Court Opinion

ID: 9483541
Source: CourtListenerOpinion
Date Created: 2023-08-05 09:23:37.081825+00
Date Added: 2024-06-11T17:49:40.915262
License: Public Domain

FLAUM, Circuit Judge.
I respectfully dissent. In my judgment, the bankruptcy judge abused his discretion by not allowing the government to amend its claim. Leave to amend is to be given freely, according to both the rule (Fed. R.Civ.P. 15(a)) and the case law (Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962); Eades v. Thompson, 823 F.2d 1055, 1062-63 (7th Cir.1987)).
As the majority explains at footnote 4, the amended claim relates back and therefore satisfies Rule 15(c). In this case, none of the relevant equitable factors outweighed the interest of justice in permitting the government to attempt recovery of funds to which it was entitled. No creditor has objected to the IRS’ amended claim. The debtors knew of the ongoing audit, and presumably of the amount of deductions they had claimed. The amendment would not delay confirmation of a final plan; it has been long delayed by other matters. There is no evidence of bad faith on the part of the IRS. I am unable to accede to the bankruptcy judge’s decision to assert prejudice on behalf of the other creditors— yet this would be the only reasonable basis for denying leave to amend. By itself, the IRS’ failure to ask for an extension to amend its claim cannot provide sufficient support for the bankruptcy court’s decision. (The IRS’ “negligence” resulted from following the Internal Revenue manual, § 57(13) 2.463, which the bankruptcy court and the majority interpret, perhaps understandably, as treating the bar date lightly.)
Without any evidence of bad faith, or prejudice to the other creditors, or disruption of orderly discharge of the bankruptcy, the lack of an extension request is not enough to overcome the interest of justice in allowing the IRS to assert its claim.1

. I concur in that part of the majority’s opinion which rejects the government’s new 1982 tax claim for $14,445.35.