Dunmore v. U.S., 02-15789.

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Citation358 F.3d 1107
Docket NumberNo. 02-15789.,02-15789.
PartiesSteven Gregory DUNMORE, Plaintiff-Appellant, v. UNITED STATES of America, Internal Revenue Service, Defendant-Appellee.
Decision Date29 January 2004

Steven Gregory Dunmore, pro se, Napa, California, for the plaintiff-appellant.

Randolph L. Hutter, Tax Division, U.S. Department of Justice, Washington, DC, for the defendant-appellee.

Appeal from the United States District Court for the Northern District of California, Vaughn R. Walker, District Judge, Presiding. D.C. No. CV-00-4224-VRW.

Before: SUSAN P. GRABER, KIM McLANE WARDLAW, and JAY S. BYBEE, Circuit Judges.

Opinion by Judge Bybee.

OPINION

BYBEE, Circuit Judge:

Pro se plaintiff Steven Dunmore sued the Internal Revenue Service ("IRS," or "Government") in district court seeking, inter alia, refunds for his alleged overpayments of taxes. The IRS contended that the bankruptcy estate, and not Dunmore, owned the unscheduled claims following Dunmore's bankruptcy. Pursuant to the parties' stipulation, the district court transferred the matter to the bankruptcy court to permit the bankruptcy trustee to administer, and possibly abandon, the refund claims. The trustee abandoned the claims. The bankruptcy court then denied Dunmore's request to transfer his action back to the district court for further proceedings, concluding that his case was a core proceeding and that it had authority to decide the matter. It subsequently dismissed his case for failure to prosecute the case in the bankruptcy forum. Dunmore appealed the bankruptcy court's dismissal, but the district court affirmed.

We conclude that, although the bankruptcy court had "related to" jurisdiction over Dunmore's tax refund claims, those claims constituted non-core proceedings. In view of this conclusion, the district court abused its discretion when it affirmed the bankruptcy court's final order dismissing Dunmore's case for failure to prosecute. Dunmore had not consented to a jury trial for his non-core proceedings in the bankruptcy court forum. Accordingly, we reverse the district court's judgment and remand for further proceedings consistent with our opinion.

FACTS AND PROCEEDINGS BELOW

In 1993, Dunmore administratively sought refunds from the IRS of three alleged tax overpayments made during 1989 and 1990. While awaiting an IRS decision on these refund claims, Dunmore consulted with his tax attorney to determine whether he should list these refund claims as assets on a voluntary Chapter 7 bankruptcy petition he was preparing. His attorney advised him that litigating the refund claims would be expensive and that, in view of the cost, it did not matter whether Dunmore scheduled the claims: The bankruptcy trustee likely would be unwilling to spend the money to litigate the matter, and Dunmore could not afford to litigate them himself. Dunmore then chose to omit the refund claims from his September 1995 bankruptcy petition. On October 20, 1995, Dunmore received formal notice that the IRS had disallowed the refund claims. Around that same date, the IRS also notified Dunmore of an alleged tax deficiency for the 1991 tax year.

In February 1996, the bankruptcy court granted Dunmore's Chapter 7 bankruptcy petition and discharged his debt. Soon thereafter, the IRS notified Dunmore of additional alleged tax deficiencies for the 1987, 1992, and 1993 tax years that, together with the alleged 1991 tax year deficiency, would offset any tax refund Dunmore might recover.

On October 17, 1997, within two years of the date of the formal IRS disallowance of his refund claims, Dunmore timely filed his original complaint seeking a tax refund. 26 C.F.R. § 301.6532-1(a) (2003). He subsequently amended his complaint in April 1998 and filed a demand for a jury trial in May 1998. His amended complaint alleged six causes of action: three tax refund claims for overpayment of taxes to the IRS during pre-petition tax years; a claim that the IRS violated the bankruptcy court's discharge injunction; a quiet title action against IRS tax liens; and a request for a permanent injunction against the IRS.

In late September 1998, almost a year after Dunmore filed his original complaint, the Government raised for the first time its concern that Dunmore lacked prudential standing to pursue the three tax refund claims in federal court.1 Dunmore, the Government argued, had denied the bankruptcy trustee an opportunity to administer the refund claims when he failed to schedule them on his bankruptcy petition as assets potentially available to satisfy his creditors. The Government contended that, as a result of Dunmore's failure to schedule these assets, the unadministered refund claims now belonged to the bankruptcy estate by operation of the Bankruptcy Code, 11 U.S.C. § 554(d) (2000). Accordingly, Dunmore lacked prudential standing to pursue the estate's refund claims.

The Government urged the district court to dismiss Dunmore's complaint for lack of standing, without prejudice to refiling. In making this request, the Government knew that the limitations period on the refund claims had since expired and that Dunmore would be time-barred on refiling. Aware of his dilemma, Dunmore pleaded with the district court not to dismiss his case. As an alternative, he proposed that the district court sit in its original bankruptcy jurisdiction so as to permit him to reopen his bankruptcy case without refiling in the bankruptcy court and then seek the trustee's abandonment, or relinquishment, of the estate's refund claims to him. That approach would avoid dismissal and the attendant difficulty of his refund claims possibly being time-barred on refiling.

Instead, Judge Patel proposed transferring Dunmore's case to the bankruptcy court so as to permit Dunmore to seek the trustee's abandonment of the claims. She allowed that, following the trustee's abandonment of any of the claims, Dunmore could reopen his case in the district court. The Government stipulated to the transfer, and Dunmore acquiesced to the dismissal of his complaint's claims to quiet title relief and a permanent injunction against the IRS. Judge Patel then approved the parties' agreement and transferred Dunmore's case to the bankruptcy court.

In the bankruptcy court, Dunmore secured the abandonment of the three tax refund claims. In a February 1999 proceeding, the bankruptcy trustee expressed no interest in pursuing the estate's refund claims, considering them to be frivolous. The bankruptcy court then ordered the trustee to abandon the claims to Dunmore. It concluded that the trustee cured Dunmore's lack of standing to pursue the refund claims when the trustee abandoned the claims to Dunmore.

Although this abandonment fulfilled the limited purpose initially motivating Judge Patel's transfer of the case to the bankruptcy court, Dunmore's case remained in the bankruptcy court and the parties proceeded with the case to trial.

In June 2000, Dunmore failed to attend a status conference that the bankruptcy court had twice continued during the previous six months. The court neither dismissed the case nor sanctioned Dunmore at that time, but issued a pretrial order that scheduled October 18, 2000, as a "date certain" for a bench trial in the bankruptcy court, and set dates for the completion of discovery and the exchange of documents.

Six days prior to the scheduled bankruptcy trial date, Dunmore, for the first time represented by counsel, moved the court to "transfer" the case back to the district court. He alleged that the bankruptcy court lost jurisdiction to hear his claims once the trustee abandoned the refund claims. In response, the IRS moved to dismiss Dunmore's complaint on account of his failure at that point to comply with the bankruptcy court's pretrial order.

On the scheduled trial date, Dunmore admitted he was not prepared to proceed with trial in the bankruptcy court. During the hearing, the bankruptcy court concluded that it had core jurisdiction over Dunmore's allegation that the IRS had violated the bankruptcy court's discharge injunction. In response, Dunmore voluntarily dismissed that claim, leaving only his three refund claims. The bankruptcy court then issued a final order dismissing his refund claims with prejudice for failure to prosecute. Dunmore appealed to the district court, and Judge Walker affirmed.

STANDARD OF REVIEW

This court exercises plenary review over the decision of the district court sitting as an appellate court in this bankruptcy case. Rifino v. United States (In re Rifino), 245 F.3d 1083, 1086 (9th Cir.2001). We review de novo whether Dunmore had prudential standing when he filed his complaint, Fair Hous. of Marin v. Combs, 285 F.3d 899, 902 (9th Cir.), cert. denied, 537 U.S. 1018, 123 S.Ct. 536, 154 L.Ed.2d 425 (2002), whether the bankruptcy court had jurisdiction over the complaint, Durkin v. Benedor Corp. (In re G.I. Indus., Inc.), 204 F.3d 1276, 1279 (9th Cir.2000), and whether Dunmore was entitled to a jury trial in federal court, United States v. Cal. Mobile Home Park Mgmt. Co., 107 F.3d 1374, 1377 (9th Cir.1997).

In addition, we review for an abuse of discretion the district court's decision to affirm the dismissal of Dunmore's case for failure to prosecute. Link v. Wabash R.R., 370 U.S. 626, 633, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962). If the district court based its decision to affirm the dismissal on an inaccurate view of the law, it abused its discretion. United States v. Iverson, 162 F.3d 1015, 1026 (9th Cir.1998).

DISCUSSION
A. Whether Dunmore had standing to pursue his refund claims

As a preliminary matter and alternative basis for affirming the district court, the Government questions Dunmore's standing to pursue his tax refund claims. To assert constitutional standing in this case, Dunmore must have suffered an "injury in fact" that is fairly traceable to the...

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