Not for Publication in West's Federal Reporter
United States Court of Appeals
For the First Circuit
No. 07-1898
PAT V. COSTA,
Plaintiff, Appellant,
v.
MAROTTA, GUND, BUDD & DZERA, LLC, ET AL.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
Before
Torruella, Lipez and Howard,
Circuit Judges.
Pat V. Costa on brief pro se.
Michael D. Sirota and Cole, Schotz, Meisel, Forman & Leonard,
P.A., on brief for appellee Marotta, Gund, Budd & Dzera, LLC.
James W. Donchess and Donchess & Notinger, PC, on brief for
appellee Steven M. Notinger.
June 16, 2008
Per Curiam. This appeal involves a motion to intervene
in an adversary proceeding arising out of a bankruptcy case. A
crisis management firm and other professionals provided services to
the debtors while they were in chapter 11. After the case was
converted to chapter 7, those professionals submitted fee
applications. Appellant Pat Costa, a former director and officer
of the debtors, objected thereto, accusing the professionals of
malpractice and related misconduct. As a creditor, Costa had
standing to advance such objections as a basis for seeking denial
(or disgorgement) of the requested fees. But only the chapter 7
trustee had standing to bring a malpractice action for damages.
Recognizing this fact, and noting that disposition of the fee
applications would bar a future malpractice action on res judicata
grounds, the bankruptcy court sua sponte converted the contested
matter into an adversary proceeding and designated the trustee as
the plaintiff. Costa was given a limited right of participation.
He nonetheless complained of his inability to prosecute a dispute
that he had initiated and, in particular, protested that the
trustee did not share his assessment of the professionals'
performance. Costa thus moved to intervene as a full party. The
bankruptcy court denied this motion, the district court affirmed,
and Costa has now appealed to this court.
The appeal ends up foundering on procedural shoals.
Nowhere in his lengthy pro se brief has Costa provided any
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developed analysis of the intervention issue. Instead, he purports
to incorporate by reference arguments advanced by his counsel in
district court--a practice that this court has repeatedly
condemned. Those arguments have thus been forfeited. And
particularly because Costa's various challenges to the denial of
intervention would likely fail on the merits in any event, we see
no reason to excuse his default.
"In an appeal from district court review of a bankruptcy
court order, we independently review the bankruptcy court's
decision ...." Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 30
(1st Cir. 1994). Costa asserts that, under Bank. R. 7024 (which
adopts Fed. R. Civ. P. 24), he has satisfied the criteria for both
permissive and mandatory intervention. As to the former, the
bankruptcy court cannot possibly be faulted for denying relief
based on concerns about undue delay and expense, given that Costa
had requested much more extensive discovery and a lengthier hearing
than had the existing parties. See, e.g., Daggett v. Comm'n on
Gov. Ethics, 172 F.3d 104, 113 (1st Cir. 1999) (determining whether
permissive intervention would cause disruption or delay "is the
kind of judgment on which the district court's expertise and
authority is at its zenith"). The appeal thus hinges on Costa's
entitlement to intervene as of right.1
1
As an alternative basis for relief, the bankruptcy court
also found a violation of Rule 24(c), which requires that a motion
to intervene "be accompanied by a pleading that sets out the claim
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Rule 24(a)(2) sets forth four criteria for intervention
as of right, which we have summarized as follows:
A putative intervenor ... must show that (1)
it timely moved to intervene; (2) it has an
interest relating to the property or
transaction that forms the basis of the
ongoing suit; (3) the disposition of the
action threatens to create a practical
impediment to its ability to protect[] its
interest; and (4) no existing party adequately
represents its interests.
B. Fernandez & Hnos., Inc. v. Kellogg USA, Inc., 440 F.3d 541, 544-
45 (1st Cir. 2006) (footnote omitted); accord, e.g., Geiger v. Foley
Hoag LLP Retirement Plan, 521 F.3d 60, 64 (1st Cir. 2008). All four
criteria--timeliness; sufficiency of interest; likelihood of
impairment; and inadequacy of representation--must be met. See,
e.g., Fernandez, 440 F.3d at 545. The bankruptcy court determined
that Costa had satisfied neither the third nor the fourth, while
the district court focused on the latter.
In district court, Costa filed a comprehensive opening
brief (and reply brief) through counsel. In this court, where he
appears pro se, he could have simply relied thereon. Instead, he
elected to prepare new documents. His 30-page opening brief
or defense for which intervention is sought." Given the unusual
circumstances involved here--particularly the fact that Costa's
objection to the fee applications was designated as the operative
complaint in the adversary proceeding--we find this a closer
question, but one that need not be resolved.
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contains two arguments, the longer of which is mostly inapposite.2
The other argument touches on the fourth Rule 24(a)(2) criterion,
but does so in cursory fashion only (and ignores the third one
altogether). Costa there contends that the trustee, even before
being installed as plaintiff in the adversary proceeding, had
discounted the allegations of malpractice, had negotiated
settlements with the professionals involving minor fee reductions
in return for full releases,3 and had been preparing a suit against
Costa for breach of fiduciary duties. Under these circumstances,
he insists, it would be "astounding" to conclude that the trustee
would adequately represent his interests. Costa then simply
states:
I believe it is clear that the Bankruptcy
laws and procedures allow me to intervene, and
as the original filings clearly convey, both
the Lower Court and District Court did not
apply the law properly. The result is a
denial of my right to due process.
(My intervention filings ... are attached
as APPENDIX B.)
2
Costa there repeats his allegations of malpractice and
fraud against the professionals; accuses the trustee and the
bankruptcy court of covering up such misconduct; and complains
about the procedural consequences of converting his fee objections
into an adversary proceeding.
3
The trustee's motions for approval of those settlements
were made part of the adversary proceeding.
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The cited portion of his appendix contains his motion to intervene,
the opening district court brief filed by counsel, and the
pertinent court rulings.4
"[A]dopting by reference memoranda filed in the district
court is a practice that has been consistently and roundly
condemned by the Courts of Appeals." Gilday v. Callahan, 59 F.3d
257, 273 n.23 (1st Cir. 1995) (internal quotation marks omitted);
accord, e.g., Northland Ins. Co. v. Stewart Title Guar. Co., 327
F.3d 448, 452-53 (6th Cir. 2003) (collecting cases). Among other
problems, advancing an argument in this fashion violates the
requirement in Fed. R. App. P. 28(a)(9)(A) that a brief contain the
party's contentions and reasoning, see, e.g., Rhode Island Dep't of
Env. Mngmt. v. United States, 304 F.3d 31, 48 n.6 (1st Cir. 2002),
and enables a party to circumvent the page/word limits in Fed. R.
App. P. 32(a)(7), see, e.g., Exec. Leasing Corp. v. Banco Popular
de Puerto Rico, 48 F.3d 66, 67 (1st Cir. 1995).5 This court
4
In his reply brief in this court, Costa quotes at length
from both of his district court briefs and includes copies thereof
in an addendum. Yet "[a]rguments omitted from an opening brief on
appeal ordinarily are deemed waived." Credit Francais Int'l, S.A.
v. Bio-Vita, Ltd., 78 F.3d 698, 709 n.18 (1st Cir. 1996). Costa
cannot claim ignorance of this rule inasmuch as appellees relied
thereon in district court. See D.N.H. No. 06-412, Dkt. # 33, at
10.
5
The practice also ignores the fact that the "posture and
focus" of a case typically will have "changed substantially on
appeal." Cray Comms., Inc. v. Novatel Computer Sys., Inc., 33 F.3d
390, 396 n.6 (4th Cir. 1994). This is less of a concern here, since
the district court was sitting in an appellate capacity.
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ordinarily regards such an "incorporated by reference" argument as
forfeited. See, e.g., Sleeper Farms v. Agway, Inc., 506 F.3d 98,
104-05 (1st Cir. 2007), cert. denied, ___ S. Ct. ___, 2008 WL 310964
(2008); Rhode Island Dep't of Env. Mngmt, 304 F.3d at 48 n.6;
Gilday, 59 F.3d at 273 n.23; Exec. Leasing Corp., 48 F.3d at 68.
An appellant's pro se status provides no exemption. See, e.g.,
Yohey v. Collins, 985 F.2d 222, 224-25 (5th Cir. 1993); Cofield v.
First Wis. Trust Co., 1996 WL 521199, at *1 (1st Cir. 1996) (per
curiam) (unpub.). Costa, having been informed of this rule by
appellees, has provided no reason why a different result should
obtain here.
Nor are the substantive arguments advanced by Costa in
district court so compelling as to suggest that a declaration of
forfeiture would be unfair; in fact, quite to the contrary. In
attempting to establish inadequacy of representation, Costa has
emphasized the contrast between his views and those of the trustee
concerning the potential viability of the malpractice allegations.
As mentioned, he has accused the professionals of gross misconduct,
whereas the trustee has discounted those claims and reached
settlements involving only minor reductions in fees.6 In an
6
Only one professional--the crisis management firm--is
involved in the instant appeal. Matters concerning the others were
either resolved at the outset or handled in parallel proceedings
that stopped short of an appeal to this court. The district court
judge in the instant case specifically adopted the decision of
another judge in a related case. We will treat that decision as
the operative one here.
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ordinary case, this would likely suffice--especially since an
intervenor "[t]ypically ... need only make a 'minimal' showing that
the representation afforded by a named party would prove
inadequate." Fernandez, 440 F.3d at 545 (quoting Trbovich v.
United Mine Workers, 404 U.S. 528, 538 n.10 (1972)); see, e.g.,
Conservation Law Found. v. Mosbacher, 966 F.2d 39, 44 (1st Cir.
1992) (finding inadequate representation where party agreed to
consent decree imposing burdens unacceptable to intervenors).
Yet "where the intervenor's ultimate objective matches
that of the named party, a rebuttable presumption of adequate
representation applies." Fernandez, 440 F.3d at 546. And that
presumption becomes especially robust where, as here, "an existing
party is under a legal obligation to represent the interests
asserted by the putative intervenor." In re Thompson, 965 F.2d
1136, 1142 (1st Cir. 1992). In that event, the applicant's burden
"is at its most onerous" and requires a "compelling showing" of
inadequacy. Id. (internal quotation marks and emphasis deleted).
We explained in Thompson that, in this context, the applicant must
assert "concrete facts" showing that the trustee is guilty of one
of three things: adversity of interest, collusion, or nonfeasance.
Id. at 1143 (emphasis deleted).
We think that the bankruptcy court was likely justified
in finding that Costa had failed to rebut this presumption. In
objecting to the fee applications and the proposed settlements,
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Costa appeared as a creditor claiming an interest in the estate
property.7 Because the trustee has a fiduciary obligation to
represent the interests of creditors, see, e.g., Petitioning
Creditors of Melon Produce, Inc. v. Braunstein, 112 F.3d 1232, 1240
(1st Cir. 1997), Costa's interests and those of the trustee are
essentially in alignment. To be sure, Costa has advanced a series
of allegations accusing the trustee (and others) of collusion and
cover-up and related misconduct. But a court need only accept as
true "the non-conclusory allegations made in support of an
intervention motion." Fernandez, 440 F.3d at 543 (internal
quotation marks omitted). We note that the bankruptcy court found
"no specific allegations from which even the possibility of
collusion may be inferred." It also held that "Costa's
disagreement with the Trustee's assessment of the benefits and
risks of litigation and of the benefits to the estate of a
compromise of professional fees is insufficient to meet [his] heavy
burden." We cannot say, based on our preliminary review, that
these determinations are clearly misplaced.
Indeed, Costa's principal argument in this regard has
been directed elsewhere. As mentioned, the bankruptcy court relied
on Thompson to hold that the presumption of adequacy could only be
rebutted by a showing of (1) adversity of interest, (2) collusion,
7
Costa holds general unsecured, priority unsecured,
administrative priority unsecured, and secured claims against the
estates.
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or (3) nonfeasance. We have since clarified that this trilogy of
grounds is not "exclusive," Daggett, 172 F.3d at 111, but "only
illustrative," Fernandez, 440 F.3d at 546.8 This means, according
to Costa, that the bankruptcy court employed an erroneous legal
standard. But even assuming arguendo that he is correct,9 we see
little cause for concern. Costa has failed to identify any other
pertinent factors--beyond those comprising the Thompson trilogy--
that if considered would have swung the balance in favor of
intervention. He has mentioned two others, neither of which seems
particularly helpful.
First, Costa has voiced the concern that resolution of
the fee applications might preclude him from pursuing personal
claims (such as for tortious interference or fraud) against the
8
These cases were not addressing Thompson (which was not
mentioned), but rather Moosehead Sanitary Dist. v. S.G. Phillips
Corp., 610 F.2d 49 (1st Cir. 1979)--where we stated that, if the
would-be intervenor has the "same ultimate goal" as an existing
party, it must "ordinarily" make one of the three showings to
overcome the ensuing presumption of adequacy. Id. at 54. The
concern was that such language could be mistakenly read to suggest
"that only a limited number of 'cubbyholes' existed for claims of
inadequate representation." Mass. Food Assoc. v. Mass Alcohol
Beverages Control Comm., 197 F.3d 560, 567 n.5 (1st Cir. 1999).
9
We note that the cases declaring the trilogy non-exclusive
involved a slightly different situation. The presumption of
adequacy arose there because an existing party and the putative
intervenor had the same ultimate goal, whereas it arises here
because an existing party has a fiduciary duty to represent the
interests of the putative intervenor. As mentioned, it is in the
latter situation that the burden of demonstrating inadequacy "is at
its most onerous." Thompson, 965 F.2d at 1142.
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professionals in the future. Yet the district court deemed this
argument forfeited, since it was not raised in bankruptcy court,
and in any event meritless, since the basis for any such preclusion
was not explained. Costa has not addressed either finding.
Second, Costa has pointed to the circumstances
surrounding the conversion of the contested matter into an
adversary proceeding. He complains that, by means of this
"discretionary" and unrequested step, the bankruptcy court removed
him from "[his] own dispute" and thereby deprived him of "due
process and appellate rights."10 Much of Costa's briefing, both
below and on appeal, is devoted to this subject. Yet the May 26,
2006 conversion order is not before us and has little direct
bearing on the intervention issue.11 Costa has gone so far as to
contend that, because of the case's unique procedural posture, it
is questionable "whether the traditional intervention analysis is
even appropriate." We disagree that the remedy for any improper
conversion would be to jettison or even relax the intervention
10
The parties appear to agree that, had the dispute remained
a contested matter, Costa would have had standing to appeal from
any adverse judgment, but that, once it became an adversary
proceeding, his standing to do so depended on intervention. Costa
also complains of restrictions on his ability to obtain discovery
and present evidence. But it is not clear that intervention would
have accorded him any greater latitude in those respects. For
example, he and the trustee were allotted the same amount of time
to examine witnesses at the hearing.
11
The district court summarily rejected as "not persuasive"
Costa's attempt to rely on the conversion order "as part of the
reasoning supporting his motion to intervene."
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criteria. In fact, Costa has mentioned the possibility of filing
an appeal to challenge the conversion order once the adversary
proceeding has concluded. Whether such a course would be
procedurally feasible, and whether such a challenge would have any
prospect of success, are matters as to which we express no opinion.
Based on the foregoing, we conclude that Costa has
forfeited his appellate arguments and that no compelling reason
exists to excuse his default.
Affirmed.
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