Klein v. Peirsol (In re Peirsol)

In Re: JONATHON PEIRSOL, Debtor.

WAYNE KLEIN, Plaintiff, v. JONATHON PEIRSOL, Defendant.

No. 19-40782-JDP

Adv. Proceeding No. 20-8060-JDP

United States Bankruptcy Court, D. Idaho

October 13, 2021

Rhett Miller, PARSONS, SMITH, STONE, LOVELAND & SHIRLEY Burley, Idaho, Attorney for Plaintiff.

Matthew Bennett, FOLEY FREEMAN, Boise, Idaho, Attorney for Defendant.

MEMORANDUM OF DECISION

Jim D Pappas, U.S. Bankruptcy Judge

I. Introduction

There are two motions before the Court in this adversary proceeding, both filed by Wayne Klein ("Plaintiff"). The first is a motion for partial summary judgment, Dkt. No. 24; the other is a motion to extend time, Dkt. No. 34. The Court heard oral argument on the motions, after which Plaintiff and Jonathon Peirsol ("Defendant") submitted additional briefing. Dkt. Nos. 38-42. During the hearing, the Court agreed to take judicial notice of the adversary docket and evidentiary exhibits in Klein v. Peirsol (In re J & J Chemical), 18-8024-JDP ("Chemical Adv."; case docket referred to as "Chemical Adv. Dkt.").^[1] After considering the record, the submissions and the arguments of the parties, as well as applicable law, this decision disposes of the motions. Fed.R.Bankr.P. 7052; 9014.^[2]

II. Motion to Extend Time

As is its usual practice, after commencement of an adversary proceeding, the Court conducts a pretrial conference with counsel to set case management goals and deadlines to govern the action. In this proceeding, a pretrial conference was held on December 15, 2020, in which the parties participated. Dkt. Nos. 6, 9, 10. Following the conference, the Court issued its Pretrial Order in which it instructed, inter alia, that, "Any and all pretrial motions, including any motions for continuances, must be filed and a hearing held before the Court in accordance with the Bankruptcy Rules on or before May 14, 2021. Continuances will not be granted unless extraordinary cause is shown." Dkt. No. 10 (emphasis added).

Plaintiff filed the current motion for partial summary judgment on May 14, 2021. Dkt. No. 24. As such, the motion itself was timely under the terms of the Pretrial Order. However, Plaintiff obviously could not comply with the second requirement for motions under the Pretrial Order: that it be heard by this Court by that same date. When brought to his attention via Defendant's brief opposing the summary judgment motion, on July 1, 2021, Plaintiff filed the motion to extend the time in which to hold a motion hearing. Dkt. No. 34.

Pursuant to Rule 9006(b)(1), Plaintiff must demonstrate excusable neglect for the Court to grant an extension sought after the deadline. Whether to grant relief is a matter for the Court's discretion, and is an equitable question, dependent upon the circumstances presented. Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 388, 113 S.Ct. 1489, 1495, 123 L.Ed.2d 74 (1993); Rule 9006(b)(1). In evaluating a claim of excusable neglect, the Court examines the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith. Id. at 395.

The Court determines that the standard for demonstrating excusable neglect has been satisfied here. First, the Court can perceive no appreciable prejudice to the Defendant by granting a brief extension to Plaintiff to conduct a hearing on the summary judgment motion. Plaintiff correctly points out that, one way or the other, these issues must be heard and decided. Certainly, if the record supports one, a summary judgment on some or all of the issues or claims is more expeditious and less expensive than resolving them with a trial. And even if the motion is denied, in actions like this one, its consideration will inform the Court about some of the issues presented in this contest and, potentially, allow the parties and Court to streamline the trial.

In addition, the length of delay occasioned by an extension is minimal. The Court has the motion before it, and the delay is a matter of a few months. The impact on judicial proceedings is equally minimal, as a trial date had not yet been set, so consideration of this motion will not delay the trial.

To explain his delay in making the motion for summary judgment, Plaintiff contends he was waiting for Defendant to certify his deposition testimony. But Plaintiff's argument is somewhat disingenuous. It is clear from Plaintiff's affidavit that the depositions of both Plaintiff and Defendant were not scheduled to occur until April 15 and 16. Aff. of Rhett M. Miller, Dkt. No. 35. With a deadline of May 15-the date by which a pretrial motion was to be both filed and argued-Plaintiff should have appreciated that an extension of the deadline would be required given the notice and briefing requirements associated with a summary judgment motion. The Court intends that parties observe the case-processing deadlines it establishes in a pretrial order. A pretrial motions deadline is included in such orders not only for the benefit of parties and their counsel, but to ensure the adversary proceeding will advance expeditiously and efficiently toward conclusion. If a pretrial motion is filed or scheduled to be heard too close to the trial date, the Court may lack adequate time to render a proper decision and allow counsel a meaningful opportunity to prepare for trial in light of that decision, which may necessitate a continued trial date. Moreover, if the motion proves dispositive on issues to be tried, then unnecessary trial preparation may have already taken place, which is wasteful in terms of both time and money. Simply put, court-imposed deadlines serve important roles in litigation and ought, in most instances, be observed.

Even so, the Court understands that other scheduling demands, and the fact that deposition transcripts take some time to prepare, may constitute credible reasons for delay. While permission to exceed the deadline is preferrable over forgiveness for failure to comply with it, and Plaintiff ought to have sought an extension of the pretrial motion deadline in advance of its expiration, nevertheless, the Court views the circumstances in this case as evidence of poor planning rather than bad faith. Since the Court finds little prejudice has been visited upon Defendant by any delay, Plaintiff's motion to extend time will be granted, and the Court will consider Plaintiffs' tardy summary judgment motion.

III. Motion for Partial Summary Judgment

A. Summary Judgment Standard

Summary judgment may be granted when no genuine and disputed issues of material fact exist, and, when viewing the evidence most favorably to the non-moving party, the movant is entitled to judgment as a matter of law. Civil Rule 56, incorporated by Rule 7056; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 992 (9th Cir. 2001). In resolving a motion for summary judgment, this Court does not weigh the evidence; rather it determines only whether a material factual dispute remains for trial. Covey v. Hollydale Mobilehome Estates, 116 F.3d 830, 834 (9th Cir. 1997). An issue is "genuine" if there is sufficient evidence for a reasonable finder of fact to find in favor of the non-moving party, and a fact is "material" if it might affect the outcome of the case. Far Out Prods., 247 F.3d at 992 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

The moving party bears the initial burden of showing there is no genuine issue of material fact. Martin v. Mowery (In re Mowery), 591 B.R. 1, 5 (Bankr. D. Idaho 2018) (citing Esposito v. Noyes (In re Lake Country Invs.), 255 B.R. 588, 597 (Bankr. D. Idaho 2000) (citing Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir. 1998))). If the non-moving party bears the ultimate burden of proof on an element at trial, however, the burden remains with that party to make a showing sufficient to establish the existence of that element in order to survive a motion for summary judgment. Id. B. Undisputed Facts

The following undisputed facts are found in Plaintiff's Statement of Undisputed Facts, Dkt. No. 27; the affidavit of R. Wayne Klein filed at Dkt. No. 25 ("Klein Aff."); the deposition of Jonathan Peirsol, Ex. B to the Klein Aff. ("Peirsol Depo."); as well as the adversary docket and evidentiary exhibits in the Chemical Adv. case.

J & J Chemical, Inc. ("Chemical") was founded in 1998, and from approximately 2002 until Chemical filed a bankruptcy petition in January 2017, Defendant was the sole owner and shareholder of the company. Peirsol Depo. at pp. 16, 17; Amended Answer ¶ 6. On January 19, 2017, acting through Defendant, Chemical filed a chapter 11 bankruptcy petition. In re J & J Chemical, 17-40037-JDP at Dkt. No. 1; Klein Aff. at ¶ 2. On March 1, 2017, Defendant pled guilty to a crime and was sentenced to a term of imprisonment. This prompted the United States Trustee to seek appointment of a chapter 11 trustee to oversee administration of Chemical's bankruptcy case. Id. at Dkt. No. 39. The Court granted the motion and Mr. Klein^[3] was appointed as the plan administrator in Chemical's bankruptcy case. Id. at Dkt. Nos. 84, 89, 90; Klein Aff. at ¶ 3.

As part of his duties, Plaintiff commenced several adversary proceedings in Chemical's bankruptcy case. One such proceeding was the Chemical Adv., filed on June 6, 2018. Chemical Adv. Dkt. No. 1; Klein Aff. at ¶ 4. The complaint in that action alleged that Defendant was the President of Chemical prior to the bankruptcy filing. Chemical Adv. Dkt. No. 1 at ¶ 2. The complaint further alleged that, in addition...