Opinion
Case No. 04-28375-D-13L, Docket Control No. KMH-1.
December 18, 2006
MEMORANDUM DECISION
On November 8, 2006, Kevin M. Healy (the "Debtor") filed a Motion Re: Judicial Disqualification (the "Motion") to request the disqualification of the undersigned bankruptcy judge.
For the reasons set forth below, the Motion will be denied.
I. INTRODUCTION
The record in this case indicates that on August 16, 2004, the Debtor filed a petition for chapter 13 relief. At that time, the Debtor was represented by Peter Macaluso ("Counsel"). The case was initially assigned to Department "A" of this court, the Honorable Michael McManus presiding. Lawrence Loheit (the "Trustee") was designated as the chapter 13 trustee for the Debtor's case.
As of Dec. 15, 2006, the court's docket continues to indicate that Mr. Macaluso is the Debtor's attorney of record in this case.
On October 30, 2004, after two objections to confirmation and a relief-from-stay motion had been filed in the Debtor's case, the case was reassigned to the Honorable Thomas Holman. Judge Holman heard these matters, and, on January 5, 2005, Judge Holman also heard the Trustee's motion to dismiss the Debtor's chapter 13 case. The court granted the Trustee's motion, and on January 14, 2005 entered an order, signed by Judge Holman, that dismissed the case.
On April 28, 2005, the Trustee filed his Final Report and Account (the "Report") for the Debtor's case. The Trustee reported the disposition of the sum of $960 that had been paid by the Debtor into his chapter 13 plan before the case was dismissed. According to the Report, $710 had been paid to Counsel and $250 had been paid to the Trustee as compensation to each party for services in the Debtor's case.
On May 31, 2005, the Debtor filed a Notice of Objection to Disbursement of Attorney Fees; Request for Hearing (the "Objection"). The Objection went solely to the disbursement of the $710 to Counsel, as set forth in the Report. In response to the Objection, the Trustee set the matter for a hearing on August 2, 2005. Meanwhile, on July 6, 2005, the undersigned was assigned as the judge in the Debtor's case, in place of Judge Holman.
At the August 2, 2005 hearing, the court set a briefing schedule for the Objection, and the parties thereafter filed pleadings in support of their respective positions. Although Counsel initially filed pleadings in regard to the Objection, attorney Paul J. Pascuzzi, of Felderstein Fitzgerald Willoughby Pascuzzi LLP (the "Felderstein Firm"), appeared on Counsel's behalf in papers filed on August 29, 2005.
After oral argument at the hearing on September 20, 2005, the court took the matter of the Objection under submission. The court later filed a Memorandum Decision, and entered an order on September 21, 2005 (the "Order") overruling the Objection.
On September 30, 2005, the Debtor filed a Notice of Appeal in regard to the Order. On September 22, 2006, this court received from the Bankruptcy Appellate Panel of the Ninth Circuit ("Panel") a memorandum disposition of the Debtor's appeal, and on October 11, 2006, this court received a copy of the Panel's judgment that vacated the Order and remanded the matter for further proceedings consistent with the Panel's memorandum.
On September 28, 2006, Counsel filed with this court a motion to set procedures on remand. On November 14, 2006, the Debtor filed opposition to Counsel's motion to set procedures. The hearing on Counsel's motion has been continued so that the Debtor's request for disqualification can be resolved first.
As noted above, the Debtor also filed the Motion, on November 8, 2006, about one month after Counsel requested scheduling of the Objection on remand. In the Motion, the Debtor requests that the undersigned be disqualified "from this matter," without describing specifically the matter from which the undersigned's disqualification is sought. The chapter 13 case has been dismissed, and the only pending matters on the docket are (a) the Objection and (b) the Motion (which will be resolved by way of the order described in this Memorandum). Given that the Objection is the only matter likely to require resolution in any event, the court will simply construe the Motion to request the undersigned's disqualification from the Debtor's case.
II. ANALYSIS
This court has jurisdiction over the Motion pursuant to 28 U.S.C. sections 1334 and 157(b)(1). The Motion is a core proceeding under 28 U.S.C. section (b)(2)(A) (0); In re Betts, 143 B.R. 1016, 1018 (Bankr. N.D. Ill. 1992).
"A bankruptcy judge shall be governed by 28 U.S.C. § 455, and disqualified from presiding over the proceeding or contested matter in which the disqualifying circumstances arises, or, if appropriate, shall be disqualified from presiding over the case." Fed.R.Bankr.P. 5004(a). Lacking any procedure for reference of the matter to another judge, motions to disqualify are heard by the judge sitting in the case. In re Bernard, 31 F.3d 842, 843 (9th Cir. 1994).
Section 455 of Title 28 provides in part as follows:
(a) Any justice, judge, or magistrate of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.
(b) He shall also disqualify himself in the following circumstances:
(1) Where he has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding.
* * *
(4) He knows that he . . . has a financial interest in the subject matter in controversy or in a party to the proceeding, or any other interest that could be substantially affected by the outcome of the proceeding.
The disqualification statute was comprehensively revised in 1974, to provide for disqualification not only where a judge holds a personal bias or prejudice, but also to spell out a list (not fully reproduced above) of various interests and relationships that require the judge to disqualify himself from hearing a proceeding; such interests and relationships were only generally stated in the prior statutory language. Liteky v. United States, 510 U.S. 540, 546-48 (1994). Section 455(a) was added to include objective, "catch-all" grounds for disqualification, in addition to the earlier "interest or relationship" grounds and "bias or prejudice" grounds, which are now specifically stated and set forth in the various subsections making up § 455(b). Liteky, 510 U.S. at 548. Under § 455(a), "[the standard for recusal is clearly objective: `whether a reasonable person with knowledge of all of the facts would conclude that the judge's impartiality might reasonably be questioned'." In re Georgetown Park Apts., Ltd., 143 B.R. 557, 559 (B.A.P. 9th Cir. 1992), quoting United States v. Nelson, 718 F.2d 315, 321 (9th Cir. 1983) (other citations omitted).
The Code of Conduct for United States Judges (the "Code of Conduct") mirrors the provisions of 28 U.S.C. § 455. The Code of Conduct requires that "every judicial officer must satisfy himself that he is actually unbiased towards the parties in each case and that his impartiality is not reasonably subject to question." Bernard, 31 F.3d at 843. Under this standard, the judge must not only be subjectively confident that he is unbiased; it is also objectively necessary that "an informed, rational, objective observer would not doubt his impartiality."Id. at 844, citing United States v. Winston, 613 F.2d 221, 222 (9th Cir. 1980). However, "to say that § 455(a) requires concern for appearances is not to say that it requires concern for mirages." United States v. El-Gabrowny, 844 F. Supp. 955, 961 (S.D.N.Y. 1994). As such, recusal must be based on factors in the record and in the law. Id. at 962.
Cases applying recusal statutes apply a presumption of impartiality. E.g. In re Larson, 43 F.3d 410, 414 (8th Cir. 1994) (judge presumed impartial; parties seeking recusal bear "substantial burden" of proving otherwise); First Interstate Bank v. Murphy, Weir Butler, 210 F.3d 983, 987 (9th Cir. 2000) ("Judicial impartiality is presumed"); In re Spirtos, 298 B.R. 425, 431 (Bankr. C.D. Cal. 2003) ("A judge is presumed to be qualified to hear a matter and the burden is upon the moving party to prove otherwise").
In addition, "Judges have an obligation to litigants and their colleagues not to remove themselves needlessly . . . because a change of umpire in mid-contest may require a great deal of work to be redone . . . and facilitate judge-shopping." In re Betts, 143 B.R. 1016, 1020 (Bankr. N.D. Ill. 1992), quoting In re National Union Fire Ins. Co., 839 F.2d 1226, 1229 (7th Cir. 1988) (omitting citation); see also In re Computer Dynamics, Inc., 253 B.R. 693, 698 (E.D. Va. 2000) (judge equally obligated not to remove himself when there is no necessity and to do so when there is), aff'd 10 F. App'x 141 (4th Cir. 2001).
Finally, in the Ninth Circuit, recusal issues must be raised "at the earliest possible time" after facts supporting a recusal request are discovered. First Interstate, 210 F.3d at 988 n. 8 (citations omitted); see also Spirtos, 298 B.R. at 434 (discussing Ninth Circuit cases requiring prompt filing of recusal motion to prevent wasted resources and judge-shopping); but see In re Cooke, 160 B.R. 701, 705 (Bankr. D. Conn. 1993) (even untimely challenge to partiality should be addressed).
In the Motion, the Debtor advances three grounds for disqualification, each of which is discussed below. In opposition, Counsel argues generally that the Debtor has failed to demonstrate grounds for disqualification.
Counsel also argues that the Motion should be denied as untimely under a four-part test described in Spirtos, 298 B.R. at 434. This court, during the time the Debtor's appeal was pending, retained jurisdiction of the Debtor's bankruptcy case and any proceeding therein other than the Objection (and thus the Debtor could have requested the undersigned's disqualification from the case earlier). But the Motion was nonetheless timely due to satisfaction of the test. Because the Debtor's case has been dismissed, recusal at this stage would not require use of a great deal of judicial resources, since for a new judge few issues would remain; and the Debtor's reason for the delay, that he did not know the outcome of his appeal, is reasonable and shows good cause.
The Debtor's first ground for disqualification is the following: "at the time of the September 2005 oral argument [on the Objection], [Judge Bardwil] reportedly had and was continuing to have undisclosed business dealings with either Mr. Pascuzzi or other partners in [the Felderstein Firm]." Motion at 2. In the Motion, these "business dealings" are alleged to be based on the undersigned's participation as a panelist for a continuing legal education course in October 2005, for which Mr. Felderstein, a partner or shareholder in the Felderstein Firm, also participated as a panelist.
At oral argument, the Debtor acknowledged that the Motion is supported by no evidence of a business relationship between the undersigned and any member of the Felderstein Firm, which might provide a basis for disqualification under 28 U.S.C. § 455(b)(4). There is in fact no such relationship. Rather, the Debtor argues that an appearance of impropriety exists because:
there is a public record (advertisements) that the judge and the attorneys are still working together outside of court dealing with this subject of. bankruptcy and for financial gain — especially when the Court does not disclose this fact before hearing [t]he matter.
Motion at 3-4.
It is common knowledge, of course, that judges regularly appear on panels and at presentations for members of the bar, and that such events are regularly advertised in various publications that might be viewed by both the public and the bar. But it is not reasonable to conclude that the participation of a judge with members of the bar who appear before the judge's court would create a predisposition, or an appearance of a predisposition, to favor the members of the bar who participate over those who do not. The Debtor's assertion of an appearance of impropriety is undermined by Canon 4 of the Code of Conduct, which not only permits judges to participate in such activities, but encourages judges to do so. See Code of Conduct for U.S. Judges, Commentary to Canon 4 (2002) (participation encouraged so that judicial officers might contribute to the improvement of the law). By itself, then, the undersigned's participation in the educational program is not sufficient to create a reasonable question of the undersigned's impartiality.
The second ground advanced by the Debtor for disqualification is that the undersigned ruled against the Debtor on the Objection and that the ruling was later reversed by the Panel. The cases, however, are uniform that a "judge's adverse rulings in the course of a judicial proceeding almost never constitute a valid basis for disqualification based on bias or partiality." 12 James Wm. Moore, Moore's Fed. Practice § 63.21[4], at 63-39 (3d. ed. 2006) (citing cases); see also Liteky, 510 U.S. at 554-55 ("[J]udicial rulings alone almost never constitute a valid basis for a bias or partiality motion"). For adverse rulings to form a basis for disqualification, there must be a "pervasive bias" that is derived from an extrajudicial source. 12 Moore, supra § 63.21[5]; Liteky, 510 U.S. at 550-55 (applying "extrajudicial source" doctrine arising under 28 U.S.C. § 144 and its predecessor to revised 28 U.S.C. § 455(a)).
In this case, the Debtor offers no evidence of pervasive bias from an extra judicial source. Instead, he points only to the prior ruling adverse to the Debtor, without any evidence to support a contention of bias. As such, the Debtor cannot prevail on the undersigned's prior adverse ruling as grounds for disqualification.
The third ground advanced by the Debtor for disqualification consists of statements allegedly made to him by Counsel and/or Mr. Pascuzzi. In his declaration, the Debtor states as follows:
[T]hey commented that [the Debtor] should do his "research" . . . about the work that [Counsel]'s attorneys do with Judge Bardwil. They laughed and stated that I should have done my homework before the oral argument of the motion and that I didn't have a chance.
[Counsel]'s comment (in front of Mr. Pascuzzi — whom [sic] did not correct him) was: "You're a small fish in a big pond, and only WE get to swim with the Sharks — you'd better drop this before you're eaten alive."
Motion at 5-6 (Declaration of Debtor).
Counsel, in his declaration in support of his opposition to the Motion, testifies that he "has no recollection" of making the statements the Debtor attributes to him. The undersigned is troubled by Counsel's failure to directly confirm or deny making these statements, or even to provide an alternative account of what exchange, if any, occurred between the parties at the time. Without Counsel's recollection having been provided, the court takes the Debtor's testimony at face value for the purpose of deciding the Motion.
From the alleged statements of Counsel, the Debtor asks the court to infer an attempt by Counsel "to intimidate [the Debtor] and throw around" his alleged influence with the undersigned. Counsel's alleged statements, however, can be interpreted in many ways. A reasonable reading of the statements attributed to Counsel (no matter how ill-advised those statements may have been), that the Debtor should "do his research" about work done by members of the Felderstein Firm with the undersigned, and that "you're a small fish in a big pond," does not necessarily mean that Counsel claimed, either himself or through his attorneys, to have any influence over the undersigned. A reasonable reading of the words attributed to Counsel is that he was boasting or bragging about the effectiveness of his newly-obtained legal representation in the matter. Such a reading is reasonable in light of the fact that the undersigned's "work" with members of the Felderstein Firm in fact amounted to a mere co-appearance by the undersigned with Mr. Felderstein on a legal-education panel.
The Debtor's third ground for disqualification, then, amounts at best to a faint innuendo of impartiality, but nothing more. There were no facts alleged or statements made that would lead a reasonable person to conclude that Counsel or his attorney hold any influence over, or have an improper connection with, the undersigned. Given that mere innuendo is insufficient to overcome the presumption of impartiality, the court finds that the third ground for disqualification advanced by the Debtor is insufficient to support disqualification under 28 U.S.C. § 455(a).
Finally, the Debtor argues that all three grounds advanced, taken together, create an objective appearance of impartiality that satisfies § 455(a). But this court disagrees. It is true that the undersigned, like all other bankruptcy judges in this judicial division, serves on various professional-education panels with members of various law firms, including the Felderstein Firm. It is also the case that the undersigned has, like at least one other bankruptcy judge previously assigned to the Debtor's case, made rulings against the Debtor. But these are facts so common to the practice of law before federal courts all over the country that they, even when added to the hazy innuendo allegedly offered by Counsel, cannot be said to create an appearance of impropriety in the mind of a reasonable person.
The undersigned is satisfied that he is actually unbiased towards the parties and attorneys in this matter. The undersigned also cannot conclude that the three grounds advanced by the Debtor, individually or considered together, can be said to constitute circumstances under which the impartiality of the undersigned might reasonably be questioned.
III. CONCLUSION
For the reasons stated above, the court finds that Debtor has not met his burden under 28 U.S.C. § 455(a) of overcoming the presumption of impartiality and demonstrating that the impartiality of the undersigned might reasonably be questioned. Neither has the Debtor demonstrated grounds under 28 U.S.C. § 455(b) for disqualification.
The court will issue an order consistent with this memorandum.