In re Ditech Holding Corp.

In re: Ditech Holding Corporation, et al., Debtors.¹

Case No. 19-10412 (JLG)

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

Filed: June 2, 2021

June 1, 2021

NOT FOR PUBLICATION

Chapter 11

(Jointly Administered)

MEMORANDUM DECISION AND ORDER DENYING THE MOTION FOR REHEARING

APPEARANCES:

WEIL, GOTSHAL & MANGES, LLP

Attorneys for Plan Administrator

767 Fifth Avenue

New York, New York 10153

By: Sunny Singh, Esq.

Richard W. Slack, Esq.

JENNER & BLOCK LLP

Attorneys for the Consumer Claims Representative

919 Third Avenue

New York, NY 10022

By: Richard Levin, Esq.

Mr. James Beekman²

Appearing Pro Se

427 9th Street

West Palm Beach, FL 33401

HON. JAMES L. GARRITY, JR. U.S. BANKRUPTCY JUDGE

Introduction³

James Beekman (the "Claimant") filed Proof of Claim No. 24609 (the "Claim") against Ditech Financial LLC ("Ditech") in these chapter 11 cases. The Claim seeks $9 million in damages and asserts priority status under the sections 507(a)(7) and (a)(10) of the Bankruptcy Code. On February 9, 2021, the Court sustained the Claim Objection jointly filed by the Plan Administrator and Consumer Claims Representative (collectively, the "Estate Representatives") and disallowed and expunged the Claim (the "Decision").⁴ The matter before the Court is the pro se Claimant's Motion for Rehearing (the "Motion").⁵ In the Motion, the Claimant asks the Court to strike the Decision "for numerous errors," and grant him a rehearing on the Claim Objection. The Estate Representatives oppose the Motion.⁶ Claimant filed a reply in support of the Motion.⁷

Section 502(j) of the Bankruptcy Code governs the Courts "reconsideration" of disallowed claims, like the Claim. In assessing the merits of a request for relief under that section, the Court applies the same analysis as it would under Rules 9023 or 9024 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"). Those rules incorporate, respectively, Rules 59 and 60 of the Federal Rules of Civil Procedure (the "Federal Rules"). As explainedbelow, construing the Motion in the light most favorable to the pro se Claimant to state the strongest argument that it suggests, the Court finds that the Claimant has failed to state grounds for relief under either Federal Rule 59 or 60. Accordingly, the Court denies the Motion.⁸

Background

On February 11, 2019, Ditech Holding Corporation (f/k/a Walter Investment Management Corp.) and certain of its affiliates ("Debtors") filed petitions for relief under chapter 11 of the Bankruptcy Code in this Court. The Debtors remained in possession of their business and assets as debtors and debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On September 26, 2019, the Debtors confirmed their Third Amended Plan,⁹ and on September 30, 2019, that plan became effective.¹⁰

On November 8, 2019, Claimant filed the Claim seeking $9 million in damages occasioned by Ditech's alleged fraud, fraudulent misrepresentation, and intentional infliction of emotional distress, in connection with its efforts to foreclose on the Claimant's property and its alleged reneging on a HAMP mortgage loan modification. The Claimant characterizes the claim as administrative in the amount of $3 million and priority in the amount of $6 million. As to the latter, he maintains that an amount of $3 million is entitled to priority under section 507(a)(7) ofthe Bankruptcy Code and another $3 million is entitled to priority under section 507(a)(10) of the Bankruptcy Code.

The Plan Administrator and Consumer Representative filed a joint objection to the Claim (the "Claim Objection")¹¹ seeking to expunge it as a "No Basis Consumer Creditor Claim." The Claimant filed two responses to the Claim Objection.¹² The Estate Administrators filed a joint reply¹³ in support of their Claim Objection. In accordance with the Claims Procedures Order, the Court conducted a Sufficiency Hearing on the Claim.

On February 9, 2021, the Court entered its Decision in which it sustained the Claim Objection and disallowed and expunged the Claim. That day, the Claimant was served with a copy of the Decision by overnight mail.¹⁴ Under Local Bankruptcy Rule 9023-1(a), a motion for rehearing must be filed within 14 days after entry of the Court's order that is the subject of the request for rehearing. On February 22, 2021, Claimant filed the Motion, seeking to strike the Decision for numerous alleged errors and to grant him a rehearing on the Claim Objection.¹⁵ On March 5, 2021, Claimant filed a motion for extension of time to file his motion for rehearing (the "Time Extension Motion").¹⁶ In support of that motion, Claimant did not cite to Local Bankruptcy Rule 9023-1, however, he explained that he "believes he [m]ailed the Motion forrehearing timely," that "[his] request is not for a delay or a stall tactic and purely precautional," and that he was making the motion because he had learned that although "opposition attorneys" timely received the Motion, it had been "lost by the clerks and delayed in being docketed."¹⁷ The Estate Representatives did not respond to the Time Extension Motion. The last day to timely file the Motion under Local Bankruptcy Rule 9023-1(a) was Tuesday, February 23, 2021. See Fed. R. Bankr. P. 9006 (a)(1)(A) (applicable to time periods under the Federal Rules and well as time periods prescribed under the Court's local rules. In computing time periods measured by days, the day of the triggering event is excluded). Accordingly, Claimant timely filed the Motion and, as such, the Court denies the Time Extension Motion as moot. The Court will consider the Motion as a timely request for rehearing under Local Bankruptcy Rule 9023-1.

Discussion

Because Claimant seeks reconsideration of the allowance of the Claim, section 502(j) of the Bankruptcy Code, Bankruptcy Rule 3008 and Local Bankruptcy Rule 3008-1 govern the Motion. See In re Best Payphones, Inc., No. 01-15472(SMB), 2008 WL 2705472, at *2 (Bankr. S.D.N.Y. July 3, 2008). Under section 502(j) of the Bankruptcy Code, "[a] claim that has been allowed or disallowed may be reconsidered for cause." 11 U.S.C. § 502(j). The Bankruptcy Code does not define "cause," but when deciding a motion under section 502(j), the court should:

[a]pply the same analysis that it would to a motion under Fed. R. Bankr.P. 9023 (incorporating Fed.R.Civ.P. 59) or Fed. R. Bankr.P.9024 (incorporating Fed.R.Civ.P. 60), depending on whether the movant ... sought reconsideration within [fourteen] days after the entry of the order disallowing the claim, or did so only later.

In re Terrestar Networks, Inc., No. 10-15446 (SHL), 2013 WL 781613, at *2 (Bankr. S.D.N.Y. Feb. 28, 2013) (collecting cases).

Whether the Motion States Grounds For Relief Under Bankruptcy Rule 9023

Bankruptcy Rule 9023 provides that "[a] motion. . . to alter or amend a judgment shall be filed. . . no later than 14 days after entry of judgment." Fed. R. Bankr. P. 9023. Local Bankruptcy Rule 9023-1(a) states:

A motion for reargument of a court order determining a motion shall be served within 14 days after the entry of the Court's order determining the original motion, or in the case of a court order resulting in a judgment, within 14 days after the entry of the judgment, and, unless the Court orders otherwise, shall be made returnable within the same amount of time as required for the original motion. The motion shall set forth concisely the matters or controlling decisions which counsel believes the Court has not considered. No oral argument shall be heard unless the Court grants the motion and specifically orders that the matter be re-argued orally.

Bankr. S.D.N.Y. R. 9023-1(a).

The rule derives from former Local Bankruptcy Rule 13(j) and is an adaptation of Civil Local Rule 6.3 of the district court. See comment to Bankr. S.D.N.Y. R. 9023-1(a). The standard applicable to motions for reargument is the same as that applicable to motions to alter or amend a judgment under Federal Rule 59(e). In re CCT Commc'ns, Inc., No. 07-10210 (SMB), 2011 WL 239658, at *2 (Bankr. S.D.N.Y. Jan. 22, 2011) (citations omitted). It is settled that "[t]he major grounds justifying reconsideration are an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir.1992) (internal quotations and citation omitted). Under the "clear error" standard, relief is "appropriate only when a court overlooks 'controlling decisions or factual matters that were put before it on the underlying motion' and which, if examined, might reasonably have led to a different result." In re Hassan, 527 B.R. 97, 100 (Bankr. E.D.N.Y. 2015) (citing Corines v. Am. Physicians Ins. Trust, 769 F.Supp.2d 584, 593-94 (S.D.N.Y.2011)). "In the context of a motion for reconsideration,'manifest injustice' is defined as 'an error committed by the trial court that is direct, obvious, and observable.'" Corpac v. Rubin & Rothman, LLC, 10 F. Supp. 3d 349, 354 (E.D.N.Y. 2013) (citing Idowu v. Middleton, 12 CIV. 1238(BSJ)(KNF), 2013 WL 371657, at *1 n.1 (S.D.N.Y. Jan. 31, 2013) (quoting In re Oak Park Calabasas Condo. Ass'n, 302 B.R. 682, 683 (Bankr.C.D.Cal.2003)) (internal citation omitted). The standard for granting a motion for reconsideration is strict, and reconsideration is generally denied unless "the moving party can point to controlling decisions or data that the court overlooked—matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995) (citing Schonberger v. Serchuk, 742 F.Supp. 108, 119 (S.D.N.Y.1990); Adams v. United States, 686 F.Supp. 417, 418 (S.D.N.Y.1988)). "Regardless of what the basis for reconsideration is, while acknowledging a court's power to revisit its own decision, the Supreme Court has cautioned that 'as a rule courts should be loathe to do so in the absence of extraordinary...