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Barnes v. Henry

United States District Court, D. Hawaii

March 28, 2017

KRISTIN KIMO HENRY, et al ., Appellee. Bankr. No. 14-01475


          Derrick K. Watson, United States District Judge


         Appellant Chad Barry Barnes seeks to stay his appeal of a bankruptcy matter to the district court, pending a decision by the United States Court of Appeals for the Ninth Circuit in a separate matter also involving Barnes, In Re Sea Hawaii Rafting, LLC, No. 16-15023 (“Ninth Circuit Appeal”). Because the balance of pertinent factors weighs in favor of Barnes' request- notably, the conservation of judicial resources, the potential for conflicting decisions, and the absence of prejudice to any other party-the Motion to Stay is GRANTED.


         By this bankruptcy appeal-and several other cases-Barnes contests the sale of a 2005 Zodiac boat, the M/V Tehani. On May 9, 2016, the Bankruptcy Court entered an order granting the Motion for Order Approving Sale. See Order Granting Trustee's Motion for Order (I) Authorizing Sale of Boat and Trailer Under Bankruptcy Code § 363, and (II) Otherwise Granting Relief (the “Order Approving Sale”), Sea Hawaii Chapter 7 Bankruptcy, Bankr. No. 14-01520 (Bankr. D. Haw. May 9, 2016), Dkt. No. 185. Barnes appealed the Order Approving Sale, commencing Barnes v. Field, Civ. No. 16-00230 LEK-KSC. On September 27, 2016, the Trustee filed a Report of Sale, acknowledging receipt of $35, 000.00 for the M/V Tehani and its trailer on August 26, 2016, and reporting that he had assigned the M/V Tehani and its trailer to Aloha Ocean Excursions, LLC on August 30, 2016. See Report of Sale, Sea Hawaii Chapter 7 Bankruptcy, Bankr. No. 14-01520, Dkt. No. 253.

         The instant bankruptcy appeal challenges the Bankruptcy Court's Order Granting Motion to Approve Sale of Property (M/V Tehani Vessel and Trailer) in a related Chapter 13 proceeding. See Barnes v. Henry et al., Bankr. No. 14-01475 (Bankr. D. Haw. Nov. 15, 2016), Dkt. No. 222. That order approved debtor Kristin Kimo Henry's May 18, 2016 Motion to Approve Sale of Vessel in Related Case of In re Sea Hawaii Rafting, LLC, 14-01520. In addition to approval of the sale of the M/V Tehani and trailer from the Chapter 7 case, Bankr. No. 14-01520, Henry's motion sought approval to incur additional debt in his Chapter 13 case because he personally guaranteed payment of the sales price. Barnes appealed the Bankruptcy Court's order granting Henry's motion to this district court on November 15, 2016. See Civ. No. 16-00588 DKW-RLP, Dkt. No. 1 (Notice of Transmittal); Bankr. No. 14-01475, Dkt. No. 223 (Notice of Appeal).

         The related Ninth Circuit Appeal, No. 16-15023, likewise involves ownership of the M/V Tehani-the boat was an asset of the Sea Hawaii bankruptcy estate and an in rem defendant in the underlying case Barnes v. Sea Hawaii Rafting, LLC, et al., Civ. No. 13-00002-ACK-RLP. The Ninth Circuit Appeal, No. 16-15023, is an interlocutory appeal from Judge Kay's order which, in relevant part, dismissed the M/V Tehani for lack of in rem jurisdiction. See Order Dismissing M/V Tehani for Lack of Jurisdiction, Civ. No. 13-00002 ACK-RLP (D. Haw. Dec. 22, 2015), Dkt. No. 197. Ninth Circuit oral argument in that matter is tentatively scheduled for the week of June 12-16, 2017. See No. 16-15023 (9th Cir. Feb. 24, 2017), Dkt. No. 70. The Court notes that, on March 14, 2017, the Ninth Circuit denied Barnes' motion to stay both the instant district court case and also Barnes v. Field, Civ. No. 16-00230 LEK-KSC, pending resolution of the Ninth Circuit Appeal. See No. 16-15023 (9th Cir. Mar. 14, 2017), Dkt. No. 77 (denying Barnes' Motion To Stay, Dkt. No. 59).

         In the meantime, the M/V Tehani was sold, pursuant to an Order of the Bankruptcy Court providing, pursuant to Section 363(m) of the Bankruptcy Code, 11 U.S.C. § 363(m), that the M/V Tehani would be sold “free and clear of all liens and encumbrances, to the maximum extent permitted by the Bankruptcy Code.” Barnes appealed that Order, but no stay of the sale Order was obtained, and, on March 14, 2017, Judge Kobayashi dismissed that appeal of a bankruptcy matter to district court. See Order Granting Appellee's Motion to Dismiss Appeal, Barnes v. Field, Civ. No.16-00230 LEK-KSC (D. Haw. March 14, 2017), Dkt. No. 33.

         Finally, on January 17, 2017, Judge Seabright stayed proceedings in a fourth bankruptcy appeal to the district court involving Barnes and the M/V Tehani. See Friedheim et al. v. Field, Civ. No. 16-00183 JMS-KJM (D. Haw. Jan. 17, 2017), Dkt. No. 65. That bankruptcy appeal involves an admiralty action filed by Barnes' attorney, Jay Lawrence Friedheim, Esq., on Barnes' behalf against Sea Hawaii, the M/V Tehani, and the boat's owner, which eventually resulted in sanctions against Friedheim. In the bankruptcy litigation, the bankruptcy judge awarded sanctions to the Trustee based upon violations of the automatic stay by Barnes and his counsel, and the appeal to district court followed. That district court case is stayed pending resolution of the Ninth Circuit Appeal. See Civ. No. 16-00183 JMS-KJM, Dkt. Nos. 64 and 65.

         As best the Court can discern, Barnes asserts that overlapping questions of law remain to be decided in both the instant bankruptcy appeal and the pending Ninth Circuit Appeal relating to the validity of the sale of the M/V Tehani, including: (1) whether applicable non-bankruptcy law permits the sale of a boat free and clear of maritime liens for maintenance and cure; (2) whether Barnes has a maritime lien on the boat for maintenance and cure; (3) the value of Barnes' lien against the M/V Tehani; and (4) whether the district court's automatic referral provisions enabled by the Bankruptcy Amendments of 1984 are unconstitutional as written and as applied to an injured seaman seeking maintenance and cure in Admiralty.

         Neither appellee Kristin Kimo Henry nor appellee Trustee Howard M.S. Hu filed an opposition nor any other statement setting forth appellees' respective positions on the Motion to Stay.


         I. Legal Framework

         “[T]he power to stay proceedings is incidental to the power inherent in every court to control disposition of the cases on its docket with economy of time and effort for itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). “The exertion of this power calls for the exercise of sound discretion.” CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962); see Clinton v. Jones, 520 U.S. 681, 706 (1997) (“The District Court has broad discretion to stay proceedings as an incident to its power to control its own docket.”); Lockyer v. Mirant Corp., 398 F.3d 1098, 1109 (9th Cir. 2005) (“A district court has discretionary power to stay proceedings in its own court[.]”). When a stay is requested because of pending proceedings that bear on the case, the Court may grant a stay in the interests of the efficiency of its own docket and fairness to the parties. See Leyva v. CertifiedGrocers of Cal. Ltd., 593 F.2d 857, 863 (9th Cir. 1979); see also MediterraneanEnters., Inc. v. Ssangyong Corp., 708 F.2d ...

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