In re Rheuban
| Decision Date | 13 June 1991 |
| Docket Number | Bankruptcy No. LA 90-10202-VZ. |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California |
| Parties | In re Carl Martin RHEUBAN a.k.a., Carl M. Rheuban, Debtor. |
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Cary Medill, Law Offices of Cary Medill, Beverly Hills, Cal., for movant.
Gary E. Klausner, Robinson, Diamant, Brill & Klausner, Los Angeles, Cal., for Lawrence Diamond, Chapter 11 Trustee.
Herbert Wolas, Randye B. Soref, Wolas, Soref & Ickowicz, Los Angeles, Cal., for the Official Committee of Unsecured Creditors.
An attorney has asked me to vacate an order requiring him to disgorge compensation he received from a debtor prior to the commencement of the debtor's bankruptcy case. The attorney asserts that my order is void because it was based on conclusions of law that were later rejected on appeal in a separate matter in the same bankruptcy case. I deny this motion for the reasons discussed below.
On December 17, 1990, my "Memorandum of Decision re Reasonableness of Compensation Paid to Cary W. Medill" (the "Medill Order") was entered. In the Medill Order, and pursuant to 11 U.S.C. § 329 ("§ 329"), I directed attorney Cary W. Medill ("Medill") to disgorge $177,500 to Lawrence Diamant (the "Trustee"), the Chapter 11 trustee in this bankruptcy case. I issued the Medill Order after conducting three hearings on my "Order to Show Cause re Disgorgement of Fees" (the "OSC") based upon my finding that Medill's receipt of $200,000 three days prior to the filing of this case, from Carl Martin Rheuban ("Debtor"), the debtor in this case, was not reasonable compensation for legal services Medill provided and promised to provide to Debtor.
On December 27, 1990, Medill timely filed a Notice of Appeal of the Medill Order (the "Appeal"). Also on December 27, 1990, Medill filed a "Notice of Motion for Reconsideration of Memorandum of Decision re Reasonableness of Compensation Paid to Cary Medill" (the "Notice"). A hearing was set for January 31, 1991 ("Hearing # 1"). On January 25, 1991, Medill filed the motion ("Motion # 1") which was referred to in the Notice. Pursuant to Local Bankruptcy Rule 111(1)(f), Motion # 1 was not timely filed and served. I therefore denied Motion # 1.
On February 22, 1991, Medill filed his "Notice of Motion and Motion for Reconsideration and/or Modification of Memorandum of Decision re Reasonableness of Compensation" ("Motion # 2"). A hearing was set for March 13, 1991 ("Hearing # 2"). On March 4, 1991, the Official Committee of Unsecured Creditors (the "Committee") and the Trustee filed a response to Motion # 2 (the "Response"). Medill, the Trustee and the Committee agreed to dismiss the Appeal before the hearing on Motion # 2.
Medill cites Federal Rule of Civil Procedure ("F.R.C.P.") 60(b)(4) as the sole basis for vacating the Medill Order1. F.R.C.P. 60(b)(4) states in part that: ". . . the court may court may relieve a party . . . from a final . . . order . . . for the following reasons: (4) the judgment is void."
Medill argues that the Medill Order is void because of an order issued by the a district judge for the Central District of California (the "Appellate Order"). The Appellate Order was published as In re Rheuban at 124 B.R. 301 (C.D.Cal.1990). In the Appellate Order, the district judge, exercising the appellate authority Congress granted in 28 U.S.C. § 158(a)2, reversed a Memorandum of Decision (the "Martin Memorandum") in which I ordered attorney Elmer Dean Martin III ("Martin") to disgorge compensation paid to him by Debtor prior to the commencement of this case pursuant to 11 U.S.C. § 329. Medill asserts that the issues of law pertinent in his case are the same as those raised by Martin, and therefore the Appellate Order renders the Medill Order void.
Neither in Motion # 2 nor at the hearing on Motion # 2 did Medill state how or why the Appellate Order has any effect on the Medill Order, let alone how or why it renders the Medill Order void. I conclude that it would be reasonable and appropriate to deny Motion # 2 strictly because of this deficiency. Because of the significance of the issues raised by Medill in Motion # 2, however, I nevertheless will discuss the only possible bases for Medill's assertion:
1. The doctrines of claim and issue preclusion require me to reverse the Medill Order because it conflicts with the Appellate Order;
2. The Appellate Order binds whatever determination I make concerning similar issues according to the doctrine of stare decisis; or
3. The reasoning in the Appellate Order persuades me that the reasoning underlying the Medill Order is flawed.
Under the doctrines of claim and issue preclusion, a party is barred from rearguing a claim for relief, an affirmative defense or an issue if the party has fully litigated that claim, defense or issue in a previously and finally determined dispute before a court with jurisdiction over the dispute. Lawlor v. National Screen Service Corp., 349 U.S. 322, 75 S.Ct. 865, 99 L.Ed. 1122 (1955); Restatement (Second) of Judgments §§ 19 and 27 (1980). These doctrines are valuable because they remove from the dockets of busy courts disputes that have already been resolved. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 649, 58 L.Ed.2d 552 (1979).
The Appellate Order has no such preclusive effect on the Medill Order for at least three reasons. First, Medill was not a party to the proceeding which the Appellate Order concerns. Second, the Appellate Order is not a final order because the district judge set a jury trial before himself under § 329.3 Third, the Appellate Order was entered after the Medill Order. Doctrines of claim and issue preclusion apply only to final orders entered before the instant dispute.
For these reasons, I conclude that the doctrines of claim and issue preclusion do not support Medill's arguments.
Under the doctrine of stare decisis, once a court renders a decision, that same court and all courts that owe obedience to that court must follow that decision. See, 1 B.J. Moore, J. Lucas & T. Currier, Moore's Federal Practice, ¶ 0.401 (2d Edition 1990). For example, all courts located in the United States of America owe obedience to the United States Supreme Court (the "Court") and are bound by the doctrine of stare decisis to follow its decisions. Similarly, the decisions of the Ninth Circuit Court of Appeals bind the United States District Judges of the Central District of California and the United States Bankruptcy Judges of the Central District of California. This doctrine is valuable because it enhances the predictability and stability of overburdened court systems and significantly reduces the number of appeals that must be heard by a superior appellate court such as the Ninth Circuit Court of Appeals or the Court. Moore, ¶ 0.4021 at 12 note 15.
Based upon the foregoing, the Appellate Order has stare decisis effect upon my decisions and the decisions of all nineteen United States Bankruptcy Judges in the Central District of California only if: (1) the Appellate Order is binding on all thirty-one United States District Judges of the Central District of California; and (2) the United States District Court of the Central District of California is superior to the United States Bankruptcy Court of the Central District of California in the same way that the Ninth Circuit Court of Appeals and the Court are superior to the United States Bankruptcy Court of the Central District of California. Neither proposition is true.
Regarding the first proposition, the Ninth Circuit Court of Appeals has decided that a judge in a multi-judge district is not bound by the decisions of other judges in that district. Starbuck v. City and County of San Francisco, 556 F.2d 450, 457 note 13 (9th Cir.1977).
As to the second, 28 U.S.C. § 151 provides, "The bankruptcy judges in regular active service shall constitute a unit of the district court to be known as the bankruptcy court for that district." Section 151 also provides that "each bankruptcy judge . . . is . . . a judicial officer of the district court." Thus the United States Bankruptcy Court of the Central District of California is not a court separate from the United States District Court for the Central District of California. Rather, it is a unit of the United States District Court for the Central District of California for the purpose of exercising judicial, rather than administrative4 power. See, In re Gaylor, 123 B.R. 236 (Bankr., E.D.Mich.1991); March and Obregon, "Are BAP Decisions Binding On Any Court?" 18 Cal.Bankr.J. 189, 191-193 (1990). Therefore the Appellate Order does not have stare decisis effect.
My conclusion is supported by Bank of Maui v. Estate Analysis, Inc., 904 F.2d 470 (9th Cir.1990). In this decision the Ninth Circuit Court of Appeals concluded that decisions of the Bankruptcy Appellate Panel for the Ninth Circuit do not bind the United States Bankruptcy Judges serving in districts located in the Ninth Circuit. The Bankruptcy Appellate Panel for the Ninth Circuit shares the same appellate authority as the United States District Court for the Central District of California. 28 U.S.C. § 158(b)(1).5 Thus, if the appellate authority exercised by the Bankruptcy Appellate Panel for the Ninth Circuit has no stare decisis effect, it follows that the appellate authority of a United States District Judge under § 158(a) does not either.
The Appellate Order and the Medill Order were issued by judicial officers serving in the same district court. The decisions of judicial officers serving in the same district court are not binding on the other judicial officers serving in that court. As a result, the Appellate...
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