Earnest D. Everett and Carol G. Everett

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re:
Earnest D. Everett and
Carol G. Everett,
Debtors.
) 	Case No. 10-31770
)
) 	Chapter 7
)
)
) 	JUDGE MARY ANN WHIPPLE
MEMORANDUM OF DECISION RE MOTION TO VACATE WITH PREJUDICE DISMISSAL
This case is before the court on the Debtors’ Motion to Partially Vacate Judgment [Doc. # 21]
(“Motion”). The judgment in issue is the court’s order entered on October 18, 2010, dismissing this case
with prejudice to the discharge in a subsequent Chapter 7 case of the dischargeable debts scheduled herein.
The United States Trustee opposes the Motion.
The Motion was filed after the court’s proceeding memo from the motion to dismiss hearing was
docketed but before the court’s memorandum of decision and order were filed of record. It does not state
the procedural rule under which it is brought. The court construes it as a motion to alter or amend judgment
under Rule 59(e) of the Federal Rules of Civil Procedure, which applies in this case under Rule 9023 of the
Federal Rules of Bankruptcy Procedure. Notwithstanding that the Motion was filed before entry of the order
that it seeks to amend, the court deems it as timely filed by “no later than 14 days after entry of judgment,”
Fed. R. Bankr. P. 9023. Smith v. Hudson, 600 F.2d 60, 62 (6th Cir. 1979). The Motion seeks to alter only that
portion of the court’s order providing that “[d]ismissal of this case bars in a later case under Chapter 7 of
Title 11 of the United States Code discharge of any debt that was dischargeable in this case” and asks to
Dated: September 30 2011
The court incorporates by reference in this paragraph and adopts as the findings and
orders of this court the document set forth below. This document has been entered
electronically in the record of the United States Bankruptcy Court for the Northern
District of Ohio.
10-31770-maw Doc 37 FILED 09/30/11 ENTERED 09/30/11 16:11:35 Page 1 of 4

have the dismissal turned into a dismissal without prejudice.
The events in this case that resulted in its dismissal “with prejudice” were detailed by the court in
its memorandum of decision entered on October 18, 2010. [Doc. # 23]. That memorandum of decision and
the detailed procedural history set forth in it that resulted in the dismissal of this case occurring “with
prejudice” to discharge of the scheduled debts in a subsequent Chapter 7 case is incorporated by reference
in this memorandum of decision. Suffice to say that the path to “with prejudice” dismissal commenced with
Debtors filing of this Chapter 7 case on March 22, 2010, at a time when they were not eligible for a Chapter
7 discharge, having filed another Chapter 7 case within the previous 8 years, on February 28, 2003, that
was not disclosed on the petition they signed under penalties of perjury. See 11 U.S.C. § 727(a)(8). After
the United State Trustee brought the issue to light by suing Debtors on April 7, 2010, Adv. Pro. No. 10-
3088, to deny them a Chapter 7 discharge on that basis, 	Debtors thereafter did nothing to rectify the
problem or to address its impact on this case, leaving the United States Trustee, the Chapter 7 panel trustee
and the court to deal with it.
Rule 59(e) is silent about the standard or grounds for relief thereunder. And while courts have
considerable discretion whether to grant or deny a motion to alter or amend a judgment, reconsideration of
a previous order is nevertheless considered an extraordinary remedy to be used sparingly. Wendy’s Int’l,
Inc. v. Nu-Cape Constr., Inc., 169 F.R.D. 680, 685 (M.D. Fla. 1996). Circumstances justifying Rule 59(e)
relief generally include correcting clear legal error, newly discovered evidence, an intervening change in
the law or a need to prevent manifest injustice, Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir.
2005), the latter being something of a catch-all. The grounds for relief stated in the Motion and at the
hearing encompass the need to prevent manifest injustice.
At the outset, there is a suggestion in the Motion that Debtors lacked fair warning of the potential
for dismissal “with” prejudice. The court rejects this argument as a basis for relief. Debtors point out that
the default judgment entered against them in the adversary proceeding after they failed to respond to the
United State’s Trustee’s complaint to deny discharge was premised on § 727(a)(8) and only denied them
a discharge in this case. The court acknowledges that § 523(a)(10), which addresses exception from
discharge of debts in a subsequent case where discharge was denied in a prior case under certain
circumstances, does not include discharge denial based on § 727(a)(8). However, the United States Trustee’s
adversary proceeding did not resolve the status of the underlying ongoing Chapter 7 case, which remained
to be addressed from the estate standpoint notwithstanding that Debtors were not entitled to a discharge.
Multiple formal and informal efforts to get Debtors to attend a meeting of creditors so the Chapter 7 Trustee
2
10-31770-maw Doc 37 FILED 09/30/11 ENTERED 09/30/11 16:11:35 Page 2 of 4

could do her job and and to seek to dismiss the case voluntarily were unsuccessful. Thus the Chapter 7
Trustee’s motion to dismiss [Doc. # 17] clearly stated that dismissal was being requested “with prejudice.”
The potential legal implications of a case dismissal “with prejudice” are plainly set forth in the statute. 11
U.S.C. § 349(a). Debtors did not oppose or otherwise respond to the Chapter 7 Trustee’s motion to dismiss
and inexplicably neither Debtors nor counsel appeared at the hearing on the Chapter 7 Trustee ‘s motion
to dismiss, see Doc. # 20. The court finds that Debtors were not blindsided by dismissal with prejudice and
therefore does not find any lack of warning or the scope of the default judgment in the adversary proceeding
as a basis to change the dismissal to a without prejudice dismissal.
Beyond the argument about the scope of the default judgment, at the hearing Debtors’ counsel took
the blame for what transpired here, or more accurately what did not transpire here. She points out that
Debtors are sick, elderly, on limited fixed incomes (and, lacking any wages to be garnished, the court
would agree probably uncollectable from future income as to general unsecured creditors, notwithstanding
discharge or lack thereof) and incapable of intending to abuse the system, the latter fact, however, being
unsupported of record. Rather, counsel argues, both counsel and Debtors “once they discovered they were
not entitled to a discharge, ... did not wish to waste the court’s time or the trustee’s pursuing the adversary
or the motion to dismiss.” Counsel forthrightly stated at the hearing that the lack of responsive action was
a miscalculation essentially “on her” and that Debtors should thus not be held responsible for ignoring the
case they had filed until it inevitably went away. To the contrary, though, 	after “the discovery” that
Debtors had filed a previous Chapter 7 case within the last 8 years, the resources of the United States
Trustee, the Chapter 7 Trustee and the court were unfairly and unnecessarily consumed.
Courts disagree about and struggle with, as this one does, when the action or inaction of counsel
should justify relief under Rule 59(e) to prevent a manifest injustice. Compare Robinson v.Wix Filtration
Corp L.L.C., 599 F. 3d 403 (4th Cir. 2010) (order denying relief from summary judgment entered after
counsel failed to oppose motion affirmed on appeal), ) and Fox v. Am. Airlines, 389 F.3d 1291, 1296 (D.C.
Cir. 2004)(affirming denial of rule 59(e) motion since “the dismissal of the ... suit might have been avoided
through exercise of due diligence”) with 	Robinson, 599 F.3d at 414 (concurrence) and 415 (dissent) and
Dale & Selby Superette & Deli v. United States Dep’t of Agric., 838 F. Supp. 1346 (D. Minn. 1993). The
court appreciates the manner in which Counsel 	forthrightly came forward at the hearing on the Motion to
take responsibility. But the court cannot find that relief is justified from the “with” prejudice dismissal on
the grounds that a manifest injustice has occurred with respect to her clients. Counsel’s arguments gloss over
the seriousness of Debtors’ own yet unexplained non-disclosure of their prior Chapter 7 bankruptcy case
3
10-31770-maw Doc 37 FILED 09/30/11 ENTERED 09/30/11 16:11:35 Page 3 of 4

on their petition. The impact of the improper case filing and the delay on creditors, including one that had
a pending lawsuit, in dragging out “the inevitable” closer toward a presumed re-filing in 2011 remains
similarly unaddressed. Debtors clearly benefitted from the automatic stay for an extended period of time
when they should not have been here in a case commenced with a material omission on their petition.1
The court will enter a separate order denying the Motion in accordance with this memorandum of
decision.
1In evaluating the extent of the “with prejudice” dismissal, the court carefully and intentionally
limited the scope of the discharge limitation 	to future Chapter 7 discharges of existing debt, having
considered whether 	discharge under Chapter 13 should 	also have been prohibited. Understanding the
seriousness 	of a dismissal with prejudice, the court’s unexpressed reasoning was 	that the impact of
Debtors’ actions on creditors could be ameliorated through a Chapter 13 repayment plan, the feasibility
of which, however, is unknown and was not a factor in the court’s original decision.
4
10-31770-maw Doc 37 FILED 09/30/11 ENTERED 09/30/11 16:11:35 Page 4 of 4