JAMES S. STARZYNSKI, Bankruptcy Judge.
This matter is before the Court on Plaintiffs' Motion for Reconsideration of Order Dismissing Complaint ("Motion") (doc. 12). Plaintiffs are self-represented. Defendant filed a Response (doc. 14). The Court will in fact reconsider its prior decision, but finds that the dismissal order was appropriate not only for the reasons stated, but for additional reasons as well. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I).
In re Bushman, 311 B.R. 91, 95 n. 5 (Bankr.D.Utah 2004) (Citation omitted). Rule 59 was amended in 2009 to increase the 10-day time periods to 28 days. Fed. R.Civ.P. 59 Advisory Notes. Relief may also be available under Rule 59 if there has been an intervening change in the controlling law. Sussman v. Salem, Saxon & Nielsen, P.A., 153 F.R.D. 689, 694 (M.D.Fla.1994); 11 Wright, Miller and Kane, Fed. Prac. & Proc. Civ. § 2810.1 (2d ed. 1995). Reconsideration of a judgment after its entry is an extraordinary remedy which should be used sparingly. Id. See also Palmer v. Champion Mortgage, 465 F.3d 24, 30 (1st Cir.2006). Rule 59 may not be used to relitigate old matters or reargue theories previously advanced and rejected. Id. Nor may Rule 59 be used to raise arguments or present evidence that could have been raised prior to the entry of the judgment. Obriecht v. Raemisch,
The Debtor (husband) in the bankruptcy case related to this adversary proceeding is an attorney that formerly represented the Plaintiffs. The Debtors filed their bankruptcy as a Chapter 11 on October 29, 2008 and then moved to convert to Chapter 7 on November 21, 2008. The deadline for complaints objecting to discharge or dischargeability was March 10, 2009.
Debtor's law practice, Aguilar Law Offices, P.C., filed a Chapter 11 case on October 16, 2008. The United States Trustee moved to convert or dismiss the case on June 18, 2009, and the Court converted it to a Chapter 7 on July 20, 2009.
On November 24, 2008 Plaintiffs filed a complaint in the United States District Court for the District of New Mexico against the Debtor (husband), the law firm, and John Does I-X. The Debtors' attorney filed a notice of bankruptcy in this District Court case on December 9, 2008, and the presiding judge statistically closed it on December 11, 2008.
On February 2, 2009 Plaintiffs filed one adversary proceeding, No. 09-1013, against both the Debtors and Aguilar Law Offices, P.C., seeking a declaration that their claims were nondischargeable under sections 523(a)(2), (a)(4) and (a)(6). At the initial pretrial conference the Court and parties discussed the District Court lawsuit and its relation to the adversary. The minutes of that hearing (doc. 8) and resulting Order (doc. 9) show that the Court ordered the parties to discuss whether stay relief could be fashioned to try the case in the District Court, including the dischargeability issues, or whether the parties should ask that the reference be withdrawn, or, failing that the Plaintiff must file an amended complaint by April 27, 2009 that had to be a "short and plain statement" of the facts that complied with the "particularity" requirements of fraud pleading. On April 13, 2009 Plaintiffs filed a Motion for Relief from Automatic Stay in the adversary case (doc. 12)
(doc. 23). On May 26, 2009 Plaintiffs filed a certificate of service of the Alias Summons stating that service was made on the law office on May 22, 2009 (doc. 24). Aguilar Law Office did not file an answer to the complaint. See docket. On June 18, 2009 Plaintiffs filed a Motion to Dismiss the Adversary Proceeding without prejudice (doc. 28). The Plaintiffs then drafted and obtained the signature of Debtors' attorney, but not the signature of the law office's attorney, on an Order Granting Motion to Dismiss Adversary Proceeding without Prejudice, which was entered by the Court on July 9, 2009 (doc. 30).
Plaintiffs' next contact with the Bankruptcy Court was on December 5, 2011 when they filed the instant adversary proceeding, No. 11-1213-S against Debtor (husband). It is styled as a Complaint for Money Damages and Determination Excepting this Complaint's 11 U.S.C. §§ 523(a)(2), (a)(4) and (a)(6) Claims from Dischargeability. All facts alleged in the complaint deal with the time period of 2004 to 2006, except for one. In the introduction to the complaint Plaintiffs state:
(Doc. 1)
Plaintiffs' Motion seeks reconsideration of the Order Dismissing this adversary proceeding. In the Motion's Introduction section, it refers to 11 U.S.C. § 523(a)(2), (a)(4) and (a)(6)
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Legal doctrine. Comment.
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1. Title 11 U.S.C. § 523(a)(2), (4) and (6). See footnote 3. These sections are not
relevant to reasons for reconsideration.
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2. Fed.R.Bankr.P. 4007(a), (b) and (e). See footnote 4. Rule 4007(b) is not relevant.
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3. Title 7, U.S.C. Title 7, Chapters 1 through 114 deal with agriculture, so are not relevant. ------------------------------------------------------------------------------------------------------- 4. NM LBR Addendum A. This is the 1984 U.S. District Court Administrative Order that refers bankruptcy issues to the Bankruptcy Court. It is not relevant. ------------------------------------------------------------------------------------------------------- 5. Title 28 U.S.C. § 157. This section allows for Federal District Courts to refer bankruptcy matters to their bankruptcy courts and defines what bankruptcy judges may hear. It is not relevant. ------------------------------------------------------------------------------------------------------- 6. Fed.R.Bankr.P. 9029. This rule permits the promulgation of local rules. It is not relevant. ------------------------------------------------------------------------------------------------------- 7. the U.S. Supreme Court's Fraudulent discussed below. Concealment Doctrine. ------------------------------------------------------------------------------------------------------- 8. Bulloch v. United States, 763 F.2d 1115, discussed below. 1121 (10th Cir.1985) re: fraud upon the court. ------------------------------------------------------------------------------------------------------- 9. the meaning and purpose of "without discussed below. prejudice" language in a court order. -------------------------------------------------------------------------------------------------------
Plaintiffs put forth their fraudulent concealment claims in the introduction to their second adversary complaint. It was quite clear that they based their claimed right to proceed upon new information. And, the Court specifically addressed that argument in the Order Dismissing Complaint (doc. 10). The Order refers to their allegation that on February 1, 2010 they first received a July 13, 2006 memorandum which was, figuratively, the smoking gun. The Order then acknowledges the theory of tolling a statute of limitations for reasons of fraud, but found that it should not apply because, in fact, Plaintiffs had already assumed, probably from other evidence in their possession, fraud, breach of fiduciary duty and willful and malicious injury when they actually filed the original adversary complaint alleging those causes of action. Had Plaintiffs done any discovery in that adversary proceeding they could have uncovered the smoking gun
The Court finds that Plaintiffs' references in the Motion for Reconsideration to fraudulent concealment are merely attempts to reargue that which was already denied. Furthermore, the Court has very serious doubts that the doctrine of fraudulent concealment tolls the deadline for filing complaints objecting to dischargeability under section 523(c) when the creditor has actual knowledge of the bankruptcy.
Plaintiffs argued in their "Factual and Legal Issues Required for January 23, 2012 Pretrial Conference", doc. 7, at p. 2 that the doctrine of fraudulent concealment is read into every federal statute of
While Plaintiffs have accurately stated the law, they have also failed to distinguish between "statutes of limitations" and "statutes of repose."
Ma v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 597 F.3d 84, 88 n. 4 (2nd Cir.2010). See also In re Exxon Mobil Corp. Securities Litigation, 500 F.3d 189, 199-200 (3rd Cir.2007):
and see Williams v. EMC Mortgage Corp. (In re Williams), 276 B.R. 394, 398 (Bankr.E.D.Pa.2002):
"In contrast to statutes of limitation, statutes of repose serve primarily to relieve potential defendants from anxiety over liability for acts committed long ago." Goad v. Celotex Corp., 831 F.2d 508, 511 (4th Cir.1987), cert. denied, 487 U.S. 1218, 108 S.Ct. 2871, 101 L.Ed.2d 906 (1988). A statutes of repose requires as an element of the cause of action that the suit be filed by a date certain. Id. Statutes of repose are not concerned with the plaintiff's diligence; they are concerned with "the defendant's peace." Underwood Cotton Co., Inc. v. Hyundai Merchant Marine (America), Inc., 288 F.3d 405, 409 (9th Cir.2002).
One significant difference between a statute of limitations and a statute of repose is that a statute of repose cannot be equitably tolled. Tidewater Finance Co. v. Williams (In re Williams), 341 B.R. 530, 538 n. 9 (D.Md.2006), aff'd, 498 F.3d 249 (4th Cir.2007); In re Maas, 416 B.R. 767, 771 (Bankr.D.Kan.2009) ("Equitable tolling is inconsistent with statutes of repose.") (citing Lampf, Pleva, Lipkind, Prupis, & Petigrow v. Gilbertson, 501 U.S. 350, 363, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991)).
Statutes of limitations have two common characteristics. Id. at 769. First, they give a plaintiff a specified period of time within which to pursue a claim. Id. at 769-70. Second, the period begins when the plaintiff has or discovers he has a complete and present claim or cause of action. Id. at 770. When both conditions are met a court may "toll" the running of the deadline if equitable considerations excuse the plaintiff's failure to file the claim timely. Id. (Citations omitted.) This "equitable tolling" is appropriate when the plaintiff has diligently pursued his remedy but some action by defendant has frustrated his efforts. Id. (Citation omitted.)
Statutes of repose do not start to run when the plaintiff has or discovers he has an action. Id. at 771. Rather, the statutes set an outside limit as to when the cause of action can accrue in the first place. Id. In other words, they set a deadline not only for filing the action but also providing that after that deadline the plaintiff can no longer even have the claim.
Bankruptcy Rule 4007(c) is a statute of repose. It states that complaints under sections 523(a)(2), (a)(4) and (a)(6) "shall be filed no later than 60 days after the first date set for the meeting of creditors under § 341(a)." This deadline has nothing to do with when a creditor's claim accrued or was discovered. It is a date set as a function of the date the debtor filed the bankruptcy. See Schunck v. Santos (In re Santos), 112 B.R. 1001, 1006 (9th Cir. BAP 1990)(Rule 4007(c) starts the running of a time to file that is not dependant on the discovery or accrual of the
Moreover, Fed.R.Bankr.P. 9006(b)(3) provides: "The court may enlarge the time for taking action under Rules ..., 4007(c),..., only to the extent and under the conditions stated in those rules." Rule 4007(c) has a provision for enlargement of time: "On motion of a party in interest, after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be filed before the time has expired."
In summary, the Court concludes that Plaintiffs' claims were not equitably tolled. Therefore, even assuming (though the Court is not deciding) that Defendant had fraudulently withheld information, Plaintiffs did not obtain an extension of time to file their second adversary after March 10, 2009. The second adversary was properly dismissed.
The Motion for Reconsideration lists fraud on the court as an issue, but goes no further. Plaintiffs' Factual and Legal Issues (doc. 7-1, pp. 4-5) cites a variety of cases that stand for the proposition that if a court officer or judge deceives the court or does not impartially perform the functions of their position, any resulting judgment is void. Also, the fraud must be directed to the judicial machinery itself and is not fraud between the parties or fraudulent documents, false statements or perjury. Plaintiffs do not specify what fraudulent conduct occurred here. The Court assumes that Plaintiffs argue that the first case was terminated fraudulently. But the Court finds nothing in that case that would show fraud. First, the only judicial action in the first adversary was the Court's signing of two stipulated automatic stay orders for entry in the main bankruptcy cases to allow the District Court action to proceed, and the signing of the stipulated order dismissing the case. The Court was not called on to rule on anything, nor did it. In fact, the Plaintiffs purportedly drafted the stipulated orders and presumably put into them what they intended. The only other possible "fraud" could have been Plaintiffs' statements that the law office's attorney threatened them (correctly, as it turned out) with sanctions for attempting to hold a corporate chapter 7 debtor's debt nondischargeable. And, as to comments about withheld information, there is no evidence
Furthermore, the Court addressed Plaintiffs' allegations of fraud on the court in the original order dismissing this adversary proceeding. The Motion for Reconsideration adds nothing new. To the extent Plaintiffs argue fraud on the Court, this issue was already argued and denied and is not the proper subject for a motion to reconsider.
Plaintiffs argue that the first case's dismissal "without prejudice" was correct. Doc. 12, p. 8. That may be true, but is totally irrelevant. Nowhere do the Plaintiffs state their assumption outright, but it is clear to the Court that they believe that when a case is dismissed without prejudice one is free to refile it any time, any statutes of limitation or statutes of repose notwithstanding. This is dead wrong.
Dupree v. Jefferson, 666 F.2d 606, 610 (D.C.Cir.1981) (quoting Willard v. Wood, 164 U.S. 502, 523, 17 S.Ct. 176, 41 L.Ed. 531 (1896)). See also Wilson v. Grumman Ohio Corp., 815 F.2d 26, 28 (6th Cir.1987) (En banc.) ("[D]ismissals without prejudice operate to leave the parties as if no action had ever been commenced.... If the period of limitations has run by the point of such a dismissal, any new action is generally untimely.") (quoting Harris v. City of Canton, Ohio, 725 F.2d 371, 376-77 (6th Cir.1984)). See also Elmore v. Henderson, 227 F.3d 1009, 1011 (7th Cir. 2000):
Finding no error in the Court's dismissal order, the Court denies reconsideration on this ground.
In Defendant's Motion to Dismiss he argued that this adversary was also barred by res judicata or collateral estoppel. The Court did not need to address that in entering the dismissal order, but has reviewed this argument in connection with the Motion to Reconsider and finds it well taken. As noted above, the Court has taken judicial notice of the District Court case. In that case, Defendant filed a motion for summary judgment requesting that the court dismiss all claims not covered by malpractice insurance because those claims had been discharged in his bankruptcy case. Judge Garcia agreed. "If Lyons intended to assert that their causes of action other than the claims of professional malpractice were nondischargeable, they could have continued with Adversary Proceedings and obtained a ruling from the Bankruptcy Court on that issue. They chose not to do so, and it is now too late. 11 U.S.C. § 523(c)(1); Fed. R.Bankr.P. Rule 4007(c)." (District Court case, doc. 111, p. 12). The Tenth Circuit affirmed, reasoning that "[b]y dismissing their complaint, plaintiffs relinquished their opportunity to have the bankruptcy court rule on the dischargeability of their claims against defendants." Order and Judgment, No. 10-2192 (10th Cir. 2011) (filed in District Court case, doc. 120).
In summary, the District Court ruled directly on the issue of whether all claims against the Debtor had been discharged by the bankruptcy. It ruled they had, and that ruling was affirmed. Plaintiffs cannot avoid the consequences of these orders by refiling a new adversary proceeding.
Plaintiffs main claim is that they discovered the smoking gun in February 1, 2010. Defendant filed the summary judgment motions in June, 2010. If the evidence was as probative as Plaintiffs claim, it should have been presented to the District Court before judgment was entered against them. If it was presented, the Court ruled against them. If it was not presented, it is too late to use it now. Finally, to the extent the new evidence had a bearing on a potential dischargeability claim, the matter was not brought to the Bankruptcy Court until December 2011. Plaintiffs stated that this was when the District Court litigation ended. As discussed above, however, the District Court litigation ended in July, 2010. Waiting eighteen months to return to the Bankruptcy Court is not acceptable, especially considering that the original deadline was sixty days and ended on March 10, 2009, Plaintiffs' actions do not demonstrate diligence. See, e.g., Merck & Co., Inc. v. Reynolds, ___ U.S. ___, 130 S.Ct. 1784, 1797, 176 L.Ed.2d 582 (2010) ("[T]he court-created `discovery rule' exception to ordinary statutes of limitations is not generally available to plaintiffs who fail to pursue their claims with reasonable diligence.").
The Court has reconsidered its Order dismissing adversary proceeding and finds that it was proper. The Court will enter an Order in conformity with this Memorandum Opinion. Plaintiffs also filed a motion to reopen this adversary proceeding. Doc. 13. That motion will also be denied for the reasons set out in this memorandum opinion.
Fed.R.Bankr.P. 4007(c) is relevant to this case. It states that the time for filing section 523(c) complaints (i.e., complaints under sections 523(a)(2), (4) or (6)) shall be filed no later than 60 days after the first date set for the meeting of creditors under § 341(a). Section (e) of Rule 4007 simply states that any complaint to determine dischargeability must be filed as an adversary proceeding.
