Source: https://law.justia.com/cases/federal/appellate-courts/F2/769/611/197154/
Timestamp: 2019-12-13 22:30:29
Document Index: 204601755

Matched Legal Cases: ['§ 303', '§ 1471', '§ 157', '§ 1471', '§ 158', '§ 303', '§ 158', '§ 1293']

In Re Tom Rubin, Dba Tom Rubin & Associates, Debtor.tom Rubin, Dba Tom Rubin & Associates, Appellant, v. Belo Broadcasting Corporation, Dba Wfaa Tv; Coxbroadcasting Corporation, Dba Wsb Tv; Wiic Tv, Inc., Awholly-owned Subsidiary of Cox Broadcasting Corporation;king Broadcasting Company, Dba King Am; Miami Broadcastingcorporation, Dba Ktvu; Gaylord Broadcasting, Dba Kstw;fisher Broadcasting, Inc., Dba Komo Tv; Hubbardbroadcasting, Inc., Dba Kstp; Teleco Indiana, Inc., Dbawttv Television; Gaylord Broadcasting Company of Ohio, Dbawuab Tv, Appellees, 769 F.2d 611 (9th Cir. 1985) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Ninth Circuit › 1985 › In Re Tom Rubin, Dba Tom Rubin & Associates, Debtor.tom Rubin, Dba Tom Rubin & Associates, Appellant...
In Re Tom Rubin, Dba Tom Rubin & Associates, Debtor.tom Rubin, Dba Tom Rubin & Associates, Appellant, v. Belo Broadcasting Corporation, Dba Wfaa Tv; Coxbroadcasting Corporation, Dba Wsb Tv; Wiic Tv, Inc., Awholly-owned Subsidiary of Cox Broadcasting Corporation;king Broadcasting Company, Dba King Am; Miami Broadcastingcorporation, Dba Ktvu; Gaylord Broadcasting, Dba Kstw;fisher Broadcasting, Inc., Dba Komo Tv; Hubbardbroadcasting, Inc., Dba Kstp; Teleco Indiana, Inc., Dbawttv Television; Gaylord Broadcasting Company of Ohio, Dbawuab Tv, Appellees, 769 F.2d 611 (9th Cir. 1985)
US Court of Appeals for the Ninth Circuit - 769 F.2d 611 (9th Cir. 1985) Argued and Submitted March 6, 1985. Decided Aug. 22, 1985
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. § 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.
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).
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. § 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. § 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.
The bankruptcy court had subject matter jurisdiction in this case under 28 U.S.C. § 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. § 158),4 and we reject Rubin's jurisdictional challenge.5
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 whether the trial court considered the relevant factors and whether the severity of the sanction is warranted by the conduct involved.
The bankruptcy court struck Rubin's answer under Rule 37(b) of the Federal Rules of Civil Procedure,6 a rule applicable only to cases in which a party has disobeyed a court order. Fremont Energy Corp. v. Seattle Post Intelligencer, 688 F.2d 1285, 1287 (9th Cir. 1982). The bankruptcy court found that Rubin had violated several discovery orders: (1) Rubin's May 1 production of documents in a random fashion made review of the documents difficult and constituted a violation of the court's order to produce records; (2) Rubin's failure to file a schedule of disputed claims and answers to the second set of interrogatories until November 25, 1981, violated the court's order that these documents be filed by November 10; (3) Rubin's supplement to its statement of disputed claims was incomplete, evasive, and nonresponsive and did not comply with the court's December 30 order to file "precise responses;" (4) Rubin's failure to make his offices available for the deposition of his custodian of records on March 3-5 constituted a violation of the court's March 1 order; and (5) Rubin's failure to produce at the custodian's deposition all the records requested in Creditors' subpoena duces tecum violated the court's order of April 8, 1982.
A party should be given some indication by the court of how its discovery responses have been deficient. See, e.g., EEOC v. Troy State University, 693 F.2d 1353, 1357 (11th Cir. 1982) (court never clearly articulated what documents EEOC was required to produce; dismissal held improper), cert. denied, 463 U.S. 1207, 103 S. Ct. 3538, 77 L. Ed. 2d 1388 (1983). Moreover, it is common practice for trial courts to issue warnings or to make orders of default or dismissal conditional on a party's continued noncompliance with an outstanding order to compel. In several of our cases, such warnings were an important factor in upholding the use of severe sanctions. See, e.g., Professional Seminar Consultants, Inc. v. Sino American Technology Exchange Council, Inc., 727 F.2d at 1474 (district court entered order to produce or risk having certain facts established); Rainbow Pioneer No. 44-18-04A v. Hawaii-Nevada Investment Corp., 711 F.2d 902, 904 (9th Cir. 1983) (magistrate's order to respond to interrogatories and produce documents contained warning that failure to comply would result in default); United States v. Sumitomo Marine & Fire Insurance Co., 617 F.2d at 1367 (district court entered order that unless interrogatories were answered by certain date, complaint would be dismissed).
Rule 37(b) provides a broad range of sanctions, dismissal and default being the harshest of all. The structure of Rule 37(b) necessarily suggests that a trial court should consider lesser sanctions before resorting to dismissal or default. See In re MacMeekin, 722 F.2d 32, 35 (3d Cir. 1983); Jones v. Louisiana State Bar Association, 602 F.2d 94, 97 (5th Cir. 1979) (per curiam); Vac-Air, Inc. v. John Mohr & Sons, Inc., 471 F.2d 231, 234 (7th Cir. 1973); cf. Tolbert v. Leighton, 623 F.2d 585, 587 (9th Cir. 1980) (consideration of less drastic alternatives required before dismissal of action for failure to prosecute).
The degree to which a party is prejudiced by his opponent's failure to permit discovery is an important factor in determining the severity of the sanction to be imposed. Compare United States v. Sumitomo Marine & Fire Insurance Co., 617 F.2d at 1370 (eighteen months of delays and failures to comply with court-ordered discovery caused "unmistakable" prejudice to defendant; order precluding proof of damages affirmed); Puerto Rico v. S.S. Zoe Colocotroni, 628 F.2d 652, 665-66 (1st Cir. 1980) (defendants admitted liability, which caused plaintiffs to cancel scheduled depositions, but later recanted admission and failed to produce witnesses; conduct "materially prejudiced" plaintiffs' trial preparation; order that liability be admitted affirmed), cert. denied, 450 U.S. 912, 101 S. Ct. 1350, 67 L. Ed. 2d 336 (1981), with Marshall v. Segona, 621 F.2d 763, 768-69 (5th Cir. 1980) (plaintiff's response to interrogatories four days late did not prejudice defendant and did not justify sanction of dismissal); cf. Bollow v. Federal Reserve Bank, 650 F.2d 1093, 1102 (9th Cir. 1981) (district court's refusal to impose sanctions for defendants' delay in producing documents not an abuse of discretion because plaintiff could not show that he had been prejudiced by delay), cert. denied, 455 U.S. 948, 102 S. Ct. 1449, 71 L. Ed. 2d 662 (1982). In Wyle v. R.J. Reynolds Industries, Inc., we noted that
We do not find a similar degree of obstructionist conduct in the case before us. To be sure, this has been a hard-fought action from the outset, and, as Rubin's counsel noted at oral argument, both sides probably have been overly litigious. We do not condone counsels' conduct in this litigation. But Rubin's conduct must be viewed in the context of the entire discovery process, and it must be noted that Rubin complied with the bulk of Creditors' discovery requests without objection. See, e.g., Fjelstad v. American Honda Motor Co., 762 F.2d at 1340. We sympathize with the bankruptcy court's efforts to supervise the discovery in this difficult case. But the Rule 37 sanctions are intended as a tool to compel production of evidence and to deter misconduct; a court should not go beyond the necessities of the situation to foreclose the merits of controversies as punishment for general misbehavior. See 4A J. Moore, J. Lucas & D. Epstein, Moore's Federal Practice p 37.03, at 37-62 (1984) (construing Societe Internationale Pour Participations Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197, 78 S. Ct. 1087, 2 L. Ed. 2d 1255 (1958)); see also National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. at 643, 96 S. Ct. at 2781. The sanction was too severe to be "just" under these circumstances.
Creditors appealed the sanctions order to the Bankruptcy Appellate Panel, which reversed on the basis that Creditors were not given adequate notice of the motion and hearing. Rubin appealed to this court, but we dismissed the appeal for lack of jurisdiction. In re Rubin, 693 F.2d 73, 76-77 (9th Cir. 1982)
The Bankruptcy Amendments modify subsections 303(b) (1) and (h) (1) of the Bankruptcy Code, 11 U.S.C. § 303(b) (1), (h) (1), to read as follows (emphasis indicates inserted language):
Pub. L. No. 98-353, Sec. 426, 98 Stat. 369. These provisions became effective on July 10, 1984. Pub. L. No. 98-353, Sec. 553(b), 98 Stat. 392.
Some cases, including ones from this court, have characterized analogous section 303 requirements as "jurisdictional." See, e.g., In re Mason, 709 F.2d 1313 at 1318-19 (9th Cir. 1983); In re Visioneering Construction, 661 F.2d 119, 122 (9th Cir. 1981); In re First Energy Leasing Corp., 38 B.R. 577, 580-81 (Bankr.E.D.N.Y. 1984); In re All Media Properties, Inc., 5 B.R. 126, 133 (Bankr.S.D. Tex. 1980), aff'd mem., 646 F.2d 193 (5th Cir. 1981). Our cases illustrate, however, that these requirements are not jurisdictional in the technical sense of subject matter jurisdiction, but are instead substantive matters which must be proved or waived for petitioning creditors to prevail in involuntary proceedings
In Mason, we held that a debtor in an involuntary proceeding waives the requirement for three petitioning creditors if he fails to raise the issue in his answer. 709 F.2d at 1318-19. In Visioneering, we held that a bankruptcy court could deem admitted petitioning creditors' allegations that several named corporations were alter egos of the same entity, owing debts to each of the creditors. 661 F.2d at 122. The fact that Mason and Visioneering permitted waivers indicates that the requirements were not truly prerequisites to subject matter jurisdiction, since parties cannot confer subject matter jurisdiction on a federal court by their consent. See Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 701-03, 102 S. Ct. 2099, 2103-05, 72 L. Ed. 2d 492 (1982) (holding that a court may enter an order that personal jurisdiction is deemed established as a sanction under Rule 37(b); Court distinguishes subject matter jurisdiction).
We cite to 28 U.S.C. § 158 here, rather than the former provision governing our jurisdiction, 28 U.S.C. § 1293, because this case was pending before us on July 10, 1984, when the Bankruptcy Amendments became effective, and, as we note in the text, generally we must apply the law in effect when we render our decision. See In re Amatex Corp., 755 F.2d 1034, 1037 (3d Cir. 1985)
Rubin raises one other jurisdictional challenge that can be disposed of summarily. He contends the BAP lacked jurisdiction to hear the appeal from the bankruptcy court after December 24, 1982, the termination date of the stay entered by the Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S. Ct. 2858, 73 L. Ed. 2d 598, 459 U.S. 813, 103 S. Ct. 199, 74 L. Ed. 2d 160 (1982). The BAP decided Rubin's appeal on February 29, 1984
Former Bankruptcy Rule 737 (applicable during the pendency of this action in the bankruptcy court; now Bankruptcy Rule 7037), made Fed. R. Civ. P. 37 applicable to bankruptcy actions
Recently, in Fjelstad v. American Honda Motor Co., 762 F.2d 1334 (9th Cir. 1985), we rejected a defendant's argument that it was not given adequate warning before entry of a default judgment as a discovery sanction. Id. at 1340. In that case, however, the district court's discovery order was explicit, the defendant admitted that its interrogatory answers were incomplete, and the court expressly warned the defendant that it was considering severe sanctions. Id. at 1337, 1340. The defendant in Fjelstad was given clear warning that the court considered its recovery answers insufficient. In contrast, Rubin had no idea that the court found his discovery responses insufficient until the court announced this as support for the sanction it imposed