Business Law

In re Arno Arutyunyan, 2021 WL 755770 (B.A.P. 9th Cir. 2021)

The following is a case update written by Boshra Khoder, Resnik Hayes Moradi LLP, analyzing a recent decision of interest:

In In re Arno Arutyunyan, 2021 WL 755770 (B.A.P. 9th Cir. 2021), the United States Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed the bankruptcy court’s dismissal of the creditor’s adversary complaint on grounds that it was filed late.  In an unpublished decision, the BAP held that “the bankruptcy court was right. It could not retroactively extend the deadline.”

A copy of the BAP’s decision can be found here.

Facts

On June 3, 2019, Arno Arutyunyan (Debtor) filed a chapter 7 petition.  Soroush Janamian was an unsecured creditor with a claim of $104,577.  All creditors, including Janamian, received notice from the court that the deadline for filing a nondischargibility complaint was September 6, 2019.

On September 13, 2019, Janamian filed an adversary complaint which was signed and dated September 6, 2019.  The complaint sought to except his debt from discharge under Bankruptcy Code sections 523 (a) (2), (4) and/or (6).  Debtor filed a motion to dismiss the complaint, arguing that Janamian failed to file the complaint within the time limit of FRBP 4007 (c) and did not file a motion to extend the deadline.

In his opposition, Janamian claimed that “the time limit was not jurisdictional, and because he made a good faith effort to timely file the complaint, the bankruptcy court should grant equitable relief.”  Janamian also provided a declaration of a registered process server who declared that he received the complaint from Janamian on September 6, 2019.  The registered process server stated that from September 6 through September 13, he made several unsuccessful attempts to file the complaint using different methods such as fax and electronic filing.

In his reply, Debtor argued that Janamian had notice of the deadline and failed to provide any basis for equitable relief.

The bankruptcy court dismissed the complaint with prejudice stating that: “Pursuant to Rule 4007 (c), Janamian was required to either file his complaint or a motion for an extension by September 6, 2019.”

Reasoning

The BAP affirmed the order of the bankruptcy court.  It began with an overview of sections 523(a)(2), (4), (6), and Rules 4007(c) and 9006(b)(3) and detailed the steps a creditor must follow to request an exception from discharge.  The BAP agreed with Janamian that the time limit is not jurisdictional, but instead is a claim processing rule “which operates to 1) inform creditors of the time to file a complaint; 2) instruct the court on the limits of its discretion to extend the deadline, and 3) provide debtors with an affirmative defense to an untimely filed complaint.”  Id., at *2, citing Kontrick v. Ryan, 540 U.S. 443, 455-56 (2004).

Janamian did not dispute that he had notice of the deadline and that he failed to timely file the complaint or a motion to extend the deadline.  Janamian argued instead that the bankruptcy court erred by failing to conduct an evidentiary hearing to determine whether his attempt to timely file the complaint made him eligible for equitable relief from the deadline.

The BAP noted that the Ninth Circuit has repeatedly held that the 60-day time limit is strict and that giving the bankruptcy court the power to retroactively extend the deadline under section 105(a) would conflict with the plain language of Rules 4007(c) and 9006(b)(3).  Based on that, the court found that Janamian’s good faith effort to file the complaint on time is irrelevant and “it is also immaterial that his untimely filing stemmed from difficulty with an electronic filing system.”  Id., at *3, citing Allred v. Kennerly (in re Kennerly), 955 F.2d 145, 146 (9th Cir. 1993).

Furthermore, the court acknowledged that a limited exception to the 60-day time limit exists, but only “where the bankruptcy court explicitly misleads a party into untimely filing its complaint.”  Id., citing In re Kennerly, 995 F.2d at 147- 48.  The BAP concluded that there were no “extraordinary circumstances” that would excuse his failure to file a timely complaint.

Finally, the court emphasized that Janamian was not misled by the bankruptcy court, instead he chose to “fax file” the complaint instead of filing it “in the divisional office of the clerk.”  And regardless of the problems that Janamian encountered in his attempt to file the complaint, the bankruptcy court lacked equitable power to deviate from the strict terms of Rule 4007(c).

Author’s Commentary

As the BAP concluded, its ruling is consistent with the Ninth Circuit law.  Here, the creditor attempted to distinguish between the time limit imposed by FRBP 4007 and 9006 and a jurisdictional rule that is strictly followed.  The creditor argued that his honest attempt to timely file the complaint should award him an equitable relief from the deadline.  The BAP agreed that FRBP 4007 and 9006 are not jurisdictional, but recognized that the Ninth Circuit has repeatedly held that the 60-day time limit is “strict” and cannot be extended absent a motion filed before this time limit expires.  In other words, under Ninth Circuit precedent, no equitable relief is available.  Since the creditor failed here to file a timely motion, his good faith attempt to file on time is irrelevant.

These materials were written by Boshra Khoder of Resnik Hayes Moradi LLP.  Editorial contributions were provided by Maggie E. Schroedter of Robberson Schroedter LLP.

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