590 B.R. 156
Bankr. E.D. Mich.2018Background
- Debtors James and Phyllis Bennett filed Chapter 13 and listed an undisputed unsecured Bank of America credit‑card claim (~$18,200) on Schedule E/F.
- Bank filed Proof of Claim No. 3-1 for $18,104.72 on the claims bar date; Debtors objected for lack of supporting documentation and gave Bank until July 3, 2018 to file a written response.
- Before that deadline, Bank filed an Amended Proof of Claim (June 18, 2018) adding supporting documents but did not file a separate written response to the objection.
- Debtors submitted a certificate of no response and the court entered an order disallowing the original claim on July 5, 2018.
- Bank filed a motion for reconsideration (July 10, 2018) under § 502(j), Fed. R. Bankr. P. 3008, and sought relief under Rule 60(b)(1), supported by an affidavit asserting Bank personnel believed the amended claim sufficed as a response.
- Court held an evidentiary/procedural inquiry, considered Pioneer factors for excusable neglect, and ultimately concluded Bank’s failure to file a written response was excusable in these circumstances.
Issues
| Issue | Plaintiff's Argument (Debtors) | Defendant's Argument (Bank) | Held |
|---|---|---|---|
| Whether reconsideration under §502(j)/Rule 3008 requires showing grounds under Rules 59/60 when final order entered | Reconsideration should not be granted absent Rule 59/60 grounds | Bank argued §502(j)/3008 allow reconsideration for cause; relied on equities | Court: Where order is final, movant must at minimum demonstrate grounds for relief under Rule 59 or Rule 60 before §502(j)/3008 relief is warranted |
| Whether Bank’s conduct amounted to "mistake" under Rule 60(b)(1) | Debtors: Bank’s belief is a procedural/legal mistake not cognizable under Rule 60(b)(1) | Bank: Bank personnel mistakenly believed amending the claim satisfied the objection requirement | Court: Not a qualifying "mistake" for Rule 60(b)(1); Sixth Circuit precedent rejects attorney/litigation‑strategy errors as Rule 60(b)(1) mistake |
| Whether Bank’s failure to file a written response constituted excusable neglect under Rule 60(b)(1) (Pioneer factors) | Debtors: Failure to follow explicit notice/local rule is neglect and not excusable | Bank: Filed amended claim promptly with documents requested; acted in good faith and without delay | Court: Excusable neglect found — no prejudice to Debtors, short delay, plausible explanation, good faith conduct; relief granted |
| Whether relief will prejudice case timeline or Debtors’ rights | Debtors: Order disallowing claim was proper and relied on their certificate of no response | Bank: Prompt motion for reconsideration; Debtors still can object to amended claim later | Court: Minimal delay to confirmation (two weeks) and no prejudice to Debtors; reconsideration appropriate |
Key Cases Cited
- U.S. Bank Nat'l Ass'n v. U.S. Env't Prot. Agency, 563 F.3d 199 (6th Cir. 2009) (discussing limits of liberal reconsideration under Rule 3008)
- In re Adkins (Ruskin dissent), 425 F.3d 296 (6th Cir. 2005) (bankruptcy courts have wide discretion to define "cause" for §502(j))
- FHC Equities, L.L.C. v. MBL Life Assurance Corp., 188 F.3d 678 (6th Cir. 1999) (attorney misinterpretation of procedural law not "mistake" under Rule 60(b)(1))
- Pioneer Inv. Servs. Co. v. Brunswick Assocs. L.P., 507 U.S. 380 (1993) (establishing equitable Pioneer factors for excusable neglect)
- In re Snyder, 68 F.3d 468 (5th Cir. 1995) (applying Rule 60 standards to §502(j) reconsideration)