Raymond Ross v. ( 2017 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 15-2222
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IN RE: RAYMOND ROSS,
Appellant
_____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 2:15-cv-00197)
District Judge: Honorable Gerald J. Pappert
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Argued October 25, 2016
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Before: VANASKIE, KRAUSE, and NYGAARD, Circuit
Judges
(Opinion Filed: June 8, 2017)
Raymond Ross
P.O. Box 285
Fort Washington, PA 19034
Pro Se
Charles J. Hartwell, Esq.
Dethlefs Pykosh and Murphy Law
2132 Market Street
Camp Hill, PA 17011
Counsel for Appellee AmeriChoice Federal Credit
Union
William H. Burgess, Esq. [ARGUED]
Kirkland & Ellis
655 15th Street, N.W.
Suite 1200
Washington, D.C. 20005
Court-Appointed Amicus Curiae in Support of
Appellant Raymond Ross
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OPINION OF THE COURT
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VANASKIE, Circuit Judge.
Raymond Ross appeals from a broad filing injunction
issued against him by the Bankruptcy Court after he and his
wife used the bankruptcy process to stave off the sheriff’s sale
of their home. Ross argues that, as a matter of law, a
bankruptcy court may never issue a filing injunction against a
Chapter 13 debtor who requests voluntary dismissal under 11
2
U.S.C. § 1307(b) because doing so would undermine the
debtor’s statutory rights. We disagree, and hold that a
bankruptcy court does indeed have the authority to issue a
filing injunction even in the context of approving a debtor’s
§ 1307(b) voluntary dismissal because nothing in the
Bankruptcy Code’s express terms says otherwise.
However, we also find that the Bankruptcy Court’s
filing injunction against Ross cannot survive this appeal due to
this case’s particular circumstances. The Bankruptcy Court
provided no reasoning for the broad nature of its filing
injunction, which went well beyond what had been requested
and what the Bankruptcy Court found appropriate in the case
of Ross’s similarly-situated wife. Accordingly, we will vacate
the injunction and remand this matter for further proceedings.
I.
Appellant Raymond Ross and his wife Sandra have
lived in their home in Ambler, Pennsylvania, since 1993. In
2003, the Rosses took on a mortgage from Appellee
AmeriChoice Federal Credit Union. The Rosses fell behind on
their payments, and in 2012 AmeriChoice filed a foreclosure
action in Pennsylvania state court. The state court entered
default judgment against the Rosses, and AmeriChoice
scheduled a sheriff’s sale to be held on October 30, 2013. Ross
v. AmeriChoice Fed. Credit Union, 530 B.R. 277, 280 (Bankr.
E.D. Pa. 2015).
3
The day before the sheriff’s sale, Raymond1—acting
alone, without Sandra—filed the first of the Rosses’ three
relevant Chapter 13 bankruptcy petitions. Raymond’s first
petition triggered Chapter 13’s automatic stay and put a halt to
the sheriff’s sale, but was dismissed about six months later
after Raymond failed to make required payments.
AmeriChoice rescheduled the sheriff’s sale for August 27,
2014.
On the day of the rescheduled sale, Raymond filed a
second Chapter 13 petition—the one that led to this appeal—
stalling the sale for a second time. The Bankruptcy Court
quickly granted AmeriChoice relief from the automatic stay,
and the sheriff’s sale was rescheduled yet again, this time for
October 29, 2014. On that day, however, Sandra filed her own
Chapter 13 petition, delaying the sale of the Rosses’ property
a third time. In re Sandra Dixon-Ross, No. 15-CV-581, 2016
WL 1056776, at *1 (E.D. Pa. Mar. 17, 2016). Sandra’s case
was assigned to the same Bankruptcy Judge overseeing
Raymond’s case, and a week later the court dismissed Sandra’s
petition for failure to obtain required pre-petition credit
counseling. Id.
In Raymond’s second case, AmeriChoice filed a motion
under 11 U.S.C. § 1307(c) to either convert Raymond’s case to
Chapter 7 or dismiss it altogether due to what AmeriChoice
saw as Raymond’s bad faith use of the bankruptcy process.
The Bankruptcy Court scheduled a hearing on the motion.
About two weeks prior to the hearing, Raymond filed a motion
to postpone the hearing due to a scheduling conflict and his
1
For sake of clarity, we will refer to Appellant
Raymond Ross hereinafter by his first name only, and his wife
by her first name, Sandra.
4
anticipated absence from the state. The Bankruptcy Court
denied the motion to postpone a week later. Raymond then
requested, the day before his hearing, that his case be dismissed
pursuant to § 1307(b).
Raymond did not appear at the hearing on
AmeriChoice’s motion. AmeriChoice did appear, and
indicated that its preference would be for the Bankruptcy Court
to convert Raymond’s case to Chapter 7; dismissal was its
second choice. If the Bankruptcy Court decided to dismiss,
AmeriChoice requested that the court also issue one of two
proposed filing injunctions: a filing injunction “barring future
filings [of both Raymond and Sandra Ross] for 180 days,” or a
filing injunction “barring the use of the automatic stay in any
future filings by either one of them.” (Addendum to Amicus
Br. at 24 (transcript of hearing).) The Bankruptcy Judge
expressed due process concerns with the prospect of issuing an
order that extended to Sandra because the hearing was held
only in Raymond’s case and Sandra had not been given notice.
The Judge instead suggested that if AmeriChoice wanted a
filing injunction entered against Sandra, it should return to
Sandra’s case and request one there. Neither the Bankruptcy
Judge nor AmeriChoice mentioned or discussed Raymond’s
request for dismissal at the hearing. Following the hearing, the
Bankruptcy Court issued an Order dismissing Raymond’s case
“with prejudice,” and further providing that “the Debtor is not
permitted to file another bankruptcy case without express
permission from this Court.” (App. 205.)
AmeriChoice took the Bankruptcy Judge’s advice and a
week later filed a motion in Sandra’s case, requesting that a
filing injunction be entered against her as well. In re Sandra
Dixon-Ross, 2016 WL 1056776, at *1. AmeriChoice
suggested as relief the same two alternatives it had proposed in
5
Raymond’s case: a general restriction on all Sandra’s filings
for 180 days, or an order granting blanket relief from the
automatic stay for any claims against the Rosses’ Ambler
property for the indefinite future. Id. It did not request the
broad restriction that the court had already entered against
Raymond. The Bankruptcy Judge granted the motion, but this
time the order extended only to what AmeriChoice requested:
Sandra was “enjoined from filing another bankruptcy for 180
days of the date of this Order,” and the automatic stay was not
to “operate against actions to enforce [AmeriChoice’s]
mortgage foreclosure judgment” on the Rosses’ property. In
re Sandra Dixon-Ross, No. 14-18608, at *1 (Bankr. E.D. Pa.
Jan. 21, 2015). Sandra lost an appeal in the district court, and
did not further appeal her case. Raymond unsuccessfully
appealed his second case to the District Court, Ross, 530 B.R.
at 282, and then filed the present appeal.
In the midst of this litigation, AmeriChoice completed
the sheriff’s sale, only to have the foreclosure undone when the
Pennsylvania Superior Court held that the Rosses never
received proper notice in the state action. AmeriChoice Fed.
Credit Union v. Ross, 135 A.3d 1018, 1023-26 (Pa. Super. Ct.
2015). The Rosses also filed a federal action against
AmeriChoice and other defendants, and eventually the parties
entered into a near-global settlement, where the Rosses
promised to make payments on their debt and AmeriChoice
promised to abandon its foreclosure action. See Ross v.
AmeriChoice Fed. Credit Union, No. 15-2650, ECF No. 28
(E.D. Pa. Mar. 31, 2016).
6
The lone unsettled issue is the Bankruptcy Court’s filing
injunction against Raymond, which remains in place.2
II.
The Bankruptcy Court had jurisdiction under 28 U.S.C.
§ 157. The District Court had jurisdiction under 28 U.S.C.
§ 158(a)(1) to review the Bankruptcy Court’s dismissal order.
And we have appellate jurisdiction under 28 U.S.C. § 1291.
Our task is to “stand in the shoes” of the District Court and
review the Bankruptcy Court’s decision anew. In re Pransky,
318 F.3d 536, 542 (3d Cir. 2003) (quoting In re Krystal
Cadillac Oldsmobile GMC Truck, Inc., 142 F.3d 631, 635 (3d
Cir. 1998)). “[W]e review a bankruptcy court’s ‘legal
determinations de novo, its factual findings for clear error, and
its exercises of discretion for abuse thereof.’” In re Miller, 730
F.3d 198, 203 (3d Cir. 2013) (quoting In re Michael, 699 F.3d
305, 308 n.2 (3d Cir. 2012)). The issuance of a filing
injunction is an exercise of discretion. Abdul-Akbar v. Watson,
901 F.2d 329, 331 (3d Cir. 1990).
III.
Raymond’s appeal raises two main issues: (1) whether
the Bankruptcy Code prohibits a bankruptcy court from issuing
a filing injunction against a debtor who requests voluntary
2
Raymond proceeds pro se in this appeal. Because of
the important and unsettled nature of the power of a bankruptcy
court to issue a filing injunction in response to a Chapter 13
debtor’s motion for voluntary dismissal, we appointed counsel
to serve as an Amicus Curiae on behalf of Raymond in this
appeal. We express our gratitude to court-appointed amicus,
who provided valuable assistance to the Court.
7
dismissal under 11 U.S.C. § 1307(b), and (2) whether this
case’s particular facts and circumstances indicate that the
Bankruptcy Court abused its discretion in issuing a broad filing
injunction. We hold that the answer to the first question is no,
but find the answer to the second is yes.
A.
Raymond’s first argument is that bankruptcy courts may
not impose a filing injunction after a debtor has motioned for
voluntary dismissal pursuant to 11 U.S.C. § 1307(b).
Bankruptcy courts possess a general statutory authority to
“issue any order, process, or judgment that is necessary or
appropriate to carry out the provisions of” the Bankruptcy
Code. 11 U.S.C. § 105(a). And bankruptcy courts “may also
possess ‘inherent power . . . to sanction ‘abusive litigation
practices.’” Law v. Siegel, 134 S. Ct. 1188, 1194 (2014)
(quoting Marrama v. Citizens Bank of Mass., 549 U.S. 365,
375-76 (2007)). But these broad “equitable powers . . . are not
without limitation.” In re Combustion Eng’g, Inc., 391 F.3d
190, 236 (3d Cir. 2004). As relevant here, for example, a
bankruptcy court’s general authority does not extend to actions
that conflict with “specific,” “explicit,” and “express” terms of
the Bankruptcy Code. Law, 134 S. Ct. at 1195-97.
In this vein, Raymond argues the Bankruptcy Court’s
filing injunction is not authorized by its general authority
because it conflicts with the express terms of § 1307(b).
Section 1307(b) states that a bankruptcy court “shall” dismiss
a Chapter 13 case on the “request” of the debtor unless the
debtor’s case has already been converted from some other
8
chapter of the code. 11 U.S.C. § 1307(b).3 There is a split in
authority as to just how mandatory this right to dismissal really
is, and the Third Circuit has yet to weigh in. Some courts hold
that the statute’s command is mandatory and grants a debtor an
“absolute” right to dismissal—if a debtor requests dismissal,
then the court must dismiss; no exceptions. See, e.g., In re
Barbieri, 199 F.3d 616, 620-21 (2d Cir. 1999) (reasoning that
reading a bad faith exception into § 1307(b) would undermine
§ 303’s procedures governing the initiation of an involuntary
Chapter 7 case); In re Procel, 467 B.R. 297, 308 (S.D.N.Y.
2012) (applying Barbieri’s rule after holding that Barbieri was
not overruled or abrogated by Marrama, 549 U.S. at 365); In
re Williams, 435 B.R. 552, 560 (Bankr. N.D. Ill. 2010) (same).
Other courts read the statute to contain an exception that
permits a bankruptcy court to delay ruling on a bad faith
debtor’s request for dismissal and instead first address a
creditor’s competing motion to dismiss the case or convert it to
Chapter 7. See, e.g., In re Jacobsen, 609 F.3d 647, 649 (5th
Cir. 2010) (holding that Marrama requires the court to read-in
a bad faith exception); In re Rosson, 545 F.3d 764, 772, 773
n.12 (9th Cir. 2009) (same). Raymond argues we should side
with Barbieri, and therefore the Bankruptcy Court erred in
granting AmeriChoice’s motion over Raymond’s dismissal
3
The precise language of section 1307(b) is as follows:
On request of the debtor at any time, if the case
has not been converted under section 706, 1112,
or 1208 of this title, the court shall dismiss a case
under this chapter. Any waiver of the right to
dismiss under this subsection is unenforceable.
9
request because a debtor’s § 1307(b) right to dismissal is
absolute.
But we need not weigh in on this split in authority today,
because even if Raymond were correct, and § 1307(b) required
the Bankruptcy Court to grant Raymond’s request for dismissal
before considering AmeriChoice’s motion, the Bankruptcy
Court could have just as easily attached its filing injunction to
Raymond’s requested dismissal order. Raymond argues that
such a conclusion cannot be correct because it would
undermine the purpose of several other Bankruptcy Code
provisions that already address the problem of repeat-filers and
bad-faith debtors: § 727(a)(8) and § 1328(f), which limit the
availability of two discharges to the same petitioner;
§ 362(b)(4), which diminishes the effect of the automatic stay
for repeat-filers; and § 109(g), which effectively imposes a
180-day filing injunction on a certain subset of repeat-filers
who act in bad faith. But whether or not the Bankruptcy
Court’s filing-injunction order undermines these sections’
purposes is not the question; all that matters is the “express”
and “explicit” terms of the Bankruptcy Code. For example, in
Marrama v. Citizens Bank, the Supreme Court upheld an order
as falling under the bankruptcy court’s general authority, and
brushed back an argument that its decision would undermine
the purpose of other Code provisions. See 549 U.S. at 375; see
also id. at 380 (Alito, J., dissenting) (arguing the majority did
not adequately consider the “purpose” of other Code
provisions). What mattered to the Court was that there was
“[n]othing in the text” of the Code that prohibited the
bankruptcy court’s order. Id. at 374-75. By comparison, when
the Supreme Court reversed an order in Law v. Siegel for
exceeding the bankruptcy court’s general authority, it held that
the order conflicted with the “explicit mandates” and “express
10
terms” of 11 U.S.C. § 522, in light of two specific aspects of
that section. 134 S. Ct. at 1196 (referencing specific textual
language granting debtors the right to seek exemptions and a
“meticulous” and “detailed” list of exceptions and limitations).
Raymond’s case is much more like Marrama than Law v.
Siegel. Raymond highlights “nothing in the text” of § 1307(b)
that prohibits the entry of a filing injunction alongside a
§ 1307(b) dismissal order, and the purposes behind the other
cited statutory provisions are irrelevant.
Raymond also argues against this conclusion by
comparing § 1307(b) to the analogous Federal Rule of Civil
Procedure governing voluntary dismissals by a plaintiff, Rule
41(a)(1).4 Rule 41 states in its text that a notice of voluntary
4
Rule 41(a)(1) provides:
(a) Voluntary Dismissal.
(1) By the Plaintiff.
(A) Without a Court Order. Subject to Rules
23(e), 23.1(c), 23.2, and 66 and any applicable
federal statute, the plaintiff may dismiss an
action without a court order by filing:
(i) a notice of dismissal before the opposing party
serves either an answer or a motion for summary
judgment; or
(ii) a stipulation of dismissal signed by all parties
who have appeared.
11
dismissal is effective without a court order and the dismissal is
without prejudice if the plaintiff requests dismissal and has not
previously had “any federal- or state-court action based on or
including the same claim” voluntarily dismissed. Fed. R. Civ.
P. 41(a)(1)(B). Thus, Raymond suggests that had the Federal
Rules of Civil Procedure governed the Bankruptcy Court’s
procedures in Raymond’s case, the Bankruptcy Judge arguably
would have been prohibited from entering the filing injunction
because Raymond’s § 1307(b) request for voluntary dismissal
was his first.5 The problem with this Rule 41 analogy,
however, is once again the text of § 1307(b): whereas Rule 41
(B) Effect. Unless the notice or stipulation states
otherwise, the dismissal is without prejudice. But
if the plaintiff previously dismissed any federal-
or state-court action based on or including the
same claim, a notice of dismissal operates as an
adjudication on the merits.
5
Raymond’s first bankruptcy petition was dismissed
involuntarily in response to a motion to dismiss filed by the
Trustee; it was not dismissed voluntarily. See In re Raymond
Ross, No. 13-19412, at *1 (Bankr. E.D. Pa. Apr. 23, 2014)
(dismissal order). Prior to dismissal, Raymond and
AmeriChoice apparently entered into a stipulation in an
attempt to relieve AmeriChoice from the automatic stay and
avoid future litigation between the parties. AmeriChoice’s
Mot. to Convert or Dismiss, Ex. P ¶¶ 10-13, Bankr. E.D. Pa.
Case No. 14-16866, Docket No. 41. But that stipulation did
not purport to resolve Raymond’s first Chapter 13 case in its
entirety, and was not the basis for the Bankruptcy Court’s
dismissal.
12
requires in specific and express terms that dismissal is
automatic and without prejudice, § 1307(b) contains no similar
textual hook.
The Bankruptcy Court therefore possessed the general
authority to issue a filing injunction against Raymond.
B.
The Bankruptcy Court’s filing injunction against
Raymond is still problematic, however, due to the specific
circumstances of this case. A court may not issue orders that
are “arbitrary or irrational,” and we may vacate decisions for
an abuse of discretion on that basis. United States v. Bailey,
840 F.3d 99, 117 (3d Cir. 2016). Furthermore, when reviewing
for abuse of discretion, we grant less deference to court
decisions that are unaccompanied by reasoning. Id. Although
we may affirm a judgment of a lower court for any reason
supported by the record, Brightwell v. Lehman, 637 F.3d 187,
191 (3d Cir. 2011), we are not obligated to search the record
for reasons to affirm and may vacate or remand if the lower
court declines to provide reasoning supporting its decision.6
6
See United States v. Garza, 593 F.3d 385, 391 (5th Cir.
2010) (holding that the district court abused its discretion when
it sua sponte transferred a case to a not very convenient venue
and did not provide reasoning); Mattel, Inc. v. Walking
Mountain Productions, 353 F.3d 792, 816 (9th Cir. 2003)
(vacating the district court’s award of damages under the
Lanham Act for lack of reasoning); Stuebben v. Gioiosi (In re
Gioioso), 979 F.2d 956, 961 (3d Cir. 1992) (remanding to the
bankruptcy court because it failed to “provide a sufficient basis
13
Here, three aspects of the filing injunction, none of
which were explained by the Bankruptcy Court, together
suggest the Bankruptcy Judge abused his discretion in issuing
the broad and indefinite filing injunction. First, the filing
injunction went beyond what AmeriChoice requested.
AmeriChoice only asked that the Bankruptcy Court either
restrict Raymond’s filings for 180 days or bar the application
of the automatic stay to AmeriChoice’s attempts to sell the
Rosses’ property. The Bankruptcy Court, however, barred
Raymond from making any bankruptcy filings anywhere for
the indefinite future—there was no temporal or geographic
limitation—except when the court grants its express
permission.
Second, the filing injunction against Raymond is
several degrees harsher than the filing injunction against
Sandra, even though the same Bankruptcy Judge oversaw each
spouse’s case and gave no indication that the two are not
similarly situated. Similarly, even though it appears that
Raymond and Sandra are similarly situated, the Bankruptcy
Court limited its filing injunction in Sandra’s case to what
AmeriChoice requested while in Raymond’s case went beyond
their request.
Third, 11 U.S.C. § 109(g) is persuasive authority that a
180-day filing restriction may have been sufficient in
Raymond’s case. As mentioned above, that section imposes
an effective 180-day filing restriction on debtors who have
either (1) willfully failed “to abide by orders of the court” or
“to appear before the court in proper prosecution of the case,”
or (2) requested and received dismissal in advance of a court
for reviewing its exercise of discretion” in imposing sanctions
under Rule 9011).
14
ruling on a creditor’s request for relief from the automatic stay.
11 U.S.C. § 109(g). Thus, the section imposes a 180-day filing
restriction on a certain subset of bad faith debtors. The section
almost certainly did not apply here because Raymond appeared
before the Bankruptcy Court, apparently followed the court’s
orders, and did not file his motion in response to
AmeriChoice’s previously-granted motion for relief from the
automatic stay but rather its motion to dismiss or convert
Raymond’s case. Nonetheless, if 180 days is often sufficient
for the bad faith debtor contemplated by §109(g), 180 days
may have been sufficient for Raymond too.
These three aspects of the Bankruptcy Court’s filing
injunction together, left unexplained by any court reasoning,
lead us to the conclusion that the court abused its discretion in
issuing such a broad filing injunction. If any one of these
factors had not been present, or if the Bankruptcy Court had
provided oral or written reasoning describing a legitimate
rationale for the broad nature of its filing injunction, then
perhaps we would have arrived at a different result, because
even broad filing restrictions are common and often justified.
See, e.g., Olson v. Ramsey Cty., No. 15-3131, 2015 WL
5778478, at *7 (D. Minn. Oct. 1, 2015) (restricting the
plaintiff, for the indefinite future, from “filing new cases in this
District Court unless he is represented by counsel or receives
prior written authorization from a judicial officer in this
District Court”); Riches v. Parcells, No. 1:07-cv-1891, 2008
WL 117887, at *2 (E.D. Cal. Jan. 10, 2008) (restricting the
Clerk of Court, for the indefinite future, from accepting any of
the plaintiff’s future civil complaints if the plaintiff has not
paid the filing fee). Nevertheless, a broad filing injunction is
an “extreme remed[y]” that “should be narrowly tailored and
sparingly used.” In re Packer Ave. Assocs., 884 F.2d 745, 747
15
(3d Cir. 1989). Given both the breadth of the injunction in this
case and the Bankruptcy Court’s failure to articulate why such
an injunction was warranted by Ross’s conduct, a remand is
warranted.7
IV.
We will vacate the Bankruptcy Court’s filing-injunction
order and remand the case to the Bankruptcy Court for further
proceedings consistent with this opinion.
7
Because we vacate the filing injunction on this basis,
we need not address Raymond’s final argument in the
alternative, that the Bankruptcy Court violated his procedural
due process rights.
16