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McCallan v. Wilkins

United States District Court, M.D. Alabama, Northern Division

March 19, 2018

TIMOTHY MCCALLAN, Appellant,
v.
CARLY B. WILKINS, as Trustee for Debtors Allegro Law, LLC and Allegro Financial Services, LLC, Appellee.

          MEMORANDUM OPINION AND ORDER

          W. KEITH WATKINS CHIEF UNITED STATES DISTRICT JUDGE

         Before the court are the following motions: (1) Defendant/Appellant Timothy McCallan's amended motion (Doc. # 1-1) for leave to file an interlocutory appeal; (2) McCallan's Emergency[1] Motion (Doc. # 2) to expedite the appeal pursuant to Rule 8003(a)(2)(B) of the Federal Rules of Bankruptcy Procedure; (3) Appellee Carly B. Wilkins's motion (Doc. # 3) to dismiss for lack of jurisdiction; (4) Appellee's motion (Doc. # 5) to strike the motion for leave to expedite the appeal; and (5) Appellee's motion to strike McCallan's brief in support of the appeal (Doc. # 14). The court concludes that the motion to dismiss for lack of jurisdiction is due to be granted, the motion for leave to file an interlocutory appeal is due to be denied on the merits, and the remaining motions are due to be denied as moot.

         I. PROCEDURAL HISTORY

         On October 6, 2016, the bankruptcy court held McCallan in civil contempt of court for willful failure to comply with a previous order to compel postjudgment discovery by, among other things, submitting discovery responses that he knew were incomplete and offering meritless excuses for his failure to fully and accurately respond to discovery. (Doc. # 7-7.) The October 6, 2016 Order did not impose sanctions on McCallan (despite a motion for sanctions from the opposing party), but did require McCallan to purge himself of contempt “not later than October 18, 2016” by supplying truthful and accurate answers to certain interrogatories and complying with a request for production of documents. (Doc. # 7-7.)

         At no time since October 6, 2016, did the bankruptcy court find that McCallan had purged himself of contempt. Since then, however, the bankruptcy court's efforts to prod McCallan into compliance have been ongoing. By Order entered October 21, 2016, the bankruptcy court found that McCallan had “perpetrated a fraud upon the Court by misrepresenting the reasons [a Florida[2] hurricane and the death of a nephew] that he failed to purge himself of contempt and instead seeking additional time . . . for the purpose of moving, hiding, or otherwise disposing of assets that could otherwise be used to satisfy the judgment against him in this matter.” (Doc. # 7-8 at ¶¶ 2-3.) Accordingly, the bankruptcy court held that McCallan “remains in contempt, has failed to purge himself of contempt, and has committed additional acts of contempt since the October 6, 2016 hearing.” (Doc. # 7-8 at ¶ 4.) The bankruptcy court directed McCallan to comply with additional discovery requests, provide an accounting of $498, 000.00 in a certain Wells Fargo bank account, and refrain from making any additional transfers of the $498, 000.00 “that he swore under penalty of perjury was in” the Wells Fargo account. (Doc. # 7-8 at ¶¶ 8-10.) The bankruptcy court warned that, if McCallan did not comply with all discovery obligations within the next seven days, the bankruptcy court would order him arrested and brought before it. (Doc. # 7-8 at ¶ 11.)

         McCallan did not comply with the requirements of the October 21, 2016 Order. For reasons not immediately apparent from the relatively limited selection of documents included in the designated record on appeal, the Bankruptcy Court did not order McCallan arrested until approximately one year later. On the Certified Docket sheet (Doc. # 1-3), one-hundred and twenty-three entries are recorded between October 21, 2016 and August 22, 2017. Those entries demonstrate that, during that time, the bankruptcy court continued to manage ongoing discovery disputes and engage in attempts to prompt McCallan to comply with his discovery obligations. By Order entered August 22, 2017, following an evidentiary hearing on pending motions for sanctions, the bankruptcy court held that McCallan was “in default on numerous obligations to provide discovery, ” had not provided an accounting of the money in the Wells Fargo account, and “ha[d] been in contempt of court at all times since this Court entered its order of October 6, 2016.” (Doc. # 7-12 at 1-2.) The bankruptcy court ordered McCallan to comply with all outstanding discovery requests, supplement all postjudgment discovery, and provide a complete accounting (through September 15, 2017) of the Wells Fargo bank account. (Doc. # 7-12 at 2.) The bankruptcy court set September 15, 2017, as the deadline for compliance and set another hearing for October 23, 2017, to review whether McCallan had purged himself of contempt. (Doc. # 7-12 at 2.)

         In an order entered September 13, 2017, the bankruptcy court considered McCallan's motion for extension of time to produce the outstanding discovery because of another Florida hurricane. The bankruptcy court noted McCallan's “history of misrepresenting the effects of natural disasters on his ability to prepare, ” the absence of an affidavit or any specifics as to the difficulties caused by the hurricane, the fact that McCallan's compliance efforts should have been mostly completed before the hurricane arrived if other allegations in the motion truthfully represented the diligence of his efforts to comply, and the fact that the hurricane tracked further west than originally forecast, further minimizing any potential effect on McCallan. (Doc. # 7-13 at 1.) Nevertheless, the bankruptcy court granted McCallan one additional week, until September 22, 2017, to comply. (Doc. # 17-13 at 2.)

         On October 23, 2017, the bankruptcy court held a hearing to determine whether McCallan had purged himself of contempt. (Doc. # 7-14.) At the hearing, the bankruptcy court ordered McCallan jailed for contempt after finding that McCallan's claims that he had complied with the court's orders were false. (Doc. # 7-14.) By written order dated October 23, 2017, the bankruptcy court explained:

McCallan is in direct civil contempt for his failure to produce post judgment discovery as required by the Court's Order of August 22, 2017.[3] McCallan's incarceration is civil in nature and therefore coercive and not punitive. McCallan holds the keys to his jail cell in his pocket. He need only produce the required discovery, or prove that he cannot, to secure his release. The Court notes that McCallan filed a Response on October 16, 2017, contending that he was in compliance with the August 22, 2017 order. . . . Indeed, at the opening of [the] October 23, 2017 hearing, McCallan argued through counsel that he was in full compliance with all obligations. At the end of the day, on October 23, 2017, it was clear that McCallan's claims of compliance were false. McCallan appeared to be changing his position, arguing alternatively, that either he had fully complied, or that he could not comply because he did not have the means. These claims are mutually exclusive.

(Doc. # 7-14 at 1-2.)

         The bankruptcy court “cautioned [McCallan] that, to purge himself of contempt[, ] he must demonstrate that he has fully disclosed all of the matters requested to the best of his ability” and that, “given McCallan's long history of lying to the Court and flouting its orders, he is cautioned that he must be candid with [Appellee] and with the Court.” (Doc. # 7-14.) The bankruptcy court set another hearing, this time for November 6, 2017, to “review McCallan's efforts to come into compliance” with the court's orders. (Doc. # 7-14 at 2-3.)

         McCallan “did not produce any further documents or materials at the time of the November 6, 2017 hearing, but promised that discovery would be forthcoming.” (Doc. # 7-16 at 1.) McCallan did represent that he had downloaded his responses to “Dropbox” folders (a cloud-based electronic method of document storage), which he would make available to Appellee. The bankruptcy court noted that “this is precisely the same representation made in advance of the October 23, 2017, hearing, which was shown to be incorrect.” (Doc. # 7-15.) The bankruptcy court further noted that, had McCallan provided access to the Dropbox files on a more timely basis, Appellee and the court would have been able to review the files before the hearing. The bankruptcy court characterized the Dropbox maneuver as a “‘document dump' . . . in an effort to prevent [Appellee] from examining the production” and noted that it was the second time McCallan had used the maneuver immediately prior to a hearing to determine whether he had purged himself of contempt, despite orders designed to require him to submit his compliant materials sufficiently in advance of the hearing. (Doc. # 7-15 at 2; Doc. # 7-16.) The court cautioned that “another document dump in advance of the next hearing will not be well received.” (Doc. # 7-15 at 2-3.) The court set another hearing for November 16, 2017, to review whether McCallan had purged himself of contempt. (Doc. # 7-15 at 3.)

         Despite the warnings of the November 7, 2017 Order against a last-minute “document dump” before the next scheduled evidentiary hearing, McCallan again performed another “document dump” of “a large number of documents” two days before the November 16, 2017 hearing. At a November 15, 2017 status conference to discuss that “document dump, ” McCallan's lawyer admitted that McCallan's submissions still were not complete. (Doc. # 7-16.) Due to the “last minute document dump, ” the November 16, 2017 hearing was postponed and a status conference was set for January 9, 2018, at which the bankruptcy court would consider “whether yet another evidentiary hearing is appropriate.” (Doc. # 7-16.) The bankruptcy court set a December 15, 2017 deadline for production of outstanding discovery and other materials. (Doc. # 7-16.)

         On December 23, 2017, McCallan filed a motion to quash the contempt finding and for release from custody (Doc. # 12-7), in which he argued that he had already purged himself of contempt and that his continued incarceration was punitive.

         Following the January 9, 2018 status conference, the bankruptcy court entered a written order on January 16, 2018. (Doc. # 7-17.) It briefly described the history of the case and noted that McCallan's lawyer at the time of trial and in the early phases of postjudgment discovery had been disbarred by the Alabama State Bar in conjunction with his conduct in the case, including efforts to thwart discovery. (Doc. # 7-17.) The bankruptcy court noted McCallan's motion to quash the contempt finding and for release from custody and expressly rejected the contention in that motion that McCallan's continued incarceration was punitive because he had already produced all responsive documents. (Doc. # 7-17.) The bankruptcy court set another hearing, this time for January 30, 2018, to resolve the dispute over whether McCallan had purged himself of contempt. (Doc. # 7-17.)

         On January 30 and 31, 2018, the bankruptcy court held a hearing to determine whether McCallan had purged himself of contempt. Following that hearing, the bankruptcy court entered a written order on February 6, 2018. (Doc. # 1-1 at 8.) In the February 6, 2018 Order, the bankruptcy court noted its finding, previously announced from the bench at the hearing, that McCallan had failed to purge himself of contempt. However, in the February 6, 2018 Order, the bankruptcy court did not expressly rule on McCallan's motion to quash the contempt finding or for release from incarceration. Instead, the bankruptcy court announced its intent to enter written findings of fact and conclusions of law following briefing by both parties, for which the court set deadlines. (Doc. # 1-1 at 9.)

         The bankruptcy court further found that the record, the voluminous documentary evidence presented, and the nature of the production to date made a “daunting task” of determining the precise contours of the remaining contempt dispute. (Doc. # 1-1 at 9.) The bankruptcy court then ordered that, before it held any additional evidentiary hearings to review whether contempt had been purged, McCallan would be required to demonstrate that he had purged himself of contempt by complying with the following conditions: (1) he must provide updated responses to specifically enumerated discovery requests; (2) he must file an updated accounting for the $498, 000 that was in the Wells Fargo account; (3) he must amend his bankruptcy schedules and statement of financial affairs in bankruptcy Case No. 17-30961; and (4) he must file a certification that he has complied with the February 6, 2018 Order. (Doc. # 1-1 at 10.) The bankruptcy court further ordered that, within thirty days of the filing of the certification, Appellee must file a response stating whether she agreed that McCallan's responses were complete. (Doc. # 1-1 at 10.) If no further controversy remained, the bankruptcy court would immediately release McCallan from jail. If further controversy remained, the court would hold more hearings to determine whether McCallan had purged himself of contempt. (Doc. # 1-1 at 10.)

         On February 15, 2018, McCallan filed a notice of appeal from the February 6, 2018 Order or, in the alternative, a motion for leave to file an interlocutory appeal from the February 6, 2018 Order pursuant to 28 U.S.C. §158(a)(3) and Rule 8004 of the Federal Rules of Bankruptcy Procedure. (Doc. # 1.) On February 22, 2018, this court entered an Order (Doc. # 8) requiring the parties to submit briefing on the question of this court's subject-matter jurisdiction. The parties have submitted briefs in compliance with the February 22 Order. (Doc. # 9; Doc. # 13.)

         II. ANALYSIS

         A. Appeal as of Right from a Final Order

         Pursuant to 28 U.S.C. § 158(a)(1) and Rule 8003 of the Federal Rules of Bankruptcy Procedure, an appeal as of right may be taken to the district court from a final order of the bankruptcy court.[4] Appellee argues that the February 6, 2018 Order is not a final order of the bankruptcy court because it does not end the litigation on the merits, leaving nothing for the trial court to do but execute on the decision. In determining the finality of an order “[i]n bankruptcy proceedings, it is generally the particular adversary proceeding or controversy that must have been finally resolved, rather than the entire bankruptcy litigation.” In re Charter Co., 778 F.2d 617, 621 (11th Cir. 1985).

         The February 6, 2018 Order represents the outcome of a hearing held on January 30-31, 2018, to review whether Appellant, who had already been in jail for civil contempt since October 23, 2017, had purged himself of contempt. The bankruptcy court stated in its February 6, 2018 Order that it intends to receive briefs from the parties (the second of which is not due until today, March 19, 2018) and enter written findings of fact and conclusions of law regarding its determination that McCallan has not yet purged himself of contempt.[5] (Doc. # 1-1 at 9.) The bankruptcy court intends to further consider whether McCallan purged ...


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