Valle v. Wolff

• Decision Date: 28 January 2021
• Docket Number: Case No.: GJH-20-707, Bankruptcy No.: 19-00202,Bankruptcy No.: 19-15518
• Parties: Diana C. VALLE, Appellant, v. Michael G. WOLFF, Appellee.
• Court: U.S. District Court — District of Maryland

627 B.R. 821

Diana C. VALLE, Appellant,

v.Michael G. WOLFF, Appellee.

Case No.: GJH-20-707

Bankruptcy No.: 19-15518

Bankruptcy No.: 19-00202

United States District Court, D. Maryland, Southern Division.

Signed January 28, 2021

Diana Carolina Valle, LLC, Bethesda, MD, Pro Se.

Jeffrey M. Orenstein, Wolff and Orenstein, LLC, Rockville, MD, for Defendant.

MEMORANDUM OPINION

GEORGE J. HAZEL, United States District Judge

Appellant Diana C. Valle, who represents the Debtor in the underlying bankruptcy case, appeals the February 24, 2020 Order of the Bankruptcy Court granting sanctions against Appellant and the March 16, 2020 Order of the Bankruptcy Court denying Appellant's motion to reconsider the award of sanctions. ECF No. 1.¹ A hearing is not necessary to resolve the present appeal. See Fed. R. Bankr. P. 8013(c) ; see also Loc. R. 105.6 (D. Md. 2018). For the following reasons, the Court affirms the Bankruptcy Court's orders.

I. BACKGROUND²

Appellant Diana C. Valle represents the Debtor, Aletha K. Barsir, in an adversary bankruptcy proceeding against Appellee Michael G. Wolff, the Chapter 7 Trustee for the Debtor's Bankruptcy estate. See Wolff v. Barsir , Adversary No. 19-0202-LSS. On November 18, 2019, Appellee served interrogatories and requests for production against the Debtor. ECF No. 8-1 at 11, 27–47. Pursuant to the Scheduling Order entered in the case, discovery was scheduled to be completed by December 27, 2019. Id. at 17, 90. On December 26, 2019, Appellee, through counsel, sent a letter (the "Letter") to Appellant advising that her client's responses to the written discovery were overdue and voluntarily extending the deadline to January 6, 2020.³

Id. at 47–48. The cover email stated, "[p]lease see the attached letter regarding [t]he over-due discovery responses in the adversary proceeding." Id. at 50, 67. Appellant responded regarding an issue with the deadline for expert reports, which had been the subject of ongoing discussions between the parties. Id. at 50, 67. Appellee replied, stating, "I note that you have sent this e-mail in response to my letter about overdue discovery. You do not say anything in your e-mail about that so I will only address your question regarding the expert." Id. at 49, 65. Appellee also sent the Letter via first-class mail to Appellant, but, according to Appellant, she did not receive notice of it before January 7, 2020 because her mailing service failed to notify her. Id. at 81–82, 149.

On January 7, 2020, having not received the discovery responses or any response to the Letter, Appellee filed a Motion for Sanctions seeking an order compelling responses to the Written Discovery and awarding monetary sanctions as a result of the Debtor's failure. ECF No. 8-1 at 15–26. Appellant states in her appeal that she contacted Appellee to assure him that discovery would be provided. ECF No. 8 at 8; see also ECF No. 8-1 at 144. On January 10, 2020, (via e-mail) and January 11, 2020 (via first-class mail), Appellant served upon Appellee Defendant's Answers to Plaintiff's First Set of Interrogatories, Defendant's Responses to Plaintiff's Requests for Production of Documents, and documents Bates-stamped 000001 to 000043. Id. at 58.

On February 18, 2020, the Bankruptcy Court held a hearing regarding Appellee's motion. Id. at 138–70. At the hearing, Appellant stated that she had not read the Letter until after the Motion for Sanctions was filed because she did not open the attachment to Appellee's email, id. at 148–50;⁴ that she was busy due to the holidays, and it was a "chaotic" and "hectic" time, id. at 150–51; that she was surprised that Appellee had filed a motion for sanctions after sending her only one letter, id. at 150–51;⁵ and that "frankly, it was just my disorganization and neglect and focusing tunnel vision on the one issue that I was focusing on," the dispute over the expert reports, id. at 152. Appellant concluded that there was no bad faith or intent not to comply with the discovery requests and emphasized that the Debtor "had nothing to do with it"—instead, Appellant said, she was at fault. Id.

The Bankruptcy Court agreed, finding:

[W]e have a situation here where I don't think this is on the debtor. I think this is on debtor's counsel. You have the most significant piece of litigation in any bankruptcy context that you can have, which is the reason the debtor's here, which is a discharge action. And the debtor relies on counsel to maintain and properly prosecute or defend any action in which the debtor is involved.

Id. at 159. The Bankruptcy Court recognized that sanctions under Rule 37(d)(3) may be awarded if the party fails to provide discovery responses "unless the failure was substantially justified" and went on to determine that "[i]n this case, the failure is not substantially justified. Being too busy to read emails that come on behalf of your client at such a critical juncture is not a justifiable excuse." Id. at 160. The Bankruptcy Court thus granted Appellee's motion and awarded $2,232.50 in attorneys' fees against Appellant herself and not her client. Id. at 160–61. Appellant was permitted to speak after the ruling and emphasized that she was representing the Debtor "basically for free" due to her strong belief in access to justice Id. at 161.

The Bankruptcy Court issued an Order awarding monetary sanctions on February 24, 2020. Id. at 86–88. The Order noted that, in the course of the hearing and because the responses had eventually been provided, Appellee had withdrawn his request for sanctions under Fed. R. Civ. P. 37(b)(2)(A)(i)–(vi), as incorporated by Bankruptcy Rule 7037, but continued to seek relief under Fed. R. Civ. P. 37(d)(3). Id. at 87. The Bankruptcy Court found that Appellant "failed to respond to the Written Discovery in a timely manner and that the failure was not substantially justified" and "that no other circumstances exist that would make an award of monetary sanctions unjust." Id.

On February 28, 2020, Appellant filed a Motion for Reconsideration of the order granting sanctions against her. Id. at 89–93. Appellant argued that she is "representing [the Debtor] on what is tantamount to a pro bono representation collecting only $100 per month" and that she does not have sufficient funds to pay the awarded sanctions. Id. 90, 92. On March 16, 2020, the Bankruptcy Court entered an order denying Appellant's Motion to Reconsider, finding Appellant "cites no new facts or law, but merely seeks to relitigate the Sanctions Motion." Id. at 128–130.

On March 17, 2020, Appellant filed a Notice of Appeal asking this Court to reverse the Bankruptcy Court's orders granting sanctions and denying the motion to reconsider. ECF No. 1. Appellant filed her brief on June 2, 2020, ECF No. 8, and Appellee filed his brief on July 2, 2020, ECF No. 10. Appellant did not file a reply brief.

II. STANDARD OF REVIEW

The Court hears this bankruptcy appeal under 28 U.S.C. § 158(a). Parties of bankruptcy cases can appeal orders that dispose of discrete disputes within the larger case. See Mort Ranta v. Gorman , 721 F.3d 241, 246 (4th Cir. 2013). Bankruptcy appeals "shall be taken in the same manner as appeals in civil proceedings generally are taken to court of appeals from the district courts." 28 U.S.C. § 158(c)(2). On appeal from the Bankruptcy Court, this Court reviews the Bankruptcy Court's findings of fact for clear error and conclusions of law de novo. See In re Merry-Go-Round Enters., Inc. , 400 F.3d 219, 224 (4th Cir. 2005) ; In re Kielisch , 258 F.3d 315, 319 (4th Cir. 2001). "[T]he decision of a bankruptcy court ‘must be affirmed if the result is correct’ even if the lower court relied upon ‘a wrong ground or gave a wrong reason.’ " Okoro v. Wells Fargo Bank, N.A. , 567 B.R. 267, 271 (D. Md. 2017) (quoting SEC v. Chenery Corp. , 318 U.S. 80, 88, 63 S.Ct. 454, 87 L.Ed. 626 (1943) ). Thus, this Court may "affirm the bankruptcy court on any ground supported by the record." LeCann v. Cobham (In re Cobham ), 551 B.R. 181, 189 (E.D.N.C.), aff'd , 669 Fed. Appx. 171 (4th Cir. 2016), reh'g denied (Nov. 29, 2016).

Relevant to this appeal, Bankruptcy Rule 7037 incorporates Rule 37 of the Federal Rules of Civil Procedure, which provides, in pertinent part, that if a motion to compel is granted or discovery is provided after the motion's filing, "the court must, after giving an opportunity to be heard, require the party or deponent whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees." Fed. R. Civ. P. 37(a)(5)(A). "But the court must not order this payment if: (i) the movant filed the motion before attempting in good faith to obtain the disclosure or discovery without court action; (ii) the opposing party's nondisclosure, response, or objection was substantially justified; or (iii) other circumstances make an award of expenses unjust." Id. Rule 37 further provides that if a party fails to serve answers to discovery requests, "[s]anctions may include any of the orders listed in Rule 37(b)(2)(A)(i)—(vi). Instead of or in addition to these sanctions, the court must require the party failing to act, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust." Fed. R. Civ. P. 37(d)(3).

To the extent the Bankruptcy Court imposes discretionary sanctions under Rule 37, the sanctions will be set aside only if the Bankruptcy Court is found to have abused its discretion or failed to clearly state its reasons for imposing a particular sanction. LeCompte v. Manekin Constr., LLC , 573 B.R. 187, 192 (D. Md.), aff'd , 706 F. App'x 811 (4th Cir. 2017) (citing National Hockey League v. Metropolitan Hockey Club, Inc. , 427 U.S. 639, 642, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976) ; Wilson v. Volkswagen of Am.,...