United States Court of Appeals
For the First Circuit
No. 07-1611
IN RE: ARCH WIRELESS, INC.; PAGING NETWORK, INC.,
Debtors.
ARCH WIRELESS, INC.; PAGING NETWORK, INC.,
Appellants,
v.
NATIONWIDE PAGING, INC.,
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Mark L. Wolf, U.S. District Judge]
Before
Torruella, Circuit Judge,
Lipez, Circuit Judge,
and Gibson,* Senior Circuit Judge.
T. Christopher Donnelly, with whom Adam B. Ziegler and
Donnelly, Conroy & Gelhaar, LLP were on brief, for appellants.
Lawrence P. Murray, with whom John F. Drew, Victor Bass, and
Burns & Levinson LLP were on brief, for appellee.
July 23, 2008
*
Of the Eighth Circuit, sitting by designation.
LIPEZ, Circuit Judge. This appeal raises an important
issue about the notice requirements of due process in a Chapter 11
bankruptcy proceeding. The appellant, Arch Wireless, Inc.
("Arch"), is a corporation that received a discharge pursuant to a
Chapter 11 reorganization plan. It now seeks to enforce that
discharge against the appellee, Nationwide Paging, Inc.
("Nationwide"). Nationwide is pursuing claims against Arch in
state court, arguing that it did not receive proper notice of the
bankruptcy proceedings and thus due process prevents the discharge
injunction from barring its claims. In support of its motion to
hold Nationwide in contempt for pursuing its claims, Arch contends
that Nationwide was not a "known creditor" at the time Arch filed
for bankruptcy and, accordingly, was entitled only to publication
notice of Arch's bankruptcy proceedings. In the alternative, Arch
claims that Nationwide's actual knowledge that Arch had filed for
bankruptcy was sufficient to satisfy the requirements of due
process. For the reasons set forth below, we reject both of Arch's
arguments and affirm the district court's denial of Arch's motion
for contempt.
I.
Arch, a supplier of paging network airtime and pagers,
and its former subsidiary PageNet,1 sold airtime and a large number
of pagers to Nationwide. Nationwide, in turn, used these pagers to
1
PageNet merged with Arch in 2000.
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supply paging services to its customers, including AT&T. In 2000,
AT&T claimed that a large number of pagers it received were
defective or defectively programmed. Nationwide turned to Arch to
correct the problem. At around the same time, Nationwide began to
allege billing errors on invoices from Arch, including multiple
bills for the defective pagers that had been replaced or were in
need of replacement.
In a series of letters and emails from September 2000
through September 2001, Nationwide identified and tried to resolve
the billing errors. As discussed in greater detail below, the
correspondence also described the defective pagers as a problem
that may need to be resolved separately from the billing dispute.
Arch filed a Chapter 11 bankruptcy petition on December
6, 2001. Arch did not list Nationwide as a creditor on its
bankruptcy schedules, and Nationwide never received any notices
from Arch or the court regarding the proceedings. Nationwide did
not file an appearance in the bankruptcy proceedings.
The bankruptcy court issued an order on February 5, 2002,
setting March 29, 2002 as the bar date, i.e., the date by which all
creditors should file proofs of claims in Arch's bankruptcy case,
and ordering Arch to notify its creditors of the bar date.
Notification was to be accomplished in two ways: 1) known creditors
were to be mailed notices; and 2) notices would be published in the
USA Today and the Wall Street Journal.
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Arch's reorganization plan was confirmed on May 15, 2002.
The confirmation order included a discharge injunction precluding
all persons from asserting claims against Arch based on "any act,
omission, transaction or other activity . . . that occurred prior
to the Confirmation Date."
In June 2002, Arch began terminating Nationwide's airtime
services for nonpayment. This led Nationwide to file suit in
Massachusetts Superior Court, seeking a temporary restraining order
preventing Arch from terminating its service, a declaratory
judgment ascertaining how much Nationwide owed to Arch for prior
bills, and damages under Massachusetts's unfair business practices
statute, Mass. Gen. Laws ch. 93A ("Chapter 93A"), for harm caused
by Arch's over-billing and defective pagers.
Nearly two years later, Arch realized that Nationwide's
Chapter 93A claim amounted to a claim for $4 million in damages.
At that point, Arch sent Nationwide a copy of the confirmation
order discharging Arch's pre-confirmation debts and demanded that
Nationwide withdraw its claims based on any events prior to the
confirmation date. Nationwide refused.
Arch filed a motion for contempt in the bankruptcy court.
The superior court stayed the proceedings, pending resolution of
the contempt motion. The bankruptcy court denied Arch's motion,
holding that Nationwide was a "known creditor" without sufficient
notice and that, accordingly, due process concerns prevented the
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discharge injunction from operating to extinguish Nationwide's
claims. The district court affirmed. This appeal followed.
II.
We independently review the bankruptcy court's decision,
granting "[n]o special deference . . . to the district court's
determinations." Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26,
30 (1st Cir. 1994). The bankruptcy court's legal conclusions are
reviewed de novo and its findings of fact are reviewed for clear
error. Id.
A. Known Creditor
The Bankruptcy Rules require a debtor to list all of its
creditors and requires that creditors be notified of key events in
the bankruptcy proceeding. Fed. R. Bankr. 1007(a), 2002. The
Bankruptcy Code broadly defines "creditors" to include all those
who hold pre-petition "claims" against the debtor. 11 U.S.C. §
101(10)(A). A "claim" is broadly defined to include a "right to
payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured."
Id. § 101(5)(A).
For notice purposes, bankruptcy law distinguishes between
"known creditors," who are entitled to receive direct notice of
each stage in the reorganization proceedings, and "unknown
creditors," for whom publication notice is sufficient. See City of
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New York v. New York, N.H. & H.R. Co., 344 U.S. 293, 296 (1953);
see also Chemetron Corp. v. Jones, 72 F.3d 341, 345-46 (3d Cir.
1995). Arch argues that Nationwide was an "unknown creditor," and
thus publication of notice of the key dates in Arch's bankruptcy in
the USA Today and Wall Street Journal was sufficient to permit the
discharge injunction to extinguish Nationwide's pre-confirmation
claims without offending Nationwide's right to procedural due
process.
An "unknown creditor" is one whose "interests are either
conjectural or future or, although they could be discovered upon
investigation, do not in due course of business come to knowledge
[of the debtor]." Mullane v. Cent. Hanover Bank & Trust Co., 339
U.S. 306, 317 (1950); see also In re XO Commc'ns, Inc., 301 B.R.
782, 793 (Bankr. S.D.N.Y. 2003) (describing an "unknown creditor"
as one whose claims are "merely conceivable, conjectural or
speculative" (internal quotation marks omitted)). A "known
creditor," by contrast, is one whose claims and identity are
actually known or "reasonably ascertainable" by the debtor. Tulsa
Prof'l Collection Servs. Inc. v. Pope, 485 U.S. 478, 490 (1988).
A creditor is "reasonably ascertainable" if its claim can be
discovered through "reasonably diligent efforts." Mennonite Bd. of
Missions v. Adams, 462 U.S. 791, 798 n.4 (1983). These efforts
generally include "a careful search of the debtor's own records."
In re Crystal Oil Co., 158 F.3d 291, 297 (5th Cir. 1998). Thus,
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"in order for a claim to be reasonably ascertainable, the debtor
must have in his possession . . . some specific information that
reasonably suggests both the claim for which the debtor may be
liable and the entity to whom he would be liable." Id. On the
other hand, there is no requirement that the debtor have
information suggesting the financial magnitude of the claim. See
11 U.S.C. § 101(5)(A) (defining "claim" to include both liquidated
and unliquidated liabilities).
The bankruptcy court rejected Arch's contention that
Nationwide's claim was "unknown." The court found that Nationwide
was a "known creditor" because its claim against Arch was
reasonably ascertainable from the correspondence between the two
companies. For example, in a September 2001 email, Nationwide
offered to "arrive at a fixed dollar solution" to the billing
dispute, but warned that the fixed dollar amount "does not take
into consideration any issues of pagers not working." After
describing the billing issues, the email went on:
Finally, there is the need to address the
problem of the lost business we suffered
because of PageNet . . . . I don't know what
to say PageNet owes us for that, but I do know
that PageNet cost itself a substantial piece
of business, and set back Nationwide's growth
an untold amount. Frankly, it may not be
possible to resolve this issue at the same
time as we resolve all of the billing issues,
but I wanted you to at least be aware of these
concerns.
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Another email, sent by Nationwide to PageNet in November 2000,
expresses similar concerns:
Virtually all of the equipment that PageNet
has sold to us has arrived at our office with
superfluous programming that detracts from the
pager's performance. . . . It has now cost us
a substantial customer. The AT&T project
manager for paging has taken our company out
of their automated ordering process. She told
me that she was doing this as a result of the
faulty equipment, and the paging just not
working. These were PageNet pagers. We need
to address this problem, and our loss caused
by PageNet.
The bankruptcy court characterized this correspondence as clearly
articulating "Nationwide's belief that [Arch] was liable to
Nationwide for affirmative compensation and offsets on its
accounts." Because these writings were contained within Arch's
records at the time of the bankruptcy filing, the bankruptcy court
reasoned that it "would have required no Herculean efforts, but
merely a reasonable inquiry" into those records to ascertain
Nationwide's claim and hence its status as a "creditor."
Accordingly, the court concluded that Nationwide was a "known
creditor" at the time the Chapter 11 petition was filed and was
entitled to more than mere publication notice.
Arch argues that "any purported claims against it by
Nationwide were speculative and conjectural, at best." Arch
characterizes its correspondence with Nationwide as documenting
merely an "on-going billing dispute" with a customer with more than
$450,000 in unpaid invoices. Arch notes that its own books carried
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an account receivable owed to it by Nationwide and that
Nationwide's books did not carry a claim against Arch as an asset.
Arch characterizes the bankruptcy court as having ignored these
facts and asserts that the court "mistook Arch's familiarity with
Nationwide for familiarity with a claim purportedly held by
Nationwide."
We disagree. The "known creditor" determination made by
the bankruptcy court is subject only to clear error review.2 The
bankruptcy court relied, not on Arch's familiarity with Nationwide,
but rather on Nationwide's specific and repeated written assertion
of claims for lost business, harm to reputation, and damages caused
by the defective pagers, as well as the billing errors. The amount
of money Nationwide would claim was certainly unknown, but
Nationwide's emails could reasonably be understood to assert an
entitlement to affirmative compensation for the defective pagers.
2
On appeal, Arch concedes that the proper standard is clear
error. However, as the district court noted, there seems to be
some difference of opinion among various courts as to whether the
"known creditor" determination is reviewed de novo or for clear
error. Compare In re J.A. Jones, Inc., 492 F.3d 242, 250 n.8 (4th
Cir. 2007) (reviewing the "known creditor" determination de novo
but according the bankruptcy court's conclusions "substantial
consideration") with Crystal Oil, 158 F.3d at 298 ("[T]his is
entirely an issue of fact, and our standard of review is therefore
one of clear error."). The issue is not so complex. The "known
creditor" determination involves the application of a legal
standard used in bankruptcy law to the facts of a particular case
and thus "poses a mixed question of law and fact, which this court
reviews for clear error unless the bankruptcy court's analysis was
based on a mistaken view of the legal principles involved." In re
Carp, 340 F.3d 15, 22 (1st Cir. 2003).
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Therefore, we see no error in the bankruptcy court's determination
that the correspondence asserted a "claim" under the Bankruptcy
Code and made Nationwide's status as a "creditor" "reasonably
ascertainable" by Arch. Accordingly, we affirm the determination
that Nationwide was a "known creditor."
B. Due Process
We next turn to Arch's argument that, even if Nationwide
was a "known creditor," the discharge injunction should nonetheless
bar Nationwide's claim because Nationwide had "actual knowledge" of
Arch's bankruptcy proceedings. The bankruptcy court, in
considering this argument, assumed that Nationwide's president,
Peter Brown, was "generally aware of the bankruptcy filing in
December 2001." His awareness apparently came from media reports
and Brown's familiarity with Arch as one of his company's two
suppliers. However, the bankruptcy court found no evidence that
Nationwide had any actual knowledge of the bar date, the
confirmation hearing, or the contents of the confirmation plan.
The Bankruptcy Rules specify that known creditors must
receive: (1) notice of deadlines for filing proofs of claims (bar
date), Fed. R. Bankr. 2002(a)(7); (2) a copy of the reorganization
plan, Fed. R. Bankr. 3017(d); (3) notice of the confirmation
hearing, Fed. R. Bankr. 3017(d); and (5) the confirmation order,
Fed. R. Bankr. 2002(f). Arch did not provide and Nationwide did
not receive any of these notices.
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The discharge injunction provisions in the Code are
written unequivocally and encompass all pre-confirmation claims,
known or unknown, without reference to the notice provided to the
claimants, see 11 U.S.C. §§ 524, 1141(d), and neither the
Bankruptcy Code nor the Rules specify any consequence for failure
to comply with the notice rules. However, the discharge injunction
could not abolish the property rights of creditors in their claims,
regardless of notice, without running afoul of creditors' due
process rights. See Chemtron Corp., 72 F.3d at 346 (characterizing
inadequate notice as a "defect which precludes discharge of a
claim" because of due process concerns). Thus, because the Code
and Rules themselves do not provide an exception to the discharge
injunction when notice rules are violated, we must look to due
process principles to evaluate the claim of a known-but-unnotified
creditor that the discharge injunction does not bar the creditor's
claims.
The general rule is that due process requires:
notice reasonably calculated, under all the
circumstances, to apprise interested parties
of the pendency of the action and afford them
an opportunity to present their objections.
The notice must be of such nature as
reasonably to convey the required information,
and it must afford a reasonable time for those
interested to make their appearance.
Mullane, 339 U.S. at 314 (citations omitted). Therefore, as we
conduct our analysis, we are chiefly concerned with determining
what constitutes the "required information" that must be
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"reasonably conveyed" to the creditor against whom the debtor
wishes to enforce the discharge injunction.
Arch urges us to adopt a rule that the "required
information" includes only actual, timely knowledge, however
acquired, that a corporation has filed for bankruptcy under Chapter
11. Thus, Arch argues that Nationwide's actual and timely
knowledge that Arch had filed for bankruptcy was sufficient to
satisfy due process requirements and permit Nationwide to be bound
by the discharge injunction because such actual knowledge of the
proceedings put Nationwide on inquiry notice of the bar date. In
other words, Arch argues that Nationwide bore the burden of
investigating Arch's proceedings to determine whether and when it
had to present its claim to the bankruptcy court. Nationwide could
not, Arch argues, intentionally, strategically sit on its rights.
Arch's argument is directly at odds with the view we
adopted in In re Intaco Puerto Rico, Inc., 494 F.2d 94, 99 (1st
Cir. 1974), as well as the view of at least five of our sister
circuits, Fogel v. Zell, 221 F.3d 955, 964 (7th Cir. 2000); In re
Maya Constr. Co., 78 F.3d 1395, 1399 (9th Cir. 1996); In re Unioil,
948 F.2d 678, 684 (10th Cir. 1991); In re Spring Valley Farms,
Inc., 863 F.2d 832, 835 (11th Cir. 1989); In re Harbor Tank Storage
Co., 385 F.2d 111, 115 (3d Cir. 1967). But see In re Christopher,
28 F.3d 512, 518 (5th Cir. 1994). The majority rule set forth in
these cases is that "the fact that the creditor may . . . be
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generally aware of the pending reorganization, does not of itself
impose upon him an affirmative burden to intervene in that matter
and present his claim. . . . [T]he creditor has a right to assume
that proper and adequate notice will be provided before his claims
are forever barred." Intaco, 494 F.2d at 99.
This rule, in turn, is based upon the Supreme Court's
holding in City of New York. 344 U.S. at 296-97. In that case,
the Court determined that, as to a known creditor, publication
notice fell short of the requirement in § 77(c)(8) of the former
Bankruptcy Act, that "[t]he judge shall cause reasonable notice of
the period in which claims may be filed, . . . by publication or
otherwise."3 344 U.S. at 296 (quoting former 11 U.S.C. §
205(c)(8)). The Court added that § 77(c)(4) was designed "to
enable the court to serve personal notices on creditors [by
providing] that '[t]he judge shall require' proper persons to file
in the court a list of all known creditors, the amount and
character of their claims and their last known postoffice
3
1 The Court explained that
2 [n]otice by publication is a poor and
3 sometimes hopeless substitute for actual
4 service of notice. . . . But when the names,
5 interests and addresses of persons are
6 unknown, plain necessity may cause a resort to
7 publication. The case here is different. No
8 such excuse existed to justify subjecting New
9 York's claims to the hazard of forfeiture
10 arising from 'constructive notice' by
11 newspaper.
12 City of New York, 344 U.S. at 296 (internal citations omitted).
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addresses." Id. As a known creditor, New York City should have
been included on such a list and mailed the pertinent notices, but
that did not happen. Id. The Court held that the consequence of
this failure of notice was that the discharge injunction was
inapplicable to the unnotified creditor, despite the creditor's
general knowledge that the debtor had filed for reorganization.
Id. at 297. The Court explained:
Nor can the bar order against New York
be sustained because of the city's knowledge
that reorganization of the railroad was taking
place in the court. The argument is that such
knowledge puts a duty on creditors to inquire
for themselves about possible court orders
limiting the time for filing claims. But even
creditors who have knowledge of a
reorganization have a right to assume that the
statutory "reasonable notice" will be given
them before their claims are forever barred.
. . .
The statutory command for notice
embodies a basic principle of justice – that a
reasonable opportunity to be heard must
precede judicial denial of a party's claimed
rights.
Id. In Intaco, we held that the same logic applied when the debtor
failed to comply with the notice requirements set forth in Chapter
X of the former Bankruptcy Act. 494 F.2d at 99.
Arch resists the logic of City of New York and Intaco on
a number of grounds. First, Arch argues that the cases were
decided on statutory rather than constitutional grounds and that
the statutes under which they were decided are no longer in force.
However, the statutory provisions in those cases closely parallel
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the current Bankruptcy Rules for notice – placing the burden on the
debtor to list its known creditors and personally notify them of
specific key dates in the proceedings. Just like the current
schema, the statutes at issue in those cases contained unequivocal
discharge provisions and did not specify the consequences of a
failure to comply with the notice requirements. The Court's
conclusion that the discharge provision was ineffective against an
unnotified creditor "clearly is not grounded in goals unique to the
former bankruptcy act." Spring Valley Farms, 863 F.2d at 835.
Also, Arch fails to appreciate the relationship between
statutory provisions that promise notice of a certain kind and
constitutional due process.4 The statutory notice requirement
shapes the contours of that constitutional due process analysis
because it informs the reasonable expectations of creditors. City
of New York, 344 U.S. at 297 ("[E]ven creditors who have knowledge
of a reorganization have a right to assume that the statutory
'reasonable notice' will be given them before their claims are
forever barred."). Thus, it is wrong to argue, as Arch does, that
City of New York was solely a statutory decision. Instead, the
decision was informed by due process concerns, Spring Valley Farms,
4
The Second and Fifth Circuits have described City of New York
as having been decided on statutory rather than constitutional
grounds. In re Medaglia, 52 F.3d 451, 456 (2d Cir. 1995);
Christopher, 28 F.3d at 517. That characterization misses the
critical relationship between the statutory notice provisions and
constitutional due process protections.
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863 F.2d at 835, described by the Court in City of New York as "a
basic principle of justice – that a reasonable opportunity to be
heard must precede judicial denial of a party's claimed rights,"
344 U.S. at 297.
Second, Arch notes that actual knowledge of the creditors
meeting has been deemed relevant in Chapter 7 and Chapter 13
proceedings. Arch argues that it is illogical to adopt a rule that
distinguishes between the various bankruptcy chapters with regard
to the amount of constitutional notice that is due. However, as
the Ninth Circuit has explained, the reason for the distinction is
the difference in claims procedures under the different chapters:
In contrast to the rule governing proofs of
claims in a Chapter 11 suit, which instructs
the court to fix a proof of claims deadline
and permits the court to extend that deadline
"for cause shown," the rule governing Chapter
7 and 13 proceedings provides that proofs of
claim shall be filed within 90 days of the
first creditors meeting and specifies limited
exceptions. Thus, once the creditors [in
Chapter 7 and 13 cases] had received notice of
the creditors meeting, they had effective
notice that proofs of claim were due within 90
days, unless very limited exceptions applied.
In contrast to creditors in a Chapter 7 or 13
case, even if [a Chapter 11 creditor] had
received notice of a creditors meeting or any
other formal notice, . . . he still would not
have known when the deadline for filing proofs
of claims was, and therefore, cannot be said
to have been given any notice.
Maya Constr., 78 F.3d at 1399 (citations omitted). Other circuits
that have considered this issue have adopted the same rationale for
the distinction. See Fogel, 221 F.3d at 964; Unioil, 948 F.2d at
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683. As the Seventh Circuit describes it, the general rule "is
that the only knowledge required is knowledge of a critical stage
of the proceeding from which the bar date can be computed, not of
the bar date itself." Fogel, 221 F.3d at 964 (citation omitted).
Unlike in Chapter 7 and 13 proceedings where the bar date may be
roughly computed based on one's knowledge of the creditors meeting,
there is simply no way to "compute" a bar date in a Chapter 11
proceeding because the date is set at the discretion of the court.5
Accordingly, the distinction between Chapter 7 and 13 on the one
hand and Chapter 11 on the other is reasonable.
Third, Arch points out that in cases involving an
individual debtor, a known creditor with actual knowledge of a
bankruptcy case is bound by the discharge whether or not it
received formal notice. This outcome is a result of 11 U.S.C. §
523(a)(3), which excepts unlisted debts from discharge "unless such
creditor had notice or actual knowledge of the case in time for
such timely filing," and applies only in cases involving individual
5
The differing rules regarding bar date under Chapters 7 and
11 can be explained by reference to the purposes of the two types
of bankruptcy. The Supreme Court observed that "[w]hereas the aim
of a Chapter 7 liquidation is the prompt closure and distribution
of the debtor's estate, Chapter 11 provides for reorganization with
the aim of rehabilitating the debtor and avoiding forfeitures by
creditors." Pioneer Inv. Servs. v. Brunswick Assocs. Ltd. P'ship,
507 U.S. 380, 389 (1993). Under Chapter 7, debtors and creditors
alike benefit from the structured and predictable schedule set
forth in the Code. On the other hand, corporate reorganizations
are often long and drawn-out, requiring that the court retain
flexibility in setting dates for various stages of the proceedings.
See Medaglia, 52 F.3d at 457.
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debtors. This provision has been held to comply with
constitutional due process principles. See, e.g., In re Medaglia,
52 F.3d 451, 455 (2d Cir. 1995). Accordingly, Arch argues, due
process must not require anything more than general knowledge of
the bankruptcy case when a corporate debtor is involved because
such knowledge satisfies due process requirements when an
individual debtor is involved.
Arch's argument is flawed. As we explained above, the
statutory framework shapes the contours of due process. Creditors
whose debtors are individuals do not have a "'right to assume that
the statutory "reasonable notice" will be given them before their
claims are forever barred'" because the statute itself warns that
"actual knowledge of the 'case'" will be enough to permit the
discharge injunction to operate against their claims. Medaglia, 52
F.3d at 456-57 (quoting City of New York, 344 U.S. at 297). The
Second Circuit in Medaglia observed that "a constructive notice
provision 'is ordinarily a creature of statute; courts usually will
not impose the onerous burden of constructive notice on a litigant
when it has not been imposed by the legislature.'"6 Id. (quoting
In re New York, N.H. & H.R. Co., 197 F.2d 428, 433 (2d Cir. 1952)
(Frank, J., dissenting), rev'd sub nom. City of New York v. New
6
The Second Circuit characterizes § 523(a)(3)(B) as a
"constructive notice" provision because, in cases involving an
individual debtor, it deems "actual notice of the case" to be
constructive notice of the particular events and deadlines in the
case.
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York, N.H. & H.R. Co., 344 U.S. 293 (1953), and noting that, on
appeal, the Supreme Court in City of New York effectively adopted
this rationale from Judge Frank's dissent below). But the Medaglia
court explained that with regard to individual debtors:
The statute itself, in § 523(a)(3)(B), does
contain a constructive notice clause that
makes crystal clear that a creditor with
timely, actual knowledge of the "case" does
not have the "right to assume" that it will
receive formal notice before its claims are
barred. Section 523(a)(3)(B) specifically
qualifies any right to assume receipt of
formal notice.
Id. at 457-58 (emphasis in original). Accordingly, a creditor of
an individual debtor is on notice of the burden-shift that requires
him to actively participate once he has general knowledge of the
proceedings. No such statutory burden-shift is present for a
creditor of a corporation. As a result, the due process
requirements may vary as between creditors of individuals and
corporations because the statute itself puts creditors on notice of
this variance.7
7
As we noted in Intaco, a case could arise in which, although
the required notices were not sent, the creditor in fact had actual
knowledge "not merely of the general pendency of the . . .
reorganization, but of each particular development therein to which
formal notice would be required." 494 F.2d at 99 n.11. In such a
case, we might conclude that the creditor's due process rights were
not violated, despite the debtor's failure to comply with notice
rules, because the creditor had actual knowledge of the critical
dates about which he could expect to be notified. Id. Those are
not the facts in this case.
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Fourth, Arch argues by analogy to civil forfeiture and
tax lien proceedings where actual knowledge of the proceedings has
been held to be sufficient to satisfy due process requirements.
See, e.g., United States v. One Star Class Sloop Sailboat, 458 F.3d
16, 22 (1st Cir. 2006); United States v. Sayer, 450 F.3d 82, 87
(1st Cir. 2006). However, as noted above, the due process inquiry
is too closely tied to the statutory framework to support this
level of generalization. The creditor's "right to assume" that a
particular level of notice will be given is based upon the notice
provisions in the applicable statute. The civil forfeiture and tax
lien statutes at issue in the cases cited by Arch do not have
notice provisions or bar date procedures that closely parallel
those in the Bankruptcy Code and Rules. As a result, Arch's
analogy is unavailing.
In sum, Arch has failed to distinguish this case from
Intaco and is bound by the rule that a known creditor's general
awareness of a pending Chapter 11 reorganization proceeding is
insufficient to satisfy the requirements of due process and render
the discharge injunction applicable to the creditor's claims.
Finding no clear error in the bankruptcy court's determination that
Nationwide was a "known creditor" with no more than a general
awareness of Arch's bankruptcy, we hold that the discharge
injunction does not apply to Nationwide's pre-confirmation claim.
Affirmed.
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