Weinman v. Kelley, 703 F. App'x 668

Background

James Ware Kelley III, a real-estate investor, filed bankruptcy petitions (including in Colorado) after a North Carolina action found he unlawfully retained tenants’ security deposits and imposed restitution, penalties, fees, and an injunction.
In the Colorado bankruptcy, the trustee filed a complaint objecting to Kelley’s discharge under 11 U.S.C. § 727(a)(2)(A), (3), (4)(D), and (5); the complaint and an amended complaint were served at Kelley’s Denver address of record.
Kelley did not answer; the trustee moved for default judgment (served at Kelley’s Denver and a North Carolina address Kelley had provided). The bankruptcy court entered default judgment on September 14, 2015.
Kelley moved under Fed. R. Civ. P. 60(b) to set aside the default judgment, claiming excusable neglect, newly discovered evidence, and fraud by the trustee; the bankruptcy court denied relief, finding no excusable neglect, no new/material evidence, and no proof of fraud, and characterized Kelley’s conduct as evasive.
Kelley filed a successive motion for reconsideration (denied as procedurally improper). The Bankruptcy Appellate Panel (BAP) affirmed, and Kelley raised for the first time on appeal a Rule 60(b)(4) (void judgment) argument, which the BAP found forfeited; he also failed to substantiate claims of fraud or jurisdictional defect.
The Tenth Circuit affirmed the BAP, rejecting Kelley’s due-process, Rule 60(b)(3) fraud, state-judgment challenge, and Rule 60(b)(4) arguments as forfeited, inadequately presented, or unsupported by clear-and-convincing evidence.

Issues

Issue	Plaintiff's Argument (Kelley)	Defendant's Argument (Trustee/BAP/Bankr. Ct.)	Held
Whether the BAP violated Kelley’s due process by holding oral argument without him	Denied Kelley opportunity to participate; prejudiced his case	Kelley failed to appear properly by phone and cannot show prejudice; BAP may proceed without absent party	Denied — no prejudice shown; issue has no effect on outcome
Whether relief is warranted under Rule 60(b)(3) for fraud/misconduct by the trustee	Trustee committed fraud upon the court and impeded Kelley’s defense	No clear-and-convincing proof of fraud; trustee did not prevent Kelley from defending; Kelley possessed relevant documents	Denied — no abuse of discretion; Kelley failed to meet high Rule 60(b)(3) standard
Whether the North Carolina judgment was incorrect and undermines discharge denial	State-court judgment was erroneous	Argument waived by failure to raise in bankruptcy court; not argued for plain-error review	Not considered — waived/forfeited
Whether default judgment is void under Rule 60(b)(4) for lack of notice/personal jurisdiction	Motion for default was not properly served; judgment void	Argument forfeited by not raising below; service of complaint was proper; motion service rules satisfied; inadequate appellate briefing	Not considered/denied — forfeited and inadequately presented

Key Cases Cited

Kirkland v. B—Line, LLC (In re Kirkland), 572 F.3d 838 (10th Cir. 2009) (standard of review for BAP decisions)
Schupbach Invs., L.L.C. v. Rose Hill Bank (In re Schupbach Invs., L.L.C.), 808 F.3d 1215 (10th Cir. 2015) (BAP is subordinate appellate tribunal; review standards)
Servants of the Paraclete v. Does, 204 F.3d 1005 (10th Cir. 2000) (successive Rule 60(b)/reconsideration improper to reargue previously rejected issues)
Lebahn v. Owens, 813 F.3d 1300 (10th Cir. 2016) (Rule 60(b) relief is extraordinary; narrow review)
Zurich N. Am. v. Matrix Serv., Inc., 426 F.3d 1281 (10th Cir. 2005) (Rule 60(b) is not a substitute for appeal; higher hurdle for movant)
Richison v. Ernest Grp., Inc., 634 F.3d 1123 (10th Cir. 2011) (arguments not raised below are waived on appeal)
Garrett v. Selby Connor Maddux & Janer, 425 F.3d 836 (10th Cir. 2005) (pro se litigants must follow procedural rules)
Bronson v. Swensen, 500 F.3d 1099 (10th Cir. 2007) (appellate courts routinely decline to consider inadequately presented arguments)