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In re Marinari

United States District Court, E.D. Pennsylvania

October 11, 2019

IN THE MATTER OF IN RE MICHELE MARINARI

          MEMORANDUM

          GERALD J. PAPPERT, J.

         Michele Marinari filed for Chapter 13 bankruptcy. Robert Murphy, one of Marinari's creditors, filed an adversary proceeding against her and moved to convert her Chapter 13 case to one under Chapter 7. Without ruling on Murphy's motion or resolving his adversary proceeding, the Bankruptcy Court dismissed Marinari's Chapter 13 case on her request. It later denied Murphy's motion to reconsider the dismissal order. Murphy now appeals from those two orders. For the reasons that follow, the Court affirms the Bankruptcy Court's judgment in all respects.[1]

         I

         In 2004, Murphy sued Marinari and her ex-husband in state court for fraudulent misrepresentation and for breaching a contract to restore his vintage automobile. See R., Vol. X, at 21-26 (State Ct. Compl., Ex. 1, Adversary Bankr. Doc. No. 1).[2] After her attorney withdrew from the case without telling her, Marinari failed to appear for several hearings, and the state court entered a default judgment against her and her ex-husband. See Id. at 32 (State Ct. J., Ex. 2, Adversary Bankr. Doc. No. 1); id., Vol. IX, at 47-48 (Order Denying Reconsideration, Ch. 13 Bankr. Doc. No. 151).

         Ten years later, Marinari filed for Chapter 13 bankruptcy. See id., Vol. I, at 19- 24 (Ch. 13 Voluntary Pet., Ch. 13 Bankr. Doc. No. 1). To ensure that this proceeding did not discharge his judgment against her, Murphy filed an adversary complaint with the Bankruptcy Court.[3] See id., Vol. X, at 116-33 (Am. Adversary Compl., Adversary Bankr. Doc. No. 22). He also moved to either dismiss Marinari's Chapter 13 proceeding or convert it to a Chapter 7 proceeding. See id., Vol. I, at 128-29 (Mot. to Dismiss or Convert, Ch. 13 Bankr. Doc. No. 25). The Bankruptcy Court scheduled a hearing on the conversion motion, but Murphy requested repeated continuances. See id., Vol. IX, at 49. Before that hearing took place, Marinari filed an application to voluntarily dismiss her Chapter 13 case under 11 U.S.C. § 1307(b). See id., Vol. VII, at 53 (Appl. to Dismiss, Ch. 13 Bankr. No. 98).

         The Bankruptcy Court initially dismissed Marinari's Chapter 13 case, but it later granted Murphy's motion to reconsider. See id., Vol. VIII, at 50 (Order Granting Mot. to Reconsider, Ch. 13 Bankr. Doc. No. 123). It also ordered Murphy to file a brief discussing “whether a debtor has an absolute right to dismissal under § 1307(b).” Id. Murphy chose instead to rely on his initial motion to reconsider rather than file another brief. See Id. at 61 (Order Dismissing Ch. 13 Case, Ch. 13 Bankr. Doc. No.129). At a hearing, the Bankruptcy Court announced that it would treat Marinari's “application” for dismissal as a formal motion to dismiss under § 1307(b); neither party objected. See Id. at 61-62.

         After the hearing, the Bankruptcy Court again dismissed Marinari's Chapter 13 case. It found that Murphy had forfeited his chance to request that the Court impose any conditions should it dismiss Marinari's Chapter 13 case.[4] See Id. at 62 & n.2. The Court also found that Murphy had notice of and an opportunity to object to Marinari's application for dismissal. See Id. at 61. It then determined that Marinari had an absolute right to dismiss her Chapter 13 case under § 1307(b). See Id. at 62-66 & n.3. In dismissing the case, the Court-with Marinari's consent-ordered that, if Marinari filed for bankruptcy again within two years, Murphy's adversary case would pick up where it left off, just before the pretrial hearing. See Id. at 67.

         Murphy again moved for reconsideration. See Id. at 81-113 (Second Mot. to Reconsider, Ch. 13 Bankr. Doc. No. 131). As before, he argued that dismissal under § 1307(b) was improper because Marinari had (1) neither formally moved nor served him with a motion to dismiss and (2) filed her Chapter 13 case in bad faith. See Id. at 82-83, 93-94. Murphy also claimed that the Bankruptcy Court erred in dismissing the Chapter 13 case while his adversary proceeding and various motions for sanctions were pending. See Id. at 96. Throughout the motion, Murphy alleged that Marinari (or the Bankruptcy Court) violated various constitutional and statutory provisions, though he provided no factual or legal support for those assertions. See, e.g., id. at 87.

         The Bankruptcy Court denied this second reconsideration motion after oral argument and supplemental briefing. See id., Vol. IX, at 52-53. Though it struggled to understand Murphy's “somewhat incoherent” arguments, id. at 49 n.6, the Bankruptcy Court thoroughly addressed and rejected each proffered ground for reconsideration or vacatur, see Id. at 53-64. As it had done earlier, the Court explained the varying views from other circuits on whether the right to dismissal under § 1307(b) is absolute or subject to a bad-faith exception; it added that Murphy's disagreement with its adherence to the absolute view was not grounds for reconsideration. See Id. at 56-60. The Bankruptcy Court also found that: (1) “all motions for sanctions had been resolved, ” id. at 52 n.10; (2) Murphy caused the delay in consideration of his motion to convert, see Id. at 60 n.18; (3) he forfeited both his right to request an evidentiary hearing on his allegations of bad faith, see id., and any objection to the Court's treatment of Marinari's application for dismissal as a formal motion, see Id. at 63 n.24; (4) Murphy made a “strategic decision to seek conversion” rather than ask for conditions on Marinari's dismissal, id. at 62; and (5) he had notice of and a hearing on Marinari's motion for dismissal, see Id. at 63 n.24. Based on those findings, the Bankruptcy Court concluded that Murphy “failed to articulate any grounds which would justify reconsidering or vacating” the order dismissing Marinari's Chapter 13 case. Id. at 53.

         II

         Murphy now appeals the orders dismissing Marinari's Chapter 13 case and denying his second motion to reconsider.[5] See (Am. Certificate of Appeal, ECF No. 7). He presents three questions for review, asking whether the Bankruptcy Court (1) erred by dismissing Marinari's Chapter 13 case under 11 U.S.C. § 1307(b); (2) abused its discretion by imposing inadequate conditions on the dismissal; and (3) erred by denying Murphy's second motion to reconsider.[6] See Aplt.'s Opening Br. at 3-7.

         District courts review final judgments of a bankruptcy court “under traditional appellate standards.” Stern v. Marshall, 564 U.S. 462, 475 (2011). Legal conclusions are reviewed de novo, “factual findings for clear error, and . . . exercises of discretion for abuse thereof.” In re Ross, 858 F.3d 779, 783 (3d Cir. 2017). When a party fails to preserve an issue, the district court reviews for plain error. See Forrest v. Parry, 930 F.3d 93, 113 (3d Cir. 2019); see also In re Walters, 649 Fed.Appx. 273, 275 (3d Cir. 2016) (unpublished) (noting that the plain-error “standard applies with respect to bankruptcy court proceedings”).

         A

         Murphy first argues that the Bankruptcy Court erred by dismissing Marinari's Chapter 13 case under 11 U.S.C. § 1307(b). See Aplt.'s Opening Br. at 24-31. Though difficult to follow, his argument seems to have three parts. First, Murphy claims that the Bankruptcy Court erred in ruling that Marinari had an absolute right to dismissal under § 1307(b). See Id. at 24-29. Second, he posits that dismissal was improper because Marinari never formally moved to dismiss her Chapter 13 case. See Id. at 29- 30. Third, Murphy reasons that the Bankruptcy Court erred in ...


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