Jackson v. Nelson
Filing
12
MEMORANDUM OPINION. Signed by Judge Ellen L. Hollander on 6/25/2018. (c/m 6/25/18 jnls, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
CLINTON A. JACKSON
Appellant,
v.
Civil Action No. ELH-18-256
RAYMON KEVIN NELSON
Appellee.
MEMORANDUM OPINION
This bankruptcy matter is before the Court for the second time,1 and is rooted in an
adversary proceeding filed in bankruptcy court by Clinton Jackson against Raymon Nelson, the
defendant in the adversary proceeding and the debtor in a related Chapter 7 bankruptcy
proceeding.
Jackson, the self-represented plaintiff, appeals an Order of the United States
Bankruptcy Court issued on January 23, 2018 (ECF 1-1), denying his Motion for Partial
Summary Judgment (ECF 4-31, the “Motion”). See ECF 1 (Notice of Appeal); see also ECF 1-2
(Bankruptcy Court docket). In the Motion, Jackson sought to bar the discharge of Nelson’s debt,
pursuant to 11 U.S.C. §§ 727(a)(3) (a)(5), and (a)(7).
On appeal, Jackson contends that the Bankruptcy Court erred in denying his Motion. See
ECF 7 (Jackson’s Brief). Jackson has filed a “Designation of Record” (ECF 4), consisting of
more than 700 pages of exhibits and other materials. He has also filed a “Statement of Issues To
Be Presented On Appeal” (ECF 4-63) and an amended Table of Contents to his brief. See ECF
11.
1
See ELH-15-3978 (Appeal filed by Raymon Nelson on December 29, 2015); see also
id., ECF 25 (Memorandum Opinion of July 20, 2016); ECF 26 (Order of July 20, 2016), vacating
the Bankruptcy Court’s award of summary judgment to Jackson and remanding to the
Bankruptcy Court.
During the adversary proceeding, Nelson was represented by counsel. However, on
March 15, 2018, Jackson filed a “Certificate of Service” (ECF 8), stating that Nelson’s attorney
informed him that he was not representing Nelson on appeal. See id. Therefore, Jackson served
the brief and exhibits on Nelson by certified mail, sent to Nelson’s last known residence and
business. ECF 8 at 1-2. However, Nelson has not responded. See Docket. And, his time to do
so has expired. See Fed. R. Bankr. 8018(a)(2) (“The appellee must serve and file a brief within
30 days after service of the appellant’s brief.”).
No hearing is necessary to resolve the appeal. See Local Rule 105.6. The Court is
mindful of its obligation to construe liberally the filings of a pro se litigant, which are held to less
stringent standards than formal filings drafted by attorneys. Erickson v. Pardus, 551 U.S. 89, 94
(2007); see also White v. White, 886 F.2d 721, 722-23 (4th Cir. 1989). Nevertheless, for the
reasons that follow, I shall dismiss the appeal. ECF 1-1.
I.
Procedural and Factual Background2
A.
As indicated, this is the second appeal arising from an adversary proceeding. I shall
briefly recount the facts as they were set forth in my Memorandum Opinion of July 20, 2016
(ECF 25), in case ELH-15-3978 (hereinafter, “Appeal I”).3
2
I shall limit the factual and procedural background to those matters that are relevant to
this appeal.
3
A court “may properly take judicial notice of ‘matters of public record’ and other
information that, under Fed. R. Evid. 201, constitute ‘adjudicative facts.’” Goldfarb v. Mayor &
City Council of Balt., 791 F.3d 500, 508 (4th Cir. 2015) (quoting Philips v. Pitt Cty. Mem’l
Hosp., 572 F.3d 176, 180 (4th Cir. 2009)); see also Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308, 322 (2007); Katyle v. Penn Nat'l Gaming, Inc., 637 F.3d 462, 466 (4th Cir.
2011), cert. denied, 565 U.S. 825 (2011). However, the adjudicative facts may “not [be] subject
to reasonable dispute,” in that they must be “(1) generally known within the territorial
2
Nelson, a cardiologist, had or has an ownership interest in three businesses: Raymon K.
Nelson, Classic Cardiology, MD, PA, Inc. (“Classic Cardiology”); All About the Heart, LLC
(“AAH”); and All About the Property, LLC (“AAP”). See Appeal I, ECF 25 at 2 (citing Appeal
I, ECF 11 at 10, 12). Between June 2005 and April 2010, Nelson employed Jackson as a
consultant to perform various services, including securing corporate financing.
Id. (citing
Appeal I, ECF 22 at 9-10, ¶ 3).
Jackson, a creditor of Nelson, ceased working for Nelson in April 2010. Appeal I, ECF
25 at 2 (citing Appeal I, ECF 22 at 9, ¶ 3). He subsequently filed suit against Nelson and Classic
Cardiology in a Maryland court, apparently for breach of contract. Id. (citing Appeal I, ECF 2-4
at 36 and ECF 22 at 9-10, ¶ 3). On September 24, 2013, the Circuit Court for Anne Arundel
County entered judgment in favor of Jackson in the amount of $135,363.72. Id. (citing Appeal I,
ECF 2-4 at 36). The circuit court had previously awarded Jackson attorney’s fees in the amount
of $64,147. Id. According to Nelson, that “matter” was appealed to the Maryland Special Court
of Appeals. Id. (citing Appeal I, ECF 11 at 10).
On November 7, 2013, Classic Cardiology filed a voluntary petition for bankruptcy relief
pursuant to Chapter 11 of the United States Bankruptcy Code (the “Corporate Case”). In re:
Raymon K. Nelson, M.D., P.A. Classic Cardiology, Inc., WIL-13-28961 (Bank. D. Md.) (ECF 1).
A week later, on November 14, 2013, Nelson filed a voluntary petition for bankruptcy relief
jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to
sources whose accuracy cannot reasonably be questioned.”
Of relevance here, courts may take judicial notice of publicly available records. See, e.g.,
Zak v. Chelsea Therapeutics Int'l, Ltd., 780 F.3d 597, 607 (4th Cir. 2015) (“[C]ourts are
permitted to consider facts and documents subject to judicial notice without converting the
motion to dismiss into one for summary judgment.”). Among other things, a court may also take
judicial notice of its own records. Anderson v. Fed. Deposit Ins. Corp., 918 F.2d 1139, 1141 n.1
(4th Cir. 1990).
3
pursuant to Chapter 11 of the United States Bankruptcy Code (the “Individual Case”). In re:
Raymon Kevin Nelson, WIL-13-29248 (Bank. D. Md.) (ECF 1).
subsequently converted to petitions under Chapter 7.
Both petitions were
See Appeal I, ECF 25 at 3 (citing
Corporate Case, ECF 180, and Individual Case, ECF 149).
On May 5, 2015, Jackson initiated an adversary proceeding against Nelson in the
Individual Case. See Appeal I, ECF 25 at 3. A copy of the Complaint was submitted as an
exhibit to this appeal. ECF 4-3; see also ECF 4-2 (Adversary Proceeding Cover Sheet, dated
May 5, 2015); ECF 1-2 at 25.
Jackson’s Complaint, titled “Creditor Clinton A. Jackson’s Complaint Objecting to
Discharge of Debtor” (ECF 4-3), is not a model of clarity. Jackson alleged that “[t]he Debtor
knowingly and fraudulently made a false oath or account” (id. at 5, ¶ 12) and that “[t]he Debtor
concealed property that belonged to the estate with the intent to hinder, delay or defraud the
Creditors and/or The Chapter 7 Trustee . . . .” Id. at 5, ¶ 13. In particular, the Complaint alleged,
inter alia, that notwithstanding Nelson’s amendments to his submissions to the Bankruptcy
Court, Nelson failed to disclose income obtained from Classic Cardiology and AAH.
See
generally id. at 5-11, ¶¶ 14-26. Further, the Complaint alleged that Nelson failed to disclose a
judgment debt incurred by AAP. See id. at 14-15, ¶ 31. Therefore, Jackson sought the denial of
Nelson’s discharge, pursuant to “11 U.S.C. Sections 727(a)(2) and/or (a)(3) and/or (a)(4) and/or
(a)(5) and/or (a)(7) . . . .” Id. at 17; see also ECF 4-2 at 1; ECF 1-2; ECF 4-5 (Nelson’s Answer,
dated June 8, 2015).
On September 4, 2015, Jackson filed “Plaintiff’s Motion for Summary Judgment”
(Appeal I, ECF 2-7 at 1-2), which Jackson later supported with “Plaintiff’s Second Amended
4
Memorandum in Support of Motion for Summary Judgment.” See Appeal I, ECF 2-17. In
relevant part, Jackson argued, id. at 27-28:
There is no reasonable dispute as to any material facts in this case. The Debtor’s
Schedules, [Statement of Financial Affairs], false oaths and false testimony
demonstrates his attempts to conceal property and hinder or delay the Trustee in
his administration of the estate and/or the Creditors; the Debtor also failed to
satisfactorily explain his unilateral removal of substantial assets from the
Corporate Debtor’s income tax returns, post-petition, and then provided false
testimony in effort [sic] to support his unilateral decision to remove the assets,
including $224,000 of accounts receivable; and the Debtor provided a host of
falsities in effort [sic] to throw his accountant 2010-2014 [sic], Mr. McDuffie,
under the bus, and toward the Plaintiff, in effort [sic] to erase a fully adjudicated
State Court Judgment, by omitting disclosure [sic] of the fact that he and his nonfiling spouse are the sole bookkeepers, check writers, printers of Quick Books and
Smooth Solutions Software Accounts Receivable Records, etc. for both the
Corporate Debtor and AAH, and exclusively control and account for in excess of
$2.5 million annual cash flow. The Debtor’s aforementioned acts were committed
in connection with both the instant case and the Corporate Debtor’s case (#1328961). Therefore, the Debtor is not entitled to a discharge [of debt] pursuant to
Section 727(a)(2), (a)(3), (a)(4), (a)(5) and (a)(7) of the Bankruptcy Code and
Plaintiff is entitled to summary judgment as a matter of law.
Nelson opposed the prior summary judgment motion. Appeal I, ECF 2-11. He argued,
inter alia, that summary judgment was improper because a dispute of material fact existed as to
whether Nelson had intended to omit or mischaracterize information pertaining to income
reported on financial disclosures to the Bankruptcy Court. See Appeal I, ECF 25 at 17-18 (citing
Appeal I, ECF 11 at 21). Jackson replied. See Appeal I, ECF 2-21.
In an Order of December 17, 2015 (see Appeal I, ECF 2-28), the Bankruptcy Court
(Lipp, J.) granted Jackson’s motion for summary judgment in the adversary proceeding. The
court denied the debtor’s discharge under 11 U.S.C. § 727(a)(4) and § 727(a)(7). Nelson
challenged that ruling in an appeal to this Court. See Appeal I, ECF 1.
By Memorandum and Order of July 20, 2016 (Appeal I, ECF 35; ECF 26), I vacated the
Bankruptcy Court’s Order of December 17, 2015, and remanded the case for further proceedings.
5
In particular, I concluded that there was a dispute of material fact as to whether Nelson intended
to omit or mischaracterize information contained in his financial disclosure forms. Id., ECF 25
at 28-29. Additionally, I concluded that the Bankruptcy Court had impermissibly assessed the
credibility of evidence submitted in the context of Jackson’s earlier summary judgment motion.
Id.
After the remand, the Bankruptcy Court entered a Scheduling Order dated November 13,
2017. ECF 4-30 at 2. The court set a trial date of February 6, 2018. Id.
On November 28, 2017, soon after the Scheduling Order was issued, Jackson filed the
Motion at issue here (ECF 4-31), asking the Bankruptcy Court, inter alia, to “deny[] the
discharge of Defendant Raymon Kevin Nelson based upon Defendant’s conduct in violation of
[11 U.S.C. §§] 727(a)(3), 727(a)(5) and/or 727(a)(7)[.]” ECF 4-31 at 4; see also id. at 24. In the
Motion, Jackson averred, inter alia, that Nelson had “concealed” and failed to “explain” assets in
financial disclosure forms related to the Corporate Case. Id. at 6-8, 11. Further, Jackson
contended that the alleged “concealment” of assets “made it impossible to ascertain the
Corporate Debtor’s true financial condition.” Id. at 20. And, Jackson argued that 11 U.S.C. §§
727(a)(3), 727(a)(5), and 727(a)(7) “do not require the Court’s finding of [Nelson’s] fraudulent
intent” as to any funds he may have concealed. Id. at 3.
Jackson also argued, id. at 17:
(1) Defendant violated [11 U.S.C.] Sections 727(a)(3) and 727(a)(7) by
concealing accounts receivable from the Corporate Debtor; (2) Defendant violated
Sections 727(a)(5) and 727(a)(7) by failing to explain satisfactorily the loss of the
Corporate Debtor’s assets and/or its’ [sic] deficiency of assets to meet the
Corporate Debtor’s liabilities; and (3) Defendant violated Section 727(a)(5) by
failing to explain satisfactorily the loss of his assets and/or his deficiency of assets
to meet his liabilities.
6
Nelson, through counsel, filed a “Partial Response to Plaintiff’s Motion For Summary
Judgment.” ECF 4-48. Nelson’s attorney stated, inter alia, that Nelson was “out of the country,
and Counsel has had a great deal of difficulty communicating with him. Counsel is therefore
unable to review, discuss, and finalize a response . . . as the Defendant is unable to assist in or
participate with the defense of his case[.]” Id. at 1, ¶ 1. Additionally, counsel stated that he had
notified his client of his desire to withdraw from representation of Nelson. Id. ¶ 2.
As to the merits, counsel for Nelson contended that Jackson’s Motion “was filed . . . in
contravention of the ruling by the U.S. District Court for the District of Maryland in Nelson v.
Jackson, Civil Action No. ELH-15-03978 (D. Md. 2016) requiring that the issue of intent be
determined at trial.” Id. at 2, ¶ 4.C.
Jackson replied. ECF 4-50. He argued that Nelson “was well aware of the pending
motion for partial summary judgment . . . , but nonetheless apparently failed and/or declined to
assist his counsel in timely responding to the motion.” Id. at 1, ¶ 2.
The Bankruptcy Court held a hearing as to the Motion on January 23, 2018. See ECF 465 (hearing transcript); ECF 4-1 (same). Nelson’s attorney appeared on Nelson’s behalf, but
Nelson did not attend. See ECF 4-65 at 2.4 Jackson appeared, without counsel. Id.
4
At the hearing of January 23, 2018, counsel for Nelson stated that on that same date he
had received two emails from Nelson (ECF 4-65 at 4), which were then read into the record, id.:
at 5:
“I left on a medical mission to Haiti December 4, 2017. I have not
returned from the medical mission trip to the USA. I am still working in Haiti on
the development of their cardiovascular wellness program. I need more time to
complete my mission.
Since the Court will not extend my trial, I will delay the Haiti mission to
attend the trial. I would prefer and request an extension of the trial date. My
intention is to be present for the trial, February 6, 2018.
7
At the hearing, Jackson contended that beginning in November 2013, Nelson “concealed
accounts receivable” for Nelson’s “corporation and also . . . for himself” when he failed to
update financial disclosure forms. ECF 4-65 at 16-17. However, Judge Lipp stated, id. at 19:
“The fact that [Nelson] did not amend his schedules, we have [already] dealt with that.” In the
context of 11 U.S.C. § 727(a)(3), she explained, id. at 20:
[O]n a summary judgment [motion] . . . , [u]nder 727(a)(3) it is not that he
did not list [property] on his schedules, which you keep going back to, it is that he
did not maintain or preserve recorded information. And the fact that he was able
to give a thumb drive of information to the Trustee counters what you have said.
And part of the problem is you have set forth a whole array of facts . . .
that you believe are undisputed because you have a partial record but that aren’t
necessarily undisputed.
There are no stipulations that that information is accurate.
The Bankruptcy Court added, id. at 21-24:
[Under 11 U.S.C. §] 727(a)(3), you do not get a discharge unless the
Debtor has failed to keep or preserve any recorded . . . information, books,
documents, records, papers from which Debtor’s financial condition or business
transaction may be ascertained unless such act or failure to act was justified under
the circumstances of the case. I am citing from In Re: Fisher: District of
Maryland to Westlaw cite 2009 Westlaw 112330, a 2009 case.
*
*
*
I have read the pleadings. . . . I do find that I would not grant summary
judgment under 727(a)(3). It appears that additional information was provided
[by Nelson]. I just do not know what that was.
I was not aware of the hearing today until I was out of the USA. I could
not get back today. I will be present on Feb. 6. I need more time in Haiti for my
medical mission.”
That is e-mail number one. E-mail number two states, “I had not received
the subpoena for February 6. This is an important piece of information that the
Judge needs to be aware of.”
The Bankruptcy Court denied Nelson’s request to postpone the trial date. ECF 4-65 at 6.
Additionally, counsel for Nelson attempted to withdraw from the case, but the Bankruptcy Court
denied that motion as well. See id. at 7-10.
8
It may be at trial you can establish that there are some things that [Nelson]
did not provide or preserve, more importantly. The fact that he did not amend the
schedules is a different section of 727. And so you cannot say because he did not
amend his schedules that he did not preserve books and records.
In other words, did he have them? Did he keep them? Now, maybe he
did not give them and then that is something else but I need to know what it is that
he had that wasn’t given because, again, there was a thumb drive of things that
was given. There were meetings of creditors and things exchanged. I just do not
know what they are and you will probably need to have somebody testify as to
what it was that was given and that he did not provide other information that at
the time would be relevant because probably these accounts receivables had been
exhausted anyway by 2015 when he converted the case.
*
*
*
I do not know that he did not reveal [records]. That is the problem. . . . I
know he gave up a thumb drive. I do not know what was on the thumb drive.
You are telling me that the thumb drive only dealt with post-petition. I do not
know that. I do not know what it is. I do not know what the Trustee got.
I do not know what information was provided and whether or not it was
necessary or relevant to the administration of the case.
*
*
*
I do not know whether [Nelson] was concealing other information. I do
not know that the record is clear as to what in fact was given and when and so I
am not granting the relief [requested by Jackson in the Motion for Partial
Summary Judgment] under 727(a)(3).
As to 11 U.S.C. §§ 727(a)(5) and (a)(7), the following portion of the hearing transcript is
pertinent, ECF 4-65 at 25-34:
MR. JACKSON: . . . So the Debtor had like $1 to $5 million dollars
evaluation for his assets and the financial statements up through 2013. Then he
files his petition in 2013 and there’s no value for those assets. So, only he listed,
what, $695,000 of assets, $658,000 of which was his residence. So, he never
explained what happened to all those assets. So that’s one and we can go through
and look at my references to the evidence in terms of his specific failures to
disclose. But that’s the big picture we are going there.
THE COURT: Okay. Mr. Weiss [Counsel for Nelson]?
9
MR. WEISS: Thank you, Your Honor. Dealing with the 727(a)(5) issue,
to quote it, “The Debtor has failed to explain satisfactorily before determination
of denial of discharge under this paragraph any loss of assets or deficiency of
assets to meet the Debtor’s liabilities.”
Well, I would argue that that type of determination is inappropriate for
decision on summary judgment. That it would require live testimony to allow the
Debtor to explain satisfactorily, at least to the Court’s satisfaction, any loss of
assets. . . . There are defenses and I would ask the Court to allow those defenses
to be made at trial instead of decided at summary judgment.
MR. JACKSON: And to counter that I would state that any explanation
not provided during the case, as he said, prior to this discharge, are not allowed at
trial. Time is up on that. The Defendant failed to explain these disappearances and
deficiencies.
THE COURT: Well, [Nelson] may have failed to explain it to your
satisfaction but he did indicate that he had changed his tax returns and the tax
returns do not necessarily show what the assets are or the value of assets in the
bankruptcy schedules. . . . Well, then if those assets were real, if he really had
them, then he will have to explain them but I do not know whether he made a
misrepresentation in his financial statements to which somebody would have had
an opportunity to object. . . . So, under summary judgment . . . I have to look to
see whether there are material facts in dispute and there are material facts in
dispute. . . . And I look at it in a light most favorable to the non-moving party.
*
*
*
But as to these — the 727(a)(3), (a)(5) and (a)(7), looking at it in a light
most favorable to the non-moving party and recognizing that the Debtor has
raised, on many occasions, the issue of the revision of the tax returns — tax
returns just are not necessarily indicative of what you own anyway in a
bankruptcy or how you value the bankruptcy.
The assets might be and that is something that will have to be explained, it
is going to be explained, by the Debtor at trial. But there are disputes as to
material facts. Again, [Jackson] ha[s] raised it in a fashion as if what [he]
believe[s] to be true cannot or is not a disputed fact and I do not find that to be the
case.
*
*
*
At this stage it does not — I do not believe that [Jackson] ha[s] met [the]
burden to establish that these are material facts that are not in dispute and that [he
is] entitled to a judgment as a matter of law.
10
MR. JACKSON: No, I understand.
*
*
*
THE COURT: But, again, based on the motion for summary judgment and
the sections under which we are dealing with the motion for summary judgment, I
am denying the motion for summary judgment.
By Order of January 23, 2018 (ECF 4-52), the Bankruptcy Court denied Jackson’s
Motion, stating, id.: “Upon consideration of the Motion for Partial Summary Judgment filed by
the Plaintiff and the opposition filed by the Defendant, and for the reasons set forth on the record
at the hearing held on this matter, it is, by the United States Bankruptcy Court for the District of
Maryland, ORDERED, that the Motion for Partial Summary Judgment is hereby denied.
Jackson filed his Notice of Appeal in the Bankruptcy Court the next day. See ECF 4-53. On
January 25, 2018, the Notice of Appeal was filed in this Court. See ECF 1.
By Order of January 29, 2018 (ECF 4-62), the Bankruptcy Court allowed Mr. Weiss to
withdraw from representation of Nelson. See ECF 8 at 1.
As indicated, trial was scheduled to begin on February 6, 2018. See ECF 4-30 at 2.
However, it seems that Jackson “did not appear” on February 6, 2018. See 15-ap-228, ECF 227
(correspondence styled “Line Regarding Plaintiff’s Absence at the Hearing on February 6,
2018”) at 1. Therefore, the trial date was rescheduled for July 24, 2018. See 15-ap-228
(Bankruptcy Court Docket Entry of March 28, 2018).
Additional facts are included in the Discussion.
II.
Discussion
A.
Jackson identifies three issues in his “Statement of Issues To Be Presented On Appeal.”
See ECF 4-63 at 1-2. They are as follows, id.:
11
1. Whether [the] Bankruptcy Court erred when it denied Plaintiff/Movant’s
Motion for Partial Summary Judgment pursuant to 11 U.S.C. Secs. 727(a)(7)
and 727(a)(3), notwithstanding the fact that, with Defendant’s intent not being
an element of the subject alleged violation, [and in consideration of the
exhibits submitted by Jackson to the Bankruptcy Court] upon which the
privilege of a discharge is dependent.
2. Whether [the] Bankruptcy Court erred when it denied Plaintiff/Movant’s
Motion for Partial Summary Judgment pursuant to 11 U.S.C. Secs. 727(a)(7)
and 727(a)(5), notwithstanding the fact that, with Defendant’s intent not being
an element of the subject alleged violation, the admissible evidence reflect[s]
that there is no issue as to any material fact that Defendant, sua sponte, failed
to explain the loss of the Corporate Debtor’s assets from its’ [sic] 2009-2013
pre-financial statements and income tax returns and the deficiency of assets to
meet the Corporate Debtor’s estate liabilities; and
3. Whether [the] Bankruptcy Court erred when it denied Plaintiff/Movant’s
Motion for Partial Summary Judgment pursuant to 11 U.S.C. Sec. 727(a)(5),
notwithstanding the fact that, with Defendant’s intent not being an element of
the subject alleged violation, the admissible evidence reflect[s] that there is no
issue as to any material fact that Defendant, sua sponte, failed to explain the
loss of the Debtor/Defendant’s assets from his 2009-2013 pre-petition
financial statements and the deficiency of assets to meet the
Debtor/Defendant’s estates’s liabilities.
In sum, Jackson insists that there is no dispute of fact as to whether Nelson violated 11
U.S.C. §§ 727(a)(3), (a)(5), and (a)(7) when Nelson allegedly “(1) concealed the Corporate
Debtor’s accounts receivable from which the Corporate Debtor’s financial condition or business
transactions might be ascertained; (2) failed to explain satisfactorily the Corporate Debtor’s loss
of assets and/or the deficiency of assets to meet the Corporate Debtor’s liabilities; and (3) failed
to explain satisfactorily his loss of assets and/or the deficiency of assets to meet the his [sic]
liabilities.” ECF 7 at 28.
Section 727(a) of Title 11 of the United States Code states, in relevant part:
(a) The court shall grant the debtor a discharge, unless—
*
*
*
(3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep
or preserve any recorded information, including books, documents, records,
12
and papers, from which the debtor’s financial condition or business
transactions might be ascertained, unless such act or failure to act was
justified under all of the circumstances of the case;
*
*
*
(5) the debtor has failed to explain satisfactorily, before determination of
denial of discharge under this paragraph, any loss of assets or deficiency of
assets to meet the debtor’s liabilities;
*
*
*
(7) the debtor has committed any act specified in paragraph (2), (3), (4), (5),
or (6) of this subsection, on or within one year before the date of the filing of
the petition, or during the case, in connection with another case, under this
title or under the Bankruptcy Act, concerning an insider; . . . .
The jurisdiction of a district court to hear an appeal from a bankruptcy court is conferred
by 28 U.S.C. § 158(a), which provides, in relevant part:
(a) The district courts of the United States shall have jurisdiction to hear appeals[]
(1) from final judgments, orders, and decrees;
(2) from interlocutory orders and decrees issued under section 1121(d) of title
11 increasing or reducing the time periods referred to in section 1121 of
such title; and
(3) with leave of the court, from other interlocutory orders and decrees[.]
28 U.S.C. §§ 158(a)(1), (a)(2), (a)(3) (emphasis added).
Thus, “by statute, an appeal of right exists only from a final judgment, and any other
appeal, i.e., from an interlocutory order, may lie only upon obtaining leave of the court.” In re
Rood, 426 B.R. 538, 546 (D. Md. 2010) (Chasanow, J.); see 28 U.S.C. §§ 158(a)(1), (a)(3). “As
a general rule, a final judgment under 28 U.S.C. § 1291 is ‘one which ends the litigation . . . and
leaves nothing for the court to do but execute the judgment.’” In re Hebb, 53 B.R. 1003, 1005
(D. Md. 1985) (quoting Catlin v. United States, 324 U.S. 229, 233 (1945)); see In re Rood, 426
B.R. at 546. By contrast, an interlocutory order is “one which does not finally determine a cause
of action but only decides some intervening matter pertaining to the cause, and which requires
13
further steps to be taken to enable the court to adjudicate the cause on the merits.” In re
Hebb, 53 B.R. at 1005.
Jackson asserts that his appeal is premised on 28 U.S.C. § 158(a)(1), which applies only
as to “final judgments, orders, and decrees[.]” See ECF 1 at 1. However, the concept of
a final judgment in a bankruptcy proceeding is more forgiving than the standard applied in civil
proceedings under 28 U.S.C. § 1291. In Bullard v. Blue Hills Bank, __ U.S. __ 135 S. Ct. 1686,
1692 (2015), the Supreme Court said: “A bankruptcy Appeal Involves ‘an aggregation of
individual controversies,’ many of which would exist as stand-alone lawsuits but for the
bankrupt status of the debtor.
Accordingly, ‘Congress has long provided that orders in
bankruptcy cases may be immediately appealed if they finally dispose of discrete disputes within
the larger case.’” (Citations omitted); see Mort Ranta v. Gorman, 721 F.3d 241, 246 (4th Cir.
2013) (“[T]he concept of finality in bankruptcy traditionally has been applied in a ‘more
pragmatic and less technical way’ than in other situations.”) (quoting McDow v. Dudley, 662
F.3d 284, 287 (4th Cir. 2011)); In re Computer Learning Centers, Inc., 407 F.3d 656, 660 (4th
Cir. 2005) (stating that orders in bankruptcy cases “‘may be immediately appealed if
they finally dispose of discrete disputes within the larger case’”) (quoting In re Saco Local Dev.
Corp., 711 F.2d 441, 444 (1st Cir. 1983)); A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 1009
(4th Cir. 1986) (stating that in the bankruptcy context, the concept of finality “has traditionally
been applied ‘in a more pragmatic and less technical way . . . than in other situations’”) (quoting
In re Amatex Corp., 755 F.2d 1034, 1039 (3d Cir. 1985)).
Judge Chasanow explained in In re Rood, 426 B.R. at 546-47:
[C]onsiderations unique to bankruptcy appeals, such as the protracted nature of
the proceedings and the large number of interested parties, require a less rigorous
application of the finality rule. See [In re Saco Local Development Corp., 711
F.2d 441, 443-48 (1st Cir. 1983)]. Put differently, “[t]o avoid the waste of time
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and resources that might result from reviewing discrete portions of the action only
after a plan of reorganization is approved, courts have permitted appellate review
of orders that in other contexts might be considered interlocutory.” In re Amatex
Corp., 755 F.2d at 1039; see also In re Mason, 709 F.2d 1313, 1316 (9th Cir.
1983) (holding that finality must be determined “in light of the unique nature
of bankruptcy procedure and not with blind adherence to the rules of finality”).
Thus, for example, the decision to appoint a trustee or an examiner is a final
appealable order because to hold otherwise would delay review of the decision
until “a final plan is approved” and “may well cause several years of hearings and
negotiations to be wasted.” In re Amatex, 755 F.2d at 1040. Furthermore, the
decision to set aside the sale of a bankruptcy asset and to reopen proceedings is
also final and appealable because it “finally determines” a creditor’s position visa-vis the debtor and places any resale of assets in considerable doubt. In re
Irvin, 950 F.2d 1318, 1319 (7th Cir. 1991); see In re Gould, 977 F.2d 1038, 1041
(7th Cir. 1992). In sum, these cases stand for the proposition that an order
is final and appealable if it (i) finally determines or seriously affects a party’s
substantive rights, or (ii) will cause irreparable harm to the losing party or waste
judicial resources if the appeal is deferred until the conclusion of the bankruptcy
case. See In re Mason, 709 F.2d at 1316 (citing R. LEVIN, BANKRUPTCY APPEALS,
59 N.C. L. Rev. 967, 985-86 & n.140).
(Quoting In re Swyter, 263 B.R. 742, 746 (E.D. Va. 2001)) (some citations omitted):
Even considering the “more liberal construction of finality as applied to appeals in
bankruptcy cases,” A.H. Robins Co., Inc., 788 F.2d at 1009, the Order of January 23, 2018 (ECF
1-1), which is the subject of Jackson’s appeal, cannot be construed as a final order.
The
adversary proceeding is still ongoing, with a trial date that is imminent. Moreover, the Order did
not finally determine the substantive claims or rights of Jackson and Nelson, nor did it
“finally dispose of discrete disputes within the larger case.” In re Saco Local Dev. Corp., 711
F.2d at 444. To the contrary, the bankruptcy judge made a determination that she could not
decide the issue on the papers. So, the issue is pending; presumably, the issue of whether
Nelson’s debt is dischargeable pursuant to 11 U.S.C. 727(a)(3), (a)(5), or (a)(7) will be decided
at the trial in July 2018. See 15-ap-228 (Bankruptcy Court docket entry of March 28, 2018)
15
(setting trial date for July 24, 2018).
B.
Because the order denying partial summary judgment is interlocutory, Jackson could
appeal from it only upon obtaining leave of the court. See 28 U.S.C. § 158(a)(3); see also In re
Rood, DKC-10-2651, 2010 WL 4923336, at *2 (D. Md. Nov. 29, 2010). A timely filed notice of
appeal may be deemed a motion for leave to appeal pursuant to Fed. R. Bankr. P. 8003(c).
See In re Minh Vu Hoang, DKC-11-3431, 2011 WL 6296839, at *1 (D. Md. Dec. 14, 2011); In
re Rood, 2010 WL 4923336, at *4.
Under Fed. R. Bankr. P. 8002(a)(1), an appeal is timely if a notice of appeal is “filed with
the bankruptcy clerk within 14 days after entry of the judgment, order, or decree being
appealed.” Here, on January 23, 2018 (ECF 1-1), Judge Lipp denied Jackson’s partial summary
judgment motion.
As noted, the following day, Jackson filed a Notice of Appeal in the
Bankruptcy Court. See ECF 4-53. And, the Notice of Appeal was filed in this Court on January
25, 2018. See ECF 1.
Accordingly, the appeal was timely filed. Therefore, although Jackson has not formally
requested leave to appeal pursuant to 28 U.S.C. § 158(a)(3), his timely notice of appeal will be
deemed a motion for leave to file an interlocutory appeal. See In re Minh Vu Hoang, 2011 WL
6296839, at *1; In re Rood, 2010 WL 4923336, at *4. But, the request shall be denied.
Judge Hazel explained in HeiTech Serv’s, Inc. v. Rowe, GJH-17-1319, 2017 WL
4838750, at *2 (D. Md. Oct. 24, 2017) (citations omitted):
When deciding whether to grant leave to appeal an interlocutory order or decree
of a bankruptcy court, the district court may employ an analysis similar to that
applied when certifying interlocutory review by the circuit court of appeals
under 28 U.S.C. § 1292(b). Under this analysis, leave to file an interlocutory
appeal should be granted only when 1) the order involves a controlling question
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of law, 2) as to which there is substantial ground for a difference of opinion, and
3) immediate appeal would materially advance the termination of the litigation.
(Quoting In re Pawlak, 520 B.R. 177, 182 (D. Md. 2014)); see KPMG Peat Marwick, LLP v.
Estate of Nelco, Ltd., Inc., 250 B.R. 74, 78 (E.D. Va. 2000). All three elements must be met for
leave to be granted. See In re Air Cargo, Inc., CCB-080587, 2008 WL 2415039, at *3 (D. Md.
June 11, 2008); KPMG Peat Marwick, 250 B.R. at 79.
A district court will not hear an interlocutory appeal when parties merely “‘disagree as to
a Bankruptcy Court’s interlocutory order, but rather only where substantial ground for
disagreement exists as to the controlling issues of law that informed the order.’” In re
Pawlak, 520 B.R. at 184 (quoting In re Air Cargo, Inc., 2008 WL 2415039, at *3); see KPMG
Peat Marwick, 250 B.R. at 79. “An issue presents a substantial ground for difference of opinion
if courts, as opposed to parties, disagree on a controlling legal issue.” Lynn v. Monarch
Recovery Mgmt., Inc., 953 F. Supp. 2d 612, 624 (D. Md. 2013).
1. Controlling Question of Law
Notably, “[a]n order involves a controlling question of law when reversal of the
bankruptcy court’s order would be dispositive of the case as either a legal or practical matter and
determination of the issue on appeal will materially affect the outcome.” In re Minh Vu
Hoang, 2011 WL 6296839, at *2; accord In re Rood, 2010 WL 4923336, at *4; In re
Pawlak, 520 B.R. at 183. A controlling question of law is “a narrow, dispositive question of
pure law.” KPMG Peat Marwick, 250 B.R. at 79.
“Factual determinations and appeals
presenting a question of law and fact are not appropriate for interlocutory review.” In re
Pawlak, 520 B.R. at 183 (quoting In re ASC, Inc., 386 B.R. 187, 196 (E.D. Mich. 2008)).
Here, Jackson’s appeal seeks to overturn Judge Lipp’s determination that material
disputes of fact prevented her from granting summary judgment as to Jackson’s claims lodged
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under 11 U.S.C. §§ 727(a)(3), (a)(5), and (a)(7). See ECF 1; ECF 1-1.
As to 11 U.S.C. § 727(a)(3), Judge Lipp noted that Nelson had produced a “thumb drive”
to “the Trustee” that contained “information” that may be relevant to whether Nelson failed to
“maintain or preserve recorded information.” ECF 4-65 at 20. Accordingly, Judge Lipp found
that “additional information was provided” by Nelson.
Id. at 21.
Further, Judge Lipp
acknowledged that “[t]here were meetings of creditors” at which “things [were] exchanged” that
may be relevant to whether Nelson failed to preserve records in relation to the underlying
bankruptcy case. Id. Moreover, Judge Lipp noted that even if Nelson “did not amend” his
financial disclosure forms, that would not necessarily prove that he “did not preserve books and
records” pursuant to 11 U.S.C. § 727(a)(3). Id. at 22. Therefore, she concluded that there are
material disputes of fact as to “what information was provided and whether it was necessary or
relevant to the administration of the case.” Id. at 23.
As to Jackson’s claim lodged under 11 U.S.C. § 727(a)(5), counsel for Nelson argued that
Nelson ought to be afforded the opportunity to testify at trial so that he may “explain
satisfactorily, at least to the Court’s satisfaction, any loss of assets.” Id. at 27. Further, counsel
for Nelson stated, id.: “There are defenses and I would ask the Court to allow those defenses to
be made at trial[.]” Notably, Judge Lipp stated that Nelson “did indicate that he had changed his
tax returns” in relation to his reported assets. Id. at 28. And, she stated that “if those assets were
real, if [Nelson] really had them, then he will have to explain them” at trial. Id. Based on those
findings, Judge Lipp concluded that disputes of fact prevented her from knowing “whether
[Nelson had] made a misrepresentation in his financial statements” constituting a failure to
explain a loss or deficiency of assets, pursuant to 11 U.S.C. § 727(a)(5). See id.
As to 11 U.S.C. § 727(a)(7), Judge Lipp noted that Nelson had “raised, on many
18
occasions, the issue of the revision of the tax returns.” Id. at 30. Of course, Judge Lipp also
stated that “tax returns just are not necessarily indicative of what [one] own[s] . . . in a
bankruptcy” matter. Id. Nevertheless, Judge Lipp concluded that the extent of Nelson’s assets
remained unclear, and “will have to be explained, by the Debtor at trial.” Accordingly, Judge
Lipp concluded that there “are disputes as to material facts” relevant to Jackson’s claim
predicated on 11 U.S.C § 727(a)(7). See id.
Jackson’s appeal of Judge Lipp’s Order of January 23, 2018 (ECF 1-1) turns largely on
factual questions. It does not involve “a narrow, dispositive question of pure law.” KPMG Peat
Marwick, 250 B.R. at 79.
2. Substantial Disagreement as to a Controlling Question of Law
As noted, the second prong is not satisfied whenever parties merely “disagree as to a
Bankruptcy Court’s interlocutory order,” but there is no “substantial ground for disagreement . . .
as to the controlling issues of law that informed the order.” In re Air Cargo, Inc., 2008 WL
2415039, at *3; see also In re Pawlak, 520 B.R. at 184. In my view, the hearing transcript (ECF
4-65) indicates that Judge Lipp’s Order of January 23, 2018 (ECF 1-1), was informed by the
appropriate standard of review used at the summary judgment stage of litigation. Moreover,
Judge Lipp’s Order (ECF 1-1) was informed by the plain meaning of 11 U.S.C. §§ 727(a)(3),
(a)(5), and (a)(7), on which Jackson predicated his Motion. See ECF 4-65 at 20-30. There is no
disagreement as to the applicable law.
3. Immediate Appeal Materially Advancing the Termination of Litigation
Even if Jackson had demonstrated substantial grounds for a difference of opinion
concerning the applicable controlling law, he must also demonstrate that an interlocutory appeal
would materially advance termination of the lawsuit. See In re Air Cargo, Inc., 2008 WL
19
2415039, at *4. Jackson has failed to make such a showing.
III.
Conclusion
Jackson’s appeal of the Bankruptcy Court’s Order of January 23, 2018 (ECF 1-1) is
subject to dismissal because it is an appeal of an interlocutory order. There is no basis to
consider the interlocutory order at this juncture.
An Order follows.
Date: June 25, 2018
/s/
Ellen Lipton Hollander
United States District Judge
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