- Category: Judge Karlin
- Published on 02 February 2012
- Written by Judge Karlin
Sims v. American Education Services et al, 11-06146 (Bankr. D. Kan. Feb. 2, 2012) doc. # 68
SIGNED this 2nd day of February, 2012.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS
Tammie Sue Sims, Case No. 10-23942
vs. Adversary No. 11-6146
American Education Services,
United States Department of
Education, and Educational Credit
Order Granting Motion to Dismiss Without Prejudice, With Conditions
On May 6, 2011, Plaintiff/Debtor filed a complaint to discharge her student
loan debts under 11 U.S.C. § 523(a)(8)(B). The Court set discovery deadlines, which
expired December 27, 2011, after one extension. During the discovery phase of the
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proceeding, the United States Department of Education (“United States”) timely
propounded discovery. Plaintiff refused to respond to Interrogatory Nos. 24 and 25,
and Request for Production No. 40, on the grounds that they were not relevant to
the proceedings. All of these requests sought information about whether Plaintiff
had ever been convicted of, or pled guilty or nolo contendere to, a crime involving
dishonesty or false statements, and if so, asked her to identify and produce the
documents relating to such crimes.
As a result of Plaintiff’s refusal, the United States properly, pursuant to Fed.
R. Bankr. P. 7037, Fed. R. Civ. P. 37(a)(3)(B)(iii), and D. Kan. LBR 7026.1(1), filed a
Motion to Compel. After a hearing, I found that Plaintiff’s failure to respond to the
interrogatories was unjustified and granted the Motion to Compel. I ordered
Plaintiff to fully respond to Interrogatory Nos. 24 and 25 and Request for
Production No. 40, within five business days and also to pay the reasonable
expenses the government incurred in obtaining compliance by Plaintiff in
responding to the discovery.1
Instead of obeying my order, Plaintiff moved to dismiss her Adversary
Proceeding, without prejudice.2 In response, the United States asked that I
condition dismissal on Plaintiff’s payment of the $2,433.50 in attorney’s fees it
incurred as a result of Plaintiff’s refusal to answer the interrogatories and request
1 Doc. 49.
2 Doc. 55.
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for production of documents. Similarly, Defendant Educational Credit Management
Corporation (“ECMC”)3 agreed to dismissal without prejudice, but because the
lengthy period of discovery allowed in this case had expired, it requested that
dismissal be conditioned such that it would not be subject to additional discovery in
the event Plaintiff refiled her complaint, absent a significant change in Plaintiff’s
Federal Rule of Civil Procedure 41(a)(2), as incorporated into bankruptcy
practice by Federal Rule of Bankruptcy Procedure 7041, governs voluntary
dismissals after an opposing party has filed an answer or motion for summary
judgment. Dismissal at this stage of the proceedings is within the sound discretion
of the court.4 In exercising my discretion, I must consider the purpose of Rule
41(a)(2), which is “primarily to prevent voluntary dismissals which unfairly affect
the other side, and to permit the imposition of curative conditions.”5 Courts should
normally grant dismissal without prejudice unless it will result in “legal prejudice”
3 When Plaintiff amended her complaint on July 15, 2011 (Doc. 22), she did not
name ECMC as a defendant. ECMC had earlier moved to intervene, and that intervention
was granted (Doc. 7), but technically ECMC is not a party to this litigation because theamended complaint superseded the pleadings. It is clear, however, that Ms. Sims andECMC believe ECMC is a party, that Ms. Sims intended for ECMC to be a party, and thatthey have conducted themselves throughout these proceedings as if ECMC is a party.
ECMC even answered the amended complaint that did not name it as a defendant. To clean
up the record, I will sua sponte add ECMC as a party-defendant.
4 Clark v. Tansy, 13 F.3d 1407, 1411 (10th Cir. 1993) (citing 9 Charles Alan Wright& Arthur R. Miller, Federal Practice & Procedure § 2364 at 161 (1971)).
5 Id. (citing Wright & Miller, § 2364 at 165).
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against the opposing party.6
Courts typically consider five factors to evaluate if legal prejudice exists: the
opposing party’s effort and expense in preparing for trial, evidence of excessive
delay or lack of diligence by the movant, insufficient justification for dismissal, the
present stage of litigation, and any other relevant considerations.7 Based on my
consideration of all these factors, including the admission by both Defendants that
they do not oppose dismissal, I find that Defendants will not be legally prejudiced if
this case is dismissed without prejudice.
First, although trial would have been set at a Pretrial Conference scheduled
for January 20, 2012, no trial date had been set, and Defendants do not claim that
they had ramped up to try the case. Second, cutting the other way, there appears to
be some lack of diligence by Plaintiff in waiting until just a few weeks before the
Pretrial Conference—and eight months after she filed suit—to file her Motion to
Dismiss. Plaintiff explains that she realized after the Court’s Order granting the
United States’ Motion to Compel that she needed to hire counsel, but there is no
sign she has done so even though more than a month has passed since that Order.
Third, there appears to be a sufficient justification for dismissal: Plaintiff wants to
hire counsel, which I always encourage. Fourth, weighing against dismissal is the
stage of the litigation. The case is literally weeks from when I expected to try it,
6 Ohlander v. Larson, 114 F.3d 1531, 1537 (10th Cir. 1997).
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and the discovery period has expired. Finally, although opposing counsel do not
claim to have been preparing for trial, I know, as a former trial lawyer, that it will
be highly inefficient to gear back up to defend this suit in a few months or even
later, depending on when Plaintiff elects to refile.
The consideration of these factors weighs in favor of granting the motion to
dismiss without prejudice, but with conditions. Rule 41(a)(2) permits the imposition
of curative conditions so as not to prejudice the parties. One such condition is
payment of the opposing party’s fees that will not otherwise be recovered.8 This
condition recognizes that when a plaintiff dismisses his or her case without
prejudice, the defendant “faces a risk that the plaintiff will refile the suit and
impose duplicative expenses upon him.”9 The likelihood of duplicative expenses is
particularly high in this case because Plaintiff has already indicated she intends to
refile this suit after she retains counsel.
Another problem here is the timing of the Motion to Dismiss. The case was
merely days away from a final Pretrial Conference when the motion was filed.
Because student loan dischargeability complaints are typically fact-intensive, it is
highly likely the case would have gone to trial within the next two months.
8 “Typically, a court imposes as a condition of dismissal without prejudice that theplaintiff pay the defendant’s expenses incurred in defending the lawsuit, which usuallyinclude a reasonable attorney’s fee.” Kansas Waste Water, Inc. v. Alliant Techsystems, Inc.,
No. 01-2236-JWL, 2002 WL 1634362, at *2 (D. Kan. May 31, 2002) (citing United States v.
Rockwell Int’l Corp., 282 F.3d 787, 810 (10th Cir. 2002)). Neither defendant has sought feesexcept those relating to the Motion to Compel by the United States.
9 Aerotech, Inc. v. Estes, 110 F.3d 1523, 1528 (10th Cir. 1997).
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Experienced trial attorneys, like those opposing Plaintiff in this case, have likely
expended numerous hours thinking about trial strategy, and in formulating
discovery and case theories. Much of that will have to be repeated if the case is
refiled, and counsel will have to get back up to speed some time in the unknown
future, which is frankly not fair.
In light of the foregoing problems and the need to provide “substantial justice
to all parties,”10 this Court imposes the following conditions on its grant of
Plaintiff’s Motion to Dismiss Without Prejudice. First, Plaintiff’s unjustified failure
to respond completely to the United States’ first set of discovery resulted in
attorney’s fees of $2,433.50. The Court finds that, although based on a lodestar
analysis these damages were reasonably incurred, the Court will reduce the
damages. Because Plaintiff is pro se, and may not have the skills or means to fully
research what was effectively an unreasonable basis for refusing to respond to
discovery, and because the government was gracious in earlier offering to reduce its
fee, I order Plaintiff to pay the government’s damages in prosecuting the Motion to
Compel in the amount of $750.11 If she fails to pay those damages within fourteen
days, this will constitute a judgment against her, with interest accruing from the
date of this order at the rate set forth in 28 U.S.C. § 1961. Because I do not know
10 Brown v. Baeke, 413 F.3d 1121, 1124 (10th Cir. 2005) (stating that the Court mustinsure that “substantial justice is accorded to both parties” when ruling on a Rule 41(a)(2)
motion to dismiss without prejudice).
11 I do not separately award $29.36 in expenses sought, as they do not appear torelate to the underlying discovery dispute.
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Plaintiff’s financial position, other than her own protestations that she cannot
afford to pay any fees, I will not condition refiling of the Complaint upon having
paid this attorney fee award.12
Second, if Plaintiff does refile her suit against any of these Defendants,
Plaintiff shall consent to the use, in any refiled action, of any material resulting
from any discovery already conducted in this case.13 In addition, because I have
already ruled that Plaintiff must answer the missing discovery, she will be required
in any refiled suit to serve her full and complete answers (and documents, if any) to
the discovery that was the subject of the Order Granting Motion to Compel within
40 days of the refiling. Any additional discovery by or against Defendants will be
determined by the court handling the matter, after input via a Report of Parties’
IT IS, THEREFORE, ORDERED that Plaintiff’s Motion to Dismiss Without
12 The fact that this case is dismissed without prejudice should not be read as aholding that Plaintiff will have the never-ending right to refile an action under 11 U.S.C. §
523(a)(8) arising out of this bankruptcy proceeding. See, e.g. In re Kapsin, 265 B.R. 778, 781
(Bankr. N.D. Ohio 2001) (change of circumstances is insufficient reason to reopen case oneand one-half years post discharge; would undermine finality of bankruptcy and permitperpetual Chapter 7 cases); In re Root, 318 B.R. 851 (Bankr. W.D. Mo. 2004) (motion toreopen denied due to unexplained delay of thirteen years post discharge); Bugos v. MIT
Bursar’s Office (In re Bugos), 288 B.R. 435 (Bankr. E.D. Va. 2003) (not appropriate toreopen bankruptcy case two and one-half years post discharge based on change ofcircumstances; present conditions did not relate to facts/circumstances of bankruptcy case).
See also Watson v. Parker (In re Parker), 264 B.R. 685 (10th Cir. BAP 2001) (no limit onmotion to reopen, but can apply doctrine of laches to determine discretionary reopening).
Because Debtor received her discharge almost a year ago, I caution her that she should
immediately seek advice of counsel if she hopes to refile.
13 See Kansas Waste Water, 2002 WL 1634362, at *2 (requiring that discoveryproduced in the action dismissed under Rule 41(a)(2) shall “be used in a subsequentaction”).
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Prejudice is granted, with conditions.14 Plaintiff shall pay the United States the
sum of $750 to compensate it for having to prosecute the Motion to Compel, but
payment of that sum will not be a condition to refiling. If Plaintiff fails to pay that
sum, however, it does constitute a post-petition judgment against her, with interest
to accrue at the rate dictated by 28 U.S.C. § 1961. If Plaintiff elects to refile this suit
against any of the Defendants, Plaintiff shall consent to the use, in any refiled
action, of any material resulting from discovery already conducted in this case. If
Plaintiff elects to refile this suit against any of the Defendants, she shall comply
with the Order Granting Motion to Compel15 entered in this case within 40 days of
# # #
14 This dismissal also includes dismissal of the complaint against DefendantAmerican Education Services, which did not answer. Plaintiff did file a Motion for Default
Judgment against that defendant (Doc. 25), but did not properly serve the amendedcomplaint on it, so that motion was denied (Doc. 49).
15 Doc. 49. Although that order did not set the amount of attorney fees for theUnited States, it indicated fees would be awarded after further proceedings. Those feeshave been set in this Order, but as noted earlier the Court does not require Plaintiff to havepaid those fees as a condition to refiling.
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