Opinion
NOT FOR PUBLICATION
Argued and Submitted at Eugene, Oregon, May 20, 2005
Appeal from the United States Bankruptcy Court for the District of Oregon. Honorable Frank R. Alley, III, Bankruptcy Judge, Presiding. Bk. No. 00-67584. Adv Nos. 02-06435. 02-06433. 02-06426. 02-06418. 02-06448.
Before: KLEIN, MONTALI, and RIEGLE, [ Bankruptcy Judges.
Hon. Linda B. Riegle, United States Bankruptcy Judge for the District of Nevada, sitting by designation.
MEMORANDUM
The debtor appeals from five orders denying its motions to reopen several adversary proceedings. The debtor argues that the bankruptcy court applied the wrong legal standard when it refused to set aside several dismissal orders under Federal Rule of Civil Procedure 60(b)(1). The debtor further contends that the court did not engage in a full equitable analysis in reaching its decision as mandated by the Ninth Circuit. We hold that the court did not engage in an adequate equitable analysis to determine if the dismissal orders should be set aside because of excusable neglect. REVERSED and REMANDED.
FACTS
On December 27, 2000, the debtor, United States Forest Industries, filed a voluntary chapter 11 case. On January 4, 2002, the bankruptcy court confirmed the debtor's second amended Plan of Reorganization, and on April 4, 2002, the Plan became effective.
Pursuant to the Plan, GMAC funded the distribution to the debtor's unsecured creditors in exchange for an assignment of the proceeds of several preference actions to be filed by the debtor.
In late 2002, the debtor filed forty-nine adversary proceedings seeking the recovery of preferential payments. Five of those forty-nine adversary proceedings are at issue in these cases. Appellees are Highcrest Wood Products, Inc., Spar-Tek Industries, Inc., Neste Resins Corporation, Sun Veneer, and Dyno Overlays, Inc.
The other forty-four adversary proceedings were settled.
In all but one of the adversary proceedings at issue on appeal, the bankruptcy court entered a scheduling order that required the parties to file a pretrial order by a set date.
On August 11, 2003, while the adversary proceedings were still pending, the debtor filed a separate chapter 7 case. A chapter 7 trustee was appointed and determined that the estate had no assets for distribution to creditors. On November 26, 2003, the chapter 7 case was dismissed.
On January 13, 2004, the bankruptcy court held a hearing in the chapter 11 case to discuss the remaining preferential transfer adversary proceedings. The court ordered the debtor to file a written status report regarding the remaining pending adversary proceedings. The court stated it would set status conferences in the matters after the status report was filed.
On January 22, 2004, Douglas Pahl (one of the debtor's attorneys) sent a letter to the bankruptcy court that described the status of the pending adversary proceedings. Pahl stated that settlement negotiations were being discussed in each case at issue on appeal.
The court set no status conference after January 13, 2004. Rather, on April 16, 2004, the court entered an " Order Re: Dismissal or Other Final Disposition" (" Dismissal Orders") in each case. In the Highcrest Wood Products, Sun Veneer, and Dyno Overlays cases, the Dismissal Orders stated:
The parties failed to timely file a proposed pre-trial order, and therefore,
IT IS ORDERED that this proceeding will be dismissed for lack of prosecution, without further Court order, unless the appropriate proposed pre-trial order is filed with the Clerk of Court within 13 days of this order's " FILED" date. Any subsequent motion required to reopen the proceeding shall be accompanied by BOTH: (1) an affidavit averring substantial reasons why this proceeding should be reopened, AND (2) a $150.00 reopening fee.
In the Spar-Tek and Neste Resins cases, the Dismissal Orders stated:
The interested parties have failed to timely prosecute this matter, and therefore,
IT IS ORDERED that this proceeding will be dismissed for lack of prosecution, without further Court order, unless appropriate action is taken to bring this proceeding to issue or trial within 20 days of this order's " FILED" date. Any subsequent motion required to reopen the proceeding shall be accompanied by BOTH: (1) an affidavit averring substantial reasons why this proceeding should be reopened, AND (2) a $150.00 reopening fee.
Each of the Dismissal Orders were addressed and mailed to Douglas Bosley, the attorney listed on the court records as the lead attorney for the debtor. During this time, however, the responsibility for handling the debtor's case was being transferred from Bosley to Pahl. Bosley and Pahl are both attorneys in the same large law firm. Notice of this internal change was not formally submitted to the court.
Neither Bosley nor Pahl saw the Dismissal Orders when they were delivered to the firm. According to the debtor, the firm's general procedure for handling the mail is that the mail is first routed to the assistant for the addressee of the letter. That assistant opens the mail, date stamps it as received, dockets it if necessary, and then gives it to the addressee for review. After the addressee reviews it, the documents are routed to the mail file room and placed in the firm's central files.
According to the debtor, in these five cases on appeal, the normal mail procedure was not followed and all five Dismissal Orders ended up in the firm's central files without a date stamp and without being initialed as docketed.
Unaware of the Dismissal Orders, Pahl took no action on the matters, and the Dismissal Orders became effective. On May 3, 2004, and May 4, 2004, each of the adversary proceedings were closed.
By July 21, 2004, after learning that the cases had been dismissed and closed, the debtor filed Motions to Reopen Case in all five dismissed adversary proceedings. Highcrest Wood Products, Neste Resins, and Sun Veneer filed objections to the motions. The debtor filed a reply to each objection arguing that the court should set aside the Dismissal Orders pursuant to Federal Rule of Civil Procedure 60(b)(1) because of excusable neglect.
On August 5, 2004, the court held a hearing on all five Motions to Reopen. At the hearing, the court denied all five motions stating findings on the record. The court focused its ruling on Rule 60(b)(1) and found that excusable neglect had not been established on the record before the court. The court stated:
This is not, you know, I emphasize, a finding of culpability or willful mishandling of the case. Something went wrong, I think because either inadequate controls were in place; or, much more likely, Mr. Pahl, I think that adequate controls just didn't happen to work on this occasion. Either way, the burden is a high one and it's on the movant to demonstrate that circumstances beyond its control led to its misplacement of the files and it's failure to meet the Court's deadlines. I don't find that to be the case.
On August 9, 2004, the court entered identical orders in each adversary proceeding denying the Motions to Reopen.
These timely appeals ensued.
JURISDICTION
The bankruptcy court had jurisdiction via 28 U.S.C. § § 1334 and 157(b)(1). We have jurisdiction under 28 U.S.C. § 158(a)(1).
ISSUE
Whether the court abused its discretion when it denied the debtor's Motions to Reopen after finding that the debtor had not met its burden of establishing excusable neglect under Rule 60(b)(1).
STANDARD OF REVIEW
A court's denial of a Rule 60(b) motion is reviewed for an abuse of discretion. Bateman v. United States Postal Serv., 231 F.3d 1220, 1223 (9th Cir. 2000). It is an abuse of discretion to apply an incorrect legal standard. Arden v. Motel Partners (In re Arden), 176 F.3d 1226, 1228 (9th Cir. 1999).
DISCUSSION
Under Rule 60(b)(1), as incorporated by Federal Rule of Bankruptcy Procedure 9024, a court may relieve a party from a final order upon a finding of excusable neglect. Fed.R.Civ.P. 60(b)(1). In Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'Ship, 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993), the Court held that excusable neglect, for purposes of Federal Rule of Civil Procedure 9006(b)(1), encompasses an attorney's negligence. Pioneer, 507 U.S. at 395.
The Pioneer court articulated an equitable test to determine whether the attorney's " neglect" is " excusable." Id. The equitable factors a court must consider are: 1) the danger of prejudice to the opposing party; 2) the length of the delay and its potential impact on the proceedings; 3) the reason for the delay; and 4) whether the movant acted in good faith. Bateman, 231 F.3d at 1223-24 citing Pioneer, 507 U.S. at 395.
The Ninth Circuit adopted the Pioneer test for Rule 60(b)(1) cases in Briones v. Riviera Hotel & Casino, 116 F.3d 379, 381 (9th Cir. 1997). See Pincay v. Andrews, 389 F.3d 853, 856-57 (9th Cir. 2004) (en banc). The four Pioneer factors are not exclusive, rather they provide a framework for evaluating whether excusable neglect has been established. Bateman, 231 F.3d at 1224.
In Pincay, the Ninth Circuit recently held that the weighing of Pioneer's equitable factors is left " to the discretion of the district court in every case." Pincay, 389 F.3d at 860. Thus, our review of a court's findings of each factor is highly deferential assuming, of course, that the court engaged in the appropriate analysis.
Here, the court did not apply the Pioneer factors in reaching its decision. Rather, it described why it believed that the misplaced dismissal orders were not due to circumstances beyond the debtor's control. It was erroneous for the court to focus on whether the circumstances were beyond the movant's control in isolation of the four Pioneer factors. See Pioneer, 507 U.S. at 392.
The appellees argue that the court did engage in a Pioneer-type equitable analysis that was sufficient to support a finding of excusable neglect. We disagree. The court does not state the name of any case that governs the analysis, nor does it expressly enumerate any of the Pioneer factors or clearly state its findings on each one. The Ninth Circuit's en banc decision in Pincay persuades us that the court must specifically address the Pioneer factors in the course of making its decision.
Accordingly, an incorrect legal standard was applied, which constitutes an abuse of discretion.
Therefore, we reverse and remand to the bankruptcy court for it to apply and make findings on each Pioneer factor when deciding whether to set aside the dismissal orders.
CONCLUSION
The court did not engage in the Pioneer equitable analysis sufficient to satisfy the Ninth Circuit's mandate for evaluating Rule 60(b)(1) excusable neglect cases. REVERSED and REMANDED.