United States District Court, D. New Mexico
WAYNE KENNETH AUGÉ, II, M.D., Individually and as Trustee on Behalf of Covalent Global Trust, Plaintiff,
STRYKER CORPORATION, and HOWMEDICA OSTEONICS CORP., Defendants.
ORDER TO SHOW CAUSE
matter comes before the Court upon Defendants' Statement
Concerning Plaintiff's Notice of Self Representation
(“Statement”), filed September 23, 2019;
Plaintiff's Statement Regarding Defendants'
Statement, filed September 27, 2019; Defendants' Reply to
its Statement, filed September 30, 2019; and Plaintiff's
Reply to Defendants' Statement, filed October 4, 2019.
(Docs. 288, 292, 297, and 300). Having considered the
parties' briefing, the record of this case, and relevant
law, the Court orders Dr. Augé to show cause why this
case should not be dismissed without prejudice.
December 1, 2003, Dr. Augé created The Covalent Global
Trust (“CGT”). (Doc. 288-1) at 2-13. More than
ten years later, on February 14, 2014, Dr. Augé filed
a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code. (Doc. 1) filed in 14-10443-TA. Later that
year, on December 2, 2014, Dr. Augé filed his
Complaint in this Court, in which he brought claims “in
his individual capacity and as trustee on behalf of The
Covalent Global Trust, ” and stated that the CGT is
“a revocable trust [Dr. Augé] created in 2003,
to which he has caused assets to be assigned that include
rights and interests that are the subject of this
Complaint.” (Doc. 1) at 1-2.
23, 2015, the Bankruptcy Court converted Dr.
Augé's Chapter 11 bankruptcy to a Chapter 7
proceeding and appointed Clarke C. Coll as the Chapter 7
Trustee. (Doc. 261) filed in 14-10443-TA. As a result,
Trustee Coll filed a Notice of Substitution in this case in
which Trustee Coll substituted himself as Plaintiff. (Doc.
30). After proceeding as Plaintiff in this case for more than
two years, Trustee Coll filed a second Notice of
Substitution, in which he notified the Court that he had
abandoned the bankruptcy estate's claims in this lawsuit
and substituted Dr. Augé as the Plaintiff in place of
Trustee Coll. (Doc. 184). Trustee Coll abandoned these claims
because the bankruptcy estate had satisfied all general
unsecured claims and expenses, so Trustee Coll found that
pursuit of the claims would be “burdensome to the
estate.” (Doc. 505) at 3, filed in 14-10443-TA (citing
Bankruptcy Code § 554(a) (“[A]fter notice and
hearing, the trustee may abandon any property of the estate
that is burdensome to the estate or that is of
inconsequential value to the estate.”)).
participating in a second unsuccessful settlement conference
in this case, on August 2, 2019, Dr. Augé's
attorneys filed a motion to withdraw as counsel. (Doc. 260).
The Court then entered an order granting the motion to
withdraw and giving Dr. Augé an opportunity to either
retain other counsel or notify the Court that he will proceed
pro se. (Doc. 278). On September 13, 2019, Dr.
Augé filed a timely notice electing to proceed pro
se. (Doc. 282).
their Statement, Defendants challenge Dr. Augé's
ability to proceed pro se on behalf of CGT. (Doc.
288) at 1. Defendants note that Dr. Augé filed this
lawsuit both in his individual capacity and as trustee on
behalf of CGT, and asserted that he assigned the
“rights and interests that are the subject of this
Complaint” to CGT. Id. at 2 (citing Doc. 1 at
2, ¶ 2, and Doc. 34 at 2, ¶ 2). Because CGT holds
the rights and interests that are the subject of this
lawsuit, and because CGT cannot be represented by a pro
se party, Defendants ask the Court to dismiss this case
without prejudice. Id. at 2-4.
response to Defendants' Statement, Dr. Augé first
asserts that if CGT is still a party to this case, then it is
currently represented by counsel because the Court's
order granting counsel's motion to withdraw related
“only to Plaintiff Wayne K. Augé, II, M.D.
individually, ” and not to Dr. Augé as trustee
on behalf of CGT. (Doc. 300) at 2. In the alternative, Dr.
Augé asserts that CGT is not a party to this case
because the second Notice of Substitution substituted only
Dr. Augé as Plaintiff in place of Trustee Coll, not
CGT. Id. at 2-3 (citing Docs. 184 and 187). Dr.
Augé contends that the substitution occurred as a
result of the Bankruptcy Court dissolving CGT. Id.
reply, Defendants dispute that the Bankruptcy Court dissolved
CGT leaving Dr. Augé as the sole remaining claimant in
this case. (Doc. 297) at 1. Instead, Defendants argue that
when Trustee Coll abandoned the bankruptcy estate's
claims in this case, the claims reverted back to their status
prior to assignment to the bankruptcy estate. Id. at
3. Therefore, Defendants maintain that Dr. Augé is
still the trustee of CGT, and that CGT owns the “rights
and interests that are the subject of” this lawsuit.
Accordingly, Defendants conclude Dr. Augé lacks
standing to proceed pro se on behalf of CGT.
Id. at 3-4.
Defendants' “Statement” is not the proper way
to request the Court to act. Instead, “[a] request for
a court order must be made by motion.” Fed.R.Civ.P.
7(b)(1). Nevertheless, Defendants are correct that the
Court's Local Rules require “[a] corporation,
partnership or business entity other than a natural
person” to be represented by an attorney. D.N.M.
LR-Civ. 83.7; see also United States v. Lain, 773
Fed.Appx. 476, 477 (10th Cir. 2019) (holding trustee may not
represent trust unless he or she is licensed attorney). In
Lain, the Tenth Circuit explained that
“[t]rusts are artificial entities that exist
independently of their trustee or trustees, ” and
“[a]lthough individuals may represent their own
personal interests without an attorney, artificial entities
may appear in court only through licensed counsel.”
Id. (citing Rowland v. Cal. Men's Colony,
Unit II Men's Advisory Council, 506 U.S. 194, 202
(1993) (“It has been the law for the better part of two
centuries … that a corporation may appear in the
federal courts only through licensed counsel. As the courts
have recognized, the rationale for that rule applies equally
to all artificial entities.”); see also United
States v. Cram, 1998 WL 919871, at *6 (D. Utah)
(reasoning that rule prohibiting pro se
representation of trust serves to protect beneficiaries of
trust who “would not be able to sustain a malpractice
action against a trustee representing a trust pro
se”). Therefore, the Court must determine if CGT
is still a party to this case requiring representation of
Augé first argues that the Court's order allowing
his counsel to withdraw from representing him did not apply
to its representation of CGT. (Doc. 300) at 2. Indeed,
neither counsel's motion to withdraw nor the Court's
order granting that motion referred to CGT. (Docs. 260 and
277). The Court's order granting the motion to withdraw
further referenced Trustee Coll's Notice of Substitution
providing that Dr. Augé was Plaintiff instead of
Trustee Coll. (Doc. 277) at 1, n.1. Nevertheless, Dr.
Augé brought this action both individually and as
trustee on behalf of CGT, and has not distinguished in the
course of this litigation between his individual claims and
his claims as trustee. See (Doc. 34). Moreover, the
engagement letter between Dr. Augé and his counsel
makes no reference to CGT and, instead, refers only to Dr.
Augé engaging counsel's services to assist in
pursuing a claim against Defendants. (Doc. 269) at 11-13. Dr.
Augé presents no evidence to support a finding that
his counsel still represents CGT in this case. Therefore, the
Court rejects Dr. Augé's argument that his former
counsel continues to represent CGT.
Dr. Augé asserts that CGT is no longer a party to this
case pursuant to Trustee Coll's Notice of Substitution.
(Doc. 300) at 2-3 (citing Doc. 184). Dr. Augé argues
that the Notice of Substitution only pertained to Dr.
Augé individually, and that CGT remained property of
the bankruptcy estate. Id. During the pendency of a
bankruptcy proceeding, the debtor's estate becomes the
bankruptcy estate. 11 U.S.C. § 541. Consequently, when
the Bankruptcy Court appointed Trustee Coll as bankruptcy
trustee in Dr. Augé's Chapter 7 proceeding, he was
also substituted as Plaintiff in this action. See
(Doc. 30). And when Trustee Coll abandoned this cause of
action pursuant to 11 U.S.C. § 554(a), he filed a second
Notice of Substitution notifying the Court that Dr.
Augé was once again the Plaintiff in this case. (Doc.
184). Importantly, however, when a bankruptcy trustee
abandons property under Section 554(a), it “reverts to
the debtor, and stands as if no bankruptcy petition was
filed.” In re Dewsnup, 908 F.2d 588, 590 (10th
Cir. 1990), aff'd 502 U.S. 410 (1992); see
also In re Gravure Paper Bd. Corp., 234 F.2d 928, 930-31
(3d Cir. 1956) (“[W]hen the trustee in bankruptcy
abandons an asset, he is to be treated as having never had
title to it; the abandonment is said to relate back, so that
the title stands as if no assignment had been made.”)
(citations omitted). Therefore, since CGT owned the
“rights and interests” that are the subject of
this action prior to assignment to the bankruptcy estate,
those assets reverted back to CGT upon Trustee Coll's
Section 554(a) abandonment. Hence, CGT resumed its status as
a party in this lawsuit.
addition, Dr. Augé contends that after he was
substituted as Plaintiff for Trustee Coll, the caption used
by the parties and the Court no longer referred to Dr.
Augé proceeding as trustee on behalf of CGT. (Doc.
300) at 2-3. However, neither Trustee Coll's Notice of
Substitution nor the caption used in the pleadings can serve
to amend the Complaint to exclude CGT as a party.
See Fed. R. Civ. P. 15 (setting out the procedure to
amend a pleading); U.S. ex rel. Eisenstein v. City of
N.Y., N.Y., 556 U.S. 928, 935 (2009) (“The caption
is not determinative as to the identity of the parties to the
action.”) (quoting 5A C. Wright & A. Miller,
Fed. Prac. and Proc. § 1321, p. 388 (3d ed.
2004)); Welch v. Laney, 57 F.3d 1004, 1010 (11th
Cir. 1995) (explaining that complaint itself, rather than
caption to complaint, controls identification of parties and
capacity in which they are sued). The Court recognizes that
Trustee Coll's Notice of Substitution stating that Dr.
Augé was the Plaintiff going forward implied that Dr.
Augé was proceeding individually. Regardless, when
Trustee Coll abandoned the claims in this lawsuit, they
reverted to the parties who had possession of them prior to
the bankruptcy proceeding, which included CGT.
extent Dr. Augé argues that the bankruptcy proceedings
dissolved CGT, the record does not support such a finding.
Dr. Augé argues that “[a]ll [CGT] assets were
decreed owned by Dr. Augé pursuant summary judgment
[sic] in Adversary No. 14-1049 t.” (Doc. 300) at 2
(citing Doc. 89, filed in 14-1049-t). In the summary judgment
order relied on by Dr. Augé, the Bankruptcy Court
explained that CGT's assets are part of Dr.
Augé's bankruptcy estate, noted that Dr.
Augé did not list CGT's assets on his bankruptcy
schedules, and required Dr. Augé to amend his
bankruptcy schedules to clarify that CGT's assets are the
property of the bankruptcy estate. (Doc. 89) filed in
14-1049-t. This summary judgment order did not, however,
serve to dissolve or liquidate CGT. Indeed, the Final Account
and Distribution Report entered at the close of Dr.
Augé's bankruptcy proceeding on February 12, 2018,
lists the assets still held by CGT, indicating CGT still
existed at that time. See (Doc. 530) filed in
14-10443-TA at 9-13. Moreover, courts have held that Chapter
7 proceedings cannot serve to dissolve a business entity.
See, e.g., F.P. Woll & Co. v. Fifth and Mitchell St.
Corp., 2001 WL 34355652, at *3 (E.D. Penn.) (“The
legislative history of Section 727(a)(1) of the Bankruptcy
Code … supports the conclusion that a corporation
which has been liquidated in a bankruptcy ...