In re Henderson, Case No. 08-60255 (Bankr. N.D.N.Y. 5/27/2009)

• Decision Date: 27 May 2009
• Docket Number: Case No. 08-60255.
• Parties: IN RE: CLINTON B. HENDERSON and RENETA HENDERSON, Chapter 7, Debtors.
• Court: U.S. Bankruptcy Court — Northern District of New York

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IN RE: CLINTON B. HENDERSON and RENETA HENDERSON, Chapter 7, Debtors.

Case No. 08-60255.

United States Bankruptcy Court, N.D. New York.

May 27, 2009.

PETER A. ORVILLE, ESQ., Binghamton, New York, Attorney for Debtors.

RONALD J. SCHEIDELMAN, KHALIDA SCHEIDELMAN, Turris ebernea, Oxford, NY, Pro Se.

MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER

DIANE DAVIS, Bankruptcy Judge

Presently under consideration by the Court is a motion filed on May 4, 2009, by Khalida and Ronald Scheidelman ("Dr. Scheidelman" and collectively, "the Scheidelmans"), seeking an order disqualifying the undersigned from hearing various matters in this case pursuant to 28 U.S.C. §455(a) and (b)(1). The motion was heard by the Court at its regular motion term in Binghamton, New York, on May 19, 2009. After listening to the arguments of Dr. Scheidelman, the Court indicated that it would issue a written decision.

JURISDICTIONAL STATEMENT

The Court has core jurisdiction over the parties and subject matter of this contested matter pursuant to 28 U.S.C. §§ 1334 and 157(a) and (b).

FACTS

On February 8, 2008, Clinton and Renata Henderson (the "Debtors") filed a petition pursuant to Chapter 13 of the U.S. Bankruptcy Code, 11 U.S.C. §§ 101-1532 ("Code"). The last day to file a complaint objecting to dischargeability in the Chapter 13 was May 5, 2008. The Scheidelmans filed a demand for discovery on April 14, 2008 and filed a motion on May 28, 2008, seeking to compel discovery (Dkt. No. 20).¹ The Honorable Stephen D. Gerling signed an Order on July 14, 2008, requiring the Debtors to comply with the Scheidelmans' discovery demand within 30 days. On July 24, 2008, the Debtors filed a notice of conversion to Chapter 7. A notice was sent to all creditors indicating that the last day to oppose the Debtors' discharge or to object to dischargeability was November 7, 2008.

On October 6, 2008, the Scheidelmans again filed a motion to compel discovery and also requested sanctions for what they alleged to be the Debtors failure to comply with the Court's prior Order of July 14, 2008. Judge Gerling signed an Order on October 23, 2008, awarding sanctions against Debtors' counsel of $500. In the interim, on October 21, 2008, the Scheidelmans sought their first extension in the converted Chapter 7 to commence an adversary proceeding, indicating that they needed to complete discovery and "at least obtain competent legal advice to determine whether or not filing Adversary Proceeding is advisably [sic], and if so, under what section of USC 11 to file and render assistance in doing so." (Dkt. No. 48). The Debtors agreed to a 30 day extension for filing a complaint, and on December 8, 2008, Judge Gerling signed an Order requiring the Debtors to appear for a 2004 examination (Dkt. No. 84) and granting the Scheidelmans an extension of 30 days from the completion of the 2004 examination to file a complaint (Dkt. No. 83). In addition, Judge Gerling signed an Order on December 24, 2008, granting both the Chapter 7 trustee and the United States Trustee an extension from November 7, 2008, to February 7, 2009, to file a complaint objecting to the Debtors' discharge (Dkt. No. 88).

On December 11, 2008, the Chapter 13 Trustee had filed his Final Report and Account (Dkt. No. 85). Contained as part of the Summary of the Trustee's Final Account is the statement:

You are further notified that unless a written application for a hearing is filed on or before 30 days from the date of this notice and summary, the estate will be closed and the trustee and the surety on the trustee's bond will be released.

On January 5, 2009, the Scheidelmans filed a motion requesting a hearing on the Chapter 13 Trustee's Final Report. Judge Gerling signed an Order on January 29, 2009, giving the Chapter 13 Trustee 30 days in which to notice a hearing on said Final Report. On February 24, 2009, the Chapter 13 Trustee filed the required notice of hearing for approval of the Final Report (Dkt. No. 154). Said hearing was scheduled for April 7, 2009. On March 4, 2009, the Scheidelmans asserted that the Chapter 13 Trustee had ignored Judge Gerling's Order of January 29, 2009, on the grounds that the Chapter 13 Trustee was seeking approval of the Final Report without a hearing. (Dkt. No. 156). The Chapter 13 Trustee filed an amended notice on March 5, 2009, adjourning the hearing to April 21, 2009 (Dkt. No. 158). On March 6, 2009, the Chapter 13 Trustee filed a Supplemental Affirmation in support of his motion seeking approval of the Final Report in which he indicated that in correspondence, as well as a conversation with Dr. Scheidelman, Dr. Scheidelman had been "unable to quantify a basis upon which he objects to the Chapter 13 Trustee's Final Report and Accounting" and that the Chapter 13 Trustee intended to file an application pursuant to Rule 9011 of the Federal Rules of Bankruptcy Procedure ("Fed.R.Bankr.P.") to sanction Dr. Scheidelman's conduct (Dkt. No. 160).

On March 18, 2009, the Honorable Robert E. Littlefield, Jr.² signed an Order at the request of the Scheidelmans further extending the deadline for commencing an adversary proceeding to April 21, 2009. The Order was amended on March 24, 2009, to provide that any further request to extend the deadline had to be made by motion returnable by April 21, 2009 (Dkt. No. 170). On April 3, 2009, the Scheidelmans filed a motion asking for a continuance of the 2004 examination³ and a further extension for commencing an adversary proceeding to at least 20 days after the Court rules on the Scheidelmans' objection to the Debtors claim of a homestead exemption.⁴ The motion was heard on April 21, 2009, and on May 8, 2009, the Court signed an Order denying the continuation of the 2004 examination and granting the Scheidelmans an extension for the commencement of an adversary proceeding to May 19, 2009 (Dkt. No. 186). Said Order was amended on May 14, 2009, giving the Scheidelmans until May 21, 2009, to file their complaint, which they did on that date. In the interim, the Scheidelmans filed the motion now under consideration seeking recusal of the undersigned.⁵

DISCUSSION

Fed.R.Bankr.P. 5004(a) provides that disqualification of a bankruptcy judge is governed by 28 U.S.C. § 455. Under 28 U.S.C. § 455(a), a judge is required to disqualify himself/herself in "any proceeding in which his/her impartiality might reasonably be questioned." In this regard, the appearance of impropriety is to be determined "not by considering what a straw poll of the only partly informed man-in-the street would show — but by examining the record facts and the law, and then deciding whether a reasonable person knowing and understanding all the relevant facts would recuse the judge." In re Drexel Burnham Lambert, Inc., 861 F.2d 1307, 1313 (2d Cir. 1988), reh'g denied, 869 F.2d 116 (2d Cir. 1989). Under 28 U.S.C. § 455(b)(1), a judge is also required to disqualify himself/herself "[w]here he/she has a personal bias or prejudice concerning a party . . .." "A judge is presumed to be impartial, and `the party seeking disqualification bears the substantial burden of proving otherwise.'" American Prairie Const. Co. v. Hoich, 560 F.3d 780, 790 (8^th Cir. 2009) (citation omitted); see also In re Wilborn; 401 B.R. 848, 860 (Bankr. S.D.Tex. 2009) (noting that the burden of proving that a judge is not qualified is clear and convincing evidence). "Litigants are entitled to an unbiased judge; not to a judge of their choosing." Drexel Burnham, 861 F.2d at 1312.

"`[O]pinions formed by the judge on the basis of facts introduced or events occurring in the course of the current proceedings, or of prior proceedings, do not constitute a basis for a bias or partiality motion unless they display a deep seated favoritism or antagonism that would make fair judgment impossible." Id. (citation omitted).

The substantive standard for recusal [under § 455(b)(1)] is whether a reasonable person, knowing all the facts, would conclude that the court's impartiality might reasonably be questioned. (citations omitted). The standard under § 455(a) is "whether an objective, disinterested observer fully informed of the facts underlying the grounds on which recusal was sought would entertain a significant doubt that justice would be done in the case."

Verone v. Taconic Telephone Corp., 826 F.Supp. 632, 634 (N.D.N.Y. 1993) (citation omitted); see also U.S. v. Bayless, 201 F.3d 116, 126 (2d Cir. 2000) (noting that "Section 455(a) complements § 455(b), which addresses the problem of actual bias by mandating recusal in certain specific circumstances where partiality is presumed"⁶).

As discussed by the concurring justices in Liteky v. U.S., 510 U.S. 540 (1994), § 455(a)

is triggered by an attitude or state of mind so resistant to fair and dispassionate inquiry as to cause a party, the public, or a reviewing court to have reasonable grounds to question the neutral and objective character of a judge's rulings or findings. . . . Thus, under § 455(a) a judge should be disqualified only if it appears that he or she harbors an aversion, hostility or disposition of a kind that a fair-minded person could not set aside when judging the dispute.

Id. at 557-8.

With respect to § 455(a), the allegations of prejudice or bias must "concern extra-judicial conduct, i.e. that is, that they must relate to something other than the judge's conduct in the case at hand. If not, they do not form a basis for recusal." In re Shugrue, 221 B.R. 394, 397 (Bankr. W.D.Tex. 1998). Adverse rulings alone almost never constitute a basis for a recusal motion pursuant to 28 U.S.C. § 455(a) or (b)(1). Taconic Telephone Corp., 826 F.Supp. at 635. However, there may be a basis for recusal should it be established that the judge has displayed "a deep-seated favoritism or antagonism that would make fair judgment impossible." Liteky, 510 U.S. at 555; In re Hutter, 221 B.R. 632, 636 (Bankr. D.Conn. 1998). As pointed out by the...