311 F.3d 298 | 3rd Cir. | 2002
Before: NYGAARD, ROTH, and WEIS, Circuit Judge s.(cid:13) Filed November 21, 2002(cid:13) Gerald T. Ford, Esquire (ARGUED)(cid:13) Robert A. Kasuba, Esquire(cid:13) Landman Corsi Ballaine & Ford(cid:13) One Gateway Center, Suite 400(cid:13) Newark, New Jersey 07102(cid:13) Attorneys for Appellant(cid:13) The Chase Manhattan Bank, now(cid:13) known as J. P. Morgan Chase Bank(cid:13) Michael M. Rosenbaum, Esquire(cid:13) (ARGUED)(cid:13) William M. D’Annunzio, Esquire(cid:13) Budd Larner Gross Rosenbaum(cid:13) Greenberg & Sade(cid:13) 150 John F. Kennedy Parkway(cid:13) Short Hills, New Jersey 07078-0999(cid:13) Attorneys for Appellee(cid:13) Cendant Corporation(cid:13) OPINION OF THE COURT(cid:13) WEIS, Circuit Judge.(cid:13) We remanded this case to the District Court for(cid:13) determination of whether Chase National Manhattan Bank(cid:13) ("Chase"), as custodian, had established excusable neglect(cid:13) for late filing of documents confirming its right to(cid:13) participate in the distribution of a fund created to settle a(cid:13) class action. In re Cendant Corp. Prides Litig. , 234 F.3d 166(cid:13) (3d Cir. 2000) ("Chase I"). After reconsideration, the District(cid:13) Court adhered to its previous ruling rejecting the(cid:13) applicability of excusable neglect. We will reverse and(cid:13) remand with directions to allow the claims.(cid:13) The case is based on Securities Act violations with(cid:13) respect to Cendant Corporation’s convertible securities(cid:13) called "Prides." As we observed in one of the numerous(cid:13) opinions in this complex litigation,1 "it is basically(cid:13) _________________________________________________________________(cid:13) 1. See In re Cendant Corp. Prides Litig., 233 F.3d 188 (3d Cir. 2000); In(cid:13) re Cendant Corp. Prides Litig., 234 F.3d 166 (3d Cir. 2000) ("Chase I");(cid:13) 2(cid:13) undisputed that Cendant’s employees committed fraud." In(cid:13) re Cendant Corp. Litig., 264 F.3d 201, 249 (3d Cir. 2001).(cid:13) Chase I reviewed the issues here in some detail, but we(cid:13) will only summarize the principal points that are relevant to(cid:13) this appeal. Chase, custodian for three mutual funds -(cid:13) Capital Income Builder, Inc., Income Fund of America, Inc.,(cid:13) and Capital World Growth and Income, Inc. - timely filed(cid:13) proofs of claim for each entity against the settlement fund(cid:13) of $341,480,861. Capital Income’s claim was $4,684,000;(cid:13) Income Fund, $16,394,000; and World Growth,(cid:13) $2,576,200.(cid:13) At the request of Valley Forge Administrative Services,(cid:13) the claims administrator, Chase provided additional(cid:13) information in August 1999 with respect to Income Fund(cid:13) and World Growth. Although the cures were eight days late,(cid:13) Valley Forge approved them. No information was supplied,(cid:13) however, in connection with the Capital Income claim, and(cid:13) Valley Forge rejected it on August 17, 1999.(cid:13) In September 1999, Cendant moved to dismiss all late(cid:13) cured claims, including Income Fund and World Growth. In(cid:13) October 1999, the District Court granted a four day(cid:13) extension of the deadline for curing claims as originally set,(cid:13) but stated that it would accept no excuses for tardiness(cid:13) that were filed with the Court after September 7, 1999.(cid:13) In January 2000, the District Court rejected the Income(cid:13) Fund and World Growth claims because they had failed to(cid:13) file excuses for their untimely filing of cures. In April 2000,(cid:13) Chase, invoking Federal Rule of Civil Procedure 60(b),(cid:13) sought allowance of all three claims, including that of(cid:13) _________________________________________________________________(cid:13) In re Cendant Corp. Prides Litig., 235 F.3d 176 (3d Cir. 2000)(cid:13) ("Santander"); In re Cendant Corp. Prides Litig., 243 F.3d 722 (3d Cir.(cid:13) 2001); In re Cendant Corp., 260 F.3d 183 (3d Cir. 2001); In re Cendant(cid:13) Corp. Litig., 264 F.3d 201 (3d Cir. 2001); In re Cendant Corp. Litig., 264(cid:13) F.3d 286 (3d Cir. 2001); In re Cendant Corp. Prides Litig., 51 F. Supp.2d(cid:13) 537 (D.N.J. 1999); In re Cendant Corp. Prides Litig., 189 F.R.D. 321(cid:13) (D.N.J. 1999); In re Cendant Corp. Litig., 60 F. Supp.2d 354 (D.N.J.(cid:13) 1999); In re Cendant Corp. Prides Litig., 98 F. Supp.2d 602 (D.N.J.(cid:13) 2000); In re Cendant Corp. Prides Litig., 157 F. Supp.2d 376 (D.N.J.(cid:13) 2001).(cid:13) 3(cid:13) Capital Income. The District Court denied the request and(cid:13) Chase appealed. We concluded that the District Court had(cid:13) failed to consider matters that might have constituted a(cid:13) basis for establishing excusable neglect and remanded for(cid:13) further proceedings.(cid:13) In accordance with our instructions, the District Court(cid:13) reconsidered Chase’s Rule 60(b) motion. After permitting(cid:13) limited discovery and hearing oral argument, the Court(cid:13) again denied the motion. Chase has appealed.(cid:13) As Chase I made clear, the proper standard to be applied(cid:13) in determining whether tardy claims were entitled to share(cid:13) in the settlement proceeds is "excusable neglect." Chase I,(cid:13) 234 F.3d at 168 n.2. The inquiry, essentially equitable,(cid:13) requires consideration of the entire situation. Pioneer Inv.(cid:13) Servs. v. Brunswick Assoc., Ltd. P’ship, 507 U.S. 380, 395(cid:13) (1993). Pioneer set out four factors to be considered: (1)(cid:13) prejudice to the adverse party; (2) length of the delay and(cid:13) its potential impact on the judicial proceedings; (3) reason(cid:13) for the delay, including whether it was within the(cid:13) reasonable control of the movant; and (4) whether the(cid:13) movant acted in good faith. Id.(cid:13) With these general principles as the backdrop, we will(cid:13) review the District Court’s rulings on remand as to the(cid:13) respective claims under the abuse of discretion standard.(cid:13) Ahmed v. Dragovich, 297 F.3d 201, 209 (3d Cir. 2002).(cid:13) Because of a difference in material facts, we will discuss the(cid:13) Capital Income claim after we have first considered the(cid:13) other two.(cid:13) I.(cid:13) Many of the surrounding matters are in dispute, but the(cid:13) controlling circumstances with respect to Income Fund and(cid:13) World Growth are definitive enough to reach a conclusion(cid:13) on the proper disposition. The crucial chronology follows.(cid:13) Valley Forge sent separate letters dated July 15, 1999 to(cid:13) Income Fund and World Growth and a duplicate one to(cid:13) Income Fund dated July 16, 1999. The letters requested(cid:13) further information about the previously submitted proofs(cid:13) of claim. Chase responded by fax on August 12, 1999,(cid:13) 4(cid:13) although this was four-days late as per the terms of the(cid:13) settlement agreement and court order.2 (cid:13) The District Court found that after receiving the faxed(cid:13) responses, Valley Forge approved those two claims. This(cid:13) finding appears to be based on the unchallenged affidavit(cid:13) submitted by Ms. Collins, a Chase employee who(cid:13) telephoned Valley Forge after sending the fax on August 12,(cid:13) 1999. She averred that she was told that the Income Fund(cid:13) and World Growth claims were now in order. She had also(cid:13) given Chase’s fax and telephone numbers to Valley Forge(cid:13) on that occasion.(cid:13) Substantial dispute exists with respect to two other(cid:13) mailings allegedly sent by Valley Forge. One letter dated(cid:13) August 5, 1999 reminded Chase of the necessity for(cid:13) information to cure the proofs of claim. Two form letters,(cid:13) dated August 27, 1999 and addressed to "Claimant" rather(cid:13) than Chase, stated that the cures were late, but that Valley(cid:13) Forge and class counsel nevertheless believed the claims(cid:13) should be accepted as valid. However, the letters urged the(cid:13) "Claimant" to write to the court explaining why the cures(cid:13) were tardy.(cid:13) The District Court, relying on the presumption of mailing(cid:13) and delivery, found that the notices of August 27, 1999 had(cid:13) been received, despite Chase’s denial of receipt. Finding(cid:13) that Cendant had not been prejudiced and Chase’s Rule(cid:13) 60(b) motion had been brought within a reasonable time,(cid:13) the Court, however, refused to modify its January 14, 2000(cid:13) order denying the Income Fund and World Growth claims.(cid:13) The parties devoted much of their argument before the(cid:13) District Court on remand and on this appeal discussing(cid:13) whether the August 27, 1999 "Claimant" letters had been(cid:13) received by Chase. We conclude, however, that that issue is(cid:13) a distraction and is not material to a determination of(cid:13) whether the delay in filing Income Fund and World Growth(cid:13) cures falls within the ambit of excusable neglect. 3(cid:13) _________________________________________________________________(cid:13) 2. Actually, it was eight-days late, but the District Court’s grant of a(cid:13) four-day grace period for all cured claims reduced the tardy factor for the(cid:13) Income Fund and World Growth to four days.(cid:13) 3. In our prior opinion we commented that the letters of August 27, 1999(cid:13) were "critical." Chase I, 234 F.3d at 173. However, the District Court had(cid:13) 5(cid:13) As stated in Chase I, Cendant could not establish(cid:13) prejudice. The District Court had earlier reached that same(cid:13) conclusion in granting the four-day grace period for filing(cid:13) the cures, explaining that the "limits of Cendant’s(cid:13) bargained--for financial obligations, $341,480,861, have(cid:13) not been expanded." In re Cendant Corp. Prides Litig., 189(cid:13) F.R.D. at 321, 325 (D.N.J. 1999). We agreed that,". . . the(cid:13) only ‘prejudice’ Cendant would suffer by being forced to pay(cid:13) Chase is the ‘loss of a windfall.’ " Chase I, 234 F.3d 171(cid:13) n.8.(cid:13) On remand, the District Court also concluded that(cid:13) Chase’s delay in filing its Rule 60(b) motion was reasonable(cid:13) and had no actual negative impact on the judicial(cid:13) proceedings. Notwithstanding the findings favorable to(cid:13) Chase, the judge criticized it for lack of diligence following(cid:13) disallowance of the Income Fund and World Growth claims(cid:13) in the January 14, 2000 order and further commented that(cid:13) Chase’s conduct indicated a lack of good faith in the claims(cid:13) process.(cid:13) In its defense, Chase pointed out that Cendant’s motion(cid:13) in September 1999 to disallow these two claims along with(cid:13) those of other parties was served on only class counsel who(cid:13) failed to notify the claimants. Moreover, in a brief submitted(cid:13) in response to Cendant’s motion, class counsel had(cid:13) suggested that all late cures, including Chase’s, be(cid:13) considered timely if filed by August 17, 1999.(cid:13) In response to the District Court’s limitation of excuses to(cid:13) those submitted before September 7, 1999, class counsel(cid:13) filed a brief that listed extenuating circumstances for some(cid:13) claimants, but proffered nothing with respect to Income(cid:13) Fund and World Growth.(cid:13) Although Chase’s lack of diligence in following the(cid:13) progress of the Court’s proceedings is far from(cid:13) commendable, it did not amount to a lack of good faith.(cid:13) _________________________________________________________________(cid:13) not mentioned the August 12th fax cures in its opinion of June 7, 2000(cid:13) (the subject of Chase I). Nor did it acknowledge that Valley Forge had(cid:13) approved the cures. Consequently, Chase I did not discuss whether the(cid:13) District Court could have considered that Valley Forge’s approval made(cid:13) it unnecessary for Income Fund or World Growth to file excuses.(cid:13) 6(cid:13) Certainly, Chase could assume that during the period in(cid:13) question, class counsel was looking after the interests of(cid:13) the Funds as well as the other class members.(cid:13) But most critical on remand was the District Court’s(cid:13) failure to consider the length of the delay in sending the(cid:13) cure information to Valley Forge -- four days. As we(cid:13) commented in a companion case, "we agree with the Prides(cid:13) Class that the District Court need not have scrutinized(cid:13) claims meeting that extended date [September 7, 1999](cid:13) with the same exactitude as those claims missing even that(cid:13) deadline." In re Cendant Corp. Prides Litig. , 233 F.3d 188,(cid:13) 197 (3d Cir. 2000). In another Prides case, In re Cendant(cid:13) Corp. Prides Litig., 235 F.3d 176 (3d Cir. 2000)(cid:13) ("Santander"), we characterized the delay of five days, or(cid:13) three business days, in filing the initial proof of claim by(cid:13) another claimant in this same litigation as "trivial."(cid:13) In the case now before us, we conclude that the four-day(cid:13) delay in filing the cures by Income Fund and World Growth(cid:13) was trivial as well. Indeed, the justification for imposing(cid:13) unyielding time limits on perfecting a cure is even less(cid:13) obvious than that for filing a proof of claim. In view of the(cid:13) insignificant time lapse of only four days, and the(cid:13) assurance given by Valley Forge that the claims were in(cid:13) order, it would not be unreasonable for Chase to have(cid:13) assumed that there was no need to submit an excuse to the(cid:13) Court -- even if the August 27, 1999 form letter had been(cid:13) received.(cid:13) Given these circumstances, and recognizing the equitable(cid:13) nature of the proceeding, we are persuaded that the record(cid:13) demonstrates the existence of excusable neglect. Thus, the(cid:13) District Court’s denial of the Income Fund and World(cid:13) Growth claims did not constitute the exercise of sound(cid:13) judicial discretion. Accordingly, those claims should be(cid:13) allowed.(cid:13) II.(cid:13) Although the proof of claim for Capital Income was filed(cid:13) at the same time as those for Income Fund and World(cid:13) Growth, the chronology of significant events thereafter(cid:13) varies substantially.(cid:13) 7(cid:13) Cendant contends that Valley Forge sent a notice dated(cid:13) July 19, 1999 to Chase as custodian for Capital Income(cid:13) requesting additional information. Like all of the others, it(cid:13) was addressed to "Chase Manhattan as TTEE, P.O. Box(cid:13) 1508 Church St. Station, New York, N.Y. 10008." Chase,(cid:13) however, asserts that it never received that letter. On(cid:13) August 5, 1999, Valley Forge mailed letters to Chase’s post(cid:13) office box again requesting cure information on each of the(cid:13) three funds, including Capital Income. Those letters did(cid:13) reach Chase, but they were date-stamped as being received(cid:13) in Chase’s Class Action Group on November 15, 1999. That(cid:13) date-stamp does not establish, however, when the letter(cid:13) actually arrived at Chase’s post office box.(cid:13) Having received no response within a few weeks to its(cid:13) earlier letters, Valley Forge sent a third notice dated August(cid:13) 17, 1999 rejecting Capital Income’s claim. Chase asserts it(cid:13) never received this letter and, thus, never knew of the(cid:13) denial. Because the Capital Income claim had been rejected(cid:13) by Valley Forge, it was not called to the attention of the(cid:13) District Court by class counsel in connection with(cid:13) Cendant’s September 1999 motion to deny various claims.(cid:13) Chase responded to the delayed letter of August 5, 1999(cid:13) on January 4, 2000 by sending the requested data to Valley(cid:13) Forge. No explanation exists in the record for the time-lapse(cid:13) between November 15, 1999, when Chase’s Class Action(cid:13) Group received the August 5th notice, and January 4,(cid:13) 2000, when it sent the information to Valley Forge.(cid:13) On January 17, 2000, class counsel wrote to Chase that(cid:13) the Court had denied the Income Fund and World Growth(cid:13) claims and suggested that because of a possible conflict of(cid:13) interest, separate counsel should be retained to appeal that(cid:13) ruling. Chase admits losing that letter. However, it has little(cid:13) bearing on the Capital Income issue because that claim had(cid:13) not been submitted to the Court, and therefore was not(cid:13) mentioned in the District Court’s January 14, 2000 order.(cid:13) In early April 2000, after Chase had requested(cid:13) information on its claims, class counsel sent a copy of its(cid:13) January 17th letter. After further investigation, Chase filed(cid:13) a motion under Rule 60(b) on April 24, 2000 seeking relief(cid:13) from the order denying its claims, including that of Capital(cid:13) Income.(cid:13) 8(cid:13) In the remand proceedings, the District Court found that(cid:13) the July 18, 1999 and the August 5, 1999 letters(cid:13) requesting cure information from Capital Income, as well as(cid:13) that of August 17th which denied the claim, had been(cid:13) received by Chase. The Court relied on affidavits submitted(cid:13) by Valley Forge describing its mailing procedures.(cid:13) The Court noted, but did not place much stock in(cid:13) Chase’s contention that it was not unusual for mail(cid:13) addressed to Chase to be delayed ten to fifteen days by the(cid:13) Post Office. The Court criticized Chase’s practice of using a(cid:13) central mailroom, which processed all incoming(cid:13) communications and employed a ten-step arrangement in(cid:13) distributing them internally. This arrangement required(cid:13) three days to transmit correspondence about class actions(cid:13) to the Class Action Group within the bank. Only after(cid:13) letters reached the Group were they date-stamped.(cid:13) The Court concluded that Chase had lost the August 17,(cid:13) 1999, notice of disallowance because of its own fault in(cid:13) maintaining an inefficient internal mail distribution system.(cid:13) During the oral argument on the Rule 60(b) motion, the(cid:13) District Court expressed its irritation with Chase’s internal(cid:13) mailroom system, commenting that "even under the Pony(cid:13) Express, delivery was better than that." The criticism was(cid:13) understandable and well-deserved.(cid:13) The Court also questioned the delay between November(cid:13) 15, 1999, when the August 5, 1999 letter was concededly(cid:13) received, and January 4, 2000, when Chase finally(cid:13) answered on behalf of Capital Income and the other two(cid:13) funds. Finally, the Court explained that finding excusable(cid:13) neglect here would provide a disincentive for diligence on(cid:13) the part of claimants in future cases.(cid:13) Despite Chase’s denial that it had received the(cid:13) documents, the Court relied on the presumption that Valley(cid:13) Forge, having produced evidence of its mailing procedures,(cid:13) had established a presumption of timely delivery. The(cid:13) common law has long recognized a presumption that an(cid:13) item properly mailed was received by the addressee. Hagner(cid:13) v. United States, 285 U.S. 427, 430 (1932) (citing Rosenthal(cid:13) v. Walker, 111 U.S. 185, 193 (1884)); United States v.(cid:13) Bowen, 414 F.2d 1268, 1272 (3d Cir. 1969).(cid:13) 9(cid:13) The presumption arises upon proof that the item was(cid:13) properly addressed, had sufficient postage, and was(cid:13) deposited in the mail. Beck v. Somerset Technologies, Inc.,(cid:13) 882 F.2d 993, 996 (5th Cir. 1989). To invoke the(cid:13) presumption, proof of procedures followed in "the regular(cid:13) course of operations" gives rise to a strong inference that it(cid:13) was properly addressed and mailed. Godfrey v. United(cid:13) States, 997 F.2d 335, 338 (7th Cir. 1993).(cid:13) The mailing and timely receipt presumption is rebuttable,(cid:13) and at least one Court has held that testimony denying(cid:13) receipt suffices to rebut the presumption. See In re The(cid:13) Yoder Co., 758 F.2d 1114, 1118 (6th Cir. 1985). Although(cid:13) the presumption of mailing rests on the dependability of the(cid:13) U.S. Postal Service, human experience has shown that that(cid:13) reliance has not always been justified.(cid:13) In this case, application of the presumption is(cid:13) troublesome. Valley Forge had to process approximately(cid:13) 8,000 claims under very tight time restraints. The record(cid:13) shows that Valley Forge sent a letter to Income Fund on(cid:13) July 15, 1999 and sent another identical one on the(cid:13) following day, July 16, 1999. This would seem to indicate(cid:13) some question by Valley Forge that it had included Income(cid:13) Fund in the mailing of the previous day. If its record(cid:13) keeping had been precise, there should have been no doubt.4(cid:13) Chase’s mailing room handled the bank’s extensive(cid:13) correspondence and distributed the mail in a manner that(cid:13) almost guaranteed human error would creep in and result(cid:13) in mishandling. However, it is curious that Chase(cid:13) responded to two of the three requests to cure, but did(cid:13) nothing about the letter to Capital Income requesting the(cid:13) same information. One could reasonably assume that since(cid:13) Chase took pains to answer the two letters, it must have(cid:13) been inadvertence that led to its failure to do the same with(cid:13) the third -- if it had been received.(cid:13) _________________________________________________________________(cid:13) 4. According to Valley Forge, the second request pertaining to Income(cid:13) Fund was sent to "insure that this large institutional claimant would(cid:13) submit sufficient documentation for its claim." However, the later(cid:13) mailings evidenced no such concern even though the Chase claims were(cid:13) among the largest of those submitted.(cid:13) 10(cid:13) Chase denied receipt of the August 17, 1999 rejection(cid:13) letter for Capital Income, but at the same time, did receive(cid:13) denials for 145 other claims that concededly were invalid.(cid:13) It is quite possible that the Capital Income denial became(cid:13) mixed in with the other 145 rejections.(cid:13) Apparently, recognizing the problem of supplying(cid:13) information to the proper persons in large organizations,(cid:13) Valley Forge, in addition to mailing the letters, faxed them(cid:13) to a number of Funds. Chase did not include a fax number(cid:13) with its proof of claim, but did supply it to Valley Forge(cid:13) before it sent the August 17, 1999 rejection letter. That(cid:13) particularly important communication not only notified(cid:13) Capital Income of the denial of its claim, but also advised(cid:13) that a petition could be filed with the Court asking for a(cid:13) reversal of the rejection.(cid:13) We recognize that these troubling uncertainties were(cid:13) within the province of the District Court to resolve, but they(cid:13) nonetheless color other aspects of the case. For example, in(cid:13) Santander, 235 F.3d at 183, the District Court refused to(cid:13) excuse a late filing caused by delay in the claimant’s(cid:13) mailing room, remarking that the reason was "internal to(cid:13) [Santander’s] organization." We reversed, concluding that "a(cid:13) mailroom which [does] not operate as it should have in the(cid:13) ordinary conduct of business" is a mitigating factor in(cid:13) weighing the existence of excusable neglect. Id . at 183.(cid:13) Santander also pointed out that in three other instances(cid:13) the District Court had accepted somewhat similar grounds(cid:13) for finding excusable neglect. Id. at 183 n.10. In one case,(cid:13) the mailroom was handled "contrary to custom" and in(cid:13) another there were problems with an internal mailroom(cid:13) procedure. Id.(cid:13) In an earlier opinion, the district judge allowed a claim(cid:13) filed by Mellon Bank. In re Cendant Corp. Prides Litig., 98(cid:13) F. Supp.2d at 606. In that case, Mellon had received four(cid:13) letters from Valley Forge between June 22, 1999 and(cid:13) August 17, 1999. Id. at 604. Mellon conceded that the clerk(cid:13) in charge deliberately did not respond and did nothing until(cid:13) he called Valley Forge in January 2000 to check on the(cid:13) status of the claim. Id. The District Court accepted Mellon’s(cid:13) excuse that the delay had been caused by a severe bout of(cid:13) 11(cid:13) depression suffered by the clerk in charge. Id . at 606. We(cid:13) have no quarrel with the Court’s ruling in the Mellon(cid:13) matter, but fail to see a difference substantial enough to(cid:13) account for a contrary result in Chase’s case.(cid:13) Even assuming that Chase received the letters of July(cid:13) and August 1999, we point out that the delay between the(cid:13) due date of August 8, 1999 and January 4, 2000 when(cid:13) Valley Forge was given the requested data is not beyond the(cid:13) pale. In In re O’Brien Envtl. Energy, Inc., 188 F.3d 116, 130(cid:13) (3d Cir. 1999), we observed that Pioneer teaches that delay(cid:13) should be considered in absolute terms, and that two(cid:13) months was not prohibitive. See also Chemetron Corp. v.(cid:13) Jones, 72 F.3d 341 (3d Cir. 1995) (claim two years late(cid:13) could be excusable). In re Orthopaedic Bone Screw Products(cid:13) Liab. Litig., 246 F.3d 315 (3d Cir. 2001) (seven month delay(cid:13) held excusable).(cid:13) We think the determining factor in arriving at a proper(cid:13) resolution in this equitable proceeding is Pioneer’s(cid:13) admonition to consider the totality of the circumstances.(cid:13) Insistence upon meeting time limitations is important in(cid:13) the prompt disposition of litigation, and the record supports(cid:13) the District Court’s view that Chase carelessly and(cid:13) inefficiently handled its serious responsibilities. However,(cid:13) given that Cendant was not prejudiced by the delay, and(cid:13) the Court not hindered in any substantial degree in its(cid:13) administration of the case, the issue is narrowed down to(cid:13) the fundamental question of whether the party that(cid:13) committed fraud should profit by the careless and inept(cid:13) conduct of the party having a legitimate claim. In the(cid:13) circumstances here, equity should, albeit with misgivings,(cid:13) tolerate negligence rather than reward fraud.(cid:13) After careful consideration of all the factors, we conclude(cid:13) that the District Court chose the wrong path, and its ruling(cid:13) in favor of Cendant and against Capital Income does not(cid:13) represent a sound exercise of judicial discretion.(cid:13) Accordingly, the order of the District Court will be(cid:13) reversed and the matter remanded for allowance of the(cid:13) claims of Capital Income Builder, Inc., Income Fund of(cid:13) America, Inc., and Capital World Growth and Income, Inc.(cid:13) 12(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the United States Court of Appeals(cid:13) for the Third Circuit(cid:13) 13
