In Re Graham Bros. Const., Inc.
ORDER
Before the Court is a Motion to Allow Late Claim filed by Len-Verandahs, LLP (“Len-Verandahs”) seeking the allowance of its late filed claim in the bankruptcy of Graham Brothers Construction Inc. (“Debtor”). The Court has jurisdiction pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B). For the reasons set forth below, the motion is denied.
FACTS
The underlying dispute between Len-Verandahs and Debtor arises out of a construction contract between Len-Verandahs and Specialized Services, Inc. (“SSI”), an affiliate company of Debtor, regarding the development of a residential subdivision known as The Verandahs in Pasco County, Florida. Apparently, SSI contracted to serve as the site preparation contractor for this development, including clearing, grubbing and mass earthwork. Debtor allegedly performed some of this work in exchange for a portion of the contract value. Len-Verandahs alleges that in the course of performing their work, both Debtor and SSI acted negligently and as a result are liable to Len-Verandahs.
To this end, Len-Verandahs sued SSI in Pasco County, Florida in 2008 for breach of contract and obtained a judgment of roughly $2 million in June 2010. LenVerandahs, LLP v. Specialized Services. Inc. et al., Case No. 51-2008-CA-004269 (Fl. Cir. Ct. 2008). Subsequently, in July of 2010, Len-Verandahs filed suit against Debtor in Pasco County, Florida alleging negligence (“the Florida Action”). LenVerandahs, LLP v. Graham Bros. Constr. Co. Inc., Case No. 51-10-CA-5697-WS (Fl. Cir. Ct. July 19, 2010). Prior to Debt- or’s bankruptcy, National Trust Insurance Company (“National”), Debtor’s commercial general liability insurance carrier, was defending Debtor in the Florida Action under a reservation of rights. Subsequently, National filed a declaratory action against Debtor and Len-Verandahs in the District Court for the Southern District of Georgia seeking a determination of its rights and obligations in connection with the Florida Action (“the Declaratory Action”). Nat’l Trust Ins. Co. v. Graham Bros. Constr. Co. Inc., et al., Case No. CV 3:10-070DHB-WLB (S.D. Ga. Aug. 24, 2010).
Len-Verandahs filed a motion for relief from stay on November 24, 2010 seeking relief to pursue Debtor nominally in the Florida Action in order to pursue the proceeds of the National insurance policy. Motion to Allow Late Claim, Dckt. No. 237, p. 1. After the hearing and post-hearing briefs, the motion was conditionally granted on April 18, 2011 allowing Len-Verandahs to pursue Debtor in the Florida Action nominally and only to the extent of insurance proceeds. 2
On March 9, 2011, the United States Trustee filed a motion for appointment of an examiner to review and report on Debt- or’s pre-petition transactions with insiders. With the consent of parties, the United States Trustee’s motion was granted at the May 10, 2011 hearing. At the hearing, the United States Trustee noted that the request for the examiner was not due to a lack of disclosure by Debtor; rather, Debt- or’s disclosures in the Statement of Financial Affairs alerted the United States Trustee of the need for an examiner.
Len-Verandahs’s motion to allow its late claim was considered at this same May 10, 2011 hearing. Len-Verandahs candidly acknowledged it made a strategic decision not to file a proof of claim against Debtor’s bankruptcy estate as it was content to seek the insurance proceeds and to pursue SSI. Len-Verandahs also acknowledged that it did not think Debtor’s bankruptcy estate would be able to pay its claim. Len-Verandahs is now concerned if Debtor’s purported liability is found not to be covered by National’s insurance policy, Len-Verandahs will be without a remedy. Len-Verandahs further acknowledges at the time of filing its motion for relief from stay, it decided not to file a proof of claim because it did not want to risk giving up its right to a jury trial or having the Florida Action heard in Florida. To date, Len-Verandahs has been unsuccessful in collecting its judgment against SSI, and states the recent motion filed by United States Trustee alerted Len-Verandahs that additional assets may be available for distribution to Debtor’s creditors.
From a timing perspective, Debtor anticipates filing its plan and disclosure statement within the next 45 days.
CONCLUSIONS OF LAW
Pursuant to Federal Rule of Bankruptcy Procedure 3003(c)(3) “[t]he court shall fix and for cause shown may extend the time within which proof of claim or interest may be filed” in chapter 11 cases. Fed. R. Bankr.P. 3003(c)(3). In a chapter 11 proceeding, if a claimant fails to timely
Consideration of “excusable neglect” is a two-pronged analysis.
Pioneer,
The ordinary meaning of “neglect” is “to give little attention or respect” to a matter, or, closer to the point for our purposes, “to leave undone or unattended to especially] through carelessness.” ... The word therefore encompasses both simple, faultless omissions to act and, more commonly, omissions caused by carelessness.
Pioneer,
(i) the danger of prejudice to the debt- or;
(ii) the length of the delay and its potential impact on the judicial proceedings;
(iii) the reason for the delay, including whether it was in the reasonable control of the movant; and
(iv) whether the movant acted in good faith.
Id.
at 395,
After
Pioneer,
the majority of courts have held that a conscious and deliberate decision not to file a proof of claim does not constitute “neglect” even where the decision ultimately is determined to be faulty.
See Banco Latino Int’l v. Gomez-Lopez (In re Banco Latino Int’l),
In the case
sub judice,
there has been no “neglect” for Rule 9006(b) purposes. Len-Verandahs made a conscious and strategic decision not to file a proof of claim. After considering the matter, it determined it did not want to jeopardize its right to a jury trial or Florida venue by filing a proof of claim. Len-Verandahs argued in its successful motion for relief from stay proceeding that there would be no harm to Debtor if the stay was lifted because Len-Verandahs was not looking directly to Debtor for payment, rather, it wanted to pursue Debtor nominally, to the extent of insurance proceeds. While this may not have changed the result in the motion for relief matter, it was a factor I considered in reaching my conclusion.
See generally World Bazaar Franchise Corp. v. Benbo of Ga., Inc. (In re Benbo of Ga., Inc.),
Len-Verandahs argues it made a mistake in deciding not to file a claim because it relied upon Debtor’s schedules when making its decision. It was not until the United States Trustee filed its motion to appoint an examiner that Len-Verandahs was alerted it to the potential solvency of the bankruptcy estate. However, Debtor’s summary of schedules discloses that Debt- or is solvent and its Statement of Financial Affairs reveals Debtor was owed approximately $7,825,350 by various insiders. Furthermore, at the hearing, the United States Trustee made it clear that his motion to appoint an examiner did not stem from any non-disclosure or fraud by Debt- or; rather, it was Debtor’s disclosure of the transfers in its Statement of Financial Affairs that prompted the filing of the motion. With this background, Len-Verandahs’s argument that Debtor mislead it is unpersuasive. Len-Verandahs consciously decided not to file a proof of claim for tactical reasons. Ultimately, the result of this decision may be different than Len-Verandahs initially thought, but the decision to file a claim was not a “mistake.” “Merely because a claim was filed late does not establish that such late filing occurred because of inadvertence, mistake, carelessness or intervening circumstances beyond the party’s control.”
In re Montaldo Corp.,
Len-Verandahs also argues Debtor is not prejudiced by its late filing of a claim because Debtor knew of Len-Verandahs’s claim and a copy of the complaint was attached to the motion for relief. As a result, Len-Verandahs argues its motion for relief and briefs constitute an informal proof of claim because it apprised the
Not every document filed in the bankruptcy court will constitute an informal proof of claim, however; the document must apprise the court of the existence, nature and amount of the claim (if ascertainable) and make clear the claimant’s intention to hold the debtor liable for the claim.... Mere knowledge by the debt- or of the creditor’s claim will not suffice to establish the existence of a valid proof of claim.
Charter Co. v. Dioxin Claimants (In re Charter Co.),
Finally, even if Len-Verandahs made a mistake, such mistake is not “excusable” under the
Pioneer
factors.
See In re Langley,
Currently, Debtor is in the drafting and negotiating stages of the plan confirmation process and a late claim prejudices Debt- or’s efforts. At the hearing, Debtor announced it projects to pay its unsecured creditors a very high dividend, and hopefully in full. The size of Len-Verandahs claim almost equals the total of all other unsecured claims listed in Debtor’s summary of schedules. As Debtor’s counsel stated at the hearing allowing a late contingent claim by Len-Verandahs would further prejudice Debtor because the plan being drafted establishes for a contingent claims reserve and funding the reserve affects distributions to creditors thereby hampering Debtor’s projections and the likelihood its proposed plan will be confirmed.
Second, the length of the delay must be considered. The motion to allow the late claim was filed over two months after the claims bar date. Except as discussed elsewhere, under the facts of this case, I do not find Debtor has been prejudiced by the length of delay.
Third, the reason for the delay was well within Len-Verandahs’s control. As previously discussed, the intentional and tactical decision not to file a claim does not amount to “neglect” under Pioneer.
[Cjonscious decisions not to file a claim may be made where a party at first believes that no dividend will be paid in the case or where there is a tactical reason for not filing a claim until after the bar date has passed. In such a situation, there simply is no neglect involved and relief based upon the concept of excusable neglect is not appropriate.
In re Montaldo Corp.,
Lastly, the good faith of Len-Verandahs must be considered. Again, Len-Verandahs made a tactical decision to pursue the matter in the venue of its choice and it did not want to jeopardize its right to a jury trial. Now, having obtained the desired result in the motion for relief from stay action, Len-Verandahs has reconsidered that decision based upon the possible lack of available insurance coverage and Debt- or’s potential assets. Such conduct does not constitute excusable neglect.
See In re Bicoastal Corp.,
For these reasons, it is ORDERED that Len-Verandahs’s Motion to Allow Late Claim is DENIED and its claim is DISALLOWED.
Notes
. At the May 10, 2011 hearing, the Debtor and United States Trustee reported Debtor is amending the schedules to disclose all such transactions made within a year of the petition date.
. With the consent of all parties, relief from the stay also was granted to National to pursue the Declaratory Action.
. Federal Rule of Bankruptcy Procedure 9006(b)(1) states:
Except as provided in paragraphs (2) and (3) of this subdivision, when an act is required or allowed to be done at or within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (2) on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect.