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In re Keenan

March 28, 2008


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge

Bankruptcy No. 96-00871-B11

Adversary Proc. No. 06-90341-B11


In this bankruptcy case pending in the United States Bankruptcy Court for the Southern District of California, Appellants James and Judy Kennan filed a complaint in an adversary proceeding against the bankruptcy trustee and his counsel for RICO violations, breach of fiduciary duty, civil rights violations, declaratory relief, breach of contract, negligence and injunctive relief. Appellees filed motions to dismiss pursuant to Federal Rule of Civil Procedure12(b)(6) or in the alternative for summary judgment pursuant to Rule 56,*fn1 and an anti- SLAPP*fn2 motion to strike pendent state law claims. Appellants, represented by counsel, did not oppose the motion to dismiss or in the alternative for summary judgment. They filed an untimely opposition to the anti-SLAPP motion, which the Bankruptcy Court did not consider. It considered the merits of both motions, granted them and entered judgment for Appellees. Appellants, proceeding pro se, appeal the judgment.

Appellant/Debtor James Keenan filed a voluntary Chapter 11 bankruptcy case in 1996. Appellee Ross M. Pyle was appointed Chapter 11 Trustee. A joint plan of reorganization was confirmed in 1998 and Mr. Pyle was appointed as the Liquidating Trustee ("Trustee"). At all relevant times, the remaining Appellees were Trustee's counsel approved by the Bankruptcy Court. In the underlying bankruptcy case, the Trustee obtained a series of orders, which resulted in a procedure to close the case. Based on Debtor's objections, the court ordered the Trustee to produce voluminous records and set a deadline for Debtor's filing of any actions or claims against the Trustee and his counsel. Appellants filed the complaint shortly before the deadline.

In their complaint, Appellants alleged the Trustee conspired with his counsel and the Bankruptcy Judge and wrongfully seized various assets, terminated Appellants' compensation, abandoned their residence, mishandled the settlement of a state court judgment and a malpractice claim against Debtor's former counsel, unnecessarily liquidated assets and thus diminished the estate, incurred excessive attorneys' fees and costs, wrongfully deprived them of their ability to hire counsel of their choice, refused to return the estate to Debtor, failed to resign, concealed information from the court related to obtaining court orders, failed to promptly administer the estate and pay creditors, liquidated certain property, mismanaged Mikal, Inc. and other estate assets, sold certain real property, failed to make payments required by the confirmed plan, and breached their fiduciary duty to Appellants.

Appellees maintain that all of Trustee's actions which are the subject of Appellants' complaint were taken pursuant to court approval after full disclosure to the court and notice to Debtor. Furthermore, in the underlying bankruptcy case, Debtor moved for turnover of the estate and for the Trustee's removal for many of the same reasons alleged in the complaint, which motions were denied. Appellants filed at least three actions against the Trustee and his counsel and appealed numerous Bankruptcy Court decisions to the United States District Court and Court of Appeals. (See Notice of Related Cases, filed Mar. 22, 2007 (58 related cases in the United States District Court and Court of Appeals; see also Record ("R") at 1955-56 (thirty some appeals).) With the exception of the appeals which are still pending, the pertinent courts found against Appellants. (See R at 1961 (appeals affirmed Bankruptcy Court decisions or were dismissed for lack of prosecution).) The resulting decisions cover a large part of Appellants' allegations in the pending adversary proceeding.

Appellees moved to dismiss or in the alternative for summary judgment and to strike pursuant to California's anti-SLAPP statute. In support of their motion to dismiss or in the alternative for summary judgment, Appellees argued, among other things, that the complaint was barred by doctrines of quasi-judicial and derived judicial immunity, res judicata and collateral estoppel, and by the statute of limitations. In support of their motion to strike they argued that Appellants' claims arose from Appellees' protected right to petition in connection with a public issue, and that Appellants could not show probability of prevailing on the merits. They supported their motions with voluminous records of the relevant prior proceedings, including orders approving Trustee's actions and decisions on appeal affirming Bankruptcy Court orders.

Appellants did not timely oppose the motions.*fn3 Instead, they untimely requested a 90-day continuance. (Id. at 1615, 1640 (untimely), 1643 (untimely), 1917 (untimely) 2285 (untimely).) The request was based on Bankruptcy Rules 9006(b) and 7056(f) and claimed that the voluminous nature of the motions, the number of legal issues raised and need to conduct discovery mandated a 90-day continuance. (Id. at 1615-17, 1639-41, 1956-57, 1962.) Appellees opposed the request. (Id. at 1623.) The request was denied because many of the voluminous documents were pleadings and transcripts from earlier bankruptcy proceedings which Appellants already had and had an opportunity to review in the preceding years. (Id. at 2280.) In addition, the request lacked any specifics to show why 90 days was needed to prepare an opposition or why the discovery was needed. (See id. at 1954, 1956, 1962, 2280.) Without giving proper notice (see id. at 2277-78), Appellants filed a motion to reconsider*fn4 (id. at 1639), which Appellees opposed (id. at 1677). The motion was denied. (Id. at 2277; see also id. at 2363-64.) Nevertheless, Appellants untimely filed an opposition to motion to strike. (Id. at 2266.) At no time did they file an opposition to motion to dismiss.

At the hearing, the Bankruptcy Judge considered both motions unopposed. (R at 2353, 2363.) However, his orders granting the motions were not based on the lack of opposition. They were based on findings on the merits. (See id. at 2353, 2363-64.)

Appellees' motion to dismiss was granted based in part on the finding that each of Appellants' claims was barred by doctrines of quasi-judicial and derived judicial immunity. (Id. at 2357-58.) In addition, the doctrines of res judicata and collateral estoppel barred most of the claims. (Id. at 2358-59.) The Bankruptcy Judge also found that the issues that had been previously raised were barred by the statute of limitations; negligence claims against the Trustee were barred by the terms of the plan; the Trustee's counsel did not owe Appellants the same fiduciary duty as the Trustee; and the counsel were not liable for breach of contract because they were not parties to any contract with Appellants. (Id. at 2359-60.) Last, Appellants' challenge to Bankruptcy Court's jurisdiction was rejected as patently without merit. (Id. at 2360-61). Leave to amend was denied because the immunity doctrines precluded any basis to amend. (Id. at 2361.) The motion to strike was granted based on findings that all of Appellants' claims arose out of the bankruptcy proceedings and that the immunity doctrines precluded Appellants from making a prima facie case of probability of success on the merits. (Id. at 2364-R at 96.)

A Bankruptcy Court's conclusions of law regarding immunity are reviewed de novo, while findings of fact are reviewed for clear error. Curry v. Castillo (In re Castillo), 297 F.3d 940, 946 (9th Cir. 2002).

A bankruptcy court's dismissal for failure to state a claim under Rule 12(b)(6) is reviewed de novo. Blyler v. Hemmeter (In re Hemmeter), 242 F.3d 1186, 1189 (9th Cir. 2001). Review is limited to the allegations of the complaint. Bennett v. Williams, 892 F.2d 822, 823 (9th Cir. 1989). However, matters of public record outside the pleadings, such as the voluminous records of prior proceedings relied upon by Appellees in the Bankruptcy Court, may be considered along with the complaint and consideration of such matters does not convert a motion to dismiss to a motion for summary judgment. See MGIC Indem. Co. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). Failure to permit leave to amend is reviewed for abuse of discretion. Roth v. Garcia Marquez, 942 F.2d 617, 628 (9th Cir. 1991). An order of dismissal may be affirmed on any ground supported by the record, even if the lower court relied on different grounds or reasoning. Maldonado v. Harris, 370 F.3d 945, 949 (9th Cir. 2004).

Orders granting an anti-SLAPP motion to strike is reviewed de novo. Bosley Med. Inst., Inc. v. Kremer, 403 F.3d 672, 676 (9th Cir. 2005).

Denial of Appellants' request for a continuance to file their opposition briefs is reviewed for abuse of discretion. Danjaq LLC v. Sony Corp., 263 F.3d 942, 961 (9th Cir. 2001) ("A district court's decision regarding a continuance is given great deference, and will not be disturbed on appeal absent clear abuse of the court's discretion.").

On many occasions Appellants do not present clear arguments in their briefs but merely obliquely suggest there may be an argument based on conclusory assertions and without citation to pertinent authority. ...

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