Shanel Ann Stasz

OCR transcription for search; preserved printed pages are authoritative

Case 2:05-bk-43980-RK Doc196 Filed 01/14/11 Entered 01/14/11 17:46:48 Desc
Main Document Page 1 of 8 -

|| [—ENTEREDNGT FOR PUBLICATION
JAN 14 203] [UNITED STATES BANKRUPTCY COURT.4—
3 .
egNTha GlatRIcT OF CALFORNIC EIN T RAL DISTRICT OF CALIFORNIA
4 By: Deputy Clerk
LOS ANGELES DIVISION
5
In re: ) Case No. 2:05-bk-43980-AA
6 )
SHANEL STASZ, ) Chapter 7
7 )
) MEMORANDUM DECISION
8 )
) Date: March 8, 2011
9 ) Time: 9:30 a.m.
) Place: United States Bankruptcy Court
10 ) Courtroom # 1539
Debtor. ) 255 East Temple Street
11 ) Los Angeles, CA 90012
12 Before the court is the motion of Debtor, Shanel Stasz (“Stasz”) for reconsideration of

13 | this court’s Order Denying Motion: (1) for Disqualification and/or Recusal of Judge Alan M.

14 | Ahart; (2) to Set Aside All Rulings, Orders and Judgments in All Proceedings in this Bankruptcy
15 | Case; (3) and for Disgorgement of All Funds and Fees Received by the Trustee and/or his

16 | Counsel or Accountant (“Order”) entered on December 28, 2010. Having considered the

17 | grounds for reconsideration stated in the motion in light of the court’s findings of fact and

18 | conclusions of law stated orally and recorded in open court at the hearing on December 28, 2010,
19 | which form the basis for the Order, the court dispenses with oral argument and denies the relief
20 | requested in the motion based upon the following findings of fact and conclusions of law!

21 | pursuant to F.R.Civ.P, 52(a)(1),’ as incorporated into FRBP 7052, and applied to contested

22

23 | ¥ To the extent that any finding of fact is construed to be a conclusion of jaw, it is hereby
adopted as such. To the extent that any conclusion of law is construed to be a finding of fact, it is
24 | hereby adopted as such.

23} y Unless otherwise indicated, all “Code,” “chapter” and “section” references are to the
96 | Bankruptcy Code, 11 U.S.C. §§ 101-1330 after its amendment by the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23 (2005). “Rule”
27 | references are to the Federal Rules of Bankruptcy Procedure (“FRBP”), which make applicable
certain Federal Rules of Civil Procedure (“F.R.Civ.P.”).

annem nena A Tee AAAs AACN A ACA AAA AACA AANA ICT

Case 2:05-bk-43980-RK Doc 196 Filed 01/14/11 Entered 01/14/11 17:46:48 Desc
Main Document Page 2 of 8

1 | matters by FRBP 9014(c).

2 I. STATEMENT OF FACTS

3 On October 13, 2005, Stasz filed her voluntary petition under chapter 7 in the above

4 | referenced case. The case was assigned to Honorable Alan M. Ahart, United States Bankruptcy
5 | Judge. Rosendo Gonzalez (“Gonzalez”) was appointed as trustee. Stasz received a discharge on
6 | March 6, 2007. Gonzalez has spent the past five years endeavoring to collect and reduce to

7 | money the property of the estate. His efforts have faced stiff opposition by Stasz. Judge Ahart

8 | has made rulings as disputes between Gonzalez, Stasz, and other interested or affected parties

9 | have arisen during the administration of the case. Gonzales ultimately submitted a final report as

10 | trustee to the United States trustee. In conjunction therewith, Gonzales and each of his

11 | professionals, over Stasz’s objection, sought final allowance of the fees incurred and costs

12 | advanced on behalf of the estate. Stasz then sought recusal of Judge Ahart.

13 On October 20, 2010, Stasz filed and served a Motion: (1) for Disqualification and/or

14 | Recusal of Judge Alan M. Ahart; (2) to Set Aside All Rulings, Orders and Judgments in All

15 | Proceedings in this Bankruptcy Case; (3) and for Disgorgement of All Funds and Fees Received
16 | by the Trustee and/or his Counsel or Accountant (“recusal motion”), together with a notice

17 | setting the matter for hearing on November 10, 2010. Stasz’s motion sought not only a recusal of
18 | Judge Ahart, but an order setting aside all rulings, orders, and judgments entered in the

19 | bankruptcy case and related adversary proceedings and a disgorgement of all fees and expenses
20 {| received by Gonzalez and his professionals. Gonzalez filed written opposition to the recusal

21 | motion on October 28, 2010, together with objections to Stasz’s declaration and request for

22 | judicial notice in support of the motion. On November 3, 2010, Stasz filed Debtor’s Reply to
23 | Chapter 7 Trustee’s Opposition to Objection to Evidence; Trustee’s Objection to Debtor’s

24 | Request for Judicial Notice, and Debtor’s Motion: (1) for Disqualification and/or Recusal of

25 | Judge Alan M. Ahart; (2) to Set Aside All Rulings, Orders and Judgments in All Proceedings in
26 | this Bankruptcy Case; and (3) for Disgorgement of All Funds and Fees Received by the Trustee

27
-2-

Case 2:05-bk-43980-RK Doc 196 Filed 01/14/11 Entered 01/14/11 17:46:48 Desc

oO oo SN HB wv

10
ll
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

Main Document Page 3 of8

and/or his Counsel or Accountant, together with a request for judicial notice and supporting
declaration (collectively, “Reply’).

Judge Barry Russell, who was assigned to hear the recusal motion, recused himself by
order entered on November 10, 2010, and the matter was reassigned to this court for
determination and continued to November 30, 2010. On November 22, 2010, Stasz filed an ex
parte request to continue the hearing on the recusal motion pending receipt of a transcript of a
hearing on the final fee applications by the Gonzalez and his professionals held before Judge
Ahart on November 10, 2010. The court granted Stasz’s request and continued a hearing on the
recusal motion to December 28, 2010. The transcript was filed on November 29, 2010. On
December 23, 2010, Stasz filed supplemental points and authorities in support of the recusal
motion, together with a further declaration and request for judicial notice. After a hearing on
December 28, 2010, Stasz’s recusal motion was denied.

II. DISCUSSION

This court has jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 157(a) and
1334(b). This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O). Venue is
appropriate in this court. 28 U.S.C. § 1409(a).

A. Standard for Reconsideration Under Rule 9023

Rule 9023 makes Rule 59(e) of the Federal Rules of Civil Procedure applicable in
bankruptcy cases. FRBP 9023. Rule 59(e) authorizes the filing of a motion to alter or amend a
judgment not later than 14 days after entry of the judgment. F.R.Civ.P. 59(e). Reconsideration is
“an ‘extraordinary remedy, to be used sparingly in the interests of finality and conservation of
judicial resources.’” Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003) (citation omitted);
Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (citation omitted). In
the Ninth Circuit, “‘a motion for reconsideration should not be granted, absent highly unusual
circumstances, unless the district court is presented with newly discovered evidence, committed

clear error, or if there is an intervening change in the controlling law.’” Kona Enters., 229 F.3d

-3-

cmon iA AA Aina Oe
Case 2:05-bk-43980-RK Doc 196 Filed 01/14/11 Entered 01/14/11 17:46:48 Desc

Ss ~s DO wr

oO

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

Main Document Page 4 of8

at 890 (quoting 389 Orange Street Partners v. Amold, 179 F.3d 656, 665 (9th Cir. 1999)).
Reconsideration may also be granted “as necessary to prevent manifest injustice.” Navajo Nation
v. Confederated Tribes & Bands of the Yakima Indian Nation, 331 F.3d 1041, 1046 (9th Cir.
2003).

In this case, the Order was entered on December 28, 2010. Stasz’s motion was filed on
January 11, 2011 — within 14 days of entry of the Order. Stasz’s motion is timely under Rule
9023. Stasz’s motion does not allege newly discovered evidence nor an intervening change in
controlling law.’ Nor does Stasz’s motion allege that reconsideration is necessary to prevent
manifest injustice. Stasz alleges in her motion that the court erred in:

1, Striking Stasz’s Supplemental Points and Authorities and Supplemental Request
for Judicial Notice as untimely;

2. Considering the Chapter 7 Trustee’s Opposition and Objection to Debtor’s
Request for Judicial Notice and Objection to Evidence — Declaration of Shanel
Stasz filed on October 28, 2010; and
3, Failing to consider, in addition to the statutory grounds for recusal under 28
U.S.C. § 455, the Supreme Court’s holding in Caperton v, A.T. Massey Coal Co.,
__US.__, 129 8.Ct. 2252, 173 L.Ed.2d 1208 (2009).
Stasz’s Motion, 3:8 — 4:2,
A. The Court Properly Struck Stasz’s Supplemental Points and Authorities, Declaration, and

Request for Judicial Notice as Untimely.

With respect to the first ground for reconsideration, the court properly struck as untimely
Stasz’s supplemental points and authorities, declaration, and request for judicial notice at the
hearing on December 28, 2010. The evidentiary record closed with the filing of Stasz’s reply to
Gonzalez’s response in opposition to the motion. Notwithstanding its ruling, the court took

judicial notice of the transcript of the hearing on November 10, 2010, and considered the

¥ Because Stasz’s motion is not premised on any ground that would necessitate the consideration
of extrinsic evidence (such as newly discovered evidence), the court declines to consider the
Declaration of Shanel Stasz and Request for Judicial Notice filed in support of the motion for
reconsideration. Stasz’s motion must be determined based on the evidentiary record before the
court at the hearing on December 28, 2010.

-4-

sR OR enn nasal iin ADE AAA nar in enn

Case 2:05-bk-43980-RK Doc196 Filed 01/14/11 Entered 01/14/11 17:46:48 Desc
Main Document Page 5of8

1 | contents of the transcript, as requested by Stasz, in ruling on the recusal motion.

2 | B. The Court Properly Considered Gonzalez’s Response in Opposition to Stasz’s Recusal

3 | Motion.

4 With respect to the second ground for reconsideration, Gonzalez was required by LBR

5 | 9013-1(f to file a written response in opposition to Stasz’s recusal motion not later than October
6 | 27, 2010 — 14 days prior to the hearing scheduled for November 10, 2010. Stasz observed in her

7 | Reply that Gonzalez’s response in opposition to the recusal motion was filed and served on

8 | October 28, 2010, stating that “it is not timely filed and cannot be considered in its entirety by the
9 | Court pursuant to LBR 9013-1(h). Stasz did not ask in her Reply that Gonzalez’s response be

10 | stricken as untimely. Given the fact that Gonzalez’s response was only 1 day late, Stasz replied
11 | to the merits of the response, and there was no showing of prejudice to Stasz attributable to the 1-
12 | day delay, the court exercised its discretion under LBR 9013-1(h) and considered Gonzalez’s

13 | response in determining the merits of Stasz’s recusal motion.

14 | C. The Court Applied the Proper Legal Standard in Determining Stasz’s Recusal Motion.

15 Finally, Stasz admits that the court applied the proper legal standard in adjudication her
16 | recusal motion. Stasz’s Motion, 3:17-18 (“[T]he Court’s rulings and subsequent Orders were
17 | solely based upon an application of 28 U.S.C. § 455 ....”}. The standard to be applied for

18 | determining whether recusal of a bankruptcy judge is appropriate is set forth in 28 U.S.C. §

19 | 455(a), which states:

20 Any justice, judge, or magistrate of the United States shall disqualify himself in any
proceeding in which his impartiality might reasonably be questioned.

2" 28 U.S.C. § 455(a) (emphasis added). Furthermore, a bankruptcy judge may be disqualified if he

2 or she “has a personal bias or prejudice concerning a party,....” 28 U.S.C. § 455(b)(1)

’ (emphasis added). The test is whether an average, reasonable person, knowing all the

25

26 | * Stasz’s Reply, 2:7-8. LBR 9013-1(h) states: “Papers not timely filed and served may be

37 deemed by the court to be consent to the granting or denial of the motion, as the case may be.”

-5-

sm mae ane smenan termes esis ccsae cae acececcaadcacaa aaa ariasiay a a leer teen

Case 2:05-bk-43980-RK Doc196 Filed 01/14/11 Entered 01/14/11 17:46:48 Desc
Main Document Page 6 of 8

1 | circumstances, would harbor doubts about the judge’s impartiality. Milgard Tempering, Inc. v.
2 | Selas Corp. of Am., 902 F.2d 703, 714 (9th Cir. 1990); In re Faulkner, 856 F.2d 716, 720 (Sth

3 | Cir. 1988). The “reasonable person” standard assumes a “well-informed, thoughtful and
4 | objective observer, rather than the hypersensitive, cynical, and suspicious person.” United States
5 | v. Jordan, 49 F.3d 152, 156 (5th Cir. 1995).

Generally, expressions of impatience, annoyance, dissatisfaction, or even anger are not
sufficient to establish bias or impartiality. United States v. Landerman, 103 F.3d 1053, 1066 (Sth

Cir. 1997). A judge’s critical or hostile remarks made during a judicial proceeding as to counsel,

eo oOo 4 DH

parties or their cases, will not support a recusal motion unless they reveal either “an opinion that
10 | derives from an extrajudicial source” or “such a high degree of favoritism or antagonism as to

11 | make fair judgment impossible.” Liteky v. United States, 510 U.S. 540, 555 (1994). Nor do

12 | judicial rulings alone, even if erroneous, “constitute a valid basis for a bias or partiality motion.”
13 | Id., see Cintron v. Union Pac. R.R. Co., 813 F.2d 917, 921 (9th Cir. 1987).

14 Stasz admits that the court, in fact, applied 28 U.S.C. § 455 in denying the recusal

15 | motion, but argues that the court did not consider the Supreme Court’s decision in Caperton v.
16 | A.T. Massey CoalCo., = U.S.__, 129 S.Ct. 2252, 173 L.Ed.2d 1208 (2009) in rendering its
17 | decision. Caperton can be distinguished on the facts. In Caperton, a West Virginia jury awarded
18 | Hugh Caperton, Harman Development Corp., Harman Mining Corp., and Sovereign Coal Sales
19 | (collectively, “Caperton”) the sum of $50 million after finding A.T. Massey Coal Co. and its

20 | affiliates (collectively, “Massey”) liable for fraudulent misrepresentation, concealment, and

21 | tortious interference with contractual relations. Id. at 2257. Massey appealed the judgment to the
22 | Supreme Court of Appeals of West Virginia. At the time, Justice McGraw was a candidate for
23 | reelection to that court. His opponent was an attorney, Brent Benjamin (“Benjamin”), Don

24 | Blankenship (“Blankenship”), who was Massey’s president, chief executive officer, and

25 | chairman, provided Benjamin with $3 million in campaign contributions — an amount “more than
26 | the total amount spent by all other Benjamin supporters and three times the amount spent by

27
-6-

nile nent ea ene a anise anaaieaeieeiaasaniaaaa amma aa et ire
Case 2:05-bk-43980-RK Doc 196 Filed 01/14/11 Entered 01/14/11 17:46:48 Desc

Main Document Page 7 of 8
1 | Benjamin’s own committee.” Id. Benjamin defeated McGraw and took McGraw’s seat on the
2 | Supreme Court of Appeals of West Virginia. Id. Benjamin then refused three separate requests
3 | to recuse himself from hearing Massey’s appeal of the $50 million judgment in favor of
4 | Caperton. Id. at 2258-59. Caperton’s judgment against Massey was reversed by the Supreme
5 | Court of Appeals of West Virginia. Id. at 2259. The Supreme Court reversed the judgment of
6 | the Supreme Court of Appeals of West Virginia and remanded for further proceedings, stating:
7 Blankenship’s campaign efforts had a significant and disproportionate influence in
placing Justice Benjamin on the case. Blankenship contributed some $3 million to unseat
8 the incumbent and replace him with Benjamin. His contributions eclipsed the total
amount spent by all other Benjamin supporters and exceeded by 300% the amount spent
9 by Benjamin’s campaign committee. .. .
10 It was reasonably foreseeable, when the campaign contributions were made, that the
pending case would be before the newly elected justice. The $50 million adverse jury
11 verdict had been entered before the election, and the Supreme Court of Appeals was the
next step once the state trial court dealt with post-trial motions. So it became at once
12 apparent that, absent recusal, Justice Benjamin would review a judgment that cost his
biggest donor’s company $50 million. Although there is no allegation of a quid pro quo
13 agreement, the fact remains taht Blankenship’s extraordinary contributions were made at
a time when he had a vested stake in the outcome. Just as no man is allowed to be a
14 judge in his own cause, similar fears of bias can arise when - without the consent of the
other parties — a man chooses the judge in his own cause. And applying this principle to
15 the judicial election process, there was here a serious, objective risk of actual bias that
required Justice Benjamin’s recusal.
16
Id, at 2264-65. No such facts exist in this case.
17
There was no credible evidence in the record that Judge Ahart’s connections with Bank of
18
America (or Charles Schwab Corporation, Charles R. Schwab, or Hugo W. Quackenbush by
19
virtue of such connections with Bank of America) prior to his appointment to the bench in 1988
20
created an actual conflict of interest with respect to any disputed matter adjudicated by him
21
during the administration of the Stasz bankruptcy estate. Nor does the evidentiary record support
22
a finding that Judge Ahart’s failure to disclose such connections when the Stasz case was filed 17
23
years after his appointment to the bench “created a constitutionally intolerable probability of . . .
24
actual bias... ,” as alleged by Stasz. See Recusal Motion, 3:23-26.
25
Reconsideration under Rule 9023 is not intended to give a litigant a “second bite at the
26
apple.” See In re Christie, 222 B.R. 64, 67 (Bankr. D.N.J. 1998) (citation omitted); see also
27
-7-

a AA a anemia anette ania enan anaes aaa each te aan
2:05-bk-43980-RK Doc 196 Filed 01/14/11 Entered 01/14/11 17:46:48 Desc

Case

oO Oo “SA

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

Main Document Page 8 of 8

Voelkel v. Gen, Motors Corp., 846 F.Supp. 1482, 1483 (D. Kan. 1994), aff'd, 43 F.3d 1484 (10th
Cir. 1994) (“A motion to reconsider is not a second chance for the losing party to make its
strongest case or to dress up arguments that previously failed.”); U.S. v. Carolina E. Chem. Co.,
639 F. Supp. 1420, 1423 (D.S.C. 1986) (“A party who failed to prove his strongest case is not
entitled to a second opportunity by moving to amend a finding of fact or a conclusion of law.”);

In re Hillis Motors, Inc,, 120 B.R. 556, 557 (Bankr. D. Haw. 1990) (Rule 59 does not “give a

disappointed litigant another chance.”(citation omitted)).

Ill. CONCLUSION

For the reasons stated, Stasz’s motion for reconsideration will be denied.

A separate order will be entered consistent

DATED: January 14, 2011

TER H. CARROLL
United States Bankruptcy Judge