In re Nutri* Bevco, Inc.

• Decision Date: 30 March 1990
• Docket Number: Bankruptcy No. 88-30264.
• Citation: 117 BR 771
• Parties: In re NUTRI*BEVCO, INC., Debtor.
• Court: U.S. Bankruptcy Court — Southern District of New York

117 B.R. 771 (1990)

In re NUTRI*BEVCO, INC., Debtor.

Bankruptcy No. 88-30264.

United States Bankruptcy Court, S.D. New York.

March 30, 1990.

COPYRIGHT MATERIAL OMITTED

McCarter, Pisarri, Mulligan & Careri by William F. McEnroe, and Frank Careri, Jr., of counsel, Hackensack, N.J., for Kurt and Marie Winner and Marion Bopp.

Jeffrey L. Sapir and Jody Kava, of counsel, Hartsdale, N.Y., for debtor.

Shaw, Licitra, Esernio & Schwartz, P.C. by Jeffrey M. Zalkin, of counsel, Garden City, N.Y., for Creditors' Committee.

Neil R. Lubarsky, White Plains, N.Y., for Equity Sec. Holders' Committee.

DECISION ON MOTION TO DEEM LATE CLAIMS TIMELY FILED

JEREMIAH E. BERK, Bankruptcy Judge.

This is a joint motion filed April 25, 1989 by Marion Bopp, Kurt Winner and Marie Winner ("movants") seeking to have their late filed proofs of claim deemed timely filed. Marion Bopp filed an unsecured claim on April 21, 1989 in the amount of $76,000.00 (claim # 186). Kurt Winner and Marie Winner filed a joint unsecured claim on April 21, 1989 in the amount of $160,000.00 (claim # 187). The last date (the "bar date") for filing proofs of claim in this case was April 18, 1989.

Movants assert five arguments in support of their motion. First, movants contend they were deprived of due process because they did not receive timely and meaningful notice of the bar date. Second, the movants assert that the claims should be deemed timely filed under the "excusable neglect" standard of B.R. 9006(b)(1). Third, they argue that they are entitled to an extension of time to file their claims for "cause shown" pursuant to B.R. 3003(c)(3). Fourth, the movants state that the debtor's purported failure to adhere to certain fiduciary and ethical obligations requires the remedial application of Fed.R.Civ.P. 60(b)(3). Fifth, movants allege that they timely filed informal proofs of claim.

Hearings were held on May 9, 1989 and May 11, 1989 at which testimonial and documentary proof were adduced. After renewed settlement attempts failed, the matter was submitted for determination. For the reasons stated below, we find that movants failed to sustain their arguments to allow their claims to be deemed timely filed and, accordingly, their motion is denied.

I. FINDINGS OF FACTS

On April 29, 1988, the debtor, a publicly held corporation, filed for relief under Chapter 11 of the Bankruptcy Code. Movants' claims were scheduled as "disputed" and "unliquidated". The debtor has remained a debtor in possession pursuant to Section 1107 of the Bankruptcy Code ("Code"), 11 U.S.C. § 1107. Official Committees of Unsecured Creditors and Equity Security Holders were appointed and are represented by counsel.

Prior to the debtor's seeking bankruptcy relief, movants commenced an action on May 20, 1987 in the United States District Court for the District of New Jersey against the debtor and certain other parties. The complaint alleged various violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. as well as the Securities and Exchange Act of 1934, 15 U.S.C. §§ 78a et seq. This litigation was stayed upon the filing of the debtor's Chapter 11 case.

Counsel representing the movants as plaintiffs in the New Jersey federal litigation continued to represent them after the debtor filed for bankruptcy. They prepared and filed the proofs of claim at issue and appear as attorneys of record for movants herein. Two of movants' attorneys from the firm of McCarter, Pisarri, Mulligan & Careri, Esqs. testified concerning their actions and awareness of the pendency of the debtor's bankruptcy case.

One of movants' attorneys, Frank Careri, Jr., testified that he first became aware of debtor's bankruptcy when he received telephonic notice of the filing "just as the petition was filed." Tr. at 15 (May 11, 1989). In addition, Careri recalled that two weeks later he obtained a copy of the Chapter 11 petition by telephonic facsimile from the attorney representing the debtor in the New Jersey federal action. Id. In fact, as a result of the debtor's pending Chapter 11 case, Careri subsequently agreed with counsel representing the debtor in the New Jersey federal action that the litigation should be "administratively closed" pending the "termination of any proceedings concerning movants' claims which may be brought in the bankruptcy" unless it was reactivated by a party to that action. Movants' Exhibit 1; Tr. at 16-17 (May 11, 1989). Additionally, counsel for parties in the New Jersey action conferred on a periodic basis during the pendency of the debtor's bankruptcy case. Movants' Brief in Support of Motion for Leave to File Proofs of Claim Out of Time ("Movants' Brief") at 2-3; Tr. at 26-27 (May 11, 1989).

Notwithstanding their knowledge of the bankruptcy filing, movants' attorneys neither checked the debtor's schedules to determine if their clients' claims were properly listed, nor filed a notice of appearance or request for notices in the bankruptcy case. Tr. at 82-84, 88 (May 11, 1989). Instead, Careri advised his client, Kurt Winner,¹ to forward all notices concerning the bankruptcy case to Careri. Id. at 89-90.

Apparently, this advice was not heeded. Although Kurt Winner testified that he received several mailings in connection with the bankruptcy case, he did not forward any of them to his attorneys prior to the claims bar date. Id. at 53. Among the mailings he admitted receiving were the following. First, at some point in "mid 1988," Winner received the "Order for Meeting of Creditors, Combined With Notice Thereof and of Automatic Stay" ("§ 341 Notice"). Movants' Exhibit 6; Tr. at 45 (May 11, 1989). Second, in late December of 1988, Winner received the Amended Order and Notice of Hearing on Disclosure Statement ("Disclosure Statement Notice"). Movants' Exhibit 7; Tr. at 47 (May 11, 1989). The substance and significance of each of these documents are later discussed.

Movants' counsel, however, testified that the first time they saw the § 341 Notice was on May 11, 1989, the second day of the hearing commenced on the instant motion. Tr. at 86-87 (May 11, 1989). The § 341 Notice received by Kurt Winner contained the following statement:

The debtor (or trustee) has filed or will file a list of creditors and equity security holders pursuant to Rule 1007. Any creditor holding a listed claim which is not listed as disputed, contingent, or unliquidated as to amount, may, but need not file a proof of claim in this case. Creditors whose claims are not listed or whose claims are listed as disputed, contingent, or unliquidated as to amount and who desire to participate in the case or share in any distribution must file their proofs of claim on or before the last day fixed for filing a proof of claim. Any creditor who desires to rely on the list has the responsibility for determining that he is accurately listed. Movants\' Exhibit 6 (emphasis added).

This statement follows the wording of Official Bankruptcy Form 16 as prescribed by the Judicial Conference of the United States pursuant to B.R. 9009. In addition, the § 341 Notice received by movants bore the following supplemental statement required for all Chapter 11 cases within the jurisdiction of the Poughkeepsie Bankruptcy Court: "A CLAIM MAY BE FILED AT ANY TIME PRIOR TO THE APPROVAL OF THE DISCLOSURE STATEMENT UNLESS A DIFFERENT TIME IS FIXED BY THE COURT ON NOTICE AS PROVIDED IN RULE 2002." Id. (original emphasis).

On November 1, 1988, the debtor filed its first disclosure statement and plan and an order for hearing on the disclosure statement pursuant to Code § 1125(b) was entered that date, setting December 14, 1988 as the hearing date. Subsequently, an amended order was entered on December 12, 1988 which set the disclosure statement hearing for January 19, 1989. Notice of this hearing, Movants' Exhibit 7, was received by Kurt Winner late in December of 1988. Tr. at 47 (May 11, 1989). Pursuant to the Disclosure Statement Notice, Winner wrote to debtor's attorney on December 28, 1988 to request a copy of the disclosure statement which he thereafter received. Tr. at 48-49, 59 (May 11, 1989).

After several hearings on the disclosure statement and its amended versions, a revised version of the disclosure statement was approved pursuant to an order entered on March 24, 1989. An amended order approving the disclosure statement was entered March 27, 1989.

Ordinarily, either March 24 or March 27, 1989 would have been the last day to file timely proofs of claim, as fixed by the § 341 Notice issued in this case. In an apparent excess of caution, the debtor sought and obtained an order entered March 3, 1989 extending the claims bar date to April 3, 1989. Due to unrelated circumstances, an order further extending the bar date was entered March 21, 1989 setting April 18, 1989 as the last date by which proofs of claim were to be filed ("Claims Bar Order"). Movants' Exhibit 5. The Claims Bar Order provided in pertinent part:

1. All claims, as defined in 11 U.S.C. Section 101(4), of any creditor that holds or believes that it holds any claims against the estate of the Debtor based on the Debtor\'s primary or secondary, direct or indirect, secured or unsecured, contingent or guaranty liability, or otherwise, other than those claims specifically excepted by this Claims Bar Order, shall be filed with this Court, in writing, together with supporting documentation, substantially conforming with official Bankruptcy Form, on or before April 18, 1989 (the "Bar Date"), at the office of the Bankruptcy Court Clerk, 176 Church Street, Post Office Box 1000, Poughkeepsie, New York XXXXX-XXXX.

2. Any claim required to be filed pursuant to the provisions of this Claims Bar Order and not filed on or before the Bar Date shall be forever barred from assertion against the Debtor and its property and the holder of such claim shall be barred from voting or participating in any distribution in this case.

3. The following are excepted

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