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Debtor May Not Reopen Adversary Proceeding to Reconsider Agreement to Settle - In re Burrage

November 21, 2011

Our Claremont consumer bankruptcy lawyers tell our clients to be as sure as they can be before accepting a legal settlement, because it's difficult to change your mind after the fact. In the absence of a special circumstance, such as a finding that one party had no authority to make the agreement, courts may hold parties to their agreements even if they later reconsider. This was the case in In re Burrage, a recent decision of the Bankruptcy Appellate Panel of the Sixth U.S. Circuit Court of Appeals. Linda Burrage of Ohio filed an adversary proceeding in her bankruptcy against Bank One, a creditor. The parties agreed orally to settle two months later, but Burrage, who was not represented by an attorney, changed her mind the next day. After the court entered the settlement, she moved unsuccessfully to reopen her adversary proceeding. The BAP agreed with the bankruptcy court that there was no evidence showing a good reason to reopen it.

Burrage and Bank One settled on Oct. 4, 2010 and Bank One notified the court, which canceled the trial in her adversary proceeding. On Oct. 5, Burrage called the court to say she changed her mind and preferred to go to trial. After the parties failed to submit a written settlement agreement, the court held a hearing and determined that the settlement was valid and enforceable. Burrage did not appeal the resulting order, but instead moved to reopen the proceeding, saying there was new evidence. She submitted a phone bill showing an Oct. 4 phone call from Bank One that lasted 54 seconds. She said this was too little time for Bank One to leave a voice mail agreeing to her settlement terms. Her other new evidence was an affidavit from a friend, Mrs. Brown, who accompanied Burrage to a meeting with Bank One's attorney and testified that she had witnessed an argument between them about phone calls to Burrage. The court ultimately found that this was not new evidence, nor was it persuasive, and denied the motion with reference only to the Oct. 4 phone call.

Burrage appealed, again representing herself. Her brief focused on the merits of reopening the adversary proceeding, again focusing on the purportedly new evidence. Under federal rules, the court said, Burrage must show that the new evidence is controlling and would have led to a different outcome in the original judgment, and that she exercised due diligence in obtaining it. Furthermore, new evidence must have been unavailable before. Unfortunately for Burrage, the BAP found that the phone records were not new evidence because they were available before the evidentiary hearing. Furthermore, the court found, the bankruptcy court's failure to consider a January phone call was not important because courts need not address every contention made by parties. The BAP's opinion did not address the affidavit by Mrs. Brown. Nonetheless, it affirmed the bankruptcy court's order declining to reopen the adversary proceeding.

As Santa Ana individual bankruptcy attorneys, we would be interested to know what Burrage was hoping to show the court when she brought up these pieces of purportedly new evidence. It's notoriously difficult for people to represent themselves in court, for reasons related to both legal expertise and emotional distance. It's possible that she could have had a strong case, but didn't know how to best articulate it. It's also possible that the court lost patience with Burrage's inexperience. This doesn't mean she had no case, however. Sometimes, professional attorneys take advantage of the inexperience of pro se plaintiffs and extract an agreement the plaintiffs don't understand until they've already agreed to it. This is why we strongly recommend that people seeking a bankruptcy at least speak to an experienced Los Angeles County personal bankruptcy lawyer first.

From a main office in Anaheim, Howard Law, P.C., represents clients across California who are considering bankruptcy as a way to put debts behind them and make a fresh start. For a consultation or to learn more, send us an email or call 1-800-872-5925.

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