Opinion
Case No. 02 B 02474
December 12, 2003
MEMORANDUM OPINION
This matter is before the court on the Motion of Leon Walker ("Walker") for Order Declaring Administrative Expense Claim to be Timely Filed or, Alternatively, to Extend Bar Date to File Administrative Expense Claim and for Relief to Limit Notice. Walker, a personal injury claimant, failed to file an administrative proof of claim by the June 20, 2003 bar date, He now seeks entry of an order deeming his late-filed claim to be timely based on excusable neglect.
BACKGROUND
On January 22, 2002, Kmart Corporation and thirty-seven of its subsidiaries and affiliates filed voluntary Chapter 11 petitions in this court. Kmart continued to operate as debtor in possession after the filing of the petitions.
On or about June 13, 2002, Walker allegedly sustained personal injuries when the pharmacy department at a Kmart store in Colorado gave Walker another person's prescription. Walker retained Kristopher L. Hammond ("Hammond") and the law firm of Oliphant, Hammond, Atwell Combs, L.L.C. as his personal injury counsel. Hammond filed an action on Walker's behalf in a Colorado court in October, 2002,
Thereafter, on or about April 23, 2003, this court entered an order confirming the First Amended Joint Plan of Reorganization of Kmart Corporation and its Affiliate Debtors and Debtors-in-Possession, as modified (the "Plan"). The Plan became effective on May 6, 2003 (the "Effective Date").
Hammond was unaware of Kmart's bankruptcy case until May 13, 2003, when he received a copy of the "Notice Regarding (A) Entry of Order Confirming the First Amended Joint Plan of Reorganization of Kmart Corporation and its Affiliated Debtors and Debtors-in-Possession, (B) Occurrence of Effective Date, and (C) Notice of the Administrative Bar Date" (the "Notice"). Paragraph 7 on the fourth page of the Notice contained a section entitled "Administrative Claims Bar Date." That section stated that "Administrative Claims" (other than certain types of claims dealt with elsewhere in paragraph 7) had to be filed by June 20, 2003 (the "Administrative Bar Date"). According to Hammond's affidavit, he "did not read through the Notice thoroughly, and placed it in Mr. Walker's file." Approximately two weeks later, on May 27, 2003, Hammond left for Australia and did not return until on or about June 26, 2003. He "was extremely busy before [his] departure, preparing to leave the office for a month," and "[i]n [his] haste, [he] did not fill in or file the Administrative Expense Claim Form." Hammond Affidavit., ¶ 10.
After his return, on or about July 7, 2003, Hammond received a letter from Kmart's state court counsel in the Colorado action, advising that Walker's claim was barred for failure to file a proof of claim by the Administrative Bar Date. Hammond immediately retrieved the materials from Walker's file. He then contacted certain unnamed bankruptcy attorneys, who advised him that Walker's claim might not be an administrative expense, but that he should file it anyway. Accordingly, he filled in the form, had Walker sign it on July 15, 2003, and submitted it together with a cover letter dated July 16, 2003.
Hammond is not a bankruptcy lawyer, and he ultimately retained bankruptcy counsel in Chicago, who filed the present motion on August 11, 2003.
DISCUSSION
Walker contends that his failure to tile an administrative claim by the bar date was the result of excusable neglect. Rule 9006(b)(1) of the Federal Rules of Bankruptcy Procedure provides in relevant part that
when an act is required or allowed to be done at or within a specified period by these rules or by a notice given there under or by order of court, the court for cause shown may at any time in its discretion . . . (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.
Prior to the Supreme Court's decision in Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993), there was a disagreement among the circuits as to the meaning and scope of "excusable neglect." Robb v. Norfolk Western Railway Co., 122 F.3d 354, 358 (7th Cir. 1997), The Seventh Circuit was among those that interpreted the phrase narrowly. Id. That narrow approach was rejected in Pioneer, and the Supreme Court made it clear that neglect could be excusable even where it was the result of carelessness on the part of a litigant or his attorney,
Of course, not all carelessness is excusable. The Supreme Court concluded in Pioneer that the determination of whether neglect is "excusable"
is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission. These include . . . the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.
507 U.S. at 395. The four factors cited by the Court are, however, not exclusive. As the Seventh Circuit has noted, the Supreme Court "specifically rejected an approach mat would `narrow the range of factors to be considered.'" Robb, 122 F.3d at 362.
In Robb, for example, the Seventh Circuit held that an attorney's "track record" maybe considered as one of the circumstances bearing on whether his negligence constitutes "excusable neglect." Another factor that has been considered is the attorney's relative experience in the area at issue. In U.S. v. Brown, 133 F.3d 993 (7th Cir. 1998), cert. denied, 519 U.S. 875, 117 S.Ct. 196, 136 L.Ed.2d 133 (1996), the defendant's attorney in a criminal case filed an appeal one day late. He had miscalculated the 10-day deadline, believing that weekends and holidays tolled the appeal period. The trial court considered the attorney's inexperience in federal court, his good faith, and the lack of prejudice resulting from his mistake. The Seventh Circuit affirmed, stating, inter alia, that "[t]hese are reasonable factors to consider, and ones invited by the Supreme Court in Pioneer and this court in Prizevoits." Brown, 133 F.3d at 997.
Although Robb involved a motion under Fed.R.Civ.P, 60(b)(1) for relief from a judgment based on allegations of "excusable neglect," the Seventh Circuit has noted that "the tenor of [the Pioneer decision] is that the term bears the same or similar meaning throughout the federal procedural domain." Prizevoits v. Indiana Bell Telephone Co., 76 F.3d 132, 134 (7th Cir. 1996).
The attorney was a Wisconsin lawyer, and his excuse was that he had confused Wisconsin rules with the federal rules. He believed that weekends and holidays tolled the 10-day deadline, which they would have in Wisconsin, because the prescribed period was less than 11 days. However, under Fed.R.App.P. 26(a), which was applicable to the appeal, weekend days were only to be excluded if the period was less than seven days. Brown, 133 F.3d at 996. The court noted that Brown was the attorney's only client in the federal courts. Id. at 997.
Prizevoits was a civil case where "experience within the federal courts worked against the attorney claiming excusable neglect." Brown, 133 F.3d at 997.
It must be remembered, however, that "[i]t is difficult to draw bright lines in this inquiry." Brown, 133 F.3d at 996. In U.S, v. Guy, 140 F.3d 735 (7th Cir. 1998), for example, the defendant's lawyer made a mistake identical to the one made in Brown. Nonetheless, the Seventh Circuit found the neglect inexcusable, noting that the attorney's level of experience was the "critical difference." In Guy, the defendant's lawyer was an experienced federal criminal appellate litigator who "must" have known how to compute the appeal deadline in a federal criminal case, Guy, 140 F.3d at 736.
The court also noted that the Brown decision had "probed the outer boundaries of excuse." Guy, 140 F.3d at 736.
Again, the fact-intensive and equitable inquiry required by Pioneer is a balancing test, and "[b]alancing tests naturally produce indeterminacy; focusing on one factor may change the balance, and, in turn, the result." Brown, 133 F.3d at 997.
In this case, the bar date set forth in the Notice applied to "Administrative Claims." Although the Notice itself did not define "Administrative Claims," it included on the first of its seven pages a statement that capitalized terms and phrases would, unless otherwise defined in the Notice, have the meanings set forth in the Plan and Confirmation Order, neither of which were served with the Notice.
There was a definition of administrative expense claims included in the; package, but it was contained in the instructions tin the back of the claim form, and not in the Notice itself.
Attorney Hammond, however, makes no allegation that he misunderstood or misinterpreted the Notice. Indeed, he admits that he did not read the Notice thoroughly and alleges that his failure to file was an inadvertent and unintentional omission resulting from his busy schedule prior to departing for Australia. Accordingly, his failure was not the result of a misunderstanding of the definition of "Administrative Claim," as was the case with certain other administrative claimants who filed similar motions herein.
Although Hammond's July 16, 2003 cover letter transmitting Walker's claim states that he did not file it sooner because it "dues not meet the definitions of an `Administrative Claim' on the reverse of the Claim Request form," that letter is merely attached to the motion, and no such statement is made in the affidavit. Indeed, it appears from the recitation of facts set forth in the affidavit that the statement was included in the cover letter only after, and apparently as a result of, conversations after the bar date with certain unnamed bankruptcy attorneys regarding the status of Walker's claim as an administrative expense vel non.
Under all the circumstances of this case, the neglect is not excusable. Although Walker's good faith is not in question and the delay in tiling was relatively short, the reason for the delay, i.e., Hammond's busy schedule, is plainly inadequate. Walker is chargeable with the failure of his counsel to handle the time-sensitive document with greater care. Although "excusable neglect" is a somewhat elastic concept, excusing the neglect in this case would seriously undermine the goal of preserving the integrity of court rules and filing deadlines.
The claim was filed only one month after the bar date, and the present motion was filed approximately one month after discovery of the omission.
CONCLUSION
For all of the reasons set forth above, the court denies Walker's Motion for Order Declaring Administrative Expense Claim to be Timely Filed or, Alternatively, to Extend Bar Date to File Administrative Expense Claim and for Relief to Limit Notice. This opinion constitutes the court's findings of fact and conclusions of law in accordance with Bankruptcy Rule 7052. A separate order will be entered pursuant to Bankruptcy Rule 9021,