Anwar v. Johnson

• Decision Date: 02 July 2013
• Docket Number: No. 11–16612.,11–16612.
• Parties: Amina ANWAR; David C. McClanahan, Appellants, v. D. Lee JOHNSON; David Lyn Vergeyle; Margaret Horne Vergeyle, and the marital community composed of David Lyn Vergeyle and Margaret Horne Vergeyle, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

720 F.3d 1183

Amina ANWAR; David C. McClanahan, Appellants,

v.D. Lee JOHNSON; David Lyn Vergeyle; Margaret Horne Vergeyle, and the marital community composed of David Lyn Vergeyle and Margaret Horne Vergeyle, Appellees.

No. 11–16612.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 12, 2013.

Filed July 2, 2013.

Mark Clarence McClanahan (argued), Portland, OR; Mark E. Hall, Chandler, AZ, for Appellants.

Randy Nussbaum (argued) and Beth J. Shapiro, Nussbaum, Gillis & Dinner P.C., Scottsdale, AZ, for Appellees.

Appeal from the United States District Court for the District of Arizona, Susan R. Bolton, District Judge, Presiding. D.C. No. 2:10–cv–02036–SRB.

Before: JEROME FARRIS, SIDNEY R. THOMAS, and N. RANDY SMITH, Circuit Judges.

ORDER

THOMAS, Circuit Judge:

Appellants' motion requesting publication of the memorandum disposition filed February 19, 2013, is GRANTED. The memorandum disposition is hereby withdrawn and replaced with the opinion filed concurrently with this order. No further petitions for rehearing or rehearing en banc will be entertained.

OPINION

The humorist Douglas Adams was fond of saying, “I love deadlines. I love the whooshing sound they make as they fly by.” But the law more often follows Benjamin Franklin's stern admonition: “You may delay, but time will not.” To paraphrase Émile Zola, deadlines are often the terrible anvil on which a legal result is forged.

This appeal presents the question of whether the Federal Rules of Bankruptcy Procedure afford the Bankruptcy Court the discretion to extend retroactively the deadline for filing nondischargeability complaints when an attorney's computer difficulties cause him to miss the electronic filing deadline. We conclude that the Rules of Bankruptcy Procedure do not allow retroactive extension of the deadline, and we affirm the judgment of the district court.

I

Amina Anwar and David C. McClanahan (collectively, “Anwar”) are former employees of the now-bankrupt Xperex corporation, of which D. Lee Johnson and David Vergeyle were the founders, principal shareholders, and Chief Financial Officer and Chief Executive Officer, respectively. Johnson and Vergeyle filed a voluntary petition in bankruptcy under Chapter 7 of the United States Bankruptcy Code in the District of Arizona.

Upon receipt of the petition, the Arizona bankruptcy court mailed notices to Anwar and other creditors listed in Johnson and Vergeyle's bankruptcy schedules, which informed the creditors of the pending bankruptcy proceedings, the date of the creditors' meeting in each case, and the deadline for filing a complaint to challenge the dischargeability of particular debts. The bankruptcy court informed Anwar and the other creditors that the deadline for filing nondischargeability complaints in Johnson's case was November 10, 2009, and the deadline in Vergeyle's case was November 20, 2009.

On November 10 and 24, 2009, Anwar filed timely motions to extend the filing deadlines in Johnson's and Vergeyle's cases, respectively. After a hearing, the bankruptcy court granted the motions and extended the deadline in both cases to April 13, 2010.

Anwar sought to challenge the dischargeability of the debts owed to her based on section 523(a) of the Bankruptcy Code, which excepts from discharge debts obtained by fraud. 11 U.S.C. § 523(a).¹ However, even debts obtained by fraud will be discharged unless the creditor timely requests a determination by the bankruptcy court that the debt is not dischargeable. 11 U.S.C. § 523(c). Federal Rule of Bankruptcy Procedure (“FRBP”) 4007(c) “imposes a strict 60–day time limit for filing complaints to determine dischargeability of debts listed in § 523(c).” Allred v. Kennerley (In re Kennerley), 995 F.2d 145, 146 (9th Cir.1993).

By local rule, the Arizona bankruptcy court has established a mandatory electronic filing system, with exceptions not relevant here. U.S. Dist. Ct. for the Dist. of Ariz., Local R. Bankr.P. 5005–2 (2007). Parties access the system through an online portal on the bankruptcy court's website. A creditor seeking to electronically file a nondischargeability complaint must complete two steps: First, the creditor must open an “adversary proceeding” in the bankruptcy court's electronic filing system. Second, the creditor must electronically file a nondischargeability complaint. Under the federal bankruptcy rules, the deadline for all electronic filings is midnight local time on the day set by the relevant order of the bankruptcy court. Fed. R. Bankr.P. 9006(a)(4)(A). Thus, the deadline for Anwar to file her nondischargeability complaints in the Johnson and Vergeyle proceedings was midnight Arizona time on April 13, 2010.

Anwar's counsel did not meet this deadline. Counsel did not initiate the first step of the electronic filing process—opening adversary proceedings—until after 9:00 p.m. on April 13, 2010—the last day of the extended period for filing nondischargeability complaints in the Johnson and Vergeyle cases. ² Due to technical problems with counsel's computer,³ he did not successfullyfile the nondischargeability complaint in the Johnson case until 12:26 a.m. on April 14, 2010. He did not file the complaint in the Vergeyle case until 12:38 a.m.

On May 18, 2010, Johnson and Vergeyle moved to dismiss Anwar's nondischargeability complaints as untimely. Anwar responded with a motion “for relief from untimely filing and to determine timeliness.” The bankruptcy court, after a hearing, granted Johnson and Vergeyle's motion, denied Anwar's, and dismissed the complaints with prejudice. The bankruptcy court explained that, under the federal bankruptcy rules and controlling precedent interpreting them, he lacked discretion to grant retroactive extensions of FRBP 4007(c)'s deadline. That the relevant authorities pre-dated the advent of the Arizona bankruptcy court's mandatory electronic filing system did not change the bankruptcy court's analysis. Reviewing de novo, the district court affirmed.

II

The sole issue on appeal is whether the bankruptcy court erred in refusing to grant Anwar a retroactive extension of the deadline for filing her nondischargeability complaints, so as to render timely her counsel's filings in the wee hours of the morning following the midnight deadline.

“ ‘On appeal from a district court's affirmance of a bankruptcy court decision, we independently review the bankruptcy court's decision, without giving deference to the district court.’ ” Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764, 770 (9th Cir.2008) (quoting Hebbring v. U.S. Trustee, 463 F.3d 902, 905 (9th Cir.2006)). “The bankruptcy court's conclusions of law and interpretation of the Bankruptcy Code are reviewed de novo and its factual findings for clear error.” Greene v. Savage (In re Greene), 583 F.3d 614, 618 (9th Cir.2009) (citing Salazar v. McDonald (In re Salazar), 430 F.3d 992, 994 (9th Cir.2005)). We review the bankruptcy court's decision to dismiss Anwar's complaints with prejudice for abuse of discretion. See Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir.2003).

A

The bankruptcy court correctly held that the Federal Rules of Bankruptcy Procedure afford it no discretion to extend retroactively the deadline set in FRBP 4007(c) for filing nondischargeability complaints. That rule provides, with an exception not relevant here, that

a complaint to determine the dischargeability of a debt under § 523(c) shall be filed no later than 60 days after the first date set for the meeting of creditors under § 341(a). The court shall give all creditors no less than 30 days' notice of the time so fixed in the manner provided by Rule 2002. On motion of a party in interest, after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be filed before the time has expired.

Fed. R. Bankr.P. 4007(c).⁴

Thus, by its terms, the rule requires creditors such as Anwar to file nondischargeabilitycomplaints within sixty days of the creditors' meeting. A creditor may move to extend the deadline for cause—as Anwar successfully did once—but “[t]he motion shall be filed before the time has expired.” Id.⁵ Reinforcing the statement that creditors must move for extensions of FRBP 4007(c)'s filing deadline before the time for filing has expired, FRBP 9006(b)(3) states that bankruptcy courts may extend this deadline “only to the extent and under the conditions stated in” FRBP 4007(c) itself. Fed. R. Bankr.P. 9006(b)(3). This requirement distinguishes FRBP 4007(c)'s deadline from most others set by the bankruptcy rules, which bankruptcy courts may extend at any time upon a showing of good cause or excusable neglect. Fed. R. Bankr.P. 9006(b)(1).

Consistent with the plain language of FRBP 4007(c) and 9006(b)(3), we have repeatedly held that the sixty-day time limit for filing nondischargeability complaints under 11 U.S.C. § 523(c) is “strict” and, without qualification, “cannot be extended unless a motion is made before the 60–day limit expires.” In re Kennerley, 995 F.2d at 146 (citing Anwiler v. Patchett (In re Anwiler), 958 F.2d 925 (9th Cir.1992)); see also, e.g., Classic Auto Refinishing, Inc. v. Marino (In re Marino), 37 F.3d 1354, 1358 (9th Cir.1994); Jones v. Hill (In re Hill), 811 F.2d 484, 486 (9th Cir.1987). Accordingly, Anwar was not entitled to a retroactive extension of the filing deadline based on equitable considerations or a local rule of bankruptcy procedure that purports to grant the bankruptcy court discretion to excuse untimely filings.

B

The bankruptcy court lacked equitable power to grant Anwar relief from her untimely filings. “In bankruptcy cases, a court's equitable power is derived from 11 U.S.C. § 105(a),” In re Anwiler, 958 F.2d at 928 n. 5, which authorizes the court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code],” 11 U.S.C. § 105(a). However, “whatever equitable powers remain in ...