Labor Commissioner v. Johnson

          PRESENT: THE HONORABLE R. GARY KLAUSNER, UNITED STATES DISTRICT JUDGE

          CIVIL MINUTES - GENERAL

         Proceedings: (IN CHAMBERS) Order re: Bankruptcy Appeal re: Order Denying Labor Commissioner, State of California's Motion to Reconsider Under FRCP 60 (DE 1)

         I. INTRODUCTION

         This matter comes before the Court on appeal from the United States Bankruptcy Court for the Central District of California. Appellant California State Labor Commissioner ("Appellant" or "Labor Commissioner") filed its opening brief on March 29, 2019 appealing the Order of the Bankruptcy Court denying Appellant's Motion to Reconsider Under FRCP 60 the partus' voluntary dismissal of the matter (DE 18). For the following reasons, the Court AFFIRMS the Order of the Bankruptcy Court.

         II. FACTUAL BACKGROUND

         On December 7, 2016, Appellee Monique Johnson ("Johnson") filed a Chapter 7 bankruptcy petition. Included in the debts that Johnson sought to discharge through the bankruptcy was a debt owed to her former employee, Brittany Banuelos ("Banuelos"). Banuelos previously received a judgment against Johnson in a retaliation action. On March 20, 2017, the Labor Commissioner filed an Adversary Proceeding against the Debtor and Appellee, Monique Johnson, on behalf of Banuelos. In the Adversary Proceeding, the Labor Commissioner sought to establish that damages awarded to Banuelos in the retaliation action are non-dischargeable.

         On August 29, 2017, the Labor Commissioner and Johnson executed a Stipulation of Dismissal ("Dismissal") of the Adversary Proceeding, pursuant to Federal Rule of Civil Procedure 41(a), which was filed and entered by the Bankruptcy Court on August 30, 2017. The Dismissal was without prejudice as to the rights of Banuelos. The Labor Commissioner's alleged reason for the Dismissal was their counsel, David Lawrence Bell's ("Bell") mistaken belief that Banuelos was unavailable. Bell claims that he sent Banuelos emails regarding the proceedings, to which she did not respond because she was in Mexico for a family emergency and Id. not have access to emails for several months. At the time of the Dismissal, Bell was unaware of this. However, contrary to Bell's belief, Banuelos allegedly assures that she could have been reached via telephone during that time.

         The Labor Commissioner alleges that on or about August 29, 2017, the same day the Dismissal was executed by the parties, Banuelos resurfaced and contacted Bell to protest the Dismissal. On December 4, 2017, the Labor Commissioner filed a Rule 60(b) Motion seeking to vacate the Dismissal. The Labor Commissioner's primary basis for the Rule 60(b) Motion was that Bell only agreed to dismiss the matter as a result of his mistaken belief that Banuelos could not be contacted, and therefore, the decision to dismiss was the result of excusable neglect and Rule 60(b) warrants vacating the Dismissal.

         On October 10, 2018, the Bankruptcy Court held a hearing on the Labor Commissioner's Rule 60(b) Motion and denied the Motion on the ground that the Labor Commissioner had failed to offer any admissible evidence to support its contentions. The sole evidence that the Labor Commissioner provided in support of the Rule 60(b) Motion was a declaration from Bell setting forth his mistaken belief that Banuelos was unavailable. Banuelos did not provide a declaration in support of the Motion. The Bankruptcy Court found that Bell's claims in his declaration regarding Banuelos were inadmissible hearsay evidence and that the failure to provide a declaration of Banuelos was fatal to the Motion. Thus, on October 22, 2018, the Bankruptcy Court filed and entered its Order denying the Motion. The Labor Commissioner now appeals this decision.

         III. JUDICIAL STANDARD

         Federal district courts have jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy judges. 28 U.S.C. § 158(a)(1); In re Frontier Props., Inc., 979 F.2d 1358, 1362 (9th Cir. 1992). This Court reviews for abuse of discretion a bankruptcy court's ruling on a motion for relief from judgment pursuant to Rule 60(b). Casey v. Albertson's Inc., 362 F.3d 1254, 1257 (9th Cir. 2004). Failure to exercise discretion is an abuse of discretion. Central Valley Typographical Union, No. 46 v. McClatchy Newspapers, 762 F.2d 741, 749 (9th Cir. 1985).

         "[A]ttorney error is insufficient grounds for relief under both Rule 60(b)(1) and (6) . . . ." Allmerica Fin. Line Ins. & Annuity Co. 139 F.3d. 664, 666 (9th Cir, 1997). "As a general rule, parties are bound by the actions of their lawyers, and alleged attorney malpractice does not usually provide a basis to set aside a judgment pursuant to Rule 60(b)(1)." Pioneer Inv. Services v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 396 (1993).

         IV. DISCUSSION

         Appellant argues that the Bankruptcy Court abused its discretion by failing to explicitly address the Pioneer-Briones factors for determining whether the error of a party or its counsel qualifies as "excusable neglect," determining that the Rule 60(b) motion was supported by "no ...