Opinion
CASE NO. 99-42577, CHAPTER 7, ADVERSARY PROCEEDING NO. 00-4054.
August 17, 2001.
MEMORANDUM OPINION
On June 1, 2001, the court held a hearing on Plaintiffs' motion for reconsideration of the court's April 3, 2001 order denying Plaintiffs' motion to open default. At the conclusion of the hearing, the parties were given an opportunity to submit letter briefs. After considering the parties' briefs and the applicable statutory and case law, the court will deny Plaintiffs' motion for reconsideration.
Although Plaintiffs' motion was captioned as "Motion to Open Default," the court construed it as a motion to extend time to file an amended complaint.
FACTS
On March 13, 2000, Plaintiffs filed this Adversary Proceeding seeking to deny Defendant's discharge pursuant to subsections 727(a)(2)(A), 727(a)(3) and 727(a)(5) of the Bankruptcy Code ("Code"). The complaint further alleges that Defendant's indebtedness to Plaintiffs should be excepted from discharge pursuant to subsection 523(a)(2).
On March 29, 2000, Defendant filed a motion to dismiss the complaint for failure to state a claim upon which relief may be granted. Defendant asserted that Plaintiffs' § 727 allegations failed to state specific facts sufficient to support such claims. Therefore, unless Plaintiffs obtained leave from the court to amend the complaint, Defendant contended that these allegations should be dismissed. Defendant similarly moved to dismiss Plaintiffs' § 523 allegation, however, Defendant maintained that this allegation was so fatally vague that an amendment should not be allowed.
On May 12, 2000, the court held a hearing on Defendant's motion to dismiss. On May 16, 2000, the court entered an order denying Defendant's motion to dismiss Plaintiffs' allegations pursuant to subsections 727(a)(3) 727(a)(5). The court granted Defendant's motion as to Plaintiffs' allegations under subsections 727(a)(2)(A) and 523(a)(2) for failure to comply with Fed.R.Civ.P. 9(b). However, the court granted Plaintiffs fourteen days to amend those portions of the complaint so that they complied with Fed.R.Civ.P. 9(b) or they would remain dismissed. The court's order further allowed Defendant "20 days after service of an amended complaint or 20 days after the 14th day from the date of this order, [May 16, 2000] whichever comes first, to file a response to the complaint . . . ." (Doc. #8, pp. 2).
Fed.R.Civ.P. 9(b) provides in pertinent part that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity."
On June 1, 2000, Plaintiffs filed their amended complaint. On June 19, 2000, Defendant answered the complaint and asserted a counterclaim. In his answer, Defendant highlighted the fact that Plaintiffs' amended complaint was filed two days after the time allowed by the court. At the Pre-trial Conference held on July 21, 2000, Plaintiffs' counsel stated that he realized the amended complaint was late when he filed it. Accordingly, the court orally ruled that the allegations under subsections 727(a)(2)(A) and 523(a)(2) were dismissed because the amended complaint was not timely filed.
On August 3, 2000, Plaintiffs moved for reconsideration of the court's order entered on July 24, 2000 dismissing the claims stated in the amended complaint. On September 8, 2000, Defendant responded maintaining that the court did not enter an order on July 24, 2000 dismissing those claims. The only order entered on July 24, 2000 was a scheduling order setting the date for the final Pre-trial Conference and discovery deadline. On September 11, 2000, Plaintiffs withdrew their motion.
On January 16, 2001, Plaintiffs filed a motion to open default alleging that the late filing of their amendments to the complaint was excusable neglect. After some defects in providing notice of the motion were corrected, Defendant filed a response and brief in opposition to Plaintiffs' motion.
On April 3, 2001, the court held a hearing on Plaintiffs' motion. Because of the relief sought, the court construed Plaintiffs' motion to open default as a motion to extend time within which to file an amended complaint. The court held that excusable neglect was the applicable standard. At the hearing, Plaintiffs explained their delay as a clerical error based on counsel's failure to diary the deadline correctly. However, Plaintiffs gave no explanation for their failure to properly move for an extension to file an amended complaint after the deadline expired. The court noted that although Plaintiffs had earlier made an attempt to have their late filed amendments considered as part of their pleadings, that motion was withdrawn. Other than this attempt to cure their defect, the court further noted that Plaintiffs did nothing from June 1, 2000 to January 16, 2001. Accordingly, the court found no excusable neglect and therefore denied Plaintiffs' motion.
On April 13, 2001, Plaintiffs filed a motion for reconsideration of the court's April 3, 2001 order. On June 1, 2001, a hearing was held on Plaintiffs' motion. At the hearing, Plaintiffs submitted authority which they had recently discovered. However, because Defendant had no knowledge of this authority, Defendant requested time to submit a letter brief. The court granted Defendant's request and allowed Plaintiffs to respond.
DISCUSSION
The issue in this case is whether Plaintiffs' six month delay in properly moving for an extension to file an amended complaint constitutes excusable neglect.
Under Rule 9006(b)(1) of the Federal Rules of Bankruptcy Procedure, the United States Supreme Court has held whether a party's neglect may be excused is an equitable decision turning on "all relevant circumstances surrounding the party's omission." Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380, 395 (1993).
Rule 9006(b)(1) provides in pertinent part,
"(b) ENLARGEMENT.
(1) . . . when an act is required or allowed to be done at or within a specified period of time . . . by order of court, the court for cause shown may at any time in its discretion . . . (2) on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect." (emphasis added).
In Pioneer, the Supreme Court set forth four factors to consider in determining whether excusable neglect exists:
(1) the danger of prejudice to the debtor;
(2) the length of delay and its potential impact on judicial proceedings;
(3) the reason for the delay including whether it was in the reasonable control of the movant; and
(4) whether the movant acted in good faith.
Pioneer, 507 U.S. at 395. See also Advanced Estimating System Inc. v. Riney, 130 F.3d 996 (11th Cir. 1997) (holding that a mistake of law is not excusable neglect); California Dep't of Health Services v. Bicostal Corp., 242 B.R. 43 (M.D.Fla. 1998) (holding that filing a claim one year after the bar date had expired was not excusable neglect); In re Intelligent Medical Imaging, Inc., 262 B.R. 142 (Bankr.S.D.Fla. 2001) (disallowing a late filed claim because of prejudice to creditors).
In Advanced Estimating Systems, the plaintiff filed an untimely motion for a new trial. Believing that this motion was timely filed, the plaintiff mistakenly believed that the time within which to file an appeal had been tolled. As a result, the plaintiff's notice of appeal was filed approximately three weeks late. Upon learning of his late filed notice of appeal, the plaintiff moved for an enlargement of time to file an appeal. Applying the Pioneer factors, the Eleventh Circuit did not find excusable neglect and therefore dismissed the appeal. Advanced at 999.
Although the court in Advanced held that mistake of law does not constitute excusable neglect, the court did focus somewhat on the promptness in which the motion for enlargement of time was filed after the plaintiff discovered its notice of appeal was not timely filed. Id. Distinguishing Cheney v. Anchor Glass Container Corp., 71 F.3d 848 (11th Cir. 1996), the court acknowledged "when the lawyers [in Cheney] realized the failure of the secretary to deliver the pertinent message, the necessary motions, including one for more time, were promptly filed."Id. The court further noted that the delay in Advanced was much longer than the six day delay in Cheney. Id. at n. 2.
In Bicostal Corp., the promptness in which the appellant moved to file a late claim was also a decisive factor. 242 B.R. at 44. In Bicostal, the appellant waited over one year to file a claim after it learned of the bankruptcy. Affirming the bankruptcy court, the district court concluded that the appellant's delay did not constitute excusable neglect. Id. at 46. The court analyzed the delay under the prejudice factor in Pioneer. Quoting the bankruptcy court, the district court held:
While there might have been slight prejudice to the Debtor to grant a Motion to file a late claim soon after the bar date passed, such is clearly not the case nearly one and one-half years after the expiration of the bar date.
Id.
In Intelligent, the county tax collector sought to have a claim which was filed 64 days late deemed timely because the bar date was calendered incorrectly. The court noted that courts place the greatest weight on whether any prejudice to other parties will result. 262 B.R. at 145. The court held that no prejudice exists "when all the parties can be placed in the same situation that they would have been in if the error had not occurred." Id. (citing In re Tannen Towers Acquisition Corp., 235 B.R. 748, 755 (Bankr.D.N.J. 1999)). In Intelligent, a plan had been confirmed with no objections by that voting class. Therefore, the court held that other creditors would experience substantial prejudice if the court allowed the tax collector's claim because it would have reduced the amount for distribution by approximately $54,000.00. Id. at 146.
As to the factor of the length of the delay and its potential impact on judicial proceedings, the court in Intelligent held that a late filed claim after confirmation would significantly hinder the distribution.Id. Moreover, this hindrance was not anticipated by the creditors. Id. Furthermore, the tax collector withdrew his objection to discharge which permitted the plan to be confirmed.
Lastly, the court found no lack of good faith on behalf of the tax collector. Id. However, the court held that his good faith did "not outweigh the prejudice to other parties and the adverse impact on the administration of the case. . . ." Id.
In the case before the court, the court finds that the facts of this case are analogous to the facts in Bicostal. On May 16, 2000, the court's order gave Plaintiffs until May 30, 2000 to file an amended complaint. Therefore, Plaintiffs were made aware of the bar date. At the Pre-trial Conference on July 21, 2000, the court orally ruled that the amended complaint was not filed timely. However, Plaintiffs did not properly move for an extension until January 16, 2001, almost six months later. Plaintiffs' delay has never been explained to the court. Although there was an attempt on August 3, 2000 by way of a motion for reconsideration, that motion was ill conceived because there was no July 24, 2000 order dismissing the claims. The court finds it remarkable that Plaintiffs took no other action until January 16, 2001 and that Plaintiffs provided no explanation for the delay. Therefore, without an explanation, the court must find in favor of Defendant as to the delay.
While Plaintiffs' delay in this case was not as long as the appellant's delay in Bicostal, the court nevertheless finds that case applicable. The issue of promptness is material to analyzing the prejudice factor underPioneer. Prejudice may have been sufficiently slight to find excusable neglect had Plaintiffs moved for an extension earlier. From July 21, 2000, nothing has prevented Plaintiffs from properly moving for an extension, however, Plaintiffs have failed to do so. Moreover, since July 21, 2000, Defendant has proceeded relying on the fact that those claims were dismissed. Had those claims been reinstated at that time, Defendant may have proceeded differently. Accordingly, the court finds that Defendant would experience substantial prejudice if the claims were reinstated.
As to the factor on the length of delay and impact on the judicial proceedings, Plaintiffs cite the cases of Agribank v. Green, 188 B.R. 982 (C.D.Ill. 1995) and In re Pappalardo, 210 B.R. 634 (Bankr.S.D.Fla. 1997). In Pappalardo, the court found sufficient reason for a seven month delay. 210 B.R. at 647. However, The court agrees with Defendant that there were issues present in that case that are absent in the case before the court. For example, the court found part of the reason for the delay was because of the debtor's failing to list the creditor on the schedules. Id. The court also found the Clerk's office partially at fault because the creditor had received misinformation that a claims bar date had not been set. Id.
The court, however, acknowledges the similarity with Pappalardo in the fact that the six month delay by Plaintiffs to act did not adversely impact the judicial proceedings. From May 30, 2000 to January 16, 2001, a substantial amount of discovery was done. Plaintiffs argue that the case went forward and allowing the amended complaint to relate back would not impact the proceedings. However, the court disagrees. For example, the issue of additional discovery, among other things, may arise if the dismissed claims are now allowed. Therefore, the court finds that reinstating the dismissed allegations under subsections 727(a)(2)(A) and 523(a)(2) this late in the process, could potentially reverse the direction in which the adversary proceeding is now progressing.
As to Agribank v. Green, the court finds it inapplicable to this case. The court notes the language in Agribank which interprets Pioneer as implying that there may be cases where a deliberate choice not to abide by a deadline may constitute excusable neglect. Agribank, 188 B.R. at 988. However, the court in Agribank held that the case before it "[was] not one of them." Therefore, the language is dicta. More importantly, there was no assertion by Plaintiffs that their delay was deliberate.
Lastly, nothing in this case indicates that Plaintiffs exhibited a lack of good faith. However, the court finds that this does not outweigh the other Pioneer factors which weigh in Defendant's favor.
Therefore, the court fails to find that Plaintiffs' delay in moving for an extension of time within which to file an amended complaint is not the result of excusable neglect. Accordingly, the court will deny Plaintiffs' motion for reconsideration of the court's April 3, 2001 order. The allegations in the complaint under subsections 727(a)(2)(A) and 523(a)(2) will remain dismissed.
An order in accordance with this Memorandum Opinion will be entered.