In re: Judy Ann Jensen

FILED
MAR 10 2015
1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. CC-13-1606-KiKuD
)
6 JUDY ANN JENSEN, ) Bk. No. 8:09-14106-CB
)
7 Debtor. )
)
8 )
TIMOTHY P. PEABODY, )
9 )
Appellant, )
10 )
v. ) M E M O R A N D U M1
11 )
JUDY ANN JENSEN; RICHARD A. )
12 MARSHACK, Chapter 7 Trustee, )
)
13 Appellees. )
______________________________)
14
Submitted without Oral Argument
15 on February 19, 2015
16 Filed - March 10, 2015
17 Appeal from the United States Bankruptcy Court
for the Central District of California
18
Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding
19
20 Appearances: Appellant Timothy P. Peabody pro se on brief;
Michael D. Franco on brief for appellee, Richard A.
21 Marshack, Chapter 7 Trustee.
22
Before: KIRSCHER, KURTZ and DUNN, Bankruptcy Judges.
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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. See 9th
28 Cir. BAP Rule 8024-1.
1 Appellant Timothy P. Peabody appeals an order denying his
2 motion for relief from judgment under Civil Rule 60(b)(1).2
3 Because the bankruptcy court failed to conduct any analysis under
4 Pioneer-Briones or to articulate any findings or conclusions in
5 denying the motion, we VACATE and REMAND.3
6 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
7 Debtor Judy Ann Jensen filed a chapter 11 bankruptcy case on
8 May 4, 2009. The Court converted her case to chapter 7 on
9 December 7, 2011.
10 During the pendency of the Chapter 11 case, Debtor filed an
11 adversary action pro se against her former business partner, a
12 debtor under chapter 7. Timothy P. Peabody substituted in as
13 counsel for Debtor in the adversary action on April 4, 2011.
14 Debtor paid Peabody a $10,000 retainer for services to be rendered
15 in the chapter 11 case. Peabody never filed an application for
16 employment with the bankruptcy court or obtained an order
17 approving his employment.
18 1. Trustee's excessive fee motion and the disgorgement
order
19
20 After conversion of the case, chapter 7 trustee Richard A.
21 Marshack filed a motion to determine whether the fees Debtor paid
22 to Peabody exceeded a reasonable value under § 329(b) and
23 Rule 2017 ("Excessive Fee Motion"). Trustee asserted two grounds
24
25 2
Unless specified otherwise, all chapter, code and rule
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
26 the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The
Federal Rules of Civil Procedure are referred to as “Civil Rules.”
27
3
The docket reflects that one of the appellees in this case
28 is debtor Judy A. Jensen. Debtor has not appeared in this appeal.
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1 for why Peabody should be required to disgorge all or a
2 substantial portion of the $10,000 retainer: (1) Peabody failed
3 to seek employment or obtain an order approving his employment in
4 accordance with § 327(a) and Rule 2014; and (2) in Trustee's
5 opinion, Peabody failed to perform services worth $10,000.
6 Peabody did nothing other than filing an amended complaint and
7 several status reports. Peabody failed to present contemporaneous
8 billing records to Debtor or the U.S. Trustee or to file any fee
9 applications with the bankruptcy court. Debtor claimed in her
10 declaration in support of the Excessive Fee Motion that Peabody
11 never served discovery requests on her former business partner in
12 connection with her adversary action.
13 Peabody failed to file a response to the Excessive Fee Motion
14 or appear at the hearing on May 14, 2013. After hearing brief
15 argument from Trustee, the bankruptcy court ruled that it would
16 grant the motion and order Peabody to disgorge the entire $10,000
17 retainer.
18 The bankruptcy court entered an order granting the Excessive
19 Fee Motion on June 24, 2013 ("Disgorgement Order") and ordered
20 Peabody to return the $10,000 retainer to Trustee within 30 days
21 of entry of the order. The bankruptcy court did not state at the
22 hearing or in the Disgorgement Order the basis for granting the
23 Excessive Fee Motion. Peabody failed to remit the funds within
24 30 days as ordered.
25 2. Peabody's motion to set aside the Disgorgement Order
26 Peabody moved to set aside the Disgorgement Order ("Motion to
27 Set Aside") on October 16, 2013. Although he cited § 105(a) as
28 the basis for relief, Peabody argued that the Disgorgement Order
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1 should be set aside due to mistake, inadvertence or excusable
2 neglect. Peabody admitted to receiving notice of the Excessive
3 Fee Motion and related hearing, but asserted that his staff
4 miscalendared the hearing date, thus preventing him from filing a
5 timely response or appearing at the hearing.
6 In support of his Motion to Set Aside, Peabody attached a
7 copy of an invoice to Debtor dated June 13, 2013. The invoice,
8 which Peabody admitted compiling after Trustee filed the Excessive
9 Fee Motion, included Peabody's time records for Debtor's case
10 dating from February 10, 2011 through May 19, 2012, and reflected
11 107.4 billable hours totaling $34,905.00. Peabody contended that
12 Debtor, being disgruntled and unhappy with the results of his
13 representation of her, sought to recover the $10,000 retainer and
14 to avoid paying the remaining outstanding amounts.
15 Trustee opposed the Motion to Set Aside, contending Peabody
16 failed to establish excusable neglect under Civil Rule 60(b)(1).
17 In his attached declaration, counsel for Trustee stated that he
18 faxed letters to Peabody on August 12, 2013, and on September 24,
19 2013, regarding the Disgorgement Order but received no response.
20 Although Trustee’s counsel stated he attached the letters as
21 Exhibit A, he did not. Counsel had also attempted to call
22 Peabody's office on August 21, 2013, to no avail. Counsel
23 contended that only after he threatened to file a motion to show
24 cause did Peabody respond, stating that he was filing the Motion
25 to Set Aside.
26 Trustee asserted the Pioneer factors for relief under Civil
27 Rule 60(b)(1) had not been met. First, Peabody’s failure to
28 prepare an adequate fee application, or to provide timely billing
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1 or to file a timely response to the Excessive Fee Motion
2 prejudiced the estate, by causing the estate to incur additional
3 administrative expenses. Second, as for delay, Peabody never
4 filed an application for employment or explained why he failed to
5 file one. Only when faced with the Excessive Fee Motion did he
6 actually compile a billing statement. Third, Peabody completely
7 controlled the reasons for delay – his staff miscalendared the
8 hearing date. Finally, Trustee disputed Peabody's good faith,
9 contending that at no point had he filed an employment application
10 or provided a fee application for review and approval by the court
11 prior to taking funds. Even now, the new bill failed to account
12 for the $10,000 retainer paid.
13 The bankruptcy court held a hearing on the Motion to Set
14 Aside on November 19, 2013. The bankruptcy court expressed its
15 concern with Peabody waiting until October to seek relief from the
16 final Disgorgement Order entered in June. When asked what he did
17 in response to Trustee's letters, Peabody stated that he informed
18 Trustee of the calendering error and his intention to file the
19 Motion to Set Aside. He also told Trustee that the Excessive Fee
20 Motion was inappropriate. Peabody told the court that he signed a
21 retainer agreement with Debtor years ago to provide work on her
22 "civil case" as well as the bankruptcy case and that not all of
23 the funds were for his bankruptcy work. Peabody contended that
24 Debtor's declaration in support of the Excessive Fee Motion
25 contained false statements.
26 After hearing further argument from the parties, the
27 bankruptcy court announced it would deny the Motion to Set Aside,
28 and that Peabody had until December 31, 2013, to return the
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1 $10,000 to Trustee. The bankruptcy court entered an order on
2 December 17, 2013 ("Order"), consistent with the oral
3 announcement. The bankruptcy court did not articulate its reasons
4 for denying the Motion to Set Aside at the hearing or in the
5 Order.
6 Peabody timely filed a notice of appeal of the Order on
7 December 23, 2013, and filed an amended notice of appeal on
8 February 15, 2014.
9 II. JURISDICTION
10 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
11 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
12 III. ISSUE
13 Did the bankruptcy court abuse its discretion in denying the
14 Motion to Set Aside?
15 IV. STANDARD OF REVIEW
16 A court's denial of a motion under Civil Rule 60(b) is
17 reviewed for an abuse of discretion. Lemoge v. United States,
18 587 F.3d 1188, 1191-92 (9th Cir. 2009); Alonso v. Summerville
19 (In re Summerville), 361 B.R. 133, 139 (9th Cir. BAP 2007)(citing
20 Hammer v. Drago (In re Hammer), 112 B.R. 341, 345 (9th Cir. BAP
21 1990), aff'd, 940 F.2d 524 (9th Cir. 1991)). A bankruptcy court
22 abuses its discretion if it applied the wrong legal standard or
23 its findings were illogical, implausible or without support in the
24 record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820,
25 832 (9th Cir. 2011).
26 V. DISCUSSION
27 Peabody contends the bankruptcy court did not apply the
28 appropriate legal standard under § 105(a) in denying the Motion to
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1 Set Aside. We agree the bankruptcy court applied an incorrect
2 legal standard in denying Peabody's motion, but for different
3 reasons.
4 A bankruptcy court has the discretionary power under § 105(a)
5 to reconsider, modify or vacate its previous orders. See Zurich
6 Am. Ins. Co. v. Int’l Fibercom, Inc. (In re Int’l Fibercom, Inc.),
7 503 F.3d 933, 940 (9th Cir. 2007). However, such relief is sought
8 by motion under Rule 9024, which has incorporated Civil
9 Rule 60(b). Meyer v. Lenox (In re Lenox), 902 F.2d 737, 739-40
10 (9th Cir. 1990).
11 Although Peabody cited § 105(a) as the basis for relief from
12 the Disgorgement Order, his motion set forth a claim for relief
13 from a final judgment under Civil Rule 60(b)(1) based on his
14 mistake, inadvertence and excusable neglect: his staff had
15 miscalendared the May 14 hearing date causing him not to file a
16 response to the Excessive Fee Motion and to miss the hearing.
17 Because of this, and because the 14-day appeal time had expired on
18 the Disgorgement Order when Peabody filed his Motion to Set Aside,
19 the bankruptcy court should have construed his motion as a motion
20 for relief from judgment under Civil Rule 60(b). Negrete v. Bleau
21 (In re Negrete), 183 B.R. 195, 197 (9th Cir. BAP 1995). The court
22 may have construed it as such; we cannot tell from the record. In
23 any event, we conclude it abused its discretion by failing to
24 apply the legal standard required under Civil Rule 60(b)(1).
25 A. The bankruptcy court failed to apply Pioneer-Briones or to
make specific findings of fact and conclusions of law in
26 denying the Motion to Set Aside.
27 Under Civil Rule 60(b)(1), as incorporated by Rule 9024, a
28 court may relieve a party from a final order upon a finding of
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1 excusable neglect. In Pioneer Inv. Servs. Co. v. Brunswick
2 Assocs. Ltd. P'ship, 507 U.S. 380, 395 (1993), the Supreme Court
3 held that excusable neglect, for purposes of Rule 9006(b)(1),
4 encompasses an attorney's negligence in complying with a filing
5 deadline.
6 To determine whether a party's neglect is excusable, courts
7 must apply a four-factor equitable test, examining: (1) the
8 danger of prejudice to the opposing party; (2) the length of the
9 delay and its potential impact on the proceedings; (3) the reason
10 for the delay; and (4) whether the movant acted in good faith.
11 Id.
12 The Ninth Circuit adopted the Pioneer test for Civil
13 Rule 60(b)(1) cases in Briones v. Riviera Hotel & Casino, 116 F.3d
14 379, 381 (9th Cir. 1997). Through subsequent decisions, including
15 Bateman v. U.S. Postal Service, 231 F.3d 1220, 1224-25 (9th Cir.
16 2000), and Pincay v. Andrews, 389 F.3d 853, 860 (9th Cir. 2004)
17 (en banc), the Ninth Circuit has further clarified how courts
18 should apply this test. In Bateman, the Circuit concluded that
19 when considering a Civil Rule 60(b) motion, a trial court abuses
20 its discretion by failing to engage in the four-factor Pioneer-
21 Briones equitable balancing test. 231 F.3d at 1223-24. Bateman
22 had moved to set aside a summary judgment which had been entered
23 due to his counsel's failure to file a timely opposition. Id. at
24 1223. The district court, without mentioning the Pioneer-Briones
25 test, denied the motion after considering only facts relating to
26 the reason for Bateman's delay — the third Pioneer-Briones factor.
27 Id. at 1224. The Circuit concluded that the district court had
28 failed to engage in the equitable analysis mandated by Pioneer and
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1 Briones and, by not considering the other three Pioneer-Briones
2 factors, had abused its discretion in denying Bateman's motion.
3 Courts must "explicitly use the Pioneer-Briones framework for
4 analysis of excusable neglect under [Civil] Rule 60(b)(1)[.]"
5 Lemoge, 587 F.3d at 1192 (district court abused its discretion for
6 not citing to Pioneer or Briones and for considering only three
7 factors relating to the four factors identified in Pioneer-
8 Briones)(citing Bateman, 231 F.3d at 1224). See also Ahanchian v.
9 Xenon Pictures, Inc., 624 F.3d 1253, 1261-62 (district court
10 abused its discretion for failing to cite or apply the equitable
11 test under Pioneer-Briones and basing its decision solely on
12 whether the reason for delay – the third Pioneer-Briones factor —
13 could establish excusable neglect). A court's mere failure to
14 cite the Pioneer-Briones test will generally not require reversal,
15 but the court must have actually engaged in the equitable analysis
16 those cases mandate. Lemoge, 587 F.3d at 1193; Bateman, 231 F.3d
17 at 1224.
18 Here, the bankruptcy court did not cite to either Pioneer or
19 Briones or expressly enumerate any of the Pioneer-Briones factors.
20 Although one could argue that it considered Peabody's delay in
21 filing his Motion to Set Aside, considering only one Pioneer-
22 Briones factor is clearly insufficient. The extent of the court's
23 oral ruling was "I'm going to deny the motion to set aside and
24 vacate the order." Hr’g Tr. 7:5-6, November 19, 2013. The Order
25 simply stated "IT IS ORDERED THAT the Motion is DENIED." The
26 above authority required the bankruptcy court to specifically
27 address the Pioneer-Briones factors in the course of making its
28 decision; it did not do so. Accordingly, it abused its discretion
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1 by applying an incorrect legal standard.
2 We acknowledge that Peabody did not specifically refer to
3 Pioneer or to Briones in his moving papers and did not mention the
4 cases during the hearing on the Motion to Set Aside. He failed
5 even to cite the correct rule for relief. Trustee, however, did
6 articulate the Pioneer-Briones factors and provided reasons for
7 why he believed Peabody had failed to establish them.
8 Nevertheless, Peabody's failure to cite the correct rule or
9 relevant authorities did not relieve the bankruptcy court of its
10 duty to apply the correct legal standard. See Bateman, 231 F.3d
11 at 1224 (party's failure to cite Pioneer or Briones or discuss any
12 of the factors under the equitable test did not relieve district
13 court of its duty to apply the correct legal standard).
14 Our decision to vacate is further supported by the fact the
15 bankruptcy court failed to articulate any findings of fact or
16 conclusions of law. A motion for relief from judgment under
17 Rule 9024 is a contested matter under Rule 9014, subject to Civil
18 Rule 52(a) by incorporation under Rule 7052, which requires the
19 bankruptcy court to find the facts specifically and state its
20 conclusions of law separately. In the absence of complete
21 findings, we may vacate a judgment and remand the case to the
22 bankruptcy court to make the required findings or develop further
23 evidence. First Yorkshire Holdings, Inc. v. Pacifica L 22, LLC
24 (In re First Yorkshire Holdings, Inc.), 470 B.R. 864, 871 (9th
25 Cir. BAP 2012) (citing United States v. Ameline, 409 F.3d 1073,
26 1079 (9th Cir. 2005)).
27 VI. CONCLUSION
28 Because the bankruptcy court failed to engage in the Pioneer-
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1 Briones analysis required for evaluating Civil Rule 60(b)(1)
2 excusable neglect cases or to make any findings and conclusions
3 sufficient for review, we VACATE the Order and REMAND to the
4 bankruptcy court for findings and conclusions consistent with this
5 decision.
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