SEAN F. COX, District Judge.
This is a bankruptcy appeal from a Chapter 13 Adversary Proceeding. Appellant Danny Lee Hakes's ("Hakes" or "Debtor") appeal relates to the bankruptcy court's "Order Denying Defendant's Motion For Reconsideration Of March 16, 2015, Order Holding Adversary Proceeding In Abeyance." (Adv. Pro. Docket #31). The parties have briefed the issues and the Court entertained oral argument as to Debtor's appeal on January 21, 2016. For the reasons set forth below, the Court shall AFFIRM the bankruptcy court's order.
On July 29, 2014, Debtor Danny Lee Hakes filed a Chapter 13 petition for bankruptcy in the United States Bankruptcy Court for the Eastern District of Michigan. The action was assigned to the Honorable Daniel Opperman, United States Bankruptcy Judge, and was assigned as Case No. 14-32139.
At the time Debtor filed his bankruptcy case, he was a Defendant in a civil action pending in the Genesee County Circuit Court ("State Court Action"). (Bankr. Docket # 79, Bankr. Opinion at 1).
The State Court Action was filed by Old Republic Insurance Company ("Old Republic") on October 12, 2012. Id. In it, Old Republic seeks declaratory relief and restitution for First Party No Fault benefits it paid to Debtor as a result of an accident that occurred on June 23, 2003. Id. Old Republic claims that Debtor obtained payments for Attendant Care Services by means of fraud and/or misrepresentation. (Docket # 9, Old Republic's App. Br. at 2). In October 2013, Old Republic stopped paying Debtor PIP benefits. (Docket #7, Debtor's App. Br. at 8). In response, Debtor filed a counterclaim. (Old Republic's App. Br. at Ex. 2). In it, Debtor seeks damages for intentional infliction of emotional distress, fraud, conspiracy to commit intentional torts, breach of contract, and violations of Michigan No Fault laws. Id.
On July 29, 2014, while the State Court Action was still pending, Debtor Danny Lee Hakes petitioned for bankruptcy. On November 24, 2014, Old Republic filed a proof of claim in the amount of $622,590 for "Money Received by False Representation." (Old Republic's App. Br. at Ex. 3, Proof of Claim.). That same day, Debtor filed an objection to the proof of claim. (Bankr. Docket #61). Debtor contends that Old Republic is precluded from bringing its proof of claim under the applicable statute of limitations, and under theories of judicial estoppel and equitable estoppel. Id.
On November 24, 2014, Old Republic also filed a complaint against Debtor pursuant to 11 U.S.C. 523(a)(2), pending as Adversary Proceeding No. 14-3199. (Adv. Pro. Docket #1). In its complaint, Old Republic objects to the dischargeability of its claims because of the fraud and misrepresentation allegedly committed by Debtor under Michigan law. Debtor filed a counterclaim against Old Republic, seeking declaratory relief from the court as to his entitlement to No Fault benefits, as well as attendant relief and costs. (Adv. Pro. Docket #9).
On December 18, 2014, Old Republic filed a "Motion for Abstention from Determination of claims, Lift of Stay, and Abeyance of Adversary Proceeding Pending Resolution of Prepetition Lawsuit." (Bankr. Docket #64, Old Republic's Motion). The motion sought the following three things from the bankruptcy court: 1) relief from the automatic stay in order to allow the State Court Action to proceed in circuit court; 2) abstention from making a determination as to its Proof of Claim until the validity of its claims were determined in the State Court Action; and 3) abeyance of the Adversary Proceeding until the State Court Action was resolved. Old Republic argued that its proof of claim and Debtor's claim discharge objections all involved a determination of the issues that were already being adjudicated in the State Court Action.
On March 16, 2015, the bankruptcy court granted Old Republic's motion through an Order Granting Motion for Relief from Stay (Bankr. Docket # 80) and an Order Holding Adversary Proceeding in Abeyance (Adv. Pro. Docket #31, Abeyance Order), both entered in connection with a contemporaneous Opinion Granting Motion for Relief from Stay re: Abstention from Determination of Claims, Lift of Stay to Continue Prepetition Lawsuit and Abeyance of Adversary Proceeding Pending Resolution of Prepetition Lawsuit Filed By Old Republic Bank. (Bankr. Docket #79, Bankr. Opinion).
In his Opinion, Judge Opperman characterized the parties' competing positions as follows:
(Bankr. Opinion at 2-3).
The court rejected Debtor's argument and concluded that the circumstances warranted permissive abstention pursuant to 28 U.S.C. § 1334(c). In reaching this conclusion, the bankruptcy court considered the 13 non-exclusive factors relied upon by courts when determining whether or not permissive abstention is appropriate. After analyzing all of the factors, the Court granted Old Republic's motion:
(Bankr. Opinion at 6-7).
On March 22, 2015, Debtor filed a Motion for Reconsideration of the bankruptcy court's March 16, 2015, Order Holding Adversary Proceeding in Abeyance, which was entered in connection with the court's Opinion granting Old Republic's Motion for Relief from Stay. (Adv. Pro. Docket #32, Motion for Reconsideration). In his motion, Debtor argued that the bankruptcy court committed palpable errors, in: 1) abstaining from determining whether to allow or disallow Old Republic's filed Proof of Claim in 14-32139, in favor of allowing a future non-bankruptcy, state court jury, to make that determination; 2) not stating how the abstention and the dischargeability abeyance are to proceed; and 3) invalidly outsourcing the determination of the Chapter 13 Estate's own claims against Old Republic to that same, to-be-formed-in-the-future, state court jury. (Motion for Reconsideration at 9).
The bankruptcy court denied that motion in an "Order Denying [Debtor's] Motion for Reconsideration of March 16, 2015, Order Holding Adversary Proceeding in Abeyance." (Adv. Pro. Docket #43).
On August 4, 2015, Debtor filed a Notice of Appeal, appealing "from the order of the Bankruptcy Court — `Order Denying Defendant's Motion For Reconsideration of March 16, 2015, Order Holding Adversary Proceeding in Abeyance,' entered in this Adversary Proceeding on July 30, 2015." (Docket # 1).
Here, Debtor appeals from the bankruptcy court's "Order Denying Defendant's Motion for Reconsideration of March 16, 2015, Order Holding Adversary Proceeding in Abeyance." (Docket # 1, Notice of Appeal).
An order which grants or denies a motion for reconsideration is reviewed for an abuse of discretion, except that any aspect of the ruling that relies upon issues of law is subject to de novo review. Greenwell v. Parsley, 541 F.3d 401, 403 (6th Cir. 2008).
In re J&M Salupo Development Co., 388 B.R. 795, 800-01 (6th Cir. BAP 2008) (quoting In re Pequeno, 240 Fed. App'x 634, 636 (5th Cir. 2007)) (internal citations and footnotes omitted).
Similarly, motions for relief from judgment pursuant to Rule 60(b) are subject to abuse of discretion review. Id. at 801.
As an initial matter, Debtor's arguments on appeal appear to center around the bankruptcy court's underlying "Order Holding the Adversary Proceeding in Abeyance." Debtor mistakenly asserts that the issue before the Court is "whether the March 16, 2015, `Order of Abeyance,' as drafted and entered by the Bankruptcy Court, unnecessarily and invalidly imperiled the § 541 Estate's own post-petition contended cause of action against Old Republic Insurance Company." (Docket #7, Debtor's App. Br. at 4). However, Debtor fails to address the order actually appealed: Order Denying Motion for Reconsideration.
Debtor has failed to apprise this Court of the reasons why he believes the bankruptcy court's denial of his Motion for Reconsideration constitutes an abuse of discretion. Instead, Debtor reasserts the same arguments advanced before the bankruptcy court in his pleadings opposing Old Republic's motion and again in his reconsideration motion.
Morever, even assuming, arguendo, that this is a legitimate appeal of the underlying Order of Abeyance, it still fails.
In its Opinion Denying Debtor's Motion for Reconsideration, the bankruptcy court noted that Debtor's motion was governed by Fed. R. Bankr. P. 9023 and L.R. Bankr. P. 9024-1.
Pursuant to Local Rule 9024-1, a court must grant a timely filed motion for reconsideration if the movant demonstrates that the Court and the parties have been misled by a palpable defect and that a different disposition of the case must result from a correction of such palpable defect. L.R. Bankr. P. 9024-1.
The bankruptcy court properly denied Debtor's motion to the extent that it was construed as an FRCP 59(e) motion to alter or amend the judgment.
To establish a palpable defect in the context of FRCP 59(e), a party must point to: "1) a clear error of law; 2) newly discovered evidence; 3) an intervening change in controlling law; or 4) a need to prevent manifest injustice." United States v. Ford Motor Co., 532 F.3d 496, 507 (6th Cir. 2008). A Rule 59(e) motion "is not an opportunity to re-argue a case." Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir. 1998) (citations omitted).
In his Motion for Reconsideration, Debtor did not point to any clear error of law committed by the bankruptcy court. Debtor focused mainly on the bankruptcy court's decision to abstain from making claim determinations. Debtor failed to point out how the bankruptcy court's application of the 13 non-exclusive abstention factors was erroneous. Further, Debtor failed to direct the bankruptcy court to an intervening change in controlling law, newly discovered evidence, or the prospect of manifest injustice.
The bankruptcy court correctly concluded that Debtor had done nothing more than recite the history of the case and repeat arguments the Court considered in issuing the Abeyance Order and underlying Opinion. In denying debtor's motion, the court concluded that:
(Adv. Pro. Docket #42, Opinion Denying Reconsideration Motion at 5-6). Even on appeal, Debtor fails to point out any palpable defect (i.e. clear error of law, newly discovered evidence, intervening change in controlling law, or a need to prevent manifest injustice) that would warrant setting aside the underlying Abeyance Order.
The bankruptcy court properly denied Debtor's motion to the extent that it was construed as a FRCP 60(b) motion for relief from judgment.
The bankruptcy court properly determined that the only applicable subsection of Rule 60(b) is subsection (b)(6), which allows the court to grant the motion for "any other reason that justifies relief." Fed. R. Civ. P. 60(b)(6). This clause, however, only applies in unusual and extreme situations. The Sixth Circuit "adheres to the view that courts should apply Rule 60(b)(6) only in exceptional or extraordinary circumstances which are not addressed by the first five numbered clauses of the Rule. Hopper v. Euclid Manor Nursing Home, Inc., 867 F.2d 291, 294 (6
A bankruptcy court's denial of a Rule 60(b)(6) motion is examined for an abuse of discretion, "which is `especially broad' given the underlying equitable principles involved." Id.
Here, the bankruptcy court properly determined that Debtor's motion did not establish the existence of any exceptional or extraordinary circumstances that would warrant the relief requested — especially since Debtor's arguments were merely recitations of arguments previously rejected by the court. On appeal, Debtor has also failed to establish the existence of any exceptional circumstance that would warrant the requested relief.
Rather than properly address the order appealed, Debtor addresses the bankruptcy court's underlying Abeyance Order and the purported error committed by the court in filing this Order.
First, Debtor argues that the bankruptcy court acted without authority when it abstained from determining claims and when it held the Adversary Proceeding in abeyance. The Court notes that this argument has already been rejected by the bankruptcy court on more than one occasion. (Bankr. Opinion; Opinion Denying Reconsideration Motion). Much of Debtor's arguments against abstention and abeyance center around the assertion that Old Republic subjected itself to the bankruptcy court's exclusive jurisdiction when it filed its proof of claim, and that jurisdiction was cemented when Debtor filed his objection to the Old Republic's claim.
Detrimental to Debtor's argument is 28 U.S.C. § 1334(c)(1), which states:
28 U.S.C. § 1334(c)(1). Accordingly, bankruptcy courts have discretion to abstain from hearing certain causes of action. In determining whether to permissively abstain under § 1334(c)(1), a court may consider a number of factors, including: 1) the effect or lack of effect on the efficient administration of the estate if a court abstains; 2) the extent to which state law issues predominate over bankruptcy issues; 3) the difficulty or unsettled nature of the applicable state law; 4) the presence of a related proceeding commenced in state court or other non-bankruptcy court; 5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334; 6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; 7) the substance rather than form of an asserted "core" proceeding; 8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court; 9) the burden on the bankruptcy court's docket; 10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties; 11) the existence of a right to a jury trial; 12) the presence in the proceeding of nondebtor parties; and 13) any unusual or other significant factors. In re Tremaine, 188 B.R. 380, 384 (Bankr. S.D. Ohio 1995).
"The decision whether to abstain is within the sound discretion of the bankruptcy judge." McDaniel v. ABN Amro Mortg. Group, 364 B.R. 644, 650 (S.D. Ohio 2007) (citing In re Tremaine, at 384). Based on a review of the applicable law, the bankruptcy court acted within its discretion when it abstained from determining the dischargeability of Old Republic's claims, thereby holding the Adversary Proceeding in abeyance. Upon making its determination, the court found:
(Opinion Denying Reconsideration Motion).
Based on the above, the bankruptcy court's determination was reasonable. The court correctly applied the relevant law to the facts before it. Debtor has made no effort to suggest otherwise. Notably, Debtor appears to ignore § 1334(c)(1) in its entirety.
In addition, Debtor's position appears to be that the "Bankruptcy Court and not a Genesee County Circuit Court Jury should determine Old Republic's Proof of Claim and the Bankruptcy Estate claims against Old Republic." Debtor's argument here is misplaced. The bankruptcy court, and not a state court jury, will make a dischargeability determination as to Old Republic's claims once the fraud allegations are litigated.
It bears noting that the bankruptcy court's decision here is not unprecedented. A factual scenario very similar was recently before the Sixth Circuit in In re Martin, 542 B.R. 199 (6th Cir. BAP 2015).
For the reasons stated above, the argument advanced here is unpersuasive.
Debtor also argues that the Order of Abeyance "improperly did not expressly declare whether the contemplated future jury verdict would preclude the estate's post-petition cause of action against Old Republic." (Debtor's App. Br. at 5). Debtor's argument here centers on a January 30, 2006, Arbitrator's Award, where it is stated that "Danny L. Hakes shall receive $250,000 from Respondent Old Republic Insurance Company for his no-fault (PIP) benefits arising out of his motor vehicle/motorcycle accident of June 23, 2003, as set forth below." Id. at 16. The Arbitration Award, however, "does not address and has no effect upon Claimant's no fault claims under MCL 500.3107(a) subsequent to the date of this award." (Docket #11, Pg ID 360, Arbitration Award).
Here, Debtor advances another exclusive jurisdiction argument and contends that a state court jury should not decide a bankruptcy estate's post-petition PIP claims against Old Republic without the estate's consent. (Docket #14, Debtor's "Sur" Sur Reply at 7). It is not clear to the Court how this argument has any bearing on the issues before it. Debtor does not properly flesh out his argument and fails to support it with any relevant authority. Again, it appears that Debtor misconstrues the effect of the bankruptcy court's Order of Abeyance. The bankruptcy court has held the Adversary Proceeding in abeyance and has abstained from determining dischargeability of Old Republic's claims because they are based upon allegations of fraud currently being litigated in a State Court Action. Once the State Court Action is resolved, the bankruptcy court will make determinations as to pre-petition and post-petition claims filed by both parties. Contrary to Debtor's assertions, the state court jury will only make findings of fact as they pertain to Old Republic's fraud allegations against Debtor.
Moreover, the Court is inclined to agree with Old Republic in that Debtor appears to skirt around addressing the bankruptcy court's ruling directly, and instead "muddies the waters on the permissibility of abstention . . . and leads the Court down a confusing path discussing why the rights of [Debtor's] bankruptcy estate are separate from those of [Debtor] and how allowing abstention will forever impair the rights of his bankruptcy estate." (Old Republic's App. Br. at 7-8).
For the reasons set forth above, IT IS ORDERED that the bankruptcy court's order is AFFIRMED.
