In Re: Roark ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 In Re: Case No.: 19-CV-2117 TWR (WVG) Bankr. No.: 18-04093-LA7 12 CARLTON ROARK, 13 Debtors. ORDER AND JUDGMENT (1) DENYING APPLICATION TO 14 SUPPLEMENT RECORD ON 15 APPEAL, (2) AFFIRMING BANKRUPTCY COURT, AND 16 CARLTON ROARK, (3) DENYING AS MOOT 17 Appellant, APPLICATION FOR EXPEDITED CONSIDERATION 18 v. 19 LESLIE T. GLADSTONE, Trustee; SAN (ECF Nos. 1, 23, 24) DIEGO COUNTY CREDIT UNION; 20 NORTH ISLAND FINANCIAL CREDIT 21 UNION; and CALIFORNIA CREDIT UNION, 22 Appellees. 23 24 25 Presently before the Court is Appellant and Debtor Carlton Roark’s Notice of Appeal 26 from the Honorable Louise Decarl Adler’s denial of his Motion to Invalidate Trustee’s 27 Settlement and Withdraw Debtor’s Chapter 7 Bankruptcy Petition (“NOA,” ECF No. 1), 28 as well as Appellant’s Ex Parte Applications for Expedited Consideration (“Mot. to 1 Expedite,” ECF No. 23) and to Supplement the Record on Appeal (“Mot. to Supp.,” ECF 2 No. 24), the latter of which is opposed. (See ECF Nos. 26–28.) Also before the Court are 3 Appellant’s Opening Brief (“AOB,” ECF No. 11); the responsive briefs filed by Appellees 4 North Island Financial Credit Union (“NIFCU”) and California Credit Union (“CCU”) 5 (“NIFCU Br.,” ECF No. 14), Trustee Leslie T. Gladstone (“Tr. Br.,” ECF No. 15), and San 6 Diego County Credit Union (“SDCCU”) (“SDCCU Br.,” ECF No. 16); and Appellant’s 7 Reply Brief (“Reply,” ECF No. 17). The Honorable Anthony J. Battaglia determined that 8 Appellant’s bankruptcy appeal was suitable for determination on the papers without oral 9 argument pursuant to Civil Local Rule 7.1(d)(1), (see ECF No. 21), following which this 10 appeal was transferred to the undersigned. (See ECF No. 22.) Having carefully considered 11 the Parties’ arguments, the record, and the applicable law, the Court DENIES Appellant’s 12 Motion to Supplement, AFFIRMS the ruling of the bankruptcy court, and DENIES AS 13 MOOT Appellant’s Motion to Expedite. 14 BACKGROUND 15 I. The San Diego County Credit Union Litigation 16 In 2012, Appellant left his job as a loan officer at SDCCU for a position at NIFCU. 17 (NOA at 11; NIFCU Br. at 4.) While working at NIFCU, Appellant allegedly 18 misappropriated loans belonging to SDCCU and engaged in a smear campaign against his 19 former employer. (NOA at 11.) 20 As a result, SDCCU sued Appellant and NIFCU for defamation and unfair trade 21 practices in the Superior Court of California for the County of San Diego, San Diego 22 County Credit Union v. Roark, No. 37-2011-00100322-CU-DF-CTL (Cal. Super. filed 23 Nov. 1, 2011) (the “SDCCU Litigation”). (NOA at 11; NIFCU Br. at 4.) During the 24 SDCCU Litigation, San Diego Superior Court Judge Joel Pressman issued an evidence 25 preservation order at SDCCU’s request (the “Preservation Order”). (NOA at 11; NIFCU 26 Br. at 4.) After SDCCU alleged that Appellant had violated the Preservation Order, a 27 neutral expert was commissioned. (NOA at 11.) 28 / / / 1 Judge Pressman ultimately concluded that Appellant had wiped 210,000 files from 2 his home computer prior to the scheduled production of the hard drive for inspection, in 3 violation of the Preservation Order. (NOA at 11; NIFCU Br. at 4.) Accordingly, Judge 4 Pressman issued terminating sanctions against Appellant on the defamation claims and 5 entered default judgment against him in the amount of $857,713.21 (the “SDCCU 6 Judgment”). (NOA at 11; NIFCU Br. at 4.) Appellant appealed, but the California Court 7 of Appeal affirmed. (Id.) 8 SDCCU and NIFCU settled the remaining unfair trade practices claims. (NIFCU 9 Br. at 5.) 10 II. The Employment Litigation 11 After the terminating sanctions were issued but before the conclusion of the SDCCU 12 Litigation, NIFCU terminated Appellant. (NOA at 11; NIFCU Br. at 5.) Appellant 13 subsequently filed a lawsuit in Superior Court against NIFCU and CCU for discrimination 14 based on age and religion, retaliation for filing sexual harassment complaints, wrongful 15 termination, whistleblower retaliation, harassment based on age, sexual harassment, and 16 failure to take steps to stop discrimination and harassment (the “Employment Litigation 17 Claims”), Roark v. North Island Financial Credit Union, No. 37-2018-00016182-CU-WT- 18 CTL (Cal. Super. filed Apr. 2, 2018) (the “Employment Litigation”). (NOA at 11; NIFCU 19 Br. at 5.) 20 III. The Bankruptcy Petition 21 On July 9, 2018, Appellant filed a voluntary Chapter 7 bankruptcy petition. (NOA 22 at 11; NIFCU Br. at 5.) Under penalty of perjury, Appellant listed the Employment 23 Litigation as an asset in his bankruptcy schedules, estimating its value at zero dollars. 24 (NOA at 11; NIFCU Br. at 5; Tr. Br. at 4–5.) Appellant did not schedule any other litigation 25 claims related to NIFCU and CCU. (NOA at 11.) 26 Because the Employment Litigation was an asset of Appellant’s Estate, the Trustee 27 investigated Appellant’s claims against NIFCU, retaining special counsel to analyze the 28 claims and advise Trustee in maximizing their value. (NOA at 12; Tr. Br. at 5; NIFCU Br. 1 at 6.) Although the Trustee invited Appellant and his prepetition state court counsel to 2 participate in the analysis, Appellant declined to respond. (NOA at 12; Tr. Br. at 5.) 3 When Appellant learned of Trustee’s interest in the claims against NIFCU, he filed 4 in the bankruptcy court a motion for relief from automatic stay, seeking permission to 5 continue litigating the Employment Litigation on his own behalf. (NIFCU Br. at 5; Tr. Br. 6 at 5.) Judge Adler denied Appellant’s request, finding that the Trustee had become the real 7 party-in-interest to the Employment Litigation once Appellant filed his Chapter 7 petition. 8 (NIFCU Br. at 5–6; Tr. Br. at 5.) 9 IV. The Adversary Proceedings 10 Appellant and SDCCU each filed an adversary proceeding against the other in the 11 bankruptcy court concerning the dischargeability of the SDCCU Judgment. (See NIFCU 12 Br. at 8–9.) On August 2, 2018, Appellant filed a complaint against SDCCU, seeking a 13 judgment that the SDCCU Judgment was dischargeable in the Chapter 7 bankruptcy case, 14 Roark v. San Diego County Credit Union, No. 18-90109-LA (Bankr. S.D. Cal. filed Aug. 2, 15 2018) (the “Roark Adversary Proceeding”). (NIFCU Br. at 8.) The Roark Adversary 16 Proceeding was dismissed with prejudice. (Id.) 17 On September 27, 2018, SDCCU filed its own adversary proceeding against 18 Appellant, seeking a judgment that the SDCCU Judgment was nondischargeable, San 19 Diego County Credit Union v. Roark, No. 18-90158-LA (Bankr. S.D. Cal. filed Sept. 27, 20 2018) (the “SDCCU Adversary Proceeding”). (NIFCU Br. at 8.) Judge Adler granted 21 summary judgment in SDCCU’s favor on February 25, 2019. (NOA at 11–12; NIFCU Br. 22 at 9.) 23 Appellant appealed to this Court, Roark v. San Diego County Credit Union (In re 24 Roark), No. 19-CV-344 AJB (MSB) (S.D. Cal. filed Feb. 20, 2019) (the “Prior Bankruptcy 25 Appeal”). (NOA at 12; NIFCU Br. at 9.) On August 15, 2019, Judge Battaglia affirmed 26 Judge Adler’s determination that the SDCCU Judgment was nondischargeable. (NIFCU 27 Br. at 9.) Appellant did not appeal Judge Battaglia’s Order. (Id.) 28 / / / 1 V. The Trustee’s Settlement 2 The Trustee and special counsel continued to investigate Appellant’s claims against 3 NIFCU, ultimately identifying two categories: (1) the Employment Litigation Claims; and 4 (2) potential claims against NIFCU for (i) reimbursement of expenses under California 5 Labor Code section 2802 in connection with the SDCCU Litigation, and/or (ii) bad faith 6 denial of coverage for the SDCCU Judgment under NIFCU’s Management Insurance 7 Policy (the “Employer Liability Claims”). (Tr. Br. at 6.) Plaintiff had neither alleged the 8 Employer Liability Claims in the Employment Litigation nor listed them on his bankruptcy 9 schedules. (Id.) 10 NIFCU disputed the merits of both the Employment Litigation and Employer 11 Liability Claims. (Id.) Additionally, special counsel advised that, while the claims might 12 have some merit, they had a low probability of success and the litigation would be complex 13 and result in significant attorneys’ fees. (NOA at 12.) Consequently, the Trustee 14 determined that settlement with NIFCU would be in the best interest of the Estate. (See 15 Tr. Br. at 6; NOA at 12.) The Trustee and NIFCU agreed to a settlement of $152,000, 16 $22,000 of which was allocated to the Employment Litigation Claims and $130,000 of 17 which was allocated to the Employer Liability Claims, in exchange for a mutual release 18 and dismissal with prejudice of those claims. (Tr. Br. at 6; NOA at 12.) 19 The Trustee filed a motion for approval by the bankruptcy court, which was set for 20 a hearing on February 7, 2019. (NOA at 12; NIFCU Br. at 6–7; Tr. Br. at 7.) Appellant 21 strenuously objected, filing three separate oppositions to the motion. (NOA at 12; NIFCU 22 Br. at 7; Tr. Br. at 7.) On February 25, 2019, the bankruptcy court entered an order 23 overruling Appellant’s objections and approving the settlement. (NOA at 12; NIFCU Br. 24 at 7; Tr. Br. at 7.) Appellant did not appeal. (NOA at 12; NIFCU Br. at 7; Tr. Br. at 7.) 25 Based on the settlement, the Superior Court dismissed the Employment Litigation with 26 prejudice on March 29, 2019. (NIFCU Br. at 8.) 27 / / / 28 / / / 1 VI. Appellant’s Motion to Invalidate the Settlement 2 By July 2019, the Trustee had obtained orders approving the compensation for her 3 and her professionals and for authority to pay the Estate’s taxes, and the Trustee was 4 preparing to pay Appellant’s creditors and to close the bankruptcy case. (Tr. Br. at 9.) 5 Although the time to appeal the settlement had long passed and the bankruptcy case was 6 winding down, Appellant filed an Amended Motion to Invalidate Trustee’s Settlement and 7 Withdraw Debtor’s Chapter 7 Bankruptcy Petition on September 17, 2019. (Id. at 9; 8 NIFCU Br. at 9.) Appellees opposed. (NIFCU Br. at 9; Tr. Br. at 9.) 9 After issuing a tentative denying the motion, the bankruptcy court held a hearing on 10 October 24, 2019. (See generally ECF No. 9-3 (“Tr.”).) When Appellant attempted to 11 argue that the SDCCU Judgment was based on fraud on the court, Judge Adler responded 12 that “this is the third time we’ve been down this road.” (Id. at 4:9–27.) Although Appellant 13 “agree[d]” that the bankruptcy court could “not go back and revisit what the state court 14 d[id],” (id. at 5:1–7), Appellant urged that he “never had an opportunity to argue any fraud 15 on the court,” with the exception of the SDCCU Adversary Proceeding. (Id. at 5:17–24.) 16 He added that he was now arguing that the approval of the settlement agreement violated 17 certain bankruptcy laws. (Id. at 5:25–6:12.) Appellees all indicated their support for the 18 tentative ruling. (Id. at 6:18–7:7.) 19 Judge Adler then proceeded to provide her ruling adopting her tentative. (See id. at 20 7:11–10:20.) Judge Adler noted that “[t]he Trustee actually did all that she was required 21 to do,” (id. at 8:10–11); that the court had “considered . . . all the factors the court was 22 required to consider” in approving the settlement, (id. at 8:27–9:2); and that Appellant had 23 failed to appeal the order approving the settlement, which was now final. (Id. at 9:3–4.) 24 Judge Adler also concluded that Appellant had failed to demonstrate that he was entitled 25 to invalidate the settlement agreement under Federal Rule of Civil Procedure 60(b). (Tr. 26 at 9:7–19.) Finally, Judge Adler found that the settlement order was the law of the case, 27 precluding further examination of the issues raised by Appellant. (Id. at 9:20–24.) Judge 28 Adler therefore denied Appellant’s motion, noting that “at this point there’s too much water 1 under the bridge, and every order that [Appellant is] challenging by this motion is now 2 final.” (Id. at 10:14–20.) 3 The Trustee filed a Notice of Lodgment of the proposed order on Appellant’s motion 4 on October 28, 2019. (Tr. Br. at 13.) On November 1, 2019, before Judge Adler entered 5 her final order, Appellant filed the instant appeal. (Id.; see also NOA.) 6 Judge Adler entered the final order on November 13, 2019, adopting an amended 7 tentative ruling. (Tr. Br. at 13.) The amended tentative ruling rejected Appellant’s 8 argument that the settlement agreement should be set aside for equitable reasons because 9 “all of debtor’s ‘evidence’ in support of the alleged abuse or fraud was previously filed and 10 necessarily known to him before the hearing on the settlement motion.” (ECF No. 1. at 11 12.) To the extent Appellant contended that the settlement agreement should be set aside 12 for “excusable neglect,” Judge Adler found that Appellant had “fail[ed] to articulate the 13 nature of his neglect and how he me[t] the legal requirements to determine whether his 14 neglect was excusable.” (Id. (citing Pioneer Inv. Servs. Co. v. Brunswick Assoc. Ltd. P’shit, 15 507 U.S. 380, 395 (1993)).) Finally, Judge Adler concluded that the settlement order was 16 the law of the case and that the Parties had “relied on [the settlement agreement’s] finality 17 in fully implementing the agreement, including dismissing the Employment Litigation with 18 prejudice and executing mutual waivers of all claims.” (Id. at 13.) Regarding Appellant’s 19 request to “withdraw” the bankruptcy case, Judge Adler noted that the factual or legal basis 20 for the motion was “unclear” and that “[n]o showing has been made.” (Id.) Judge Adler 21 therefore denied both Appellant’s request to invalidate the settlement agreement and to 22 withdraw the bankruptcy petition. (Id.) 23 JURISDICTION 24 The appeal is timely pursuant to Federal Rule of Bankruptcy 8002(a)(2). Fed. R. 25 Bankr. P. 8002(a)(2) (“A notice of appeal filed after the bankruptcy court announces a 26 decision or order—but before entry of the judgment, order, or decree—is treated as filed 27 on the date of and after the entry.”); see also, e.g., In re Schafler, No. C 01-1818 MMC, 28 2002 WL 1940295, at *3 (N.D. Cal. Aug. 13, 2002) (concluding court had jurisdiction 1 where appeal was not premature pursuant to Rule 8002(a)). The Court has jurisdiction 2 under 28 U.S.C. § 158(a). 3 ISSUES ON APPEAL 4 Appellant designates the following issues on appeal: 5 a) Did the Bankruptcy Court disregard evidence and abuse its discretion in an Order (Docket #138) to sustain a 6 Trustee Settlement, corrupted by a conflict of interest, that 7 was in contravention of nonbankruptcy laws because it allowed partial satisfaction for the only claim in Debtor’s 8 Chapter 7 bankruptcy petition consisting of an 9 unreimbursed CA Labor Code § 2802 expense in the form of a default judgment that pursuant to CA Labor Code 10 § 2804 is impermissible to partially satisfy with any 11 agreement in violation of 11 U.S. Code § 541(c)(1), and; 12 b) Did the Bankruptcy Court disregard evidence and abuse 13 its discretion in an Order (Docket# 138) to sustain a Trustee Settlement, corrupted by a conflict of interest, that 14 allowed the Trustee to improperly take possession of an 15 asset in Debtor’s estate (his lawsuit against his former employer, NIFCU, et al) for an improper claim as 16 described in a) above and c) below, in contravention of 11 17 U.S. Code § 704(a)(5), and; 18 c) Did the Bankruptcy Court disregard evidence and abuse 19 its discretion in an Order (Docket #138) to sustain a Trustee Settlement, corrupted by a conflict of interest, that 20 allowed the Trustee to take possession of an asset in 21 Debtor’s estate (his lawsuit against NIFCU, et al) to partially satisfy a claim consisting of an unreimbursed CA 22 Labor Code § 2802 expense in the form of a Judgment 23 fully owed by another entity (NIFCU, Debtor’s employer), in violation of 11 U.S. Code § 524(e), and; 24 25 d) Did the Bankruptcy Court disregard evidence and abuse its discretion in an Order (Docket# 138) to sustain a 26 Trustee Settlement, corrupted by a conflict of interest, that 27 was not in the best interests of the creditor to whom the unreimbursed CA Labor Code § 2802 expense in the form 28 1 of a Judgement was owed in its entirety by NIFCU, a multi-billion dollar corporation, nor the best interests of 2 other parties in interest (i.e., Debtor) in violation of 11 3 U.S. Code § 704(a)(1), and; 4 e) Did the Bankruptcy Court disregard evidence and abuse 5 its discretion in an Order (Docket #138) to sustain a Trustee Settlement, corrupted by a conflict of interest, that 6 allowed the Trustee to abuse her position against a pro se 7 bankruptee to engage in unlawful, unfair or fraudulent business acts or practices as described in a) through d) 8 above, with regard to Debtor’s Chapter 7 bankruptcy 9 petition, in violation of CA Bus. & Prof. Code § 17200? 10 (ECF No. 2-1 at 1–3 (emphasis in original) (footnote omitted).) 11 STANDARD OF REVIEW 12 A bankruptcy court’s denial of a motion for reconsideration is reviewed for abuse of 13 discretion. Alexander v. Bleau (In re Negrete), 183 B.R. 195, 197 (B.A.P. 9th Cir. 1995) 14 (citing S.G. Wilson Co. v. Cleanmaster Indus., Inc. (In re Cleanmaster Indus., Inc.), 106 15 B.R. 628, 630 (B.A.P. 9th Cir. 1989); Martinelli v. Valley Bank of Nev. (In re Martinelli), 16 96 B.R. 1011, 1012 (B.A.P. 9th Cir. 1988)), aff’d, 103 F.3d 139 (9th Cir. 1996). Under 17 this standard, the reviewing court “first ‘determine[s] de novo whether the [bankruptcy] 18 court identified the correct legal rule to apply to the relief requested.’” Clinton v. Deutsche 19 Bank Nat’l Tr. Co. (In re Clinton), 449 B.R. 79, 82 (B.A.P. 9th Cir. 2011) (second alteration 20 in original) (quoting United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009)). “If 21 the bankruptcy court identified the correct legal rule, [the reviewing court] then 22 determine[s] under the clearly erroneous standard whether its factual findings and its 23 application of the facts to the relevant law were: ‘(1) illogical, (2) implausible, or 24 (3) without support in inferences that may be drawn from the facts in the record.’” Id. 25 (quoting Hinkson, 585 F.3d at 1262). 26 / / / 27 / / / 28 / / / 1 ANALYSIS 2 I. Motion to Supplement 3 As an initial matter, Appellant requests leave to supplement the appellate record to 4 include several documents, including deposition transcripts from the SDCCU Litigation; 5 the settlement agreement between SDCCU and NIFCU in the SDCCU Litigation; evidence 6 that Appellant had purchased a list of SDCCU borrowers from ReiSource.com; 2013 7 articles from the Credit Union Times and San Diego Union Tribune; documents proving 8 Scott Norris’ relationship to Roger McTighe; documents proving Angela Brill’s 9 relationship to Kit Gardner; NIFCU’s 2015 Form 990; the Joint Defense and Common 10 Interest Agreement between NIFCU and Appellant; various emails; the February 2014 11 California Code of Civil Procedure section 998 offer; an audio file of a hearing before the 12 California Court of Appeal; Appellant’s 2012 through 2015 performance reviews from 13 NIFCU; the August 27, 2013 coverage letter from CUNA Mutual and blanket policy; and 14 the waiver agreement with GAIC. (Mot. to Supp. at 4–9.) Appellant contends that the 15 Court should consider this evidence because (1) it “bear[s] heavily” on the merits of the 16 issue before the Court, (2) it involves “highly indisputable facts”; (3) it “will advance the 17 principles of fairness, truth and justice, and prevent unpunished criminal conduct”; (4) it is 18 “in the interests of public policy”; and (5) it “offer[s] evidence of a criminal conspiracy.” 19 (Id. at 10 (emphasis omitted).) Appellees oppose Appellant’s request as untimely and 20 improper because Appellant seeks to add materials that were not considered by the 21 bankruptcy court. (See ECF No. 26 at 5–6; see also ECF Nos. 27, 28.) 22 Federal Rule of Bankruptcy Procedure 8009(e) provides that, “[i]f anything material 23 to either party is omitted from or misstated in the record by error or accident, the omission 24 or misstatement may be corrected, and a supplemental record may be certified and 25 transmitted . . . by the court where the appeal is pending.” Fed. R. Bankr. P. 8009(e)(2)(C). 26 Rule 8009(e) is modeled on Federal Rule of Appellate Procedure 10(e), see Fed. R. Bankr. 27 P. 8009(e) Advisory Committee Notes (2014), which, except “in unusual circumstances,” 28 the Ninth Circuit has construed as requiring review of “only the [trial] court record on 1 appeal.” Lowry v. Barnhart, 329 F.3d 1019, 1024 (9th Cir. 2003). The rationale behind 2 this rule is that “the [trial] court [i]s the appropriate forum in which to introduce . . . 3 ‘evidence,’” meaning that the reviewing court would be “usurping that court’s function by 4 entertaining new evidentiary submissions on appeal.” Long Beach Area Chamber of 5 Commerce v. City of Long Beach, 603 F.3d 684, 698 (9th Cir. 2010). 6 Although Appellant contends that the materials he now seeks to introduce were 7 “previously omitted in error,” (see Mot. to Supp. at 2), the documents all date from 2012 8 through 2015, well before Appellant filed his Chapter 7 petition. With the exception of the 9 deposition transcripts that Appellant asks the Court to order Appellees to produce, (see id. 10 at 4–5), there is no indication that these materials were not previously available to 11 Appellant and could not have been presented to the bankruptcy court (or even the Superior 12 Court). Appellant also fails to account for why he did not seek to add these documents to 13 the record until November 2020, over nine months after briefing on this appeal had closed. 14 The Court therefore concludes that it would be improper to review those materials in the 15 first instance on appeal. See, e.g., In re TAC Fin., Inc., No. 17CV00381-AJB-BGS, 2017 16 WL 5632083, at *3 (S.D. Cal. Nov. 22, 2017) (denying motions to supplement record on 17 appeal where documents had not been considered by the bankruptcy court). 18 Further, Rule 8009(e)(2) allows the record to be supplemented only if the omitted 19 evidence is “material.” See Fed. Bank. R. P. 8009(e)(2)(C). To the extent Appellant seeks 20 to relitigate his contention of fraud before the Superior Court, Judge Battaglia concluded 21 in the prior appeal that Appellant had failed to introduce evidence of extrinsic fraud to 22 Judge Adler. (Prior Appeal at 6–9.) Appellant failed to appeal Judge Battaglia’s Order, 23 rendering it final. Because Appellant cannot now challenge that ruling, the evidence 24 Appellant seeks to introduce is not material to the instant appeal. To the extent Appellant 25 contends that Judge Adler violated bankruptcy and non-bankruptcy laws by approving the 26 Trustee’s settlement with NIFCU, further evidence of SDCCU’s alleged fraud before the 27 Superior Court is not material to those arguments. Accordingly, the Court DENIES 28 Appellant’s Motion to Supplement (ECF No. 24). 1 II. Appeal of Judge Adler’s November 13, 2019 Order 2 Appellant challenges Judge Adler’s November 13, 2019 Order denying his motion 3 to invalidate the settlement agreement and “withdraw” his Chapter 7 petition under Federal 4 Rule of Civil Procedure 60, which allows a court to “relieve a party . . . from a final 5 judgment, order, or proceeding for the following”: “mistake, inadvertence, surprise, or 6 excusable neglect;” “newly discovered evidence that, with reasonable diligence, could not 7 have been discovered in time to move for a new trial[;]” “fraud (whether previously called 8 intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;” or “any 9 other reason that justifies relief”. See Fed. R. Civ. P. 60(b)(1)–(3), (6). Rule 60, which is 10 made applicable to bankruptcy proceedings through Federal Rule of Bankruptcy Procedure 11 9024, “does not limit a court’s power to . . . set aside a judgment for fraud on the court.” 12 See Fed. R. Civ. P. 60(d)(3). 13 Relief under Rule 60 is an “extraordinary remedy, to be used sparingly in the 14 interests of finality and conservation of judicial resources.” Kona Enters., Inc. v. Estate of 15 Bishop, 229 F.3d 877, 890 (9th Cir. 2000). Accordingly, “a party may not use a motion 16 for reconsideration ‘to present a new legal theory for the first time or to raise legal 17 arguments which could have been raised in connection with the original motion . . . [or] to 18 rehash the same arguments presented the first time or simply to express the opinion that 19 the court was wrong.’” Lee v. Bank of N.Y. Mellon (In re Lee), Nos. CC-15-1240 et al., 20 2016 WL 1450210, at *7 (B.A.P. 9th Cir. Apr. 11, 2016) (alterations in original) (quoting 21 Wall St. Plaza, LLC v. JSJF Corp. (In re JSJF Corp.), 334 B.R. 94, 104 (B.A.P. 9th Cir. 22 2006), aff’d & remanded, 277 Fed. App’x 718 (9th Cir. May 7, 2008)). 23 On de novo review, the Court concludes that Judge Adler applied the appropriate 24 standard to Appellant’s request to invalidate the settlement agreement. (See, e.g., NOA at 25 12.) The Court must therefore determine whether Judge Adler’s application of that 26 / / / 27 / / / 28 / / / 1 standard was illogical, implausible, or unsupported by the record. Appellant raises five 2 issues on appeal. See supra at pages 8–9. The Court addresses each in turn.1 3 A. California Labor Code Section 2804 4 Appellant first contends that the bankruptcy court erred by approving a settlement 5 agreeing to payment of less than the full amount Appellant had sought to recover under 6 California Labor Code Section 2802, which covers employer indemnification of 7 expenditures necessary to the discharge of an employee’s duties. (See AOB at 6–8.) 8 Appellant raised this argument in his opposition to the bankruptcy court’s original approval 9 of the settlement agreement, (see ECF No. 13 (“ER”) at 209–11), and Judge Adler 10 considered and implicitly rejected it. (See id. at 216, 219.) Appellant failed to appeal that 11 decision, rendering it final. 12 Through the instant appeal, Appellant challenges the bankruptcy court’s denial of 13 his motion under Federal Rule of Civil Procedure 60(b). (See AOB at 10.) But a litigant 14 cannot circumvent the appeals process by using Rule 60(b) where he has made a deliberate 15 choice not to appeal, see Plotkin v. Pac. Tel. & Tel. Co., 688 F.2d 1291, 1293 (9th Cir. 16 1982), and “an appeal from the denial of Rule 60(b) relief ‘does not bring up the underlying 17 judgment for review.’” Banister v. Davis, 590 U.S. at ___, 140 S. Ct. 1698, 1710 (2020) 18 / / / 19 20 21 1 To the extent Appellant requests the Court to revisit orders other than Judge Adler’s November 13, 2019 order denying him relief under Rule 60, the Court concludes that Appellant’s request is improper. Those 22 orders have all become final by virtue of appeal or Appellant’s failure to appeal. Rule 60 does not allow Appellant to circumvent the appeals process, see infra Section II.A, or to “rehash the same arguments.’” 23 In re Lee, 2016 WL 1450210, at *7. 24 Appellant also requests that the Court refer NIFCU and CUNA Mutual “to federal law enforcement for 25 criminal acts.” (See AOB at 16.) While the bankruptcy court may be required to report to the United States Attorney reasonable suspicion of bankruptcy fraud, see 18 U.S.C. § 3057(a), Appellant charges 26 NIFCU and CUNA Mutual with violations of non-bankruptcy criminal statutes. (See AOB at 16–17.) Further, there can be no reasonable grounds for believing that violations of the bankruptcy laws have been 27 committed where “the same issue of fraud had been pleaded, argued and litigated before the bankruptcy, district and appellate courts.” In re Botany Indus., Inc., 463 F. Supp. 793, 799 (E.D. Pa. 1978), aff’d, 609 28 1 (quoting Browder v. Director, Dep’t of Corrs. of Ill., 434 U.S. 257, 263 n.7 (1978)). 2 Accordingly, Judge Adler’s denial of Appellant’s motion was not erroneous. 3 In any event, Appellant misreads California Labor Code Section 2804. Section 2804 4 provides that “[a]ny contract or agreement, express or implied, made by any employee to 5 waive the benefits of [Section 2802], is null and void, and this article shall not deprive any 6 employee or his personal representative of any right or remedy to which he is entitled under 7 the laws of this State.” Cal. Lab. Code § 2804. Contrary to Appellant’s suggestion, (see, 8 e.g., AOB at 7), Section 2804 renders unenforceable a waiver for future Section 2802 9 claims or an uncompensated waiver of Section 2802 claims, not a negotiated, paid 10 settlement for past, unpaid business expenses. See, e.g., Aguilar v. Zep Inc., No. 13-cv- 11 00563-WHO, 2014 WL 1900460, at *5–6 (N.D. Cal. May 12, 2014) (citing Villacres v. 12 ABM Indus. Inc., 189 Cal. App. 4th 562, 591 (2010)). As the Court of Appeal explained 13 in Villacres, “[w]ere it otherwise, a suit alleging a wage claim could be resolved only 14 through a dispositive motion or a trial.” 189 Cal. App. 4th at 591. 15 The Court therefore concludes that Judge Adler did not err by refusing to reconsider 16 Appellant’s argument that settlement of his Section 2802 claims violated Section 2804. 17 B. 11 U.S.C. § 704(a)(5) 18 Appellant next argues that Judge Adler erred by “allow[ing] the Trustee to 19 improperly take possession of an asset in Debtor’s estate (his lawsuit against his former 20 employer, NIFCU, et al) for an improper claim . . . , in contravention of 11 U.S. Code 21 § 704(a)(5),” (ECF No. 2-1 at 2 (footnote omitted)), which requires the Trustee, “if a 22 purpose would be served, [to] examine proofs of claims and object to the allowance of any 23 claim that is improper.” 11 U.S.C. § 704(a)(5). The Trustee explains, however, none of 24 the Parties to the settlement agreement (i.e., the Trustee, NIFCU, and CCU) filed a proof 25 of claim, meaning no proof of claim to which the Trustee could object was implicated in 26 Judge Adler’s order approving the settlement. (See Tr. Br. at 22–23.) Accordingly, Section 27 704(a)(5) is inapplicable, and Judge Adler did not err by concluding that relief under Rule 28 60(b) was not merited under that provision. 1 C. 11 U.S.C. § 504(e) 2 Appellant urges that Judge Adler’s approval of the settlement violated 11 U.S.C. 3 § 504(e), (see ECF No. 2-1 at 2), which provides that, “[e]xcept as provided in [11 U.S.C. 4 § 504(a)(3)], discharge of a debt of the debtor does not affect the liability of any other entity 5 on . . . such debt,” 11 U.S.C. § 504(e), by “allowing Trustee to partially (or even fully) 6 settle a claim fully owed by another entity.” (AOB at 8 (emphasis in original).) But Section 7 504(e) is inapplicable—as the Trustee explains, “Section 524(e) involves the effect of a 8 discharge of a debt owed by a debtor, not a claim or debt owed to a debtor.” (Tr. Br. at 22 9 (emphasis in original).) The settlement approved by Judge Adler concerned Appellant’s 10 Employment Litigation and Employer Liability Claims against NIFCU, which fall into the 11 latter category. Accordingly, Judge Adler did not err by refusing to reconsider her prior 12 approval of the settlement order based on Section 504(e). 13 D. 11 U.S.C. § 704(a)(1) 14 According to Appellant, Judge Adler erred in approving the settlement agreement 15 because it was not in the best interest of either the creditor (SDCCU) or other parties in 16 interests (namely, Appellant) in violation of 11 U.S.C. § 704(a)(1). (ECF No. 2-1 at 2.) 17 Under Section 704(a)(1), the Trustee is required to “collect and reduce to money the 18 property of the estate for which such trustee serves, and close such estate as expeditiously 19 as is compatible with the best interests of parties in interest.” 11 U.S.C. § 704(a)(1). 20 Specifically, Appellant faults the Trustee for failing to use Section 2804 to extract from 21 NIFCU the full amount of the SDCCU Judgment. (See AOB at 9; ER at 245–46.) 22 Although Appellant did not explicitly cite Section 704(a)(1) in his original 23 oppositions to the Trustee’s motion for approval of the settlement agreement, he did argue 24 that SDCCU “would be better served if Trustee abandoned the lawsuit and allowed 25 [SDCCU] to place a lien against Debtor’s [Employment Litigation] and allow Debtor and 26 his attorney to pursue it.” (ER at 210.) Again, Judge Adler considered and rejected 27 Appellant’s argument, (see id. at 216, 219), a decision that Appellant failed to appeal. 28 / / / 1 Judge Adler therefore properly rejected Appellant’s attempt to circumvent the appeals 2 process. See, e.g., Plotkin, 688 F.2d at 1293. 3 In any event, Appellant’s invocation of Section 704(a)(1) is without merit. First, as 4 discussed above, see supra Section II.A, Appellant misreads Section 2804, which does not 5 proscribe settling a Section 2802 claim for less than the full amount claimed by the 6 employee. Second, as the Trustee notes, (see Tr. Br. at 23), Section 704(a)(1) requires the 7 Trustee to “close [the] estate as expeditiously as is compatible with the best interests of 8 parties in interest.” 11 U.S.C. § 704(a)(1). Settlement is more expeditious that litigation, 9 and “[t]he duty to close the estate as quickly and expeditiously as is compatible with the 10 best interests of the parties in interest has been called the trustee’s ‘main duty.’” In re 11 Riverside-Linden Inv. Co., 85 B.R. 107 (Bankr. S.D. Cal. 1988), aff’d, 99 B.R. 439 (B.A.P. 12 9th Cir. 1989), aff’d, 925 F.2d 320 (9th Cir. 1991). “And embedded in this duty is the 13 requirement to maximize the value of estate assets,” McClenny v. McClenny (In re 14 McClenny), No. CC-17-1155-TaFS, 2018 WL 1354550, at *5 (B.A.P. 9th Cir. Mar. 6, 15 2018) (citing United States v. Sims (In re Feller), 218 F.3d 948, 952 (9th Cir. 2000)), with 16 an eye toward maximizing recovery for the debtor’s creditors. In re Feller, 218 F.3d at 17 952. “Appellant’s only creditor of any significance, SDCCU[,] supported and continues to 18 support the Chapter 7 Trustee’s settlement” and believes that “the proceeds of that 19 settlement are the only funds that will likely be available to pay at least some portion of 20 SDCCU’s judgment against Appellant.” (SDCCU Br. at 2.) 21 The Trustee determined in her business judgment that the settlement was in the best 22 interests of the Estate and creditors, and Judge Adler determined in her discretion that the 23 settlement was fair and equitable. Judge Adler did not abuse her discretion in denying 24 Appellant’s motion to alter or amend her prior approval of the settlement agreement based 25 on Section 704(a)(1). See, e.g., I & S Farms v. Hopkins (In re Isom), No. ID-19-1198- 26 BGL, 2020 WL 1950905, at *10 (B.A.P. 9th Cir. Apr. 22, 2020). 27 / / / 28 / / / 1 E. — California Business and Professions Code § 17200 2 Finally, Appellant contends that Judge Adler erred by approving the settlement 3 ||agreement despite the Trustee’s “unlawful, unfair or fraudulent business acts or practices 4 ..in violation of CA Bus. & Prof. Code § 17200.” (ECF No. 2-1 at 3.) While Appellant 5 || may attempt to bring a separate action against the Trustee under Section 17200, it is not a 6 || proper basis for reconsideration. Accordingly, Judge Adler did not err in refusing to revisit 7 ||her prior approval of the settlement agreement on this ground. 8 ||III. Motion to Expedite 9 On October 13, 2020, Appellant requested that the Court provide “expedited 10 || consideration (within 30-60 days)” of his appeal. (See Mot. to Expedite at 1.) In light of 11 Court’s ruling on Appellant’s appeal, the Court DENIES AS MOOT Appellant’s 12 || Motion to Expedite (ECF No. 23). 13 CONCLUSION 14 In light of the foregoing, the Court DENIES Appellant’s Motion to Supplement 15 || ECF No. 24), AFFIRMS the ruling of the bankruptcy court, and DENIES AS MOOT 16 || Appellant’s Motion to Expedite (ECF No. 23). The Clerk of Court SHALL ENTER 17 || JUDGMENT and SHALL CLOSE the case. 18 IT IS SO ORDERED. 19 20 ||Dated: December 31, 2020 —— 21 | 9) (2 re 09 Honorable Todd W. Robinson United States District Court 23 24 25 26 27 28