Skinner v. First Union National

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
EDGAR S. SKINNER, Debtor,
Plaintiff-Appellant,
v. No. 98-1627
FIRST UNION NATIONAL BANK,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Virginia, at Harrisonburg.
James H. Michael, Jr., Senior District Judge.
(CA-98-10-H, Bk-5-95-1090-7, AP-96-14)
Argued: March 3, 1999
Decided: May 3, 1999
Before WILKINSON, Chief Judge, and MICHAEL and
MOTZ, Circuit Judges.
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Vacated and remanded by unpublished per curiam opinion.
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COUNSEL
ARGUED: Gary Michael Bowman, Roanoke, Virginia, for Appel-
lant. John Edward Davidson, MCGUIRE, WOODS, BATTLE &
BOOTHE, L.L.P., Charlottesville, Virginia, for Appellee. ON
BRIEF: Kurt J. Krueger, Joel H. Trotter, MCGUIRE, WOODS,
BATTLE & BOOTHE, L.L.P., Charlottesville, Virginia, for Appel-
lee.
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Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
The district court dismissed Edgar Skinner's appeal of a bank-
ruptcy court order because his lawyer failed to file a brief on time.
The court also denied Skinner's motion to reconsider. Because the
district court did not consider (at the time of dismissal) the factors set
out in In re Serra Builders, Inc., 970 F.2d 1309 (4th Cir. 1992), and
In re SPR Corp., 45 F.3d 70 (4th Cir. 1995), we vacate the dismissal
order and the order denying reconsideration. The case is remanded for
new proceedings on what should be done about the late brief.
I.
Skinner operated Arena Sports, Inc., an indoor recreation center in
Stuart's Draft, Virginia. Both Skinner and Arena Sports filed for
bankruptcy in December of 1995. Skinner had borrowed money to
build the recreation center from a predecessor of First Union National
Bank. This loan was secured by deeds of trust on Skinner's commer-
cial real estate and on his home. Thus, when Skinner went into bank-
ruptcy, First Union held valid liens against both his commercial and
residential property.
The waters began to get muddy when First Union failed to file a
proof of claim in Skinner's bankruptcy. Thereafter, when another
secured creditor (the SBA) sought relief from the automatic stay to
foreclose against Skinner's home, Skinner objected for two reasons:
first, he argued that First Union's failure to file a claim barred the
bank from receiving a distribution from any sale of either the com-
mercial or residential property; second, Skinner believed that his
remaining creditors might be satisfied by the sale of the commercial
property alone. The bankruptcy court overruled Skinner's objection,
concluding that First Union's failure to file a proof of claim did not
bar it from receiving a distribution of sale proceeds from the trustee.
2
Skinner appealed to the district court. According to Skinner, the dis-
trict court deferred a decision on the merits of that appeal and directed
the bankruptcy court to determine the amount First Union was owed
and report back to the district court. Instead of reporting back, the
bankruptcy court allowed First Union to file a proof of claim. Skinner
objected on the grounds of untimeliness, and the bankruptcy court
entered an order overruling that objection. Skinner then appealed a
second time to the district court, expecting that First Union's failure
to file a proof of claim by the bar date would finally be addressed.
This time, a late filing by Skinner himself got matters off track. The
district court clerk directed Skinner to file his appeal brief by a certain
date, pursuant to Bankruptcy Rule 8009(a)(1). Skinner's lawyer pre-
pared the brief and gave it to a temporary secretary, who was
instructed to send the brief to the court by express mail, in time to
meet the deadline. Two weeks later, Skinner's lawyer received a dis-
trict court order dismissing the appeal because no brief had been filed.
The lawyer searched his office and discovered the unmailed brief in
a desk drawer.
Skinner promptly filed a motion to reconsider (with the brief
attached) and asked the district court to allow him to submit his brief
late. The court denied the motion, concluding that Skinner's lawyer
had not established excusable neglect. Skinner appeals both the
underlying order dismissing the appeal and the order denying his
motion for reconsideration.
II.
There are two orders on appeal, and different tests governed the
entry of each of them, even though both dealt with the failure to file
a brief on time. We will first discuss the order denying the motion to
reconsider because there the district court provided its reasoning in a
memorandum.
Skinner moved the district court to reconsider the dismissal under
Fed. R. Civ. P. 60(b), which provides:
On motion and upon such terms as are just, the court may
relieve a party or a party's legal representative from a final
judgment, order, or proceeding for the following reasons:
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(1) mistake, inadvertence, surprise, or excusable neglect
....
Fed. R. Civ. P. 60(b)(1). Skinner's Rule 60(b) motion asserted "ex-
cusable neglect" by his lawyer, and the district court evaluated the
motion on that ground. The court relied in large part on the Supreme
Court's interpretation of the term "excusable neglect" in Pioneer
Investment Services Co. v. Brunswick Associates Limited Partnership,
507 U.S. 380 (1993). There, in the context of Bankruptcy Rule
9006(b)(1), the Court said that the factors to be considered in deter-
mining excusable neglect include: "[1] danger of prejudice to the
[non-movant], [2] the length of delay and its potential impact on judi-
cial proceedings, [3] the reason for the delay, including whether it
was within the reasonable control of the movant, and[4] whether the
movant acted in good faith." Pioneer, 507 U.S. at 395. We have indi-
cated that this approach is not limited to Bankruptcy Rule 9006(b)(1),
but has general application to the consideration of excusable neglect.
See, e.g., Thompson v. E.I. DuPont de Nemours & Co., Inc., 76 F.3d
530, 533 (4th Cir. 1996) (citing United States v. Hooper, 9 F.3d 257,
259 (2d Cir. 1993), for the proposition that "nothing in Pioneer limits
its interpretation of `excusable neglect' to the Bankruptcy rules").
Thus, the district court reasonably applied the Pioneer factors in con-
sidering Skinner's Rule 60(b) motion.
In applying the Pioneer factors, the district court concluded (1) that
"the `prejudice prong' . . . is not dispositive either way" and (2) that
the two-week delay in the filing of the brief was"not unreasonably
burdensome" on the judicial process. The court then considered
Pioneer factors (3) and (4) -- cause of the delay and the movant's
good faith -- and concluded that both factors weighed against Skin-
ner. As to those factors, the court said that "counsel's excuses ring
hollow." The court attributed the delay to "mere inattentiveness" on
the part of Skinner's lawyer. In addition, the court noted that the law-
yer had prior difficulty with deadlines or scheduling in bankruptcy
court.1 All in all, the district court found that Skinner's "counsel's
inattentiveness [was] especially inexcusable" and concluded that the
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1 At oral argument before us Skinner's lawyer maintained that any prior
difficulty was solely the result of miscommunication.
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late filing was not due to excusable neglect. Skinner's Rule 60(b)
motion was accordingly denied.
If the order denying the Rule 60(b) motion was the only matter
before us, we would be hard pressed to find any abuse of discretion
on the part of the district court. As we have noted, however, the initial
order dismissing the bankruptcy appeal has also been appealed, so we
must also consider the propriety of that order. That order's entry was
not governed by the "excusable neglect" standard. Instead, a different
test applies in deciding whether to order the dismissal of a bankruptcy
appeal for the tardy filing of a brief. The test was set forth in In re
Serra Builders, Inc., 970 F.2d 1309 (4th Cir. 1992), and clarified in
In re SPR Corp., 45 F.3d 70 (4th Cir. 1995).
In Serra we said that a district court must take at least one of the
following steps before dismissing a bankruptcy appeal on non-
jurisdictional procedural grounds: "(1) make a finding of bad faith or
negligence; (2) give the appellant notice and an opportunity to explain
the delay; (3) consider whether the delay had any possible prejudicial
effect on the other parties; or (4) indicate that it considered the impact
of the sanction and available alternatives." Serra, 970 F.2d at 1311.
In SPR we added that all relevant Serra factors had to be weighed:
Any fair reading of Serra reveals that a proper application
of its test will normally require a district court to consider
and balance all relevant factors, including the good faith of
the appellant (see step one) and possible prejudice to other
parties (see step three). Finally, throughout the process a
district court should bear in mind that, although dismissal is
an option, less drastic alternatives must be considered (see
step four).
SPR, 45 F.3d at 74.
Skinner argues that because the district court did not apply the
Serra/SPR test in dismissing his appeal, the dismissal order should be
vacated and the case remanded for application of that test.
First Union counters that Skinner has waived the Serra/SPR argu-
5
ment because he did not mention those cases in connection with his
Rule 60(b) motion. We disagree. Skinner's appeal was dismissed
without notice, so he had no chance to argue prior to dismissal that
Serra/SPR applied. Skinner's hands were tied by the time he made his
motion for reconsideration because an "excusable neglect" standard
governed that motion, and Skinner was correct to argue under that
standard.2
First Union next argues that even if the Serra/SPR factors should
have been applied initially, the district court sufficiently covered them
in deciding the Rule 60(b) motion. That argument, however, falls
somewhat short. We agree with the bank that the court's Rule 60(b)
memorandum does include a finding of negligence on the part of
Skinner's lawyer (Serra/SPR factor (1)). The district court also con-
sidered whether the delay in filing prejudiced the bank (Serra/SPR
factor (3)). It is a closer question whether factor (2) was covered. That
factor requires the court to give the late filer notice and an opportunity
to explain the delay. First Union argues that Skinner's lawyer had the
opportunity to explain the delay in his papers supporting the Rule
60(b) motion. That is true enough, but by that time Skinner was at a
significant disadvantage: his appeal had been dismissed. Serra and
SPR contemplate that the late filer be given a chance to explain him-
self before any adverse action is taken. In any case, we need not
decide whether factor (3) was satisfied because factor (4) was not
considered at all. Factor (4) requires the court to"consider[ ] the
impact of the sanction and available alternatives." Serra, 970 F.2d at
1311. There is nothing in the district court's Rule 60(b) memorandum
to indicate that the court considered any sanction less drastic than dis-
missal of the appeal. For that reason, we must vacate the dismissal
and remand for the district court to start afresh, applying the
Serra/SPR factors.
We note in closing that under Bankruptcy Rule 8001(a) "[f]ailure
of an appellant to take any steps other than the timely filing of notice
of appeal . . . is ground only for such action as the district court . . .
deems appropriate, which may include dismissal of the appeal." Fed.
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2 Still, it could have been useful to the district court if Skinner had
mentioned Serra and SPR when he made his Rule 60(b) motion.
6
Bankr. R. 8001(a). Dismissal, of course, is the ultimate sanction, but
we take no position on what the outcome should be on remand.
III.
The district court's order dismissing Skinner's bankruptcy appeal
is vacated. Because we vacate the underlying order, we also vacate as
moot the order denying Skinner's motion for reconsideration. The
case is remanded for the district court to consider (in light of the
Serra/SPR factors) what action, if any, should be taken against Skin-
ner for his lawyer's failure to file a timely brief.
VACATED AND REMANDED
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