Suter v. Goedert
| Citation | 504 F.3d 982 |
| Decision Date | 01 October 2007 |
| Docket Number | No. 04-17306.,04-17306. |
| Parties | Horace Burl SUTER and Barbara J. Suter, Appellants, v. Warren GOEDERT, Erica Michaels Holander, and Bruce Matley, Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Kevin J. Mirch argued the cause and was on the briefs for the appellants; Marie C. Mirch was also on the briefs for the appellants.
Bruce T. Beesley argued the cause and was on the briefs for the appellees; Tricia M. Darby was also on the briefs for the appellees.
Appeal from the United States District Court for the District of Nevada; Edward C. Reed, District Judge, Presiding. D.C. No. CV-N-04-00325-ECR (RAM).
Before: B. FLETCHER, and RICHARD R. CLIFTON, Circuit Judges, and EDWARD F. SHEA,* District Judge.
Appellants Horace B. and Barbara J. Suter appeal the district court's judgment dismissing their appeal from the bankruptcy court as moot. Appellees Warren Goedert, Erica Michaels Holander, and Bruce Matley (collectively, the "Goedert firm") are lawyers against whom the Suters filed a legal malpractice lawsuit in a Nevada state court. During the course of the bankruptcy proceeding, the Goedert firm obtained control of the malpractice lawsuit asset, then a dismissal in the Suter appeal, and finally a ruling in both the bankruptcy court and the district court that the Suter appeal following the bankruptcy court decision awarding the asset to the Goedert firm was moot.
The Suters raise only one issue for review: whether the district court erred in dismissing as moot their appeal of the bankruptcy court order. The Suters timely filed this appeal, and we have jurisdiction pursuant to 28 U.S.C. § 158(d). On de novo review, we hold that mootness does not apply, and REVERSE the district court's order and REMAND the case to allow the district court to review the merits of the bankruptcy court's decision.
This case unfolds with a series of tragic circumstances, missed opportunities, and untimely steps. Appellants Horace and Barbara Suter had a teenage daughter who was institutionalized at the Truckee Meadows Hospital and Rehabilitation Center and treated by Dr. Tannenbaum. The Suters came to believe that their daughter was being abused at the facility, and retained the Goedert firm to bring a personal injury lawsuit on behalf of themselves and their daughter against the hospital and physicians. Although their daughter's claims were settled and the Suters' claims against the hospital were settled, the Suters' claims against the physicians proceeded to trial. Following trial, judgment was entered against the Suters on the physicians' counterclaim for over two hundred thousand dollars.
Following the adverse judgment, Dr. Howle, the facility's chief of staff, was deposed in another case and admitted knowledge of one of Dr. Tannenbaum's unconventional if not unscientific therapies administered to patients like the Suter's daughter at the facility. The Suters also later learned that a partner in the Goedert firm was a patient of Dr. Howle, a fact which the firm had failed to disclose to the Suters. The Goedert firm had also failed during the Suter personal injury case to engage in discovery regarding Dr. Howle or to take his deposition.
The Suters initiated a malpractice lawsuit against the Goedert firm for mishandling the personal injury case. The malpractice case was dismissed on statute of limitation grounds; the Suters timely appealed the dismissal to the Nevada Supreme Court.
Facing the entry of a substantial monetary judgment against them, the Suters filed for bankruptcy in 2003. A trustee was appointed to manage and liquidate the non-exempt assets of their bankruptcy estate. Their contingent assets included the legal malpractice lawsuit. The Suters filed a motion to convert the case to Chapter 13. While the motion was pending, the Suters raised $10,000 from a family member and negotiated with the trustee for a buy-back of the legal malpractice suit. The trustee moved the bankruptcy court to authorize a release of the estate's interest in the legal malpractice suit, and a hearing was set on both motions on April 13, 2004. At the hearing, counsel for the Suters, the Goedert firm, and the trustee were all present. The Goedert firm then offered $11,000 to acquire the claim. The Suters then offered to match that amount, and the Goedert firm then bid $15,000 if no appeal was taken, and $12,500 if the order was appealed. The Suters objected that they did not know the trustee was planning an impromptu auction and that the claim was not being appropriately valued; they requested more time to prepare a better offer. After a recess, the trustee decided to compromise the claim by accepting the higher offer from the Goedert firm.1 The bankruptcy court orally approved this compromise. Counsel for debtors orally moved for a stay, but the bankruptcy court denied the motion as premature. The bankruptcy court stated it would not enter a ruling "either way" on the merits of the stay without briefing, but invited the parties to prepare a written motion for a stay while the court was preparing its written order on the compromise. With this compromise of the legal malpractice asset to the Goedert law firm, the Suters became nonparties to the Nevada Supreme Court appeal.
The written Order of the bankruptcy court approving settlement was entered on May 14, 2004. On May 19, 2004, the trustee and Appellees filed a stipulation to dismiss the Suters' appeal of the dismissal of the legal malpractice lawsuit pending before the Nevada Supreme Court. On May 24, 2004, the Suters timely filed with the bankruptcy court a notice of appeal of the Order and on May 25, 2004, filed their written Motion for Stay of the Order Pending Appeal.
On June 9, 2004, pursuant to the stipulation of the trustee and the Goedert firm, the Nevada Supreme Court dismissed the appeal of the malpractice case. On June 14, 2004, the Goedert firm filed its response to the motion to stay before the bankruptcy court, arguing that once the claim was dismissed by the Nevada Supreme Court on June 9, 2004, nothing could undo that dismissal, the Goedert's claim no longer existed, and the request for a stay from the bankruptcy court was therefore moot. On July 26, 2004, the bankruptcy court agreed and issued its order denying the Suters' Motion for Stay on the grounds of mootness. The bankruptcy court found, alternatively, that the Suters were unlikely to succeed on the merits of their appeal. However, part of this analysis on the merits and likelihood of success was premised on mootness in the Nevada Supreme Court. The Suters elected to appeal the bankruptcy court's decision to the district court. In the district court, the Goedert firm again moved to dismiss the Suters' appeal as moot. The district court granted the motion based on the same reasoning applied by the bankruptcy court. The Suters timely filed this appeal.
Although the procedural history of this case is littered with allegations of secret deals, suppression of evidence, and improper self-dealing among the doctors and the lawyers, we confine our review solely to the question of whether the district court's dismissal of the appeal for mootness was proper. We apply the same de novo standard of review the district court uses to review a bankruptcy court's decision. See In re Raintree Healthcare Corp., 431 F.3d 685, 687 (9th Cir.2005). In doing so, we "independently review the bankruptcy court's decision and do not give deference to the district court's determinations." In re Saxman, 325 F.3d 1168, 1172 (9th Cir.2003) (quoting Preblich v. Battley, 181 F.3d 1048, 1051 (9th Cir. 1999)). Mootness is a question of law that we review de novo. Or. Advocacy Ctr. v. Mink, 322 F.3d 1101, 1116 (9th Cir.2003). We conclude that the application of mootness doctrine was error and reverse.
The bankruptcy court necessarily enters orders to sell or distribute assets of the debtor's estate. If the bankruptcy court denies a motion to stay such an order, then mootness may bar further review of the order. "Bankruptcy's mootness rule `developed from the general rule that the occurrence of events which prevent an appellate court from granting effective relief renders an appeal moot, and the particular need for finality in orders regarding stays in bankruptcy.'" In re Onouli-Kona Land Co., 846 F.2d 1170, 1172 (9th Cir. 1988) () (citing Algeran, Inc. v. Advance Ross Corp., 759 F.2d 1421, 1424 (9th Cir.1985) (sale of securities)). See also In re Suchy, 786 F.2d 900, 901 (9th Cir.1985) (). The policy behind mootness is "to protect the interest of a good faith purchaser ... of the property." In re Onouli-Kona Land, 846 F.2d at 1172 (citing In re Suchy, 786 F.2d at 901-02). An alternative policy supporting mootness is "the consistent policy in recent bankruptcy law of assuring finality of judgments relating to the automatic stay." Id.
The district court accepted this argument and ruled that the appeal of the disputed compromise was rendered moot by the Nevada Supreme Court's dismissal of the Suters' appeal of the trial court's dismissal of their legal malpractice claim. The bankruptcy mootness rule applies In re Onouli-Kona Land, 846 F.2d at 1171 (citing Algeran, Inc., 759 F.2d at 1423). The Goedert firm argues the failure of the Suters to obtain a stay from the bankruptcy court, before the appeal of the malpractice claim was dismissed by the Nevada Supreme Court, moots the appeal. The Suters present various arguments why mootness should not apply in this case. Among these are...
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