ELECTRONIC CITATION: 14 FED App. 0008P (6th Cir.)

File Name: 14b0008p.06

BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

In re: SII Liquidation Company,

Debtor.

David A. Schwab, et al.,

Plaintiffs-Appellants,

v.

Lawrence E. Oscar, et al.,

Defendants-Appellees.

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No. 14-8009

Appeal from the United States Bankruptcy Court

for the Northern District of Ohio at Canton.

No. 10-60702; Adv. No. 12-6035

Before: HUMPHREY, OPPERMAN, and PRESTON, Judges of the Bankruptcy 

Appellate Panel.

COUNSEL

ON BRIEF: Charles V. Longo, Matthew D. Greenwell, CHARLES V. LONGO, CO., L.P.A., 

Beachwood, Ohio, for Appellants. Daniel R. Warren, Thomas D. Warren, BAKER & 

HOSTETLER LLP, Cleveland, Ohio, Jack B. Cooper, DAY KETTERER LTD., Canton, Ohio, 

for Appellees.
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OPINION

GUY R. HUMPHREY, Bankruptcy Appellate Panel Judge. Appellants were 

shareholders and directors of the corporate debtor prior to its liquidation. They filed an 

adversary complaint alleging malpractice against the Debtor’s bankruptcy attorneys. On 

September 20, 2012, the bankruptcy court granted the Defendants’ and Trustee’s motions to 

dismiss the adversary proceeding. The bankruptcy court held that Appellants did not have 

standing to bring the complaint. Additionally, the bankruptcy court found that the complaint was 

barred by res judicata. Appellants did not appeal the bankruptcy court’s decision. One year 

later, they filed a motion for relief from judgment pursuant to Federal Rule of Bankruptcy 

Procedure 9024, which incorporates Federal Rule of Civil Procedure 60(b). Appellants asserted

grounds under the following subsections: (1) mistake, surprise or excusable neglect; (2) newly 

discovered evidence; (3) fraud; and (6) any other reason that justifies relief. The bankruptcy 

court denied the motion for relief from judgment finding that Appellants still did not have 

standing, and further, were bound by the bankruptcy court’s previous order holding that they did 

not have standing. Appellants filed this timely appeal. For the reasons stated below, the 

bankruptcy court’s order is affirmed. 

I. ISSUES ON APPEAL

Appellants raised several issues on appeal. However, Appellants' lack of standing is 

dispositive. Accordingly, the Panel declines to address the remainder of the issues.

II. JURISDICTION AND STANDARD OF REVIEW

Under 28 U.S.C. § 158(a)(1), this Panel has jurisdiction to hear appeals “from final 

judgments, orders, and decrees” issued by the bankruptcy court. For purposes of appeal, an 

order is final if it “ends the litigation on the merits and leaves nothing for the court to do but 

execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S. Ct. 
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1494, 1497 (1989) (quotation marks and citation omitted). “An order denying a motion for relief 

pursuant to Federal Rule of Civil Procedure 60(b) is a final order.” In re Calloway, 11-8059, 

2012 WL 1003559, at *1 (B.A.P. 6th Cir. Mar. 27, 2012) (citing Slutsky v. Am. Express Travel 

Related Servs. Co. (In re William Cargile Contractor, Inc.), 209 B.R. 435, 435-36 (B.A.P. 6th 

Cir. 1997)). 

The decision to grant or deny a motion pursuant to Federal 

Rule of Civil Procedure 60(b) is within the discretion of the 

bankruptcy judge. Bavey v. Powell (In re Baskett), 219 B.R. 754, 

757 (B.A.P. 6th Cir. 1998). The bankruptcy judge's decision is

reviewed on appeal for abuse of discretion. Blue Diamond Coal 

Co. v. Trustees of UMWA Combined Ben. Fund, 249 F.3d 519, 524 

(6th Cir. 2001). An abuse of discretion will be found when the 

reviewing court has a “definite and firm conviction that the court 

below committed a clear error of judgment in the conclusion it 

reached upon a weighing of the relevant factors.” Huey v. Stine, 

230 F.3d 226, 228 (6th Cir. 2000) (citations and internal quotation 

marks omitted). “The question is not how the reviewing court 

would have ruled, but rather whether a reasonable person could 

agree with the bankruptcy court's decision; if reasonable persons 

could differ as to the issue, then there is no abuse of discretion.” In 

re Behlke, 358 F.3d 429, 437 (6th Cir. 2004) (citation omitted).

In re Calloway, 11-8059, 2012 WL 1003559, at *1 (B.A.P. 6th Cir. Mar. 27, 2012). 

Jurisdictional questions are reviewed de novo. Kahn v. Regions Bank (In re Khan), 544 F. App'x 

617, 619 (6th Cir. 2013), cert. denied 134 S. Ct. 1545 (2014). “Standing is a jurisdictional 

requirement and we are under a continuing obligation to verify our jurisdiction over a particular 

case.” Id. (quoting Harker v. Troutman (In re Troutman Enters., Inc.), 286 F.3d 359, 364 (6th 

Cir. 2002)).

III. FACTS

Schwab Industries, Inc. filed a chapter 11 bankruptcy petition on February 28, 2010. The 

filing had been authorized by the board of directors, including David Schwab, Jerry Schwab and 
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Donna Schwab (“Appellants”). Hahn Loeser & Parks, LLP (“HLP”) was appointed as 

bankruptcy counsel. 

On May 10, 2012, Appellants filed an adversary proceeding against Attorney Lawrence 

Oscar and HLP (together “Appellees”) asserting a malpractice claim arising from an allegedly 

undisclosed conflict of interest with Bank of America. The bankruptcy court dismissed the 

adversary proceeding on September 20, 2012, holding that (1) Appellants lacked standing to 

bring the claim directly or derivatively on behalf of Debtors, and (2) the claim was barred by res 

judicata. Mem. Op. at 8-13, Schwab v. Oscar, No. 12-6035 (Bankr. N.D. Ohio Sept. 20, 2012), 

ECF No. 41. Appellants did not appeal this final order.

On September 20, 2013, one year after the dismissal, Appellants filed a motion seeking 

relief from the dismissal order pursuant to Rule 60(b). Appellants sought to reopen the adversary 

proceeding on the basis of asserted newly discovered evidence that Appellees had failed to 

disclose a conflict with Huntington National Bank and sought to amend the complaint to add 

allegations concerning this new evidence. 

On January 22, 2014, the bankruptcy court denied the motion for relief from judgment. 

The bankruptcy court determined that Appellants had not challenged the court’s prior ruling that 

they lacked standing. In an attempt to address the standing issue, Appellants’ motion for relief 

asserted that if the case was reopened they would either persuade the Trustee to bring the claim 

or obtain an assignment of the claim. However, the bankruptcy court noted that Appellants had 

done neither of those things. The bankruptcy court held that Appellants were bound by the order 

holding that they did not have standing. Additionally, the bankruptcy court held that although 

the other arguments were immaterial in light of Appellants’ lack of standing, the evidence 

proffered by Appellants was neither new nor newly discovered. In fact, the bankruptcy court 

held that the evidence clearly established that Appellants “had knowledge of the specific conflict 

at least three years earlier than they’ve claimed in their motion for relief.” Mem. Op. at 5. 

Finally, the bankruptcy court held that the motion for relief was not timely in light of the fact that

Appellants had “information which would have led to discovery of the conflict much earlier.” 

Mem. Op. at 7.
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Appellants timely filed an appeal of the order denying their motion for relief from the 

judgment.

IV. DISCUSSION

Rule 60(b) permits a bankruptcy court to grant relief from a final judgment for any of the 

following reasons:

(1) Mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered 

evidence which by due diligence could not have been discovered in time to move 

for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated 

intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse 

party; (4) the judgment is void; (5) the judgment has been satisfied, released, or 

discharged, or a prior judgment upon which it is based has been reversed or 

otherwise vacated, or it is no longer equitable that the judgment should have 

prospective application; or (6) any other reason justifying relief from the 

operation of the judgment.

Fed. R. Civ. P. 60(b). 

Appellants allege that the newly discovered evidence relating to HLP’s conflict of 

interest with Huntington provided a basis for the bankruptcy court’s vacating of its dismissal of 

the adversary proceeding. However, even if there was newly discovered evidence of such a 

conflict, that discovery does not serve as a basis for vacating the dismissal order due to the 

Appellants’ lack of standing.

In their motion for relief from judgment, Appellants did not challenge the bankruptcy 

court’s previous ruling that they lacked standing. In fact, Appellants seem to concede that they 

do not have standing to bring the underlying claims by asserting that they will either convince

the Trustee to bring the claims or obtain an assignment of the claims. The bankruptcy court 

ruled that Appellants did not have standing to bring the underlying claim and did nothing to cure 

their lack of standing prior to bringing their motion for relief from judgment.
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On appeal, Appellants attempt to challenge the bankruptcy court’s September 20, 2012 

holding that they do not have standing to bring the malpractice claims. In their brief, Appellants 

begin their argument with the assertion that “[t]he bankruptcy court erred as a matter of law 

when it held that Appellants did not have standing to pursue the claims asserted in their 

Amended Complaint filed in the adversary proceeding.” Br. of Appellants at 18, Apr. 30, 2014, 

ECF No. 15. Appellees argue that Appellants are bound by the bankruptcy court’s September

20, 2012 order, which Appellants did not appeal. Appellees are correct.

“The law-of-the-case doctrine bars challenges to a decision made at a previous stage of 

litigation which could have been challenged in a prior appeal, but were not.” JGR, Inc. v. 

Thomasville Furniture Indus., Inc., 505 F. App’x 430, 435 (6th Cir. 2012) (quotation marks and 

citation omitted). The Sixth Circuit has unambiguously stated “[a] Rule 60(b) motion is neither a 

substitute for, nor a supplement to, an appeal.” GenCorp, Inc. v. Olin Corp., 477 F.3d 368, 373 

(6th Cir. 2007). “For this reason, arguments that were, or should have been, presented on appeal 

are generally unreviewable on a Rule 60(b)(6) motion.” Id. (citations omitted). And for related 

reasons, “an appeal from [the] denial of Rule 60(b) relief does not bring up the underlying 

judgment for review.” Id. (quoting Browder v. Dir., Dep’t of Corr. Of Illinois, 434 U.S. 257, 

263 n.7, 98 S. Ct. 556, 560 (1978)).

In the September 20, 2012 opinion dismissing the adversary complaint, the bankruptcy 

court clearly held that Appellants did not have standing to bring the underlying claims. Mem. 

Op. at 8-13, Schwab v. Oscar, No. 12-6035 (Bankr. N.D. Ohio Sept. 20, 2012), ECF No. 41. 

Specifically, the bankruptcy court held that only the representative of the bankruptcy estate or its 

successor had standing to bring a malpractice claim against Appellees absent a showing of 

shareholder derivative standing or assignment of the claims. The bankruptcy court further held 

that Appellants did not establish derivative standing nor did they obtain an assignment of claims. 

Id. at 10.

The order dismissing the complaint because Appellants lacked standing was a final, 

appealable order. Hamilton v. Appolon (In re Hamilton), 399 B.R. 717, 720 (B.A.P. 1st Cir. 

2009) (“An order dismissing an adversary proceeding is a final order as it ends the litigation on 
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the merits of the complaint.”). Appellants should have filed an appeal if they wished to 

challenge the bankruptcy court’s decision that they lacked standing to bring the malpractice 

claims. Accordingly, they are bound by the bankruptcy court’s decision that they lacked 

standing under the law of the case doctrine. They may not raise any issues regarding the prior 

order in this appeal.

In the motion for relief from judgment, Appellants attempted to address the standing 

defect asserting: “[I]t is [Appellants’] intention to either obtain commitment from the 

Creditor/Trustee to pursue the malpractice claims against [Appellees and others], or, in the 

alternative, obtain an assignment of those rights[.]” Mot. For Relief from Judgment at 32, 

Schwab v. Oscar, No. 12-6035, (Bankr. N.D. Ohio, Sept. 20, 2013), ECF No. 47. The 

bankruptcy court noted that neither of these assertions had come to fruition. Mem. Op. at 3, 

Schwab v. Oscar, No. 12-6035 (Bankr. N.D. Ohio Jan. 22, 2014), ECF No. 75.

1

 Accordingly, 

the bankruptcy court found that there was no factual basis for a determination that the 

Appellants’ standing had changed. “The [Appellants] did not have standing when the complaint 

was filed and have done nothing to cure the lack of standing.” Id. at 4. Further, there is no basis 

from the record to determine that the asserted newly discovered evidence relating to the alleged 

conflict of interest involving Huntington affects Appellants’ standing, or lack thereof, in any 

manner. 

In this appeal, Appellants are attempting to use a Rule 60(b) motion to re-litigate the 

issue of their standing to bring the underlying claims when they should have filed a timely appeal 

if they wished to challenge that ruling. Marbly v. City of Southfield, 2001 U.S. App. LEXIS 

18599, at *6 (6th Cir. Aug. 13, 2001) (Rule 60(b) may not be employed to re-litigate issues 

previously decided); Hopper v. Euclid Manor Nursing Home, Inc., 867 F.2d 291, 294 (6th Cir. 

1989) (citations omitted) (Rule 60(b) not a substitute for an appeal). 

 

1

 The bankruptcy court was not convinced that an assignment would have cured the 

standing defect. Mem. Op. at 3, Schwab v. Oscar, No. 12-6035 (Bankr. N.D. Ohio Jan. 22, 

2014), ECF No. 75. “[Appellants] have not cured the standing problems identified in the court’s 

previous order and are unable to do so after the fact.” Id. at 6.
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Because Appellants lack standing to be a party in the underlying complaint, they lack 

standing to bring a motion for relief from judgment. “The plain language of Rule 60(b) only 

allows relief to be given to ‘a party’ to the litigation.” Bridgeport Music, Inc. v. Smith, 714 F.3d 

932, 940 (6th Cir. 2013) (citations omitted). The bankruptcy court correctly determined that 

Appellants’ motion for relief from judgment should be denied due to the preclusive effect of its 

prior ruling determining that the Appellants’ lacked standing to pursue the adversary proceeding.

V. CONCLUSION

For the reason stated, the order of the bankruptcy court denying the motion for relief from 

judgment is AFFIRMED.