FILED DEC 10 2015 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. EC-14-1200-FDJu ) 6 ROBERT NORIK KITAY and ) Bk. No. 13-20645 TRISTINA COFFIN KITAY, ) 7 ) Adv. Pro. 13-02126 Debtors. ) 8 ______________________________) ) 9 DANIEL E. GONZALEZ, ) ) 10 Appellant, ) ) 11 v. ) MEMORANDUM* ) 12 ROBERT NORIK KITAY; ) TRISTINA COFFIN KITAY; LAW ) 13 OFFICES OF ROBERT NORIK KITAY,) ) 14 Appellees. ) ______________________________) 15 Argued and Submitted on November 19, 2015 16 at Sacramento, California 17 Filed – December 10, 2015 18 Appeal from the United States Bankruptcy Court for the Eastern District of California 19 Honorable Thomas C. Holman, Bankruptcy Judge, Presiding 20 21 Appearances: Appellant Daniel E. Gonzalez argued pro se. 22 Before: FARIS, DUNN, and JURY, Bankruptcy Judges. 23 24 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8024-1. 1 INTRODUCTION 2 Appellant Daniel E. Gonzalez appeals from the bankruptcy 3 court’s order granting in part and denying in part Appellees 4 Robert Norik Kitay’s and Tristina Coffin Kitay’s1 motion to set 5 aside default. We hold that the bankruptcy court did not err in 6 granting Mr. Gonzalez default judgment against Mr. Kitay in the 7 amount of $5,000 as a nondischargeable debt pursuant to 11 U.S.C. 8 § 523(a)(4)2 and dismissing the remainder of Mr. Gonzalez’s 9 claims. Accordingly, we AFFIRM. 10 FACTUAL BACKGROUND 11 Beginning in January 2010, Mr. Gonzalez retained Mr. Kitay, 12 an attorney, to represent him and his daughter, Christina, in 13 numerous state court actions. Those cases involved an automobile 14 accident, alleged wrongful foreclosure, and a probate collection 15 matter. Mr. Gonzalez alleged that, during the course of his 16 representation, “Mr. Kitay committed professional negligence, 17 fraudulent concealments, and misrepresentations.” Mr. Kitay 18 responded in kind, claiming that Mr. Gonzalez engaged in “several 19 acts of fraud and dishonesty . . . , all of which led me to sever 20 all ties with Mr. Gonzalez as a client . . . . Over time, it 21 became clear that all his personal cases that he brought to me 22 presented multiple acts of fraud, dishonesty, and a complete lack 23 24 1 The Kitays did not file an answering brief or otherwise make an appearance in this appeal. 25 2 26 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all 27 “Rule” references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037, and all “Civil Rule” references are 28 to the Federal Rules of Civil Procedure, Rules 1-86.
2 1 of ethics or morality.”3 2 On October 29, 2012, Mr. Gonzalez filed a complaint against 3 Mr. Kitay in the Superior Court of California, County of 4 Sacramento (“state-court action”). Mr. Gonzalez alleged that Mr. 5 Kitay breached the agreement to provide legal services by “acting 6 incompetent and failing or refusing to conduct proper and timely 7 discovery, prosecute, investigate, and research, and in 8 abandoning client.” He claimed that he 9 suffered judgments for attorney fees in the amount of $48,000, negligent or intentional emotional distress, 10 incurred over $12,000 in attorney fees and costs to correct the negligence of [Mr. Kitay], and will incur 11 additional attorney fees in an amount not yet ascertained, but in excess of $50,000 including appeals 12 and trial. [I]n addition, plaintiff claims damages in the amount of $140,000 or more for restitution. 13 14 The aggregate amount claimed by Mr. Gonzalez was $250,000 plus 15 attorneys’ fees. 16 On January 17, 2013, Mr. and Mrs. Kitay filed their 17 chapter 7 petition in the United States Bankruptcy Court for the 18 Eastern District of California. The Kitays’ Schedule F 19 identified Mr. Gonzalez as a creditor with an unsecured, 20 nonpriority claim of $250,000 for the state-court action. 21 Mr. Gonzalez initiated an adversary proceeding against 22 Mr. Kitay and the Law Offices of Robert N. Kitay, PC, on or 23 around April 15, 2013. Mr. Gonzalez objected to discharge under 24 §§ 727(a)(3) and 727(a)(4)(a) and sought a determination as to 25 3 26 Not all facts discussed herein are included in the excerpts of record. We have exercised our discretion to review 27 the bankruptcy court’s docket. See Woods & Erickson, LLP v. Leonard (In re AVI, Inc.), 389 B.R. 721, 725 n.2 (9th Cir. BAP 28 2008).
3 1 dischargeability of the debt arising from the state-court action 2 under §§ 523(a)(2)(A), 523(a)(4), and 523(a)(6). 3 Mr. Kitay filed an answer to Mr. Gonzalez’s complaint, but 4 the bankruptcy court struck Mr. Kitay’s answer for his failure to 5 comply with the court’s order to meet and confer with 6 Mr. Gonzalez on issues including initial disclosures, settlement, 7 and a discovery plan. The court issued its Entry of Default and 8 Order re: Default Judgment Procedures, in which it directed 9 Mr. Gonzalez to apply for a default judgment. 10 Mr. Gonzalez filed his Motion for Entry of Default Judgment, 11 in which he requested that the bankruptcy court enter default 12 judgment against Mr. Kitay based on his failure to properly 13 represent him and his daughter in the various state-court 14 lawsuits. Mr. Gonzalez stated that he paid Mr. Kitay and his law 15 firm “over $2,500 in attorney’s fees” in a wrongful foreclosure 16 case and “over $2,500 for legal services” in two consolidated 17 cases regarding a probate collection matter. 18 The bankruptcy court granted in part and denied in part the 19 Motion for Entry of Default Judgement. It stated that 20 Mr. Gonzalez shall recover $5,000 plus costs from Mr. Kitay, the 21 total of which shall be nondischargeable pursuant to 11 U.S.C. 22 § 523(a)(4). However, the court denied Mr. Gonzalez’s request 23 for entry of default judgment pursuant to 11 U.S.C. 24 §§ 523(a)(2)(A), (a)(6), 727(a)(3) and (a)(4). It dismissed 25 Mr. Gonzalez’s claims under Civil Rule 12(b)(6), stating that the 26 allegations in the complaint were insufficient. 27 The court gave Mr. Gonzalez leave to amend his complaint, 28 stating:
4 1 On or before November 19, 2013, the plaintiff shall file and serve on both defendants consistent with the 2 requirements of Fed. R. Bankr. P. 7004 an amended complaint. If the plaintiff does not file an amended 3 complaint by the foregoing deadline, the plaintiff’s claims under 11 U.S.C. §§ 523(a)(2)(A), (a)(6), 4 727(a)(3) and (a)(4) will be dismissed without further notice or hearing. Judgment will not be entered until 5 all of the plaintiff’s claims, including those that may be asserted in an amended complaint, are resolved. 6 7 On November 19, 2013, Mr. Gonzalez filed his First Amended 8 Complaint. The bankruptcy court issued a Reissued Summons and 9 Notice of Status Conference in an Adversary Proceeding the 10 following day. 11 On November 27, 2013, the bankruptcy court issued a minute 12 order, noting that Mr. Gonzalez had not yet filed proof of 13 service for the First Amended Complaint. The court instructed 14 Mr. Gonzalez to file a proof of service. In response, 15 Mr. Gonzalez filed a notice of compliance in which he stated that 16 he had mailed a copy of the First Amended Complaint to Mr. Kitay 17 on November 19. He attached to the notice a copy of the proof of 18 service affixed to the end of the First Amended Complaint and a 19 U.S. Postal Service receipt dated November 19. Mr. Gonzalez 20 filed a renewed Motion for Entry of Default Judgment on 21 December 3, 2013. 22 Mr. Gonzalez said that, on December 28, 2013, the complaint 23 was returned to him as undeliverable, and he realized for the 24 first time that he had mailed the First Amended Complaint to the 25 wrong address. He claimed that he had mistakenly used the 26 address listed on the chapter 7 petition. On December 30, 27 Mr. Gonzalez effected personal service on the Kitays at 28 Mr. Kitay’s law firm.
5 1 On January 3, 2014, Mr. Kitay (on behalf of himself and 2 Mrs. Kitay) filed a motion to set aside the entry of default and 3 to dismiss the complaint (“Motion to Set Aside”). In support of 4 the Motion to Set Aside, Mr. Kitay referred to Mr. Gonzalez as a 5 “con-man” and a liar. He raised issues of truthfulness and 6 veracity from Mr. Gonzalez’s past, including the suspension of 7 his dental and real estate licenses, allegedly for negligence and 8 fraud. Mr. Kitay claimed that, as working with Mr. Gonzalez on 9 the state cases became more unsavory, he “decided to completely 10 disassociate [himself] from Mr. Gonzalez.”4 Mr. Kitay also 11 disputed that he received $5,000 in retainer payments from 12 Mr. Gonzalez and stated that he only received $1,000 as an 13 initial retainer. 14 Mr. Kitay argued that the bankruptcy court should not have 15 struck his answer for failing to meet and confer with 16 Mr. Gonzalez. He stated that Mr. Gonzalez never contacted him to 17 meet and confer, and he was never served with any order to meet 18 and confer. Mr. Kitay argued that he tried to cooperate with 19 Mr. Gonzalez on discovery issues, but Mr. Gonzalez never 20 responded to his communications. Mr. Kitay also informed the 21 4 For example, Mr. Kitay stated that Mr. Gonzalez 22 “fraudulently filed documents, or pleadings, under counsel’s name 23 without counsel’s consent.” Mr. Gonzalez allegedly filed a chapter 11 petition under Mr. Kitay’s name on behalf of a company 24 that Mr. Kitay did not represent. Mr. Gonzalez’s subsequent attorney also sought to withdraw as Mr. Gonzalez’s counsel for 25 similar reasons. Mr. Kitay also claimed that Mr. Gonzalez “was 26 holding himself out to the public, and charging substantial money (thousands in retainers), representing to his purported ‘clients’ 27 that he would be able to get their loans re-financing, or modified, and that if he was unable to accomplish that, he would 28 secure counsel on their behalf . . . .”
6 1 court that he was not served with any pleadings after 2 September 30, 2013, and did not receive the First Amended 3 Complaint until December 30. 4 In its written disposition entered on January 14, 2014, the 5 bankruptcy court denied Mr. Gonzalez’s Motion for Entry of 6 Default Judgment, filed December 3, 2013, since the First Amended 7 Complaint added Mrs. Kitay as a defendant and added additional 8 claims. The court held that the Kitays were entitled to answer 9 the First Amended Complaint. Inexplicably, the Kitays never 10 filed an answer. 11 On January 28, 2014, Mr. Gonzalez filed his Amended Motion 12 for Entry of Default Judgment. 13 On April 8, 2014, the bankruptcy court issued its written 14 ruling regarding Mr. Kitay’s Motion to Set Aside. The court 15 denied Mr. Kitay’s request to vacate the court’s August 21, 2013 16 order striking his answer and entering default and the 17 November 4, 2013 order entering default judgment. However, 18 regarding the request to dismiss the adversary proceeding, the 19 court dismissed all claims without leave to amend, “with the 20 exception of the claim for relief under 11 U.S.C. § 523(a)(4) as 21 to Robert N. Kitay only . . . .” 22 First, regarding Mr. Kitay’s request to vacate the default 23 order and default judgment, the court stated that Mr. Kitay did 24 not satisfy the three-prong test set out in Franchise Holding II, 25 LLC v. Huntington Restaurants Group, Inc., 375 F.3d 922, 925-26 26 (9th Cir. 2004). The court held that Mr. Kitay did not meet his 27 burden regarding the first prong, i.e., whether default was 28 willful or whether culpable conduct of defendant led to default.
7 1 The court stated that, even though Mr. Kitay may not have 2 received any communication from Mr. Gonzalez regarding orders to 3 confer, the filing of his answer subjected him to the 4 jurisdiction of the court, and he was required to comply with all 5 court orders. The court also held that Mr. Kitay did not meet 6 the third prong, i.e., whether setting aside default would 7 prejudice the adverse party, since this factor was not addressed 8 in the Motion to Set Aside. However, the court held that 9 Mr. Kitay satisfied the second prong, i.e., whether a meritorious 10 defense has been presented. 11 Second, regarding Mr. Kitay’s request to dismiss the 12 adversary proceeding, the court agreed that Mr. Gonzalez’s 13 failure to timely serve the First Amended Complaint warranted 14 dismissal of the remaining claims. It also noted that the new 15 claims against Mrs. Kitay were time-barred and that the remaining 16 claims should be asserted in a proof of claim. Finally, the 17 court found that $5,000 was the proper amount of the 18 nondischargeable debt owed to Mr. Gonzalez. 19 Also on April 8, 2014, Mr. Gonzalez filed a proof of claim 20 for “$250,000 or more” in the underlying bankruptcy action. 21 Mr. Gonzalez filed his notice of appeal on April 17, 2014. 22 On April 18, 2014, the bankruptcy court entered its Judgment in 23 Mr. Gonzalez’s favor for $5,000 plus $293 in costs and held that 24 those amounts are nondischargeable under § 523(a)(4).5 25 5 26 On November 12, 2015, Mr. Gonzalez filed his Motion for Judicial Notice, which requested that the Panel take notice of: 27 (1) a case in support of his “liberality of amendment” argument; (2) Mr. Kitay’s discovery responses regarding his liability 28 (continued...)
8 1 JURISDICTION 2 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 3 §§ 1334 and 157(b)(1) and (b)(2)(I) and (J). We have 4 jurisdiction under 28 U.S.C. § 158. 5 ISSUES 6 (1) Whether the bankruptcy court erred in awarding 7 Mr. Gonzalez $5,000 plus costs instead of $250,000. 8 (2) Whether the bankruptcy court erred in finding that 9 Mr. Kitay had asserted a meritorious defense, even though it 10 found that Mr. Kitay did not satisfy the other two prongs 11 required to set aside the default judgment. 12 (3) Whether the bankruptcy court erred in dismissing the 13 remaining claims against the Kitays for Mr. Gonzalez’s failure to 14 timely serve the amended complaint. 15 16 5 (...continued) 17 insurance policy; (3) a case concerning whether the court had constitutional authority to enter a final judgment; (4) a state- 18 court minute order purporting to establish the validity of his 19 dismissed claims; and (5) a disciplinary opinion demonstrating that Mr. Kitay has been suspended for thirty days by the 20 California state bar.
21 These documents are not appropriate for judicial notice. First, the Panel does not take judicial notice of the cases 22 presented by Mr. Gonzalez, which may be appropriate as case 23 citations or authority, rather than adjudicative facts. Second, the remainder of the documents are irrelevant to the present 24 appeal. See Ly v. Che (In re Ly), 601 F. App’x 494, 496 n.1 (9th Cir. 2015) (“We deny all of the pending requests for judicial 25 notice because all of them seek notice of matters irrelevant to 26 the decision of this appeal.”); Santa Monica Food Not Bombs v. City of Santa Monica, 450 F.3d 1022, 1025 n.2 (9th Cir. 2006) 27 (declining to take judicial notice of documents not relevant to resolution of the appeal). Therefore, Mr. Gonzalez’s Motion for 28 Judicial Notice is DENIED.
9 1 STANDARD OF REVIEW 2 “In bankruptcy discharge appeals, the Panel reviews the 3 bankruptcy court’s findings of fact for clear error and 4 conclusions of law de novo, and applies de novo review to ‘mixed 5 questions’ of law and fact that require consideration of legal 6 concepts and the exercise of judgment about the values that 7 animate the legal principles.” Oney v. Weinberg 8 (In re Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009), aff’d, 9 407 F. App’x 176 (9th Cir. 2010) (citing Wolkowitz v. Beverly 10 (In re Beverly), 374 B.R. 221, 230 (9th Cir. BAP 2007), aff’d in 11 part & dismissed in part, 551 F.3d 1092 (9th Cir. 2008)). 12 We review the bankruptcy court’s ruling on a motion to set 13 aside a default judgment for abuse of discretion. Sallie Mae 14 Serv., LP v. Williams (In re Williams), 287 B.R. 787, 791 (9th 15 Cir. BAP 2002) (citing United States v. Real Prop., 135 F.3d 16 1312, 1314 (9th Cir. 1998)). A bankruptcy court abuses its 17 discretion if it applied the wrong legal standard or its findings 18 were illogical, implausible, or without support in the record. 19 See TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 20 (9th Cir. 2011). 21 We review for abuse of discretion the bankruptcy court’s 22 dismissal of a complaint for failure to comply with the rules or 23 court order. See Schmidt v. Herrmann, 614 F.2d 1221, 1224 (9th 24 Cir. 1980). 25 “We do not reverse for errors not affecting substantial 26 rights of the parties, and may affirm for any reason supported by 27 the record.” COM–1 Info, Inc. v. Wolkowitz (In re Maximus 28 Computers, Inc.), 278 B.R. 189, 194 (9th Cir. BAP 2002); see
10 1 28 U.S.C. § 2111; Civil Rule 61, incorporated by Rule 9005. 2 DISCUSSION 3 While many of Mr. Gonzalez’s arguments are unclear, 4 Mr. Gonzalez is proceeding pro se in this appeal, so we will 5 construe the arguments in his brief liberally. See Kashani v. 6 Fulton (In re Kashani), 190 B.R. 875, 883 (9th Cir. BAP 1995). 7 A. The bankruptcy court did not err in awarding Mr. Gonzalez $5,000, rather than $250,000. 8 9 Mr. Gonzalez first assigns error to the bankruptcy court’s 10 award of $5,000 plus costs as nondischargeable under § 523(a)(4). 11 He argues that the bankruptcy court erred by failing to apply the 12 rule of “liberality in amendments.” He claims that his proof of 13 claim for “$250,000 or more,” filed on the same day the 14 bankruptcy court issued its order on the Motion to Set Aside 15 Default, as well as the $250,000 informally requested in the 16 adversary complaint, put the bankruptcy court on notice that he 17 sought recovery of $250,000 from Mr. Kitay. He argues that, 18 because a “[p]roof of claim is prima facie evidence of the 19 validity and amount of claim[,]” the bankruptcy court should have 20 awarded him the entire $250,000 he requested. He requests that 21 the Panel order the $250,000 “paid ‘on demand’ by the liability 22 policy carrier of attorney/debtor Kitay.” 23 Mr. Gonzalez does not understand that filing a proof of 24 claim in a bankruptcy case is different from, and not a 25 substitute for, filing a complaint and presenting evidence in an 26 adversary proceeding. A party who wishes to share in the 27 distribution from a bankruptcy estate generally must file a proof 28 of claim in the parent bankruptcy proceeding. See Rule 3001;
11 1 § 501. A party who wishes to object to the debtor’s discharge, 2 or seek a determination of the dischargeability of debt, must 3 file a complaint to commence an adversary proceeding. See 4 Rule 7001; Rule 7003. Filing a proof of claim in the underlying 5 bankruptcy case is separate from any adversary proceeding: “the 6 filing of a proof of claim does not . . . initiate an adversary 7 proceeding.” Lyon v. Gila River Indian Cmty., 626 F.3d 1059, 8 1070 (9th Cir. 2010) (citing Lundell v. Anchor Constr. 9 Specialists, Inc., 223 F.3d 1035, 1039 (9th Cir. 2000)). 10 The distinction between a proof of claim and a complaint is 11 important in several respects, one of which has to do with the 12 burdens of production and proof. A proof of claim is 13 presumptively valid. Garner v. Shier (In re Garner), 246 B.R. 14 617, 620 (9th Cir. BAP 2000) (“There is an evidentiary 15 presumption that a correctly prepared proof of claim is valid as 16 to liability and amount.”). Anyone who contests the claim must 17 produce evidence sufficient to dispel the presumptive validity of 18 the claim. In an adversary proceeding, however, the plaintiff 19 has the burdens of production and proof. The plaintiff cannot 20 carry or shift that burden by the simple expedient of filing a 21 proof of claim. In other words, the mere filing of a proof of 22 claim does not establish the validity of the claim for the 23 purposes of an adversary proceeding. 24 Mr. Gonzalez points out that, in appropriate circumstances, 25 an adversary complaint can serve as an informal proof of claim. 26 See Dicker v. Dye (In re Edelman), 237 B.R. 146, 154 (9th Cir. 27 BAP 1999). But the converse is not true. While an adversary 28 complaint can sometimes suffice as an informal proof of claim, a
12 1 proof of claim cannot suffice as a complaint under Rules 7001 and 2 7003. The filing of the proof of claim in the underlying 3 bankruptcy proceeding does not affect the adversary proceeding or 4 require the court to determine that the entire amount of the 5 claim is nondischargeable. 6 Moreover, the bankruptcy court’s August 21, 2013 Entry of 7 Default and Order re: Default Judgment Procedures specifically 8 required Mr. Gonzalez to apply for a default judgment and “prove 9 up” his request. The court then found that, based on 10 Mr. Gonzalez’s two alleged payments of $2,500 to Mr. Kitay, 11 $5,000 plus costs were nondischargeable under § 523(a)(4). 12 Mr. Gonzalez did not submit evidence that would substantiate the 13 remainder of his claim for $250,000. In any event, Mr. Gonzalez 14 has not assigned any other error to the award. Accordingly, we 15 hold that the bankruptcy court did not err in awarding 16 Mr. Gonzalez $5,000 plus costs as nondischargeable debt. 17 B. The bankruptcy court did not err in its application of Civil Rule 55(c) and finding that Mr. Kitay stated a meritorious 18 defense. 19 Second, Mr. Gonzalez argues that the court erred in its 20 application of Civil Rule 55 because it held that Mr. Kitay 21 satisfied the second prong of the test by stating a “meritorious 22 defense.” 23 Civil Rule 55(c), made applicable through Rule 7055, 24 provides that “[t]he court may set aside an entry of default for 25 good cause . . . .” The “good cause” inquiry considers three 26 factors: “(1) whether [the defendant] engaged in culpable conduct 27 that led to the default; (2) whether [the defendant] had a 28 meritorious defense; or (3) whether reopening the default
13 1 judgment would prejudice [the plaintiff].” Franchise Holding II, 2 LLC v. Huntington Restaurants Grp., Inc., 375 F.3d 922, 926 (9th 3 Cir. 2004). “As these factors are disjunctive, the district 4 court was free to deny the motion ‘if any of the three factors 5 was true.’” Id. (quoting Am. Ass’n of Naturopathic Physicians v. 6 Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000)). 7 In the present case, the bankruptcy court found that 8 Mr. Kitay could not establish the first and third factors, but 9 that he had stated “a meritorious defense” under the second 10 factor. It stated that Mr. Kitay “has alleged sufficient facts 11 in the motion that, if true[,] would constitute a defense to the 12 plaintiff’s claims.” Nevertheless, because Mr. Kitay did not 13 satisfy all three factors, the court denied the Motion to Set 14 Aside. 15 Mr. Gonzalez argues that the court “overreached to the point 16 of denying [him] an appropriate award of damages according to the 17 amended proof of claim or the amount of damages detailed in the 18 [First Amended Complaint].” He claims that, in another case 19 concerning a motion to set aside, the bankruptcy court stopped 20 its analysis after finding that the movant did not meet the third 21 criterion. Citing In re Christiansen, Case No. 05-200050-B-7, 22 United States Bankruptcy Court for the Eastern District of 23 California, Mr. Gonzalez points to the court’s conclusion that, 24 “[b]ecause the court finds prejudice, it declines to reach the 25 other two possible reasons for denial enumerated in Franchise 26 Holding.” 27 Mr. Gonzalez misapprehends the court’s analysis. While it 28 is true that a movant’s failure to establish any one of the three
14 1 factors is fatal to his position, nothing prevents a court from 2 articulating a complete analysis of all factors. Further, the 3 court’s decision to award Mr. Gonzalez $5,000 rather than 4 $250,000 had nothing to do with its analysis of the second 5 factor. The court awarded $5,000 months before it considered 6 Mr. Kitay’s Motion to Set Aside. The court did not “overreach” 7 when it determined that Mr. Kitay had alleged meritorious 8 defenses. 9 Mr. Gonzalez also argues that the court “overreached” and 10 “made reversible error in finding that Kitay met the second 11 factor . . . .”6 Mr. Gonzalez goes on at length to argue 12 Mr. Kitay’s alleged professional negligence and fraud. However, 13 the bankruptcy court was not adjudicating the merits of 14 Mr. Gonzalez’s case or Mr. Kitay’s defenses. Mr. Kitay needed 15 only to offer “specific facts that would constitute a defense.” 16 Franchise Holding II, LLC, 375 F.3d at 926 (citing Madsen v. 17 Bumb, 419 F.2d 4, 6 (9th Cir. 1969)). Although Mr. Gonzalez may 18 not have liked the fact that Mr. Kitay’s defenses involved 19 allegations of Mr. Gonzalez’s wrongdoing and misconduct, the 20 court found that these facts were sufficient to carry the 21 relatively light burden of stating a meritorious defense. As 22 such, the court did not err in its analysis of the Civil 23 6 24 Mr. Gonzalez seems to conflate the Motion to Set Aside with the Motion to Strike the Adversary Proceeding. He states 25 that the court overreached when it held that Mr. Kitay met the 26 second factor of the three-part test “based on a mistaken and inadvertent mailing error causing no consequence to Kitay.” The 27 late service of the First Amended Complaint is unrelated to Mr. Kitay’s burden to offer meritorious defenses to the claims 28 raised by Mr. Gonzalez.
15 1 Rule 55(c) test, and it did not adjudicate the merits of 2 Mr. Kitay’s defense. 3 Mr. Gonzalez states that, because of the court’s ruling, he 4 will face prejudice by having to “re-litigate” the issues raised 5 by Mr. Kitay. Mr. Gonzalez will face no such burden. In fact, 6 because the bankruptcy court ruled that Mr. Kitay’s 7 nondischargeable liability is only $5,000, Mr. Gonzalez’s 8 additional claims will be barred (assuming Mr. Kitay receives a 9 discharge). 10 In any event, Mr. Gonzalez lacks standing to appeal on this 11 basis, because he prevailed in the bankruptcy court: the court 12 declined to set aside the default. See Duckor Spradling & 13 Metzger v. Baum Tr. (In re P.R.T.C., Inc.), 177 F.3d 774, 777 14 (9th Cir. 1999) (“[C]ourts have created an additional prudential 15 standing requirement in bankruptcy cases: The appellant must be a 16 ‘person aggrieved’ by the bankruptcy court’s order.” (citing 17 Brady v. Andrew (In re Commercial W. Fin. Corp.), 761 F.2d 1329, 18 1334 (9th Cir. 1985))); id. (“An appellant is aggrieved if 19 ‘directly and adversely affected pecuniarily by an order of the 20 bankruptcy court’; in other words, the order must diminish the 21 appellant’s property, increase its burdens, or detrimentally 22 affect its rights.” (quoting Fondiller v. Robertson 23 (In re Fondiller), 707 F.2d 441, 442 (9th Cir. 1983))). 24 C. The court did not err in dismissing the remaining claims for Mr. Gonzalez’s failure to timely serve an amended complaint. 25 26 Next, Mr. Gonzalez argues that the bankruptcy court erred in 27 dismissing his remaining claims for failing to comply with the 28 court’s deadline to serve the First Amended Complaint. We hold
16 1 that the court did not abuse its discretion in dismissing the 2 untimely complaint.7 3 A court may dismiss an untimely complaint pursuant to a 4 federal statute or rule, a local rule, or the court’s inherent 5 power. As the bankruptcy court did not identify the underlying 6 authority for its dismissal, we first consider whether the court 7 properly dismissed the remaining claims under the federal rules. 8 Civil Rule 41(b), which is made applicable to adversary 9 proceedings pursuant to Rule 7041, states that, “[i]f the 10 plaintiff fails to prosecute or to comply with these rules or a 11 court order, a defendant may move to dismiss the action or any 12 claim against it.” Civil Rule 41(b) (emphases added). “[W]hen a 13 plaintiff fails to amend his complaint after the district judge 14 dismisses the complaint with leave to amend, the dismissal is 15 typically considered a dismissal for failing to comply with a 16 court order rather than for failing to prosecute the claim.” 17 Yourish v. Cal. Amplifier, 191 F.3d 983, 986 (9th Cir. 1999). 18 [I]n order for a court to dismiss a case as a sanction, the district court must consider five factors: “(1) the 19 public’s interest in expeditious resolution of litigation; (2) the court’s need to manage its docket; 20 (3) the risk of prejudice to the defendants; (4) the public policy favoring disposition of cases on their 21 merits; and (5) the availability of less drastic alternatives.” We “may affirm a dismissal where at 22 23 7 Mr. Gonzalez also argues that the court erred in 24 dismissing the remaining claims, because, inter alia, it found that Mr. Kitay “acted in willful bad conduct,” it “disregarded 25 the availability of Kitay’s $1M liability policy,” and it did not 26 award $250,000 in the interest of justice. However, these arguments are facially not relevant to dismissal of claims that 27 the debt is nondischargeable, and Mr. Gonzalez develops no arguments that make them pertinent. Therefore, we are unable to 28 discern any error.
17 1 least four factors support dismissal, . . . or where at least three factors ‘strongly’ support dismissal.” 2 “Although it is preferred, it is not required that the district court make explicit findings in order to show 3 that it has considered these factors and we may review the record independently to determine if the district 4 court has abused its discretion.” 5 Id. at 990 (internal citations omitted). “These factors are not 6 a series of conditions precedent before the judge can do 7 anything, but a way for a district judge to think about what to 8 do.” In re Phenylpropanolamine Prods. Liab. Litig., 460 F.3d 9 1217, 1226 (9th Cir. 2006) (internal quotation marks omitted). 10 In the present case, it is undisputed that Mr. Gonzalez did 11 not comply with the court’s order to timely serve the Kitays. 12 The bankruptcy court gave Mr. Gonzalez until November 19, 2013 to 13 file and serve his amended complaint and cautioned that, if 14 Mr. Gonzalez did “not file an amended complaint by the foregoing 15 deadline, the plaintiff’s claims under 11 U.S.C. §§ 523(a)(2)(A), 16 (a)(6), 727(a)(3) and (a)(4) will be dismissed without further 17 notice or hearing.” 18 Mr. Gonzalez filed his First Amended Complaint on 19 November 19. He sent a copy to the Kitays via U.S. mail, but 20 mailed it to the wrong address. He claims that he did not 21 realize the error until the complaint was returned undelivered. 22 Mr. Gonzalez eventually served the Kitays on December 30, over a 23 month past the court’s deadline. 24 In dismissing the First Amended Complaint, the bankruptcy 25 court’s April 8, 2014 order did not explicitly address the five 26 factors articulated in Hernandez and Yourish. We thus review the 27 five factors to determine whether the bankruptcy court abused its 28 discretion in dismissing the First Amended Complaint. See
18 1 Yourish, 191 F.3d at 989 (the appellate court has “not always 2 been troubled by a district court’s failure to explain the 3 reasons for dismissal”). 4 The first two factors weigh heavily in favor of dismissal. 5 First, “the public’s interest in expeditious resolution of 6 litigation always favors dismissal.” Id. at 990. Moreover, 7 “[d]istrict judges are best situated to decide when delay in a 8 particular case interferes with docket management and the public 9 interest.” Id. (quoting Ash v. Cvetkov, 739 F.2d 493, 496 (9th 10 Cir. 1984)). Second, “to be able to manage its docket 11 effectively, the Court must be able to dismiss actions without 12 operative complaints which have stalled due to one party’s 13 unilateral inaction in meeting court-imposed deadlines.” Gleason 14 v. World Sav. Bank, FSB, Case No. 12–cv–03598–JST, 2013 WL 15 3927799, at *1 (N.D. Cal. July 26, 2013). Here, Mr. Gonzalez’s 16 failure to serve his First Amended Complaint for over a month 17 after the court-imposed deadline cuts against the public interest 18 and the court’s ability to manage its docket. The court made 19 clear that Mr. Gonzalez was to “file and serve” the amended 20 complaint by November 19, 2013. The record supports a factual 21 finding that Mr. Gonzalez’s delay interfered with the expeditious 22 resolution of the case. Thus, the first two factors strongly 23 favor dismissal. See Yourish, 191 F.3d at 991 (“[W]e accept [the 24 court’s] factual finding that Plaintiffs knew that they were 25 required to file the amended complaint within sixty days rather 26 than within sixty [days] of the issuance of a written order as 27 they claim. Because the district judge was in a superior 28 position to evaluate the effects of delay on her docket, . . . we
19 1 find that this factor strongly favors dismissal.”). 2 The third factor, the risk of prejudice to the defendants, 3 “is related to the plaintiff’s reason for defaulting in failing 4 to timely amend.” Id. (citation omitted). A plaintiff’s “paltry 5 excuse for his default on the judge’s order” may “indicate[ ] 6 that there was sufficient prejudice to Defendants from the delay 7 . . . .” Id. at 992. In the present case, the bankruptcy court 8 made clear that Mr. Gonzalez’s excuse for his failure to serve 9 the Kitays was unacceptable. It noted that the Kitays had filed 10 a notice of change of address months before Mr. Gonzalez 11 instituted the adversary proceeding. It also pointed out that 12 Mr. Gonzalez had previously used the Kitays’ correct address for 13 earlier filings. In sum, the bankruptcy court found 14 Mr. Gonzalez’s excuses “unavailing.” We agree that Mr. Gonzalez 15 was not justified in untimely serving the Kitays with the First 16 Amended Complaint, and this factor weighs in favor of dismissal.8 17 See League of United Latin Am. Citizens Inc. v. Eureste, 18 No. 13-CV-04725-JSC, 2014 WL 5473560, at *4 (N.D. Cal. Oct. 28, 19 2014) (finding that the third factor slightly favors dismissal 20 where the court “does not find this explanation credible[,]” 21 where the plaintiff claimed he had miscalculated the number of 22 days that he had to file an amended complaint). 23 8 24 Mr. Gonzalez argues that the court should have accepted the untimely filing under Rule 9006(b)(1), which allows for an 25 enlargement of time “where the failure to act was the result of 26 excusable neglect.” However, Rule 9006(b)(1) is invoked “on motion made[,]” and Mr. Gonzalez did not file any motion for 27 enlargement of time. Moreover, the bankruptcy court did not err in rejecting Mr. Gonzalez’s excuse for the late filing, so we do 28 not recognize any “excusable neglect.”
20 1 The fourth factor, whether public policy favors disposition 2 of the case on the merits, “normally weighs strongly against 3 dismissal.” Gleason, 2013 WL 3927799, at *2. On the other hand, 4 “this factor lends little support to a party whose responsibility 5 it is to move a case toward disposition on the merits but whose 6 conduct impedes progress in that direction.” 7 In re Phenylpropanolamine Prods. Liab. Litig., 460 F.3d at 1228. 8 We cannot say that the tardiness in serving the First Amended 9 Complaint created such a great delay as to trump the presumption 10 in favor of resolution on the merits. As such, this factor 11 weighs against dismissal. 12 Finally, we consider whether the bankruptcy court should 13 have employed less drastic alternatives. On the one hand, the 14 Ninth Circuit has held that, in some circumstances, a chance to 15 amend the complaint and a “warning to a party that his failure to 16 obey the court’s order will result in dismissal can satisfy the 17 ‘consideration of alternatives’ requirement.” Ferdik v. 18 Bonzelet, 963 F.2d 1258, 1262 (9th Cir. 1992) (citation omitted). 19 On the other hand, the Ninth Circuit has also held that a warning 20 and “the district court’s granting Plaintiffs leave to amend was 21 not a lesser sanction because they had not yet disobeyed the 22 court’s order.” Yourish, 191 F.3d at 992; see Pagtalunan v. 23 Galaza, 291 F.3d 639, 643 (9th Cir. 2002) (“we are constrained by 24 the holding in Yourish to find that the availability of less 25 drastic alternatives was not considered by the district court”). 26 The record does not disclose whether the bankruptcy court 27 considered less drastic alternatives to dismissal. Although the 28 bankruptcy court gave Mr. Gonzalez a chance to amend his
21 1 deficient pleading and warned that it would dismiss the complaint 2 if not filed and served by November 19, the warning alone appears 3 to be insufficient to constitute a less drastic sanction. As 4 such, this factor weighs against dismissal. 5 In weighing the five factors, we are guided by the Ninth 6 Circuit’s decision in Yourish, which also involved dismissal 7 under Civil Rule 41(b) for failure to timely amend a complaint. 8 In that case, the court granted the defendants’ motion to 9 dismiss, but, upon agreement of the parties, gave the plaintiffs 10 sixty days to file an amended complaint. When the plaintiffs 11 failed to do so, the defendants moved to dismiss the case. The 12 court granted the motion and dismissed the case with prejudice. 13 On appeal, the Ninth Circuit considered the five factors for 14 dismissal under Civil Rule 41(b). As in the present case, the 15 court found that the first three factors favored dismissal, while 16 the latter two factors weighed against dismissal. The court 17 concluded that, “[b]ecause we have found that three factors 18 strongly favor dismissal, we feel that the district court did not 19 abuse its discretion in dismissing Plaintiffs’ case for failing 20 to amend in a timely fashion. Although dismissal was harsh, we 21 do not have a ‘definite and firm conviction’ that the district 22 court ‘committed a clear error of judgment in the conclusion it 23 reached upon a weighing of the relevant factors.’” Yourish, 24 191 F.3d at 992 (quoting Ferdik, 963 F.2d at 1260). 25 Accordingly, because a permissible weighing of the five 26 factors favors dismissal, we hold that the bankruptcy court did 27 not abuse its discretion in dismissing the First Amended 28 Complaint for Mr. Gonzalez’s failure to comply with the court’s
22 1 order.9 (We therefore need not consider the bankruptcy court’s 2 authority to dismiss the amended complaint under the local rules 3 or its inherent powers.) 4 Furthermore, the court dismissed the claims against 5 Mrs. Kitay, who was newly added as a defendant to the First 6 Amended Complaint. The court held that, not only did 7 Mr. Gonzalez fail to timely serve Mrs. Kitay, but objections as 8 to Mrs. Kitay’s “discharge or nondischargeability as to a debt 9 . . . are time-barred; the filing of the FAC on November 19, 2013 10 . . . occurred long after the deadline of April 15, 2013, to file 11 a claim objecting [to Mrs. Kitay’s] discharge or the 12 nondischargeability of a debt as to [Mrs. Kitay] expired.” 13 Mr. Gonzalez does not challenge the court’s dismissal of the 14 claims against Mrs. Kitay as time-barred. As such, the court did 15 not err in dismissing all claims against Mrs. Kitay. 16 D. The Panel declines to consider issues not raised before the bankruptcy court or not properly on appeal. 17 18 Mr. Gonzalez offers materials and arguments not properly 19 before this Panel on appeal. We decline to consider them. 20 First, we will only consider documents that are properly a 21 part of the record below. Except in rare cases where “‘the 22 interests of justice demand it,’ an appellate court will not 23 consider evidence not presented to the trial court[.]” Graves v. 24 9 Presumably in connection with his discussion of prejudice, 25 Mr. Gonzalez argues at length about a law firm that represented 26 both Mr. Kitay and a defendant in one of the state-court cases, Mr. Kitay’s allegations of Mr. Gonzalez’s questionable background 27 and character, and his difficulties collecting the $5,000 award from Mr. Kitay. These arguments are not relevant to the present 28 appeal and are not addressed herein.
23 1 Myrvang (In re Myrvang), 232 F.3d 1116, 1119 n.1 (9th Cir. 2000) 2 (citations omitted). Mr. Gonzalez attaches numerous documents to 3 his appendix (specifically, his Supplemental Excerpts) that were 4 not presented to the bankruptcy court. The vast majority of 5 these documents were filed in the state-court action after the 6 bankruptcy court’s April 8, 2014 order. Furthermore, these 7 documents have little bearing on the present appeal, since they 8 do not appear to concern the issues raised by the bankruptcy 9 court’s April 8, 2014 order. As such, the interests of justice 10 do not demand that we consider the documents and arguments not 11 raised before the bankruptcy court. 12 Second, Mr. Gonzalez requests that the Panel not only award 13 him $250,000 per his proof of claim, but that we order 14 Mr. Kitay’s liability insurer to satisfy the judgment 15 immediately. Mr. Gonzalez’s request is outside of the scope of 16 this appeal. Most importantly, the insurer is not a party to 17 this appeal, so we cannot exercise jurisdiction over the insurer 18 to compel payment. Nor was the insurer a party before the 19 bankruptcy court, and the bankruptcy court never adjudicated the 20 obligations of Mr. Kitay’s insurer. Even if we were to find in 21 Mr. Gonzalez’s favor, we cannot afford Mr. Gonzalez the relief he 22 requests with regard to Mr. Kitay’s insurer. 23 CONCLUSION 24 For the reasons set forth above, we conclude that the 25 bankruptcy court did not err in awarding Mr. Gonzalez $5,000 plus 26 costs under § 523(a)(4) and dismissing his other claims. 27 Accordingly, we AFFIRM. 28