Featured Chrome Extensions:

Casey IRACs are produced by an AI that analyzes the opinion’s content to construct its analysis. While we strive for accuracy, the output may not be flawless. For a complete and precise understanding, please refer to the linked opinions above.

Keywords

contractmotionbankruptcychapter 11 bankruptcypartnership
damagesappealmotionbankruptcygood faithappellee

Related Cases

Wellmore Coal Corp. v. Harman Mining Corp., 264 Va. 279, 568 S.E.2d 671
View Case »
Behrens v. Wedmore, 698 N.W.2d 555, 2005 S.D. 79
View Case »
George v. Caton, 93 N.M. 370, 600 P.2d 822, 1979-NMCA-028
View Case »
McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 42 Tex. Sup. Ct. J. 597
View Case »
Simon v. KPMG LLP, Not Reported in F.Supp.2d, 2006 WL 1541048, 97 A.F.T.R.2d 2006-2806
View Case »
Justia Law Link
LexisNexis Link
Westlaw Link
CourtListener Link
Oyez Link

In re Enron Corp., 419 F.3d 115, 45 Bankr.Ct.Dec. 45, Bankr. L. Rep. P 80,338

Facts

Midland Cogeneration Venture Limited Partnership (Midland) had a contract with Union Pacific Fuels, Inc. for natural gas supply, which was later assumed by Enron Capital & Trade Resources Corp. (a subsidiary of Enron Corp.). After Enron and its subsidiaries filed for Chapter 11 bankruptcy, Midland filed a proof of claim against Enron North America Corp. (ENA) but did not file a claim against Enron Corp. until six months after the bar date. Midland argued that its failure to file timely was due to inadvertence as it was focused on negotiations with ENA regarding the rejection of the contract.

On October 10, 2002, five days before the bar date, Midland filed with the bankruptcy court proof of an unsecured claim against ENA in the amount of $12,567,557 based on ENA's failure to deliver natural gas from April 1 to April 19, 2002, and for damages resulting from ENA's rejection of its remaining obligations under the natural gas purchase agreement.

Issue

Did the Bankruptcy Court abuse its discretion in denying Midland's motion to amend its proof of claim to include Enron Corp. or to file a new claim against it after the bar date?

Did the Bankruptcy Court abuse its discretion in denying Midland's motion to amend its proof of claim to include Enron Corp. or to file a new claim against it after the bar date?

Rule

The court applied the 'excusable neglect' standard from Pioneer Investment Services Co. v. Brunswick Associates L.P., which allows for late filings if the failure to comply with a deadline was due to excusable neglect, considering factors such as the reason for the delay, the length of the delay, and potential prejudice to the debtor.

The Federal Rules of Bankruptcy Procedure provide that when an act is required or allowed to be done at or within a specified period … by order of court, the court for cause shown may at any time in its discretion … on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect.

Analysis

The Bankruptcy Court found that Midland's explanation for the delay was inadequate and that the delay of over six months was substantial. The court emphasized the potential prejudice to the reorganization process if late claims were allowed, as it could open the floodgates to similar claims. The court concluded that Midland had been given adequate notice of the bar date and that its neglect did not meet the standard for excusable neglect.

The bankruptcy court specifically credited Midland's arguments that it acted in good faith, see In re Enron Corp., 298 B.R. at 526, that its claim was 'not substantial in relation to the [Enron] estate,' id. at 525, and that the claim was 'filed before [Enron and its subsidiaries] filed their proposed plan of reorganization and disclosure statement,' id. at 525–26. But the court also noted that Midland had been provided with 'adequate notice' of the bar date, that its delay of more than six months after that date was 'substantial,' and that its explanation for missing the deadline was ordinary 'inadvertence' based on the fact that 'it was distracted by extensive negotiations regarding [ENA's] rejection of the Purchase Agreement and assignment and assumption of [an unrelated agreement].'

Conclusion

The court affirmed the Bankruptcy Court's decision, concluding that there was no abuse of discretion in denying Midland's motion to amend its claim or file a new claim against Enron Corp.

We affirm because we agree with the district court that the bankruptcy court did not abuse its considerable discretion in finding that the creditor's neglect in this case was not excusable, especially in light of the complexity of the reorganization the court was overseeing.

Who won?

Enron Corp. prevailed in the case because the court found that Midland's delay in filing was substantial and lacked a genuine reason, which could prejudice the bankruptcy proceedings.

Enron contends in its brief on appeal that some '26 percent of all [Enron-related] debtors, including ENA, received Enron credit support in the form of guaranties,' Appellees' Br. at 30 n. 13, a fact Midland does not challenge and of which the bankruptcy court, given its familiarity with the case, must have been aware.

You must be