Opinion ID: 706018
Heading Depth: 3
Heading Rank: 2

Heading: The bankruptcy court's refusal of Resorts's request for a conditional withdrawal

Text: 28 We review de novo the district court's decision on an appeal from a bankruptcy court, applying the same standard of review to the bankruptcy court's findings as did the district court. In re Tucson Estates, Inc., 912 F.2d 1162, 1166 (9th Cir.1990). We review for abuse a bankruptcy court's exercise of discretion over a creditor's voluntary withdrawal of claims. See Koch v. Hankins, 8 F.3d 650, 652 (9th Cir.1993) (district court's determination of the terms and conditions of dismissal under Fed.R.Civ.P. 41(a)(2) is reviewed for abuse of discretion.); see also Lawler v. Guild, Hagen & Clark, Ltd., (In re Lawler), 106 B.R. 943, 951 (Bankr.N.D.Tex.1989) (bankruptcy court's decision to grant withdrawal of proof of claim subject to review for abuse of discretion). 29 We recognize that the bankruptcy court's exercise of discretion should not be disturbed unless we have  'a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors.'  Moneymaker v. CoBen (In re Eisen), 31 F.3d 1447, 1451 (9th Cir.1994) (quoting Nealey v. Transportacion Maritima Mexicana, S.A., 662 F.2d 1275, 1278 (9th Cir.1980)). 30 Federal Rule of Bankruptcy Procedure 3006, which is governed by the same considerations underlying Federal Rule of Civil Procedure 41(a)(2), provides that voluntary dismissals should be granted only upon an order of the bankruptcy court which shall contain such terms and conditions as the court deems proper. Fed.R.Bankr.P. 3006; see id., Advisory Committee Note (1984). In deciding whether to grant a voluntary dismissal, a trial court must consider whether the defendant will suffer legal prejudice as a result of the court's dismissal. See Hyde & Drath v. Baker, 24 F.3d 1162, 1169 (9th Cir.1994); see also LeCompte, 528 F.2d at 604 ([We] follow the traditional principle that dismissal should be allowed unless the defendant will suffer some plain prejudice other than the mere prospect of a second lawsuit.) (emphasis in original) (citations omitted) (cited with approval in Unioil, 809 F.2d at 556). 31 In LeCompte, 528 F.2d at 602, the plaintiff requested a voluntary dismissal without prejudice. In granting the dismissal, the district court attached several conditions, one of which was a requirement that the plaintiff preliminarily prove his case before relitigating. Id. at 604. The Fifth Circuit vacated and remanded the conditional dismissal because the district court failed to consider whether the defendant would be prejudiced legally by an unconditional dismissal and because, if such prejudice existed, the court failed to explain how the imposition of its conditions would alleviate legal prejudice to the defendant. The district court was instructed to better determine what interests are at stake and to fashion only such conditions as are necessary to protect the legitimate interest of defendants. Id. at 605. 32 LeCompte is instructive on the issue at bar. The Nevada Bankruptcy Court appears to have denied summarily Resorts's request for a conditional withdrawal in its hurry to settle all of Resorts's claims against Lowenschuss's estate without considering what interests are at stake. Id. The bankruptcy court did not consider adequately the fact that, at the time of its ruling, Resorts would have been litigating against the wrong defendant if it had gone ahead with the trial against Lowenschuss's bankruptcy estate because the Pension Plan had been exempted from the estate. Nor did the bankruptcy court properly consider the fact that dismissing Resorts's proofs of claim with prejudice would preclude Resorts from asserting its interest against the Pension Plan if the Pension Plan Exemption Order later were reversed and the Pension Plan again became a part of Lowenschuss's bankruptcy estate. Nor did the bankruptcy court consider whether Lowenschuss would be prejudiced legally by permitting Resorts to withdraw conditionally. 33 The following excerpt from the hearing transcript supports the conclusion that the bankruptcy court denied the conditional withdrawal without addressing any of Resorts's arguments and without finding that Lowenschuss would be prejudiced legally by a conditional dismissal: 34 Mr. Goodenow [Resorts's counsel]: And all our motion asks for, your Honor, is that we be allowed to withdraw the claim with prejudice with the condition that we can come back in if you're reversed on appeal on the order as to the pension plan. It's a pretty si--it's really not aggressive, an aggressive type of relief we're requesting for. We're just asking that this case go forward in an orderly fashion. 35 The Court: Why don't we go ahead and just hear [the claim] Thursday. 36 Mr. Smith [Lowenschuss's counsel]: Let's do that. That's-- 37 The Court: Fine. 38 Mr. Goodenow: Your Honor, that does not make any sense for Resorts to pursue it in that manner. 39 The Court: Well,-- 40 Mr. Goodenow: First of all, the order--the action's pending-- 41 The Court: --you're the one that filed the claim. 42 Mr. Goodenow: That's correct. But it was filed before the objection to--Resorts' objection to the plan in this case was heard. And before the Court ruled with respect to the pension plan, that the pension plan was exempt, you remember that the--there was significant.... 43