572 B.R. 638
Bankr. S.D. Tex.2017Background
- Debtors Marcus and Wendy Thompson filed Chapter 7 on Dec. 9, 2016; creditor Chris Louviere held a prepetition state-court judgment for $88,743 against Marcus Thompson.
- Clerk’s notice set the § 341 meeting for Jan. 19, 2017 and the 60-day bar date for objecting to discharge or nondischargeability as March 20, 2017.
- Louviere filed a motion to lift the automatic stay on Jan. 13, 2017 describing fraud-based grounds for nondischargeability; the motion was heard and later dismissed for procedural errors (Feb. 14, 2017), with a court footnote warning Louviere to file an adversary by March 20, 2017.
- On March 20, 2017 Louviere’s counsel filed in the main bankruptcy case (not as an adversary) a detailed "Main Case Complaint" alleging § 523(a) and § 727(a) claims and served it on debtors’ counsel; the court sua sponte dismissed that filing for not commencing an adversary proceeding.
- Louviere then filed a proper adversary complaint and paid the fee on May 11, 2017 and moved for leave to treat that filing as timely (i.e., to relate back); debtors moved to dismiss as untimely. The court heard testimony from the creditor’s legal assistant about the procedural errors.
Issues
| Issue | Plaintiff's Argument (Louviere) | Defendant's Argument (Debtors) | Held |
|---|---|---|---|
| Whether Rule 9006(b) excusable-neglect can cure late adversary filing under Rules 4007(c)/4004(a) | Counsel’s procedural mistakes were excusable neglect and should permit late filing | Rule 9006(b)(3) excepts Rules 4007(c)/4004(a) from excusable-neglect relief; deadlines are strict | Denied: excusable neglect unavailable for Rule 4007(c)/4004(a) deadlines |
| Whether an "actual notice / relation-back" exception permits a late adversary to relate back to earlier filings | Jan. 13 motion to lift stay and March 20 Main Case Complaint gave debtors actual notice; May 11 adversary should relate back to those filings | Strict application of Rule 4007(c)/4004(a) bars late adversary despite prior filings | Granted (conditionally): court applied actual-notice/relation-back and found May 11 adversary relates back to Jan. 13 or March 20 filings |
| Whether failure to obtain and serve summons within 90 days requires dismissal under FRCP 4(m)/Rule 7004 | Service technical errors should be excused because debtors had actual notice and dismissal would bar refiling | Lack of timely service justifies dismissal | Court exercised discretion: denied dismissal but ordered summons/service by July 14, 2017 or adversary will be dismissed (effectively with prejudice) |
| Whether dismissal with prejudice is appropriate now | Counsel’s errors caused the delay; policy favors merits and no prejudice to debtors now | Debtors have right to finality and strict deadlines; court warned earlier | Court declined immediate dismissal with prejudice, conditioned leave on prompt service to protect debtor’s fresh-start policy |
Key Cases Cited
- Pioneer Inv. Serv. Co. v. Brunswick Assoc. Ltd. P’ship, 507 U.S. 380 (Sup. Ct.) (excusable neglect standard and client responsibility for counsel’s acts)
- Neeley v. Murchison, 815 F.2d 345 (5th Cir. 1987) (Rule 9006(b)(3) excludes enlargement of time under Rule 4007(c))
- Covert v. McGuirt (Matter of McGuirt), 879 F.2d 182 (5th Cir. 1989) (discussing but not foreclosing a possible notice-based relation-back exception to Rule 4007(c))
- Millan v. USAA Gen. Indem. Co., 546 F.3d 321 (5th Cir. 2008) (standards for dismissal with prejudice for delay and prejudice analysis)
- Thompson v. Brown, 91 F.3d 20 (5th Cir. 1996) (Rule 4(m) good-cause standard for service-of-process extensions)
- Ichinose v. United States (In re Ichinose), 946 F.2d 1169 (5th Cir. 1991) (Chapter 7 discharge policy emphasizing the debtor’s fresh start)