Shu Lun Wu v. May Kwan Si, Inc., 508 B.R. 606

Defendant Tsu Yue Wang filed a Chapter 11 petition on March 22, 2010 and did not list plaintiffs Shu Lun Wu and Foong Oi Wong on his bankruptcy schedules.
Bankruptcy Judge Glenn entered a Bar Date Order setting July 15, 2010 as the deadline to file proofs of claim; the order required notice to known creditors and required the debtor to give notice to holders of claims affected by any subsequent schedule amendments.
Plaintiffs sued Wang in district court on July 14, 2010 asserting FLSA, New York Labor Law, and NYC labor regulation claims; Wang did not serve them with the Bar Date Order.
On September 10, 2010 (after the Bar Date), Wang’s counsel notified the district court and plaintiffs of the pending bankruptcy, and the district action was stayed as to Wang; Wang never amended his schedules to add the plaintiffs or filed proofs of claim on their behalf.
Wang’s disclosure statement and Chapter 11 plan were approved and the plan confirmed in early 2012; the plan and confirmation order provided for discharge and an injunction against collecting discharged debts, but plaintiffs were not served with those documents.
District court denied Wang’s motion to dismiss without prejudice because Wang failed to prove plaintiffs received adequate pre‑Bar Date notice; plaintiffs’ Rule 11 sanctions motion was denied for procedural and substantive reasons.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether plaintiffs’ claims were discharged by Wang’s confirmed Chapter 11 plan	Plaintiffs argue they were not discharged because they were unscheduled and did not receive timely notice of the Bar Date	Wang contends his bankruptcy and confirmation discharged plaintiffs’ claims; his counsel’s September 2010 letter provided adequate notice	Held: Dismissal denied without prejudice — Wang failed to prove plaintiffs had notice of the July 15 Bar Date, so their claims were not shown discharged
Whether Rule 11 sanctions against Wang’s counsel are warranted	Plaintiffs argue counsel misled courts by failing to amend schedules and by seeking dismissal despite lack of required notice	Wang contends the dismissal argument was colorable and not frivolous; different counsel represented him in bankruptcy	Held: Sanctions denied — plaintiffs failed to comply with Rule 11 procedural prerequisites and did not show the dismissal argument was objectively baseless

Medaglia v. 52 F.3d 451 (2d Cir. 1995) (knowledge of bankruptcy differs between Chapter 7 and Chapter 11 for bar‑date purposes)
Massa v. 187 F.3d 292 (2d Cir. 1999) (unscheduled creditor without notice is not bound by discharge)
Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990) (standards and caution in imposing Rule 11 sanctions)
Kropelnicki v. Siegel, 290 F.3d 118 (2d Cir. 2002) (Rule 11 sanctions standard in the Second Circuit)