In re: ENERGY FUTURE HOLDINGS CORP., et al., Debtors.
Case No. 14-10979 (CSS)
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
August 27, 2020
Chapter 11 (Jointly Administered) Related Docket Nos. 14047 and 14055
OPINION1
Jeffrey M. Schlerf
919 North Market Street, Suite 300
Wilmington, DE 19801
-and-
WHITE & CASE LLP
Thomas E. Lauria
Matthew C. Brown
Southeast Financial Center, Suite 4900
200 South Biscayne Blvd.
Miami, FL 33131
-and-
WHITE & CASE LLP
J. Christopher Shore
1221 Avenue of the Americas
New York, NY 10020
Counsel to Sempra Energy and the Reorganized EFH/EFIH Debtors
HOGAN MCDANIEL
Daniel K. Hogan
1311 Delaware Avenue
Wilmington, DE 19806
Counsel for Denis and Meri Bergschneider and Kaye Heinzmann
-and-
THE RUCKDESCHEL LAW FIRM LLC
Jonathan Ruckdeschel
8357 Main Street
Ellicott City, MD 21043
Counsel for Kaye Heinzmann
KAZAN MCCLAIN SATTERLEY & GREENWOOD, A Professional Law Corporation
Jack London Market
55 Harrison Street, Suite 400
Oakland, CA 94607
Counsel for Denis and Meri Bergschneider
Dated: August 27, 2020
Sontchi, C.J.
INTRODUCTION
Before the Court is the
JURISDICTION
This Court has jurisdiction over this matter, pursuant to
STATEMENT OF FACTS
A. Procedural History
In December 2015, and as discussed in detail below, the Court established a bar date in these cases for asbestos related claims. Thereafter, the Movants were diagnosed with asbestos-related illnesses, and participated actively in the plan and confirmation process related to the Debtors’ Plan (as defined below), including an appeal of the confirmation order to the Third Circuit. After the Third Circuit‘s disposition of that appeal on February 18, 2020,4 affirming this Court‘s confirmation of the Plan and finding that the notice of the Asbestos Bar Date was sufficient under the facts and circumstances of these cases, the Movants filed the Motions on April 20, 2020, and May 1, 2020 respectively.5 The Motions are fully briefed6 and the Court heard argument on the Motions on June 1, 2020. At the conclusion of the argument, the Court took these Motions under advisement. This is the Court‘s ruling thereon.
B. Factual History of the Bankruptcy Cases
On April 29, 2014, each of the Debtors filed a voluntary petition under chapter 11 of the Bankruptcy Code. The Debtors are operating their businesses and managing their properties as debtors in possession pursuant to
The United States Trustee has appointed two official committees of unsecured creditors in these cases.7
In 2014, the Debtors sought to establish a process to notify potential asbestos claimants of the bankruptcy and a deadline for them to submit proof of claims.8
Various personal injury law firms9 objected to the Debtors’ motion to establish a bar date, arguing that it “would violate the fundamental due process rights of thousands of potential asbestos claimants.”10 The objecting law firms argued that providing adequate notice for Unmanifested Asbestos Claimants11 was not possible.12 On August 13 and October 28, 2014, the Court held two hearings and ordered additional briefing on the issue.13
On January 7, 2015, the Court issued a written opinion in which it held that it had the power and jurisdiction to establish a bar date for Unmanifested Asbestos Claims and found that an appropriate notice program could satisfy due process concerns.14 The Court stated that the discharge of the Debtors’ liability for Unmanifested Asbestos Claims could be consistent with due process and found that, for Unmanifested Asbestos Claims under Third Circuit law, “publication notice may be sufficient to satisfy due process.”15
The Bar Date Opinion required that the Debtors devise a comprehensive notice program to inform potential asbestos claimants, including “Unmanifested Asbestos Claimants,” of their rights to file proofs of claim.16 To that end, the Debtors and the E-side Committee each retained noticing experts and engaged in extensive diligence. Two asbestos claimants, including one of the Kazan Law‘s clients, sat on the E-side Committee throughout the cases.17
The Debtors retained Hilsoft Notifications (“Hilsoft“) to design a comprehensive plan (the “Notice Plan“) to provide notice of the bar date (the “Asbestos Bar Date Notice“). Hilsoft is a nationally recognized leader in providing notice and has experience in some of the largest, most complex,
The E-side Committee provided extensive feedback on the proposed notice plan, virtually all of which the Debtors incorporated into their noticing program.21
On July 30, 2015, the Court entered the “Asbestos Bar Date Order” approving the Notice Plan for distributing the Asbestos Bar Date Notice and setting December 14, 2015 as the “Asbestos Bar Date.”22 The Asbestos Bar Date Order and Notice Plan were designed to comprehensively address any due process concerns, both by the means of distribution and the content of the notice.23
Following entry of the Asbestos Bar Date Order, the Debtors provided notice in various forms as set forth in the Notice Plan, which included: (i) direct mailing to known asbestos claimants with “personalized” proof of claim forms; (ii) nearly 75,000 direct mailings to former employees and known asbestos claimants; (iii) extensive publication notice in consumer publications, local newspapers, national newspapers, trade publications, and union labor publications (with a total combined circulation of 69,893,892); (iv) dedicated website and toll-free number; (v) internet banner advertising and sponsored search listings (resulting in 436,346,154 gross online impressions); (vi) informational release to approximately 4,200 print and broadcast media outlets and 5,500 online outlets; and (vii) targeted outreach to labor unions.24
Hilsoft determined that the comprehensive publication notice program would “reach approximately 90.1% of men aged 65+ in the U.S. an average of 3.4 times each, 89.4% of adults aged 45+ in the U.S. an average of 3.5 times each, and approximately 85.7% of adults aged 18+ in the U.S. an average of 3.1 times each.”25
In all, the Debtors spent approximately $2.5 million implementing the Notice Plan.26
In addition to the Debtors’ efforts, Kazan Law took out Google search advertisements linked to the search terms “efh case info,” “efh bankruptcy,” and “efh restructuring.”27
The notice package attached to the Asbestos Bar Date Order outlined six different methods by which Unmanifested Asbestos Claimants could submit their proofs of claim and clearly explained the substantive requirements for filing a proof of claim.28
Approximately 30,000 proofs of claim were filed in response to notice of the Asbestos Bar Date.29 Of that, approximately
D. Challenges to the Asbestos Bar Date and Related Timeline
Two asbestos plaintiffs filed the Motion of Charlotte Liberda and Curtis Liberda To Appoint Legal Representative, requesting that the Court appoint a representative for unmanifested asbestos claimants on all issues before the Court, which motion was denied.31 Due process objections were also raised by certain asbestos claimants to one of the Debtors’ proposed plans on the basis that the plan did not include a
Mr. Heinzmann was diagnosed with mesothelioma on July 15, 2016, which was after the Asbestos Bar Date.36 Thereafter, on November 3, 2016, Mr. Heinzmann filed a notice of intent to participate in plan confirmation proceedings for the EFH/EFIH Debtors.37 In December 2016, this Court denied a motion by asbestos claimants, including Mr. Heinzmann, to dismiss the chapter 11 cases of EECI, Inc., EEC Holdings, Inc., LSGT Gas Co. LLC, and LSGT SACROC, Inc. (the “LSGT Debtors“).38 The Court also overruled an objection to the NextEra-backed plan filed by asbestos claimants, including Mr. Heinzmann.39
On September 11, 2017, the EFH/EFIH Debtors filed the Plan.
Mr. Bergschneider was diagnosed with mesothelioma on September 14, 2017, almost two years after the Asbestos Bar Date.40 On November 27, 2017, Mr. Bergschneider filed a notice of intent to participate in the confirmation proceeding for EFH/EFIH Debtors.41
On December 19, 2017, Messrs. Bergschneider and Heinzmann filed their objection to confirmation of the Plan.42 On February 27, 2018, the Court confirmed the Plan.43 During the confirmation process, the Court overruled Messrs. Bergschneider and Heinzmann‘s objection
On February 18, 2020, the Third Circuit affirmed this Court‘s confirmation of the Plan and founds that due process had been satisfied by the Asbestos Bar Date.48 The Third Circuit held:
Appellants do not dispute that they received publication notice prior to the bar date. EFH launched a multimillion-dollar notice plan to contact latent claimants and notify them of the impending bar date and the accompanying need to file a proof of claim. All latent claimants who timely filed proofs of claim—and there were nearly 10,000 such claimants—were assured of retaining their ability to pursue their claims and, contrary to Appellants’ argument that actual notice to all potential claimants was required, claimants who were unknown at the time of the discharge—such as Appellants—were entitled only to publication notice of a property deprivation . . . . We are also unpersuaded that EFH was not “desirous of actually informing” latent claimants of the bar date, . . . ; to the contrary, it employed a noticing expert, “follow[ed] the principles in the Federal Judicial Center‘s ... illustrative model forms of plain language notices,” JA 392, and published notice in seven consumer magazines, 226 local newspapers, three national newspapers, forty-three Spanish-language newspapers, eleven union publications, and five Internet outlets. Under our case law, that publication was sufficient.49
On March 17, 2020, Mr. and Mrs. Bergschneider jointly filed four proofs of claim against the LSGT Debtors.50 On April 20, 2020, Mr. and Mrs. Bergschneider filed their Motion, attaching the proofs of claim, as well as an affidavit by Mr. Bergschneider.51
On April 28, 2020, Mrs. Heinzmann, surviving spouse of Mr. Heinzmann, filed four proofs of claim against the LSGT Debtors.52 On May 1, 2020, Mrs. Heinzmann filed her Motion, attaching the proofs of claim and an affidavit by Mr. Heinzmann.53
A. Notice of the Bar Date
The Movants argue that they never received notice of the bar date and, as a result, the Movants did not have due process of the Asbestos Bar Date.
As this Court stated:
“A bar date serves the important purpose of enabling the parties to a bankruptcy case to identify with reasonable promptness the identity of those making claims against the bankruptcy estate, and the general amount of the claims, a necessary step in achieving the goal of successful reorganization. It is akin to a statute of limitations, and must be strictly observed.” This rule “contributes to one of the main purposes of bankruptcy law, securing, within a limited time, the prompt and effectual administration and settlement of the debtor‘s estate.”54
In Grossman‘s, the Third Circuit applied this rule in holding that a claimant‘s pre-petition exposure to a product, such as asbestos, gives rise to the claim, even though the injury manifests after the reorganization.55 The Third Circuit continued that this does not necessarily mean that a claimant‘s claims are discharged by the plan confirmed in the case. Rather, due process considerations could revive a claim.56 In other words, inadequate notice would preclude discharge of a claim in bankruptcy.57
The Third Circuit specifically held that publication notice was adequate in these cases.58 “‘The proper inquiry in evaluating notice is whether a party acted reasonably in selecting means likely to inform persons affected, not whether each person actually received notice.‘”59 “Further, unknown creditors entitled to only publication notice cannot blame their ignorance on the fact that they did not receive actual notice: because Appellants did ‘not read the legal section of the newspaper and did not read the legal section of the newspaper that published the bar date order in this case is not controlling.‘”60 Here, as previously ruled upon by the Third Circuit, in an appeal taken by the Movants, among others, publication notice was sufficient and adequate under the circumstances.
Furthermore, the Movants are both in a unique circumstance as they participated in these cases and were both represented by law firms that actively participated in the objection to and formulation of a noticing plan for Unmanifested Asbestos Claimants. As the Court has previously found, notice of the Asbestos Bar Date was adequate in the circumstances of these cases. Once again, the Court finds
However, that only leads to the next stage of the analysis, whether the Movants can demonstrate excusable neglect for not filing claims prior to the Asbestos Bar Date.
B. Filing Late-Filed Proofs of Claim
The bankruptcy court may allow the filing of an untimely Proof of Claim after the bar date only where the claimant‘s failure to timely file a Proof of Claim was due to excusable neglect.61
[T]he bankruptcy court‘s discretion to extend time is limited to two situations—requests made before the expiration of the originally prescribed time limitation, and where failure to act was due to excusable neglect. The court has no discretion to grant an extension simply because no prejudice would result, or for any other equitable reason.62
Although the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure do not define “excusable neglect”
the United States Supreme Court has found that “[through]
Rule 9006(b)(1) , Congress plainly contemplated that the courts would be permitted, where appropriate, to accept late filings caused by inadvertence, mistake, or carelessness, as well as by intervening circumstance beyond the party‘s control” . . . and that “the enlargement of prescribed time periods under the ‘excusable neglect’ standard ofRule 9006(b)(1) is not limited to situations where the failure to timely file is due to circumstances beyond the control of the filer.”63
Hence, by empowering the courts to accept late filings “where the failure to act was the result of excusable neglect,”
In Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership, a creditor‘s attorney received notice of a creditors meeting from the bankruptcy court shortly after the debtor filed its chapter 11 cases.65 The notice also contained the bar date for filing claims in the cases.66 The attorney was in the middle of withdrawing from his law firm and did not appreciate that the creditors meeting notice also contained the bar date and failed to timely file a claim.67 The attorney filed the claim and a motion to allow a late filed proofs of claim only 20-days after the bar
Because Congress has provided no other guideposts for determining what sorts of neglect will be considered “excusable,” we conclude that the determination is at bottom an equitable one, taking account of all relevant circumstances surrounding the party‘s omission.70
After considering the relevant factors, the Supreme Court in Pioneer held that the attorney‘s neglect in not filing the claims timely was excusable.71
Courts take a “hard line” when applying the Pioneer test,72 and have placed the emphasis in their analysis on the “reason” for the delay.73 Furthermore, “[t]he burden of proving excusable neglect lies with the late-claimant.”74 Thus, the Movants bear the burden of proving excusable neglect for their late-filed claims.
As instructed by the Pioneer Court, the Court will take each factor in turn in determining whether the Movants’ delay was excusable.
i. Prejudice to the Debtors
In evaluating prejudice to the Debtors, courts are instructed to consider several relevant factors, including:
(i) whether the debtor was surprised or caught unaware by the assertion of a claim that it had not anticipated, (ii) whether the payment of the claim would force the return of amounts already paid out under the confirmed plan or affect the distribution to creditors; (iii) whether payment of the claim would jeopardize the success of the debtor‘s reorganization; (iv) whether allowance of the claim would adversely impact the debtor actually or legally; and (v) whether allowance of the claim would open the floodgates to other future claims.75
The Debtors assert that they relied upon the universe of claims against the EFH/EFIH Debtors as defined by the Asbestos Bar Date. Although allowed asbestos claims passed through the Plan unimpaired upon confirmation, the Debtors utilized the Asbestos Bar Date in establishing a liability amount for the purchaser of the Debtors’ assets by Sempra Energy. As this Court held:
“[t]he objectives of finality and fixing the universe of claims permeate the law of bankruptcy, and in achieving those ends, the setting of a bar date is no more unfair, assuming reasonable notice, than is a statute of limitations, a finality concept firmly embedded in our legal system
generally. Tort claimants can have their right to pursue their claims foreclosed if they fail to take action before the expiration of a statute of limitations. It is no more unfair to require that they here take action before expiration of the bar date.”76
“‘Prejudice is not an imagined or hypothetical harm; a finding of prejudice should be a conclusion based on facts in evidence.‘”77
As the Debtors argue, if the Movants had filed proofs of claim prior to the Asbestos Bar Date or even before consummation of the sale to Sempra, the Movants’ claims would have been properly accounted for by the Debtors and Sempra Energy. The Movants’ assert that there would be no prejudice to the Debtors as late-filed claims were always “expected” with the Asbestos Bar Date. The Movants’ look to the Third Circuit‘s recent decision in these cases which held:
all latent claimants will have the opportunity to show that reinstatement of their claims would pose no “danger of prejudice” to the debtors here. As we have explained, the prospect of a post-confirmation procedure allowing for reinstatement was baked into the merger agreement, and
Rule 3003(c)(3) provides that procedure. Reinstatement of latent claims underRule 3003(c)(3) thus would appear not to not alter the expectations the parties had at the time they agreed to the merger.78
The Movants’ continue that the asbestos claim reconciliation process has not commenced, no distributions have been made to asbestos claimants, who are unimpaired pursuant to the Plan, and there would be no impact to the Debtors, as Sempra assumed the liability.
The burden is on the Movants’ to show that there was no danger of prejudice to the Debtors. Although late-filed asbestos claims have always been somewhat expected by the Court and the Debtors, here the Debtors must be surprised by the Movants’ claims. Here, instead of filing proofs of claim and seeking relief from the Asbestos Bar Date after their respective diagnoses, the Movants elected to prosecute multiple challenges to the Asbestos Bar Date. These Movants have been participating in these cases for years and have never asserted a manifested asbestos claim despite
Although surprised, many of the other suggested elements are not present (such as return of amounts already paid or causing jeopardy to the success of the Debtors’ reorganization). However, as discussed here, these Movants have troubling facts to contend with – if the Court would allow these claims under these circumstances, the Court is confident that the floodgates of additional claims would open. Although the Court believes that the notice of the Asbestos Bar Date was widely disseminated and meets due process, these facts facing the Court are such that any late-filed asbestos claim would be acceptable, thus, eviscerating the very Asbestos Bar Date that was established in these cases. As a result, the Court finds that there would be prejudice to the Debtors.
ii. Reasonableness of Delay
The Movants’ assert that their respective delays in filing their proofs of claim relate to the lack of notice provided by the Debtors as well as the fact that neither could have understood the importance of the notice in December of 2015.
Mr. Bergschneider’s motion was filed 41 months (July 2016 to March 2020) and Mr. Heinzmann’s motion was filed 29 months (September 2017 to April 2020) after they were diagnosed with asbestos-related illnesses. Furthermore, both Movants, and their counsel, participated actively in these cases.
In In re Nortel Networks Inc., the claimant filed an original proof of claim for approximately $22,500 for contractual royalties and then proceeded to amend the proof of claim five (5) times, including adding affiliate companies seven years after the bar date, to arrive at a claim of approximately $81 million for copyright infringement damages.80
Evidence presented by the claimant was that the claimant believed that the original claim covered both affiliates’ claims.81 The Nortel court held that the explanation of why the affiliate “did not join in the claims shows that the mistake was not ‘excusable.’ Ignorance of the law is not excusable neglect.”82 The Nortel court first decided that the claim
“The length of the delay must be examined in ‘absolute terms’ or in an ‘absolute sense,’ meaning that the extent of the delay should be considered in isolation.”86
In Jones v. Chemetron Corp. (Chemetron II), the Third Circuit, applying Pioneer, reviewed the standard for a late-filed claim.87 In that case, the debtors had incurred prepetition liability as a result of uranium contamination on or near former property of the business.88 After the debtors filed for chapter 11, a bar date was set for May 31, 1988,and a plan confirmed July 12, 1990.90 But, four years after the bar date, a group of residents brought suit in state court for injuries caused by the contamination, and ended up in bankruptcy court seeking leave to allow their late claims.91 After the Third Circuit “ruled that the plaintiffs had received sufficient notice of the bankruptcy proceeding,” it “remanded to the bankruptcy court . . . to determine whether the plaintiffs should still be permitted to file their claims based on excusable neglect.”92 On appeal again to the Third Circuit, the court affirmed that plaintiffs had not demonstrated excusable neglect, and rejected the argument that the claimants “had no way of knowing that they had a claim against Chemetron prior to the 1988 bar date,” noting that the “burden of proving excusable neglect lies with the late-claimant,” and that “ignorance of one’s own claim does not constitute excusable neglect.”93 The court noted
Furthermore, in Silva v. New Century TRS Holdings, Inc. (In re New Century TRS Holdings, Inc.),95 the court found that publication notice was sufficient for unknown claimants and that a delay in four years from the bar date and nine months from learning of the debtors’ bankruptcy was inexcusable neglect.96
Similarly, in In re Majestic Holdco, LLC,97 the claimant provided electricity to one of the debtors. The claimant discovered meter-reading errors and, as a result of a lengthy audit process, filed its motion to enlarge time to file its claim five months after discovering the errors.98 As a result, the claimant filed its pre-petition claim twenty months after the Bar Date and filed its administrative payment claim nearly eight months after the Bar Date. The Majestic Holdco court found the delay in these claims was inexcusable, finding
Adding insult to injury, Entergy did not file the Motions to Enlarge until five months had passed from discovering the meter malfunction. What is especially egregious is that Entergy took more time from discovery to filing five months versus 45 and 60 days, the bar dates the Court set for pre-petition and administrative claims, respectively. Moreover, the Court confirmed the Debtors’ plan for reorganization on March 1, 2011, and most of the Debtors’ cases were closed on September 27, 2012.99
The use of the procedures established by
Here, the timeline is what will ultimately guides the Court’s decision – not only does the Court find that the timing of the filing of the asbestos claims was due to gamesmanship; but it was done in full knowledge of the bankruptcy cases, the Asbestos Bar Date, and then only after the Unmanifested Asbestos Claimants exhausted all of their appellate rights in challenge after challenge to the Asbestos Bar Date. Movants’ delay was not excusable neglect. As this Court is exhaustively familiar with the events in these cases, it will summarize the timeline below of the most pertinent events over the last six years:
| | Event |
|---|---|
| April 29, 2014 | Petition Date |
| July 23, 2014 | Debtors’ filed motion to establish a bar date for all asbestos claims. |
| October 14, 2017 | The United States Trustee formed a Committee of Unsecured Creditors for EFH/EFIH, whereon two of the five members are asbestos claimants. |
| October 28, 2014 | The Court heard argument on whether to establish a bar date for unmanifested asbestos claimants. |
| January 7, 2015 | The Court issued the Asbestos Bar Date Opinion allowing for the establishing of a bar date for unmanifested asbestos claimants. |
| July 30, 2015 | The Court issued the Asbestos Bar Date Order. (It bears noting that no appeal was taken from this order.) |
| August 11, 2015 | Court denied a motion to appoint a separate legal representative for Unmanifested Asbestos Claimants. |
| December 3, 2015 | Court overruled due process objections raised by asbestos claimants to the proposed Hunt Plan because it did not include a section 524(g) channeling injunction to address the claims of Unmanifested Asbestos Claimants. |
| December 14, 2015 | Asbestos Bar Date |
| September 28, 2016 | Court denied a motion by certain asbestos claimants to file a class proof of claim on behalf of all unfiled/untimely asbestos claimants. |
| July 15, 2016 | Mr. Heinzmann was diagnosed with mesothelioma. |
| November 2, 2016 | Mr. Heinzmann filed a notice of intent to participate in plan confirmation proceedings for EFH/EFIH Debtors. |
| December 16, 2016 | The Court denied a motion by asbestos claimants, including Mr. Heinzmann, to dismiss the LSGT Debtors’ chapter 11 cases. |
| February 17, 2017 | Court overruled an objection to the NextEra-backed asbestos claimants, including Mr. Heinzmann. |
| September 11, 2017 | EFH/EFIH Debtors filed the Plan. |
| September 14, 2017 | Mr. Bergschneider was diagnosed with mesothelioma. |
| November 27, 2017 | Mr. Bergschneider filed a notice of intent to participate in the confirmation proceedings for EFH/EFIH Debtors. |
| Date | Event |
|---|---|
| | Messrs Bergschneider and Heinzmann filed their objection to confirmation of the Plan. |
| February 27, 2018 | The Court confirms the Plan and overrules Messrs. Bergschneider and Heinzmann’s objection to the Sempra Energy backed Plan. |
| March 9, 2018 | The EFH/EFIH Plan went effective. |
| March 9, 2018 | Messrs. Bergschneider and Heinzmann appealed from the confirmation order. |
| January 24, 2019 | Following briefing, the District Court dismissed the appeal as statutorily moot under section 363(m) of the Bankruptcy Code. |
| February 22, 2019 | Messrs. Bergchneider and Heinzmann appealed to the Third Circuit. |
| February 18, 2020 | The Third Circuit affirmed this Court’s confirmation of the Plan and found that due process had been satisfied by the Asbestos Bar Date. |
| March 17, 2020 | Mr. and Mrs. Bergschneider jointly filed four proofs of claim against the LSGT Debtors. |
| April 20, 2020 | Mr. and Mrs. Bergschneider filed their Motion which is subject of this Opinion. |
| April 28, 2020 | Mrs. Heinzmann, surviving spouse to Mr. Heinzmann, filed four proofs of claim against the LSGT Debtors. |
| May 1, 2020 | Mrs. Heinzmann filed her motion which is subject of this Opinion. |
As highlighted above, both Mr. Bergschneider and Mr. Heinzmann began participating in these cases within months of their respective diagnoses as Unmanifested Asbestos Claimants – they participated in motion practice, objections, argument, and appeals as Unmanifested Asbestos Claimants, and although both had received asbestos-related diagnoses, they chose not to file claims or motions to enlarge the time to file claims for years; and then only filing these claims upon exhausting their appellate rights. As the Supreme Court reasoned in Pioneer the “reasonableness” of “neglect” is to “deter creditors or other parties from freely ignoring court-ordered deadlines in the hopes of winning a permissive reprieve under Rule 9006(b)(1).”103 As in Nortel Networks, the delay in filing the Movants’ respective claims was “within the reasonable control of the movant[s].”104 “If individual creditors were permitted to postpone indefinitely the effect of a bar order . . . [while they completed their other litigation with the debtors], the institutional means of ensuring the sound administration of the bankruptcy estate would be undermined.”105 Similarly, the Hooker court’s analysis was based on the conflict facing a plaintiff who wished to invoke the equitable jurisdiction of the Bankruptcy Court for some purposes, but not for others.106
iii. Impact on Judicial Proceedings
Here, both the EFH/EFIH Debtors and Sempra reasonably relied upon the universe of claims filed against the EFH/EFIH Debtors, pursuant to the Asbestos Bar Date. Both Movants could easily have filed their albeit-late claims prior to the effective date of the Plan.
In addition to the actual amount of time that passed between the Bar Date and the late filing, the Third Circuit stated that courts should consider the “length of delay in absolute terms.”107 In In re O’Brien, for example, the actual delay was only two months (i.e., the claim was filed two months after the Bar Date), but, in that two months, the debtor’s plan became effective. As such, the actual delay took on “significance mainly because of the intervening occurrence of the effective date of the Plan . . . .”108 The Third Circuit held that the delay “should not be held to turn entirely on the urgency created by the debtor’s time line. Such an approach makes the two month delay seem significant, whereas a similar delay [in another case] . . . would be insignificant.”109
Here, not only do we have a significant delay; but in that delay, the Plan has gone effective and Sempra is now running the EFH/EFIH Debtors’ business. Furthermore, the Asbestos Bar Date defined the potential liability being taken on by Sempra and was part-and-parcel to the transaction with Sempra. The impact proscribed by Pioneer is to the “judicial proceedings” and not limited to singular consideration of the financial impact on the Debtors, but to the judicial proceedings overall, and in these cases, the impact on the judicial proceeding caused by not on the length of time, but also the facts and circumstances discussed above, weighs in favor of the Debtors.
iv. Good Faith
The final
Even if the length of the delay is justified under Grossman’s, the Movants exhibited bad faith by waiting to file claims until after the Third Circuit’s decision, despite knowing about and participating in the Debtor’s bankruptcy process. The Court is persuaded that such delay was either a “strategic attempt to preserve appellate standing,” as alleged by the debtors,112 or a simple mistake. Not filing a claim as a litigation tactic is bad faith, and that finding mitigates against finding excusable neglect.113 Movants “chartered their own fate by their tactical decision to actively participate in this case . . . and yet ignored the status of their claim.”114 “[A] creditor having actual knowledge of a chapter 11 case may not lie behind the log and delay seeking an extension of time for filing a claim to the prejudice of the debtor and other creditors.”115 And if the delay in filing a claim was not strategic but accidental, an attorney’s mistake creates a malpractice claim, but does not constitute excusable neglect.116 As a result, this factor also weighs in favor of inexcusable neglect.
In sum, all four factors support finding that the failure of the Movants to timely file their claims did not arise from excusable neglect.
C. Notices of Intent to Participate are not Informal Proofs of Claim
The Movants suggest that their filing of their respective notices to participate in the confirmation process were “informal” proofs of claim.117
A creditor must “specify, among other things, the date debt was
Neither of the Movants filed a proof of claim when they were diagnosed with mesothelioma.123 The Movants assert that the Notices of Intent filed by both Movants qualify as informal proofs of claim under In re American Classic Voyages Co.,124 because the Notices of Intent “apprised the Court and all interested parties of the existence, nature, and amount of [the Movants’] claims” and expressed “intention to hold the debtors liable for the claims.”125 The proofs of claim filed “earlier this year relate back to the Notices of Intent filed by” the Movants,126 and presumably function as a formalization or amendment of the Notices of Intent.
Both Movants’ Notices of Intent contain substantially the same language. The Notices of Intent state that each Movant has personal injury claims against the Debtors arising from asbestos exposure.127 Each “was diagnosed with mesothelioma,” “was not notified of, and was unaware of, the bar date in these cases, and did not file a proof of claim.” And “[if] the discharge provisions of the Debtors’ plan were approved, [Movant’s] claims against the Debtors for personal injury caused by exposure to asbestos . . . would, purportedly, be extinguished.”128
The Notices of Intent meet some, but not all, of the In re American Classic Voyages Co. factors, and therefore do not constitute informal proofs of claim. While the Notices of Intent are in writing and filed with the bankruptcy court (factors 1 and 4), they do not contain a demand on the bankruptcy estate or express an intent to hold the Debtors liable (factors 2 and 3). Instead, the Notices of Intent state matter-of-factly that the Movant has claims against the estate. This “mere notice” does not qualify as “an informal proof of claim.”129
As a result, the Court finds that the Notices of Intent are not “informal proofs of claim.”
CONCLUSION
Publication notice of the bar date was adequate for the movants who were “unknown creditors” of the Debtors. Furthermore, the Pioneer factors weigh against a finding of excusable neglect. Although the prejudice to the Debtors is minimal, the length of delay, impact on the judicial proceedings, and lack of good faith all weigh heavily in favor of finding that the neglect in missing the bar date was not excusable. Furthermore, the Movants’ Notices of Intent are not informal proofs of claim. As a
Notes
D.I. 12770 (Trans. of Hr‘g Feb. 27, 2019) at 229:18-230:3.[A]s I have ruled numerous times now in this case, I believe that the use of the asbestos bar date and notice program . . . was proper, was supported by the evidence, and was consistent with due process. Applying that bar date to the discharge at this time I believe is also justified by the facts and is entirely appropriate and consistent with due process and applicable law.
Energy Future Holdings Corp., 522 B.R. at 537 (footnotes and citations omitted).Here, the Court is not looking back to determine if adequate due process was given to an unknown claimant. In the look-back cases, courts have the benefit of knowing the contents of the notice, the number of times the notice was published, and in which publications the notice was published. In fact, in a look-back scenario, courts have the benefit of knowing the terms of the plan and whether, in fact, there are Unmanifested Claimants. Obviously, this Court does not have this information (as above stated, the Debtors agreed to narrow the issues herein to whether a bar date may be established for Unmanifested Claimants; the issues related to content and scope of the notice have been continued). The posture of this issue is akin to the bankruptcy court‘s ruling in Chemtura Corp. As such, the Court must consider what it does know.