Opinion
4:01CV65, BR:00-20467
August 15, 2001
Eduardo Leon Del Rio, Jesup, GA, for EDUARDO LEON DEL RIO, appellant
Jack K. Berry, U.S. Trustee, Savannah, GA, for C. DAVID BUTLER, U.S. Trustee, appellee and R. MICHAEL SOUTHER, Bankruptcy Trustee, interested party
Jack K. Berry, pro se
O R D E R
I. BACKGROUND
In this bankruptcy appeal, Chapter 7 debtor Eduardo Del Rio contends that the bankruptcy court erred in granting a Chapter 7 trustee's motion to dismiss his case under 11 U.S.C. § 707(a) or (b). The trustee argued that Del Rio ran up $225,000 worth of credit card debt, then in bad faith sought to discharge it by filing for Chapter 7 bankruptcy relief. RI 1.
11 U.S.C. § 707 authorizes a bankruptcy court, " after notice and a hearing," to dismiss a debtor's bankruptcy petition "for cause," and thus deny him the chance to discharge his debts to get an economic "fresh start." See § 707(a). The court also can dismiss if the debtor has engaged in a "substantial abuse" within the meaning of § 707(b). Substantial abuse includes running up one's credit cards with the intent to use bankruptcy to evade payment. See In re Padilla, 222 F.3d 1184, 1193-95 (9th Cir. 2000).
Brown and blue-colored folders comprise the record in this case. Cites to the blue (district court, 401CV65 file) folder shall be designated as "doc. #___." Cites to the 8-document brown folder shall be designated as "RI ___," and cites to the 3-document brown folder shall be designated "RII ___."
Del Rio never appeared at a hearing on the § 707 motion and related matters. He and the trustee pointed out why: he is in federal prison until 2014. RI 2 ¶ 2; RII 1. Because Del Rio failed to appear, the bankruptcy judge granted the trustee's motion, RII 1, and stood on that reasoning when he denied Del Rio's ensuing F.R.Civ.P 60(b) motion. RI 3.
Del Rio appealed to this Court. The bankruptcy judge recommended that this Court deny Del Rio leave to appeal in forma pauperis (IFP) to this Court because he failed to include an indigency affidavit with his IFP application. RI 6. Del Rio responded by supplying an affidavit. RI. 7. His appeal is unopposed.
This Court agrees with the bankruptcy court that, until the Eleventh Circuit or Supreme Court pass on the matter, bankruptcy judges should make IFP recommendations, rather than IFP rulings.
II. ANALYSIS
A. Due Process
Del Rio raises constitutional (due process and equal protection) arguments, essentially contending that he should not be stripped of his right to file for Chapter 7 relief merely because, due to his incarceration, he could not appear for 11 U.S.C. § 341 and related bankruptcy hearings. Doc. #6 at 3-4; see also RI 3 at 3-4 (bankruptcy judge ruling that "based on the debtor's failure to appear at the § 341 meeting and the [§ 707] hearing . . . I dismissed his case with prejudice").
It is undisputed that Del Rio pointed to his incarceration and asked for an accommodation. See RI 3 at 3 (bankruptcy judge acknowledging Del Rio's "Motion to be Heard in Writing" but noting that, under 11 U.S.C. § 343, a "debtor shall appear and submit to examination under oath at the meeting of creditors under § 341 of this title") (quoting § 343; emphasis original). The bankruptcy judge denied Del Rio's request based on the plain text of § 343 and Bank. R. 4002 ("the debtor shall attend and submit to an examination. . . ."). RI 3 at 3-4.
However, the court did not address Del Rio's due process rights. Something like this issue came up in In re Palm Beach Partners, Ltd., 251 B.R. 906 (Bkrtcy. S.D.Fla. 2000), where the court addressed a confined bankruptcy litigant's request to appear before it:
The United States Supreme Court, in Price v. Johnston, 334 U.S. 266, 68 S.Ct. 1049, 92 L.Ed. 1356 (1948), rev'd on other grounds by McCleskey v. Zant, 499 U.S. 467, 111 S.Ct. 1454, 113 L.Ed.2d 517 (1991), held that "[l]awful incarceration brings about the necessary withdrawal of limitation of many privileges and rights, a retraction justified by the considerations underlying our penal system. Among those limited is the otherwise unqualified right . . . to parties in all courts of the United States to `plead and manage their own causes personally.'" Id. at 285-86, 68 S.Ct. 1049 (internal citation omitted).Id. at 907.
Courts interpreting Price, the Palm Beach court found,
have held that inmates do not have a constitutionally protected right to appear personally in civil trials. See, e.g., In re Wilkinson, 137 F.3d 911, 914 (6th Cir. 1998) (holding that prisoners who bring civil actions "have no right to be present at any stage of the judicial proceedings"); Michaud v. Michaud, 932 F.2d 77, 81 (1st Cir. 1991) (finding that courts may exercise discretion in allowing prisoners to attend civil court proceedings initiated by the prisoner and that "[u]nder some circumstances, a prisoner may be forced to forego the right to appear personally in civil lawsuits"); Poole v. Lambert, 819 F.2d 1025, 1028 (11th Cir. 1987) (citing Price and holding that an inmate has no absolute right to be present at the trial of his civil action).Id.
So, that court concluded, the "due process requirements of the Fifth and Fourteenth Amendments, which guarantee access to the courts, do not grant a prisoner the right to attend court in order to carry on the civil proceedings which he initiates." Id.; accord Kulas v. Flores, 255 F.3d 780, 786 (9th Cir. 2001) (In a civil suit, the parties do not have a constitutional right to be personally present during trial).
However, because "courts should try to fashion other procedures enabling the inmate to go forward," Palm Beach, 251 B.R. at 907 (quotes, alterations and cite omitted), the Palm Beach court permitted the inmate — who was not the debtor but merely an interested party — "to attend and participate in all hearings . . . by telephone." Id. at 908 (emphasis added).
Here the inmate is the debtor, who understandably could not appear for mandatory hearings and suffered dismissal as a result. He sought accommodation but was told it was not possible, when the record reveals no attempt to consider reasonable alternatives like telephone access, written interrogatories from § 341 creditors, or entertaining Del Rio's § 707-opposition arguments by brief.
Yet, bankruptcy courts routinely recognize litigants' due process right to be heard, see, e.g., In re Golant, 239 F.3d 931, 238 (7th Cir. 2001); In re Hancock, 192 F.3d 1083, 1086 (7th Cir. 1999); In re Lowenschuss, 170 F.3d 923, 929 (9th Cir. 1999), as property interests and statutory rights are at stake. Cf. Degen v. U.S., 517 U.S. 820, 822 (1996) (citizens have a right to a hearing to contest property foreclosures). And both sections of § 707 authorize dismissal only after "notice and a hearing."
Consistent with the Palm Beach court's reasoning, this Court concludes that low-burden alternatives to a live hearing ( e.g., telephonic access, § 341 creditor interrogatories, etc.) must be explored before summarily dismissing the petition of an incarcerated bankrupt. Remand is warranted, then, for the bankruptcy court to consider reasonable alternatives.
In that respect, flexibility is permitted. See Faucher v. Lopez, 411 F.2d 992, 996 (9th Cir. 1969) (no violation of due process when the bankrupt, who was incarcerated but represented by counsel, was not present at a hearing before a special master and a jury trial); Helminski v. Ayerst Lab., A Div. of A.H.P.C., 766 F.2d 208, 218 (6th Cir. 1985).
B. Harmless Error
Federal appellate courts routinely apply the "right for any reason" rule when reviewing lower court decisions. See Lucas v. W.W. Grainger, Inc., ___ F.3d ___, 2001 WL 803481 at *5 (11th Cir. 7/17/01) ("we may affirm [a district court's] judgment `on any ground that finds support in the record.' Jaffke v. Dunham, 352 U.S. 280, 281, 77 S.Ct. 307, 308, 1 L.Ed.2d 314 (1957)"); Hall v. Holder, 117 F.3d 1222, 1226 (11th Cir. 1997) (citing Watkins v. Bowden, 105 F.3d 1344, 1353 n. 17 (11th Cir. 1997) (appellate court may affirm district court on any ground, even one not considered)); accord Mann v. Haigh, 120 F.3d 34, 36 (4th Cir. 1997) ("we may affirm the judgment of the district court on any basis that the record fairly supports").
That may be warranted here. Padilla illuminates an issue that may moot the instant inquiry, since Del Rio is only entitled to appellate relief by showing both error and prejudice to his rights under F.R.Civ.P. 61. Suppose the record (only a partial record is presented here on appeal) shows that, even if Del Rio is accorded the process he is due, the same (dismissal) result nevertheless will obtain?
Padilla shows that those who simply rack up huge amounts of consumer debts, then use bankruptcy to evade them, may face § 707(b) dismissal. See Padilla, 222 F.3d at 1194 ("Padilla's alleged credit card `bust-out' did not constitute cause under § 707(a)," but was "the type of misconduct contemplated by § 707(b)"), analyzed in In re Blumenberg, 263 B.R. 704, 716 (Bkrtcy. E.D.N.Y. 2001) (Dismissal of bankruptcy case, as having been filed in bad faith, can serve as substantive ground upon which to base award of sanctions under Bankruptcy Rule 9011 for abuse of bankruptcy process); Ann., What are "primarily consumer debts," under 11 U.S.C.A. sec. 707(b), authorizing dismissal of Chapter 7 bankruptcy case if granting relief would be substantial abuse of Chapter's provision, 101 A.L.R. Fed. 771 § 4 (1991).
Padilla's debts consisted of credit card debt and a mortgage, and thus were solely "consumer debts," as that term is used by § 707(b). The court thus concluded that his alleged misconduct may fall under § 707(b), which provides for dismissal of a chapter 7 bankruptcy case for "substantial abuse." Padilla, 222 F.3d at 1193-94. Courts approach the matter from different directions. See In re Beharry, ___ B.R. ___, 2001 WL 845324 at **3-4 (W.D.Pa. 7/18/01).
Were that the case here, Del Rio could notshow Rule 61-level reversible error. In other words, so long as he is "heard" on his contention that he should not face § 707 dismissal, he will not be able to claim reversible error if in fact the bankruptcy court's dismissal judgment is otherwise supported. Cf. Patriot Portfolio, LLC v. Weinstein (In re Weinstein), 164 F.3d 677, 686-87 (1st Cir.) ("because we have fully considered the merits of [a creditor']s constitutional claim, any resulting prejudice from [its] alleged inability to raise this argument below has been cured"), cert. denied, 527 U.S. 1036 (1999).
Not every right or privilege, after all, requires a "live" hearing, just a hearing of some sort. See, e.g., In re C-TC 9th Avenue Partnership, 113 F.3d 1304, 1312 (2d Cir. 1997) (Bankruptcy court's election to decide bad faith issue without formal evidentiary hearing, at same time that it addressed question raised as to dissolved partnership's eligibility for Chapter 11 relief, was not abuse of discretion and did not violate debtor-partnership's due process rights, where debtor-partnership was advised of fact that bankruptcy court was considering whether to dismiss its petition for bad faith before bankruptcy court decided issue, debtor had opportunity to address issue, and record provided ample evidence on which court could decide issue).
In any event, the bankruptcy court, on remand, must ensure that Del Rio has had a meaningful opportunity to be heard. In light of this result, it is not necessary to reach Del Rio's equal protection claim ( i.e., according him due process may neutralize the equal protection issue that he framed on appeal).
III. CONCLUSION
The Court GRANTS Del Rio's IFP motion (R.I. 7), VACATES the bankruptcy court's 8/24/00 dismissal (bankruptcy docket #15) and Rule 60(b)-denial orders (R.I. 3), and REMANDS this matter for proceedings consistent with this Order.
3/28/01 __ BANKRUPTCY RECORD on appeal received (ssl) [Entry date 03/29/01]
3/28/01 1 NOTICE of docketing bankruptcy record on appeal. Appellant's brief due 4/12/01 for Eduardo Leon Del Rio (ssl) [Entry date 03/29/01]
4/12/01 2 MOTION by Eduardo Leon Del Rio to Extend Time to File Brief on Appeal Pending Production and Filing of Pertinent Transcript on the Hearing of this case on August 10, 2000 with brief in support. (ssl) [Entry date 04/12/01]
4/19/01 __ Motion(s) referred: [2-1] motion to Extend Time to File Brief on Appeal Pending Production and Filing of Pertinent Transcript on the Hearing of this case on August 10, 2000 referred to Magistrate Judge G. R. Smith (ssl) [Entry date 04/19/01]
4/23/01 3 ORDER granting [2-1] motion to Extend Time to File Brief on Appeal Pending Production and Filing of Pertinent Transcript on the Hearing of this case on August 10, 2000 (signed by Magistrate Judge G. R. Smith); [EOD Date 4/23/01] copies served. (kts) [Entry date 04/23/01]
4/30/01 4 MOTION by Eduardo Leon Del Rio to Extend Time to file brief with brief in support. (kts) [Entry date 04/30/01]
4/30/01 __ Motion(s) referred: [4-1] motion to Extend Time to file brief referred to Magistrate Judge G. R. Smith (kts) [Entry date 04/30/01]
5/3/01 5 ORDER granting [4-1] motion to Extend Time to file brief reset Brief deadline to 5/14/01 (signed by Magistrate Judge G. R. Smith); [EOD Date 5/4/01] copies served. (jgb) [Entry date 05/04/01]
6/28/01 __ ADDITIONAL BANKRUPTCY RECORD on appeal received 6/28/01. (nys) [Entry date 06/29/01]
6/29/01 6 BRIEF by Eduardo Leon Del Rio (ssl) [Entry date 06/29/01]
8/15/01 7 ORDER GRANTING Del Rio's IFP motion (R.I. 7), VACATING the bankruptcy court's 8/24/00 dismissal (bankruptcy docket #15) and Rule 60(b)-denial orders (R.I. 3), and REMANDING this matter for proceedings consistent with this Order. (signed by Judge B. Avant Edenfield); [EOD Date 8/15/01] copies served. (nys) [Entry date 08/15/01]
8/15/01 8 JUDGMENT entered REMANDING this case to the U.S. Bankruptcy Court in accordance with the Court's Order of 8/15/01; [EOD Date 8/15/01] copies served. (nys) [Entry date 08/15/01]
8/15/01 __ Case closed (nys) [Entry date 08/15/01]