Opinion
Civil Action. No. 04-CV-02506.
March 17, 2006
ORDER
NOW, this 17th day of March, 2006, upon consideration of Appellee's Motion for Reconsideration of March 30, 2005 Order, which motion was filed April 8, 2005; upon consideration of Appellants' Reply to Appellee's Motion for Reconsideration, which reply was filed April 19, 2005,
IT IS ORDERED that the motion for reconsideration is denied.
The United States Court of Appeals for the Third Circuit has stated that "[t]he purpose of a motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence." Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985). Courts within the Eastern District of Pennsylvania have interpreted this standard as meaning that a motion for reconsideration is properly granted only where "the moving party establishes one of three grounds: (1) there is newly available evidence; (2) an intervening change in the controlling law; or (3) there is a need to correct a clear error of law or prevent manifest injustice." Brunson Communications, Inc. v. Arbitron, Inc., 246 F.Supp.2d 446 (E.D.Pa. 2003).
In this case, appellee United States moves for reconsideration of our Order dated March 30, 2005. In that Order, we granted the appeal by appellants Randall Ernest Otto and Nancy Kusmider Otto from the decision of Bruce Fox, United States Bankruptcy Judge for the Eastern District of Pennsylvania, denying their motion to reopen their bankruptcy case. See In re Otto, 311 B.R. 43 (Bankr. E.D.Pa. 2004). Specifically, we reasoned as folows:
As compelling as we find Judge Fox's Opinion, we also agree with his statement that in the absence of an additional forum available to hear the Ottos' claims, it would be inappropriate for the bankruptcy court to not open the case for purposes of reviewing the 7003(b) claim. In setting forth the facts of the case, the bankruptcy court indicated that "the IRS commenced a collection action against the Ottos on October 17, 2002." In re Otto, 311 BR. at 47. However, the IRS collection action was actually directed against Revered Otto alone.
Although Reverend Otto has the various due process appellate procedures available to him under 26 U.S.C. § 6330, Mrs. Otto does not. The Ottos' motion thus presents a situation where not all of the claims raised in it can be addressed in another forum. As correctly noted by the bankruptcy court, under circumstances such as this, it is an abuse of discretion for the bankruptcy court to fail to open the case so as to consider the claims.
Accordingly, we vacated the decision of the bankruptcy court and remanded the case with directions to reopen the bankruptcy case for the limited purpose of evaluating the Ottos' dischargeability claims under Federal Rule of Bankruptcy Procedure 4007(b).
In support of the instant motion, appellee asserts that we were incorrect in concluding that Mrs. Otto lacked an alternative forum to the bankruptcy court. Appellee therefore seems to be seeking reconsideration under the third ground for reconsideration, clear error of law. Brunson, 246 F.Supp.2d at 446. Specifically, appellee contends that Mrs. Otto has two options. First, in the event that the Internal Revenue Service ("IRS") seeks to collect taxes from her, she may raise the dischargeability of those taxes at her Collection Due Process hearing and in a Tax Court Petition. Alternatively, irrespective of whether the IRS ever attempts to collect the taxes allegedly owed, Mrs. Otto may pay the taxes due and then bring a tax refund suit in a federal district court. Appellee's Motion for Reconsideration of March 30, 2005 Order at page 2.
In response, appellants argue, first, that the relief provided by 26 U.S.C. § 6330 is not currently available to Mrs. Otto because the IRS has not yet sought to collect the taxes owed. Accordingly, Mrs. Otto is not presently entitled to either a hearing or an appeal in the Tax Court. Second, appellants argue that Mrs. Otto is unable to pay the sum due in order to obtain the right to bring a tax refund suit in which she could raise the issue of the dischargeability of the tax liability. As one might logically infer from the fact that Mrs. Otto has recently filed for bankruptcy, she may lack the funds to pursue this course of action.
We do not believe that our finding that Mrs. Otto lacked an alternative forum was clearly erroroneous. Mrs. Otto is not currently entitled to argue the dischargeability of her tax liability in the fora provided by § 6330 because the IRS has not yet sought to collect taxes from her. With respect to the possibility of bringing a refund action, we do not dispute that a refund suit is an available forum as a matter of law. As a practical matter, however, we find that this forum is unlikely to be available to an individual who has recently filed for no-asset bankruptcy.
The United States Bankruptcy Court for the Northern District of Ohio, Eastern Division, persuasively argues that "[t]he option of paying an enormous sum to obtain a day in court is no different from denial of a forum for those without the resources to pay."In re Miller, 300 B.R. 422, 434 (Bankr. N.D.Ohio 2003). Although we are not aware of the amount due to the IRS, we find persuasive the suggestion that an individual who has recently filed for bankruptcy may well lack the resources to pay taxes that are due prior to litigating the dischargeability of the debt. Imposing such a financial hurdle on an individual who has recently concluded bankruptcy proceedings will, in many instances, be the practical equivalent of denying such an individual an alternative forum.
Accordingly, we deny appellee's motion for reconsideration.