Court Opinion

ID: 4369507
Source: CourtListenerOpinion
Date Created: 2019-02-21 01:00:31.75334+00
Date Added: 2024-06-11T14:49:25.276488
License: Public Domain

FILED
                                                                         FEB 20 2019
                           NOT FOR PUBLICATION
                                                                    SUSAN M. SPRAUL, CLERK
                                                                       U.S. BKCY. APP. PANEL
                                                                       OF THE NINTH CIRCUIT

              UNITED STATES BANKRUPTCY APPELLATE PANEL
                        OF THE NINTH CIRCUIT

In re:                                              BAP No. NC-18-1139-BKuF

FAROUK E. NAKHUDA,                                  Bk. No. 4:14-bk-41156-RLE

                     Debtor.

ANDREW W. SHALABY,

                     Appellant.                            MEMORANDUM*

                   Argued and Submitted on November 29, 2018
                           at San Francisco, California

                               Filed – February 20, 2019

                  Appeal from the United States Bankruptcy Court
                      for the Northern District of California

             Honorable Roger L. Efremsky, Bankruptcy Judge, Presiding

Appearances:         Appellant Andrew W. Shalaby argued pro se.

Before:         BRAND, KURTZ and FARIS, Bankruptcy Judges.

         *
        This disposition is not appropriate for publication. Although it may be cited
for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no
precedential value, see 9th Cir. BAP Rule 8024-1.
                                 INTRODUCTION

      Appellant Andrew W. Shalaby appeals an order denying his motion

for relief from judgment under Civil Rule 60(b)(5)1 and (b)(6) and an order

denying his request for leave to file a supplemental brief. We AFFIRM.

      I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A.    The prior sanctions order

      This case has a lengthy history. We limit our discussion to those facts

relevant for this appeal.2 In November 2014, the bankruptcy court issued an

order to show cause (OSC) directing Shalaby, the attorney for debtor

Farouk E. Nakhuda, to show cause why he should not be sanctioned for

actions he took during the debtor's case. In re Nakhuda, 544 B.R. at 895-96.

      Ultimately, the bankruptcy court entered an order sanctioning

Shalaby ("Sanctions Order"). Among other things, Shalaby was suspended

from the practice of law in the bankruptcy courts for the Northern District

of California until he completed twenty-seven hours of continuing legal

education ("CLE Provision") and lost his e-filing privileges until he

completed ECF training provided by the clerk's office ("ECF Provision" and

      1
       Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all "Rule" references are to the Federal Rules of
Bankruptcy Procedure, and all "Civil Rule" references are to the Federal Rules of Civil
Procedure.
      2
       A more thorough background of this appeal can be found in the Panel's
published decision in Shalaby v. Mansdorf (In re Nakhuda), 544 B.R. 886 (9th Cir. BAP
2016).

                                            2
together with the CLE Provision, the "Suspension Provisions"). The court

imposed the ECF Provision based on Shalaby's admitted practice of failing

to obtain wet ink signatures from clients on documents filed with the court

and his apparent failure to review local ECF rules prior to practicing in

bankruptcy courts in the Northern District.

      Shalaby timely appealed the Sanctions Order to the BAP. While the

appeal was pending, Shalaby completed the CLE requirement and was

reinstated to practice before the bankruptcy court in the Northern District,

and he completed the ECF training, thus restoring his ECF filing privileges.

Id. at 889 n.2.

      The BAP affirmed the bankruptcy court's ruling on the ECF Provision

based on violations of ECF Administrative Procedures and Local Rules

5005-2(d) and 9011-1. Id. at 902-05. Shalaby had argued that the ECF

Provision was moot due to his compliance or, alternatively, that his failure

to obtain wet ink signatures was an innocent mistake, had since been

corrected, and could not be subject to sanctions. The Panel disagreed that

the matter was moot, explaining that Shalaby's compliance did not moot

the legal question of whether his conduct was sanctionable. Id. at 905 n.11.3

      Shalaby appealed those points affirmed by the BAP to the Ninth

      3
        The Panel reversed some monetary sanctions, holding that the bankruptcy court
had misapplied applicable law for sua sponte sanctions under Rule 9011. Id. at 899-902.
The Panel was silent on the CLE Provision. However, since the bankruptcy court had
also based that sanction on Rule 9011, we believe the CLE Provision was also reversed.

                                          3
Circuit Court of Appeals, including the ECF Provision. The Ninth Circuit

affirmed the BAP on the ECF Provision, ruling that the bankruptcy court

had not abused its discretion. Shalaby v. Mansdorf (In re Nakhuda), 703 Fed.

App'x. 621 (9th Cir. 2017).

      The catalyst which led to this appeal is what the Ninth Circuit stated

in its decision with respect to the ECF Provision:

      The record supports the bankruptcy court’s finding that
      Shalaby’s continued failure to obtain the debtor’s original ink
      signature on documents electronically filed with the court
      violated the local rules. The error was brought to Shalaby’s
      attention, yet he continued to violate the rules. The district [sic]
      court did not abuse its discretion by suspending his filing
      privileges until he had received training.

Id. at 622 (emphasis added).

      Shalaby timely filed a petition for rehearing, arguing that the circuit's

finding on the ECF Provision constituted reversible error. Specifically,

Shalaby argued that the finding — "The error was brought to Shalaby's

attention, yet he continued to violate the rules" — was not supported by

the record. Shalaby maintained that once he learned of the rule regarding

wet ink signatures he immediately changed his practice; thus, he did not

"continue[] to violate the rules" as the Ninth Circuit had found and which

provided the factual basis for its decision to affirm.

      The Ninth Circuit denied Shalaby's request for rehearing in a one-

sentence order. No appeal was taken to the U.S. Supreme Court.

                                       4
      The Ninth Circuit issued its mandate on December 14, 2017.

B.    Shalaby's Civil Rule 60(b) motion

      Subsequently, three years after the Sanctions Order had been issued,

Shalaby filed in the bankruptcy court a "Motion to Amend Pre-Appeal

Sanction and Suspension Order" ("60(b) Motion"). He argued that the

Suspension Provisions in the Sanctions Order had to be stricken because

the Ninth Circuit's factual finding to support and affirm the ECF Provision

was erroneous. According to Shalaby, the bankruptcy judge had "personal

knowledge" that the circuit's decision was erroneous and contradicted the

record. Shalaby argued that he never violated the wet ink signature rule

after learning about it for the first time at the OSC hearing in November

2014, and that the bankruptcy judge knew this to be true.

      Shalaby explained that the reason for the 60(b) Motion was a pending

motion to disqualify him as counsel in a products liability case in Illinois.

Opposing counsel in that case was using the Suspension Provisions of the

Sanctions Order as a basis for revoking his pro hac vice status. In a

nutshell, the Sanctions Order was detrimentally affecting his ability to

practice law.

      In the 60(b) Motion, Shalaby mentioned Civil Rule 59 in a heading

but never discussed it again, and he offered a block quotation of Civil Rule

60(b), subdivisions (1) through (6). Notwithstanding this "spaghetti"

approach, Shalaby appeared to be seeking relief under Civil Rule 60(b)(5)

                                       5
and (b)(6), noting that Civil Rule 60(b)(5) was "directly on point" but that

Civil Rule 60(b)(6) also provided grounds for relief. Shalaby argued that

this was not a motion to reverse an appellate decision; rather, it was a

proper motion to amend and strike the Suspension Provisions from the

Sanctions Order nunc pro tunc on the grounds of fairness, justice and the

bankruptcy judge's personal knowledge that Shalaby did not continue to

violate ECF rules.

      Without a hearing, the bankruptcy court entered an order denying

the 60(b) Motion on the grounds that it was procedurally improper and

substantively unwarranted ("60(b) Order"). The court determined that

Shalaby had failed to provide any basis for why it should depart from the

doctrine of law of the case or the mandate rule. The court also determined

that Shalaby had failed to show any grounds for striking the Suspension

Provisions from the Sanctions Order under Civil Rule 60(b)(5) or (b)(6).

      Undeterred, the next day Shalaby filed a request for leave to file a

supplemental brief in support of the 60(b) Motion. The bankruptcy court

promptly denied Shalaby's request ("Brief Order").

      Shalaby timely appealed the 60(b) Order and the Brief Order.

C.    Post-appeal events

      Previously, a motions panel entered an order striking Shalaby's reply

brief (due to the lack of an appellee in this case) and denying his request for

judicial notice in support of his reply. Dkt. no. 17. However, we exercise

                                       6
our discretion to VACATE that order because the reply brief and RJN

provide a strong and clear basis for affirming the 60(b) Order.

      While this appeal was pending, Shalaby filed a motion to reconsider

the 60(b) Order, again arguing that the bankruptcy judge knew that

Shalaby had not continued to violate the wet ink signature requirement

once he learned of it, and that the Ninth Circuit had erred in finding to the

contrary. The bankruptcy court denied the motion and squarely addressed

the alleged erroneous finding at issue. Citing to the appellate record for the

Sanctions Order, the bankruptcy court found that the circuit had not erred.4

                                 II. JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.

                                      III. ISSUES

1.    Did the bankruptcy court abuse its discretion by applying law of the

case to the Sanctions Order?

2.    Did the bankruptcy court abuse its discretion by denying the 60(b)

      4
         The bankruptcy court found that the record before the Ninth Circuit had shown
that Shalaby was aware of the wet ink signature requirement in June 2014, but that it
was not until some six months later "that he even began to correct his shoddy practices
in [the Nakhuda] case. The court does not know if he corrected his mistakes in any of
the other bankruptcy cases in which he is counsel." RJN at 9 n.3.
        This order also provides some background for Shalaby's troubles with the Illinois
court. In short, he was not truthful on his pro hac vice application, stating that he had
never been suspended by any court or investigated by a state bar. Apparently, defense
counsel discovered the untrue statements and brought it to the Illinois court's attention.

                                            7
Motion?

3.    Did the bankruptcy court err by denying Shalaby's request for leave

to file a supplemental brief?

                        IV. STANDARDS OF REVIEW

      We review the bankruptcy court's decision whether to apply the

doctrine of law of the case for an abuse of discretion. See S. Oregon Barter

Fair v. Jackson Cty., Oregon, 372 F.3d 1128, 1136 (9th Cir. 2004) (citing United

States v. Lummi Indian Tribe, 235 F.3d 443, 452 (9th Cir. 2000)). But see Am.

Express Travel Related Servs. Co. v. Fraschilla (In re Fraschilla), 235 B.R. 449,

454 (9th Cir. BAP 1999) (applying a "de novo" standard of review).

      We review the bankruptcy court's denial of a motion under Rule

9024, which incorporates Civil Rule 60(b), for an abuse of discretion.

Tennant v. Rojas (In re Tennant), 318 B.R. 860, 866 (9th Cir. BAP 2004).

      A bankruptcy court abuses its discretion if it applied the wrong legal

standard or its findings were illogical, implausible or without support in

the record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir.

2011).

                                V. DISCUSSION

      To recap the relevant procedural history, Shalaby challenged the

Suspension Provisions in his appeal of the Sanctions Order to the BAP. The

BAP reversed, at least implicitly, the CLE Provision but affirmed the ECF

Provision. Shalaby appealed the BAP's ruling on the ECF Provision to the

                                          8
Ninth Circuit Court of Appeals, which affirmed. In doing so, the circuit

made what has become the controversial finding that Shalaby continued to

violate the wet ink signature requirement in the ECF rules after learning of

its existence. Shalaby raised this exact issue in his petition for rehearing,

arguing that the Ninth Circuit's finding was not supported by the record.

The Ninth Circuit denied the request for rehearing. No appeal was taken to

the U.S. Supreme Court. The Ninth Circuit then entered its mandate. The

decision as to the ECF Provision became final.

A.    The bankruptcy court did not abuse its discretion by applying law
      of the case to the Sanctions Order.

      Under the doctrine of law of the case, a court is generally precluded

from reconsidering an issue previously decided by the same court, or a

higher court in the identical case. Lummi Indian Tribe, 235 F.3d at 452. “For

the doctrine to apply, the issue in question must have been decided

explicitly or by necessary implication in [the] previous disposition.” Id.

(internal quotation marks and citation omitted). Shalaby's failure to comply

with ECF rules was at issue in the prior appeal, and the precise issue of

whether he continued to violate the wet ink signature requirement after

learning of it was the subject of the petition for rehearing, which the Ninth

Circuit considered and denied.

      While observance of the doctrine of law of the case is discretionary,

the prior decision should be followed unless (1) it is clearly erroneous and

                                        9
enforcing it would work a manifest injustice; (2) intervening controlling

authority makes reconsideration appropriate; or (3) substantially different

evidence was adduced at a subsequent trial. Alaimalo v. United States, 645
F.3d 1042, 1049 (9th Cir. 2011); Caldwell v. Unified Capital Corp. (In re

Rainbow Magazine, Inc.), 77 F.3d 278, 281 (9th Cir. 1996); In re Fraschilla, 235
B.R. at 454. The bankruptcy court found that none of the exceptions for

departing from law of the case was present.

      Shalaby argues that the first exception — the decision is clearly

erroneous and enforcing it would work a manifest injustice — applied here

and that the bankruptcy court erred in finding otherwise. Stating only that

any clear error by the Ninth Circuit was "absent," the bankruptcy court did

not elaborate on why this exception was not met, at least in the 60(b) Order

on appeal. Shalaby maintains that no one, including the bankruptcy court

or the trustee, ever alleged that he continued to violate the wet ink

signature requirement after learning of it, and that the Ninth Circuit's

finding to the contrary was "nothing short of untrue." While the Sanctions

Order noted that Shalaby had violated ECF rules on multiple occasions, it

did not appear to suggest that he continued to violate the rule regarding

wet ink signatures after learning of it or that this was a basis for imposing

the ECF Provision.

      In any case, the record for the Sanctions Order paints an entirely

different picture than the one Shalaby portrays, and we find it

                                        10
incomprehensible that he continues to assert arguments he knows are

untrue. In his brief on appeal before the Ninth Circuit, the chapter 7 trustee

argued that Shalaby knew as early as June 2014 about the wet ink signature

requirement, but yet he persisted in ignoring the rule for another six

months — until the OSC was issued in November 2014 — before rectifying

the problem. The trustee supported his argument with a deposition taken

of the debtor in June 2014. There, Shalaby admitted his failure to obtain wet

ink signatures from clients on documents filed with the court, and the

trustee told Shalaby that this practice was problematic. See Trustee's

Response Brief, Case No. 16-60017, dkt. no. 11, pp. 22-23, citing to his

excerpts of the record, dkt. no. 12, pp. 83-84. Notably, this same deposition

transcript was presented to the bankruptcy court prior to the OSC hearing,

see Case No. 14-41156, dkt. no. 178-3, pp. 7-9, and it was also before the

BAP, see Case No. 15-1149, dkt. no. 23, pp. 576-578.

      Thus, contrary to Shalaby's contention, evidence of his failure to

comply with the wet ink signature requirement after learning of it was

presented to every court, including the Ninth Circuit Court of Appeals.

Presuming he reviewed the trustee's brief and record, Shalaby was aware

of the argument and the evidence he now contends did not exist. It also

establishes the falsity of Shalaby's contention in the 60(b) Motion that he

did not learn of the wet ink signature requirement until the OSC hearing in

November 2014.

                                      11
       Accordingly, the bankruptcy court did not err in finding the absence

of any clear error by the Ninth Circuit with respect to the ECF Provision.

Given the lack of any other exceptions to the rule, the court did not abuse

its discretion by applying law of the case to the Sanctions Order.5

       On a side note, Shalaby fails to recognize that the Ninth Circuit could

have affirmed the ECF Provision on the basis that he failed to comply with

the wet ink signature requirement multiple times prior to learning of the

rule; he did not have to continue to violate it after the fact for the sanction

to stand. As a bankruptcy attorney, Shalaby is charged with knowing ECF

rules for the bankruptcy court. Thus, failing to comply with them subjected

him to sanctions.

B.     The bankruptcy court did not abuse its discretion in denying the
       60(b) Motion.

       The next issue is whether the bankruptcy court abused its discretion

in denying the 60(b) Motion to any extent that the motion requested relief

beyond the confines of law of the case. See Cool Fuel, Inc. v. Cal. State Bd. of

Equalization (In re Cool Fuel, Inc.), 2006 WL 6810933, at *6 (9th Cir. BAP June

21, 2006). The 60(b) Motion did not precisely identify which subdivision

Shalaby was asserting for relief. And the imprecision continues. He now

       5
        The bankruptcy court also determined that the mandate rule applied. Shalaby
does not present any argument on this. Accordingly, this issue has been waived. City of
Emeryville v. Robinson, 621 F.3d 1251, 1261 (9th Cir. 2010) (issues not argued "specifically
and distinctly" in a party's opening brief are waived).

                                             12
argues that he sought relief under Civil Rule 60(b)(1) and (b)(6). The

bankruptcy court determined that Shalaby was seeking relief under Civil

Rule 60(b)(5) and (b)(6). We agree.

      Civil Rule 60(b)(5), applicable here by Rule 9024, allows a party to

obtain relief from a judgment or order if: (1) it has been satisfied, released

or discharged; (2) it is based on an earlier judgment that has been reversed

or vacated; (3) or applying it prospectively is no longer equitable. Shalaby

never articulated which of the three grounds provided a basis for relief or

cited any case law to help the court make that determination. The CLE

Provision was reversed on appeal; therefore, striking it from the Sanctions

Order would have no effect. The ECF Provision was not reversed or

vacated, so the second ground would not apply to that. Shalaby had

satisfied the ECF Provision by this time, but he did not assert the first

ground as a basis for striking that portion of the Sanctions Order, assuming

he could even do so.

      Given Shalaby's expressions of fairness and justice, the bankruptcy

court assumed that he was relying on ground three — that applying the

Sanctions Order was no longer equitable. This was a reasonable

assumption. This provision of Civil Rule 60(b)(5) provides a means by

which a party can ask a court to modify or vacate a judgment or order if "a

significant change either in factual conditions or in law" renders continued

enforcement "detrimental to the public interest." Horne v. Flores, 557 U.S.
13
433, 447 (2009) (citing Rufo v. Inmates of Suffolk Cty. Jail, 502 U.S. 367, 384

(1992)). Modification of an order may be warranted under Civil Rule

60(b)(5) if changed factual conditions make compliance substantially more

onerous, when a decree proves to be unworkable because of unforeseen

obstacles, when enforcement of the decree without modification would be

detrimental to the public interest, or where compliance becomes legally

impermissible. SEC v. Coldicutt, 258 F.3d 939, 942 (9th Cir. 2001) (citing

Rufo, 502 U.S. at 388). Relief from a court order should not be granted,

however, simply because a party finds it is no longer convenient to live

with the terms of the order. Id.

      The bankruptcy court determined that Shalaby had failed to satisfy

any of the above conditions for relief from the Sanctions Order:

      Mr. Shalaby has made no showing that satisfies any of these
      factors; he merely argues that the Sanctions Order has led to
      opposing counsel seeking to revoke his pro hac vice admission in
      another court in which he is currently litigating based on the fact
      that he was suspended and failed to disclose it in his application.
      To the extent the Sanctions Order presents an 'unforeseen
      obstacle' to Mr. Shalaby obtaining pro hac vice admission in any
      court, assuming this court has authority to do so, it declines to
      afford Mr. Shalaby the relief he seeks.

      The only argument Shalaby raises here is that the bankruptcy court

erred in finding that there would be no injustice by leaving the Sanctions

Order as is. Of course, he begins this argument with the faulty premise that

the bankruptcy judge knew the Ninth Circuit had erred yet he refused to

                                        14
fix the error. Shalaby's failure to disclose the sanction to the Illinois court

now haunts him. However, as the bankruptcy court correctly noted,

vacating the ECF Provision in the Sanctions Order is not warranted simply

because it may be inconvenient for Shalaby.

      Shalaby did not show that any significant change either in factual

conditions or the law occurred here warranting relief from the Sanctions

Order. Accordingly, the bankruptcy court did not abuse its discretion in

denying relief under Civil Rule 60(b)(5).

      The bankruptcy court also denied relief under Civil Rule 60(b)(6),

determining that Shalaby had shown neither injury nor extraordinary

circumstances warranting relief. We agree that relief under Civil Rule

60(b)(6) was not available here but on a different basis. A motion brought

under Civil Rule 60(b)(6) — the "catch-all" provision — applies only when

the reason for granting relief is not covered by any of the other reasons set

forth in Rule 60. Cmty. Dental Servs. v. Tani, 282 F.3d 1164, 1168 n.8 (9th Cir.

2002); Lafarge Conseils Et Etudes, S.A. v. Kaiser Cement & Gypsum Corp., 791
F.2d 1334, 1338 (9th Cir. 1986). In his 60(b) Motion, Shalaby argued that

Civil Rule 60(b)(5) was "directly on point," and the arguments he made fell

directly within the scope of that subdivision. Therefore, relief under Civil

Rule 60(b)(6) was not available. Additionally, Shalaby failed to articulate a

proper argument for such relief, and this failure provided another basis for

denying it.

                                        15
C.    Shalaby waived any challenge to the Brief Order.

      Although Shalaby appealed the Brief Order, he did not articulate any

argument on the matter in his opening brief. Issues which are not argued

specifically and distinctly in a party's opening brief are waived. City of

Emeryville, 621 F.3d at 1261. In any case, filing a supplemental brief at that

time was foreclosed. The bankruptcy court had already entered the 60(b)

Order announcing its decision to deny the 60(b) Motion. In reality,

Shalaby's request for leave to file a supplemental brief was a motion for

reconsideration of the 60(b) Order, arguing that the "clearly erroneous"

exception to law of the case was met and that the bankruptcy court erred in

determining otherwise. That is the issue squarely before this Panel, which

we have determined against Shalaby. To the extent his request for leave

was a motion to reconsider, there were no grounds upon which to grant it.

                                 VI. CONCLUSION

      For the reasons stated above, we AFFIRM. 6

      6
         We decline to address additional issues Shalaby raises that are outside the scope
of this appeal, such as the propriety of the BAP's ruling in the prior appeal and its
reliance on Local Rule 9011-1 to affirm the bankruptcy court's ruling on the ECF
Provision.

                                           16