Prosser v. Springel (In re Innovative Commc'n Corp.), Bankruptcy No. 3:07-30012
| Decision Date | 27 September 2013 |
| Docket Number | Bankruptcy No. 3:07-30012,Adv. No. 3:08-03004,Civil No. 2012-51 |
| Parties | IN RE: INNOVATIVE COMMUNICATION CORPORATION, Debtor. LYNDON ADRIAN PROSSER, MICHELLE LABENNETT PROSSER, SYBIL G. PROSSER, and JOHN JUSTIN PROSSER, Appellants, v. STAN SPRINGEL, CHAPTER 11 TRUSTEE; THE BANKRUPTCY ESTATE OF INNOVATIVE EMERGING COMMUNICATIONS, INC., and INNOVATIVE COMMUNICATION COMPANY, LLC, Appellees. |
| Court | U.S. District Court — Virgin Islands |
ATTORNEYS:
Leigh F. Goldman, Esq.
Goldman Law Offices, Inc.
St. Thomas, USVI
For Lyndon Prosser, Michelle Prosser, Sybil Prosser, and
Vinson & Elkins, LLP
Dallas, TX
Before the Court is the appeal of Lyndon Prosser, Michelle Prosser, Sybil Prosser, and John Prosser (collectively referred to as "the Prossers") from the Bankruptcy Division's August 5, 2011, Summary Judgment regarding alleged fraudulent conveyances.
This appeal arises out of the lengthy, and ongoing, bankruptcy of Innovative Communication Corporation ("ICC"), a Virgin Islands telecommunications company, and its former owner and chief executive officer, Jeffrey Prosser.
On October 19, 2007, the appellee Stan Springel, as the Chapter 11 Trustee of the Bankruptcy Estates of ICC, as well as the related entities Emerging Communications, Inc., and Innovative Communication Company, LLC, initiated an adversary proceeding against the Prossers. James P. Carroll, the Chapter 7 Trustee of the Bankruptcy Estate of Jeffrey Prosser subsequently joined the adversary proceeding as a co-plaintiff. Together, Springel and Carroll asserted, among other things, several claims that sought to turn over property from the Prossers tothe bankruptcy estate1 pursuant to Title 11, Section 542 of the United States Code.2
On August 5, 2011, the United States Bankruptcy Court for the District of the Virgin Islands (the "Bankruptcy Division") entered a "Memorandum Opinion and Judgment Order," (Doc. No. 119) allowing Springel to recover certain unauthorized post-petition transfers from the Prossers.
On July 13, 2012, the Prossers filed a notice of appeal.
On July 16, 2012, the Clerk of the Court issued a scheduling order (the "Scheduling Order"). The Scheduling Order required the Prossers to file and serve the designation of record and a statement of issues within 10 days of the date of the order, "failing which the Appeal may be dismissed for failure to prosecute." Further, the Scheduling Order requiredthe Prossers to file and serve their brief within 30 days of the order.
The Prossers failed to fully comply with the Scheduling Order. They filed their designation of record and statement of issues. They did not file their brief.
Because the Prossers failed to file their appellants' brief, the Court entered an order on December 12, 2012, that ordered the Prossers to, "no later than December 28, 2012, show cause in writing why this matter should not be dismissed for failure to prosecute." (ECF No. 7.)
On March 18, 2013, the Prossers filed a motion requesting that the Court extend its December 28, 2012, deadline for them to show cause. The Prossers explained that they learned only the day before from another attorney that their attorney, Leigh Goldman, failed to timely respond to the December 12, 2013, Order to Show Cause. The Prossers sought an extension so they could have time to find new counsel.
On March 26, 2013, the Court granted a 60-day extension beginning March 26, 2013, for the Prossers to file and serve on Springel their Appellants' Brief. The Court advised that a failure to comply with its order could result in dismissal of the case for failure to prosecute.
On May 29, 2013, and May 30, 2013, after the extended deadline had passed, each Prosser filed a motion requesting that the Court again extend the deadline to file their Appellants' Brief, this time to July 24, 2013. The Prossers explained that the issues involved in the appeal are complex and that many local attorneys are unable because of conflicts of interest to represent them, or unwilling. Therefore, they requested more time.
As of the date of this order, the Prossers have violated each of the deadlines set by the Court to file their appellants' brief. Over fourteen months have passed since the Prossers filed their notice of appeal.
The Court has jurisdiction to review the "final judgments, orders, and decrees" of bankruptcy courts pursuant to section 158(a) of Title Twenty-Eight of the United States Code.3
The Court will review the bankruptcy court's findings of fact for clear error and will exercise plenary review over questions of law. In re Barbel, Civ. No. 01-221 (RLF) 2004 U.S.Dist. LEXIS 19417, at *2 (D.V.I. Sept. 21, 2004) ("A district court reviews the Bankruptcy Division's conclusions of law de novo but may only review findings of fact that are clearly erroneous." (citing Fed. R. Bankr. P. 8013; In re Excalibur Auto. Corp., 859 F.2d 454, 457 (7th Cir. 1988)), aff'd 183 Fed. App'x 227 (3d Cir. 2006). "[A] bankruptcy court's exercise of its equitable power is reviewed only for an abuse of discretion." In re Mou San Rim, Civ. No. 10-1066 (DMC), 2010 U.S. Dist. LEXIS 117458, at *3-4 (D.N.J. Nov. 3, 2010).
A motion for relief from judgment is ordinarily addressed to the sound discretion of the trial judge. However, if the court was powerless to enter the judgment in the first instance, the judgment is void and "the trial judge has no discretion and must grant appropriate . . . relief." Textile Banking Co. v. Rentschler, 657 F.3d 844, 851 (7th Cir. 1981) (citing In re Four Seasons Sec. Law Litig., 502 F.2d 834 (10th Cir.), cert. denied, 419 U.S. 1034 (1974)).
"Under Rule 8001(a)4 of the Federal Rules of Bankruptcy Procedure, the District Court is empowered to dismiss an appealfor failure to prosecute or otherwise follow the procedures set out in the Bankruptcy Rules." In re Richardson Industrial Contractors, Inc., 189 Fed. App'x 93, at *96 (3d Cir. 2006). Before such a dismissal occurs, however, a district court must consider six factors outlined in Poulis v. State Farm Fire and Cas. Co., 747 F.2d 863, 868 (3d Cir. 1984). In Poulis, the Third Circuit stated that a district court must balance the following factors:
1) the extent of the party's personal responsibility; (2) the prejudice to the adversary caused by the failure to meet scheduling orders and respond to discovery; (3) a history of dilatoriness; (4) whether the conduct of the party or the attorney was willful or in bad faith; (5) the effectiveness of sanctions other than dismissal, which entails an analysis of alternative sanctions; and (6) the meritoriousness of the claim or defense.
Id. () (alteration in original); see also In re E Toys Inc., 263 Fed. App'x 235, 237, 2008 WL 241367 at *2 (3d Cir. Jan. 30, 2008) (). "Not all of the[] Poulis factors need be met for a district court to find dismissal is warranted." Hicks v. Feeney, 850 F.2d 152, 156 (3d Cir. 1988). However, courts must consider and balance all six Poulis factors before dismissing a case with prejudice, and all doubts must be resolved in favor of adjudication on the merits. See $8,221,877.16 in U.S. Currency, 330 F.3d 141, 161 (3d Cir. 2003) (); see also Bjorgung, 197 Fed. App'x at 125-26 () (quoting Mindek v. Rigatti, 964 F.2d 1369, 1373 (3d Cir. 1992)).
In In re Richardson Industrial Contractors, Inc., 189 Fed. Appx. 93 (3d Cir. 2006), the United States Court of Appeals for the Third Circuit addressed the relevant factors that a district court must consider before dismissing a bankruptcy appeal for failure to prosecute. In that case, the district court dismissed a creditor's appeal with prejudice for failure to comply withthe mandates of the Federal Rules of Bankruptcy Procedure. In so doing, the district court considered only two of the six Poulis factors: the creditor's bad faith in requesting a second extension of time in which to file his brief and the ineffectiveness of alternative sanctions. The creditor appealed the district court's decision.
On appeal, the Third Circuit found that, in addition to not considering all six Poulis factors, the district court's discussion of two factors was limited and did not set out the basis for its conclusions in such a way to permit meaningful review of its decision. The Third Circuit vacated the District Court's order and remanded it for further proceedings. In re Richardson Indus. Contractors, Inc., 189 F. App'x 93, 97 (3d Cir. 2006).
Ordinarily, a district court must balance all six Poulis factors when determining whether a party has failed to prosecute a matter. Id. (quoting United States v. $8,221,877.16 in United States Currency, 330 F.3d 141, 162 (3d Cir.2003)) ("[W]e have always required consideration and balancing of all six of the factors, and have recommended the resolution of any doubts in favor of adjudication on the merits."). The Third Circuit has noted the particular importance of the third factor, the party's history of dilatoriness, in the overall balancing of the sixPoulis factors. Richardson Indus. Contractors, Inc., 189 F. App'x 93, 97 (3d Cir. 2006). The Richardson Court noted that "'[d]ismissal typically occurs in cases showing consistently dilatory conduct or...
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