Atlantic Sea Pride, Inc. v. McCarthy
Filing
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MEMORANDUM-DECISION and ORDERED, that the Bankruptcy Courts decision is AFFIRMED. Signed by Senior Judge Lawrence E. Kahn on October 15, 2013. (sas)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
ATLANTIC SEA PRIDE, INC.,
Appellant,
-against-
1:13-CV-0670 (LEK)
WILLIAM M. McCARTHY, as Chapter 7
Trustee of the Bankruptcy Estate of The
Cousins Fish Market, Inc.,
Appellee.
MEMORANDUM-DECISION and ORDER
I.
INTRODUCTION
Appellant Atlantic Sea Pride (“Appellant”), a creditor in the bankruptcy action below,
appeals from an October 24, 2012, decision of the Honorable Robert E. Littlefield, Jr., Chief U.S.
Bankruptcy Judge, granting summary judgment to Appellee William M. McCarthy (“Appellee”), the
trustee below. Appellant contends that judgment was based on falsehoods that it now seeks to
correct. For the following reasons, the Court affirms the decision of the Bankruptcy Court.
II.
BACKGROUND
On October 26, 2011, Appellee commenced an adversary proceeding against Appellant
seeking to recover $144,014.04 in pre-petition payments and to disallow Appellant’s claim pursuant
to 11 U.S.C. § 502(d). Dkt. No. 4 (“Appellee’s Brief”) at 3. Following a deadline extension,
Appellant timely filed its answer on January 4, 2012. Id. Appellee then served interrogatories,
requests for production, and requests for admission on May 18, 2012. Id. Appellant provided
nothing in response except a batch of invoices that did not correspond with any canceled check
copies or other materials in Appellee’s possession. Id. at 3-4.
An initial pre-trial conference was completed, after two continuances, on June 1, 2012, at
which time the parties discussed discovery. Id. at 4. Appellant’s counsel represented his belief that
the invoices were all that Appellant would provide, but said he would check for further information.
Id. At the next conference, held on July 25, 2012, Appellant requested, and was granted, additional
time to respond to Appellee’s discovery requests. Id. A third conference was held on August 29,
2012, at which time Appellant again requested an extension of time to provide discovery responses.
Id. Appellee stated that if Appellant did not so respond, Appellee would move for summary
judgment. Id. At the final conference on September 19, 2012, Appellant’s counsel indicated that
the invoices were all that Appellant would provide. Id. at 5.
Discovery closed on October 3, 2012, and Appellee moved for summary judgment. Id.
Because Appellant did not respond to Appellee’s requests for admission or seek a further extension
of time to do so, the requests were deemed admitted and conclusively established. See Dkt. No. 141 (“February 2013 Order”) at 5:18-23 (citing FED. R. CIV. P. 36(a)(3), (b); FED. R. BANKR. P.
7036). On that basis, and because Appellant did not move under Federal Rule of Civil Procedure
36(b) to withdraw or amend the admissions, Chief Judge Littlefield found that there were no
genuine issues of material fact and that Appellee was entitled to summary judgment. Id. at 6:4-8.
An order to that effect was entered on October 13, 2012, as to the first, fourth, and fifth causes of
action in Appellee’s complaint. Id. at 6:9-13.
On November 27, 2012, and December 3, 2012, Appellant filed two motions for
reconsideration seeking to respond to the requests for admission. See id at 6:13-25 (citing FED. R.
CIV. P. 59, 60(b); FED. R. BANKR. P. 9023, 9024). Chief Judge Littlefield noted that the proper way
to attempt to withdraw or amend admissions made by default is a motion to that effect under Federal
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Rule of Civil Procedure 36(b) and held that even if the court treated Appellant’s motions for
reconsideration as such, it was too late to correct discovery deficiencies because judgment had
already been entered. Id. at 7:13-21 (citing United States v. Kasuboski, 834 F.2d 1345, 1350 (7th
Cir. 1987)). Appellant does not contest any of the foregoing, but argues that its failure to respond to
the requests for admission, due to “a break down in communications between [Appellant] and its
attorneys,” should not result in judgment being entered “in complete disregard of the truth.” See
generally Dkt. No. 3 (“Appellant’s Brief”).
III.
LEGAL STANDARD
On appeal, a district court reviews a bankruptcy court’s factual findings for clear error and
its legal conclusions de novo. County of Clinton v. Warehouse at Van Buren St., Inc., No. 12-CV1636, 2013 WL 2145656, at *1 (N.D.N.Y. May 15, 2013) (citing R2 Invs., LDC v. Charter
Commc’ns, Inc. (In re Charter Commc’ns, Inc.), 691 F.3d 476, 483 (2d Cir. 2012)). “A finding is
‘clearly erroneous’ when although there is evidence to support it, the reviewing court on the entire
evidence is left with the definite and firm conviction that a mistake has been committed.” United
States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948). Following review, a district court “may
affirm, modify, or reverse a bankruptcy judge’s judgment, order, or decree or remand with
instructions for further proceedings.” FED. R. BANKR. P. 8013.
IV.
DISCUSSION
“Admissions made under Rule 36, even default admissions, can serve as the factual
predicate for summary judgment” and may be withdrawn or amended only by a motion made under
Rule 36(b). Kasuboski, 834 F.2d at 1350; accord In re Carney, 258 F.3d 415, 419-20 & n.6 (5th Cir.
2001); GTE Directories Corp. v. McCartney, 11 F. App’x 735, 737 (9th Cir. 2001); Karras v.
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Karras, 16 F.3d 245, 247 (8th Cir. 1994); Anchorage Assocs. v. V.I. Bd. of Tax Review, 922 F.2d
168, 176 n.7 (3d Cir. 1990); Donovan v. Carls Drug Co., 703 F.2d 650, 651-52 (2d Cir. 1983),
rejected on other ground by McLaughlin v. Richland Shoe Co., 486 U.S. 128, 134 (1988); In re
Antex, Inc., 397 B.R. 168, 171 (B.A.P. 1st Cir. 2008); Sook Kim v. Goldstein, No. 04 Civ. 3755,
2007 WL 1649902, at *2 (S.D.N.Y. June 6, 2007); see also FED. R. CIV. P. 56(c)(1)(A) (providing
that admissions can show the absence of a genuine factual dispute). A party making a Rule 36(b)
motion must establish that “(1) the presentation of the merits will be aided and (2) no prejudice to
the party obtaining the admission will result.” Donovan, 703 F.2d at 652. No such motion was
made here, however, nor will it be implied. See GTE Directories Corp., 11 F. App’x at 737
(“[I]ntroduction of allegedly contradictory evidence cannot serve as an ‘implied’ motion to
withdraw.”); see also In re Carney, 258 F.3d at 420; Karras, 16 F.3d at 247; Kasuboski, 834 F.2d at
1350 (citing Donovan, 703 F.2d 650); In re Antex, 397 B.R. at 171; Sook Kim, 2007 WL 1649902,
at *2.
Moreover, the granting of such a motion is wholly within a court’s discretion. See Fed. R.
Civ. P. 36(b) (“A matter admitted under this rule is conclusively established unless the court, on
motion, permits the admission to be withdrawn or amended. . . . [T]he court may permit withdrawal
or amendment . . . .” (emphases added)); Kasuboski, 834 F.2d at 1350 n.7 (“[R]ule 36(b) allows
withdrawal of admissions if certain conditions are met and the district court, in its discretion,
permits the withdrawal.”); Donovan, 703 F.2d at 652 (“Because the language of the Rule is
permissive, the court is not required to make an exception to Rule 36 even if both the merits and
prejudice issues cut in favor of the party seeking exception to the rule.”). Here, Appellant, who was
represented by counsel, had over four months to respond to the requests for admission, sought and
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received extensions of time to do so, and was on notice that a motion for summary judgment would
be filed premised on its failure to do so. Appellant neither moved for a further extension of time to
respond nor moved to withdraw or amend under Rule 36(b).
In light of the foregoing and the fact that judgment has already been rendered, the Court
declines to permit Appellant to withdraw or amend its admissions even if Appellant has met both
the merits and prejudice prerequisites to the granting of a Rule 36(b) motion.1 As other courts have
stated:
We recognize the potential harshness of this result. The failure to respond to admissions
can effectively deprive a party of the opportunity to contest the merits of a case. This
result, however, is necessary to insure the orderly disposition of cases; parties to a
lawsuit must comply with the rules of procedure. In addition, the harshness is tempered
by the availability of the motion to withdraw admissions, a procedure which [Appellant]
did not employ.
Kasuboski, 834 F.2d at 1350, quoted in In re Carney, 258 F.3d at 421, and Sook Kim, 2007 WL
1649902, at *2.
While the loss to a party of his right to contest a matter on its merits is not to be treated
1
This case is unlike In re Runnels, No. 06-50022, 2007 WL 4166126 (Bankr. E.D. Tex.
Nov. 20, 2007), discussed in the February 2013 order as “In re Reynolds,” and Szatanek v.
McDonnell Douglas Corp., 109 F.R.D. 37 (W.D.N.Y. 1985). Judgment has already been granted in
this case, whereas admissions were withdrawn in In re Runnels and Szatanek prior to judgment. See
In re Runnels, 2007 WL 4166126, at *1 (noting withdrawal of admissions prior to ruling on motion
for summary judgment); Szatanek, 109 F.R.D. at 39, 41 (deeming facts not admitted and directing a
response rather than granting pending motion for summary judgment). Further, In re Runnels
involved a Rule 36(b) motion by debtors, which the court granted despite the debtors’ extreme
tardiness in responding to discovery requests and filing the motion, observing that “[i]t is a basic
principle of bankruptcy that exceptions to discharge must be strictly construed against a creditor and
liberally construed in favor of a debtor so that the debtor may be afforded a fresh start.” 2007 WL
4166126, at *4 (internal quotation marks omitted). Here, by contrast, Appellant is a creditor and
never filed a Rule 36(b) motion. In Szatanek, both parties were dilatory such that the court saw no
harm in permitting late responses to requests for admission; here, there is no allegation that
Appellee has been less than diligent. See 109 F.R.D. at 41; see also Kasuboski, 834 F.2d at 1350
n.7 (criticizing and distinguishing Szatanek).
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lightly, where that loss results from the party’s own failure to file an answer to requests
for admission and further its failure to utilize the procedure provided in Rule 36 to
rectify the deficiency, the loss is a casualty of the court’s obligation to process cases to
disposition in an orderly, effective, expeditious manner and in accordance with its
published rules.
O’Bryant v. Allstate Ins. Co., 107 F.R.D. 45, 48 (D. Conn. 1985).
V.
CONCLUSION
Accordingly, it is hereby:
ORDERED, that the Bankruptcy Court’s decision is AFFIRMED; and it is further
ORDERED, that the Clerk serve a copy of this Memorandum-Decision and Order on all
parties.
IT IS SO ORDERED.
DATED:
October 15, 2013
Albany, NY
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