankruptcy court continued the status 11 conference to the end of the month. 12 After the bankruptcy judge continued the hearing, he 13 learned that Stephens was present. At that time, he explained 14 to Stephens that Smith failed to appear and also failed to file 15 a required pre-hearing status report. Further, he disclosed to 16 Stephens that Debtor’s status report mentioned a possible 17 settlement, which allegedly failed based on Stephens’s change of 18 mind. Stephens expressed surprise at this news and indicated 19 20 3 The complaint alleged fraud stemming from a business 21 partnership dispute between the parties. 22 4 LBR 7016-1(a) and (a)(2) provide that the bankruptcy clerk issues a summons and notice of the status conference and 23 that the parties are required to file a joint status report at 24 least 14 days prior to each scheduled conference. 5 25 Debtor’s counsel’s declaration stated that Smith’s office emailed a joint report on August 12, 2011 that was 26 essentially blank on Stephen’s end and was not executed by Smith 27 or anyone at Smith’s office. Consequently, when filed, it was deemed a unilateral status report by Debtor pursuant to 28 LBR 7016-1(a)(3).
3 1 that he was unaware of any settlement discussions. 2 Stephens then inquired whether he, in fact, was represented 3 by Smith. In response, the bankruptcy court stated: 4 Well, you have a couple options. You can fire Ms. Smith and hire another lawyer or you can fire 5 Ms. Smith and represent yourself. One way or the other, you have to do something to move this case 6 ahead from your stand point, and one way or another Ms. Smith has some obligations. I would suggest you 7 start by talking to Ms. Smith. If that’s a dead end, then why don’t you [pick] up the phone and call 8 [Debtor’s counsel] and see what you can work out. 9 Hr’g Tr. (Sept. 1, 2011) 10:10-17. 10 Stephens advised that he had called Smith multiple times, 11 to no avail, and that he did not trust Smith. The bankruptcy 12 court emphasized that Stephens was obligated as the plaintiff to 13 file a status report as required by the local bankruptcy rules, 14 irrespective of Smith’s deficient representation. 15 The September 29 status conference. Smith filed a status 16 report two weeks after the initial status conference. Both 17 Smith and Stephens appeared at the September 29, 2011 status 18 conference. The bankruptcy judge reemphasized the obligations 19 of the parties in the adversary proceeding to prosecute and 20 defend the case expeditiously. He also warned both parties that 21 failure to do so could lead to appropriate sanctions. Hr’g Tr. 22 (Sept. 29, 2011) 6:1-4 (“If the Plaintiff drops the ball, I can 23 dismiss the lawsuit. If the Defendant drops the ball, I can 24 preclude the Defendant from offering evidence down the road in 25 the lawsuit.”). But he highlighted that the responsibility was 26 ultimately on Smith as counsel for Stephens, the plaintiff, to 27 move the case along. The bankruptcy judge set a discovery 28 cutoff deadline and directed Smith to lodge a proposed
4 1 scheduling order. Smith, in turn, represented that the parties 2 sought mediation and that a proposed mediation order would be 3 filed. The hearing concluded with the bankruptcy judge 4 reiterating his frustration with the case because of the lack of 5 reports and warning that the case may be heading toward 6 dismissal. 7 Notwithstanding the bankruptcy court’s orders and Smith’s 8 representations, Smith filed nothing. Sometime during this time 9 frame, however, Stephens filed a complaint against Smith with 10 the State Bar of California. 11 The February 2 status conference and case dismissal. In 12 anticipation of a continued status conference in February of 13 2012, Debtor’s counsel filed another unilateral LBR 7016-1 14 status report.6 Neither Smith nor Stephens filed a status 15 report. Consequently, Debtor moved to dismiss the adversary 16 proceeding with prejudice pursuant to LBR 7041-1 and Civil 17 Rule 41(b). Among other things, he argued that Stephens’s 18 failure to comply with either the discovery deadline or LBR 19 7016-1 warranted dismissal. The motion to dismiss was scheduled 20 for hearing in mid-February. 21 At the status conference in early February, the bankruptcy 22 judge began by noting that the case was seven months old. 23 6 24 Once again, Debtor’s counsel’s declaration provided that she had twice contacted Smith’s office regarding the joint 25 report but did not hear back in time to timely file a joint report as required by the local rules. LBR 7016-1(a)(3) 26 provides that if a party fails to cooperate in preparing a joint 27 status report and an answer has been filed, the parties must each submit a unilateral status report at least seven days 28 before the scheduled conference.
5 1 Despite this age, he concluded: 2 [T]he Plaintiff has [pretty consistently] not complied with our Local Rules. The Plaintiff has not taken 3 the active role that plaintiffs are supposed to take. Plaintiffs are supposed to prosecute their lawsuits, 4 and they’re supposed to do it diligently, and they’re supposed to do it by sharing information with the 5 other side by talking to the other side, by initiating status reports, by doing that on a timely basis, by 6 doing that before every hearing. And in this case, and we are now on our – we’re on our third hearing, 7 but we’ve pretty consistently not had much of a showing of any compliance with the standards that I’ve 8 outlined from the Plaintiff’s side. 9 Hr’g Tr. (Feb. 2, 2012) 1:22-2:8. Debtor, by contrast, the 10 bankruptcy judge remarked, “has fairly consistently taken the 11 initiative to take care of its side of the bargain by filing 12 reports.” Id. at 2:9-11. 13 The bankruptcy judge expressed his concern that, if the 14 matter went to trial in two weeks as Debtor wanted, then because 15 of Stephens’s disorganization and ineffective prosecution, 16 “we’ll have a mess of a trial on our hands.” Id. at 3:5-14. 17 And he expressed his frustration that he was told the parties 18 were going to mediate, but a mediation order was never lodged, 19 and that the case was going to settle, but then it did not. 20 Smith then explained that “there has been a complete and 21 irredeemable breakdown of relationship between the client and 22 the attorney.” Id. at 4:16–18. And the discussion turned to 23 that topic. Stephens, who spoke after Smith, concluded his 24 presentation by requesting time to find new counsel. 25 After hearing from both Stephens and Smith, the bankruptcy 26 judge orally dismissed the adversary proceeding based on lack of 27 diligent prosecution. In addition to the above reasons, he 28 again noted that the case had been pending for seven months and
6 1 added: “for me to learn this at a status conference hearing, and 2 not in formal pleadings from one side or the other, is 3 inexcusable, and an inexcusable burden on the [Debtor], and on 4 the legal process, and on this Court.” Id. at 9:14-20. On 5 February 8, 2012, the bankruptcy court entered an order 6 dismissing the adversary proceeding for lack of prosecution. 7 Acting pro se, Stephens moved for reconsideration of the 8 dismissal order on February 27, 2012. He did not obtain a 9 hearing date and did not properly notice or serve the motion. 10 Two days later, the bankruptcy judge denied the reconsideration 11 motion by writing “motion denied” on its face. Stephens 12 appealed. 13 Stephens’s appeals. In that first appeal, a BAP motions 14 panel determined that the appeal from the dismissal order was 15 untimely. It limited the scope of the review to the order 16 denying the reconsideration motion. Later, a BAP merits panel 17 vacated the order denying reconsideration and remanded to the 18 bankruptcy court for findings of fact and conclusions of law. 19 On remand, the bankruptcy judge prepared a memorandum 20 decision and supported his decision to deny relief from the 21 dismissal order based on both procedural deficiencies and 22 substantive legal grounds. Stephens appealed. 23 In the second appeal, we affirmed the bankruptcy court’s 24 decision and concluded that the bankruptcy court did not abuse 25 its discretion in denying reconsideration under Civil Rule 26 60(b). Stephens again appealed. 27 The Ninth Circuit then vacated and remanded; it determined 28 that we erred in limiting the scope of Stephens’s appeal to
7 1 reconsideration. Thus, “[b]ecause the BAP did not reach the 2 issue of whether the bankruptcy court properly dismissed 3 Stephens’s adversary proceeding for failure to prosecute,” the 4 Ninth Circuit remanded so we might consider the issue in the 5 first instance. 6 JURISDICTION 7 The bankruptcy court had jurisdiction under 28 U.S.C. 8 §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. 9 § 158. 10 ISSUES 11 Whether the bankruptcy court erred in dismissing Stephens’s 12 adversary complaint for failure to prosecute. 13 Whether the bankruptcy court abused its discretion by 14 denying the reconsideration motion. 15 STANDARDS OF REVIEW 16 We review the bankruptcy court’s dismissal of an adversary 17 proceeding based on a plaintiff’s failure to prosecute for an 18 abuse of discretion. Olomi v. Tukhi (In re Tukhi), 568 B.R. 19 107, 112 (9th Cir. BAP 2017); Lee v. Roessler–Lobert 20 (In re Roessler–Lobert), 567 B.R. 560, 567 (9th Cir. BAP 2017). 21 We review the bankruptcy court’s denial of a motion for 22 reconsideration for an abuse of discretion. Tracht Gut, LLC v. 23 Cnty. of L.A. Treasurer & Tax Collector (In re Tracht Gut, LLC), 24 503 B.R. 804, 809 (9th Cir. BAP 2014). 25 A bankruptcy court abuses its discretion if it applies the 26 wrong legal standard, misapplies the correct legal standard, or 27 if it makes factual findings that are illogical, implausible, or 28 without support in inferences that may be drawn from the facts
8 1 in the record. See TrafficSchool.com, Inc. v. Edriver Inc., 2 653 F.3d 820, 832 (9th Cir. 2011) (citing United States v. 3 Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)). 4 And we may “affirm on any ground supported by the record, 5 regardless of whether the [bankruptcy] court relied upon, 6 rejected, or even considered that ground.” Fresno Motors, LLC 7 v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014) 8 (quotation marks omitted); Cigna Prop. & Cas. Ins. Co. v. 9 Polaris Pictures Corp., 159 F.3d 412, 418 (9th Cir. 1998). 10 DISCUSSION 11 The bankruptcy court dismissed the case for failure to 12 prosecute under Civil Rule 41(b). Civil Rule 41(b), applied in 13 bankruptcy by Bankruptcy Rule 7041, provides that “[i]f the 14 plaintiff fails to prosecute . . ., a defendant may move to 15 dismiss the action or any claim against it.” Fed. R. Civ. 16 P. 41(b). Although the text only discusses a party’s motion, 17 the bankruptcy court has “the inherent power sua sponte to 18 dismiss a case for lack of prosecution.” Henderson v. Duncan, 19 779 F.2d 1421, 1423 (9th Cir. 1986). Although state of mind is 20 relevant when evaluating an excuse, no showing of bad faith is 21 required for the bankruptcy court to dismiss the case under its 22 inherent power. In re Roessler-Lobert, 567 B.R. at 568 n.8. 23 “Dismissal [however] is a harsh penalty and is to be 24 imposed only in extreme circumstances.” Id. The bankruptcy 25 court must weigh several factors, known as the Henderson 26 factors: “(1) the public’s interest in expeditious resolution of 27 litigation; (2) the court’s need to manage its docket; (3) the 28 risk of prejudice to the defendants; (4) the public policy
9 1 favoring disposition of cases on their merits[,] and (5) the 2 availability of less drastic sanctions.” Henderson, 779 F.2d at 3 1423; In re Roessler-Lobert, 567 B.R. at 568; In re Tukhi, 4 568 B.R. at 114. Further, the dismissal “must be supported by a 5 showing of unreasonable delay.” Henderson, 779 F.2d at 1423. 6 Although specific findings are beneficial to the reviewing 7 court, the bankruptcy court “is not required to make specific 8 findings on each of the essential factors.” Moneymaker v. CoBen 9 (In re Eisen), 31 F.3d 1447, 1451 (9th Cir. 1994). If there are 10 no explicit findings, we review the record independently. Id. 11 A. The bankruptcy court did not err in dismissing the adversary proceeding for lack of prosecution. 12 13 As a preliminary matter, we note the particular posture of 14 this appeal and the manner in which Stephens’s briefing 15 addressed it. We have recounted its procedural path above. In 16 short, a BAP motions panel limited the scope of appeal to the 17 order denying reconsideration; the Ninth Circuit determined that 18 this was an error; accordingly, it vacated and remanded so we 19 may consider the issue of whether the bankruptcy court properly 20 dismissed Stephens’s adversary proceeding for failure to 21 prosecute. 22 Stephens’s briefing on remand, however, is aslant of the 23 remanded issue. He acknowledges that failure to prosecute is 24 the issue, but he then reasserts and reargues that “[t]his 25 appeal remains a request for 60(b) relief.” Appellant’s Amended 26 Response to Remand from Ninth Circuit, and Reasons for Failure 27 to Prosecute (“Amended Opening Brief on Remand”) at 3. 28 Stephens neither discusses the five Henderson factors nor
10 1 explains why the bankruptcy court erred in dismissing the case 2 for failure to prosecute. He, thus, conceivably waived that 3 issue on appeal. See Padgett v. Wright, 587 F.3d 983, 986 n.2 4 (9th Cir. 2009) (per curiam) (appellate courts “will not 5 ordinarily consider matters on appeal that are not specifically 6 and distinctly raised and argued in appellant’s opening brief”). 7 The Ninth Circuit, however, remanded so we may consider the 8 issue in the first instance; we will do so. And Stephens is pro 9 se, so we liberally construe his brief to the extent there is 10 any conceivable overlap. See Cruz v. Stein Strauss Trust # 1361 11 (In re Cruz), 516 B.R. 594, 604 (9th Cir. BAP 2014). 12 In his briefing, Stephens pins the dismissal solely on his 13 attorney. See Appellant’s Amended Opening Brief on Remand 14 passim; e.g., id. at 3 (“For these listed reasons, appellant 15 feels and knows that the whole failure of the case to move 16 forward in a progressive way was totally the fault of his 17 neglectful attorney . . . .”). But Stephens never argues that 18 the bankruptcy court erred in dismissing his case for lack of 19 prosecution. At one point, he appears to concede the operative 20 issue: “This inaction [i.e., not filing a status report] by 21 itself, is grounds for a dismissal of appellant[’]s case. This 22 action of not preparing Status Reports was committed twice by 23 appellant[’]s attorney Smith, and the trial was continued.” Id. 24 at 4. Instead, he strenuously contends that he was not at fault 25 for the dismissal—his attorney was. But that is not a reason to 26 reverse the bankruptcy court’s decision. Nevertheless, despite 27 Stephens’s failure to discuss them, we now consider the five 28 Henderson factors.
11 1 The public’s interest in expeditious resolution of 2 litigation. This factor typically weighs in favor of dismissal. 3 In re Roessler-Lobert, 567 B.R. at 568 (citing Yourish v. Cal 4 Amplifier, 191 F.3d 983, 990 (9th Cir. 1999)). “But not any 5 delay will justify dismissal; rather, the deficient conduct must 6 result in unreasonable delay.” Id. (citing Henderson, 779 F.2d 7 at 1423 and In re Eisen, 31 F.3d at 1451). We give deference to 8 the bankruptcy court “to decide what is unreasonable because it 9 is in the best position to determine what period of delay can be 10 endured before its docket becomes unmanageable.” In re Eisen, 11 31 F.3d at 1451 (quotation marks omitted); see Henderson, 12 779 F.2d at 1424. 13 Here, the bankruptcy court indirectly found, and we agree, 14 that the delay in this case was unreasonable. In the bankruptcy 15 court’s judgment: “[Smith and Stephens] were abusing Mr. Gomez 16 by their lack of diligence and by delaying the trial and 17 disposition that Gomez was seeking actively as early as 18 November 1, 2011, as stated in [Debtor’s] August 24, 2011 status 19 conference report and emphasized again in [Debtor’s] timely 20 appearance and comments at the September 1 hearing.” Bankruptcy 21 Court’s Memorandum Decision Regarding Remand, AP Dkt. No. 44 22 (“Bkcy. Ct. Mem. Dec. on Remand”) at 8. 23 More than seven months after Stephens filed his adversary 24 proceeding, after the court’s oral instructions concerning the 25 discovery cutoff (which was never memorialized in an order 26 because Stephens did not submit one), and despite repeated 27 admonitions from the bankruptcy court, neither Smith nor 28 Stephens had done anything to advance the case other than filing
12 1 a single, unilateral status report. Smith, and as a result 2 Stephens, failed to produce written discovery, a settlement 3 proposal, a mediation stipulation and proposed order, or propose 4 a scheduling order. By contrast, Debtor was allegedly ready for 5 trial in November 2011. 6 We acknowledge Stephens’s argument that he should not be 7 held responsible for Smith’s inaction. But, in the final event, 8 the bankruptcy court concluded that “Stephens should be held 9 responsible for what resulted in an inexcusably abusive 10 prosecution of his lawsuit insofar as the rights of [Debtor] 11 were concerned.” Id. at 9. As discussed in more depth in our 12 previous memorandum, which we adopt here, we agree. Stephens v. 13 Gomez (In re Gomez), BAP No. CC-13-1282-TaKuPa, 2014 WL 1229612, 14 *4-*5 (9th Cir. BAP Mar. 25, 2014), vacated and remanded, 670 F. 15 App’x 549 (9th Cir. 2016). 16 True, Smith was not forthcoming with Stephens; but Stephens 17 was not unaware of the situation: he expressed frustration at 18 the September 1 hearing. And the bankruptcy court personally 19 admonished Stephens that it was Stephens’s responsibility to 20 move the case forward. These facts, and others, distinguish 21 Lal v. California, 610 F.3d 518 (9th Cir. 2010) and Community 22 Dental Services v. Tani, 282 F.3d 1164 (9th Cir. 2002), which 23 essentially hold that an attorney’s gross negligence may 24 insulate a client from responsibility for the attorney’s 25 actions. But that excuse only applies when the client is 26 unaware of an attorney's inaction. As the record makes clear, 27 Stephens knew that Smith was not properly prosecuting the case. 28 We both agree with and defer to the bankruptcy court’s
13 1 finding on this factor; it weighs in favor of dismissal. 2 The court’s need to manage its docket. “This factor is 3 usually reviewed in conjunction with the public’s interest in 4 expeditious resolution of litigation to determine if there is 5 unreasonable delay.” In re Eisen, 31 F.3d at 1452. Appellate 6 courts “generally should defer to the bankruptcy court’s 7 assessment of what action is needed to facilitate the court’s 8 management of its own docket.” In re Tukhi, 568 B.R. at 115 9 (citing In re Eisen, 31 F.3d at 1452). 10 Here, the bankruptcy judge, at the September 29, 2011 11 hearing, noted that the court’s docket was full. Hr’g Tr. 12 (Sept. 29, 2011) 10:6-8 (“We have a very full docket, and we 13 don’t have time to just meet and exchange these kinds of views 14 every once in a while.”). And at the February 2, 2012 hearing, 15 the bankruptcy judge orally found: “So in my standpoint, this 16 case is wasting a lot of the [Debtor’s] time. This case is 17 wasting a lot of the Court’s time, and this is probably one of 18 the busiest courts in the country. We don’t have a whole lot of 19 time to waste needlessly.” Hr’g Tr. (Feb. 2, 2012) 4:2-6. On 20 appeal, Stephens does not challenge this finding; and we defer 21 to the bankruptcy judge’s assessment of his own docket. 22 Further, the hearing occurred at the height of the recession and 23 the bankruptcy court for the Central District of California 24 could correctly be characterized, at that time, as one of the 25 busiest courts in the United States. We thus conclude that this 26 factor weighs in favor of dismissal. 27 The risk of prejudice to the defendant. Even without a 28 showing of actual prejudice, “[t]he law presumes injury from
14 1 unreasonable delay.” In re Eisen, 31 F.3d at 1452 (quoting 2 Anderson v. Air West, Inc., 542 F.2d 522, 524 (9th Cir. 1976)). 3 But that presumption is rebuttable: 4 In summary, where a plaintiff has come forth with an excuse for his delay that is anything but frivolous, 5 the burden of production shifts to the defendant to show at least some actual prejudice. If he does so, 6 the plaintiff must then persuade the court that such claims of prejudice are either illusory or relatively 7 insignificant when compared to the force of his excuse. At that point, the court must exercise its 8 discretion by weighing the relevant factors—time, excuse, and prejudice. 9 10 In re Roessler-Lobert, 567 B.R. at 569 (quoting Nealey v. 11 Transportacion Maritima Mexicana, S.A., 662 F.2d 1275, 1281 (9th 12 Cir. 1980)). 13 Prejudice “usually takes two forms—loss of evidence and 14 loss of memory by a witness.” Nealey, 662 F.2d at 1281. That 15 said, “a significant delay in resolution of litigation caused by 16 a litigant’s unreasonable conduct can cause prejudice to the 17 adverse party under certain circumstances.” In re Tukhi, 18 568 B.R. at 115. “This is particularly true in bankruptcy 19 cases, when the litigation involves an exception to discharge 20 claim, which clouds the debtor’s fresh start by its mere 21 existence.” Id.7 22 23 7 Tenorio v. Osinga (In re Osinga), 91 B.R. 893, 895 (9th 24 Cir. BAP 1988) (“We note that debtors have recourse to bankruptcy so that they may have the benefit of immediate relief 25 from oppressive economic circumstances and a fresh start. Parties seeking to except their debts from the operation of a 26 discharge should litigate their claims with reasonable 27 promptitude.”); In re Bomarito, 448 B.R. 242, 251 (Bankr. E.D. Cal. 2011) (“A Chapter 7 bankruptcy discharge entitles a debtor 28 (continued...)
15 1 We start by concluding that Stephens rebutted the 2 presumption of prejudice; his excuse (i.e., it was his counsel’s 3 fault) is not frivolous. So we consider whether Debtor suffered 4 prejudice and weigh the relevant factors. 5 As we explain elsewhere, we are not persuaded by Stephens’s 6 excuse; thus, the force of Stephens’s excuse is low, at best. 7 The record on prejudice, however, is thin; nothing suggests that 8 a witness’s memory would fade or that evidence would have been 9 lost.8 But we conclude that this is a case where the delay, 10 itself, was prejudicial. 11 True, in previous cases, “we have stated that the fact that 12 ‘a defendant is impacted by the mere existence of pending 13 litigation against them is not prejudice as contemplated by this 14 factor.’” In re Roessler-Lobert, 567 B.R. at 570 (quoting 15 In re Singh, 2016 WL 770195, at *9). The present situation is 16 readily distinguishable. 17 In In re Singh, we concluded that pending 18 nondischargeability and denial of discharge litigation was not 19 prejudicial because the debtor “was subject to a separate 20 7 21 (...continued) to a ‘fresh start,’ therefore, the debtor has an interest in the 22 prompt resolution of all discharge issues.” (internal quotation marks and citations omitted)); Taylor v. Singh (In re Singh), 23 BAP No. CC-15-1126-TaFC, 2016 WL 770195, at *8 (9th Cir. BAP 24 Feb. 26, 2016) (“It is true that the public has an interest in avoiding unreasonable delay and in the expeditious resolution of 25 complaints as to the dischargeability of debts and the denial of discharge.”). 26 8 27 We review this factor as of the time the bankruptcy judge made his decision. But we observe that the complaint was 28 filed in late 2011; it is now late 2017.
16 1 discharge denial proceeding . . . as well as other related 2 adversary proceedings.” 2016 WL 770195, at *9. What’s more, 3 the debtor had requested a stay of the adversary proceeding, 4 leading to the result that the plaintiff’s failure to file a 5 status report would not prejudice the debtor. Id. 6 In In re Roessler-Lobert, we concluded that requiring the 7 debtor to show up at two brief hearings was not prejudicial. 8 567 B.R. at 570. And we observed that the debtor “did not make 9 any serious effort to comply with the scheduling conference 10 order or applicable rules; although she is unrepresented, she is 11 not completely blameless.” Id. Finally, in In re Tukhi, we 12 concluded: “When, as here, the debtor Tukhi was advocating for 13 even greater delay in the resolution of the nondischargeability 14 action, it is illogical to conclude that Tukhi was at risk of 15 being prejudiced by a brief delay resulting from the 16 [plaintiff’s] isolated incident of noncompliance with pretrial 17 procedures.” 568 B.R. at 116. 18 None of the mitigating factors in the cited cases are 19 present here; thus, no such factor eliminates or reduces the 20 impact of the elongated pendency of this litigation on Debtor. 21 Debtor was prepared to promptly proceed to trial and resolve the 22 dischargeability dispute. Debtor was not advocating for an even 23 longer delay. And there were no other presently pending 24 dischargeability or denial of discharge proceedings. 25 What’s more, the bankruptcy court also found that Stephens 26 transformed his dispute with Debtor into a dispute with Debtor 27 and Smith; this necessarily shifted some cost and expense to 28 Debtor. Bkcy. Ct. Mem. Dec. on Remand at 8 (“Instead of taking
17 1 corrective action as suggested by the court, Stephens allowed 2 his dispute with Gomez to morph into one between Stephens and 3 Smith. But the [Debtor] Gomez was the party at expense and risk 4 as a result of the ongoing and utterly unproductive seven-month 5 long prosecution of Stephens’ lawsuit.”). Consistently, Debtor 6 mainly points to increased attorneys’ fees as prejudice; this is 7 sufficient. 8 Accordingly, we conclude that this factor favors dismissal 9 or, at worst, is neutral. 10 The public policy favoring disposition of cases on their 11 merits. Normally, this factor “weighs strongly against 12 dismissal.” In re Roessler-Lobert, 567 B.R. at 570 (quotation 13 marks omitted). But we need not “scrutinize the merits” when 14 reviewing a dismissal. In re Eisen, 31 F.3d at 1454. For 15 instance, “[e]ven if the plaintiff has an obviously strong case, 16 dismissal would be appropriate if the plaintiff has clearly 17 ignored his responsibilities to the court in prosecuting the 18 action and the defendant has suffered prejudice as a result 19 thereof.” Id. (quoting Anderson, 542 F.2d at 526). Even 20 despite the public policy favoring disposition on the merits, 21 “[i]t is the responsibility of the moving party to move towards 22 that disposition at a reasonable pace, and to refrain from 23 dilatory and evasive tactics.” Id. (quoting Morris v. Morgan 24 Stanley & Co., 942 F.2d 648, 652 (9th Cir. 1991)). 25 Here, neither the bankruptcy court nor the parties 26 discussed the merits of the case. And the bankruptcy court 27 repeatedly admonished Stephens that it was his responsibility to 28 move the case towards disposition at a reasonable pace. Not
18 1 only did Stephens fail to move the case forward at a reasonable 2 pace, he also does not accept that responsibility; he blames his 3 attorney. True, Stephens suggests that he sought to retain 4 other counsel. But he ultimately failed to do so, and when 5 given the option, Stephens elected not to proceed pro se. Given 6 the circumstances (Smith was not going to continue representing 7 him; he would not represent himself; and he did not have another 8 counsel available), we agree with the bankruptcy court’s view 9 that Stephens’s prosecution of the case was dilatory. This 10 factor weighs toward dismissing the case or is neutral. 11 The availability of less drastic sanctions. The bankruptcy 12 court “need not exhaust every sanction short of dismissal before 13 finally dismissing a case, but must explore possible and 14 meaningful alternatives.” Henderson, 779 F.2d at 1424. That 15 said, “[a]n explicit discussion of alternatives is not 16 mandatory, especially if the court actually tried alternatives 17 or warned the plaintiff before ultimately dismissing the case.” 18 In re Roessler-Lobert, 567 B.R. at 570 (citing In re Eisen, 19 31 F.3d at 1454–55). 20 This factor weighs strongly in favor of dismissal. 21 Although the bankruptcy judge did not discuss the availability 22 of less drastic sanctions, he did not need to. At the 23 September 1 hearing, the bankruptcy judge warned Stephens that 24 it was his responsibility to prosecute the case and that if he 25 did not, the case might be dismissed. At the September 29 26 hearing, the bankruptcy judge again admonished Stephens and his 27 counsel about the need to diligently prosecute the lawsuit and 28 warned them that the case may be dismissed. The bankruptcy
19 1 judge dismissed the case only at a third hearing and after 2 Stephens ignored prior warnings and only when it was clear that 3 no cure for the unreasonable delay was at hand. Accordingly, 4 this factor favors dismissal. 5 Weighing the factors. In sum, all of the factors either 6 favor dismissal or are neutral, at worst. In these 7 circumstances, we conclude that it was not an abuse of 8 discretion for the bankruptcy court to dismiss the adversary 9 complaint for lack of prosecution. 10 B. We adopt our previous decision affirming the bankruptcy court’s order denying reconsideration with 11 one modification. 12 As already noted, on appeal Debtor ignores the current 13 appellate context; he continues to argue as if this is a Civil 14 Rule 60(b) appeal. It is not. As before, we do not condone his 15 attorney’s actions or inactions, as the case may be. But the 16 bankruptcy court determined, and we agreed and agree, that 17 Stephens was partly responsible for Smith’s inaction. Given his 18 continuous knowledge of Smith’s consistent dereliction of duty, 19 there is no justification for deviating from the general rule 20 that the client is bound by the action or inaction of his 21 attorney. As we previously concluded, the bankruptcy court did 22 not err in holding Stephens responsible for Smith’s action and 23 inaction and, thus, it did not abuse its discretion in denying 24 relief under Civil Rule 60(b)(6). We also determined that the 25 bankruptcy court did not err in denying reconsideration under 26 Civil Rule 60(b)(2). 27 None of Stephens’s present arguments persuade us that our 28 previous Civil Rule 60(b) analysis was wrong. True, the Ninth
20 1 Circuit vacated that decision, but that was so we might consider 2 the underlying dismissal decision; it did not express any 3 opinion about the merits of our Civil Rule 60(b) decision. We 4 thus adopt it. 5 We have one small amendment. We observed that Stephens’s 6 reconsideration motion failed to identify the underlying legal 7 rule under which it sought relief and that the bankruptcy court 8 applied Civil Rule 60(b). We concluded that this was not 9 erroneous because we assumed that the time for appeal had 10 passed. 11 The Ninth Circuit, however, determined that the time for 12 appeal had not expired. Thus Civil Rule 59, applied in 13 bankruptcy adversary proceedings by Bankruptcy Rule 9023, 14 analysis appears warranted.9 Having considered it, we determine 15 that Civil Rule 59 relief was not appropriate here. First, as 16 before: 17 Careful review of Stephens’ appellate brief as well as the record below, however, reveals that his arguments 18 rest only on Civil Rule 60(b)(6) and, if liberally construed, the purported existence of “new evidence” 19 under Civil Rule 60(b)(2). Thus, we do not consider Civil Rule 60(b)(1) and (b)(3) in this appeal; 20 Stephens did not raise theories for reconsideration thereunder either below or on appeal. 21 22 9 Civil Rule 59(e) allows for reconsideration only if the 23 bankruptcy court: “(1) is presented with newly discovered 24 evidence that was not available at the time of the original hearing, (2) committed clear error or made an initial decision 25 that was manifestly unjust, or (3) there is an intervening change in controlling law.” Fadel v. DCB United LLC 26 (In re Fadel), 492 B.R. 1, 18 (9th Cir. BAP 2013). “There may 27 also be other, highly unusual, circumstances warranting reconsideration.” Sch. Dist. No. 1J v. ACandS, Inc., 5 F.3d 28 1255, 1263 (9th Cir. 1993).
21 1 Id. at *3. We agree. And, he also failed to assert any basis 2 for relief under Civil Rule 59. This works a waiver. Even if 3 we review his arguments generously, we can neither discern an 4 argument supporting Civil Rule 59 relief nor manufacture a basis 5 for Civil Rule 59 relief on these facts. We thus also affirm 6 the bankruptcy court’s decision on the motion for 7 reconsideration. 8 CONCLUSION 9 Based on the foregoing, we AFFIRM. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28