573 B.R. 522
Bankr. D. Del.2017Background
- SNMP Research International, Inc. (SNMPRI) and SNMP Research, Inc. (SNMPR) are related Tennessee corporations; SNMPR owns software copyrights and licensed the software to SNMPRI, which marketed/licenses to customers.
- Debtors licensed software from SNMPRI (License dated Dec. 23, 1999); Debtors filed Chapter 11 on Jan. 14, 2009; bar date for prepetition claims was Sept. 30, 2009.
- SNMPRI filed an original proof of claim Sept. 29, 2009 for unpaid royalties (~$22,281) and reserved right to amend; SNMPRI filed five successive amendments through Oct. 2015, culminating in a claim for ~$8.4 million (contractual royalties and related fees).
- In Nov. 2011 SNMPRI and SNMPR filed an adversary proceeding asserting postpetition copyright, trade secret, and contract claims; SNMP now seeks leave (Nov. 2016) to (1) amend SNMPRI’s prepetition proofs of claim to assert ~$81.1 million in copyright damages and (2) add SNMPR as a claimant—more than seven years after the bar date.
- Debtors opposed; the court treats SNMP’s Proposed Claims as a new, late claim (different party, different claim theory, far larger damages) and denied the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether leave should be granted to file Proposed Claims converting contractual royalty claims into large copyright damages after the bar date | Amendment relates to same conduct and should be allowed; expert report supports damages | Proposed Claims are new, not an amendment, and are prejudicial and untimely | Denied — Proposed Claims are new claims and untimely |
| Whether SNMPR can be added as a claimant to SNMPRI’s prepetition claim more than seven years after the bar date | SNMPRI’s filings sufficiently preserved rights; adding SNMPR corrects a mistaken omission and relates back | Addition is untimely, not excusable neglect, and would prejudice Debtors | Denied — addition barred by delay and lack of excusable neglect |
| Whether Rule 15/relation-back or Rule 17 justify adding a new claimant post-bar date | Relation back/Rule 17 permit adding the real party in interest and amending party list | Rule 15 does not permit adding new parties in this context; relation back fails because plaintiffs slept on rights | Denied — Rule 15/17 do not cure a long-postponed attempt to add a new claimant |
| Whether SNMPRI could assert copyright claims it did not own or cure standing by substituting SNMPR later | SNMP contended substitution would correct the record and allow claims to proceed | Constitutional standing is assessed at filing; SNMPRI lacked standing for copyrights it didn’t own so substitution cannot cure jurisdictional defect | Denied — SNMPRI lacks Article III standing to assert copyrights it does not own; cannot be cured by late substitution |
Key Cases Cited
- Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380 (equitable Pioneer excusable-neglect test governs late claim amendments)
- Midland Cogeneration Venture Ltd. P'ship v. Enron Corp., 419 F.3d 115 (2d Cir.) (courts apply a "hard line" on excusable neglect; reason for delay is decisive)
- Gardner v. State Farm Fire & Cas. Co., 544 F.3d 553 (3d Cir.) (Rule 15 does not permit adding new parties by amendment)
- Abraxis Bioscience, Inc. v. Navinta, 625 F.3d 1359 (Fed. Cir.) (lack of Article III standing at filing cannot be cured later)
- Zurich Ins. Co. v. Logitrans, Inc., 297 F.3d 528 (6th Cir.) (one entity cannot benefit from another’s jurisdictional mistake by late substitution)