Petition for Writ of Certiorari — Simmons v. Kmart Corp.

O

No. CFFICE O 180

In the

Supreme Court of the United States

WILHEMINA SIMMONS,

Petitioner,

v.

K-MART CORPORATION,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Seventh Circuit

PETITION FOR WRIT OF CERTIORARI

BARBARA L. YONG

Counsel of Record

FIELD & GOLAN LLP

70 West Madison Street

Suite 1500

Chicago, IL 60602-4206

(312) 263-2300

Attorney for Petitioner,

Wilhemina Simmons

Midwest Law Printing Company/Photex — Chicago — (312) 321-0220

1)

2)

3)

4)

i

QUESTIONS PRESENTED

Whether the Seventh Circuit Court of Appeals erred

when it split with the Third Circuit Court of Appeals

by considering the dollar amount of Petitioner

Wilhemina Simmons’s Proof of Claim in affirming the

lower courts’ rulings that Petitioner's Proof of

Claim—which was filed one day after the initial claim

Bar Date due to a clerical error—could not be deemed

timely filed pursuant to the “excusable neglect” doc-

trine established by Federal Rule of Bankruptcy

Procedure 9006(b) and Pioneer Investment Services Co.

v. Brunswick Assocs. Lid. Partnership, 507 U.S. 380

(1993).

Whether the Seventh Circuit erred in affirming the

lower courts’ denials of Petitioner’s Rule 90060 b)

Motion based on a narrow application of “excusable

neglect,” contrary to the liberal construction mandated

by this Court’s decision in Pioneer.

Whether the Seventh Circuit erred by affirming the

lower courts’ rulings based on the mistaken belief that

it had not been provided, and therefore was unable to

consider, certain unpublished opinions of the Bank-

ruptcy Court which supported Petitioner’s argument

that the period of time between the late filing and the

subsequent Rule 9006(b) Motion is irrelevant to the

“excusable neglect” analysis, when those opinions were

actually included in the attachments to Petitioner’s

appellate brief.

Whether the Seventh Circuit erred by affirming the

lower courts’ rulings that a Supplemental Bar Date

should not apply to Petitioner’s Proof of Claim based

on a factual distinction that had no basis in the record

and which was not applied to other similarly situated

claimants.

i

LIST OF PARTIES

The Petitioner to this Honorable Court for a writ of

certiorari is Wilhemina Simmons. Petitioner is a citizen of

the U.S. Virgin Islands. Petitioner is a pre-petition creditor

of K-Mart Corporation based on a personal injury claim.

The Respondent is K-Mart Corporation, as debtor in

possession. K-Mart filed its Chapter 11 bankruptcy case on

January 22, 2002 in the United States Bankruptcy Court

for the Northern District of Illinois. K-Mart’s bankruptcy

proceedings are ongoing.

CORPORATE DISCLOSURE

Petitioner is an individual with no corporate parent or

subsidiary requiring disclosure pursuant to Supreme Court

Rule 29.6.

TABLE OF CONTENTS

PAGE

QUESTIONS PRESENTED ........2cccccccccccecs i

3 8 hoe cect ce vecbnvedeccconcees ii

CORPORATE DISCLOSURE ..................... ii

Ty SEE Tt... iil

TABAde OF AUTESOREEIMD occ ccc ccccccccccccccces v

, Üõ ͤ ͤ nnn 1

,,,, bed Sdesuedes 2

CONSTITUTIONAL PROVISIONS, STATUTES

AND REGULATIONS INVOLVED .............. 2

STATEMENT OF THE CASE ..................... 2

A. PETITIONER’S LATE CLAIM AND

THE BANKRUPTCY COURT'S DECISION ... 2

B. THE DISTRICT COURT'S DECISION WW 4

C. THE SEVENTH CIRCUITS DECISION ...... 6

WHY THE PETITION SHOULD BE GRANTED ...... 9

I. The Seventh Circuit Erred By Splitting With The

Third Circuit And Considering The Dollar Value

Of Petitioner's Claim As Part Of The Excusable

rr A ea aw ee eee s 9

II.

III.

iv

The Seventh Circuit Failed To Follow This

Court's Mandate That Rule 9006(b) And Pioneer

Should Be Liberally Construed ........... 12

The Seventh Circuit Erred By Not Reading The

Unpublished Opinions Of The Bankruptcy Court

And By Considering The Length Of Time That

Passed From The Bar Date To The Filing Of

Petitioner’s Rule 9006(b) Motion .......... 16

The Seventh Circuit Erred By Affirming The

Lower Courts’ Decisions Based Upon A Factual

Distinction That Had No Basis In The Record

And Which Was Not Applied To Similarly

, èͥͤ ᷣr᷑- X]... eewde nes 21

——

v

TABLE OF AUTHORITIES

Federal Cases Cited: PAGE(S)

Farley, Inc. v. Ohio Bureau of Workers’ Compensation,

, 17-18

In re AOV Industries, Inc., et al.,

792 F. 2d 1140 (D.C. Cir. 1986) ....... „ 21

In re Cendent Corp. PRIDES Litigation,

235 F. 3d 176 (3d Cir. 200o 14-15, 20

In re Dartmoor Homes, Inc.,

175 B. R. 659 (Bankr. N. D. III. 1994aꝓ)ͥv: 20

In re O’Shaughnessy,

252 B. R. 722 (Bankr. N. D. III. 2000 : 18

In re Singson,

Arens rrr 12, 13

O’Brien Environmental Energy, Inc. v.

NRG Energy, Inc.

(In re O’Brien Environmental Energy, Inc.),

188 F.3d 116 (3d Cir. 1999) ........... 9-11, 18-20

Pioneer Inv. Servs. Co. v. Brunswick Assocs.

Ltd. Partnership,

OT UE. SCID noc i bd dees cas tacesaes passim

Robb v. Norfolk & Western Railway Co.,

ene 12

Federal Rule of

Bankruptcy Procedure Cited:

1

OPINIONS BELOW

This Petition arises from the denial of two motions

Petitioner brought in the United States Bankruptcy Court

for the Northern District of Illinois (“Bankruptcy Court”).

On October 21, 2002, Petitioner filed a Motion to Have her

Proof of Claim Deemed Timely Filed pursuant to the

“excusable neglect” provision contained in Rule 9006(b) of

the Federal Rules of Bankruptcy Procedure (“Rule 9006(b)

Motion”). The Bankruptcy Court heard argument on

November 19, 2002 and denied Petitioner’s Rule 9006(b)

Motion by Order dated November 26, 2002. No written

opinion was issued. On January 14, 2003, Petitioner moved

to have her claim included in a Supplemental Bar Date

that was established upon motion of the debtor, K-Mart,

for personal injury claimants who had not received

Debtor’s original bar date notice. On February 5, 2003, the

Bankruptcy Court heard argument and denied this Motion

as well. No written opinion was issued. The grounds for

the Bankruptcy Court’s oral rulings with respect to both

Motions are discussed in detail in the District Court and

Seventh Circuit opinions attached in the Appendix hereto.’

Petitioner appealed both of the Bankruptcy Court’s

rulings to the United States District Court for the

Northern District of Illinois. The District Court consoli-

dated both of Petitioner’s appeals and affirmed both of the

Bankruptcy Court’s rulings in a single Memorandum

Opinion and Order dated October 27, 2003. (App. at 15-24.)

Petitioner appealed the District Court’s rulings to the

United States Court of Appeals for the Seventh Circuit.

The Seventh Circuit heard oral argument on April 9, 2004

and issued an Opinion and Order affirming the judgment

The transcripts from the relevant hearings are included in the

Appendix to Petitioner's opening appellate brief to the Seventh

Circuit.

2

of the District Court on August 27, 2004. (Id. at 1-14.) The

Seventh Circuit’s Opinion is reported at 381 F.3d 709.

JURSIDICTION

Pursuant to 28 U.S.C.A. § 1254(1), Petitioner seeks the

grant of a writ of certiorari to obtain review of the Order

entered by the Seventh Circuit on August 27, 2004. (App.

at 14.)

CONSTITUTIONAL PROVISIONS, STATUTES

AND REGULATIONS INVOLVED

Federal Rule of Bankruptcy Procedure 9006(b).

Petitioner asserts that the Seventh Circuit misapplied

Rule 9006(b) of the Federal Rules of Bankruptcy Proce-

dure, which provides in relevant part:

MWhen an act is required.. to be done at or within a

specified period by these rules or by a notice given

thereunder or by order of court, the court for cause

shown may at any time in its discretion .. . (2) 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.

Fed. R. Bankr. P. Rule 9006(b). :

STATEMENT OF THE CASE

A. Petitioner’s Late Claim and the Bankruptcy

Court’s Decision

The Bankruptcy Court established July 31, 2002 as the |

deadline for filing proofs of claim in the K-Mart bank-

ruptcy case (‘ie “Bar Date”). (Id.) In order to comply with

— — —

3

the Bar Date, Petitioner’s counsel timely prepared a Proof

of Claim. On July 30, 2002, Petitioner’s attorneys in-

structed their office clerk to send the Proof of Claim by

next-day Express Mail. (Id. at 2-3.) By mistake, the clerk

who completed the Express Mail delivery form checked the

box for “second day” delivery, rather than “next day”

delivery as instructed by Petitioner’s counsel. (Id.) The

office clerk also neglected to deliver the Proof of Claim to

the Post Office until some time after 2:00 p.m.—the

deadline for “next day” delivery. (Id.) As a result of these

clerical errors, Petitioner’s Proof of Claim was received and

filed on August 1, 2002—one day after the Bar Date. (Id.)

The clerk never alerted Petitioner’s attorneys to any

problems in carrying out their instructions, and Peti-

tioner’s attorneys therefore assumed that the clerk had

carried out their instructions and that the Proof of Claim

would be timely filed. Id.) It was not until September 23,

2002 that Petitioner’s attorneys learned of the late filing,

when they received a letter from a K-Mart claims exam-

iner dated September 18, 2002. (Id. at 3, 17.)?

After conducting an investigation and preparing a sup-

porting affidavit, Petitioner’s attorneys on October 21, 2002

filed a Motion to Have her Proof of Claim Deemed Timely

Filed pursuant to the “excusable neglect” provision con-

tained in Rule 9006(b) of the Federal Rules of Bankruptcy

Procedure (“Rule 9006(b) Motion”). (Id. at 17.) The Bank-

ruptcy Court heard argument on November 19, 2002 and

denied Petitioner’s Rule 9006(b) Motion by Order dated

November 26, 2002. No written opinion was issued. (Id. at

3-4, 17.)

Shortly thereafter, on December 11, 2002, Debtors moved

for, and were subsequently granted, leave to establish a

2 The office clerk responsible for the delivery errors was subse-

quently terminated.

4

Supplemental Bar Date of January 22, 2003, based on the

omission of certain personal injury claimants from

K-Mart’s bankruptcy schedules. K-Mart’s omission had

potentially prevented those claimants from receiving direct

mail notice of the original July 31, 2002 claim Bar Date.

(Id. at 2.) Petitioner had not been included on K-Mart's |

bankruptcy schedules, nor had she received direct mail

notice of the original July 31, 2002 Bar Date. (Id. at 2.)

While K-Mart had mailed notice of the original Bar Date :

to Petitioner on May 22, 2002, the notice was sent to an f

address where Petitioner did not receive mail. (Id.)

Based on these facts, Petitioner's attorneys on qanuary

14, 2003 moved to have her claim included in the Supple-

mental Bar Date. On February 5, 2003, the Bankruptcy

Court heard argument and denied Petitioner’s Motion

based on the Court’s conclusion that Petitioner’s attorneys

were aware of the bankruptcy and could have ascertained

the original Bar Date.

Petitioner appealed both of the Bankruptcy Court’s

rulings to the United Sates District Court for the Northern

District of Illinois (the “District Court”).

B. The District Court’s Decision

The District Court consolidated both of Petitioner's

appeals and addressed them in a single Memorandum

Opinion and Order dated October 27, 2003. (Id. at 16-24.)

The District Court affirmed both of the Bankruptcy Court’s

rulings. (Id. at 15.)

The District Court first reviewed the Bankruptcy Court’s

denial of Petitioner’s Rule 9006(b) Motion. (Id. at 18-21.)

It considered the Bankruptcy Court’s findings under Rule

9006(b) and the four-factor “excusable neglect” analysis

established by this Court’s decision in Pioneer Inv. Servs.

Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380,

®

bad

L

f eee Eo

5

395 (1993). (Id.) Under Pioneer, the factors to be consid-

ered are: “[1] the danger of prejudice to the debtor, [2] the

length of the delay and its potential impact on judicial

proceedings, [3] the reason for the delay, including

whether it was within the reasonable control of the

movant, and [4] whether the movant acted in good faith.”

507 U.S. at 395. (Id. at 18.)

With regard to the first factor, the danger of prejudice to

the debtor, the District Court concluded that the Bank-

ruptcy Court did not abuse its discretion by finding that

the late filing of Petitioner’s claim would prejudice K-Mart

because the dollar amount of Petitioner’s claim ($750,000)

was “no small amount” with respect to the total number of

claims against K-Mart. (Id. at 19.)

With regard to the second factor, the length of the delay

and its potential impact on the judicial proceedings, the

District Court noted that the Bankruptcy Court did not

make any findings of adverse impact attributable to the

one-day delay in filing the Proof of Claim. (Id. at 20.)

However, the District Court cbserved that the Bankruptcy

Court did appear to consider the possible adverse impact

on the bankruptcy proceeding attributable to the delay

between the one-day late filing of the claim on August 1,

2003, to the filing of Petitioner’s Rule 9006(b) Motion on

October 21, 2003. (Id.) The District Court then concluded

that the Bankruptcy Court’s apparent consideration of the

delay element of the excusable neglect analysis was not

clearly erroneous. (Id.)

Next, the District Court considered the third factor, the

reason for the delay. (Id. at 20-21.) The Court determined

that the Bankruptcy Court’s conclusion that the delay was

within Petitioner’s control was not erroneous. (Id.) The

District Court based that determination on the fact that

the claim was not sent for filing until the day before the

July 31, 2002 deadline. (Id. at 21.)

6

Finally, the District Court considered the good faith

element. (Id.) It acknowledged that it was unclear whether

the Bankruptcy Court had considered that factor. (Id.)

However, the District Court concluded that Petitioner's

showing of good faith was not strong enough to outweigh

the other factors that the Bankruptcy Court specifically

considered. (Id.) Based on the foregoing analysis, the

District Court affirmed the Bankruptcy Court’s denial of

Petitioner’s Rule 9006(b) Motion. (Id.)

The District Court then turned to the Bankruptcy

Court’s denial of Petitioner’s Motion to be Included in the

Supplemental Bar Date. (Id. at 22-24.) It began by noting

that the Supplemental Bar Date was established to

remedy due process concerns with respect to those claim-

ents who, like the Petitioner, were not included in

K-Mart’s schedules of assets and liabilities and who

therefore were not notified of the original deadline for

filing proofs of claim. (Id. at 22.) Although the District

Court acknowledged that K-Mart had not included Peti-

tioner in its schedules, it held that her attorney’s alleged

actual notice of the original Bar Date should be imputed to

her. (Id. at 22-23.) Neither the Bankruptcy Court nor the

District Court made any inquiry as to whether counsel for

any or all of the other claimants who were allowed to file

by the Supplemental Bar Date, much less whether those

claimants themselves, also had actual notice of the initial

Bar Date. Nevertheless, the District Court held that that

the Bankruptcy Court did not err by denying Petitioner's

Motion. (Id. at 23-24.)

Petitioner appealed the District Court’s decision to the

Seventh Circuit.

C. The Seventh Circuit’s Decision

The Seventh Circuit heard oral argument on April 9,

2004, and affirmed the District Court’s decision by Order

7

dated August 27, 2004. (Id. at 14.) In doing so, it first

conducted a de novo review of the District Court’s analysis

of excusable neglect under Rule 9006(b) according to the

factors established by Pioneer. (Id. at 5-11.)

The Seventh Circuit began by reviewing the Bankruptcy

Court's analysis of the prejudice factor. (Id. at 5-7.) It

observed that the Bankruptcy Court did not address

certain facts cited by Petitioner in support of her conten-

tion that the one-day late filing did not prejudice K-Mart.

(Id. at 5-6.) These included the fact that, at the time of the

late filing, K-Mart had not yet filed its plan of reorganiza-

tion, as well as the fact that additional claims were still

being filed pursuant to the Supplemental Bar Date. (Id.) In

light of these issues, the Seventh Circuit remarked that it

did] not find the Bankruptcy Court’s reasoning over-

whelmingly persuasive.” (Id. at 7.) Nevertheless, it con-

cluded that the Bankruptcy Court was in the best position

to assess the prejudice factor and therefore the Seventh

Circuit affirmed the Bankruptcy Court’s finding that there

was a risk of prejudice to K-Mart because the dollar

amount of Petitioner’s claim was “no small amount.” (Id.

at 6.) Importantly, the Seventh Circuit also suggested that

the outcome would have been different had the claim been

for $75,000 or $80,000, rather than $750,000. (Id.)

Next, the Seventh Circuit considered the length of the

delay and its impact on the judicial proceedings. (Id. at

7-8.) It began by noting that Petitioner’s claim was filed

only “one day late, a fact which seems to support the grant

of her Rule 9006(b) Motion.” (Id. at 7.) It then noted that

Petitioner filed her Rule 9006(b) Motion eighty-one days

after the initial Bar Date, a fact which the Bankruptcy

Court had emphasized. (Id.) Notably, Petitioner had

attached to her appellate brief three unpublished decisions

in which the Bankruptcy Court had granted “late claims

motions” filed as late as seventy days after the applicable

8

Bar Date. Despite this, the Seventh Circuit held that it

lacked the ability to consider these decisions because

Petitioner did not provide copies of them to the Seventh

Circuit with her brief. But on this point the Seventh

Circuit was plainly in error: the decisions were included in

Petitioner's bound volume which included her brief,

appendix, and addendum of authority. The Seventh Circuit

apparently overlooked the decisions, and as a result its

only comment on them was that a seventy-day delay was

“not as tardy” as Petitioner’s eighty-one day delay. (Id. at

8.)

The Seventh Circuit next considered the reason for the

delay, which it characterized as an “immensely persuasive”

factor in this case. (Id. at 9-10.) Its analysis was simply

that Petitioner did not file the claim until the last minute,

that the mailing responsibilities were left to a clerk, and

that Petitioner did not verify whether her claim arrived on

time. (Id.) While the Court concluded that those reasons

were poor ones, it never compared Petitioner’s reasons to

those in the Pioneer decision or other cases decided under

Rule 9006(b). (Id.)

Finally, the Court considered Petitioner's good faith. (Id.

at 10-11.) The Court acknowledged that the Bankruptcy

Court had not even addressed Petitioner's good faith and

that Petitioner’s counsel had in fact attempted to file her

claim on time. (Id. at 10, n.3.) However, it focused again on

the length of the delay and reason for the delay in deciding

that Petitioner’s efforts “cannot be called extraordinary or

even particularly diligent.” (Jd. at 10.) Accordingly, it held

that the good faith factor was inconclusive. (Id.)

Based on the foregoing analysis, the Seventh Circuit

concluded that the Bankruptcy Court’s denial of Peti-

tioner’s Rule 9006(b) Motion was not an abuse of discre-

tion. (Id. at 10-11.) In explaining that finding, the Court

9

commented that “ultimately this mistake is attributable to

no one except Simmons.” (Id. at 11.)

The Seventh Circuit then turned to the denial of Peti-

tioner’s motion to be included in the Supplemental Bar

Date. (Id. at 11-13.) The Court acknowledged that Peti-

tioner was similar to the other claimants to whom the

Supplemental Bar Date applied in that she was not listed

on K-Mart’s schedules and never physically received notice

of the initial Bar Date. (Id. at 11.) However, it concluded

that she could be distinguished from the other claimants

on the grounds that her counsel had actual knowledge of

the initial Bar Date and therefore the Bankruptcy Court’s

denial of Petitioner’s motion was not an abuse of discre-

tion. (Id. at 12.) The Seventh Circuit reached that conclu-

sion despite the fact that there was nothing in the record

as to whether any of the other claimants to whom the

Supplemental Bar Date did apply may also have had

actual knowledge of the original Bar Date, and should

therefore not have been afforded more favorable treatment.

WHY THE PETITION SHOULD BE GRANTED

I. The Seventh Circuit Erred By Splitting With The

Third Circuit And Considering The Dollar Value

Of Petitioner’s Claim As Part Of The Excusable

Neglect Analysis.

The Seventh Circuit based its critical finding of prejudice

in this case on the fact that Petitioner’s claim was for “no

small amount,” and specifically stated that the case may

have turned out differently had Petitioner’s claim been for

$75,000 or $80,000 rather than $750,000. (Id. at 6.) This

aspect of the Seventh Circuit’s opinion not only amounts to

a rejection of Pioneer, it also creates a split with the Third

Circuit as to whether the dollar amount of a claim should

be considered as part of the prejudice element of the

10

excusable neglect analysis. O’Brien Environmental Energy,

Inc. v. NRG Energy, Inc. (In re O’Brien Environmental

Energy, Inc.), 188 F.3d 116, 126 (3d Cir. 1999).

In O’Brien, the Third Circuit held that the size of a

late-filed claim and the loss of the windfall that its allow-

ance would cause to other creditors are not facts that

should be considered in assessing the Pioneer prejudice

factor. In so holding, the Third Circuit noted that “[o]ther

circuits too have held that prejudice is not merely the loss

of an advantageous position, but must be something more

closely tied with the merits of the issue.” O’Brien, 188 F.3d

at 127. Indeed, if the size of a late claim and its dilution of

the distribution pool constituted prejudice, the Third

Circuit recognized, then “virtually all late filings would be

condemned by this factor.” Jd. at 126. To avoid the inequity

of such an approach, the Third Circuit employed a

five-factor analysis for prejudice which considered, inter

alia, the impact that the late claim would have on the

administration of the case, whether the plan was filed or

confirmed with the existence of the claim, and whether the

late filing would upset the plan’s economic model. See id.

at 127. While the Third Circuit also took into account

claim size, it did so not in a vacuum, but only with respect

to the rest of the estate. See id.

Although Petitioner explained to the Seventh Circuit

why the O’Brien prejudice factors weighed in her favor, her

arguments fell on deaf ears. The Seventh Circuit relied

solely on the Bankruptcy Court’s curt observ tion that her

claim was “for no small amount.” (App. at 6.)

This refusal to look beyond the dollar amount and

consider the full range of issues relevant to prejudice was

reversible error. Had the Seventh Circuit fully analyzed

the issue, it would have had no choice but to concede that,

in fact, the size of Petitioner’s claim was insignificant with

respect to rest of the claims in the K-Mart estate. The

Va —

11

Seventh Circuit appeared to recognize this when it ac-

knowledged, “it is true that Simmons's claim represents

only a small fraction of the approximately $6 billion total

of unsecured claims against K-Mart... .” Id. However, the

Court’s analysis ended there. Had it followed the issue to

its logical conclusion, it would have also understood that

because Petitioner's claim is unsecured, she would have

only received a fraction of $750,000 if her claim were

allowed. But instead, the Seventh Circuit chose not to give

Petitioner the benefit of the analysis she deserved, and

erroneously found that the mere observation of claim size

as “no small amount” constituted a sufficiently reasonable

analysis of prejudice. (Id. at 7.)

The Seventh Circuit also reasoned that if all such claims

were allowed, “K-Mart could easily find itself faced with a

mountain of such claims, with a corresponding price tag in

the millions of dollars.” (Id. at 6.) However, this was rank

speculation. Even more fundamentally, nowhere did the

Seventh Circuit ever explain how prejudice to the bank-

ruptcy proceeding would materialize even if allowing

Petitioner to file her claim one day late did in fact lead to

more claims being filed. After all, the K-Mart bankruptcy

involves $6 billion in claims. Petitioner’s claim is unse-

cured. It is difficult to envision how K-Mart’s reorganiza-

tion would be jeopardized by a few million extra dollars in

unsecured claims which stand to receive only pennies on

the dollar. See O’Brien, 188 F.3d at 128. Moreover, the

prejudice that the courts in this case were alluding to is

not any type of prejudice to K-Mart, but instead is the

mere loss of the windfall that other creditors stand to

receive only because unfortunate bona fide creditors filed

their claims late.

For all of the foregoing reasons, the Seventh Circuit’s

prejudice analysis in this case is not only fundamentally

unsound, it is a departure from established law that

12

squarely conflicts with the sound approach espoused by the

Third Circuit in O’Brien. The Seventh Circuit erred by

finding that the Bankruptcy Court’s “no small amount”

analysis was sufficiently reasonable under Rule 9006(b)

and Pioneer. If its decision is allowed to stand, the letter

and spirit of Rule 9006(b) and Pioneer will be eviscerated

in the Seventh Circuit. Its decision should be reversed.

2. The Seventh Circuit Failed To Follow This

Court’s Mandate That Rule 9006(b) And Pioneer

Should Be Liberally Construed.

The Seventh Circuit also erred in applying Pioneer and

Rule 9006(b) when considering the reason for the delay. Its

analysis was simply that Petitioner did not file the claim

until the last possible day, that the mailing responsibilities

were left to a clerk, and that Petitioner did not verify

whether her claim arrived on time. (App. at 9-10.) It also

noted, although in its consideration of good faith, that her

efforts were not “extraordinary or even particularly dili-

gent.” (Id. at 10.) It concluded that “ultimately this

mistake is attributable to no one except Simmons.” (Id. at

11.) :

In that analysis, the Seventh Circuit erroneously applied

a higher standard than that established by Rule 9006(b)

and Pioneer. It affirmed the disallowance of Petitioner’s

claim based upon nothing more than an innocent mistake

and the size of the claim. It lost sight of the fact that a

mistake is not fatal under Rule 9006(b). To the contrary,

mistakes are specified as an allowable form of excusable

neglect.

This Court requires a “flexible understanding of ‘excus-

able neglect’ [that] accords with the policies underlying

Chapter 11 and the bankruptcy rules.” Pioneer, 507 U.S. at

389. That is because “[w]hereas the aim of a Chapter 7

liquidation is the prompt closure and distribution of the

13

debtor’s estate, Chapter 11 provides for reorganization

with the aim of rehabilitating the debtor and avoiding

forfeitures by creditors.” Id. (emphasis added). Indeed,

the Seventh Circuit’s own precedents also require a liberal

interpretation of excusable neglect in light of Pioneer. See

Robb v. Norfolk & Western Railway Co., 122 F.3d 354,

360-62 (7th Cir. 1994); see also In re Singson, 41 F.3d 316,

318 (7th Cir. 1994).

K-Mart’s case is proceeding under Chapter 11 and

therefore the courts in this case should have applied the

Pioneer factors and Rule 9006(b) liberally, with the goal of

avoiding forfeiture of Simmons’ claim. Their focus should

have been whether any true damage to K-Mart’s reorgani-

zation would occur if her claim were allowed. They failed

to do so.

The Supreme Court in Pioneer explained that even

mistakes within a claimant’s control may constitute

excusable neglect under Rule 9006(b):

[B]y empowering the courts to accept late filings

“where the failure to act was the result of excusable

neglect,” Rule 9006(b), Congress plainly contemplated

that the courts would be permitted, where appropriate,

to accept late filings caused by inadvertence, mis-

take, or carelessness, as well as by intervening

circumstances beyond the party’s control.

Pioneer, 507 U.S. at 388 (emphasis added). So too, in

Singson, the Seventh Circuit itself explained that the

circumstances surrounding a late filing need not be “ex

traordinary” in order to merit relief under Rule 9006(b).

See Singson, 41 F.3d at 318.

In this case, the Seventh Circuit found fault with

Petitioner because she did not file her claim earlier.

However, no claimant is ever required to file a claim early;

one must only file by the deadline. Therefore, failing to

14

send a claim for filing prior to the deadline is not in and of

itself indicative of fault. Here, the mistake was nothing

more than a clerk’s failing to follow instructions by

sending the claim via second day mail instead of overnight

delivery, and then not informing the attorneys of this fact.

If that is not “excusable neglect,” then what is?

Also overly strict, and therefore contrary to the liberal

construction required to be applied to Rule 9006(b), is the

Seventh Circuit’s implicit holding that “delegat[ing] the

mailing responsibilities to a clerk” was somehow unreason-

able or indicative of fault. (App. at 9.) To the contrary,

entrusting mailing to a clerk is a common and acceptable

practice. If the Seventh Circuit's decision is allowed to

stand, attorneys will have to choose between depositing

claims and other papers in the mail (and potentially

performing other clerical duties) themselves or running the

risk of being viewed as inexcusably negligent because they

delegated that clerical function to a clerk.

The Seventh Circuit also erred by finding no excusable

neglect based on the fact that Simmons did not verify

whether her claim had been timely filed. That fact is not

relevant under Rule 9006(b) or Pioneer because it has

nothing to do with the reason why the claim was filed one

day late. For this reason, too, the Seventh Circuit failed

to give Petitioner the benefit of the liberal construction of

“excusable neglect” to which she was entitled under

Pioneer.

The unreasonableness of the Seventh Circuit’s analysis,

and the schism it has created with the regard to the

This error is part of a larger error in the courts’ analysis in this

case: the courts did, but should not have, considered the time

that passed from the bar date to the date that the motion was

filed rather than simply considering the reason for the delay in

filing the claim itself and the length of delay in filing the claim.

See infra. Section 3.

15

appropriate standard, becomes evident when one compares

the Seventh Circuit’s approach in this case to other

decisions under Rule 9006(b). For example, in In re

Cendent Corp. PRIDES Litigation, 235 F.3d 176 (3d Cir.

2000), a claimant’s proof of claim was filed only five days,

or three business days, late due to unforeseeable failure in

the claimant’s usual mailroom procedures. Jd. at 183.

Although the proof of claim was timely prepared and

tendered to the mailroom for mailing well within the claim

bar date, the proof of claim was not timely mailed either

due to unforeseeable error by the mailroom employees or

simply due to a failure in the mailroom’s ordinary operat-

ing procedures. Jd. The Court of Appeals reversed the

District Court’s order denying the claimant’s motion to

have its claim deemed timely filed. Jd. at 184. In support

of its holding, the Court of Appeals found that the District

Court’s failure to consider the Pioneer factors in consider-

ing the claimant’s late-filed claim was an abuse of discre-

tion that constituted reversible error. Jd. at 182-83. The

Court of Appeals further held that the filing of the proof of

claim five days, or three business days, late “could not

have had any real impact on the judicial proceedings.” Id.

at 183. Finally, the Court of Appeals held that the failure

of the mailroom personnel to timely mail the proof of claim

in accordance with ordinary procedures constituted

excusable neglect. Jd. at 184.

Similarly, in Pioneer, a claimant filed a late claim and

then filed a motion to have it deemed timely filed under

Rule 9006(b). The claimant and its attorney explained that

the claimant had forwarded its complete file to its attorney

regarding the bankruptcy case. The file included a notice

to creditors of the deadline for filing claims. However,

there was an issue as to whether the notice of the bar date

was conspicuous enough on the face of the notice. A few

months after receiving the file, the attorney left his law

firm. For approximately three weeks thereafter the

16

attorney did not have access to his copy of the case file.

Approximately one week later the bar date passed, but no

claim was filed on behaif of the claimant. In arguing

excusable neglect, the claimant’s attorney claimed that he

and his client were unaware of the bar date and that

during the dates relevant to the matter the attorney “was

experiencing a ‘major and significant disruption’ in his

professional life” which caused the late filing. See Pioneer,

507 U.S. at 384. The Supreme Court decided that under

those circumstances and in light of the issue with the

clarity of the notice, the claim should be deemed timely

filed. See id. at 398-99.

The reason for the delay in Petitioner’s case is compara-

ble to that in Cendant and less egregious than that in

Pioneer. Accordingly, the Seventh Circuit’s decision, in

which it emphasized the reason for the delay (App. at

9-10), should be overturned.

III. The Seventh Circuit Erred By Not Reading The

Unpublished Opinions Of The Bankruptcy

Court And By Considering The Length Of Time

That Passed From The Bar Date To The Filing

Of The Rule 9006(b) Motion.

The Seventh Circuit also erroneously focused on the

length of time that passed from the initial Bar Date to the

filing of the Rule 9006(b) Motion. In her briefs, Petitioner

cited three unpublished decisions in which the Bankruptcy

Court deemed late filed claims to be timely filed even

though the delay in filing the respective Rule 9006(b)

motions was comparable to that in Petitioner’s case.

Specifically, two claimants filed their motions 70 days

after the applicable Bar Date and one filed her motion 48

days after the applicable Bar Date. In each of those cases,

the Bankruptcy Court held that the delay in filing the

motion was minimal and nonprejudicial. Petitioner filed

17

her motion 81 days after the applicable Bar Date, but

before the Supplemental Bar Date, yet the Seventh Circuit

without explanation held that the delay was too lengthy

and prejudicial in her case.

Crucially, the Seventh Circuit’s finding of prejudice was

based on its professed lack of ability to consider the

unpublished decisions, allegedly because “Simmons failed

to include the court’s unpublished orders addressing these

claims in her appendix to this court ... .” (App. at 8.)

However, Petitioner did include the unpublished opinions

in the bound volume that contained her brief, appendix,

and addendum of statutory provisions and rules. The

unpublished opinions are also identified on page ii of the

Table of Contents of that bound volume. Clearly, the

unpublished opinions were provided to the Seventh

Circuit. If it had merely consulted the Table of Contents or

reviewed the exhibits, it would have been able to read the

opinions and verify the veracity of her argument.

Instead, the Seventh Circuit merely noted, dismissively,

that even if it were to consider those opinions, they would

be distinguishable from Petitioner's circumstances because

those motions “were not as tardy as Simmons’s.” (Id. at 8.)

While it is true that Petitioner’s motion was filed eleven

days later than those of two of the movants, under Pioneer

an eleven-day difference is not per se prejudicial. Under

Pioneer’s liberal standard, the unpublished decisions

Petitioner submitted deserved more analysis than the

Seventh Circuit gave them.

On a more fundamental level, the delay in the filing of

the Rule 9006(b) Motion should not have been considered

at all. No authority has been cited by the Bankruptcy

Court, the District Court, the Seventh Circuit, or K-Mart

for the proposition that it is even appropriate to consider

the time that passed between the Bar Date and the date on

which Simmons filed her Motion. They also cited no

18

authority to support the decision that the time that passed

was too long. In fact, in Farley, Inc. v. Ohio Bureau of

Workers’ Compensation, 213 B. R. 138, 142 (N. D. III. 1997),

the Northern District of Illinois affirmed a decision of the

Bankruptcy Court in which the Bankruptcy Court ex-

plained that the “relevant focus for a finding of prejudice

was the time period between the Bar Date and the late

filing, not the period from the filing date to the filing of the

motion to extend time.” The Bankruptcy Court further

explained that considering time of the filing of the motion

would be “confusing a prejudice with a consequence [from

the filing of the late claim].” Id.

Even those courts that have considered the length of

time from a bar date to the filing of a motion seeking an

extension have determined that delays greater than or

identical to Petitioner's were nonprejudicial. In the

Northern District of Illinois, the Bankruptcy Court has

determined that a five-month delay in filing a motion for

an extension of a bar date was reasonable given the

complex nature of the case and a related case. See In re

O’Shaughnessy, 252 B. R. 722, 733 (Bankr. N. D. Ill. 2000),

(citing Pettibone Corp. v. Payne (In re Pettibone Corp.), 151

B. R. 166, 174 (Bankr. N. D. Ill. 1993) (claimant’s ten-month

delay between the time it learned of the bankruptcy case

to filing a motion for leave to file a late claim was reason-

able where the claimant had to retain bankruptcy counsel

and investigate the matter)).

The Third Circuit has also considered the impact of the

time between the late filing and the motion to extend time

under circumstances almost identical to those in

Petitioner’s case, and found that the length of the delay in

filing the motion was insignificant for the purposes of

19

Pioneer.“ See O’Brien, 188 F.3d at 129-30. In O’Brien, the

Third Circuit reviewed the bankruptcy court’s analysis of

the length of the delay and explained why it was errone-

ous:

Finally, we consider the length of the delay and its

impact on the judicial proceedings. The Bankruptcy

Court declared the delay and its impact “significant,”

because the requested relief in this case occurred after

the effective date of the Plan and thus “would under-

mine the stability of the confirmation process.” The

Bankruptcy Court, however, did not really address the

length of the delay. The actual delay was approxi-

mately two months, and takes on significance mainly

because of the intervening occurrence of the effective

date of the Plan on April 30, 1996. As the District

Court noted, the delay associated with Manus’s re-

questing relief from the March 8 order—which occurred

approximately ten weeks after the March 8 hearing,

approximately four weeks after Manus was aware that

its claim was waived, and approximately two weeks

after the effective date of the Plan—is not significant

in an absolute sense.

r * &

—

[T]he delay factor in the excusable neglect inquiry

should not be held to turn entirely on the urgency

created by the debtor’s time line. Such an approach

makes the two month delay seem significant, whereas

a similar delay, or even a much longer delay in a case

where the debtor proceeds more expeditiously to

resolve outstanding claims under its contracts, or

In O'Brien, the Third Circuit « usidered a motion brought by

a creditor who had failed to file a timely claim for the cure of

defaults in connection with a contract assumed by the Debtor.

See O’Brien, 188 F.3d at 120-21.

20

allows itself more time between confirmation and

closing under its plan, would be insignificant.

Id. (emphasis added).

Petitioner’s situation is like that described in O’Brien, in

which a delay of even longer than two months would be

insignificant. The actual claim was received by K-Mart

only one day late. The Seventh Circuit refused to acknowl-

edge that a one-day delay could not possibly prejudice

K-Mart or its estate. See Pioneer, 507 U.S. at 384 (proof of

claim filed 20 days late would be deemed timely); Jn re

Cendent Corp. PRIDES Litigation, 235 F.3d at 183 (three

business day delay in filing proof of claim could not have

any real impact on judicial proceedings); In re Dartmoor

Homes, Inc., 175 B.R. 659, 666-67 (Bankr. N.D. Ill. 1994)

(proof of claim filed 16 days late would be deemed timely).

The Seventh Circuit also failed to give adequate consid-

eration to the fact that when Simmons filed her motion on

October 21, 2002, K-Mart had not yet filed its plan of

reorganization. In fact, the filing of its February 25, 2003

first amended plan was still months away. In O’Brien, the

Third Circuit explained that the only reason the length of

the delay had any relevance in that case was because the

plan had become effective during the “delay.” See O’Brien,

188 F.3d at 129-30. Moreover, throughout its bankruptcy

case, K-Mart has been engaged in a long and methodical

claims objection process and personal injury claims

resolution procedure. K-Mart has also allowed itself ample

time both before and after plan confirmation to resolve

claim issues. Therefore in K-Mart’s case, unlike O’Brien,

there has been no urgency with respect to the resolution of

claims. No event in K-Mart’s case lends any significance to

either the day-late receipt of the claim or the length of the

delay in filing the motion. The Seventh Circuit also erred

by affirming that aspect of the Bankruptcy G and

District Court's decisions.

21

IV. The Seventh Circuit Erred By Affirming The

Lower Courts’ Decisions Based Upon A Factual

Distinction That Had No Basis In The Record

And Which Was Not Applied To Similarly Situ-

ated Claimants.

In considering the denial of Petitioner’s Motion to be

included in the Supplemental Bar Date, the Seventh

Circuit acknowledged that Petitioner was similarly

situated to those claimants to whom the Supplemental Bar

Date applied because she was not listed on K-Mart’s

schedules and never physically received notice of the

initial Bar Date from K-Mart. (App. at 12.) Despite this

fact, the Seventh Circuit concluded that she was distin-

guishable from the other claimants solely because her

counsel had actual knowledge of the initial Bar Date and

therefore that the Bankruptcy Court’s denial of Peti-

tioner’s Motion was not an abuse of discretion. (Jd.)

This aspect of the Seventh Circuit’s opinion was also

erroneous because absolutely no basis in the record exists

to support the factual conclusion that the other Supple-

mental Bar Date claimants or their attorneys did not

likewise have actual knowledge of the initial Bar Date.

K-Mart has never asserted that it combed through the list

of those claimants and weeded out those, like Simmons,

who were represented by counsel who also represented

other parties in the case or that it took any other steps to

determine whether the claimants had actual knowledge of

the Bar Date. Therefore, the Seventh Circuit had no basis

for distinguishing Petitioner from all of the other claim-

ants included in the Supplemental Bar Date. Its decision

in this regard is erroneous. ~

Bankruptcy courts may not engage in disparate treat-

ment of creditors of the same class. See, e.g., In re AOV

Industries, Inc., et al., 792 F.2d 1140, 1154-55 (D.C. Cir.

1986). In this case, this principle was violated when the

22

Seventh Circuit unfairly required Petitioner to prove that

she met additional de facto requirements for eligibility for

the Supplemental Bar Date, but did not require similarly

situated creditors to make such a showing. The Seventh

Circuit's refusal to place Petitioner on equal footing with

other similarly situated creditors results in great prejudice

to Simmons without any basis in law or fact. The Seventh

Circuit erred in this regard as well.

CONCLUSION

Bankruptcy claimants are required to follow the rules,

but the rules include an excusable neglect exception which

assumes that mistakes will be made and which requires

courts to liberally construe the doctrine to avoid forfeitures

by creditors. In this case, it is the Seventh Circuit who did

not follow the rules. It ignored all notions of leniency, ran

roughshod over numerous principles of law, and created a

split among the Circuits, in order to hold that a one-day

late filing resulting from a clerk’s mistake in sending a

claim two-day air rather than next day air did not qualify

as “excusable neglect.” This Court should grant Wilhemina

Simmons's Petition for writ of certiorari.

Respectfully submitted,

BARBARA L. YONG

Ill. State Bar No. 6184000

FIELD & GOLAN LLP

Counsel of Record for Petitioner

23

Of Counsel:

JEFFREY M. GLASS

KAREN G. KRANBUEHL

FIELD & GOLAN LLP

LEE J. ROHN

K. GLENDA CAMERON

LAW FIRM OF LEE J. ROHN

1101 King Street, Suite 2

Christiansted, St. Croix USVI 00820-4933