In re Tri-State Ethanol Co., LLC

Decision Date17 May 2007
Docket NumberNo. CIV 07-1003.,No. CIV 06-1040.,No. CIV 06-1043.,CIV 06-1040.,CIV 06-1043.,CIV 07-1003.
Citation2007 DSD 9,369 B.R. 481
PartiesIn the Matter of Appeals from Orders of the Bankruptcy Court in the Case of TRI-STATE ETHANOL COMPANY, LLC, Debtor.
CourtU.S. District Court — District of South Dakota

Courtney R. Clayborne, Clayborne, Loos, Strommen & Gusinsky, LLP, Rapid City, SD, Jerrold L. Strasheim, Baird Holm Law Firm, LLP, Omaha, NE, for Appellant.

Clair R. Gerry, Stuart, Gerry & Schlimgen, Scott M. Perrenoud, Cadwell, Sanford, Deibert & Garry, LLP, Patrick T. Dougherty, Dougherty & Dougherty, James C. Robbennolt, James Robbennolt Law Office, PC, Sioux Falls, SD, Michael F. Marlow, Johnson, Miner, Marlow, Woodward & Huff, Prof. LLC, Yankton, SD, Frank S. Mitvalsky, Jeffrey B. Moorhouse, Califf & Harper, PC, Moline, IL, for Appellee.

ORDER AND OPINION

KORNMANN, District Judge.

[¶ 1] The bankruptcy case of Tri-State Ethanol Company, LLC ("TSE"), debtor and the owner of a then defunct ethanol plant in South Dakota, has been ongoing since May of 2003. There are at least eleven matters pending on appeal. Ten appeals are brought by Tri-State Financial, LLC ("TSF"). Some of the orders may well be interlocutory and not appealable as a matter of right. TSF did not seek leave of court pursuant to 28 U.S.C. § 158(a)(3) and claims the district court has jurisdiction pursuant to 28 U.S.C. § 158(a)(1) ("final judgments, orders and decrees"). No party has challenged jurisdiction. The court intends to consider and decide all pending appeals, if nothing else pursuant to § 158(a)(3). I will deal with all these matters on appeal in an omnibus order and opinion since I am confident that an appeal will be taken from my order and opinion and I wish to burden the Court of Appeals with as few appeals as possible.

[¶ 2] This court reviews the legal conclusions of the bankruptcy court de novo; findings of fact acre upheld unless clearly erroneous. Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th Cir.1987) (citations omitted). Federal Rule of Bankruptcy Procedure, § 8013 provides as much and tells us that "due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses." A finding is clearly erroneous when the reviewing court is left with the definite and firm conviction that a mistake has been committed, this despite the fact that there is some evidence to support the finding. Anderson v. City of Bessemer, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985), citing United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948).

RECUSAL OF BANKRUPTCY JUDGE

[¶ 3] On June 30, 2006, TSF filed a motion for a United States Bankruptcy Judge to recuse from any additional proceedings in the bankruptcy case. I will first deal with this matter.

[¶ 4] 28 U.S.C. § 455(a) provides that a judge "shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned." The question is whether the impartiality of the judge "might reasonably be questioned by the average person on the street who knows all of the relevant facts." In re Kansas Public Employees Retirement System, 85 F.3d 1353, 1358 (8th Cir.1996) (citations omitted). The existence of "actual bias" need not be shown. Moran v. Clarke, 296 F.3d 638, 648 (8th Cir.2002) (en banc), citing Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 859-60, 108 S.Ct. 2194, 100 L.Ed.2d 855 (1988). 28 U.S.C. § 455(b) provides that a judge "shall also disqualify himself ... (1) Where he has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding ..."

[¶ 5] The impartiality of a judge is presumed to exist; a party seeking recusal bears a substantial burden to prove otherwise. United States v. Denton, 434 F.3d 1104, 1111 (8th Cir.2006), citing Lunde v. Helms, 29 F.3d 367, 370 (8th Cir.1994). Whether to recuse is committed to the bankruptcy court's sound discretion. Dossett v. First State Bank 399 F.3d 940, 953 (8th Cir.2005), citing Moran, 296 F.3d at 648.

[¶ 6] The disqualification of a judge for personal bias or prejudice under 28 U.S.C. § 455 is at least somewhat limited by the "extrajudicial source doctrine." Liteky v. United States, 510 U.S. 540, 114 S.Ct. 1147, 127 L.Ed.2d 474 (1994). "All of these grounds are inadequate under the principles we have described above: They consist of judicial rulings, routine trial administration efforts, and ordinary admonishments (whether or not legally supportable) to counsel and to witnesses. All occurred in the course of judicial proceedings, and neither (1) relied upon knowledge acquired outside such proceedings nor (2) displayed deep-seated and unequivocal antagonism that would render fair judgment impossible." Id. at 556, 114 S.Ct. 1147. There is nothing in the record to even suggest bias stemming from any extrajudicial source. Of course, any judge presiding in a given case reaches opinions about parties and counsel. The bankruptcy judge readily concedes that he has done that here. Reaching such opinions would especially be true when the case is so extremely protracted and so bitterly fought at every stage as this case has been. The judge reaches opinions about conduct and occasionally acts to prevent misconduct or miscarriages of justice. That is the nature of being a judge. There is in this case no actual deep-seated antagonism. Nor is there any such antagonism that is "unequivocal." At best, all comments are subtle and equivocal. They are insufficient to show any degree of deep-seated antagonism.

[¶ 7] TSF "must allege specific, non-conclusory facts showing a personal bias or prejudice against [it] that emanates from an extrajudicial source as distinguished from a judicial source, i.e. court proceedings." United States v. Kirkpatrick, 2005 WL 2989314, citing Youn v. Track, Inc., 324 F.3d 409, 423 (6th Cir. 2003). The essence of the complaints of TSF is that the opinions of the bankruptcy judge show a bias against TSF and one of its attorneys. "Adverse judicial rulings, however, `almost never' constitute a valid basis or recusal; the proper recourse for a dissatisfied litigant is appeal." Dossett, 399 F.3d at 953, citing Liteky, 510 U.S. at 555, 114 S.Ct. 1147.

[¶ 8] The job of a trial judge is often frustrating, especially when counsel do not act in a professional manner. We are dealing here with a non-jury proceeding. Thee was no jury to listen to the judge speak about counsel or a party. A judge must, as we all know, be especially careful in the presence of a jury to say and do nothing to influence the jury as to how to decide a case. We know that judicial remarks and comments that are critical or disapproving, or even hostile to, a party or counsel, or to a party's case, ordinarily do not support a motion to disqualify a judge for personal bias or prejudice. Liteky, 510 U.S. at 555, 114 S.Ct. 1147. In motions hearings or a trial to the court, most judges do not sit like bumps on a log. They express opinions, although in a preliminary fashion until the judge is ready to rule. Judges often question where the lawyers and the parties are going and the arguments being made. They are not required to listen to evidence that is "going nowhere." It is helpful to lawyers to know what the judge is thinking, at least on a preliminary basis, so that the lawyer can correct the judge or change course to meet the questions being raised by the judge. It is part of the process of "trying to get it right."

[¶ 9] We know also that "even though § 455 has no express timeliness requirements, claims under § 455 will not be considered unless timely made." In re Kansas Public Employees Retirement System, 85 F.3d at 1360, citing Holloway v. United States, 960 F.2d 1348 (8th Cir. 1992). In that case, a petition for a writ of mandamus (attempting to disqualify a federal judge) was untimely since it was filed more than one year after the petitioner first learned the claimed relevant facts underlying the motion. 85 F.3d at 1360-61. I will later discuss the timeliness factor in this case.

[¶ 10] The bankruptcy judge denied the motion for recusal and issued a very lengthy memorandum opinion (117 pages). He sets forth the long history of motions and hearings and what has transpired in this case. The bankruptcy judge treated the motion for recusal very carefully and in great detail. That would be appropriate since no judge wants any litigant or spectator to reach the reasonable opinion that the judge has been unfair or is biased. A judge should be very careful to explain why recusal is not appropriate, assuming that is the case. The bankruptcy judge sets forth that he has been a trial court judge for more than 30 years, including over 18 years as a bankruptcy judge. He describes this case as "one of the more difficult ones over which he has presided, not because of its legal complexity but due to the sheer volume of contested matters and the animosity among major parties." I do not intend to repeat all the matters contained in the memorandum opinion of the bankruptcy judge. It is a very thorough and carefully set out opinion.

[¶ 11] TSF has taken appeals from the order denying the motion to recuse. The appeals have been filed in CIV 06-1040, CIV 06-1043, and CIV. 07-1003. This is a belt and suspenders approach.

[¶ 12] TSF has not only sought to require the recusal of the bankruptcy judge but has also alleged that the recently appointed bankruptcy judge in South Dakota should, at the outset, not be allowed to take over the case if the now retired bankruptcy judge is recused. TSF suggests that we need a bankruptcy judge from Iowa. This is a collateral gratuitous improper attack on the integrity and fairness of the recently appointed bankruptcy judge for the District of South Dakota. TSF has accused the now retired bankruptcy...

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