Opinion
Nos. 1:03-CV-574 (Lead), 1:03-CV-665 (Member).
March 24, 2004
BANK SHEER SEYMOUR, DANIEL A. SEYMOUR, ESQ., Attorneys for Plaintiffs, White Plains, New York.
GOLDBERG, SEGALLA LAW FIRM, THOMAS F. SEGALLA, ESQ., THERESA J. PULEO, ESQ., WILLIAM J. GREAGAN, ESQ., Attorneys for Defendants, Albany, NY.
FRIDAY ELDREDGE CLARK, WILLIAM M. GRIFFIN, ESQ., Attorneys for Defendants, Little Rock, AR.
Introduction
On April 22, 2000, plaintiff William Cuccia, Jr., son of plaintiff William Cuccia, allegedly sustained "serious and permanent personal injuries" when a paintball gun unexpectedly discharged. Affidavit of William J. Greagan (Oct. 14, 2003), exh. A thereto (Complaint) at ¶ 11. Purportedly that paintball gun was distributed and/or sold by defendant Brass Eagle, Inc. to defendant Kmart Corporation. Id. at ¶ 6. Kmart, in turn, allegedly distributed and sold the paintball gun to plaintiffs for their use. Id. at ¶ 7. Currently before the court is a motion by Kmart for summary judgment pursuant to Fed.R.Civ.P. 56.
William Cuccia, William Cuccia, Jr.'s father, is bringing this action in his capacity as "parent and natural guardian of William Cuccia, Jr. and in his individual capacity.
Initially plaintiffs commenced separate actions against Brass Eagle and Kmart, but those actions have been consolidated.See Greagan Aff., exh. D thereto (Stipulation to Consolidate Actions). The only motion pending at this time, however, is by Kmart.
Background
Nearly three years after this paintball gun incident, on approximately April 17, 2003, plaintiffs filed a complaint in New York State Supreme Court asserting negligence, strict liability, and breach of warranty causes of action, as well as a derivative claim on behalf of the plaintiff father. Greagan Aff., exh. A thereto (Complaint ("Co.")). The present action was removed to this federal district court on May 28, 2003 on the basis of diversity jurisdiction See id., exh. B thereto at ¶¶ 3-5. Plaintiffs are not in any way challenging removal.
Between the time of the son's injury and the commencement of this action, Kmart filed for voluntary bankruptcy pursuant to 11 U.S.C. § 101 et seq. As part of that proceeding, on March 26, 2002, the Bankruptcy Court of the Northern District of Illinois, Eastern Division, issued an order "establishing bar dates for filing proofs of claim and approving form and manner of notice thereof[.]" Greagan Aff., exh. E ("Bar Date Order" or "the Order") thereto at 1. Basically that Order required that all those "wishing to assert claims . . . against a Debtor [ e.g. Kmart]" must "file a separate, completed, and executed proof of claim form . . . on account of any Claims such Creditor holds or wishes to alert against a Debtor so that the Proof of Claim is actually received on or before 4:00 p.m., [EST], on July 31, 2002[.]" Id. at 3 (emphasis added).
In addition to setting a "General Bar Date" ( i.e. July 31, 2002) for proofs of claims, that Order explicitly "directed" Kmart to "give notice of the Bar Date Notice by publication in The New York Times (national edition), The Wall Street Journal (national, European and Asian editions) and USA Today (worldwide)." Id. at 7. That Order further provided that Kmart was "authorized ( but not required) to publish notice of the Bar Date at such times and in such trade or other local publications of general circulation as [Kmart] shall determine."Id. (emphasis added). Kmart complied with the Bankruptcy Court's direction by providing notice of the General Bar Date through publication in the three newspapers just listed. See id., exh. F thereto (publication affidavit); and exh. G thereto (Confirmation Plan) at 4, ¶ D.
"A bar [date] order in a chapter 11 case serves the important purpose of enabling the parties in interest to ascertain with reasonable promptness the identity of those making claims against the estate and the general amount of the claims, a necessary step in achieving the goal of successful reorganization." In re XO Communications, Inc., 301 B.R. 782 791 (Bankr. S.D.N.Y. 2003) (internal quotation marks and citation omitted).
Roughly one year after issuance of the Bar Date Order, by order dated April 23, 2003, the Bankruptcy Court confirmed Kmart's reorganization plan. See id., exh. G thereto. Among other things that Confirmation Plan explicitly stated:
[T]he debtors, and all Persons who have held, hold or may hold Claims or Interests . . . shall be precluded and permanently enjoined on and after the Effective Date from: (a) commencing or continuing in any manner any Claim, action or other proceeding of any kind with respect to any Claim, Interest or any other right of Claim against the Reorganized Debtors, which they possessed or may possess prior to the Effective Date[.]Id. at 33-34, ¶ 12 (emphasis added). This language is substantially similar to section 524(a) of the Bankruptcy Code, entitled "Effect of Discharge."
Kmart is arguing that plaintiffs' claims against it are barred by Kmart's discharge in bankruptcy. More specifically, Kmart contends that plaintiffs' claims "arose" on April 22, 2000, the date when the son allegedly sustained injuries due to the accidental discharge of a paintball gun. See Memorandum of Law in Support of Defendant's Motion for Summary Judgment ("Kmart Memo.") at 2. Despite that, Kmart asserts that it did not receive notice of those claims until May, 2003 — after both the Bar Date Order and the Confirmation Plan.
Plaintiffs respond that the notice of its bankruptcy provided by Kmart was insufficient as matter of law, and hence this action is not barred by Kmart's bankruptcy. Plaintiffs further respond that because the plaintiff son was 13 years old at the time of the incident, he was an infant and his cause of action against Kmart will not accrue until June 24, 2004, when he turns 18 years old. On that basis, plaintiffs conclude that "Kmart's bankruptcy bar date is not effective in precluding [the son's] cause of action for personal injury[,]" and thus the court should deny Kmart's summary judgment. Memorandum of Law in Opposition to Kmart Corporation's Motion for Summary Judgment ("Pl. Memo.") at 5.
Discussion
I. Summary Judgment StandardThere is no need to elaborate upon the "well-settled" principles which govern summary judgment motions, and presumably the parties are familiar with same. See Elliott v. Club Med Sales, Inc., No. 99 Civ. 1202, 2004 WL 541843 at *3 (March 19, 2004). Simply put, "[s]ummary [j]udgment may be granted only when there is no genuine issue of material fact remaining for trial, and the moving party is entitled to judgment as a matter of law."Id. (citing, inter alia, Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)).
Before discussing the merits, the court is compelled to comment upon Kmart's assertion that, if for no other reason, it is entitled to summary judgment because the "facts" upon which plaintiffs are relying to oppose this motion are not based upon personal knowledge. Instead those purported facts are found in the affidavit of plaintiffs' attorney, and there is no indication that he has personal knowledge of same.
Fed.R.Civ.P. 56(e) requires, among other things, that "[s]upporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." Fed.R.Civ.P. 56(e) (emphasis added). "[A] court may strike portions of an affidavit that are not based upon the affiant's personal knowledge," but Kmart is not so moving. See Gwynn v. Clubine, Nos. 02-CV-073A, 02-CV-557A, 2004 WL 214288 (W.D.N.Y. Jan. 26, 2004) (citation omitted). Regardless, as will be seen, even if the court takes into account the affidavit of plaintiffs' attorney, the "facts" averred therein do not form a sufficient basis upon which to oppose Kmart's motion. II. Bankruptcy Discharge
Before addressing the parties' notice and statute of limitations arguments, it is necessary to address an issue which is critical to the resolution of this motion, but which the parties completely disregarded. As set forth earlier, the Bar Date Order expressly provides that those "hold[ing] or wish[ing] to assert . . . any Claims" against Kmart were obligated to make sure that Kmart received proof of such claim by July 31, 2002 at the latest. Greagan Aff., exh E thereto at 3. It is undisputed that plaintiffs did not do that. The issue thus becomes whether the Cuccia plaintiffs had a "claim" for which they were required to submit proof under that Order. Without a "claim" Kmart cannot argue that this action should be discharged in bankruptcy, and that would end the court's inquiry. On the other hand, if plaintiffs did have a "claim," that would alter the court's analysis.
A. Claim
"[T]o determine when a claim arises for bankruptcy purposes, reference is to be made to federal bankruptcy law rather than to state law." In re Jason Pharmaceuticals, Inc., 224 B.R. 315, 319 (Bankr. D. Md. 1998) (internal quotation marks and citations omitted). Under Chapter 11 of the Bankruptcy Code ("the Code"), "confirmation of a plan 'discharges the debtor from any debt that arose before the date of such confirmation[.]'" In re Texaco Inc., 182 B.R. 937, 951 (Bankr. S.D.N.Y. 1995) (quoting 11 U.S.C. § 1141 (d)(1)(A)) (emphasis added by Texaco court);see also In re Union Hospital Association of the Bronx, 226 B.R. 134, 138 (Bankr. S.D.N.Y. 1998) (citing 11 U.S.C. § 1141(d)(1)) ("Confirmation of a plan of reorganization, so long as it does not provide for the liquidation of the debtor, discharges the reorganized debtor from any preconfirmation debt whether or not a proof of claim is filed, the claim is allowed or the holder of the claim has accepted the plan.") Section 101(12) of the Code defines "debt" as "liability on a claim." 11 U.S.C. § 101(12) (West 1993). Here, the Bar Date Order specifies that "claims" as used therein should be accorded the same meaning as that found in § 105(5) of the Code. Greagan Aff., exh. E thereto at 2-3, ¶ 1.
Section 105(5) of the Code states that a "'claim' means — . . . right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured[.]" 11 U.S.C. § 105(5)(A) (West 1993). "Numerous decisions in many jurisdictions have expounded at length upon the extraordinary breadth with which Congress intended to invest the term 'claim' by means of this definition." Texaco, 182 B.R. at 950 (citing cases). "The leading decision in this Circuit with respect [to the definition of "claim"] is In re Chateaugay Corp., 944 F.2d 997, 1003 (2d Cir. 1991)[.]" Id. at 951. There, the Second Circuit said:
Congress unquestionably expected this definition [of claim] to have wide scope. 'By this broadest possible definition . . . the bill contemplates that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case.'Id. (quoting H.R. Rep. No. 595, 95th Cong., 2d Sess 309 (1978), reprinted in 1978 U.S. Code Cong. Admin. News 5787, 5963, 6266) (other citations omitted). As should be abundantly clear by now, "[a]n essential element of the Code's scheme for a broad discharge is its expansive definition of 'claim.'" In re Kewanee Boiler Corporation, 198 B.R. 519, 526 (Bankr. N.D. Ill. 1996) (citing In re Johns-Manville, 57 B.R. 680, 686-87 (Bankr.S.D.N.Y. 1986)). In fact, so expansive is the definition of "claim" that "even though some of the elements necessary to constitute a cause of action have yet to occur, a 'claim' may exist under federal bankruptcy law provided there is a reasonable likelihood that there will occur within a reasonable time in the future those elements necessary to constitute a cause of action." In re Amfesco Industries, Inc., 81 B.R. 777, 781 (Bankr. E.D.N.Y. 1988).
Turning to the present case, the court readily finds that the Cuccia plaintiffs had a "claim." The record shows that the plaintiff son was injured on April 22, 2000, prior to both the General Bar Date and the Confirmation Order. To be sure, plaintiffs did not have a claim "until the accident." See Kewanee Boiler, 198 B.R. at 528 (citation omitted). They did, however, have a claim when the plaintiff son sustained injuries allegedly due to the unexpected discharge of a paintball gun sold to plaintiffs by Kmart. At that time, plaintiffs had a tort cause of action which "constitute[s] [a] claim, and thus [is] payable out of the estate, and constitute[s] [a] dischargeable debt[.]" 2 Lawrence P. King et al., Collier on Bankruptcy ¶ 101.05[6], at 101-36.3 (15th ed. rev. 1998). Plaintiffs had a tort cause of action on April 22, 2002 regardless of "whether [they] . . . satisfied all the technical elements for a cause of action[.]"See Jason Pharmaceuticals, 224 B.R. at 319 (quotation marks and citations omitted).
This broad reading of a "claim" is in keeping with the fact that "[u]nder the Code . . . [a] tort claim may be unliquidated or disputed[,]" but that "does not mean that it is not a claim." Collier ¶ 101.05[1], at 101-26-27. "All that is necessary is that a 'right to payment' may arise." Jason Pharmaceuticals, Inc., 224 B.R. at 319 (internal quotations marks and citations omitted) (emphasis added). In fact, courts have recognized that "persons whose injuries manifest themselves before confirmation have 'claims' under the § 101(5) definition, even if liability or damages are still unresolved." Kewanne Boiler, 198 B.R. at 528 (citation omitted) (emphasis added); see also In re Johns-Manville Corp., 57 B.R. 680, 687-88 (Bankr. S.D.N.Y. 1986), aff'd sub nom. Grady v. A.H. Robins, Co., 839 F.2d 198 (4th Cir. (1988)) ("At this juncture [certain plaintiffs'] claims are contingent and unliquidated because there has been no determination yet in the state court actions on their possible liability."). Thus, because the injuries which the son sustained on April 22, 2000 obviously manifested themselves before the July 31, 2002 General Bar Date and before the April 23, 2002 Confirmation Plan, plaintiffs had a claim on the date of injury. That is so regardless of the fact that there has yet to be a determination of causation or damages.
Just as claims can exist even in the absence of a finding of causation or damages, so, too, can they exist even if the plaintiffs were unaware that a claim existed at the time of injury. "As the Second Circuit explained in Chateaugay, unmatured tort, contract and statutory claims are all dischargeable in bankruptcy even if the creditor is unaware of the claim." Texaco, 182 B.R. at 953-54 (internal quotation marks and citation omitted) (emphasis added); see also In re Union Hospital Association of the Bronx, 226 B.R. 134, 138 (Bankr. S.D.N.Y. 1998) (citations omitted) ("Even the claims of tort creditors unaware of the bankruptcy are ordinarily discharged.) Consequently, plaintiffs' assertions that they were unaware of Kmart's bankruptcy are irrelevant to a finding that they had a claim.
In sum, because the acts giving rise to the liability here (the son's injuries allegedly caused by the unexpected discharge of a paintball gun) occurred before both the General Bar Date and the Confirmation Plan, plaintiffs' claims are barred by Kmart's discharge in bankruptcy. See Texaco, 182 B.R. at 951.
B. Notice
The court's analysis cannot end here though because "for a particular debt to be discharged, one predicate must be met — the creditor must have been given notice of the bankruptcy and of the relevant bar date sufficient to satisfy due process." Union Hospital, 226 B.R. at 138 (citations omitted); see also In re U.S.H. Corporation of New York, 223 B.R. 654, 658 (Bankr. S.D.N.Y. 1998) (same). In that way, "creditors receive notice of the debtor's bankruptcy case and applicable bar date so that creditors have an opportunity to make any claims they may have against the debtor estate." XO Communications, 301 B.R. at 792 (citing cases).
In the present case, plaintiffs contend that the notice of Kmart's bankruptcy was "insufficient as a matter of law" in that Kmart did not provide "adequate notice . . . to the infant." Pl. Memo. at 3 and 4 (emphasis added). Implicit in this assertion is that because Kmart's notice supposedly was inadequate, plaintiffs were excused from filing a proof of claim. See U.S.H. Corporation, 223 B.R. at 658 ("Discharge under the Bankruptcy Code, . . ., presumes that all creditors bound by the plan have been given notice sufficient to satisfy due process.")
Plaintiffs' attorney, but not the plaintiff father himself, avers that the father did not "receive notice of the bar date prior to March 28, 2002." Affidavit of Daniel A. Seymour (Dec. 2, 2003) at ¶ 9. As an additional means of showing inadequate notice, plaintiffs' attorney points to the lack of evidence that the son "routinely purchased or read" the newspapers in which Kmart's notice of bar date appeared. Id. Instead, plaintiffs maintain that they "only learned of the bankruptcy proceeding" after the filing of this action, "when Kmart asserted that the action was time barred." Pl. Memo. at 3.
The record is void of any explanation as to why or how the plaintiff father received notice on this date.
Plaintiffs alternatively refer to the father and son. There is no need to distinguish between the two, however, given the court's conclusion above.
Kmart retorts that because it did not have prior knowledge of plaintiffs' claims or potential claims, "the only reasonable method of giving notice was through publication." Reply Memorandum of Law in Support of Defendant's Motion for Summary Judgment at 2. Further, Kmart replies, because the notice provided fully comported with the Bar Date Order, it does not violate plaintiffs' due process rights. Simply because notice complies with the Bar Date Order does not mean a fortiori that it also satisfies due process concerns under the United States Constitution, however.
The Bar Date Order concluded by stating:
Provision of the Bar Dates to the Persons and Entities set forth in the Motion and this Order, in the manner set forth above and as described more particularly in the Motion and this Order, shall constitute adequate and sufficient notice of each of the Bar Dates and shall be deemed to satisfy the requirements of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and the Local Rules of this Court.
Greagan Aff., exh. E thereto at 7-8, ¶ 11 (emphasis added).
"'An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.'" Texaco, 254 B.R. at 561 (quoting Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 314 (1950)). "Due process is met if notice is 'reasonably calculated to reach all interested parties, reasonably conveys all of the required information, and permits a reasonable amount of time for response.'" U.S.H., 223 B.R. at 658 (quoting Mullane, 339 at 314) (other citation omitted). In the bankruptcy context, "[w]hen a creditor is unknown to the debtor, publication notice of the claims bar date may satisfy the requirements of due process."Id. (citing Mullane, 339 U.S. at 317-18). In other words, "[i]f a debtor who files for chapter 11 bankruptcy protection does not give 'reasonable notice' to a creditor of the bankruptcy proceeding and the applicable bar date(s), the creditor's proof of claim cannot be constitutionally discharged." XO Communications, 301 B.R. at 792 (citation omitted).
Applying the Mullane standard to the present case supports a finding that Kmart's notice satisfied the Due Process clause of the Fifth Amendment. It is undisputed that plaintiffs were "unknown" creditors in that Kmart was not aware of them or their claims until the commencement of this action. Where a potential creditor is unknown, "constructive notice is generally sufficient." Id. (citation omitted). "Constructive notice can be satisfied through publication notice since 'in the case of persons missing or unknown, employment of an indirect and even a probably futile means of notification is all that the situation permits and creates no constitutional bar to a final decree foreclosing their rights.'" Id. at 792-93 (quoting Mullane, 339 U.S. at 317) (other citations omitted).
Here, Kmart did provide constructive notice. In accordance with the Bar Date Order, as mentioned earlier, Kmart published notice in three national newspapers. That publication was a reasonable means for alerting potential creditors, such as plaintiffs, of the need to file a proof of claim. See U.S.H. Corporation, 223 B.R. at 658-59 (citing cases). In this respect, it does not matter that plaintiffs do not read The New York Times, The Wall Street Journal, or USA Today. "It is impracticable . . ., to expect a debtor to publish notice in every newspaper a possible unknown creditor may read." In re Best Products, 140 B.R. 353, 358 (Bankr. S.D.N.Y. 1992). "[I]impracticable and extended searches are not required in the name of due process." Mullane, 339 U.S. at 317-18. As the foregoing demonstrates, through publication in three national newspapers, Kmart provided constructive notice to plaintiffs, unknown creditors. Under the circumstances, nothing more was required of it. Furthermore, even if, as plaintiffs' attorney avers, plaintiffs did not actually receive notice, that is irrelevant because the test is one of reasonableness in providing notice — not actual receipt. See Best Products, 140 B.R. at 357-58 (citing Weigner v. New York, 852 F.2d 646, 649 (2d Cir. 1988)). In light of the foregoing, the court finds that Kmart's notice was constitutionally sound. Consequently, plaintiffs are not entitled to rely upon a claimed violation of their due process rights to excuse their failure to file a proof of claim.
"The term 'creditor' in bankruptcy law is sufficiently broad to include a potential creditor." U.S.H. Corporation, 223 B.R. at 658 (citations omitted).
C. Statutory Disability
Section 208 of New York's C.P.L.R. defines a person as being under a "disability" based upon, "infancy." N.Y.C.P.L.R. § 208 (McKinney 2003). An infant is "a person who has not attained the age of eighteen years." N.Y.C.P.L.R. § 105(j) (McKinney 2003). Thus, "New York law tolls applicable statute of limitations when the plaintiff is incapacitated by infancy." Thomas v. New York City, 814 F. Supp. 1139, 1153 (E.D.N.Y. 1993) (citation omitted). Relying upon the fact that the son was 13 years old at the time of the incident, plaintiffs' maintain that his "cause of action does not accrue until he reaches the age of eighteen, when the disability of infancy ceases[,]" which will be June 24, 2004. Pl. Memo. at 5 (citation omitted). Assuming that accrual date, plaintiffs reason that their causes of action herein were not discharged by Kmart's bankruptcy because the son's causes of action did not accrue prior to July 31, 2002.
Kmart counters that plaintiffs are improperly relying upon the son's infancy to show that his cause of action will not accrue until June 24, 2004 when he turns 18. See N.Y.C.P.L.R. § 105(j). According to Kmart, the son's cause of action accrued on April 22, 2000 — the date of injury. Kmart points out that section 208 of the C.P.L.R., upon which plaintiffs are relying to establish a later accrual date, is actually a tolling statute which allows for tolling of a statute of limitations due to infancy, among other things.
This accrual argument is a red herring. As should be patently obvious by now, the issue is not the accrual date of plaintiffs' causes of action. Rather, the issue is whether plaintiffs had a claim under the Bankruptcy Code. The court found that they did and that Kmart acted reasonably by providing notice to potential creditors in three national newspapers. Under the particular facts of this case, it is simply irrelevant when plaintiffs' cause of action accrued or will accrue.
As an aside, the court observes that plaintiffs' assertion that the son's cause of action will not accrue until he turns 18 is an inaccurate statement of the law. Plaintiffs are confusing two distinct legal concepts — accrual and tolling.
Under New York law "[a] claim does not accrue . . . until the continuing wrong has ceased." Thomas v. New York City, 814 F. Supp. 1139, 1153 (E.D.N.Y. 1993) (citations omitted). Applying that reasoning to a negligence claim, it "accrues on the date of injury[.]" Coleman Co. Securities v. Giaquinto Family Trust, 236 F. Supp.2d 288, 299 (S.D.N.Y. 2002) (citation omitted). A statute of limitations may be tolled under certain circumstances, however. For instance, "New York tolls the statute of limitations on an infant's claim during infancy." Kulpa v. Glass, 903 F. Supp. 321, 323 (N.D.N.Y. 1995) (citing N.Y.C.P.L.R. § 208)). In other words the running of the statute of limitations is suspended during, in this case, the period of the plaintiff son's statutory "disability" of "infancy." That tolling does not effect the accrual date, however. See also Britt v. Legal Aid Society, 95 N.Y.2d 443, 446 (2000) (citation omitted) ("Statutes of Limitation begin to run when a cause of action accrues[.]") The son's cause of action accrued on the date of injury, April 22, 2000. Even though his cause of action accrued then, as an infant the plaintiff son would be entitled to rely upon § 208's tolling provision. In any event, for the reasons set forth herein, it does not matter that as an infant the plaintiff son could rely upon statutory tolling.
To conclude, the court hereby grants the motion for summary judgment pursuant to Fed.R.Civ.P. 56 by defendant Kmart Corporation, Inc., and directs the Clerk of the Court to dismiss the complaint in its entirety as against that defendant only.
IT IS SO ORDERED.