Opinion
Case No. 09-02140 (HB), (Joint Administration).
July 30, 2010
ORDER DENYING MOTION OF DONNIE T. SKELTON
This matter came before the Court pursuant to Donnie T. Skelton's ("Skelton") Motion to Allow Late Filed Claim to be Deemed Timely Filed and Memorandum in Support [Docket Entry 3286], filed on May 21, 2010. Clingman Hanger Management Associates, LLC, the Trustee for the Creditors' Trust ("Trustee") appointed under the confirmed plan of reorganization of BI-LO, LLC, et. al. ("BI-LO), objected to the Motion. At the hearing, William G. McCarthy, Jr., appeared on behalf of the Trustee; Julius W. Babb, IV, appeared on behalf of Skelton, who was not present at the hearing; and Frank B.B. Knowlton appeared on behalf of BI-LO. The Court finds as follows:
FACTS
1. BI-LO operates more than 200 grocery stores and employs approximately 15,000 people across the Southeast.
2. Skelton was employed by Bi-LO, and alleges that on or about February 7, 2009, he was wrongfully terminated from his employment.
3. Bi-LO filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on March 23, 2009.
4. At some point during April 2009, Skelton hired the law firm of Cromer Mabry.
5. On April 2, 2009, at the direction of the BI-LO's bankruptcy counsel and the Court, Skelton and others were mailed a copy of the "Notice of Chapter 11 Bankruptcy Case, Meeting of Creditors, Deadlines" ("Bar Date Notice") [Docket Entry 174], as evidenced by the Certificate of Mailing filed in this bankruptcy case [Docket Entry 221]. The Bar Date Notice was mailed by BI-LO's noticing and balloting agent, Kurtzman Carson Consultants LLC ("KCC"). The Bar Date Notice provided that the deadline for creditors to file a proof of claim was August 13, 2009. A copy was timely mailed to Skelton at "319 Olde Springs Road, Columbia, SC 29223," which was the last known address for Skelton of which BI-LO was aware.
The Court approved BI-LO's application to employ KCC as claims, noticing and balloting agent on March 25, 2009. See Order Authorizing the Debtors to Employ Kurtzman Carson Consultants LLC as Claims, Noticing and Balloting Agent, In re BI-LO, LLC, C/A No. 09-02140-hb (Bankr. D.S.C. March 25, 2009) [Docket Entry 57].
6. Skelton filed charges of discrimination against BI-LO with the South Carolina Human Affairs Commission ("SCHAC") and the United States Equal Employment Opportunity Commission ("EEOC") dated June 3 and 4, 2009. Skelton provided these documents (included below) to the Court as Movant's Exhibit 2:
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7. The claims bar date in the bankruptcy case passed on August 13, 2009, and neither Skelton nor his counsel filed a timely claim. Skelton's counsel admitted that Skelton received the Bar Date Notice. However, counsel stated at the hearing that they were not aware of the deadline to file a claim and of the ramifications for not filing a claim.
8. BI-LO's counsel stated that he had spoken with a member of the firm representing Skelton around December 2009, which was after the bar date, and advised that individual to file a motion to allow a late proof of claim, and even sent a number of documents to aid in filing such a motion.
9. On February 23, 2010, the EEOC mailed Skelton a "Dismissal and Notice of Rights" letter (included below) explaining that Skelton had ninety days to file a lawsuit:
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10. Skelton's counsel explained that the firm of Ogletree, Deakins, Nash, Smoak Stewart, PC represented the BI-LO in labor and employment matters, and that as the above letter indicates attorney Thomas Bright of that firm received a copy of the letter.
11. Skelton's counsel explained to the Court that his law firm believed that no further action or filing of a proof of claim was required while the matter was under investigation by the EEOC. Counsel argued that he assumed that filing the matter with the EEOC and SCHAC put BI-LO on notice of the potential claim by Skelton. Skelton's counsel explained that EEOC and SCHAC are the gatekeepers to discrimination lawsuits, which resulted in counsel's inference/conclusion that nothing would affect Skelton's claim in a bankruptcy proceeding without the approval of EEOC and SCHAC.
12. On April 30, 2010, the Court entered an order confirming the BI-LO's Fourth Amended Plan of Reorganization. The plan created a Creditors' Trust for timely filed claims and required BI-LO to deposit funds with the Trustee for distribution to those creditors. Skelton's late claim, if allowed, would be submitted to the Trustee for payment from that fund as a beneficiary. Based on the record available to the Court in this case, it is anticipated that a significant distribution will be made to the numerous beneficiaries/creditors with timely filed claims, but that claims will not be paid in full. Available funds will be distributed pro rata after expenses are paid.
13. Skelton's claim and Motion were filed on May 21, 2010, within the ninety days set forth in the right to sue letter. The amount of the claim is unknown and therefore must be liquidated. The Creditors' Trust argues that contesting and/or liquidating the claim and the costs thereof will unfairly dilute the distribution to creditors that filed proofs of claim prior to the bar date.
14. Skelton could have filed a claim in the bankruptcy case at any time to preserve his rights pending any determination or final action by the EEOC and/or SCHAC.
15. Skelton's counsel requested that Skelton be permitted to seek compensation from BI-LO's insurance coverage for his claims as well. BI-LO's counsel explained to the Court that the BI-LO is self-insured and that liability on this claim would have to exceed one-million dollars before the insurance coverage would be available.
16. At the hearing, the Court asked Skelton's counsel when his firm received notice of the bar date from Skelton. Skelton's counsel stated that he did not know. There is no further evidence before the Court regarding Skelton's actions or inaction in failing to file a timely proof of claim.
DISCUSSION AND CONCLUSIONS OF LAW Excusable Neglect
Skelton, through his counsel, asserts that his failure to file a proof of claim prior to the deadline resulted from excusable neglect and, therefore, he should be permitted to file his late claim and have it deemed timely filed. Rule 9006(b)(1) provides the basis for the relief sought by Skelton:
When an act is required or allowed to be done at or within a specified period by these rules or by a 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.
(emphasis added). The Supreme Court has addressed excusable neglect, stating the following:
Chapter 11 provides for reorganization with the aim of rehabilitating the debtor and avoiding forfeitures by creditors. In overseeing this latter process, the bankruptcy courts are necessarily entrusted with broad equitable powers to balance the interests of the affected parties, guided by the overriding goal of ensuring the success of the reorganization. This context suggests that Rule 9006's allowance for late filings due to `excusable neglect' entails a correspondingly equitable inquiry.
Pioneer Investment Services Company v. Brunswick Associates Limited Partnership, 507 U.S. 380, 389 (U.S. 1993) (citations omitted). The Pioneer Court further discussed Rule 9006(b)(1), providing that "Congress plainly contemplated that the courts would be permitted, where appropriate, to accept late filings caused by inadvertence, mistake, or carelessness, as well as by intervening circumstances beyond the party's control." Id. at 388. Finally, the Pioneer Court explained that the following factors were relevant in determining whether excusable neglect was present: "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." Id. at 395. Other courts have found that an excusable neglect inquiry involves weighing the Pioneer factors, but "that not all factors need to favor the moving party." In re XO Communications, Inc., 301 B.R. 782, 796 (Bankr. S.D.N.Y. 2003) (finding that the majority of the Pioneer factors weighed in favor of the debtor despite the fact that there was little prejudice to the debtor due to the small size of the movant's claim). "Instead, courts are to look for a synergy of several factors that conspire to push the analysis one way or the other." In re 50-Off Stores, Inc., 220 B.R. 897, 901 (Bankr. W.D. Tex. 1998) (finding that excusable neglect was not present where creditors received notice of the bar date from the court and supplemental notice from the debtors; that allowing the claims would not create significant problems in delaying or complicating the judicial proceedings, nor were the claims large enough to interfere with the case's administration; that allowance of one claim could result in the filing of many other claims, which would be prejudicial to the debtor; and that the notice given to claimants was not ambiguous).
This Court notes that a review of the decisions of other bankruptcy courts since Pioneer suggests that allowing late filed claims as a result of excusable neglect appears to be the exception, not the rule. See In re Gardenhire, 209 F.3d 1145 (9th Cir. 2000) (holding that "a bankruptcy court lacks equitable discretion to enlarge the time to file proofs of claim; rather, it may only enlarge the filing time pursuant to the exceptions set forth in the Bankruptcy Code and Rules."); see also Jones v. Chemetron Corp., 212 F.3d 199 (3rd Cir. 2000); see also In re American Classic Voyages Co., 405 F.3d 127 (3rd Cir. 2005); see also In re Enron Corp., 419 F.3d 115 (2nd Cir. 2005); see also In re Kmart Corp., 381 F.3d 709 (7th Cir. 2004).
The danger of prejudice to the Debtors, the length of the delay and its potential impact on judicial proceedings
The bar date in Chapter 11 cases functions as a statute of limitations that excludes late claims "in order to provide the Debtor and its creditors with finality to the claims process and permit the Debtor to make swift distributions under the Plan." XO Communications, 301 B.R. at 797-98; see also Berger v. TWA (In re TWA), 96 F.3d 687, 690 (3d Cir. Del. 1996); see also Grand Union, 204 B.R. 864 (finding that excusable neglect was not present to warrant allowing the late filed proofs of claims).
The record reflects that BI-LO likely had some notice of Skelton's complaints as a result of the June 3 and 4, 2009, charges of discrimination. Further, a non-bankruptcy attorney for BI-LO was copied on the February 23, 2010, right to sue letter. However, the record does not support a finding that BI-LO or creditors of the bankruptcy estate had knowledge of Skelton's intent to pursue a claim in this bankruptcy proceeding prior to the phone call with Debtors' counsel, and definite notice that a claim would be asserted herein was not received until this Motion was filed. That notice was after the bar date passed and after the plan, which included payment for timely filed claims, was confirmed. The gathering of claims against a debtor in one forum through uniform procedures — providing a deadline for asserting those claims, notice to the debtor and other creditors of those claims, and thereafter allowing a debtor and creditors the right to rely on claims timely and properly asserted — is essential in bankruptcy. Skelton filed his proof of claim and Motion approximately nine months after the bar date and after the plan was confirmed. This delay is significant, especially given the progression of this case during that time. BI-LO proceeded towards evaluation of claims and confirmed a plan relying on claims timely filed in the bankruptcy case. Creditors reviewed and voted on the plan without notice of this claim.
Note that the U.S. Equal Employment Opportunity Commission form provided by Skelton lists "Ms. Susan Howell, Fair Employment Manager, BI-LO, LLC, P.O. Box 99, Mauldin, SC 29662" and therefore it appears that through the administrative process she was likely provided with notice of the complaint. However, the form is unsigned and there is no direct proof of any such notice.
The record in this case indicates that BI-LO employs a small army of attorneys across the Southeast for various specific matters not necessarily related to the bankruptcy case. See Docket #168, Order Authorizing Debtors' Retention and Compensation of Certain Professionals Utilized in the Ordinary Course of Business.
Further, litigation to dispute the merits of the claim could delay distribution to other beneficiaries of the Creditors' Trust who timely filed claims. Finally, allowing any late claim on the facts presented could set a precedent encouraging or allowing others.
The estate will be prejudiced if the claim is allowed.
The reason for the delay, including whether it was within the reasonable control of the movant
When deciding whether excusable neglect is present, numerous courts emphasize "the reason for the delay" factor. In re PT-1 Communications, Inc., 403 B.R. 250, 260 (Bankr. E.D.N.Y. 2009); In re Enron Corp., 419 F.3d. 115, 122 (2nd Cir. 2005) ("We noted, though, that `we and other circuits have focused on the third factor: "the reason for the delay, including whether it was within the reasonable control of the movant."'"(quoting Pioneer, 507 U.S. at 395)); Lowry v. McDonnell Douglas Corp., 211 F.3d 457, 463 (8th Cir. 2000) ("While prejudice, length of delay, and good faith might have more relevance in a closer case, the reason-for-delay factor will always be critical to the inquiry."); In re Musicland Holding Corp., 356 B.R. 603, 607 (Bankr. S.D.N.Y. 2006) ("Consequently, the Second Circuit, as well as other Circuits, focus on the third factor — the reason for the delay — as the predominant factor."). "Courts generally do not rule in favor of claimants . . . who have neglected to timely file proofs of claim as a result of their failure to communicate with counsel regarding a legal notice or their own or their counsel's disregard of the relevant substantive law governing their claim." In re Agway, Inc., 313 B.R. 31, 40 (Bankr. N.D.N.Y. 2004); see also Brunswick, 2007 WL 160749, at *5.
The Court cannot determine Skelton's reason for the delay nor whether the delay was in Skelton's reasonable control. Skelton's counsel admitted that Skelton timely and properly received the Bar Date Notice at Skelton's last known address. Skelton's counsel also stated that his firm did not believe they had to make any additional filings to preserve his claim in the bankruptcy after the matter was reported to the EEOC and SCHAC. In light of this, Skelton's counsel insists that Skelton should not be prejudiced by counsel's failure to file a claim. However, a repeated review of the record does not show if or when Skelton notified his counsel that he received notice of the bar date. The Court notes that Skelton did not attend the hearing or testify. In addition, there is no evidence showing that Skelton sought advice from counsel after receiving notice of the bar date or relied on the advice of his counsel in deciding not to file a proof of claim prior to the bar date. Although Skelton's counsel states that the client should not be prejudiced by counsel's failure to file a claim on his behalf, the Court does not have sufficient evidence to conclude that the delay in filing the claim was not within the reasonable control of Skelton, that Skelton's counsel was notified by Skelton of the bar date, that Skelton's counsel led Skelton to believe that no proof of claim was necessary, or that the delay was reasonable.
Whether the Movant Acted in Good Faith
In cases addressing motions to allow late filed claims based upon excusable neglect, it is rarely found that the movants acted without good faith; therefore, courts often give little weight to the good faith factor in an excusable neglect analysis. BOUSA, Inc. v. United States (In re Bulk Oil (USA) Inc.), 2007 WL 1121739, n. 6 (S.D.N.Y. Apr. 11, 2007). However, courts have found that inaction during the time period allotted for the filing of claims is an example of a lack of good faith. In re J.S. II, L.L.C., 397 B.R. 383, 389 (Bankr. N.D. Ill. 2008). In courts' examinations of the good faith factor in excusable neglect analyses, the inquiry as to whether good faith is present focuses on a subjective review of the specific facts of a given case. See In re Garden Ridge Corp., 348 B.R. 642 (Bankr. D. Del. 2006); see also In re Smidth Co., 413 B.R. 161 (Bankr. D. Del. 2009); see also In re J.S. II, L.L.C., 397 B.R. 383.
No actions by Skelton or his counsel suggest an absence of good faith and there is no evidence or testimony specifically addressing Skelton's good faith. Therefore, this factor is neutral.
CONCLUSION
After weighing the factors necessary to a finding of excusable neglect, the Court finds that they weigh in favor of the objecting party and therefore Skelton's Motion should be denied.
IT IS THEREFORE, ORDERED, that the Motion of Donnie T. Skelton to Allow Late Filed Claim to be Deemed Timely Filed is DENIED.
Notice Recipients
Recipients of Notice of Electronic Filing:
District/Off: 0420-7 User: smithj Date Created: 7/30/2010 Case: 09-02140-hb Form ID: pdf01 Total: 5 aty G. William McCarthy, Jr. bmccarthy@mccarthy-lawfirm.com aty George Barry Cauthen George.Cauthen@nelsonmullins.com aty George Barry Cauthen George.Cauthen@nelsonmullins.com aty Joseph F. Buzhardt, III USTPRegion04.CO.ECF@usdoj.gov aty Julius W. Babb, IV jayb@cromermabry.com TOTAL: 5