In re Eagle-Picher Industries, Inc.

• Decision Date: 04 April 2002
• Docket Number: No. 00-4469.,00-4469.
• Parties: In re EAGLE-PICHER INDUSTRIES, INC., et al., Debtors. Mayor and City Council of Baltimore, Maryland, Appellant, v. State of West Virginia, Michigan School Class Action, County of Wayne, Michigan, and B.C. Hydro & Electric, Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

285 F.3d 522

In re EAGLE-PICHER INDUSTRIES, INC., et al., Debtors.

Mayor and City Council of Baltimore, Maryland, Appellant, v. State of West Virginia, Michigan School Class Action, County of Wayne, Michigan, and B.C. Hydro & Electric, Appellees.

No. 00-4469.

United States Court of Appeals, Sixth Circuit.

Argued January 23, 2002.

Decided and Filed April 4, 2002.

COPYRIGHT MATERIAL OMITTED

Carl E. Tuerk, Jr. (argued and briefed), Cooper & Tuerk, Baltimore, MD, Fredric Francis Tilton (briefed), Cincinnati, OH, Stanley J. Levy, Levy, Phillips & Konigsberg, LLP, New York, NY, for Appellant.

Philip J. Goodman (argued and briefed), Brmingham, MI, Edward B. Cottingham (briefed), Jr., Ness, Motley, Loadholt, Richardson & Poole, Mt. Pleasant, SC, for Appellees.

Before BOGGS and MOORE, Circuit Judges; RUSSELL, District Judge.^*

OPINION

RUSSELL, District Judge.

This is an appeal from a bankruptcy court order granting Appellees West Virginia, et al., preferred status in the disposition of a settlement trust corpus funded by Debtor Eagle-Picher Industries, Inc., despite Appellees' failure to comply fully with a mandatory notification provision. While Appellees were required to give notice to three entities as a prerequisite to preferred status, they only notified two of the three. Notwithstanding this failure, the bankruptcy court determined that Appellees were entitled to preferred status in the trust dispensation because they had substantially complied with the notice requirements. Because we agree with the bankruptcy court that substantial compliance can operate to obviate the need for a deadline extension and because we see no abuse of discretion in the bankruptcy court's application of the doctrine in the present case, we AFFIRM.

BACKGROUND

In 1991, Eagle-Picher Industries, Inc. filed for Chapter 11 bankruptcy. A plan of reorganization was confirmed on November 18, 1996. The plan provided for the creation of a Settlement Trust to be funded by Eagle-Picher in the amount of $3 million. All damages claims against Eagle-Picher resulting from asbestos installation were to be paid out of this Settlement Trust.

After the plan confirmation, several disputes arose regarding the dispensation of the $3 million. The claimants eventually agreed upon a multi-tiered scheme, which they memorialized as a "Stipulation for Treatment of Property Damage Claims." (See J.A. # 17, pp. 209-213.) The bankruptcy court approved this proposal on May 7, 1999. (See J.A. # 16, pp. 166-68.) Under the claimants' framework, the balance of the Settlement Trust, after fees and expenses, would be divided into two separate funds, Tier I Product ID Claimants and Tier II Non-Product ID Claimants. The Tier I fund was to receive two-thirds of the available funds for distribution (approximately $2 million), while the Tier II fund was to receive one-third (approximately $1 million).

Access to Tier I funds was limited to parties whose claims were based on damages from Debtor's asbestos-containing building materials and who had already filed a timely Proof of Claim. (J.A. # 17, p. 209, ¶ 5.) The Stipulation provided that a claimant seeking payment under Tier I

must serve written notice of its intention to have its claim treated as a Tier I Product-ID Claim hereunder on the Committee [of Property Damage Claimants], NAAG [National Association of Attorneys General],¹ and the Property Damage Claims Administrator (the "PDCA" ...) so that it is actually received by no later than one month after the date of the court's approval of this Stipulation. Any Claimant not giving such written notice shall automatically, and without further action by the claimant, have their claim treated as a Tier II Non-Product ID claim hereunder.

(J.A. # 17, pp. 210, ¶ 7 (footnote added).)

Only two claimants, the Mayor and City Council of Baltimore ("Baltimore") and the Cincinnati School District ("Cincinnati") fully complied with this portion of the stipulation by providing written notice to the Committee, NAAG, and the PDCA on or before the June 7, 1999 deadline. Appellees state that six of eight claimants, or 75% of all claimants seeking Tier I status made the same technical error of failing to provide written notice to the PDCA. Appellant disputes this assessment, and argue that only the four Appellees made the error.²

Two and a half months after the bankruptcy court's order, on August 23, 1999, Appellees filed a motion entitled "Motion for Waiver or Modification of Deadline to File Statement of Intent with the Property Damage Claims Administrator." (See J.A. # 15, p. 158-165.) In that motion, Appellees stated that they had substantially complied³ with the order by filing with the NAAG and the Committee, that the PDCA had actual notice before he mailed the Tier I claim forms, and that no prejudice had ensued. Appellees argued that due to inadvertence or misunderstanding, the notices of intention were not filed with the PDCA. Appellees stated that they believed that the NAAG was coordinating the statements and would make any necessary additional filings on behalf of the claimants. They requested that the deadline be waived or modified to allow for an additional ten days to file such notice.

On September 9, 1999, Baltimore filed its opposition to the Appellees' Motion for Waiver or Modification. (See J.A. # 14, pp. 129-157.) Baltimore argued that Appellees' motion was governed by Bankr.R. 9006(b)(1), which allows for post-deadline enlargement of time where the failure to act was the result of excusable neglect. Appellant maintained that Appellees had failed to comply with Rule 9006(b)(1) because they never claimed or established that their failures were the result of excusable neglect. Baltimore also asserted that substantial prejudice would result to the claimants who timely filed because granting the motion would expand the number of qualifying participants in the Tier I division. Baltimore also argued that the PDCA would have to receive, review, assess, and consider a greater number of claims.

The Cincinnati School District also filed a Memorandum in Opposition on September 9. (See J.A. # 13, pp. 126-28.) Cincinnati expressed concern about the numerous other potential claimants who also failed to comply with the notification requirements and would also argue that the bankruptcy court's requirements should be waived. Cincinnati further pointed to the court's previous refusal of its requests to modify or waive deadlines.⁴

Two appellees, Michigan Schools and the County of Wayne, replied to Baltimore and Cincinnati's filings (see J.A. # 11, pp. 105-21), stating that they "honestly believed that they had already fulfilled their obligation to give notice of their intent to file Tier I claims by having previously signed and sent the `Claims Questionnaire' provided by NAAG months before the filing deadline subsequently established by the Court." (J.A. # 11, p. 107.)⁵ They argued that the claimants who had timely filed "will suffer no prejudice by losing the unexpected opportunity to enhance the value of their claims at the expense of those claimants who have worked long and hard to assemble the product identification evidence necessary to support Tier I claims." (J.A. # 11, p. 109.) In further support of their Motion, Appellees submitted two letters from the PDCA. In the first letter, dated August 10, 1999, the PDCA stated that he had received copies of the documents filed with the NAAG in which claimants expressed their intention of seeking Tier I status. In the second, which was dated August 25, 1999, the PDCA stated his intention not to oppose the Motion for Waiver or Modification of the Deadline.

The bankruptcy court, Perlman, J., issued a decision and order on January 7, 2000, in which it allowed Appellees to seek Tier I status. (See J.A. # 9, pp. 33-41.) In so doing, the court "f[ound] that movants have not sought relief from this court under an excusable neglect standard as has been suggested by the opposition. Instead, they have presented arguments under a substantial compliance theory, and it is on that basis that this court has considered the matter." (Id. at 35.) Noting that the Stipulation's notice provision was not intended to benefit other Tier I claimants, the court found that the only parties who could be prejudiced were the three parties receiving notice and that the PDCA had expressly disclaimed any prejudice. The court also acknowledged that all parties knew that the Appellees had property damage claims against the Debtor. Because of the number of parties making the same mistake, the bankruptcy court found it reasonable to believe that some type of misunderstanding was present. The court concluded that the Appellees' submission of their statements of intent constituted substantial compliance with the notice provision, using the four-factor test of Borzeka v. Heckler, 739 F.2d 444 (9th Cir.1984).

After briefing and without a hearing, the United States District Court for the Southern District of Ohio, Weber, J., affirmed the bankruptcy court's ruling. (See R. 9, pp. 10-19.).

DISCUSSION

In a bankruptcy appeal, the Court of Appeals "review[s] the bankruptcy court's decision rather than the district court's review of the bankruptcy court's decision." Barlow v. M.J. Waterman & Assocs., Inc. (In re M.J. Waterman & Assocs., Inc.), 227 F.3d 604, 607 (6th Cir. 2001). The bankruptcy court's factual findings are examined for clear error (i.e., "the most cogent evidence of mistake of justice"), while all conclusions of law are reviewed de novo. Id. (bankruptcy court's conclusions of law reviewed de novo); Wesbanco Bank Barnesville v. Rafoth (In re Baker & Getty Financial Servs., Inc.), 106 F.3d 1255, 1259 (6th Cir.1997) (district court's conclusions of law reviewed de novo). Mixed questions of law and fact must be separated into their constituent parts and each analyzed using the appropriate standard of review. In re Baker & Getty, 106 F.3d at 1259. Finally, the...