Zhang et al v. Greenfeld

Filing 16

MEMORANDUM OPINION (c/m to Debtor 10/19/12 sat). Signed by Chief Judge Deborah K. Chasanow on 10/19/12. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
IN RE: XIAOLAN ZHANG
_______________________________
XIAOCHUN ZHANG, et al.
Appellants
v.

:
:

: Civil Action No. DKC 12-1287
:

STEVEN H. GREENFELD
Appellee

:
MEMORANDUM OPINION

Pending before the court is an appeal from an order entered
by United States Bankruptcy Judge Paul Mannes on February 28,
2012, which denied the motion of Appellants Livecity Trading
Company, Inc., Miue Yee “Mindy” Lam, M.Lady, LLC, Alan Howar,
and Xiaochun Zhang to vacate the bankruptcy court’s previous
order

entering

judgment

against

Appellants

as

a

sanction.

Because the facts and legal arguments are adequately presented
in the briefs and record, oral argument is deemed unnecessary.
See Fed.R.Bankr.P. 8012; Local Rule 105.6.

For the reasons that

follow, the rulings of the bankruptcy court will be affirmed.
I.

Background
On March 9, 2010, Debtor Xiaolan Zhang filed a petition for

relief under chapter 7 of the bankruptcy code in the United
States

Bankruptcy

Court

for

the

District

of

Maryland.

On

November 7, 2010, Steven H. Greenfeld, the chapter 7 trustee,
commenced

this

adversary

proceeding

to

resolve

a

dispute

regarding the ownership of certain jewelry and equipment that
was discovered in a retail store leased by Debtor.
Xiaochun

Zhang

and

original complaint.

Howar

were

named

as

Appellants

defendants

in

the

On March 20, 2011, the trustee was granted

leave to add Appellants Lam, M.Lady, LLC, and Livecity Trading
Co., Inc., as defendants.
The

trustee

discovery

alleges

requests

on

that
all

on

May

5,

defendants

2011,

to

the

proceeding, including Appellants, via the U.S.P.S.

he

served

adversary

(ECF No. 14,

at 9 (citing ECF No. 3-27, at Docket Entry 70).

Appellants

contend that they were unaware of the discovery requests until
August

2011,

when

their

attorney

“became

alarmed

when

he

observed the docket entries indicating that other parties [we]re
responding to the [trustee’s] interrogatories.”
2).

(ECF No. 6, at

Shortly thereafter, counsel for Appellants e-mailed the

trustee’s

attorney,

stating

that

he

had

not

received

any

discovery requests and that “[i]f we haven’t received them due
to some ‘delivery glitch’ as our mail [] does at times end[] up
at

the

office

next

door,

they

can

be

completed

delivered to your office by the middle of next week.”
1-5, at 1).

ASAP

and

(ECF No.

On September 14, 2011, counsel for the trustee sent

the discovery requests via e-mail to Appellants’ counsel.
No. 1-6, at 1).

2

(ECF

On

November

10,

2011,

counsel

for

the

trustee

e-mailed

Appellants’ attorneys, noting that he still had not received any
responses

and

would

be

“forced

to

file

a

motion

to

compel”

unless the responses were served by November 15, 2011 – the date
of a previously scheduled inspection of the property at issue in
this proceeding.

(ECF No. 1-7, at 1).

The trustee contends

that, at the inspection, Appellants’ counsel promised to deliver
the responses by no later than November 25, 2011, but failed to
do so.

(ECF No. 14, at 10).

Counsel for Appellants, in turn,

emphasizes that he “met with certain difficulties” in attempting
to respond to the discovery requests, including a sudden twomonth coma suffered by one of the Appellants and the extensive
foreign travels of another.
On

December

sanctions

under

21,

(ECF No. 6, at 3).

2011,

the

Fed.R.Civ.P.

trustee

37(d)

and

filed

a

motion

Fed.R.Bankr.P.

seeking entry of default judgment against Appellants.
1-3, at 1).

at

motion

12).

The

because

inadequate.”

7037,

(ECF No.

On December 23, 2011, Appellants provided responses

to the trustee’s discovery requests.
14,

for

trustee

Appellants’

refused

(ECF No. 6, at 2; ECF No.
to

unverified

(ECF No. 14, at 12).

withdraw
responses

the

sanctions

“were

wholly

Appellants did not oppose

the sanctions motion.
On

January

11,

2012,

the

bankruptcy

court

granted

the

trustee’s motion, concluding that Appellants “failed to serve
3

their

answers,

objections,

interrogatories

and

or

requests

a

written

for

response

production

of

to

the

documents

properly served by the Trustee” and that “the legal and factual
bases

set

forth

in

the

Motion

establish

just

relief sought therein.”

(ECF No. 1-4, at 2).

court

entered

against

“[a]ny

rights

judgment
to,

interests

Appellants

in,

liens

cause

for

the

Accordingly, the
and

on,

ordered

or

other

that
claims

regarding the personal property that is the subject of this
[adversary] action previously held by [Appellants] are hereby
forfeit and deemed to have no effect.”

(Id.).

On January 12, 2012, Appellants filed a motion to vacate
under

Fed.R.Bankr.P.

Fed.R.Civ.P.

60.

9024,

(ECF

No.

the

bankruptcy

3-19).

After

equivalent

of

hearing,

the

a

bankruptcy court denied the motion on February 28, 2012, holding
that

the

factual

and

legal

arguments

advanced

by

Appellants

“fail[] to establish the requisite cause necessary” to vacate
the sanctions order.

(ECF No. 1-2, at 2).

On April 27, 2012, Appellants filed a notice of appeal with
this court seeking review of “the Order on [Appellants’] Motion
to Vacate entered on February 28, 2012.”
Appellants

filed

their

brief

one

day

(ECF No. 1).

late

(ECF

trustee moved to dismiss the appeal (ECF No. 8).

No.

After

6),

the

That motion

was denied on June 14, 2012 (ECF No. 13), and the trustee filed

4

his brief on June 21, 2012 (ECF No. 14).

Appellants did not

file a reply.
II.

Standard of Review
When

reviewing

a

bankruptcy

court’s

district court acts as an appellate court.
conclusions

are

reviewed

reviewed for clear error.

de

novo

and

final

order,

the

Accordingly, legal

findings

of

fact

are

In re Official Comm. of Unsecured for

Dornier Aviation (N. Am.), Inc., 453 F.3d 225, 231 (4th Cir.
2006).

An abuse of discretion standard applies to a bankruptcy

court’s orders denying either a Rule 60(b) motion, Nat’l Org.
for Women v. Operation Rescue, 47 F.3d 667, 669 (4th Cir. 1995),
or a Rule 59(e) motion, see EEOC v. Lockheed Martin Corp., 116
F.3d 110, 112 (4th Cir. 1997).
discretion

standard

applies

The same deferential abuse of

to

a

bankruptcy

denying or imposing discovery sanctions.

court’s

orders

Jacksonville Airport,

Inc. v. Michkeldel, Inc., 434 F.3d 729, 732 (4th Cir. 2006).

“At

its immovable core, the abuse of discretion standard requires a
reviewing

court

to

show

enough

deference

to

a

primary

decisionmaker’s judgment that the court does not reverse merely
because it would have come to a different result in the first
instance.”

Evans v. Eaton Corp. Long Term Disability Plan, 514

F.3d 315, 322 (4th Cir. 2008) (citation omitted).

5

III. Analysis
As an initial matter, the parties dispute what is properly
at issue in the instant appeal.

Appellants noted an appeal from

the bankruptcy court’s order denying their motion to vacate (see
ECF No. 1), but appear to contest the original order entering
default judgment as a sanction in their brief (see ECF No. 6).
The trustee argues that Appellants did not properly preserve any
issues relating to the sanctions order itself.
2-7).

(ECF No. 14, at

The trustee’s argument need not be reached, however,

because

there

is

no

basis

to

reverse

either

the

original

sanctions order or the order denying the motion to vacate.
A.

Sanctions Order

As to the order imposing sanctions, the bankruptcy court
was

well

within

its

discretion

to

enter

judgment

against

Appellants based on their repeated failures to respond to the
trustee’s discovery requests.
37(d),

applicable

to

Federal Rule of Civil Procedure

the

bankruptcy

court

pursuant

to

Fed.R.Bankr.P. 7037, governs sanctions for a party’s failure to
respond to discovery requests.

The sanctions available under

Rule 37(d) include, inter alia, “rendering a default judgment
against the disobedient party.”

Fed.R.Civ.P. 37(b)(2)(A)(vi).

The

be

following

four

factors

must

default judgment as a sanction:
party

acted

in

bad

faith;

(2)
6

considered

when

entering

(1) whether the noncompliant
the

amount

of

prejudice

the

party’s

noncompliance

necessarily

includes

an

caused

the
into

inquiry

opposing
the

party,

materiality

which
of

the

evidence he failed to produce; (3) the need for deterrence of
the particular sort of noncompliance; and (4) the effectiveness
of less drastic sanctions.

Mut. Fed. Sav. & Loan v. Richards &

Assocs., Inc., 872 F.2d 88, 92 (4th Cir. 1989).
Although the bankruptcy court’s order did not make specific
findings with respect to each of these factors, the record of
the adversary proceeding clearly supports the entry of default
judgment

as

a

sanction.

In

light

of

Appellants’

repeated

failures to respond to the trustee’s requests and the inadequacy
of the responses they eventually provided, a finding of bad
faith would have been warranted.

Likewise, in seeking entry of

default judgment, the trustee clearly explained that Appellants’
pattern

of

unresponsiveness

prejudiced

him

by

precluding

him

from taking additional, follow-up discovery before the close of
discovery.
been

an

(ECF No. 1-3, at 7).
abuse

of

discretion

to

Finally, it would not have
conclude

either

(1)

that

repeatedly failing to respond to discovery requests is conduct
that should be deterred; or (2) that a less severe sanction
would not function as an effective deterrent.

In sum, Judge

Mannes had broad discretion to enter default judgment against
Appellants as a discovery sanction, and there is no basis for
concluding that he abused it.
7

B.

Order Denying Motion to Vacate

It was likewise within the discretion of the bankruptcy
court to deny Appellants’ motion to vacate.
cited

Fed.R.Civ.P.

60(b)

in

their

Although Appellants

motion,

a

request

for

reconsideration filed within 28 days of a bankruptcy court order
is typically treated as a motion to alter or amend judgment
pursuant to Fed.R.Civ.P. 59(e), made applicable to bankruptcy
cases by Fed.R.Bankr.P. 9023.
2006

WL

5737842,

at

*1-2

In re Corbin, No. 05–90280–SD,

(Bankr.D.Md.

Jan.

19

2006).

“In

general, ‘reconsideration of a judgment after its entry is an
extraordinary remedy which should be used sparingly.’”

Pac.

Ins. Co. v. Am. Nat’l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir.
1998) (quoting 11 Charles Alan Wright et al., Federal Practice &
Procedure § 2810.1, at 124 (2d ed.1995)).

As a result, courts

have recognized only three limited grounds for granting a Rule
59(e) motion to reconsider:

(1) to accommodate an intervening

change in controlling law; (2) to account for new evidence not
available at trial; or (3) to correct clear error of law or
prevent manifest injustice.

United States ex rel. Becker v.

Westinghouse Savannah River Co., 305 F.3d 284, 290 (4th Cir.
2002) (citing Pac. Ins., 148 F.3d at 403).
axiomatic

that

relitigate

old

evidence

that

a

Rule

matters,
could

have

59(e)
or

motion
to

been

raise

raised
8

Additionally, it is

“may

not

be

arguments
prior

to

or

the

used

to

present
entry

of

judgment.”

Pac.

Ins.,

148

F.3d

at

403

(quoting

Frietsch

v.

Refco, Inc., 56 F.3d 825, 828 (7th Cir. 1995)).
Appellants’ motion to vacate did not raise any of the three
grounds that warrant relief under Rule 59(e).
19).

(See ECF No. 3-

More specifically, they did not identify any intervening

change in the law, newly developed evidence, or clear error of
law or manifest injustice that could have caused the bankruptcy
court to alter its sanctions order.

Rather, Appellants asserted

(1) that their failures to respond were due to uncontrollable
circumstances rather than any bad faith and (2) that the trustee
was not prejudiced by their delay given the parties’ agreement
to extend discovery until December 30, 2011.
other

words,

Appellants

made

arguments

that

(Id. at 2-4).
could

have

In
been

raised had they timely filed an opposition to the trustee’s
motion.
under

Thus, to the extent it construed the motion as one

Rule

59(e),

the

bankruptcy

court

was

well

within

the

bounds of its discretion in denying Appellants’ request.
Appellants would fare no better if their motion had been
construed as one to vacate under Rule 60(b).

To obtain relief

from a judgment or final order under Rule 60(b), a movant is
required to meet certain “threshold conditions.”
Union

Admin.

Bd.

v.

Gray,

1

F.3d

262,

264

(4th

Nat’l Credit
Cir.

1993).

Specifically, it must be shown that (1) the motion is timely,
(2) the movant has a meritorious defense to the action, and
9

(3) the

opposing

party

would

not

having the judgment set aside.

suffer

Id.

unfair

prejudice

by

Upon making this threshold

showing, a party must also establish one of the following:
(1) mistake, inadvertence, surprise, or
excusable neglect; (2) newly discovered
evidence that, with reasonable diligence,
could not have been discovered in time to
move for a new trial under Rule 59(b);
(3) fraud . . . misrepresentation,
or
misconduct by an opposing party; (4) the
judgment is void; (5) the judgment has been
satisfied, released or discharged; it is
based on an earlier judgment that has been
reversed
or
vacated;
or
applying
it
prospectively is no longer equitable; or
(6) any other reason that justifies relief.
Fed.R.Civ.P.

60(b).

Motions

extraordinary

remedy

which

for

should

reconsideration

be

used

are

sparingly.”

“an
Pac.

Ins., 148 F.3d at 403.
Here,

Appellants’

motion

to

vacate

apparently

sought

relief pursuant to Rule 60(b)(6) (see ECF No. 3-19, at 1), the
catchall provision that applies only in “situations involving
extraordinary
Casualty

Auto.

circumstances.”
Ins.

Appellants

argued

trustee’s

discovery

Co.,

that

Dowell

993

F.2d

their

responses

46,

delay
was

v.

State
48

in

caused,

(4th

Cir.

responding
in

Appellant’s sickness and another’s travel plans.
19).

Farm

part,

Fire

&

1993).
to

the

by

one

(ECF No. 3-

In his opposition, the trustee countered that Appellants

had not established a meritorious defense; that setting aside
the judgment would prejudice him; and that Appellants had not
10

established any ground for relief under Rule 60(b).
22, at 11-18).

(ECF No. 3-

The trustee characterized Appellants’ excuses as

“hollow and irrelevant” and pointed out that they applied to
only two of the five Appellants.

(Id. at 2).

The trustee

further argued that Appellants’ proffered explanations – even
when considering the “remarkable event” of a two-month coma –
could not justify the seven-month delay at issue in this case
and

therefore

did

not

establish

exceptional

warranting relief under Rule 60(b)(6).
In

his

order,

Judge

Mannes

circumstances

(Id. at 18).
agreed

with

the

trustee,

concluding that Appellants failed to “establish just cause” for
vacating the sanctions order.

(ECF No. 1-2, at 2).

Based on

the record establishing Appellants’ history of dilatory action
and the arguments advanced by the trustee, it cannot be said
that this holding constituted an abuse of discretion, and there
is no basis for reversal.
IV.

Conclusion
For

entering

the

foregoing

judgment

reasons,

against

the

Appellants

bankruptcy
and

the

Appellants’ motion to vacate will be affirmed.

court’s
order

denying

A separate order

will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge
11

order