American Express Centurion Bank v. McGuinness et al

UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
In re: 	ANTHONY M CG UINESS
KATHLEEN M CG UINESS,
Debtors
Case No. 	05-46084
Adv. No. 	06-3108
AMERICAN EXPRESS C ENTURION B ANK,
Plaintiff
v.
ANTHONY M CG UINESS
KATHLEEN M CG UINESS,
Defendants
Judge Waldron
Chapter 7
DECISION DENYING PLAINTIFF’S
MOTION FOR SUMMARY
JUDGMENT
DATED AT DAYTON, OHIO this 12th Day of July, 2006:
Background
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: July 12, 2006
____________________________________________________________
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On February 24, 2006, the Plaintiff, American Express Centurion Bank, filed a
complaint to determine that debts on a credit card account were non-dischargeable
pursuant to 11 U.S.C. § 523(a)(2)(A) and (C). (Doc. 1) On March 23, 2006, the Debtors
filed an answer which denied the essential allegations of the complaint. (Doc. 3) 	On
May 9, 2006, the court issued an Order: Governing Pretrial and Trial Procedures, Fixing
Dates for filing LBR Form 7016-1-PPS and Motions Pursuant to 28 U.S.C. § 157 and 28
U.S.C. § 1334, and Ordering Other Matters. (Doc. 7) 	The Plaintiff filed a Pretrial
Statement (Doc. 14) and an Amended Pretrial Statement. (Doc. 15) On June 19, 2006,
the Debtors filed a pretrial statement, which the court notes was untimely, denying that
the debt to the Plaintiff was non-dischargeable. 1
On May 30, 2006, the Plaintiff filed a Motion for Summary Judgment Pursuant to
Fed. R. Civ. P. 56 and Fed. R. Bankr. P. 7056 (Doc. 9), a separate Brief in Support of
Plaintiff’s Motion for Summary Judgment (Doc. 10) and a Notice Deeming Plainitff’s
First Request for Admissions Admitted. (Doc. 12). 	The Plaintiff attached support2 that
on April 3, 2006, the Plaintiff served the Debtors with admissions, interrogatories and
requests for production of documents. 	The Debtors did not request an extension nor
1 The court notes, consistent with counsel for the Debtors’ concession, that counsel for the Debtors has
unnecessarily increased the work load in this adversary for both the Plaintiff and this Court.
2 The court notes the attachments are not properly submitted as evidentiary material because there are
not accompanied by an affidavit. 	See Federal Rule of Civil Procedure 56(e) and (f), applicable by
Bankruptcy Rule 7056; Honorable Barry Russell, Bankruptcy Evidence Manual, § 101.1, pages 483-91
(2004 ed.). 	However, the Debtors concede the operative facts concerning the failure to timely respond to
the April 3,, 2006 discovery. (Doc. 16) 	Without regard to the evidentiary concerns, the Debtor rejects the
Plaintiff’s separate argument (See Pages 5-6 of Doc. 10) that based on the Debtor’s answer to the
complaint, the Plaintiff should be awarded summary judgment. 	The court concludes that whether any or
all of the purchases were luxury goods within the meaning of 11 U.S.C. § 523(a)(2)(C) is a factual issue
which cannot be determined based on the current state of the record. Without the necessary admissions,
none of the holdings of the cases cited by the Plaintiff support granting summary judgment based on 11
U.S.C. § 523(a)(2)(C). 	Finally, based on this decision, whether the Plaintiff complied with Local Rule
7026-1 is a moot issue.
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reply to the discovery within the required 30 days. See Federal Rule of Civil Procedure
36(a), applicable by Bankruptcy Rule 7036.
On June 19, 2006, the Debtors filed a Response (Doc. 16) to the Plaintiff’s
Motion (Doc. 9). 	Counsel for the Debtors conceded the failure to timely respond to the
discovery. 	Counsel for the Debtors stated the failure was “due solely to the mistake of
counsel.” 	The explanation afforded for the mistake is poor communications within the
Debtors’ counsel’s office. 	The Debtors have represented to the court that responses
(Exhibit 1 to Doc. 16) were sent to the Plaintiff’s counsel on June 19, 2006. 	In a reply
brief, the Plaintiff notes that counsel for the Debtors’ internal office management issues
do not constitute “excusable neglect” under the standard pronounced by the United
States Supreme Court in Pioneer Inv. Svcs. Co. v. Brunswick Assocs. Ltd. P’ship, 507
U.S. 380, 113 S.Ct. 1489 (1993).
As the court will detail, the result in this case is not governed by Pioneer, which
addresses Bankruptcy Rules 9006(b) and 9024, but instead the decision of the Sixth
Circuit in Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147 (6th Cir. 1997), which
interprets Federal Rule of Civil Procedure 36 (applicable by Bankruptcy Rule 7036).
The court concludes, in the totality of the circumstances of this adversary proceeding,
the Plaintiff’s motion will be DENIED.
Law and Analysis
In Kerry Steel, the court noted that a formal motion to withdraw admissions was
not required. Id. at 153-54. 	This court deems that the Debtors’ filings amount to a
motion to have all the admissions admitted by Federal Rule of Civil Procedure 36(b)
(applicable 	by 	Bankruptcy 	Rule 	7036) 	withdrawn. 	The 	court 	has 	“considerable
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discretion” in whether to permit admissions to be withdrawn. Id. at 154. The Kerry court,
in granting the motion to withdraw the admissions, stated:
[I]t does not seem to us that the district abused its discretion in deeming
the admission withdrawn. A “district court has considerable discretion
over 	whether 	to 	permit 	withdrawal 	or 	amendment 	of 	admissions.”
American 	Auto., 	930 	F.2d 	at 	1119. 	The 	court's 	discretion 	must 	be
exercised in light of Rule 36(b), which permits withdrawal (1) “when the
presentation of the merits of the action will be subserved thereby,” and (2)
“when the party who obtained the admission fails to satisfy the court that
withdrawal or amendment will prejudice that party in maintaining the
action or defense on the merits.” Here there can be no doubt that the
presentation 	of 	the 	merits 	of 	the 	jurisdictional 	issue 	was 	served 	by
allowing the withdrawal of the admission. In regard to prejudice, “[t]he
prejudice contemplated by [Rule 36(b)] is not simply that the party who
initially obtained the admission will now have to convince the fact finder of
its truth.” Brook Village North Assoc. v. General Elec. Co., 686 F.2d 66,
70 (1st Cir.1982). Prejudice under Rule 36(b), rather, “relates to special
difficulties a party may face caused by a sudden need to obtain evidence
upon withdrawal or amendment of an admission.” American Auto., 930
F.2d at 1120. Kerry Steel has not shown prejudice of the sort required by
the rule.
Id. 	See also Smith Road Furniture, Inc. v. Able Computer Sys. (In re Smith Road
Furniture, Inc.), 304 B.R. 790, 791-93 (Bankr. S.D. Ohio 2003) (following Kerry); In re
Haas, 292 B.R. 167, 172, fn. 3 (Bankr. S.D. Ohio 2003) (same).
At this early stage in this case, the court finds no prejudice to the Plaintiff in
withdrawing the admissions and denying the Plaintiff’s Motion (Doc. 9). Additionally, the
court does not believe denying the Plaintiff’s Motion (Doc. 9) will prejudice a ruling on
the merits. Indeed, today’s ruling ensures this adversary proceeding can be decided on
a merit basis. 	The court reaches this conclusion in recognition of the letter and spirit of
the Sixth Circuit’s decision in Kerry and not as an endorsement of the practices of
Debtors’ counsel.
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Conclusion
The Plaintiff’s Motion for Summary Judgment Pursuant to Fed. R. Civ. P. 56 and
Fed. R. Bankr. P. 7056 (Doc. 9) is DENIED. 	The Debtors’ June 19, 2006 responses to
the April 3, 2006 admission requests are deemed responses by the Debtors.
The court has by a separate order scheduled a pretrial conference.
An order consistent with this decision is separately entered.
c:
Phyllis A. Ulrich, Esq., 24755 Chagrin Boulevard, Suite 200, Cleveland, Ohio 44122
(Atty. for the Plaintiff)
Anthony McGuinness and Kathleen McGuinness, 50 Catalpa Drive, Springboro, Ohio
45066 (Debtors/Defendants)
David M. Hopper, Esq., 780 West Central Avenue, Springboro, Ohio 45066 (Atty. for the
Debtors/Defendants)
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