FILED NOT FOR PUBLICATION FEB 7 2020 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP Nos. NV-19-1081-BHF NV-19-1082-BHF JAIRO ALEJANDRO RODRIGUEZ, (Related Appeals)

Debtor. Bk. No. 2:18-bk-14694-MKN

JAIRO ALEJANDRO RODRIGUEZ, Adv. No. 2:18-ap-01123-MKN

Appellant,

v. MEMORANDUM*

DOUGLAS B. ROSS, M.D.,

Appellee.

Argued and Submitted on November 21, 2019 at Las Vegas, Nevada

Filed – February 7, 2020

Appeal from the United States Bankruptcy Court for the District of Nevada

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. Honorable Mike K. Nakagawa, Bankruptcy Judge, Presiding

Appearances: A.J. Kung of Law Offices of AJ Kung, Ltd., argued for appellant Jairo Alejandro Rodriguez; Amanda M. Perach of McDonald Carano LLP argued for appellee Douglas B. Ross, M.D.

Before: BRAND, HERCHER** and FARIS, Bankruptcy Judges.

INTRODUCTION

Debtor Jairo Rodriguez appeals orders (1) granting Douglas B. Ross,

M.D. relief from the automatic stay to continue with a state court action

against Rodriguez, (2) denying reconsideration of the stay relief order, and

(3) denying Rodriguez's motion to dismiss Dr. Ross's adversary complaint

or alternatively for summary judgment and sua sponte staying the

adversary proceeding until resolution of the state court action.

The automatic stay terminated before Dr. Ross filed his motion for

relief; Rodriguez received a discharge three weeks prior. Because the

bankruptcy court had no authority to grant relief from a nonexistent stay,

we REVERSE the order granting stay relief.

Rodriguez has not satisfied his burden to establish that we have

** Hon. David W. Hercher, Bankruptcy Judge for the District of Oregon, sitting by designation.

2 jurisdiction over the order denying his motion to dismiss or alternatively

for summary judgment and sua sponte staying the adversary proceeding.

Therefore, we DISMISS the appeal from this order for lack of jurisdiction.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Prepetition events

Dr. Ross is a licensed physician in Nevada. Rodriguez is a physician's

assistant, licensed to practice medicine under the supervision of a licensed

physician in Nevada.

In August 2013, Rodriguez formed Rutishauser, LLC, dba NLV Pain

Management ("LLC" or "NLV Pain"), a medical practice that offered pain

management, urgent care, urine analysis testing, and a pharmaceutical

dispensary for patients involved in personal injury claims. Soon thereafter,

Rodriguez and Dr. Ross agreed that Dr. Ross would serve as Medical

Director for NLV Pain. Dr. Ross received a salary and a 15% ownership

interest in the LLC.

In October 2014, Rodriguez and Dr. Ross agreed to increase Dr. Ross's

ownership interest in the LLC to 33% in exchange for an additional $60,000

investment.1 Dr. Ross also made two loans to the LLC. In January 2015, he

made a $100,000 loan for the purpose of growing the business of NLV Pain,

and in mid-October 2015, he made an emergency loan of $25,000 to cover

payroll. In November 2015, Dr. Ross's two loans were consolidated in an

1 The following facts are as alleged by Dr. Ross.

3 unsecured promissory note signed by Rodriguez in favor of Dr. Ross.

During this same time period, Dr. Ross repeatedly requested

financial information about the LLC. Other than receiving a one-page

spreadsheet in February 2015, Dr. Ross was denied access to the LLC's

financial records until April 2015, when Rodriguez finally provided him

with online "view only" access to the LLC's operating account. Upon

review, Dr. Ross noticed unusually large financial transactions and

irregularities.

Ultimately, Rodriguez produced the LLC's financial records for 2014

and 2015. The financials showed that Rodriguez was embezzling funds,

using LLC money to pay for items not typically paid for with cash (i.e.,

rent), and making unexplained cash withdrawals. The financials also

showed highly suspicious billing practices and commingling of funds with

other entities not owned by Dr. Ross.

Thereafter, Dr. Ross demanded that all improper billing cease, that

Rodriguez repay all embezzled funds and unauthorized expenditures or

distributions, that Rodriguez provide an explanation for money transfers

from the LLC, and that all patient billing be suspended pending an

investigation. Rodriguez refused Dr. Ross's demands and notified Dr. Ross

of his immediate removal as Medical Director for NLV Pain.

In December 2015, Dr. Ross filed suit against Rodriguez (and others)

in state court for (1) breach of contract, (2) tortious breach of the implied

4 covenant of good faith and fair dealing, (3) fraudulent misrepresentation,

(4) breach of fiduciary duty, (5) civil conspiracy, (6) embezzlement/theft/

conversion, (7) unjust enrichment, (8) injunctive relief, (9) an accounting,

and (10) constructive trust ("State Court Action"). The State Court Action

was pending for 2 1/2 years when Rodriguez filed his petition.

B. Postpetition events

Rodriguez filed his chapter 72 bankruptcy case on August 6, 2018. On

that same day, he removed the State Court Action to the bankruptcy court,

which the bankruptcy court remanded on Dr. Ross's motion. The remand

order was not appealed. Dr. Ross filed a timely adversary complaint

against Rodriguez for claims under § 523(a)(2) and (4). Rodriguez received

a chapter 7 discharge on November 14, 2018.

1. Dr. Ross's motion for relief from stay (Appeal No. 19-1081)

On December 4, 2018, Dr. Ross moved for relief from the automatic

stay under § 362(d)(1) to continue with the State Court Action against

Rodriguez ("Stay Relief Motion"). Rodriguez argued that "cause" did not

exist to terminate the stay, because Dr. Ross's claims in the State Court

Action: (1) were discharged in the bankruptcy; (2) were property of the

2 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code,

, all "Rule" references are to the Federal Rules of Bankruptcy Procedure, and all "Civil Rule" references are to the Federal Rules of Civil Procedure.

5 LLC's bankruptcy estate;3 or (3) would be resolved by Dr. Ross's adversary

complaint. Dr. Ross agreed that the only claims against Rodriguez not

discharged were those for fraudulent misrepresentation, breach of

fiduciary duty and embezzlement.

After a hearing, the bankruptcy court entered an order granting the

Stay Relief Motion ("Stay Relief Order"), finding that Dr. Ross had

established "cause." Rodriguez moved for reconsideration of the Stay Relief

Order, which the bankruptcy court denied. Rodriguez timely appealed the

Stay Relief Order and the order denying reconsideration.

2. Dr. Ross's adversary complaint (Appeal No. 19-1082)

Rodriguez moved to dismiss Dr. Ross's adversary complaint under

Civil Rule 12(b)(6) for failure to state a claim or, alternatively, for summary

judgment under Civil Rule 56 ("Motion to Dismiss"). Dr. Ross opposed the

Motion to Dismiss.

After a hearing, the bankruptcy court entered an order denying the

Motion to Dismiss and staying the adversary proceeding until completion

of the State Court Action ("Adversary Order"). Rodriguez timely appealed.

II. JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(G) and (I). We have appellate jurisdiction over the Stay Relief

3 Rodriguez caused the LLC to file a chapter 7 bankruptcy case on December 18, 2018.

6 Order under

. However, as we explain below, Rodriguez has

not carried his burden of showing that we have appellate jurisdiction over

the Adversary Order.

III. ISSUES

1. Did the bankruptcy court abuse its discretion in granting Dr. Ross

relief from the automatic stay to continue with the State Court Action?

2. Did the bankruptcy court abuse its discretion in denying the motion

to reconsider the Stay Relief Order?

3. Do we have jurisdiction over the Adversary Order?

IV. STANDARDS OF REVIEW

We review a bankruptcy court's order granting relief from the

automatic stay for an abuse of discretion. Lakhany v. Khan (In re Lakhany),

(9th Cir. BAP 2015). Denial of a motion to amend or alter

judgment under Civil Rule 59(e) is reviewed for an abuse of discretion.

Dixon v. Wallowa Cty.,

, 1022 (9th Cir. 2003). A bankruptcy

court abuses its discretion if it applies the wrong legal standard, misapplies

the correct one, or makes illogical or implausible factual findings, or

findings without support from the facts in the record. See TrafficSchool.com,

Inc. v. Edriver Inc.,

(9th Cir. 2011) (citing U.S. v. Hinkson,

(9th Cir. 2009) (en banc)).

To the extent the Panel must determine whether we have jurisdiction

to grant the relief requested, jurisdiction is reviewed de novo. Lake v. Capps

7 (In re Lake),

(9th Cir. BAP 1996).

V. DISCUSSION

A. The bankruptcy court abused its discretion in granting the Stay Relief Motion.

The bankruptcy court acknowledged that Rodriguez had received a

discharge three weeks prior to Dr. Ross filing his Stay Relief Motion, and

that the discharge order discharged Rodriguez's personal liability for his

prepetition debts, except for those to be determined in the adversary

proceeding. Nonetheless, the court entered the Stay Relief Order granting

Dr. Ross relief from the automatic stay to continue with the State Court

Action. This was erroneous.

Section 362 provides, in relevant part, that the filing of a bankruptcy

petition stays

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.

§ 362(a)(1). But "'insofar as the automatic stay bars actions against the

debtor, the stay automatically expires upon the grant of a discharge.'" In re

Lakhany,

(quoting Ruvacalba v. Munoz (In re Munoz),

(9th Cir. BAP 2002) (referencing § 362(c)(2)(C)); see also ZiLOG, Inc.

v. Corning (In re ZiLOG, Inc.),

, 1009 n.13 (9th Cir. 2006) ("We

8 don't understand why the district court discussed the automatic stay. By

August 21, 2002, the automatic stay had long since disappeared; it was only

the discharge injunction that was relevant."). The court abuses its discretion

if it grants relief from the automatic stay after it is terminated. In re Lakhany,

; In re Munoz,

.

The automatic stay terminated on November 14, 2018, when the

bankruptcy court issued Rodriguez's discharge. The court could not

thereafter grant Dr. Ross relief from the nonexistent stay, and it abused its

discretion when it did so.4 Accordingly, we must REVERSE the Stay Relief

Order.5

4 Proceeding to determine Rodriguez's liability in the State Court Action also would not violate the discharge injunction. The discharge injunction does not apply to this debt, because the debt is the subject of Dr. Ross's adversary proceeding seeking a determination of its dischargeability. The bankruptcy court may ultimately hold that the debt is discharged, but until that happens, the discharge injunction does not apply. See Kvassay v. Kvassay (In re Kvassay), BAP No. CC-15-1420-KiTaKu,

, at *7 (9th Cir. BAP Oct. 6, 2016) ("[U]pon the timely filing of a complaint objecting to dischargeability of a debt under § 523, the discharge injunction does not apply with respect to that debt until the bankruptcy court makes a determination as to the dischargeability of that debt.") (citing cases).

This does not mean, however, that Dr. Ross can proceed to collection should he prevail in the State Court Action. The bankruptcy court has exclusive jurisdiction to determine dischargeability of debts under § 523(a)(2), (4) and (6) and that determination must still be made. § 523(c); Aldrich v. Imbrogno (In re Aldrich),

(9th Cir. BAP 1983) (explaining that claims for nondischargeable debts under § 523(a)(2), (4) and (6) may not be pursued in the state court as a result of the exclusive jurisdiction granted to bankruptcy courts by the Code). 5 For this same reason, we also REVERSE the order denying reconsideration of (continued...)

9 B. We lack jurisdiction over the Adversary Order.

The appellant has the burden of establishing that the appellate court

has jurisdiction to hear the case. Melendres v. Maricopa Cty.,

(9th Cir. 2016). As a threshold matter, we must determine our

jurisdiction over the Adversary Order. See Sinochem Int’l Co. v. Malaysia Int’l

Shipping Corp.,

(2007) (generally a federal court must

first determine whether it has jurisdiction before reaching the merits of a

case). After Rodriguez filed his notice of appeal, the Clerk issued an order

directing him to file a written response explaining how the Adversary

Order was final and immediately reviewable or, alternatively, to file a

motion for leave to appeal. Rodriguez filed his response. The motions

panel deferred ruling on appellate jurisdiction to the merits panel and

resumed briefing.

An order denying a motion to dismiss a § 523 complaint is an

interlocutory order. Travers v. Dragul (In re Travers),

(9th

Cir. BAP 1996). The same is true for an order denying a motion for

summary judgment. Jones-Hamilton Co. v. Beazer Materials and Servs., Inc.,

(9th Cir. 1992). Normally, such orders are not appealable

as of right.

While Rodriguez concedes that the bankruptcy court's decisions to

5 (...continued) the Stay Relief Order.

10 deny dismissal of the § 523 complaint and to deny summary judgment are

not final and appealable, he argues that the interlocutory order is

appealable as of right, because the court's sua sponte stay of the adversary

proceeding is an "injunctive order" reviewable under

(a)(1).

We disagree.

Interlocutory orders of district courts granting injunctions may be

appealed to the court of appeals as of right.

(a)(1).6 That

statute is inapplicable here. Unlike the Court of Appeals, the BAP does not

have jurisdiction to hear such orders of the bankruptcy court as of right. See

Morgan-Busby v. Gladstone (In re Morgan-Busby),

, 260 n.5 (9th

Cir. BAP 2002); Quigley Co., Inc. v. A.C. Coleman (In re Quigley Co., Inc.), 323

6

(a)(1) provides:

(a) Except as provided in subsections (c) and (d) of this section, the courts of appeals shall have jurisdiction of appeals from:

(1) Interlocutory orders of the district courts of the United States, the United States District Court for the District of the Canal Zone, the District Court of Guam, and the District Court of the Virgin Islands, or of the judges thereof, granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions, except where a direct review may be had in the Supreme Court.

Rodriguez's reliance on Young Properties is misplaced. See Young Props. Corp. v. United Equity Corp.,

, 850 n.1 (9th Cir. 1976) ("Appellate jurisdiction by virtue of

exists in bankruptcy matters . . . for the granting or denying of injunctions, under § 1292(a)(1)[.]"). Young Properties was a Bankruptcy Act case and was an appeal from a district court exercising bankruptcy jurisdiction, not from a bankruptcy court.

, 75 n.4 (S.D.N.Y. 2005) (language in

(a)(1) indicates

that preliminary injunctive orders should be treated differently from other

interlocutory orders for purposes of analyzing appealability, but

(a) dictates which orders of the bankruptcy court are appealable as of

right and includes only final orders, interlocutory orders issued under

§ 1121(d), and "other interlocutory orders and decrees," including

preliminary injunctions, which are only appealable "with leave of the

court"); Mirzai v. Kolbe Foods, Inc. (In re Mirzai),

, 651 n.4 (C.D.

Cal. 2001), aff'd,

(9th Cir. 2002) (noting that while orders of

district courts granting or denying injunctions may be appealed to the

court of appeals as of right under

(a)(1), there is no similar

provision for bankruptcy court orders regarding injunctions). Thus,

Rodriguez has not met his burden of establishing our jurisdiction to hear

the appeal as of right.

The only way Rodriguez may obtain review of the Adversary Order

is to seek leave to appeal. The Panel is authorized to grant leave to appeal

interlocutory orders under

(a)(3). In re Travers,

. Rodriguez did not file a motion for leave to appeal. Instead, he

requested in cursory fashion in his response that we grant leave to appeal

solely on the basis that it was inequitable for the bankruptcy court to sua

sponte stay the adversary proceeding pending resolution of the State Court

Action. Given the lack of a proper motion and supported argument

12 establishing the factors necessary for granting leave, Rodriguez has not met

his burden to establish that we should grant leave under

(a)(3).

Since Rodriguez did not meet his burden of establishing our

jurisdiction over the Adversary Order, we DISMISS the appeal for lack of

jurisdiction.

VI. CONCLUSION

For the reasons stated above, we REVERSE the Stay Relief Order, and

we DISMISS for lack of jurisdiction the appeal of the Adversary Order.

13