In re Byrnes

1

In Re SYLVIA MARIE BYRNES, Debtor.

BARRY J. BYRNES, Appellant, v. SYLVIA MARIE BYRNES, Appellee.

Civ. No. 22-426 JCH/GBW

Bankruptcy Court No. 20-01070-t

United States District Court, D. New Mexico

July 6, 2023

PROPOSED FINDINGS AND RECOMMENDED DISPOSITION

GREGORY B. WORMUTH CHIEF UNITED STATES MAGISTRATE JUDGE

THIS MATTER comes before me on Appellant's Notice of Appeal and Statement of Election, doc. 1-1, and the Court's Order of Reference, doc. 2, referring this case to me pursuant to 28 U.S.C. § 636(b)(1)(B) “to conduct hearings, if warranted, including evidentiary hearings, and to perform any legal analysis required to recommend to the Court an ultimate disposition of the case.” Having reviewed the briefing (docs 13, 17, 18), the applicable law, and being otherwise fully advised, I RECOMMEND that the Court AFFIRM the final judgment of the United States Bankruptcy Court for the District of New Mexico's (“Bankruptcy Court”) for the reasons discussed below.

I. Background

The procedural history of this appeal spans more than four years and includes proceedings in the New Mexico state court system as well as in the United States Bankruptcy Court for the District of New Mexico, the United States Bankruptcy Appellate Panel of the Tenth Circuit, the United States District Court for the District of New Mexico, and the Tenth Circuit Court of Appeals. The Court does not endeavor to provide an exhaustive overview of the proceedings that have culminated in this appeal and instead summarizes the relevant history as follows.

A. Initiation of Adversary Proceeding No. 20-1070-t

Appellee Sylvia Marie Byrnes, Appellant Barry J. Byrnes's estranged wife, filed a petition for relief under Chapter 7 of the Bankruptcy Code on October 2020.^[1] See Bankruptcy Record on Appeal (“ROA”) vol. 1 at 351. In October and November 2020, Appellant initiated two adversary proceedings against Ms. Byrnes in the United States Bankruptcy Court for the District of New Mexico (“Bankruptcy Court”), one of which was a removed action initially filed by Mr. Byrnes in state court in 2019 based on domestic abuse allegations made against him by Ms. Byrnes. See ROA vol. 1 at 12-30. The presiding United States Bankruptcy Judge, David T. Thuma, consolidated Appellant's two proceedings into a single adversary proceeding in the Bankruptcy Court, which was assigned proceeding number 20-1070-t. Id. at 42. On February 10, 2021, Appellant filed an amended complaint in the consolidated proceeding which contained two counts: a first count bringing claims for defamation and intentional infliction of emotional distress against Ms. Byrnes (“Count I”), and a second count requesting a declaratory judgment holding that various of Ms. Byrnes's contract and domestic support obligations were nondischargeable (“Count II"). Id. at 47-57.

Appellant demanded a jury trial on all issues so triable and did not consent to his claims being heard and adjudicated by the Bankruptcy Court. See id. at 134, 163.

B. Motion for Withdrawal of Reference

On March 31, 2021, Appellee filed a Motion for Withdrawal of Reference requesting withdrawal of the proceedings from the Bankruptcy Court so he could try his Count I claims before a jury in federal district court. Id. at 146-152. The motion was referred to the United States District Court for the District of New Mexico by the Bankruptcy Court and assigned case number 1:21-cv-00295. See id. at 153. While Plaintiff's Motion for Withdrawal of Reference was pending before the District Court, the Bankruptcy Court dismissed Count II of Appellant's Amended Complaint, leaving Plaintiff's Count I claims for defamation and intentional infliction of emotional distress. See id. at 241. The Bankruptcy Court also found that it could try Plaintiff's Count I claims and that-subject to the District Court's decision on Appellant's pending Motion for Withdrawal of Reference-these claims were ready for trial. Id. at 715-16.

On April 15, 2022, presiding United States District Judge Kea W. Riggs entered an order adopting United States Magistrate Judge Jerry H. Ritter's Proposed Findings and Recommended Disposition (“PFRD”) recommending that the Court deny Appellant's Motion for Withdrawal of Reference without prejudice (“Order Denying Motion for Withdrawal of Reference”). See ROA vol. 3 at 322. Inter alia, the order overruled Appellant's objections to the PFRD and kept Appellant's case in Bankruptcy Court for pretrial proceedings. See id. at 322-23. On April 19, 2022, the Bankruptcy Court set a final pretrial conference on Appellant's claims. ROA vol. 1 at 757. Eight days later, Appellant appealed the Order Denying Motion for Withdrawal of Reference to the Tenth Circuit Court of Appeals, id. at 762.

C. May 13, 2022, Pretrial Conference and Final Judgment in Adv. No. 20-1070-t

The Bankruptcy Court moved forward with holding a pretrial conference for Appellant's Count II tort claims on May 13, 2022, after granting one continuance of the conference at Appellant's request. See ROA vol. 1 at 757, 760, 792. At the May 13 pretrial conference, Appellant stated that he would not participate in good faith because of his position that the Order Denying Motion for Withdrawal of Reference had dismissed his claims and his appeal of that dismissal was before the Tenth Circuit. See id. at 793; PDF File With Audio File Attachment at 01:42-02:20, In re Byrnes, No. 20-12086-t7, Adv. No. 20-1070-t7 (consolidated), 2022 WL 1721469 (Bankr. D.N.M. May 27, 2022), ECF No. 164 (hereinafter “Pretrial Conference Audio File”).^[2] The Bankruptcy Judge advised Appellant that he interpreted the Order Denying Motion for Withdrawal of Reference as a ruling on Appellant's Motion for Withdrawal of Reference, rather than a ruling on the merits of Mr. Byrnes's case, but Appellant resisted the Bankruptcy Court's attempts to correct his interpretation. ROA vol. 1 at 793; Pretrial Conference Audio File at 04:23-04:36 (after the Bankruptcy Court's comments about its interpretation of the Order Denying Motion for Withdrawal of Reference, Appellant responding: “Well, you're not the Tenth Circuit, you're just a Bankruptcy Judge. You're nobody.”). The Bankruptcy Court advised Appellant that if he was not prepared to participate in good faith, the court would assess sanctions-possibly to include dismissal of the proceeding as one of the sanctions under Rule 16-and again asked Appellant if he was prepared to participate in good faith. Pretrial Conference Audio File at 04:42-04:57. Appellant maintained that he would not participate. After giving both sides an opportunity to present argument about what would be an appropriate sanction, the Bankruptcy Court determined that it would not set a trial date, vacated the pretrial conference, and stated that a sanctions order would be forthcoming. See id. at 05:09-07:10.

On May 27, 2022, the Bankruptcy Court issued its Final Judgment Dismissing Adversary Proceeding with Prejudice and Awarding Attorney Fees and Costs, which dismissed Appellant's proceeding with prejudice under Rules 16(f) and 41(b) and assessed a $12,921.14 monetary judgment against Appellant and for Appellee based on her attorney's fees and costs associated with the adversary proceeding. ROA vol. 1 at 802. Appellant filed this appeal of the Bankruptcy Court's Final Judgment on June 6, 2022. Doc. 1. During the pendency of the instant appeal, on December 21, 2022, the Tenth Circuit dismissed Mr. Byrnes's appeal of the District Court's order denying his Motion for Withdrawal of Reference on the basis that the District Court's order was an interlocutory, non-appealable order. Byrnes v. Byrnes (In re Byrnes), No. 22-2049, 2022 WL 19693003, at *2 (10th Cir. Dec. 21, 2022).

II. Standard of Review

When reviewing the “final judgment[], order[], [or] decree” of a bankruptcy court under 28 U.S.C. § 158(a), “the district court . . . appl[ies] the same standards of review that govern appellate review in other cases.” Country World Casinos, Inc. v. Tommyknocker Casino Corp. (In re Country World Casinos, Inc.), 181 F.3d 1146, 1149 (10th Cir. 1999). Thus, questions of law are reviewed de novo and discretionary decisions for abuse of discretion. Busch v. Anderson (In re Busch), 294 B.R. 137, 140 (B.A.P. 10th Cir. 2003) (citing Pierce v. Underwood, 487 U.S. 552, 558 (1988)). The district court is bound by the bankruptcy court's findings of fact unless they are clearly erroneous. Id.

III. Analysis

The issues on appeal are: (1) whether the Bankruptcy Court was divested of jurisdiction over Mr. Byrnes's adversary proceeding at the time of the May 13, 2022, pretrial conference, (2) if the Bankruptcy Court was not divested of jurisdiction, whether it abused its discretion by imposing the dismissal sanction and assessing a $12,921.14 monetary sanction against Mr. Byrnes.

A. The Bankruptcy Court Was Not Divested of Jurisdiction on May 13, 2022

Appellant advances numerous arguments asserting that the Bankruptcy Court lacked “jurisdiction and administrative control” over Mr. Byrnes's adversary proceeding on May 13, 2022, the day of the final pretrial conference, or otherwise lacked authority to hold the pretrial conference. See doc. 13 at 6, 21. Consequently, argues Appellant, the Bankruptcy Court could not sanction Appellant for his failure to participate. See id. at 21.

The undersigned first addresses Appellant's contention that the Bankruptcy Court was divested of jurisdiction over his proceeding while the Tenth Circuit resolved “[whether] Plaintiff's motion to withdraw the United States District Court Reference should be granted and [whether Mr. Byrnes had] a seventh amendment right to a jury trial on the Defamation and IIED tort claims.”^[3] Id. at 19, 21. Appellant identifies the general rule of appellate...