Renfrow v. Grogan, Successor Trustee of The Joe

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IN RE )

)

RENFROW, MIRANDA KRISTIN, _ ) Case No. 17-10385-R

) Chapter 7

Debtor. )

MIRANDA KRISTIN RENFROW __ )

)

Plaintiff, )

)

VS. ) Adv. No. 17-1027-R

)

COURTNEY GROGAN, )

SUCCESSOR TRUSTEE OF THE _)

JOE C. COLE REVOCABLE )

TRUST, UNDER TRUST AGREEF- __)

MENT DATED MARCH 28, 2002, +)

and ATKINSON, HASKINS, )

NELLIS, BRITTINGHAM, GLASS _ )

& FIASCO, P.C., )

)

Defendants. )

ORDER DENYING DEFENDANTS’ MOTION TO DISQUALIFY

Before the Court is the Defendants’ Motion to Disqualify the Honorable Dana Rasure

(Doc. 69) (“Motion to Disqualify’’) filed on November 21, 2018, by Defendants Courtney

Grogan, Successor Trustee of the Joe C. Cole Revocable Trust (“Grogan”) and Atkinson,

Haskins, Nellis, Brittingham, Glass & Fiasco, P.C. (“AHN”) (collectively, “Defendants” or

“Movants”’), and Plaintiff's Response thereto (Doc. 72) filed on November 26, 2018.

I. Jurisdiction

The Court has jurisdiction of this proceeding pursuant to 28 U.S.C. §§ 1334, 157(a),

and 157(b)(1) and (2), and Local Civil Rule 84.1(a) of the United States District Court for

the Northern District of Oklahoma.

IL. Background

Trial on the merits in this adversary proceeding is set for November 29, 2018.

Plaintiff Miranda Renfrow filed her original complaint against Defendants in August 2017,

and her amended complaint in January 2018. In her amended complaint, Renfrow alleges

that after receiving a Chapter 7 discharge, Defendants, among other things, continued to

prosecute an action in Tulsa County District Court (the “Grogan Action”) to collect

prepetition debts. The Grogan Action was tried in December 2017, and Grogan obtained a

jury verdict and judgment that imposed personal liability on Renfrow under the Uniform

Fraudulent Transfer Act (““UFTA”) (the “Judgment”). In her closing argument, Grogan,

through her counsel, asked the jury to find Renfrow liable for transferring particular assets

from her wholly owned corporation to herself with the intent to defraud her creditors.

Renfrow contends that those transfers occurred, if at all, prior to her filing bankruptcy. In

this proceeding, Renfrow charges Defendants of acting in contempt of the discharge order

and in violation of 11 U.S.C. § 524(a)(2), and seeks sanctions under 11 U.S.C. § 105(a)! in

‘Section 105(a) of the Bankruptcy Code provides bankruptcy courts with the equitable

power to enforce and remedy violations of substantive provisions of the Bankruptcy Code,

to enforce and implement court orders, and to prevent an abuse of process.

the form of damages. Defendants strenuously deny that they took any action to collect

prepetition debts.

On September 11, 2018, Defendants filed a motion for summary judgment, seeking

dismissal of this proceeding for lack of jurisdiction under the Rooker-Feldman doctrine, or,

in the alternative, judgment in Defendants’ favor on the ground that the jury verdict and

Judgment barred Renfrow from relitigating whether the debt reduced to judgment was

discharged debt. Defendants also argued that Renfrow could not show that Defendants

intended to violate the discharge injunction. Finally, Grogan, individually, sought judgment

in her favor on the basis that she acted on the advice of her counsel, AHN, and therefore did

not intend to violate the discharge injunction.

On November 13, 2018, the Court heard oral argument on the summary judgment

motion and Renfrow’s response thereto. On November 20, 2018, the Court entered an order

denying summary judgment. The Court concluded that under the Exxon Mobil case decided

by the United States Supreme Court,’ the Rooker-Feldman doctrine was inapplicable because

Renfrow had commenced this adversary proceeding prior to the entry of the Judgment. The

Court also concluded that under Oklahoma issue preclusion law, Defendants had not

established all the elements required to preclude Renfrow from seeking a declaration from

this Court that Defendants’ conduct in the Grogan Action violated this Court’s discharge

injunction. Elements not established by undisputed facts and applicable law included the

*Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (2005).

requirements that the Judgment be valid and final, and that Renfrow had a full and fair

opportunity to litigate. In addition, Defendants had not included the judgment roll of the

Grogan Action in their record on summary judgment.

Later on November 20, 2018, at a scheduled final pretrial conference, the Court

instructed the parties to submit a revised proposed Joint Pretrial Order to take into account

the issues of fact and law eliminated, narrowed, or clarified in the order denying summary

judgment. Defendants orally requested a continuance of the trial because they had not yet

obtained the full transcript of the trial in the Grogan Action. The Court found the motion to

continue the trial untimely because Defendants had asserted issue preclusion as a defense as

early as January 2018, and knew or should have known that it was their evidentiary burden

to tender the entire judgment roll to establish preclusion.’

On November 21, 2018, Defendants filed their Motion to Disqualify.

*See Defendants’ Response and Objection to Plaintiffs Motion to Amend Complaint

(Doc. 27) filed on January 29, 2018, wherein Defendants argued:

The publicly available record in the underlying case demonstrates Defendants

neither sought nor recovered any amounts for Plaintiffs pre-petition conduct

at the trial of the underlying case, and Plaintiff cannot ever prove Defendants

sought such damages. As such, Plaintiff's proposed amendment fails on its

face, and Plaintiff should be denied leave to amend her Complaint to add

claims that Defendants attempted to collect against Plaintiff for pre-petition

conduct at trial.

Id. at 3-4 (emphasis added).

Ill. Movants’ Allegations

Movants assert that the undersigned judge must recuse under 28 U.S.C. § 455(a)

because her “impartiality might reasonably be questioned.” They contend that certain

findings of fact the Court made after a full evidentiary hearing in another adversary

proceeding, Miranda Kristen Renfrow vs. Carrie Pettigrew and Thomas Mortensen, Adv. No.

17-1038 (the “Pettigrew Proceeding”), demonstrate that the Court has predetermined the

veracity of a key witness in this case, namely Renfrow’s counsel, Ron Brown. Motion, 6,

17-23. In denying defendant Mortensen’s motion to vacate the entry of default against him,

the Court found Brown’s testimony that he mailed the summons and complaint to Mortensen

credible and Mortensen’s testimony that he did not receive the complaint not credible.*

“In the Pettigrew Proceeding, Mortensen testified that he did not receive a dismissal

of claims in the Pettigrew state court litigation, notwithstanding Brown’s certificate of

service thereof. Pettigrew Order at 10 n.28. Mortensen also denied receiving the summons

and complaint Renfrow filed to commence the Pettigrew Proceeding, notwithstanding

Brown’s return of service which Mortensen deemed a “‘sham” affidavit. Id. at 19 & n.65.

The Court was required to weigh the evidence, and the credibility of both Brown and

Mortensen, to determine whether Brown had filed “sham” affidavits. The Court found in

both instances that it had no reason to doubt the accuracy of Brown’s certificates, stating

“Brown practices before this Court on a regular basis and has never given the Court any

reason to doubt his integrity.” Id. at 10 n.28 and 19 n.65. Further, the Court found that

Mortensen’s denial of receipt of the dismissal and the complaint was not convincing in that

Mortensen stated that he often set aside his unopened mail for extended periods of time, and

claimed that he routinely failed to receive mail that lawyers certified had been sent to him.

Id. at 20 n.67. Moreover, Mortensen’s client, Pettigrew, testified that she had reviewed the

complaint with Mortensen in December 2017. Id. at 21.

Movants also contend that in the Pettigrew Proceeding the undersigned

“predetermined Renfrow hired Brown because she needed to ‘enforce her discharge’ in the

Grogan Action.” Motion at 3, § 8-9.°

In addition, Movants contend that in tts order denying summary judgment in this case,

the undersigned “sua sponte raised the issues of (1) whether Renfrow was given a full and

fair opportunity to litigate the dischargeability of the alleged post-petition transfers in the

Grogan Action and (2) whether the judgment in the Grogan Action is valid.” Motion at 4,

q11.°

Further, Movants argue that at the pretrial conference, the undersigned informed the

parties that “she intends to re-try the UFTA claim from the Grogan Action in toto and will

allow Brown to present hearsay testimony on issues relating to the Grogan Action verdict’s

“In the Pettigrew Order, the Court found that “Renfrow retained Brown to defend

against [the Second Amended Complaint in the Grogan Action] and to enforce her

discharge.” Pettigrew Order at 10. Movants complain that the Court made this finding

despite the fact that Renfrow did not testify at the Pettigrew Proceeding. Renfrow’s

testimony was not necessary to find that Renfrow hired Brown for these purposes. After

Renfrow obtained her discharge and her bankruptcy case was closed, Brown entered an

appearance in the Grogan Action on behalf of Renfrow and filed Renfrow’s answer to the

Second Amended Complaint. Less than a week later, Brown filed, on behalf of Renfrow, a

Complaint for Violation of the Permanent Discharge Injunction to commence this

proceeding. These facts are matters of public record and were not disputed.

°Defendants urged summary judgment on the basis of issue preclusion. The Court

determined that Defendants, who have the burden of proving issue preclusion, did not make

a showing sufficient to establish all essential elements of their defense.

validity without awaiting the trial transcript to show what actually happened at trial.”” Motion

at 5,9 13.’

IV. Analysis

A judge 1s required to disqualify herself any proceeding in which [her] impartiality

might reasonably be questioned."* The test under § 455(a) in this Circuit is “whether a

reasonable person, knowing all the relevant facts, would harbor doubts about the judge's

impartiality.”” The Tenth Circuit has stressed that the statute must not be so broadly

construed to require recusal “upon the merest unsubstantiated suggestion of personal bias or

prejudice.”’° Even if the judge is “exceedingly ill disposed” towards a party, if her opinion

could be seen by a third party as reasonably formed from evidence presented at trial or based

the pretrial conference, the Court reviewed and revised the parties’ proposed

pretrial order (submitted on November 1, 2018), line by line, in order to eliminate non-issues

and to clarify the scope of remaining issues based upon the applicable law. Also, some

issues and contentions were superceded by denial of summary judgment. Because Renfrow

alleges that Grogan’s closing argument at trial constituted an act to collect prepetition debt,

an obvious threshold factual issue is whether the transfers outlined by Grogan’s counsel in

closing argument occurred prepetition or postpetition. The closing argument has been

transcribed and is already in the record. Evidence of the nature and timing of the transfers

referred to in closing argument may be in the record of the Grogan Action, or it may exist

independent of that record. Nothing said at the pretrial conference should be interpreted to

preclude either party from objecting to inadmissible hearsay.

U.S.C. § 455(a). Section 455 is made expressly applicable to bankruptcy judges

by Bankruptcy Rule 5004(a).

” United States v. Cooley, 1 F.3d 985, 993 (10" Cir. 1993) (internal quotation marks

and citations omitted).

'Id. (internal quotation marks and citations omitted).

on prior proceedings, no basis for recusal exists.'' A judge has as strong a duty to sit when

there is no reason to recuse as she does to recuse when the law and facts require recusal.'”

Movants suggest that the Court is partial toward Brown and impartial toward

Movants. Generally, recusal on the grounds of partiality may be required when the judge

forms opinions about the litigants based on information obtained outside the course of

judicial proceedings, i.e., from an “extrajudicial source.” Recusal is not required simply

because the judge has ruled against the movant in pretrial proceedings. “[J]udicial rulings

alone almost never constitute a valid basis for a bias or partiality motion. [Citation omitted. |

... Almost invariably, they are proper grounds for appeal, not for recusal.” '? A judge is not

required to recuse on account of —

opinions formed by the judge on the basis of facts introduced or events

occurring in the course of the current proceedings, or of prior proceedings, . . .

unless they display a deep-seated favoritism or antagonism that would make

fair judgment impossible. Thus, judicial remarks during the course of a trial

that are critical or disapproving of, or even hostile to, counsel, the parties, or

their cases, ordinarily do not support a bias or partiality challenge. They may

do so if they reveal an opinion that derives from an extrajudicial source; and

they will do so if they reveal such a high degree of favoritism or antagonism

as to make fair judgment impossible."*

"Liteky v. United States, 510 U.S. 540, 550-51 (1994).

"See Hinman v. Rogers, 831 F.2d 937, 939 (10" Cir. 1987). See also In re Allied-

Signal, Inc., 891 F.2d 967, 970 (1* Cir. 1989) (judges must be circumspect in recusing so as

to discourage and prevent judge shopping by litigants unhappy with adverse rulings by the

presiding judge).

SLiteky v. United States, 510 U.S. 540, 555 (1994) (citation omitted).

'4Id. (emphasis original).

When a judge’s opinion on the merits of a case derives from the evidence presented, and no

extrajudicial source is involved, unfavorable judicial rulings can "only in the rarest

circumstances evidence the degree of favoritism or antagonism required" for recusal.’°

Movants’ contention that the undersigned's impartiality might reasonably be

questioned is based on the Court’s finding of Brown’s credibility in the Pettigrew

Proceeding, its ruling on summary judgment in this proceeding, its conduct of the pretrial

conference, and its denial of Movants’ continuance request. All complaints of partiality

and/or impartiality stem from findings, conclusions, and decisions made in the course and

context of judicial proceedings and routine trial administration efforts. Movants have not

established that any opinion the Court may have of the litigants or their counsel is derived

from an extrajudicial source.'®

Further, Movants have not established that a third-party observer, fully informed of

all the relevant facts, would find that the Court’s findings, conclusions, rulings, or conduct

of pretrial proceedings, display the degree of deep-seated favoritism or antagonism required

to question the impartiality of the undersigned judge. Adverse rulings “almost never

Td.

‘The Court’s opinion of Brown’s integrity was informed, as stated in the Pettigrew

Order, solely by his past conduct in proceedings before the Court. Movants do not allege any

extra-judicial knowledge or relationship, and there is none. Thus, the cases Movants cite in

support of their Motion to Disqualify are inapposite. See Roberts v. Bailar, 625 F.2d 125 (6"

Cir. 1980) judge had a duty to recuse because judge knew the defendant and opined that he

was an “honorable man” who “would never intentionally discriminate against anyone’);

Hadler v. Union Bank & Trust Co. of Greensburg, 765 F.Supp. 976 (S.D. Ind. 1991) Gudge

was required to recuse due to long standing friendship with the key witness who had a

financial stake in the outcome of the proceeding).

constitute a valid basis for recusal.”’” Further, a court’s comments on the merits of the case

based on its interpretation of applicable law, or comments concerning a party’s failure to

comply with the court’s rules or orders, or comments made to focus parties on the elements

of their claims and defenses, or efforts to narrow the issues for trial, are necessary for the

efficient administration of a proceeding, and are not grounds for recusal."*

V. Conclusion

Movants have not demonstrated that the undersigned has formed opinions of the

parties or counsel based upon an extrajudicial source, nor have they shown that the

undersigned has displayed “such a high degree of favoritism or antagonism as to make fair

judgment impossible.”’’ Accordingly, the Motion to Disqualify is denied.”

"Liteky, 510 U.S. at 555.

'SSee, e.g., Barna v. Haas (Inre Haas), 292 B.R. 167, 178-81 (Bankr. S.D. Ohio 2003),

and cases cited therein.

MLiteky, 510 U.S. at 555.

The Motion to Disqualify is also untimely. In the Tenth Circuit, a party must “act

promptly once it knows of the facts on which it relies in its motion. A promptly filed motion

conserves judicial resources and alleviates the concern that it is motivated by adverse rulings

or an attempt to manipulate the judicial process.” United States v. Pearson, 203 F.3d 1243,

1276 (10" Cir. 2000); Willner v. Univ. of Kansas, 848 F.2d 1023, 1028-29 (10" Cir. 1988).

Movants filed their Motion to Disqualify on the eve of trial after the Court denied

their motion for summary judgment. The Motion to Disqualify was filed long after Movants

should have known that under Oklahoma preclusion law, they needed to present the entire

judgment roll in the Grogan Action to establish their defense of issue preclusion. Further,

Movants were aware of the Court’s finding concerning Brown’s credibility in the Pettigrew

Proceeding at least three weeks before they filed the Motion to Disqualify because they

submitted the Pettigrew Order as one of their trial exhibits.

10

SO ORDERED this 26" day of November 2018.

DANA L. RASURE, CHIEF JUDGE

UNITED STATES BANKRUPTCY COURT

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