Opinion
No. 04 Civ. 9647 (JSR).
April 8, 2005
MEMORANDUM ORDER
On November 8, 2004, appellant Academy, Ltd. timely appealed the Order of Judge Cornelius Blackshear, United States Bankruptcy Judge, dated November 1, 2004, which denied Academy's motion to enlarge the bar date for filing a proof of claim. By Order dated March 10, 2005, the Court denied the appeal and affirmed Judge Blackshear's ruling. This Memorandum Order will briefly recite the reasons for that ruling and direct the entry of judgment.
On September 4, 2003, the debtors filed for Chapter 11 bankruptcy, and on January 7, 2004 the Bankruptcy Court set March 2, 2004 as the deadline for filing all proofs of claim against debtors in the consolidated action (the "Bar Date"). See Order dated January 7, 2004, No. 03-15564, Chapter 11 Case, Bankr. S.D.N.Y. Pursuant to that order, the debtors published, on January 14, 2004, notices of the Bar Date in the Wall Street Journal (National Edition) andNewsday.
In relevant part, the order provided that whoever misses filing a proof of claim by March 2, 2004, at 5 p.m. "shall be forever barred, estopped and enjoined from asserting such claim against the Debtors . . . and the Debtors and their property shall be forever discharged from any and all indebtedness or liability with respect to such claim." Order dated January 7, 2004.
On February 26, 2004, four days prior to the Bar Date, one Jalena Malenica filed certain proofs of claims against the debtor. Her claims neither specified that they were ephedra-related nor named Academy. On July 20, 2004, however, after all personal injury actions against debtors had been removed to this Court, Malenica filed a formal complaint alleging ephedra-related claims against both the debtors and Academy.See Complaint, 04 Civ. 5639, attached as Exhibit B to Academy's Designation of Records and Statement of Issue on Appeal. On September 29, 2004, seven months after the Bar Date had passed and two months after being served with the aforementioned complaint, Academy filed a motion to extend the Bar Date and permit the late filing of a proof of claim, so that it could seek indemnification from debtors in the Malenica action. By Order dated November 1, 2004, Judge Blackshear denied Academy's motion to enlarge the Bar Date. This appeal followed.
Few large bankruptcies could ever be successfully resolved if substantial finality were not accorded a bar date. Yet a completely rigid adherence to bar date finality might result in substantial inequities in certain cases. Accordingly, Rule 9006(b)(1)(2), Fed.R.Bankr.P., permits relaxation of the bar date "where the failure to act was the result of excusable neglect." Id.
In Pioneer Ins. Servs. Co. v. Brunswick Assocs. Ltd. P'ship., 507 U.S. 380, 388 (1993), the Supreme Court set forth a list of factors to be considered in making the equitable determination of whether an the neglect is "excusable," to wit, "the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith." Id. at 395. It is for the Bankruptcy Court to weigh these and any other factors relevant to a particular motion to enlarge the bar date, and the Bankruptcy Court's determination will not be overturned unless it has been abused its discretion. See id. 398-99. No such abuse may be found where there is "any evidence of prejudice to [the estate] or to judicial administration. . . ." Id.;see also In re Drexel Burnham Lambert Group, Inc., 146 B.R. 84, 87 (S.D.N.Y. 1992).
Here, it cannot be said that Judge Blackshear abused his discretion in determining that there would be some prejudice to the estate and to judicial administration if Academy's motion were granted. By the time appellant filed its motion on September 29, 2004, a settlement mediation was well underway before Retired Justice John K. Trotter of the California State Supreme Court that included all 2002-2004 ephedra-related claims against debtor and that shortly thereafter resulted in a global settlement.See this Court's Order dated March 23, 2005. Far from abusing his discretion, Judge Blackshear was right to conclude that the addition of a new party to the negotiations could prejudice the estate and the numerous participants to the mediation, all of whom had met the Bar Date.
Academy, moreover, could have mitigated, if not eliminated this prejudice if it had acted more swiftly in moving to extend the Bar Date as to its cross-claim for indemnification. Instead, it waited two months after being sued by Malenica before filing the instant motion — months during which, as even the most modest inquiry would have revealed, the negotiations before Justice Trotter were reaching a critical state. A party seeking such disruptive relief as extension of a bar date should at least proceed with expedition if it expects to obtain equitable relief.
Accordingly, the Court hereby reaffirms its Order of March 10, 2005, denies Academy's appeal, and affirms Judge Blackshear's order of March 1, 2004. Clerk to enter judgment.
SO ORDERED.