Sanders v. Wells Fargo Dealer Servs. (In re Sanders)

In re QUEENA CHANDRA SANDERS, Debtor.

Queena Sanders, Plaintiff, v. Wells Fargo Dealer Services, Defendant.

Case No. 17-28379-L

Adv. Proc. No. 19-00195

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF TENNESSEE

May 15, 2020

The following is ORDERED:

Chapter 13

ORDER ON DEFENDANT'S MOTION TO DISMISS ADVERSARY PROCEEDING

BEFORE THE COURT is the "Motion by Wells Fargo Bank, N.A., dba Wells Fargo Dealer Services, to Dismiss Adversary Proceeding." [Dkt. No. 10]. The Motion seeks dismissal of the Complaint for Turnover with prejudice and reimbursement of fees and expenses incurred in responding to the Complaint and prosecuting the Motion. The Motion was filed on March 16, 2020. On March 19, 2020, the Court entered its Order and Notice of Defendant's Motion to Dismiss Adversary Proceeding giving the Debtor/Plaintiff until April 15, 2020, to file a response to the Motion. The Debtor/Plaintiff has filed no Response to the Motion to Dismiss and neither party has requested oral argument.

JURISDICTION AND AUTHORITY

Jurisdiction over a complaint arising under the Bankruptcy Code lies with the district court. 28 U.S.C. § 1334(b). Pursuant to authority granted to the district courts at 28 U.S.C. § 157(a), the district court for the Western District of Tennessee has referred to the bankruptcy judges of this district all cases arising under title 11 and all proceedings arising under title 11 or arising in or related to a case under title 11. In re Jurisdiction and Proceedings Under the Bankruptcy Amendments Act of 1984, Misc. No. 8-30 (W.D. Tenn. July 10, 1984). Matters concerning orders to turn over property of the estate and administration of the estate are core proceedings arising under the Bankruptcy Code. See 28 U.S.C. § 157(b)(2)(A) and (E). Accordingly, this court has authority to hear and determine this Adversary Proceeding and Motion to Dismiss subject to appellate review under section 158 of title 28. 28 U.S.C. § 157(b)(1).

ADVERSARY PROCEEDING SUMMARY

The Complaint for Turnover was filed September 4, 2019, against Wells Fargo Dealer Services ("Wells Fargo" or "Defendant"), holder of an allowed prepetition claim secured by the Debtor's 2012 Nissan Altima. Payment of the Defendant's $17,774.12 claim was provided for in the Debtor's plan which was confirmed December 21, 2017. [Bankr. Dkt. No. 26]. According to the Complaint, the Defendant's secured claim was paid in full with insurance proceeds after the Debtor/Plaintiff was involved in an accident and the 2012 Nissan Altima was deemed a total loss. The relief sought in the Complaint was "a judgment ordering the Defendant to turn over the funds received from the Bankruptcy Trustee after the secured debt on the 2012 Nissan Altima was paidin full by MetLife and Safe Guard Products (Gap Insurer)." Dkt. No. 1, p. 1. The Defendant filed its Answer on September 10, 2019. [Dkt. No. 4]. In its Answer, the Defendant admitted receipt of insurance proceeds from MetLife from the Debtor's March 2019 accident, but stated it was without sufficient information to admit or deny the payment from Safe Guard Products or whether the insurance payments had paid its claim in full. The Answer further stated that it was investigating the matter and reserved the right to supplement the pleading. The Defendant denied that any funds received after the payoff date should be returned to the Debtor because: (1) if its contract balance was not satisfied, turnover of the funds would prematurely strip its security interest in the proceeds in violation of the lien retention provisions of Code section 1325(a) and the confirmed plan; and (2) if the case was later dismissed, it would be deprived of its revesting rights under Code section 349.

On September 18, 2019, the Court issued its Preliminary Pretrial and Scheduling Order. [Dkt. No. 5]. The Order directs counsel for each party to, by November 1, 2019, make Federal Rule of Civil Procedure 26(a) disclosures, confer with each other, prepare and file a joint or individual pretrial statement that contains specified information about the proceeding, and attend a Scheduling Conference before the court on November 14, 2019. The final paragraph in the Preliminary Pretrial Order states, "Failure to comply with the requirements of this order may result in dismissal of the complaint, default, assessment of costs including attorneys' fees, or other penalties." Dkt. No. 5, p. 2.

Counsel for the Defendant filed an individual Pretrial Statement on November 1, 2019. The Pretrial Statement includes the following provision: "Counsel for the Defendant emailed the Plaintiff's Counsel multiples times seeking to confer regarding the adversary proceeding and pre-trial statement; however, Counsel did not any receive response from opposing counsel or hisportion of this statement." Dkt. No. 7, p. 2.¹ Plaintiff's counsel did not file a Pretrial Statement before the Scheduling Conference on November 14, 2019. Counsel for both parties attended the Scheduling Conference on November 14, 2019, at which time, according to the Motion to Dismiss, the Court ordered Plaintiff's counsel to file a Pretrial Statement and continued the Scheduling Conference to December 19, 2019. Further according to the Motion to Dismiss, counsel for Wells Fargo attended the Scheduling Conference on December 19, 2019. Counsel for the Plaintiff had still not filed his Pretrial Statement and thus, the Scheduling Conference was continued to January 9, 2020. However, counsel for Wells Fargo later reviewed the minutes of the hearing on Pacer and it seems counsel for the Plaintiff announced that this matter was "resolved" and stated that an order to this effect would be filed with the court. Wells Fargo had neither reached an agreement to resolve nor been able to reach counsel for the Plaintiff at all to discuss his pending Complaint. On January 8, 2020, Counsel for the Defendant sent a letter to the court and requested that the Scheduling Conference be reset on the court's next available 10:00 a.m. docket.² Dkt. No. 10.

Notwithstanding the letter of January 8, 2020, requesting that the Scheduling Conference be reset, Defendant's counsel attended the Scheduling Conference previously set on January 9, 2020. At that time, Plaintiff's counsel announced that he would "withdraw the Complaint."³ Dkt.No. 10. meanwhile, in response to Defendant's counsel's letter, the court entered an Amended Preliminary Pretrial Order on January 13, 2020, directing the filing of a Pretrial Statement, if not previously filed, by January 31, 2020, and setting a Scheduling Conference on February 6, 2020. The Amended Pretrial Order contains the same notice of potential penalties for failure to comply with the order as the original Preliminary Pretrial Order. Dkt. No. 8. Counsel for the Plaintiff did not confer with counsel for the Defendant or file a Pretrial Statement as ordered.

The disposition on the Chapter 13 docket call calendar for February 6, 2020, shows the matter "withdrawn." Since that time, according to the Motion to Dismiss, Defendant's counsel has "repeatedly requested Plaintiff's counsel to submit an order withdrawing the Complaint," but he has not done so. Neither has he filed a Pretrial Statement.

DISCUSSION

The relief sought by the Defendant is dismissal of the Complaint with prejudice and reimbursement of the fees and expenses it incurred in responding to the Complaint and prosecuting the Motion to Dismiss. The court has wide discretion under the Federal Rules of Bankruptcy Procedure to dismiss an adversary proceeding for failure to prosecute that proceeding or disobedience of a court order; statutory authority to take any action or make any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process; and, like other federal courts, inherent authority to manage its own affairs so as to achieve the orderly and expeditious disposition of cases by imposing sanctions. See, Fed. R. Bankr. P. 7041(b); 11 U.S.C. § 105(a); Rosellini v. U.S. Bankr. Court (In re Sanchez), 941 F.3d 625, 628 (2nd Cir. 2019), citing, Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S. Ct. 2123, 2132 (1991). See also, Law v. Siegel, 571 U.S. 415, 420-21; 134 S. Ct. 1188, 1194 (2014); Charbono v. Sumski(In re Charbono), 790 F.3d 80, 86-87 (1st Cir. 2015); Mapother & Mapother, P.S.C. v. Cooper (In re Downs), 103 F.3d. 472, 477 (6th Cir. 1996).

The Motion to Dismiss

Federal Rule of Civil Procedure 41, made applicable in bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 7041, governs the voluntary and involuntary dismissal of adversary proceedings. Rule 7041(b) provides:

(b) Involuntary Dismissal; Effect. If the plaintiff fails to prosecute or comply with these rules or a court order, a defendant may move to dismiss the action or any claim against it. Unless the dismissal order states otherwise, a dismissal under this subdivision (b) and any dismissal not under this rule - except one for lack of jurisdiction, improper venue, or failure to join a party under Rule 19 - operates as an adjudication on the merits.

"The Rule is a safeguard against delay in litigation and harassment of a defendant." In re Acosta, 497 B.R. 25, 33 (Bankr. D. P.R. 2013). Although a court may consider lesser sanctions, "[d]ismissal for lack of prosecution is appropriate without consideration of lesser sanctions where the Plaintiff has engaged in 'extreme conduct' such as knowing disobedience of a court order." Id. See also, Link v. Wabash R.R. Co., 370 U.S. 626, 630-32, 82 S. Ct. 1386, 8 L. Ed. 2d 734 (1962) (Federal courts, even sua sponte, may dismiss a case for any of the reasons prescribed in Federal Rules 41(b).). Dismissal under Rule 41(b) operates as an adjudication on the merits and principles of res judicata prevent any relitigation of the matter. Paul v. Marberry, 658 F.3d. 702, 704 (7th Cir. 2011).

The Sixth Circuit Court of Appeals is increasingly reluctant to uphold dismissal under Rule 41(b) "merely to...