Bellanti v. Land Escape Outdoor Maint., L.L.C. (In re Bellanti)
| Decision Date | 07 August 2012 |
| Docket Number | Bankruptcy No. 08–33895.,No. 12–10298.,Adversary No. 09–03004.,12–10298. |
| Citation | 476 B.R. 504 |
| Parties | Jeremy BELLANTI, Debtor. Jeremy Bellanti, Appellant, v. Land Escape Outdoor Maintenance, L.L.C., Appellee. |
| Court | U.S. District Court — Eastern District of Michigan |
OPINION TEXT STARTS HERE
Timothy R. Graves, Allard & Fish, Detroit, MI, for Appellant.
Kassem M. Dakhlallah, United Law Group, P.C., Dearborn, MI, for Appellee.
This case is before the Court on an appeal of an order entered by the bankruptcy court granting a motion for relief from an order of dismissal. The bankruptcy court vacated a dismissal and reinstated an adversary proceeding that challenged the dischargeability of a debt. The effect of the bankruptcy court's order was to continue litigation, but the debtor filed a notice of appeal as if it was a final order. The case was dismissed below initially because the attorney for the creditor missed a deadline for responding to a motion to enforce a sanctions order that had been entered to correct discovery abuses. The creditor had paid the monetary sanctions, but its attorney did not file an answer to the motion saying so. Meanwhile, the debtor's attorney filed a notice in the bankruptcy court stating that the creditor had not responded to the dismissal motion, but its lawyer neglected to mention that the sanctions had been paid. It may be superfluous to say that this case does not represent a model of good lawyering by either side.
The bankruptcy court, taking a rather generous view of counsels' conduct, expressed a preference for deciding cases on their merits rather than on procedural maneuvering, stated that it would have not dismissed the case had it known that the creditor paid the sanctions, granted the creditor's motion under Federal Rule of Civil Procedure 60(b), reinstated the adversary proceeding, and awarded additional costs against the creditor. This Court finds that the bankruptcy court's exercise of discretion was sound. The bankruptcy court's order will be affirmed.
Appellant-debtor Jeremy Bellanti and appellee-creditor Land Escape Outdoor Maintenance, LLC (LEOM) were partners in a business that installed decorative stone projects. Jeremy Bellanti filed a voluntary petition for Chapter 7 bankruptcy protection on September 24, 2008. On January 5, 2009, LEOM initiated an adversary proceeding against Jeremy Bellanti in an attempt to exempt Bellanti's indebtedness to the appellee from discharge under 11 U.S.C. §§ 523(a)(2)(A), 523(a)(4), 523(a)(6), 727(a)(2)(A), and 727(a)(3)–(5), alleging that Bellanti had embezzled more than $350,000 from the business.
After a number of adjournments, the bankruptcy court reopened discovery for 28 days on April 18, 2011 and ordered Jeremy Bellanti, Courtney Bellanti, Christopher Yatooma (the owner of LEOM), and Erika McKeogh to submit to depositions. On April 29, 2011, LEOM noticed duces tecum depositions for Jeremy and Courtney Bellanti, which required them to bring numerous documents. On May 4, 2011, Bellanti moved to quash LEOM's notice of deposition duces tecum, arguing that requiring Courtney and Jeremy Bellanti to produce thousands of pages of documents contravened the bankruptcy court's limited order reopening discovery. Bellanti also asked for attorney's fees.
On May 16, 2011, LEOM, despite having a transcript of the hearing that clearly delineated the extent to which the bankruptcy court had reopened discovery, noticed the additional depositions of John Bellanti, Marion Bellanti, Todd's Services, Terrafirma, and National Landscape, each of which required the production of documents. On May 20, 2011, Bellanti filed an emergency motion to quash the subpoenas, arguing that the depositions violated the bankruptcy court's order reopening discovery and that the documents requests (LEOM requested documents from Bellanti's parents evidencing any payments to their son from January 1, 2006 to present) were meant to harass and intimidate Bellanti. In his motion, Bellanti requested quashing of the subpoenas, an award of attorney's fees, monetary sanctions, and case-terminating sanctions. The notice attached to the emergency motion indicated that a response had to be filed within fourteen days and that if a response was not filed, “the Court may decide that you do not oppose the relief sought in the Motion and may enter an order granting that relief.” Emergency Mot. to Quash Subpoena and Impose Sanctions [bankruptcy case 09–03004, dkt. # 72] at 9. On the same day, Bellanti filed an emergency ex parte motion to shorten the response time to four days. The court granted that request and ordered a response to be filed by noon on May 24, 2011. LEOM did not file a response, and the bankruptcy court granted Bellanti's motion to quash, quashed the subpoenas, and awarded Bellanti attorney's fees and costs.
Bellanti's counsel submitted an application for attorney's fees and costs related to the motions to quash subpoenas. On August 9, 2011, the bankruptcy court entered two orders requiring LEOM to pay Bellanti attorney's fees and costs totaling $5,176.94 within fourteen days.
On August 15, 2011, both parties filed cross motions for summary judgment on the merits, and each party filed a response. Bellanti believed that LEOM's response included a document not previously disclosed in discovery. LEOM contended that it had disclosed the document.
On August 26, 2011, Bellanti filed a second motion for sanctions, asserting that LEOM had failed to pay the required attorney's fees and costs and failed to produce responsive documents during the discovery period despite a court order requiring it. This second motion for sanctions asked the court to (a) find LEOM in contempt for failure to comply with the earlier order granting sanctions, (b) require LEOM to pay attorney's fees and costs, (c) require LEOM to pay $10,000 as an additional sanction for willful violation of the earlier two sanction orders, (d) require LEOM to pay attorney's fees for time spent waiting for depositions to start due to LEOM's lawyer's tardiness, (e) dismiss LEOM's complaint with prejudice, and (f) grant any other relief. LEOM did not file a response to the second motion for sanctions on time, but it did tender $5,176.94 to Bellanti's attorney on September 1 or 2, 2011. Bellanti's attorney filed a notice of no-response thereafter, but he did not inform the bankruptcy court that LEOM had paid the $5,176.94.
On September 9 and 12, 2011, the parties exchanged several emails to schedule their mediation.
On September 14, 2011, the bankruptcy court granted the second motion for sanctions in its entirety, awarding all of the requested sanctions and dismissing the complaint.
On September 20, 2011, LEOM filed a motion for relief from the court's dismissal order under Federal Rule of Civil Procedure 60(b) and its bankruptcy court counterpart, Federal Rule of Bankruptcy Procedure 9024, plus a belated response to Bellanti's second motion for sanctions. In its Rule 60(b) motion, LEOM asserted that (1) there was a misunderstanding between LEOM and its attorney as to the date by which the monetary sanctions had to be paid; (2) LEOM's attorney was out of the office on vacation from August 13, 2011 through September 1, 2011; (3) after realizing its mistake, LEOM mailed a check for $5,176.94 to Bellanti's attorney on September 2, 2011 (which cleared on September 9); (4) LEOM's attorney believed that the motion for sanctions would be treated like a motion in limine because the issues remaining after paying the sanctions were evidentiary; (5) the parties exchanged emails on September 9 and 12 in an attempt to settle the case through mediation; (6) and the parties had a mediator booked for September 23, 2011.
On December 9, 2011, the bankruptcy court granted the appellee's motion for relief and reinstated the case. The bankruptcy court stated that case-terminating sanctions must be viewed as a remedy of last resort, courts generally prefer to resolve disputes on their merits, had the judge known that the monetary sanctions had been paid he would have not dismissed the case, and no prejudice would inure to either party if the case were reinstated because each side was gearing up for mediation. The bankruptcy court entered an order that reinstated the case, set aside the September 14, 2011 order of dismissal, and imposed additional fees against LEOM in favor of Bellanti.
This appeal followed. Oral argument was held on August 6, 2012.
District courts have jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy courts, 28 U.S.C. § 158(a)(1), and, with leave of court, appeals from interlocutory orders and decrees, id. § 158(a)(3). Bellanti contends that he has a right to appeal the order setting aside the dismissal under Rule 60(b) and cites Mallory v. Eyrich, 922 F.2d 1273 (6th Cir.1991), in support of that argument. In Mallory, the Sixth Circuit suggested “[t]he law is settled that a ruling on a Rule 60(b) motion may be appealed under Fed. R.App. P. 4(a),” id. at 1277, and cited Browder v. Director, Illinois Department of Corrections, 434 U.S. 257, 263 n. 7, 98 S.Ct. 556, 54 L.Ed.2d 521 (1978). But Browder dealt with an order denying relief under Rule 60(b)(6). An order granting relief that sets aside a dismissal and reinstates a case “clearly contemplates further proceedings” and is not final. Dunn v. Savage (In re Saffady), 524 F.3d 799, 802 (6th Cir.2008); see also Fuller v. Quire, 916 F.2d 358, 360 (6th Cir.1990) ().
But the jurisdictional issue, while important, need not detain the Court long. The “finality requirement is considered ‘in a more pragmatic and less technical way in bankruptcy cases than in other situations,’ ” Lindsey v. O'Brien, Tanski, Tanzer & Young Health Care Providers of Connecticut (In re Dow Corning Corp.), 86 F.3d...
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