United States Bankruptcy Appellate Panel of the Ninth Circuit
In re: AHMAD J. TUKHI, Debtor.
AHMAD J. TUKHI, Appellee. ABDUL HABIB OLOMI, Appellant, Bk. No. 8:15-bk-14015-MW Adv. No. 8:15-ap-01449-MW
and Submitted on March 23, 2017 at Pasadena, California
from the United States Bankruptcy Court for the Central
District of California Honorable Mark S. Wallace, Bankruptcy
Nikolaus W. Reed argued for appellant;
Paul Mroczynski of Cooksey, Toolen, Gage, Duffy & Woog
argued for appellee.
Before: KURTZ, FARIS and LAFFERTY, Bankruptcy Judges.
Habib Olomi appeals from a judgment dismissing his
nondischargeability action against chapter 7 debtor Ahmad J.
Tukhi. The bankruptcy court dismissed the action because
Olomi appeared for a pretrial conference without having filed
or served a pretrial stipulation as required by the
bankruptcy court's Local Rule 7016-1(b) and (c).
According to the bankruptcy court, Olomi's noncompliance
was the result of the "fault" of his counsel but
was neither willful nor done in bad faith.
though this one-time act of noncompliance would have resulted
merely in several weeks of delay in the pretrial proceedings,
the bankruptcy court held that dismissal was appropriate
either under its Local Rule 7016-1(f) sanctioning authority
or as a failure to prosecute under Civil Rule 41(b) (made
applicable in adversary proceedings by Rule 7041). The
bankruptcy court's dismissal order was an abuse of
discretion. The bankruptcy court did not apply the correct
legal standard before imposing the sanction of dismissal
based on a Local Rule violation. Furthermore, the facts in
the record do not support dismissal either based on the Local
Rule violation or based on a failure to prosecute.
the bankruptcy court's judgment of dismissal is VACATED,
and this matter is REMANDED for completion of pretrial
proceedings and the setting of a trial date.
commenced his bankruptcy case in August 2015, and Olomi
timely filed a nondischargeability complaint against Tukhi in
November 2015. Olomi stated a single claim for relief under
§ 523(a)(6) for a debt allegedly arising from a willful
and malicious injury. According to Olomi, Tukhi intentionally
struck him with an automobile.
nondischargeability action proceeded without incident - even
smoothly - up until the time the parties' joint pretrial
stipulation was due. In the bankruptcy court's scheduling
order entered March 7, 2016, the bankruptcy court set a
pretrial conference date of September 28, 2016. The
scheduling order contained the following warning:
The parties are placed on notice that it is the Court's
policy to strictly enforce the Local Bankruptcy Rules
relating to pre-trial conferences and this Court's
procedures supplement to those rules, which are published on
the court's website. Failure to comply with the
provisions of this order may subject the responsible party to
sanctions, including judgment of dismissal or the entry of a
default and a striking of the answer.
Scheduling Order (Mar. 7, 2016) at pp. 2-3 (emphasis in
bankruptcy court obviously considered it extremely important
to obtain the litigants' compliance with its pretrial
procedures. The scheduling order admonition was the fourth of
four advance warnings regarding the importance of adhering to
required pretrial procedures. At the initial status
conference held immediately before the scheduling order was
issued, the bankruptcy court stated as follows:
THE COURT: And the Court wishes to advise the parties that
the Court applies the Local Bankruptcy Rules relating to
pretrial conferences very strictly. The Court views the
pretrial conference as an indispensable part of the
resolution of this matter and probably the second most
important proceeding after the trial itself.
And for that reason, it's the Court's practice that
if there is a material default by the plaintiff in compliance
with the Local Bankruptcy Rules relating to pretrial
conferences, the most likely outcome is that the Court will
grant judgment of dismissal in favor of the defendant and, on
the other hand, if there's a material default by the
defendant, the Court's most likely outcome is that the
Court would strike the answer and enter a default.
These consequences are in the nature of terminating
sanctions. The Court believes that those types of -- that
that type of sanction is appropriate in connection with
pretrial conferences because to allow a material breach of
those rules and to simply impose a monetary sanctions it
could be viewed as setting up a situation where there's
simply a toll charge for violating the Local Bankruptcy Rules
and I don't think that's appropriate. So the parties
are on notice of the Court's intentions in this regard
and the Court will certainly be looking to the parties to
fully comply with those Local Bankruptcy Rules.
Hr'g Tr. (Mar. 2, 2016) at 4:14-5:15.
were similar warnings about the importance of the pretrial
procedures in form instructions accompanying the summons and
in the presiding judge's supplemental procedures set
forth on the court's website. Indeed, the form
instructions accompanying the summons stated:
11. Joint Pre-Trial Order. Failure to timely file a Joint
Pre-Trial order may subject the responsible party and/or
counsel to sanctions, which may include dismissal of the
adversary proceeding. The failure of either party to
cooperate in the preparation of timely filing of a Joint
Pre-Trial Conference [sic] or appear at the Joint Pre-Trial
Conference may result in the imposition of sanctions under
LBR 7016-1(f) or (g).
Early meeting of Counsel and Status Conference Instructions
(Nov. 19, 2015) at ¶ 11 (emphasis in original).
all of these warnings, and the unequivocal requirement set
forth in Local Rule 7016-1(b) and (c) for the preparation,
service and filing of a joint pretrial stipulation in advance
of the pretrial conference, Olomi attended the pretrial
conference without having first served or filed the requisite
pretrial stipulation. When the court asked Olomi's
counsel where his pretrial stipulation was, counsel explained
that he had mistakenly prepared and filed instead a joint
status report because he was inexperienced in practicing
before the bankruptcy court and had misread what the
"statute" required. The bankruptcy court seemed to
credit counsel's explanation for his noncompliance but
nonetheless concluded that dismissal was appropriate under
Local Rule 7016-1(f)(4). The court reasoned that dismissal
was justified because: (1) the pretrial conference and the
pretrial procedures were very important; (2) Olomi had been
warned of that importance and of the consequences for failure
to comply; and (3) lesser sanctions in the form of monetary
sanctions would amount to nothing more than a "toll
charge" for violating the very important pretrial
procedures. The bankruptcy court reiterated the same
reasoning in its written order of dismissal.
a few days of the bankruptcy court's dismissal ruling,
Olomi simultaneously filed both a notice of appeal and a
motion for reconsideration. Olomi explicitly based his
reconsideration motion on Civil Rule 60(b)(1), as made
applicable in bankruptcy cases pursuant to Rule 9024. Olomi
maintained that the court should grant him relief from his
excusable neglect ...