Rubin, In re

• Citation: 769 F.2d 611
• Decision Date: 22 August 1985
• Docket Number: No. 84-5675,84-5675
• Parties: 13 Collier Bankr.Cas.2d 599, 3 Fed.R.Serv.3d 968 In re Tom RUBIN, dba Tom Rubin & Associates, Debtor. Tom RUBIN, dba Tom Rubin & Associates, Appellant, v. BELO BROADCASTING CORPORATION, dba WFAA TV; Cox Broadcasting Corporation, dba WSB TV; WIIC TV, Inc., a wholly-owned subsidiary of Cox Broadcasting Corporation; King Broadcasting Company, dba King AM; Miami Broadcasting Corporation, dba KTVU; Gaylord Broadcasting, dba KSTW; Fisher Broadcasting, Inc., dba Komo TV; Hubbard Broadcasting, Inc., dba KSTP; Teleco Indiana, Inc., dba WTTV Television; Gaylord Broadcasting Company of Ohio, dba WUAB TV, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 611

769 F.2d 611

13 Collier Bankr.Cas.2d 599, 3 Fed.R.Serv.3d 968

In re Tom RUBIN, dba Tom Rubin & Associates, Debtor Tom RUBIN, dba Tom Rubin & Associates, Appellant, v. BELO BROADCASTING CORPORATION, dba WFAA TV; Cox Broadcasting Corporation, dba WSB TV; WIIC TV, Inc., a wholly-owned subsidiary of Cox Broadcasting Corporation King Broadcasting Company, dba King AM; Miami Broadcasting Corporation, dba KTVU; Gaylord Broadcasting, dba KSTW Fisher Broadcasting, Inc., dba Komo TV; Hubbard Broadcasting, Inc., dba KSTP; Teleco Indiana, Inc., dba WTTV Television; Gaylord Broadcasting Company of Ohio, dba WUAB TV, Appellees.

No. 84-5675.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 6, 1985.

Decided Aug. 22, 1985.

Gary E. Klausner, Herbert Wolas, Robinson, Wolas & Diamant, Kenneth N. Klee, Stutman, Treister & Glatt, Los Angeles, Cal., for appellant.

Daniel Slate, Gendel, Raskoff, Shapiro & Quittner, Los Angeles, Cal., for appellees.

Appeal from the Bankruptcy Appellate Panel for the Ninth Circuit.

Before GOODWIN, FLETCHER, and PREGERSON, Circuit Judges.

FLETCHER, Circuit Judge:

Rubin appeals the bankruptcy court's dismissal of his answer to a petition for involuntary bankruptcy as a sanction for his conduct during discovery. We reverse.

I. BACKGROUND

Tom Rubin operates a media consulting firm and advertising agency under the name of Tom Rubin & Associates. On February 19, 1981, several broadcasting companies ("Creditors") filed a petition for involuntary bankruptcy against Rubin, alleging that he generally was not paying his debts as they came due. See 11 U.S.C. Sec. 303 (1982) (amended by the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353, Secs. 426, 427, 98 Stat. 333, 369). Rubin timely answered the petition and denied Creditors' allegations.

The discovery process in this case began after Rubin answered the petition, when he filed a motion to dismiss and noticed depositions of twenty-one of Creditors' corporate officers, to commence immediately and to continue for the next four weeks in seven cities across the United States. After the first deponent did not appear as scheduled, the court granted Rubin's motion for sanctions against Creditors. ¹

Creditors also began their own discovery shortly after Rubin answered the involuntary petition. They noticed depositions of Tom Rubin and of Rubin's custodian of records, and they requested Rubin to produce his accounts payable records at the custodian's deposition. Rubin's counsel twice postponed the depositions. The court granted Creditors' motion to compel but reserved their request for sanctions. The custodian of records appeared as ordered on May 1 and produced thirty-three boxes of documents. Creditors claimed the documents were disorganized and nonsensical.

In June and July, Creditors served on Rubin two sets of interrogatories. While Rubin failed to answer either set on time, he eventually did answer the first set two days before a sanctions motion was to be heard, and the second set fifteen days after the date set in a court order. Creditors moved to compel further answers but eventually withdrew the motion.

In October, the court ordered Rubin to prepare and file a schedule of disputed claims by October 28. When Rubin did not comply, the court set a new due date of November 10. Rubin filed the schedule on November 25. The court found Rubin's schedule insufficient and ordered him to respond more precisely by February 2, 1982. Rubin timely filed a supplement, which Creditors contend was still insufficient.

Creditors also sought to depose Rubin's custodian of records for a second time. After Rubin's counsel twice postponed the deposition, the court granted Creditors' motion to compel, and Creditors noticed the deposition for February 1982. In February, Rubin's counsel again attempted to postpone the scheduled date, and Creditors moved to direct Rubin to make his offices available for the deposition on March 3-5, 1982. The court granted the motion, but Rubin did not comply. Instead, he filed a motion for reconsideration of the court's order. The court denied Rubin's motion and ordered the deposition to go forward at Rubin's offices on April 21-23. The deposition took place as ordered on April 21 and was scheduled to continue the next day. That day, one of Rubin's counsel was delayed due to a court appearance. Creditors' counsel left after waiting twenty minutes, and refused to reconvene the deposition.

The discovery process as a whole was extensive, and included, in addition to the matters set forth above, depositions on written questions from Rubin of forty-three radio and television stations across the country, and several ancillary proceedings in other courts to compel document production from many of these stations. In all, Creditors conducted fifteen depositions of Rubin's accountants, employees, and customers. They deposed Tom Rubin himself in five separate sessions.

On May 10, 1982, the court called a status conference to consider the parties' readiness for trial. At the outset of the conference, although no motions for sanctions or to compel discovery were outstanding, the court invited argument concerning whether it should impose sanctions against Rubin for his conduct during discovery. It then set the matter over until May 27, to allow Creditors to prepare and file a formal motion for sanctions. After the May 27 hearing, the court entered an order, striking Rubin's answer and entering an order for relief as a sanction under Fed.R.Civ.P. 37. Rubin appealed to the Bankruptcy Appellate Panel ("BAP"), which affirmed the bankruptcy court's order. 37 B.R. 232 (9th Cir.1984).

II. DISCUSSION

A. Jurisdiction

Rubin contends the bankruptcy court had no jurisdiction over this case in light of the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353, 98 Stat. 333 ("Bankruptcy Amendments"). Rubin contends the Bankruptcy Amendments add a new jurisdictional requirement in involuntary proceedings, that the claims of petitioning creditors not be subject to bona fide disputes. He asserts that the amendments apply to pending cases and therefore are applicable here. Since the bankruptcy court in this case has not determined that Creditors' claims were not subject to bona fide disputes, he would have us remand to the bankruptcy court to permit it to make a determination of its jurisdiction. ²

Absent manifest injustice or congressional intent to the contrary, we generally apply the law as it exists when we render our decision. Bradley v. Richmond School Board, 416 U.S. 696, 711, 94 S.Ct. 2006, 2016, 40 L.Ed.2d 476 (1974); In re Reynolds, 726 F.2d 1420, 1422 (9th Cir.1984). This rule applies to changes in the law that affect jurisdiction. See, e.g., Andrus v. Charlestone Stone Products Co., 436 U.S. 604, 608 n. 6, 98 S.Ct. 2002, 2005 n. 6, 56 L.Ed.2d 570 (1978); Carlton v. Baww, Inc., 751 F.2d 781, 787 & n. 6 (5th Cir.1985). However, we conclude that with regard to section 303 the Bankruptcy Amendments do not impose jurisdictional requirements. ³

Subject matter jurisdiction deals with a court's competence to hear and determine cases of the general class to which the proceedings in question belong and the power to deal with the general subject involved in the action. In re Earl's Tire Service, Inc., 6 B.R. 1019, 1022 (D.Del.1980). The bankruptcy court in the instant case was vested with this general power under 28 U.S.C. Sec. 1471 (superseded by the Bankruptcy Amendments, Pub.L. No. 98-353, Sec. 104(a), 98 Stat. 333, 340-41 (to be codified at 28 U.S.C. Sec. 157)). Section 1471 authorized the bankruptcy court to "exercise jurisdiction of all cases under title 11," and vested in them "exclusive jurisdiction of all the property" of debtors in such cases. Id.

We conclude that the undisputed claims requirement of the Bankruptcy Amendments is not jurisdictional. Rather, it goes to the merits--an element that must be established to sustain an involuntary proceeding. Petitioning creditors cannot prevail unless they show that their claims are not subject to bona fide disputes, but the bankruptcy court is not without jurisdiction prior to this determination.

The bankruptcy court had subject matter jurisdiction in this case under 28 U.S.C. Sec. 1471. The bankruptcy court's order striking Rubin's answer and entering an order for relief was a final decision. In re Mason, 709 F.2d 1313, 1315 (9th Cir.1983). The BAP's affirmance was a final decision for our purposes. In re Sambo's Restaurants, Inc., 754 F.2d 811, 814-15 (9th Cir.1985). Accordingly, we have jurisdiction under section 104(a) of the Bankruptcy Amendments, Pub.L. No. 98-353, Sec. 104(a), 98 Stat. 333, 341 (to be codified at 28 U.S.C. Sec. 158), ⁴ and we reject Rubin's jurisdictional challenge. ⁵

B. Propriety of Sanctions

We review a trial court's imposition of sanctions for an abuse of discretion. Professional Seminar Consultants, Inc. v. Sino American Technology Exchange Council, Inc., 727 F.2d 1470, 1473 (9th Cir.1984); United States v. Sumitomo Marine & Fire Insurance Co., 617 F.2d 1365, 1369 (9th Cir.1980). The question is not whether this court would as an original matter impose the sanctions chosen by the trial court, but whether the trial court exceeded the limits of its discretion. See National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642, 96 S.Ct. 2778, 2780, 49 L.Ed.2d 747 (1976); In re Visioneering Construction, 661 F.2d at 123.

Rule 37 sanctions must be just and must be specifically related to the particular "claim" that was at issue in the order to provide discovery. Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. at 707, 102 S.Ct. at 2106; Fjelstad v. American Honda Motor Co., 762 F.2d 1334, 1340-1341, 1342 (9th Cir.1985); Wyle v. R.J. Reynolds Industries, Inc., 709 F.2d 585, 591 (9th Cir.1983). To determine whether a sanction is "just," we examine...