United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
August 23, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
05-10867
In The Matter Of: LEWIS EUGENE WOOD,
Debtor,
********************************
JAMES P. GRAHAM;
RAY S. TOLSON, III,
Appellants,
v.
LEWIS EUGENE WOOD,
Appellee.
Appeal from the United States District Court for the
Northern District of Texas
(05-CV-332)
Before JONES, Chief Judge, and BARKSDALE, and BENAVIDES, Circuit
Judges.
BENAVIDES, Circuit Judge:*
This appeal is from the dismissal of a bankruptcy proceeding
for failure to prosecute. Applying our precedent, we conclude that
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
there is not a clear record of delay or contumacious conduct by the
Appellants. Further, the record does not show either that the
court determined that lesser sanctions would not prompt diligent
prosecution or that it employed lesser sanctions which proved to be
futile. Under those circumstances, the bankruptcy court abused its
limited discretion in dismissing for failure to prosecute. We
therefore vacate and remand for further proceedings.
I. BACKGROUND AND PROCEDURAL HISTORY
Appellee Lewis Wood (“Appellee”) procured a loan of $250,000
from Dallas National Bank. Pursuant to an agreement, James P.
Graham and Ray S. Tolson, III (“Appellants”) provided land as
collateral for the loan. Appellee agreed to use the proceeds of
the loan to fund a portion of construction costs for a project by
Urban Woods on Commerce, Ltd. (“Urban Woods”). In exchange for
providing this collateral, Appellants were to receive a portion of
the profits from the project. Appellants allege that Appellee did
not use the monies in conjunction with Urban Woods; instead, they
allege that he diverted the monies to his other “projects and/or
companies.” The project failed, and Appellee defaulted on the
loan. Appellants assert that, as guarantors, they were required to
pay off the loan to Dallas National Bank.
Appellee later filed for personal bankruptcy protection.
Appellee listed a debt of approximately $300,000 owed to Tolson,
one of the Appellants. On March 22, 2004, pursuant to 11 U.S.C.
section 523(a)(2) and (a)(4), Appellants filed their objection to
2
the dischargeability of the debt. Three days later, the bankruptcy
court entered a scheduling order setting the trial docket call for
August 9. On March 30, the bankruptcy court dismissed the
complaint because Appellants had not paid the filing fee. On April
5, Appellants filed a motion to vacate the dismissal order.1 The
court granted Appellants’ motion, vacated the dismissal order on
April 7, and reinstated the scheduling order.
On May 12, Appellee filed an answer. On May 14, Appellants
filed a first amended objection to dischargeability, which
Appellees answered on May 24. Meanwhile, Appellants had served
Appellee with requests for production of documents and
interrogatories. On June 18, Appellants received Appellee’s
answers to the interrogatories and response to the request for
production. Appellants deemed the responses insufficient and filed
a motion to compel discovery and to impose sanctions on July 8. On
July 22, the court ordered Appellee to file a detailed response to
the motion to compel. Appellees filed a response on August 4.
At the trial docket call on August 9, the bankruptcy court
continued the trial docket call to November 8. Notably, Appellants
did not move for the continuance. The court apparently continued
1
In the motion, counsel indicated that, after receiving a
phone call from the clerk advising that fees were due, his
secretary mailed the check on March 29. The next day he received
a notice of fees due dated March 24 and also learned of the
dismissal order. Counsel indicated that the failure to pay timely
was “not intentional, nor the result of conscious indifference, but
was accidental.” Finally, counsel argued that reinstating the case
would not cause delay or prejudice.
3
it because of the discovery dispute. The discovery deadline was
rescheduled for October 12.
On September 1, the bankruptcy court granted Appellants’
motion to compel discovery and ordered Appellee to furnish
additional responses to the interrogatories. On September 15, the
parties filed a stipulation that Appellee had supplemented his
responses to the interrogatories and request for production of
documents pursuant to the court’s order. On October 21, Appellee
filed a witness list indicating that he would be the only defense
witness for the trial scheduled for the week of November 15, 2004.2
On October 26, Appellants filed a witness list comprised of the
parties to the suit and “any person listed in Plaintiffs’ responses
to discovery.”3 In that filing, Appellants further indicated to
the court that they had:
received six boxes of documents on October 22, 2004
related to the transaction that is the subject of this
suit and Plaintiffs’ counsel have not had time to review
in any detail the documents provided by Debtor/Defendant.
Dallas National Bank, a non-party, has not yet responded
to discovery requests. Therefore, in the interest of
justice Plaintiff intends to file a Motion for
Continuance.
2
That exhibit list indicated Appellee intended to introduce
the following exhibits at trial: (1) “Note to Dallas Bank”; (2)
“Assignment of Net Profits Interest dated November 3, 2000"; (3)
“Any exhibits timely designated by Plaintiffs”; and (4) “Any
exhibits used for impeachment.”
3
Appellants also listed these categories of exhibits: (1)
documents designated by the defendant; (2) documents provided to
plaintiff by debtor/defendant; and (3) “[b]ank records of any
account of Debtor/Defendant or any of his companies.”
4
On November 8, Appellants filed a motion to continue the trial
setting to allow discovery to be completed. In the motion,
Appellants provided as follows:
On May 21, Graham and Tolson sent their first round
of paper discovery. On June 18, responses with
objections were received by Graham. On July 8, Graham
filed a Motion to Compel and an Order was issued on
August 31. On September 10, Graham received supplemental
responses from Defendant. On October 11, Graham sent a
Subpoena to Dallas National Bank for documents and
cancelled checks. Those documents were received by
Graham on November 1, but did not include deposit slips.
On October 25, a Witness List and notice that Graham
would seek a continuance was filed because he had not
received essential documents. On November 1, Plaintiffs
received documents from Dallas National Bank including a
copy of a wire transfer of fund to American Title
Company. On November 5, Graham sent a Subpoena to
American Title Company and on November 8 sent a subpoena
to Bank of Texas, Tulsa, Oklahoma for documents.
In spite of Plaintiffs’ diligence, essential records
are required, including documents showing the use of the
loaned funds. Additional subpoenas have been issued for
documents held by American Title Company Dallas (the
recipient of the loan proceeds) and Bank of Texas, Tulsa,
Oklahoma (the holder of the bank deposit slips which were
not among the documents produced by Defendant).
Graham and Tolson issued a non-party subpoena to
Dallas National Bank on October 11, 2004 to obtain the
entire record of the transaction. The bank provided a
response on November 1, 2004, which showed a wire
transfer of $242,000.00 into a previous[ly] unknown
account of Defendant at American Title Company. Graham
and Tolson issued a subpoena to American Title, but no
response has yet been received.
Later that same day, the bankruptcy court held its previously
scheduled docket call. Appellants announced not ready for trial,
and from the bench the court dismissed the case for failure to
5
prosecute.4 On November 15, the bankruptcy court entered a written
order dismissing the case. In its entirety, the order provided
that:
THIS CAUSE having come before this Court on November
8, 2004, for Docket Call on Plaintiff's Complaint to
Determine Dischargeability of Debt, and the Plaintiffs,
having announced that they were not ready for trial, and
having no reasonable explanation for the need for a
continuance, and this being a continued Docket Call from
August 9, 2004, it is, therefore ORDERED, ADJUDGED and
DECREED that:
The above-styled and numbered adversary proceeding
shall be and is hereby DISMISSED FOR WANT OF
PROSECUTION.
Appellants subsequently filed a motion to reinstate or in the
alternative a motion for a new trial, both of which the bankruptcy
court denied in a written order. In a memorandum opinion and
order, the district court affirmed the bankruptcy court’s judgment,
which Appellants now appeal.
III. ANALYSIS
A. Dismissal for Failure to Prosecute
Appellants argue that the bankruptcy court erred in dismissing
the case for failure to prosecute. Although the order did not
provide whether the dismissal was with prejudice, this Court has
treated a dismissal for failure to prosecute as an involuntary
dismissal under Federal Rule of Civil Procedure 41(b), which is a
4
Although the court did not expressly rule from the bench on
the motion to continue, it implicitly denied it by dismissing the
suit.
6
dismissal with prejudice.5 See Boudwin v. Graystone Ins. Co., 756
F.2d 399, 400 n.1 (5th Cir. 1985).
This Court reviews a dismissal with prejudice for failure to
prosecute for abuse of discretion. Berry v. CIGNA/RSI-CIGNA, 975
F.2d 1188, 1191 (5th Cir. 1992). “A dismissal with prejudice is an
extreme sanction that deprives the litigant of the opportunity to
pursue his claim.” Id. (internal quotation marks and citations
omitted). Thus, we have limited a trial court’s discretion to
dismiss cases with prejudice. Id. More specifically, we have
found no abuse of discretion only if “(1) there is a clear record
of delay or contumacious conduct by the plaintiff, and (2) the
district court has expressly determined that lesser sanctions would
not prompt diligent prosecution, or the record shows that the
district court employed lesser sanctions that proved to be futile.”
Id. (citations and footnote omitted). Further, when this Court
affirms such a dismissal, it usually finds one of the following
aggravating factors: “(1) delay caused by [the] plaintiff himself
and not his attorney; (2) actual prejudice to the defendant; or (3)
delay caused by intentional conduct.” Id. (internal quotation
marks and citations omitted) (brackets in opinion).
Here, the bankruptcy court's order of dismissal provides that
(1) Appellants did not have a reasonable explanation for the need
for a continuance when they announced not ready for trial and that
5
Rule 41(b) is made applicable by Bankruptcy Rule 7041.
7
(2) this was a continued docket call from August 9. The
continuance from the August 9 docket call, however, appears to be
based on a discovery dispute, which the court ultimately resolved
in Appellants’ favor. That continuance should not weigh against
Appellants. As set forth above, this Court must determine whether
there is contumacious conduct by the plaintiff or a clear record of
delay.
“Contumacious Conduct”
Appellee asserts that Appellants’ failure to: (1) timely pay
the filing fee; (2) move for leave of court to file an amended
pleading after a responsive pleading had been filed;6 (3) file
proposed findings of fact and conclusions of law; and (4) “formally
request a continuance” until docket call constitute contumacious
conduct. “Contumacious” is defined as “stubbornly perverse or
rebellious; willfully disobedient.” Webster's College Dictionary
297 (1995). It is worth noting that neither in its order of
dismissal nor its order denying the motion to vacate the dismissal
order and reinstate the case did the bankruptcy court rely on the
second and third “failings” alleged above by Appellee.
Although counsel failed to timely pay the filing fee, once
notified of the error counsel quickly rectified it and, in the
successful motion to reinstate the case, indicated that it was not
intentional. With respect to failing to move for leave to file an
6
Appellee relies on Rule 15 of the Federal Rules of Civil
Procedure, made applicable by Bankruptcy Rule 7015.
8
amended pleading, at oral argument Appellants pointed out that the
amended complaint was filed just two days after Appellee’s
responsive pleading, suggesting the pleadings may have “crossed in
the mail.” With respect to the “failure” to file proposed findings
of fact, Appellants state that they did not do so because, as
represented to the court in their October 26 filing, they intended
to (and later did) move for a continuance. Although Appellants
should have timely filed the motion for a continuance, they
provided both the court and opposing counsel notice of their intent
to do so approximately two weeks prior to the docket call.
Ultimately, Appellants did belatedly file it prior to dismissal.
We conclude that although counsel’s conduct may appear careless, it
does not constitute “willfully disobedient” conduct.
“Clear Record of Delay”
We have explained that a clear record of delay entails
“significant periods of total inactivity.” Berry, 975 F.2d at 1191
n.5 (internal quotation marks and citation omitted). Referring to
Appellants’ issuance of a subpoena the day before the discovery
deadline, Appellee argues that “[w]hen a party faced with a
deadline 27 days away does nothing for 26 days, that is a
significant period of time.” Twenty-six days does not constitute
a significant period of time under our precedent. “[O]ur cases
recognize that delay which warrants dismissal with prejudice must
be longer than just a few months . . . .” McNeal v. Papasan, 842
9
F.2d 787, 791 (5th Cir. 1988). This Court has made clear that
dismissals are for “egregious and sometimes outrageous delays.”
Rogers v. Kroger, 669 F.2d 317, 321 (5th Cir. 1982). See Callip v.
Harris County Child Welfare Dep’t, 757 F.2d 1513, 1519-21 (finding
clear record of delay after plaintiff missed nine deadlines in two
and one-half years); Delta Theatres v. Paramount Pictures, 398 F.2d
323 (5th Cir. 1968) (affirming dismissal of a particularly
egregious fourteen-year old case that was dormant for seven years).
Further, the 26-day period relied upon by Appellee is only one time
period, and our precedent indicates that there must be “significant
periods,” plural. The instant case was filed in March 2004 and
dismissed for failure to prosecute less than eight months later.
See Morris v. Ocean Systems, 730 F.2d 248, 252 (5th Cir. 1984)
(holding that the court “exceeded its well-defined discretion” in
dismissing for failure to prosecute when only eight months elapsed
from date of the first status conference to the date of its
dismissal).
In numerous cases, this Court has concluded that a
“plaintiff’s failure to comply with scheduling and other pretrial
orders and rules did not establish a clear record of delay or
contumacious conduct.” Callip, 757 F.2d at 1520 & n.10 (collecting
cases). We explained that “[m]ost of these cases involve
noncompliance with two or three orders or rules of the district
court.” Id. at 1520-21.
10
For example, in Rogers, this Court held that a district court
abused its discretion in dismissing for failure to prosecute. 669
F.2d 317. In that case, Rogers filed a racial discrimination suit
against his employer, Kroger, on May 8, 1978. The case was on the
docket a total of two years and four months and, during that time,
lay dormant for over a year. The parties filed two agreed or
stipulated motions to extend deadlines, and the plaintiff and the
defendant each filed two motions to extend various discovery
deadlines, which resulted in changing the date of the docket call
twice.
Additionally, on September 8, 1980, the plaintiff filed a
motion to continue the trial, arguing that there had not been
adequate time to prepare because the defendant’s responses to
interrogatories were filed ten days late. Two days later, the
court “called the case for trial.” Id. at 319. New counsel
appeared on behalf of Rogers and requested that she be substituted
as counsel. She also requested a two-week continuance, explaining
that she was unprepared to proceed to trial because of difficulties
assimilating the defendant’s interrogatory responses. Defense
counsel objected and announced ready for trial. After reviewing
the procedural history of the case, the court, noting that counsel
had been unprepared without cause in a previous case, denied the
continuance and dismissed for failure to prosecute under Rule
41(b).
11
On appeal, this Court conducted a thorough review of our
caselaw with respect to dismissals for failure to prosecute.
Rogers, 669 F.3d 319-21. We observed that “cases in this circuit
in which dismissals with prejudice have been affirmed on appeal
illustrate that such a sanction is reserved for the most egregious
of cases, usually cases where the requisite factors of clear delay
and ineffective lesser sanctions are bolstered by the presence of
at least one of the aggravating factors.” Id. at 320 (footnote
omitted). Further, we noted that, although the majority of the
pretrial delay was attributable to the plaintiff, some was
attributable to the defendant. We concluded that “Rogers’ case
lacks all of the elements that justified dismissal with prejudice
in our appellate decisions affirming such Rule 41(b) dismissals.”
Id. at 321. Thus, we held that the district court had abused its
discretion in dismissing the case and reversed and remanded.
The instant case was on the docket a total of only eight
months, while the Rogers case lay dormant over a year. Also, in
Rogers, the docket call date was continued twice, and, in the
instant case, the docket call date was continued once. Indeed, the
only docket call continuance occurred because of a discovery
dispute that ultimately was resolved in Appellants’ favor.
Therefore, because Appellee’s conduct in responding to discovery
requests resulted in continuing the first docket call, that delay
is attributable to Appellee. Further, Appellant filed only one
12
motion for an extension of time, and, in Rogers, the plaintiff had
filed several such motions. Although Appellants’ counsel should
have filed the motion to continue in a more timely manner, counsel
had notified the court of his intention to so move approximately
two weeks prior to the docket call. In short, the record in Rogers
evidences more delay than the case at bar. Accordingly, in light
of our holding that the facts of Rogers did not demonstrate a
record of clear delay, we are compelled to conclude that this
record falls short of clear delay.
No Consideration of Lesser Sanctions
Additionally, there is no indication that the court had
considered whether lesser sanctions might be appropriate. This
Court has explained that “[a]ssessments of fines, costs, or damages
against the plaintiff or his counsel, attorney disciplinary
measures, conditional dismissal, dismissal without prejudice, and
explicit warnings are preliminary means or less severe sanctions
that may be used to safeguard a court’s undoubted right to control
its docket.” Rogers, 669 F.2d at 321.
Nonetheless, relying on Sturgeon v. Airborne Freight, Appellee
argues that dismissing with prejudice was a lesser sanction in that
Appellants were not exposed to possible liability for costs. 778
F.2d 1154, 1159-60 (5th Cir. 1985). We find Sturgeon inapposite.
In Sturgeon, the case had been called to trial, and a jury had been
selected prior to the plaintiff moving for a continuance. “A party
13
cannot ordinarily be allowed to force an unmerited continuance by
simply refusing to go forward with a trial in which the jury has
already been selected.” Id. at 1160 (citation omitted). Here,
although there was a trial docket call, the case had not been
called to trial.7 We do not find Sturgeon controlling. Assuming
arguendo that the lesser-sanctions factor is satisfied, because
there was not a clear record of delay or contumacious conduct by
Appellants, the dismissal for failure to prosecute is still error.8
Aggravating Factors
Further, there is no indication that any of the three
aggravating factors listed above are present in this case. First,
there is no indication that the delay was caused by Appellants (as
opposed to their counsel). Second, in his brief, Appellee does not
even attempt to argue that he has or would suffer actual prejudice
7
Moreover, we found the plaintiff’s actions in Sturgeon
constituted intentional conduct. Id. at 1160-61. Here, Appellants
notified both the court and Appellee that they were going to file
a motion for continuance approximately two weeks prior to the
docket call. Although counsel’s belated filing of the motion for
continuance is not to be commended, we are not prepared to
characterize it as intentional conduct.
8
This Court very recently questioned (but did not decide)
whether there is some tension in our caselaw with respect to the
standard used to determine whether the lesser-sanctions factor is
satisfied. Sealed Appellant v. Sealed Appellee, 452 F.3d 415, 417
n.3, 420 (5th Cir. 2006). As set forth previously, because the
first factor regarding clear record of delay or contumacious
conduct was not established, even assuming the lesser-sanctions
factor was shown, it was error to dismiss for failure to prosecute.
Thus, we find it unnecessary to reach the question raised in
Sealed Appellant regarding the proper standard for determining
whether the lesser-sanctions factor is met.
14
due to the delay. Third, the evidence does not indicate that the
conduct was intentional.
In conclusion, although Appellants’ counsel was not “an
exemplar of efficiency, [the] conduct simply did not equal the
delinquencies that this court has found amount to a clear record of
delay in affirming other Rule 41(b) dismissals with prejudice.”
Rogers, 669 F.2d at 321. Accordingly, although we are mindful of
and respect the right of a trial court to control its busy docket,
our precedent instructs that the bankruptcy court abused its
limited discretion in dismissing for failure to prosecute on this
record.
B. Denial of Motion for Continuance
Finally, Appellants argue that the bankruptcy court abused its
discretion in failing to grant their motion for a continuance. For
purposes of completeness and to ensure adequate time for
Appellants to prepare their case on remand, we address the error in
denying the motion for continuance. This Court reviews the denial
of a motion to continuance for abuse of discretion and “will not
substitute our judgment concerning the necessity of a continuance
for that of the district court unless the complaining party
demonstrates that it was prejudiced by the denial.” See Streber v.
Hunter, 221 F.3d 701, 736 (5th Cir. 2000) (internal quotation marks
15
omitted). This is a closer question in that, unlike in the context
of dismissing for failure to prosecute, a trial court’s discretion
to deny a continuance is not limited.
Nonetheless, as noted above, this was Appellants’ first motion
for a continuance, and the case had been on the bankruptcy court’s
docket for less than eight months. As set forth previously, the
court continued the first docket call apparently because of a
discovery dispute that ultimately was resolved in Appellants’
favor. Because Appellee’s conduct in responding to discovery
requests resulted in that continuance, such delay is attributable
to Appellee. Moreover, Appellants have argued that the denial of
a continuance prejudiced them. According to Appellants, as a
result of their November 8 subpoena, they later received documents
revealing that the proceeds of the loan had been transferred to the
Bank of Tulsa. On November 12, 2004, Appellants subpoenaed the
bank, and bank records received indicated that the loan proceeds
were not used to fund the Urban Woods project as promised. Because
Appellants assert they now are able to prove that Appellee used the
proceeds in violation of their agreement,9 they have alleged
sufficient prejudice as a result of the denial of their first
continuance request. Although we respect the bankruptcy court’s
9
Appellee did not respond to these allegations in his brief.
At oral argument, without explication, Appellee’s counsel asserted
that Appellee had a defense.
16
right to control its busy trial docket, under these particular
circumstances, we conclude that the court abused its discretion in
denying Appellants’ motion for a continuance.
IV. CONCLUSION
For the foregoing reasons, we REVERSE the dismissal order and
REMAND for proceedings consistent with this opinion.
17