United States District Court, N.D. Illinois, Eastern Division
September 27, 2004.
IN RE: KMART CORPORATION, et al., Debtors. SUSAN BROOKS, Appellant,
KMART CORPORATION, Appellee.
The opinion of the court was delivered by: REBECCA PALLMEYER, District Judge
MEMORANDUM OPINION AND ORDER
Susan Brooks seeks leave to appeal from the decision of the
Bankruptcy Court, Judge Susan P. Sonderby, denying her motion for
leave to file an untimely proof of claim in the Chapter 11
proceedings for appellee Kmart Corporation. Kmart argues that the
court has no jurisdiction over Brooks's appeal, as it was not
filed within the ten-day period prescribed by Bankruptcy Rule
8002(a), and the Bankruptcy Court refused to consider Ms.
Brooks's motion for an extension of that time period. For the
reasons set forth here, the court agrees that Ms. Brooks's appeal
is untimely. If the court were to consider Brooks's appeal on the
merits, it would conclude that Judge Sonderby did not abuse her
discretion in denying leave to file an untimely claim.
On April 20, 1998, at 4:30 p.m., Appellant Susan Brooks tripped
and fell in a Kmart store in Allegheny County, Pennsylvania.
Brooks filed a personal injury action against Kmart Corporation
on February 3, 2000. In January 2002, while the case was pending,
Kmart filed a Chapter 11 petition in the United States Bankruptcy
Court for the Northern District of Illinois. On or about January 28, 2002, Brooks was notified of the bankruptcy filing.
On March 6, 2002, Bankruptcy Judge Susan Sonderby set a general
claims bar date of July 31, 2002.
Brooks received formal notice of the bar date and a proof of
claim form by mail in April 2002. She nevertheless failed to file
a timely proof of claim. Instead, on July 23, 2002, her attorney
forwarded to Kmart a "Praecipe for Appearance," and a letter,
which, he asserts, provided all the information called for in a
proof of claim, except for the dollar amount of the claim. After
counsel learned, months later, that Kmart had moved to reject the
claim, Brooks filed a motion on March 3, 2003, for enlargement of
the time for filing of her proof of claim. Judge Sonderby heard
argument on that motion on April 28, 2003, six days after Kmart's
Plan of Reorganization was confirmed. (Transcript of Proceedings
(hereinafter, "Transcript"), Exhibit 4 to Appellee's Brief;
Docket Report, Exhibit 4 to Appellee's Brief, at No. 10871)
Although her written motion asserted that the "Praecipe for
Appearance," had been filed with the court (Motion for
Enlargement of Time, Exhibit 3 to Appellee's Brief, at ¶ 7),
Brooks's attorney admitted at oral argument that it was not filed
with the court. (Transcript, at 103.) He also acknowledged that
the Praecipe could not be characterized as an informal proof of
claim. (Id. at 102, 103.) Counsel admitted that he was aware of
the bar date and that he had instructed his paralegal to file a
proof of claim. (Id. at 101.) He admitted, further, that he
himself had not signed the Praecipe or the cover letter, and that
he did not know that his paralegal assistant had not "follow[ed]
my direction" until February 5, 2003, when he received a letter
from Kmart advising that the claim had been barred. (Id. at
Judge Sonderby announced her ruling without equivocation in
open court: "The motion of Susan Brooks for enlargement of time
for filing Proof of Claim form is denied." (Id. at 107.) Judge
Sonderby continued by explaining her conclusion that counsel had
not shown "excusable neglect" for the late filing, as defined in
Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship,
507 U.S. 380 (1993), and concluded by saying, "I will sign an order
denying this motion." (Id. at 108.) Judge Sonderby did follow
up with a written order denying the motion. (Order, Exhibit 5 to
Appellee's Brief.) That order was docketed on May 1, 2003, as reflected in
the court's electronic docket report. (Docket Report, Exhibit 6
to Appellee's Brief.)
For reasons not explained in the record, Brooks's counsel did
not receive written notice that the court order had been entered.
On May 12, 2003, he wrote to the Bankruptcy Court Clerk asking
for a copy of the April 28, 2003 order. (Motion for Extension of
Time for Appeal and supporting materials, Exhibit 8 to Appellee's
Brief.) On May 23, 2003, counsel forwarded a Notice of Appeal,
together with a Motion for Extension of Time for Appeal, to the
Bankruptcy Court; that Notice was docketed on May 27, 2003.
(Id.) Counsel apparently made no effort to notice his motion
for a hearing. On July 15, 2003, Judge Sonderby entered an order
striking that motion, along with several others, "for being filed
without a Notice of Hearing as required by the Local Rules."
(July 15, 2003 Order, Exhibit 9 to Appellee's Brief.)
Appellee Kmart Corporation asks the court to dismiss this
appeal for want of jurisdiction. If the court concludes it does
have jurisdiction, Kmart argues, it should affirm Judge
Sonderby's decision. The court considers these arguments in turn.
I. Untimely Appeal
Under Bankruptcy Rule 8002(a), an appeal from a bankruptcy
court decision must be filed within 10 calendar days of the date
of entry of the order at issue. Where, as in this case, an
appellant fails to file a notice of appeal within that time
period, the district court has no jurisdiction over the matter.
See Matter of Maurice, 69 F.3d 830, 832 (7th Cir. 1995) (where
"notice of appeal to the district court was jurisdictionally
late" the "bankruptcy judge's orders were outside the district
judge's power of review"); Stelpflug v. Federal Land Bank of St.
Paul, 790 F.2d 47, 49 (7th Cir. 1986) ("requirement of a timely
notice of appeal is `mandatory and jurisdictional'"). Brooks's
counsel appears to believe that the fact that he did not receive
the court's order within ten days excuses his late filing. The
law is to the contrary. As the Stelpflug court explained, the
Rules make clear that the "date of `entry' is the critical event from which
to measure the timeliness of an appeal." 790 F.2d at 50. Accord,
In re Williams, 216 F.3d 1295, 1297 n. 3 (11th Cir. 2000)
("contention that the 10-day period . . . ran from the date he
received the court's order, rather than from the date of entry of
the order . . . is without merit"). Indeed, Bankruptcy Rules
explain that "[l]ack of notice of the entry does not affect the
time to appeal or relieve or authorize the court to relieve a
party for failure to appeal within the time allowed. . . ."
Bankruptcy Rule 9022.
In any event, Brooks's attorney does not suggest, nor could he,
that the Clerk's failure to provide him with a copy of Judge
Sonderby's written order left him in the dark about her ruling.
Counsel was present in open court when that ruling, and Judge
Sonderby's rationale, were announced. Bankruptcy rules expressly
contemplate the filing of an appeal from the bankruptcy court's
ruling, even before that ruling has been memorialized in a
written order: "A notice of appeal filed after the announcement
of a decision or order but before entry of the judgment, order,
or decree shall be treated as filed after such entry and on the
day thereof." Bankruptcy Rule 8002(a). Counsel was fully aware of
Judge Sonderby's ruling on April 28 and could have filed his
appeal on the next business day.
The Rules do permit a late filing, but only with leave of
court. As noted, Brooks did file a motion for an extension of the
time to file an appeal. Rule 8002 explains that such a motion
must be filed before the time for filing an appeal has run. A
litigant who fails to do so will have up to 20 days after the
period has expired in which to seek leave to file a late notice
of appal, but leave should be granted only "upon a showing of
excusable neglect." Bankruptcy Rule 8002(c)(2).
Brooks filed his motion for leave to file a late notice of
appeal on May 23, well within 20 days after the May 11 date on
which the statutory appeal period expired. In denying Brooks's
motion, Judge Sonderby never reached the issue of whether the
claimant had established excusable neglect for a late appeal.
Instead, the Judge denied the motion because counsel failed to
notice it for a hearing, as required by the court's Local Rules.
Brooks offers no challenge to that ruling. Counsel does not suggest the Local Rules were not available to
him. Nor, having appeared for presentation of a motion on April
28, could he suggest he was unfamiliar with the court's oral
motion practice. Brooks's brief to this court devotes substantial
attention to the issue of whether she can establish excusable
neglect for her late-filed proof of claim, an issue this court
addresses briefly below. Brooks offers no basis whatever for the
court to entertain her appeal, which was also tardy. The court
concludes it lacks jurisdiction over this appeal.
II. Excusable Neglect for Late Proof of Claim
If the court were to reach the issue, it would affirm Judge
Sonderby's ruling that Brooks did not establish excusable neglect
for filing her proof of claim nearly seven months after the bar
date. In an appeal from a bankruptcy court's decision, the
district court reviews the findings of fact of the bankruptcy
court for clear error, and its legal conclusions de novo. Dye v.
United States, 360 F.3d 744, 747 (7th Cir. 2004). The Seventh
Circuit recently reviewed another of Judge Sonderby's decisions
to bar a late-filed claim in the Kmart bankruptcy, characterizing
its review as one for an abuse of discretion. See In re KMart
Corp., ___ F.3d ___, No. 03-4084, 2004 WL 1908374 (7th Cir. Aug.
27, 2004). In that case, the creditor's claim was substantial, in
the amount of $750,000, but was late by a single day. Noting the
importance of claims-filing deadlines, and the negative
consequences of permitting extensions of time, the Seventh
Circuit affirmed the Bankruptcy Court's decision to bar the late
filing. 2004 WL 1908374, *4-5, citing In re Hooker Invs., Inc.,
937 F.2d 833, 840 (2d Cir. 1991).
As in the earlier Kmart appeal, the parties here agree that in
evaluating whether a late filing is the result of "excusable
neglect," the court addresses the four factors identified by the
Supreme Court in the Pioneer case, 507 U.S. at 395: "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." In this court's view, Judge Sonderby did not abuse her discretion
in determining that these factors did not support a late filing
Brooks notes that her claim is a reasonably modest one, in the
amount of $50,000. (Transcript, at 102-03.) Although the
comparatively small size of her claim militates against a finding
of prejudice to the debtor here, other factors support such a
finding. Brooks's motion for leave to file a late claim was not
filed until March 3, 2003, and was not heard by the court until
April 28, 2003, after Kmart's Chapter 11 plan had been confirmed.
In In re Dartmoor Homes, Inc. 175 B.R. 659, 666 (N.D. Ill.
1994), the court permitted the filing of a claim two weeks after
the bar date. Pioneer similarly involved a claim filed just two
weeks after the bar date. Prejudice from a late-filed claim is
greater when the creditor's delay extends into the period in
which the plan of reorganization is being "negotiated, drafted,
filed or confirmed." Dartmoor, 175 B.R. at 666. The seven-month
delay involved in this case, and its obvious potential impact on
the bankruptcy proceeding, support Judge Sonderby's resolution.
The reason for Brooks's delay in filing her proof of claim is
arguably the most significant factor in the Pioneer test. In
re KMart Corp., 2004 WL 1908374, at *5. In Dartmoor, neither
the claimant nor his attorney had received notice of the bar
date. 175 B.R. at 667. The Pioneer court emphasized that notice
of the bar date had been placed "peculiarl[ly] and
inconspicuous[ly]" in a notice of a creditor's meeting, without
any warnings concerning its significance. 507 U.S. at 398. Here,
in contrast, Brooks's counsel admits he received notice of the
bar date several months before the time for filing a proof of
claim expired. Counsel permitted his assistant to stamp his name
to a letter and Praecipe of Appearance and made no further effort
to confirm the filing of a timely proof of claim. Where the
responsibility for delay is that of claimant's counsel, that
responsibility must be attributed to the claimant herself. Id.
Counsel for Kmart characterizes the delay here as the product
of a "gross lack of oversight" and inconsistent with a finding of
good faith. (Appellee's Brief, at 10.) In her own brief, Brooks does not specifically address the matter of good faith, but the
court concludes it need not decide the issue. The circumstances
were more sympathetic in the earlier Kmart appeal, where
claimant's counsel delegated the responsibility of mailing to a
clerk, who placed the proof of claim in the mail just one day
before the bar date, inadvertently marked for "second-day
delivery." 2004 WL 1908374, at *5. The Seventh Circuit
characterized these efforts as not "extraordinary or even
particularly diligent," but found the matter of good faith
"inconclusive." Id. The remaining factors satisfied the court
that Judge Sonderby did not abuse her discretion in denying the
motion to have the one-day-late claim deemed timely. Id.
So too here. Brooks has not established excusable neglect for
her failure to file a timely proof of claim. At a minimum, Judge
Sonderby did not abuse her discretion in so ruling.
Kmart's motion to supplement the appellate record (Doc. No.
12-2) is granted without objection. Kmart's motion to dismiss
Petitioner Susan Brooks's appeal as untimely (Doc. No. 12-1) is
granted. This appeal is dismissed.
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