503 B.R. 620
Bankr. E.D. Pa.2013Background
- Frazer/Exton Development, L.P. and Whiteland Village, Ltd. seek to reopen their Chapter 11 cases to challenge a settled plan and its release, and to reimpose the automatic stay related to a pre-petition Foreclosure Action by Sovereign Bank.
- Sovereign Bank was the debtors’ largest creditor and a party to a Settlement Agreement approved by the court on November 17, 2011.
- The Remediation Loan originally funded environmental cleanup for Whiteland Village and secured by a $23 million mortgage; it was amended and increased to $29 million with additional security.
- The Makemie sale transaction, contemplated in the Settlement Agreement, did not close by the June 30, 2012 deadline, triggering defaults under the agreement.
- The Settlement Agreement included a broad release covering claims related to the Remediation Loan, the Foreclosure Action, the Guaranty Action, and the Debtors’ bankruptcy cases, which the Debtors seek to modify or rescind.
- The court denied the Motion to reopen, ruling reopening would be futile because Rule 60(b)(3) relief is time-barred and an independent Rule 60(d)(1) action is not warranted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the case should be reopened for relief under Rule 350(b). | Debtors seek reopening to undo the Settlement and modify the Plan. | Sovereign argues reopening would be futile and improper. | Denial; reopening would be futile. |
| Whether Debtors may obtain Rule 60(b)(3) relief from the Order. | Rule 60(b)(3) relief could be warranted due to discovery misconduct by Sovereign. | Rule 60(b)(3) motion time-barred and tolling inappropriate; misconduct insufficient. | Rule 60(b)(3) relief denied; time-barred and tolling inapplicable. |
| Whether an independent Rule 60(d)(1) action against Sovereign is available to prevent a grave miscarriage of justice. | Independent action would address alleged fraud/misconduct. | Beggerly standard not satisfied; no grave miscarriage of justice. | Denied; no grave miscarriage of justice requires independent action. |
Key Cases Cited
- Beggerly v. United States, 524 U.S. 38 (U.S. 1998) (independent action under Rule 60 limited to grave miscarriages of justice)
- Stridiron v. Stridiron, 698 F.2d 204 (3d Cir. 1983) (discovery misconduct can support Rule 60(b)(3) relief but requires specific factors)
- Bandai America Inc. v. Bally Midway Manufacturing Co., 775 F.2d 70 (3d Cir. 1985) (three-factor test for discovery misconduct under Rule 60(b)(3))
- In re Janssen, 396 B.R. 624 (Bankr.E.D.Pa. 2008) (six-factor test for reopening under Rule 350 and futility analysis)
- In re 400 Walnut Associates, L.P., 475 B.R. 217 (Bankr.E.D.Pa. 2012) (discovery misconduct and bankruptcy context in related adversary proceedings)