Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
4-27-2005
In Re: Amer Classic
Precedential or Non-Precedential: Precedential
Docket No. 03-3944
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-3944
IN RE: AMERICAN CLASSIC VOYAGES CO.,
Debtor
SCOTT HEFTA
v.
OFFICIAL COMMITTEE OF UNSECURED CREDITORS;
AMERICAN CLASSIC VOYAGES, CO.
(D.C. Civil No. 02-01684)
IN RE: AMERICAN CLASSIC VOYAGES CO., a Delaware
Corporation, f/k/a Delta Queen Steamboat, Co.,
Debtor
SCOTT HEFTA
v.
AMERICAN CLASSIC VOYAGES CO., f/k/a Delta Queen
Steamboat Co.
(D.C. Civil No. 03-cv-00112)
SCOTT HEFTA,
Appellant
On Appeal from the United States District Court
for the District of Delaware
District Judge: Honorable Joseph Farnan, Jr.
Submitted September 28, 2004
Before: RENDELL, FUENTES, and SMITH, Circuit Judges.
(Filed: April 27, 2005)
OPINION OF THE COURT
FUENTES, Circuit Judge.
Petitioner Scott Hefta, a seaman, sustained serious
injuries while employed aboard a steamboat owned by his
employer. His attorney sent the employer a letter to put it on
notice of a claim relating to Hefta’s accident. Shortly
2
thereafter, the employer filed for bankruptcy. Hefta’s attorney
wrote the court-appointed claims agent informing it that his
client was injured and “[had] a claim against the debtor.”
While the letter also requested a claim form, Hefta did not file
a formal claim prior to the court-established bar date.1 The
issues in this case require us to clarify the requirements for an
informal proof of claim in bankruptcy. We conclude that
Hefta’s letter was insufficient to constitute a properly filed
claim and that his failure to file a timely proof of claim did
not result from excusable neglect. We will affirm the
judgment of the District Court.
I. Facts and Procedural History
Scott Hefta, a Jones Act Seaman,2 was injured in the
course of his employment at the Delta Queen riverboat on
June 28, 2000. The vessel was owned and operated by
American Classic and/or its subsidiary Delta Queen
Steamboat Company (“American Classic” or “Debtors”).
Hefta reported the injury to American Classic the next day.
1
Federal Rule of Bankruptcy Procedure 3001(c)(3) provides
that, in Chapter 11 proceedings, a bankruptcy court “shall fix .
. . the time within which proofs of claim or interest may be
filed.” Fed. R. Bankr. P. 3001(c)(3). The deadline in a given
proceeding is referred to as the “bar date.”
2
See 46 App. U.S.C. § 688 (“Any seaman who shall suffer
personal injury in the course of his employment may, at his
election, maintain an action for damages at law.”).
3
Thereafter, counsel for Hefta sent American Classic a letter
dated June 15, 2001 to advise it of Hefta’s claim. Hefta’s
employer acknowledged receipt of the letter on July 19, 2001.
Then, in October 2001, American Classic filed for
Chapter 11 Bankruptcy in the United States District Court for
the District of Delaware. The Debtors cancelled almost all of
their scheduled passenger cruises, resulting in approximately
18,000 claims for deposits on cancelled cruises. Several
hundred personal injury plaintiffs have also filed claims
against Debtors.
Counsel for Hefta received a notification of Debtors’
bankruptcy that directed creditors to file proofs of claim with
the appointed claims agent, Logan & Company (“Logan”).
On February 7, 2002, Hefta’s counsel wrote Logan, stating
that Hefta “worked on the S/S DELTA QUEEN and was
injured on June 29, 2000.3 He has a claim against the debtor.”
Hefta’s letter also requested a “Proof of Claim” form and
inquired whether Debtors had insurance coverage for Hefta’s
injury.
On March 18, 2002, the Bankruptcy Court entered an
order setting a claims bar date for April 30, 2002 (the “Bar
Date”). Logan sent Hefta and his attorney a notice of the Bar
Date, together with a proof of claim form, on March 27, 2002.
Failing to appreciate the significance of that notice, neither
3
The briefs on appeal refer to Hefta’s injury as having
occurred on June 28, 2000.
4
Hefta nor his attorney filed the proof of claim form prior to
the Bar Date.
Instead, Hefta filed a Motion for Relief from
Automatic Stay with the Bankruptcy Court on August 1,
2002. The next day, counsel for Hefta received via fax an
objection to that Motion on the grounds that the Bar Date had
passed. Hefta’s counsel claims that only then did he realize
that the Bar Date had passed. On August 18, 2002, Hefta’s
counsel filed a Motion for Enlargement of Time to File Proof
of Claim seeking an extension for “excusable neglect” under
Federal Bankruptcy Rule of Procedure 9006(b)(1). Hefta’s
counsel subsequently also argued to the Bankruptcy Court that
his February 7, 2002 letter constituted an informal proof of
claim. The Bankruptcy Court denied both motions initially
and upon reconsideration. The District Court affirmed each
of those orders.
II. Jurisdiction and Standard of Review
The bankruptcy court had subject matter jurisdiction
pursuant to 28 U.S.C. § 1334. The district court had appellate
jurisdiction over the final order of the bankruptcy court
pursuant to 28 U.S.C. § 158(a). We have jurisdiction
pursuant to 28 U.S.C. §§ 158(d), and 1291. “In reviewing the
decision of the Bankruptcy Court, we exercise the same
standard of review as the District Court, that is, we review the
bankruptcy court’s legal determinations de novo, its factual
findings for clear error, and its exercise of discretion for
abuse thereof.” See Manus Corp. v. NRG Energy, Inc. (In re
O’Brien Envtl. Energy, Inc.), 188 F.3d 116, 122 (3d Cir.
5
1999). Thus, we review de novo the question of law as to
whether Hefta’s February 7, 2002 letter constituted an
informal proof of claim, and we review the Bankruptcy
Court’s determination regarding the existence of excusable
neglect for abuse of discretion. See Anderson-Walker Indus.,
Inc. v. Lafayette Metals, Inc. (In re Anderson-Walker Indus.,
Inc.), 798 F.2d 1285, 1287 (9th Cir. 1986) (informal proof of
claim issue); Jones v. Chemetron Corp., 212 F.3d 199, 205
(3d Cir. 2000) (excusable neglect issue).
III. Informal Proof of Claim
Hefta’s primary argument is that his February 7, 2002
letter to the court-appointed claims agent was an informal
proof of claim properly filed prior to the Bar Date.
Specifically, he contends that the current law of this Court
does not require a formal pleading or that the proof of claim
be sent to a court. Debtors respond that bankruptcy law
almost universally recognizes certain pleading and proof
requirements for a properly filed proof of claim, which Hefta
did not meet, and that, in any event, Hefta’s letter was too
vague to actually put Debtors on notice of Hefta’s claim.
We addressed the requirements for a proof of claim for
the first time nearly one hundred years ago in First Nat’l Bank
of Woodbury v. West (In re Thompson), 227 F. 981 (3d Cir.
1915). In Thompson, the issue was whether a letter from a
bank to the receiver in bankruptcy, stating that the debtor was
indebted to the bank for $20,000, was insufficient to
constitute a valid proof of claim. The Court observed that the
letter “was a mere statement that the bank was a creditor” and
6
that, in any event, “no claim could then have been made”
against the bankrupt estate because “the estate had not yet
come into being.” Id. at 984. Accordingly, the Court refused
to permit a late claim and held that the allegedly timely letter
from a creditor did not qualify as a proof of claim. The Court
specifically noted that the bank’s letter did not meet the
requirements of even an “informal proof of claim” because
the letter failed to state “a demand . . . against the estate, and
[failed to show] the creditor’s intention to hold the estate
liable.” Id. at 983. Those requirements for a proof of claim
have remained constant over the decades.
In more recent times, a number of Courts of Appeals
have elaborated on the requirements for a proof of claim in
the bankruptcy context and have adopted a slightly more
exacting five-part test. See Barlow v. M.J. Waterman &
Assocs., Inc. (In re M.J. Waterman & Assocs., Inc.), 227 F.3d
604, 609 (6th Cir. 2000); Nikoloutsos v. Nikoloutsos (In re
Nikoloutsos), 199 F.3d 233, 236 (5th Cir. 2000); Clark v.
Valley Fed. Sav. & Loan Ass’n. (In re Reliance Equities,
Inc.), 966 F.2d 1338, 1345 (10th Cir. 1992). Under the five-
part test, a document will qualify as an informal proof of
claim in bankruptcy only if it is in writing, contains a demand
by the creditor on the bankruptcy estate, expresses an intent to
hold the debtor liable for the debt, and the document is filed
with the bankruptcy court.4 See M.J. Waterman, 227 F.3d at
609. If a document meets those four requirements, the
4
But see infra note 4, citing exceptions contained in
Bankruptcy Rule of Procedure Rule 5005(c).
7
bankruptcy court must determine whether, given the particular
surrounding facts of the case, it would be equitable to treat the
document as a proof of claim. Id. Courts within our circuit
have already applied that five-part test. See, e.g., Agassi v.
Planet Hollywood Int’l, Inc., 269 B.R. 543, 550 (D. Del.
2001); In re Petrucci, 256 B.R. 704, 706 (Bankr. D.N.J.
2001).
Petitioner argues that the five-factor test is inconsistent
with Thompson. We disagree. In Thompson we pointed out
two deficiencies but did not purport to establish a
comprehensive test. We stated only that “[w]hether formal or
informal, a claim must show (as the word itself implies) that a
demand is made against the estate, and must show the
creditor’s intention to hold the estate liable.” Thompson, 227
F. at 983. The facts of that case did not require the Court to
explain precisely what constitutes a demand. While we note
that the five-part test enumerates several factors in addition to
those identified in Thompson, it is entirely consistent with the
holding in that case, and, we believe, it more accurately
identifies the requirements for a properly filed proof of claim.
The modern formulation of the two-part test in
Thompson reflects significant changes in the administration
of bankruptcy over the last nine decades. Not only are
modern bankruptcy courts themselves creatures of intervening
statutes, but also, bankruptcy proceedings today, including
those initiated by American Classic, are of a scale and
complexity unforeseen in 1915. Bankruptcy proceedings are
now governed by elaborate rules of procedure designed to
make that scale and complexity manageable.
8
Two requirements in the five-part test are absent in
Thompson: that informal proofs of claim must be in writing
and that they must be filed with the bankruptcy court.5 Those
two new factors are justified, however, by specific rules of
bankruptcy procedure. First, Rule 3001(a) defines a proof of
claim as “a written statement setting forth a creditor’s claim.”
Fed. R. Bankr. P. 3001(a). Second, Rule 5005(a)(1) provides,
with certain specified exceptions, that proofs of claim are to
be filed with the clerk of the bankruptcy court.6 See Fed. .R.
5
We disregard for purposes of this discussion the general
requirement that recognition of an informal proof of claim be
equitable, a requirement inescapable in courts of equity like
federal bankruptcy court. See In re Combustion Eng’g, Inc., 391
F.3d 190, 235 (3d Cir. 2004); see also Local Loan Co. v. Hunt,
292 U.S. 234, 240 (1934) (“[C]ourts of bankruptcy are
essentially courts of equity, and their proceedings inherently
proceedings in equity.”).
6
Rule 5005(a)(1) provides, in relevant part:
[P]roofs of claim . . . and other papers required to be
filed by these rules, except as provided in 28 U.S.C. §
1409, shall be filed with the clerk in the district where
the case under the Code is pending. The judge of that
court may permit the papers to be filed with the judge, in
which event the filing date shall be noted thereon, and
they shall be forthwith transmitted to the clerk. Fed. R.
Bankr. P. 5005(a)(1).
9
Bankr. P. 5005(a)(1). Those rules apply to all proofs of
claim, whether formal or informal, and are reflected in the
five-part test. Because the Rules of Bankruptcy Procedure are
binding, the five-part test supercedes the Thompson test. See
In re Gershenbaum, 598 F.2d 779, 781 n. 4 (3d Cir. 1979)
(“Bankruptcy Rules . . . superceded interpretive case law
dealing with procedure.”); see also 28 U.S.C.A. § 2075;
Weiss v. Regal Collections, 385 F.3d 337, 349 n. 21 (3d Cir.
2004).
More generally, we note that the substantive
requirements of a proof of claim, including the notice
requirement, cannot be significantly relaxed for “informal”
proofs of claims. The distinction between formal and
See also Official Bankruptcy Form 10, 11 U.S.C. (“This form
must be filed with the clerk of the bankruptcy court where the
bankruptcy case was filed.”). Rule 5005(c) provides certain
limited exceptions:
A paper intended to be filed with the clerk but
erroneously delivered to the United States trustee, the
trustee, the attorney for the trustee, a bankruptcy judge,
a district judge, or the clerk of the district court shall,
after the date of its receipt has been noted thereon, be
transmitted forthwith to the clerk of the bankruptcy court
. . . In the interest of justice, the court may order that a
paper erroneously delivered shall be deemed filed with
the clerk . . . as of the date of its original delivery. Fed.
R. Bankr. P. 5005(c).
10
informal proofs of claim refers only, as the terms suggest, to
their form, not their substance. See Fed. R. Bankr. P.
5005(a)(1) (“The clerk shall not refuse to accept for filing any
petition or other paper presented for the purpose of filing
solely because it is not presented in proper form as required
by these rules or any local rules or practices.”). All proofs of
claim must “conform substantially to the appropriate Official
Form.” Fed. R. Bankr. P. 3001(a). Official Bankruptcy Form
10, 11 U.S.C., defines a “proof of claim” as a “form telling
the bankruptcy court how much the debtor owed a creditor at
the time the bankruptcy case was filed (the amount of the
creditor’s claim),” and instructs a potential creditor to specify,
among other things, the date debt was incurred and the total
amount of her claim, as well as to attach documents that show
the debtor owes the debt claimed.
In this case, Hefta’s February 7, 2002 letter to Logan
fails to satisfy the modern test for an informal proof of claim.
The letter fails the second prong of the five-part test, i.e., that
the alleged claim contain a demand on the estate.7 To state a
demand, it was not sufficient for Hefta merely to state that he
had a claim against the Debtors arising from a work injury.
“[M]ere notice of a claim alone is not to be called an informal
proof of claim.” United States v. Int’l Horizons, Inc. (In re
Int’l Horizons, Inc.), 751 F.2d 1213, 1217 (11th Cir. 1985);
see also In re A.H. Robins Co., Inc., 862 F.2d 1092, 1095 (4th
7
Because the second prong under the five-part test is the first
prong of Thompson, we note that Hefta’s letter would not
qualify as an informal proof of claim under that test either.
11
Cir. 1988); Wilkens v. Simon Bros., Inc. (In re Wilkins), 731
F.2d 462, 465 (7th Cir.1984). In order to constitute an
informal proof of claim, the alleged demand must be
sufficient to put the debtor and/or the court on notice as to
“the existence, nature and amount of the claim (if
ascertainable).” Charter Co. v. Dioxin Claimants (In re
Charter Co.), 876 F.2d 861, 863 (11th Cir. 1989); see also
Anderson-Walker, 798 F.2d at 1288 (9th Cir. 1986) (allowing
informal proof of claim where letter “unambiguously states
the existence and amount of the debt, that the Debtor owed
this sum to [the creditor], and that it had not been paid”).
The alleged demand contained in the February 7, 2002
letter failed to inform Debtors of either the nature of Hefta’s
injury or the amount of his alleged claim. Although both
Hefta and his attorney notified his employer of the injury in
June 2000 and July 2001, respectively, and though those
notices may have described the basic circumstances of Hefta’s
injury and its immediate physical symptom, there was no
reason for Logan to read Hefta’s February 7, 2002 letter to
Logan in connection with those pre-petition notices of injury
directed to Hefta’s employer. Certainly, the letter to Logan
requesting a proof of claim form did not contemplate or invite
such guesswork.
Moreover, the February 7, 2002 letter would have been
deficient even if it had referenced the earlier notices. The
2000 and 2001 notices of injury would not have apprised
Debtors of the true nature and magnitude of Hefta’s claim.
The June 2000 report was filed shortly after the injury and
before Hefta underwent surgery, and the July 2001 letter
12
merely notified American Classic of Hefta’s representation by
counsel. Because Hefta’s letter to Logan lacked the requisite
detail, we conclude that Hefta did not file a timely informal
proof of claim.8
IV. Excusable Neglect
Hefta also seeks permission to file a late claim. Even
if Hefta’s letter to Logan fails to qualify as a timely informal
proof of claim, the Bankruptcy Court could accept a late claim
if the delay resulted from excusable neglect. See Fed. R.
Bankr. P. 9006(b)(1). “The determination whether a
party’s neglect of a bar date is ‘excusable’ is essentially an
equitable one, in which courts are to take into account all
relevant circumstances surrounding a party’s failure to file.”
Chemetron Corp. v. Jones, 72 F.3d 341, 349 (3d Cir. 1995).
Under Pioneer Investment Services Co. v. Brunswick
Associates Limited Partnership, 507 U.S. 380 (1993), courts
look to four factors: first, prejudice to the Debtors; second,
length of delay and its potential impact on judicial
proceedings; third, the reason for delay, including whether it
was within the reasonable control of the movant, and; fourth,
whether the movant acted in good faith. Id. at 395. All
factors must be considered and balanced; no one factor
trumps the others. See George Harms Constr. Co. v. Chao,
371 F.3d 156, 164 (3d Cir. 2004).
8
Because we concluded that the letter fails the second part of
the five-part test, we need not consider whether the February 7,
2002 letter would meet the other four factors.
13
Applying the first and second Pioneer factors, we
conclude that Debtors will be prejudiced by exposure to a late
claim and that the length of the delay would have a substantial
impact on the bankruptcy proceedings. See O’Brien, 188
F.3d at 127 (identifying, as among the factors to consider,
“whether allowing the late claim would have an adverse
impact on the judicial administration of the case” and
“whether allowing the claim would open the floodgates to
other similar claims”). Hefta moved for relief from the
automatic stay two days after Debtors filed their Joint Plan of
Liquidation with the Bankruptcy Court. A policy that would
allow proof of claims at that late date would have disrupted
Debtors’ reorganization.
Thousands of individual claims are outstanding against
Debtors; the sheer scale presents a formidable problem of
management. The strict bar date provided by the Bankruptcy
Court was intended, in part, to facilitate the equitable and
orderly intake of those claims. Debtors argue, with some
persuasive effect, that, in view of the large number of post-bar
date claims filed, allowing appellant to file late might “render
the bar order meaningless.” Debtors allege, upon information
and belief, that other prospective claimants have filed late
claims for a total value of almost $5 million, and that counsel
for both Debtors and the Official Committee of Unsecured
Creditors continue to receive numerous inquiries from
prospective claimants. Cf. id. at 128 (rejecting assertion of
prejudice where debtor failed to allege other claimants also
sought relief from Bar Date based on excusable neglect). In
the context of this massive bankruptcy proceeding, Hefta’s
late claim would be prejudicial.
14
We rely, however, primarily on the third Pioneer
factor. Specifically, we conclude that the delay in this case
was entirely avoidable and within Hefta’s control. Delay was
the direct result of the negligence of Hefta’s counsel in failing
to review the Notice sent to him by Logan. Under Pioneer,
we must impute that negligence to Hefta himself. See 507
U.S. at 397 (“[R]espondents [must] be held accountable for
the acts and omissions of their chosen counsel. Consequently,
in determining whether respondent’s failure to file their
proofs of claim prior to the bar date was excusable, the proper
focus is upon whether the neglect of respondents and their
counsel was excusable.”). Thus, the third factor strongly
disfavors Hefta.
With respect to the fourth and final Pioneer factor,
there is no reason to believe that Hefta ever acted in bad faith.
But nor was he so careful or vigilant as to overcome the
weight of the previous three factors – especially the second.
Accordingly, the Bankruptcy Court did not abuse its
discretion by concluding that Hefta’s failure to file his claim
by the Bar Date does not qualify as “excusable neglect.” See
Fed. R. Bankr. P. 9006(b)(1).
Therefore, there is no cause to lift the automatic stay
imposed under 11 U.S.C. § 362(d)(1). Like the District
Court, we will affirm the orders of the Bankruptcy Court
denying Hefta’s Motion for Relief from Automatic Stay, his
Motion for Enlargement of Time to File Proof of Claim, and
his Motion to Reconsider and Vacate the previous orders.
15