in re Tevis

Filing 23

ORDER signed by Senior Judge Lawrence K. Karlton on 10/5/09. The Bankruptcy Court's decision of January 26, 2009, denying the motion to recuse, is AFFIRMED. CASE CLOSED. (Kaminski, H)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 v. CALIFORNIA DEPARTMENT OF VETERAN AFFAIRS, Appellee. IN RE: LARRY TEVIS and NANCY TEVIS, Debtors. LARRY TEVIS and NANCY TEVIS, Appellants, ORDER / NO. CIV. S-09-316 LKK UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

/

Pending before the court is an appeal from the denial of a motion seeking recusal of a bankruptcy judge. pro se and in forma pauperis. Appellants appear

Appellants argue that recusal was

required because the bankruptcy judge is biased against them and is a necessary party to the case. on the papers. The court resolves this appeal

The court has jurisdiction to hear this appeal and 1

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affirms.

The

court

further

concludes

that

appellees

have

adequately shown cause as to why no sanctions should issue for their initial failure to file an answering brief. I. BACKGROUND1 This case arises from appellants' bankruptcy petition,

No. 04-26357-B13, filed June 21, 2004, and the related adversary proceeding, No. 08-02004, filed January 2, 2008, in which

appellants bring claims against the California Department of Veterans Affairs, the California Department of Housing and

Community Development, and various attorneys and trustees connected with appellants in the bankruptcy petition. The bankruptcy petition was initially before Bankruptcy Judge Klein. The petition was filed under Chapter 7 of the Bankruptcy Judge Klein

Code, but has since been converted to Chapter 13.

approved a settlement agreement and compromise of controversy in November of 2004. Although appellants contend that this settlement was "fraudulent," they have not succeeded in having it set aside. On July 6, 2005, the case was assigned Bankruptcy Judge Holman. Doc. 10-2, page 59. Appellants moved to disqualify Judge That motion, like the briefs filed to comprehend. Judge Holman Three

Holman on November 13, 2008. in this appeal, was

difficult

identified four grounds for dismissal raised in the motion.

of these concerned the correctness of prior rulings, including The following facts are taken from appellants' excerpt of record. Because of the inconsistent way in which the record is organized, the court cites to the record using the page numbers provided under the court's CM/ECF system.
1

2

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Judge Klein's decision to adopt, and Judge Holman's later decision to enforce, the settlement agreement. The fourth ground identified by Judge Holman were various of his statements that appellants contended demonstrated bias. The particular statements relied upon by appellants primarily demonstrated Judge Holman's belief that the case should settle. hearing Doc. 10-2, page 13 (appellants' excerpts from The court joins Judge Holman's

transcripts).

interpretation of appellant's initial motion, except to note that Judge Holman did not explicitly discuss appellants' broader, unexplained contention that Judge Holman was "a necessary party to this Lawsuit." Judge inadequate, Doc. 10-2, page 10. found the proffered motion grounds on for recusal 2009.

Holman and he

denied

the

January

26,

Appellants filed a notice of appeal on February 4, 2009. The clerk of the court set a briefing schedule for the appeal and appellants filed their opening brief. response. No party filed a timely brief in

The court then ordered "appellee" to file an answering

brief, as well as to show cause as to why sanctions should not issue. Order of August 20, 2009 (Doc. No. 12). The California

Department of Veterans Affairs responded by filing both an answer and a response to the order to show case. II. JURISDICTION The district courts' jurisdiction over appeals from the bankruptcy court is governed by 28 U.S.C. section 158(a). This

statute provides jurisdiction to hear appeals "(1) from final judgments, orders, and decrees; [and] . . . (3) with leave of the 3

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court, from other interlocutory orders and decrees." §§ 158(a)(1), (a)(3). interlocutory."

28 U.S.C.

"An order denying a motion to recuse is

Seidel v. Durkin (In re Goodwin), 194 B.R. 214,

221 (B.A.P. 9th Cir. 1996); see also Smith v. Edwards & Hale (In re Smith), 317 F.3d 918, 932 (9th Cir. 2002), Lopez v. Behles (In re American Ready Mix), 14 F.3d 1497, 1499 (10th Cir. 1994), Stewart Enterprises, Inc. v. Horton (In re Horton), 621 F.2d 968, 970 (9th Cir. 1980), United States v. State of Washington, 573 F.2d 1121, 1122 (9th Cir. 1978). Thus, "the district courts have

discretionary jurisdiction over appeals from interlocutory orders of the bankruptcy court." Fondiller v. Robertson (In re

Fondiller), 707 F.2d 441, 441 n.1 (9th Cir. 1983); 28 U.S.C. § 158(a)(3). Appellee California Department of Veterans Affairs argues that leave to bring an interlocutory appeal should be granted only in extraordinary circumstances. Appellee relies upon Washington,

573 F.2d at 1122, which concerned appeal of a district court's order denying a motion to recuse the district judge. As such, the

Ninth Circuit's appellate jurisdiction in Washington was provided by 28 U.S.C. section 1291. While the circuit courts may hear

interlocutory appeals under section 1291 only upon certification by the district court, section 158(a) provides the reviewing district court with discretion to hear interlocutory appeals from the bankruptcy courts. Washington's rule limiting interlocutory

appeals to "extraordinary circumstances" therefore derives from /// 4

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limitations not found in the statute governing jurisdiction over this appeal. Ordinarily, an interlocutory appeal must be accompanied by a motion seeking leave to appeal. Appellants filed no such motion. Fed. R. Bankr. P. 8001(b). When an interlocutory appeal is

filed without the proper motion for leave, the district court may nonetheless grant leave to appeal. Fed. R. Bankr. P. 8003(c). The decision to grant or deny leave is in the court's discretion. In

a similar appeal, also concerning denial of a motion for recusal, the Bankruptcy Appellate Panel for the Ninth Circuit "[found] it appropriate to treat the notice of appeal as a motion for leave to appeal, and grant[ed] the motion." In re Goodwin, 194 B.R. at 221. The court reaches the same conclusion here, and grants leave to hear this interlocutory appeal. III. DISCUSSION "An order denying a motion to recuse is reviewed for abuse of discretion." In re Goodwin, 194 B.R. at 220. "An abuse of

discretion may be based on an incorrect legal standard, or a clearly erroneous view of the facts, or a ruling that leaves the reviewing court with a definite and firm conviction that there has been a clear error of judgment." Khachikyan v. Hahn, 335 B.R. 121, 125 (B.A.P. 9th Cir. 2005) (citing SEC v. Coldicutt, 258 F.3d 939, 941 (9th Cir. 2001) and Ho v. Dowell (In re Ho), 274 B.R. 867, 871 (B.A.P. 9th Cir. 2002)). "[B]ankruptcy court judges are subject to recusal only under 28 U.S.C. § 455." In re Smith, 317 F.3d at 932; Fed. R. Bankr. P. 5

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5004(a).

Although

appellants

do

not

invoke

any

particular

provision of section 455, they argue that Judge Holman is biased. Section 455(b)(1) requires recusal when a judge "has a personal bias or prejudice concerning a party." More generally, section

455(a) mandates recusal from "any proceeding in which [the judge's] impartiality might reasonably be questioned." A party seeking

recusal must identify the specific facts that "might reasonably cause an objective observer to question [the judge's]

impartiality."

Liljeberg v. Health Services Acquisition Corp.,

486 U.S. 847 (1988). Appellants have not identified any error in legal standard or statement of facts in the order they appeal, and no such error is apparent. This appeal must therefore turn on the argument that

there has been a clear error of judgment. In reviewing a request to recuse a bankruptcy judge, the Ninth Circuit has explained that "[u]nfavorable rulings alone are legally insufficient to require recusal . . . even when the number of such unfavorable rulings is extraordinarily high on a statistical basis." In re Beverly Hills Bancorp, 752 F.2d 1334, 1341 (9th Cir. 1984) (citing In re International Business Machines Corp., 618 F.2d 923, 929-30 (2d Cir. 1980) and Botts v. United States, 413 F.2d 41, 44 (9th Cir. 1969)). Here, the only purported indications of bias

other than the adverse rulings are Judge Holman's statements in this case. These statements also fail to demonstrate that denial

of the motion to recuse was an abuse of discretion. In particular, the repeated statements to the effect that the case should settle 6

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do not demonstrate any bias arising from an extrajudicial source, and instead indicate the judge's assessment of the case. See In

Re Smith, 317 F.3d at 933 (judge's statements that he was disposed to approving settlement demonstrated merely that after researching the case, he came to an inclination, and did not show bias). Accordingly, Judge Holman did not abuse his discretion in

determining that appellants had failed to show bias requiring recusal. Appellants also argued below, and reiterate here, their belief that recusal is required because Judge Holman is a necessary party to the adversary proceeding. Appellants base this argument on the

mistaken belief that, in order to challenge Judge Holman's rulings, he must be named as a defendant. The proper mechanism for a

challenge to those rulings is an appeal, which will necessarily be presided over by a judge or judges other than Judge Holman. Accordingly, Judge Holman is not a necessary party to the

proceedings below. IV. SANCTIONS On August 20, 2009, the court ordered "appellee" to show

cause as to why sanctions should not issue for failure to file a brief in compliance with the schedule in this case. The California Department of Veterans Affairs ("CDVA"), whom appellants had named as the appellee, then filed a brief and response to the order to show cause. CDVA argues that notwithstanding appellants' filing,

CDVA is only one of seven defendants in the proceeding below, and that because CDVA had not filed an opposition to the initial motion 7

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for recusal, CDVA is not properly an appellee in this case. Moreover, CDVA states that it was not involved in any of the earlier proceedings that appellants argue were wrongly decided. In light of these facts, the court concludes that no sanctions are required. V. CONCLUSION For the reasons stated above, the Bankruptcy Court's decision of January 26, 2009, denying the motion to recuse, is AFFIRMED. IT IS SO ORDERED.

DATED: October 5, 2009

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