Opinion
00-CV-0254E(Sr), BK-94-10866K 00-CV-0255E(Sr), BK-94-10866K 00-CV-0256E(Sr), BK-94-10866K
February 16, 2001
William F. Savino, Esq. and Brian D. Gwitt, Esq., c/o Damon Morey, Buffalo, NY, for D.A. Elia.
William H. Gardner, Esq. and Stephen L. Yonaty, Esq., c/o Hodgson, Russ, Andrews, Woods Goodyear, Buffalo, NY, Naples Naples Claims — Garry M. Graber, Esq., c/o Hodgson, Russ, Andrews, Woods Goodyear, Buffalo, N.Y. for NCIDA.
MEMORANDUM and ORDER
Presently before the undersigned are appeals precipitated by a February 10, 2000 Order of the Bankruptcy Court ("the Bankruptcy Order") which stated that Joseph J. Naples Associates, Inc.'s and Naples Claims Management, Inc.'s ("the Naples companies") claims are barred for failure to file timely proofs thereof, that D.A. Elia Construction Corp. ("debtor") would not be discharged and that the Niagara County Industrial Development Agency ("the NCIDA") is free to assert "rights of offset" in a related arbitration proceeding. Jurisdiction is premised on 28 U.S.C. § 158. For the reasons that follow, the Bankruptcy Order will be affirmed.
Findings of fact made by the Bankruptcy Court are reviewed by this Court pursuant to a clearly erroneous standard. Fed.R.Bankr.P. 8013. The Bankruptcy Court's conclusions of law are reviewed de novo. In re Arochem Corp., 176 F.3d 610, 620 (2d Cir. 1999). Where excusable neglect is claimed, an abuse of discretion standard shall also apply. See Canfield v. Van Atta Buick/GMC Truck, Inc., 127 F.3d 248 (2d Cir. 1997) (applying the abuse of discretion standard in a civil rights action where excusable neglect has been claimed).
The relevant facts are not in dispute and are briefly recited herein. Debtor filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code March 30, 1994. By Order and Notice for a hearing on the disclosure statement of the debtor dated June 6, 1995, the Bankruptcy Court advised those receiving such order — which recipients included the Naples companies and the NCIDA — that July 18, 1995 would be the last day for filing proof of claims ("the bar date"). According to the debtor's schedules as submitted to the Bankruptcy Court at that time, the claims of the Naples companies and of the NCIDA were listed as unliquidated and disputed, meaning that those creditors needed to file proof of claims before the bar date to participate in any bankruptcy distribution. 15 U.S.C. § 1111 (a). No such claims were filed before July 18, 1995 and none was filed prior to the Bankruptcy Court's confirmation of the debtor's Fourth Amended Plan of Reorganization June 3, 1996.
During the course of these bankruptcy proceedings, the debtor maintained an action against its former surety, United States Fidelity and Guaranty Company ("USFG"), that ultimately concluded late 1997 in a settlement between the parties valued at over $7 million for the debtor. Soon thereafter and specifically on February 2, 1998, the Naples companies filed their proof of claims. The NCIDA filed its proof of claim March 8, 1999.
The Naples companies and the NCIDA — to the extent the language and outcome of the Bankruptcy Order affect the NCIDA's particular proof of claim — contend that the Bankruptcy Court erred in disallowing the late-filed claims because it failed to properly consider the guidance set forth by the United States Supreme Court in Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380 (1993), which holds that, where "excusable neglect" is shown, a tardy proof of claim should not be barred, especially where the debtor will not be prejudiced by its allowance. The debtor argues that, because the Naples companies and the NCIDA were aware of the bar date and failed to file any such proof of claims prior to the passing thereof, all such tardy proof of claims must be disallowed. With regard to its denial of a discharge, the debtor claims that, because section 1141 of the Bankruptcy Code provides for the discharge of a debtor upon confirmation of a plan of reorganization and because the language in its disclosure statement did not preclude its recommencement of business operations, its plan and the confirmation order did not limit its ability to recommence business and the Bankruptcy Court erred in failing to recognize that the debtor had been granted a discharge upon confirmation of the plan in June 1996.
The Naples companies and the NCIDA argue that the debtor's settlement with USFG provided the debtor with more than enough funds to satisfy their claims and without detriment to any other creditor.
In Pioneer, what constitutes excusable neglect under Bankruptcy Rule 9006(b)(1), which "empowers a bankruptcy court to permit a late filing if the movant's failure to comply with an earlier deadline `was the result of excusable neglect is considered.'" Id. at 382 (quoting Fed.R.Bank.P. 9006(b)). In adopting a broad interpretation of the excusable neglect standard, the Supreme Court determined that Congress intended for such standard to include, not only faultless omissions, but also omissions caused by "inadvertence, mistake, or carelessness." Id. at 388. Consequently, the determination as to whether excusable neglect will apply "is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission." Id. at 395. Such circumstances include "the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith." Ibid.
As set forth in the Bankruptcy Order, the Court noted that, insofar as the Naples companies had timely notice of the bankruptcy proceedings and of the bar date, it was not neglect to ignore "a whole sequence and system designed to inform" them of that date and the consequences which may flow therefrom. Bankruptcy Order at 11. Specifically, the Bankruptcy Order indicates that, although the attorney for the Naples companies knew that the claims of his clients were listed as unliquidated and that his clients disputed and had been given — at the very least — constructive notice of the bar date, the Naples companies' counsel was neither aware of what the consequences were for failing to file proof of claims in this particular bankruptcy action nor did he promptly act to discern what these consequences might be. Bankruptcy Order at 11-13; see also Naples Companies Ex. 3 (affidavit of former counsel explaining the "reasons" for failing to file timely proof of claims). Such facts led the Bankruptcy Court to conclude that the excusable neglect standard had little application to "excusing" the lateness of the Naples companies' particular and tardily-filed proof of claims and barred the proof of such. The undersigned agrees.
As the Bankruptcy Court found, while the bar date may not have been consciously flouted, the facts of this case show that "the whole panoply of creditor-protection devices that led up to and followed the order [containing the bar date] and the omission were * * * ignored on a systematic basis." Bankruptcy Order at 13. In light of these facts, the Bankruptcy Court correctly determined that, because the Naples companies had failed to show the existence of "neglect," the excusable neglect standard was inapplicable. Such a finding is not unlike the situation wherein a court has denied a tardy filing based on its finding that a party deliberately chose, for whatever reason, to miss the deadline for filing a proof of claim. See In re The Celotex Corp., 232 B.R. 493 (M.D. Fl. 1999) (barring tardy proof of claims where creditor was aware of claims bar date but waited to file its proof of claims until it had "sufficient evidence" to justify filing such).
Turning to the issue of debtor's discharge, the undersigned first addresses debtor's allegation that such issue was not properly before the Bankruptcy Court. See Appellant-Debtor Reply Brief at 6 (stating that the "Bankruptcy Court offered its advisory opinion [on the issue of discharge] without the benefit of receiving evidence or law and/or `teed up' argument from the litigants"). However, it appears to the undersigned that such ruling was required inasmuch as both the Naples companies and the NCIDA argued, in support of the allowance of their late proof of claims, that debtor's bankruptcy plan envisioned liquidation, not a resumption of business activities. See Naples Companies Ex. 2; NCIDA Ex. 2. This issue was addressed by debtor in its objections to those late-filed proof of claims. See Naples Companies Ex. 5; NCIDA Ex. 3. Therefore, this objection to the Bankruptcy Order is without merit.
There is no dispute among the parties as to the pertinent law governing whether the debtor is not entitled to a discharge — viz., the confirmation of a plan does not discharge a debtor if "the plan provides for the liquidation of all or substantially all of the property of the estate," "the debtor does not engage in business after consummation of the plan" and "the debtor would be denied a discharge under section 727(a) of [the Bankruptcy Code] if the case were a case under chapter 7." 11 U.S.C. § 1141 (d)(3). Rather, debtor's appeal from the Bankruptcy Order is based on its contention that the bankruptcy plan, disclosure statement and confirmation order all envisioned reorganization and recommencement of business operations, not eventual liquidation, and that the Bankruptcy Court — upon examining the facts peculiar to this case — erred in determining otherwise. However and insofar as debtor objects to the Bankruptcy Order's characterization of the bankruptcy proceedings as one contemplating liquidation, such a finding may only be disturbed if the Bankruptcy Court's decision is clearly erroneous.
While it is undoubtedly true that there is nothing in the plan, disclosure statement or confirmation order which expressly bars debtor from recommencing business operations, such "omission" does not undermine the Bankruptcy Court's basic finding that debtor's bankruptcy plan was, in principal, a liquidation plan proceeding under Chapter 11 so that certain litigation could be "pressed, and not be compromised at liquidation values" under Chapter 7 to the benefit of debtor and its creditors. See NCIDA Tab 2 (transcript of proceedings held on August 27, 1998); see Bankruptcy Order at 6 (noting that the court "has consistently treated [debtor's plan] as a liquidation plan"). In this regard, a reasonable, but differing, interpretation of the record is not enough to overturn the Bankruptcy Court's determination. The undersigned must instead be left with the conviction that a mistake has been committed and such is not the case at hand. See In re Miner, 229 B.R. 561, 564 (B.A.P.2d Cir. 1999). Simply stated, the undersigned's review of the characterization by the Bankruptcy Court of this case does not reveal clear error and there are no grounds upon which to reverse this decision.
Accordingly, it is hereby ORDERED that the February 10, 2000 Order of the Bankruptcy Court is affirmed in its entirety.