### INTHE UNI TED S TATESCOU RT OFAPPEALS FORTHE FIFTH CIRCU IT

N o. 09- 50364

I n t he M at t e ro f: DAVI D TH O M AS C H AR LE S M AR I N EZ, D e b t o r

--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- -- J E F F R E YW . H E L L E R , A p p ell a n t v. T E XA S R E A L E S T A T E C O M M IS S IO N , A pp el l ee

A pp ealf

rom t h e U n i t ed S t ates D i st ri ctC ou rt f or t h e W est ern D i st ri ctof T exas
B ef ore JO L L Y , W IE N E R , an d B A R K S D A L E , C i rcui tJu dg es . E
. G R A D YJO L L Y , C i rcui tJu dg e: Jef f rey W
. H el l er app eal s t h e j u dg m en tof t h e di st ri ct c o u rt, w h i ch af f i r m e d an or de rof

t he bank r upt c y c o ur tt hats e ta s i de a n o r de rdi r e c t i ng t he Texas R ealE st at e C om m i ss i on ( “ TR E C ” ) to pay H el l er$100, 000 f r om t he Texas R ealE st ate R ecovery T rust A ccoun t(“ T rust A ccoun t” )
. B ecau se t h e ban kru ptcy
c o ur tdi d no ta bus e i t s di s c r e t i o n i n s e t t i ng as i de t h e orde r , w e AFF I RM t he j u d gm en t of

the distri ct cou rt. United States Court of App eals Fifth Circuit 

### F I L E D December

8, 2009 Cha rl es R. F ulb ru g e II I ClerkN o. 09- 50364

2 H el l er , a r eales t at e i nves t or , s ued M ar i nez, a r eales t at e b r oker , i n T exas state co u rt, all eg i n g th a t M a ri n ez vio la te dthe T ex a s R ea lE state L i cen se A ct. D u ri n g t h e p e n d e n cy of t h at l aw sui t , M ari n ez f i l ed f or ban kru ptcy un der C h ap t er 13. I n an adv ersary proc eedi n g i n i t i ated by H el l er, t h e ban kru ptcy
c our tf ound t hatM ar i nez w as l i abl e t o H el l erf or$120, 000, and t hatt he deb t
w as notdi sc harge abl e i n bankrupt c y. T o col l ectthis d ebt, H el l er then inst i t u t ed a sepa rat e proceedi n g aga i n st t h e T R E C , w h i ch ad m i n i st ers a st ate f u n d to com pen sate vi ct i m s of condu ctof
r e al e s t at e l i c e ns e ho l de r s s uc h as M ar i ne z . Thi s Te xa s s t at ut e pr o vi de s t hatt he vi c t i m m us tf

i l e t he a ppl i c at i o n forp aym enti n t he c o ur tt hate nt e r e d t he j u dg m en t , h ere the ban kru ptcy court. H el l er thu s f i l ed i n t h e ban kru ptcy c ou rt
an Appl i c at i o n f

o rPay m e ntf

r o m t he f

und ad m i n i s t e r e d b y t he TRE C. The ba nkr upt c y c o ur t , w i t ho utahe ar i ng, o r de r e d t he TRE C t o pa y H e l l e rt he
m a x im u m a m o u n ta ll o w e du n d e rth e T e x a s s t a t u t e , $ 1 0 0 ,0 0 0 . U p o n T R E C ’s
m ot i on , how ever, t h e ban kru ptcy c ou rtl atersetasi de the o rd e r. A f t er c o n d u c tin gah e a r in g , th e b a n k r u p tc y c o u r t or d e r e d th e T R E C to p a yH e lle ro n ly $18 , 963
. H el l er now app eal s; bu the on l y ap pea l s t h e ban kru ptcy c ou rt ’ s or der
se t t i ng as i de t he i ni t i alord er di r ec t i ng t he TR E C t o payH el l er$100, 000. A ccor di n gl y, t h e onl y i ssue bef ore us i n t h i s app ea l i s w h et h er t h e ban kru ptcy
c o u r ta b u s e di t s d i s c r e t i o n b ys e t t i n ga s i d e i t s i n i t i a lo r d e rd i r e c t i n gt h e T REC t o payH el l er$100, 000. I
. A
. The Tr us tAc c o unt , a dm i ni s t e r e d b y t he TRE C, w as e s t ab l i s he d b y t he T exas L egi sl ature t o com pen sate vi ct i m s of cer t ai n c o n d u ctof

T R E C l i cense h ol ders. T EX . O CC
. C ODE A NN . § 1101
. 60 1. One who has o bt ai ne d aj udg m e nt aga i n sta l i cense holder f or c on du ctcovered by t h e T exas R ealE st ate L i cense A ct
m ay f i l e a cl ai m f

or paym en tf

rom t h e T rust A ccoun ti n t h e courtt h at enter edN o. 09- 50364

3 t he j udgm ent, af

t erhavi ng f

i r stdem ons t r at ed t hatt he j udgm entc annotbe
c o lle c te dfr o m th e lice n s e h o ld e r . Id
. § 1101

. 606 ( a)
. T h e a ggri eved person m u st g iv e w r itt e n n o tic e o f th e cla im to th e T R E C a n dth e ju d g m e n t d e b to r . Id . § 11 01
. 60 6(b)
. The s t at u t e p r o vi de s t hat“ [t ] he c o ur ts hal lpr o c e e d p r o m pt l y o n t he
a p p l i ca ti on . ” Id
. “ O n r e c e i pto f no t i c e und e rSe c t i o n 1 10 1. 60 6 andt he
s c he dul i ng o f

ahe ar i ng, t he [TR EC ] m ayno t i f y t he a t t o r ne y ge ne r alo f t he [ TR E C ] ’ s des i r e t o e nt eran appear ance , f i l e a r es ponse , appearatt he hear i ng, d e fe n dt h e a c tio n , o rta k e a n yo th e ra c tio n th e [T R E C ] c o n s id e r s a p p r o p r ia te .” Id
. § 1101

. 608
. Sect i on 110 1. 607 describes t h e show i n g t h at t h e ag gri eved cl ai m an tm u stm ak e at a h eari n g on t h e A pp l i cat i on f or Pa ym en t
. A m on g ot h er t hi ngs , t h e c l a i m a n tmus ts h o w “ t h a tt h e j u d g m e n ti s b a s e do n fa c t s a l l o wi ng recover y u n der t h i s s u bch ap t er. ” Sect i on 110 1. 609 provi des:

T h e courtshallorder t h e [T R E C ] t o payf rom t h e t rust a c c o u n t t h e a m o u n t th e c o u r t fin d s p a y a b le o n th e cla im u n d e rth is s ubc hap t e ri f

a tahe ar i ng t he c o ur ti s s at i s f i e d: (1 ) o f th e tr u th o f e a c h m a tt e rth e a g g r ie v e d p e r s o n is r e qui r e d b y Se c t i o n 1 10 1. 60 7 t o s ho w ; a nd ( 2) t hatt he agg r i e ve d pe r s o n ha s s at i s f i e d e ac h r e quir e m e nt of Sec t i ons 1101. 606 and 1101
. 607. B
. In accordan ce w i t h t h e provi si on s of t h e T exas st atute, H e ll e r, on D ece m b er 1 2 , 20 0 7 , f i le d h i s A p p l i ca ti on f or P a ym en t f

rom the T ru st A ccou n t. O n Fe br uar y 20 , 2 00 8, t he b ank r upt c y c o ur te nt e r e d a n o r der di re c t i ng t he T R E C t o payH el l er $1 00, 000 , the m axim u m a m ou n trecoverabl e fr om t h e T rust A c c o u n t. S eeT EX . O CC
. C ODE A NN . § 1 1 0 1 .6 1 0
. B e c a u s e t h is o r d e rd o e s n o t fit
n e a tlyin to ap r e c is e ca te g o r y , w e t r e a t it, a s t h e p a r tie s d o , a s a“d e fa u lt o r d e r .” A l t hough t he defaul tor ders t at es t hat“ [t ] he par t i es appear ed byand t hro ugh t he i rr e s pe c t ive l e ga lc o uns e l” a nd t hatt he “ Cour tc o ns i de r e d t he Appl i c at i o n,N o. 09- 50364

4 r e c e ive d e vi de nc e , and hea r d ar gum e ntf r o m c o uns e l , ” t he r e w as no he ar i ng, no p r e s e n ta tio n o f e v id e n c e , a n dn o a r g u m e n t o f c o u n s e l o n th e a p p lic a tio n . N i n e d a ys l a ter, on F eb ru a ry29 , 2 0 0 8 , th e T R E C fi l ed a m oti on to va ca te t h e defaul t order di rect i n g pa ym en t , ci t i n g F ederal R u l es of B a n k ru ptcy Pr o c e dur e 9 02 3 and9 02 4, a nd Fe de r alRul es o f Ci vilPr o c e dur e 5 9( e ) a nd 6 0 (b)( 1 ) a n d( 6 ). In it s m oti on , the T R E C stated tha t alt h ou gh i t w a s serv ed w i th
an d aw are of H el l er’ s ap pl i cat i on , i t w as en gag ed i n neg ot i ati on s w i t h H el l er f or an ag r e e d r e s o l ut i o n o f H e l l e r ’ s c l ai m . The TR EC at t ac he d as an e xhibi t t o t he
m ot i on a l et t ert hati t s c ounse lw r ot e t o H el l er ’ s c ounse lon Ja nuary 11 , 2008, stating , “[p ]l ea se d o n ot set the cl a i m f or h ea ri n g w h i l e w e ex p l ore the po ssibil i ty of a n a g r e e d o r d e r . . . . I wi l l p r e s e nt t hi s c l a i m a t t he Febr uary 25, 2008 [ T R E C ] m eet i n g i f

I ha v e enou gh i n f

orm ati on t o subm i tt o t h e [T R E C ] f or a d eterm i n a ti on . ” T h e T R E C ex p l a i n ed i n the m oti on to va ca te tha t i t “focu sed i ts ef f ort s on i t s n egoti ati on s w i t h M r. H el l er, rat h er t h an l i t i gati n g t h e app l i cat i on bef ore t h i s C ou rt , b e ca u se t h e T R E C un derst ood an d beli eved t h at an order
w ou l dn ot be en tered i n the pr oce ed i n g w i th ou t a h ea ri n g a n dan op p ortu n i ty to be h eard on t h e m eri t s. ” A t t ach ed as an exh ibi tt o t h e m o tion to vacate w as a Feb r uar y 18 l e t t erf r o m H e l l e r ’ s c o uns e lt o t he TRE C’ s c o uns e ls ubm i t t i ng m ater i al s f

or t h e T R E C ’ s con si derati on a tit s F ebru ary 25 m eet i n g. In i t s m ot i on t o v ac at e , t he TR EC po i nt e d o ut t hat H e l l e r ’ s ac t i o ns w e r e c o ns i s t e ntw i t h t he TR E C ’ s und er st an d i ng t hatan or derw oul d notbe ent er ed w i t houta hea r i ng, i nas m uc h a s H e l l e r ’ s a ppl i c at i o n di d notco nt ai n neg at ive not i c e l ang uag e , a nd H el l erhad pr ovi ded t he TR E C w i t h doc um ent at i on s upport i ng hi s c l ai m as rec e nt l y as Fe br uar y 18 , t w o da ys b e f o r e t he de faul to r de rdi r e c t i ng pa ym e nt
w a s e n te r e d
. A c c o r d in gt o t h e p a r tie s , “ n e g a tiv e n o tic e ” is la n g u a g e cu s to m a r ilyN o. 09- 50364

T h e b a n k r u p tc yco u r t’s lo c a l r u le s g o v e r n in gc o n te s te dm a tt e r s co n ta in 1 th e fol l ow i n g p rov i sion reg a rd i n g “n eg a tive n oti ce”:

( a) N egat i ve N ot i ce Lan guage . N oti ce a n dan op p ortu n i ty f o rahe ar i ng m ayb e a c c o m pl i s he d b y t he i nc l us i o n o f t he f o l l o w i ng fo r m la n g u a g e p r e s e n te dco n s p ic u o u s ly , fu llyca p i t a liz e din b o ld faced t yp e ( at l east 12 pt. ) an d pl aced i m m edi ately bel ow t h e capti on a n db e fo r e th e b o d yo f th e p le a d in g . . . . THI S PL EADI NG REQUES TS REL I EF T HAT MAY B E AD VE R SE TO YO U R I N TE R ESTS. IF N O T IM E L YR E S P O N S E IS F IL E D W IT H IN TWENTY( 2 0 ) DAY S F ROM T HE DAT E OF S ERVI CE, THE RE LI EF REQUES TE D HEREI N M AYBE GRA NT E D WI T HOUT AHE A RI NG B E I NG HE L D. A T I M EL Y FI LE D RES PONS E I S NECE S S ARYF OR A HE A RI NG T O B E HE L D. B ANKR
. W
. D. T EX . R
. 9 0 1 4 (a ). 5 u s e d i n b a n k r u p t c y c a s e s t o i n d i c a t e i f a n d wh e n a r e s p o n s e i s d u e and t he consequ en ces of

fai l i n g t o f

i l e a res pon se. 1 T h e b a n k r u p tc y c o u r t g r a n te dth e T R E C ’ s m o tio n to v a c a te th e d e fa u lt
o r de r , s t at i ng t hat“ [t ] he TRE C c o ul d r e as o nab l y hav e e xp e c t e d ah e a r i n gs e t t i ng o n t he m o t i o n, b e c aus e t he r e w as no ne ga t ive no t i c e . ” Fo l l o w i ng a he ar i ng, t he bankru p t c yc o ur te nt e r e da n o r d e rd i r e c t i ngt he TREC t o p a yH e l l e r$ 1 8 , 9 63 f rom t h e T rust A ccoun t
. H el l er app eal ed on l yth e ban kru ptcy c ou rt ’ s or der set t i n g asi de the defaul torder di rect i n g pa ym en t , an d the di st ri ctcourt
a ff i rm ed
. H ell er n ow ap p ea l s to this cou rt. II. A
.
“W e r evi ew a di st r i c t c our t ’ s af f i r m ance of a bankrupt c y c our t dec i si on by ap pl yi ng t he s am e s t and ar d of re vi e w t o t he bank r upt c y c o ur tdec i s i o n t hatt heN o. 09- 50364

6 d i stri ct cou rt ap p l i ed
. ” In reMart i n ez , 5 6 4 F .3d 7 1 9 , 7 2 5 -2 6 (5 t h C ir . 2 0 0 9 ). A l t h ou gh t h e ban kru ptcy c ou rtdi d n otspeci f y w h et h er i t act ed un der R u l e 59(e)
o r R u le 60 i n set t i n g asi de the defaul torder di rect i n g pa ym en t , t h e abu se- o fd is c r e tio n s ta n d a r d o f r e v ie w a p p lie s to its d e c is io n . S e eE d w a r dH. B o h lin Co ., Inc. v. T h e B an n i ng Co. , I

n c. , 6 F
. 3d 350 , 353 ( 5th C i r. 199 3) ( abu se of di scr et i on s ta n d a r da p p lie s t o r u lin g s o n m o tio n s u n d e rR u le 5 9 (e ) a n dR u le 6 0 (b )); B ei t el
v . O C A , In c . (Ma tte rof O C A , In c .) , 551 F
. 3d 359 , 367 ( 5th C i r. 200 8) (ban kru ptcy
co u rt’s d e cisio n to s e t a sid e d e fa u lt j u d g m e n t is re v iew e dfora b u se of d iscr e tion ). B
. H el l er argues t h at t h e T R E C coul d n otseek rel i ef f rom t h e defau l torder d i r e c tin gp a y m e n t u n d e rF e d e r a l R u le o f C iv il P r o c e d u r e 5 9 b e c a u s e th a t r u le
can n otbe used t o setasi de a defaul tj u dg m en t
. E ven if i tcoul d, H el l er f

u rt h er c o n te n d s , t h e T R E C fa ile dto s a tis fyth e re q u ir e m e n ts o f R u le 5 9 b e c a u s e it d id
n ot f i l e a n y a ff

i d a vits ex p l a i n i n g w h y th e T R E C b eli ev ed th a t itd i dn ot n ee dto f i l e ar e s po ns e t o H e l l e r ’ s A ppl i c at i o n f o rP ay m e nt , how i tfo r m e d t hatb e l i e f, a nd
w h et h er i tchecked w i t h coun sel
. H e ll er al so asser t s t h at t h e T R E C di d n ot p r e s e n t a n ye v id e n c e t o s u b s ta n tia te its cla im th a t itw a s in v o lv e din
n eg oti a ti on s w i th h i m . M ore ov er, th e T R E C fai l ed to sa ti sfy th e req u i rem en ts
o f F e d e r a l R u le s o f C iv il P r o c e d u r e 5 5 (c ) a n d6 0 (b ), fo rt h e s a m e r e a s o n s t h a t it fai l e d to s a t i sf

y R u l e 59 – that i s, t h e T R E C di d n otpresent anyevi den ce or af f i da vi t s. I n addre ss i ng H ell er ’ s ar gum ent s, w e f i r stn ot e t hatR ul es 59( e) and 60(b)
o f th e F e d e r a l R u le s o f C iv il P r o c e d u r e a p p lyin b a n k r u p tc y c a s e s (w ith ce r ta in
e x c e p tio n s n o t a p p lic a b le h e r e ). F ED . R. B ANKR
. P
. 902 3, 902 4. F ederalR u l e of C iv il P r o c e d u r e 5 5 , g o v e r n in ge n tr yo f d e fa u lt a n dd e fa u lt ju d g m e n ts , a p p lie s in
a d v e r s a r yp r o c e e d in g s in b a n k r u p tc yco u r t. F ED . R. B ANKR
. P. 905 5. H ere, h ow ever, t h e T R E C di d not pa rt i ci pa t e i n t h e adv ersary proc eedi n g an d d i d n ot att ack theb ank r upt c y c o u rt ’ s j u dg m en ti n t h at proc eedi n g, w h i ch f ou n d M ari n ezN o. 09- 50364

Heller’s assertion that the TRE C’s motion to vacate is unclear a s to whichsub section 2 of rule6 0 (b) itrelie d oni s incorrect. Th e motioncle arlycitessub section s ( 1 ) an d (6). 7 l i able t o H el l er. Th u s, t h e a p p li cabi l i t y of t h ose r u l es i n t h e ci rcum st an ces of t h i s A pp l i cat i on f

or Pa ym en tf

rom t h e T rust A ccoun t i s n ot cl ear. A s t h e di st ri ct court n ot ed, t h e T R E C w as not a party, or ot h erw i se i n vol ved , i n t h e adv ersary pro c ee di ng i ni t i at ed byH el l eragai nstM ar i nez. I tw as onl y a ft ert hat p roce ed i n g h a dcon cl u d ed tha t th e T R E C w a s “su ed ” i n the ba n k ru p tcy cou rt. S t i l l f u rt h er, i t i s u n cl ear t h at H el l er’ s A pp l i cat i on f or P aym en t i n i t i ated a new
a d v e r s a r yp r o c e e d in g . S eeF ED . R. B ANKR
. P
. 700 1 (l i st i n g cat egori es of ad versary proceedi n gs)
. In short, w h et h er R u l e 55 ap pl i es t o t h e proceedi n gs on H e l l e r ’ s Appl i c at i o n f o rP aym entf

r o m t he Tr us tAc c o unta dm i ni s t e r e d b y t he TR EC i s abi tof

a puzz l e . Ass um i ng, howev e r , t hatR ul e 55 a ppl i e s , a nd t hatt he
o r de rdi r e c t i ng pa ym e ntw as a“ de faul tj udg m e nt , ” Rul e 5 5(c ) s t at e s t h at t he
c our t“ m ay s etas i de a defaul tj udgm entu nderR ul e 60(b)
. ” B ec ause R ul e 6 0(b)
a p p lie s to “a fin a l ju d g m e n t, o r d e r , o rp r o c e e d in g ,” w e th in k th a t itis
u n n ece ssa ryfor u s to de ci d e w h eth er th e ord er d i rectingpa ym en t w a s, i n fa ct,
a d e fa u lt ju d g m e n t. W e n o w tu rn to c o n sid e r th e ru li n g s b e low u n d e r R u le 6 0 (b ). C
. A s w e h a v e s u g g e s t e d , itis n o tn e c e s s a r yfo ru s to a d d r e s s H e ll e r ’s argu m en tt h at R u l e 59 cann otbe used t o set asi de a d efau l tj u dg m en t , becau se th e T R E C ’ s m o tio n to v a c a te a ls o r e lie d o n R u le 6 0 (b ). R u le 6 0 (b ) p r o v i d e s , in relev a n t pa rt, tha t “ [o] n m oti on an dj u st t erm s, the cou rt m a y re l i ev e a pa rty 2
o ri t s l e ga lr e pr e s e nt at ive f r o m af i nalj udg m e nt , o r de r , o rproceed i ng f o rt he fo llo w in g r e a s o n s : (1 ) m is ta k e , in a d v e r te n c e , s u r p r is e , o r e x c u s a b le n e g le c t; . .

. o r (6 ) an yoth e r r e a so n th a t ju stifies re li e f. ” F e d
. R
. C iv. P
. 6 0 (b )(1), ( 6 ). Thi s c o ur tha s de s c r ibe d t h e “ fac t o r s [t hat] s hap e t he f r am e w o r k o f

t he court’ s c on si derati on of a 60(b) m ot i on ” as f

ol l ow s:N o. 09- 50364

8 ( 1) Thatf

i nalj udg m e nt s s ho ul d no t l i ght l y be di s t urbe d; ( 2) t hatt he R ul e 6 0(b) m oti on i s nott o b e us ed as a s ubst i t ut e f orappeal ; ( 3) t hatt he rul e s houl d be l iber al l y c ons t r ued i n or dert o do s ubst ant i al j u st i ce; (4) w h et h er t h e m ot i on w as m ad e w i t h i n a reasonab l e t i m e; ( 5) w h et h er – if

t h e j u dg m en tw as a defaul tor a di sm i ssal i n w h i ch t he r e w as no c o ns i de r at i o n o f t he m e r i t s –t he i nt e r e s ti n deci di ng c a s e s o n th e m e r its o u tw e ig h s , in th e p a r tic u la rca s e , th e in te r e s t in t h e fi n al i t y of

j u dg m en t , a n d t h ere i s m eri tin t h e m ovan t ’ s c l ai m or d e fe n s e ; (6 ) w h e th e rth e r e a r e a n yin te r v e n in ge q u itie s th a t w o u ld m ak e i ti ne qui t ab l e t o gr ant r e l i e f; and ( 7) anyo t he rfac t o r s r e l e va nt t o t he j us t i c e o f

t he j udg m e ntund e ra t t ac k. E d w ardH
. B oh l i n Co. , 6 F. 3d at355- 57. A s o u rco u r tre c e n tlyn o te d , “[i]n a s s e s s in gam o tio n to v a c a te ad e fa u lt j udg m e nt , w e ha ve i nt e r pr e t e d Rul e 6 0(b) ( 1) a s i nc o r po r at i ng t he Rul e 5 5 ‘ go o dca u se’stan d a rdap p l i ca b l e to en tri es o f d efau l t. ” OCA , 5 51 F. 3da t3 69 ( quo t i ng Jenk ens & G i l chri stv. G roi a & Co. , 5 4 2 F .3 d1 1 4 , 1 1 9 (5 th C ir . 2 0 0 8 )). I n d e t e r m i n i n gw h e t h e rg o o d c a u s e e x is ts to s e t a s id e a d e fa u lt j u dg m en tun der R u l e 60(b) ( 1) w e exam i n e t h e f ol l ow i n g fact ors: w h e th e r th e d e fa u lt w a s w illfu l, w h e th e r s e tt in g it a s i d e w o u ld p r eju d ic e th e a d v e r s a r y , a n dw h e th e ram e r ito r io u s d e fe n s e is presented. C ou rt s m ay als o consi der w h et h er t h e pu bl i c i n t erest w as i m pl i c at e d, w he t he r t he r e w as s i gnif i c antf i nanc i all o s s t o t he defenda n t , an d w h et h er t h e defe nda nta c t ed exp edi t i ou sl y t o cor rect th e d efau l t. Jenk ens & G i l chri st , 5 42 F. 3da t1 19 (i nt e r nalq uo t at i o n m ar ks a nd c i t at i o ns o m itt e d ). The ve r s i o n o f

Rul e 5 5(c ) t hatw as a ppl i e d i n Jenk ens & G i l chri sta nd OCA pr o vi de d: “ Forg o o d c aus e s ho w n t he c o ur tm ays e ta s i de a n e nt r y o f de faul ta nd, if a ju d g m e n t b yd e fa u lt h a s b e e n e n te r e d , m a y l i k e w is e s e t ita s id e in
ac c or dance w i t h R ul e 60(b)
. ” S ee OCA , 551 F. 3d at370 n. 29. Ef fec t ive D e c e m b e r1 , 2 0 0 7 , R u le 5 5 (c ) w a s a m e n d e dw ith re s p e c t t o s e tt in ga s id e d e fa u lt j udgm ent s und erR ul e 6 0, and now pr ovi des t hat“ [t ] he c our tm ay se tas i de an
en t ry of defau l tf

or good cause, a n d it m a y setasi de a d efau l tj u dg m en tun derN o. 09- 50364

9 Rul e 6 0(b)
. ” The am e nde d ve r s i o n of R ul e 55(c ) appl i e s i n t hi s c as e , b e c aus e t he ban kr upt c y c o ur t ’ s o r de rdi r e c t i ng pa ym e nta nd it s o r de rv ac at i ng t hato r der
w e r e e n te r e da fte rt h e e ffe c tiv e d a te o f th e a m e n d m e n t. A s th is co u r t n o te din OCA , “ [b] y de l e t i ng t he w o r d ‘ l i ke w i s e , ’t he cur r e ntve r s i o n m ayco nf i r m t hatt he

‘ go od -cau se’stan d a rdap p l i ca b l e to en tri es o f d efau l t d oe s n ot a p p l y to d efau l tj u d gm en t case s. ” OCA , 551 F
. 3d at 370 n . 29. W e n eed n otadd ress t h at m att er t o da y, b e c aus e t he b ank r upt c y c o ur tdi d no t ab us e i t s di s c r e t i o n i n s e t t i ng as i de t h e order di rect i n g pa y m e n t, ir respect ive of w h et h er t h e good-c au se s t an da rd ap pl i es. D
. T h e ban kru ptcy c ou rts t ated t h at itvacated t h e defau l torder because

“ [t ] he T R EC c o ul d r e as o nab l y hav e e xp e c t e d ahe ar i ng s e t t i ng o n t he m o t i o n, b e c a u s e t h e r e wa s n o n e g a t iv e n o t i c e . ” Th e c o u r t ’ s f i n d i n g t h atT REC
r e a s o n a b lyco u ldh a v e e x p e c te dah e a r in gis n o t c le a r lye r r o n e o u s . SeeLacy v. Si t e lCor

p. , 227 F
. 3d 290 , 292 ( 5th C i r. 200 0) ( st ati n g t h at al t h ou gh a deci si on t o s etas i de a defaul tj udgm enti s r evi ew ed f orabus e o f

di sc r et i on, “ [ a] ny fac t ual d e te rm in a tion s u n d e rly in gt h a t d e cisio n a re re v iew e dforclea r e rr o r”). Fur t he r m o r e , i n a ddit i on to the no t i c e r ul e s o f t he b ank r upt c y c o ur t , t he p rov i sion s of t h e T ex a s O ccu p a ti on C od e, d escr ib ed pr ev i ou sly, a l so co n tem p l a te th a t t h ere w i l lbe a h ea ri n g p r io rt o th e en try of an y o rd er d i rectingpa ym en t. F in a ll y , t h e b a n k r u p t c yc o u r t ’s r u li n gi s s u p p o r t e db yth e fa c tth a tth e T R E C ’s
c o uns e lw as a c t ive l y i nvo lve d i n di s c us s i o ns w i t h H e l l e r ’ s c o uns e li n a n a t t e m pt t o r e ac h a n a gr e e d r e s o l ut i o n o f H e l l e r ’ s c l ai m a tt he t i m e of the en t ry o f t he defaul torder. A ss um i ng t hatt he TR E C w as r equi r ed t o dem ons t r at e g oo d c ause , i thas sati sf i ed that r equ i rem en t
. Th e T R E C ’ s fai l u re t o res pon d to t h e m ot i on w as not
w i l l f ul
. Th e TR E C ’ s c ounse lm ade r epe at ed c ont ac t s w i t h H el l er ’ s c ounse li n an a tt e m p t t o re a c h a n a g r e e dre s o lu tio n o f H e lle r ’ s cla im
. S ee L acy , 227 F. 3d atN o. 09- 50364

See OCA , 55 1 F .3d at 3 70 (citation s omitte d) (noting preference for tri al on the merits 3 ratherth andef

aultj u dgme nt wh ere there areno “interveninge quitie s”). 10 292

- 93 (hol di n g t h at al t h ou gh Sit elm i st ak en l y assum ed t h at s ervi ce of process had notbe en e f

fec t ed, Si t eldi d notw i l l f ul l y fai lt o r es pond w hen i t s c ounse lhad
m ade r epe at ed c ont ac t s w i t h L ac y i n an at t em pt t o r es olve t he s ui t)
. H el l erw as n ot p reju d i ced bythe ord er se tti n ga s i d e th e d efau l t ord er d i rectingpa ym en t.

“ Th er e i s no pr ej udi c e t o t he pl ai nt i f f w her e t he s et t i ng as i de of the defaul thas d on e n o h a rm to plain ti ff ex cep t to req u i re [h i m ] to p rov e [his] ca se.” Id
. at293 (i nt e r nalq uo t at i o n m ar ks a nd c i t at i o n o m i t t e d)
. The TRE C had a m e r i t o r i o us de fe ns e , a s e vi de nc e d b y t he fac tt hata f t e rahe ar i ng on t he m e r i t s , t he b a n k r u p tc yco u r t a w a r d e dH e l l e ro n ly$ 1 8 ,9 6 3 , fa rle s s th a n th e $ 1 0 0 ,0 0 0 it
aw ar ded i n t he o r i gi nalor der d i recti ng paym ent
. H el l erdi d notappealt hat
awar d. Fi nal l y, t he TRE C ac t e d e xp e di t i o us l y t o co r r e c tt he defaul t– i tf i l e d t he
m oti on to va ca te n i n e d a ys after en try of the ord er d i rectingpa ym en t. C on si derin ga llof

t h ese c i rcum st an ces, an d i n t h e l i gh tof t h e pol i cy favori n g resol u t i on of di spu t es on t h e m eri ts, t h e ban kru ptcy c ou rtdi d n ot 3
a b u se it s d i scre ti on bysetti n g a side th e d efau l t ord er d i rectingpa ym en t. III. For t he f

o r e go i ng r e as o ns , t he j udg m e nt o f t he di s t r i c t c o ur t , a f f i r m i ng t he
o r d e ro f th e b a n k r u p tc yco u r t, is AF F I RMED.