Opinion
Case No. 01-12264-SSM.
May 8, 2002
Alexander M. Laughlin, Esquire, Wiley Rein Fielding, LLP, McLean, VA, Local counsel for the debtor.
Malcolm Mitchell, Esquire, Vorys, Sater, Seymour Pease, L.L.P., Alexandria, VA, Local counsel for the Official Committee of Unsecured Creditors.
MEMORANDUM OPINION
A hearing was held in open court on April 26, 2002, on the objection (Doc. # 729) filed by the jointly administered debtors on March 27, 2002, to the alleged secured claims of certain creditors, including Claims No. 245 and 273 in the aggregate amount of $26,003.10 filed by Teletech, Inc. No response had been filed by Teletech prior to the hearing, and no appearance was made on its behalf at the hearing. Upon examination of the claim and the objection, and after hearing the argument of the debtors' attorney, the court ruled from the bench that the claims would be disallowed as a secured claim but allowed as general unsecured claims in the amounts asserted.
Pathnet Telecommunications, Inc. ("PTI"), and five direct or indirect subsidiaries, Pathnet, Inc. ("PNI"), Pathnet Operating, Inc. ("POI"), Pathnet Real Estate, LLC, Pathnet Fiber Equipment, LLC, and Pathnet Operating of Virginia, Inc., filed voluntary chapter 11 petitions on April 2, 2001, in the District of Delaware. All six cases were ordered be jointly administered and were thereafter transferred to this district. Four of the cases were eventually converted to chapter 7. However, PTI and PNI have remained in chapter 11 and have had plans of liquidation confirmed.
Following the hearing, it has been brought to the court's attention that on the morning of the hearing, a pleading was received and filed by the clerk entitled "Response of Teletech, Inc., to Debtor's Objection to Alleged Secured Claim of Teletech, Inc." The response explains that it was filed not earlier because the objection and notice of hearing were mailed (the response suggests deliberately) to a non-existent address. The response further asserts that the claim — for sums due under two Telecommunication Site Access License Agreements with Pathnet, Inc. — are secured by the debtors' equipment at the two sites. The Agreements are attached to the response, and while they do not contain language in express terms granting Teletech a security interest in the debtors' equipment, there is language that could be construed as having that effect.
The sites in question are located at 555 East William Street, Ann Arbor, Michigan, and 13333 Pennsylvania Road, Riverview, Michigan. The agreements identify a transmitter, receiver, and two antennas at each location.
Under ¶ 20 ("Default by Licensee") the agreement provides that upon default by Pathnet, Teletech would have the right to terminate the agreement, and, upon such termination, "to disconnect Licensee's Equipment from the Facility, and recover forthwith as damages, the cost of removal of Licensee's Equipment from the Facility plus the balance of the total of all Monthly License Fees provide [sic] to be paid to Licensor hereunder for the remainder of the stated term of this License Agreement. . . ." Paragraph 20 then states, "To satisfy any unpaid balance, Licensor may dispose of Licensee's Equipment and remit to Licensee only those proceeds from the sale . . . above the contractual balance owed. . . ."
The response is not signed by an attorney at law but rather by Clifford T. Bengis, Chief Executive Officer. Although a corporation does not need an attorney in order to file a proof of claim, the filing of an objection to the claim commenced a contested matter. At that point, pleadings submitted by a creditor that is not a natural person acting on his or her own behalf were required to be signed by an attorney who is a member of the bar of this court. See Local Bankruptcy Rule 9010-1; Rowland v. Calif. Men's Colony, 506 U.S. 194, 202 (1993) ("It has been the law for the better part of two centuries . . . that a corporation may appear in the federal courts only through licensed counsel.").
Local Rule 9010-1 provides in relevant part, "Except for filing a proof of claim, request for notices, or notice of transfer of claim, no party or entity other than a natural person acting in his or her own behalf or, to the extent permitted by § 304(g) of Pub.L. 103-394, a child support enforcement agency, may appear in a bankruptcy case or proceeding, sign pleadings, or perform any act constituting the practice of law except by counsel permitted to appear under LBR 2090."
With respect to the notice issue, the objection to claim contains a certificate of service reflecting that the objection was mailed to Teletech at three different addresses: (1) in care of Susan K. Dobronski, Statutory Agent, 14201 North Hayden Road, Suite C-4, Phoenix, Arizona 85260-2929; (2) in care of Susan K. Dobronski, President/CEO, 38235 Executive Drive North, Westland, Michigan 48185-1971; and (3) Post Office Box 4221, Scottsdale, Arizona 85261-4221. The latter is the address shown on the proof of claim. The first two addresses presumably represent the debtors' attempt to comply with the ruling of Judge Mayer of this court in In re Boykin, 246 B.R. 825 (Bankr.E.D.Va. 2000) that an objection to claim must be served in the manner prescribed by F.R.Bankr.P. 7004, and cannot simply be mailed to the address shown on the proof of claim. The response filed by Mr. Bengis asserts that North Hayden Road is not in Phoenix, but in Scottsdale, Arizona, and that the incorrect address resulted in delivery being "delayed" (although he does not state the date it was actually received). But given the certificate of service reflecting that the objection was also mailed to the address shown on the proof of claim — which is the address shown in Mr. Bengis's response — the court is unable to conclude that service of the objection was inadequate.
In light of Judge Mayer's ruling, the court rejects as unfounded the suggestion that the mailings to the first two addresses were an attempt to "sandbag" the creditor.
As noted, the court ruled that Teletech's two claims would be allowed in full as unsecured claims but disallowed as secured claims. Allowance as an unsecured claim is admittedly cold comfort, since the evidence presented at the hearing on approval of the PTI and PNI joint plan of liquidation was to the effect that allowed unsecured claims would likely receive a dividend of no more than 2 or 3 cents on the dollar. In this connection, the court notes that the objection to claim did not seek to avoid any security interest, but simply sought to fix the amounts upon which the debtors would make distribution under the plan. On the present record, the court is unable to determine the status of PNI's equipment at each of the two sites. Although certain equipment has been sold in the course of these cases free and clear of liens, other equipment has been abandoned. Mr. Bengis's reply does not state whether the debtor's equipment is still located at the site. If the equipment has been abandoned (which seems likely) such abandonment would constitute a surrender of the collateral, fully satisfying the secured portion of Teletech's claim. If, on the other hand, it has been sold free and clear of liens (which seems less likely), any lien of Teletech (unless avoided) would attach to the proceeds of sale, and Teletech would be entitled to the value of the equipment at the time it was sold (up to the amount of its claim), with any shortfall treated as a general unsecured claim. But in any event, the order being entered by the court does not extinguish any lien, if one exists.
These are all interesting questions. However, until Teletech obtains counsel to represent it in connection with the objection to claim, the court need not address them. Because the court's bench ruling on April 26, 2002, appears to be correct, /a separate order will be entered.
A separate order has been entered allowing Teletech's claims as general unsecured claims in the amount of $26,003.10, but disallowing them as secured claims, subject to Teletech's right to seek reconsideration under § 502(j), Bankruptcy Code.