Centric Corp., In re
| Citation | 901 F.2d 1514 |
| Decision Date | 23 April 1990 |
| Docket Number | 89-1081,Nos. 89-1080,s. 89-1080 |
| Parties | 12 Employee Benefits Ca 1516 In re CENTRIC CORPORATION, Debtor. TRUSTEES OF the CENTENNIAL STATE CARPENTERS PENSION TRUST FUND, Creditor-Appellant, v. CENTRIC CORPORATION, Debtor-Appellee, U.S. Trustee, Trustee. CENTRIC CORPORATION, Plaintiff-Appellee, v. TRUSTEES OF the CENTENNIAL STATE CARPENTERS PENSION TRUST FUND; and the Centennial State Carpenters Pension Trust Fund, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
Timothy J. Parsons (David B. Seserman with him on the briefs), Gorsuch, Kirgis, Campbell, Walker and Grover, Denver, Colo., for defendants-appellants.
Kenneth R. Stettner (Cynthia R. Hanley with him on the brief), Stettner, Miller and Cohn, P.C., Denver, Colo., for plaintiff-appellee.
Before McKAY, BARRETT, and ANDERSON, Circuit Judges.
The Trustees of the Centennial State Carpenters Pension Trust Fund ("the Trustees") appeal two orders of the district court. We affirm both.
On April 7, 1983, the Trustees notified Centric Corporation ("Centric") that Centric had been found to have withdrawn from the Centennial State Carpenters Pension Trust Fund and was therefore accountable for withdrawal liability under the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), in the amount of $372,775. See R. Vol. I at Tab 4, Ex. A. The MPPAA requires disputes between a plan sponsor and an employer to be resolved through arbitration, which either party must initiate within 180 days of a request by the employer that the sponsor review specific matters (which must be made within 90 days of the notice), or within 60 days of the sponsor's response to such a request, whichever comes first. 29 U.S.C. Secs. 1399(b)(2), 1401(a)(1). If arbitration is not properly initiated, the assessed liability becomes "due and owing." 29 U.S.C. Sec. 1401(b)(1).
On April 29 and July 6, 1983, Centric asked the Trustees to review certain alleged errors in the assessment. When the Trustees did not respond, Centric on December In July 1985, Centric filed a bankruptcy petition. The district court consequently stayed its proceedings and terminated the litigation without prejudice. The Trustees filed a proof of claim in the bankruptcy court for the assessed withdrawal liability, and moved for relief from the automatic stay. The motion was granted on May 13, 1986.
30, 1983 1 filed suit seeking a declaratory judgment that portions of the MPPAA, including the arbitration requirement, were unconstitutional. The complaint also alleged that, even if the MPPAA was constitutional, Centric had incurred no withdrawal liability because of the exception in 29 U.S.C. Sec. 1398 for suspensions caused by labor disputes. The Trustees counterclaimed for the assessed withdrawal liability. Centric posted a bond sufficient to pay the assessment. In April 1985, the district court ruled against Centric's constitutional claims but held that the applicability of the labor dispute exception could not be determined on a motion for summary judgment.
In May 1987, Centric objected to a number of the claims filed against it, including the Trustees' claim. Pursuant to a local bankruptcy rule, 2 each party to whose claim Centric objected was notified that if the creditor opposed the objection, a written request for a hearing had to be filed by June 22, 1987 or the bankruptcy court would act on the objection on June 29, 1987. The Trustees admit that they received their notice. Brief of Appellant at 14. Many creditors responded, but not the Trustees. On August 10, 1987, the bankruptcy court resolved the claims of the creditors who responded. The bankruptcy court then approved a plan under which all of Centric's assets would go to its secured creditors, after which the company would be dissolved. The unsecured creditors, including the Trustees, were to receive nothing from the bankruptcy estate.
Sometime between June 1986 and January 1988 (the record does not permit greater specificity), the Trustees changed legal counsel. On January 29, 1988, the Trustees, through their new attorney, filed a motion in the district court to reopen those proceedings and a motion in the bankruptcy court for leave to respond to Centric's objection to the Trustees' claim. The district court granted the motion to reopen. On July 14, 1988, the bankruptcy court, which had not formally ruled upon Centric's objection to the Trustees' claim, denied the Trustees' motion to respond to Centric's objection, and disallowed their claim. 3 The Trustees appealed to the district
court, which affirmed the bankruptcy court's decision. In a separate order, the district court held that the Trustees' withdrawal liability claim was barred by the doctrine of laches. The Trustees appeal both orders.
The Trustees were notified that if they opposed Centric's objection to their proof of claim, a written opposition and request for a hearing had to be filed by June 22, 1987. Yet, the Trustees did not try to respond until January 29, 1988--seven months after their opposition was due. The bankruptcy court denied their motion:
"This Court is convinced that if it were to allow the response of the Trust Fund to the Debtor's Objection to Claims, which was extremely tardy and which was the product of what is admitted to be simple oversight and neglect, then further unnecessary delay, cost, and disruption to the case is assured....
....
To grant the Motion to Respond will, inevitably, cause continuing confusion in an already disputed bankruptcy case, further dissipate an estate already inadequate to allow distribution to unsecured creditors, and send a message to creditors and the bar alike that schedules, timelines, and bar dates are not of importance in bankruptcy proceedings."
A bankruptcy court may allow a party to act tardily when the failure to act in a timely manner "was the result of excusable neglect." Bankr.R. 9006(b)(1). Courts "have generally not been liberal in granting [such] motions...." 9 L. King, Collier on Bankruptcy p 9006.06, at 9006-16 (15th ed. 1989). The court's decision on a Rule 9006(b) motion shall be reversed only for an abuse of discretion. In re Int'l Coating Applicators, Inc., 647 F.2d 121, 124 (10th Cir.1984).
The bankruptcy court tested the Trustees' claim of excusable neglect against the factors identified as relevant by the Ninth Circuit in In re Magouirk, 693 F.2d 948 (9th Cir.1982):
"(1) whether granting the delay will prejudice the debtor, (2) the length of the delay and its impact on efficient court administration, (3) whether the delay was beyond the reasonable control of the person whose duty it was to perform, (4) whether the creditor acted in good faith, and (5) whether the clients should be penalized for their counsel's mistake or neglect."
Regarding the first factor, the court found that allowing the Trustees to raise their response to Centric's opposition to their claim after a seven-month delay would prejudice Centric because the debtor was on the verge of executing its plan of liquidation. The effect on a plan which was prepared before the creditor made its motion is a valid consideration under this factor. See In re Standard Metals Corp., 48 B.R. 778, 782 (D.Colo.1985); cf. In re Dix, 95 B.R. 134, 138 (9th Cir. BAP 1988). Further proceedings in the bankruptcy court would both disrupt and diminish the distribution of the estate to Centric's creditors by requiring time and money to litigate the Trustees' claim. Centric would indeed have been prejudiced by the resurrection of litigation in its almost-completed bankruptcy proceeding.
The court held that the second factor weighed against the Trustees because delaying the termination of the proceeding would add to the congestion currently plaguing the Bankruptcy Court for the District of Colorado. A delay which hinders "the objective of finality which the fixing of a bar date seeks to establish" has an adverse impact on efficient court administration. In re Standard Metals Corp., 48 B.R. at 788. The premium on finally disposing of a matter is especially high when the court's docket is already overcrowded.
The third Magouirk factor--whether the delay was within the creditor's reasonable control--has been interpreted as simply asking whether the creditor had knowledge of his duties. See id. at 789; In re Dix, 95 B.R. at 138-39; In re Figueroa, 33 B.R. 298, 302 (Bankr.S.D.N.Y.1983). Because the Trustees received notice of the deadline, it was within their reasonable control to respond promptly.
The bankruptcy court decided that these three factors weighed so "substantial[ly] and compelling[ly]" against the Trustees' motion that, even assuming that the last two factors mitigated in favor of the motion, relief would not be granted. R. Vol. III, Tab 18 at 5. A similar conclusion was reached in In re Standard Metals Corp., 48 B.R. at 789. Moreover, because the Trustees were an unsecured creditor, they would not have collected anything on their claim anyway, so they lost very little (if anything) by being denied the opportunity to respond belatedly to Centric's objection to their claim. The district court correctly determined that the bankruptcy court did not abuse its discretion when it denied the Trustees' motion.
Under the MPPAA, "[a]ny dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination [of withdrawal liability] shall be resolved through arbitration." 29 U.S.C. Sec. 1401(a)(1) (emphasis added). "If no arbitration proceeding has been initiated pursuant to [section 1401(a)(1) ], the amounts demanded by the plan sponsor ... shall be due and owing ... ...
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