|
289 B.R. 730 United States
Bankruptcy Court, N.D. California. In re H. Keith
HENSON, Debtor. No. 98-51326-ASW. Jan. 7, 2002. [*730] COUNSEL: Stanley A. Zlotoff, Esq., Law Offices
of Stanley A. Zlotoff, San Jose, CA, for Debtor. Elaine M. Seid, Esq., McPharlin Sprinkles Thomas, Thomas R. Hogan,
Esq., Law Offices of Thomas R. Hogan, San Jose, CA, Helena K. Kobrin, Esq.,
Moxon & Kobrin, Los Angeles, CA, Samuel D. Rosen, Esq., Paul Hastings
Janofsky Walker, New York City, for Religious Technology Center. MEMORANDUM DECISION DENYING MOTION TO DISMISS BANKRUPTCY CASE
BASED ON FUGITIVE DISENTITLEMENT DOCTRINE JUDGE: ARTHUR S. WEISSBRODT, Bankruptcy Judge. Before the Court is a motion by Religious Technology Center
(“Creditor”), a [*731] creditor of H. Keith Henson
(“Debtor”), to dismiss this Chapter 13 [FN1] case based on
the fugitive disentitlement doctrine. The motion is opposed by Debtor. FN1. Unless otherwise noted, all statutory
references are to Title 11 U.S.C., “the Bankruptcy Code”., as
amended in 1994. Creditor is represented by Elaine M. Seid, Esq. of McPharlin,
Sprinkles & Thomas LLP; Thomas R. Hogan, Esq. and Leslie Holmes, Esq. of
the Law Offices of Thomas R. Hogan; Samuel D. Rosen, Esq. of Paul, Hastings,
Janofsky & Walker LLP; and Helena K. Kobrin, Esq. of Moxon & Kobrin.
Debtor is represented by Stanley A. Zlotoff, Esq. The matter was briefed, argued on October 17, 2001, and submitted
for decision at that time. Thereafter, on November 2, 2001, Creditor filed unsolicited
pleadings in the form of a “supplemental” brief and
declaration, addressing events that occurred after October 17. On December 10,
2001, Creditor filed further unsolicited pleadings in the form of a
“supplemental” declaration addressing events that occurred
after November 2. Debtor was served with both sets of pleadings at the time of
filing and has filed no response. I. BACKGROUND Debtor commenced this bankruptcy case by filing a petition under
Chapter 13 on February 23, 1998. Creditor holds a judgment that was issued pre-petition by the
United States District Court for the Northern District of California in the
amount of $75,000 statutory damages for Debtor’s infringement of
Creditor’s copyright. Creditor’s claim filed in this
bankruptcy case totals $1,060,636.86, for the judgment as well as pre-petition
attorney’s fees of approximately $866,000, pre-petition sanctions
sought in the District Court of approximately $96,219, and pre-petition costs of
some $23,500; [FN2] Creditor contends that Debtor is also liable for District
Court judgments based on post-petition acts by Debtor, which amounts are not
included in Creditor’s claim. FN2. The claim has never been amended to show
whether any amounts over and above the $75,000 statutory damages were ever
awarded by the District Court. Creditor has objected to confirmation of Debtor’s Chapter
13 plan, alleging that it is not feasible and has been proposed in bad faith.
Creditor has also filed a motion to dismiss the bankruptcy case with prejudice
or convert it to Chapter 7, alleging that Debtor filed bankruptcy in bad faith.
Trial of both Creditor’s objection to confirmation and
Creditor’s motion for dismissal or conversion for bad faith is in the
process of being scheduled. Creditor now seeks dismissal of the bankruptcy case for a new
reason, urging that the fugitive disentitlement doctrine should be applied. II. FACTS Creditor alleges the following facts without substantial
contradiction by Debtor. For purposes of Creditor’s motion, these
facts will be accepted as true. In 2001, Debtor was charged by the Riverside County District
Attorney with violating California Penal Code (“PC”)
§ 422.6 by intimidating, threatening, and oppressing Scientologists on
account of their religious beliefs. Debtor was convicted on April 26, 2001 and
released on his own recognizance until May 16, 2001, when he was scheduled to
be sentenced. [*732] Prior to that date, Debtor “fled” to
Canada. On May 13, 2001, Debtor stated on the Internet that he would not appear
for sentencing. On May 15, 2001, Debtor said on the Internet that he was
entitled to seek political asylum in Canada on the basis of having been
persecuted by the governments of California and the United States. When Debtor failed to appear for sentencing on May 16, the State
Court revoked his release, charged him with violating PC § 1320 by
failing to appear, and issued a bench warrant without bail for his arrest. Debtor then announced on the Internet that he is staying in Canada
and seeking “refugee” status, a process that he said he
expects to take at least two years. Debtor has now been sentenced by the State Court in Riverside
County in absentia to incarceration for 365 days (to be suspended if he agrees
to serve 180 days’. incarceration, serve three years’.
probation, and pay a $2,700 fine). Upon return to California, Debtor will be
tried in the State Court in Riverside County on additional criminal charges of
failing to appear for sentencing; Creditor believes that conviction is
“likely”., and would result in Debtor being sentenced to
incarceration for another six months. On October 24, 2001, Debtor made statements on the Internet that
Creditor considers to be violations of a permanent injunction issued by the
District Court on June 16, 1997 in Creditor’s copyright infringement
action against Debtor. The injunction prohibits, inter alia, solicitation
and/or publication of certain material as to which Creditor owns copyrights. On November 22, 2001, Debtor made statements on the Internet that
criticized the integrity of “the judge in my case”., by which
Creditor says Debtor “attacks the Riverside Superior Court Judge
presiding over Debtor’s criminal case”. On November 29, 2001, the State Court in Riverside County entered
a minute order in Debtor’s appeal of his criminal conviction, denying
a motion by Debtor for appointment of counsel and ordering Debtor to show cause
within twenty days as to why the appeal should not be dismissed on the grounds
that “appellant is a fugitive and therefore has forfeited his right to
appeal”. III. FUGITIVE
DISENTITLEMENT DOCTRINE Creditor contends that Debtor should not be permitted to proceed
with his Chapter 13 case while at the same time being a fugitive from justice
in the State Court criminal case, citing the fugitive disentitlement doctrine.
The doctrine and its basis are explained in Degen v. United States, 517
U.S. 820, 824, 116 S.Ct. 1777, 135 L.Ed.2d 102 (1996) (“Degen”): … we have held federal courts do have
authority to dismiss an appeal or writ of certiorari if the party seeking
relief is a fugitive while the matter is pending. Several reasons have been
given for the rule. First, so long as the party cannot be found, the judgment
on review may be impossible to enforce. [citations omitted] Second, we have
said an appellant’s escape “disentitles” him
“to call upon the resources of the Court for determination of his
claims.” [citations omitted] In reviewing similar practices in state
courts for conformity with the Due Process Clause, we have noted further reasons
for them: Disentitlement “discourages the felony of escape and
encourages voluntary surrenders,” and “promotes the
efficient, dignified operation” of the courts. [citations omitted] [*733] Creditor cites Ortega-Rodriguez v. United States, 507
U.S. 234, 113 S.Ct. 1199, 122 L.Ed.2d 581 (1993) and Magluta v. Samples,
162 F.3d 662 (11th Cir.1998) for the elements of the doctrine: 1/ The plaintiff is a fugitive; and 2/ The fugitive status has a connection to the
plaintiff’s civil action; and 3/ Dismissal of the plaintiff’s
action is necessary to carry out the concerns underlying the doctrine. As set forth following, not all of the elements are present in
this case and Creditor’s motion must therefore be denied. A. Fugitive Status The existence of the first element is not disputed. Debtor
announced that he would not appear for sentencing in the State Court criminal
case in May 2001, did not appear, was sentenced at that time, and has since
stated publicly that he is in Canada and intends to stay there for at least two
years while seeking refugee status. For purposes of Creditor’s motion, Debtor is currently a
fugitive within the meaning of the disentitlement doctrine. B. Connection Between Fugitive Status and Civil Case The second element is not present, because there is little or no
connection between Debtor’s fugitive status and his Chapter 13 case. As Debtor points out, he is not a fugitive from this Court, he is
a fugitive from the State Court in a criminal action that was commenced in
2001, three years after Debtor filed his bankruptcy petition. [FN3] In
attempting to refute this point, Creditor cites Morrell v. Kramer, 2001 WL 764947, *6
(N.D.Cal.) (“Morrell”), where the disentitlement doctrine was
applied in dismissing a federal habeas corpus claim by a former fugitive from a
State Court criminal action, and the District Court noted that “it
does not matter that the former fugitive fled from the custody of another
sovereign”. However, in that case, a “connection”
was found between the prisoner’s previous fugitive status in the State
Court case and his claim for relief in the District Court, despite the existence
of two different sovereigns. FN3. It appears from Creditor’s
“supplemental” pleadings that Creditor considers Debtor to be
a fugitive from the District Court also. Creditor complains that Debtor is now
“exploiting his fugitive status” to engage in contempt of
Creditor’s District Court injunction by his October 24 statements on
the Internet, while avoiding punishment for those actions by remaining in
Canada. Assuming arguendo that Creditor’s view is justified, the fact
remains that Debtor’s statements of October 24 do not violate any
order of this Court or make him a fugitive from this Court, and they have
nothing to do with his bankruptcy case. The Supreme Court has indicated that a former
fugitive may be disentitled if his flight has a “connection”
to current proceedings. Ortega-Rodriguez v. United States, 507
U.S. 234, 249[, 113 S.Ct. 1199, 122 L.Ed.2d 581] (1993). A lengthy escape,
for example, might justify dismissal of a fugitive’s action, even
after recapture, because the government may be prejudiced in locating witnesses
and presenting evidence if a retrial were required, or because it may somehow
make meaningful review of the former fugitive’s conviction impossible
or otherwise disrupt the judicial process. See id at 249-50[, 113 S.Ct.
1199]. Put simply, a former fugitive’s action may be dismissed if
granting relief is likely to result in an undue burden on the government or if
the former fugitive’s flight will result in significant interference
with the operation of the judicial process. [*734] See United
States v. Rosales, 13 F.3d 1461, 1462-63 (11th Cir.1994). It does not matter that
the former fugitive fled from the custody of another sovereign. [Prevot v.
Prevot,
59 F.3d 556 (6th Cir.1995)]. [¶] Here, petitioner’s flight
from his state trial and decision to remain a fugitive for over 11 years
resulted in the records of his trial being lawfully destroyed. The absence of a
trial transcript or settled statement of the trial proceedings due to
petitioner’s flight seriously interferes with this court’s
collateral review of petitioner’s trial error claims nearly 20 years
after petitioner’s state trial was held. Petitioner cannot point to
the trial proceedings to prove prejudice from any trial error, the government
cannot fairly dispute any assertions of prejudice, and the court cannot
properly assess any such claims. Petitioner’s flight should disentitle
him from litigating any claims of trial error in this court. It would be
“unconscionable” that petitioner’s
“deliberate attempt to evade his day of reckoning, successful for a
time, should be allowed to impose additional burdens upon the judiciary to
accommodate claims that should be forfeited by flight.” United
States v. Sudthisa-Ard, 17 F.3d 1205, 1208-09 (9th Cir.1994) (internal quotation
marks and citation omitted). Morrell, at *6-7. In this case, there is no connection between
Debtor being a fugitive in the State Court criminal action while also being a
bankruptcy debtor in his Chapter 13 case (and vice versa), because the criminal
action is unaffected by the pendency of the bankruptcy case, and the bankruptcy
case is unaffected by Debtor’s fugitive status. [FN4] The existence of
two different sovereigns may “not matter” in the sense of
conclusively establishing a lack of connection and being dispositive of the
issue, but it does highlight the fact that, under the circumstances here,
Debtor’s fugitive status and his bankruptcy case are not connected
with each other. FN4. The latter statement may not prove to be
true in the future, as discussed below. But, at this time, the Bankruptcy Court
is not faced (as was the District Court in Morrell) with a request by
the fugitive Debtor for relief that cannot be granted due to the absence of
records that were destroyed as a result of Debtor’s fugitive status.
If Debtor remains a fugitive, and if that status eventually interferes with the
administration of his bankruptcy case, a connection such as that in Morrell might then exist. Creditor argues that there is a connection between
Debtor’s fugitive status and his bankruptcy case, because Debtor is
engaged in a “scheme to attack and destroy the Scientology religion”.—Creditor
quotes statements by Debtor dating back to 1995 about
“breaking”, “destroying”, “killing
off”, and “annihilating” the Church of Scientology.
Creditor contends that the bankruptcy case is just one part of
Debtor’s “common scheme”.: Debtor filed bankruptcy
as a direct result of Creditor receiving judgment for copyright infringement;
Debtor has stated publicly many times that such infringement was part of his
effort to harm the Church of Scientology; the criminal case in Riverside County
resulted from Debtor’s attacks upon Scientologists based on their
religion; all of these events, Creditor asserts, are related to each other and
form a general pattern of Debtor’s acts against the Church of
Scientology, its followers, and Creditor. [FN5] [*735] Creditor cites Prevot
v. Prevot, 59 F.3d 556 (6th Cir.1995) (“Prevot”), where a
“general scheme” was held to constitute a sufficient
connection for purposes of the disentitlement doctrine. In that case, a
fugitive violated probation and restitution orders in a criminal conviction for
theft and fled to France when the Internal Revenue Service commenced to pursue
him, then filed a civil action from France to gain custody of his children. The
trial court found no “nexus” between the father’s
fugitive status and his custody action, but the appellate court disagreed: FN5. At oral argument on October 17, Creditor’s
attorney described the relationship between the Church of Scientology and
Creditor as follows: Creditor is a non-profit “religious corporation”.,
which is responsible for “maintaining the integrity and orthodoxy of
the Scientology religion”.; Creditor is not a “parish
church” and does not have members; Creditor is a “religious
body of Scientology” that owns and licenses use of trademarks and
copyrights; Creditor owns its facilities but does not own the Church of Scientology
of, e.g., San Jose; Creditor is “different from the religion”
of Scientology but is “part of the religion”., and owns the
religious scriptures of Scientology and the copyrights in such scriptures;
Creditor’s capacity in this bankruptcy case is as a copyright owner
with a judgment for Debtor’s infringement thereof. In
Creditor’s initial brief at page 1, line 22, Creditor refers to
Creditor as a “church”.: “… members of the
Scientology religion—the religion of which [Creditor] is a church
….”. Mr. Prevot’s flight and his
subsequent [custody action] were, paraphrasing [Conforte v. Commissioner, 692 F.2d 587, 590
(9th Cir.1982)], “related components of a general scheme.” He
fled to escape his criminal conviction and other responsibilities to court,
probation officers, victim and government, and to assemble and hold his family
in a refuge beyond the reach of American courts and American responsibilities.
In Mr. Prevot’s hands [the custody action] is a tool used to permit
him to escape American justice and responsibilities while holding his children
with him. Flight was but one step, and [the custody action] the latest link, in
a chain of proximately related events that began with the Texas conviction and
ended in the district court proceedings in this case. Prevot, at 567. In Conforte v. Commissioner, 692 F.2d 587, 590
(9th Cir.1982) (“Conforte”), cited and paraphrased by Prevot,
the appellate court found that a taxpayer’s fugitive status from a
criminal conviction for attempted evasion of employment tax liability and his
civil appeal of income tax liability were “each related components of
a general tax evasion scheme”., so as to constitute the requisite connection
for application of the disentitlement doctrine in the civil case. Both Prevot and Conforte were decided before Degen. Degen does not address the
concept of a “general scheme” and neither approves nor
disapproves it, but Degen does dictate that the disentitlement doctrine be
applied sparingly; such an approach necessarily limits the circumstances under
which a “general scheme” can properly be found. [FN6] In Degen, the Supreme Court
reversed the Ninth Circuit’s application of the doctrine against a
defendant in a civil forfeiture action that was proceeding while he was a
fugitive from criminal charges of drug smuggling, and explained why the
doctrine should not be used too freely: FN6. Creditor attempts to distinguish Degen on
the basis that the fugitive in that case was the defendant in the civil action,
whereas Debtor here is the equivalent of a plaintiff; Creditor also argues that
the fundamental Constitutional right of due process was an important issue in
Degen but is not an issue here. It is arguable whether Debtor is really akin to
a plaintiff—on the one hand, he seeks relief under the Bankruptcy
Code and bears the burden of establishing his good faith; on the other hand, he
is in the position of having to defend against Creditor’s objection to
plan confirmation and motion to dismiss or convert for bad faith. In any event,
the rationale of Degen does not appear to this Court to depend upon whether the
fugitive is a defendant or a plaintiff, nor upon whether fundamental
Constitutional rights are at stake. [*736] [In Ortega-Rodriguez vs. U.S., 507
U.S. 234, 113 S.Ct. 1199, 122 L.Ed.2d 581 (1993)] [w]e did not rule out
the possibility of appellate disentitlement where necessary to prevent actual
prejudice to the Government from a fugitive’s extended absence,
[citation omitted] but we concluded the sanction of disentitlement was
unjustified as a sanction applicable to all cases where an escape once had
occurred [citation omitted]. We conduct a similar examination of the
disentitlement imposed here, and find it likewise unjustified. [¶]
There is no risk in this case of delay or frustration in determining the merits
of the Government’s forfeiture claims or in enforcing the resulting
judgment. The Government has shown probable cause to forfeit the property, and
Degen must refute the showing or suffer its loss. Since the court’s
jurisdiction over the property is secure despite Degen’s absence,
there is no danger the court in the forfeiture suit will waste its time
rendering a judgment unenforceable in practice. [¶] The Government is
on stronger ground in suggesting the criminal prosecution against Degen might
be compromised by his participation in the forfeiture case. The problem stems
from the differences between the discovery privileges available to Degen in
each case…. [¶] … [O]f course, Degen’s
absence entitles him to no advantage. If his unwillingness to appear in person
results in non-compliance with a legitimate order of the court respecting
pleading, discovery, the presentation of evidence, or other matters, he will be
exposed to the same sanctions as any other uncooperative party. A federal court
has at its disposal an array of means to enforce its orders, including
dismissal in an appropriate case. Again, its powers include those furnished by
federal rule, [citations omitted] The details of these steps are committed to
the discretion of the District Court; it would be premature to consider now the
precise measures the court should adopt as the case proceeds. The existence of
these alternative means of protecting the Government’s interests,
however, shows the lack of necessity for the harsh sanction of absolute
disentitlement. Consideration of some of Degen’s defenses, such as the
statute of limitations, appears to require little discovery. If they have
merit, the Government should not prevail; if they are groundless, the
Government’s interests will not be compromised by their consideration.
[¶] We have yet to consider two other purposes said to be advanced by
disentitlement: The need to redress the indignity visited upon the District
Court by Degen’s absence from the criminal proceeding, and the need to
deter flight from criminal prosecution by Degen and others. Both interests are
substantial, but disentitlement is too blunt an instrument for advancing them.
Without resolving whether Degen is a fugitive in all the senses of the word debated
by the parties, we acknowledge disquiet at the spectacle of a criminal
defendant reposing in Switzerland, beyond the reach of our criminal courts,
while at the same time mailing papers to the court in a related civil action
and expecting them to be honored. [citations omitted]. A court-made rule
striking Degen’s claims and entering summary judgment against him as a
sanction, however, would be an arbitrary response to the conduct it is supposed
to redress or discourage…. [T]he sanction of disentitlement is most
severe and so could disserve the dignitary purposes for which it is invoked.
The dignity of a court derives from the respect accorded its judgments. That
respect is eroded, not enhanced, by too free a recourse to rules foreclosing consideration
of claims on the merits. [¶] [*737] There would be a measure of rough
justice in saying Degen must take the bitter with the sweet, and participate in
the District Court either for all purposes or none. But the justice would be
too rough. A court’s inherent power is limited by the necessity giving
rise to its exercise. There was no necessity to justify the rule of
disentitlement in this case; to strike Degen’s filings and grant
judgment against him would be an excessive response to the concerns here
advanced. The Supreme Court’s admonition against overly zealous use
of the disentitlement doctrine was made in a case with a strong connection
between the fugitive status and the civil action: Degen was a fugitive because
he had fled from prosecution of drug smuggling charges, and the civil action
sought his forfeiture of property that had been purchased with the proceeds of
the smuggling. Here, there is no such clear connection: Debtor filed bankruptcy
after Creditor obtained a District Court judgment for money damages based on
Debtor’s infringement of copyrights owned by Creditor; three years
later, Debtor was convicted in the State Court of crimes against members of the
Church of Scientology (which Creditor insists is not the same entity as
Creditor) and became a fugitive in that criminal action; Debtor continues to be
a bankruptcy debtor in a Chapter 13 case while he is a fugitive; there is no
current activity in the bankruptcy case pending trial of Creditor’s
objection to plan confirmation and Creditor’s motion to dismiss or
convert the case for bad faith. [FN7] Given those circumstances, a connection
cannot reasonably be found unless the “general scheme” theory
of Prevot and Conforte is applicable to the facts of this case and dispositive.
Creditor urges that the doctrine should be controlling here, but the links
between events are too tenuous under the cautious approach that is required by
Degen. FN7. The Chapter 13 Trustee has not moved to
dismiss the bankruptcy case due to any failure by Debtor to make payments under
his unconfirmed plan, which suggests that such payments are being made and that
the Trustee is able to administer the case despite Debtor’s current
absence. The “general scheme” that Creditor attempts to
demonstrate amounts to little more than Debtor’s hostile attitude
toward the Church of Scientology. Creditor argues that the filing of the
bankruptcy case was a step in Debtor’s longstanding fight against the
Church of Scientology, but there is no showing that Debtor filed bankruptcy
solely, or even primarily, in order to harm the Church—Creditor
(which insists that it is distinct from the Church) received a large judgment
against Debtor, and Debtor’s bankruptcy schedules show no significant
assets other than his home—on the surface, it appears that Debtor
filed bankruptcy to deal with the economic consequences of Creditor’s
judgment, i.e., to reorganize his financial affairs, which is the very purpose
of Chapter 13. During the bankruptcy case, Creditor has frequently sought
orders compelling Debtor to comply with discovery requests and complained that
Debtor was uncooperative—Debtor has countered with charges that
Creditor’s discovery was burdensome, invasive of his privacy and that
of others, and designed to harass—regardless of who is right (and
neither may be wholly right), the discovery disputes do not establish that
Debtor has been using the bankruptcy case as a means to advance a campaign
against the Church of Scientology (which Creditor says is a different entity
from Creditor). Debtor’s motive in filing bankruptcy and his manner of
conducting the case will be considered as part of the [*738]
“totality of the circumstances” test required by In re
Warren,
89 B.R. 87 (9th Cir. BAP 1988) (“;Warren”) and In
re Padilla, 213 B.R. 349 (9th Cir. BAP 1997) (“Padilla”)
when Creditor’s objection to plan confirmation and motion to dismiss
or convert for bad faith are tried. At this time, for the purposes of this
motion, Creditor has not shown that Debtor’s bankruptcy case is part
of a “general scheme” to harm the Church of Scientology, such
as to establish the connection that is necessary for application of the
disentitlement doctrine. C. Necessity of Dismissal The third element is not present, because dismissal of
Debtor’s bankruptcy case is not necessary to address the concerns
underlying the disentitlement doctrine. [4] Link to KeyCite Notes Creditor contends that Debtor’s
actions ranging from his pre-petition copyright infringement to his failure to
appear for sentencing and his flight have constituted “contumacious
behavior, harassment, stalking, terrorist threats, criminal behavior, and a
persistent refusal” to accept adverse rulings, coupled with the
attitude that access to the courts is a “sport” and
“entertainment”.—Creditor argues that such conduct
justifies application of the disentitlement doctrine. Creditor cites Pesin
v. Rodriguez, 244 F.3d 1250, 1253 (11th Cir.2001) (“Pesin”),
a post-Degen case that applied the doctrine to a party who … repeatedly defied court orders and
ignored contempt sanctions and has continued to evade arrest. Her behavior to
date leaves little doubt that she would defy an adverse ruling. Moreover, it
would be inequitable to allow [her] to use the resources of the courts only if
the outcome is a benefit to her. We cannot permit [her] to reap the benefits of
a judicial system the orders of which she has continued to flaunt [sic, should
be “flout”.]. Pesin does not stand for the proposition that the disentitlement
doctrine should be applied whenever a party displays a bad attitude. In that
case, a mother did not comply with an order granting custody of her children to
their father, and appealed the order while hiding the children and herself in a
secret location—the father had already won the right of custody and
was being wrongfully deprived of it by the mother, even while she availed
herself of the appellate process. The Court properly noted that it would be
“inequitable” for the mother to receive the benefits of the
judicial system without bearing its burdens and abiding by its rules. Debtor
here is not currently in the position of the mother in Pesin—at this
time, all that the Bankruptcy Code requires Debtor to do is make payments to
the Chapter 13 Trustee and, as noted above, there is no indication that he is
failing to perform that duty. Further, Creditor is not currently in the
position of the father in Pesin—Creditor has filed a proof of claim
to collect its judgment, and Creditor’s objection to plan confirmation
and motion to dismiss or convert for bad faith are pending trial; Creditor is
asserting the rights provided by the Bankruptcy Code and is not being
wrongfully deprived of them by Debtor. Under Degen, the disentitlement doctrine
is not to be applied merely to accomplish what appears to be “rough
justice”., but must be reserved for situations where foreclosing
consideration of the merits is actually necessary to avoid some specific
injustice. Creditor contends that such necessity does exist here, due to
“strong” practical considerations. Creditor argues that trial
of Creditor’s objection to plan confirmation and motion to dismiss or
convert for bad faith cannot be held in Debtor’s absence, [*739] because he
would have to testify on his own behalf and, even if he chose not to testify,
Creditor would be entitled to question him about issues raised by
Creditor’s objection and motion. Creditor maintains that, if Debtor
stays in Canada for at least two years while pursuing refugee status (and
perhaps much longer), trial cannot be held while he is gone, nor should it be
delayed that long—delay would constitute giving “aid and
comfort” to a “lawbreaker and a fugitive”.,
disregard Chapter 13’s requirements that Debtor act with honesty and
good faith, and “be an unseemly accommodation for a Federal court to
make”. Creditor cites Sarlund v. Anderson, 205 F.3d 973, 974
(7th Cir.2000) (“Sarlund”), a post-Degen case, which notes
that “Degen as we read it shifts the emphasis from considerations of
dignity, deterrence, respect, propriety, and symmetry found in a number of
earlier cases [citations omitted] to the kind of practical considerations that
inform the decision whether to dismiss a suit with prejudice as a sanction for
mistakes, omissions, or misconduct”. Creditor approves of Sarlund’s result
concerning a fugitive who attempts to “exploit” the court
based on his “self-imposed exile”: … the plaintiff’s fugitive
status places him entirely beyond judicial control, thus creating a situation
severely prejudicial to his adversaries. Since his whereabouts are unknown, he
cannot be deposed by the defendants or made to pay costs (should he lose) or
attorneys’. fees (should he lose and his suit be adjudged sanctionably
frivolous). There is nothing to prevent him from using the litigation process
to harass the defendants with impunity, and no measure that we can think of
short of dismissal of his suit that will protect the defendants from such
harassment. Sarlund, at 975. Creditor also contends that it is
“seriously” prejudicial for Creditor to incur the expense of
preparing for a trial at which Debtor may not appear, so the fact that the
Court could dismiss the case if Debtor fails to appear for trial does not
prevent Creditor from suffering “severe” prejudice prior to
that time—Creditor notes that Sarlund found an abuse of discretion
and held that the trial court should have dismissed the fugitive
plaintiff’s action rather than put the other parties to the expense of
defending on the merits when the fugitive was “using the litigation
process to harass the defendants with impunity”. Debtor states without contradiction that, although Creditor
complains that the litigation will be “stalled” by
Debtor’s absence, Creditor has already deposed Debtor for
“several days”. Debtor points out that, if Creditor prevails
in the pending trial, plan confirmation will be denied and/or the case will be
dismissed or converted regardless of whether Debtor is present; Creditor would
not be unable to receive relief if the bankruptcy case were continued in effect
pending trial rather than being dismissed now, because the relief sought by
Creditor at the upcoming trial is nothing more than denial of plan
confirmation, or dismissal or conversion of the case, all of which relief could
be granted with or without Debtor’s presence. Debtor notes that the
trial could be handled in various ways, including permitting Debtor to appear
“live electronically”., or by accepting written declarations
and deposition transcripts, or even by issuing judgment to Creditor by default
if Debtor fails to appear. In Sarlund, the fugitive was the plaintiff and was prosecuting
litigation against defendants who could not properly prepare for trial to
defend themselves because the fugitive was not available for discovery, and
whose litigation expense could not be shifted because the fugitive could not be
compelled to pay. Those factors are not [*740] present here. With respect to
discovery, Creditor does not deny that it has already conducted extensive
discovery—indeed, discovery may be complete, since the matter was in
the trial setting stage over six months ago. [FN8] If Creditor’s
discovery is already complete, Debtor’s absence will not deprive
Creditor of discovery; if Creditor seeks to do further discovery,
Debtor’s absence may or may not impede or prevent legitimate discovery
and that issue can be dealt with if and when it arises (and, as Degen points out, dismissal
is among the sanctions available for failure to provide discovery). As for
Creditor’s trial preparation expense, the fact that the case was ready
to be set for trial over six months ago suggests that much (perhaps most) of
that expense has already been incurred. Creditor has denounced
Debtor’s suggestion that Debtor might be able to appear at trial
“live electronically” or through declarations or deposition
transcripts, but no motion for such relief has been filed and the issue of
whether Debtor should be permitted to participate in trial without being
physically present is not before the Court. If Debtor does not attend trial, he
risks losing, since he bears the burden of demonstrating the good faith that is
required to defeat both Creditor’s objection to plan confirmation and
Creditor’s motion to dismiss or convert for bad faith, see Warren and
Padilla. However, at this point, it has not been established that Debtor definitely
or probably will not appear for trial, and it is entirely possible that he will
decide that bankruptcy relief is sufficiently important to warrant his
appearance—if he does not, the chips will fall where they may. If
Creditor does prevail at trial and Debtor remains a fugitive,
Creditor’s victory will not be rendered meaningless by
Debtor’s absence, because Creditor already has a money judgment and
that is not the relief sought by Creditor’s objection to plan confirmation
and motion for dismissal or conversion for bad faith. Rather, Creditor seeks
denial of plan confirmation and/or dismissal or conversion of the bankruptcy
case—pursuant to § 1307(c), denial of plan confirmation
would ultimately lead to dismissal or conversion of the bankruptcy case unless
Debtor were able to propose a confirmable plan by a date certain, and dismissal
or conversion is precisely what Creditor seeks. Accordingly, the practical
reasons advanced by Creditor do not constitute necessity for application of the
disentitlement doctrine. FN8. That process came to a halt when Creditor
filed a motion to disqualify the undersigned and sought to have the District
Court withdraw reference of the bankruptcy case pursuant to 28 U.S.C.
§ 157(d). Both of those motions were denied. Creditor has appealed
from denial of the recusal motion, and has now filed this motion. IV. CONCLUSION For the reasons set forth above, Creditor’s motion to
dismiss Debtor’s Chapter 13 case based on the fugitive disentitlement
doctrine is denied. Counsel for Debtor shall submit a form of order so providing,
after review by counsel for Creditor as to form. |