United States District Court, N.D. Illinois, Eastern Division
August 25, 2005.
DANA HALL, Appellant,
KMART CORPORATION, Appellee.
The opinion of the court was delivered by: JOHN GRADY, Senior District Judge
This case is before us on appeal from Bankruptcy Judge
Sonderby's order of August 11, 2004, which denied Dana Hall's
motion to file a late administrative expense claim in the
bankruptcy reorganization of Kmart Corporation ("Kmart"). For the
reasons explained below, the bankruptcy court's order is
On January 22, 2002, appellee Kmart filed a voluntary petition
for reorganization pursuant to Chapter 11 of the United States
Bankruptcy Code. On May 22, 2002, appellant Dana Hall was
shopping at a San Diego Kmart store and allegedly suffered severe
injury to her left foot when a pile of paint cans fell on it.
Hall's counsel, Norton & Norton LLP (the "Norton Firm"), notified
Kmart in August 2002 that it was representing Hall in connection
with the incident. On May 9, 2003, Hall filed a personal injury
suit against Kmart in California state court. The deadline for filing administrative claims in the Kmart
bankruptcy proceeding (the "bar date") was June 20, 2003. On May
9, 2003, Kmart mailed a notice to the Norton Firm informing Hall
of the bar date. The notice was mailed to the correct address for
the Norton Firm, but it omitted the ZIP Code. On May 19, 2003,
Kmart mailed a second copy of the notice to Hall's counsel at the
same address, along with a blank proof of administrative expense
claim form. Neither of the mailings were returned to Kmart as
"undeliverable." The Norton Firm, however, denies receiving
On June 10, 2003, Alexandra Wilcox, Kmart's personal injury
defense counsel, called Marshall Rosenbach, Hall's counsel at the
Norton Firm, and left a voice-mail message regarding the personal
injury action, the Kmart bankruptcy, and the filing of documents
with the bankruptcy court. Whether Wilcox and Rosenbach had a
conversation that day concerning the bar date is in dispute, as
described infra in our discussion. Rosenbach faxed Wilson a
letter at 5:15 p.m. that same day, the pertinent content of which
is also set forth infra.
After June 10, the parties proceeded with the personal injury
action and ultimately transferred venue to San Diego. On August
26, 2003, Rosenbach received a letter from Wilcox advising him
that Hall's claim was time-barred. The letter also stated: "On
June 10, 2003, while we were discussing the transfer of this case
from Los Angeles to San Diego, we called to remind you to file the
administrative expense claim form." The Norton Firm claims that
this was their first notification of the bar date. According to
Wilcox, she advised Rosenbach in early September 2003 that he
should consult Kmart's bankruptcy counsel to proceed with the
matter in bankruptcy court.
Some months later, on December 22, 2003, the Norton Firm filed
a "Motion of Claimant Dana Hall Seeking Authority to File Late
Administrative Expense Claim." On March 10, 2004, the bankruptcy
court heard oral argument and testimony on Hall's motion and
reserved ruling. On August 11, 2004, the bankruptcy court entered
a memorandum opinion and a separate order denying Hall's motion.
Hall now appeals.
The bankruptcy court's refusal to allow Hall to file a late
administrative expense claim is reviewed for an abuse of
discretion. See In re Kmart Corp., 381 F.3d 709, 712 (7th
Cir. 2004). "In general terms, a court abuses its discretion when
its decision is premised on an incorrect legal principle or a
clearly erroneous factual finding, or when the record contains no
evidence on which the court rationally could have relied." Id.
at 713. We review the bankruptcy court's factual findings for
clear error and its conclusions of law de novo. See In re
Smith, 286 F.3d 461, 464-65 (7th Cir. 2002); Fed.R.Bankr.P.
8013. "[D]ue regard shall be given to the opportunity of the bankruptcy court to
judge the credibility of the witnesses." Fed.R.Bankr.P. 8013.
We begin with the applicable general principles. "[J]ustice
does not require amendment, and indeed rarely permits
amendment, once the last date for filing claims has passed.
`Late-filed claims, especially in the bankruptcy context, disrupt
orderly discharge and should generally be barred.'" In re
Plunkett, 82 F.3d 738, 741 (7th Cir. 1996) (quoting In re
Unroe, 937 F.2d 346, 351 (7th Cir. 1991)).
Under Federal Rule of Bankruptcy Procedure 9006(b), a
bankruptcy court may, in its discretion, allow a late-filed proof
of claim if the late filing was the result of "excusable
neglect." See Kmart, 381 F.3d at 713. There are four general
factors to guide the court's excusable neglect analysis: 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 the good faith of the movant. See id. (citing
Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship,
507 U.S. 380, 395 (1993)). "One ancillary rule is that
inattentiveness to the litigation is not excusable." Plunkett,
82 F.3d at 742.
Judge Sonderby's detailed analysis focused primarily on the
reason for the delay the purported lack of notice and the
length of the delay. The bankruptcy court held that, even
assuming that Hall otherwise acted in good faith and that Kmart would not be
prejudiced, Hall's counsel's neglect was not excusable. Hall
argues that the bankruptcy court abused its discretion by: (1)
finding that the presumption of receipt of the notices had not
been rebutted; (2) finding that appellant had received notice of
the bar date on June 10, 2003; (3) allowing the telephonic
testimony of Wilcox and in "giving greater weight and
credibility" to her testimony; (4) holding that 10 days' notice
was sufficient; and (5) finding that there was delay in filing
the motion. Hall also contends that Kmart should have been
estopped from opposing Hall's motion because Kmart "vigorously
litigated" the underlying state court action. We will examine
each argument in turn.
Mail that is properly addressed, stamped, and deposited in the
mail system is presumed to have reached its destination in the
usual time and to have been received by the party to whom it was
addressed, see Hagner v. United States, 285 U.S. 427, 430
(1932). The bankruptcy court correctly noted that the presumption
arises even if a ZIP Code has been omitted from the otherwise
correct address, see In re Longardner & Assocs., Inc.,
855 F.2d 455, 460 (7th Cir. 1988). Such an omission weakens the
presumption, but the presumption is strengthened again where a
mailing is never returned as "undeliverable." See id. at 460.
Moreover, a simple denial of receipt does not rebut the
presumption, but merely creates a question of fact. See id.
at 459. The bankruptcy court considered the affidavit of Kmart's
noticing agent, who stated that notices were mailed to the Norton
Firm on May 9 and May 19, 2003 and that neither mailing was
returned as "undeliverable." The court also considered the
affidavit and testimony of Hall's counsel, Rosenbach, and the
telephonic testimony of Kmart's counsel, Wilcox. According to
Rosenbach, the Norton Firm did not receive either of the bar date
notices that were mailed by Kmart in May 2003. Rosenbach conceded
that Wilcox left him a voice-mail message on June 10, 2003,
regarding an unspecified filing in relation to Kmart's
bankruptcy, but stated that he never had a discussion with Wilcox
that day concerning the bar date.
Wilcox, on the other hand, testified that she spoke with
Rosenbach the afternoon of June 10 and discussed the bankruptcy
filing with him, as well as the administrative expense claim
form. She recalled that Rosenbach had asked her what the form
looked like and that she responded that she was not bankruptcy
counsel so she did not know, but that he should "make sure" to
look for it. According to Wilcox, Rosenbach stated that his boss,
Todd Norton, might have it on his desk somewhere.
Rosenbach contended (and Hall contends on appeal) that his June
10 fax at 5:15 pm to Wilcox corroborated his argument that the
notices had not been received because he would not have sent it
if he had known about the bar date. The fax stated in pertinent
part: "This letter confirms our conversation of earlier today
regarding changing venue to San Diego. . . . I also received your
voice mail this afternoon regarding an additional filing that we
had to file in light of KMart's bankruptcy filing." (Appellee's
Br., Ex. F.) Wilcox testified that she did not respond to the fax
because she had assumed it was written prior to their
conversation but not faxed until afterward.
The bankruptcy court observed that although Rosenbach claimed
that the June 10 discussion with Wilcox never took place, Hall's
motion curiously contained the following inconsistent statements:
"This Motion . . . is based upon the grounds that HALL's
administrative expense claim was not timely filed because her
counsel did not receive notice of the bar date until June 10,
2003"; ". . . HALL's administrative expense claim was not timely
filed because her counsel did not receive notice of the bar date
until June 10, 2003"; and "HALL was not notified of the
administrative expense bar date until ten (10) days prior to the
expiration thereof." (Appellee's Br., Ex. B, Motion Seeking
Authority to File Late Administrative Expense Claim at 2, 6, 8.)
When the court asked Rosenbach about the inconsistency between
these statements and his contention that the June 10 conversation
never took place, Rosenbach responded that the statements in the
motion were "really an alternative argument." (Appellee's Br.,
Ex. E, Tr. at 15.) The bankruptcy court concluded that Rosenbach's simple denial
of receipt did not rebut the presumption that the notices had
been received. Regarding the June 10 fax, the court stated: "The
letter does not . . . provide . . . corroboration [that the
Notices had not been received]; it merely indicates that
Rosenbach (when he wrote the letter) was unaware of the Notice.
Indeed, when Rosenbach spoke to Wilcox, he acknowledged that his
boss, Todd, might have it `on his desk somewhere.' . . .
Rosenbach may even have seen the Notice, but ignored it, thinking
that it did not apply to Hall's claim." (Memorandum Opinion at
7-8.) We find no error in the bankruptcy court's conclusion, and
Hall simply gives us no reason why we should do so.
The bankruptcy court could have stopped there and relied on the
presumption of notice,*fn1 but it also found that Rosenbach
himself was specifically advised by Wilcox on June 10, 2003 that
the administrative expense claim form had to be filed by June 20,
2003. In the court's view, ten days were "more than sufficient"
to allow the Norton form to timely file the claim form. The court
found Wilcox's testimony persuasive, as well as the admissions in
Hall's motion that notice had been received on June 10, which
according to the court were "not adequately explained as an
`alternative argument.'" (Memorandum Opinion at 8.) Again, we discern no error in the bankruptcy court's
conclusion. Wilcox testified that on June 10, she discussed with
Rosenberg "the bankruptcy filing and AEC [administrative expense
claim] form and date." (Appellee's Br., Ex. E, Tr. at 24-25.)
Hall argues that the court's finding was erroneous because
Wilcox's shorthand notes of certain conversations with Rosenberg
did not mention that she had "given oral notice of the bar date."
We are unpersuaded. Wilcox's notes were shorthand and incomplete,
and she was able to indpendently recall many of the details of
her conversation(s) with Rosenberg. The bankruptcy court, often
asking questions herself, heard detailed testimony from Wilcox
and Rosenberg. The court determined that Wilcox was credible, and
Hall offers us no reason to believe otherwise.
We also reject Hall's argument that the bankruptcy court should
not have allowed Wilcox, who was out of state, to testify by
telephone. Hall's counsel did not object to the telephonic
testimony at the hearing, and the argument therefore has been
waived. Hall also failed to raise before the bankruptcy court the
argument that Kmart is estopped from opposing Hall's motion;
thus, it has been waived as well.
Hall's final argument is that ten days' notice of the bar date
(from the June 10 conversation to the June 20, 2003 bar date) was
insufficient because she was entitled to twenty days under
Federal Rule of Bankruptcy Procedure 2002. Rule 2002, however, prescribes a twenty-day notice for mailing, among other things,
notice of the time for filing proofs of claims. The Rule does not
apply to oral notice, and Hall does not cite any authority for
extending it to the instant situation. In any event, the
bankruptcy court's holding regarding notice on June 10 was an
alternative holding. Its primary holding, which was not
erroneous, was that Hall's counsel failed to rebut the
presumption that it had received the notices that were mailed in
May 2003, which was more than twenty days before the bar date.
After weighing all the evidence, the bankruptcy court found
that Hall had failed to rebut the presumption that she received
(through counsel) the two notices of the bar date mailed in May
2003, as well as oral notice in June 2003. The motion to file a
late claim was not filed until December 22, 2003, over six months
after the June 10 conversation. The court found Hall's counsel's
reasons for the delay he had made numerous unsuccessful
attempts to contact Kmart's bankruptcy counsel and had spent
"several weeks" researching the underlying issues to be
inadequate explanations. We find no error in this conclusion. Six
months is a lengthy delay, and neither consultation with Kmart's
counsel nor extensive research was necessary for Hall's counsel
to file a motion seeking leave to file a late proof of claim.
We believe that the bankruptcy court's findings and analysis
regarding Hall's motion to file a late adminstrative expense
claim were correct; there was no excusable neglect. The court did not
abuse its discretion in refusing to allow a late-filed claim.
For the foregoing reasons, the bankruptcy court's order of
August 11, 2004, denying the motion of Dana Hall seeking leave to
file a late administrative expense claim is affirmed.
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