In Re Vesteq Financial Corporation, Debtor.edward M. Walsh, Trustee of the Estate of Vesteq Financialcorporation Appellant, v. Bank of San Francisco, Appellee, 947 F.2d 952 (9th Cir. 1991)

Before WILLIAM A. NORRIS and DAVID R. THOMPSON, Circuit Judges, and VAN SICKLE, District Judge.^** 

MEMORANDUM^*** 

OVERVIEW

The appellant, Edward M. Walsh, Trustee of The Estate of Vesteq Financial Corporation, appeals a decision from the United States Bankruptcy Appellate Panel for the Ninth Circuit. The Panel's decision affirmed the bankruptcy court's denial of appellant's Motion To Reopen a Dismissed Adversary Proceeding and Set Aside the Order of Dismissal, pursuant to Rule 60(b) of the Federal Rules of Civil Procedure.¹  We affirm the decision of the United States Bankruptcy Appellate Panel.

JURISDICTION

This Court has jurisdiction over this action pursuant to 28 U.S.C. § 158(d), as an appeal from a final order from the Bankruptcy Appellate Panel under 28 U.S.C. § 157(b).

FACTS AND PROCEEDINGS

Vesteq Financial Corporation filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code, on July 16, 1986. On August 12, 1986, Vesteq, acting as "debtor-in-possession" filed an adversary proceeding against Bank of San Francisco ("BSF") for conversion, turnover of property of the estate, and avoidance of a fraudulent conveyance. Eventually, Vesteq's bankruptcy case was converted to Chapter 7, and Edward M. Walsh was appointed the Chapter 7 trustee on November 6, 1987.

The complaint by Vesteq against BSF commenced and proceeded toward trial. Discovery was commenced, pursued, and completed. The trial date was May 26, 1987. Prior to trial, BSF filed a Motion to Disqualify Vesteq's counsel, Howard, Rice, Nemerovski, Canady, Robertson & Falk ("Howard, Rice") on the grounds of conflict of interest. The Motion to Disqualify was granted pursuant to an order dated June 3, 1987, a copy of which was signed by a member of the Howard, Rice firm.

The order specified that the Howard, Rice Firm was to remain as counsel for Vesteq for purposes of receiving all notices, pleadings, and correspondence until such time as new counsel was obtained and a formal Substitution of Counsel was filed with the court.²  The order also specified that the May 26, 1987, trial date was vacated and that a status conference was scheduled for July 24, 1987.

Although BSF appeared at the status conference on July 24, 1987, no appearance was made on behalf of Vesteq. The court dismissed the adversary proceeding on July 31, 1987, for failure to prosecute. Following the order dismissing the action, Vesteq did not set the matter for trial, file a substitution of counsel, appeal the order, bring a motion to set aside the dismissal order, or otherwise reassert its claims against BSF until trustee Edward Walsh filed a motion on July 19, 1989, to reopen the adversary proceeding and to set aside the order of dismissal, pursuant to Federal Rule of Civil Procedure 60(b) (6).

The bankruptcy court denied the trustee's Rule 60(b) motion and the bankruptcy appellate panel affirmed. This appeal followed.

DISCUSSION

The appellant's motion for relief from a judgment is governed by Rule 60(b) of the Federal Rules of Civil Procedure.³  The United States Supreme Court held in Link v. Wabash Railroad Co., 370 U.S. 626, 633 (1962), that it is within a district court's prerogative to dismiss a plaintiff's lawsuit sua sponte for failure to prosecute. 370 U.S. 626, 633 (1962). Failure of plaintiff's counsel to attend a pretrial conference can be evidence of failure to prosecute. Id. A district court's decision to deny a Rule 60(b) motion should be reversed on appeal only when there has been abuse of discretion by the district court. Redfield v. Insurance Company of North America, 940 F.2d 542 at 544 (9th Cir. 1991); Mission Indian v. American Management & Amusement, Inc., 840 F.2d 1394, 1408 (9th Cir. 1987); Plotkin v. Pacific Telephone & Telegraph Co., 688 F.2d 1291, 1292 (9th Cir. 1985); Pena v. Seguros La Comercial. S.A., 770 F.2d 811, 814 (9th Cir. 1985).

The appellant argues that his motion to set aside the dismissal is made under Rule 60(b) (6), which allows for relief from a final judgment for "any other reason justifying relief from the operation of the judgment" and which requires that a motion be filed "within a reasonable time." F.R.Civ.P. 60(b) (6). The appellant also contends that dismissal of the adversary proceeding by the bankruptcy judge was an impermissibly harsh sanction for a single unexplained absence from a pretrial conference, especially as the case was relatively young.

In support of his contentions, the appellant cites Tolbert v. Leighton, 623 F.2d 585 (9th Cir. 1980), for the proposition that the court of appeals should look to the merits of the underlying judgment in determining whether to affirm a district court's denial of a Rule 60(b) motion. The court in Tolbert determined that an abuse of discretion can be found if the district court dismisses a plaintiff's case for failure to prosecute where:

(1) the only evidence of dilatoriness is his or his attorney's failure to attend a pretrial conference;

(2) the court has not warned that failure to attend will create a risk of dismissal; and (3) the case is still "young."

623 F.2d 585, 587 (9th Cir. 1980).

The facts of the instant case are distinguishable from Tolbert in several ways. First, in Tolbert less than seven months had elapsed between the filing of the complaint and the failed appearance at the status conference. Id. at 586. In the instant case, the failure to attend the status conference was scheduled over twelve months after the complaint was filed. In Tolbert, neither the plaintiff nor the defendant appeared at the status conference. Id. In the instant case, only the plaintiff failed to attend the status conference. The Tolbert opinion does not cite any additional acts of dilatoriness in the plaintiff's behavior. In the instant case, further acts of dilatoriness are evidenced by the trustee's failure to make the Rule 60(b) motion until nearly two years after the bankruptcy judge had dismissed the case.⁴  We conclude that the Tolbert rationale does not apply in this case.

The appellant also relies on Carter v. Beverly Hills Savings & Loan Association, 884 F.2d 1186, 1191 (9th Cir. 1989). In Carter, this court determined that the district court had abused its discretion in deciding that the Rule 60(b) motion was untimely, because the one year time requirements in Rule 60 begin at the time that a judgment, order, or proceeding was entered or taken. Id. at 1190. Because the district court in Carter had failed to properly enter an order, pursuant to Rule 58 of the Rules of Civil Procedure, we found that the one year time limitation for a Rule 60 motion had not begun to toll. Id. at 1191.

In Carter, we addressed all of the bases on which the district court had relied in denying the Rule 60(b) motion, which included the alternate grounds that "the motion appeared to have no merit." Id. In Carter, we addressed the merits of the motion only to point out that the district court had abused its discretion both on the basis of untimeliness and on the basis of lack of merits.

We reject appellant's argument that it is necessary to look to the merits of the underlying judgment of this case. The correct standard of review in this case is abuse of discretion by the district court. Redfield v. Insurance Company of North America, 940 F.2d 542 (9th Cir. 1991); Mission Indian v. American Management & Amusement, Inc., 840 F.2d 1394 (9th Cir. 1987); Plotkin v. Pacific Telephone & Telegraph Co., 688 F.2d 1291, 1292 (9th Cir. 1985); Pena v. Seguros La Comercial. S.A., 770 F.2d 811 (9th Cir. 1985). This Court stated in Molloy v. Wilson, 878 F.2d 313, 315 (9th Cir. 1989), that a court's order denying a Rule 60(b) motion will be reversed only upon a clear showing of abuse of discretion.

In determining whether there was an abuse of discretion, we review the bankruptcy court's rationale in denying appellant's Rule 60(b) motion. The transcript of the hearing on the motion clearly delineates the factors considered by the bankruptcy court in making its decision. (Exhibit 18 of the Appellant's Excerpts of the Record.)

The bankruptcy court noted that the appellant's motion was more correctly termed a Rule 60(b) (1) motion, rather than a Rule 60(b) (6) motion as characterized by the appellant. (Exhibit 18 at 14.) A Rule 60(b) (1) motion must be brought within one year of the Order of Dismissal. F.R.Civ.P. 60(b) (1). The court noted that the one year time limit would dispose of the appellant's motion, because the appellant had waited for nearly two years after entry of the Order of Dismissal before filing the Rule 60(b) motion. Id.

The bankruptcy court continued its analysis to explain why the appellant's motion would be denied, even if it was considered under the more liberal time requirements of a Rule 60(b) (6) motion. Id. In its analysis, the bankruptcy court noted that dismissal for nonappearance at a status conference is a harsh penalty. Id. In support of the denial, however, the bankruptcy court cited the appellant's lack of timeliness in bringing the Rule 60(b) motion, the failure of appellant's counsel of record to fulfill their responsibilities to give notice of the status conference, the failure of appellant's substituted counsel to file an appearance with the court, the proof of service by the court that counsel had received notice of the dismissal of the adversary proceeding, and the possible prejudice to the defendants that would result by reopening the adversary proceeding after a two year delay in prosecution. Id. at 15-16.

In reviewing the bankruptcy court's rationale for denying the appellant's Rule 60(b) motion, we conclude that there was no abuse of discretion by the bankruptcy court in denying the appellant's Rule 60(b) motion.

The decision of the Bankruptcy Appellate Panel is AFFIRMED.