Renfrow v. Grogan (In re Renfrow)

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In re Miranda Kristin Renfrow, Debtor.

MIRANDA KRISTIN RENFROW, Plaintiff-Appellee, v. COURTNEY GROGAN, Successor Trustee of the Joe C. Cole Revocable Trust, Under Trust Agreement dated March 28, 2002, and ATKINSON, HASKINS, NELLIS, BRITTINGHAM, GLASS & FIASCO, an Oklahoma Professional Corporation, Defendants-Appellants.

Bankr. No. 17-10385-R

No. 22-cv-00381-SH

Appeal Adv. No. 17-01027-M

United States District Court, N.D. Oklahoma

December 14, 2022

OPINION AND ORDER

SUSAN E. HUNTSMAN, MAGISTRATE JUDGE

Before the undersigned is Defendants-Appellants' unopposed appeal of the bankruptcy court's order denying the parties' Joint Motion for Indicative Ruling Under Bankruptcy Rule 8008 & to Vacate and Set Aside Judgments (ECF No. 3-1). Defendants-Appellants have elected to have this matter heard by a district court. (ECF No. 3.) See 28 U.S.C. § 158(c)(1); Fed.R.Bankr.P. 8005(a). In accordance with 28 U.S.C. § 636(c), the parties have also consented to proceed before a United States Magistrate Judge. (ECF No. 13.) For reasons explained below, the Court REVERSES the bankruptcy court's denial of the motion for indicative relief.

BACKGROUND

This matter arises from entwined state and federal litigation that has been pending for over six years with no foreseeable chance of timely resolution-absent settlement. In 2016, Grogan^[1] filed a lawsuit against Renfrow^[2] and her company, Envision,^[3] in Tulsa County (the “State Case”).^[4] (No. 21-cv-228, ECF No. 13-1 at 53-56.^[5]) Atkinson Haskins^[6]represented Grogan before the state court. (Id.) Renfrow is an ophthalmologist and the State Case initially arose out of debts Renfrow and Envision allegedly owed Grogan from the purchase of Dr. Joe C. Cole's ophthalmology practice.

While the State Case was pending, on March 10, 2017, Renfrow filed a petition for relief under Chapter 7 of the Bankruptcy Code. (No. 21-cv-228, ECF No. 13-4 at 983.) All

Renfrow's prepetition debts-and all claims against Renfrow related to prepetition actions-were subsequently discharged.^[7] (Id. at 985; see also No. 21-cv-228, ECF No. 13 1 at 73.) Envision did not seek bankruptcy relief.

Back in the State Case, Grogan amended her petition to add a claim against Renfrow under the Uniform Fraudulent Transfer Act (“UFTA”),^[8] alleging Renfrow fraudulently transferred assets away from her creditors after she filed bankruptcy. (No 21-cv-228, ECF No. 13-1 at 86-90.) While the propriety of what happened in the State Case is the subject of the related appeal, the State Case ended with a jury verdict for Grogan and against Renfrow in the amount of $89,500 (ostensibly for post-petition UFTA violations) and against Envision in the amount of $111,293.75 (for breach of contract). (No 21-cv-228, ECF No. 13-1 at 350-52.) The district judge entered a judgment on January 3, 2018, reflecting the amounts awarded by the jury, as well as an additional award against Envision (the “State Judgment”). (No. 21-cv-228 ECF No. 13-2 at 168-69.) Renfrow has appealed that judgment to the Oklahoma Supreme Court, which has stayed the proceedings pending resolution of matters in this Court. See Order, Grogan v Renfrow, No. 117,301 (Okla. Dec. 6, 2022).^[9]

Because Renfrow believed Defendants-Appellants' actions in the State Case had violated her rights under the discharge, she brought the underlying adversary bankruptcy case, which was tried before then-Chief Judge Dana Rasure roughly a year after judgment was entered in the State Case. (ECF No. 7-1 at 29.^[10]) At the conclusion of the adversary trial, Judge Rasure issued a Memorandum Opinion, setting forth her findings of fact and conclusions of law. (Id. at 435-513.) Judge Rasure (1) concluded the State Judgment was void under 11 U.S.C. § 524(a)(1); (2) ordered Defendants-Appellants to obtain an order vacating the State Judgment and to the dismiss the State Case; and (3) awarded Renfrow $50,000 in damages for emotional distress, $17,306 in damages for her state-court attorney fees, $37,561 in damages for her adversary-proceeding attorney fees, and $100,000 in punitive damages. (Id. at 513.) Judge Rasure then entered the Judgment, which reflected her declaratory judgment, mandatory injunction, and award of damages in favor of Renfrow and against Defendants-Appellants. (Id. at 514-15.) Defendants-Appellants appealed to this Court, which subsequently remanded for reconsideration in light of the Supreme Court decision Taggart v. Lorenzen, 139 S.Ct. 1795 (2019).^[11] (Case No. 19-cv-248-TCK-FHM, ECF No. 40.) In her Order on Remand-relying heavily on the original Memorandum Opinion-Judge Rasure affirmed her findings and upheld the original Judgment. (ECF No. 7-1 at 519-38.) The Memorandum Opinion, Judgment, and Order on Remand are collectively referred to herein as the “Bankruptcy Judgment.”

Defendants-Appellants again appealed. (See Case No. 21-cv-228.) In that appeal, the undersigned found Defendants-Appellants were entitled to a stay of the monetary judgment upon the filing of a supersedeas bond. (No. 21-cv-228, ECF No. 33.) The undersigned further found Defendants-Appellants had made a strong showing of a likelihood of success on the merits, as well as other showings, and were entitled to a stay of the injunctive portion of the Bankruptcy Judgment. (No. 21-cv-228, ECF No. 35.) Renfrow's objection to that order, as well as the remainder of the merits appeal, remains pending.

As a result, Grogan (on behalf of the trust) has a judgment against Renfrow for $89,500 that the trust cannot currently enforce, and Renfrow has a judgment against Grogan and Atkinson Haskins for $204,867 and injunctive relief that she cannot currently enforce. All parties actively dispute the validity of the judgments against them and have pending appeals to determine said validity. Both sets of judgment debtors also assert that the very existence of the judgments against them are doing them a continued harm.

The Settlement

Without court prompting, and while the above appeals were pending, the parties attended a mediation with a U.S. Chapter 7 Trustee and reached a conditional resolution of all litigation between them. (ECF No. 12 at 9.) This settlement is contingent upon vacatur of both the Bankruptcy Judgment and the State Judgment^[12] and would also provide Renfrow with additional “financial compensation.” (Id.; ECF No. 15 at 11.)

The Parties' Joint Motion for Indicative Relief

The parties then attempted to effectuate their settlement. Because Defendants-Appellants' appeal of the Bankruptcy Judgment is still pending, the parties could not simply ask the bankruptcy court to vacate it.^[13] Instead, the parties brought a joint motion for indicative relief under Fed.R.Bankr.P. 8008(a), which states, “[i]f a party files a timely motion in the bankruptcy court for relief that the court lacks authority to grant because of an appeal that . . . is pending,” the court may either defer consideration of the motion, deny the motion, or “state that the court would grant the motion if the court where the appeal is pending remands for that purpose, or state that the motion raises a substantial issue.” Id. If the bankruptcy court makes the latter finding, the district court may then remand for further proceedings. Fed.R.Bankr.P. 8008(c).

In making their indicative motion, the parties asked the bankruptcy court to vacate the Bankruptcy Judgment pursuant to Fed.R.Civ.P. 60(b)(6), which allows that, “[o]n motion and just terms, the court may relieve a party . . . from a final judgment, order, or proceeding for . . . any . . . reason that justifies relief.” Id.; see also Fed.R.Bankr.P. 9024 (applying Rule 60 in most bankruptcy cases).

The parties agreed the relief they sought can be appropriate only in “exceptional circumstances.” (ECF No. 7-1 at 542 (quoting U.S. Bancorp Mortg. Co. v. Bonner Mall P'ship, 513 U.S. 18, 29 (1994), and Amoco Oil Co. v. U.S. E.P.A., 231 F.3d 694, 697 (10th Cir. 2000).) They argued, however, that such “exceptional circumstances” were present in this case-namely that (1) the Bankruptcy Judgment had “limited precedential value given the factual context of the case,” the “incorrect legal standard” applied in the Memorandum Opinion, and Defendants-Appellants' contention that the Order on Remand misapplied Taggart and resulted from bias (ECF No. 7-1 at 542-43); (2) settlement “would serve the interests of both parties and judicial efficiency” by saving costs and removing the appeal from this Court's docket and the risk the bankruptcy court might have to retry the case on remand (id. at 543-44); (3) the “benefits of vacatur outweigh[ed] any harm the judicial system might suffer from losing legal precedent,” as the opinions in the Bankruptcy Judgment were of little precedential value while it and the State Judgment imposed “monumental” harm to the parties by impugning their personal and professional reputations (id. at 544); and (4) “settlement is in the best interests of both parties,” as it would allow them to “end the protracted litigation” between them and “clear their names and reputations and stop expending significant funds in attorney fees and costs” (id. at 545).

The Hearing Before Judge Michael

The hearing before the bankruptcy court lasted 12 minutes and consisted of attorney argument and Judge's Michael's oral ruling. (Id. at 551-62.) At the hearing, the parties reiterated their position that vacatur was proper because the judgments impugned their reputations (with Renfrow's counsel arguing she had to work temporary jobs due to the State Judgment (id. at 553)), the case was “taking forever to get through the district court” (id.), Defendants' belief that the Bankruptcy Judgment was the result of bias (id. at 554), vacatur would serve interests of judicial efficiency (id. at...