Donald F Wellington, 631 B.R. 833

Background

Debtor filed chapter 11 on January 24, 2020; AAEB5 Fund 17 LLC and ZSC Nyack Hotel Fund LLC received notice that their claims were listed as unliquidated and the claims bar date was May 20, 2020.
The Creditors filed proofs of claim on May 25, 2020 (five days late). The Debtor objected and the Creditors moved to allow the late-filed claims. The court denied that motion in a December 15, 2020 bench ruling, finding no excusable neglect under Pioneer due chiefly to the lack of an explanation for the delay.
The confirmed plan established a $6.1 million fund for general unsecured creditors; the Debtor later sought interim distributions (about $2.3 million) from that fund.
The Creditors appealed the denial of their late-claim motion and moved for a stay pending appeal under Fed. R. Bankr. P. 8007 (and alternatively under the court’s inherent powers) to block distributions pending the appeal.
At a May 13, 2021 hearing the court applied the Nken/Hilton four-factor stay test and Pioneer excusable-neglect framework, finding the Creditors bore a heavy burden and failed to show (1) a strong likelihood of success and (2) irreparable harm; the court also found substantial harm to other creditors and minimal public interest in a stay.
The court denied the motion for a stay and refused to invoke inherent authority to grant alternative relief, issuing the written order on May 20, 2021.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether to grant a stay pending appeal under Fed. R. Bankr. P. 8007	Creditors: Court misapplied Pioneer by considering prejudice to other unsecured creditors; therefore stay likely warranted	Debtor/Others: Creditors have not met heavy burden for extraordinary relief; existing ruling should allow distributions	Denied — four-factor stay test weighed against granting a stay
Likelihood of success on appeal (excusable neglect under Pioneer)	Creditors: Pioneer requires balancing; prejudice to other creditors is not a Pioneer factor, so appeal likely to succeed	Debtor: Fourth Circuit precedent makes the reason for delay the pivotal factor; Creditors offered no reasonable explanation for the five-day delay	Denied — Creditors failed to make the “strong showing” of likely success; no adequate reason for delay
Irreparable harm if stay denied	Creditors: Monetary losses and potential inability of other creditors to disgorge make harm irreparable	Debtor/Others: Harm is monetary and compensable; no evidence other creditors would be insolvent or unable to disgorge	Denied — no irreparable harm shown; monetary remedies adequate
Whether court should issue stay under its inherent powers	Creditors: alternatively ask court to suspend distributions under inherent authority	Debtor/Others: Bankruptcy rules provide the exclusive procedural mechanism; inherent power should not override rules	Denied — court declines to invoke inherent power where Rules control

Key Cases Cited

Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380 (1993) (established four-factor test for excusable neglect under Rule 9006)
Nken v. Holder, 556 U.S. 418 (2009) (explains stay-pending-appeal standards and four-factor balancing)
Hilton v. Braunskill, 481 U.S. 770 (1987) (articulates the four-factor stay test used by courts)
Thompson v. E.I. DuPont de Nemours & Co., Inc., 76 F.3d 530 (4th Cir. 1996) (emphasizes that the reason for delay is the most important Pioneer factor)
Long v. Robinson, 432 F.2d 977 (4th Cir. 1970) (endorses balancing of stay factors and notes monetary harm alone is insufficient for irreparable injury)
Tubens v. Doe, 976 F.3d 101 (1st Cir. 2020) (supports the view that the reason for delay is the pivotal Pioneer factor)
Hefta v. Official Comm. of Unsecured Creditors (In re American Classic Voyages Co.), 405 F.3d 127 (3d Cir. 2005) (discusses Pioneer balancing but relies on cause-of-delay analysis)
Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (cautions courts about invoking inherent powers and limits on those powers)