Court Opinion

ID: 6321241
Source: CourtListenerOpinion
Date Created: 2022-03-08 21:00:38.936214+00
Date Added: 2024-06-11T08:37:18.296902
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                             MAR 8 2022
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

In re: STEWART NEIL MAYER,                       No.   20-56340

          Debtor,                                DC No. 3:20-cv-01376-TWR
______________________________

ROBERT J. HARRINGTON,                            MEMORANDUM*

              Appellant,

 v.

STEWART NEIL MAYER,

              Appellee.

                    Appeal from the United States District Court
                       for the Southern District of California
                    Todd W. Robinson, District Judge, Presiding

                      Argued and Submitted January 10, 2022
                               Pasadena, California

Before:      TASHIMA, M. SMITH, and WATFORD, Circuit Judges.
             Partial Dissent by Judge TASHIMA.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      Robert J. Harrington appeals from an order of the district court denying his

motion for leave to appeal from the bankruptcy court’s order, which denied his

motion for relief from the automatic stay imposed in the bankruptcy proceeding of

debtor Stewart Neil Mayer. In a concurrently filed opinion, we hold that the

bankruptcy court’s denial of stay relief was final and appealable. In this

memorandum disposition, we conclude that: (1) we should address the merits of

the appeal rather than remand to the district court; and (2) the bankruptcy court did

not abuse its discretion in denying Harrington’s stay-relief motion.

       1.    “When a district court improperly dismisses a bankruptcy appeal

without reaching the merits, we generally reverse the district court’s dismissal and

remand for the district court’s consideration of the appeal in the first instance.”

Mastro v. Rigby, 764 F.3d 1090, 1097 (9th Cir. 2014). However, “remand is not

mandatory.” Reid & Hellyer, APC v. Laski (In re Wrightwood Guest Ranch, LLC),

896 F.3d 1109, 1113 (9th Cir. 2018). As in In re Wrightwood, the record here is

“sufficient for us to decide the issues now presented,” and “we are ‘in as good a

position as the district court’” to consider the merits of the appeal because “both

we and the district court review orders of the bankruptcy court in an appellate

capacity.” Id. (quoting Kasdan, Simonds, McIntyre, Epstein & Martin v. World

Sav. & Loan Ass’n (In re Emery), 317 F.3d 1064, 1069 (9th Cir. 2003)); see also

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Alexander v. Compton (In re Bonham), 229 F.3d 750, 763–71 (9th Cir. 2000) (after

concluding that the district court erred in dismissing the appeal for lack of finality,

addressing the merits of the appeal, reversing the district court decision, and

remanding with instructions to affirm the bankruptcy court order). We therefore

turn to the merits of Harrington’s appeal.

      2.     In denying Harrington’s request for stay relief, the bankruptcy court

explained that, by granting in part Mayer’s summary judgment motion, the court

had narrowed the issues such that it was appropriate to address Harrington’s claims

against Mayer in the adversary proceeding rather than in the Massachusetts state

court. The court further reasoned that there was no stay in effect as to Harrington’s

claims against nondebtor parties.

      The bankruptcy court did not abuse its discretion in denying Harrington’s

motion for stay relief. See Gruntz v. County of Los Angeles (In re Gruntz), 202

F.3d 1074, 1084 n.9 (9th Cir. 2000) (en banc) (stating that the bankruptcy court’s

decision to deny relief from the automatic stay is reviewed for an abuse of

discretion). “Decisions committed to the bankruptcy court’s discretion will be

reversed only if ‘based on an erroneous conclusion of law or when the record

contains no evidence on which [the bankruptcy court] rationally could have based

that decision.’” Benedor Corp. v. Conejo Enters., Inc. (In re Conejo Enters., Inc.),

                                             3
96 F.3d 346, 351 (9th Cir. 1996) (quoting Vanderpark Props., Inc. v. Buchbinder

(In re Windmill Farms, Inc.), 841 F.2d 1467, 1472 (9th Cir. 1988)). The

bankruptcy court properly considered interests of judicial economy in denying the

relief from stay motion. See Merriman v. Fattorini (In re Merriman), 616 B.R.

381, 389 (B.A.P. 9th Cir. 2020). At the hearing on July 2, 2019, when the

bankruptcy court vacated its tentative ruling granting the stay relief motion, the

court emphasized that permitting limited discovery could significantly narrow the

issues in the adversary proceeding and might be more efficient “in the long term.”

The bankruptcy court reiterated these considerations when it later denied the stay

relief motion, indicating that it would not permit Harrington to return to the

Massachusetts court to litigate issues that had been addressed at summary

judgment or were ready for trial in the adversary proceeding. Thus, the bankruptcy

court’s decision was neither based on an erroneous conclusion of law nor

unsupported by the record.

      We reverse the order of the district court and remand with instructions to

affirm the order of the bankruptcy court denying relief from the automatic stay.

      REVERSED and REMANDED with INSTRUCTIONS.

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                                                                            FILED
Harrington v. Mayer (In re Mayer), No. 20-56340
                                                                                 MAR 8 2022
TASHIMA, Circuit Judge, dissenting in part:                              MOLLY C. DWYER, CLERK
                                                                           U.S. COURT OF APPEALS

      As set forth in the opinion filed concurrently with this memorandum, I agree

with the majority that the bankruptcy court order was final and appealable and that

we should address the merits of the appeal. I would, however, reverse the

bankruptcy court order denying Harrington’s request for relief from the stay in

order to allow him to pursue his claims against Mayer in his chosen forum. I

therefore respectfully dissent from the majority’s disposition on the merits.

      The bankruptcy court denied the stay-relief motion “for the reasons stated in

open session.” At the hearing, the court stated only that, by granting in part

Mayer’s summary judgment motion, the court had narrowed the issues such that it

was appropriate to address Harrington’s claims against Mayer in the adversary

proceeding rather than returning to Massachusetts, and that there was no stay in

effect as to the nondebtor parties. The court did not consider the concerns raised

by forcing Harrington to litigate his Massachusetts claims against Mayer in

bankruptcy court in California. Nor did it consider the fact that Mayer is a party in

both state cases.

      The factors we generally consider in such cases favor granting relief from

the stay. All the following factors favor Harrington’s position: “the extent to

which state law issues predominate over bankruptcy issues,” “the presence of a
related proceeding commenced in state court,” “the feasibility of severing state law

claims from core bankruptcy matters to allow judgments to be entered in state

court with enforcement left to the bankruptcy court,” “the lack of a federal

jurisdictional basis other than bankruptcy jurisdiction for the state claims,” “the

right to a jury trial in state court,”1 and Harrington’s “nondebtor status.”

Christensen v. Tucson Ests., Inc. (In re Tucson Ests., Inc.), 912 F.2d 1162, 1167,

1169 (9th Cir.1990).

      The following factors also favor relief from the stay: allowing the state

litigation to proceed would result in “complete resolution of the issues” in the

adversary proceeding and the proof of claim, and the state court issues lack “any

connection” with the bankruptcy case. Truebro, Inc v. Plumberex Specialty Prods.,

Inc. (In re Plumberex Specialty Prods., Inc.), 311 B.R. 551, 559 (Bankr. C.D. Cal.

2004). In addition, the bankruptcy trustee favored stay relief in order to allow the

bankruptcy estate to benefit from Harrington’s litigation of the claims against

      1
              Harrington requested a jury trial in both state actions. The
Massachusetts Constitution provides that “the parties have a right to a trial by jury”
“[i]n all controversies concerning property, and in all suits between two or more
persons.” Mass. Const. pt. 1, art. XV; Dalis v. Buyer Advert., Inc., 636 N.E.2d
212, 214 (Mass. 1994) (“Article 15 ‘preserves the common law trial by jury in its
indispensable characteristics as established and known at the time the Constitution
was adopted in 1780.’” (quoting Dep’t of Revenue v. Jarvenpaa, 534 N.E.2d 286,
291 (Mass. 1989))).

                                           2
Mayer in the state court, indicating that the state litigation would not “prejudice the

interests of other creditors.” Id. Finally, because the denial of the stay deprives

Harrington of his state constitutional right to a jury trial, the “balance of hurt”

favors Harrington. Id.

      Although the bankruptcy court reasoned that Harrington could proceed

against nondebtor parties in the state litigation, the record indicates that

Harrington’s claims against Mayer are intertwined with his claims against Mayer’s

sister. Harrington’s allegations in both state cases concerned the same real estate2

and the same allegations regarding Mayer’s and his sister’s actions as to those

properties through their family trust. Furthermore, in the case filed by Mayer’s

sister, Harrington counterclaimed against both Mayer and his sister, which means

that Mayer is a party in both state cases. Thus, not only are the two cases

intertwined, but the issues are the same, making it difficult and burdensome for

Harrington to litigate the claims in both bankruptcy court and state court, and

“significantly increas[ing] [his] costs.” Ritzen Grp., Inc. v. Jackson Masonry, LLC,

140 S. Ct. 582, 590 (2020). Because Harrington’s claims against Mayer and his

sister are identical, judicial economy would be served by litigating all of

      2
            Both state actions concerned land in Framingham, Massachusetts –
parcels owned by Nexum that Terrian and Nexum planned to develop and a
contiguous lot owned by Terrian.

                                            3
Harrington’s claims in state court.

       In addition to these other considerations, at oral argument, Harrington’s

counsel represented that the state court would not allow the consolidated cases to

be tried separately. Harrington accordingly cannot proceed against the nondebtor

parties unless the stay is lifted.

       Thus, although a decision on a request for stay relief is committed to the

bankruptcy court’s discretion, on this record, the denial of stay relief was an abuse

of discretion. I therefore respectfully dissent from the majority’s denial of relief

from the automatic stay.

                                           4