Court Opinion

ID: 4540257
Source: CourtListenerOpinion
Date Created: 2020-06-10 01:01:34.794156+00
Date Added: 2024-06-11T08:00:10.579350
License: Public Domain

FILED
                                                                                JUN 5 2020
                           NOT FOR PUBLICATION
                                                                          SUSAN M. SPRAUL, CLERK
                                                                             U.S. BKCY. APP. PANEL
                                                                             OF THE NINTH CIRCUIT

             UNITED STATES BANKRUPTCY APPELLATE PANEL
                       OF THE NINTH CIRCUIT

In re:                                               BAP No. EC-19-1201-GLB

NATIONS FIRST CAPITAL, LLC,                          Bk. No. 18-20668

                    Debtor.

NATIONS FIRST CAPITAL, LLC,

                    Appellant,

v.                                                   MEMORANDUM*

JEAN G. DECEMBRE, DBA Ale
Transportation,

                    Appellee.

                     Argued and Submitted on May 21, 2020

                                 Filed – June 5, 2020

               Appeal from the United States Bankruptcy Court
                    for the Eastern District of California

         *
        This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value. See 9th Cir. BAP Rule 8024-1.
          Honorable Christopher M. Klein, Bankruptcy Judge, Presiding

Appearances:        Paul J. Pascuzzi of Felderstein Fitzgerald Willoughby
                    Pascuzzi & Rios LLP argued for Appellants; Noel C.
                    Crowley of Crowley & Crowley argued for Appellees

Before: GAN, LAFFERTY, and BRAND, Bankruptcy Judges.

                                 INTRODUCTION

      Reorganized chapter 111 debtor Nations First Capital, LLC (“NFC”)

appeals an order from the bankruptcy court denying its motion for

reconsideration of the court’s decision to vacate its prior order disallowing

the claim filed by Appellee Jean Decembre (“Decembre”). Decembre did

not respond to NFC’s claim objection and expressed his opposition for the

first time at the hearing on NFC’s motion for entry of a final decree. After

briefing and a subsequent hearing, the bankruptcy court continued the

hearing and requested briefing on the merits of the claim. The court

ultimately determined that cause existed to reconsider its prior order

      1
       Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, all “Civil Rule” references are to the Federal Rules of Civil
Procedure, and all “Local Bankruptcy Rule” references are to the United States
Bankruptcy Court Eastern District of California, Local Rules of Practice, effective April
2018.

                                            2
pursuant to Civil Rule 60(b)(6)2, made applicable by Rule 9024, and entered

an order setting aside the disallowance of the claim. The court then

abstained from hearing the merits of the claim, which was pending in state

court.

         NFC filed a motion for reconsideration, which the court denied. NFC

argues that the bankruptcy court abused its discretion by deciding that

cause existed to reconsider the claim disallowance under Civil Rule 60(b)(6)

and by determining that the claim was potentially meritorious under state

law.

         The bankruptcy court abused its discretion by determining that cause

existed to reconsider the claim disallowance under Civil Rule 60(b)(6)

despite finding that Decembre lacked a cogent excuse for failing to respond

to the objection. Accordingly, we REVERSE.

                                        FACTS

A.       Prepetition Events

         In 2016, Decembre agreed to lease a 2008 Freightliner semi-truck from

NFC for a term of 24 months. The lease provided Decembre with an option

to purchase the truck at the end of the term. In 2017, Decembre was unable

to make full payments as required by the lease and NFC repossessed the

         2
        As explained more fully in the discussion section of this memorandum, when
reconsidering the allowance or disallowance of a claim under § 502(j), cause is defined
under Civil Rule 59 or 60.

                                           3
truck. In November 2017, NFC advised Decembre that it sold the truck and

he was liable for a deficiency balance of $22,991.49.

      In January 2018, Decembre filed suit against NFC in the Superior

Court of New Jersey seeking damages, and injunctive and declaratory

relief. Decembre alleged that the lease violated the New Jersey Consumer

Fraud Act, the New Jersey Criminal Usury Act, the New Jersey Consumer

Protection Leasing Act, and the New Jersey “plain language” statute.

B.    The Bankruptcy Case and the Claim Objection

      In February 2018, NFC filed a chapter 11 petition. Decembre timely

filed an unsecured claim in the amount of $388,000 and attached the

verified complaint filed in the state court action. Decembre did not seek

stay relief or object to NFC’s chapter 11 plan. The court confirmed NFC’s

plan in August 2018.

      NFC filed an objection to Decembre’s claim in November 2018. NFC

alleged that Decembre failed to provide a legal basis for his claim because

the statutes cited in the complaint did not apply to the lease under New

Jersey law, and Decembre provided no documentation to support the

amount of the claim. NFC supported the objection with a declaration and

exhibits, and filed a notice of hearing on its objection for January 9, 2019.

NFC filed a certificate of service which stated that Decembre, and

Decembre’s attorney Noel Crowley (“Crowley”), were separately served by

mail with the objection and the notice of hearing. NFC served Decembre’s

                                       4
attorney at the address provided in the proof of claim.

      NFC also filed a notice of errata for the exhibits attached to the

declaration in support of its objection and filed a second proof of service

stating that the notice of errata was served separately by mail on Decembre

and Crowley.

      Decembre did not file a response to the objection and did not appear

at the hearing on January 9, 2019. At the hearing, the bankruptcy court

made findings of fact and conclusions of law on the record and entered an

order sustaining NFC’s objection without prejudice to reconsideration

under § 502(j).

C.    Reconsideration of the Claim Disallowance

      On March 20, 2019, the bankruptcy court held a hearing on

NFC’s motion for a final decree. Crowley appeared on behalf of Decembre

and requested that the court delay entry of the final decree in order to

reconsider the disallowance of Decembre’s claim. The bankruptcy court

continued the hearing to April 17, 2019 to allow Decembre time to file a

brief outlining its request for reconsideration. The court’s minute entry

stated that the deadline for Decembre to file a response was April 10, 2019.

      On March 21, 2019, Decembre filed a Declaration of Noel C. Crowley

in Opposition to Motion by the Reorganized Debtor for the Entry of a Final

Decree. Crowley stated in the declaration that “to the best of my

knowledge and belief, my office did not receive notice” of the hearing on

                                       5
the claim objection.

      On April 12, 2019, Decembre filed a second “Declaration of Noel C.

Crowley in Support of Application To Restore The Claim of Jean G.

Decembre” (the “April Declaration”). Crowley stated in the April

Declaration that “I absolutely deny having seen the Debtor’s Objection to

Decembre’s claim” before March 21, 2019. The April Declaration also

includes argument that Decembre has a valid claim under New Jersey law.

      NFC filed a reply and recounted that at the March 20, 2019 hearing,

the court continued the hearing on the motion for final decree to allow

Decembre to file a response. NFC argued that Decembre filed the April

Declaration after the deadline set by the court, and nothing in the April

Declaration warranted denial of the motion for final decree. NFC argued

that to the extent that the April Declaration was intended to serve as a de

facto motion for reconsideration, it should also fail because Decembre did

not rebut the presumption of receipt of the objection and notice of hearing

by both Decembre and Crowley. NFC argued that Decembre failed to

establish cause for reconsideration because merely asserting or implying

that counsel did not receive notice, without any assertion that Decembre

did not receive notice, did not rise to the level of excusable neglect under

Civil Rule 60(b)(1). NFC did not address the merits of the claim in its reply.

      At the continued hearing on April 17, 2019, the bankruptcy court

heard arguments regarding whether Decembre was properly served with

                                       6
the objection and whether there was evidence to support mistake,

inadvertence, or excusable neglect under Civil Rule 60(b). But, because

NFC had not addressed the underlying merits of the Decembre claim, the

bankruptcy court again continued the hearing to June 5, 2019 and

requested that NFC address the merits.

      NFC filed a brief regarding the merits of Decembre’s claim and

argued that although Decembre had not established cause to relitigate the

merits, all of his claims for relief were contingent on whether the lease was

a “true lease” under state law, or a disguised purchase financing

transaction. NFC argued that the lease was a “fair market value

commercial lease” and therefore exempt under the New Jersey statutes

because the lease term was not for the useful life of the truck, Decembre

was not obligated to purchase the truck at the end of the lease term, and

the option price was defined in the lease as the fair market value of the

equipment. NFC also argued that Decembre had not justified the $388,000

amount of the claim, and the deficiency owed by Decembre would exceed

the maximum amount of damages Decembre could recover under the

statutes. NFC filed a declaration from its portfolio manager which

provided evidence in support of NFC’s argument that the lease was a fair

market value commercial lease.

      Decembre replied and argued that the relevant New Jersey consumer

protection statutes applied to products and equipment sold or leased for

                                      7
business purposes, and that leases are included in the statutes unless they

fall within the stated exemptions. Decembre argued that the lease was not

exempt as a “fair market value commercial lease” because New Jersey case

law required the lease to either state the option price or the method for

ascertaining the option price, but NFC reserved the right to determine the

option price without any mention in the lease of the method to be used.

D.    The Hearing and the Court’s Order

      At the continued hearing, the bankruptcy court stated that based on

its analysis of relevant state law, it appeared that Decembre may have a

meritorious case, but the question was how to best resolve the claim and in

which forum. The bankruptcy court noted that if the lease was exempt

from the statutes as a matter of law, the state court could make that

determination and dismiss the case. The court then took the matter under

advisement.

      On June 13, 2019, the bankruptcy court entered an order granting

reconsideration of the claim and abstaining under 28 U.S.C. § 1334(c)(1).

The court held that reconsideration was appropriate to allow the issues to

be decided on the merits, and that the state court was better suited to

decide the claims and defenses which were mixed questions of state law

and fact.

      The bankruptcy court stated that a motion for reconsideration under

§ 502(j) is evaluated under the same criteria as a motion under Civil Rule

                                      8
60(b), and that the strong federal policy favoring determination of disputes

on their merits and Decembre’s potential meritorious defense to the

objection, were sufficient to satisfy Civil Rule 60(b)(6), “notwithstanding

the lack of a cogent excuse for not having responded to the Objection in the

first place.” Order, June 13, 2019, 4:10-11.

E.    NFC’s Motion to Reconsider

      NFC filed a motion for reconsideration and argued that the court

committed clear error by finding cause under Civil Rule 60(b)(6) after

acknowledging that the standard under Civil Rule 60(b)(1) was not met.

Additionally, NFC argued that the court erred by looking to the merits of

the underlying claim as part of its analysis in determining cause for

reconsideration, contrary to the holding of United Student Funds, Inc. v.

Wylie (In re Wylie), 349 B.R. 204 (9th Cir. BAP 2006). Finally, NFC argued

that the court erred by determining that factual issues precluded a ruling

that the Decembre claim fails as a matter of law.

      Decembre opposed the motion and argued that the bankruptcy court

appropriately looked to Civil Rule 60(b)(6). Decembre argued that the court

was not required to analyze excusable neglect because Crowley was not to

blame for failing to read a document that was not available to be read.

Decembre suggested that cause to reconsider might also be found in Civil

Rule 60(b)(3) for fraud based on the language in the lease. He attempted to

distinguish Wylie on the basis that the creditor in that case admitted that it

                                        9
received the objection but failed to respond, whereas Crowley testified he

did not see the objection. Finally, he reiterated that the claims were

meritorious.

       At the hearing on the motion for reconsideration, the bankruptcy

court stated that the purpose of reconsideration under § 502(j) and Civil

Rule 60(b) is to allow the court discretion to take another look at summary

decisions which may have been made without appropriate conversation.

The court acknowledged that the catch-all provision in Civil Rule 60(b)(6)

has limitations but that the court had discretion to reconsider where

questions of state law and interests of comity were present. The court

denied the motion and entered an order on July 31, 2019. NFC timely

appealed.3

                                   JURISDICTION

       The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.

                                         ISSUES

       Did the bankruptcy court abuse its discretion by vacating its prior

order disallowing Decembre’s claim?

       3
         The notice of appeal refers only to the order denying NFC’s motion for
reconsideration, but an appeal of an order denying a motion for reconsideration is
sufficient to bring up the merits of both the underlying order and the motion for
reconsideration if the reconsideration motion was filed within fourteen days of the
entry of the underlying order. See Watson v. Shandell (In re Watson), 192 B.R. 739, 742 n.3
(9th Cir. BAP 1996), aff'd, 116 F.3d 488 (9th Cir. 1997).

                                            10
      Did the bankruptcy court abuse its discretion by denying NFC’s

motion for reconsideration?

                          STANDARD OF REVIEW

      We review the bankruptcy court’s decision to reconsider the

disallowance of Decembre’s claim under § 502(j) for abuse of discretion.

Ashford v. Consol. Pioneer Mortg. (In re Consol. Pioneer Mortg.), 178 B.R. 222,

225 (9th Cir. BAP 1995). We also review for an abuse of discretion the

bankruptcy court’s ruling on NFC’s motion for reconsideration. Dicker v.

Dye (In re Edelman), 237 B.R. 146, 150 (9th Cir. BAP 1999).

      A bankruptcy court abuses its discretion if it applies the wrong legal

standard, or misapplies the correct legal standard, or if it makes factual

findings that are illogical, implausible, or without support in inferences

that may be drawn from the facts in the record. See TrafficSchool.com, Inc. v.

Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011) (citing United States v. Hinkson,

585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)).

                                DISCUSSION

      NFC argues that the bankruptcy court abused its discretion by:

(1) finding cause to reconsider under Civil Rule 60(b)(6) despite factual

circumstances which invoked, but did not satisfy, Civil Rule 60(b)(1); and

(2) deciding that it could not definitively determine that the lease was

exempt from the state statutes cited in Decembre’s complaint.

      Section 502(j) allows a bankruptcy court to reconsider an order

                                       11
disallowing a claim for cause, and allow or disallow the reconsidered claim

according to the equities of the case. This section is implemented by

Rule 3008, which states “[a] party in interest may move for reconsideration

of an order allowing or disallowing a claim against the estate. The court

after a hearing on notice shall enter an appropriate order.” However,

neither § 502(j) nor Rule 3008 define the standard for “cause.”

      We have held that when a request to reconsider a claim disallowance

is made within the time to appeal the order, “cause” to reconsider is

governed by Rule 9023. Wall St. Plaza, LLC v. JSJF Corp. (In re JSJF Corp.),

344 B.R. 94, 103 (9th Cir. BAP 2006), aff’d, 277 F. App’x 718 (9th Cir. 2008).

When, as here, the request is made after the time to appeal has expired, it is

subject to the constraints of Rule 9024. In re Wylie, 349 B.R. at 209; S.G.

Wilson Co. v. Cleanmaster Indus., Inc. (In re Cleanmaster Indus. Inc), 106 B.R.
628, 630 (9th Cir. BAP 1989); see also Blixseth v. Glasser (In re Yellowstone

Mountain Club, LLC), 593 F. App’x 643 (9th Cir. 2015) (“Bankruptcy Rule

9024 says that Federal Rule of Civil Procedure 60 applies to bankruptcy

proceedings. Rule 9024 makes no exception for motions made under 11

U.S.C. § 502(j) to reconsider contested orders allowing claims against the

estate.”). Therefore, the applicable standards for cause to reconsider

Decembre’s claim under § 502(j) are the grounds for relief enumerated in

Civil Rule 60(b).

      Rule 3008 and § 502(j) essentially provide for a two-step analysis.

                                        12
First the bankruptcy court must determine if cause exists to reconsider the

claim, and second, the court may enter an appropriate order based on the

equities of the case. “While Rule 3008 permits an order disallowing a claim

to be reconsidered, the merits of the claim objection are no longer fair game

unless the claimant first establishes a good excuse, cognizable under [Civil

Rule] 60(b), for its failure to timely contest the objection.” In re Wylie, 349
B.R. at 210.

      Here, Decembre raised the issue of reconsideration approximately 60

days after the order on the claim objection and the bankruptcy court

properly evaluated cause under Civil Rule 60(b). 4 Under Civil Rule 60(b),

the bankruptcy court can relieve a party from a final order for the

following reasons:

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

               (2) newly discovered evidence that, with reasonable
               diligence, could not have been discovered in time to

      4
        NFC argues that Decembre failed to file or notice a motion as contemplated by
Rule 3008. However, the bankruptcy court has authority to act on its own motion to
reconsider claims. See Simpson v. Deutsche Bank Nat’l Tr. Co. (In re Simpson), No. CC-12-
1445, 2013 WL 2350967 at *5 (9th Cir. BAP May 29, 2013) (citing Kirwan v. Vanderwerf (In
re Kirwan), 164 F.3d 1175, 1177 (8th Cir. 1999)). A bankruptcy court acting sua sponte
must still find cause under § 502(j). To preserve the finality of orders allowing or
disallowing claims, the court must find cause under either Rule 9023 or Rule 9024
whether a party in interest files a motion or the court moves sua sponte. See e.g., In re
Kirwan, 164 F.3d at 1177; Kraemer v. FS P’ship (In re Doorman Prop. Maint.), No. NC-17-
1233-TaFB, 2018 WL 3041128 (9th Cir. BAP June 19, 2018); In re Wylie, 349 B.R. at 210.

                                           13
            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.

A.    Decembre Did Not Establish Excusable Neglect

      Decembre’s reason for failing to respond to the objection is that

Crowley did not see the objection or notice of hearing. NFC filed its

certificate of service which stated, under penalty of perjury, that the

objection, notice of hearing, and exhibits were served by first class mail on

Decembre, and on Crowley at the address listed on the proof of claim. The

record does not indicate that the documents were returned as

undeliverable or unclaimed.

      Mail that is properly stamped, addressed, and deposited is presumed

to be received by the addressee. Moody v. Bucknum (In re Bucknum), 951
F.2d 204, 207 (9th Cir. 1991). The movant can rebut this presumption with

clear and convincing evidence. Id. But, the movant must provide something

                                        14
more than a declaration alleging non-receipt. Herndon v. De la Cruz (In re De

la Cruz), 176 B.R. 19, 22 (9th Cir. BAP 1994).

      Decembre does not dispute that NFC mailed the notice. He also does

not dispute that he personally, or Crowley’s office, received the objection

and notice of hearing. He only states that Crowley did not see the

documents. This is insufficient to rebut the presumption that Decembre

and his attorney received notice.

      The bankruptcy court heard arguments regarding whether there was

evidence in support of mistake, inadvertence, or excusable neglect and

determined that Decembre lacked a cogent excuse for failing to respond.

The record supports this finding and we discern no error here.

B.    The Bankruptcy Court Abused Its Discretion By Finding Cause to
      Reconsider Under Civil Rule 60(b)(6)

      Notwithstanding Decembre’s lack of a cogent excuse, the bankruptcy

court determined that it had discretion to set aside the disallowance under

Civil Rule 60(b)(6) based on the policy of deciding cases on their merits,

and the potential meritorious defense argued by Decembre.

      Civil Rule 60(b)(6) should be applied “sparingly as an equitable

remedy to prevent manifest injustice . . . [and] only where extraordinary

circumstances prevented a party from taking timely action to prevent or

correct an erroneous judgment.” United States v. Alpine Land & Reservoir Co.,

984 F.2d 1047, 1049 (9th Cir. 1993). A party seeking relief under Civil Rule

                                       15
60(b)(6) must show extraordinary circumstances that demonstrate it is

faultless in the delay. Pioneer Inv. Servs. Co. v. Brunswick Assocs. Lts. P’ship,

507 U.S. 380, 393 (1993).

      Clauses (1) through (6) of Civil Rule 60 are mutually exclusive.

Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 864 n.11 (1988).

Therefore, Civil Rule 60(b)(6) applies “only when the reason for granting

relief is not covered by any of the other reasons set forth in [Civil] Rule 60."

Delay v. Gordon, 475 F.3d 1039, 1044 (9th Cir. 2007).

      Neither the policy of adjudicating cases on their merits, nor

Decembre’s potential meritorious claim are sufficient to constitute

extraordinary circumstances under Civil Rule 60(b)(6) where Decembre has

not demonstrated that he was faultless in the delay.

      In the context of a motion for relief from a default order, the Ninth

Circuit has instructed courts to consider: (1) whether the non-movant will

be prejudiced; (2) whether the movant has a meritorious defense; and

(3) whether culpable conduct of the movant led to the default. Cassidy v.

Tenorio, 856 F.2d 1412, 1415 (9th Cir. 1988). “This tripartite test is

disjunctive.” Id. A movant’s failure to demonstrate any one of the factors is

justification to deny relief under Civil Rule 60(b). Id.

      Although the “policy favoring deciding cases on the merits means

that ‘the finality interest should give way fairly readily’ to the merits,” the

movant must first show that his conduct was not culpable in prompting the

                                        16
default. Morris v. Peralta (In re Peralta), 317 B.R. 381, 388 (9th Cir. BAP 2004)

(quoting TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir.

2001), overruled on other grounds by Egelhoff v. Egelhoff, 532 U.S. 141 (2001));

See Cassidy, 856 F.2d at 1415. A defendant’s “culpability” is construed to be

consistent with the Supreme Court’s definition of “excusable neglect.” TCI,
244 F.3d at 696.

      Decembre has not shown extraordinary circumstances that

demonstrate he was faultless in the delay. The strong federal policy of

deciding cases on the merits does not override the interest in finality unless

the reason for failing to respond is excusable or not otherwise chargeable to

the movant. The bankruptcy court determined that Decembre lacked a

viable excuse for not responding.

      Furthermore, disallowance of a claim under § 502(b)(1) necessarily

requires the court to evaluate the merits of the claim. Once filed, a proof of

claim is entitled to prima facie validity. Rule 3001(f). The filing of a claim

objection initiates a contested matter under Rule 9014 which must be

resolved after notice and opportunity for hearing. Lundell v. Anchor Const.

Specialists, Inc., 223 F.3d 1035, 1039 (9th Cir. 2000). To defeat a claim, the

objector “must come forward with sufficient evidence and ‘show facts

tending to defeat the claim by probative force equal to that of the

allegations of the proof of claim themselves.’” Id. (quoting Wright v. Holm

(In re Holm), 931 F.2d 620, 623 (9th Cir. 1991)).

                                        17
      A mere formal objection without evidence is not sufficient to

overcome a proof of claim. In re Holm, 931 F.2d at 623; see also Local

Bankruptcy Rule 3007-1 (“the objection shall be accompanied by evidence

establishing its factual allegations and demonstrating that the proof of

claim should be disallowed. A mere assertion that the proof of claim is not

valid or that the debt is not owed is not sufficient to overcome the

presumptive validity of the proof of claim.”). If the objecting party fails to

present sufficient evidence to rebut the presumption of validity, “the

claims litigation ends there; the claim should be allowed without the

claimant bearing any further burden to demonstrate the validity of its

claim.” Bayview Loan Servicing, LLC v. Donnan (In re Donnan) No. EC-18-

1106-BSL, 2019 WL 1922843, *3 (9th Cir. BAP Apr. 29, 2019).

      Pursuant to § 502(b)(1), the bankruptcy court must evaluate the

substance of the claim to determine whether the evidence shows that it is

valid under state law. See Durkin v. Benedor Corp. (In re G.I. Indus., Inc.), 204
F.3d 1276, 1281 (9th Cir. 2000). The bankruptcy court could not have

sustained the objection merely because Decembre failed to respond. It was

required to evaluate the evidence submitted by NFC in support of the

objection and allow or disallow the claim based on the substance of the

claim. This is necessarily a determination on the merits. See Semtek Int’l Inc.

v. Lockheed Martin Corp., 531 U.S. 497, 501-02 (2001) (“an ‘on the merits’

adjudication is one that actually ‘pass[es] directly on the substance of [a

                                        18
particular] claim’ before the court.”) (alterations in original) (citations

omitted). Therefore, the bankruptcy court decided the claim on the merits

at the initial disallowance. While reconsideration is possible, cause to do so

does not include a desire to relitigate the merits.

      Similarly, whether Decembre had a potential meritorious defense is

not an extraordinary circumstance sufficient to warrant relief under Civil

Rule 60(b)(6) unless Decembre’s failure to respond to the objection was

excusable. While the lack of a meritorious defense can alone justify denial

of a Civil Rule 60(b) motion, a meritorious case is not sufficient to justify

granting relief unless the movant also demonstrates a lack of culpable

conduct. See TCI, 244 F.3d at 697; In re Wylie, 349 B.R. at 210.

      The bankruptcy court cited Cmty. Dental Servs. v. Tani, 282 F.3d 1164,

1172 (9th Cir. 2002) for the proposition that “[Civil] Rule 60(b)(6) may often

constitute the only mechanism for affording . . . the opportunity to present

[a] case on the merits.” Order, June 13, 2019, 4:4-6. Tani involved

“extraordinary circumstances” under Civil Rule 60(b)(6) based on the gross

negligence of the party’s counsel. Id. The Ninth Circuit drew a line between

“gross negligence—which is not chargeable to the client—and ‘ordinary’

negligence or neglect—which is.” Id. at 1170. The Circuit held that errors

made due to the “mere neglect” of a party or its counsel are encompassed

within Civil Rule 60(b)(1) whereas Civil Rule 60(b)(6) encompasses “errors

or actions beyond the petitioner's control.” Id. at 1170, n. 11. There is

                                       19
nothing in the record to indicate that Crowley’s failure to see the objection

and file a response was “gross negligence” or otherwise beyond his control.

      Decembre suggests that we can alternatively affirm the bankruptcy

court's finding of cause under Civil Rule 60(b)(3) because of "incoherent"

language in the lease. However, to prevail under Civil Rule 60(b)(3) the

movant “must establish that a judgment was obtained by fraud,

misrepresentation, or misconduct, and that the conduct complained of

prevented the moving party from fully and fairly presenting the case.” In re

M/V Peacock, 809 F.2d 1403, 1404-05 (9th Cir. 1987). Any alleged fraud or

misrepresentation in the lease itself cannot support cause under Civil Rule

60(b)(3).

      Decembre’s proffered excuse for failing to respond to the objection is

properly analyzed under Civil Rule 60(b)(1). Decembre failed to

demonstrate excusable neglect under Civil Rule 60(b)(1) and the

bankruptcy court abused its discretion by finding cause to reconsider the

claim disallowance under Civil Rule 60(b)(6).

                              CONCLUSION

      For the reasons set forth above, we REVERSE the bankruptcy court's

order granting reconsideration of the Decembre claim disallowance.

                                      20