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Pro Se Debtor Can Show Misconduct Evidence

In debtor’s dispute with a landlord who evicted her when she defaulted on her lease and filed for bankruptcy after paying only one month’s rent, the bankruptcy court did not abuse its discretion in deferring disposition of debtor’s motion claiming misconduct in use of her security deposit for rent, violation of the automatic stay and failure to return her personal property, in order to allow the pro se debtor to present evidence; the Richmond U.S. District Court affirms this order and the bankruptcy court’s denial of the landlord’s motion for reconsideration.

The court has discretion to either grant or deny the landlord leave to appeal the order. The order arguably does involve a controlling question of law – namely, whether a court abuses its discretion in holding that a pro se party’s inexperience with evidentiary requirements caused “manifest injustice” sufficient to warrant reconsideration pursuant to Fed. R. Civ. P. 59(e). Second, there may be a ground for a difference of opinion on the issue presented: courts have resolved analogous situations differently. Third, immediate appeal may materially advance the termination of the litigation because a ruling in the landlord’s favor will effectively deny debtor the opportunity to present evidence of property damage, limiting the misconduct motion to a single issue; on the other hand, regardless of the outcome of this appeal, the bankruptcy court must still resolve the misconduct motion. For these reasons, either a grant or denial of leave to appeal is supportable; however, to prevent the inefficiency of relitigating this issue after a possible judgment in debtor’s favor, the court elects to grant the landlord leave to appeal the order.

Reaching the merits of the appeal, the court finds the bankruptcy court did not abuse its discretion in denying the motion to reconsider. At bottom, the landlord argues that the bankruptcy court abused its discretion in denying the motion to reconsider because the earlier order constituted clear error by the bankruptcy court insofar as it granted debtor a second rehearing on legally insufficient grounds. The motion for reconsideration merely asked the bankruptcy court to rethink what it had already thought through. Because the motion provided no grounds for denial that the court had not explicitly considered, the bankruptcy court acted within its authority in denying the motion for reconsideration.

The bankruptcy court’s earlier order granted reconsideration of the damages portion of the misconduct motion pursuant to Rule 59(e) in order to prevent the manifest injustice that would occur if debtor were precluded from presenting competent evidence. At bottom, the issue presented is whether a pro se party’s inexperience with evidentiary requirements can be sufficient to create manifest injustice.

The 4th Circuit has not squarely addressed this issue but its precedents appear to be in line with the notion that a showing of manifest injustice requires that there exist a fundamental flaw in the court’s decision that without correction would lead to a result that is both inequitable and not in line with applicable policy. The bankruptcy court found the landlord admitted to possessing debtor’s property on June 19, 2013, and that debtor presented an affidavit of $50,000 in losses on July 23, 2014. While debtor indisputably failed to present competent evidence of her damages, she sought reconsideration only of the bankruptcy court’s oral statement that she had not proved damages. This statement was not accompanied by any ruling on the misconduct motion, and was made without any finding as to the landlord’s liability. Because there is legal support for the bankruptcy court’s earlier order, it was not guided by erroneous legal principles and did not abuse its discretion. The landlord’s arguments to the contrary are unpersuasive.

The court will affirm the bankruptcy court orders and dismiss the appeal.

Mack v. Yankah (Spencer) No. 3:13cv804, July 25, 2014; USDC at Richmond, Va. VLW 014-3-392, 12 pp.

VLW 014-3-392

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