Bankruptcy No. 11-15905-PB7
The opinion of the court was delivered by: M. James Lorenz United States District Court Judge
ORDER AFFIRMING BANKRUPTCY ) COURT DECISION
Pending before the Court is Appellant and Creditor Liliana Esparza's appeal of the bankruptcy court's decision denying her motion for an extension of time to file a complaint to determine non-dischargeability of her claims under 11 U.S.C. § 523. The parties have fully briefed the issue presented to the Court.
The Court found this appeal suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). (Doc. 21.) For the following reasons, the Court AFFIRMS the bankruptcy court's decision.
Appellee and Debtor Ricardo Pedro Robledo*fn2 owns a taco shop in San Diego, California operating under the name "Roberto's Taco Shop." (B 119.) Ms. Esparza was employed at this San Diego taco shop location. On October 7, 2010, Ms. Esparza filed a complaint in the San Diego Superior Court, alleging causes of action for failure to pay overtime, failure to pay wages, failure to pay reimbursement, meal and rest period violations, failure to pay wages upon termination, failure to maintain time records, failure to provide itemized statements, unfair business practices, and sexual harassment. (B 41.) Thereafter, on September 26, 2011, Appellees filed for Chapter 7 relief. (Id.)
A. Ms. Esparza's Motion for an Extension of Time
On December 19, 2011, Ms. Esparza filed a "Motion to Extend Deadline to File Motion to Dismiss Pursuant to 707(b) and to File Adversary Complaint Pursuant to FRBP 4004(b) and 4007(c)." (B 40--46.) Relying on Federal Rules of Bankruptcy Procedure 4004(b) and 4007(c) as well as In re Sturgis, 46 B.R. 360 (Bankr. W.D. Okla. 1985), Ms. Esparza argued Movant [Ms. Esparza] hired counsel to pursue her claims in Bankruptcy Court and needs more time to "clarify [her] position on any objections" against the Debtors. In light of some of the proposed amendments to Schedules B, C, I and J and some allegations regarding his financial situation that Debtor made during the §341(a) Meeting of Creditors held on November 30, 2011, Movant will need to discuss with her counsel the contents of such amendments when such amendments are filed with the Court and the allegations Debtor made at that hearing. Movant's counsel will need additional time to analyze Debtor's financial situation. [¶] Thus, Movant should be granted an extension to file a motion to dismiss and an adversary proceeding so she may discuss with her counsel the option of objecting to Debtor's discharge once Debtors file these proposed amendments to Schedules. (B 42--43.) In the same motion, Ms. Esparza continued
[T]he extension for the time period of until January 30, 2012 is a reasonable amount of time for Movant to consult with counsel on her position on any objections against the Debtors and is not prejudicial to the Debtors because the Debtors have yet to file their proposed amendments to Schedules B, C, I and J with the Court. Further, the Chapter 7 Trustee and the United States Trustee have extended the deadline to object to Debtors' discharge to the same date of January 30, 2012 given Debtor's allegations and proposals for amendment of Schedules at the §341(a) Meeting of Creditors held on November 30, 2011. In fact, the Debtors would be more prejudiced to have to defend a precipitated adversary proceeding complaint filing containing a laundry list of claims when many of the claims may not even be necessary after Movant's counsel examines Debtor's financial situation when Debtors file the proposed amendment to Schedules. [¶] Court administration is not impacted because, as mentioned above, the Chapter 7 Trustee and the United States Trustee have both extended the deadline per the Stipulation to the same date of January 30, 2012 that Movant is requesting. [¶] Therefore, Movant has "cause" to extend the deadline to file a motion to dismiss pursuant to §707(b) and to file her adversary proceeding complaint pursuant to FRBP 4004(b) and 4007(c) and Movant's motion to extend the deadline should be granted. (B 43.)
On February 6, 2012, the bankruptcy court held a hearing for Ms. Esparza's motion. (B 95.) During the hearing, Ms. Esparza's counsel reiterated many of the same points argued in the motion, but also emphasized that the important issue is whether the debtors have been prejudiced. (B 98--102.)
B. Bankruptcy Court Decision
During the hearing held on February 6, 2012, the bankruptcy court addressed Ms. Esparza's arguments and issued an order from the bench denying her motion. Before concluding that Ms. Esparza's motion will be denied, the bankruptcy court provided its reasoning by addressing each argument put forth by Ms. Esparza's counsel during the hearing.
In response to Ms. Esparza's contention that she needed more time for her counsel to examine the proposed changes to Debtors' Schedules to determine "whether it's even worth pursuing these claims if the debtor is not making any money," the bankruptcy court explained Well, I think that's too little too late. [She] had 60 days from the first date set for the Meeting of Creditors; so it gave you, roughly, 90 days from the filing of the petition. You had an opportunity to do a 2004 exam if you're looking for assets. [¶] I don't disagree with the practicality of saying I want to find out if this is a dry hole before I invest a bunch of effort and money into trying to tap it. But that's not what the law provides. The law provides a narrow window within which to commence a §523. And if it's under A(2), A(4) or A(6), you've got to bring it within that period of time; 60 days from the first date set for the Meeting of Creditors or it's gone. And asking this Debtor to agree to additional time to expose itself to a § 523 claim that you want to assert, that's prejudice in ...