DAHLGREN v. PALONE

Filing 13

OPINION filed. Signed by Judge Freda L. Wolfson on 6/1/2011. (mmh)

*NOT FOR PUBLICATION*

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

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In re:
JOHN DAHLGREN
Debtor.
______________________________
JOHN DAHLGREN,
Plaintiff-Appellant,
v.

REGINA PALONE,
Defendant-Appellee.

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Chapter 13
Case No. 09-18982 (RTL)

Civil Action No. 10-1988 (FLW)
OPINION

WOLFSON, United States District Judge:
This matter comes to the Court by way of motion for reconsideration filed by Appellant John
Dahlgren (“Dahlgren” or the “Debtor”). Appellant seeks reconsideration of the Court’s December
16, 2010 Order, which denied Debtor’s appeal and affirmed the Order of the Bankruptcy Court. The
Court affirmed the Order of the Bankruptcy Court because the Rooker-Feldman doctrine prevents
both the Bankruptcy Court and this Court from exercising jurisdiction over the partition of the
property, which was the basis for the Debtor’s proposed chapter 13 reorganization plans.
Additionally, this Court held that the Bankruptcy Court was within its discretion to impose sanctions
since the Debtor twice submitted reorganization plans that were patently unconfirmable based on
their proposed treatment of Palone’s interest in the Property.

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I.

BACKGROUND
Because the parties are familiar with the factual background of this matter, the Court will

only recount the facts necessary for disposition of the instant motion.
As noted in this Court’s December 16th Opinion, Dahlgren and Defendant-Appellee Regina
Palone (“Palone”) began a romantic relationship in the mid 1990s. Although the couple never
married, over the course of their relationship they purchased several properties together. On August
3, 2001, Dahlgren and Palone purchased the property at issue in this motion, residential/farm
property in Monmouth County, New Jersey (the “Property”). The couple financed the purchase of
the Property with a cash contribution by Dahlgren and with two separate mortgages. The first
mortgage names both Dahlgren and Palone as the mortgagors, and the second names only Palone.
The deed to the Property lists both parties together, with no identification of ownership percentage.
In 2005 the relationship soured. Three years of dispute ensued, and in 2008, Palone filed a
partition action in the New Jersey Superior Court (“State Court”). On October 14, 2008, the State
Court approved Palone’s request for a partition of the Property (“Sale Order”). Through the Sale
Order, the State Court directed the sale of the Property, with the proceeds placed into a trust account
until the appropriate allocation of the proceeds between Dahlgren and Palone could be determined at
a later hearing.
On April 9, 2009, Dahlgren filed a petition in the instant chapter 13 bankruptcy,
automatically staying all other legal proceedings involving Dahlgren, including the State Court
proceedings of the Sale Order and the scheduled allocation hearing. Dahlgren’s petition treated
Palone as a creditor as opposed to a co-owner of the Property. In response to Dahlgren’s bankruptcy
petition, Palone filed a proof of claim of her co-ownership interest in the Property with the
Bankruptcy Court, as well as a motion to dismiss the petition as a bad faith filing.

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The Bankruptcy Court issued the Bankruptcy Opinion on November 9, 2009, denying both
Palone’s motion to dismiss, and Dahlgren’s proposed chapter 13 reorganization plan. In its Opinion,
the Bankruptcy Court acknowledged that “the timing of the Debtor’s bankruptcy petition and
apparent forum shopping [were] suspicious,” but nonetheless held that the filing “did not rise to the
level of bad faith as construed by the Third Circuit.” Bankruptcy Opinion at 8. In addition, the
Bankruptcy Court reasoned, dismissal at that stage was not in the interest of Dahlgren’s other
creditors.
Importantly, the Bankruptcy Court further held that Dahlgren’s plan proposed to treat
Palone’s interest in the Property as that of a creditor in bankruptcy, rather than that as a co-tenant
owner, rendering the plan “patently unconfirmable.” Id. at 16. The Bankruptcy Court reasoned that it
“would not be justified in confirming a plan that abrogates the [State Court Sale Order].” Id. at 14. In
the Bankruptcy Court’s view, “[n]either the Bankruptcy Code nor existing state law authorize[d] the
remedy proposed in Debtor’s plan, i.e., the forced sale to him of [Palone’s] interest in the farm. The
Debtor missed his opportunity to ask the state court to fashion such a remedy and the state court has
already ordered the sale of the farm.” Id. at 15-16. The Bankruptcy Court did not dismiss Dahlgren’s
case at that time, but instead gave Dahlgren leave to file another reorganization plan.
Dahlgren filed a modified chapter 13 reorganization plan on November 24, 2009. Dahlgren’s
modified plan proposed the same treatment of Palone’s interest in the Property as under the prior
plan. As a result, the Bankruptcy Court again denied confirmation of Dahlgren’s modified plan, and
instead, on December 15, 2009, issued an order vacating the automatic stay with regard to the State
Court action. That same day, Palone moved for sanctions against Debtor’s counsel.
Agreeing with Palone that sanctions were appropriate, the Bankruptcy Court imposed
sanctions on Debtor’s counsel for attorney’s fees and costs, noting, inter alia:

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The fact that I said that the petition wasn’t filed in bad faith, which
was an extremely close call, and that I didn’t dismiss for bad faith
because it wasn’t in the interests of the creditors, doesn’t absolve
you from 9011 sanctions.
December 15 Hearing Tr., 24:4-8. The Bankruptcy Court subsequently held a hearing to determine
the amount of sanctions, and concluded that $12,500 in fees, as well as $400 in costs was
appropriate.
Thereafter, the parties returned to State Court and, ultimately, settled the partition action in
July of 2010. Per the settlement, the parties entered into a consent judgment that allotted Palone
$57,500. The consent judgment, further, dictated that the property be either refinanced or sold by
July 21, 2010. Dahlgren then appealed the Bankruptcy Court’s sanctions ruling. This Court
concluded that the Bankruptcy Court did not abuse its discretion in imposing sanctions because the
Bankruptcy Court properly concluded that the Rooker-Feldman doctrine precluded it from
confirming Debtor’s proposed reorganization plan.
This Court issued an Opinion on December 16, 2010, which denied Debtor’s appeal and
affirmed the Order of the Bankruptcy Court. This Court determined that the Rooker-Feldman
doctrine prevents both the Bankruptcy Court and this Court from exercising jurisdiction over the
partition of the property. Additionally, this Court held that the Bankruptcy Court was within its
discretion to impose sanctions since the Debtor twice submitted reorganization plans that were
patently unconfirmable based on their proposed treatment of Palone’s interest in the Property. Now
before this Court is Appellant’s motion for reconsideration. Appellant argues that reconsideration is
warranted because: (a) the court did not review all the documents necessary to make a ruling, (b)
Dahlgren did challenge the monetary amount of the sanctions and does argue that the fees were
excessive, and (c) the Bankruptcy Court did not rely on Rooker-Feldman doctrine when it issued its
Opinion.

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II.

STANDARD OF REVIEW
When the District Court is acting as an appellate court in a Bankruptcy case, “[b]ankruptcy

Rule 8015 provides the sole mechanism for filing a motion for rehearing.” In re Lisanti Foods, Inc.,
No. 04-3868, 2006 WL 2927619, *4 (D.N.J. Oct. 11, 2006) (quoting, Matter of Eichelberger, 943
F.2d 536, 538 (5th Cir. 1991)). See also In re Rashid, 210 F.3d 201, 204-05 (3d Cir. 2000)
superceded by statute on other grounds as stated in In re Thompson, 418 F.3d 362 (3d Cir. 2005).
Rule 8015 provides:
[A] motion for rehearing may be filed within fourteen days after
entry of judgment of the district court.... If a timely motion for
rehearing is filed, the time for appeal to the court of appeals for all
parties shall run from the entry of the order denying rehearing or
the entry of a subsequent judgment.
Bankr.Rule 8015. While Rule 8015 provides a mechanism for rehearing bankruptcy rulings, it
does not set forth standard of review for such motions.
The Third Circuit also has not articulated a standard for when rehearing under Rule 8015
should be granted. However, two district courts within the Third Circuit (consistent with courts
in other jurisdictions) have adopted such a standard. See In re New Century TRS Holding Inc.,
Civ. No. 08-546, 2009 WL 1833875, 1 (D. Del June 26, 2009); In re Lisanti Foods, 2006 WL
2927619 at *4. That court in In re Lisanti Foods held that the standard applicable to an
appellee’s motion for rehearing should be “the test traditionally used to evaluate motions for
reconsideration.” 2006 WL 2927619 at *4. That test is whether: “(1) the court has “patently
misunderstood a party,” (2) the court has “made a decision outside the adversarial issues
presented ... by the parties;” (3) the court has “made an error not of reasoning but of
apprehension;” or (4) there has been “a controlling or significant change in the law or facts since
the submission of the issue to the Court.” Id. at * 4 (internal quotation marks omitted).

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In adopting this standard, the court in In re Lisanti Foods explains that “[t]he Third Circuit
has repeatedly emphasized that the ‘unique considerations in bankruptcy cases,’ Buncher Co. v.
Official Comm. of Unsecured Creditors of GenFarm Ltd. P'ship IV, 229 F.3d 245, 250 (3d
Cir.2000), require quick and efficient resolution of ‘issues central to the progress of the bankruptcy
petition.” Century Glove, Inc. v. First Am. Bank, 860 F.2d 94, 98 (3d Cir. 1988). Moreover, as In
re Lisanti Foods notes, “the Third Circuit has adopted special finality rules to expedite the resolution
of such issues.” Id. (citations omitted). Consequently, “[r]equiring parties to go through a lengthy
appeals process to raise issues of manifest injustice, a change in applicable law, or newly available
facts, when the issue could be resolved by way of a motion for relief in the district court, would run
counter to the Third Circuit's well-established broad concept of finality.” Id. This Court finds In re
Lisanti Foods’ reasoning persuasive, and will join that court in adopting the traditional motion for
reconsideration standard.
III.

DISCUSSION
Dissatisfied with this Court’s prior ruling, Appellant asserts that a motion for rehearing is

appropriate and necessary to fulfill the judicial and public policies of fairness, due process, and
justice. In support of this contention, Appellant makes three central arguments: (1) the Court issued
its December 16, 2010 Opinion without reviewing all of the items designated as the record on
appeal; (2) the Bankruptcy Court did not cite the Rooker-Feldman doctrine in its Opinion and
therefore could not have relied upon the Rooker-Fedman doctrine when issuing its Opinion; (3) the
District Court’s Opinion did not address the Appellant’s challenge to the amount of attorney’s fees.
The Court is not persuaded by any of these arguments.
The first argument in support of Appellant’s motion for rehearing alleges that the Court’s
December 16, 2010 Opinion was issued without reviewing the entire record, referring to certain

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documents that the Court noted, in the December 16th Opinion, as absent from Appellant’s exhibits
before this Court. First, everything that Counsel submitted to this Court for review was thoroughly
examined. Furthermore, it is the responsibility of the Appellant to provide the Clerk of the District
Court with all papers and transcripts upon which he wishes to rely in support of his appeal. Federal
Rule 11(a) of Appellate Procedure provides:
An appellant filing a notice of appeal must comply with Rule 10(b) and
must do whatever else is necessary to enable the clerk to assemble and
forward the record. 1
Fed. R. App. P. 11(a). (emphasis added).
Moreover, it is the Appellant’s responsibility to ensure that the record on appeal is complete.
“The Appellant is required to provide a record to support the claims it makes on appeal.” Shell
Petroleum Inc. v. U.S., 182 F.3d 212, 218 n. 13 (3d Cir. 1999). As stated by the First Circuit, “it is
the Appellant who must bear the brunt of an insufficient record on appeal.” Real v. Hogan, 828 F.2d
58, 60 (1st Cir. 1987). Therefore, because it is the Appellant’s responsibility to ensure that he
properly and completely filed everything that he wished the Court to review, and Appellant’s
counsel candidly admits that he failed to do so, see Shaver Afft., ¶¶ 5-6 (“I did not send paper copies
of all of the items designated to be included in the record on appeal to the Court . . . I must have
overlooked [the docket entry directing me to furnish paper copies] when it was sent.”), Appellant’s
argument for a rehearing on this basis is denied.
The Appellant also argues that when the Bankruptcy Court issued its Opinion it did not rely
on the Rooker-Feldman doctrine, by name, as a basis for its holding. This Court disagrees with
Appellant’s assertion. As noted in this Court’s initial opinion, even if the Bankruptcy Court did not
specifically mention the Rooker-Feldman doctrine as the basis for its analysis, it is apparent that the
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Rule 10(b) deals with the Appellant’s duty to order a transcript of the proceedings within
14 days after filing the notice of appeal.
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Bankruptcy Court denied the Debtor’s plans by applying the Rooker-Feldman doctrine. More to the
point, the Appellant has not met his burden of proof by providing the Court with any indication that
this aspect of the Court’s ruling was improperly decided in the first instance.
On a motion for rehearing, the Appellant’s motion should only be granted if: “(1) the court
has “patently misunderstood a party,” (2) the court has “made a decision outside the adversarial
issues presented ... by the parties;” (3) the court has “made an error not of reasoning but of
apprehension;” or (4) there has been “a controlling or significant change in the law or facts since the
submission of the issue to the Court.” In re Lisanti Foods, Inc., at *4 (internal quotation marks
omitted). Here, the Appellant has simply made an assertion that because the Bankruptcy Court did
not mention the Rooker-Feldman doctrine by name that the Bankruptcy Court did not apply the
reasoning

of

the

doctrine.

As

noted

in

this

Court’s December 16th Opinion, the Bankruptcy Court clearly employed a Rooker-Feldman style
analysis, although it did not explicitly reference the doctrine. In ruling that Dahlgren’s proposed
plan was unconfirmable because it would undermine the final order rendered in state court directing
that the parties’ farm be sold, the Bankruptcy Court reasoned that it “would not be justified in
confirming a plan that abrogates the [State Court Sale Order].” Bankruptcy Opinion at 14. This
statement clearly reflects the essence of the Rooker-Feldman doctrine, which bars:
cases brought by state-court losers complaining of injuries caused
by state-court judgments rendered before the [bankruptcy] court
proceedings commenced and inviting [bankruptcy] court review
and rejection of those judgments.
Turner v. Crawford Square Apartments III, L.P., 449 F.3d 542, 547 (3d Cir. 2006) (quoting Exxon
Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280, 284 (2005)). Accord Pondexter v.
Allegheny County Housing Auth., 329 Fed.Appx. 347, 350 (3d Cir. 2009) (“The District Court
correctly determined that it lacked jurisdiction under the Rooker - Feldman doctrine to consider

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certain of [the plaintiff’s] claims . . ., which would undermine the state court’s judgment ….”)
(emphasis added).
The Appellant has not presented the Court with any new cases or supported reasoning to
indicate that the Court has “patently misunderstood a party,” that the Court has made a decision
outside the adversarial issues presented, that the court has made an error not of reasoning but of
apprehension, or that there has been a “controlling or significant change in the law or facts.”
Therefore, because the Appellant has failed to present the Court with any new cases, information, or
circumstances the Court denies Appellant’s motion for rehearing on this basis.
The last argument presented by Appellant is that the Court improperly concluded that
Appellant was not challenging the monetary amount of the sanctions, which amount represents the
$12,500 in attorney’s fees Appellee incurred in responding to Dahlgren’s motions, as well as $400 in
costs. Appellant contends that he challenged the monetary amount in Point II of his brief. Upon
reviewing that section of Appellant’s brief, however, the Court does not find Appellant’s
characterization of its brief persuasive. In Point II, Appellant simply asserted that the Bankruptcy
Court improperly employed Rule 9011 as a fee-shifting device. Moreover, Appellant presented no
argument as to why the $12,900 amount was excessive, and tellingly, Appellant did not challenge
the hourly rate charged by his opposing counsel or the number of hours expended.
Accordingly, for the foregoing reasons, the Appellant has failed to meet his burden for
demonstrating

that

rehearing

is

required.

Dated: June 1, 2011

The

request

for

rehearing

is

/s/ Freda Wolfson__________
Honorable Freda L. Wolfson
United States District Judge

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denied.