In re: Inglewood Womans Club, Inc.

FILED JUN 07 2017 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. AZ-16-1084-JuLB ) 6 Inglewood Woman’s Club, Inc. ) Bk. No. 4:15-BK-15376-SHG ) 7 Debtor. ) ______________________________) 8 ) Marlene Fearing, ) 9 ) Appellant. ) M E M O R A N D U M* 10 ______________________________) [11] Argued and Submitted on May 18, 2017 12 at Phoenix, Arizona 13 Filed - June 7, 2017 14 Appeal from the United States Bankruptcy Court District of Arizona [15] Honorable Scott H. Gan, Bankruptcy Judge, Presiding 16 _________________________ 17 Appearances: Appellant Marlene Fearing argued pro se. _________________________ [18] 19 Before: JURY, LAFFERTY, and BRAND, Bankruptcy Judges. [25] 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1. -1- 1 This is an appeal from bankruptcy court rulings that 2 (a) dismissed a chapter 111 bankruptcy case because the debtor, 3 a non-profit corporation, failed to obtain attorney 4 representation; (b) denied a request by an interested party that 5 the bankruptcy court commence an independent investigation of 6 alleged criminal activity by a United States Attorney, a party 7 unrelated to the bankruptcy proceeding; and (c) denied 8 reconsideration of those rulings. For the reasons set forth 9 below, we AFFIRM. 10 I. FACTS 11 The facts are straightforward. Inglewood Woman’s Club, Inc. 12 (“Debtor”) filed a voluntary chapter 11 petition on December 3, 13 2015. Debtor is a non-profit corporate entity. Debtor’s chief 14 executive officer is Marlene Fearing (“Ms. Fearing”), who is 15 also a creditor of the estate. The main asset of Debtor is a 16 single piece of real property located in Oro Valley, Arizona, 17 with one of the largest creditors, Stoney Canyon I Townhomes 18 Association (“Stoney Canyon”), holding a secured claim. 19 Shortly after filing the bankruptcy petition, Debtor filed 20 an application to employ the Wright Law Offices as counsel, 21 which was approved by the bankruptcy court on December 8, 2015. 22 On January 14, 2016, Ms. Fearing, acting pro se and primarily on 23 her own behalf, filed a motion entitled “Motion to Compel 24 Investigation of Stolen Assets Belonging to the Inglewood [1] 26 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 , 27 all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal 28 Rules of Civil Procedure. -2- 1 Woman’s Club” (the “Motion to Compel Investigation”). Generally 2 speaking, the Motion to Compel Investigation (a) alleged that a 3 Minnesota United States Attorney stole $2 million of Debtor’s 4 assets in a prior bankruptcy case, and (b) demanded that the 5 bankruptcy court call for an independent investigation of the 6 alleged orchestrated embezzlement. The very next day, on 7 January 15, 2016, the Wright Law Offices filed a motion to 8 withdraw as counsel (the “Motion to Withdraw”), citing as cause 9 “irreconcilable differences” and an “adverse relationship” 10 between Debtor’s representative, Ms. Fearing, and the Wright Law 11 Offices. On January 19, 2016, Stoney Canyon filed a response, 12 requesting that any order granting the Motion to Withdraw 13 require new counsel to file an appearance within ten calendar 14 days. The bankruptcy court set the Motion to Compel 15 Investigation and the Motion to Withdraw for hearing on 16 February 9, 2016. 17 At the February 9th hearing, the bankruptcy court granted 18 the Motion to Withdraw and denied the Motion to Compel 19 Investigation. In doing so, the court (a) gave Debtor ten days 20 to seek employment of counsel or the case would be dismissed, 21 per Stoney Canyon’s request; and (b) made clear that it never 22 could grant the relief Ms. Fearing requested in the Motion to 23 Compel Investigation, as a bankruptcy court does not have 24 jurisdiction to compel an investigation of alleged crimes. On 25 February 16, 2016, the Court entered its order granting the 26 Motion to Withdraw. As a result of Debtor’s failure to retain 27 new counsel, on February 22, 2016, the court entered an order 28 dismissing the case (the “Dismissal Order”). The next day, -3- 1 Ms. Fearing, again acting primarily on her own behalf, filed a 2 request for “Hearing for Motion to Uphold Crime Statutes and 3 Adversary Complaint” (the “Second Motion to Compel 4 Investigation”) asserting the same arguments set forth in the 5 Motion to Compel Investigation. The court set the matter for 6 hearing on March 22, 2016. 7 At the March 22nd hearing, the bankruptcy court treated the 8 Second Motion to Compel Investigation as a motion for 9 reconsideration of the Dismissal Order and the denial of the 10 Motion to Compel Investigation (the “Reconsideration Motion”). 11 The court denied the Reconsideration Motion for two reasons. 12 First, as to the dismissal of the case, the court stated Debtor 13 did not retain counsel in the ten day time period as required by 14 the court when granting the Motion to Withdraw; therefore, 15 because, under federal law, a corporation must be represented by 16 counsel in federal court, the court denied reconsideration of 17 its decision to dismiss the case. Second, as to the motion to 18 compel a criminal investigation, the court again stressed that 19 it did not have the authority or jurisdiction to commence the 20 action requested by Ms. Fearing against the United States 21 Attorney. The court advised Ms. Fearing to look to a proper 22 forum for such relief, but noted that the bankruptcy court was 23 not the proper forum. Ms. Fearing filed a timely appeal.2 [24] 25 2 The timeliness of Ms. Fearing’s appeal was not immediately 26 apparent. The Clerk’s office sent a Notice of Deficient Notice of Appeal, questioning whether the appeal was timely filed. A 27 motions panel entered an order determining that the notice of appeal was timely filed because the Reconsideration Motion was a 28 (continued...) -4- 1 II. JURISDICTION 2 The bankruptcy court had jurisdiction over the Dismissal 3 Order pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(A). The 4 bankruptcy court’s jurisdiction over the criminal investigation 5 is discussed below. We have jurisdiction of this appeal under [6] 28 U.S.C. § 158 . 7 III. ISSUES 8 A. Whether the bankruptcy court abused its discretion in 9 dismissing the corporate debtor’s chapter 11 bankruptcy case for 10 failure to obtain replacement counsel; 11 B. Whether the bankruptcy court erred in the denial of 12 Ms. Fearing’s request to commence a criminal investigation; 13 C. Whether the bankruptcy court abused its discretion in 14 not granting Ms. Fearing’s motion to reconsider the dismissal of 15 the case and denial of her request to commence a criminal 16 investigation. 17 IV. STANDARD OF REVIEW 18 We review a bankruptcy court’s order to dismiss a 19 bankruptcy case for abuse of discretion. Leavitt v. Soto 20 (In re Leavitt), 171 F.3d 1219, 1223 (9th Cir. 1999); Guastella 21 v. Hampton (In re Guastella), 341 B.R. 908, 915 (9th Cir. BAP 22 2006). 23 The existence of jurisdiction is a question of law which we 24 review de novo. Bethlahmy v. Kuhlman (In re ACI–HDT Supply Co.), [25] 26 2 (...continued) 27 timely tolling motion pursuant to Rule 8002(b)(1)(D). The panel then requested a formal order denying the reconsideration. That 28 order was filed on May 20, 2016. -5- [1] 205 B.R. 231, 234 (9th Cir. BAP 1997); Nilsen v. Neilson 2 (In re Cedar Funding, Inc.), 419 B.R. 807, 816 (9th Cir. BAP 3 2009). 4 We review a bankruptcy court’s denial of a motion for 5 reconsideration for an abuse of discretion, whether the motion 6 for reconsideration is based on Civil Rule 59(e) or Civil 7 Rule 60(b). First Ave. W. Bldg., LLC v. James (In re OneCast 8 Media, Inc.), 439 F.3d 558, 561 (9th Cir. 2006); School District 9 No. 1J v. AC & S, Inc., 5 F.3d 1255 , 1262 (9th Cir. 1993). 10 Under the abuse of discretion standard, we reverse only 11 when the bankruptcy court applied an incorrect legal rule or 12 where its application of the law to the facts was illogical, 13 implausible or without support in inferences that may be drawn 14 from the record. TrafficSchool.com, Inc. v. Edriver Inc., [15] 653 F.3d 820, 832 (9th Cir. 2011), citing United States v. 16 Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009)(en banc). 17 V. DISCUSSION 18 A. The scope of the appeal 19 Following the notice of appeal, after briefing had 20 concluded, Ms. Fearing attempted to file supplemental 21 declarations and exhibits based on issues pertaining to pre22 appeal and post-appeal events that purportedly related to the 23 requested criminal investigation. On April 11, 2017, a motions 24 panel entered an order rejecting Ms. Fearing’s supplemental 25 filings (the “April 11th Order”). In doing so, the panel stated 26 that Ms. Fearing’s attempted filings contained documents which 27 were not considered by the bankruptcy court when it made its 28 rulings, noting that the sole issue on appeal was the dismissal -6- 1 of the Debtor’s bankruptcy case for failure to retain legal 2 counsel. 3 On April 27, 2017, Ms. Fearing filed a response to the 4 April 11th Order, asserting that the dismissal of the case is 5 not the sole issue on appeal. Recognizing an error in its order, 6 on April 28, 2017, the panel entered a corrective order finding 7 that the scope of the appeal includes (1) the order dismissing 8 the bankruptcy case for failure of the debtor to appear through 9 counsel, (2) the order denying the motion for criminal 10 investigation, and (3) the order denying reconsideration of 11 those rulings. 12 We agree with the motions panel and conclude that the scope 13 of this appeal includes the three issues described in its order 14 of April 28. 15 B. The bankruptcy court’s dismissal of the chapter 11 case 16 On appeal, Ms. Fearing does not posit any argument as to 17 why the bankruptcy court abused its discretion in dismissing 18 Debtor’s bankruptcy case for not retaining counsel. Nor could 19 she. 20 In federal courts an individual may proceed either pro se 21 or by an attorney. See 28 U.S.C. § 1654 (“In all courts of the 22 United States the parties may plead and conduct their own cases 23 personally or by counsel.”) Although federal statutes protect an 24 individual’s right to conduct her own litigation, that right has 25 never been interpreted to allow a corporation to appear pro se. 26 See Carr Enterprises, Inc. v. United States, 698 F.2d 952 , 953 27 (8th Cir. 1983). Unlike an individual, a corporation is an 28 artificial entity, which can only act or appear through an -7- 1 authorized agent. See Ritchie Grocer Co. v. Aetna Casualty & 2 Surety Co., 426 F.2d 499, 500 (8th Cir. 1970) (asserting the 3 general principle of corporate law that a corporation may only 4 act through its authorized agents); see also Envtl. Corp. v. 5 Knight (In re Goodman), 991 F.2d 613, 618 (9th Cir. 1993) 6 (rejecting the view that a corporation is an “individual” as 7 defined by the Bankruptcy Code). As a result, it is a well8 settled principle that a corporation must be represented by an 9 attorney to appear in federal court. Rowland v. Cal. Men’s 10 Colony, Unit II Men’s Advisory Council, 506 U.S. 194 , 201-02 11 (1993) (“It has been the law for the better part of two 12 centuries . . . that a corporation may appear in the federal 13 courts only through licensed counsel”); Osborn v. Bank of United 14 States, 22 U.S. 738, 830 (1824); First Hartford Corp. Pension 15 Plan & Trust v. United States, 194 F.3d 1279, 1290 (Fed. Cir. 16 1999); Pridgen v. Andresen, 113 F.3d 391, 392-93 (2d Cir. 1997); 17 In re Tamojira, Inc., 20 F. App’x 133, 133-34 (4th Cir. 2001); 18 National Indep. Theatre Exhibitors v. Buena Vista Distrib., [19] 748 F.2d 602, 609 (11th Cir. 1984); Carr Enter., Inc. v. United 20 States, 698 F.2d at 953 . 21 In the instant case, the bankruptcy court did not abuse its 22 discretion by dismissing the bankruptcy case. At the February 23 9th hearing, the bankruptcy court gave Debtor ten days to retain 24 legal counsel or the case would be dismissed. When Debtor did 25 not retain counsel after twelve days, the bankruptcy court 26 entered the Dismissal Order. Although the Dismissal Order is 27 silent as to what authority the bankruptcy court relied upon to 28 dismiss the case, the court made it clear at the February 9th -8- 1 hearing that federal law requires a corporation to be 2 represented by a licensed attorney in a bankruptcy case. Because 3 the Supreme Court has consistently held that federal law 4 requires a corporation to be represented through counsel, see 5 Rowland, 506 U.S. at 201 , we conclude that the bankruptcy court 6 did not err. 7 C. Bankruptcy court jurisdiction over criminal investigation 8 Most of Ms. Fearing’s argument takes issue with the 9 bankruptcy court’s refusal to commence a criminal investigation. 10 Although Ms. Fearing argues that the bankruptcy court had the 11 jurisdictional authority to compel such investigation, she is 12 mistaken. 13 The bankruptcy court is a court of limited jurisdiction. 14 See Bd. of Governors v. MCorp Fin., Inc., 502 U.S. 32 , 40 15 (1991). Bankruptcy courts fall outside of the constitutional 16 authority of Article III and derive their authority from federal 17 statutes. N. Pipeline Constr. Co. v. Marathon Pipe Line Co., [18] 458 U.S. 50 , 60–87 (1982) (plurality opinion); Celotex Corp. v. 19 Edwards, 514 U.S. 300, 307 (1995) (asserting that the 20 jurisdiction of a bankruptcy court is “grounded in, and limited 21 by, statute.”). Two statutes, 28 U.S.C. §§ 157 (a) and 1334, 22 allow district courts to refer proceedings arising in, arising 23 under, or related to a bankruptcy case, to bankruptcy courts. 24 Although generally bankruptcy courts have jurisdiction to hear a 25 wide array of matters, the exercise of bankruptcy court 26 jurisdiction to enter any final order or judgment is limited to 27 (1) “cases under title 11,” § 157(b)(1); (2) “core” bankruptcy 28 proceedings that either “arise under” the Bankruptcy Code or -9- 1 “arise in” a case under the Code, id.; or (3) cases in which all 2 interested parties consent to the bankruptcy court entering a 3 final order in a matter that is “related to” a case under the 4 Bankruptcy Code. § 157(c)(2); see also Marathon Pipe Line, [5] 458 U.S. at 68 ; Harris v. Wittman (In re Harris), 590 F.3d 730 , 6 737 (9th Cir. 2009). 7 In the Motion to Compel Investigation, Ms. Fearing sought 8 an order from the bankruptcy court that would commence a 9 criminal investigation against a Minnesota United States 10 Attorney for allegedly stealing assets of the Debtor. At the 11 February 9th hearing, the bankruptcy court stated very clearly 12 it could not grant Ms. Fearing’s request, as the court does not 13 have the jurisdiction to compel a governmental agency to 14 commence an investigation for any alleged crimes committed. The 15 court pointed out to Ms. Fearing that she must target her 16 request to an agency that would have such jurisdiction, but as a 17 court of limited jurisdiction, it was not the bankruptcy court. 18 We agree. Ms. Fearing seeks a remedy that is well outside 19 the jurisdiction of any bankruptcy court. Although, in limited 20 circumstances, a bankruptcy court may be required to report 21 violations of the law to the United States Attorney,3 no federal [3] 23 See 18 U.S.C. § 3057 (“Any judge . . . having reasonable grounds for believing that any violation under chapter 9 of this 24 title or other laws of the United States relating to insolvent debtors, receiverships or reorganization plans has been 25 committed, or that an investigation should be had in connection 26 therewith, shall report to the appropriate United States attorney all the facts and circumstances of the case, the names of the 27 witnesses and the offense or offenses believed to have been committed.”) However, § 3057 does not help Ms. Fearing because 28 (continued...) -10- 1 statute grants jurisdiction to a bankruptcy court to compel an 2 investigation, as Ms. Fearing requests. It is well established 3 that bankruptcy courts merely decide matters involving property 4 of the debtor and adjudicate disputes between debtors and 5 creditors. See Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 , 43 6 (1989). A bankruptcy court simply lacks any jurisdiction over 7 criminal proceedings. See e.g., Menk v. Lapaglia (In re Menk), [8] 241 B.R. 896, 904 (9th Cir. BAP 1999) (holding that § 1334 9 grants bankruptcy courts jurisdiction only over certain “civil 10 proceedings”); Gruntz v. City of Los Angeles (In re Gruntz), [11] 202 F.3d 1074, 1083 (9th Cir. 2000) (interpreting § 362(b)(1) as 12 rendering the automatic stay inapplicable to all criminal 13 proceeding consistent with “its object and policy”); Knupfer v. 14 Lindblade (In re Dyer), 322 F.3d 1178 , 1192–95 (9th Cir. 15 2003)(holding that bankruptcy courts have no authority to impose 16 criminal contempt sanctions based on their punitive nature). Nor 17 does the bankruptcy court have discretion to compel governmental 18 agencies to commence criminal investigations. See e.g., Wayte v. 19 United States, 470 U.S. 598, 607 (1985)(finding that the 20 decision to prosecute is “ill-suited to judicial review”). 21 Because a bankruptcy court does not have the power to compel 22 other independent governmental agencies to investigate criminal 23 matters, Ms. Fearing’s request falls outside any relief the 24 bankruptcy court could have sanctioned under 28 U.S.C. §§ 157 (a) [3] 26 (...continued) creditors do not have a legal right to request the court to make 27 a report. See In re Valentine, 196 B.R. 386, 387 (Bankr. E.D. Mich. 1996); see also In re Narumanchi, 471 B.R. 35, 44 (D. Conn. 28 2012). -11- 1 or 1334. Therefore, the bankruptcy court properly denied her 2 request. 3 D. The bankruptcy court did not abuse its discretion when it 4 denied the motion to reconsider 5 The bankruptcy court did not make clear under which rule it 6 was treating Ms. Fearing’s motion to reconsider.4 7 Notwithstanding such, we conclude that it fell under Civil 8 Rule 59(e) since the Second Motion to Compel Investigation was 9 filed within the required 14 days. Absent highly unusual 10 circumstances, a motion under Civil Rule 59(e) should not be 11 granted unless the court is presented with newly discovered 12 evidence, committed clear error, or if there is an intervening 13 change of controlling law. 389 Orange St. Partners v. Arnold, [14] 179 F.3d 656, 665 (9th Cir. 1999). A motion for reconsideration 15 is not for rehashing the same arguments made the first time or 16 to assert new legal theories or new facts that could have been 17 raised at the initial hearing. Greco v. Troy Corp., 952 F.2d 406 18 (9th Cir. 1991). 19 In the ruling, the bankruptcy court first determined that 20 it could not grant reconsideration of the dismissal of the case. 21 The court stated that when it granted the Motion to Withdraw, it 22 gave Debtor ten days to seek employment of counsel or the case 23 would be dismissed. Debtor did not retain counsel. Therefore, 24 because the bankruptcy court, per Supreme Court mandate, could [25] 26 4 Treating the Second Motion to Compel Investigation as a 27 motion to reconsider was solely the court’s interpretation of Ms. Fearing’s motion; Ms. Fearing did not specify which rule 28 governed her motion. -12- 1 not allow the case to go forward without counsel, it would not 2 reconsider the Dismissal Order. Second, the bankruptcy court had 3 determined that it lacked power over any criminal investigation. 4 Based on this lack of power, the bankruptcy court could not 5 reverse course and compel the requested investigation just 6 because Ms. Fearing asked a second time. 7 The bankruptcy court did not abuse its discretion in 8 denying both rulings. It identified the correct legal rules of 9 law and its application of the law to the undisputed facts was 10 not illogical, implausible, or without support in inferences 11 which may be drawn from the record. 12 VI. CONCLUSION 13 For the reasons stated above, we AFFIRM. [28] -13-