Opinion
Case No. 04-39980, Adv. No. 05-3092.
May 24, 2005
James Papakirk, Middletown, Ohio (Atty. for the Plaintiff, First National Bank, NA).
Harold Jarnicki, Lebanon, Ohio (Attorney for the Debtors/Defendants).
Timothy Charles Forsythe/Kristin K. Forsythe, Middletown, Ohio (Debtors/Defendants).
DECISION ON ORDER DENYING MOTION TO DISMISS ADVERSARY COMPLAINT
Background
On November 11, 2004, the Debtors filed for chapter 7. (Doc. 1) The meeting of creditors ( 11 U.S.C. § 341) was set for January 12, 2005. This date is significant because a creditor has only 60 days from the first date set for the meeting of creditors to file a complaint objecting to the dischargeability of a debt under 11 U.S.C. § 523(a)(2), (4), (6) and (15). See Bankruptcy Rule 4007(c) and 11 U.S.C. § 523(c). In this case, the deadline for such complaints was March 14, 2005 (See Doc. 7 — FORM B9A — Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, Deadlines).
On March 14, 2005, First National Bank, NA, Successor in Interest to First National Bank of Southwest Ohio (the "Plaintiff") electronically filed a document captioned "Complaint to Determine Dischargeability of Debts" (the initial complaint). (Doc. 13) The initial complaint raised two immediate concerns: (1) it was filed in the estate case and not as a separate adversary proceeding (this error was noticed to counsel and is also on the docket) and (2) the complaint was docketed by counsel as a "Submission of Summons for Court Issuance." The following day, March 15, 2005 — one day past the deadline — the complaint was re-filed as a new adversary proceeding (the complaint). (Adv. Doc. 1) The Plaintiff also filed a "Report to the Court" on March 15, 2005, which simply reiterates what the court record shows — the Plaintiff electronically filed the initial complaint incorrectly on March 14, 2005 and re-filed the complaint as an adversary proceeding on March 15, 2005. On March 15, 2005, the Plaintiff also withdrew the incorrectly filed initial complaint. (See Doc. 16 — Notice of Withdrawal)
The court notes the complaint does not specify subsections of 523; however, Count I quotes the language from 11 U.S.C. § 523(a)(2)(A) and Count II quotes the language from 11 U.S.C. § 523(a)(2)(B).
The court notes that the Bankruptcy Court for the Southern District of Ohio operates through a mandatory case management/electronic case filing [cm/ecf] system. Filing, which previously routinely required a physical presence at the courthouse, is now a cyberspace occurrence accomplished with a few computer keystrokes. Pursuant to Local Bankruptcy Rule 5005-4 and the applicable Southern District of Ohio Administrative Procedures for Electronic Case Filing, all attorneys (with few exceptions not relevant here) are required to file all documents through the electronic case filing system. In addition, the Administrative Procedures require the attorney, and not the Clerk, to select the title under which such filings will appear on the docket. When the docket must be corrected, the Clerk's office sends a "deficiency notice" to the attorney, which, depending on the deficiency, the attorney may be required to correct. See ECF Procedure 3(e).
On April 6, 2005, the Debtors filed a Motion to Dismiss (Adv. Doc. 7), noting the adversary proceeding was filed one day late and requesting dismissal. [The Debtor also filed an answer (Adv. Doc. 6), which raised the same issue as an affirmative defense.] On April 26, 2005, the Plaintiff filed a Memorandum in Opposition. (Adv. Doc. 8). The Plaintiff's memorandum and accompanying affidavit simply recite the above history, which appears as part of the court's record in this case and related adversary.
ISSUE FOR DETERMINATION
The issue presented is whether the Plaintiff's complaint was timely filed; untimely filed, but pursuant to equitable principles of tolling, should be considered timely filed; or should be dismissed for failure to comply with the requirements of Bankruptcy Rule 4007(c).
DETERMINATION OF ISSUE
The Court determines that, in the facts and circumstances of this proceeding, without regard to the electronic filing deficiencies in connection with the initial complaint, the initial complaint was timely filed and the subsequent complaint, which is presently before the court, although not filed timely, is, as a result of the application of the principles of equitable tolling, considered timely filed, and will remain before the court for determination pursuant to applicable law.
Analysis The Initial Complaint was Timely Filed
The initial complaint was part of the Court's docket in this case on March 14, 2005. Concededly, the filing of the complaint was not consistent with the requirements of the Court's Administrative Procedures; however, the complaint had successfully made it through the Court's (electronic) door. Before electronic filing, if a paper complaint was filed with the Clerk and stamped "March 14, 2005" and then either incorrectly docketed or physically placed in an estate file, rather than an adversary file, it was, nevertheless, determined to be filed as of March 14, 2005. As noted by Judge William A. Clark of this Court in Stipancich v. Colston (In re Colston), 244 B.R. 770, 771 (Bankr. S.D. Ohio 2000), filing, for purposes of a complaint, "means that the pleadings `are placed in the possession of the Clerk of the Court.'" (quoting Wright and Miller, § 1052 and 1153; other citation omitted) Although the Clerk does not take possession of paper documents under the current Administrative Procedures, the initial complaint was in the Clerk's possession on March 14, 2005.
ECF Procedure 3 — Consequences of Electronic Filing — states that:
(a) Filing and Entry on the Docket. Once electronic transmission of a document to ECF, consistent with these rules, has been received by the Court, the document has been filed for all purposes required by the Federal Rules of Bankruptcy Procedure and the Local Rules of this Court and is entered upon the docket kept by the clerk under Rule 5003. (b) Official Record. When a document has been filed through ECF, the official record is the electronic recording of the document as stored by the Court, and the filing party is bound by the document as filed. Except in the case of documents first filed conventionally, a document filed through ECF is deemed filed at the date and time stated on the Notice of Electronic Filing from the Court. (c) Filing Date and Time. Filing a document electronically does not alter the filing deadline for that document. Unless otherwise ordered, filing must be completed before midnight local time where the Court is located in order to be considered timely filed that day. (d) Appropriate Title of ECF Documents. A Filer or User electronically filing a pleading or other document shall be responsible for designating the appropriate title for that pleading or other document by selecting among the categories provided through ECF.
(e) Corrections. In the event that a docket entry must be corrected, the clerk's office will notify the Filer or User of the deficiency. (underlining added)
ECF Procedure 3 is consistent with the applicable substantive law. The Notice of Electronic Filing of the initial complaint (Doc. 13) was March 14, 2005. Although it is clear counsel is now responsible for correcting filing and docketing [See ECF Procedures 3(d) and (e)], correcting a filing error does not change the date a pleading was filed because it was, as required, electronically filed.
It may be noted how failure to correctly complete electronic filings complicates court proceedings, adversely impacts counsel and their clients and potentially raises the issue of sanctions. See Local Bankruptcy Rules 5005-4(b) and 9011-3.
The instant case is distinguished from cases where there is a complete failure to comply with a local rule or other governing law. See LeGrand v. Harbaugh (In re Harbaugh), 301 B.R. 317, 319-20 (B.A.P. 8th Cir. 2003) (Pursuant to Bankruptcy Rule 5005(a)(2), facsimile filing not permitted where not authorized in a local rule. Since the local rule allowed such filing only when expressly authorized by the judge, and because such authorization was not obtained, the facsimile filing sent to the Clerk was "dead on arrival." (citation omitted))
The court also finds this case distinguishable from Household Fin. Co. v. Beam (In re Beam), 73 B.R. 434 (Bankr. S.D. Ohio 1987). In that case, this court did not allow a late filed motion for an extension of the dischargeability date, since, although counsel had timely filed the motion, he had filed it a completely unrelated case where it would have been impossible for any interested party to have knowledge the filing had occurred. The case sub judice is different in several respects. First, the initial complaint in this case was filed in the estate case, where all interested parties had either actual or constructive knowledge — not in a completely unrelated case. Second, the caption was correct. Therefore, unlike Beam, counsel's mistake in this case is akin to the Clerk' office in the previous paper system placing the timely filed paper document in the wrong case jacket and/or docketing the document in the wrong case. Third, the underpinning of the Beam decision was a body of case law that prohibited equitable consideration of late filings under Bankruptcy Rule 4007(c). As discussed in the balance of this decision, subsequent decisions of the U.S. Supreme Court and Sixth Circuit Court of Appeals have determined that this court should analyze equitable considerations in such circumstances. These decisions follow the general mandate of the Sixth Circuit to decide cases on the merits. This decision is the court's expression of the current state of the law.
The initial complaint was filed on March 14, 2005 and, accordingly, was timely filed. It could have been subject to subsequent correction by counsel. The Court, also, recognizes that this initial complaint has been withdrawn and, accordingly, is not longer before the court for determination. The timely filing, however, is part of the consideration in the following section, which discusses the complaint presently before the Court.
Equitable Tolling
Since the initial complaint was timely filed on March 14, 2005, the deadline date, and could have been amended to correct any docketing deficiencies, but was subsequently withdrawn, and the complaint pending before the court was filed on March 15, 2005, one day after the deadline date, an appropriate analysis requires this Court to consider the application of principles of equitable tolling, which, in appropriate circumstances, would "toll" the date for a required filing.
In a recent decision, the Sixth Circuit affirmed the bankruptcy court, reversed the Bankruptcy Appellate Panel, and concluded the bankruptcy court was within its equitable power under 11 U.S.C. § 105 to allow a creditor to file a dischargeability complaint three days late. Nardei v. Maughan, 340 F.3d 337, 343-44 (6th Cir. 2004). The court concluded the deadline in Bankruptcy 4007(c) is not jurisdictional and could be tolled in appropriate circumstances. Id. at 344. The court noted a five factor test for equitable tolling:
There are five factors that should be considered when deciding to apply the doctrine of equitable tolling: "The factors are: (1) lack of actual notice of filing requirement; (2) lack of constructive knowledge of filing requirement; (3) diligence in pursuing one's rights; (4) absence of prejudice to the defendant; and (5) a plaintiff's reasonableness in remaining ignorant of the notice requirement." Andrews v. Orr, 851 F.2d 146, 151 (6th Cir. 1988). Since Nardei did not claim lack of notice or knowledge of the filing deadline, "our inquiry must focus on the diligence used by the plaintiff in pursuing its rights and the resulting prejudice, if any, to the defendant." First Bank System v. Begue (In re Begue), 176 B.R. 801, 804 (Bankr.N.D.Ohio 1995).
Id.
In addition, the United States Supreme Court has recently concluded that Bankruptcy Rule 4004, which addresses the deadline for objecting to the debtor's discharge, is also not jurisdictional. Kontrick v. Ryan, 540 U.S. 443, 124 S.Ct. 906 (2004) In Kontrick, the Court ruled that a party forfeited the right to raise Bankruptcy Rule 4004 after it lost the case on the merits. The Court noted in Kontrick the "practical identity" of Bankruptcy Rules 4004 and 4007. Id. at 448, 124 S.Ct. at 911, fn. 3. Although the holding in Kontrick is narrower than Maughan, both decisions stand for the principle that Bankruptcy Rules 4007 and 4004 are not jurisdictional and are subject to equitable principles.
In this proceeding, there was no lack of notice or constructive knowledge of the March 14, 2005 deadline. As in Maughan, the inquiry in this proceeding must "[F]ocus on the diligence used by the plaintiff in pursuing its rights and the resulting prejudice, if any, to the defendant." Id. at 344 (citation omitted). In addition to timely filing (although not in compliance with the applicable Administrative Procedures) the initial complaint, counsel for the plaintiff diligently and promptly pursued the Plaintiff's rights and within 24 hours corrected the electronic filing error. As a result, the Court determines, in the facts and circumstances of this proceeding, there was no meaningful delay prejudicial to the Debtors, nor any other prejudice to the Debtors.
Accordingly, although the complaint pending before the court was filed a day after the filing deadline, equitable tolling of the filing deadline is appropriate. The complaint pending before the court is considered timely filed and will remain before the court for determination pursuant to applicable law.
Conclusion
The Motion to Dismiss (Adv. Doc. 7) is DENIED. An Order in accordance with this decision is simultaneously entered.