Netsch et al v. Sherman

Filing 16

Memorandum Opinion and Order: The court affirms the bankruptcy court's 1/26/2015 and 3/4/2015 orders and dismisses with prejudice this appeal. (Ordered by Judge Sam A Lindsay on 3/31/2016) (axm)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
BRYAN NETSCH AND,
INTENSE PRINTING, INC.,
Appellants,
v.
DANIEL J. SHERMAN, TRUSTEE,
Appellee.

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Civil Action No. 3:15-CV-0455-L
(Consolidated with 3:15-785-L)

MEMORANDUM OPINION AND ORDER
Appellants Bryan Netsch and Intense Printing, Inc. (collectively, “Appellants”) appeal the
bankruptcy court’s denial of their motion to extend the time to appeal and motion for
reconsideration. After careful consideration of the bankruptcy court’s orders, briefs, the record on
appeal, and applicable law, the court affirms the bankruptcy court’s January 26, 2015 and March
4, 2015 orders and dismisses with prejudice this appeal.
I.

Procedural and Factual Background
The underlying adversary proceeding that gave rise to this appeal was brought on April 23,

2010, by Debtor Prism Graphics, Inc.’s Chapter 7 bankruptcy trustee Daniel J. Sherman (“Trustee”).
On October 27, 2014, after a trial of the Trustee’s claims against Bryan Netsch and Intense Printing,
Inc., the bankruptcy court entered a final judgment in favor of the Trustee. Federal Rule of
Bankruptcy Procedure 8002(a) requires a notice of appeal to be filed “within 14 days after entry of
the judgment, order, or decree being appealed.” Thus, the deadline to appeal this judgment was
November 10, 2014. No appeal by Appellants was filed by this date. On November 20, 2014, an

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amended final judgment was entered by agreement to correct a clerical error in the original judgment.
The deadline to appeal the amended judgment was December 4, 2014. Appellants did not file their
Notice of Appeal or Motion to Extend Time to File Notice of Appeal until December 16, 2014. The
Trustee opposed the motion for extension of time.
On January 26, 2015, after a hearing, the bankruptcy court denied the Motion to Extend Time
to File Notice of Appeal. On January 30, 2015, Appellants moved the bankruptcy court to reconsider
its denial of their motion for extension of time. Thereafter, Appellants filed a supplemental motion
for reconsideration, which was docketed on February 4, 2015, and denied by the bankruptcy court
on March 4, 2015. Appellants appealed the bankruptcy court’s January 26, 2015 and March 4, 2015
orders denying their motions in two separate appeals. The later-filed appeal of the motion for
reconsideration was transferred to this court and consolidated with the appeal in this case of
Appellants’ motion for extension of time to appeal.
II.

The Parties’ Contentions on Appeal
According to Appellants, their counsel was not aware that either deadline to appeal had

expired until receiving the Trustee’s demand letter for payment of the judgment on December 15,
2014. Appellants state that their counsel’s mistake was not due to his misinterpretation of the
Bankruptcy Rules but instead was attributable to his mistaken belief that he had 28 days, rather than
14 days, to appeal. Appellants’ Br. 10 (“The mistake was not due to Appellants’ counsel’s
misinterpretation of the Bankruptcy rules, but rather on his blind assurance that he ‘knew’ the correct
deadline.”). Appellants maintain that their counsel inadvertently calendared the wrong deadline but
acknowledge that this factor weighs against a finding of excusable neglect. Id. at 10-11. Appellants,
nevertheless, contend that consideration of counsel’s mistake in calculating the appeal deadline

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should not “trump” the other factors in the analysis of whether the mistake constitutes excusable
neglect. Appellants, therefore, assert that, “in finding that excusable neglect did not exist, the
bankruptcy court held this factor dispositive instead of balancing all of the factors and circumstances
against each other” and “placed too much weight on the reason for the delay.” Appellants’ Br. 11.
Appellants do not dispute that their Notice of Appeal and motion for extension of time were
filed after the deadline for filing a notice of appeal. They instead contend that the bankruptcy court
erred in denying their motions for extension of time to file a notice of appeal and reconsideration
because their counsel’s mistake in calculating or calendaring the appeal deadline constitutes
“excusable neglect” under Bankruptcy Rule 8002(c) and the standard set forth in Pioneer Investment
Services Company v. Brunswick Associates Limited Partnerships, 507 U.S. 380 (1993), particularly
when all of the Pioneer factors are considered. Appellants contend that neither Pioneer nor the Fifth
Circuit’s opinion in Halicki v. Louisiana Casino Cruises, Inc., 151 F.3d 465 (5th Cir. 1998),
forecloses a finding of excusable neglect when other factors, such as the danger of prejudice to the
debtor and whether the movant acted in good faith, are considered. In addition to the Pioneer
factors, Appellants request that the court also consider whether their appeal is meritorious and the
likelihood that the bankruptcy court would have granted their requested extension if it had been filed
timely.
The Trustee disagrees and contends that the bankruptcy court correctly determined that
Appellants’ counsel’s mistake is not excusable neglect under Pioneer and Halicki. The Trustee
asserts that consideration of the other Pioneer factors also weighs against a finding of excusable
neglect. The Trustee contends that the two additional equitable considerations relied on by
Appellants are not relevant to the issue of whether excusable neglect has been established under

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Pioneer, and Appellants have not cited any authority to show that consideration of such factors is
required or appropriate in an excusable neglect analysis.
III.

Standard of Review
In a bankruptcy appeal, district courts review bankruptcy court rulings and decisions under

the same standards employed by federal courts of appeal: a bankruptcy court’s findings of fact are
reviewed for clear error, and its conclusions of law are reviewed de novo. In re Universal Seismic
Assocs., Inc., 288 F.3d 205, 207 (5th Cir. 2002). The court reviews for abuse of discretion the
bankruptcy court’s determination that Appellants’ failure to file a timely notice of appeal was not
due to excusable neglect. See Midwest Employers Cas. Co. v. Williams, 161 F.3d 877, 878 (5th Cir.
1998).
IV.

Analysis
The Supreme Court in Pioneer established the following factors for determining “excusable

neglect”: (1) “danger of prejudice to the opposing party”; (2) “the length of the delay and its potential
impact on judicial proceedings”; (3) “the reason for the delay, including whether it was within the
reasonable control of the movant”; and (4) whether the movant acted in good faith. Pioneer Inv.
Servs. Co., 507 U.S. at 395. The court in Pioneer explained that the determination as to whether
excusable neglect exists is “at bottom an equitable one, taking into account of all relevant
circumstances surrounding the party’s omission.” Id. at 394. The Pioneer court, however, went on
to explain that “inadvertence, ignorance of the rules, or mistakes construing the rules do not usually
constitute ‘excusable’ neglect.” Id. at 392. Pioneer involved an “excusable neglect” analysis under
Bankruptcy Rule 9006(b)(1), but the Fifth Circuit has adopted the Pioneer factors and standard of

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excusable neglect and applied them to a number of procedural rules in the civil and criminal context.
See Halicki, 151 F.3d at 468-69.
Based on the standard in Pioneer, the Fifth Circuit in Halicki reasoned that “a
misconstruction of the rules—especially when their language is plain—will rarely satisfy the
‘excusable neglect’ standard.” Id. at 469 (citing Pioneer Inv. Servs. Co., 507 U.S. at 392). While
“some misinterpretations of the federal rules may qualify as excusable neglect, such is the rare case
indeed.” Id. at 470. Thus, when “the rule at issue is unambiguous, a district court’s determination
that the neglect was inexcusable is virtually unassailable. Were it otherwise, almost every appellant’s
lawyer would plead his own inability to understand the law when he fails to comply with a deadline.”
Id.
In this case, the bankruptcy court applied the Pioneer standard to the facts of the case and
determined that Appellants’ reason for missing the deadline to file a notice of appeal, counsel’s
mistake in calculating the appeal deadline under the Federal Rules of Civil Procedure rather than the
Federal Rule of Bankruptcy Procedure 8002(a), does not constitute excusable neglect under Pioneer
or Fifth Circuit precedent because the “Bankruptcy Rules for appeals from the bankruptcy court are
unambiguous and not onerous on counsel purporting to represent litigants” in the bankruptcy court.
February 10, 2015 Order 6. The bankruptcy court noted that the facts of this case are strikingly
similar to those in Halicki v. Louisiana Casino Cruises, Inc., 151 F.3d 465 (5th Cir. 1998), and In
re Sanders, 163 F.3d 1356, 1998 WL 858820 (5th Cir. 1998) (per curiam), in which the Fifth Circuit
upheld the lower courts’ findings of inexcusable neglect because such determinations are “virtually
unassailable” when the rule at issue is unambiguous. February 10, 2015 Order 4-5 (quoting Halicki,
151 F.3d at 470). The bankruptcy court, therefore, concluded that counsel’s confusion and mistake,

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which was within his or Appellants’ control, weighed against a finding of excusable neglect,
notwithstanding the court’s findings regarding the other Pioneer factors. The bankruptcy court also
noted, “Had [Appellants’] failure to file the Notice of Appeal been the product of counsel merely
putting the wrong date on the calendar, the Stotter case cited in the Motion to Extend time might
apply”; however, because Appellants were apparently aware of Rule 8002(a), the court concluded
that the facts of this case were more similar to those in Halicki and In re Sanders and did not support
a finding of excusable neglect.
The court detects no error in the bankruptcy court’s application of the Pioneer standard to
the facts of this case. Unlike Pioneer, which involved an attorney’s failure to file a proof of claim
by the deadline set by the court because the notice of bar date was provided in a manner that was
inconspicuous and inconsistent with the ordinary course of bankruptcy cases, Pioneer Inv. Servs.
Co., 507 U.S. at 398, Appellants’ counsel’s mistake involved an unambiguous rule and a calculation
of a deadline that was within his control. Consequently, the nature of counsel’s mistake in
calculating the deadline to file a notice of appeal under the Federal Rules of Civil and Appellate
Procedure, rather than the applicable unambiguous bankruptcy rule, “weighs heavily against a
finding of excusable neglect.” Halicki, 151 F.3d at 470.
Although Appellants cite a number of cases in which the Fifth Circuit has affirmed a lower
court’s finding of excusable neglect, the standard of review in such cases is less stringent. As the
Fifth Circuit has explained, it “gives more leeway to a district court’s determination of excusable
neglect when the district court grants the motion for an extension of time.” Stotter v. University of

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Tex. at San Antonio, 508 F.3d 812, 820 (5th Cir. 2007) (citing Midwest Employers Cas. Co., 161
F.3d at 879). Because the procedural posture and facts of this case are more like those of Halicki
than the other cases cited by Appellants, the court finds the reasoning in Halicki more persuasive.
Appellants’ characterization on appeal of their counsel’s neglect as a calendaring mistake in
an apparent effort to bring the facts of this case in line with Stotter in light of the bankruptcy court’s
comment regarding Stotter does change the nature of the mistake or the court’s determination that
the bankruptcy court did not abuse its discretion in denying the motion for extension of time to
appeal. As with the other Fifth Circuit cases cited by Appellants, Stotter involved an appeal of a
district court’s finding of excusable neglect, and the court’s opinion in that case makes clear that its
affirmance of the district court’s finding of excusable neglect was based on “the leeway granted to
district courts” under the less stringent standard of review. Stotter, 508 F.3d at 820. This alone
makes Stotter distinguishable.

Moreover, unlike Stotter, in which the appellant’s counsel

“accidentally entered the incorrect year into her new computer-based calendar,” Appellants’
bankruptcy counsel in this case incorrectly calculated the deadline to appeal by using Federal Rules
of Civil and Appellate Procedure rather than the applicable bankruptcy rules. To make matters
worse, Appellants’ counsel made the same mistake twice in calculating the deadlines to appeal the
original and amended judgments. As a result, he missed not one, but two appeal deadlines.
Consequently, the facts of this case are distinguishable from those in Stotter.
The court, therefore, agrees with the bankruptcy court’s determination that Appellants’ reason
for missing the deadline for filing a notice of appeal, counsel’s simple mistake in calculating the
appeal deadline, was not the result of excusable neglect under the standard set forth in Pioneer. See
Halicki, 151 F.3d at 467-70; see also In re Sanders, 1998 WL 858820 at *1 (affirming denial of

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extension of time to appeal because “confusing the Bankruptcy Rules and the Federal Rules of Civil
Procedure, does not constitute ‘excusable neglect.’”). Further, the bankruptcy court applied the
correct standard under Pioneer, considered all relevant factors under Pioneer, and considered all
arguments and matters presented to it in making the equitable determination that an extension was
unwarranted. Under Pioneer, no more is required. See Halicki, 151 F.3d at 469. Accordingly, the
court does not consider the additional equitable factors urged by Appellants.
V.

Conclusion
For the reasons stated, the court concludes that the bankruptcy court did not abuse its

discretion in denying Appellants’ request to extend their time to appeal or their motion for
reconsideration. Accordingly, the court affirms the bankruptcy court’s January 26, 2015 and March
4, 2015 orders and dismisses with prejudice this appeal. The clerk of court is directed to prepare,
sign, and enter judgment in accordance with this memorandum opinion and order pursuant to Rule
8016(a) of the Federal Rules of Bankruptcy Procedure.
It is so ordered this 31st day of March, 2016.

_________________________________
Sam A. Lindsay
United States District Judge

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