Dale v. Butler

WENDY DALE, Appellant, v. ALGERNON L. BUTLER, III, Appellee.

No. 7:19-CV-254-BR

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA SOUTHERN DIVISION

Filed: November 18, 2020

November 17, 2020

ORDER

This matter is before the court on the appeal of debtor Wendy Dale ("appellant") from the bankruptcy court's: (1) 9 December 2019 order denying appellant's motion to convert and allowing Algernon L. Butler, III's (the "trustee") motion for approval of compromise of controversy and (2) 8 January 2020 orders denying appellant's motion to stay pending appeal and motion to reconsider. (Am. Notice of Appeal, DE # 5.)

I. BACKGROUND

In June 2018, appellant filed pro se an employment discrimination lawsuit against her former employer Red Hat, Inc. ("Red Hat").¹ Dale v. Red Hat, Inc., No. 5:18-CV-262-BO, DE # 5 (E.D.N.C.) In her amended complaint, appellant alleges claims under the Americans with Disabilities Act and for wrongful termination in violation of public policy under North Carolina law. Id., DE # 20. Appellant demands $2,000,000 in compensatory damages and $30,000,000 in punitive damages. Id. In November 2018, the court denied Red Hat's motion to dismiss.² Id., DE # 30.

A few weeks prior to that decision, appellant filed a voluntary petition under Chapter 7 of the Bankruptcy Code. Among her assets, appellant listed her pending employment discrimination lawsuit, which she valued at $32,000,000. (R., DE # 8-1, at 21.) She did not claim an exemption in the lawsuit.³ (See id. at 24-25.) Later, appellant amended her schedules of assets and exemptions, changing the value of the lawsuit to $0 and claiming an exemption in the lawsuit in the amount of "100% of fair market value, up to any applicable statutory limit" based on N.C. Gen. Stat. § 1C-1601(a)(2).⁴ (Id. at 80, 84.) The trustee filed an objection to this claimed exemption and requested that the bankruptcy court limit the exemption and prohibit appellant from further amending it. (Id. at 89-92.) Appellant did not file a response, (Appellant's Br., DE # 18, at 10), and the bankruptcy court allowed the objection and ordered appellant could not further amend this exemption, (R., DE # 8-1, at 93-94). As a result, appellant's exemption in the lawsuit is limited to $4,930. (See id.; Appellant's Br., DE # 18, at 10.)

In May 2019, the trustee filed a motion for approval of the settlement he had negotiated with Red Hat of all claims in the employment discrimination lawsuit for $54,450, representing $10,000 to compensate and reimburse the estate for the trustee's time and expense related to the settlement and the remainder as consideration for the dismissal of the claims in the lawsuit and a release. (R., DE # 8-2, at 4-23.) Appellant filed an objection to the motion and requested ahearing. (Id. at 24-38.) Later, the trustee supplemented his motion, (id. at 79-183), to which appellant responded, (id. at 200-03).

In July 2019, appellant filed a motion to convert her bankruptcy case from Chapter 7 to Chapter 13, (id. at 63-66), to which the trustee objected, (id. at 184-95). Later, appellant supplemented her motion. (Id. at 204-06.)

In the meantime, appellant also filed an objection to the proof of claim of her largest unsecured creditor, Ascendium Education Solutions, Inc. ("Ascendium").⁵ (Id. at 51-62.) After a hearing, the bankruptcy court denied the objection and allowed the claim. (Id. at 196.)

In September 2019, the bankruptcy court held an evidentiary hearing on appellant's motion to convert her case and the trustee's motion for approval of the settlement. (9/18/19 Tr., DE # 10.) On 9 December 2019, the bankruptcy court denied appellant's motion and allowed the trustee's motion. (Notice of Appeal, DE # 1-1.) Thereafter, appellant appealed from that order, (DE # 1), and filed a motion to stay pending appeal, (R., DE # 8-2, at 243-48). She later filed a motion for a new hearing or, alternatively, for reconsideration of the December 2019 order and of the earlier orders regarding her claimed exemptions and her objection to Ascendium's claim. (Id. at 254-65). In separate orders, on 8 January 2020, the bankruptcy court denied appellant's motions, and appellant amended her appeal to include those orders. (DE # 5.)

II. DISCUSSION

When reviewing a decision of the bankruptcy court, this court sits as an appellate court and applies the same standards as would the Court of Appeals. Paramount Home Ent. Inc. v. Circuit City Stores, Inc., 445 B.R. 521, 526-27 (E.D. Va. 2010). Accordingly, the court reviews the factual findings of the bankruptcy court for clear error and its legal conclusions de novo. See Mort Ranta v. Gorman, 721 F.3d 241, 250 (4th Cir. 2013).

In her opening brief, appellant claims the bankruptcy court erred by: (1) ordering appellant could not amend her claim of exemption in the employment discrimination lawsuit; (2) denying her motion to convert her case; (3) allowing the trustee's motion for approval of the settlement of the employment discrimination lawsuit; and (4) allowing the claim of Ascendium. (Appellant's Br., DE # 18, at 6; see also id. at 16-18 (summarizing arguments).) She does not make any argument regarding the bankruptcy court's denial of her motion to stay pending appeal, and, accordingly, she has abandoned this issue. See Bastman v. Hassell, No. 5:18-CV-486-D, 2019 WL 2366422, at *3 (E.D.N.C. 2019) (holding the appellant had abandoned the issue where the appellant had noted appeal of the bankruptcy court's ruling but did not address it in her opening brief) (collecting cases). The court turns to the merits of the appeal.

A. Denial of Reconsideration of Exemption

In January 2019, the bankruptcy court entered its order prohibiting appellant from further amending her claimed exemption in the employment discrimination lawsuit. Specifically, the bankruptcy court found that appellant "has had adequate time to claim exemptions, and any amendment to [her] claims of exemption in the property that is the subject of this objection after the entry of the Court's order on this objection would be prejudicial to the Trustee and his administration of this estate." (R., DE # 8-1, at 94.) Nearly a year later, appellant soughtreconsideration of this order pursuant to Federal Rule of Civil Procedure 60(b) to enable her to amend her exemption in the employment discrimination lawsuit, specifically to claim an exemption under N.C. Gen. Stat. § 1C-1601(a)(12) based on any payments representing lost wages. (See R., DE # 8-2, at 256.) After a hearing, the bankruptcy court denied the motion for reconsideration. (Am. Notice of Appeal, DE # 5, at 4.)

Appellant claims the bankruptcy court erred because she is entitled to relief from the January 2019 order under Rule 60(b)(1), (3), (4), (5), and (6). (Appellant's Br., DE # 18, at 26.) These provisions generally permit the court to relieve a party from a final judgment or order for mistake, inadvertence, or misrepresentation or misconduct by an opposing party; where the judgment is void or applying it prospectively is no longer equitable; or for any other reason justifying relief. Fed. R. Civ. P. 60(b)(1), (3)-(6).

Rule 60 applies in bankruptcy cases. Fed. R. Bank. P. 9024. "'In ruling on an appeal from a denial of a Rule 60(b) motion this Court may not review the merits of the underlying order; it may only review the denial of the motion with respect to the grounds set forth in Rule 60(b).'" Breen v. Stephenson, No. C.A. 4:08-804-TLW, 2009 WL 440490, at *4 (D.S.C. Feb. 20, 2009) (quoting In re Burnley, 988 F.2d 1, 3 (4th Cir. 1992)). "The Court reviews the denial of a Rule 60 motion for reconsideration under an abuse of discretion standard." Snyder v. I.R.S., No. CIV. L-07-255, 2007 WL 4287529, at *1 (D. Md. Mar. 8, 2007) (footnote omitted), aff'd, 241 F. App'x 984 (4th Cir. 2007); see also Cook Group Inc. v. Wilson (In re Wilson), 248 B.R. 745, 748 (M.D.N.C. 2000). "A court abuses its discretion when its conclusion is guided by erroneous legal principles or rests upon a clearly erroneous factual finding." Blue Cross Blue Shield of N.C. v. Jemsek Clinic, P.A. (In re Jemsek Clinic, P.A.), 850 F.3d 150, 156 (4th Cir. 2017) (citation and internal quotation marks omitted).

The bankruptcy court did not abuse its discretion in denying appellant's motion to reconsider. First, in her motion for reconsideration, appellant gave the bankruptcy court no explanation for why she did not initially claim an exemption in the employment discrimination lawsuit under N.C. Gen. Stat. § 1C-1601(a)(12). Furthermore, there was no ground for the bankruptcy court to reconsider its order as it would have been futile to allow appellant to claim this exemption. By the statute's plain language, the exemption applies only to "[a]limony, support, separate maintenance, and child support payments or funds." N.C. Gen. Stat. § 1C-1601(a)(12). Any lost wages that might be recovered in the employment discrimination lawsuit are not payments or funds covered by § 1C-1601(a)(12).

Appellant argues other statutory exemptions apply. (See Appellant's Br., DE # 18, at 23-25; Appellant's Reply, DE # 21, at 9.) However, she did not raise that argument with the bankruptcy court, and this court will not consider it now. See Williams v. Lynch (In re Lewis), 611 F. App'x 134, 137 (4th Cir. 2015) (holding the appellant had waived an argument because he failed to raise it in the district court); Williams v. McDow (In re Williams), No. 5:10CV00049, 2010 WL 3292812, at *6 (W.D. Va. Aug. 19, 2000) ("Because a district court functions as an appellate court when reviewing a bankruptcy court's decision, a district court in these circumstances[, i.e., where the appellants failed to raise an argument in the proceedings below,] applies the same legal standards that govern appellate review in a court of appeals." (citations and internal quotation omitted)). For the same reason, the court does not consider appellant's other arguments under Rule 60(b), such as the trustee...