In re: Earl Strong

Filing 14

MEMORANDUM OPINION. Signed by Judge Gregory M. Sleet on 2/14/2018. (asw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
Chapter 7

IN RE: EARL STRONG

Banla. Case No. 17-10106 (BLS)

Debtor.

Adv. No. 17-50646 (BLS)

EARL STRONG,
Appellant,
V.

JEOFFREYL. BURTCH, CHAPTER 7 TRUSTEE, :
and ANDREW R. V ARA, Acting United States
Trustee for Region 3,

Civ. No. 17-1271 (GMS)

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Appellees.

MEMORANDUM
I.

INTRODUCTION

This appeal arises from a Bankruptcy Court order entered on August 24, 2017, which
extended the Banlauptcy Rule 4004(a) deadline to file a complaint objecting to Appellant's
discharge in his chapter 7 case. (Banla. DJ. 79). 1 Appellant timely appealed the order on
September 5, 2017. (DJ. 1). Presently before the court is Appellant's motion for stay pending
appeal (DJ. 6, 11) ("Stay Motion"), filed September 25, 2017, and motion for disqualification of
the bankruptcy judge assigned to Appellant's chapter 7 case (D.I. 7), filed October 4, 2017
("Recusal Motion"). For the reasons that follow, the court will deny the Stay Motion as moot,
deny the Recusal Motion as procedurally improper, and set a briefing schedule on the merits.

II.

BACKGROUND

On JanuarYi 13, 2017, Appellant filed a voluntary petition under chapter 7 of the
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Bankruptcy Code. l(Bankr. D.I. 1). On January 19, 2017, Appellant filed the required schedules
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The docket of the chJpter 7 case, captioned In re Earl Strong, Case No. 17-10106 (BLS), shall be cited herein as
"Bankr. D.I. _." The bocket of the adversary proceeding, captioned Andrew R. Vara v. Strong, Adv. No. 17-50646
(BLS).

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and other documents regarding his assets, liabilities, and other information in support of his
petition. (Banla. D.I. 10). On January 24, 2017, the Bankruptcy Court Clerk issued a notice that
the § 341(a) meeting would be held on February 22, 2017. (Banla. D.I. 14). On April 6, 2017,
the chapter 7 trustee appointed in the case ("Trustee") filed a motion to extend the time to file a
complaint objecting to Appellant's discharge. (Banla. D.I. 45).

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Bankruptcy Rule 4004(b)(1) provides: "On motion of any party in interest, after notice
and hearing, the court may for cause extend the time to object to discharge," and "the motion
shall be filed before the time [to object] has expired."). Fed. R. Bankr. P. 4004(b)(l). The
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motion to extend sought to extend the time for the Trustee, the United States Trustee ("UST"),
and creditors to object to Appellant's discharge through July 24, 2017. (See id.). On May 11
and 17, 2017, the Banlauptcy Court held hearings on several matters, including Trustee's motion
to extend. (Banla. D.I. 61, 64). At the hearings, Trustee advised the Banlauptcy Court that an
extension until the conclusion of Appellant's litigation with Wells Fargo Bank, N.A. ("Wells
Fargo") was warranted based on, inter alia, Appellant's apparent transfer of property to his wife
for no consideration during the year prior to the chapter 7 filing, while he was in state court
litigation with Wells Fargo regarding nonpayment of his mortgage (which could result in denial
of discharge under§ 727(a)(2)(A)); and Appellant's apparent false oaths (which could result in
denial of discharge under§ 727(a)(4)(A)). The Bankruptcy Court took Trustee's motion to
extend under advisement. (See Bankr. D.I. 64).
On June 16, 2017 - before the new deadline sought by Trustee's motion to extend - the
UST filed a complaint objecting to Appellant's discharge pursuant to§§ 727(a)(2) and (a)(4). (See

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Banla. D.I. 66; Ady- D.I. 1). The complaint was based on Appellant's testimony at the§ 341(a)

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meeting, during wh'ich he admitted, inter alia, that: he had transferred real property to his wife for
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no consideration within the year before the banlauptcy filing; he owned a vehicle that he did not
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disclosed on his schedules of assets; he owned a bank account that he did not disclose on his
schedules; and his wife received rental income that he did not disclose on his schedules. (Id.)
On June 20, 2017, Appellant filed a motion to dismiss the UST's complaint, and thereafter,
an amended version of same. (See Adv. D.I. 6, 7). Appellant argued that, because the Bankruptcy
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Rule 4004(a)

deadli~e was April 24, 2017, and the complaint was filed on June 16, 2017, the
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complaint was not tituely filed. As the Bankruptcy Court had not yet ruled on his first motion to
extend, on July 12, 2017, Trustee filed a second motion to extend the time to file a complaint
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objecting to

dischar~e.

(See Bankr. D.I. 69). Appellant objected, reiterating his argument that

both motions, and the UST's complaint, were untimely. (Banla. D.I. 70).
At a pre-trial conference held on July 27, 2017, the Bankruptcy Court directed the UST to
file a briefregarding 1the timeliness of the complaint. (See Adv. D.I. 8). The US T's brief explained
that the complaint was timely because it was filed during the extension period requested by
Trustee's first extension motion, which was timely as it was filed before the April 24, 2017,
deadline. (See Adv. D.I. 18; Del. Bankr. L.R. 9006-2 ("Unless otherwise provided in the Code or
in the Fed. R. Banla. P., if a motion to extend the time to take any action is filed before the
expiration of the period prescribed by the Code, the Fed. R. Bankr. P., these Local Rules or Court
order, the time shall automatically be extended until the Court acts on the motion, without the
necessity for the entry of a bridge order."). The Bankruptcy Court held a hearing on August 23,
2017, at which it found that Trustee had timely filed his first extension motion, and had carried his
burden under Fed. R. Bankr. P. 4004(b)(l) to show cause for the extension. 2 The Bankruptcy
Court also concluded that the UST was the beneficiary of the reliefrequested by Trustee, and that
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the initial extensio~ was sufficient to preserve the UST's time to file a complaint objecting to

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See Bankr. D.I. 9 I, 8/23/I 7 Hr' g. Tr. at I I: I2-13 ("Based upon the record before me I'm satisfied that the Chapter
7 Trustee has carried his burden[.]"); id., at I3:I5-I6 ("I'm satisfied that the trustee's motion was timely filed[.]").

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discharge. 3 As a result, the Bankruptcy Court held that both extension motions would be granted
and that the adversary proceeding would continue to trial. 4 A docket entry dated August 23, 2017,
stated that "the Chapter 7 Trustee's motions to extend discharge are granted," and that "the orders
will issue." (See Bahkr. D.I. 75). On August 24, 2017, the Bankruptcy Court entered an order
granting Trustee's sdcond motion to extend. (See Bankr. D.I. 79).

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On September 5, 2017, Appellant filed a notice of appeal attaching the order granting the
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Trustee's second extbnsion motion. (See Bankr. D.I. 81). Based on the wording of this notice and
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a subsequent "Notic~ to Amend Appellant Appeal" (D.I. 3), it is clear that Appellant appeals the
determination that the UST's complaint was timely filed. On September 25, 2017, Appellant filed
the Stay Motion, which sought "a Stay Order Of the October 23, 2017 Trial Pending the Appeal
Decision[.]" (D.I. 6). The two-page Stay Motion cites no legal authority for the relief requested,
and argues: (i) the appeal will possibly dismiss the UST's complaint as untimely; and (ii)
proceeding to trial would be a violation of Appellant's rights under the Sixth Amendment,
Confrontation Clause, and a violation of his right to due process. (Id.) After several continuances
intended to accommodate Appellant, but before this court was able to rule on the Stay Motion, the
Bankruptcy Court conducted a trial on December 11, 2017, and, based on the uncontroverted
evidence presented at trial, the Bankruptcy Court entered an order denying discharge (Adv. D.I.
54). The record reflects that Appellant did not appear at the trial.

III.

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JURISDICTION

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Bankr. D.I. 91, 8/23/,17 Hr'g. Tr. at 12-15 ("Based upon the record before me I'm satisfied ... that the [UST] is
similarly a beneficiary of the reliefrequested and obtained by the Chapter 7 Trustee."); id. at 13: 15-20 ("I'm satisfied
that the trustee's motio~ was timely filed, that the court took the first one under advisement and then that a second
motion was filed and a· request also by the Office of the [UST] sufficient to preserve that timeline so that the court
could extend it.").
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Bankr. D.I. 91, 8/23/17 Hr'g. Tr. at 11 :16-18 ("The Trustee's first and second motions were taken under advisement
by this court and will be granted by this court."); id. at 21-24 ("[T]he court will schedule ... a trial on ... the adversary
proceeding commenced by the Office of the [UST].").

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Appeals from the Bankruptcy Court to this court are governed by 28 U.S.C. § 158.
Pursuant to § 158(a)(l), the court has mandatory jurisdiction over this appeal, which is a final
order of the Bankruptcy Court. 28 U.S.C. § 158(a)(l). The court reviews the Bankruptcy Court's
findings of fact for clear error and exercises plenary review over questions of law. See Am. Flint
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Glass Workers Union v. Anchor Resolution Corp., 197 F.3d 76, 80 (3d Cir. 1999). The court must

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"break down mixed questions of law and fact, applying the appropriate standard to each
component." Meridian Bankv. Alten, 958 F.2d 1226, 1229 (3d Cir. 1992).

IV.

DISCUSSION
A.

Stay Motion

The Stay Motion must be denied as moot. The Stay Motion requested a stay of the trial on
the UST's complaint objecting to discharge, pending the court's ruling on this appeal. The trial
was completed before the court ruled on the Stay Motion. The relief requested in the Stay Motion
is therefore moot. Even if the Stay Motion were not moot, however, the court would not have
granted relief. Appellant did not seek a stay pending appeal in the Bankruptcy Court prior to
moving for a stay in this court on September 25, 2017. 5 Pursuant to Bankruptcy Rule 8007(a)(l),
a party seeking a stay pending appeal of a bankruptcy court order must ordinarily request the stay
from the bankruptcy court in the first instance. Where, as here, a stay pending appeal is sought in
the district court in the first instance, the movant must "show that moving first in the bankruptcy
court would be impracticable." Fed. R. Bankr. P. 8007(b)(2)(A). The Stay Motion does not
indicate any reason that a stay was not sought from the Bankruptcy Court. In his reply, Appellant
states that he "filed the stay motion with the Federal Court because Appellant feared [t]hat it would

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be denied and [because] Appellant has filed a motion to dismiss [Judge Shannon] from these

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On October 18, 2017, Appellant made a telephonic request that the Bankruptcy Court stay further hearings in the
adversary proceeding including trial on the discharge objection, until such time as this court might rule on his appeal,
and that request was d~nied. (See Adv. D.I. 43).

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[c]ases." (See D.I. 10 at 6,

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12). Appellant's assumption that the Bankruptcy Court would rule

against him based on prior rulings was not a sufficient reason to seek a stay first in this Court rather
than seeking it first in the bankruptcy court. 6
Even excusing this failure,7 the Stay Motion set forth no basis upon which a stay of the
appeal could have been granted. "The granting of a motion for stay pending appeal is discretionary
with the court." See In re Trans World Airlines, Inc., 2001 WL 1820325, at *2-3 (Bankr. D. Del.
Mar. 27, 2001 ). Appellant bears the burden of proving that a stay of the Order is warranted based
on the following criteria: (1) whether appellant has made "a strong showing" that it is likely to
succeed on the merits; (2) whether appellant will be irreparably injured absent a stay; (3) whether
a stay will substantially injure other interested parties; and (4) where the public interest lies.

Republic of Phil. v. Westinghouse Electric Corp., 949 F.2d 653, 658 (3d Cir. 1991). The most
critical factors, according to the Supreme Court, are the first two: whether the appellant has
demonstrated (1) a strong showing of the likelihood of success, and (2) that it will suffer irreparable
harm - the latter referring to harm that cannot be prevented or fully rectified by a successful appeal.

In re Revel AC, Inc., 802 F.3d 558, 568 (3d Cir. 2015) (citing Nken v. Holder, 556 U.S. 418, 434
(2009) (internal citations omitted)).
As to the first factor, there was no likelihood of success on appeal. The record is clear that
a motion to extend was filed before the expiration of the deadline, and the applicable rules are
clear that a motion to extend stays the deadline until the .Bankruptcy Court can rule on the motion
to extend. (See Fed. R. Bankr. P. 4004(b)(l); Del. Bankr. L.R. 9006-2). As to the second factor,
Appellees are correct that Appellant did not suggest any noneconomic harm which he might suffer
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See, e.g., In re TACFinancial, Inc., 2017 WL 2833246 at *3-*4 (S.D. Cal. June 30, 2017); In re Howes, 2016 WL
4944983 at *2-*3 (D. Md. Sept. 15, 2016).
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See Erickson v. Pardus, 551 U.S. 89, 94 (2007) ("A document filed prose is to be liberally construed.") (internal
quotation marks omit):ed).

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in absence of a stay. (See D.I. 9 at 14-15). Appellant's costs attendant to proceeding to trial on
the discharge objection were economic and did not constitute the "irreparable harm" necessary to
obtain a stay pending appeal. See Acierno v. New Castle County, 40 F.3d 645, 653 (3d Cir. 1994)
("[e]conomic loss does not constitute irreparable harm.") Denial of Appellant's discharge also
would not satisfy the standard; assuming Appellant is pursued by his creditors for payment of his
debts, any resulting loss will be economic, and would not constitute irreparable harm. See id. As
Appellant did not make the requisite showings on either of these first two factors, the inquiry into
the balance of harms and the public interest is unnecessary, and the stay should be denied without
further analysis. Revel AC, 802 F.3d at 571 (internal citations omitted).

B.

Recusal Motion

The Recusal Motion must also be denied. On September 29, 2017, the Bankruptcy Court
held a hearing on pretrial matters, and set October 23, 2017 as a further pretrial conference. (See
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Adv. D.I. 38). On 6ctober 5, 2017, Appellant filed a three-page motion seeking to "disqualify and
remove" the Judge Shannon. (Adv. D.I. 37). The motion attached no affidavit in support, and the
UST opposed the relief. (Adv. D.I. 46) On October 23, 2017, the Bankruptcy Court held a further
pretrial conference in the adversary proceeding. (See Adv. D .I. 25). Although originally scheduled
for hearing on October 23, 2017, the Bankruptcy Court granted Appellant permission to adjourn
the hearing on his motion for recusal. (See Adv. D.I. 43). The Bankruptcy Court entered a
scheduling order, which provided that Appellant was required to file a reply, if any, in support of
the motion for recilsal by November 17, 2017, and that the parties were required to submit trial.
exhibits and witness lists regarding the motion for recusal on or before December 1, 2017. (See
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Adv. D.I. 48). The docket reflects that Appellant made no further submissions and did not appear
at the December lil, 2017 hearing on the motion for recusal. At the December 11, 2017 hearing,
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the Bankruptcy Court denied the relief requested in the motion for recusal, both as a procedural
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matter, based on Appellant's failure to attend the hearing and present the matter, and on a
substantive basis, based on the findings and analysis set forth by the Bankruptcy Court on the
record. (See 12/11/1'7 Hr'g. Tr. at29:13-31:8).
Appellant's additional request for relief, the Recus.al Motion filed in this court (D.I. 7), was
procedurally improper, as a motion for recusal of a bankruptcy judge must be filed with the
bankruptcy court and considered by the bankruptcy judge in the first instance. See US. v.
Townsend, 478 F.2d 1072, 1073 (3d Cir. 1973) Gudge against whom an affidavit is filed bears

responsibility of assessing legal sufficiency of affidavit). Judge Shannon found Appellant's
motion for recusal insufficient and denied relief in his December 11, 2017 ruling (see 12/11/17
Hr'g. Tr. at 29:13-31 :8). The docket reflects no appeal of the Bankruptcy Court's ruling. Absent
a timely appeal, the court has no jurisdiction over this matter. 8

V.

CONCLUSION

For the foregoing reasons, the Appellant's Stay Motion and Recusal Motion will be
and merits briefing shall proceed. A separate order shall is e.

February

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Even if such a request were procedurally proper, the Recusal Motion offered no evidence and demonstrated no basis
for such relief. Recusal is governed by 28 U.S.C. §§ 144 and 455. Section 144 provides that "Whenever a party to
any proceeding in a district court makes and files a timely and sufficient affidavit that the judge before whom the
matter is pending has a personal bias or prejudice either against him or in favor of any adverse party, such judge shall
proceed no further therein." 28 U.S.C. § 144. Section 455 provides that a judge is required to recuse himself"in any
proceeding in which his impartiality might reasonably be questioned." 28 U.S.C. § 455(a). The test for recusal under
section 455(a) is whether a "reasonable person, with knowledge of all the facts, would conclude that the judge's
impartiality might reasonably be questioned," In re Kensington Int'/ Ltd., 368 F.3d 289, 296 (3d Cir. 2004), not
"whether a judge actually harbors bias against a party," U.S. v. Kennedy, 682 F.3d 244, 258 (3d Cir. 2012). Under§
455(b)(l), a judge is required to recuse himself"[w]here he has a personal bias or prejudice concernirig a party."
Under either subsection of section 455, the bias necessary to require recusal generally must derive from a source
outside of the official proceedings. See Liteky v. U.S., 510 U.S. 540, 554 (1994); Selkridge v. United of Omaha Life
Ins. Co., 360 F.3d 155:, 167 (3d Cir. 2004) ("beliefs or opinions which merit recusal must involve an extrajudicial
factor"). Hence, "judicial rulings alone almost never constitute a valid basis for a bias or partiality motion." Liteky,
510 U.S. at 555. The Recusal Motion, which is replete with accusations concerning the integrity of the Bankruptcy
Court, lacks any factuai allegations of personal bias or prejudice which might satisfy these standards. Appellant offers
no evidence in support of these allegations apart from adverse rulings, and the Third Circuit has repeatedly observed
that "a party's displeas'ure with legal rulings does not form an adequate basis for recusal." Securacomm Consulting,
Inc. v. Securacom Inc.! 224 F.3d 273, 278 (3d Cir. 2000).

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