In re: Lavesta M. Locklin ( 2015 )


Menu:
  •                                                                FILED
                                                                    DEC 07 2015
     1                          NOT FOR PUBLICATION
                                                                SUSAN M. SPRAUL, CLERK
                                                                  U.S. BKCY. APP. PANEL
     2                                                            OF THE NINTH CIRCUIT
    
     3                   UNITED STATES BANKRUPTCY APPELLATE PANEL
     4                             OF THE NINTH CIRCUIT
     5   In re:                         )      BAP No.      CC-14-1446-KuFKi
                                        )
     6   LAVESTA M. LOCKLIN,            )      Bk. No.      13-24951
                                        )
     7                       Debtor.    )
         _______________________________)
     8                                  )
         RELIANCE STEEL & ALUMINUM CO., )
     9                                  )
                             Appellant, )
    10                                  )
         v.                             )      MEMORANDUM*
    11                                  )
         LAVESTA M. LOCKLIN,            )
    12                                  )
                             Appellee. )
    13   _______________________________)
    14                   Argued and Submitted on October 22, 2015
                                at Los Angeles, California
    15
                                 Filed – December 7, 2015
    16
                      Appeal from the United States Bankruptcy Court
    17                    for the Central District of California
    18             Honorable Mark D. Houle, Bankruptcy Judge, Presiding
    19
         Appearances:      Robert P. Goe of Goe & Forsythe, LLP argued for
    20                     appellee LaVesta M. Locklin.**
    21
         Before: KURTZ, FARIS and KIRSCHER, Bankruptcy Judges.
    22
    23
    24        *
               This disposition is not appropriate for publication.
         Although it may be cited for whatever persuasive value it may
    25   have (see Fed. R. App. P. 32.1), it has no precedential value.
    26   See 9th Cir. BAP Rule 8024-1.
              **
    27         Counsel for appellant Reliance Steel & Aluminum Co. did
         not appear for oral argument, so appellant’s position was deemed
    28   submitted on its appeal briefs and on the appellate record.
     1                              INTRODUCTION
     2        Reliance Steel & Aluminum Co. appeals from an order
     3   disallowing the claim it filed in LaVesta Locklin’s chapter 111
     4   bankruptcy case.   In disallowing the claim, the bankruptcy court
     5   held that no evidentiary hearing was required under Rule 9014(d)
     6   because Reliance’s papers responding to Locklin’s claim objection
     7   did not include any evidence demonstrating that there was a
     8   disputed material factual issue requiring resolution at an
     9   evidentiary hearing.
    10        We disagree with the bankruptcy court.   Reliance’s properly
    11   filed proof of claim constituted prima facie evidence of the
    12   validity of Reliance’s claim, including the allegations contained
    13   therein contending that Locklin was the alter ego of her wholly
    14   owned corporation Nightscaping, Inc.   When these allegations are
    15   considered in conjunction with the opposing evidence Locklin
    16   presented with her claim objection, they establish that there was
    17   a disputed issue of material fact regarding the alter ego issue.
    18   Therefore, the bankruptcy court abused its discretion when it
    19   denied Reliance’s request for an evidentiary hearing.
    20        Therefore, we must VACATE the bankruptcy court’s claim
    21   disallowance order and REMAND for further proceedings.
    22                                  FACTS
    23        In February 2014, Reliance filed a proof of claim for
    24   $17,205.58 in Locklin’s bankruptcy case.   Reliance did not
    25
              1
    26         Unless specified otherwise, all chapter and section
         references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
    27   all "Rule" references are to the Federal Rules of Bankruptcy
         Procedure. All “Civil Rule” references are to the Federal Rules
    28   of Civil Procedure.
    
                                          2
     1   include with its proof of claim any documentation and did not
     2   explain the basis for its claim, other than to state that the
     3   claim was for “goods and services.”    Locklin filed an objection
     4   to that claim, which the bankruptcy court sustained with leave to
     5   amend.2
     6        On June 10, 2014, Reliance filed its amended proof of claim.
     7   This time, Reliance included enough documentation and explanation
     8   with its proof of claim that the basis for its claim was
     9   apparent.   Reliance’s claim against Locklin allegedly arose from
    10   a credit arrangement between Reliance on the one hand and
    11   Locklin’s wholly-owned corporations Nightscaping, Inc. and Loran,
    12   Inc. on the other hand.3    Pursuant to this credit arrangement,
    13   Reliance supplied to Nightscaping, on credit, stainless steel
    14   sheeting.   Reliance effectively acknowledged in its amended proof
    15   of claim that Locklin was not directly liable for Nightscaping’s
    16   trade debt.   Instead, Reliance alleged that Locklin was
    17   Nightscaping’s alter ego.
    18        In support of its alter ego allegation, Reliance included in
    19   its proof of claim numerous conclusory, boilerplate statements
    20
    21        2
               Reliance did not include in its excerpts of record a copy
    22   of its February 2014 proof of claim, nor did it include copies of
         Locklin’s March 2014 claim objection, or the bankruptcy court’s
    23   June 2014 order sustaining that objection with leave to amend.
         We have obtained copies of these documents by accessing the
    24   bankruptcy court’s electronic docket. We can and do take
         judicial notice of the docket and the imaged documents attached
    25   thereto. Goldstein v. Stahl (In re Goldstein), 
    526 B.R. 13
    , 17
    26   (9th Cir. BAP 2015).
              3
    27         For purposes of this appeal, there is no material
         difference between Nightscaping and Loran. For ease of
    28   reference, both are jointly referred to herein as Nightscaping.
    
                                           3
     1   that, if proven, might have supported alter ego liability against
     2   Locklin under California law.   See CADC/RAD Venture 2011-1 LLC v.
     3   Bradley, 
    235 Cal. App. 4th 775
    , 788-89 (2015), review denied,
     4   (July 8, 2015) (generally describing circumstances that might
     5   lead to a finding of alter ego liability).   As set forth in the
     6   proof of claim, Reliance alleged as follows:
     7        On information and belief, some or all of the following
              facts and factors for alter ego liability exist to
     8        impose individual liability on Lavesta Locklin for that
              [sic] acts and omissions of Nightscaping and Loran:
     9
                   a.   The business is inadequately capitalized,
    10
                   b.   The business is operated by Locklin as if it
    11                  is herself,
    12             c.   The business fails to observe corporate
                        formalities,
    13
                   d.   There is a commingling of funds and other
    14                  assets,
    15             e.   There is the holding out by one entity that
                        it is liable for the debts of the other,
    16
                   f.   The corporation is a mere shell or conduit
    17                  for the affairs of the individual,
    18             g.   There is identical ownership, management, and
                        control, where the corporation is completely
    19                  owned, managed, and controlled by the
                        individual,
    20
                   h.   The use of the corporation as a mere shell,
    21                  instrumentality or conduit for a single
                        venture or the business of the individual,
    22
                   i.   The individual using the   corporation's income
    23                  and assets and resources   to pay herself large
                        amounts of compensation,   while failing to pay
    24                  the legitimate creditors   of the corporation,
    25             j.   The use of the corporate entity to procure
                        labor, services or merchandise for the
    26                  individual,
    27             k.   The diversion of assets from the corporation
                        by or to a stockholder or other person or
    28                  entity, to the detriment of creditors, or the
    
                                          4
     1                    manipulation of assets and liabilities
                          between entities and individuals so as to
     2                    concentrate the assets in one and the
                          liabilities in another,
     3
                   1.     The contracting with another with intent to
     4                    avoid performance by use of a corporate
                          entity as a shield against personal
     5                    liability, or the use of a corporation as a
                          subterfuge of illegal transactions,
     6
                   m.     The use of a corporation to avoid personal
     7                    liability, while the individual takes the
                          income and value from the corporation to have
     8                    a luxurious personal lifestyle, while failing
                          to pay creditors, who should be entitled to
     9                    pursue the assets and value into the
                          individual rather than being limited to
    10                    pursuing the corporation,
    11             n.     Incurring debts far beyond the ability to
                          pay, purportedly only as corporate
    12                    liabilities, and then declaring bankruptcy to
                          discharge those debts to creditors, while
    13                    maintaining a luxurious individual lifestyle.
    14   Amended Proof of Claim (June 10, 2014) at pp. 5-6.
    15        On July 8, 2014, Locklin filed her objection to Reliance’s
    16   amended proof of claim (“Second Claim Objection”).    The Second
    17   Claim Objection focused on and attacked Reliance’s alter ego
    18   allegations.    Locklin supported her Second Claim Objection with
    19   declarations and exhibits.   Her declaration told a much different
    20   story than that suggested by Reliance’s alter ego allegations.
    21   Locklin explained that her husband founded Nightscaping in 1963
    22   and successfully designed, manufactured and sold landscape
    23   lighting products through Nightscaping for decades.    When her
    24   husband passed away in 2007, she became the sole owner of
    25   Nightscaping.   Thereafter, Nightscaping’s business quickly and
    26   significantly deteriorated, with revenues falling by 70% in 2008
    27   and by 80% in 2009.   As Locklin puts it, between 2009 and 2011,
    28   she invested over $1.7 million of her own personal funds in
    
                                           5
     1   Nightscaping in an attempt to turn around operations, but all of
     2   this investment capital was consumed as a result of poor business
     3   planning and management.
     4        As a result, in June 2011, she hired a professional senior
     5   management team in an attempt, once again, to turn around
     6   Nightscaping.   According to Locklin, once she hired the
     7   management team, she was not involved in Nightscaping’s day-to-
     8   day operations.   She further asserted that she invested in
     9   Nightscaping another $1.2 million in 2011 and 2012.   Again in
    10   2013, Locklin claims that she invested further funds in an
    11   attempt to keep Nightscaping’s doors open while the management
    12   team negotiated a sale of the business as a going concern to a
    13   third party for $3 million, but that sale fell through as a
    14   result of the third party’s inability to obtain financing.
    15   Because she had borrowed funds to make many of her capital
    16   investments in Nightscaping, Locklin explained that she ended up
    17   heavily indebted and ultimately was forced to file her personal
    18   chapter 11 bankruptcy petition.
    19        The Second Claim Objection also included the declaration of
    20   Nightscaping’s chief executive officer Richard Henninger – one of
    21   the members of Nightscaping’s turnaround management team.
    22   Henninger explained that, as chief executive officer, he was in
    23   possession of Nightscaping’s books and records, and that, in
    24   2014, he searched those records for all transactions between
    25   Nightscaping and Reliance.   According to Henninger, those records
    26   reflected that, between 2006 and 2012, Nightscaping received
    27   95 invoices for credit purchases from Reliance and that
    28   Nightscaping fully paid 94 of those 95 invoices.   Furthermore,
    
                                           6
     1   Henninger corroborated Locklin’s testimony that she had no
     2   involvement in Nightscaping’s day-to-day operations in 2012 and
     3   that, at the time Nightscaping made the 2012 purchase from which
     4   Reliance’s claim arose, Locklin had no responsibility for making
     5   purchasing decisions on behalf of Nightscaping and had no reason
     6   to even know about individual purchasing decisions.
     7        Henninger further opined that Nightscaping’s 2012 credit
     8   purchase from Reliance was made in good faith and in the ordinary
     9   course of Nightscaping’s business and that Nightscaping, at the
    10   time, was in the process of implementing its turnaround business
    11   plan, which was aimed at selling the business as a going concern.
    12   Finally, Henninger maintained that, during his entire tenure as
    13   chief executive officer, Nightscaping complied with all corporate
    14   formalities.
    15        Reliance filed a response to the Second Claim Objection, but
    16   the response was quite brief and did not include any evidence.
    17   The entire response consisted of four short paragraphs, in which
    18   Reliance merely asserted that, at the upcoming hearing on the
    19   Second Claim Objection, the bankruptcy court should set a
    20   schedule for discovery, briefing and an evidentiary hearing in
    21   light of the fact that the Second Claim Objection involved a
    22   disputed material issue of fact, namely whether Locklin was
    23   Nightscaping’s alter ego.
    24        At the hearing on the Second Claim Objection, the bankruptcy
    25   court disagreed with Reliance.   The court held that, because
    26   Locklin had presented evidence tending to refute Reliance’s alter
    27   ego allegations and because Reliance had not submitted any
    28   evidence in support of its alter ego allegations, there was no
    
                                          7
     1   material factual issue, so no evidentiary hearing was necessary.
     2   Rather, according to the court, Reliance had been obligated under
     3   the court’s local rules to provide evidence in support of its
     4   claim contemporaneously with its opposition to the Second Claim
     5   Objection, and because of Reliance’s failure to include any such
     6   evidence on the alter ego issue, Locklin’s Second Claim Objection
     7   would be sustained and Reliance’s claim would be disallowed.
     8        The bankruptcy court entered an order disallowing Reliance’s
     9   amended claim on August 29, 2014, and Reliance timely appealed
    10   the claim disallowance order.
    11        Locklin had included in her Second Claim Objection a request
    12   for attorney’s fees, which the bankruptcy court denied without
    13   prejudice.   After Reliance filed its notice of appeal, Locklin
    14   filed a motion for attorney’s fees as the prevailing party on its
    15   Second Claim Objection.   After briefing and a hearing, the
    16   bankruptcy court entered an order on December 5, 2014, granting
    17   Locklin’s attorney’s fees motion.     Reliance did not timely file a
    18   notice of appeal from the fees order.      Eventually, on January 7,
    19   2015, Reliance filed a “Supplemental” notice of appeal, in which
    20   it requested appellate review of the fees order as part of its
    21   appeal from the claim disallowance order.
    22                               JURISDICTION
    23        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
    24   §§ 1334 and 157(b)(2)(B).   Except as otherwise noted below, we
    25   have jurisdiction under 28 U.S.C. § 158.
    26                                   ISSUES
    27   1.   Was the appeal from the order awarding attorney’s fees
    28        timely filed?
    
                                           8
     1   2.   Is the appeal from the order disallowing Reliance's amended
     2        proof of claim moot?
     3   3.   Did the bankruptcy court commit reversible error when it
     4        disallowed Reliance’s amended proof of claim?
     5                           STANDARDS OF REVIEW
     6        We have an independent duty to examine our jurisdiction, and
     7   we review jurisdictional issues de novo.   Couch v. Telescope,
     8   Inc., 
    611 F.3d 629
    , 632 (9th Cir. 2010); Wolkowitz v. Beverly
     9   (In re Beverly), 
    374 B.R. 221
    , 230 (9th Cir. BAP 2007), aff'd in
    10   part, dismissed in part, 
    551 F.3d 1092
     (9th Cir. 2008).
    11        Orders resolving claims objections can raise both legal
    12   issues and factual issues.   We review the legal issues de novo
    13   and the factual issues under the clearly erroneous standard.     See
    14   Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal), 
    450 B.R. 15
       897, 918 (9th Cir. BAP 2011).
    16        The bankruptcy court’s decision not to conduct an
    17   evidentiary hearing is reviewed for an abuse of discretion.
    18   Tyner v. Nicholson (In re Nicholson), 
    435 B.R. 622
    , 636 (9th Cir.
    19   BAP 2010), partially abrogated on other grounds by, Law v.
    20   Siegel, 
    134 S. Ct. 1188
    , 1196-98 (2014).   The bankruptcy court
    21   abused its discretion if it incorrectly construed or applied the
    22   law or its factual findings were clearly erroneous.   United
    23   States v. Hinkson, 
    585 F.3d 1247
    , 1262 (9th Cir. 2009) (en banc).
    24                                DISCUSSION
    25   A.   Timeliness Issue re Appeal From Attorney’s Fees Order
    26        A timely-filed notice of appeal is mandatory and
    27   jurisdictional.   Browder v. Dir., Dep't of Corr. of Ill.,
    28   
    434 U.S. 257
    , 264 (1978); Hunt v. City of Los Angeles, 
    638 F.3d 9
     1   703, 719 (9th Cir. 2011).   When the appellant fails to timely
     2   file a notice of appeal from a post-judgment order awarding
     3   attorney’s fees, the appellate court lacks jurisdiction to review
     4   the fees order.   Id.; Farley v. Henderson, 
    883 F.2d 709
    , 712 (9th
     5   Cir. 1989) (citing Culinary & Serv. Employees Union, Local 555 v.
     6   Haw. Employee Benefit Admin., 
    688 F.2d 1228
    , 1232 (9th Cir.
     7   1982)).
     8        Here, Reliance’s January 7, 2015 supplemental notice of
     9   appeal was untimely.   The bankruptcy court entered its fee order
    10   on December 5, 2014, and pursuant to Rule 8002(a)(1), the last
    11   day to timely file a notice of appeal therefrom was December 19,
    12   2014.   Reliance argues that its belated supplemental notice of
    13   appeal referencing the fees order should relate back to the date
    14   of the filing of its appeal from the claim disallowance order.
    15   We disagree.   The above-cited Ninth Circuit decisions stand for
    16   the proposition that a timely supplemental notice of appeal must
    17   be filed from a post-judgment fees order.
    18        Because Reliance’s appeal of the fees order was untimely, we
    19   lack jurisdiction to review the bankruptcy court’s fees order.
    20   B.   Mootness Issue re Claim Disallowance Order
    21        An appeal is constitutionally moot if it has become
    22   impossible for the appellate court to fashion meaningful relief.
    23   Ederel Sport, Inc. v. Gotcha Int'l L.P. (In re Gotcha Int'l
    24   L.P.), 
    311 B.R. 250
    , 254 (9th Cir. BAP 2004) (citing Church of
    25   Scientology of Cal. v. United States, 
    506 U.S. 9
    , 12 (1992)).
    26        Here, after Reliance appealed the claim disallowance order,
    27   the bankruptcy court entered an order granting Locklin’s request
    28   to dismiss her bankruptcy case.    The case dismissal order has not
    
    
                                           10
     1   been appealed, and its entry raises the question of whether this
     2   appeal has been rendered moot.    See Omoto v. Ruggera
     3   (In re Omoto), 
    85 B.R. 98
    , 100 (9th Cir. BAP 1988) (“The general
     4   rule, when an underlying bankruptcy case is dismissed, is that it
     5   ‘may indicate that no case or controversy remains with respect to
     6   issues directly involving the reorganization of the estate.’”).
     7        While the dismissal of the underlying bankruptcy case
     8   sometimes renders moot a pending appeal arising from that case,
     9   that is not what happened here.    The bankruptcy court’s dismissal
    10   order explicitly stated that both its claim disallowance order
    11   and its fees order would remain effective notwithstanding the
    12   dismissal of Locklin’s bankruptcy case.    The case dismissal order
    13   also provided for the bankruptcy court’s post-dismissal retention
    14   of jurisdiction in the event that any of the matters taken up on
    15   appeal were remanded for further proceedings.    Most importantly,
    16   the case dismissal order contemplated the payment in full of all
    17   allowed general unsecured claims, which in light of our ruling in
    18   this appeal conceivably could eventually include Reliance’s
    19   claim.   Under these circumstances, the appeal from the claim
    20   disallowance order is not moot.
    21   C.   Substantive Review of Claim Disallowance Order
    22        “The filing of an objection to a proof of claim ‘creates a
    23   dispute which is a contested matter’ within the meaning of
    24   Bankruptcy Rule 9014 and must be resolved after notice and
    25   opportunity for hearing upon a motion for relief.”    Lundell v.
    26   Anchor Const. Specialists, Inc., 
    223 F.3d 1035
    , 1039 (9th Cir.
    27   2000) (quoting   Adv. Comm. Notes accompanying Rule 9014).   As
    28   amended in 2002, Rule 9014 generally requires bankruptcy courts
    
    
                                           11
     1   to resolve contested matters only after holding an evidentiary
     2   hearing at which the testimony of witnesses is taken in the same
     3   manner as it is in adversary proceedings.     See Rule 9014(d) and
     4   accompanying Adv. Comm. Note.   There are two exceptions to this
     5   rule: (1) the court may, if the parties so stipulate, decide the
     6   contested matter based on the parties’s affidavits and exhibits;
     7   and (2) the court may dispense with the evidentiary hearing
     8   requirement when there are no “disputed material factual issues”
     9   presented.   Id.; see also Caviata Attached Homes, LLC v. U.S.
    10   Bank, N.A. (In re Caviata Attached Homes, LLC), 
    481 B.R. 34
    , 44
    11   (9th Cir. BAP 2012).   Put another way, “Where the . . . core
    12   facts are not disputed, the bankruptcy court is authorized to
    13   determine contested matters . . . on the pleadings and arguments
    14   of the parties, drawing necessary inferences from the record.”
    15   In re Caviata Attached Homes, LLC, 481 B.R. at 45-46 (quoting
    16   In re Nicholson, 435 B.R. at 636).
    17        Here, the bankruptcy court noted the alter ego allegations
    18   set forth in the amended proof of claim and acknowledged
    19   Reliance’s request for the court to set an evidentiary hearing.
    20   But the court declined to do so.     No evidentiary hearing was
    21   necessary, the court reasoned, because Reliance had not included
    22   with its written claim objection response any declarations or
    23   exhibits tending to demonstrate that Locklin was Nightscaping’s
    24   alter ego.   Consequently, the court ruled, the alter ego issue
    25   was not a disputed material factual issue for purposes of
    26   Rule 9014(d) because the only evidence before the court –
    27   Locklin’s evidence – tended to demonstrate that Locklin was not
    28   Nightscaping’s alter ego.
    
    
                                         12
     1        We cannot uphold this ruling of the bankruptcy court.     The
     2   alter ego allegations in the amended proof of claim constituted
     3   “some evidence” in support of Reliance’s alter ego theory.
     4   Wright v. Holm (In re Holm), 
    931 F.2d 620
    , 623 (9th Cir. 1991)
     5   (citing 3 L. King, Collier on Bankruptcy § 502.02, at 502-22
     6   (15th ed. 1991)).    Indeed, the bankruptcy court acknowledged the
     7   prima facie validity of Reliance’s amended proof of claim based
     8   on its alter ego theory.    This acknowledgment is consistent with
     9   the Federal Rules of Bankruptcy Procedure and Ninth Circuit
    10   authority.    Rule 3001(f) provides that “A proof of claim executed
    11   and filed in accordance with these rules shall constitute prima
    12   facie evidence of the validity and amount of the claim.”     And our
    13   Court of Appeals has held that the allegations set forth in a
    14   properly-filed proof of claim constitute prima facie evidence for
    15   purposes of ruling on a claim objection.    Lundell, 223 F.3d at
    16   1040 (“Claimants alleged in their proofs of claim that Lundell
    17   was a West Coast general partner, which is prima facie valid.”).
    18        In Lundell, the bankruptcy court weighed the evidence at an
    19   evidentiary hearing at which both sides presented evidence in
    20   support of their respective positions.    Id. at 1037.   Here, in
    21   contrast, the bankruptcy court refused to hold an evidentiary
    22   hearing.    While the bankruptcy court here concluded that there
    23   was no factual dispute – no conflicting evidence – for which it
    24   needed to hold an evidentiary hearing, this conclusion was
    25   incorrect.    The bankruptcy court here weighed the evidence
    26   presented by both sides and determined that Reliance’s alter ego
    27   evidence was de minimis and Locklin’s contrary evidence was
    28   credible.    These two determinations constituted the resolution of
    
    
                                          13
     1   a material factual dispute, which the bankruptcy court only
     2   should have resolved after holding an evidentiary hearing, per
     3   Rule 9014(d).
     4        According to the bankruptcy court, its local rules – namely
     5   C.D. Cal. L. Bankr. R. 9013-1(f) and (i) – required Reliance to
     6   include with its written response to the Second Claim Objection
     7   the evidence it wished to submit on the alter ego issue.    Having
     8   not done so, the court ruled, Reliance failed to meet its burden
     9   to demonstrate the existence of a disputed material factual issue
    10   requiring an evidentiary hearing.    As the bankruptcy court
    11   explained to Reliance at oral argument:
    12        I think your burden in your response was to present
              evidence, and I’ll turn back to other local bankruptcy
    13        rules. 9013-1(f) and (i) both require as part of an
              opposition that you include evidence as well as the
    14        legal argument on which you base your opposition for,
              among other things, due process concerns.
    15
              Ultimately, that wasn’t done in any respect. And so I
    16        think in terms of the shifting of the burdens with
              respect to a claim objection, you, sir, you failed to
    17        satisfy your burden, the Claimant's ultimate burden of
              persuasion, by presenting evidence as part of your
    18        response to raise an issue of fact in part, because
              there is no evidence presented with your initial
    19        claim. So there’s no evidence at all supporting your
              assertions that Ms. Locklin is the alter ego of
    20        Nightscaping.
    21   Hr’g Tr. (Aug. 19, 2014) at 5:21-6:9.
    22        The manner in which the bankruptcy court applied its local
    23   rules shifted the timing and manner of presenting evidence from
    24   an evidentiary hearing to the briefing portion of the claim
    25   objection proceedings.   In this sense, the bankruptcy court’s
    26   application of its local rules impermissibly contravened the
    27   Federal Rules of Bankruptcy Procedure by altering the procedural
    28   scheme for resolving claim objections set forth in Rule 9014(d).
    
    
                                         14
     1   See Rule 9029(a)(1) (authorizing courts to promulgate local rules
     2   only to the extent they are consistent with the Federal Rules of
     3   Bankruptcy Procedure); see also Garner v. Shier (In re Garner),
     4   
    246 B.R. 617
    , 624 (9th Cir. BAP 2000) (citing Rule 9029(a)(1) and
     5   noting that local rules must be consistent with the Federal Rules
     6   of Bankruptcy Procedure).4
     7            In addition, by weighing the evidence presented by both
     8   sides and finding for Locklin on the alter ego issue, the
     9   bankruptcy court conflated its initial duty to ascertain whether
    10   there existed a disputed material factual issue with its ultimate
    11   duty to resolve factual disputes by weighing the evidence.
    12   Consequently, the bankruptcy court committed reversible error
    13   when it disallowed Reliance’s claim without holding an
    14   evidentiary hearing.
    15        It also is worth noting that the bankruptcy court was
    16   insistent that its ruling did not amount to a grant of summary
    17   judgment.     Summary judgment procedures are available in
    18   bankruptcy court contested matters, see Rule 9014(c)
    19
    20
              4
               In In re Garner, this panel upheld the validity of a local
    21   rule requiring those objecting to proofs of claim to submit with
         their claims objections evidence sufficient to overcome the prima
    22
         facie validity of a properly-filed proof of claim. In relevant
    23   part, In re Garner held that this local rule was consistent with
         Rules 3007 and 9014. We need not further address In re Garner
    24   because it dealt with the requirements for claims objections and
         not, as implicated here, the requirements for responses to claims
    25   objections. However, we do note that In re Garner was decided
    26   before Rule 9014 was amended in 2002 to require evidentiary
         hearings in contested matters and that some of In re Garner’s
    27   reasoning depended on the bankruptcy court’s discretion, before
         the 2002 amendments, to decide disputed material factual issues
    28   on affidavits. See In re Garner, 246 B.R. at 623-24.
    
                                           15
     1   (incorporating Civil Rule 56), and the bankruptcy court here
     2   could have sua sponte invoked the summary judgment process if it
     3   believed, based on the parties’ papers, that the claim objection
     4   presented no genuinely disputed issues of material fact.    See
     5   Norse v. City of Santa Cruz, 
    629 F.3d 966
    , 971-72 (9th Cir.
     6   2010).
     7        However, before sua sponte granting summary judgment, courts
     8   first must give the adverse party adequate opportunity to avail
     9   itself of summary judgment procedures, which are designed to
    10   flesh out whether a genuinely disputed issue of material fact
    11   exists.   Id.   Here, the evidentiary record presented at the
    12   initial hearing on Locklin’s Second Claim Objection arguably
    13   suggested that there was no “genuine” issue of material fact
    14   within the meaning of seminal summary judgment decisions like
    15   Anderson v. Liberty Lobby, Inc., 
    477 U.S. 242
    , 248–49 (1986).
    16   Regardless, Reliance was not given adequate notice and
    17   opportunity to avail itself of summary judgment procedures
    18   designed to test this notion.
    19        Nothing in our decision should be construed to suggest that
    20   the bankruptcy court is obliged on remand to give Reliance more
    21   time to conduct discovery.    Reliance’s opening appeal brief
    22   mentions discovery only once, and then only in passing.    As a
    23   result, Reliance has forfeited the issue of whether the
    24   bankruptcy court erred by not giving it more time to conduct
    25   discovery.   See Christian Legal Soc'y v. Wu, 
    626 F.3d 483
    , 487–88
    26   (9th Cir. 2010); Brownfield v. City of Yakima, 
    612 F.3d 1140
    ,
    27   1149 n.4 (9th Cir. 2010).
    28        Moreover, even if Reliance had properly preserved for appeal
    
                                          16
     1   the discovery issue, the record reflects that Reliance had ample
     2   time to conduct discovery.    As early as September 2013, when
     3   Reliance filed a state court complaint against both Locklin and
     4   Nightscaping, Reliance already had stated that the basis of its
     5   claim against Locklin arose from alter ego principles.    See
     6   Complaint (Sept. 11, 2013) – attached as Exhibit 3 to Reliance’s
     7   June 10, 2014 amended proof of claim (“LaVesta Locklin is liable
     8   for the debt pursuant to the doctrine of alter ego.”).    Thus, at
     9   the time it filed its initial proof of claim in February 2014,
    10   Reliance already knew that its claim against Locklin ultimately
    11   depended on it being able to prove that Locklin was
    12   Nightscaping’s alter ego.    This need to prove its alter ego
    13   allegations was further driven home when Locklin filed her first
    14   claim objection in March 2014 and when the court sustained the
    15   first claim objection in June 2014 (with leave to amend).    Yet
    16   there is nothing in the record indicating that Reliance made any
    17   effort to conduct discovery at any time during the claim
    18   proceedings – from the February 2014 filing of its original proof
    19   of claim to the August 2014 entry of the order disallowing its
    20   amended proof of claim.   Nor is there anything in the record
    21   indicating any legitimate reason why Reliance was unable to
    22   conduct the requisite discovery while its bankruptcy claim
    23   against Locklin was pending.
    24        Finally, at the end of its opening brief, Reliance requested
    25   that this panel order that the dispute between the parties, on
    26   remand, be reassigned to another bankruptcy judge.    We deny that
    27   request.   Reliance did not attempt to explain why it believes
    28   reassignment is necessary.    Furthermore, if Reliance believes
    
                                          17
     1   that reassignment is justified based on some particular conduct
     2   of the bankruptcy court, Reliance in the first instance should
     3   have filed a motion for recusal in the bankruptcy court and
     4   should have followed all applicable procedural rules for
     5   requesting such relief.   See generally United States v. Studley,
     6   
    783 F.2d 934
    , 939-40 (9th Cir. 1986).5
     7                               CONCLUSION
     8        For the reasons set forth above, we VACATE the bankruptcy
     9   court’s claim disallowance order, and we REMAND for further
    10   proceedings consistent with this decision.
    11
    12
    13
    14
    15
    16
    17
    18
    19
    20
    21
    22
    23
              5
               On appeal, after we set this matter for oral argument,
    24   Reliance filed a motion to continue oral argument, which we
         denied. Reliance then filed additional requests for relief
    25   regarding oral argument and attempted to support these requests
    26   with a request for judicial notice. We addressed all of these
         requests in our decision disposing of Reliance’s and Opperwall’s
    27   companion appeal (BAP No. CC-15-1008-KuFKI), and we deny those
         requests for purposes of this appeal for the same reasons as
    28   stated therein.
    
                                         18