Opinion
Case No. 02 B 2474
March 13, 2003
MEMORANDUM OPINION
This matter is before the court on the motion of Patricia Schroder ("Schroder"), a personal injury claimant, to have her proof of claim deemed to be timely filed. The claim was filed well after the July 31, 2002 bar date fixed by court order on March 26, 2002. According to Debtor, Kmart Corporation, Ms. Schroder received timely notice of the bar date, which was sent by Trumbull Services, LLC, the court-approved noticing agent in this case, on or about April 1, 2002. Schroder, however, contends that she did not receive the notice and that it should have gone to her personal injury attorney in any event. She argues in the alternative that if she did in fact receive notice of the bar date, her failure to file a timely proof of claim was the result of excusable neglect.
Her motion is actually entitled "Motion to Allow Late Filing of Proof of Claim for Personal injury Plaintiff/Creditor or Alternatively to Extend Bar Date to Date Claim was Filed with Trumbull Services Pursuant to Bankruptcy Rule 3003(c)."
BACKGROUND
Schroder alleges that she was injured at a Kmart store in August, 2000, and she retained Wayne Buckwalter, a Pennsylvania attorney, to represent her in connection therewith. On September 5, 2000, Buckwalter sent a letter to Kmart's agent, Armando Wright (a Claims Examiner with Sedgwick Claims Management Services, Inc., Kmart's third party administrator), advising of his representation, requesting that Kmart have no further contact with Schroder, and directing Kmart to send all future correspondence to him. A line of communication was thereafter established, as requested, between Wright, on behalf of Kmart, and Buckwalter, on behalf of Schroder,
On January 22, 2002, Kmart Corporation and thirty-seven of its subsidiaries and affiliates filed voluntary Chapter 11 petitions in this court. One month later, on February 22, 2002, Wright wrote to Buckwalter, advising him of the tiling of these cases and the resulting automatic stay prohibiting the commencement or continuation of proceedings against the Debtors. In the February 22, 2002 letter, Wright further stated, "We acknowledge your representation of Patricia Schroder in the above-captioned matter" (i.e., the August, 2000 injury), Buckwalter, in his affidavit, states that "[t]his acknowledgement was made post-bankruptcy and led me to believe that all bankruptcy communications would come to me."
In August of 2002, over seven months after these cases were commenced, Buckwalter filed a complaint sounding in negligence on Schroder's behalf in Pennsylvania state court. Buckwalter states in his affidavit that he filed the action "because of the statue [sic] of limitations" and that he "did not know that the automatic stay of the bankruptcy code prohibited such a filing."
Sometime during the first week of September, 2002, he received a notice from Kmart that the filing of the state court complaint was prohibited by the automatic stay. The notice further informed him that the bar date for filing proofs of claim was July 31, 2002. Buckwalter thereafter filed a proof of claim and engaged bankruptcy counsel to file the instant motion seeking to have the claim deemed timely filed.
Kmart acknowledges that Trumbull Services did not send notice of the bar date to Buckwalter, but instead sent it to Schroder herself. Schroder has submitted an affidavit stating that she never received the bar date notice and that it was her understanding that all documents relating to her injury were to go to her attorney. Kmart, in turn, has submitted the affidavit of Amy Lewis, of Trumbull Services, averring that the notice to Schroder was not returned as "undeliverable."
DISCUSSION
A fundamental requirement of due process is "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950) (citations omitted). Accordingly, unless a creditor is given reasonable notice of the bankruptcy case and the relevant bar dates, his claim cannot be constitutionally discharged. In re O'Shaughnessy, 252 B.R. 722, 729 (Bankr. N.D. Ill. 2000) (citations omitted); see also Chemetron Corp. v. Jones, 72 F.3d 341, 346 (3rd Cir. 1995), cert. denied, 517 U.S. 1137, 116 S.Ct. 1424, 134 L.Ed.2d 548 (1996).
The court reviews the totality of circumstances to determine whether reasonable notice was given. O'Shaugnessy, 252 B.R., at 730. The court should consider, among other things, whether any inadequacies in the notice prejudiced the creditor and whether notice is given in enough time to afford a creditor sufficient opportunity to respond to "the impending deprivation of its rights." O'Shaugnessy, 252 B.R., at 730 ( citing In re Walker, 149 RR. 511, 514 (Bankr. N.D. Ill. 1992)). Another circumstance to consider is whether a creditor who did not receive formal notice, nevertheless had actual knowledge of the bankruptcy case. O'Shaugnessy, 252 B.R., at 730 "A party with actual notice of a bankruptcy case must act diligently to protect its interest, despite the lack of formal notice." O'Shaugnessy, 252 B.R., at 730 ( citing In re Marino, 195 B.R. 886, 893 (Bankr.N.D.IIl. 1996)). In certain circumstances, due process may be satisfied if a creditor has informal actual knowledge of the bankruptcy ease in sufficient time to take appropriate action. O'Shaugnessy, 252 B.R., at 730, 732.
A. Notice to Claimant
As indicated above, Schroder contends that she did not receive the notice of bar date sent by Trumbull Services and submits her affidavit to that effect. Rule 9006(e) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") provides that "(s)ervice of . . . notice by mail is complete on mailing." The Supreme Court has "repeatedly recognized that mail service is an inexpensive and efficient mechanism that is reasonably calculated to provide actual notice." Tulsa Professional Collection Services, Inc. v. Pope, 485 U.S. 478, 490, 108 S.Ct. 1340, 99 L.Ed.2d 565 (1988). Mail properly addressed, stamped, and deposited in the mail system is presumed to have been received by the party to whom it has been addressed, See, e.g., In re Bucknum, 951 F.2d 204, 207 (9th Cir. 1991); Hagner v. U.S., 285 U.S. 427, 430, 52 S.Ct. 417, 76 L.Ed. 861 (1932) ("The rule is well settled that proof that a letter properly directed was placed in a post office creates a presumption that it reached its destination in usual time and was actually received by the person to whom it was addressed"); Boomer v. ATT Corp., 309 F.3d 404, 415 n. 5 (7th Cir. 2002).
Here, Kmart submitted the affidavit of Amy Lewis, a bankruptcy analyst at Trumbull Services, in which she avers that the bar date notice was mailed to Schroder at 784 Sugar Town Road, Malville, PA 19355. Accordingly, Kmart is entitled to the benefit of the presumption that Schroder received the notice. It was Schroder's responsibility to rebut the presumption of receipt. See In re Pettibone Corp., 123 B.R. 304, 310 (Bankr. N.D.Ill. 1990). As indicated above, Schroder submitted her affidavit denying receipt of the bar date notice. While such a denial creates a question of fact, it does not rebut the presumption. In re Longardner Assoc., Inc., 855 F.2d 455, 459 (7th Cir. 1988), cert. denied, 489 U.S. 1015, 109 S.Ct. 1130, 103 L.Ed.2d 191 (1989); Pettibone, 123 13.R., at 310; see also In re Ms. Interpret, 222 B.R. 409, 413 (Bankr. S.D.N.Y. 1998) ("a party must do more than merely assert that it did not receive the mailing; its testimony or affidavit of non-receipt is insufficient, standing alone, to rebut the presumption"). Schroder offered no other evidence in support of her general denial. Kmart, on the other hand, through the affidavit of Amy Lewis, established that the notice sent to Schroder was not returned as "undeliverable." Accordingly, the Court finds that Schroder actually received the bar date notice. See, e.g., Longardner, 855 F.2d, at 459-60; Pettibone, 123 B.R., at 310.
The court notes that Lewis' affidavit, as well as Trumbull's computer generated records attached as exhibits to Kmart's objection, indicate that Schroder was served at the Sugar Town Road address in "Malville," Pennsylvania, whereas Schroder's affidavit indicates that she lives in Malvern, Pennsylvania Schroder, however, did not note this discrepancy, either at oral argument or in her papers, much less contend that it precluded the presumption of receipt. (Indeed, Schroder instead contended that the presumption had been rebutted.) Moreover, although the presumption of delivery may be weakened where an address is slightly incorrect, it nonetheless arises. See, e.g., In re Longardner Assoc., Inc., 855 F.2d 455, 460 (7th Cir. 1988). In Longardner, the Zip code was omitted from the address in question; yet the Court upheld the bankruptcy court's finding that the notice was properly addressed. The Court stated that "[a]lthough the presumption of delivery may be weakened by the absence of a zip code, . . . it is strengthened in this case by the fact that the notice was never returned to the clerk's office . . ." Id. (citations omitted)
B. Notice to Counsel
As noted above, Schroder also contends that her claim should be deemed timely filed because the bar date notice should have been sent to her personal injury attorney, Wayne Buckwalter. Buckwalter had instructed Kmart prepetition to have no further contact with Schroder and to send all future correspondence to him (which request was honored by Kmart, other than the bar date notice). Schroder urges that the parties' course of dealing, wherein all communications other than the bar date notice were sent to her counsel, and in particular Kmart's postpetition written acknowledgement of Buckwalter's representation of Schroder, led Buckwalter to believe that all bankruptcy communications would come to him.
Bankruptcy Rule 2002(a) requires, inter alia, that "all creditors" be given at least 20 days' notice by mail of the deadline for filing proofs of claim in a Chapter 11 case. F.R.Bankr.P. 2002(a)(7). Under subsection (g)(1) of Rule 2002, "[n]otices required to be mailed under Rule 2002 to a creditor . . . shall be addressed as such entity or an authorized agent has directed in its last request filed in the particular case." However, under subsection (g)(2), "[i]f a creditor . . . has not filed a request designating a mailing address under Rule 2002(g)(1), the notices shall be mailed to the address shown on the list of creditors or schedule of liabilities, whichever is filed later." Rule 9010(b) further provides that "[a]n attorney appearing for a party in a case under the Code shall file a notice of appearance with the attorney's name, office address and telephone number, unless the attorney's appearance is otherwise noted in the record."
The 1991 Advisory Committee Note to this Rule states that subsection (g) was amended to delete the words "with the court's because the phrase was unnecessary (citing Rules 5005(a) and 9001(3)).
Schroder has not contended that she or her "authorized agent" filed a request in this "particular case," as contemplated by Rule 2002(g)(1), designating the address to which notices should be sent. Schroder further acknowledges that her counsel did not file a notice of appearance in this case, pursuant to Rule 9010(b). Accordingly, Kmart sent the bar date notice to Schroder at her home address, listed in its schedule of liabilities, as authorized by Rule 2002(g)(2).
Although service of the notice directly upon Schroder was thus authorized by the Rules, it must nevertheless meet the due process standard articulated in Mullane, i.e., whether it was reasonably calculated, under all the circumstances, to apprise her of the bar date and afford her an opportunity to take appropriate action. Mullane, 339 U.S., at 314; see also In re Marino, 195 B.R. 886, 891 (Bankr. N.D.Ill. 1996) (if application of the Rules would deny due process rights, then the Constitution must take precedence). As noted above, the court reviews the totality of circumstances to determine whether reasonable notice was given, including whether the party had actual knowledge of the bankruptcy case, despite lack of formal notice. In certain circumstances, due process may be satisfied if a creditor has informal actual knowledge of the bankruptcy case in sufficient time to protect his rights. See O'Shaugnessy, 252 B.R., at 730, 732.
Schroder in effect takes the position that notice to her, rather than to her counsel, failed to satisfy due process requirements, not only because of Kmart's postpetition acknowledgement of her counsel's representation (which led counsel to believe that all notices would be sent to him), but also because "if she got something she wouldn't have known what to do with it anyhow." (Transcript, page 274)
However, it must be remembered that Buckwalter, Schroder's personal injury lawyer, had actual knowledge of Kmart's bankruptcy case approximately five months prior to the bar date. Kmart's February 22, 2002 letter, advising him of the automatic stay and acknowledging his representation, put him on notice that the bankruptcy case had been filed. Again, parties with actual notice of a bankruptcy case must act diligently to protect their rights. O'Shaugnessy, 252 WR., at 730. The fact that Buckwalter assumed, based on Kmart's acknowledgement of representation, that a formal bar date notice would be sent to him, and the fact that he chose to wait for such a notice to come in the mail, does not relieve him of the responsibility to act diligently to protect his client's interests upon learning that the bankruptcy case had been filed. It may be that Mr. Buckwalter is unfamiliar with the Bankruptcy Code and Rules. However, failure to apprise oneself of the rules will not ordinarily excuse failure to take needed action based on notice that otherwise satisfies due process requirements. Under all the circumstances of this case, including the fact that Schroder herself received a formal bar date notice and the fact that Buckwalter had actual notice of the bankruptcy case approximately five months prior to the bar date, due process standards are satisfied, without regard to any requirement of formal notice to Schroder's counsel.
C. Excusable Neglect
Schroder finally contends that in the event the court makes a finding that she actually received the bar date notice sent to her by Trumbull Services, then her failure to file a timely proof of claim was due to "excusable neglect." See Bankruptcy Rule 9006(b)(1). She argues that because she expected all communications to go to her counsel, she may not have "focus[ed] on the bar date notice as it was being handled by her attorney who should have received separate notice," (Patricia Schroder's Response to Debtors' Omnibus Objection to Motions by Personal Injury Claimants, page 2) In addition, although not specifically articulated as such, Schroder's contention that her personal injury counsel was led to believe (through Kmart's postpetition acknowledgement of representation) that the bar date notice would be mailed to him, and not to Schroder, may also be considered an "excusable neglect" argument.
As the Supreme Court stated in Pioneer Investment Services Co. v. Brunswick Associates, Ltd. Partnership, 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993), 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.
Id. at 395. Pioneer also teaches that although "excusable neglect" is a somewhat "elastic concept," inadvertence, ignorance of the rules, or mistakes construing the rules do not usually constitute "excusable neglect." Pioneer, 507 U.S., at 392.
While Schroder and her counsel have acted in good faith, the delay in filing both the proof of claim and the instant motion, — which was almost two months after the claims bar date, — was clearly within the reasonable control of Schroder and her personal injury counsel. Again, Schroder received a formal notice of the deadline for filing claims several months prior to the bar date, and her counsel had actual knowledge of the bankruptcy case approximately five months before the bar date. The delay in filing the claim resulted for the most part from "ignorance of the rules" or mistakes construing them. Under all the circumstances of this case, the neglect was not excusable.
CONCLUSION
For the reasons set forth above, the Court denies Patricia Schroder's Motion to Allow Late Filing of Proof of Ciaim for Personal Injury Plaintiff/Creditor or Alternatively to Extend Bar Date to Date Claim was Filed with Trumbull Services Pursuant to Bankruptcy Rule 3003(c).
This Opinion constitutes the Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. A separate order shall be entered pursuant to Federal Rule of Bankruptcy Procedure 9021.
ORDER
For the reasons stated in its memorandum opinion entered on this date, the court denies Patricia Schroder's Motion to Allow Late Filing of Proof of Claim for Personal Injury Plaintiff/Creditor or Alternatively to Extend Bar Date to Date Claim was Filed with Trumbull Services Pursuant to Bankruptcy Rule 3003(c).