Ferrell v. U-Haul Co. of West Virginia
2:21-cv-00670
S.D.W. VaSep 26, 2022Background
- Debtor: U-Haul Co. of West Virginia filed Chapter 11 on June 16, 2021; sole shareholder U-Haul International, Inc. (UHI) filed a proof of claim > $120 million.
- The Ferrell Class (Amanda Ferrell, et al.) were customers who sued the Debtor (state-court class action) and submitted a late proof of claim in the bankruptcy alleging widespread fraud and statutory damages.
- The Debtor’s confirmed Plan (Aug. 23, 2021) provided for an auction sale of equity to UHI for $2.5 million; UHI’s support and release of its unsecured claim were central to funding creditor distributions.
- Bankruptcy Court denied the Ferrell Class’s motion to enlarge time to file and found they lacked party-in-interest standing, barring their objection to confirmation; Plan was confirmed and substantially consummated with stock cancellation/issuance and distributions to creditors.
- The Ferrell Class appealed but did not seek a stay; appellants sought merits review (three substantive issues), appellees moved to dismiss the appeal as equitably moot; the District Court granted the motion and terminated the appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Equitable mootness of the appeal | Appeal not moot; court can fashion equitable relief that preserves Plan and addresses merits | Appeal equitably moot: no stay sought, Plan substantially consummated, relief would undermine Plan and harm third parties | Appeal dismissed as equitably moot — relief impractical and would disrupt consummated Plan |
| Denial of enlargement for excusable neglect (late proof of claim) | Bankruptcy Court abused discretion applying excusable neglect to bar claim | Filing was untimely; denial proper under excusable neglect analysis | Not reached on merits due to equitable mootness |
| Standing / party-in-interest to object to Plan | Ferrell Class had standing to object to confirmation | Ferrell Class lacked party-in-interest status; objection properly disallowed | Not reached on merits due to equitable mootness |
| Confirmation and release of alter-ego claims against UHI | Confirmation improperly released appellants’ alter-ego claims | Release was a material condition of UHI’s support; altering Plan would undermine it | Not reached on merits due to equitable mootness |
Key Cases Cited
- Mac Panel Co. v. Virginia Panel Corp., 283 F.3d 622 (4th Cir. 2002) (articulates equitable-mootness doctrine and factors; relief impractical may be denied)
- U.S. Airways Group, Inc. v. McCutchen, 369 F.3d 806 (4th Cir. 2004) (failure to seek a stay is a significant factor weighing toward equitable mootness)
- Central States Se. & Sw. Areas Pension Fund v. Central Transp., Inc., 841 F.2d 92 (4th Cir. 1988) (substantial consummation does not automatically bar appellate review)
- In re AOV Indus., Inc., 792 F.2d 1140 (D.C. Cir. 1986) (discusses limits on review after plan consummation)