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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2005
- **Citation:** 543 U.S. 1056

## Text

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consider, certain unpublished opinions of the Bank-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,

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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386003_1826%3A1. Public record. Not legal advice.