FILED
United States Court of Appeals
Tenth Circuit
January 5, 2011
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
RIVIERA DRILLING &
EXPLORATION COMPANY, a Texas
corporation,
Plaintiff - Appellant, No. 10-1081
v. (D. Colorado)
GUNNISON ENERGY (D.C. No. 1:08-CV-02486-REB-CBS)
CORPORATION, a Delaware
corporation; SG INTERESTS I, LTD.,
a Texas limited partnership; SG
INTERESTS VII, LTD., a Texas
limited partnership,
Defendants - Appellees.
ORDER AND JUDGMENT *
Before LUCERO, EBEL, and HARTZ, Circuit Judges.
Riviera Drilling & Exploration Company, a Texas corporation, filed an
antitrust complaint against Defendants Gunnison Energy Corporation, SG
Interests I, Ltd., and SG Interests VII, Ltd. on November 14, 2008, in the United
States District Court for the District of Colorado. Two months later, the court set
*
This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
trial for 13 days beginning February 22, 2010. On January 20, 2010, however,
Riviera’s counsel, Hill & Robbins, moved to withdraw. The motion was served
on Riviera and its in-house counsel, and was unopposed by Defendants. In
support of the motion, counsel filed an ex parte memorandum. The magistrate
judge reviewed the memorandum and held a hearing on the motion on January 25.
Although the judge thoroughly and sternly warned Scott Thurner, a principal and
officer of Riviera, that a corporation could not litigate in court without an
attorney and that the court could dismiss the suit if Riviera did not obtain
replacement counsel, he consented to the withdrawal and the judge granted the
motion.
On February 2, 2010, Riviera, through counsel, filed a voluntary petition
for bankruptcy under Chapter 11. Three days later Scott Thurner and Jacob
Thurner, another principal and officer of Riviera, informed the district judge at
the trial-preparation conference that Riviera had been unable to obtain
replacement counsel. Jacob told the court that they had not appreciated the
difficulty of finding a new attorney and asked the judge to reconsider the motion
to withdraw. The judge denied the motion because it was not made through
counsel and it should have been made first to the magistrate judge. The court
then ruled that the bankruptcy petition did not stay the trial proceeding and
ordered Riviera to show cause by February 9 why the case should not be
dismissed with prejudice.
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On February 9, Jacob Thurner filed a motion to have Hill & Robbins
reinstated as counsel. The district judge denied the motion and dismissed the
complaint with prejudice for failure to prosecute. Riviera appeals. We have
jurisdiction under 28 U.S.C. § 1291 and affirm.
I. DISCUSSION
On appeal Riviera argues that the magistrate judge should not have
allowed its counsel to withdraw, the district court should have reversed the
magistrate judge’s order allowing withdrawal, and the district court should not
have dismissed the complaint with prejudice. In the alternative, Riviera argues
that the district court’s order of dismissal is void as a violation of the automatic
bankruptcy stay under 11 U.S.C. § 362(a). We consider each claim in turn.
A. The Order Allowing Counsel to Withdraw
Riviera contends that the magistrate judge should not have granted Hill &
Robbins’ motion to withdraw. Ordinarily, we review the grant of a motion to
withdraw for an abuse of discretion. See Stafford v. Mesnik, 63 F.3d 1445, 1448
(7th Cir. 1995). But Riviera did not file a timely written objection to the
magistrate judge’s ruling. See Fed. R. Civ. P. 72(a). Under this circuit’s firm-
waiver rule, it therefore “waive[d] appellate review of both factual and legal
questions.” Morales-Fernandez v. INS, 418 F.3d 1116, 1119 (10th Cir. 2004).
We apply the rule unless “a pro se litigant has not been informed of the time
period for objecting and the consequences of failing to object, or . . . the ‘interests
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of justice’ require review.” Id. The first exception does not apply because a
corporation cannot appear pro se. See Rowland v. Cal. Men’s Colony, Unit II
Men’s Advisory Council, 506 U.S. 194, 201–03 (1993). And even if Riviera could
rely on the second exception by showing good cause for failing to object to the
magistrate judge’s ruling, see In re Key Energy Resources, Inc., 230 F.3d 1197,
1200 (10th Cir. 2000), our ultimate review would be for plain error, see Emp’rs
Reinsurance Corp. v. Mid-Continent Cas. Co., 358 F.3d 757, 769 (10th Cir.
2004), and Riviera cannot satisfy that standard because it has not shown that the
magistrate judge committed any error in this case.
The memorandum submitted by Riviera’s attorneys in support of the motion
to withdraw presented numerous reasons for withdrawal: Riviera’s repeated
failures to follow their advice, Riviera’s failure to cooperate and even
communicate with them at critical times, and Riviera’s failure to pay legal fees
and expenses. It said that Riviera had failed to fulfill its obligations despite
repeated warnings that the firm would withdraw. Specifically mentioned were
Riviera’s
responding to an offer from Defendants’ counsel by sending a letter
directly to the Defendants’ principals, refusing to sign a verification
statement for accurate discovery responses, failing to participate in
settlement conferences in a meaningful way, displaying a general
unwillingness to accept and follow [counsel’s] advice on matters
material to litigation strategy, and failing to pay the fees of necessary
experts.
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J. App., Vol. II at 5. The memo asserted that Riviera’s refusal to participate in a
settlement conference scheduled with the magistrate judge and its refusal even to
communicate with counsel the day before the scheduled conference made
continued representation impossible. Correspondence from counsel to Riviera
was attached to the memo. It confirmed that counsel had warned Riviera in
August and November 2009 that its case was being jeopardized by failure to make
required payments to experts; and a January 14, 2010, letter informed Riviera that
without expert testimony the claim could not succeed at trial.
Despite the apparent merits of counsel’s frustration with Riviera, the
magistrate judge could still have denied the motion because of the burden on the
client resulting from withdrawal from the case so close to trial. But Riviera’s
principals consented to the withdrawal, even after warnings from the magistrate
judge of the potential consequences and even though Riviera had in-house counsel
to advise it. Under these circumstances the magistrate judge’s decision was not
plain error.
B. The District Court’s Refusal to Reconsider
Riviera argues that the district court’s denial of its motion for
reconsideration of the order granting leave to withdraw was an abuse of
discretion. Under 28 U.S.C. § 636(b)(1)(A) the district court must defer to the
magistrate judge’s ruling on nondispositive matters unless the ruling is “clearly
erroneous or contrary to the law.” Allen v. Sybase, Inc., 468 F.3d 642, 658 (10th
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Cir. 2006) (internal quotation marks omitted). That is, the district court must
affirm unless “on the entire evidence [it] is left with the definite and firm
conviction that a mistake has been committed.” Id. (internal quotation marks
omitted). We then review the district court’s review for abuse of discretion. See
id. at 659.
We hold that the district court did not err in denying Riviera’s verbal
motion for reconsideration or its later written motion to reinstate counsel. Both
motions were made by nonlawyer representatives of Riviera, and a corporation
can present a motion only through licensed legal counsel. See Rowland, 506 U.S.
at 201–03.
C. Dismissal With Prejudice
Riviera challenges the district court’s decision to dismiss its complaint with
prejudice as a sanction for its failure to prosecute. Under Federal Rule of Civil
Procedure 41(b) a district court may dismiss an action with prejudice if the
plaintiff fails “to prosecute or to comply with [the Federal Rules of Civil
Procedure] or a court order.” We review for an abuse of discretion a district
court’s decision to dismiss an action for failure to prosecute. See Ecclesiastes
9:10-11-12, Inc. v. LMC Holding Co., 497 F.3d 1135, 1143 (10th Cir. 2007). “An
abuse of discretion occurs when a district court makes a clear error of judgment
or exceeds the bounds of permissible choice in the circumstances. This occurs
when a district court relies upon an erroneous conclusion of law or upon clearly
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erroneous findings of fact.” Id. (brackets, citation, and internal quotation marks
omitted).
Before choosing the sanction of dismissal, the district court should
ordinarily consider the following factors:
(1) the degree of actual prejudice to the defendant; (2) the amount of
interference with the judicial process; (3) the culpability of the
litigant; (4) whether the court warned the party in advance that
dismissal of the action would be a likely sanction for noncompliance;
and (5) the efficacy of lesser sanctions.
Ehrenhaus v. Reynolds, 965 F.2d 916, 921 (10th Cir. 1992) (citations, ellipses,
and internal quotation marks omitted). “These factors do not constitute a rigid
test,” but are simply “criteria for the district court to consider.” Id. Moreover,
“we can of course affirm a district court’s dismissal based on our own
independent assessment of its legal propriety.” Nasious v. Two Unknown B.I.C.E.
Agents, 492 F.3d 1158, 1162 (10th Cir. 2007). Riviera argues that the district
court failed to evaluate and weigh all five factors and that dismissal with
prejudice is an extreme sanction that is unreasonable in this case. Under the
deferential abuse-of-discretion standard, we affirm the district court’s dismissal
order. We address each factor in turn.
1. Prejudice to Defendants
The district court found that there was no possibility of trial as scheduled
and that the trial could not be reset before March 2011 “without disturbing other
trial settings.” J. App., Vol. I at 275. It noted the obvious “substantial prejudice
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[to Defendants] in the form of wasted time, effort, and expense” that would result
from such delay. Id. at 274. The intense work required in the weeks just before a
13-day trial would need to be largely repeated after a one-year delay. See Rogers
v. Andrus Transp. Servs., 502 F.3d 1147, 1152 (10th Cir. 2007) (“Having to
prepare for trial on multiple occasions can be a considerable burden, wasting time
and resources.”). The court also observed that a continuance would “prolong for
the defendants the substantial uncertainty faced by all parties pending litigation.”
J. App., Vol. I at 275. Ehrenhaus noted that “a lawsuit containing the serious and
stigmatizing allegations of fraud damages the reputation of those accused so long
as the lawsuit remains pending.” 965 F.2d at 921. The same can be said of
antitrust allegations.
We reject Riviera’s argument that there was “no actual factual evidence”
that Defendants would be prejudiced by a continuance. Aplt. Br. at 18. An
experienced trial judge could see the obvious. Nor is it relevant that there had
been no prior delays and that the case was “only” 14 months old. The problem
was the timing of the continuance—the eve of trial. If counsel had withdrawn
months before the scheduled trial, we assume that the court would not have
dismissed the case. But a plaintiff who, at the last minute, is unprepared for trial
is not properly prosecuting its case. We see no error in the district court’s finding
of substantial prejudice.
2. Interference With Judicial Process
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The district court found that Riviera “short-circuited [the court’s] efforts
shortly before they were to come to fruition at trial.” J. App., Vol. I at 275.
Thirteen days on a district court’s calendar is a precious resource. Riviera
categorizes the problem as just “one missed deadline.” Aplt. Br. at 24. Perhaps,
but few missed deadlines can so greatly disrupt a court’s schedule. The district
court properly evaluated this factor.
3. Culpability of Riviera
Much of Riviera’s attack on the dismissal concerns the district court’s
finding that it was responsible for the inability to proceed to trial. It presents
itself as always eager to try the case, as undertaking great effort to obtain
replacement counsel, and as the victim of its ignorance of the difficulty of
obtaining counsel when it agreed to the withdrawal of Hill & Robbins.
But the district court quite properly concluded that Riviera had substantial
culpability for its inability to proceed to trial. Although the magistrate judge
refused to “assign[] fault or blame in any way” when it granted the motion to
withdraw by Hill & Robbins, J. App., Vol. I at 132, the letters to Riviera that the
firm submitted to the court paint a picture of a client knowingly preventing
counsel from pursuing the litigation.
In any event, there is no need to apportion blame between lawyer and
client. Under the Ehrenhaus factors we rarely distinguish between the party and
its agent. See Gripe v. City of Enid, Okla., 312 F.3d 1184, 1188–90 (10th Cir.
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2002). But cf. Davis v. Miller, 571 F.3d 1058, 1064 (10th Cir. 2009) (recognizing
exception to general rule for habeas petitioners because liberty is at stake and
malpractice suit could not provide relief). Thus, whether the consensual
withdrawal of counsel was the fault of Riviera or of its counsel is of no
importance. What can be said with certainty, however, is that no one else must
bear that blame. Neither the Defendants nor the court had any obligation to
perform the duties of the already occupied position of general counsel for Riviera.
Accordingly, the district court properly weighed this factor against Riviera.
4. Notice of Possible Dismissal
In its order of dismissal the district court did not explicitly mention the
fourth Ehrenhaus factor—a warning by the court of the possibility of dismissal.
But any error in this regard is inconsequential, because there undoubtedly was
such a warning. Before the magistrate judge granted the motion of Hill &
Robbins to withdraw, he repeatedly emphasized to Riviera’s representative the
dire consequences that could result from not retaining replacement counsel,
saying that lack of counsel “will effectively end the case,” J. App., Vol. I at 129,
and would present “an insurmountable problem.” Id. at 133. See Jones v.
Thompson, 996 F.2d 261, 265 (10th Cir. 1993) (notice prong was satisfied when
plaintiffs admitted that “the court warned them in advance that dismissal of the
action would be a likely sanction for noncompliance”). Even if the district court
did not weigh the notice factor in deciding to dismiss the case with prejudice,
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there is no reason to believe that consideration of the factor could have caused the
court to choose a lesser sanction or no sanction at all.
5. Availability of Lesser Sanctions
The district court’s dismissal order also did not explicitly address the fifth
Ehrenhaus factor—the availability of lesser sanctions. But its consideration of
this factor was clearly implicit in its analysis. Because Riviera had filed for
bankruptcy, a financial sanction was out of the question. The only issue was
whether to dismiss or grant a continuance. The court found that Riviera had no
“realistic prospect” of proceeding to trial “in the reasonably foreseeable future,”
since there was “no indication . . . that any attorney had indicated even a potential
willingness to represent Riviera even if a brief continuance of the current trial
date is granted.” J. App., Vol. I. at 274. Moreover, the correspondence from Hill
& Robbins to Riviera strongly suggested that even if an attorney would take the
case, it could not be successfully tried at the scheduled time because the
necessary experts had not been paid their fees. And, as previously noted,
anything beyond a brief continuance would require postponing trial more than a
year, causing unacceptable prejudice to the Defendants.
In light of the findings by the district court, we hold that it did not abuse its
discretion in deciding that dismissal with prejudice was the proper disposition.
D. The Bankruptcy Stay
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Riviera contends that the automatic bankruptcy stay under 11 U.S.C. § 362
voided the district court’s order of dismissal. A petition in bankruptcy operates
as a stay of:
(1) the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other action
or proceeding against the debtor that was or could have been
commenced before the commencement of the case under this title, or
to recover a claim against the debtor that arose before the
commencement of the case under this title; [and]
....
(3) any act to obtain possession of property of the estate or of
property from the estate or to exercise control over property of the
estate;
11 U.S.C. § 362(a) (emphasis added). Riviera argues that § 362(a)(3) precluded
the dismissal of its lawsuit, because the lawsuit is an asset of the bankruptcy
estate. The district court orally ruled that the bankruptcy stay did not apply to its
actions, and we agree.
Because the lawsuit was brought by the debtor Riviera, not against it,
§ 362(a)(1) is inapplicable. A debtor can continue to pursue its claims against
another party even after filing for bankruptcy protection. And § 362(a)(3) is also
inapplicable, because an attempt to dismiss or defeat a debtor’s lawsuit is not an
act to obtain possession or exercise control over property of the debtor’s estate.
To adopt Riviera’s reading of § 362(a)(3) would prevent those sued by debtors
from defending themselves. See United States v. Inslaw, Inc., 932 F.2d 1467,
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1473 (D.C. Cir. 1991) (“[S]omeone defending a suit brought by the debtor does
not risk violation of § 362(a)(3) by filing a motion to dismiss the suit, though his
resistance may burden rights asserted by the bankrupt.”); In re Bryner, 425 B.R.
601, 607–08 (B.A.P. 10th Cir. 2010).
II. CONCLUSION
We AFFIRM the judgment of the district court.
ENTERED FOR THE COURT
Harris L Hartz
Circuit Judge