Court Opinion

ID: 45595
Source: CourtListenerOpinion
Date Created: 2010-04-25 22:41:13+00
Date Added: 2024-06-11T14:56:53.238920
License: Public Domain

United States Court of Appeals
                                                                  Fifth Circuit
                                                               F I L E D
                    UNITED STATES COURT OF APPEALS
                                                               August 23, 2006
                        FOR THE FIFTH CIRCUIT
                                                           Charles R. Fulbruge III
                                                                   Clerk

                               05-10867

                In The Matter Of:   LEWIS EUGENE WOOD,

                                          Debtor,

                   ********************************

     JAMES P. GRAHAM;
     RAY S. TOLSON, III,

                                          Appellants,

                               v.

     LEWIS EUGENE WOOD,

                                          Appellee.

         Appeal from the United States District Court for the
                      Northern District of Texas
                              (05-CV-332)

Before JONES, Chief Judge, and BARKSDALE, and BENAVIDES, Circuit
Judges.

BENAVIDES, Circuit Judge:*

     This appeal is from the dismissal of a bankruptcy proceeding

for failure to prosecute. Applying our precedent, we conclude that

     *
          Pursuant to 5TH CIR. R. 47.5, the Court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
there is not a clear record of delay or contumacious conduct by the

Appellants.     Further, the record does not show either that the

court determined that lesser sanctions would not prompt diligent

prosecution or that it employed lesser sanctions which proved to be

futile. Under those circumstances, the bankruptcy court abused its

limited discretion in dismissing for failure to prosecute.              We

therefore vacate and remand for further proceedings.

     I.   BACKGROUND AND PROCEDURAL HISTORY

     Appellee Lewis Wood (“Appellee”) procured a loan of $250,000

from Dallas National Bank.          Pursuant to an agreement, James P.

Graham and Ray S. Tolson, III (“Appellants”) provided land as

collateral for the loan.         Appellee agreed to use the proceeds of

the loan to fund a portion of construction costs for a project by

Urban Woods on Commerce, Ltd. (“Urban Woods”).            In exchange for

providing this collateral, Appellants were to receive a portion of

the profits from the project.       Appellants allege that Appellee did

not use the monies in conjunction with Urban Woods; instead, they

allege that he diverted the monies to his other “projects and/or

companies.”     The project failed, and Appellee defaulted on the

loan. Appellants assert that, as guarantors, they were required to

pay off the loan to Dallas National Bank.

     Appellee    later   filed    for   personal   bankruptcy   protection.

Appellee listed a debt of approximately $300,000 owed to Tolson,

one of the Appellants.      On March 22, 2004, pursuant to 11 U.S.C.

section 523(a)(2) and (a)(4), Appellants filed their objection to

                                        2
the dischargeability of the debt. Three days later, the bankruptcy

court entered a scheduling order setting the trial docket call for

August   9.      On   March   30,    the    bankruptcy       court   dismissed    the

complaint because Appellants had not paid the filing fee.                  On April

5, Appellants filed a motion to vacate the dismissal order.1                      The

court granted Appellants’ motion, vacated the dismissal order on

April 7, and reinstated the scheduling order.

     On May 12, Appellee filed an answer.                    On May 14, Appellants

filed    a    first   amended    objection         to   dischargeability,        which

Appellees answered on May 24.               Meanwhile, Appellants had served

Appellee      with    requests       for        production     of    documents    and

interrogatories.        On    June    18,       Appellants    received   Appellee’s

answers to the interrogatories and response to the request for

production. Appellants deemed the responses insufficient and filed

a motion to compel discovery and to impose sanctions on July 8.                    On

July 22, the court ordered Appellee to file a detailed response to

the motion to compel.         Appellees filed a response on August 4.

     At the trial docket call on August 9, the bankruptcy court

continued the trial docket call to November 8. Notably, Appellants

did not move for the continuance.                The court apparently continued

     1
        In the motion, counsel indicated that, after receiving a
phone call from the clerk advising that fees were due, his
secretary mailed the check on March 29. The next day he received
a notice of fees due dated March 24 and also learned of the
dismissal order. Counsel indicated that the failure to pay timely
was “not intentional, nor the result of conscious indifference, but
was accidental.” Finally, counsel argued that reinstating the case
would not cause delay or prejudice.

                                            3
it because of the discovery dispute.        The discovery deadline was

rescheduled for October 12.

     On September 1, the bankruptcy court granted Appellants’

motion   to   compel   discovery   and   ordered   Appellee   to   furnish

additional responses to the interrogatories.        On September 15, the

parties filed a stipulation that Appellee had supplemented his

responses to the interrogatories and request for production of

documents pursuant to the court’s order.       On October 21, Appellee

filed a witness list indicating that he would be the only defense

witness for the trial scheduled for the week of November 15, 2004.2

On October 26, Appellants filed a witness list comprised of the

parties to the suit and “any person listed in Plaintiffs’ responses

to discovery.”3    In that filing, Appellants further indicated to

the court that they had:

     received six boxes of documents on October 22, 2004
     related to the transaction that is the subject of this
     suit and Plaintiffs’ counsel have not had time to review
     in any detail the documents provided by Debtor/Defendant.
     Dallas National Bank, a non-party, has not yet responded
     to discovery requests. Therefore, in the interest of
     justice Plaintiff intends to file a Motion for
     Continuance.

     2
       That exhibit list indicated Appellee intended to introduce
the following exhibits at trial: (1) “Note to Dallas Bank”; (2)
“Assignment of Net Profits Interest dated November 3, 2000"; (3)
“Any exhibits timely designated by Plaintiffs”; and (4) “Any
exhibits used for impeachment.”
     3
       Appellants also listed these categories of exhibits: (1)
documents designated by the defendant; (2) documents provided to
plaintiff by debtor/defendant; and (3) “[b]ank records of any
account of Debtor/Defendant or any of his companies.”

                                    4
     On November 8, Appellants filed a motion to continue the trial

setting to allow discovery to be completed.        In the motion,

Appellants provided as follows:

          On May 21, Graham and Tolson sent their first round
     of paper discovery.       On June 18, responses with
     objections were received by Graham. On July 8, Graham
     filed a Motion to Compel and an Order was issued on
     August 31. On September 10, Graham received supplemental
     responses from Defendant. On October 11, Graham sent a
     Subpoena to Dallas National Bank for documents and
     cancelled checks.    Those documents were received by
     Graham on November 1, but did not include deposit slips.
     On October 25, a Witness List and notice that Graham
     would seek a continuance was filed because he had not
     received essential documents. On November 1, Plaintiffs
     received documents from Dallas National Bank including a
     copy of a wire transfer of fund to American Title
     Company.   On November 5, Graham sent a Subpoena to
     American Title Company and on November 8 sent a subpoena
     to Bank of Texas, Tulsa, Oklahoma for documents.

          In spite of Plaintiffs’ diligence, essential records
     are required, including documents showing the use of the
     loaned funds. Additional subpoenas have been issued for
     documents held by American Title Company Dallas (the
     recipient of the loan proceeds) and Bank of Texas, Tulsa,
     Oklahoma (the holder of the bank deposit slips which were
     not among the documents produced by Defendant).

          Graham and Tolson issued a non-party subpoena to
     Dallas National Bank on October 11, 2004 to obtain the
     entire record of the transaction. The bank provided a
     response on November 1, 2004, which showed a wire
     transfer of $242,000.00 into a previous[ly] unknown
     account of Defendant at American Title Company. Graham
     and Tolson issued a subpoena to American Title, but no
     response has yet been received.

     Later that same day, the bankruptcy court held its previously

scheduled docket call.   Appellants announced not ready for trial,

and from the bench the court dismissed the case for failure to

                                  5
prosecute.4    On November 15, the bankruptcy court entered a written

order dismissing the case.      In its entirety, the order provided

that:

          THIS CAUSE having come before this Court on November
     8, 2004, for Docket Call on Plaintiff's Complaint to
     Determine Dischargeability of Debt, and the Plaintiffs,
     having announced that they were not ready for trial, and
     having no reasonable explanation for the need for a
     continuance, and this being a continued Docket Call from
     August 9, 2004, it is, therefore ORDERED, ADJUDGED and
     DECREED that:

          The above-styled and numbered adversary proceeding
     shall be and is hereby DISMISSED FOR WANT OF
     PROSECUTION.

     Appellants subsequently filed a motion to reinstate or in the

alternative a motion for a new trial, both of which the bankruptcy

court denied in a written order.       In a memorandum opinion and

order, the district court affirmed the bankruptcy court’s judgment,

which Appellants now appeal.

     III. ANALYSIS

          A.     Dismissal for Failure to Prosecute

     Appellants argue that the bankruptcy court erred in dismissing

the case for failure to prosecute.       Although the order did not

provide whether the dismissal was with prejudice, this Court has

treated a dismissal for failure to prosecute as an involuntary

dismissal under Federal Rule of Civil Procedure 41(b), which is a

     4
       Although the court did not expressly rule from the bench on
the motion to continue, it implicitly denied it by dismissing the
suit.

                                   6
dismissal with prejudice.5   See Boudwin v. Graystone Ins. Co., 756
F.2d 399, 400 n.1 (5th Cir. 1985).

     This Court reviews a dismissal with prejudice for failure to

prosecute for abuse of discretion.       Berry v. CIGNA/RSI-CIGNA, 975
F.2d 1188, 1191 (5th Cir. 1992).   “A dismissal with prejudice is an

extreme sanction that deprives the litigant of the opportunity to

pursue his claim.”     Id. (internal quotation marks and citations

omitted).     Thus, we have limited a trial court’s discretion to

dismiss cases with prejudice.      Id.     More specifically, we have

found no abuse of discretion only if “(1) there is a clear record

of delay or contumacious conduct by the plaintiff, and (2) the

district court has expressly determined that lesser sanctions would

not prompt diligent prosecution, or the record shows that the

district court employed lesser sanctions that proved to be futile.”

Id. (citations and footnote omitted).        Further, when this Court

affirms such a dismissal, it usually finds one of the following

aggravating factors:    “(1) delay caused by [the] plaintiff himself

and not his attorney; (2) actual prejudice to the defendant; or (3)

delay caused by intentional conduct.”         Id. (internal quotation

marks and citations omitted) (brackets in opinion).

     Here, the bankruptcy court's order of dismissal provides that

(1) Appellants did not have a reasonable explanation for the need

for a continuance when they announced not ready for trial and that

     5
         Rule 41(b) is made applicable by Bankruptcy Rule 7041.

                                   7
(2)   this   was    a   continued   docket   call   from   August   9.   The

continuance from the August 9 docket call, however, appears to be

based on a discovery dispute, which the court ultimately resolved

in Appellants’ favor.        That continuance should not weigh against

Appellants.    As set forth above, this Court must determine whether

there is contumacious conduct by the plaintiff or a clear record of

delay.

      “Contumacious Conduct”

      Appellee asserts that Appellants’ failure to:          (1) timely pay

the filing fee; (2) move for leave of court to file an amended

pleading after a responsive pleading had been filed;6 (3) file

proposed findings of fact and conclusions of law; and (4) “formally

request a continuance” until docket call constitute contumacious

conduct.     “Contumacious” is defined as “stubbornly perverse or

rebellious; willfully disobedient.”          Webster's College Dictionary

297 (1995).        It is worth noting that neither in its order of

dismissal nor its order denying the motion to vacate the dismissal

order and reinstate the case did the bankruptcy court rely on the

second and third “failings” alleged above by Appellee.

      Although counsel failed to timely pay the filing fee, once

notified of the error counsel quickly rectified it and, in the

successful motion to reinstate the case, indicated that it was not

intentional.       With respect to failing to move for leave to file an

      6
        Appellee relies on Rule 15 of the Federal Rules of Civil
Procedure, made applicable by Bankruptcy Rule 7015.

                                      8
amended pleading, at oral argument Appellants pointed out that the

amended     complaint         was   filed    just        two    days         after    Appellee’s

responsive pleading, suggesting the pleadings may have “crossed in

the mail.” With respect to the “failure” to file proposed findings

of fact, Appellants state that they did not do so because, as

represented to the court in their October 26 filing, they intended

to (and later did) move for a continuance.                                 Although Appellants

should have          timely    filed   the       motion      for       a    continuance,     they

provided both the court and opposing counsel notice of their intent

to   do    so    approximately       two    weeks       prior          to   the   docket     call.

Ultimately, Appellants did belatedly file it prior to dismissal.

We conclude that although counsel’s conduct may appear careless, it

does not constitute “willfully disobedient” conduct.

      “Clear Record of Delay”

      We    have      explained     that     a       clear   record         of    delay   entails

“significant periods of total inactivity.” Berry, 975 F.2d at 1191

n.5 (internal quotation marks and citation omitted).                                 Referring to

Appellants’ issuance of a subpoena the day before the discovery

deadline,       Appellee      argues   that          “[w]hen       a    party     faced    with a

deadline        27   days   away    does    nothing          for       26   days,     that   is   a

significant period of time.”                Twenty-six days does not constitute

a significant period of time under our precedent.                                   “[O]ur cases

recognize that delay which warrants dismissal with prejudice must

be longer than just a few months . . . .”                          McNeal v. Papasan, 842

                                                 9
F.2d 787, 791 (5th Cir. 1988).             This Court has made clear that

dismissals are for “egregious and sometimes outrageous delays.”

Rogers v. Kroger, 669 F.2d 317, 321 (5th Cir. 1982).                  See Callip v.

Harris County Child Welfare Dep’t, 757 F.2d 1513, 1519-21 (finding

clear record of delay after plaintiff missed nine deadlines in two

and one-half years); Delta Theatres v. Paramount Pictures, 398 F.2d
323   (5th    Cir.   1968)   (affirming     dismissal       of    a   particularly

egregious fourteen-year old case that was dormant for seven years).

Further, the 26-day period relied upon by Appellee is only one time

period, and our precedent indicates that there must be “significant

periods,” plural.       The instant case was filed in March 2004 and

dismissed for failure to prosecute less than eight months later.

See Morris v. Ocean Systems, 730 F.2d 248, 252 (5th Cir. 1984)

(holding that the court “exceeded its well-defined discretion” in

dismissing for failure to prosecute when only eight months elapsed

from date of the first status conference to the date of its

dismissal).

      In     numerous   cases,    this      Court     has        concluded that a

“plaintiff’s failure to comply with scheduling and other pretrial

orders and rules did not establish a clear record of delay or

contumacious conduct.” Callip, 757 F.2d at 1520 & n.10 (collecting

cases).       We   explained   that   “[m]ost    of    these       cases   involve

noncompliance with two or three orders or rules of the district

court.”      Id. at 1520-21.

                                      10
     For example, in Rogers, this Court held that a district court

abused its discretion in dismissing for failure to prosecute.   669
F.2d 317.   In that case, Rogers filed a racial discrimination suit

against his employer, Kroger, on May 8, 1978.    The case was on the

docket a total of two years and four months and, during that time,

lay dormant for over a year.     The parties filed two agreed or

stipulated motions to extend deadlines, and the plaintiff and the

defendant each filed two motions to extend various discovery

deadlines, which resulted in changing the date of the docket call

twice.

     Additionally, on September 8, 1980, the plaintiff filed a

motion to continue the trial, arguing that there had not been

adequate time to prepare because the defendant’s responses to

interrogatories were filed ten days late.       Two days later, the

court “called the case for trial.”      Id. at 319.     New counsel

appeared on behalf of Rogers and requested that she be substituted

as counsel.   She also requested a two-week continuance, explaining

that she was unprepared to proceed to trial because of difficulties

assimilating the defendant’s interrogatory responses.       Defense

counsel objected and announced ready for trial.     After reviewing

the procedural history of the case, the court, noting that counsel

had been unprepared without cause in a previous case, denied the

continuance and dismissed for failure to prosecute under Rule

41(b).

                                 11
     On appeal, this Court conducted a thorough review of our

caselaw with respect to dismissals for failure to prosecute.

Rogers, 669 F.3d 319-21.         We observed that “cases in this circuit

in which dismissals with prejudice have been affirmed on appeal

illustrate that such a sanction is reserved for the most egregious

of cases, usually cases where the requisite factors of clear delay

and ineffective lesser sanctions are bolstered by the presence of

at least one of the aggravating factors.”                Id. at 320 (footnote

omitted).     Further, we noted that, although the majority of the

pretrial    delay    was   attributable      to   the    plaintiff,   some   was

attributable to the defendant.           We concluded that “Rogers’ case

lacks all of the elements that justified dismissal with prejudice

in our appellate decisions affirming such Rule 41(b) dismissals.”

Id. at 321.    Thus, we held that the district court had abused its

discretion in dismissing the case and reversed and remanded.

     The instant case was on the docket a total of only eight

months, while the Rogers case lay dormant over a year.                Also, in

Rogers, the docket call date was continued twice, and, in the

instant case, the docket call date was continued once.            Indeed, the

only docket call continuance occurred because of a discovery

dispute    that     ultimately    was   resolved    in    Appellants’   favor.

Therefore, because Appellee’s conduct in responding to discovery

requests resulted in continuing the first docket call, that delay

is attributable to Appellee.            Further, Appellant filed only one

                                        12
motion for an extension of time, and, in Rogers, the plaintiff had

filed several such motions.       Although Appellants’ counsel should

have filed the motion to continue in a more timely manner, counsel

had notified the court of his intention to so move approximately

two weeks prior to the docket call.         In short, the record in Rogers

evidences more delay than the case at bar.          Accordingly, in light

of our holding that the facts of Rogers did not demonstrate a

record of clear delay, we are compelled to conclude that this

record falls short of clear delay.

     No Consideration of Lesser Sanctions

     Additionally, there is no indication that the court had

considered whether lesser sanctions might be appropriate.            This

Court has explained that “[a]ssessments of fines, costs, or damages

against   the   plaintiff   or   his    counsel,   attorney   disciplinary

measures, conditional dismissal, dismissal without prejudice, and

explicit warnings are preliminary means or less severe sanctions

that may be used to safeguard a court’s undoubted right to control

its docket.”    Rogers, 669 F.2d at 321.

     Nonetheless, relying on Sturgeon v. Airborne Freight, Appellee

argues that dismissing with prejudice was a lesser sanction in that

Appellants were not exposed to possible liability for costs.           778
F.2d 1154, 1159-60 (5th Cir. 1985).          We find Sturgeon inapposite.

In Sturgeon, the case had been called to trial, and a jury had been

selected prior to the plaintiff moving for a continuance. “A party

                                       13
cannot ordinarily be allowed to force an unmerited continuance by

simply refusing to go forward with a trial in which the jury has

already been selected.”      Id. at 1160 (citation omitted).           Here,

although there was a trial docket call, the case had not been

called to trial.7   We do not find Sturgeon controlling.          Assuming

arguendo that the lesser-sanctions factor is satisfied, because

there was not a clear record of delay or contumacious conduct by

Appellants, the dismissal for failure to prosecute is still error.8

     Aggravating Factors

     Further,   there   is   no   indication   that   any   of   the   three

aggravating factors listed above are present in this case.             First,

there is no indication that the delay was caused by Appellants (as

opposed to their counsel). Second, in his brief, Appellee does not

even attempt to argue that he has or would suffer actual prejudice

     7
        Moreover, we found the plaintiff’s actions in Sturgeon
constituted intentional conduct. Id. at 1160-61. Here, Appellants
notified both the court and Appellee that they were going to file
a motion for continuance approximately two weeks prior to the
docket call. Although counsel’s belated filing of the motion for
continuance is not to be commended, we are not prepared to
characterize it as intentional conduct.
     8
        This Court very recently questioned (but did not decide)
whether there is some tension in our caselaw with respect to the
standard used to determine whether the lesser-sanctions factor is
satisfied. Sealed Appellant v. Sealed Appellee, 452 F.3d 415, 417
n.3, 420 (5th Cir. 2006). As set forth previously, because the
first factor regarding clear record of delay or contumacious
conduct was not established, even assuming the lesser-sanctions
factor was shown, it was error to dismiss for failure to prosecute.
Thus, we find it unnecessary to reach the question raised in
Sealed Appellant regarding the proper standard for determining
whether the lesser-sanctions factor is met.

                                    14
due to the delay.      Third, the evidence does not indicate that the

conduct was intentional.

     In    conclusion,   although   Appellants’          counsel    was    not    “an

exemplar of efficiency, [the] conduct simply did not equal the

delinquencies that this court has found amount to a clear record of

delay in affirming other Rule 41(b) dismissals with prejudice.”

Rogers, 669 F.2d at 321.      Accordingly, although we are mindful of

and respect the right of a trial court to control its busy docket,

our precedent instructs that the bankruptcy court abused its

limited discretion in dismissing for failure to prosecute on this

record.

            B.    Denial of Motion for Continuance

     Finally, Appellants argue that the bankruptcy court abused its

discretion in failing to grant their motion for a continuance.                    For

purposes    of   completeness     and     to    ensure    adequate        time    for

Appellants to prepare their case on remand, we address the error in

denying the motion for continuance.            This Court reviews the denial

of a motion to continuance for abuse of discretion and “will not

substitute our judgment concerning the necessity of a continuance

for that    of   the   district   court      unless   the   complaining          party

demonstrates that it was prejudiced by the denial.”                See Streber v.

Hunter, 221 F.3d 701, 736 (5th Cir. 2000) (internal quotation marks

                                        15
omitted).   This is a closer question in that, unlike in the context

of dismissing for failure to prosecute, a trial court’s discretion

to deny a continuance is not limited.

     Nonetheless, as noted above, this was Appellants’ first motion

for a continuance, and the case had been on the bankruptcy court’s

docket for less than eight months.        As set forth previously, the

court continued the first docket call apparently because of a

discovery dispute that ultimately was resolved in Appellants’

favor.   Because Appellee’s conduct in responding to discovery

requests resulted in that continuance, such delay is attributable

to Appellee.   Moreover, Appellants have argued that the denial of

a continuance prejudiced them.          According to Appellants, as a

result of their November 8 subpoena, they later received documents

revealing that the proceeds of the loan had been transferred to the

Bank of Tulsa.    On November 12, 2004, Appellants subpoenaed the

bank, and bank records received indicated that the loan proceeds

were not used to fund the Urban Woods project as promised.          Because

Appellants assert they now are able to prove that Appellee used the

proceeds in    violation   of   their   agreement,9   they   have   alleged

sufficient prejudice as a result of the denial of their first

continuance request.   Although we respect the bankruptcy court’s

     9
        Appellee did not respond to these allegations in his brief.
At oral argument, without explication, Appellee’s counsel asserted
that Appellee had a defense.

                                   16
right to control its busy trial docket, under these particular

circumstances, we conclude that the court abused its discretion in

denying Appellants’ motion for a continuance.

     IV.   CONCLUSION

     For the foregoing reasons, we REVERSE the dismissal order and

REMAND for proceedings consistent with this opinion.

                               17