United States District Court, District of Columbia
In Re MAX E. SALAS, Debtor.
v.
MAX E. SALAS, Appellee. NICOLAAS J. BREKELMANS, et al ., Appellants,
Chapter
11
MEMORANDUM OPINION
KETANJI BROWN JACKSON UNITED STATES DISTRICT JUDGE.
Nicolaas
J. Brekelmans, Gail Gregory Brekelmans, Michael McLoughlin,
and Martha Johnson (collectively, “Appellants”)
appealed a decision of the United States Bankruptcy Court for
the District of Columbia (Teel, J.) regarding certain real
property that is also the subject of a related bankruptcy
proceeding in the Middle District of Tennessee. (See
Appellants' Opening Br., ECF No. 6.) Before this Court at
present is Appellants' motion to supplement the record on
appeal or, alternatively, to remand the case to the
bankruptcy court. (See Appellants' Mot. to
Supplement or Remand, ECF No. 17). Appellee Max E. Salas
(“Salas”) opposes that motion. (See
Appellee's Opp. to Appellants' Mot.
(“Opp.”), ECF. 21.) As explained below,
Appellants' motion to supplement the record must be
DENIED, and their motion to remand-which is
properly construed as a motion to voluntarily dismiss the
appeal-will be GRANTED.
I.
FACTUAL AND PROCEDURAL BACKGROUND
On
April 18, 2018, debtor Max Salas filed for Chapter 11
bankruptcy in the District of Columbia. (See Mem. in
Supp. of Appellants' Mot. to Stay, ECF No. 24-2 at 5.)
His son, Len, filed his own, separate Chapter 11 proceedings
in the Middle District of Tennessee. (See id.)
Appellants are creditors of both father and son. (See
id.) When Salas filed his petition for bankruptcy, he
claimed an exemption for certain real property-arguing that,
because he purportedly owned and lived on that property, the
property was subject to the so-called “Homestead
Exemption” such that it need not be included in his
bankruptcy estate. (See Id. at 6.) Appellants
objected to this claimed exemption. (See id.)
On
September 25, 2018, Judge Teel overruled Appellants'
objection and determined that Salas was entitled to claim the
Homestead Exemption. (See id.; see also
Appendix to Appellants' Br., ECF No. 6-1, at 5.) On
October 9, 2018, Appellants filed a notice of appeal in this
Court. (See Not. of Appeal from Bankr. Ct., ECF No.
1.) On June 6, 2019, Appellants moved to stay Judge
Teel's order (see Appellants' Mot. to Stay
the J. & Order of the Bankr. Ct., ECF No. 24), and this
Court denied that motion (see Mem. Op., ECF No. 27).
On May
13, 2019, Appellants filed a motion to supplement the record
on appeal or, alternatively, to remand the case to the
bankruptcy court. (See Mem. in Supp. of
Appellants' Mot. to Remand (“Appellants'
Mem.”), ECF No. 17-1.) Appellants seek to introduce
three transcripts of statements made by Salas and Len during
the bankruptcy proceedings in the Middle District of
Tennessee, all of which postdate Judge Teel's decision in
this case. (Id. at 6.) According to Appellants, the
information that Appellants seek to introduce “clearly
establishes a lack of consideration regarding the alleged
transfer of the Property” at issue in the bankruptcy
proceeding and is “determinative of the issue of
consideration which is at the heart of the Bankruptcy
Court's decision.” (Id. at 9-10.) As an
alternative to adding the statements to the record on appeal,
Appellants contend that “remand would be
appropriate.” (Id. at 10.)
Salas
opposes the motion to supplement the appellate record on the
grounds that this Court is tasked with reviewing Judge
Teel's decision “on the basis of a closed record,
which is limited to the materials in the record when the
lower court made the decision on review.” (Opp. to Mot.
at 5). Salas further argues that Bankruptcy Rule 8009(e) is
inapplicable, because there was no error or omission in the
record transmitted to this Court, and there are no
exceptional circumstances that warrant the invocation of this
Court's inherent equitable powers. (Id. at
8-10.) Salas also objects to a remand, asserting that it
would not be proper to send this matter back to the
bankruptcy court because the appeal was filed a long time ago
and a remand would unfairly give Appellants another bite at
the apple. (Id. at 11.)
II.
LEGAL STANDARD
When
reviewing a matter that is on appeal from a bankruptcy court
decision, a district court generally considers only the
evidence that was part of the factual record considered
below. See Fed. R. Bankr. P. 8006 (“The record
on appeal shall include the items so designated by the
parties, the notice of appeal, the judgment, order, or decree
appealed from, and any opinion, findings of fact, and
conclusions of law of the court.”). Notably, the only
federal bankruptcy rule that addresses supplementation is
Federal Rule of Bankruptcy Procedure 8009(e), which was
enacted in 2014 and authorizes a district court to correct or
modify the record on appeal “[i]f anything material to
either party is omitted from or misstated in the record by
error or accident.” Fed.R.Bankr.P. 8009(e)(2)(C);
see also Committee Notes on Rules-2014 Amendments
(“[Rule 8009(e)], modeled on F. R. App. P. 10(e),
provides a procedure for correcting the record on appeal if
an item is improperly designated, omitted, or
misstated.”) Thus, Rule 8009(e) provides an avenue to
correct the record on appeal and to bring it in conformity
with the bankruptcy court record, rather than a mechanism for
supplementing the record on appeal with new information that
was never considered by the bankruptcy court.
Rule
8009(e) adopts the text of an analogous rule in the Federal
Rules of Appellate Procedure. Cf. Fed. R. App. P.
10(e) (“If anything material to either party is omitted
from or misstated in the record by error or accident, the
omission or misstatement may be corrected and a supplemental
record may be certified and forwarded: . . . by the court of
appeals.”). In the D.C. Circuit, pursuant to Rule
10(e), courts reviewing decisions on appeal “do not
ordinarily consider evidence not contained in the
record” that was developed below. Colbert v.
Potter, 471 F.3d 158, 165-66 (D.C. Cir. 2006); see
also Washington University, 387 F.3d 872, 877 (D.C. Cir.
2004) (holding that, in light of Rule 10(e), an appellate
court “will not normally consider evidence that a party
never presented” below). Instead, “[t]he purpose
of the rule is to permit correction or modification of the
record transmitted to the Court of Appeals so that it
adequately reflects what happened in the District
Court.” In re Application of Adan, 437 F.3d
381, 389 n.3 (3d Cir. 2006) (internal quotation marks and
citation omitted). See also Adamov v. U.S. Bank Nat.
Ass'n, 726 F.3d 851, 854 (6th Cir. 2013);
Midwest Fence Corp. v. Dep't of Transp., 840
F.3d 932, 946 (7th Cir. 2016).
With
respect to all other requests for supplementation, the D.C.
Circuit has recognized that courts may-in exceptional
circumstances-choose to invoke their “inherent
equitable power to allow supplementation of the appellate
record if it is in the interests of justice.”
Colbert, 471 F.3d at 165-66 (internal quotation
marks and citations omitted). The D.C. Circuit has generally
recognized “limited exceptions” to the
prohibition against consideration of new evidence on appeal,
and those exceptions only apply in circumstances where
“injustice might otherwise result.” In re AOV
Indus., Inc., 797 F.2d 1004, 1013 (D.C. Cir. 1986)
(internal quotation marks and citation omitted). For
instance, in a case where the record on appeal included only
a copy of the back side of a USPS Domestic Return Receipt and
the appellant was challenging the sufficiency of the
information contained in the receipt, the D.C. Circuit
supplemented the appellate record with the front side of the
receipt, which further confirmed the information on the back
side. Colbert, 471 F.3d at 165-66.
In the
bankruptcy context, the D.C. Circuit has expressly
acknowledged this inherent equitable power to supplement the
appellate record at least once. In AOV Industries, a
creditor had objected to fees awarded to the law firm of a
Chapter 11 debtor, and between the time of the lower
court's fee award and the appeal relevant time sheets
were discovered. See 797 F.2d at 1012. The D.C.
Circuit noted that, while “[n]ormally, of course, we
are not required to consider evidence presented for the first
time on appeal[, ]” the court of appeals has the
discretion “to make limited exceptions to this rule
when injustice might otherwise result.” Id. at
1013. Notably, however, under the circumstances presented in
AOV Industries, the D.C. Circuit declined to
exercise that authority. The Circuit reasoned that, because
“the time sheets [went] to the heart of the contested
issue, it would be inconsistent with th[e] court's own
equitable obligations, and its supervisory role in reviewing
other courts in equity, to pretend that they do not
exist.” Id. Yet, the Circuit added, “it
would be unfair to rely on these documents” for the
first time on appeal, since “determining the
significance of the new evidence requires factual inquiries,
a duty strictly within the province of the [lower]
court.” Id. Consequently, the Circuit remanded
the case back to the lower court. Id.
III.
...