United States Court of Appeals,
Fifth Circuit.
No. 94-60393.
In re EAGLE BUS MFG., INC., et al., Debtors.
GREYHOUND LINES, INC., Appellant,
v.
Donna ROGERS, et al., Appellees.
Sept. 1, 1995.
Appeal from the United States District Court for the Southern District of Texas.
Before REYNALDO G. GARZA, HIGGINBOTHAM and PARKER, Circuit Judges.
REYNALDO G. GARZA, Circuit Judge:
On June 4, 1990, Greyhound Lines, Inc. and associated entities ("Greyhound" or "Debtor")
commenced Chapter 11 proceedings by filing voluntary petitions for protection under the Bankruptcy
Code. Pursuant to Bankruptcy Rule 3003(c)(3), the bankruptcy court set November 19, 1990
(hereinafter the "bar date") as the date by which all creditors had to file their proofs of claim.
Twenty-three creditors failed to file their proofs of claim before the bar date. Approximately six to
eight months after the bar date passed some of these creditors filed motions for leave to file their
respective proofs of claim.
After conducting a hearing on these motions, the bankruptcy court held that Donna Rogers,
C.B. and Nancy Burgess, on their own behalf and on behalf of Trey Burgess, and James Fine, Jr.
(collectively the "Claimants"), could file untimely proofs of claim.1 After the district court affirmed
the bankruptcy court's rulings, Greyhound filed this appeal. For the reasons stated below, we affirm
in part and reverse in part the bankruptcy and district court's findings; we affirm the findings that
1
The bankruptcy court also allowed Kinta Pardo, the Estate of R.L Rose, and Stephen Fry to
file proofs of claim after the passage of the bar date. Again, the Debtor disagreed with the lower
court and appealed that ruling. However, before the date of oral argument, Stephen Fry and the
Rose Estate resolved their disputes with the Debtor. Not long thereafter, Kinta Pardo also settled
her claim with the Debtor. Therefore, these parties no longer have an interest in the outcome of
this appeal.
allowed the Claimants to file untimely proofs of claim with the sole exception of Donna Rogers. We
remand this case to the bankruptcy court to determine if Donna Rogers' failure to file a late claim was
excusable neglect.
BACKGROUND
After the bankruptcy court set the bar date, Poorman-Douglas Corporation was appointed
to conduct all necessary mailouts on behalf of Greyhound. It mailed packets containing a notice of
the bar date, a proof of claim form, notice of the first creditor's meeting, and a map to such meeting
to all known creditors and parties in interest on two separate occasions.2
Anticipating that a large number of creditors would seek relief from the automatic stay to
liquidate their claims outside of bankruptcy, the bankruptcy court entered an order requiring the
claimants to participate in Alternative Dispute Resolution ("ADR") prior to hearing any motion on
lifting the stay.3 The purpose of the ADR Order was to approve and adopt a procedure that would
serve as an orderly and efficient mechanism for the liquidation and satisfaction of more than 3000
personal injury and property damage claims pending against Greyhound on the petition date.
Twenty-three creditors who failed to file proofs of claim before the bar date filed motions to
file late claims.4 The bankruptcy court consolidated these motions and held a hearing on April 2,
1992. At the hearing, the court made the following findings of facts with respect to the Claimants:
Donna Rogers' notice was sent to her brother's home, but the evidence was inconclusive as
to whether she actually received notice of the bar date.
James Fine, Jr. denies receipt of the notice of the bar date though the evidence indicates that
a notice was sent to him. However, his attorney participated in the ADR program.
The Burgess family received timely notice of the bar date. They elected to participate in the
ADR program and were in the ADR process.
The bankruptcy court ultimately concluded that the failure by James Fine, Jr. ("Fine") and the Burgess
2
The mailouts occurred on August 2, 1990 and October 26, 1990.
3
In bankruptcy cases personal injury claimants often file motions to lift the automatic stay in
order to liquidate their claims in a non-bankruptcy forum.
4
Of the twenty-three motions filed, the bankruptcy court allowed only thirteen creditors,
including the Claimants, to file late proofs of claim.
family to file timely claims was due to excusable neglect and thus they could file claims after passage
of the bar date. It also found that Fine and Donna Rogers ("Rogers") could file untimely proofs of
claim in light of due process considerations.
The district court affirmed the bankruptcy court, finding that Rogers could file a late claim
on due process grounds and that the remaining Claimants could untimely file due to excusable
neglect.
DISCUSSION
I. Jurisdiction
District courts have appellate jurisdiction over "final judgments, orders, and decrees" issued
by the bankruptcy court. 28 U.S.C. § 158(a). This jurisdiction includes interlocutory orders and
decrees which the bankruptcy court has granted leave to appeal. Id. The courts of appeals have
jurisdiction over "all final decisions, judgments, orders, and decrees" issued by the bankruptcy court.
Id. § 158(d). This Court views finality in bankruptcy proceedings in a practical and less technical
light to preserve judicial and other resources. England v. FDIC (In re England), 975 F.2d 1168,
1171 (5th Cir.1992) (citations omitted). We have determined that "an order which ends a discrete
judicial unit in the larger case concludes a bankruptcy proceeding and is a final judgment for the
purposes of section § 158(d). Finality in bankruptcy cases is contingent upon the conclusion of an
adversarial proceeding within the bankruptcy case, rather than the conclusion of the entire litigation."
Id. at 1172 (citations omitted).
Rogers argues that this appeal should be dismissed for lack of jurisdiction. She contends that
the order allowing the Claimants to file untimely proofs of claim is not a final appealable order
because it does not "conclusively" settle the claims before the bankruptcy court. Rogers insists that
the procedural context of the case is identical to Giles World Mktg., Inc. v. Boekamp Mfg., Inc., 787
F.2d 746 (1st Cir.1986) and thus we should dismiss the appeal. We disagree.
In Giles, the district court affirmed a bankruptcy court order allowing a creditor to file an
informal proof of claim after the confirmation of the debtor's reorganization plan. The debtor
appealed the district court's judgment on the ground that the proof of claim was untimely filed. The
reviewing court noted that a "final judgment, order, or decree" from a bankruptcy court included
orders that "conclusively" determined a separable dispute over a creditor's claim. Id. at 748 (citation
omitted). Therefore, the court found that the bankruptcy court's order was not final because it neither
conclusively allowed the creditor's claim against the debtor nor determined what amount, if any, the
debtor owed the creditor. Id. In other words, judicial activity involving the exercise of considerable
discretion was further expected in the bankruptcy court before these issues could be resolved. See
id.5 Thus, our sister court held that the order did not "conclusively" resolve the parties' dispute and
dismissed the appeal. Giles, 787 F.2d at 748.
In the matter sub judice the order granting the motions to file untimely proofs of claim is final
and appealable because, unlike the cases cited above, the bankruptcy court was left with no dispute
or issue to resolve after entering the order. See Broken Bow Ranch Inc. v. Farmers Home Admin.
(In re Broken Bow Ranch, Inc.), 33 F.3d 1005, 1008 (8th Cir.1994) (bankruptcy court's order was
an appealable final decision because order did not contemplate further significant judicial activity in
the bankruptcy case, such as the submission and consideration of a modified plan of reorganization).
Indeed, Greyhound's reorganization plan has been confirmed by the bankruptcy court. Under that
plan, once a proof of claim is filed it must go through the compulsory ADR program. If the claim
is settled in the ADR, it is paid without the bankruptcy court's involvement unless the settlement
exceeds $250,000. If such action is required, however, we note that it will not constitute significant
5
Two district courts have specifically held that an order allowing the late filing of a proof of
claim is not a final appealable order. See, e.g., Charter Co. v. Petroleos Mexicanos (In Re
Charter Co.), 76 B.R. 191 (M.D.Fla.1987) and X-CEL, Inc. v. International Ins. Co. (In Re X-
CEL, Inc.), 68 B.R. 131 (N.D.Ill.1986). However, in each case the district court recognized that
the bankruptcy court would invariably have to entertain the merits of the claims to reach a final
resolution. In Charter, for example, the district court found that the bankruptcy court's order
allowing the creditor to file a late claim would be fully reviewable after a determination on the
merits of the claim. In re Charter, 76 B.R. at 193. More importantly, it found that more
litigation involving the creditor was necessary because the bankruptcy court had not yet resolved
the status of the creditor's claim nor the final resolution of the pending claim. Id. Likewise, in X-
CEL, the district court concluded that the orders denying the debtor's objections to the late filing
of a proof of claim were not appealable because the orders did not conclusively determine a
separable dispute over the creditor's claim or priority. In re X-CEL, 68 B.R. at 133. In other
words, the orders were not appealable because they did not address or resolve the merits of the
claim. Id. Like Giles, the orders from these two cases were not final and appealable because
significant judicial activity was still expected in the bankruptcy court in order to resolve the
creditor's claims.
judicial activity; it is a simple ministerial function.
If the ADR fails, on the other hand, the claimant may seek to lift the confirmation injunction
so the claim may be litigated in state court.6 If the claimant succeeds in that court, the judgment may
be satisfied under the plan without any involvement from the bankruptcy court. For all practical
purposes, the bankruptcy court's order ended a discrete judicial unit in the case, thereby concluding
an adversarial proceeding in the bankruptcy case. In re England, 975 F.2d at 1171. Therefore, the
bankruptcy court's order is appealable as a final order.
II. Due Process
The bankruptcy court found that Rogers did not receive actual notice of the bar date although
a notice, addressed in her name, was mailed to her brother's address. The court also found that notice
of the bar date was mailed to Fine's address even though he denied receiving it. Based on these
findings, the bankruptcy court allowed Rogers and Fine to file late proofs of claim on due process
grounds.7 On appeal the district court agreed with the bankruptcy court's findings as they applied to
Rogers, but disagreed with the conclusion that Fine's due process rights had been violated. Instead,
the district court found that Fine had received reasonable notice to satisfy due process. Nevertheless,
the district court allowed Fine to file an untimely proof of claim under t he excusable neglect
exception. Greyhound contends that Rogers and Fine were properly mailed notice of the bar date to
their last known address, thereby complying with due process.
We review a bankruptcy court's findings of fact for clear error, which calls for reversal only
if, considering all the evidence, we are left with the definite and firm conviction that a mistake was
made. Affiliated Computer Systems, Inc. v. Sherman (In re Kemp), 52 F.3d 546, 550 (5th Cir.1995).
When the district court has affirmed the bankruptcy court's findings, our review for clear error is
strict. Id. Issues of law are subject to a de novo review. Id.
"A creditor's claim can be barred for untimeliness only upon a showing that it received
6
The claims pending against Greyhound involve personal injuries suits. Because the
bankruptcy court has no jurisdiction to adjudicate these claims, they will proceed to state court
(or other appropriate court or agency) if not settled in the compulsory ADR.
7
Fine was also permitted to file a late proof of claim on the basis of excusable neglect.
reasonable notice." Oppenheim, Appel, Dixon & Co. v. Bullock (In re Robintech, Inc.), 863 F.2d
393, 396 (5th Cir.), cert. denied, 493 U.S. 811, 110 S.Ct. 55, 107 L.Ed.2d 24 (1989). Determining
whether a creditor received adequate notice depends on the facts and circumstances of each case.
Id. Due process requires notice that is "reasonably calculated to reach all interested parties,
reasonably conveys all of the required information, and permits a reasonable amount of time for
response." Id. A claimant may therefore file a late proof of claim if he can show that failure to allow
the filing would be violative of due process.
In addition to due process concerns, Bankruptcy Rule 2002(a)(8) requires that known
creditors be given at least 20 days notice by mail of the proofs of claim bar date. The 1983 advisory
committee note for this rule indicates that notice by mail is effective upon mailing. In re Robintech,
863 F.2d at 395. "Correspondingly, Bankruptcy Rule 9006(e) states that "notice by mail is complete
on mailing.' These rules imply that correctly mailed notice creates a presumption that proper notice
was given. Further, correctly mailed notice also triggers a parallel common law presumption that
proper notice was given." In re Schepps Food Stores, Inc., 152 B.R. 136, 139
(Bankr.S.D.Tex.1993); In re Longardner & Assocs., 855 F.2d 455, 459 (7th Cir.1988), cert. denied,
489 U.S. 1015, 109 S.Ct. 1130, 103 L.Ed.2d 191 (1989). Cf. Beck v. Somerset Technologies, Inc.,
882 F.2d 993, 996 (5th Cir.1989) ("Proof that a letter properly directed was placed in a U.S. Post
office mail receptacle creates a presumption that it reached its destination in the usual time and was
actually received by the person to whom it was addressed."). Thus, the question becomes whether
the sender properly mailed the notice and not whether the intended recipient received it. In re
Schepps, 152 B.R. at 139; Moody v. Bucknum (In re Bucknum), 951 F.2d 204, 207 (9th Cir.1991).
Cf. Beck, 882 F.2d at 996 (the question is whether the letter was mailed).
A denial of receipt is insufficient to rebut a presumption that proper notice was given, but it
does raise a factual issue. In re Schepps, 152 B.R. at 139; In re Bucknum, 951 F.2d at 207; In re
Longardner, 855 F.2d at 459. Cf. Beck, 882 F.2d at 996 (employee's testimony that he did not
remember receiving the letter and that he did not recall whether the person who signed for it was a
co-worker was insufficient to rebut the presumption). Consequently, the issue is whether notice was
properly sent. In re Schepps, 152 B.R. at 140. Evidence that the notice was never mailed or that no
other creditor received notice will rebut the presumption that proper notice was given. Id. "In effect,
the presumption may only be overcome by "evidence that the mailing was not, in fact, accomplished.'
" Id. (quoting Osborn v. Ricketts (In re Ricketts), 80 B.R. 495, 498 (Bankr. 9th Cir.1987) (Jones,
J., concurring)). To determine if a mailing was accomplished the courts may consider whether the
notice was correctly addressed, whether proper postage was affixed, whether it was properly mailed,
and whether a proper certificate of service was filed. Id.
Mailing a notice by First Class U.S. Mail to the last known address of a creditor satisfies due
process because it is "reasonably calculated" to inform the creditor of the bar date for filing proofs
of claim. Mackie v. Production Oil Co., 100 B.R. 826, 828 (N.D.Tex.1988); In re Solvation, Inc.,
48 B.R. 670, 673 (Bankr.D.Mass.1985). The creditor is responsible for notifying the debtor, trustee,
or the court of any changes in her mailing address to guarantee that she be given reasonable notice.
See In re Solvation, 48 B.R. at 673; Mackie, 100 B.R. at 827, 828. If the creditor fails to up-date
her address and as a consequence does not receive a notice of the bar date that was properly mailed,
she cannot later argue that her due process rights were violated. See In re Nutri*Bevco, Inc., 117
B.R. 771, 781 (Bankr.S.D.N.Y.1990) (due process does not require receipt of mail; actual timely
notice of bar date was mailed to creditor's record address but the creditor's failure to designate an
agent or to effectively forward his mail during his three month vacation caused the failure to receive
timely notice). Cf. In re Auto-Train Corp., 57 B.R. 566, 567-68 (Bankr.D.D.C.1986) (claimants'
failure to advise the court or the trustee of their current addresses constituted waiver of the right to
receive notice of the trustee's objections to the claim).
A.
The courts below found that notice of the bar date was properly mailed to the address
provided by Rogers, i.e., her brother's home address. Apart from denying receipt of the notice, she
did not present any evidence to show that the notice was not properly mailed. As a matter of fact,
the notice was not returned to the sender as undeliverable nor was there a widespread failure in the
mailing of notices. She failed to rebut the presumption that she was given proper notice. Moreover,
we note that Rogers herself is to blame for not receiving the notice because she failed to keep
Greyhound apprised of any changes in her mailing address. Mailing a notice by First Class U.S. Mail
to Rogers' last known address was reasonably calculated to inform her of the bar date for filing proofs
of claim. Therefore, we conclude that Rogers' due process rights were not violated.
However, the courts below did not consider whether Rogers' failure to keep Greyhound
apprised of her mailing address can constitute excusable neglect under the bankruptcy law.
Therefore, we remand this issue to the bankruptcy court for consideration.
B.
The bankruptcy court also found that notice of the bar date was mailed to Fine. There is no
evidence in the record to suggest that the notice was not properly mailed to Fine's known address.
We find Fine's denial of receipt to be insufficient to rebut the presumption that he was given
reasonable notice of the bar date. Thus, we hold that Fine's due process rights were not violated.
Yet, the courts below also found that Fine could file his claim due to excusable neglect. We will
consider the propriety of that finding below.
III. Excusable Neglect
The bankruptcy court may extend the bar date for cause to "permit a late filing if the movant's
failure t o comply with an earlier deadline "was the result of excusable neglect.' " Pioneer Inv.
Services Co. v. Brunswick Assocs. Ltd. Partnership, --- U.S. ----, ---- - ----, 113 S.Ct. 1489, 1491-92,
123 L.Ed.2d 74 (1993) (quoting Bankruptcy Rule 9006(b)(1)). In Pioneer, the creditors in a Chapter
11 bankruptcy were allowed to file late proofs of claim after the attorney handling their affairs failed
to file them prior to the bar date. The Supreme Court held that due to the circumstances of the case,
the attorney's failure to file the necessary proofs of claim constituted excusable neglect. Id. at ---- -
----, 113 S.Ct. at 1498-90. The Court emphasized that excusable neglect was not limited to errors
caused by circumstances beyond the late-filing party's control and concluded that the concept of
neglect was "some what elastic" and could include "inadvertent delays." Id. at ----, 113 S.Ct. at 1496.
Accord United States v. Clark, 51 F.3d 42, 43 (5th Cir.1995). However, the Court cautioned that
"inadvertence, ignorance of the rules, o r mistakes construing the rules [did] not usually constitute
"excusable neglect' ..." Pioneer, --- U.S. at ----, 113 S.Ct. at 1496. The Court stressed that the
determination of whether a party's neglect of a deadline was excusable was "at bottom an equitable
one, taking account of all relevant circumstances surrounding the party's omission." Id. at ----, 113
S.Ct. at 1498. Thus, in making such a finding, the courts should explore the following:
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. The Court found these factors to support a finding of excusable neglect. Id. at ----, 113 S.Ct.
at 1500. More importantly, the neglect was deemed excusable because the bankruptcy court's
misleading and inconspicuous notification of the bar date created a "dramatic ambiguity," which
caused the failure to file a timely claim. Id.
With Pioneer's four factors in mind, we turn to the facts of the instant case to determine if
the parties' failure to file timely proofs of claims was caused by excusable neglect.
A. Good Faith
Greyhound does not argue that the Claimants acted in bad faith. Indeed, the record is devoid
of anything to suggest that the parties acted in any way other than in good faith.
B. Prejudice
Another factor to consider is the potential prejudice that a debtor may face if an untimely
proof of claim is allowed. The Claimants argue that the Debtor will not be prejudiced by these late
filings because it was aware of these claims before negotiating and confirming the reorganization plan.
In other words, the Debtor recognized that some of these claims would have to be paid and
responded by allocating funds for their satisfaction. Accordingly, they maintain that Greyhound will
not be detrimentally impacted by these claims.
The bankruptcy court evaluated the danger of prejudice to Greyhound and concluded that
granting the delay in filing proofs of claim will not prejudice the debtor. The debtor knew
about these claims and the majority [of claimants] participated in the Alternative Dispute
Resolution process ... pursuant to the order of this court. Moreover, there is a limited pool
of money for payment of these claims in the plan of reorganization, which means that while
other creditors may be prejudiced by a reduction in the payout, the debtor will not be
prejudiced. The impact on other unsecured creditors will be relatively insignificant because
these claims were known at the time of balloting and there are a limited number of these type
of claims.
Despite Greyhound's arguments to the contrary, we agree with the bankruptcy court that it will not
be prejudiced by the untimely filing of this handful of claims.8
Under Pioneer, the central inquiry is whether the debtor will be prejudiced. We note that
Greyhound's reorganization plan was negotiated and approved after Greyhound had notice of these
claims. This is not a situation where the debtor's plan was formulated, negotiated, and confirmed
before notice was given of a substantial late claim. See, e.g., In re Drexel Burnham Lambert Group,
Inc., 148 B.R. 1002, 1007 (S.D.N.Y.1993) ("acceptance of a substantial late claim after
consummation of a vigorously negotiated claims settlement and Plan of Reorganization thereon and
a distribution of a major part of the assets thereunder, would disrupt the economic model on which
the creditors, the debtor and the stockholders reached their agreements"); In re Alexander's Inc., 176
B.R. 715, 722 (Bankr.S.D.N.Y.1995) ("Debtors and other creditors will be prejudiced because the
Proof of Claim was filed after the Debtors' Plan was formulated, negotiated and confirmed. Debtors
had proposed the Plan based upon a claims analysis ... which did not include [claimant's] substantial
claim.... Creditors who had timely filed their claims voted on a Plan based on this estimate.... Thus,
allowance of [claimant's] claim would disrupt the "economic model' on which all parties reached their
agreements.") (emphasis added). Quite the contrary, these late filed claims were clearly expected by
the debtor. In re Alexander's Inc., 176 B.R. at 722 (expectation of claim is one factor to consider
in determining if the debtor is prejudiced).
Greyhound also asserts that it reasonably believed that the Appellees' claims would be barred
because they failed to file timely claims. Accordingly, the Debtor claims it formulated the plan based,
in part, on its ability to identify the number and amount of allowed claims. We find Greyhound's
argument unpersuasive. If Greyhound had in fact believed that these claims were barred it would not
have allowed the Claimants' to participate in the ADR and would not have negotiated with them for
8
Unlike In re Specialty Equip. Co., Inc., 159 B.R. 236 (Bankr.N.D.Ill.1993), allowing the
Claimants' to file late claims will not invite the filing of hundreds of additional claims because all
the claims that were pending against Greyhound prior to its bankruptcy, with the exception of the
Claimants', have been settled or disposed of. In Specialty, 231 claimants, holding in excess of $12
million in disputed or unliquidated claims, had not filed their proofs of claim. The court believed
that allowing the present late claim would invite all the other creditors to file their claims as well,
thereby prejudicing the debtor. Id. at 239.
several months after passage of the bar date. Furthermore, we remain unconvinced that resolution
of these claims will exhaust the assets in the plan or trigger any future payment obligations by
Greyhound.
Finally, though it is not an expressed Pioneer factor, Greyhound argues that this Court should
also consider and heavily weigh the effect that a late filed claim will have on its creditors. See, e.g.,
In Re R.H. Macy & Co., Inc., 161 B.R. 355, 361 (Bankr.S.D.N.Y.1993) ("Extending the bar date to
allow any of the Movants to file a proof of claim could result in the depletion of assets which would
otherwise be available for distribution to creditors who have filed timely proofs of claim."). But see
Manousoff v. Macy's Northeast, Inc. (In re R.H. Macy & Co., Inc.), 166 B.R. 799 (S.D.N.Y.1994)
(prejudice to debtor is a more flexible and complex concept than a simple dollar-for-dollar depletion
of assets otherwise available for timely filed claims; the pertinent circumstances includes the size of
late claim in relation to estate and disruptive effect the late filing would have upon a plan close to
completion, not simply a dollar-for-dollar depletion of assets otherwise available to timely filed
creditors). Although we do not decide this issue, we note that even if this factor was considered
significant, it would not help Greyhound in this case. As we have stated, the allowance of these late
filed claims would minimally affect the creditors because these claims were known and expected at
the time of balloting. Cf. In re Alexander's Inc., 176 B.R. at 722 (creditor prejudiced where claim
was filed after plan was formulated, negotiated, and confirmed). These claims will not upset the
expectations of recovery that supported the creditors' votes for the plan. Indeed, the creditor body,
through its represent ative creditor's committee, elected not to object to these claims. Further,
Greyhound has not satisfactorily shown that the size of these claims are sizable in relation to the
debtor's estate nor that they would disrupt the distribution of the assets among the timely filed
creditors. These handful of claims were anticipated before the plan was negotiated and will not
impair the success of the confirmed plan.9
9
In Omni Mfg., Inc. v. Smith (In re Smith), 21 F.3d 660 (5th Cir.1994), the issue was whether
the bankruptcy court was authorized to extend the bar date to enable a creditor, Omni
Manufacturing, Inc. ("Omni"), to file a late proof of claim and to contest the dischargeability of
the debt owed to it by the debtor. Omni failed to timely file its claim because the debtor failed to
properly and timely schedule or list Omni as a creditor. As a result, Omni was not listed as a
C. Length of Delay
As noted above, because the reorganization plan has been confirmed, these claims, if allowed,
would be resolved without necessitating the involvement of the bankruptcy court. These claims
would still be required to undergo arbitration and then, quite possibly, litigation. Either way, it was
contemplated that resolution of these claims would be an on-going and lengthy process that would
continue even after the plan's confirmation. It is difficult to glean how allowance of these claims
would be disruptive of that process.
Moreover, though the delay in filing the untimely claims seems egregious—six to eight
months—it was incidentally caused by Greyhound. While it is true that the Claimants were provided
materials stating that they could not participate in the ADR if their claims were late, Greyhound
nevertheless negotiated with the Claimants for months after the passage of the bar date, allowing the
claimants to incur further delay and additional expense, without the Debtor ever raising the late claim
issue. It seems to us that Greyhound negotiated with the Claimants in an attempt to reach a favorable
settlement with the knowledge that if these negotiations were not successful, they could resort to the
passage of the bar date as their "ace" in the sleeve. We do not condone such unsavory tactics. If
creditor in the debtor's mailing matrix and therefore it had no actual or constructive knowledge of
the bankruptcy until four years after it was filed, one year after the deadline to file a proof of claim
had passed, and three months after a plan of reorganization had been approved by the creditors.
To determine if Omni's debt had been discharged, we turned to the factors listed in Stone v.
Caplan (In re Stone), 10 F.3d 285 (5th Cir.1994) and Robinson v. Mann, 339 F.2d 547 (5th
Cir.1964), which we refer to as the Stone/Robinson factors. These factors obligate the courts to
examine the "reason the debtor failed to list the creditor, the amount of disruption which would
likely occur by an untimely listing of the claim, and any prejudice suffered by the listed creditors
and the unlisted creditor in question." In re Smith, 21 F.3d at 664.
The third Stone/Robinson factor, which evaluated prejudice to the creditors, was
found to be critical in that case. After determining that Omni was seriously prejudiced by
the late notification of the debtors' bankruptcy, we examined the potential prejudice to
other creditors. We stated that "[i]ncluding an unanticipated claim such as Omni's in a
particular creditor class after the plan has been negotiated might upset the expectations of
recovery that supported other creditor's votes for the plan. Is it not accurate, however, to
say that holding Omni's claim nondischargeable necessarily prejudices the other creditors
unless that ruling would impair the success of the confirmed plan." (emphasis added).
Although Smith dealt with a different legal issue, we nevertheless find, under the facts of
the instant case, that including a claim which was anticipated prior to the negotiation and
confirmation of the plan will not impair its success and will not prejudice the other
creditors.
Greyho und had brought this issue to the Claimants' attention during the early stages of the
bankruptcy, they would have filed their untimely claims without delay. We conclude that this delay
will not disrupt or adversely impact the effective administration of this case.
D. Reason for Delay
The standard for determining whether a party's neglect of a deadline is excusable is a flexible
one because it is rooted in equity. As such, excusable neglect is not limited to errors caused by
circumstances beyond the late filing party's control. United States v. Clark, 51 F.3d 42, 43 (5th
Cir.1995) (citing Pioneer, --- U.S. at ----, 113 S.Ct. at 1496). In the instant case, the failure to file
a timely proof of claim was not beyond the control of the Claimants in this case.10 However, their
failure to file timely was due, in part, to the creation of the ADR program mandated by the
bankruptcy court. As the bankruptcy court noted, "the ADR order required claimants to participate
in ADR prior to any hearing on a motion to lift stay. Had this order not been issued the majority of
the claimants would no doubt have filed a motion to lift the automatic stay." But for the requirement
to go to ADR, the Claimants would have most probably filed motions to stay the execution months
before the bar date.11 These motions usually constitute informal proofs of claim.
Furthermore, the warning provided to creditors about the need for filing their proofs of claim,
regardless of the ADR, was not very co nspicuous. Although the warning was clear, it did not
necessarily draw the reader's attention.12 Arguably, some confusion or ambiguity existed regarding
the need to file. This ambiguity was further compounded by the fact that Greyhound entertained the
Appellees' claims and negotiated with them in the ADR process even though they had not filed timely
proofs of claim. Although it was not entirely "dramatic," this ambiguity supports our belief that the
10
As Greyhound points out, approximately 2,000 claimants who elected to participate in the
ADR also filed timely proofs of claim. Even so, just because a large number of claimants
complied with the filing deadline does not automatically mean that individual claimants cannot be
excused for the neglect that occasioned their failure to file on time.
11
In their briefs, the Claimants steadfastly maintain that they did not file any motions due to the
court mandated ADR program. They believed that they were barred from seeking motions to lift
the automatic stay until after the ADR was completed.
12
The warning was embedded in twelve pages of text describing the ADR procedures.
Claimants' neglect was excusable. See Pioneer, --- U.S. ----, ----, 113 S.Ct. 1489, 1500, 123 L.Ed.2d
74 (1993) ("dramatic ambiguity" that was created by "peculiar and inconspicuous" placement of bar
date in notice of creditor's meeting without an indication of significance of bar date contributed to
finding that failure to file timely proof of claim was excusable neglect). In sum, we perceive the
Claimants' failure to file timely claims to be the result of simple neglect and not due to some gross or
intentional inadvertence.
E. Equity
After reviewing the circumstances of this case, we conclude that the party's neglect of the bar
date was excusable. We believe that the court ordered ADR program was to blame, in part, for the
Claimants' failure to file timely proofs of claim, and out of equity, we will allow their claims to be
filed. We wholeheartedly agree with the bankruptcy court's following observation:
The Court used the ADR Order as a method of reducing the number of motions to lift stay
filed in this case. In fact, the ADR Order obviated the need to file a motion to lift the stay.
But for the ADR Order, the claimants would likely have filed motions to lift stay, which have
been routinely held to constitute informal proofs of claims.... [T]he ADR Order was clearly
beneficial to the speedy administration of this case and should not be used as a vehicle to
punish those claimants who chose to participate.
The ADR program, instituted for the benefit of Greyhound, should not be used to punish the
Claimants for their omission. We so hold.
CONCLUSION
Based on the specific facts of this case, with the exception of Donna Rogers we AFFIRM the
courts below and allow the Claimants' to file untimely proofs of claim based on excusable neglect.
We also REMAND the case to the bankruptcy court to det ermine if Rogers' failure to timely file
constituted excusable neglect.