419 F.3d 115 (2nd Cir. 2005), 04-3251, In re Enron Corp.

Docket Nº:04-3251
Citation:419 F.3d 115
Party Name:In re Enron Corp.
Case Date:August 16, 2005
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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419 F.3d 115 (2nd Cir. 2005)


Midland Cogeneration Venture Limited Partnership, Appellant,


Enron Corp., Appellee,

The Official Committee of Unsecured Creditors, Movant.

No. 04-3251BK.

United States Court of Appeals, Second Circuit

Aug. 16, 2005

Argued: April 1, 2005.

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C. MacNeil Mitchell, Winston & Strawn LLP, New York, N.Y. (Terry John Malik, Winston & Strawn LLP, Chicago, IL, of counsel), for Appellant.

Christian J. Ward, Weil, Gotshal & Manges LLP, Austin, TX (Gregory S. Coleman, Meredith B. Parenti, Weil, Gotshal & Manges LLP, Austin, TX, Brian S. Rosen, Weil, Gotshal & Manges LLP, New York, NY, of counsel), for Appellee.

Before: FEINBERG, SACK, and KATZMANN, Circuit Judges.

SACK, Circuit Judge.

This appeal, spawned by what would appear to be one of the largest and most complex bankruptcy proceedings in American history, presents the question whether the United States Bankruptcy Court for the Southern District of New York (Arthur J. Gonzalez, Judge ) abused its discretion by denying a creditor's motion either to amend its timely filed proof of claim against a debtor to include the debtor's parent corporation, or to file a new proof of claim against the parent corporation, six months after the expiration of the court-imposed "bar date" for filing claims. In rejecting the motion, the bankruptcy court--applying the test for "excusable neglect" set forth by the United States Supreme Court in Pioneer Investment Services Co. v. Brunswick Associates L.P., 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993)--cited the substantial length of the delay, the lack of a "genuine reason" for the late filing, and the potential prejudice to the reorganization proceedings from the possible opening of the "floodgates" to similar late claims. The United States District Court for the Southern District of New York (Alvin K. Hellerstein, Judge ) affirmed the order, concluding that "the purpose of a bar date has to be given great deference." Hearing Tr. at 16, In re Enron Corp. Corp., No. 03 Civ. 9319 (S.D.N.Y. May 19, 2004) ("May 19, 2004, Hearing Tr.").

We affirm because we agree with the district court that the bankruptcy court did not abuse its considerable discretion in finding that the creditor's neglect in this case was not excusable, especially in light of the complexity of the reorganization the court was overseeing.


This dispute arises out of a contract for the purchase natural gas by the appellant, Midland Cogeneration Venture Limited Partnership ("Midland"), from Union Pacific Fuels, Inc. ("Union Pacific"). The contract, executed on May 26, 1993, called for Union Pacific to supply natural gas to Midland from October 1, 1993, through September 30, 2006. See In re Enron Corp., 298 B.R. 513, 517 (Bankr.S.D.N.Y.2003). On May 7, 1996, Enron Capital &

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Trade Resources Corp., a subsidiary of Enron Corp. ("Enron"), assumed all of Union Pacific's "rights and liabilities" under the contract, effective the following month. Id. As part of that transaction, Enron executed a guaranty of the obligations that Enron Capital & Trade--later renamed Enron North America Corp. ("ENA")--had assumed, pursuant to which Enron "absolutely and unconditionally guarantee[d] the prompt payment when due of all indebtedness and liabilities incurred" by its subsidiary. See Mot. of Midland Cogeneration Venture L.P. to File Am. Proof of Claim, Ex. B.3, In re Enron Corp., 298 B.R. 513 (No. 01-16034) ("Midland Mot. to Amend").

On December 2, 2001, Enron and certain of its subsidiaries, including ENA, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York. In re Enron Corp., 298 B.R. at 516. Thereafter, in March 2002, ENA notified Midland that it did not intend to deliver natural gas to Midland the following month. See id. at 517. On April 19, 2002, ENA formally gave notice--under the procedure established by the bankruptcy court for terminating executory contracts--that it was rejecting its remaining contractual obligations to Midland. See id.

On August 1, 2002, upon motion of Enron and its subsidiaries, the bankruptcy court set October 15, 2002, as the deadline, or "bar date," by which creditors would be required to file proofs of claim against the debtors. See In re Enron Corp., No. 01-16034, order at 3 (Bankr.S.D.N.Y. Aug. 1, 2002) ("Bar Date Order") (order stating that "October 15, 2002 at 5:00 p.m. (New York City Time) shall be the last date and time by which Proofs of Claim relating to these Debtors may be filed"). The order specified that "Proofs of Claim will be deemed timely filed only if actually received by the Enron Claims Docketing Center on or before the applicable Bar Date." Id. (emphasis in original). And it cautioned that

any holder of a claim against a Debtor who is required to but fails to file a proof of claim for such claim in accordance with this Order on or before the applicable Bar Date shall be forever barred, estopped and enjoined from asserting such claim against such Debtor (or filing a proof of claim with respect thereto) and such Debtor and its respective property shall be forever discharged from any and all indebtedness or liability with respect to such claim.

Id. at 5-6.

The order required that Enron and its affiliates "shall mail, on or before August 16, 2002, [a] Bar Date notice" to potential creditors. Id. at 3. That notice, which Enron mailed to creditors on August 10, 2002, and which was thereafter published in various national newspapers, see In re Enron Corp., 298 B.R. at 517, was captioned "NOTICE OF BAR DATE REQUIRING FILING OF PROOFS OF CLAIM AGAINST DEBTORS LISTED ON EXHIBIT A ON OR BEFORE OCTOBER 15, 2002 AT 5:00 P.M. (NEW YORK TIME)." See Notice of Bar Date at 1, In re Enron Corp., 298 B.R. 513 (No. 01-16034) (the "Bar Date Notice").

The notice instructed creditors: "If you assert Claims against more than one Debtor, you must file a separate Proof of Claim with respect to each such Debtor. In addition, you must identify on your proof of claim form the particular Debtor against which your Claim is asserted." Id. at 2 (emphasis in original). And it contained a paragraph headed "CONSEQUENCES OF FAILURE TO FILE PROOF OF CLAIM," that stipulated as follows:

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Any entity that is required to file a Proof of Claim, but that fails to do so by the applicable Bar Date described in this Notice, shall be forever barred, estopped and enjoined from the following:

a. asserting any Claim against a Debtor that the entity has that (i) is in an amount that exceeds the amount, if any, that is identified in the Schedules on behalf of such entity as undisputed, noncontingent and liquidated or (ii) is of a different nature or a different classification than any Claim identified in the Schedules on behalf of such entity (any such Claim being referred to in this Notice as an " Unscheduled Claim "); or

b. voting upon, or receiving distributions under, any plan or plans of reorganization in these chapter 11 cases in respect of an Unscheduled Claim.

Id. at 2-3 (emphasis in original). The paragraph continued: "If it is unclear from the Schedules whether your Claim is disputed, contingent or unliquidated as to amount or whether it is otherwise properly listed and classified, you must file a proof of claim on or before the applicable Bar Date." Id. at 3 (emphasis in original). Schedule F of Enron's financial disclosures, in turn, listed Midland's "Guarantee Claim" as "contingent" and "unliquidated," and listed the amount of the claim as "unknown." Sch. F: Creditors Holding Unsecured Nonpriority Claims at 624, In re Enron Corp., 298 B.R. 513 (No. 01-16034).

On October 10, 2002, five days before the bar date, Midland filed with the bankruptcy court proof of an unsecured claim against ENA in the amount of $12,567,557 based on ENA's failure to deliver natural gas from April 1 to April 19, 2002, and for damages resulting from ENA's rejection of its remaining obligations under the natural gas purchase agreement. See Proof of Claim, Ex. A 2-3, In re Enron Corp., 298 B.R. 513 (No. 01-16034). Midland's filing included a "reservation of rights" provision pursuant to which it purported to "reserve[ ] the right to amend, supplement, or otherwise modify this Proof of Claim at any time." Id.

Midland did not, however, attempt to file a proof of claim against Enron under the guaranty until April 24, 2003--some six months after the bar date. At that time, Midland filed a motion seeking "to assert the 1996 Guaranty against Enron Corp. as either an amendment to the Claim [against ENA] or as a late-filed claim." Midland Mot. to Amend at 5. Midland argued that its failure to file a timely claim against Enron under the guaranty "resulted solely from inadvertence," id., because "Midland and its counsel were so heavily focused upon and involved in negotiations with personnel of [ENA] and its attorneys regarding the rejection of the 1996 Agreement and the assumption and assignment of [an unrelated agreement] that they neglected to include with the [proof of claim against ENA] a claim [against Enron] under the 1996 Guaranty." Id. at 3. The amended or late-filed claim could not "under any circumstance come as a surprise to [ENA], Enron Corp., its affiliated debtors or their creditors," Midland argued, because "Midland's rights and remedies under the 1996 Guaranty were well known by business personnel and counsel for Enron Corp. and [ENA, and because] the 1996 Guaranty was disclosed on Enron Corp.'s schedules of financial affairs." Id. Midland also contended that neither company could be prejudiced by its delay because they had not yet filed a disclosure statement or plan of...

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