Unpublished Disposition, 932 F.2d 972 (9th Cir. 1990)

MEMORANDUM^** 

American Condominium Corporation ("A.C.C.") appeals the district court's dismissal of its appeal as a sanction for failure to comply with an order requiring the filing of a designation of record and statement of issues on appeal. We reverse and remand this case to the district court for prosecution of the appeal.

On September 1, 1989, the United States Bankruptcy Court for the District of Nevada held an evidentiary hearing pursuant to a motion to enforce an attorney's lien filed by appellee E. Leslie Combs, Jr., Esq. At the hearing's conclusion, the Bankruptcy Court ruled in Combs' favor¹  and on September 27 entered its written order adjudicating and enforcing the attorney's lien. Following Combs' timely objection to review by the Bankruptcy Appellate Panel ("BAP"), the matter was referred to the district court on October 5.

On October 10, 1989, the district court acknowledged receipt of the appeal from the BAP and ordered that the designation of record and statement of issues on appeal be filed with the bankruptcy court clerk and then transmitted to the district court. On February 28, 1990, the bankruptcy court filed a status report indicating that neither document had been filed despite the district court's order. A.C.C. filed the designation of record and statement of issues on appeal on March 2, 1990.

On March 19, 1990, the district court dismissed the appeal for failure to comply with its prior order of October 10, 1989. On March 28, A.C.C. filed a motion to vacate the order dismissing the appeal, and the motion was denied by an order entered on April 27. A.C.C.'s timely notice of appeal to this court was filed shortly thereafter.

In 1986, A.C.C. commenced litigation in the bankruptcy court against the debtor-in-possession, M & R Investments, Inc., d/b/a Dunes Hotel & Casino, to determine the validity and amount of its claim in the bankruptcy estate. Combs represented A.C.C., and the litigation settled when A.C.C. received $315,000.00

A dispute then arose between A.C.C. and Combs concerning the legal fees to which Combs was entitled. The dispute involves the sum of $9,227.40, and the bankruptcy court declared the attorney's lien valid and resolved the dispute in Combs' favor. The bankruptcy court's ruling was appealed to the district court, and the district court's dismissal is the focus of this appeal.

Bankruptcy Rule 8006 requires the appellant to file both a designation of record and a statement of issues within ten days after filing the notice of appeal. A.C.C. filed its notice of appeal on September 13, 1989, but its failure to file the documents pursuant to Rule 8006 went unnoticed by counsel until February 28, 1990, when the bankruptcy court clerk issued the status report regarding the record on appeal. A.C.C. then filed the required documents on March 2, 1990.

Bankruptcy Rule 8001(a) in part provides: "Failure of an appellant to take any step other than the timely filing of a notice of appeal does not affect the validity of the appeal, but is ground only for such action as the district court ... deems appropriate, which may include dismissal of the appeal." On March 19, 1990, seventeen days after A.C.C. filed the required documents, the district court dismissed the appeal. A.C.C. moved to vacate the district court's dismissal order, and counsel noted that she was wholly responsible for the failure to timely file the documents. She further stated that the documents were filed as soon as she learned of the oversight and prior to the court's dismissal of the case. The motion to vacate was denied.

A district court's imposition of sanctions for failure to comply with non-jurisdictional bankruptcy procedural requirements is reviewed for an abuse of discretion. Sierra Switchboard Co. v. Westinghouse Electric Corporation, 789 F.2d 705, 706-07 (9th Cir. 1986).

Our decision is guided by In re Hill, 775 F.2d 1385 (9th Cir. 1985), a case in which the district court's dismissal of the appeal rested on counsel's failure to file a brief within the period required by Bankruptcy Rule 8009. As in the case now before us, failure to comply with the relevant rule was the fault of the attorney and not the litigant. In holding that dismissal of the appeal constituted an abuse of discretion, the court stated:

We have no intent to disavow the established principle that the faults and defaults of the attorney may be imputed to, and their consequences visited upon, his client. We do, however, believe that when any court is considering the imposition of sanctions for non-jurisdictional, procedural defaults and deficiencies in the management of litigation, the selection of the sanction to be imposed must take into consideration the impact of the sanction and the alternatives available to achieve assessment of the penalties in conformity with fault. Absent such consideration, there is an abuse of discretion.

Id. at 1387.

A review of both the district court's March 19, 1990, order dismissing the appeal and its April 27, 1990, order denying A.C.C.'s motion to vacate the dismissal provides no indication of what consideration, if any, preceded the imposition of the dismissal sanction. As this court has said in the context of dismissal for non-compliance with Rule 41(b):

Application of the remedy rests within the sound discretion of the court, but since it may severely punish a party not responsible for the alleged dereliction of his counsel, the Rule should only be invoked in extreme circumstances. In reviewing the propriety of dismissal ... we should ... look to see whether the court might have first adopted other, less drastic alternatives.

Industrial Building Materials, Inc. v. Interchemical Corp., 437 F.2d 1336, 1339 (9th Cir. 1971) (as amended). Nothing in the record shows that the district court considered alternative sanctions, so we must consider the dismissal to have been an abuse of discretion. See In re Russell, 746 F.2d 1419, 1420 (10th Cir. 1984) (where failure to comply with procedural bankruptcy rule was counsel's fault and nothing in record indicated dismissal was proper, dismissal constituted an abuse of discretion).

A.C.C.'s counsel did not file the required documents until they were several months past due, and the fault, as counsel concedes, is in no way that of the client. Although the sanction of dismissal is within the sound discretion of the district court, "justice is better served when controversies are decided on their merits rather than procedural technicalities." In re Bienert, 48 B.R. 326, 327 (N.D. Iowa 1985) (where debtors and their counsel showed no bad faith with reference to their untimely designation of record and issues on appeal, dismissal is inappropriate); accord Sierra Switchboard, 789 F.2d at 707 (permitting debtor to appeal from bankruptcy court was not an abuse of discretion despite debtor's failure in timely manner to designate record and issues on appeal).

Counsel became aware that the designation of record and statement of issues on appeal had not been filed when the bankruptcy clerk issued its status report on February 28, 1990. Counsel rectified her serious mistake two days later. When the district court entered its order on March 19 dismissing the appeal, it may not have known that the required documents had been filed; indeed, nothing in the record indicates that the district court was then informed that the deficiencies set forth in the previous status report had been cured. Under these circumstances and upon review of A.C.C.'s motion, however, the district court abused its discretion in refusing to vacate the dismissal order. The district court should therefore consider effective alternative sanctions.

REVERSED AND REMANDED.