Re: S.P. Richards Co. v. Arora

Re: S.P. Richards Company v. Arora, et al.

Suneet Arora and Janet Arora

Adv. Pro No.:18-01047

Bankr. Case No.: 14-28073

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY

August 29, 2019

Hon. Michael B. Kaplan United States Bankruptcy Judge

Rose Suriano, Esq..

Counsel for Plaintiffs S.P. Richards Company and Chapter 7 Trustee, Karen Bezner, Esq.

Mitchell Malzberg, Esq.,

Counsel for Defendant Sparken IT Solutions Pvt. Ltd.

Graig P. Corveleyn, Esq.,

Counsel for Defendants Reena Aggarwal, Zehra Properties, LLC, Creative SAAS, LLC, Dependable Office Products, Inc., Dependable Office Supplies, Inc., Midtown Office Supplies and Phazle Tsiamwala

Dear Counsel,

Presently before the Court is a Motion for Reconsideration (ECF No. 168) filed by Plaintiff S.P. Richards Company ("S.P. Richards"). The factual background and procedural history of this case are well known to the parties and will not be repeated in detail here. In relevant part, S.P. Richards obtained a default judgment against Defendant Sparken IT Solutions Pvt. Ltd. ("Sparken") on February 26, 2019. On May 3, 2019, Sparken filed a motion to vacate the default judgment and sought permission to file a responsive pleading. The parties briefed the issue and the Court heard oral argument on July 1, 2019. At the conclusion of that hearing, the Court vacated the default judgment and made certain other rulings with respect to attorneys' fees and discovery—which were memorialized in Orders dated July 3, 2019 (ECF No. 166) and July 10, 2019 (ECF No. 157) (collectively, the "July Orders"). S.P. Richards now files a motion seeking reconsideration of those Orders.

In its application, S.P. Richards requests that the Court reconsider three aspects of the July Orders. First, S.P. Richards asserts that the Court should not have vacated the entry of default and the default judgment. Next, S.P. Richards contends that the Court should have conditioned any vacatur of judgment on the immediate payment of S.P. Richards' legal fees. Finally, S.P. Richards contends that the Court should have compelled Sparken's representative to appear for deposition and to provide discovery. For the following reasons, this Court declines to reconsider its previous rulings and S.P. Richards' motion will be denied in its entirety.

I. Motion for Reconsideration of an Interlocutory Order

Prior to addressing the merits of S.P. Richards' motion, the Court will briefly discuss the appropriate procedure and the applicable standard of review for a motion seeking reconsideration of an interlocutory order, like the one presently before this Court. As noted in Defendant Sparken's brief in opposition, the Federal Rules of Bankruptcy Procedure do not recognize a "motion for reconsideration." Such a motion is not mentioned in the Federal Rules of Civil Procedure, nor is it provided for in our Local Bankruptcy Rules. Nevertheless, as S.P. Richards points out, this Court has previously determined that it possesses the inherent power to reconsider its orders at any time before final judgment. See In re Dots, LLC, 562 B.R. 286, 291 (Bankr. D.N.J. 2017) (collecting cases and discussing bankruptcy court's authority to reconsider its interlocutory orders at any time when it is consonant with justice to do so); see also In re Energy Future Holdings Corp., 904 F.3d 298 (3d Cir. 2018), cert. denied sub nom. NextEra Energy, Inc. v. Elliott Assocs., L.P., 139 S. Ct. 1620, 203 L. Ed. 2d 898 (2019). Furthermore, litigants may seek relief from any order of the bankruptcy court under Federal Rule of Bankruptcy Procedure 9024, which incorporates Federal Rule of Civil Procedure 60(b). Notably, while Rule 60(b) applies only to final orders or judgments in the district court, Congress distinguished Bankruptcy Rule 9024 from its federal counterpart and made it applicable to all orders of the bankruptcy court. See FED. R. BANKR. P. 9024 advisory committee notes ("For the purpose of this rule all orders of the bankruptcy court are subject to Rule 60."). Accordingly, the authority for a bankruptcy court to grant relief from an interlocutory order can stem from both its inherent powers and Bankruptcy Rule 9024.

The Court notes that in its opposition to S.P. Richards' motion, Defendant Sparken recites the standard for a motion filed pursuant to Federal Rule of Civil Procedure 59(e), which is made applicable to the bankruptcy court under Federal Rule of Bankruptcy Procedure 9023. However, Rule 59 encompasses a Motion for a New Trial or to Alter or Amend a Judgment and "the rule only applies to final judgments, not interlocutory orders." Zitter v. Petruccelli, No. 15-6488, 2017 WL 1837850, at *2 (D.N.J. May 8, 2017). Here, the Court is tasked with reconsideration of an interlocutory order, thus, Rule 59(e) does not apply. Although Congress distinguished Bankruptcy Rule 9024 from its federal counterpart and made Bankruptcy Rule 9024 applicable to all orders of the bankruptcy court, it did not similarly distinguish Bankruptcy Rule 9023 from its federal counterpart Rule 59. Instead, Bankruptcy Rule 9023 merely incorporates Federal Rule 59 and, thus, it serves only as a mechanism to seek a new trial or amendment of a final judgment in bankruptcy cases—and is inapplicable in the instant case.

The Court engages in this discussion not to chastise the parties for any failure to understand completely the nuanced procedural and substantive differences between motions seeking reconsideration filed under Rule 60(b), Rule 59(e), or any other basis. They are complicated and confusing, and both litigants and courts often misapply the various rules and standards associated with these types of motions and sometimes misuse the term "reconsideration" altogether. Indeed, the cases cited by Defendant Sparken simultaneously acknowledge that Rule 59(e) governs motions to alter or amend final orders and observe that bankruptcy courts routinely apply the standards governing Rule 59(e) motions to motions to alter or amend interlocutory orders. See, e.g., Calyon New York Branch v. Am. Home Mortg. Corp., 383 B.R. 585, 589 (Bankr. D. Del. 2008); In re Pac. Forest Prod. Corp., 335 B.R. 910, 917 (S.D. Fla. 2005). This should not be so.

Not all motions bearing the label "reconsideration" can be treated the same. It is incumbent upon litigants and courts to identify the proper basis for a motion that seeks "reconsideration." The appropriate basis will depend on upon a number of factors such as the relief sought, the nature of the order being reconsidered, the court in which the motion was filed, and the existence of applicable local rules. See D.N.J. L.Civ.R. 7.1(i); compare FED. R. BANKR. P. 9024 with FED. R. CIV. P. 60(b); see also United States v. Fiorelli, 337 F.3d 282, 288 (3d Cir. 2003) (observing that"[a]lthough motions for reconsideration under Federal Rules of Civil Procedure 59(e) and 60(b) serve similar functions, each has a particular purpose."). After the appropriate basis for a motion is identified, that authority will then determine the procedural and substantive treatment of the motion going forward. The various bases for reconsideration motions may invoke different time deadlines in which a litigant must file (compare FED. R. BANKR. P. 9024 with FED. R. BANKR. P. 9023), different page limits, (compare FED. R. BANKR. P. 9023 & 9024 with D.N.J. L.Civ.R. 7.1(i)), different grounds for relief (compare FED. R. CIV. P. 59(e) with FED. R. CIV. P. 60(b)), different standards of review, see Fiorello, 337 F.3d at 288, and may have unintended consequences on tolling the time to file an appeal, see e.g. In re Pac. Forest Prod. Corp., 335 B.R. at 917 (discussing whether the filing of a motion for rehearing tolls the time for appealing the decision being reheard).

The point is that there are subtle, but distinct, differences between the various authorities under which a motion seeking reconsideration of a prior ruling can be heard, and these differences can have a significant impact on how the motion should be filed and decided. See, e.g., Blystone v. Horn, 664 F.3d 397, 415 (3d Cir. 2011) ("[W]e do not believe that the differences between Rules 60(b) and 59(e) are merely technical."). It is important to identify the proper basis for relief to ensure the procedural appropriateness of the motion, the proper standard of review, and the sanity of my law clerk.

In returning to the matter at hand, the Court reiterates that S.P. Richards' motion for reconsideration of an interlocutory order of the bankruptcy court can be rooted in either the Court's inherent powers or in Federal Bankruptcy Rule 9024. Thus, it is procedurally appropriate. However, S.P. Richards does not set forth any substantive reasons which warrant reconsideration of the July Orders and, therefore, the motion must be denied.

II. Standard of Review

Federal Rule of Bankruptcy Procedure 9024, which incorporates Federal Rule of Civil Procedure 60(b), provides six enumerated bases for relief from any order of the bankruptcy court:

(1) mistake, inadvertence, surprise, or excusable neglect;

(2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b);

(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;

(4) the judgment is void;

(5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or

(6) any other reason that justifies relief.

FED. R. CIV. P. 60(b); see also Dominion Dev. Grp., LLC v. Beyerlein, No. 17-3391, 2019 WL 2246547, at *2 n.13 (3d Cir. May 24, 2019).

Additionally, it is within the Court's inherent powers to reconsider its orders at any time before final judgment. See State Nat'l Ins. Co. v. Cty. of Camden, 824 F.3d 399, 406 (3d Cir. 2016) (citing United States v. Jerry, 487 F.2d 600, 605 (3d Cir. 1973) ("[S]o long as the district court has...