MAX O. COGBURN, Jr., District Judge.
The procedural history of this appeal is somewhat involved. The plaintiff previously sought to intervene in the bankruptcy action and dissatisfied with the bankruptcy court's denial of that motion under Rule 24, Federal Rules of Civil Procedure, appealed that decision to this Court.
Turning now to this appeal, an Amended Bankruptcy Scheduling Order was enter by this court on February 7, 2017.
This Court has jurisdiction to hear the appeal pursuant to 28 U.S.C. §§ 158(a)(1) and 1334. As the appellee has not responded within the time allowed, the Court has considered the merits of appellant's appeal based on the arguments she presented in her brief and considered the record on appeal as presented in her Designation (#5). The court has reviewed the appealed bankruptcy court decisions (#1-1 & #1-2), the appellant's filings related to this case, and the transcripts of proceedings before the bankruptcy court, including the key proceedings on October 4th and October 16th, 2016. (Bankr. #83 & #84). Inasmuch as appellees have not responded, the Court has read appellant's arguments in a light most favorable to her. For the reasons that follow will, however, dismiss the appeal and again affirm the determinations of the bankruptcy court.
As this is a second appeal from the bankruptcy court, the following background is drawn largely from the Court's earlier Orders in
Appellant is both a beneficiary and a trustee of Ronald B. Livesay's (deceased) Revocable Trust. Additionally, appellant is a creditor of Communications Electrical Industries ("CEI" or "Debtor"), a limited liability corporation that filed Chapter 7 bankruptcy. On June 4, 2013, Langdon M. Cooper, Trustee in Bankruptcy for CEI, ("Appellee" or "Trustee") filed the underlying adversary action against Global Fiber, LLC and Kenneth W. Livesay (collectively referenced herein as "Defendants") in the bankruptcy court.
Prior to filing the first appeal, appellant sought leave to intervene in the underlying adversary proceeding as a party plaintiff pursuant to Fed. R. Civ. P. 24 on March 19, 2015, which was then almost two years after the underlying proceeding was initiated. After all parties briefed the issue of intervention, the Honorable George R. Hodges, United States Bankruptcy Judge, held a hearing on appellant's Motion to Intervene on April 21, 2015, and thereafter denied the motion by written order on July 28, 2015.
Rather than appeal that decision to the Fourth Circuit, appellant elected to file a Motion to Reconsider the Order affirming the bankruptcy court's denial of the Motion to Intervene. See (Motion for Reconsideration, Livesay I #23). In denying the Motion to Reconsider, this Court held as follows:
(
However unartful that final line of the Order may seem or actually be, all the leave that this Court afforded appellant was to renew before the bankruptcy court its allegation that appellee's statement that "almost three years['] worth of negotiations, litigation, and trial preparation" had occurred in this case was inaccurate.
On her return to bankruptcy court, appellant filed with the bankruptcy court a Second Amended Renewed Motion to Intervene and a Motion for Discovery, which were both denied by the bankruptcy court. (Appellant's Brief (#4) at 2). Appellant's Second Amended Renewed Motion to Intervene did not squarely tee-up her allegation that Judge Hodges' denial of Intervention was based on a misrepresentation. More importantly, she did not reveal her basis for concluding that a misrepresentation had occurred, but instead informed the bankruptcy court in relevant part, as follows:
(Bankr. #50 at 3) (footnote omitted). While it appears from the transcript that Judge Hodges was able to discern that appellant was asserting that a misrepresentation (
On October 4, 2016, the bankruptcy court denied appellant's Motion for Discovery (Bankr. # 51). After the Motion for Discovery was denied on October 4, 2016, appellant issued subpoenas and attempted to serve those on counsel for the parties in the adversary proceedings. In essence, those subpoenas would have required counsel for the parties to disclose and share with counsel for appellant the discovery they had completed in the bankruptcy proceeding. Those subpoenas were, however, quashed by the bankruptcy court at a hearing on October 18, 2016. Judge Hodges found that appellant lacked authority under Rule 45 to issue those subpoenas. Judge Hodges concluded at the October 18, 2017, hearing, as follows:
(Bankr. Doc. # 84 at 10-11).
Under 28 U.S.C. § 158(a), district courts have jurisdiction to hear appeals of the decisions of bankruptcy courts. On appeal from a bankruptcy proceeding, the court reviews the bankruptcy court's legal conclusions de novo and its factual findings for clear error.
The Court has reviewed the appeal and the record submitted. On this appeal, appellant presents the following issues:
Intervention in an adversary proceeding is governed by Rule 24 of the Federal Rules of Civil Procedure. See Fed.R.Bankr.P. 7024 (applying Fed.R.Civ.P. 24(a)(2) to adversary proceedings). Rule 24 contemplates two means of intervening in an existing litigation: as of right (via Fed. R. Civ. P. 24(a)) or through permission by the court (vie Fed. R. Civ. P. 24(b)). The "standard of review for the bankruptcy judge's denial of intervention of right under Rule 24(a)(2) is de novo, while a denial of permissive intervention under Rule 24(b) by a bankruptcy judge is reviewable under an abuse of discretion standard."
Timeliness of the Motion to Intervene was central to the bankruptcy court's earlier determination and it was again implicit in appellant's Second Amended Renewed Motion to Intervene. The Court notes that a party seeking to intervene under either Federal Rule of Civil Procedure 24(a) or 24(b) may do so only upon the filing of a "timely motion."
Appellant's assignments of error will be reviewed seriatim.
Appellant first argues that the bankruptcy court should have granted appellant's Motion for Discovery. Appellant's Brief (#4) at 3. In assigning error, appellant contends that such determination is contrary to the language of this Court's prior Order.
As discussed above, this Court denied appellant's Motion to Reconsider without prejudice to allow for the "renewing [of] any allegations of evidentiary disputes as to the extent of discovery in this case that Appellant may wish the Bankruptcy Court to consider in the first instance." (
(
Turning to the substance of the bankruptcy court's Order denying the Motion for Discovery, this Court has reviewed that determination and finds no legal or factual error or any abuse of that court's discretion. The bankruptcy court clearly stated its reasons for denying the requests for discovery.
The appellant next claims that the bankruptcy court erred in quashing her subpoenas. Appellant's Brief (#4) at 4. After the bankruptcy court denied appellant's request to take discovery, she resorted to issuing subpoenas to counsel that would require them to reveal to appellant the discovery that had been conducted in the adversary proceeding. At the October 4, hearing, the following exchange took place:
(Bankr. #83 at 8-9). In relevant part, the appellant contends that it was her desire to create a record on the renewed motion to intervene, which, she argues, this Court's earlier Order had "left open for further development."
This Court disagrees with appellant's broad reading of the Order denying the Motion to Reconsider. First, the earlier decision in no manner constrained or even suggested an outcome if appellant decided to pursue with the bankruptcy court her contention that counsel in the adversary proceeding had made misrepresentations that undermined the decision on intervention. Thus, the bankruptcy court in deciding the issue anew in no manner ran afoul of this Court's earlier Order. Clearly, that extraordinary relief which appellant sought (discovery by a non-party) was foreclosed by not informing the bankruptcy court of her basis for concluding that a misrepresentation had occurred.
Turning to the substance of the bankruptcy court's Order and the transcripts, made part of the Record on Appeal by appellant, this Court again finds no legal or factual error or any abuse of that court's discretion.
(Bankr. (#84) at 10-11)(emphasis added). Based on the record before this Court, Judge Hodges' decision to quash appellant's subpoenas was appropriate under Rule 45, Federal Rules of Civil Procedure, because appellant was not a party to the bankruptcy proceeding. As she was not a party to the proceeding, she could not issue subpoenas in the bankruptcy proceeding. Based on the record before this Court, the decision of the bankruptcy court quashing appellant's subpoenas is affirmed.
Third, appellant contends that the bankruptcy court's denial of the Motion for Reconsideration was error as it did not make any evidentiary determinations as to discovery undertaken in the adversary proceeding. Appellant's Brief (#4) at 4. Relying on the language of this Court's earlier Order, the appellant argues that this Court's use of "without prejudice" meant that the bankruptcy court was directed to not deny the Motion to Reconsider whatever the extent of discovery in the case.
Using the term "without prejudice" is in no manner synonymous with remanding a matter with instructions; rather, the use of that term simply permitted the appellant to renew the argument she asserted for the first time in her Motion to Reconsider before the court below, which she did. The bankruptcy court was, in turn, free to decide the issue presented. Judge Hodges' determination, in turn, is legally and factually correct and in no manner can be deemed an abused of its discretion. As to appellant theory that it somehow contravened this Court's Order denying her Motion to Reconsider, Judge Hodges' Order is in no way contrary to any Order in
With regard to the fourth claim of error, the Court finds this claim of error to be more akin to a request for relief from this Court. In particular, appellant asks this Court to modify its affirmance of the bankruptcy court's denial of her Motion to Intervene if it finds that the bankruptcy court committed error in not allowing her to pursue discovery related to proving counsel had misrepresented what discovery had been accomplished.
This argument provides the Court with an opportunity to discuss what it believes is the crux of appellant's concern: how can she disprove the basis for Judge Hodges' denial of her Rule 24 motion when she is not allowed to look beyond counsels' claims that substantial discovery had been conducted?
The problem with the argument, as this Court sees it, is that appellant has presupposed that an unsupported claim that attorneys have made a misrepresentation entitles her to discovery as to what discovery those attorneys have actually done. It doesn't. In the proceedings below, appellant at no time moved her allegation of misrepresentation from anything other than "conclusory." Judge Hodges was accurate when he labeled appellant's attempts to support that claim as a "fishing expedition." Clearly, Judge Hodges recognized that appellant failed to provide the court with any basis for her conclusion of misrepresentation when he concluded that "there's no indication that the parties have not proceeded appropriately." (Bankr. #84 at 10-11).
The fact that Judge Hodges did not require the attorneys in the adversary proceeding to wheel-in their discovery to support their statements, either initially or in the second go-round, does not move this Court to conclude that any error occurred. Just as in daily life, courts accept statements and representations unless they have some reason to doubt the veracity of the speaker. A conclusory allegation from a disappointed intervenor does not in and of itself raise a reasonable doubt. This Court need look no further than Rule 9, which requires that "a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b).
Where the veracity or credibility of an attorney is seriously called into question, this Court could foresee conducting an evidentiary hearing. However, to raise an allegation of misrepresentation from mere conjecture to a level that would warrant such proceedings requires that the party making the accusation come forward with the evidence that informs her accusation. Clearly, the bankruptcy court found no basis and denied the relief sought.
There is, therefore, no reason on these assignments of error to again revisit this Court's earlier affirmation of the denial of appellant's request to intervene. Finding no error in the decisions of the bankruptcy court challenged in this appeal, this Court affirms the Orders appealed from and dismisses the appeal with prejudice.
ORDERS AFFIRMED, APPEAL DISMISSED WITH PREJUDICE
The Clerk of Court is respectfully instructed to transmit a copy of this Order to the Clerk of the Bankruptcy Court.
