In re Beachport Entertainment, 03-55251.

• Decision Date: 03 February 2005
• Docket Number: No. 03-55251.,03-55251.
• Parties: In re BEACHPORT ENTERTAINMENT, Debtor, Howard M. Ehrenberg, Chapter 7, Trustee, Appellant, v. California State University, Fullerton Foundation, a Non-Profit corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

396 F.3d 1083

In re BEACHPORT ENTERTAINMENT, Debtor,

Howard M. Ehrenberg, Chapter 7, Trustee, Appellant, v. California State University, Fullerton Foundation, a Non-Profit corporation, Appellee.

No. 03-55251.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 2, 2004.

Filed February 3, 2005.

Rebekah L. Parker, Los Angeles, CA, for the appellant.

Paul L. Gale, Stradling Yocca Carlson & Rauth, Newport Beach, CA, for the appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Perris, Klein, and Baum, Bankruptcy Judges, Presiding. BAP No. CC-02-01268-KBaP.

Before: TASHIMA, FISHER, and TALLMAN, Circuit Judges.

TASHIMA, Circuit Judge.

Howard Ehrenberg, the Chapter 7 trustee ("Trustee"), appeals a decision of the Bankruptcy Appellate Panel ("BAP"), dismissing his appeal from an order of the bankruptcy court granting summary judgment in favor of the California State University, Fullerton Foundation ("Foundation"). The Trustee had brought an adversary proceeding in the bankruptcy court seeking to avoid an allegedly fraudulent transfer made by debtor Beachport Entertainment ("Debtor") to the Foundation. The BAP dismissed the Trustee's appeal for failure to provide the BAP with the judgment or the order being appealed, the complaint, and the answer, in violation of Federal Rule of Bankruptcy Procedure 8009. Our jurisdiction is pursuant to 28 U.S.C. § 158(d). While we appreciate the BAP's frustration with counsel's failure to follow the procedural rules, we conclude, based on the record before us, that dismissal was an inappropriately harsh sanction. Accordingly, we reverse and remand for the BAP to consider alternate sanctions.

BACKGROUND

The Foundation was established to provide administrative and support services for contracts entered into between California State University, Fullerton ("University"), and third parties.¹ In January 1998, the University entered into a contract with Debtor, granting Debtor the right to conduct events in the University Sports Complex. In exchange, Debtor was to place $1,000,000 in an escrow account, to be used by the University to make improvements to the Sports Complex.

When the University received the first payment of $500,000 from Debtor, it delivered the funds to the Foundation, which, in turn, began making plans to begin the improvements. Debtor made the second payment of $500,000 directly to the Foundation, apparently in March 1998. The second payment is the one at issue in this case.

Debtor filed a petition under Chapter 7 of the Bankruptcy Code in August 1999. In August 2001, the Trustee initiated an adversary proceeding against the Foundation in bankruptcy court, seeking to avoid the second $500,000 payment as a fraudulent transfer. The Foundation filed a motion for summary judgment, contending that the suit was barred by the Eleventh Amendment because the Foundation is an instrumentality of the State of California. The Foundation further contended that the Trustee's avoidance action was time-barred pursuant to 11 U.S.C. § 548, and that the transfer was not a fraudulent transfer for purposes of the Bankruptcy Code and California law. The bankruptcy court granted the Foundation's motion without explanation.

The Trustee appealed the order to the BAP. The Trustee's notice of appeal was filed on May 20, 2002. Federal Rule of Bankruptcy Procedure 8006 required the Trustee, as the appellant, to file his designation of record and statement of issues within 10 days of filing the notice of appeal. He did not do so. On June 5, 2002, the Clerk of the BAP sent the Trustee a notice of deficient appeal and impending dismissal, stating that the appeal was subject to dismissal for failure to prosecute because of the Trustee's failure to file the designation of record, statement of issues, transcript order notice, and transcripts. The notice further stated that the appeal would be dismissed unless the Trustee "provide[d] an adequate legal explanation as to why the appeal should not be dismissed" within 14 days.

On July 10, 2002, the Foundation moved to dismiss the appeal for failure to prosecute, pursuant to Bankruptcy Rules 8001 and 8006.² The Foundation argued that the Trustee did not file his designation of record and statement of issues until June 26, 2002, a week after the deadline set by the court, and that the Trustee had failed to serve the documents on the Foundation.

The BAP denied the motion to dismiss on July 30, 2002, stating that the Trustee had filed the designation of the record and the statement of issues and that the record was now complete. It reasoned that the Foundation had not been prejudiced by the Trustee's delay in completing the record on appeal.

Oral argument before the BAP was held on November 20, 2002. Both parties argued the merits of the case, and there was no indication that the BAP was unfamiliar with any aspects of the case. Following oral argument, the BAP issued a decision in which it noted that neither the Trustee nor the Foundation included in its excerpts of record on appeal a copy of the order appealed from, although both parties stated that the Foundation's motion had been granted. The BAP thus framed the issue as whether the appeal should be dismissed for failure to comply with Federal Rule of Bankruptcy Procedure 8009(b), which delineates the documents that must be included in the excerpts of record on appeal to the BAP.³ Because the Trustee's excerpts of record failed to include the judgment or order appealed from, the complaint, and the answer, in violation of Rule 8009(b), the BAP dismissed the appeal, stating that, "[w]ith this sorry record, we are unable to conduct a meaningful review." It further noted that it had "conscientiously reviewed the snippets of the record that have been provided and [did] not have the sense that our action in dismissing the appeal constitutes a miscarriage of justice." The Trustee filed a timely notice of appeal.

STANDARD OF REVIEW

Generally, "[d]ecisions of the BAP generally are reviewed de novo." Carrillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th Cir.2002). However, "the BAP's imposition of sanctions for non-compliance with non-jurisdictional procedural requirements" is reviewed for an abuse of discretion. Morrissey v. Stuteville (In re Morrissey), 349 F.3d 1187, 1190 (9th Cir.2003); see also Nat'l Bank of Long Beach v. Donovan (In re Donovan), 871 F.2d 807, 808 (9th Cir.1989) (per curiam) (reviewing for an abuse of discretion the BAP's dismissal of an appeal for failure to comply with a bankruptcy rule). "Where, under that standard, summary affirmance is an appropriate sanction by the BAP, we do not reach the merits of the bankruptcy court's ruling." In re Morrissey, 349 F.3d at 1190.

DISCUSSION

In determining whether to dismiss summarily an appeal for non-compliance with a procedural rule, the BAP must consider the impact of the sanction, alternative sanctions, and "the relative culpability of the appellant and his attorney, because dismissal may inappropriately punish the appellant for the neglect of his counsel." In re Donovan, 871 F.2d at 808; see also In re Morrissey, 349 F.3d at 1190 (stating that "`the selection of the sanction to be imposed must take into consideration the impact of the sanction and the alternatives available to achieve assessment of the penalties in conformity with fault'") (quoting Myers v. Shekter (In re Hill), 775 F.2d 1385, 1387 (9th Cir.1985) (per curiam)). Although summary dismissal is within the BAP's discretion, it "should first consider whether informed review is possible in light of what record has been provided." Kyle v. Dye (In re Kyle), 317 B.R. 390, 393 (B.A.P. 9th Cir.2004).

The failure to take into consideration "the impact of the sanction and the alternatives available to achieve assessment of the penalties in conformity with fault" constitutes an abuse of discretion. In re Hill, 775 F.2d at 1387. Where the procedural violations have been egregious, however, we have not required an explicit discussion of alternative sanctions. See Moneymaker v. CoBen (In re Eisen), 31 F.3d 1447, 1454-55 (9th Cir.1994) (stating that "[w]e have `never held that explicit discussion of alternatives is necessary for an order of dismissal to be upheld'") (quoting Malone v. United States Postal Serv., 833 F.2d 128, 132 (9th Cir.1987)); Fitzsimmons v. Nolden (In re Fitzsimmons), 920 F.2d 1468, 1472 (9th Cir.1990) (stating that, "in egregious circumstances such as these, not even consideration of alternative sanctions is necessary before dismissal").

In In re Morrissey, for example, the appellant's brief to the BAP "egregiously violated the requirements of Fed. R. Bankr.P. 8010" by failing to include, inter alia, a statement of appellate jurisdiction, an intelligible statement of the issues presented, a statement of the...