Blinder, Robinson & Co., Inc., In re, 95-1473

• Decision Date: 04 September 1997
• Docket Number: No. 95-1473,95-1473
• Parties: Fed. Sec. L. Rep. P 99,554, 97 CJ C.A.R. 1835 In re BLINDER, ROBINSON & COMPANY, INC., Debtor. SECURITIES INVESTOR PROTECTION CORPORATION, Glen E. Keller, Jr., Appellants, v. Christos STELLATOS, Olinka Podany, Paul P. Tan, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1238

124 F.3d 1238

Fed. Sec. L. Rep. P 99,554, 97 CJ C.A.R. 1835

In re BLINDER, ROBINSON & COMPANY, INC., Debtor SECURITIES INVESTOR PROTECTION CORPORATION, Glen E. Keller Jr., Appellants, v. Christos STELLATOS, Olinka Podany, Paul P. Tan, Appellees.

No. 95-1473.

United States Court of Appeals Tenth Circuit.

Sept. 4, 1997.

Stephen P. Harbeck and Kevin H. Bell, Washington, DC, for Appellant Securities Investor Protection Corporation, and Andrew M. Low and Mark L. Taylor, Davis, Graham & Stubbs LLP, Denver, CO, for Appellant Glen E. Keller, Jr.

George Poulos, Astoria, NY, for Appellee Christos Stellatos, and Paul P. Tan, pro se.

Before PORFILIO and LOGAN, Circuit Judges, and BURRAGE, District Judge. ^*

PER CURIAM.

After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed. R.App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore ordered submitted without oral argument.

Background

On July 31, 1990, Blinder, Robinson & Company, Inc. (debtor) filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Immediately thereafter, the Securities Investor Protection Corporation (SIPC) applied to the United States District Court for the District of Colorado for protection under the Securities Investor Protection Act (SIPA), 15 U.S.C. §§ 78aaa-78lll. Pursuant to § 78eee(b)(3) of SIPA, the district court appointed Glen Keller (trustee) trustee for the liquidation of debtor and, pursuant to § 78eee(b)(4) of SIPA, removed the liquidation proceeding to the bankruptcy court.

On August 8, 1990, the bankruptcy court entered an Order Approving And Adopting Trustee's Application. The order directed the trustee to effect publication of notice of the proceedings in twenty-six newspapers throughout the country on or before August 14, 1990, and to effect a mailing of notice to each person who appears from the debtor's records to have been a customer of the debtor with an open account within the past twelve months to the address of the person as it appears from the debtor's records, also by August 14, 1990. The order also approved the form and content of the notice and various other documents to be mailed in the claim package. In accordance with § 78fff-2(a), ¹ the notice informed that claims must be filed within six months from the date of the notice and that no claims filed after that time would be allowed. The bar date by which claims had to be filed was February 14, 1991.

Christos Stellatos, Paul Tan, and Olinka Podany, were customers of the debtor with open accounts within twelve months of commencement of the proceedings. For various reasons, they all filed claims with the trustee after the bar date of February 14, 1991, and the trustee rejected each of their claims as untimely. The bankruptcy court held a hearing with respect to each of the three claimants, and it overruled the trustee's rejection of the claims and ordered that those three claims be treated in the same manner as timely-filed customer claims in the SIPA liquidation. The trustee and the SIPC ² appealed to the district court. The district court affirmed the bankruptcy court decision, but on an entirely different basis. The trustee and the SIPC now appeal the district court's affirmance of the bankruptcy court's decision to this court. We exercise jurisdiction under 28 U.S.C. § 158(d), ³ and, for the reasons set forth herein, we must reverse.

Bankruptcy Court Order

In its Order Approving Certain Late-Filed Claims As Timely-Filed, entered on January 14, 1993, the bankruptcy court found the following facts. The trustee obtained a list of approximately 220,000 customers from the debtor's computer records, and he and his staff printed information from those computer records regarding those customers onto pressure-sensitive mailing labels. The mailing labels were then checked and shipped to a direct mail company in Pennsylvania. Customer claim packets containing notice, claim forms, and general information regarding the SIPA proceeding were printed, and those materials were also shipped to the direct mail company. The direct mail company affixed the mailing labels to the claim packets and stuffed them in window envelopes, checked for visibility of the mailing labels, affixed postage, and placed the envelopes in the United States mail for delivery no later than August 14, 1990. The bankruptcy court found that the trustee's mailing of the notice was reasonable under the circumstances.

The bankruptcy court specifically found that the trustee mailed notice to Olinka Podany, Paul Tan, and Christos Stellatos at the addresses that appeared for them in the debtor's records and that those mailings were not returned to the trustee's office. In addition, the court found that notice of the proceedings had been published in twenty-six newspapers of general circulation throughout the country, including all editions of the Wall Street Journal.

Acknowledging that all three claimants denied actual receipt of notice, the bankruptcy court found specific facts with respect to all three claimants. The bankruptcy court's findings regarding the individual circumstances surrounding each of the three claimants' submission of untimely claims are fully set forth in the district court's opinion, see SIPC v. Stellatos (In re Blinder Robinson & Co., Inc.), 169 B.R. 704, 707-08 (D.Colo.1994), and we will not repeat them here.

The bankruptcy court ultimately found that, despite the trustee's efforts in mailing notice to Ms. Podany, Mr. Tan, and Mr. Stellatos, and his publication of notice,

these particular Claimants received no actual or constructive notice of the proceedings and that due process and concepts of fundamental fairness require allowance of late customer claims when a claimant has sufficiently and persuasively demonstrated that he had not received actual notice of the SIPA liquidation proceedings and the deadline for filing customer claims.

Bankr.Ct. Order at 8. The court emphasized that, despite having held hearings on many scores of untimely claims disputes where the trustee's determination was upheld and the customer claim was denied, these three particular claims "stand in sharp distinction from and involve unique circumstances distinguishing them from the other late customer claims to date." Id. at 9. The court found that, although the trustee's notice by mailing and publication was reasonable in light of the sheer volume of customers, these three claimants had rebutted the presumption of actual receipt that mailing affords by direct and substantial evidence.

The bankruptcy court also found that none of the three claimants received constructive notice; it accepted their respective testimony that they did not read newspapers during the relevant time. The court concluded that, because Ms. Podany, Mr. Tan, and Mr. Stellatos did not actually receive notice of the liquidation proceeding, their claims should be treated as timely filed. The bankruptcy court held that literal application of SIPA to these three claimants would be unconstitutional. In other words, it held that SIPA is unconstitutional as applied to these three claimants.

District Court Order

The district court affirmed the bankruptcy court order that Ms. Podany, Mr. Tan, and Mr. Stellatos be treated as having timely-filed their claims, but it did so on an entirely different basis than the bankruptcy court. The district court did not address the legal analysis of the bankruptcy court regarding the due process violations and resulting constitutionality of SIPA as applied to the three claimants. Instead, it found clear error in the bankruptcy court's finding that the trustee mailed notice to Mr. Tan and Mr. Stellatos. Therefore, the district court concluded that Mr. Tan and Mr. Stellatos were deprived of the requisite notice under SIPA, and that published notice alone was insufficient to satisfy due process requirements. As to Ms. Podany, it found that she fell within one of the statutory exceptions to the time-bar provision of SIPA.

Discussion

1. Factual Findings as to Mailing of Notice.

"In reviewing a district court's decision affirming the decision of a bankruptcy court, this court applies the same standards of review which governed the district court. The bankruptcy court's findings of fact will be rejected only if clearly erroneous." Tulsa Energy, Inc. v. KPL Prod. Co. (In re Tulsa Energy, Inc.), 111 F.3d 88, 89 (10th Cir.1997) (quotation omitted).

If the [bankruptcy] court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.

Anderson v. City of Bessemer City, 470 U.S. 564, 573-74, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985). Thus, the factual findings need not be correct, see Bill's Coal Co., Inc. v. Board of Pub. Utils., 887 F.2d 242, 244 (10th Cir.1989), but we must uphold them if they fall within the range of permissible conclusions, see Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 400, 110 S.Ct. 2447, 2458, 110 L.Ed.2d 359 (1990).

After taking testimony in three separate hearings for these three claimants and receiving much documentary evidence in those and other hearings, as well as receiving testimony from the trustee, the bankruptcy court stated:

This Court is convinced that Ms. Podany, Mr. Tan, and Mr. Stellatos ... were mailed a customer claim packet containing the Notice and a customer claim form on or before August 14, 1990. In addition, it is uncontroverted that Keller published notice in 26 newspapers of general circulation throughout the United States, including all editions of the Wall Street Journal.

Bankr.Ct. Order at 8. It also...