FILED
NOV 04 2014
1 NOT FOR PUBLICATION
2 SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. CC-14-1134-DKiTa
)
6 MICHELE RENEE CLARK, ) Bk. No. 10-41323-RN
)
7 Debtor. ) Adv. Proc. No. 10-03035-RN
______________________________)
8 )
ESTATE OF KIMBERLY KEMPTON, )
9 )
Appellant, )
10 )
v. ) M E M O R A N D U M1
11 )
MICHELE RENEE CLARK, )
12 )
Appellee. )
13 ______________________________)
14 Argued and Submitted on October 23, 2014
at Malibu, CA
15
Filed - November 4, 2014
16
Appeal from the United States Bankruptcy Court
17 for the Central District of California
18 Honorable Richard Neiter, Bankruptcy Judge, Presiding
19
Appearances: Charles G. Kinney argued for the appellant; Eric
20 Chomsky argued for the appellee.
21
Before: DUNN, KIRSCHER, and TAYLOR, Bankruptcy Judges.
22
23
24
25
26 1
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 8013-1.
-1-
1 Judith Kempton (“Appellant”), as personal representative of
2 the estate of Kimberly Kempton (“Ms. Kempton”), appeals the
3 bankruptcy court’s order (“Dismissal Order”) reopening and
4 dismissing Ms. Kempton’s adversary proceeding (“Adversary
5 Proceeding”) against chapter 7 debtor Michele R. Clark
6 (“Ms. Clark”), based on the claim preclusive effect of the state
7 court’s dismissal with prejudice of Ms. Kempton’s underlying
8 state law claims.2 As discussed in greater detail infra, we
9 consider this appeal as encompassing certain interlocutory orders
10 entered by the bankruptcy court in the adversary proceeding prior
11 to its entry of the Dismissal Order, but we do not consider
12 orders entered by the bankruptcy court in Ms. Clark’s main
13 chapter 7 case or orders entered in independent state court
14 proceedings. We AFFIRM.
15 I. FACTUAL BACKGROUND
16 Both the Appellant and Ms. Clark have filed excerpts of
17 record in this appeal, but their excerpts fail to include a
18 number of documents filed in the Adversary Proceeding that are
19 material to our disposition of this appeal.3 We have exercised
20
21 2
Unless otherwise indicated, all chapter and section
22 references are to the federal Bankruptcy Code,
11 U.S.C. §§ 101-
1532, and all “Rule” references are to the Federal Rules of
23 Bankruptcy Procedure, Rules 1001-9037. All “Civil Rule”
24 references are to the Federal Rules of Civil Procedure.
3
25 Ms. Clark argues in her answering brief that we should
summarily affirm the bankruptcy court based on deficiencies in
26 Appellant’s opening brief and excerpts of record and violations
27 by Appellant of the rules of appellate procedure. Appellant
clearly could have done better, but we certainly have seen worse.
28 (continued...)
-2-
1 our discretion to review the bankruptcy court’s Adversary
2 Proceeding and main case dockets and the documents on record
3 therein to assist us in our consideration of this appeal. See
4 O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.),
887 F.2d
5 955, 957-58 (9th Cir. 1989); Atwood v. Chase Manhattan Mortg. Co.
6 (In re Atwood),
293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). The
7 following factual narrative relies on information gleaned from
8 that review as well as from the parties’ excerpts of record, but
9 the narrative is limited to factual information relevant to this
10 appeal.4
11 A. Pre-Bankruptcy Disputes
12 In 2005, Ms. Kempton and Charles G. Kinney, an attorney who
13 represented Ms. Kempton before the bankruptcy court and is one of
14 the attorneys representing Appellant in this appeal
15 (“Mr. Kinney”), purchased a residence on Fernwood Avenue in Los
16
3
17 (...continued)
“It is too late in the day and entirely contrary to the spirit of
18 the [Civil Rules] for decisions on the merits to be avoided on
19 the basis of such mere technicalities.” Foman v. Davis,
371 U.S.
178, 181 (1962). Accordingly, we determine in our discretion to
20 proceed to consider the merits of Appellant’s appeal.
21 4
The parties have filed multiple motions to augment the
22 record and/or for judicial notice of various documents filed in
California state court proceedings and supplemental authorities
23 (“Motions for Judicial Notice”). We have considered the
supplemental authorities submitted to the extent that they relate
24
to the issues we are deciding in this appeal. As for the
25 documents, primarily orders, from state court proceedings, we
have considered such documents to the extent they were presented
26 to the bankruptcy court in the Adversary Proceeding, as discussed
27 in the following factual narrative, but otherwise deny the
Motions for Judicial Notice, as not presenting documents relevant
28 for our consideration in this appeal.
-3-
1 Angeles (“Fernwood Property”) from Ms. Clark. Mr. Kinney
2 negotiated the Fernwood Property purchase contract for himself
3 and Ms. Kempton.
4 Ms. Kempton and Mr. Kinney subsequently alleged that
5 Ms. Clark “intentionally, willfully, and maliciously concealed
6 many adverse material facts [about the Fernwood Property] during
7 the negotiations . . . , all of which were required to be
8 disclosed under California law.” Ms. Kempton and Mr. Kinney
9 eventually sued Ms. Clark and her real estate brokers for “fraud,
10 nondisclosure, and rescission” in California state court (the
11 “State Court Litigation”). Actually, Mr. Kinney filed and
12 pursued a number of lawsuits with regard to the purchase of the
13 Fernwood Property, described as follows by the California Court
14 of Appeal:
15 This unusual case involves Charles G. Kinney, a
lawyer who was declared a vexatious litigant in 2008 in
16 Los Angeles Superior Court. . . . Despite his status
as a vexatious litigant, Kinney has pursued a
17 persistent and obsessive campaign of litigation terror
against his neighbors and the City of Los Angeles.
18 Kinney has evaded the effect of the 2008 prefiling
order by enlisting a cohort, Kimberly Jean Kempton, to
19 stand in his stead as plaintiff and appellant, because
Kinney can no longer represent himself in litigation
20 without prior court approval. . . .
With Kinney at the helm, Kempton has pursued six
21 lawsuits in Los Angeles Superior Court over the last
five years. All of the lawsuits relate to the
22 [Fernwood Property]. [Ms. Kempton and Mr. Kinney] have
continually – and resoundingly – lost their cases in
23 the trial courts. As one trial judge aptly wrote in a
statement of decision, Kinney is “a relentless bully”
24 who displays “terrifying arrogance” by filing “baseless
litigation against the City and its citizens.”
25 After losing in the trial courts, [Ms. Kempton and
Mr. Kinney] have repeatedly appealed. Since 2007, they
26 have lost 13 appeals, had two appeals involuntarily
dismissed and had a writ petition summarily denied. We
27 conclude that Attorney Kinney is using [Ms.] Kempton as
his proxy or puppet in order to continue his career as
28 a vexatious litigant. This opinion and order will
-4-
1 serve to curb that behavior.
2 In re Finding of Charles G. Kinney, as a Vexatous Litigant,
3
201 Cal.App.4th 951, 953 (2011); Adversary Proceeding Docket
4 No. 12, Exhibit A, at 3.5
5 In part as a result of the litigation barrage from
6 Mr. Kinney and Ms. Kempton, Ms. Clark sought relief in chapter 7
7 on August 6, 2010, in Case No. 2:10–bk–41323–RN (the “Main
8 Case”).
9 B. The Adversary Proceeding
10 On November 8, 2010, Ms. Kempton filed the Adversary
11 Proceeding, Case No. 2:10–ap–03035. In the Adversary Proceeding
12 complaint, Ms. Kempton asserted exception to discharge claims
13 under §§ 523(a)(2)(A) and (6), based on claims made in the stayed
14
15
5
The California Court of Appeal went on to conclude:
16
17 Kinney has brought a multitude of cases – and lost
every one of them – in two different counties, all
18 relating to the properties he owns. When authorized,
19 the courts have ordered him to reimburse his opponents’
attorney fees. Despite paying tens of thousands of
20 dollars to his opponents for the attorney fees that
they needlessly incurred to fight him off, Kinney is
21 undeterred. He continues to sue and to appeal, wasting
22 vast quantities of judicial resources and taxpayer
money to process his absurd and unsupported claims.
23 Kinney’s conduct must be stopped, immediately.
24
Id. at 960; Adversary Proceeding Docket No. 12, Exhibit A, at 5.
25 The Court of Appeal’s Opinion served “as a prefiling order
prohibiting Kinney from filing any new litigation – either in his
26 own name or in the name of [Ms. Kempton] – in the courts of
27 [California] without first obtaining leave of the presiding
judge.” Id. at 960-61; Adversary Proceeding Docket No. 12,
28 Exhibit A, at 6.
-5-
1 State Court Litigation. Ms. Clark filed an answer to the
2 complaint on December 16, 2010.
3 The bankruptcy court held a case management conference in
4 the Adversary Proceeding on January 20, 2011. We do not know
5 what was discussed at the case management conference because we
6 have not been provided with a transcript. However, the
7 bankruptcy court entered an Order re: Case Management (“Case
8 Management Order”) on March 3, 2011, staying the Adversary
9 Proceeding pending the outcome of the State Court Litigation.
10 The Case Management Order further provided:
11 2. [Ms.] Clark must appear and defend in the [State
Court Litigation], which amounts to relief from the
12 bankruptcy automatic stay as to her, subject to the
Bankruptcy Court’s review of, and decision regarding,
13 any judgment entered by the State Court against
[Ms.] Clark before any enforcement of that State Court
14 judgment can occur.
3. If such a judgment against [Ms.] Clark is entered
15 in the State Court [Litigation], enforcement of said
judgment is still subject to the stay of 11 USC 362 and
16 will require a further order of this Court.
17 Over a year later, on April 27, 2012, Ms. Kempton moved to
18 vacate (“Motion to Vacate”) the Case Management Order sending the
19 State Court Litigation back to the California state court,
20 arguing, among other things, that Ms. Clark’s attorneys might
21 succeed in having the State Court Litigation dismissed “using
22 State Court laws.” Ms. Clark opposed the Motion to Vacate, and
23 Ms. Kempton replied to Ms. Clark’s opposition.
24 In fact, on or about May 21, 2012, the California State
25 Court entered an order (“Security Order”) in the State Court
26 Litigation in response to Ms. Clark’s motion as follows:
27 IT IS HEREBY ORDERED . . . that Plaintiff Kempton is
declared a Vexatious Litigant in this litigation
28 because she is a strawman for Kinney, and/or Kinney is
-6-
1 using her as his puppet or proxy in this litigation.
The Court bases this finding on In re Kinney (2011)
2
201 Cal.App.4th 951, and Kempton’s failure to submit a
declaration disputing this finding. In light of the
3 prior findings that Kinney is a vexatious litigant
under CCP § 391.1, Kempton is bound by this
4 determination in this case. Kempton shall post
security in the sum of $185,000 no later than 6/4,
5 2012, for Clark’s attorneys’ fees and other defense
expenses in the event judgment is against Plaintiff.
6 If the bond is not posted by this date, the case shall
be dismissed.
7
8 Adversary Proceeding Docket No. 12.
9 On June 13, 2012, Ms. Kempton filed a motion for a temporary
10 restraining order in the Adversary Proceeding, seeking to vacate
11 the Case Management Order (and, from Ms. Kempton’s perspective,
12 hoping to void any intervening orders entered by the California
13 state court in the State Court Litigation) and to set a trial
14 date in the Adversary Proceeding. In her motion, she claimed
15 that irreparable harm would result to her if the State Court
16 Litigation were dismissed based on the requirements of the
17 Security Order.
18 On June 15, 2012, the California state court entered an
19 order (“State Court Litigation Dismissal Order”) dismissing the
20 State Court Litigation with prejudice based upon Ms. Kempton’s
21 failure to satisfy the requirements of the Security Order. There
22 is no evidence in the record before us that Ms. Kempton ever
23 appealed the State Court Litigation Dismissal Order. Ms. Clark
24 has submitted in her excerpts of record a Remittitur and Order
25 from the California Court of Appeal, entered December 31, 2012
26 and September 13, 2012 respectively, that evidence denial of
27 Mr. Kinney’s appeals from “vexatious litigant” and prefiling
28 orders entered against him. On April 29, 2013, the United States
-7-
1 Supreme Court denied Mr. Kinney’s petition for writ of
2 certiorari, which, among other things, denied Mr. Kinney’s
3 request for a trial in federal court of Ms. Kempton’s claims in
4 the Adversary Proceeding. See Adversary Proceeding Docket
5 No. 54, at 6. The State Court Litigation Dismissal Order is
6 final for California state law purposes.
7 The Motion to Vacate was heard by the bankruptcy court on
8 June 19, 2012. Again, we have not been provided with a
9 transcript; so, we do not know what was discussed at the June 19,
10 2012 hearing. However, the bankruptcy court posted a tentative
11 decision in advance of the hearing that was incorporated in and
12 attached to its order denying the Motion to Vacate, entered on
13 July 30, 2012 (the “July 30, 2012 Order”).
14 In its tentative decision, the bankruptcy court indicated
15 that it was inclined to deny the Motion to Vacate for a number of
16 reasons, including the following: 1) If the State Court
17 Litigation were dismissed for failure to post the required
18 security bond, such dismissal “will be by Plaintiff’s
19 [Ms. Kempton’s] own doing” in light of the California state
20 court’s holding, “consistent with the California Court of Appeal
21 and Supreme Court,” that “Mr. Kinney and/or Ms. Kempton are
22 vexatious litigants.” In such circumstances, the bankruptcy
23 court would “give full faith and credit to the [California state
24 court’s] decision to dismiss the case, and the [Adversary
25 Proceeding] will also be dismissed.” 2) If the State Court
26 Litigation were not dismissed, the bankruptcy court had already
27 decided that the State Court Litigation should continue in
28 California state court because the State Court Litigation
-8-
1 involves State law issues and non-debtor parties (such
as the Real Estate Broker); the State law claims can be
2 most expeditiously tried in State Court; they can be
tried by a jury in that Court but not in Bankruptcy
3 Court . . .; the litigation over the subject real
estate transaction has been pending in the State Court
4 since 2006; and this Court sees no reason to vacate the
[Case Management Order].
5
6 On December 6, 2012, the Adversary Proceeding was closed
7 administratively. On December 17, 2012, Ms. Kempton moved to
8 reopen the Adversary Proceeding, asserting, among other reasons,
9 that the “debt” owed by Ms. Clark to Ms. Kempton “was never
10 determined by any court.” In his Declaration filed in support of
11 the motion to reopen, Mr. Kinney advised that he had filed a
12 motion in the California state court to overturn the Security
13 Order. Thereafter, the Adversary Proceeding was reopened, as
14 closed by inadvertent clerical error, by order entered on
15 December 20, 2012.
16 On October 4, 2013, the Adversary Proceeding again was
17 closed administratively, in conjunction with the closing of the
18 Main Case, since “it appears that no further matters are pending
19 that require this [Adversary Proceeding] remain open.” On
20 November 4, 2013, the Appellant [Ms. Kempton apparently was now
21 deceased] moved to reopen the Adversary Proceeding, supported by
22 the Declaration of Mr. Kinney. A hearing (“Hearing”) was set on
23 the motion to reopen for March 13, 2014. Ms. Clark opposed the
24 motion to reopen, supported by the Declaration of her counsel.
25 The Appellant filed a reply on March 6, 2014.
26 The bankruptcy court posted a tentative ruling in advance of
27 the Hearing. At the Hearing, after hearing argument from counsel
28 for the Appellant and Ms. Clark, the bankruptcy court stated that
-9-
1 1) it would reopen the Adversary Proceeding because it was not
2 properly closed on October 4, 2013, and 2) it then would dismiss
3 the Adversary Proceeding “because the underlying fraud action was
4 dismissed in State Court.” Tr. of March 13, 2014 hr’g, 8:14-17;
5 11:7-11.
6 On March 21, 2014, the bankruptcy court entered the
7 Dismissal Order, reopening and dismissing the Adversary
8 Proceeding. In the Dismissal Order, the bankruptcy court
9 incorporated all but the last two sentences of its tentative
10 ruling. In its tentative ruling, the bankruptcy court noted that
11 the October 4, 2013 closing of the Adversary Proceeding was
12 inappropriate procedurally in that none of the reasons stated on
13 the closing docket entry applied. Accordingly, the bankruptcy
14 court would reopen the Adversary Proceeding to correct the
15 clerical error in closing it. However, getting to the substance
16 of the matter, the bankruptcy court noted that, “[t]he dismissal
17 of the [State Court Litigation] is final and no appeal of the
18 dismissal was taken.” Dismissal Order, at 4. “[I]n view of the
19 final non-appealable order in the state court dismissing the
20 [State Court Litigation], there appears to be no basis for the
21 Plaintiff’s nondischargeability claim but an order to that effect
22 needs to be entered in order to dispose of the [Adversary
23 Proceeding] properly.” Dismissal Order, at 6.
24 The Appellant filed a timely Notice of Appeal on March 24,
25 2014.6
26
27 6
In her Answering Brief, Ms. Clark argues that this appeal
28 (continued...)
-10-
1 II. JURISDICTION
2 The bankruptcy court had jurisdiction under 28 U.S.C.
3 §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C.
4 § 158.
5 III. ISSUES
6 In the Statement of Issues filed with the bankruptcy court
7 (Adversary Proceeding Docket No. 73) and in her Opening Brief,
8 Appellant lists eighteen issues for consideration in this appeal.
9 Some of the listed issues relate to proceedings and orders in the
10 Main Case, in California state courts and in federal district
11 court that are not properly before us in this appeal, as
12 discussed more fully infra. Otherwise, we distill the issues
13 before us in this appeal down to the following two:
14 1) Did the bankruptcy court abuse its discretion in staying
15 the Adversary Proceeding pending the outcome of the State Court
16 Litigation and in granting relief from stay so that the State
17 Court Litigation could proceed?
18 2) Did the bankruptcy court err in dismissing the Adversary
19 Proceeding based on its conclusion that no debt was owed by
20 Ms. Clark to Ms. Kempton and the Appellant, as Ms. Kempton’s
21
22 6
(...continued)
23 is untimely for some or all purposes, as no Notice of Appeal was
filed within fourteen days following the administrative closing
24
of the Adversary Proceeding on October 4, 2013, pursuant to the
25 requirements of Rule 8002(a). Since we agree with the bankruptcy
court that the closing of the Adversary Proceeding on October 4,
26 2013 was the result of clerical error, the operative order was
27 the Dismissal Order, entered on March 21, 2014, and the Notice of
Appeal filed in behalf of the Appellant three days later was
28 timely.
-11-
1 successor in interest?
2 IV. STANDARDS OF REVIEW
3 We review a bankruptcy court’s decision to dismiss an
4 adversary proceeding on the pleadings de novo. Henry A. v.
5 Willden,
678 F.3d 991, 998 (9th Cir. 2012). Likewise, we review
6 a bankruptcy court’s summary judgment determinations and its
7 interpretations of bankruptcy and state law de novo. Trunk v.
8 City of San Diego,
629 F.3d 1099, 1105 (9th Cir. 2011) (summary
9 judgment); Hopkins v. Cerchione (In re Cerchione),
414 B.R. 540,
10 545 (9th Cir. BAP 2009) (interpretation of the Bankruptcy Code
11 and state law). De novo means that we consider a matter anew, as
12 if no decision previously had been rendered. Dawson v. Marshall,
13
561 F.3d 930, 933 (9th Cir. 2009).
14 We review a bankruptcy court’s case management decisions for
15 abuse of discretion. GCB Commc’ns, Inc. v. U.S. S. Commc’ns,
16 Inc.,
650 F.3d 1257, 1262 (9th Cir. 2011); Rivera v. Orange Cnty
17 Probation Dept. (In re Rivera),
511 B.R. 643, 648 (9th Cir. BAP
18 2014). A bankruptcy court abuses its discretion if it applies an
19 incorrect legal standard or misapplies the correct legal
20 standard, or if its fact findings are illogical, implausible or
21 without support from evidence in the record. TrafficSchool.com
22 v. Edriver Inc.,
653 F.3d 820, 832 (9th Cir. 2011).
23 We may affirm a decision of the bankruptcy court on any
24 basis supported by the record. Shanks v. Dressel,
540 F.3d 1082,
25 1086 (9th Cir. 2008).
26 V. DISCUSSION
27 A. Main Case Proceedings and Orders
28 We begin our analysis by discussing some matters that are
-12-
1 not appropriately considered in this appeal. Rule 8001 sets
2 forth the procedure for appealing bankruptcy court orders and
3 judgments. Rule 8001(a), which is adapted from Rule 3(a) of the
4 Federal Rules of Appellate Procedure (“FRAP”), provides that:
5 An appeal from a judgment, order, or decree of a
bankruptcy judge to a district court or bankruptcy
6 appellate panel as permitted by
28 U.S.C. § 158(a)(1)
or (a)(2) shall be taken by filing a notice of appeal
7 with the clerk within the time allowed by Rule 8002
. . . . The notice of appeal shall (1) conform
8 substantially to the appropriate Official Form, . . . .
9 The appropriate Official Form is Form 17, which provides in its
10 initial paragraph as follows:
11 _____________, the plaintiff [or defendant or other
party] appeals under
28 U.S.C. § 158(a) or (b) from the
12 judgment, order, or decree of the bankruptcy judge
(describe) entered in this adversary proceeding [or
13 other proceeding, describe type] on the ___ day of
(month), (year).
14
15 Accordingly, the appellant is required to designate in the notice
16 of appeal the specific judgment or order appealed from in the
17 particular concerned case.
18 In the Notice of Appeal filed by Appellant herein, Appellant
19 states that she is appealing the Dismissal Order, copies of which
20 are attached to the Notice of Appeal.7 The Notice of Appeal
21 does not identify any other order(s) that the Appellant seeks to
22 appeal.
23 We discuss interlocutory orders in the Adversary Proceeding
24 that merged in the final Dismissal Order infra, but proceedings
25
26 7
The Dismissal Order apparently was docketed both as an
27 order reopening the Adversary Proceeding (see Adversary
Proceeding Docket No. 62) and as an order dismissing the
28 Adversary Proceeding (see Adversary Proceeding Docket No. 63).
-13-
1 and orders in the Main Case are fundamentally different in that
2 the Main Case and the Adversary Proceeding are not the same
3 cases. “An adversary proceeding is . . . part of the bankruptcy
4 but it is not the bankruptcy case itself, as illustrated by the
5 fact that the dismissal of an adversary proceeding is an
6 appealable final order even though the bankruptcy [main] case
7 continues.” United States v. Peel,
595 F.3d 763, 768-69 (7th
8 Cir. 2010), cert. denied, Peel v. United States,
131 S.Ct. 994
9 (2011) (citing Marchiando v. Illinois (In re Marchiando),
13 F.3d
10 1111, 1113-14 (7th Cir. 1994)). The Appellant did not designate
11 or identify any order(s) in the Main Case that she sought to
12 appeal in her Notice of Appeal.
13 A mistake in designating an order or judgment that the
14 appellant seeks to appeal in a notice of appeal is not
15 necessarily fatal to an appeal “so long as the intent to appeal a
16 specific judgment can be fairly inferred from the notice and
17 appellee is not misled by the mistake.” Kelly v. United States,
18
789 F.2d 94, 96 n.3 (1st Cir. 1986). See Foman v. Davis,
19
371 U.S. 178 (1962). “[I]f a litigant files papers in a fashion
20 that is technically at variance with the letter of a procedural
21 rule, a court may nonetheless find that the litigant has complied
22 with the rule if the litigant’s action is the functional
23 equivalent of what the rule requires.” Torres v. Oakland
24 Scavenger Co.,
487 U.S. 312, 316-17 (1988) (emphasis added).
25 However, that liberal principle of construction is not without
26 limits and does not excuse noncompliance with the rules of
27 appellate procedure. See Smith v. Barry,
502 U.S. 244, 248
28 (1992). “[A]lthough a court may construe [FRAP] liberally in
-14-
1 determining whether they have been complied with, it may not
2 waive the jurisdictional requirements of Rules 3 and 4, even for
3 ‘good cause shown’ under Rule 2, if it finds that they have not
4 been met.” Torres v. Oakland Scavenger Co.,
487 U.S. at 317.
5 Nothing in the Notice of Appeal here gives any indication
6 that Appellant sought to appeal any order in the Main Case.
7 Since the Main Case was closed on October 4, 2013, the deadline
8 for filing a notice of appeal with respect to any order in the
9 Main Case under Rule 8002 is long past. Nothing in the record
10 before us tends to establish that the Appellant or her
11 predecessor in interest ever filed a notice of appeal with
12 respect to any order entered in the Main Case. Accordingly, we
13 do not consider any issues raised by Appellant as to the actions
14 of the chapter 7 trustee or Ms. Clark’s attorneys in the Main
15 Case and specifically, any abandonment order(s) entered by the
16 bankruptcy court in the Main Case as encompassed by this appeal.
17 See, e.g., Spookyworld, Inc. v. Town of Berlin
18 (In re Spookyworld, Inc.),
346 F.3d 1, 6 (1st Cir. 2003).
19 B. The Case Management Order
20 Pulling together the threads of Appellant’s wide-ranging
21 arguments in her opening brief presents a challenge, but we
22 interpret one argument submitted by Appellant as follows: Lifting
23 the automatic stay of § 362 in the Case Management Order was
24 procedurally improper because the requirements of § 362(d) were
25 not followed. See Appellant’s Opening Brief, at 17 and 24. In
26 relevant part, § 362(d) provides that in appropriate
27 circumstances, the automatic stay can be lifted “[o]n request of
28 a party in interest and after notice and a hearing.”
-15-
1 Appellant did not designate the Case Management Order in her
2 Notice of Appeal as an order that she was appealing. However, in
3 her Statement of Issues, issue number two is stated as: “Whether
4 the US Bankruptcy Court can transfer KEMPTON’s adversary
5 proceeding to the State Court for a determination by the State
6 Court of any ‘debt’ owed by CLARK to KEMPTON on March 3, 2011,
7 without any motion for relief from stay or similar motion to
8 allow such a transfer to State Court under 11 U.S.C. Sec. 362?”
9 See Adversary Proceeding Docket No. 73, at 3. The Case
10 Management Order was an interlocutory order in the Adversary
11 Proceeding that without leave, could not be appealed until a
12 final judgment, i.e., the Dismissal Order, was entered. See,
13 e.g.,
28 U.S.C. § 158(a); Baldwin v. Redwood City,
540 F.2d 1360,
14 1364 (9th Cir. 1976); Adamian v. Jacobsen,
523 F.2d 929, 931 (9th
15 Cir. 1975). Since Appellant manifested a clear intent to appeal
16 the interlocutory Case Management Order in her Statement of
17 Issues and argued that lifting the stay in the Case Management
18 Order was not proper procedurally in her opening brief, to which
19 argument Ms. Clark responded in her answering brief (see
20 Appellee’s Answering Brief, at 11 and 15-18), we conclude that it
21 is appropriate to consider the Case Management Order in this
22 appeal. See Foman v. Davis,
371 U.S. at 181.
23 However, considering the entire record before us (and what
24 is not before us) in this appeal, we conclude that we must affirm
25 the Case Management Order for the following reasons:
26 1. “Where there is a clearly inadequate record on appeal,
27 we have ‘little choice’ but to affirm.” Hardcastle v. Greer
28 (In re Hardcastle),
2013 WL 5944042, at *9 (9th Cir. BAP Nov. 7,
-16-
1 2013) (emphasis in original), citing Morrissey v. Stuteville
2 (In re Morrissey),
349 F.3d 1187, 1191 (9th Cir. 2003). As noted
3 above, while Appellant included the Case Management Order itself
4 in her excerpts of record, we do not have a transcript of the
5 case management conference that generated the order. So, we do
6 not know what was discussed at the case management conference or
7 what rationale the bankruptcy court articulated in determining to
8 issue the Case Management Order. In light of Appellant’s failure
9 to provide us with a transcript of the case management
10 conference, we are entitled to presume that the Appellant does
11 not think that a transcript would be helpful to her in this
12 appeal. See Gionis v. Wayne (In re Gionis),
170 B.R. 675, 681
13 (9th Cir. BAP 1994).
14 2. “As a general rule issues which have not been raised in
15 the trial court will not be reviewed on appeal.” Scott v.
16 Pacific Maritime Ass’n,
695 F.2d 1199, 1203 (9th Cir. 1983).
17 “Ordinarily, if an issue is not raised before the trial court, it
18 will not be considered on appeal and will be deemed waived.”
19 Levesque v. Shapiro (In re Levesque),
473 B.R. 331, 336 (9th Cir.
20 BAP 2012). Beverly Cmty. Hosp. Ass’n v. Belshe,
132 F.3d 1259,
21 1267 (9th Cir. 1997) (“[B]efore an appellate court will consider
22 . . . an issue, ordinarily the argument must have been raised
23 sufficiently for the trial court to rule on it.”).
24 We have reviewed the documents on the Adversary Proceeding
25 docket very carefully, and we do not find that Appellant or
26 Ms. Kempton ever argued to the bankruptcy court that the Case
27 Management Order was improperly entered because the bankruptcy
28 court lifted the § 362 stay sua sponte to allow the State Court
-17-
1 Litigation to proceed. The only reference to this issue that we
2 have been able to find in pleadings by Ms. Kempton or the
3 Appellant in the Adversary Proceeding is the following statement
4 in the “History” section of Appellant’s reply pleading with
5 respect to her motion to reopen the Adversary Proceeding: “This
6 Court at a case management conference for the [Adversary
7 Proceeding] ordered CLARK to ‘appear and defend’ in a 2007 State
8 Court fraud case on March 3, 2011 without any party requesting
9 such relief (e.g. from the automatic stay) under 11 U.S.C.
10 Sec. 362.” See Adversary Proceeding Docket No. 61, at 2
11 (emphasis in original). That document was filed more than two
12 years after the Case Management Order was entered. No argument
13 that the Case Management Order was improper because no party had
14 moved in advance for relief from the automatic stay to allow the
15 State Court Litigation to proceed was made by Appellant’s counsel
16 at the Hearing.
17 3. As to the substance of Appellant’s argument, the Case
18 Management Order documents decisions of the bankruptcy court made
19 at the case management conference in January 2011. As we noted
20 supra, case management decisions are reviewed for abuse of
21 discretion. GCB Commc’ns, Inc. v. U.S. S. Commc’ns, Inc.,
22
650 F.3d at 1262; In re Rivera, 511 B.R. at 648.
23 Rule 7016 makes Civil Rule 16 applicable in adversary
24 proceedings in bankruptcy. Civil Rule 16(a) states the purposes
25 for a pretrial or case management conference as follows:
26 In any action, the court may order the attorneys and
any unrepresented parties to appear for one or more
27 pretrial conferences for such purposes as:
(1) expediting disposition of the action;
28 (2) establishing early and continuing control so
-18-
1 that the case will not be protracted because of
lack of management;
2 (3) discouraging wasteful pretrial activities;
(4) improving the quality of the trial through
3 more thorough preparation; and
(5) facilitating settlement.
4
5 Although our review is hampered by the absence of a transcript of
6 the case management conference, there are indications in the
7 Adversary Proceeding record as to the reasoning behind the
8 bankruptcy court’s decision to stay the Adversary Proceeding
9 until the underlying State Court Litigation was resolved.
10 In the Motion to Vacate, counsel for Ms. Kempton noted that
11 “this Court expected a ‘trial’ to occur in State Court but then
12 come back to this Court for ‘judgment’ with required findings and
13 conclusions [to benefit CLARK so she would not have to go through
14 2 trials in pro per].” See Adversary Proceeding Docket No. 6, at
15 2. In its tentative decision incorporated in the July 30, 2012
16 Order, the bankruptcy court further noted that it already had
17 decided (presumably at the case management conference) that the
18 State Court Litigation should continue to a conclusion in the
19 California state court because the State Court Litigation
20 involves State law issues and non-debtor parties (such
as the Real Estate Broker); the State law claims can be
21 most expeditiously tried in State Court; they can be
tried to a jury in that Court but not in Bankruptcy
22 Court . . .; the litigation over the subject real
estate transaction has been pending in the State Court
23 since 2006 . . . .
24 Contrary to Appellant’s argument, there is authority that a
25 bankruptcy court can lift the automatic stay of § 362 sua sponte
26 in appropriate circumstances. Section 105(a) provides that,
27 The [bankruptcy] court may issue any order, process, or
judgment that is necessary or appropriate to carry out
28 the provisions of this title. No provision of this
-19-
1 title providing for the raising of an issue by a party
in interest shall be construed to preclude the
2 [bankruptcy] court from, sua sponte, taking any action
or making any determination necessary or appropriate to
3 enforce or implement court orders or rules, or to
prevent an abuse of process.
4
5 Section 105(a) has been interpreted as allowing a bankruptcy
6 court to lift the automatic stay sua sponte to allow related
7 litigation to proceed in another court. See, e.g.,
8 In re Laventhol & Horwath,
139 B.R. 109, 116 and n.6 (Bankr.
9 S.D.N.Y. 1992); Bellucci v. Swift (In re Bellucci),
119 B.R. 763,
10 778-79 (Bankr. E.D. Cal. 1990). See also In re Henderson,
11
395 B.R. 893, 899 (Bankr. D.S.C. 2008); Harris v. Margaretten
12 (In re Harris),
203 B.R. 46, 50 n.1 (Bankr. E.D. Va. 1994). Cf.
13 Case Management Manual for United States Bankruptcy Judges 73
14 (Fed. Judicial Center, 2d ed. 2012) (“From a practical
15 standpoint, an order granting abstention should include a
16 provision granting relief from the automatic stay to permit the
17 matter to proceed in the appropriate forum.”).
18 In these circumstances, we do not perceive an abuse of
19 discretion in the bankruptcy court’s decision to lift the
20 automatic stay of § 362 to allow the State Court Litigation to
21 proceed in the California state courts prior to moving forward
22 with the Adversary Proceeding, and we conclude that the
23 bankruptcy court did not err in entering the Case Management
24 Order.8
25
26 8
In her reply brief, Appellant includes the July 30, 2012
27 Order among the orders to which her Notice of Appeal might relate
(see Appellant’s Reply Brief, at 10). However, she does not
28 (continued...)
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1 C. The State Court Litigation
2 In light of our conclusion that the bankruptcy court did not
3 abuse its discretion in lifting the automatic stay to allow the
4 State Court Litigation to proceed, we do not perceive that we
5 have any authority to review, let alone reverse, subsequent
6 orders and decisions of the California state courts in the State
7 Court Litigation. Under the Full Faith and Credit Act,
8 implementing the Constitution’s Full Faith and Credit Clause, we
9 are required to accord the decisions of state courts “the same
10 full faith and credit . . . as they have by law or usage in the
11 courts of such State . . . from which they are taken.” 28 U.S.C.
12 § 1738; Migra v. Warren City Sch. Dist. Bd. of Edu.,
465 U.S. 75,
13 80 (1984). In addition, we have no authority to review on appeal
14 the decisions of the California state courts in the State Court
15 Litigation. “[T]he Rooker-Feldman doctrine provides that the
16 United States Supreme Court is the only federal court that may
17 review an issue previously determined or ‘inextricably
18 intertwined’ with the previous action in state court between the
19
20
8
(...continued)
21 assert any argument in her opening brief (or in her reply brief
22 either, for that matter) as to why the bankruptcy court erred in
entering the July 30, 2012 Order. “The Court of Appeals will not
23 ordinarily consider matters on appeal that are not specifically
and distinctly argued in the appellant’s opening brief.” Miller
24
v. Fairchild Indus., Inc.,
797 F.2d 727, 737 (9th Cir. 1986).
25 Christian Legal Soc. v. Wu,
626 F.3d 483, 487-88 (9th Cir. 2010);
Jodoin v. Samayoa (In re Jodoin),
209 B.R. 132, 143 (9th Cir. BAP
26 1997). Since Appellant does not make any argument asserting
27 error with respect to the July 30, 2012 Order, any such argument
is waived, and we do not consider the July 30, 2012 Order
28 further.
-21-
1 same parties.” Huse v. Huse-Sporsem, A.S. (In re Birting
2 Fisheries, Inc.),
300 B.R. 489, 498 (9th Cir. BAP 2003). See
3 D.C. Court of Appeals v. Feldman,
460 U.S. 462, 486 (1983); and
4 Rooker v. Fid. Trust Co.,
263 U.S. 413, 415-16 (1923).
5 Appellant argues that all such orders “are void since
6 [Ms. Kempton’s] adversary proceeding precludes those state court
7 decisions.” Appellant’s Opening Brief, at 23. We disagree.
8 This Panel did conclude in In re Birting Fisheries, Inc.,
9
300 B.R. at 498, that, “[w]hen a matter comes within the
10 bankruptcy court’s exclusive jurisdiction . . . general
11 preclusion rules and the Rooker-Feldman doctrine do not apply.”
12 See, e.g., Kalb v. Feuerstein,
308 U.S. 433, 438-39 (1940)
13 (“Congress, because its power over the subject of bankruptcy is
14 plenary, may by specific bankruptcy legislation create an
15 exception . . . and render judicial acts taken with respect to
16 the person or property of a debtor whom the bankruptcy law
17 protects nullities and vulnerable collaterally.”).
18 However, when the bankruptcy court sent the State Court
19 Litigation back to the California state courts for determination,
20 it required Ms. Clark to defend the purely state law claims
21 asserted by Ms. Kempton in her state court complaint for fraud,
22 breach of contract and nondisclosure, nothing less, but nothing
23 more. The bankruptcy court did not send the exception to
24 discharge claims before it to state court, but retained its
25 authority to adjudicate claims under § 523(a)(2) and (6) between
26 the parties, if such claims remained to be decided after the
27 State Court Litigation was concluded. In these circumstances, we
28 simply have no authority to review the decisions reached by the
-22-
1 California state courts in the State Court Litigation in this
2 appeal. We discuss the result in the State Court Litigation and
3 its impact on the Adversary Proceeding in the next section of the
4 Discussion.
5 D. The Dismissal Order
6 Some clarification is in order as to what the Dismissal
7 Order represents procedurally. Appellant characterizes the
8 Dismissal Order as a “defacto” involuntary dismissal under Civil
9 Rule 52(c), applicable in adversary proceedings in bankruptcy
10 under Rule 7052, which applies to a judgment entered by the court
11 in a nonjury trial, finding against a party on a claim after such
12 party has been fully heard on a dispositive issue. See
13 Appellant’s Opening Brief, at 24. Since, as Appellant is
14 painfully aware, no trial was held on her claims in the Adversary
15 Proceeding, we suggest that it is more accurate to characterize
16 the Dismissal Order as dismissing Appellant’s claims on the
17 pleadings under Civil Rule 12(c), applicable in adversary
18 proceedings in bankruptcy under Rule 7012(b), for failure to
19 state a claim upon which relief can be granted. However, since
20 the bankruptcy court considered matters and evidence outside the
21 pleadings from the parties’ legal memoranda and declarations in
22 arriving at its decision to dismiss the Adversary Proceeding, we
23 consider the Dismissal Order as in the nature of a summary
24 judgment under Civil Rule 56, applicable in adversary proceedings
25 in bankruptcy under Rule 7056. Jacobson v. AEG Capital Corp.,
26
50 F.3d 1493, 1496 (9th Cir. 1995). In any event, as noted
27 above, however we characterize the Dismissal Order, the
28 applicable standard for our review is de novo.
-23-
1 Appellant argues that we should vacate the Dismissal Order
2 and remand to the bankruptcy court for further proceedings
3 because the Appellant “is entitled to have a trial in her
4 [A]dversary [P]roceeding against [Ms.] Clark.” Appellant’s
5 Opening Brief, at 24. We disagree for the following reasons.
6 We start our analysis by reviewing the statutory provisions
7 on which Appellant relies to state her claims.
8 Sections 523(a)(2)(A) and (a)(6) provide in relevant part as
9 follows:
10 (a) A discharge under section 727 . . . of this title
does not discharge an individual debtor from any debt–
11 (2) for money [or] property . . . to the extent
obtained, by–
12 (A) false pretenses, a false representation,
or actual fraud . . . ;
13 (6) for willful and malicious injury by the debtor
to another entity or to the property of another
14 entity . . . . (Emphasis added.)
15 Accordingly, a condition precedent to pursuing a claim under
16 § 523(a)(2)(A) or (a)(6) is that the debtor owe a “debt” to the
17 claimant.
18 The term “debt” is defined in the Bankruptcy Code as a
19 “liability on a claim,” and in turn, a “claim” is defined as:
20 (A) right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed,
21 contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured; or
22 (B) right to an equitable remedy for breach of
performance if such breach gives rise to a right to
23 payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent,
24 matured, unmatured, disputed, undisputed, secured, or
unsecured.
25
26 Sections 101(12) and 101(5), respectively.
27 Both terms are very broad, and the Supreme Court has held
28 that they are coextensive. See Pennsylvania Dept. of Public
-24-
1 Welfare v. Davenport,
495 U.S. 552, 558 (1990). However, their
2 compass is not limitless.
3 We have said that “claim” has “the broadest available
definition,” Johnson v. Home State Bank,
501 U.S. 78,
4 83 . . . (1991), and have held that the “plain meaning
of a ‘right to payment’ is nothing more nor less than
5 an enforceable obligation” . . . .
6 FCC v. NextWave Personal Communications Inc.,
537 U.S. 293, 302-
7 03 (2003), quoting Pennsylvania Dept. of Public Welfare v.
8 Davenport,
495 U.S. at 559 (emphasis added). Appellant’s
9 fundamental problem in this appeal is that no enforceable
10 obligation underlies the claims for relief she asserts in the
11 Adversary Proceeding.
12 Ms. Kempton’s allegations in the Adversary Proceeding
13 complaint essentially overlay her claims asserted in the State
14 Court Litigation with allegations addressing the elements of
15 § 523(a)(2)(A) and (a)(6) claims. In the Case Management Order,
16 the bankruptcy court stayed the Adversary Proceeding and lifted
17 the automatic stay to allow the State Court Litigation to proceed
18 to establish any debt owed by Ms. Clark to Ms. Kempton. In
19 pleadings before the bankruptcy court in the Adversary Proceeding
20 (see, e.g., Adversary Proceeding Docket No. 25, at 2 and 4; and
21 Adversary Proceeding Docket No. 61, at 2) and in her opening
22 brief in this appeal (see Appellant’s Opening Brief, at 16),
23 Ms. Kempton and Appellant have admitted that the California state
24 court had concurrent jurisdiction with the bankruptcy court to
25 determine the “debt” owed, if any, by Ms. Clark to Ms. Kempton.
26 The California state court ultimately dismissed the State
27 Court Litigation based on Ms. Kempton’s failure to satisfy the
28 terms of the Security Order. The dismissal of the State Court
-25-
1 Litigation resulted from the application of a state law
2 procedural requirement without a trial ever having occurred in
3 California state court. However, the State Court Litigation
4 Dismissal Order dismissed the State Court Litigation with
5 prejudice, and the record reflects that no appeal ever was taken
6 from that dismissal order. Accordingly, the dismissal of the
7 State Court Litigation is final.
8 Under California law, a dismissal with prejudice, whether it
9 is procedural or on the merits, has claim preclusive effect. See
10 Boeken v. Philip Morris USA, Inc.,
48 Cal.4th 788, 809-810 (Cal.
11 2010) (“[F]or purposes of applying the doctrine of res judicata
12 . . . a dismissal with prejudice is the equivalent of a final
13 judgment on the merits, barring the entire cause of action.”;
14 Roybal v. Univ. Ford,
207 Cal.App.3d 1080, 1086-87 (1989) (“The
15 statutory term ‘with prejudice’ clearly means the plaintiff’s
16 right of action is terminated and may not be revived. . . . [A]
17 dismissal with prejudice . . . bars any future action on the same
18 subject matter.”).
19 “[A] federal court must give to a state-court judgment the
20 same preclusive effect as would be given that judgment under the
21 law of the State in which the judgment was rendered.” Migra v.
22 Warren City Sch. Dist. Bd. of Edu.,
465 U.S. at 896, citing Allen
23 v. McCurry,
449 U.S. 90, 96 (1980). Gayden v. Nourbakhsh
24 (In re Nourbakhsh),
67 F.3d 798, 801 (9th Cir. 1995);
25 In re Birting Fisheries, Inc.,
300 B.R. at 497-98 (“Rules of
26 federal and state comity establish that federal courts are
27 required to give prior state court judgments the same preclusive
28 effect as the state court that rendered the judgment.”). The
-26-
1 Supreme Court has held that preclusion principles apply in
2 exception to discharge actions in bankruptcy. See Grogan v.
3 Garner,
498 U.S. 284-85 n.1 (1991); Cal-Micro, Inc. v. Cantrell
4 (In re Cantrell),
329 F.3d 1119, 1123 (9th Cir. 2003).
5 The effect of a final California state court dismissal of
6 the State Court Litigation with prejudice is that no enforceable
7 obligation, i.e., no debt, is owed by Ms. Clark to Ms. Kempton.
8 The condition precedent of such a debt for the Appellant to
9 pursue the exception to discharge claims asserted in the
10 Adversary Proceeding consequently cannot be satisfied, and we
11 conclude as a matter of law, that the bankruptcy court did not
12 err in dismissing the Adversary Proceeding.
13 VI. CONCLUSION
14 For the foregoing reasons, we AFFIRM the orders of the
15 bankruptcy court appropriately before us in this appeal,
16 including the Case Management Order and the Dismissal Order.
17
18
19
20
21
22
23
24
25
26
27
28
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