Court Opinion

ID: 203334
Source: CourtListenerOpinion
Date Created: 2011-02-07 06:13:56+00
Date Added: 2024-06-11T17:27:36.002597
License: Public Domain

Not for Publication in West's Federal Reporter

          United States Court of Appeals
                        For the First Circuit

No. 07-1898

                               PAT V. COSTA,

                         Plaintiff, Appellant,

                                      v.

              MAROTTA, GUND, BUDD & DZERA, LLC, ET AL.,

                        Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                  FOR THE DISTRICT OF NEW HAMPSHIRE

         [Hon. Paul J. Barbadoro,           U.S. District Judge]

                                   Before

                     Torruella, Lipez and Howard,
                           Circuit Judges.

     Pat V. Costa on brief pro se.
     Michael D. Sirota and Cole, Schotz, Meisel, Forman & Leonard,
P.A., on brief for appellee Marotta, Gund, Budd & Dzera, LLC.
     James W. Donchess and Donchess & Notinger, PC, on brief for
appellee Steven M. Notinger.

                               June 16, 2008
            Per Curiam.        This appeal involves a motion to intervene

in an adversary proceeding arising out of a bankruptcy case.                          A

crisis management firm and other professionals provided services to

the debtors while they were in chapter 11.                       After the case was

converted      to    chapter        7,     those    professionals        submitted   fee

applications.        Appellant Pat Costa, a former director and officer

of the debtors, objected thereto, accusing the professionals of

malpractice and related misconduct.                    As a creditor, Costa had

standing to advance such objections as a basis for seeking denial

(or disgorgement) of the requested fees.                    But only the chapter 7

trustee had standing to bring a malpractice action for damages.

Recognizing this fact, and noting that disposition of the fee

applications would bar a future malpractice action on res judicata

grounds, the bankruptcy court sua sponte converted the contested

matter into an adversary proceeding and designated the trustee as

the plaintiff.        Costa was given a limited right of participation.

He nonetheless complained of his inability to prosecute a dispute

that he had initiated and, in particular, protested that the

trustee   did       not    share     his    assessment      of   the     professionals'

performance.        Costa thus moved to intervene as a full party.                   The

bankruptcy court denied this motion, the district court affirmed,

and Costa has now appealed to this court.

            The appeal ends up foundering on procedural shoals.

Nowhere   in    his       lengthy    pro    se     brief   has   Costa    provided   any

                                            - 2 -
developed analysis of the intervention issue. Instead, he purports

to incorporate by reference arguments advanced by his counsel in

district     court--a     practice    that    this    court    has   repeatedly

condemned.        Those   arguments    have   thus    been    forfeited.    And

particularly because Costa's various challenges to the denial of

intervention would likely fail on the merits in any event, we see

no reason to excuse his default.

            "In an appeal from district court review of a bankruptcy

court    order,    we   independently    review      the   bankruptcy   court's

decision ...."     Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 30

(1st Cir. 1994).        Costa asserts that, under Bank. R. 7024 (which

adopts Fed. R. Civ. P. 24), he has satisfied the criteria for both

permissive and mandatory intervention.                As to the former, the

bankruptcy court cannot possibly be faulted for denying relief

based on concerns about undue delay and expense, given that Costa

had requested much more extensive discovery and a lengthier hearing

than had the existing parties.          See, e.g., Daggett v. Comm'n on

Gov. Ethics, 172 F.3d 104, 113 (1st Cir. 1999) (determining whether

permissive intervention would cause disruption or delay "is the

kind of judgment on which the district court's expertise and

authority is at its zenith").          The appeal thus hinges on Costa's

entitlement to intervene as of right.1

     1
        As an alternative basis for relief, the bankruptcy court
also found a violation of Rule 24(c), which requires that a motion
to intervene "be accompanied by a pleading that sets out the claim

                                      - 3 -
          Rule 24(a)(2) sets forth four criteria for intervention

as of right, which we have summarized as follows:

          A putative intervenor ... must show that (1)
          it timely moved to intervene; (2) it has an
          interest   relating   to   the   property   or
          transaction that forms the basis of the
          ongoing suit; (3) the disposition of the
          action threatens to create a practical
          impediment to its ability to protect[] its
          interest; and (4) no existing party adequately
          represents its interests.

B. Fernandez & Hnos., Inc. v. Kellogg USA, Inc., 440 F.3d 541, 544-

45 (1st Cir. 2006) (footnote omitted); accord, e.g., Geiger v. Foley

Hoag LLP Retirement Plan, 521 F.3d 60, 64 (1st Cir. 2008).     All four

criteria--timeliness;   sufficiency    of    interest;   likelihood    of

impairment; and inadequacy of representation--must be met.            See,

e.g., Fernandez, 440 F.3d at 545.     The bankruptcy court determined

that Costa had satisfied neither the third nor the fourth, while

the district court focused on the latter.

          In district court, Costa filed a comprehensive opening

brief (and reply brief) through counsel.       In this court, where he

appears pro se, he could have simply relied thereon.       Instead, he

elected to prepare new documents.           His 30-page opening brief

or defense for which intervention is sought." Given the unusual
circumstances involved here--particularly the fact that Costa's
objection to the fee applications was designated as the operative
complaint in the adversary proceeding--we find this a closer
question, but one that need not be resolved.

                               - 4 -
contains two arguments, the longer of which is mostly inapposite.2

The other argument touches on the fourth Rule 24(a)(2) criterion,

but does so in cursory fashion only (and ignores the third one

altogether).    Costa there contends that the trustee, even before

being installed as plaintiff in the adversary proceeding, had

discounted     the   allegations   of      malpractice,   had   negotiated

settlements with the professionals involving minor fee reductions

in return for full releases,3 and had been preparing a suit against

Costa for breach of fiduciary duties.         Under these circumstances,

he insists, it would be "astounding" to conclude that the trustee

would adequately represent his interests.             Costa then simply

states:

               I believe it is clear that the Bankruptcy
          laws and procedures allow me to intervene, and
          as the original filings clearly convey, both
          the Lower Court and District Court did not
          apply the law properly.      The result is a
          denial of my right to due process.
               (My intervention filings ... are attached
          as APPENDIX B.)

     2
        Costa there repeats his allegations of malpractice and
fraud against the professionals; accuses the trustee and the
bankruptcy court of covering up such misconduct; and complains
about the procedural consequences of converting his fee objections
into an adversary proceeding.
     3
        The trustee's motions for approval of those settlements
were made part of the adversary proceeding.

                                   - 5 -
The cited portion of his appendix contains his motion to intervene,

the   opening        district   court    brief   filed    by   counsel,    and   the

pertinent court rulings.4

                 "[A]dopting by reference memoranda filed in the district

court       is   a   practice   that    has   been    consistently   and   roundly

condemned by the Courts of Appeals."                 Gilday v. Callahan, 59 F.3d

257, 273 n.23 (1st Cir. 1995) (internal quotation marks omitted);

accord, e.g., Northland Ins. Co. v. Stewart Title Guar. Co., 327

F.3d 448, 452-53 (6th Cir. 2003) (collecting cases).                 Among other

problems, advancing an argument in this fashion violates the

requirement in Fed. R. App. P. 28(a)(9)(A) that a brief contain the

party's contentions and reasoning, see, e.g., Rhode Island Dep't of

Env. Mngmt. v. United States, 304 F.3d 31, 48 n.6 (1st Cir. 2002),

and enables a party to circumvent the page/word limits in Fed. R.

App. P. 32(a)(7), see, e.g., Exec. Leasing Corp. v. Banco Popular

de Puerto Rico, 48 F.3d 66, 67 (1st Cir. 1995).5                      This court

        4
        In his reply brief in this court, Costa quotes at length
from both of his district court briefs and includes copies thereof
in an addendum. Yet "[a]rguments omitted from an opening brief on
appeal ordinarily are deemed waived." Credit Francais Int'l, S.A.
v. Bio-Vita, Ltd., 78 F.3d 698, 709 n.18 (1st Cir. 1996). Costa
cannot claim ignorance of this rule inasmuch as appellees relied
thereon in district court. See D.N.H. No. 06-412, Dkt. # 33, at
10.
        5
        The practice also ignores the fact that the "posture and
focus" of a case typically will have "changed substantially on
appeal." Cray Comms., Inc. v. Novatel Computer Sys., Inc., 33 F.3d
390, 396 n.6 (4th Cir. 1994). This is less of a concern here, since
the district court was sitting in an appellate capacity.

                                         - 6 -
ordinarily regards such an "incorporated by reference" argument as

forfeited.      See, e.g., Sleeper Farms v. Agway, Inc., 506 F.3d 98,

104-05 (1st Cir. 2007), cert. denied, ___ S. Ct. ___, 2008 WL 310964

(2008); Rhode Island Dep't of Env. Mngmt, 304 F.3d at 48 n.6;

Gilday, 59 F.3d at 273 n.23; Exec. Leasing Corp., 48 F.3d at 68.

An appellant's pro se status provides no exemption.             See, e.g.,

Yohey v. Collins, 985 F.2d 222, 224-25 (5th Cir. 1993); Cofield v.

First Wis. Trust Co., 1996 WL 521199, at *1 (1st Cir. 1996) (per

curiam) (unpub.).      Costa, having been informed of this rule by

appellees, has provided no reason why a different result should

obtain here.

           Nor are the substantive arguments advanced by Costa in

district court so compelling as to suggest that a declaration of

forfeiture would be unfair; in fact, quite to the contrary.              In

attempting to establish inadequacy of representation, Costa has

emphasized the contrast between his views and those of the trustee

concerning the potential viability of the malpractice allegations.

As mentioned, he has accused the professionals of gross misconduct,

whereas   the    trustee   has   discounted   those   claims   and   reached

settlements involving only minor reductions in fees.6                 In an

     6
         Only one professional--the crisis management firm--is
involved in the instant appeal. Matters concerning the others were
either resolved at the outset or handled in parallel proceedings
that stopped short of an appeal to this court. The district court
judge in the instant case specifically adopted the decision of
another judge in a related case. We will treat that decision as
the operative one here.

                                    - 7 -
ordinary case, this would likely suffice--especially since an

intervenor "[t]ypically ... need only make a 'minimal' showing that

the   representation   afforded    by     a   named   party   would   prove

inadequate."    Fernandez, 440 F.3d at 545 (quoting Trbovich v.

United Mine Workers, 404 U.S. 528, 538 n.10 (1972)); see, e.g.,

Conservation Law Found. v. Mosbacher, 966 F.2d 39, 44 (1st Cir.

1992) (finding inadequate representation where party agreed to

consent decree imposing burdens unacceptable to intervenors).

          Yet "where the intervenor's ultimate objective matches

that of the named party, a rebuttable presumption of adequate

representation applies."      Fernandez, 440 F.3d at 546.        And that

presumption becomes especially robust where, as here, "an existing

party is under a legal obligation to represent the interests

asserted by the putative intervenor."          In re Thompson, 965 F.2d

1136, 1142 (1st Cir. 1992).    In that event, the applicant's burden

"is at its most onerous" and requires a "compelling showing" of

inadequacy.    Id. (internal quotation marks and emphasis deleted).

We explained in Thompson that, in this context, the applicant must

assert "concrete facts" showing that the trustee is guilty of one

of three things: adversity of interest, collusion, or nonfeasance.

Id. at 1143 (emphasis deleted).

          We think that the bankruptcy court was likely justified

in finding that Costa had failed to rebut this presumption.             In

objecting to the fee applications and the proposed settlements,

                                  - 8 -
Costa appeared as a creditor claiming an interest in the estate

property.7          Because the trustee has a fiduciary obligation to

represent         the    interests     of   creditors,      see,    e.g.,   Petitioning

Creditors of Melon Produce, Inc. v. Braunstein, 112 F.3d 1232, 1240

(1st Cir. 1997), Costa's interests and those of the trustee are

essentially in alignment.              To be sure, Costa has advanced a series

of allegations accusing the trustee (and others) of collusion and

cover-up and related misconduct.                But a court need only accept as

true       "the    non-conclusory       allegations        made    in    support   of   an

intervention            motion."     Fernandez,      440    F.3d    at    543   (internal

quotation marks omitted).              We note that the bankruptcy court found

"no    specific          allegations    from   which    even      the    possibility    of

collusion          may    be   inferred."       It     also       held   that   "Costa's

disagreement with the Trustee's assessment of the benefits and

risks of litigation and of the benefits to the estate of a

compromise of professional fees is insufficient to meet [his] heavy

burden."          We cannot say, based on our preliminary review, that

these determinations are clearly misplaced.

                  Indeed, Costa's principal argument in this regard has

been directed elsewhere. As mentioned, the bankruptcy court relied

on Thompson to hold that the presumption of adequacy could only be

rebutted by a showing of (1) adversity of interest, (2) collusion,

       7
          Costa holds general unsecured, priority unsecured,
administrative priority unsecured, and secured claims against the
estates.

                                            - 9 -
or (3) nonfeasance.   We have since clarified that this trilogy of

grounds is not "exclusive," Daggett, 172 F.3d at 111, but "only

illustrative," Fernandez, 440 F.3d at 546.8   This means, according

to Costa, that the bankruptcy court employed an erroneous legal

standard.    But even assuming arguendo that he is correct,9 we see

little cause for concern.   Costa has failed to identify any other

pertinent factors--beyond those comprising the Thompson trilogy--

that if considered would have swung the balance in favor of

intervention.   He has mentioned two others, neither of which seems

particularly helpful.

            First, Costa has voiced the concern that resolution of

the fee applications might preclude him from pursuing personal

claims (such as for tortious interference or fraud) against the

     8
        These cases were not addressing Thompson (which was not
mentioned), but rather Moosehead Sanitary Dist. v. S.G. Phillips
Corp., 610 F.2d 49 (1st Cir. 1979)--where we stated that, if the
would-be intervenor has the "same ultimate goal" as an existing
party, it must "ordinarily" make one of the three showings to
overcome the ensuing presumption of adequacy.     Id. at 54.   The
concern was that such language could be mistakenly read to suggest
"that only a limited number of 'cubbyholes' existed for claims of
inadequate representation."    Mass. Food Assoc. v. Mass Alcohol
Beverages Control Comm., 197 F.3d 560, 567 n.5 (1st Cir. 1999).

     9
        We note that the cases declaring the trilogy non-exclusive
involved a slightly different situation.       The presumption of
adequacy arose there because an existing party and the putative
intervenor had the same ultimate goal, whereas it arises here
because an existing party has a fiduciary duty to represent the
interests of the putative intervenor. As mentioned, it is in the
latter situation that the burden of demonstrating inadequacy "is at
its most onerous." Thompson, 965 F.2d at 1142.

                               - 10 -
professionals in the future.          Yet the district court deemed this

argument forfeited, since it was not raised in bankruptcy court,

and in any event meritless, since the basis for any such preclusion

was not explained.      Costa has not addressed either finding.

            Second,    Costa    has      pointed     to    the     circumstances

surrounding   the     conversion    of   the    contested       matter   into   an

adversary   proceeding.        He   complains      that,   by    means   of   this

"discretionary" and unrequested step, the bankruptcy court removed

him from "[his] own dispute" and thereby deprived him of "due

process and appellate rights."10          Much of Costa's briefing, both

below and on appeal, is devoted to this subject.                 Yet the May 26,

2006 conversion order is not before us and has little direct

bearing on the intervention issue.11           Costa has gone so far as to

contend that, because of the case's unique procedural posture, it

is questionable "whether the traditional intervention analysis is

even appropriate."      We disagree that the remedy for any improper

conversion would be to jettison or even relax the intervention

     10
        The parties appear to agree that, had the dispute remained
a contested matter, Costa would have had standing to appeal from
any adverse judgment, but that, once it became an adversary
proceeding, his standing to do so depended on intervention. Costa
also complains of restrictions on his ability to obtain discovery
and present evidence. But it is not clear that intervention would
have accorded him any greater latitude in those respects.      For
example, he and the trustee were allotted the same amount of time
to examine witnesses at the hearing.
     11
        The district court summarily rejected as "not persuasive"
Costa's attempt to rely on the conversion order "as part of the
reasoning supporting his motion to intervene."

                                    - 11 -
criteria.    In fact, Costa has mentioned the possibility of filing

an appeal to challenge the conversion order once the adversary

proceeding   has   concluded.    Whether   such   a   course   would   be

procedurally feasible, and whether such a challenge would have any

prospect of success, are matters as to which we express no opinion.

            Based on the foregoing, we conclude that Costa has

forfeited his appellate arguments and that no compelling reason

exists to excuse his default.

            Affirmed.

                                - 12 -