Opinion
Case No. O1-61119-DHA
August 1, 2002
MEMORANDUM OPINION AND ORDER
This matter is before the Court on the Joint Motion of Bexar County and Fort Bend County for Enlargement of Time to Respond to Debtors' Second Omnibus Objection to Certain Claim, or Alternatively, for Their Response to be Considered Timely Filed ("Motion to Enlarge Time"). The issue is whether this Court should allow the responses by Bexar and Fort Bend Counties to debtor's Second Omnibus Objection to Claims ("Second Omnibus Objection") as timely filed due to counsel's excusable neglect. This is a core proceeding over which this Court has jurisdiction under 28 U.S.C. § 157 (b)(2) and 1334 (b). Venue is proper pursuant to 28 U.S.C. § 1408 and 1409.
FINDINGS OF FACT
Bexar and Fort Bend Counties ("the Counties") hold secured claims for unpaid ad valorem taxes on the debtor's personal and real property located in those jurisdictions. Debtor objected to the allowance of those claims arguing that it had paid certain portions of the tax claims and therefore the amount of the claims should be reduced. The Counties filed a response to debtor's Second Omnibus Objection on May 22, 2002, arguing that while debtor has paid certain of its tax liabilities, the Counties still dispute the amounts debtor alleges are due on those taxes.
Pursuant to the Notice of Debtor's Second Omnibus Objection ("Notice"), any written response to debtor's claim objections contained within the Second Omnibus Objection were due on or before May 16, 2002, with a hearing set on debtor's objections for May 23, 2002. This response deadline was noted in bold print on the front page of the Notice that was mailed on April 19, 2002. Counsel for the Counties acknowledges receipt of debtor's Second Omnibus Objection on April 23, 2002.
Counsel for the Counties requested that each tax file for debtor's claims be pulled for her review. She set the due date for the files to be delivered to her for two days prior to the response due date. However, in actually setting the dates for the retrieval of the files, she mistakenly used the hearing date of May 23, 2002 rather than the response date of May 16, 2002. Therefore, counsel only received the Counties' tax files on May 21, 2002 — five days beyond the response deadline. Upon receiving the files, counsel noticed the mistake in calendaring and immediately contacted debtor's counsel to attempt to resolve the discrepancy in the amounts owing. Debtor refused to work out the discrepancy stating tat it would not attempt to settle claims for which a timely objection was not filed. Nonetheless, counsel for the Counties was able to find local counsel and file their joint response to the Second Omnibus Objection on May 22, 2002 — the day prior to the hearing on debtor's Second Omnibus Objection.
The Counties assert that their response should be deemed timely filed because of her "excusable neglect" under Bankruptcy Rule 9006. She asserts that her clients should not be penalized for what amounted to a "simple mistake on the part of counsel for the Counties." Motion to Enlarge Time at ¶ 9. We heard argument on this and other Rule 9006 motions on June 19, 2002 and subsequently allowed the parties to file post-hearing briefs on the Rule 9006 issue.
CONCLUSIONS OF LAW
Counsel argues that it was her excusable neglect that caused the Counties' responses to be filed past the due date and thus, her clients should not suffer due to her carelessness. The Counties also argue that under the factors used to evaluate excusable neglect as set forth in Pioneer Invesunent Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380 (1993), her conduct should be deemed excusable neglect under Rule 9006. Debtor argues that counsel's conduct was not excusable neglect but the type of negligence that places her conduct outside of Rule 9006. Further, debtor asserts that the need for finality in the claims resolution is of paramount importance in large cases such as debtor's.
Bankruptcy Rule 9006 provides as follows:
IN GENERAL. ... when an act is required or allowed to be done at or within a specified period by these rules or by notice given thereunder or by order of court, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (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.
Rule 9006 (b). The Supreme Court has interpreted this provision and the meaning of excusable neglect and found that this determination is an equitable one. Pioneer Investment Servs. Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380, 395 (1993). Pioneer has been further examined by the Fourth Circuit most notably in its decision in Thompson v. E.I. DuPont de Nemours Co., 76 F.3d 530 (4th Cir. 1996).
Under Pioneer, we must first determine whether counsel's conduct was due to neglect. See Pioneer, 507 U.S. at 394. Only after we determine that her conduct constitutes neglect are we then able to examine whether the neglect was excusable. See id. at 395.
We find, and counsel for the Counties has effectively stated, that the conduct involved here constitutes neglect. Counsel calendared the response deadline incorrectly which she admits led to the late filing. This oversight by counsel resulted from her failure to note the correct response date that was clearly and prominently set forth on the Notice, and her error is negligent conduct.
Next, we must determine whether this is the type of conduct that is excusable under Rule 9006. In defining what may be considered as excusable, the Supreme Court in Pioneer stated:
. . . the determination is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission. These 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.
Pioneer, 507 U.S. at 395. The Court also noted that "inadvertence, ignorance of the rules, or mistakes construing the rules do not usually constitute 'excusable' neglect. . . ." Id. at 392. In the Fourth Circuit, "'[e]xcusable neglect' is not easily demonstrated, nor was it intended to be." Thompson, 76 F.3d at 534. While the Fourth Circuit follows the Pioneer factors, it places particular emphasis on the reason for the delay. See Id ("The most important of the factors Rule 9006 (b). The Supreme Court has interpreted this provision and the meaning of excusable neglect and found that this determination is an equitable one. Pioneer Investment Sen's. Co. v. Brunswick Assocs. Ltd Partnership, 507 U.S. 380, 395 (1993). Pioneer has been further examined by the Fourth Circuit most notably in its decision in Thompson v. E.I DuPont de Nemours Co., 76 F.3d 530 (4th Cir. 1996).
Under Pioneer, we must first determine whether counsel's conduct was due to neglect. Pioneer, 507 U.S. at 394. Only after we determine that her conduct constitutes neglect are we then able to examine whether the neglect was excusable. Id at 395.
We find, and counsel for the Counties has effectively stated, that the conduct involved here constitutes neglect. Counsel calendared the response deadline incorrectly which she admits led to the late filing. This oversight by counsel resulted from her failure to note the correct response date that was clearly and prominently set forth on the Notice, and her error is negligent conduct.
Next, we must detennine whether this is the type of conduct that is excusable under Rule 9006. In defining what may be considered as excusable, the Supreme Court in Pioneer stated:
. . . the determination is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission. These 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.
Pioneer, 507 U.S. at 395. The Court also noted that "inadvertence, ignorance of the rules, or mistakes construing the rules do not usually constitute 'excusable' neglect. . . ." Id at 392. In the Fourth Circuit, "'[e]xcusable neglect' is not easily demonstrated, nor was it intended to be." Thompson, 76 F.3d at 534. While the Fourth Circuit follows the Pioneer factors, it places particular emphasis on the reason for the delay. See id ("The most important of the factors identified in Pioneer for determining whether 'neglect' is 'excusable' is the reason for the failure to file [the relevant pleading].").
Of the Pioneer factors, the parties do not dispute that the Counties acted with anything but good faith in filing their response after the deadline. The Counties also do not deny that the reason for the delay was within their control because they received the Second Omnibus Objection on April 23, 2002, and the delay was the result of incorrectly noting the response due date. The factors in dispute are the potential prejudice to the debtor by allowing the late filing, the impact upon the judicial proceedings in this case and whether the reason for the delay is excusable.
Counsel does not assert that the due date for her response was in any way unclear or hidden on debtor's Second Omnibus Objection and Notice, as was the case in Pioneer. We find that this type of mistake on counsel's part is exactly the type of "inadvertence" the Pioneer Court found was not excusable neglect. Counsel's mistake was one of mere inattentiveness to the proper deadline and as such is not excusable.
As to the potential prejudice upon the administration of debtor's estate, we find that the delays which may result from repeated hearings and litigation over late-filed responses regarding the claims filed in this case may be quite burdensome. Debtor asserts that it received some 5, 000 claims in this case and because the deadline for claims objections has now passed, it has filed objections to all of those claims. The remaining claim objections are scheduled to be heard by this Court at the end of August and debtor asserts that its latest omnibus claim objection covers approximately 778 claims. Should debtor receive numerous late-filed responses to the last of its claim objections, the burden on the debtor of defending against excusable neglect motions would be great indeed. Since its inception, this case has moved through the bankruptcy process expeditiously and thus, the need to strictly adhere to the deadlines set in this case becomes all the more important. We find the need to enforce those deadlines is especially vital to the claims resolution process required in this "mega case." Therefore, we find that the potential delay in the administration of this case is of sufficient concern to this Court that this factor weighs in favor of the debtor. We do not hold that the potential delay of litigating this and all future motions for extension of time are defacto reasons to deny any requests based on Rule 9006. This concern is merely one factor and counsel's argument that there is effectively no delay, an argument we do not accept m this particular case, does not supercede the other factors such as the reason for the delay, which this Court relies heavily upon in making this ruling.
The Counties also seek relief citing Federal Rules of Civil Procedure (FRCP) 55 (c) and 60 (b). We note, however, that both of these provisions address relief from final judgments or orders. The motion at issue here was to allow a late filed response, hence, no final judgment has been entered regarding the timeliness of the Counties Motion to Enlarge Time nor has an order been entered disallowing their respective claims. We find that Rules 55 (c) and 60 (b) are therefore inapplicable to the matter at issue here. Further, if the Counties were to seek relief from any judgment regarding their claim under FRCP 55 (c) or 60 (b), it would only be appropriate to do so as to the Order Sustaining Debtor's Second Omnibus Objection to Claims that was entered by this Court on May 23, 2002. That order reduced the claims of the Counties. The Counties have not moved for reconsideration of that Order nor have they sought an appeal of that Order, and their time to do so has now passed. Thus, counsel's request for relief under FRCP 55 (c) and 60 (b) is not appropriately before us.
CONCLUSION
We find that the Counties' response to debtor's Second Omnibus Objection to Claims is not timely filed, and we hold that counsel's reasons for the late-filed response do not constitute excusable neglect. Therefore, the Counties Motion for Enlargement of Time is hereby DENIED.
IT IS SO ORDERED.