R MICHAEL BOLEN, United States Trustee, Region 5, Appellee, versus CARL A DENGEL, Appellant. Consolidated With 02-30929 CARL A DENGEL, Appellant, versus BANK ONE, NATIONAL ASSOCIATION, successor by name change to Bank One, Louisiana, National Association & successor by merger & name change to First National Bank of Commerce Appellee.
No. 02-30574
United States Court of Appeals Fifth Circuit
August 11, 2003
Appeals from the United States District Court for the Eastern District of Louisiana
Before JOLLY, HIGGINBOTHAM, and STEWART, Circuit Judges.
In this consolidated civil action, Carl A. Dengel (“Dengel“) filed suit against the United States Trustee (“UST“) and Bank One for withholding his standing trustee compensation and expenses. In particular, this dispute stems from the UST‘s interpretation of
FACTUAL AND PROCEDURAL BACKGROUND
In 1987 Dengel was appointed to be a Chapter 12 standing trustee
In addition, in 1989, the Executive Office of the U.S. Trustee (“EOUST“) created a
In November 1994, Dengel initiated litigation against the UST contesting the Handbook‘s “expense first, funds available” method of calculation. In that case, Dengel interpled approximately $5,787 representing a 10% fee from certain pending Chapter 12 cases. These funds were deposited in the court‘s registry. The district court dismissed that case for lack of subject matter jurisdiction consistent with
During Dengel‘s tenure, the Office of Inspector General (“OIG“) periodically audited Dengel‘s annual reports. Both the 1992 and 1994 reports found deficiencies in Dengel‘s recоrd keeping. In the 1995 audit report, the OIG found that Dengel had not corrected the prior deficiencies and that he was incorrectly carrying over unpaid compensation as well as expenses. Following Dengel‘s resignation, the OIG ordered a routine close-out audit. His records, however, were not auditable and had to be reconstructed by his successor trustee. This 1997 Audit was focused solely on the incorrect payment of fees. Following the compensation policies in the Handbook, the OIG concluded that Dengel received a net overpayment, and therefore, the funds escrowed in the court‘s registry and the TF12 account should bе turned over to the UST. Moreover, the OIG concluded that Dengel actually owed the UST an additional $2,843.
In 1998, the UST initiated a declaratory judgment action against Dengel in the bankruptcy court. The suit was then lodged in the district court after Dengel responded with compulsory counterclaims and third party claims against Bank One, the former UST, Region 5 and the Assistant UST, Region 5. In April 2000, The district court referred the action to the bankruptcy court. In July 2000, Bank One filed a Rule 12(b)(6) motion to dismiss. Bank One also moved to interplead seeking to deposit the funds in the trustee account in the registry of the court. In September 2001, the bankruptcy court issued its report and recommendations in which it gavе the EOUST Handbook deference in interpreting
DISCUSSION
I. Statutory Interpretation
Dengel аrgues that the district court erred when it granted judicial deference to the UST‘s interpretation of
A. Standard of Review
We review the district court‘s interpretation of
B. The Executive Office of the U.S. Trustee has authority under the statute.
Dengel argues that the EOUST Handbook is not entitled to deference for interpreting
In addition to the language of the staute, Christensen v. Harris County, 120 S.Ct. 1655 (2000) supports the Attorney General‘s authority to institute such a policy. In Christensen, the Supreme Court determined that the Fair Labor Standards Act (FLSA) limits the State “from compelling employees to utilize accrued compensatory time.” 120 S. Ct. at 1660. In that case, Harris County, Texas gave employeеs statutorily required accrued compensatory time as payment for overtime above the statutory maximum of 40 hours per week. The County found that employees were
Similarly, Dengel expresses the misguided theory that under expressio unius est exclusio alterius, the statute limited the Attorney General‘s authority to fixing a percentage fee and a maximum annual compensation to the exclusion of any other activity. We conclude, however, that “the thing to be done” in the present statute is the 5% maximum allocation of bankruptcy payments to compensation. The statute guarantees a compensation ceiling of 5% but does not prohibit the Attorney General from instituting a method for calculating compensation and expenses, nor does the statute guarantee that trustees will receive the full 5% for compensation. Rather the Attorney General is prohibited from setting an annual maximum compensation exceeding 5% of bankruptcy payments. The Attorney General‘s “expense first” policy does not change the maximum percentage allowable, it simply sets a calculation method. Thus, the agency‘s actions do not conflict with the language of the statute.
C. The statute is ambiguous.
To determine whether a statute is ambiguous, we must use the traditional canons of statutory interpretation. This includes looking to the language of the statute itself, the larger statutory context, and the legislative history. See Walton, 122 S. Ct. at 1269.
In this case, the statute‘s silence on the calculation of compensation and expensеs indicates its ambiguity. The district court relied on the Tenth and Eighth Circuit‘s findings in In re BDT Farms, Inc., 21 F.3d 1019, 1023 (10th Cir. 1994) and Pelofsky v. Wallace, 102 F.3d 350, 354 (8th Cir. 1996), that
Although the relevant portions of
The Tenth Circuit, in In re BDT Farms, addressed the same issue of the method for calculating the percentage fee required under
Although the instant case presents a slightly different issue, determining how the Attorney General, through the EOUST, is to calculate the standing trustee‘s compensation and expenses is fundamentally similar to thе issue determined by the Eighth and Tenth Circuit. Notwithstanding the nuanced difference of the issues, under the same analysis, we conclude that
After finding that the statute is ambiguous, the second step in the Chevron analysis is to determine “whether the agency‘s answer is based on a permissible construction of the statute.” 104 S. Ct. at 2782. We find that it is. In this case, however, the agency‘s interpretation comes from a published Handbook rather than regulations. The Supreme Court has ruled that “[i]nterpretations such as those in opinion letters – like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law–do not warrant Chеvron-style deference.” Christensen, 120 S. Ct. at 1662. As the EOUST Handbook qualifies as a policy statement, agency manual, or enforcement guideline, this Court cannot give it Chevron-style deference. Nonetheless, this Court may find the Handbook persuasive. Id. at 1663 (“Instead, interpretations contained in formats such as opinion letters are ‘entitled to respect’ under our decision in Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct. 161, 89 L.Ed. 124 (1944), but only to the extent that those interpretations have the ‘power to persuade.’“).
The purpose of the “expense first” policy is to encourage standing trustees to reduce expenses. This purpose comports with the limited legislative history available. Although there is no legislative histоry precisely on the method of calculation of trustee compensation, we find the House Judiciary Committee‘s underlying policy for structuring the fee system outlined in
The Attorney General will be able to utilize the private sector to provide personalized efficient service and to keep subordinate employees of the standing trustee off the public payroll. The fee system is designed to encourage the standing trustees to keep costs low at the risk of reduced compensation.
H.R. REP. NO. 95-595, at 107 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6068 and Collier on Bankruptcy App. Pt. 4-1176. Although this legislative history references the 1978 Act which was a predecessor to the 1986 Act, it sheds some clarity on the purpose of the fee structure. The Handbook‘s policy is only persuasive and is not entitled to deference, nevertheless, our conclusion that the Attorney General is not prohibited from instituting the “expense first” policy comports with the plain language of the statute.
As the Supreme Court noted in Christensen, “no relevant statutory provision expressly or implicitly prohibits Harris County from pursuing its policy of forcing employees to utilize their compensatory time.” 120 S. Ct. at 1663. Similarly, section 586(e) does not appear to either mandate or preclude the “expense first” policy. Notwithstanding our finding that the statute is ambiguous, the Supreme Court‘s analysis in Christensen also provides strong support for finding that the statute unambiguously does not prohibit the Attorney General, through EOUST, to institute the “expense first” policy, and therefore, the EOUST has not violated
Thus, although the Handbook is not entitled to full Chevron deference, the expense first policy is persuasive, particularly in light of the limited available legislative history and the entire context of the statute. We conclude that the UST‘s policy is not prohibited by
II. Calculation of the Standing Trustee Fees
Dengel argues that the UST‘s calculation of his compensation fees are arbitrary and capricious under the Administrative Procedure Act,
Because the “expense first” рolicy is not prohibited by the statute, we find that the UST had authority to disallow Dengel from drawing any compensation for the years in dispute. The bankruptcy court explained that the zero compensation orders were correctly calculated because the Handbook specifically disallows any carryover of unpaid compensation from year to year. Because Dengel carried-over his unpaid compensation each year in violation of the Handbook policies, the bankruptcy court accepted the exclusion of carryovers in the UST‘s calculation and the district court affirmed.
The “expense first” policy reasonably comports with the plain language of the statute as does the calculation which effectively disallows any compensation for services rendered by Dengel. The statute sets a ceiling for compensation allocated from fees but does not set a floor. The UST contends that its carryover limitation does not deprive the standing trustee from receiving compensation. Rather, the compensation order created by the UST is based on the standing trustee‘s own budget. The UST contends that it is only because Dengel purposely violated the Handbook‘s “expense first” and “no carryover of compensation” policies, that the OIG‘s audit resulted in a zero compensation finding for the years in dispute. We agree. The statute does not guarantee that the standing trustee will receive a full 5% of bankruptcy payments as compensation.
III. Bank One‘s 12(b)(6) Motion to Dismiss
Before determining whether the district court erred in granting Bank One‘s 12(b)(6) motion to dismiss, we must determine what was before the district court and the scope of its ruling.
A. Scope of the district court‘s order
In his third party counterclaim against Bank One, Dengel complained that Bank One: “1) improperly disclosed privileged information, 2) froze the account for four years, 3) paid minimum interest, 4) did not respond or seek a resolution of the problem, 5) reneged on a loan commitment, and 6) damaged Carl Dengel‘s creditworthiness.” In sum, his counterclaim amounts to seeking damages for Bank One‘s failure to turn over the funds in the TF12 account to Dengel and for breaching the loan commitment. He attached as exhibits various letters between the parties, including an unsigned loan commitment letter. The letter states that the commitment shall be null and void if Dengel‘s and his wife‘s signatures representing acceptance are not received by August 25, 1995 and if the commitment is not funded by September 23, 1995. The attachments do not include Dengel‘s acceptance of the loan commitment nor do they include confirmation that the loan has been funded.
Bank One filed a 12(b)(6) motion to dismiss Dengel‘s “lender liability claim ... [f]or the reasons set forth in the attached memorandum.” In the attached memorandum supporting the 12(b)(6) motion, Bank One requested that:
If the Court accepts the recommendation of the bankruptcy court, then Bank One‘s interpleader claim will be moot, and Dengel‘s claim against Bank One for the turnover of the funds should be dismissed with prejudice.
Also in the attached memorandum, Bank One requested that: “[B]ased on Dengel‘s third party complaint and the attachments thereto, Dengel‘s lender liability claim against Bank One should be dismissed for
Regarding his claim for damages resulting in Bank One‘s refusal to turn over the funds in the TF12 account, the district court only granted dismissal on Dengel‘s lender liability сlaim and not on his other claims. On its face, Bank One only moved to dismiss Dengel‘s lender liability claim. Viewing the motion in the light most favorable to the nonmoving party, Bank One did not request dismissal of all third-party claims against it.3 Fairly read, we cannot construe the language in Bank One‘s supporting memo as part of its 12(b)(6) motion to dismiss Dengel‘s lender liability claim. Instead, Bank One merely made a vague assertion that its interpleading motion should be moot and that Dengel‘s other third-party claims should be dismissed with prejudice. As Bank One moved to dismiss only Dengel‘s lender liability claim, we conclude that the district court‘s order relates to only the lender liability claim. The district court never rendered finаl judgment in Bank One‘s motion to interplead the funds into the court‘s registry.
B. Standard of Review
We review the district court‘s dismissal of a claim under the Federal Rules of Civil Procedure 12(b)(6) de novo. Vulcan Materials Co. v. Tehuacana, 238 F.3d 382, 387 (5th Cir. 2001). “The complaint must be liberally construed in favor of the plaintiff, and all the facts pleaded in the complaint must be taken as true” to determine whether the plaintiff has any valid claim for relief. Brown v. Nationsbank Corp., 188 F.3d 579, 586 (5th Cir. 1999). The dismissal will be upheld only if “it appears beyond doubt that the plaintiff can prove no set of facts that would entitle him to relief.” U.S. ex rel Thompson v. Columbia HCA/Healthcare Corp., 125 F.3d 899, 901 (5th Cir. 1997).
In this case, however, the district court‘s order must be construed as a grant of summary judgment because the district court did not exclude Dengel‘s affidavit which was outside of the submitted pleadings. See Burns v. Harris County Bail Bond Bd, 139 F.3d 513, 517 (5th Cir. 1998). (“When matters outside the pleadings are presented to and not excluded by the district court, the district court must convert a motion to dismiss into a motion for summary judgment.“). We, therefore, construe Bank One‘s motion to dismiss as a summary judgment motion and apply the applicable standard of review. See Sandstad v. CB Richard Ellis, Inc., 309 F.3d 893, 896 (5th Cir. 2002). Even if the district court erred by failing to review Bank One‘s motion to dismiss as a motion for summary judgment, this error is reversible only if Dengel had no notice or opportunity to refute Bank One’ allegations
As an initial matter, Dengel‘s affidavit is inappropriate summаry judgment evidence. Thus, we do not consider it here. Rule 56(e) requires statements in affidavits to be based on personal knowledge and not based on information and belief. Richardson v. Oldham, 12 F.3d 1373, 1378 (5th Cir. 1994) (instructing that statements “based on information and belief ... [are] struck as not based on personal knowledge and therefore fail[] the requirements of
Dengel‘s pleadings present no factual dispute to overcome summary judgment nor do his pleadings state a claim upon which relief may be granted. “[W]e consult the applicable law to ascertain the material factual issues.” F.D.I.C. v. Firemen‘s Ins. Co. of Newark, NJ, 109 F.3d 1084, 1087 (5th Cir. 1997). In this case, we look to Louisiana law. See Id. (“We look to state law for rules governing contract interpretation.“). Because Dengel did not plead that he and his wife signed the credit agreement and because the alleged credit agreement attached to the third party claim is not signed by Dengel and his wife as required by
Dengel also urges that even though the copy of the commitment letter was not signed, there is other evidence attached to his third party counterclaim that establishes that there was a written agreement signed by the creditor and the debtor. In particular, Dengel offers that Bank One scheduled a loan closing which “very strongly implies that a valid, binding and written loan commitment signed by both parties existed between the Bank and Dengel.” We disagree. Under Lоuisiana law, “a writing cannot qualify as a credit agreement if parol evidence must be received in order to establish that status.” Fleming Irr. Inc. v. Pioneer Bank & Trust Co., 661 So. 2d 1035 (La. App. 2nd Cir. 1995). Regardless of whether Dengel‘s evidence that there was a loan commitment absent a signed commitment letter constitutes parole evidence, under Louisiana law, “the
CONCLUSION
Under the traditional cannons of statutory interpretation,
Moreover, we construe the district court‘s order granting Bank One‘s motion to dismiss Dengel‘s lender liability claim as granting summary judgment to Bank One and AFFIRM that order.
AFFIRMED.