537 B.R. 108
Bankr. D.P.R.2015Background
- Debtor Temsco filed Chapter 11 on Aug. 24, 2013; it listed the State Insurance Fund Corporation (SIF/CFSE) on its creditor lists and Schedule E with mailing address P.O. Box 42006, San Juan, PR 00940-2006 and marked the claim as disputed.
- The Clerk’s Notice of Chapter 11 and bar dates was docketed Aug. 30, 2013; the Certificate of Notice shows the Bankruptcy Noticing Center (BNC) electronically transmitted the notice to Alejandro.Suarez@cfse.gov.pr.
- SIF did not file a proof of claim by the governmental-entity bar date (Feb. 26, 2014); SIF filed a late proof of claim and moved for permission to file late on Aug. 25, 2014, arguing it had not been properly noticed.
- Temsco moved for summary judgment, arguing (inter alia) SIF was properly noticed because SIF had an Electronic Bankruptcy Noticing Agreement with the BNC and was sent notice to Suarez’s email; Temsco also faulted SIF’s internal notice procedures.
- The court found (i) the BNC sent notice electronically to an email address SIF had registered and (ii) Temsco failed to comply with a local rule requiring separate LBF A service to creditors scheduled as disputed, contingent, or unliquidated, but nonetheless concluded SIF received reasonable notice of the filing and bar dates.
- The plan was confirmed Aug. 29, 2014; the court held that because SIF received adequate notice, the confirmation is binding and SIF cannot use Rule 9006(b)(1) to resurrect an untimely claim. Debtor’s summary judgment was granted; SIF’s denied.
Issues
| Issue | Plaintiff's Argument (Temsco) | Defendant's Argument (SIF) | Held |
|---|---|---|---|
| Whether SIF received reasonable/adequate notice of the Chapter 11 filing and bar date | Notice was sent electronically to an email SIF registered with the BNC (Alejandro.Suarez@cfse.gov.pr); debtors need not list a creditor at any particular office; internal notice failures are SIF’s responsibility | Notice was materially deficient because the scheduled mailing address and the email recipient did not put the Bankruptcy Division counsel on notice; SIF’s Bankruptcy Division used a different address and Suarez was not the bankruptcy contact after July 2013 | Held SIF received reasonable notice: BNC transmitted notice to an email SIF had registered; the electronic-noticing agreement made transmission effective notice |
| Whether failure to serve LBF A to creditors scheduled as disputed (local rule) affects adequacy of notice | Not dispositive because SIF actually received electronic notice; any local-service lapse does not change that the BNC sent notice to SIF’s registered email | SIF argued debtor failed to send required LBF A notice to disputed creditors, prejudicing SIF’s opportunity to file timely claim | Court found Debtor violated local rule on LBF A service but that SIF nonetheless received reasonable notice via electronic transmission |
| Whether untimely proof of claim can be allowed after plan confirmation under Rule 9006(b)(1) (excusable neglect) | If notice was adequate, SIF is bound by confirmation; Rule 9006(b)(1) cannot resurrect a claim post-confirmation | SIF urged equitable relief/excusable neglect because of alleged defective notice and internal changes at SIF | Held that because SIF received adequate notice and the plan was confirmed, Rule 9006(b)(1) cannot be used to allow a post-confirmation, untimely claim; confirmation is binding under §1141(a) |
| Effect of SIF having registered electronic noticing and its duty to update BNC | Temsco: registration made electronic transmission effective; SIF had duty to update contact info and internal procedures | SIF: disputed whether Suarez remained the appropriate contact and argued internal changes excused nonreceipt of practical notice | Held registration made the electronic transmission effective notice; SIF had the responsibility to maintain/update its BNC registration and internal notice procedures |
Key Cases Cited
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (constitutional standard that notice must be reasonably calculated to apprise interested parties)
- Pioneer Inv. Servs. Co. v. Brunswick Assocs., 507 U.S. 380 (1993) (framework for excusable neglect analysis under Rule 9006(b))
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010) (confirmations are binding when parties receive constitutionally adequate notice)
- In re O’Shaughnessy, 252 B.R. 722 (Bankr. N.D. Ill. 2000) (applies Pioneer factors to excusable neglect in bankruptcy context)
- In re St. James Mech., Inc., 434 B.R. 54 (E.D.N.Y. 2010) (post-confirmation untimely claims cannot be revived where adequate notice was given)