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Barnes v. Henry

United States District Court, D. Hawaii

January 13, 2020



          Derrick K. Watson, United States District Judge

         In these consolidated appeals, Appellant Chad Barry Barnes challenges two orders of the U.S. Bankruptcy Court for the District of Hawai‘i, which, together, addressed a motion for reconsideration Barnes filed with respect to various orders entered in two separate bankruptcy proceedings.[1] In addressing Barnes' motion, the Bankruptcy Court reconsidered and vacated certain orders, declined to vacate orders for which an appeal was already pending, and observed that other orders had already been declared void. Otherwise, the Bankruptcy Court denied Barnes the relief he sought. On appeal, Barnes' briefing is, once again, largely unhelpful.[2] Nevertheless, in one of the other consolidated appeals involving the parties here, this Court found that Barnes' claim for maintenance and cure was, in part, a secured in rem claim against Appellee Kristin Kimo Henry to the extent Barnes was able to pierce the corporate veil of Appellee Sea Hawaii Rafting, LLC. Because that issue arises again in these consolidated appeals, as set forth below, this Court REVERSES IN PART the order of the Bankruptcy Court entered in Henry's bankruptcy proceeding that is subject to these appeals. In all other respects, the two orders of the Bankruptcy Court are AFFIRMED for the reasons discussed below.

         I. Procedural Background[3]

         To better understand the motion for reconsideration and orders addressing the same at issue in these consolidated appeals, it is helpful to recount some of the procedural background on which many of the requests in the motion are based. The underlying litigation between the parties here began, seven years ago, with Barnes' filing of an admiralty complaint against, inter alia, Appellees Henry and Sea Hawaii Rafting, LLC (“SHR”). Nearly two years later, Henry and SHR filed voluntary petitions for bankruptcy protection. Those three proceedings-one admiralty and two bankruptcy-have produced a vast amount of litigation and a large number of appeals. For example, in the bankruptcy proceeding of SHR, at the time the motion for reconsideration was filed, at least six appeals had been docketed with the district court from orders of the Bankruptcy Court. In the admiralty case, meanwhile, three appeals had been docketed with the Ninth Circuit Court of Appeals by a similar time. Those appeals have, in turn, on occasion, produced results that reverse, at least in some fashion, actions taken by the Bankruptcy Court and/or the admiralty court in their respective proceedings. It is in this context that the motion for reconsideration exists, as therein, many of the requests for reconsideration are premised upon Barnes' interpretation of orders entered in the foregoing appeals or his interpretation of orders entered following the remand of an appeal.

         In ruling on the motion for reconsideration, the Bankruptcy Court split its decision into two separate orders: one entered in the SHR bankruptcy proceeding and one entered in Henry's. In total, the motion for reconsideration sought reconsideration of 13 orders: 5 in the SHR bankruptcy proceeding and 8 in Henry's. In Henry's bankruptcy proceeding, the Bankruptcy Court vacated one order, indicated that it would vacate another, and otherwise denied the motion for reconsideration. Case No. 19-cv-211-DKW-RT, Dkt. No. 1-2 (“Henry Order”). In SHR's bankruptcy proceeding, the Bankruptcy Court vacated one order, declined to take further action with respect to two orders (because the orders had already been vacated), and otherwise denied the motion for reconsideration. Case No. 19-cv-214-DKW-RT, Dkt. No. 1-2 (“SHR Order”).

         On April 24, 2019, Barnes filed notices of appeal of the foregoing orders, one in the SHR bankruptcy proceeding and one in Henry's (collectively, “the Bankruptcy Appeals”).[4] Because the orders being appealed in the Bankruptcy Appeals involved common questions of law and fact, and because consolidation would produce savings in time and effort, while causing no inconvenience, delay, or expense, the Court consolidated the Bankruptcy Appeals. See Dkt. No. 5. In the Court's order of consolidation, Barnes was instructed to clearly identify the issue or issues being appealed, clearly explain how the Bankruptcy Court purportedly erred with respect to the issue, and provide legal support for the Bankruptcy Court's purported error.

         On August 16, 2019, Barnes filed his opening brief. Dkt. No. 10. Thereafter, Appellee SHR filed a response brief. Dkt. No. 11. Appellee Henry has not filed any brief in these Bankruptcy Appeals. Finally, while Barnes had until November 4, 2019 to file a reply brief, Dkt. No. 9, no such brief was (or has been) filed.

         II. Legal Standard

         This Court reviews a bankruptcy court's factual findings for clear error and its conclusions of law and determinations on mixed questions of law and fact de novo. In re Salazar, 430 F.3d 992, 994 (9th Cir. 2005); In re Hamada, 291 F.3d 645, 649 (9th Cir. 2002).

         III. Discussion

         In order to make as straightforward as possible this Court's review of the rulings at issue in these Bankruptcy Appeals, the Court will address each of the orders for which reconsideration was sought in Henry's bankruptcy proceeding, followed by the orders in the SHR bankruptcy proceeding. Initially, however, the Court first discusses an issue that, although not involving a specific order for which Barnes sought reconsideration, was addressed by both the Bankruptcy Court and Barnes in his opening brief.

         A. Recusal of the Bankruptcy Court

         In both orders at issue in these Bankruptcy Appeals, the Bankruptcy Court observed that Barnes had asserted the Bankruptcy Court was biased against Barnes or his counsel. Henry Order at 2; SHR Order at 2. The Bankruptcy Court stated that, “[a]t multiple points in these cases, I have carefully considered whether I should recuse myself, and I have determined (and I still conclude) that a reasonable person would not conclude that I could not decide these cases fairly.” Henry Order at 2 (footnote omitted); SHR Order at 2 (footnote omitted).

         In his opening brief, Barnes asserts that the Bankruptcy Court applied the wrong standard in considering recusal, arguing that an “appearance of impropriety” is sufficient to justify recusal. Dkt. No. 10 at 26. Barnes asserts that the Bankruptcy Court's actions and comments warrant recusal, including sanctioning Barnes' counsel, causing Barnes' counsel “embarrassment and stigmatization[, ]” and “reward[ing]” the Bankruptcy Court's former partner. Id. at 26-30. Barnes asserts that the Bankruptcy Court has “personal animosity” toward his counsel and his counsel's actions “provoked” the Bankruptcy Court. Id. at 31.

         Barnes' assertions provide no basis for recusal of the Bankruptcy Court. As for the standard the Bankruptcy Court applied, that standard came from the relevant statutory provision - Section 455 of Title 28. There was, thus, no error in applying the standard of the statute. As for Barnes' other arguments, they are principally based upon either legal rulings made by the Bankruptcy Court or his speculation that the Bankruptcy Court has animus toward his counsel or is biased in favor of opposing counsel. Neither is a basis for recusal. See Liteky v. United States, 510 U.S. 540, 555-556 (1994) (stating that “judicial rulings alone almost never constitute a valid basis for a bias or partiality motion” and “judicial remarks during the course of a trial that are critical or disapproving of, or even hostile to, counsel, the parties, or their cases, ordinarily do not support a bias or partiality challenge.”); Sivak v. Hardison, 658 F.3d 898, 926 (9th Cir. 2011) (“‘rumor, speculation, beliefs, conclusions, innuendo, suspicion, opinion, and similar non-factual matters' do not form the basis of a successful recusal motion.”) (quoting Clemens v. U.S. Dist. Court for the Cent. Dist. of Cal., 428 F.3d 1175, 1178 (9th Cir. 2005)) (alteration omitted). The same is true for the Bankruptcy Court purportedly saying that any “embarrassment is deserved.” See Dkt. No. 10 at 27. Taken in context, contrary to Barnes' assertion, this statement does not evidence a “personal desire” on the Bankruptcy Court's part for Barnes' counsel to be embarrassed, see id. at 30, but, rather, a statement that Barnes' counsel must live with the consequences (for better or worse) of his actions.

         B. Henry's Bankruptcy Proceeding

         The Bankruptcy Court explained that the motion for reconsideration concerned eight orders entered in Henry's bankruptcy proceeding. Henry Order at 1. This Court addresses those orders first.

         1. Order One

         The first order concerns a matter related to lifting the automatic stay. The Bankruptcy Court vacated this order, Henry Order at 3, and Barnes does not raise any issue with respect thereto in his opening brief. Therefore, this Court does not further address the first order.

         2. Order Two

         The second order confirmed Henry's Chapter 13 plan of reorganization. Henry Order at 3. The Bankruptcy Court declined to reconsider this order, explaining that there are three ways to challenge the confirmation of a plan, none of which Barnes showed applied here. Id. at 3-5.

         In his opening brief, Barnes' argument against the Bankruptcy Court's ruling is perhaps an exemplar of many of his deficient arguments in these Bankruptcy Appeals. Notably, Barnes sets forth the standard for proving that confirmation of a plan was obtained by fraud and then states that he was “denied the opportunity to develop the necessary facts under [that standard] because of the Bankruptcy Court's protective order and the stay which Barnes sought to lift.” Dkt. No. 10 at 2-3. Nothing else is stated with respect to the second order. Barnes does not explain how Henry's plan confirmation was procured by fraud nor does Barnes provide any explanation as to how the protective order actually prevented him from developing any facts in this regard. Instead, it appears that this Court is simply meant to assume the accuracy of Barnes' statement about his lack of opportunity to develop facts, assume that this has ...

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