Court Opinion

ID: 2973798
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:07:21.36429+00
Date Added: 2024-06-11T09:32:53.334372
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                             File Name: 06a0294n.06
                                Filed: May 1, 2006

                                              Nos. 04-2112/2136

                              UNITED STATES COURT OF APPEALS
                                   FOR THE SIXTH CIRCUIT

In re: J. EDWARD KLOIAN,                                 )
                                                         )
        Debtor,                                          )
                                                         )
------------------------------------------------------   )
-                                                        )
                                                         )
J. EDWARD KLOIAN,                                        )
                                                         )   ON APPEAL FROM THE UNITED
Plaintiff-Appellant,                                     )   STATES DISTRICT COURT FOR THE
                                                         )   EASTERN DISTRICT OF MICHIGAN
v.                                                       )
                                                         )
BASIL T. SIMON, Trustee; RONALD L.                       )
ROSE, Guardian Ad Litem                                  )
                                                         )
Defendants-Appellees.                                    )

        Before: Norris, Suhrheinrich, Rogers, Circuit Judges.
        Rogers, Circuit Judge. This consolidated appeal challenges the district court’s orders

dismissing four appeals from the bankruptcy court at the behest of the debtor’s guardians ad litem,

and denying the debtor a second competency hearing. The debtor is J. Edward Kloian. The district

court dismissed Kloian’s appeals from the bankruptcy court because his guardians ad litem requested

voluntary dismissal. We affirm the district court’s orders of dismissal because the district court

properly deferred to Kloian’s duly-appointed guardians at litem. We also affirm the district court’s

order denying Kloian a second competency hearing because Kloian supplied the district court with
Nos. 04-2112/2136
Kloian v. Simon (In re Kloian)

no evidence tending to indicate that he should now be considered competent.

                                                I.

       On March 26, 2003, the United States Bankruptcy Court for the Eastern District of Michigan,

acting sua sponte, appointed Ronald Rose to be guardian ad litem (GAL) for Kloian. The

bankruptcy court did so after holding a hearing. The hearing included a direct examination of

Kloian’s psychiatrist, Dr. Bucknam. Bucknam’s testimony on direct examination was the only

evidence received. At the hearing, Bucknam refused to be cross-examined, claiming in effect that

Kloian had not waived psychotherapist-patient privilege. The bankruptcy court ruled from the bench

that Kloian had waived any such privilege. The bankruptcy court adjourned the hearing to permit

Bucknam to consult his attorney on the waiver issue and rescheduled the hearing. Kloian’s

psychiatrist did not attend the rescheduled hearing and the bankruptcy court entered an order

appointing a GAL for Kloian without ever hearing from his psychiatrist on cross-examination.

         The bankruptcy court explained its decision to appoint a GAL for Kloian in a 31-page

opinion. The bankruptcy court noted that Federal Rule of Civil Procedure 17(c) and Federal Rule

of Bankruptcy Procedure 7017 empower bankruptcy judges to appoint guardians ad litem for

incompetent persons. The bankruptcy court also recognized that determinations of incompetency

must be made in accordance with Michigan law. Applying Michigan law, the bankruptcy court

declared Kloian mentally incompetent in the “very limited sense” of bankruptcy-litigation

incompetence due to his severe clinical depression:

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Nos. 04-2112/2136
Kloian v. Simon (In re Kloian)

       After an exhaustive review of the files in Debtor’s main bankruptcy case, as well as
       several adversary proceedings and other evidence properly before the Court, the
       inescapable conclusion is that the appointment of a guardian ad litem for Debtor is
       required. The sheer magnitude of the evidence, (virtually all of it in Debtor’s own
       words or the words of his doctors and/or his own counsel), supports that conclusion.
       Moreover, it also supports a conclusion that the Court’s failure to do so would be
       inimical to Debtor’s interests and run contrary to what the Court views as its
       obligation to do so when called for by the facts. Although the Court’s conclusion is
       that Debtor is “incompetent” in the very limited sense of his inability to protect his
       interests in the administration of his bankruptcy case in a reasonably efficient and
       timely manner, the Court also notes that Debtor has, at many times, appeared to be
       quite capable. However, the Court believes this is because it has accommodated
       Debtor as much as possible in scheduling matters in a way that would allow Debtor
       to participate. However, these accommodations have reached the point where they
       have unfairly prejudiced the other parties in interest, and there is no reason to believe
       that the situation will improve. Debtor’s principal position is that his mental state
       or condition limits him to being able to address one thing at a time, and that if the
       case is administered on that basis, there is or will be, no problem.

JA 200. Kloian subsequently filed an appeal in the district court challenging the bankruptcy court’s

appointment of a GAL and its determination that he is in any sense incompetent. The district court

dismissed Kloian’s appeal because he failed to comply with court rules. Kloian then appealed to

this court, and the appeal was entertained by a different panel from the present one. See Kloian v.

Simon (In re Kloian), 137 Fed. Appx. 780 (6th Cir. 2005). Our court upheld the district court’s

dismissal of Kloian’s appeal, and in effect upheld the bankruptcy court’s appointment of a GAL.

The panel held that the district court acted within its discretion when it dismissed Kloian’s appeal

challenging the bankruptcy court’s appointment of a GAL. See id. at 782-83. Dismissal was

warranted because Kloian had filed a statement of the issues with the district court about a month

late, in violation of Federal Rule of Bankruptcy Procedure 8006. See id. The panel also held that

Kloian did not have authority to hire an attorney to represent his company Financial Associates of

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Nos. 04-2112/2136
Kloian v. Simon (In re Kloian)

America, Ltd. and that “Kloian could not act in the bankruptcy proceedings except through his

GAL.” Id. at 784. The panel’s opinion never explicitly interpreted Michigan’s law governing mental

incompetence.

       After this unsuccessful appeal, Kloian continued to file motions in the bankruptcy court,

despite this court’s holding that “Kloian could not act in the bankruptcy proceedings except through

his GAL.” Id. at 784. Kloian proceeded to file in the district court four more appeals from adverse

bankruptcy court orders. In two orders of its own, the district court permitted two different GALs

of Kloian’s to dismiss these four appeals voluntarily. In the course of proceedings related to these

voluntary dismissals, the district court entered an order denying Kloian’s motion for a second

competency hearing.

       Kloian premised his motion for a second competency hearing on two arguments: (1) Kloian

asserted that the district court had legally erred when it appointed GALs for him at the district court

level to handle his appeals; (2) Kloians contended that the appointment of his GALs violated

Michigan law and his due process rights, in part because he is not incompetent. The district court

rejected Kloian’s challenges to the legal process afforded him. It also rejected the idea of holding

a new hearing, because Kloian had “submitted no new evidence to persuade the court that his

circumstances have changed or that the effects of his mental condition have lessened. Neither has

[Kloian’s] guardian ad litem, Mr. Rose, informed this court or the bankruptcy court that [Kloian]

is now competent to handle his own affairs.” JA at 301. This appeal followed.

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                                                  II.

       The district court properly deferred to Kloian’s GALs when it permitted them to dismiss

Kloian’s appeals voluntarily. This court unambiguously held in its prior panel opinion that “Kloian

[can]not act in the bankruptcy proceedings except through his GAL.” Kloian, 137 Fed. Appx. at

784. That determination is the law of Kloian’s bankruptcy case, and we therefore adhere to it. See

Arizona v. California, 460 U.S. 605, 618 (1983) (the law-of-the-case “doctrine posits that when a

court decides upon a rule of law, that decision should continue to govern the same issues in

subsequent stages in the same case.”).

       Kloian cannot appeal, except through his GAL, from adverse bankruptcy court orders as a

general matter. Kloian cannot appeal his GALs’ decision to voluntarily dismiss his appeals in the

district court because he has no authority to “act in the bankruptcy proceedings except through his

GAL.” See Kloian, 137 Fed. Appx. at 784.

                                                  III.

       We also affirm the district court’s order denying Kloian a second competency hearing under

the abuse of discretion standard because Kloian neglected to support his motion with any evidence

tending to prove that he is now competent. “The decision as to whether to appoint a next friend or

guardian ad litem rests with the sound discretion of the district court and will not be disturbed unless

there has been an abuse of its authority.” Gardner v. Parson, 874 F.2d 131, 140 (3d Cir. 1989). By

implication, the district court also has discretion to hold a second competency hearing related to the

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Kloian v. Simon (In re Kloian)

appointment of a GAL.

          The district court did not abuse its discretion when it denied Kloian’s motion for a second

competency hearing.        Kloian’s motion in effect challenged the bankruptcy court’s initial

appointment of his GALs, which had already been upheld by this court. For example, Kloian argued

that the district court had legally erred when it appointed the same GALs for him at the district court

level that had been appointed by the bankruptcy court. Kloian largely based this argument on the

notion that the original appointment of a GAL violated Michigan law and his due process rights.

Absent from Kloian’s motion was any evidence or argument establishing that he is now competent.

The district court noted that Kloian had “submitted no new evidence to persuade the court that his

circumstances have changed or that the effects of his mental condition have lessened.” JA at 301.

Kloian’s attorney at oral argument conceded that Kloian attached no new evidence to his motion for

a competency hearing indicating that he is now competent. Kloian gave the district court no reason

to hold a new hearing and the district court did not abuse its discretion by declining revisit the

matter.

          In so deciding, we have set no Kafkaesque precedent shielding the authority of GALs from

all challenge. Kloian can of course challenge the authority of his GALs if he comes forward with

actual evidence that he is now competent. As Wright, Miller, and Kane have observed:

          the authority of a representative under Rule 17(c) does not necessarily survive until
          the action has been terminated; rather, his power is dependent upon the continued
          disability of the person being protected. State law controls the question whether the
          represented party’s disability has ended during the action and once it is determined

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Nos. 04-2112/2136
Kloian v. Simon (In re Kloian)

       that this has occurred, the fiduciary loses authority to maintain the suit on behalf of
       the former infant or incompetent.

6A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure

§ 1570, at 507 (1990). This principle is most explicit in the context of represented minors. One

district court has held that service upon a former minor’s GAL was “no service” because the minor

had reached the age of majority. See Mason v. Royal Indem. Co., 35 F. Supp. 477, 480-81 (N.D. Ga.

1940). The same general principle can be inferred from state law involving incompetents who

allegedly regained their capacity pending legal proceedings. See, e.g., Kroehl v. Taylor, 61 A. 257,

257-58 (N.J. Ch. 1905) (ordering a hearing to determine the capacity of a ward previously thought

to be insane for whom the court had appointed a next friend). With appropriate additional evidence,

Kloian is free to seek another competency hearing.1

       Kloian’s failure to come forward with sufficient evidence of his competence requires us to

affirm the order denying him a second competency hearing.

       1
         The bankruptcy court has ordered a hearing for June 6, 2006, to decide Kloian’s pending
motion to dismiss his GAL. Kloian can presumably present to the bankruptcy court additional
evidence of his competence at that time.
        We note that the bankruptcy court has adjourned the hearing concerning Kloian’s motion
to dismiss his GAL several times. On November 17, 2005, an order was filed adjourning the
hearing until January 18, 2006. On January 18, 2006, the bankruptcy court entered an order
adjourning the hearing again until March 1, 2006. On February 28, 2006, the bankruptcy court
adjourned the hearing yet again until April 11, 2006. On April 8, 2006, the bankruptcy court
entered an order adjourning the hearing until June 6, 2006. Kloian’s motion has been pending
for a long time, and he is entitled to have his request denied or granted in a timely fashion so that
he may appeal should the court determine not to dismiss the GAL in the face of new evidence of
competence.
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                                                IV.

       For the foregoing reasons, the district court’s orders are affirmed.

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