In re: Steven D. Stein

FILED
MAR 13 2012
1
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. SC-11-1472-MkHKi
)
6 STEVEN D. STEIN, ) Bk. No. 10-03458-LA11
)
7 Debtor. ) Adv. No. 10-90305-LA
)
8 )
STEVEN D. STEIN, )
9 )
Appellant, )
10 v. ) MEMORANDUM*
)
11 EL DORADO CUSTOM POOLS, )
)
12 Appellee. )
)
13
Argued and Submitted on
14 February 24, 2012, at Pasadena, California
15 Filed - March 13, 2012
16 Appeal from the United States Bankruptcy Court
for the Southern District of California
17
Honorable Louise DeCarl Adler Bankruptcy Judge, Presiding
18
19 Appearances: Jeffrey Lewis of Broedlow Lewis LLP appeared for
Appellant Steven D. Stein. Molly T. Shields
20 appeared for Appellee El Dorado Custom Pools.
21
Before: MARKELL, HOLLOWELL, and KIRSCHER, Bankruptcy Judges.
22
23
24
25
26 *
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8013-1.
1
1 INTRODUCTION
2 Debtor Steven D. Stein (“Stein”) appeals the bankruptcy
3 court’s order denying relief from its order dismissing an
4 adversary proceeding related to his Chapter 111 bankruptcy case.
5 We REVERSE and REMAND.
6 FACTS2
7 On January 12, 2008, Stein and Susan Corl3 contracted with
8 El Dorado Custom Pools (“El Dorado”) to construct a swimming pool
9 at their residence in El Dorado, California (the “Property”).
10 El Dorado is the fictitious business name under which Erik and
11 Jackie Heasley (the “Heasleys”) operate a pool construction
12 business.
13 Stein arranged financing for the project through Bank of
14 America, N.A. (“BofA”). The borrowed funds were placed on
15 deposit with First American Title (“First American”). First
16 American was to disburse the funds upon submission of approved
17 invoices.
18 The project did not go as planned. On July 11, 2008,
19 El Dorado filed a complaint in California Superior Court for the
20
21 1
Unless specified otherwise, all “Chapter” and “Section”
22 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all
“Rule” references are to the Federal Rules of Bankruptcy
23 Procedure, Rules 1001-9037, all “Civil Rule” references are to
the Federal Rules of Civil Procedure, 1-86, and all “Evidence
24 Rule” references are to the Federal Rules of Evidence, Rules 101-
1103.
25
2
26 The factual background of the state court litigation has
been compiled from the allegations in the parties’ complaints.
27
3
Corl was a co-owner of the Property at the time of
28 construction.
2
1 County of El Dorado. In the complaint, El Dorado sought recovery
2 based on breach of contract, negligence, and quantum meruit;
3 El Dorado also sought to foreclose on a mechanic’s lien it had
4 recorded against the Property and to recover payments of amounts
5 allegedly due and owing on Stein and Corl’s open book account.
6 Stein and Corl cross-claimed, bringing causes of action for
7 fraud in the inducement, slander of title, breach of contract,
8 negligence, and breach of warranty against El Dorado. They also
9 sued BofA for breach of contract and breach of the covenant of
10 good faith and fair dealing.
11 On March 3, 2010, Stein filed a Chapter 13 petition4 in the
12 United States Bankruptcy Court for the Southern District of
13 California. Stein then removed the California state court
14 litigation to the United States Bankruptcy Court for the Eastern
15 District of California.5 He thereafter moved to transfer the
16 lawsuit to the United States Bankruptcy Court for the Southern
17 District of California, where his main bankruptcy case was
18 pending. That motion was granted on June 23, 2010.
19 Once transferred, nothing happened in the adversary
20 proceeding for almost a year. On April 6, 2011, the bankruptcy
21 court issued a “Notice of Intent to Dismiss Adversary Proceeding
22 for Want of Prosecution.” In the notice, the bankruptcy court
23 warned that it would dismiss the adversary proceeding unless
24
25 4
Stein’s Chapter 13 case was converted to one under
Chapter 11 on October 4, 2010.
26
5
According to El Dorado’s counsel in the state court
27
proceedings, the state court had already set the matter for a
28 jury trial when Stein removed the case to bankruptcy court.
3
1 “Plaintiff takes action during the twenty-one day period either
2 by filing the appropriate order or judgment or by noticing the
3 matter for hearing.”6 Dkt. No. 5. In the removed action, the
4 only entity denominated a “Plaintiff” was El Dorado.
5 At the time the bankruptcy court issued its April 6, 2011
6 notice, only four entries appeared on the adversary docket. The
7 first item was the order transferring the adversary proceeding to
8 the bankruptcy court, filed on June 29, 2010. The second was a
9 “Notice of Filing Proceeding on Transfer from Another District,”
10 filed on June 29, 2010. The third was an “Association of
11 Counsel,” filed on July 30, 2010. The fourth and final item was
12 a “Notice of Appearance and Demand for Notices and Papers,” filed
13 on August 4, 2010. Bures submitted these last two filings on
14 behalf of El Dorado.
15 No responses were filed to the court’s notice. The
16 bankruptcy court thus dismissed the adversary proceeding and all
17 related cross and counterclaims without prejudice for want of
18 prosecution on June 6, 2011. At the time the bankruptcy court
19 granted its motion, the only filing submitted by Stein in the
20 adversary proceeding was a “Substitution of Attorney,” filed on
21
22 6
The accompanying certificate of notice shows that Matthew
23 Clark Bures (“Bures”) and Richard Seegman (“Seegman”) received
notice by first class mail. At the time of service, Seegman was
24 counsel of record for Stein in the adversary proceeding. Burres
was counsel of record for El Dorado but purported to represent
25 El Dorado as a cross-defendant only. We remain perplexed as to
26 how an attorney can only represent a party on a cross-claim
(counterclaim in federal parlance) when that cross-claim appears
27 to arise out of the same nucleus of operative facts. Our
confusion, however, does not affect the disposition of this
28 appeal.
4
1 April 27, 2011.
2 On June 23, 2011, Stein’s new counsel moved for relief from
3 the order of dismissal under Rule 9024, which incorporates Civil
4 Rule 60(b)(1). In his brief in support of the motion, Stein
5 argued that “the dismissal was a result of inadvertence,
6 surprise, and excusable neglect.” Stein’s Mem. of Points and
7 Authorities at 4. Specifically, Stein asserted that because he
8 was “not the named plaintiff in the case, . . . counsel[7]
9 mistakenly assumed that the named plaintiff, El Dorado, would
10 follow the appropriate Bankruptcy procedures and file the
11 requisite certificate of compliance with th[e] Court as required
12 by local rules.” Id. According to Stein, “it came as a complete
13 surprise . . . that El Dorado took no action in response to the
14 Court’s notice of its intent to dismiss this matter.” Id. Stein
15 further contended that if El Dorado had informed Stein of its
16 intent to abandon the litigation, he “would have taken further
17 steps to prevent the Court’s . . . order.” Id. at 7. In
18 addition, Stein maintained that “counsel acted with reasonable
19 diligence, including contacting th[e] Court to reserve a June 30,
20 2011 hearing date to conduct a status conference” and contacting
21 “all counsel for all parties in th[e] matter.”8 Id. at 4. Stein
22
7
23 As noted in text, attorney Jeffrey Lewis (“Lewis”) did not
substitute in as Stein’s counsel in the adversary proceeding
24 until April 27, 2011.
25 8
In his declaration in support of the motion for relief,
26 Lewis declared as follows:
27 6. Upon learning that the Court was considering
dismissing the merits, I took the following steps:
28 (continued...)
5
1 also contended that no party would be prejudiced if the
2 bankruptcy court granted the motion. The record reflects that
3 Stein’s counsel emailed information regarding a possible status
4 conference to interested parties, but it appears that he never
5 followed through on his promise that a “[f]ormal notice will
6 follow this email.”9
7
8
8 (...continued)
a) I contacted the clerk and reserved a pre-
9 trial conference for June 30, 2011. She informed me that
the parties would have to file a joint pre-trial
10 certificate of compliance in advance of the June 30, 2011
11 hearing.
b) On April 28, 2011, I contacted the other
12 parties to this litigation to attempt to meet and
confer . . . . I reminded plaintiff El Dorado Custom
13 Pools’ counsel, Jennifer Wiener, of the plaintiffs’
obligation to set up a pre-trial conference . . . in
14 advance of the June 30, 2011 hearing . . . . I have not
15 been able to locate a substitution of attorney filed by
Ms. Weiner nor have I been able to find a reference to one
16 on the Court’s docket for this matter.
c) On April 28, 2011, I received an email from
17 plaintiff El Dorado Custom Pools’ counsel, Jennifer Wiener.
Ms. Wiener advised me that she was no longer counsel for
18
plaintiff El Dorado Custom Pools. I informed Ms. Wiener
19 that I had no record of the filing of a substitution of
attorney and that the plaintiff’s rights may be impaired if
20 she or her client d[id] not take action.
21 Lewis’ Decl. in Support of Mot. for Relief at 2-3.
22 9
This email read:
23
Counsel,
24
As you may recall, I represent Mr. Stein with respect to
25 litigation involving El Dorado Custom Pools, Bank of
26 America, and First American Title. You are receiving this
email because you were counsel of record at the time
27 Mr. Stein removed [these cases to federal court] . . . .
Please be advised that counsel has set a status conference
28 (continued...)
6
1 El Dorado opposed Stein’s motion for relief, requesting that
2 the bankruptcy court deny the relief sought because: (1) the
3 bankruptcy court did not have authority to enter final judgment
4 on Stein’s cross-claims in light of the United States Supreme
5 Court’s decision in Stern v. Marshall, U.S. , 131 S. Ct.
6 2594, 180 L. Ed. 2d 574 (2011); (2) Stein had the option to
7 pursue his claims in state court; and (3) the bankruptcy court
8 could not hold a jury trial absent the parties’ consent, which,
9 El Dorado argued, had not been given.
10 In his reply, Stein first reiterated his argument that the
11 order of dismissal resulted from mistake, inadvertence, surprise,
12 or excusable neglect.10 He also asserted that his entitlement to
13 relief was uncontested, as El Dorado’s opposition contained no
14 evidence or argument that Stein was not entitled to relief under
15 any of the grounds set forth in Civil Rule 60(b)(1) and did not
16 contain any argument or evidence demonstrating prejudice to any
17
9
(...continued)
18
in this matter for June 30, 2011, 2:00 p.m. Formal notice
19 will follow this email. In advance of that conference we
are required to meet and confer regarding our readiness for
20 trial . . . .
21 By this email, I am requesting that plaintiffs’ counsel
22 arrange and set up the conference. If you are no longer
counsel of record, please send me a copy of the
23 substitution of attorney filed with the United States
Bankruptcy Court so that I may remove you from this list.
24
Email from Lewis (April 28, 2011). The email was not addressed
25 to Bures, who represented El Dorado as cross-defendants in the
26 adversary proceeding as of July 30, 2010.
10
27 This varied slightly from the argument offered in the
brief in support of the motion, which Stein based on
28 “inadvertence, surprise, and excusable neglect.”
7
1 party in the event the bankruptcy court granted Stein’s motion.
2 In addition, Stein argued that the Stern decision did not
3 preclude the bankruptcy court from granting relief under Civil
4 Rule 60(b)(1) because even if the bankruptcy court lacked the
5 authority to enter final judgment, it could still submit proposed
6 findings of fact and conclusions of law to the district court.
7 Alternatively, Stein maintained that Stern was inapplicable. As
8 to El Dorado’s argument that it did not consent to a jury trial
9 in bankruptcy court, Stein contended that El Dorado had
10 previously waived its jury trial right.11
11 The hearing on the motion was scheduled for July 28, 2011.
12 Prior to the hearing, the bankruptcy court issued its tentative
13 ruling:
14 First, movant fails to satisfy [the] standard of ‘mistake,
inadvertence or surprise’. The failure of debtor/movant or
15 plaintiff to do anything for 12 months is hardly a
surprise; it is certainly not excusable or inadvertent.
16 The failure of plaintiff to respond to debtor’s request to
meet and confer does not excuse debtor’s failure to notice
17 a pretrial status conference for its cross-complaint and
file a certificate of compliance re: early meeting of
18 counsel as required by LBR 7016-2(a)-(c) and 7016-3.
19 Second, if the action is still pending in state court,
[the] Court agrees with opposition [sic] that this court
20 lacks Constitutional authority to enter a final judgment on
the counterclaims since the recent USSC decision in Stern
21 v. Marshall [2011 WL 247292 (June 23, 2011)] squarely
applies to these counterclaims. We cannot conduct a jury
22 trial without consent which the plaintiff refuses to give
and since the state court can conduct a jury trial and, at
23 least when this case was initially filed, was on the eve of
doing so, judicial economy would be better served by that
24
25 11
Stein did not cite to Pioneer Inv. Servs. Co. v. Brunswick
26 Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993), or Briones v.
Riviera Hotel & Casino, 116 F.3d 379, 381 (9th Cir. 1996) (per
27 curiam), in the papers he submitted in support of the motion for
relief. He similarly did not identify those cases during the
28 hearing on the motion.
8
1 court adjudicating this action.
2 Dkt. No. 15.
3 At the hearing, Stein argued that if the bankruptcy court
4 remanded the case to state court, there could be a delay in
5 getting the case ready for trial. According to Stein, such delay
6 could be anticipated in light of the “pleadings battle” that was
7 raging at the time the case was removed to federal court and the
8 fact that it appeared as though El Dorado and the Heasleys had
9 obtained replacement counsel. Tr. of July 28, 2001 Hr’g at 3-4.
10 Stein also argued that he had acted in good faith, pursuing
11 negotiations and possible resolution with BofA, up until, as
12 Stein represented, BofA “all of a sudden withdrew its consent to
13 participate in the mediation . . . .” Id. at 4. These dealings
14 with BofA, according to Stein, were also another reason for his
15 “delay in getting to the El Dorado argument.” Id. at 5.
16 In response, El Dorado maintained that none of Stein’s
17 arguments “address[ed] the standard of inadvertent excusable
18 neglect” and that nothing Stein presented “would give him the
19 right for this Court to reverse its order dismissing th[e] case.”
20 Id.21 Stein’s reply to these arguments was as follows:
22 With respect to the Stern case that affects this
Court’s ability to render a jury trial and enter judgment,
23 I believe the rules still allow, notwithstanding that
decision, this Court to refer this matter to the district
24 court, either here in the southern district or up in the
central district, for a jury trial.
25
On the issue of inadvertence and the standard, I
26 believe the Court has to find that one or more of the
parties would be prejudiced and that we acted in bad faith
27 and that the delay in prosecuting the case would slow down
the proceedings of this bankruptcy, and I don’t believe any
28 of those findings can be sustained.
9
1 Id. at 6.
2 Without addressing the factors Stein mentioned, the
3 bankruptcy court adopted its tentative ruling at the conclusion
4 of the hearing. Id. It reasoned:
5 [T]o get relief from a dismissal, you have to satisfy
the standard of mistake, inadvertence, or surprise; and as
6 the Court’s tentative observed, the failure of anything to
come to the attention of the Court for 12 months is hardly
7 a surprise, and it certainly does not appear to be
excusable or inadvertent.
8
The plaintiff had to respond to the request to meet
9 and confer, but the debtor could have noticed a pretrial
conference on its cross-complaint and had the burden of
10 doing so, and doing that which was required under LBR 1716-
2(a) through (c) and 1716-3.
11
12 Id. at 6-7.12
13 The bankruptcy court entered the order denying relief
14 from its order dismissing the adversary proceeding on
15 September 6, 2011. Stein timely appealed.
16 JURISDICTION
17 The bankruptcy court had jurisdiction under 28 U.S.C.
18 §§ 1334 and 157(c)(1). The Panel has jurisdiction under
19 28 U.S.C. § 158.
20 ISSUE
21 Did the bankruptcy court abuse its discretion when it denied
22 Stein’s motion for relief from the order of dismissal?
23 STANDARD OF REVIEW
24 We review a bankruptcy court’s decision to deny a motion
25
26 12
As to the Stern issue, the bankruptcy court determined
27 that “it would be far better to leave [the litigation] in the
state court and let it complete there.” Tr. of July 28, 2011
28 Hr’g at 7.
10
1 under Civil Rule 60(b) for abuse of discretion. Lemoge v. United
2 States, 587 F.3d 1188, 1191-92 (9th Cir. 2009); Alonso v.
3 Summerville (In re Summerville), 361 B.R. 133, 139 (9th Cir. BAP
4 2007) (citing Hammer v. Drago (In re Hammer), 112 B.R. 341, 345
5 (9th Cir. BAP 1990), aff’d, 940 F.2d 524 (9th Cir. 1991)).
6 The abuse of discretion standard has two prongs: “first,
7 whether the court applied the correct legal standard; and second,
8 whether the factual findings supporting the legal analysis were
9 clearly erroneous.” Veal v. Am. Home Mortg. Servicing (In re
10 Veal), 450 B.R. 897, 915 (9th Cir. BAP 2011) (citing United
11 States v. Hinkson, 585 F.3d 1247, 1261-63 (9th Cir. 2009) (en
12 banc)). Where a bankruptcy court has failed to apply the correct
13 legal standard, “it has ‘necessarily abuse[d] its discretion.’”
14 Id. (quoting Hinkson, 585 F.3d at 1261-63) (modifications in
15 original). We review this prong of the analysis de novo. Id.16 Where a bankruptcy court has applied the correct legal standard,
17 “the inquiry then moves to whether the factual findings made were
18 clearly erroneous.” Id. (citing Hinkson, 585 F.3d at 1262). See
19 also Rule 8013. A bankruptcy court’s findings of fact are
20 clearly erroneous if they are “‘illogical, implausible, or
21 without support in inferences that may be drawn from the
22 record.’” Id. (quoting Hinkson, 585 F.3d at 1263).
23 DISCUSSION
24 I. The bankruptcy court did not apply the correct legal
standard.
25
26 A. Civil Rule 60(b) and the Pioneer-Briones test.
27 Civil Rule 60(b) applies to bankruptcy proceedings. Rule
28 9024 (“Rule 60 F.R.Civ.P applies in cases under the
11
1 Code . . . .”). Under Civil Rule 60(b)(1), the bankruptcy court
2 may grant relief from a final judgment, order, or proceeding for
3 “mistake, inadvertence, surprise, or excusable neglect.” Civil
4 Rule 60(b)(1)(emphasis supplied).
5 To determine whether a party’s neglect is excusable, the
6 court must consider: “[(1)] the danger of prejudice to the
7 [opposing party], [(2)] the length of the delay and its potential
8 impact on judicial proceedings, [(3)] the reason for the delay,
9 including whether it was within the reasonable control of the
10 movant, and [(4)] whether the movant acted in good faith.”
11 Pioneer, 507 U.S. at 395.
12 These four factors, however, are “not an exclusive list.”
13 Lemoge, 587 F.3d at 1195 (citing Briones, 116 F.3d at 381).13
14 “The determination as to what sorts of neglect will be considered
15 ‘excusable’ is at bottom an equitable one.” Pioneer, 507 U.S. at16 395. See also Bateman, 231 F.3d at 1224 (“We would not
17 ordinarily reverse a court simply for failing to articulate the
18 Pioneer and Briones test, as long as it actually engagedin [sic]
19 the equitable analysis those cases mandate.”). In making that
20 determination, the court must also consider “all relevant
21 circumstances.” Id.; Lemoge, 587 F.3d at 1195. Where “prejudice
22 to the movant . . . is one of the relevant circumstances[,] that
23 should be considered when evaluating excusable neglect.” Lemoge,
24
25 13
After its decision in Briones, 116 F.3d at 381 (holding
26 that the equitable test set out in Pioneer applies to Civil
Rule 60(b)), the Ninth Circuit refers to this framework as the
27 Pioneer-Briones test. See, e.g., Lemoge, 587 F.3d 1188; Bateman
v. U.S. Postal Service, 231 F.3d 1220 (9th Cir. 2000). We use
28 that same appellation here.
12
1 587 F.3d at 1195.
2 Moreover, the Ninth Circuit has expressly noted that a
3 party’s failure to either (a) cite Pioneer or Briones or (b) to
4 discuss any of the factors under the equitable test “d[oes] not
5 relieve the court of the duty to apply the correct legal
6 standard.” Bateman, 231 F.3d at 1224 (citation omitted).
7
8 B. The bankruptcy court erred when it did not consider all
of the Pioneer-Briones factors, including the risk of
9 any prejudice to Stein.
10 On appeal, Stein argues, among other things, that the
11 bankruptcy court abused its discretion because it did not weigh
12 all of the Pioneer factors. We agree.
13 First, the bankruptcy court’s tentative ruling fails to
14 mention excusable neglect as a separate grounds for granting
15 relief. The tentative ruling seems to address whether any
16 alleged “mistake, inadvertence, or surprise” was excusable, but
17 it contains no language to suggest that term “excusable” was used
18 in reference to any alleged neglect. Second, the order from
19 which this appeal arises provides no additional clarification.
20 It merely documents the bankruptcy court’s adoption of its
21 tentative ruling.
22 Even if we were, however, to assume that the bankruptcy
23 court’s tentative ruling and its subsequent order properly
24 referred to excusable neglect, the remainder of the record shows
25 that the bankruptcy court did not consider whether its order of
26 dismissal, though without prejudice as a procedural matter, would
27
28
13
1 present a risk of any actual prejudice to Stein.14 In
2 particular, the record reflects that the bankruptcy court did not
3 consider the effect its order would have on Stein’s ability to
4 litigate his claims in state court.
5 We acknowledge that Stein did not specifically refer to
6 Pioneer or to Briones in the papers he submitted in support of
7 the motion for relief; nor did he mention the cases during the
8 hearing on the motion. In this case, however, Stein’s failure to
9 cite the relevant authorities did not relieve the bankruptcy
10 court of its duty to apply the correct legal standard. See
11 Bateman, 231 F.3d at 1224.
12 Moreover, at the hearing, Stein did mention a number of the
13 factors courts are to consider when deciding a motion under Civil
14 Rule 60(b)(1):
15 On the issue of inadvertence and the standard, I believe
the Court has to find that one or more of the parties would
16 be prejudiced and that we acted in bad faith and that the
delay in prosecuting the case would slow down the
17 proceedings of this bankruptcy, and I don’t believe any of
those findings can be sustained.
18
Tr. of July 28, 2011 Hr’g at 6.
19
Without addressing these factors, however, the bankruptcy
20
court adopted its tentative ruling at the conclusion of the
21
hearing, adding only that:
22
I think [El Dorado] is correct that, to get to relief
23 from a dismissal, you have to satisfy the standard of
mistake, inadvertence or surprise; and as the Court’s
24 tentative observed, the failure of anything to come to the
attention of the Court for 12 months is hardly a surprise,
25 and it certainly does not appear to be excusable or
26
14
27 From the record, it appears the bankruptcy court did not
consider this factor, as well as the remainder of the Pioneer-
28 Briones factors.
14
1 inadvertent . . . .
2 [T]he debtor could have noticed a pretrial conference
on its cross-complaint and had the burden of doing so, and
3 doing that which was required under LBR 1716-2(a) through
(c) and 1716-3.
4
5 Id. at 6-7.
6 As set forth above, when deciding whether relief is
7 appropriate under Civil Rule 60(b)(1) on the grounds of excusable
8 neglect, the Pioneer-Briones test requires that the bankruptcy
9 court consider all four factors. See Bateman, 231 F.3d at 1224
10 (“The court would have been within its discretion if it spelled
11 out the equitable test and then concluded that [the moving party]
12 had failed to present any evidence relevant to [those]
13 factors.”). Under the circumstances of this case, the Pioneer-
14 Briones test also requires that the bankruptcy court consider any
15 prejudice to the movant. See Lemoge, 587 F.3d at 1195.
16 While Stein’s counsel may have been negligent or careless,
17 “[t]hat . . . represents the beginning of [the] inquiry as to
18 whether the negligence is excusable, not the end of it.” See
19 Pincay v. Andrews, 389 F.3d 853, 858-59 (9th Cir. 2004) (en banc)
20 (district court did not abuse its discretion by granting, on the
21 grounds of excusable neglect, an extension to file a notice of
22 appeal where counsel had delegated the task to a paralegal who
23 had misread Fed. R. App. P. 4(a)). See also Pioneer, 507 U.S. at24 394 (“Thus, at least for the purposes of [Civil] Rule 60(b),
25 ‘excusable neglect’ is understood to encompass situations in
26 which the failure to comply with a filing deadline is
27 attributable to negligence.”); Bateman, 231 F.3d at 1225
28 (reversing and remanding to the district court with instructions
15
1 to grant relief under Civil Rule 60(b)(1) even though counsel,
2 who was aware of an upcoming summary judgment motion, left the
3 country without filing a response or seeking an extension of the
4 filing deadline).
5 Here, the procedural posture of the adversary proceeding
6 makes the inquiry as to the risk of prejudice to the movant,
7 which the bankruptcy court did not conduct, all the more crucial.
8 Based on the record, it appears that the bankruptcy court’s
9 ruling was premised on the availability of the state court as an
10 alternate and more appropriate forum for the litigation. Absent
11 from the record, however, are any indicia that the bankruptcy
12 court considered whether the removal of the state court
13 litigation to bankruptcy court had effectively undermined that
14 premise. Simply put, nothing in the record suggests that the
15 bankruptcy court assessed whether Stein could litigate his claims
16 in state court without an order of remand from the bankruptcy
17 court. See Rule 9027(c) (“Promptly after filing the notice of
18 removal, the party filing the notice shall file a copy of it with
19 the clerk of the court from which the claim or cause of action is
20 removed. . . . The parties shall proceed no further in that
21 court unless and until the claim or cause of action is
22 remanded.”).
23 Accordingly, we conclude that the bankruptcy court did not
24 conduct the equitable analysis Pioneer and Briones require. We
25 therefore agree with Stein insofar as he challenges whether the
26 bankruptcy court applied the correct legal standard.
27 CONCLUSION
28 For the reasons set forth above, we REVERSE the bankruptcy
16
1 court’s order denying relief from its order dismissing the
2 adversary proceeding and REMAND this matter to the bankruptcy
3 court.15 On remand from this panel, the bankruptcy court may
4 consider whether remand to the California Superior Court is
5 appropriate under the circumstances.
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25 15
Because we reverse with respect to the bankruptcy court’s
26 application of the Pioneer-Briones test, we need not address the
portion of its order that suggests Stern renders Stein’s claims
27 ineligible for final adjudication by the bankruptcy court.
To the extent the parties dispute the issue of costs on
28 appeal, costs shall be allowed as provided for in Rule 8014.
17