Opinion
IP 02-1252-C-M/F, Case No. 01-8081-FJO-11.
June 26, 2003.
Appeal from the United States Bankruptcy Court, Southern District of Indiana, Bankruptcy Court,
ORDER ON LIQUIDATING AGENT'S APPEAL FROM BANKRUPTCY RULING
This matter is before the Court on the appeal of Margaret M. Good, Liquidating Agent for the Heartland Steel, Inc. Liquidation Trust (the "Liquidating Agent"), from the Bankruptcy Court's Entry on the Motion of the Liquidation Trustee to Extend Deadline to File Objection to Claims ("Order"), finding the Liquidating Agent's objections to claims for mechanic's liens ("Mechanic's Lien Objections") were not timely filed. The Liquidation Agent claims that the Mechanic's Lien Objections were timely filed because Bankruptcy Rule 9006(a) applies, automatically extending a weekend filing deadline to the next business day. The Liquidation Agent also argues that the Bankruptcy Court's denial of her Motion to Extend Deadline to File Objection to Claims ("Motion"), filed pursuant to Bankruptcy Rule 9006(b), was in error. For the reasons discussed herein, the Court REVERSES the decision of the Bankruptcy Court finding the Mechanic's Lien Objections untimely filed, and AFFIRMS the decision of the Bankruptcy Court denying the Liquidation Agent's Motion.
The Liquidation Agent was referred to as the Liquidation Trustee below. The Plan subsequently was modified to change the name.
I. BACKGROUND
This is an appeal from a Chapter 11 bankruptcy proceeding, in which the Bankruptcy Court has confirmed a liquidation plan, as modified. Third Modification to First Amended Plan of Liquidation ("Plan"); Order Confirming Third Modification to First Amended Plan of Reorganization ("Confirmation Order"). The effective date of the Plan is defined as "the next business day after the Confirmation Order becomes a Final Order." Plan § 2.1.41. The Confirmation Order was signed November 20, 2001, but not entered until November 27, 2001. The Plan became a final order when no notice of appeal was filed within 10 days, thus becoming final on Friday, December 7,2001. See id. § 2.1.47; F.R.Bankr.P. 8002. Accordingly, the Plan became effective on the next business day, Monday, December 10, 2001.
The following creditors have claims for mechanic's liens: Bascon, Inc.; Cardinal Contracting Corporation; Ecological Systems, Inc.; Lewis Steel Company; Patriot Engineering and Environmental Co., LLC; Schueck Steel Company; Siemens Energy Automation, Inc.; and Voest-Alpine Industries, Inc. (collectively, the "Mechanic's Lien Appellees"). With regard to objections to claims, the Plan provides as follows:
Time Limit for Objections to Claims. Objections to Claims . . . shall be filed by the Liquidation Trustee (subject to the approval of the Steering Committee) with the Court and served on each holder of each of the Claims to which objections are made not later than ninety (90) days after the Effective Date, or within such other time period as may be fixed by the Court.
Plan § 10.1. The 90th day fell on Sunday, March 10, 2002. The Liquidation Agent filed her Mechanic's Lien Objections on Monday, March 11, 2002, objecting to the validity and priority of the Mechanic's Lien Appellees' claims. See Order ¶ 10.
On March 18,2002, the Liquidation Agent filed the Motion, seeking an order extending the time for filing objections to claims up to, and including, September 21, 2002. Motion at 3. The Mechanics Lien Appellees moved to strike the Mechanic's Lien Objections on the basis that they were not timely filed, and objected to the Motion as not timely filed. See, e.g., Motion to Strike Trustee's Objection to the Validity and Priority of Bascon, Inc.'s Mechanic's Lien; Schueck Steel's Objection to Motion of the Liquidation Trustee to Extend Deadline to File Objection to Claims. The Liquidation Agent filed responses, arguing essentially that (1) the Mechanic's Lien Appellees were not prejudiced by any allegedly untimely filing of the Mechanic's Lien Objections, and (2) the Mechanic's Lien Appellees would not be prejudiced by the requested extension of time.
The Liquidation Agent also attached to its responses a copy of a written consent into which the Debtor and Steering Committee had entered, extending the time for filing objections to claims up to, and including, September 24, 2002 ("Consent"). See, e.g., Response of the Liquidation Trustee to the Motion to Strike Trustee's Objection to Validity and Priority of the Voest-Alpine Industries, Inc. Mechanic's Lien ¶ 5 and attached Consent. The Consent purported to be created pursuant to Section 13.10 of the Plan, which states:
Extension of Dates. To the extent that any provision of the Plan provides for an act or event to take place on a certain date, such date may be extended upon the written consent of the Debtor and the Steering Committee. Any provision of the Plan which is conditioned upon, or subject to, the written consent of the Steering Committee, shall be deemed satisfied if a consent is executed by counsel for the Steering Committee.
Plan § 13.10.
Finally, the Liquidation Agent claimed the Motion was unrelated to the Mechanic's Lien Objections, but rather related to the time for filing objections to any other claims of creditors. Liquidation Trustee's Sur Response Memorandum of Law Concerning the Timeliness of Objections to Mechanic's Liens and Timeliness of Extension of Time to Object to Other Claims at 1. The Mechanic's Lien Objections were timely, the Liquidation Agent argued, because the Sunday, March 10, 2002, filing deadline automatically extended to Monday, March 11, 2002, pursuant to Bankruptcy Rule 9006(a). Id. at 2-4. In the alternative, the Liquidation Agent argued, the Bankruptcy Court should exercise its discretion to enlarge the filing period, pursuant to Bankruptcy Rule 9006(b). Id. at 5-8.
The Bankruptcy Court, having received the parties' written submissions, held a hearing on the Motion on June 10, 2002. Order at 1. The Bankruptcy Court concluded that Section 10.1 of the Plan, "Time Limit for Objections to Claims," was a specific provision that controlled over the more general Section 13.10, "Extension of Dates." Id. ¶ 5. For this and other reasons not pertinent here, the Bankruptcy Court thus found that the Consent could not operate to extend the time for filing objections to claims. Id. ¶ 6. The Bankruptcy Court also concluded that Bankruptcy Rule 9006(a) did not apply to the deadline for filing objections to claims because the deadline set forth in the Plan is part of a contractual agreement among the parties, not a "period of time prescribed or allowed by" a court order or by the Bankruptcy Rules. Id. ¶ 10. The Bankruptcy Court also rejected a new argument in the Liquidation Agent's post-hearing brief, that the deadline for filing objections to claims was extended to the next business day by Section 7.15 of the Plan, which extends any weekend "transaction" date to the following business day. Id. at 12.
Finally, the Bankruptcy Court determined that the Motion should be denied because the Liquidation Agent had not demonstrated that her failure to timely file was due to "excusable neglect" as required by Bankruptcy Rule 9006(b)(2). Id. ¶ 17. Specifically, the Bankruptcy Court noted that the Mechanic's Lien Objections were mailed to other counsel on March 7,2002, and concluded that the Liquidation Agent presented no explanation why
those Objections could not have been filed in this Court on the same day or even on the next day, Friday, March 8, 2002 [or] why the [Motion] could not also have been prepared and filed by that date or the next day on Friday, March 8, 2002. Indeed, there has been no explanation why the Liquidation Trustee waited until March 18, 2002 to file that Motion, which is dated and was apparently prepared on March 11, 2002, over a week earlier.Id. ¶¶ 18-19. The Bankruptcy Court also concluded that it need not consider whether any of the Mechanic's Lien Appellees suffered prejudice by the late filing, because the Liquidation Agent had not demonstrated excusable neglect. Id. at 20. In any event, the Bankruptcy Court concluded, the Mechanic's Lien Appellees argued a sufficient prejudice to justify denying the Motion. Id.
II. STANDARD
When it reviews a decision of the Bankruptcy Court, the District Court acts as an appellate tribunal. Therefore, its review is governed by traditional standards of appellate review. Specifically, the Court "is constrained to accept the bankruptcy court's findings of facts unless they are clearly erroneous." In re Excalibur Auto Corp., 859 F.2d 454, 457 n. 3 (7th Cir. 1988). See also In re Fedpak Sys., Inc., 80 F.3d 207,211 (7th Cir. 1996); In re Longardner Assocs., Inc., 855 F.2d 455, 459 (7th Cir. 1988). However, the Bankruptcy Court's conclusions of law must be reviewed de novo. See Excalibur Auto Corp., 859 F.2d at 457 n. 3; Longardner Assocs., Inc., 855 F.2d at 459. Decisions as to whether to grant extensions of time pursuant to Bankruptcy Rule 9006(b) should be reviewed for an abuse of discretion. F.R.Bankr.P. 9006(b); Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380,398 (1993). With these general standards in mind, the Court will address the issues raised in the instant appeal.III. DISCUSSION A. THE MECHANIC'S LIEN OBJECTIONS WERE TIMELY FILED
The issue of whether the Mechanic's Lien Objections were timely filed on March 11, 2002, turns on whether the March 10, 2002, deadline was established as a matter of contract, or of court order. Federal Bankruptcy Rule 9006(a) provides:
In computing any period of time prescribed or allowed by these rules or by the Federal Rules of Civil Procedure made applicable by these rules, by the local rules, by order of court, or by any applicable statute,. . . . [t]he last day of the period so computed shall be included, unless it is a Saturday, a Sunday, or a legal holiday . . . in which event the period runs until the end of the next day which is not one of the aforementioned days.
F.R.Bankr.P. 9006(a) (emphasis added). The Seventh Circuit has explained that "[a] confirmed plan of reorganization is in effect a contract between the parties and the terms of the plan describe their rights and obligations." Ernst Young LLP v. Baker O'Neal Holdings, Inc., 304 F.3d 753,755 (7th Cir. 2002). The provisions of a confirmed plan bind the debtor and creditors in the same manner as a contract. See In re Harvey, 213 F.3d 318, 321 (7th Cir. 2000); Envirodyne Indus., Inc. v. Viskase Corp., 183 B.R. 812, 818 (N.D. Ill. 1995). There is no doubt that the principles of contract construction apply to confirmed plans, and that contract principles apply to the essential terms of a confirmed plan. See In re Penrod, 169 B.R. 910, 917 (N.D. Ind. 1994), aff'd, 50 F.3d 459 (7th Cir. 1995); UNR Indus., Inc. v. Bloomington Factory Workers, 173 B.R. 149, 157 (N.D. Ind. 1994). A bankruptcy plan "bears close analogy" to a private contract, in the sense that it is created by offer, acceptance and negotiations. UNR Indus., Inc., 173 B.R. at 157 (citing In re L V Realty Corp., 76 B.R. 35, 37 (E.D.N.Y. 1987)). However, a plan of reorganization also has been viewed as a consent decree or agreed order. See id. The Seventh Circuit has recognized that a confirmed bankruptcy plan "acts more or less like a court-approved contract or consent decree." In re Harvey, 213 F.3d at 321.
Recognizing that these cases provide only vague direction on the present issue, the Court finds that the period of time for filing the Mechanic's Liens Objections was prescribed or allowed by order of court. Without the Bankruptcy Court's confirmation order, there would be no period of time to compute. It is the confirmation order that gives effect to all terms, substantive and procedural, in the Plan, and thus prescribes or allows them.
A confirmed bankruptcy plan of reorganization is neither a mere contract, nor a court order. It is its own animal — a contract between the debtor and creditors that is made effective and binding by the bankruptcy court's confirmation order. All the terms and conditions of the plan are binding on the parties because the court's confirmation order gives them that effect. The plan is not a private business contract. The bankruptcy court's indispensable role in the plan is further demonstrated by the operation of 11 U.S.C. § 1127(b), which requires that after a plan is confirmed, it may be modified only when the court, after notice and a hearing, confirms the modification. 11 U.S.C. § 1127(b). The court's approval is not necessary in private contract situations. A confirmed plan, like a consent decree, can be interpreted like a contract, but the filing deadlines contained therein are subject to the same rules of procedure as other filing deadlines. See United States v. Alshabkhoun, 277 F.3d 930, 954 (7th Cir. 2002) ("For purposes of construction, a judicially approved consent decree is essentially a contract.").
The parties discuss at some length the effect of In re Ampace Corp., 279 B.R. 145 (Del. 2002), on the issue of whether Bankruptcy Rule 9006 applies to deadlines in confirmed plans. This Court does not find the Delaware District Court's opinion in Ampace persuasive. First, the court in Ampace found that the deadline for filing objections "was established solely by the terms of the confirmed Plan, and therefore, may only be modified in accordance with [11 U.S.C.] § 1127(b)." In re Ampace, 279 B.R. at 152. However, as discussed above, the deadlines in a confirmed plan are not established solely by the plan, but rather, through a court order confirming the plan.
Second, the court in Ampace found that the extension of the objections deadline in that case was substantive and material enough to constitute a modification of the plan. Id. At this point, the present case is factually different. The trustee in Ampace requested multiple extensions of the objections deadline, so that the trustee's objections, originally due on March 14,2000, were not filed until November 8, 2001. Id. at 149. The several requests for extensions of time to file objections in Ampace may well have constituted a substantive and material alteration of the plan, so as to require notice and hearing pursuant to 11 U.S.C. § 1127. Those motions were filed, and granted without notice or a hearing, pursuant to Bankruptcy Rule 9006(b)(1), which allows a court to enlarge a period of time for cause shown. Here, however, the issue is one of automatic extension pursuant to Bankruptcy Rule 9006(a), allowing an act to happen on the next business day. It should not be said that such a minor extension constitutes a "plan modification," as addressed by 11 U.S.C. § 1127.
Because the Court has determined that Bankruptcy Rule 9006(a) applies, and the Mechanic's Lien Objections were timely filed on March 11, 2002, the Court need not address the Liquidation Agent's argument that the deadline was automatically extended by Section 7.15 of the Plan.
B. "POTENTIAL OTHER CLAIMS OBJECTIONS"
Although the above discussion resolves the issue of timeliness of the Mechanic's Liens Objections, the Liquidation Agent also appeals from the Order on the basis that it denied her later-filed Motion. Additionally, the Liquidation Agent challenges the Bankruptcy Court's conclusion that the Consent did not operate to extend automatically the deadline to file objections to claims. It appears the Order is relevant to "Potential Other Claims Objections," which the Liquidation Agent asserts was the primary focus of the Motion. Appellant's Brief at 3.
1. Motion Pursuant to Rule 9006(b)
a. Rule 9006(b) Applies.
Where an act is required or allowed by order of court within a period of time, such as filing objections to claims as described in Part A, above, Bankruptcy Rule 9006(b) allows that a court may, in its discretion, "after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect." F.R.Bankr.P. 9006(b)(2). The Court already has explained that the conclusion in Ampace — that the time for filing claims objections, as set forth in the Plan, is not an act "required or allowed to be done . . . by order of court" — is incorrect. Thus, Rule 9006(b) applies just as plainly as does Rule 9006(a).
The court in Ampace discussed the idea that an extension of an objections deadline is a modification of the plan, which requires notice and a hearing pursuant to 11 U.S.C. § 1127(b). Even if true, that does not necessarily mean a motion for extension cannot be made pursuant to Rule 9006(b), so long as notice and a hearing occur, in compliance with 11 U.S.C. § 1127(b).
In Ampace, the court noted that the parties had not included language that would waive notice and a hearing, allowing the bankruptcy court to extend deadlines upon motion by the trustee. In re Ampace, 279 B.R. at 153. Had that language been included, the trustee in that case could have moved unilaterally to extend the deadline for filing objections. Id. The court in Ampace found importance in the fact that the deadline was extended without notice and a hearing, and that "[b]ecause these types of extension motions are submitted to the Court for approval on a routine basis, the Court granted the Trustee's requests based on the assumption that the [p]lan, like most plans, included the language" waiving notice and hearing. Id. at 153-54 n. 20. In the present case, the Bankruptcy Court did hold a hearing and the parties submitted briefs to advise the court. Thus, entertaining the Liquidation Agent's Motion pursuant to Rule 9006(b) was not a violation of 11 U.S.C. § 1127.
b. The Liquidation Agent Did Not Demonstrate Excusable Neglect.
The Bankruptcy Court has broad discretion in deciding whether to grant or deny the Motion, and this Court reviews that decision only for an abuse of discretion. In re Morris, 223 F.3d 548, 554 (7th Cir. 2000). The relevant inquiry is whether a reasonable person could disagree with the Bankruptcy Court. Id. Bankruptcy Rule 9006(b)(2) allows an extension of time to be granted after the expiration of the time period only where the failure to act was the result of excusable neglect. F.R.Bankr.P. 9006(b)(2). The Liquidation Agent has the burden of demonstrating excusable neglect.
The Liquidation Agent filed the Motion on March 18,2002, which was seven days after the deadline for filing claims objections. The Bankruptcy Court noted that the Liquidation Agent did not offer any explanation as to why the Mechanic's Lien Objections were not filed on March 7 or March 8, because service copies had been mailed on March 7. Order ¶ 18. The Bankruptcy Court further found that the Liquidation Agent offered no explanation as to why the Motion was not filed until more than a week after the deadline passed. Id. ¶ 19. The Bankruptcy Court found that the Motion had been prepared March 11, and that the Liquidation Agent did not explain why the Motion was not filed until seven days later. Id. In response to the Liquidation Agent's argument that the Mechanic's Lien Claimants suffered no prejudice, the Bankruptcy Court found that it "must first conclude that the movant demonstrated excusable neglect" before considering whether any prejudice occurred. Id. ¶ 20. The Liquidation Agent challenges this finding, relying on Pioneer Inv. Serv. Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380 (1993).
In Pioneer, the Supreme Court closely examined the concept of "excusable neglect" and determined that enlargements of time under the "excusable neglect" standard of Rule 9006(b)(2) could occur not just in circumstances beyond the party's control, but also where the late filing is caused by inadvertence, mistake or carelessness. Pioneer Inv. Serv. Co., 507 U.S. at 391. The Supreme Court approved of the use of several factors, including whether the other parties suffered prejudice, in determining whether a party's neglect was "excusable neglect." Id. at 395. However, before a court gets to that equitable inquiry, it must first determine that the party missed the bar date because of neglect at all, including attorney negligence. See id. at 394-95; Robb v. Norfolk W. Ry. Co., 122 F.3d 354, 359 (7th Cir. 1997) ("Under the approach set forth by the Supreme Court in Pioneer, we think it is clear that a trial court has discretion to consider the equities and then determine whether a missed filing deadline attributable to an attorney's negligence is (or is not) "excusable neglect."); In re O'Shaughnessy, 252 B.R. 722, 730-31 (N.D. Ill. 2000) ("The United States Supreme Court established a two-step test for determining `excusable neglect' under Bankruptcy Rule 9006. . . . First, the movant must show that its actions constituted `neglect.' . . . If neglect is shown, then the movant must prove that the neglect was `excusable.'" (citing Pioneer)). The equitable factors, including prejudice to the opposing parties, are relevant only to whether the neglect is excusable.
The Liquidation Agent did not offer the Bankruptcy Court any explanation for the missed deadline. Order ¶ 19. This is one principle difference between the present case and In re Hall, which the Liquidation Agent cites for authority. See In re Hall, 259 B.R. 680, 681 (N.D. Ind. 2001); see also Donald v. Cook County Sheriff's Dep't, 95 F.3d 548, 558 (7th Cir. 1996) (ruling that the district court's granting of an extension of time to answer a complaint was in error, in that there was no showing of excusable neglect where the party requesting the extension made no explanation for its failure to timely respond). Thus, the Bankruptcy Court reasonably concluded that the Liquidation Agent did not show she missed the deadline for filing claims objections because of attorney neglect, whether or not "excusable." Without this showing, the Liquidation Agent failed to carry her burden of proving the Potential Other Claims Objections, or the Motion, were not timely filed due to excusable neglect.
It was not an abuse of the Bankruptcy Court's discretion to find the Liquidation Agent failed to demonstrate excusable neglect. Like the Bankruptcy Court, this Court need not address the Liquidation Agent's claim that the Mechanics Lien Appellants did not suffer prejudice by her late request for an extension.
2. The Consent Pursuant to Plan § 13.10
The Liquidation Agent argues that the March 27, 2002, Consent was effective to extend the deadline for filing Potential Other Claims Objections to September 24, 2002. Plan Section 13.10 states that "to the extent any provision of the Plan provides for an act or event to take place on a certain date, such date may be extended upon the written consent of the Debtor and the Steering Committee." However, Section 10.1 of the Plan clearly states that objections to claims were to be made "not later than ninety (90) days after the Effective Date, or within such other time period as may be fixed by the Court."
The specific provision addressing time for filing objections to claims controls over the general provision for extension of dates. Construing the Plan's terms like a contract, the general rule of contract construction applies, that where the parties have agreed upon a specific term, it governs over any seemingly inconsistent general term. See BeerMart, Inc. v. Stroh Brewery Co., 804 F.2d 409,411 (7th Cir. 1986) (citing Fox Realty Co. v. Montgomery Ward Co., 124 F.2d 710, 714 (7th Cir. 1942)); George S. May Int'l Co. v. King, 629 N.E.2d 257, 261 (Ind.Ct.App. 1994). According to Section 10.1, any date for filing objections other than 90 days after the Effective Date must be fixed by the Bankruptcy Court. Thus, the Consent cannot alter the claims objection deadline. Moreover, as the Bankruptcy Court noted, the Consent was not filed until 17 days after the deadline for filing claims objections had passed. If the Debtor and Steering Committee unilaterally could extend deadlines after their expiration, no deadlines or time period within the Plan would have any meaning at all. The creditors are entitled to rely upon deadlines that have already passed.
IV. CONCLUSION
The Mechanic's Lien Objections were timely filed on March 11, 2001. However, the Bankruptcy Court below correctly denied the Liquidation Agent's Motion, as it would relate to other claims objections. Further, the Consent entered into by the Debtor and Steering Committee was not effective to extend the deadlines to September 24, 2002. Thus, the Liquidation Agent has missed the opportunity to file "Potential Other Claims Objections."
IT IS SO ORDERED.