All-Tex Staffing & Personnel, Inc.

Filing 17

MEMORANDUM AND OPINION AFFIRMING THE JUDGMENT OF THE BANKRUPTCY COURT. The judgment of the bankruptcy court is affirmed. Case terminated on 10/30/2020.(Signed by Judge Charles Eskridge) Parties notified.(jengonzalez, 4)

Case 4:19-cv-01479 Document 17 Filed on 10/30/20 in TXSD Page 1 of 6
United States District Court
Southern District of Texas

ENTERED
October 30, 2020
David J. Bradley, Clerk

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ALL-TEX STAFFING &
PERSONNEL INC,
Appellant,

§ CIVIL ACTION NO.
§ 4:19-cv-01479
§
§
§ JUDGE CHARLES ESKRIDGE
vs.
§
SARAH ROMO-TORRES, §
§
SYLVIA ROMO, and
§
MOMENTUM
STAFFING SOLUTIONS §
§
LLC,
§
Appellees.
MEMORANDUM AND OPINION
AFFIRMING THE JUDGMENT OF THE BANKRUPTCY COURT
Appellant All-Tex Staffing and Personnel Inc appeals from
the denial of its Rule 60(b)(3) motion to set aside an order
approving a settlement concluded during its bankruptcy
proceeding.
The memorandum and opinion by the bankruptcy court
found that the motion by All-Tex was untimely under Rule 60(c)
of the Federal Rules of Civil Procedure. Dkt 4-2 at 74–80. Its
judgment is affirmed on that basis.
1. Background
All-Tex is an employment-staffing business. It previously
employed Appellee Sarah Romo-Torres. It terminated her on
suspicion that she was diverting clients to Appellee Momentum
Staffing Solutions, LLC. Appellee Sylvia Romo is the mother of
Romo-Torres. Romo also owns Momentum. Dkt 4 at 69–70, 291,
387, 443–44; Dkt 4-1 at 622.
All-Tex filed suit against Appellees in November 2016 in the
281st Judicial District of Harris County, Texas. It brought claims

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for breach of fiduciary duty, breach of contract, tortious
interference with contract and business relationships, and
misappropriation of intellectual property. All-Tex filed for
bankruptcy protection under Chapter 11 in February of 2017. It
then removed the instant dispute to the bankruptcy court as an
adversarial proceeding. Dkt 4 at 1, 4, 65–83.
The bankruptcy court held hearings in April and May of 2017
on Appellees’ motion for a temporary restraining order. RomoTorres initially testified that she never sent clients to or otherwise
had any dealings with Momentum, which she said was operated
only by her mother. Romo-Torres on a later day recanted that
testimony. She admitted to receiving money from Romo, to
referring clients to Momentum, and to assisting with its business.
But she continued to deny being employed by Momentum while
still working for All-Tex. Dkt 4-2 at 222–23.
The parties filed a notice of settlement of the adversary
proceeding in December 2017. This included agreement by
Appellees to pay All-Tex a total of $200,000 in sixty monthly
installments. All-Tex moved to dismiss its bankruptcy proceeding
and all related disputes in April 2018. The bankruptcy court
granted the motion in May 2018. Dkt 4-2 at 228–30.
All-Tex moved in November 2018 pursuant to Rule 60(b)(3)
to set aside the order approving the settlement. The bankruptcy
court held an evidentiary hearing on the motion and considered
post-hearing briefs. All-Tex argued among other things that it
was highly influential to its bargaining position that Romo-Torres
testified that she didn’t work at Momentum while employed by
All-Tex. Id at 231–32; Dkt 8 at 14.
It is pertinent in this regard that Romo-Torres has a LinkedIn
profile. It is undisputed that All-Tex reviewed her profile in early
April 2018. The bankruptcy court found that the profile
represented that Romo-Torres was the president and chief
executive officer of Momentum and that she had held these roles
since May 2016. Dkt 4-2 at 188. It did so in part because the
owner and president of All-Tex testified that he also learned in
April 2018 that Romo-Torres’ employment with All-Tex and
Momentum overlapped. See id at 188–94.

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The bankruptcy court denied the Rule 60(b)(3) motion for
three reasons. It first found that the motion was untimely. It also
found that the motion was barred by principles of judicial
estoppel. And it finally found that All-Tex failed to meet the
requisite clear and convincing evidentiary burden.
All-Tex appeals the order. Id at 261. It contests among other
things the factual finding by the bankruptcy court regarding the
content of the LinkedIn profile as of April 2018.
2. Legal Standard
Rule 60(b) of the Federal Rules of Civil Procedure allows a
party to seek relief “from a final judgment, order, or proceeding”
for certain enumerated reasons. Rule 60(b)(3) relates to an
opposing party’s fraud, misrepresentation, or misconduct. This
requires the movant to establish by clear and convincing evidence
not only that the adverse party engaged in fraud or other
misconduct, but also that this misconduct prevented the movant
from fully and fairly presenting its case. Hesling v CSX
Transportation, Inc, 396 F3d 632, 641 (5th Cir 2005) (citations
omitted). A party may challenge a settlement agreement through
a Rule 60(b) motion. California Dive International, Inc v Schmidt, 639
F Appx 214, 216 (5th Cir 2016) (per curiam).
Rule 60(c)(1) requires a Rule 60(b) motion to be brought in
a timely fashion. If there is delay, the determination whether to
excuse it “is at bottom an equitable [consideration], taking
account of all the relevant circumstances surrounding the party’s
omission.” In re Osborne, 379 F3d 277, 284 (5th Cir 2004), quoting
Pioneer Investment Services Co v Brunswick Associates LP, 507 US 380,
385 (1993); see also Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 2866 (3d ed 2012).
The decision to grant a Rule 60(b) motion is “within the
sound discretion of the trial court.” Diaz v Methodist Hospital, 46
F3d 492, 496 (5th Cir 1995), citing Montgomery v Hall, 592 F2d
278, 279 (5th Cir 1979). A reviewing court on appeal shouldn’t
overturn the decision of the bankruptcy court absent an abuse of
discretion. Diaz, 46 F3d at 496, citing Johnson v Offshore Exploration,
Inc, 845 F2d 1347, 1359 (5th Cir), cert denied, 448 US 968 (1988).
This standard is “highly deferential.” First RepublicBank Fort Worth
v Norglass, Inc, 958 F2d 117, 119 (5th Cir 1992). A bankruptcy
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court abuses its discretion when it applies an improper legal
standard or bases its decision on clearly erroneous findings of
fact. In re Crager, 691 F3d 671, 675 (5th Cir 2012).
3. Analysis
The bankruptcy court denied the motion to dismiss by AllTex on three independent grounds—that it was untimely, that it
was also barred by judicial estoppel, and that it failed on the
merits. All-Tex attacks each as an abuse of discretion. To the
contrary, the bankruptcy court was well within its discretion to
find the motion untimely. The other two grounds thus needn’t
be addressed.
The pertinent inquiry is whether the bankruptcy court
abused its discretion by deeming the at-issue motion untimely.
Rule 60(c)(1) states, “A motion under Rule 60(b) must be made
within a reasonable time—and for reasons (1), (2), and (3) no
more than a year after the entry of the judgment or order or the
date of the proceeding.” All-Tex did make its motion under Rule
60(b)(3) within one year of the ruling. The question, then, is
whether the motion was still brought within a reasonable time.
Whether an interval constitutes a reasonable time depends
upon the following considerations:
o First, the interests in finality;
o Second, the reason for delay;
o Third, the practical ability of the litigant to learn
earlier of the grounds relied on; and
o Fourth, prejudice to others.
Legion Insurance Co v Mega Interests Inc, 78 F Appx 945, 946 (5th Cir
2003) (per curiam), quoting Travelers Insurance Co v Lijeberg
Enterprises, Inc, 38 F3d 1404, 1410 (5th Cir 1994). All-Tex directly
challenges only the analysis by the bankruptcy court on the
second factor. See Dkt 8 at 24–29.
Analysis of the reason for delay seeks to determine if there is
“any compelling reason” explaining the delay in seeking relief
under Rule 60. Shoemaker v Estis Well Service, LLC, 122 F Supp 3d
493, 516 (ED La 2015). The Fifth Circuit holds that “the
timeliness of the motion is measured as of the point in time when
the moving party has grounds to make such a motion, regardless
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of the time that has elapsed since the entry of judgment.” In re
Edwards, 865 F3d 197, 208 (5th Cir 2017), quoting First
RepublicBank, 958 F2d at 120.
The bankruptcy court determined the period of delay to have
begun in April 2018, being the time All-Tex obtained and
reviewed the LinkedIn profile of Romo-Torres. All-Tex filed its
Rule 60 motion in November 2018. The bankruptcy court thus
measured the delay to be eight months.
All-Tex attacks this finding of fact. It argues that it allegedly
didn’t learn of Romo-Torres’ overlapping employment until July
2018. Dkt 8 at 24–25. It offered as evidence a printout of the
LinkedIn page purporting to show a profile updated as of July
2018. Dkt 4-2 at 174–75. It argued that the page didn’t show any
overlap in employment prior to that. Dkt 8 at 24–25. It also
offered testimony from its owner and president. See Dkt 4-2 at
188–91 (summary of testimony by the bankruptcy court). All-Tex
argued this was sufficient to start the clock running in July 2018,
reducing the delay to five months.
The bankruptcy court considered the printout, the testimony
of All-Tex’s owner and president, and the rest of the record. It
expressly discredited this factual contention:
The Court finds it disingenuous that the
Debtor’s [All-Tex’s] Post-Hearing Brief asserts
that the Debtor did not discover until July of
2018 that Romo-Torres’ LinkedIn profile
represented that she had been president of
Momentum since May of 2016, when Patterson
[the owner and president] himself testified . . .
that he first learned of this information in early
April of 2018.
Dkt 4-2 at 189 n 17; see generally id at 188–94.
This evidentiary finding isn’t clearly erroneous. Indeed, the
resolution of conflicting information—with the attendant
determination which to find credible—is a fundamental
prerogative of the trial court. The bankruptcy court weighed the
credibility of witnesses and evidence by All-Tex. It then
determined that All-Tex knew about Romo-Torres’ employment
at Momentum (and by extension, her alleged perjury) since April
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2018. Dkt 4-2 at 202. And it then found that All-Tex failed to
provide any good reason for its eight-month delay in bringing its
Rule 60(b)(3) motion. Id at 204.
It bears mention that the bankruptcy court substantiated that
many courts have denied Rule 60(b) motions where the movant
failed to adequately explain a delay. Dkt 4-2 at 201–02; see also
Krishnan v JPMorgan Chase Bank, NA, 2018 WL 7138385, *3 (ED
Tex); Limon v Double Eagle Marine, LLC, 771 F Supp 2d 672, 677–
80 (SD Tex 2011). When doing so, it cited numerous opinions
that would establish unreasonable delay even if the point of
measurement were from July 2018. These included examples of
refusals to grant relief on intervals of three to four months down
to as low as ten weeks. For example, see Dkt 4-2 at 201, citing
McLawhorn v John W Daniel & Co, 924 F2d 535, 538 (4th Cir 1991);
Federal Lank Bank of St Louis v Cupples Brothers, 889 F2d 764, 768
(8th Cir 1989). The ruling of the bankruptcy court would plainly
have been no different if measured from the latter date, which
ruling itself wouldn’t have been clearly erroneous.
4. Conclusion
A reviewing court is to be “highly deferential” to a trial
court’s decision that a Rule 60 motion is untimely. First
RepublicBank, 958 F2d at 119.
The bankruptcy court was well within its discretion to
conclude that an unexplained eight-month delay weighed in favor
of denying the motion as untimely. And it was certainly entitled
on the record before it to disbelieve All-Tex’s factual contention
that its delay was shorter.
The judgment of the bankruptcy court is AFFIRMED.
SO ORDERED.
Signed on October 30, 2020, at Houston, Texas.

Hon. Charles Eskridge
United States District Judge

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