Court Opinion

ID: 4192811
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:02:47.160357+00
Date Added: 2024-06-11T14:40:21.557592
License: Public Domain

FILED
                                                                  DEC 07 2015
 1                         NOT FOR PUBLICATION
 2                                                          SUSAN M. SPRAUL, CLERK
                                                               U.S. BKCY. APP. PANEL
                                                               OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.      NC-14-1573-TaDJu
                                   )
 6   JACQUELINE C. MELCHER,        )      Bk. No.      01-53251
     A/K/A Jacqueline Carlin,      )
 7                                 )
                    Debtor.        )
 8   ______________________________)
                                   )
 9   JACQUELINE C. MELCHER,        )
                                   )
10                  Appellant,     )
                                   )
11   v.                            )      MEMORANDUM*
                                   )
12   JOHN W. RICHARDSON, CHAPTER 7 )
     TRUSTEE,                      )
13                                 )
                    Appellee.      )
14   ______________________________)
15                  Argued and Submitted on October 23, 2015
                          at San Francisco, California
16
                            Filed – December 7, 2015
17
               Appeal from the United States Bankruptcy Court
18                 for the Northern District of California
19     Honorable Arthur S. Weissbrodt, Bankruptcy Judge, Presiding
20
     Appearances:     Jacqueline C. Melcher argued pro se; Charles
21                    Patrick Maher of McKenna Long & Aldridge LLP
                      argued for John W. Richardson, Chapter 7 Trustee.
22
23   Before:   TAYLOR, DUNN, and JURY, Bankruptcy Judges.
24
25
26        *
             This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8024-1(c)(2).
 1                               INTRODUCTION
 2       In the latest installment of this ongoing bankruptcy saga,
 3   chapter 71 debtor Jacqueline Melcher appeals from the bankruptcy
 4   court’s pre-filing order.   We AFFIRM the bankruptcy court in the
 5   main; but, in a narrow regard, we REVERSE and REMAND with
 6   instructions that the bankruptcy court strike certain language
 7   from the order.
 8                                  FACTS2
 9       The Debtor is no stranger to the Panel; various issues in
10   her now 14-year old bankruptcy case spawned two prior appeals.
11   See Estate of Terrence P. Melcher v. Melcher (In re Melcher),
12   2006 WL 6810966 (9th Cir. BAP May 31, 2006) (“Melcher I”),
13   aff’d, 300 F. App’x 455 (9th Cir. 2008); Richardson v. Melcher
14   (In re Melcher), 2014 WL 1410235 (9th Cir. BAP Apr. 11, 2104)
15   (“Melcher II”).   Those memorandum decisions detail the factual
16   background of the property division disputes between the Debtor
17   and her deceased ex-husband and his probate estate and the
18   Debtor’s bankruptcy.   There is a long complicated history, but
19   we recount here only those facts most relevant to the present
20   appeal.
21       At the heart of the Debtor’s disputes is 3.75 acres of real
22   property located on Martha’s Vineyard and known as “Stonewall.”
23
24
          1
             Unless otherwise indicated, all chapter and section
25   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
26        2
             We exercise our discretion to take judicial notice of
27   documents filed in the bankruptcy case. See Atwood v. Chase
     Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th
28   Cir. BAP 2003).

                                      2
 1   During pre-petition divorce proceedings, a California state
 2   court ordered the Debtor to sell Stonewall and then split the
 3   proceeds with her ex-husband.   In the face of this mandate, she
 4   filed a chapter 11 petition in June 2001, mere hours before a
 5   sale of Stonewall was to close.
 6       In September 2008, the bankruptcy case was converted to
 7   chapter 7.   As the Melcher II panel observed, the Debtor then
 8   began to “oppose[] most substantive actions of the Trustee to
 9   liquidate estate property.”   2014 WL 1410235, at *2.
10   Eventually, the Trustee requested, at least twice, an
11   adjudication that the Debtor was a “vexatious litigant”; the
12   bankruptcy court denied these requests.
13       Following a further series of protracted proceedings
14   relating to his unsuccessful attempts to sell Stonewall, the
15   Trustee made another attempt to obtain an order controlling the
16   Debtor-driven litigation juggernaut.   The Trustee asserted that
17   the Debtor had:
18       [S]teadily depleted her bankruptcy estate by (1)
         incurring during the Chapter 11 case $3.5 million in
19       professional expenses, borrowing approximately the same
         sum secured by equity in real estate, and selling [a
20       rental property], and (2) filing possibly 1,000
         pleadings or more during the Chapter 7 case, [and]
21       challenging the Trustee in almost every aspect of his
         administration of the bankruptcy estate.
22
23   Id. at *8.   The bankruptcy court, again, denied his motion, and
24   the Trustee appealed.
25       On appeal, the Melcher II panel determined that the
26   Trustee’s motion in effect requested a pre-filing restriction
27   and that the bankruptcy court abused its discretion in denying
28   this request.   After determining that the standard articulated

                                       3
 1   in DeLong v. Hennessey, 912 F.2d 1144 (9th Cir. 1990), was
 2   applicable, it vacated and remanded.     In short, DeLong required
 3   consideration of factors which were clearly satisfied based on
 4   the evidence in the record on appeal: the Debtor received
 5   sufficient notice and an opportunity to be heard in relation to
 6   the request for a pre-filing order, and an adequate record of
 7   the Debtor’s abusive litigation activities over a lengthy period
 8   of time existed.    The Melcher II panel observed that the
 9   Debtor’s history of litigation and motive in pursuing litigation
10   “were no longer subject to any dispute,” and pointed to the
11   Ninth Circuit’s determination in another appeal that the
12   Debtor’s motive in the bankruptcy case was an abusive use of the
13   bankruptcy process.    Id. at *10-11.   It also noted that the
14   “record establishe[d] beyond any question that estate assets
15   [had] been all but used up as a result of [the Debtor’s]
16   continued meritless litigation.”     2014 WL 1410235, at *11.    And,
17   finally, it noted that no sanction short of a pre-filing
18   restriction would curtail the Debtor’s actions.
19       The Melcher II panel, thus, concluded that the bankruptcy
20   court abused its discretion and clearly erred in denying the
21   Trustee’s motion.    It vacated the order denying the motion and
22   remanded the case back to the bankruptcy court with instructions
23   that it make appropriate findings and that it implement an
24   appropriate pre-filing order.
25       On remand, the bankruptcy court complied and issued the
26   required order (“Pre-Filing Order”).     Based on its findings, the
27   bankruptcy court ordered that the Debtor was “enjoined from
28   filing, in this bankruptcy case, and any related litigation with

                                      4
 1   the Trustee in any other federal or state court, any further
 2   pleadings without prior order of this Court.”       It then provided
 3   guidelines for any proposed future filings.       The Debtor
 4   appealed.
 5                              JURISDICTION
 6        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
 7   §§ 1334 and 157(b)(2)(A) and (O).       We have jurisdiction under
 8   28 U.S.C. § 158.
 9                                   ISSUE
10        Whether the bankruptcy court abused its discretion in
11   issuing the Pre-Filing Order.
12                          STANDARD OF REVIEW
13        We review for an abuse of discretion a bankruptcy court’s
14   decision to issue pre-filing orders.       See Ringgold–Lockhart v.
15   Cnty. of Los Angeles, 761 F.3d 1057, 1062 (9th Cir. 2014).       A
16   bankruptcy court abuses its discretion if it applies the wrong
17   legal standard, misapplies the correct legal standard, or if its
18   factual findings are illogical, implausible, or without support
19   in inferences that may be drawn from the facts in the record.
20   See TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832
21   (9th Cir. 2011) (citing United States v. Hinkson, 585 F.3d 1247,
22   1262 (9th Cir. 2009) (en banc)).
23        We may affirm on any basis supported by the record.       Heers
24   v. Parsons (In re Heers), 529 B.R. 734, 740 (9th Cir. BAP 2015).
25                               DISCUSSION
26   A.   Request for recusal
27        As a preliminary matter, we consider the Debtor’s motion
28   seeking an order recusing Judge Dunn from this appeal based on

                                       5
 1   his membership in the Melcher II panel.3    She contends that the
 2   Melcher II panel, including Judge Dunn, was unduly harsh and
 3   simply “adopted the Trustee’s unsupported litigious accusations
 4   against [her] and did not rule on the prudential standing issue
 5   on appeal.”   Given his involvement in Melcher II, the Debtor
 6   believes that “Judge Dunn cannot hear the [appeal] in a fair and
 7   prudential manner.”
 8       The decision on a motion to recuse a judge rests with that
 9   particular judge.   See Bernard v. Coyne (In re Bernard), 31 F.3d
10   842, 843 (9th Cir. 1994).   As a result, Judge Dunn is
11   appropriately involved in the recusal decision.
12       In relevant part, 28 U.S.C. § 455(a)-(b)(1) provides that a
13   judge must “disqualify himself in any proceeding in which his
14   impartiality might reasonably be questioned,” such as “[w]here
15   he has a personal bias or prejudice concerning a party . . . .”
16   Emphasis added.   Whether an appearance of impropriety exists is
17   examined from an objective standpoint.     Blixseth v. Yellowstone
18   Mountain Club, LLC, 742 F.3d 1215, 1219 (9th Cir. 2014) (“We
19   gauge appearance by considering how the conduct would be viewed
20   by a reasonable person, not someone hypersensitive or unduly
21   suspicious.”) (internal quotation marks and citation omitted).
22       Here, Judge Dunn’s involvement in Melcher II is an
23   insufficient basis to demonstrate impartiality, personal bias,
24   or prejudice.   It is well established that “judicial rulings
25   alone almost never constitute a valid basis for a bias or
26
27        3
             Judge Jury was also a member of the Melcher II panel;
28   however the Debtor does not seek her recusal from this appeal.

                                     6
 1   partiality motion.”     Liteky v. United States, 510 U.S. 540, 555
 2   (1994).    That Judge Dunn sat on the Melcher II panel and gained
 3   information and insight in so doing is also an insufficient
 4   basis.    “[O]pinions formed by the judge on the basis of facts
 5   introduced or events occurring in the course of the current
 6   proceedings, or of prior proceedings, do not constitute a basis
 7   for a bias or partiality motion unless they display a
 8   deep-seated favoritism or antagonism that would make fair
 9   judgment impossible.”    Id.
10        Here, the Debtor fails to show that the Melcher II decision
11   or any other facts reveal a “high degree of favoritism or
12   antagonism” by Judge Dunn such that a fair judgment on this
13   appeal is impossible.    She takes particular umbrage at the
14   following statement in the Melcher II decision: “she [the
15   Debtor] will only sell the Stonewall property if she absolutely
16   has to at the end of her life.”        The decision, however, refers
17   to this statement only twice,4 and in doing so is quoting the
18   bankruptcy court’s statement at a prior hearing.       Judge Dunn’s
19   impartiality is not subject to reasonable question; we deny the
20   Debtor’s motion to recuse.
21   B.   Pre-filing Order
22        On appeal, the Debtor reiterates the long litigation history
23   involving Stonewall and then argues that the Trustee had no
24   basis to declare her a vexatious litigant or to assassinate her
25   character and reputation.      She asserts that the Trustee’s
26
          4
27           The Melcher I decision also refers to this statement,
     also quoting the bankruptcy court. Judge Dunn, however, did not
28   sit on the Melcher I panel.

                                        7
 1   efforts are at their core an attempt to retroactively void a
 2   prior bankruptcy court order that permitted her to object to the
 3   Trustee’s fees.   To be clear, the sole issue before us on this
 4   appeal is whether the bankruptcy court abused its discretion in
 5   issuing the Pre-filing Order; the prudential standing issue that
 6   is the focus of much of the Debtor’s argument on appeal is not
 7   before us.   With one narrow exception, we conclude that there
 8   was no abuse of discretion.
 9       A pre-filing restriction permits a federal court to
10   “regulate the activities of [an] abusive litigant[] by imposing
11   carefully tailored restrictions under . . . appropriate
12   circumstances.”   Ringgold-Lockhart, 761 F.3d at 1061.   This
13   restriction, however, must be tempered by a litigant’s right of
14   access to the courts.   Id.
15       In this respect, in order to impose pre-filing restrictions,
16   a federal court must: (1) give the litigant notice and “an
17   opportunity to oppose the order” prior to its entry; (2) compile
18   an adequate record for appellate review, including “a listing of
19   all the cases and motions that led the [] court to conclude that
20   a vexatious litigant order was needed”; (3) make substantive
21   findings of frivolousness or harassment; and (4) tailor the
22   order narrowly so as “to closely fit the specific vice
23   encountered.”   Id. at 1062.   The first two requirements are
24   procedural in nature; the third and fourth, constitute
25   “substantive considerations.”    Id.
26       The Melcher II panel concluded that the procedural
27   considerations were satisfied.    It instructed the bankruptcy
28   court on remand to make appropriate findings in connection with

                                      8
 1   the substantive considerations.       As a result, our review in this
 2   appeal is focused solely on those particular requirements.
 3       In assessing the substantive considerations and determining
 4   “whether a party is a vexatious litigant and whether a
 5   pre-filing order will stop the vexatious litigation or if other
 6   sanctions are adequate,” the court must consider the following
 7   five factors, known as the “Safir5 factors”:
 8   (1) the litigant’s history of litigation and in particular
 9       whether it entailed vexatious, harassing or duplicative
10       lawsuits;
11   (2) the litigant’s motive in pursuing the litigation, e.g.,
12       does the litigant have an objective good faith expectation
13       of prevailing?;
14   (3) whether the litigant is represented by counsel;
15   (4) whether the litigant has caused needless expense to other
16       parties or has posed an unnecessary burden on the courts
17       and their personnel; and
18   (5) whether other sanctions would be adequate to protect the
19       courts and other parties.
20   Ringgold-Lockhart, 761 F.3d at 1062.      The fifth factor is of
21   particular importance.   Id.
22       1.    Findings of Frivolousness or Harassment
23       To determine whether litigation is frivolous, the court
24   “must look at both the number and content of the filings as
25   indicia of the frivolousness of the litigant’s claims.”      Id. at
26
27        5
              See Safir v. U.S. Lines, Inc., 792 F.2d 19 (2d Cir.
28   1986).

                                       9
 1   1064 (internal quotation marks and citation omitted).    The court
 2   may also “make an alternative finding that the litigant’s
 3   filings show a pattern of harassment.”    Id. (internal quotation
 4   marks and citation omitted).    Repetitious filings do not
 5   constitute harassment per se; rather, the court must determine
 6   whether the repetitious filings are done with “an intent to
 7   harass the defendant or the court.”    Id.
 8       Here, the bankruptcy court identified the Safir factors and
 9   made the following findings thereunder:
10       First factor.
11   C   Many of the Debtor’s multiple pleadings and appeals were
12       duplicative of matters already ruled upon and/or were
13       frivolous and, in many instances, intended to block the
14       normal bankruptcy process and inhibit the Trustee from
15       administering the estate;
16   C   The Debtor continued to re-hash arguments that the
17       bankruptcy court had already ruled on; and
18   C   The Debtor directed personal attacks against the Trustee and
19       his counsel, and other parties in the case, including her
20       ex-husband’s estate and its counsel.
21       Second factor.   The Debtor’s numerous, largely duplicative
22   filings were an abuse of the bankruptcy process.
23       Third factor.    While the Debtor was unrepresented, her pro
24   se status was not enough to overcome the fact that she
25   continually failed to heed the bankruptcy court’s efforts to
26   instruct her as to proper procedures and to limit her arguments.
27       Fourth factor.
28   C   The Debtor’s conduct had caused needless expense and

                                      10
 1       unnecessary burden to other parties and to the bankruptcy
 2       court; and
 3   C   Many of the estate’s assets had been expended as a result of
 4       the Debtor’s continued and substantially meritless
 5       litigation, negatively impacting creditors and the Trustee.
 6       Fifth factor.    No sanction short of a pre-filing restriction
 7   would curtail the Debtor’s duplicative or frivolous filings.     As
 8   stated, the Debtor had not heeded the bankruptcy court’s
 9   admonitions and surcharging a claimed homestead exemption was no
10   longer viable in light of Law v. Siegel.
11       On this record, the bankruptcy court’s findings were not
12   clearly erroneous.   As detailed in Melcher I and Melcher II, and
13   the Ninth Circuit’s unpublished decision affirming Melcher I in
14   Melcher v. Estate of Terrence P. Melcher (In re Melcher), 300 F.
15   App’x 455 (9th Cir. 2008), the Debtor has a long history of
16   filing motions, papers, and appeals that are frivolous or
17   evidence a pattern of harassment.    The Debtor continues to
18   advance arguments about Stonewall and the impropriety of the
19   Trustee’s and other parties’ actions in relation to the
20   property.   See, e.g., In re Melcher, 300 F. App’x at 456 (“[T]he
21   [BAP] has found that Jacqueline did not file the [Chapter 11]
22   Plan in good faith but to keep Stonewall from being sold.      It is
23   time to bring this abuse of the bankruptcy process to an end.
24   We affirm the judgment of the BAP.”).    The order to sell
25   Stonewall was long ago adjudicated by the California state
26   court, affirmed by the California court of appeal, and is now
27   beyond dispute in the federal courts.    See In re Marriage of
28   Melcher, 2006 WL 119127, at *18 (Cal. Ct. App. Jan. 13, 2006)

                                     11
 1   (affirming the state court’s order to sell Stonewall), reh’g
 2   denied, Feb. 9, 2006, review denied, Mar. 29, 2006.
 3       There is no question that a once solvent estate is now
 4   insolvent due to the Debtor’s protracted efforts to stall the
 5   sale of Stonewall and other real properties.      Between the dates
 6   that the case was converted to chapter 7 (and the Trustee was
 7   appointed to the case) and the Debtor’s filing of the notice of
 8   appeal in the present appeal, there have been over 2,000 docket
 9   entries in the bankruptcy case.      Review of the docket in just
10   the first year of the chapter 7 case reflects a number of
11   motions, oppositions, and other papers filed by the Debtor - the
12   bankruptcy court denied many of the Debtor’s requests and
13   objections contained therein.    This pattern continued in
14   subsequent years.
15       On this record, the bankruptcy court’s findings clearly
16   support a vexatious litigant finding and the imposition of a
17   pre-filing restriction against her.
18       2.   Narrowly tailored
19       In addition, a “pre-filing order[] must be narrowly tailored
20   to the vexatious litigant’s wrongful behavior.”
21   Ringgold-Lockhart, 761 F.3d at 1066 (internal quotation marks
22   and citation omitted).    In Ringgold-Lockhart, the Ninth Circuit
23   determined that the pre-filing order was too broad where the
24   order provided that the district court would first deem the
25   action “meritorious.”    The Ninth Circuit determined that by
26   adding this qualifier, “the district court added a screening
27   criteria that is not narrowly tailored to the problem before it,
28   and is in fact unworkable.”    Id.

                                       12
 1       Here, the Pre-Filing Order provides that the bankruptcy
 2   court “will permit the filing of the pleading only if it appears
 3   that the pleading has merit and is not duplicative of matters
 4   previously ruled upon by this Court and/or an appellate court,
 5   and has not been filed for the purposes of harassment or delay.”
 6   With one exception, we conclude that the order is not overly
 7   broad.
 8       First, the screening criteria are substantively narrowly
 9   tailored.   The order refers to criteria as: “not duplicative of
10   matters previously ruled upon by” the bankruptcy court or an
11   appellate court, and which has not been filed for the purposes
12   of harassment or delay; these are appropriate screening
13   criteria.   The order, however, contains one form of
14   inappropriate criterion: that the bankruptcy court will
15   determine whether the pleading “appears to have merit.”   As
16   stated in Ringgold-Lockhart, this type of criterion is overly
17   broad for a pre-filing restriction.   See 761 F.3d at 1066.
18   Nonetheless, the offensive language may be stricken from the
19   order without issue.
20       Second, the Pre-Filing Order is appropriately limited to
21   actions involving the Trustee.   Again, the record clearly shows
22   that the Debtor has fought the Trustee at every step both in and
23   out of the bankruptcy court, thereby exhausting significant
24   estate assets and prejudicing the interests of creditors and the
25   Debtor alike.   There is no danger that this portion of the order
26   could extend to factual scenarios entirely unrelated to the
27   Trustee in his capacity as the estate representative.
28

                                      13
 1                              CONCLUSION
 2       Based on the foregoing, we AFFIRM the bankruptcy court in
 3   part; but, we REVERSE and REMAND the order back to the
 4   bankruptcy court with instructions that it strike the “has merit
 5   and” phrase from page four, line 19 of the Pre-Filing Order.
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